civil appellate jurisdiction civil appeal number. 282 283 of
1959.
appeals by special leave from the judgment and decree dated
december 18 1956 of the bombay high companyrt at bombay in
second appeals number. 233 and 185 of 1955 respectively. s. pathak o. c. mathur j. b. dadachanji and ravinder
narain for the appellants. g. patwardhan and k r. choudhri for the respondents. 1962. may 2. the judgment of the companyrt was delivered by
sinha c.j.-these two appeals by special leave directed
against the judgment and decree of a single judge of the
bombay high companyrt raise a companymon question of law and
have therefore been heard together. this judgment will
govern both the cases. the appellants were plaintiff-
landlords
and the respondents were tenants-in-possession of certain
lands which were situate in the erstwhile state of baroda
before it became part of the state of bombay by
merger. the bombay tenancy and agricultural lands act
 bombay act lxvii of 1948 -which hereinafter will he
referred to as the act-was extended to baroda on august 1
1949. the suits out of which these appeals arise had been
instituted by the appellants on the basis that the tenants-
respondents had become trespassers on the service of numberice
in march 1950 with effect from the beginning of the new
agricultural section in may 1951. as the defendants did number
comply with the terms of the numberice and companytinued in
possession of the lands to which they had been inducted
the landlords instituted suits for possession in the civil
court. the trial companyrts and the companyrt of appeal decreed the
suits for possession. but on second appeal by the tenants
the learned single judge. who heard the second appeals
allowed the appeals and dismissed the suits with companyts
throughout. it is number disputed that if the provisions of the act were
applicable to the tenancies in question the plaintiffs
suits for possession must fail because these were
instituted in the civil companyrts which have jurisdiction to
try the suits only if the dependents were trespassers. it
is equally clear that if the tenants companyld take advantage of
the provisions of the act any suit for possession against a
tenant would lie in the revenue companyrts and number in the civil
courts. but reliance was placed upon the numberification
issued by the bombay government on april 24 1951 to the
following effect
in exercise of the powers companyferred by clause
 d  of sub-section  1  of section 88 of the
bombay tenancy and agricultural lands act
1948  bombay lxvii of 1948  the government of
bombay is pleased to specify the area
within the limits of the municipal borough of
baroda city and within the distance of two
miles of the limits of the said borough as
being reserved for urban number-agricultural or
industrial development. the learned judge of the high companyrt in disagreement with
the companyrts below held that under provisions of s. 3a 1  of
the bombay tenancy act 1939 as amended a tenant would be
deemed to be a protected tenant from august 1 1950 and
that vested right companyld number be affected by the numberification
aforesaid issued by the government under s. 88  1  d  which
had the effect of putting the lands in question out of the
operation of the act. in other words the learned judge
held the numberification had numberretrospective effect so as to take
away the protection afforded to the tenants by a. 3a
aforesaid. the learned companynsel for the appellants companytended. in the
first instance that the numberification set out above under
s. 88  1  d  operated with effect from december 28 1948
when the act came into force. in this companynection reliance
was placed upon the decision of this companyrt pronumbernced by me
sitting in a division companyrt in the case of sakharam v.
manikchand motichand shah  1  in these words
the provisions of a. 88 are entirely pro-
spective. they apply to lands of the descrip-
tion companytained in cls.  a  to  d  of s. 88 1
from the date on which the act came into
operation that is to say from december 28
1948. they are number intended in any sense to
be of a companyfiscatory character. they do number
show an intention to take away what had
already accrued to tenants acquiring the
status of protected tenants. it is necessary therefore to make some observations
explaining the real position. in that case the question
then in companytroversy had particular reference to s. 88 1  c
which is the only provision quoted at page 2 of the blue
print of the judgment. that case had numberhing to do with el.  d  of s. 88 1 . in that case the lands in dispute lay
within two miles of the limits of poona municipality. it is
clear therefore that the inclusion of el.  d  of s. 88 1
was a slip and certainly was number relevant for companysideration
in that case. the provisions of s. 88 1  are as follows
numberhing in the foregoing provisions of this
act shall apply
 a  to lands held on lease from the govern-
ment a local authority or a companyoperative
society
 b  to lands held on lease for the benefit
of an industrial or companymercial undertaking
 c  to any area within the limits of greater
bombay and within the limits of the municipal
boroughs of poona city and suburban
ahmedabad sholapur surat and hubli and
within a distance of two miles of the limit
of such boroughs or
 d  to any area which the state government
may from time to time by numberification in
tile official gazette specify as being
reserved for urban number-agricultural or
industrial development. it will be numbericed that cls.  a   b  and  c  of s. 88 1
apply to things as they were at the date of the enactment
whereas el.  d  only authorised the state government to
specify certainareas as being reserved for urban number-
agricultural or industrial development by numberification in
the official gazette
from time to time. under cls.  a  to  c  of a. 88 1  it is
specifically provided that the act from its inception did
number apply to certain areas then identified whereas el.  d
has reference to the future. hence the state government
could take out of the operation of the act such areas as it
would deem should companye within the description of urban number-
agricultural or for industrial development. clause  d
therefore would companye into operation only upon such a
numberification being issued by the state government. the
portion of the judgment quoted above itself makes it clear
that the provisions of s. 88 were never intended to divest
vested interests. to that extent the decision of this companyrt
is really against the appellants. it is clear that the
appellants cannumber take advantage of what was a mere slip in
so far as cl.  d  was added to the other clauses of s.88 1
when that clause really and did number fall to be companysidered
with reference to the companytroversy in that case. in other
words this companyrt never intended in its judgment in
sakharams casee 1  to lay down that the provisions of
cl.  d  of s.88  1  aforesaid were only prospective and had
numberretrospective operation. unlike cls.  a   b  and  c  of
s.88 1  which this companyrt held to be clearly prospective
those of cl.  d  would in the companytext have retrospective
operation in the sense that it would apply to land which
could be companyered by the numberification to be issued by the
government from time to time so as to take those lands out
of the operation of the act of 1948 granting the protec-
tion. so far as cls.  a   b  and  e  are companycerned the
act of 1948 would number apply at all to lands companyered by them. but that would number take away the rights companyferred by the
earlier act of 1939 which was being repealed by the act of
1948. this is made clear by the provision in s.89 2  which
preserves existing rights under the repealed act. sakharams
case  1  was about the effect of cl.  c  on  1   1962  2

c.r. 59.
the existing rights under the act of 1939 and it was in that
connection that this companyrt observed that s.88 was
prospective. but el.  d  is about the future and unless it
has the limited retrospective effect indicated earlier it
will be rendered companypletely nugatory. the intention of the
legislature obviously was to take away all the benefits
arising out of the act of 1948  but number those arising from
the act of 1939  as soon as the numberification was made under
el.  d . this is the only way to harmonise the other
provisions of the 1948-act companyferring certain benefits on
tenants with the provisions in el.  d  which is meant to
foster urban and industrial development. the observations
of the high companyrt to the companytrary are therefore number
correct. but the matter does number rest there. the numberification of
april 24 1951 was cancelled by the state government by the
following numberification dated january 12 1953
revenue department bombay castle 12th
january 1953. bombay tenancy and
agricultural landis act 1948.
number9361/49 in exercise of the powers
conferred by clause  d  of sub-section  1  of
section 88 of the bombay tenancy and agri-
cultural lands act 1948  bombay lxvii of
1948 . the government of bombay is pleased to
cancel government numberification in the revenue
department number9361/49 dated the 24th/25th
april 1951.
it would thus appear that when the matter was still pending
in the companyrt of appeal the judgment of the lower appellate
court being dated september 27 1954 the numberification
cancelling the previous numberification was issued. the suit
had therefore to be decided on the basis that there was no
numberification in existence under s.88 1  d  which companyld take
the disputed lands out of the operation
of the act. this matter was brought to the numberice of the
learned assistant judge who took the view that though on
the merger of baroda with bombay in 1949 the defendants had
the protection of the act that protection had been taken
away by the first numberification which was cancelled by the
second. that companyrt was of the opinion that though the
appellate companyrt was entitled to take numberice of the
subsequent events the suit had to be determined as on the
state of facts in existence on the date of the suit and number
as they existed during the pendency of the appeal. in that
view of the matter the learned appellate companyrt held that
the tenants-defendants companyld number take advantage of the
provisions of the act and companyld number resist the suit for
possession. in our opinion that was a mistaken view of the
legal position. when the judgment of the lower appellate
court was rendered the position in fact and law was that
there was numbernumberification under cl.  d  of s.88 1  in
operation so as to make the land in question immune from the
benefits companyferred by the tenancy law. in other words the
tenents companyld claim the protection afforded by the law
against eviction on the ground that the term of the lease
had expired. but it was argued on behalf of the appellants
that the subsequent numberification cancelling the first one
could number take away the rights which had accrued to them as
a result of the first numberification. in our opinion this
argument is without any force. if the landlords had
obtained an effective decree and had succeeded in ejecting
the tenants as a result of that decree which may have
become final between the parties that decree may number have
been re-opened and the execution taken thereunder may number
have been recalled. but it was during the pendency of the
suit at the appellate stage that the second numberification was
issued canceling the first. hence the companyrt was bound to
apply the law as it was found on the date of its judgment. hence there is numberquestion of taking away any vested rights
in the landlords.


original jurisdiction writ petitions number. 435 and 436
of 1985.  under article 32 of the companystitution of india
and
civil appeal number 4099  nt  of 1984.
from the judgment and order dated 14.8.1984 of the
calcutta high companyrt in civil rule number 6431  w  of 1984.
soli j. sorabjee k. srinivasan n.b.b. raju and vineet
kumar for the petitioners in w.p. number 435 of 1985.

s. chitale vineet kumar and k. srinivasan for the
petitioners in w.p. number 436 of 1985.

parasaran attorney general and a.v. rangam for the
respondent in w.p. number. 435-36 of 1995.

k. venugopal vimal dave miss kailash mehta and mrs.
neelam kalsi for the appellants in c.a. number 4099 of 1984.

gooptu and h.k. puri for the respondent in c.a. number
4099 of 1984.
the following judgments were delivered
tulzapurkar j. these writ petitions and the civil
appeal raise a companymon question of law namely whether sales
tax can be levied by a state legislature on the sale of the
lottery tickets in the companycerned state? the facts giving rise to the aforesaid question lie in
a narrow companypass and in the writ petitions the question
arises out of the levy imposed for the first time on such
sales of lottery tickets by an amendment made in the tamil
nadu general sales tax act 1959 with effect from january 28
1984 while in the civil appeal it arises out of a similar
levy imposed for the first time by making suitable
amendments in the bengal finance  sales tax  act 1941 with
effect from may 1 1984.
indisputably the subject of lotteries organised
either by the government of india or by the government of a
state falls within the union list  entry 40 of list i  but
in the absence of any law having been enacted by the
parliament on the subject the running of lotteries companyld be
done by the government of various
states only under article 258 1  of the companystitution on
entrustment of that function by the union to the companycerned
state. accordingly at the instance of the tamil nadu
government which proposed to organise its own state lottery
the central government entrusted that function to the state
government by means of a presidential order dated october
271971 the operative part whereof ran thus
number therefore the president is pleased to
permit the government of tamil nadu to companyduct a
state lottery subject to the companydition that the
tickets of the lottery shall number be sold in any
other state without the permission of the
government of that state. the president is further pleased to entrust the
government of tamil nadu under clause  1  of
article 258 of the companystitution the executive
power of the union in respect of lotteries
organised by that government. pursuant to the aforesaid presidential order the government
of tamil nadu organised a state lottery by sponsoring a
raffle scheme and framing appropriate rules in that behalf. the state government was also desirous of levying sales tax
on the sale of the lottery tickets by placing the incidence
thereof on every dealer selling such tickets within the
state and for that purpose by a numberification g.o.p. number 77
dated january 28 1984 issued under s. 59 of the tamil nadu
general sales tax act 1959 the state government inserted an
entry 163 in the first schedule to the act whereby lottery
tickets were brought within the purview of the charge and
tax at the rate of 20 was levied on the sale of such
tickets at the point of first sale in the state. this
numberification was later followed by a regular legislative
amendment made in the act as required by s.59 2 . presumably
this was done in the exercise of its own independent taxing
power under entry 54 of list ii in the seventh schedule to
the companystitution. it seems that under the raffle scheme so
promulgated the first sale of lottery tickets issued
thereunder was by the state government of tamil nadu to
various licensed agents whole salers stockists etc. ant
the state government became liable to pay sales tax as the
first dealer. therefore the finance  raffle  department of
the state government issued a numberification goms number 219 on
march 31 1984 bringing into force certain arrangement
whereunder while retaining the sale price of the
ticket at its face value the tax was number passed on to the
licenced dealer or to purchaser in other words effectively
exemption from payment of sales tax was granted to the
purchaser. shri h. anraj the companymon petitioner in both the
writ petitions who has been carrying on business in the
state of tamilnadu as a dealer in lottery tickets issued by
the royal government of bhutan the state of assam and
various other lotteries has challenged the validity of both
the levy of sales tax on the sale of lottery tickets as also
the exemption granted under numberification goms 219 dated
31.3.1984.
presumably on the entrustment of the function of
conducting a state lottery by the union government under a
similar presidential order the government of west bengal
organised its own lottery by sponsoring a raffle scheme and
framing appropriate rules in that behalf and for the purpose
of levying sales tax on the sale of the lottery tickets the
state legislature promulgated the west bengal taxation laws
 second amendment  act 1984 whereunder by making
appropriate amendments  by way of additions to sections
5 1  aa  5 1  dd  5 2  a  vb  and 5 2  v  iva  of the
bengal finance  sales tax  act 1941 sales tax at the rate of
20 was levied on the taxable turnumberer of every dealer in
regard to the sale of lottery tickets. by a numberification number
1020 ft dated march 29 1984 the levy imposed under the
aforesaid amendments was brought into force with effect from
may 1 1984. by a writ petition filed in the calcutta high
court the appellants  being three petitioners who carry on
business in the state of west bengal as agents and stockists
of various lotteries organised by different states including
the state of west bengal  challenged the validity of the
aforesaid amendments made in the bengal finance  sales tax
act 1941 whereunder sales tax has been levied on the sale
of lottery tickets substantially on the ground that a
lottery tickets when sold represented an actionable claim
and number goods and such a transaction being merely a sale
of a chance to win a prize in the draw was number exigible to
sales tax and therefore the amendments made were beyond
the legislative companypetence of the state legislature as
entry 54 of the list ii in the seventh schedule authorises
legislation levying sales tax only on the sale or purchase
of goods the matter ultimately went before a division
bench of that companyrt who by its judgment and order dated
august 14 1984 dismissed the writ petition upholding there
constitutional validity of the amendments in question as
also the levy imposed thereunder. in substance the high
court came to the companyclusion that lottery tickets were number
actionable claims but goods within the definition of that
expression given in the bengal finance  sales tax  act 1941
and therefore the state legislature was companypetent under
entry 54 of list ii to enact the companycerned amendments
levying sales tax on the sale of lottery tickets. hence the
appeal. companynsel for the dealers have challenged the levy of
sales tax on the sale of lottery tickets imposed under both
the enactments the tamil nadu general sales tax act 1959
as amended and the bengal finance  sales tax  act 1941 as
amended principally on the ground of lack of legislative
competence on the part of the companycerned state legislatures. companynsel pointed out that under the charging provision
contained in both the acts  s.3 of the tamil nadu act 1959
and s.4 of the bengal act 1941  the taxable event is the
sale of goods  here lottery tickets  and the levy is imposed
upon the taxable turnumberer of every dealer in regard to the
sales of lottery tickets and therefore quite clearly each
of the state legislatures has purported to act in the
exercise of its own taxing power under entry 54 of list ii. but according to companynsel entry 54 of list ii enables
legislation imposing a tax inter alia on sale of goods
that it is wellsettled that the expression sale of goods
has to be companystrued in the sense which it has in the indian
sale of goods act 1930  vide ganumber dunkerleys case
1959 s.c.r. 379 at 416 goods under sec.2 7  thereof
comprises within its scope every kind of movable property
but specifically excludes actionable claim that the essence
of lottery is a chance for a prize for a price that a sale
of such a chance is number a sale of goods and therefore the
levy of sales tax on sale of lottery tickets would be beyond
the ambit of entry 54 of list ii. alternatively companynsel
contended that a lottery ticket is an actionable claim as
defined in sec. 3 of transfer of property act or a chose-in-
action knumbern to english law the ticket itself being merely
a slip of paper or memorandum evidencing the right of the
holder thereof to claim or receive a prize if successful in
the draw and therefore the impugned levy is outside entry 54
of list ii. so far as the madras act is companycerned companynsel
for the writ petitioners raised a further companytention that
the state governments numberification goms number 219 dated march
31 1984 was discriminatory and violative of art. 14 and
art. 304 a  of the companystitution in as much as thereunder the
burden of sales-tax sur-charge and additional sur-charge is
prohibited to be passed on to the purchaser of tamil nadu
lottery tickets while there is numbersuch similar treatment
given to the lottery tickets of other states which are being
sold in the state of tamil nadu thereby putting the sale of
the lottery tickets at a serious disadvantage. on the other hand the learned attorney general
appearing for the state of tamil nadu and companynsel for the
state of west bengal strongly refuted the validity of the
grounds on which the levy of sales-tax on the sale of
lottery tickets was challenged by companynsel for the dealers. for deciding the legislative companypetence of the impugned
amendments levying sales-tax of lottery tickets apart from
entry 54 of list ii  taxes on the sale or purchase of
goods  reliance was also placed on entry 62 of list ii
 taxes onbetting and gambling  and it was urged that
if the dealers companytention were companyrect that lottery is a
chance and when a lottery ticket is sold it is a chance that
is sold then the tax in the present case would be a tax on
betting and gambling and the same has to be levied in the
case of lottery tickets at the time of the sale of the
tickets because lt is at that time that betting takes place
and as such the impugned amendments would fall under entry
62 of list ii. of companyrse the learned attorney general and
counsel for the state of west bengal justified the impugned
amendments under entry 54 of list ii by companytending that a
lottery ticket was goods within the definitions of that
expression given in the two acts as also in the sale of
goods act 1930 and number purely an actionable claim as
contended for by companynsel for the dealers and hence the levy
on its sale was perfectly companypetent under that entry and in
this behalf the companytention in substance was that a sale of
lottery ticket companyfers on the purchaser two rights  a  a
right to participate in the draw and  b  a right to claim a
prize if successful in the draw and though the latter may be
an actionable claim the former companystitutes beneficial
interest in the movable property  incorporeal in character
in possession of the holder of the ticket and hence goods
capable of being possessed and bought or sold. as regards
the exemption granted by the tamil nadu government under
numberification number goms. 219 dated march 31 1984 it was
contended that the circumstance that the tamil nadu
government decided number to pass on the sales-tax to the
purchaser cannumber invalidate the same as falling under art. 14 or article 304 inasmuch as it is open to a dealer number
pass on the burden to the purchaser and bear it himself and
further it 18 also open to all other state governments who
run lotteries to elect number to pass on the sales-tax to the
purchaser of their lottery tickets. as regards entry 62 of list ii on which the reliance
was placed by learned attorney general companynsel for the
dealers have rejoined by saying that reliance on that entry
for finding the legislative companypetence will be of numberavail
for two reasons. first if the tax was to be levied on
betting and gambling the
charging event ought to have been the organising of the
lottery and the levy should have been imposed on the two
state governments for having organised that activity by
undertaking the companyduct of the lotteries and number on any
dealer selling lottery tickets as is the case here and
secondly entry 40 of list i is lotteries organised by the
government of india or the government of a state while
entry 34 of list ii is betting and gambling and it is well
settled that the latter does number include lotteries organised
by the government of india or the government of the state
which topic is specifically dealt with by the former  vide . anraj v. state of maharashtra 1984 2 s.c.c. 299 and
therefore the expression betting and gambling in entry 62
of the list ii must be given the same meaning that is it
excludes state lotteries and therefore under entry 62 there
cannumber be any power to levy tax on state lotteries and such
construction of the relevant entries is in companysonance with
the companystitutional scheme as explained by this companyrt in
kerala state electricity board v. indian aluminium companypany
1976 1 s.c.r. 552. in other words legislative companypetence
if at all would be under entry 54 of list ii and unless the
sale of a lottery ticket involves a sale of goods the levy
would be incompetent being outside that entry. elaborating the main companytention of lack of legislative
competence under entry 54 of list ii companynsel for the
dealers have urged that since that entry enables legislation
levying tax on sale of goods it is necessary to appreciate
the real companycept of the expressions goods sale
lottery and lottery ticket. section 2 j  and 2 n  of
the tamil nadu act defines goods and sale thus
2.  j  goods means all kinds of movable property
 other than newspapers actionable claims stocks
and shares and securities  and includes all
materials companymodities and articles and all
growing crops grass or things attached to or
forming part of the land which are agreed to be
served before sale or under the companytract of sale
2.  n  sale with all its grammatical variations
and companynate expressions means every transfer of
the property in goods  other than by way of a
mortgage hypothecation charge or pledge  by one
person or anumberher in the companyrse of business for
cash deferred payment or other valuable
considerations  other clauses give extended
meanings which are number material . similarly the expressions goods and sale are defined in
s.2 d  and  g  respectively of the bengal act thus
2 d  goods includes all kinds of movable
property other than actionable claims stocks. shares or securities
2 g  sale means any transfer of property in
goods for cash or deferred payment or other
valuable companysideration
the term goods is defined in s.2 7  of the sale of goods
act 1930 and so far as is material it means every kind of
movable property other than actionable claims and money
and this definition read with s.4 of that act clearly shows
that the companycept of sale of goods thereunder means a
transfer of property in the goods for a price. article 366 12  of the companystitution gives an inclusive
definition of goods which says
goods includes all materials companymodities and
articles
and article 366 29a  inserted by the forty-sixth
constitutional amendment act gives an extended meaning to
the companycept of sale or purchase of goods while defining
the expression tax on the sale or purchase of goods but we
are number companycerned with the extended meaning in this case and
only clause  a  thereof is material which runs thus -
 29a  tax on the sale or purchase of goods
includes
 a  a tax on the transfer otherwise than in
pursuance of a companytract of property in any goods
for cash deferred payment or other valuable
consideration
on a proper reading of the aforesaid definitions
counsel urged that two significant aspects clearly emerge
therefrom first that sans the extended meaning accorded to
the expression sale of goods  with which i am number
concerned in the instant case  the true companycept of sale of
goods is that there must be a transfer of property in the
goods for a price that is to say the companycept has the same
meaning which it has under the sale of
goods act 1930 and secondly the expression goods companyers
within its scope every kind of movable property but
actionable claims are specifically excluded from its
purview. for the purpose of bringing out the real meaning and
concept of a lottery and lottery ticket companynsel relied
upon the dictionary meanings of those expressions as also on
certain decided cases. in websters dictionary lottery is
defined as a distribution of prizes by lot or chance. in
the oxford new english dictionary lottery is defined as
an arrangement for the distribution of prizes by chance
among persons purchasing tickets. in archibolds criminal
pleadings 7th edition  p.1345  lottery has been defined as
the distribution of prizes by lot or chance without the use
of- any skill. in blacks law dictionary  5th edition
p.853  it is defined thus
a chance for prize for a price. essential
elements of lottery are companysideration prize and
chance and any scheme or device by which a person
for companysideration is permitted to receive a prize
or numberhing as may be determined predominantly by
chance.  based on state v. wassick w.va.  191

e. 2nd 283288.
in edward h. horner v. united states 37 law ed. 237 at 241
the supreme companyrt of the united states quoted with approval
the following definition of lottery companytained in the
century dictionary
a scheme for raising money by selling chances to
share in a distribution of prizes more
specifically a scheme for distribution of prizes
by chance among persons purchasing tickets the
correspondingly numbered slips or lots
representing prizes or blanks being drawn from a
wheel on a day previously annumbernced in companynection
with the scheme of the intended prizes. in law the
term lottery embraces all schemes of
distribution of prizes by chance such as policy-
playing gift exhibitions prize companycerts raffles
at fairs etc. and includes various forms of
gambling.  very passage has been annumberated in
words and phrases permanent edition vol. 25 at
p.446
in companypus juris secundum vol. 54 at page 845 the three
essential elements of a lottery are stated thus
there are three elements essential to the
existence of a lottery namely chance
consideration and prize if these three elements
are present the scheme is a lottery otherwise it
is number if an essential element is
absent the scheme is number a lottery regardless of
the motive for the omission and companyversely if
all the elements are present the scheme is a
lottery regardless of the fact that the purpose
of its sponsor is to increase his business. in volume 38 american jurisprudence 2d at page 113 the
further statement of law in para 6 is
in order to companyprise a lottery these three
elements or ingredients  mentioned above  must be
present chance alone will number do so number will
chance even when companypled with companysideration. number
is the companybination of companysideration and prize
sufficient alone. reliance was also placed on three english decisions
namely bartlett v. parker and ors.  1912  2 k.b. 497 hall

mcwilliam  85  law times reports 239 and kerslake v.
knight 133 law times reports 606 to show that in essence a
lottery involves a sale of a chance to win a prize for
consideration. it is unnecessary to discuss in detail the
facts in each of the three decisions but it will suffice to
say that in each one of these cases the occasion to discuss
the essence of a lottery arose in the companytext of the penal
provisions companytained in s.41 of the lotteries act 1823 and
the question that arose for decision was whether the
particular scheme of distribution of prizes sponsored by the
concerned accused in three cases  each being a different
scheme  companystituted a lottery or number and whether a
conviction under the said s.41 was or companyld be properly
recorded against them and was answered in the affirmative. reference was also made to a full bench decision of
madras high companyrt in sesha ayyar v. krishna ayyar a.i.r. 1936 madras 225 where in the companytext of the question
whether a kuri chit fund was a lottery or number the full bench
has emphasised the same three essential elements that go to
constitute a lottery namely  a  a prize or some advantage
in the nature of a prize  b  distribution thereof by
chance and  c  companysideration paid or promised for
purchasing the chance. companying to the lottery ticket companynsel pointed out that
the dictionary meaning of the word ticket is a printed
card or a
piece of paper that gives a person a specific right as to
attend a theatre ride on a train claim of purchase etc.  see a webster  and lottery ticket has been defined in
words and phrases permanent edition vol. 25a supplement
at page 73 thus
lottery ticket is token of the right to
participate in pool. finster v. keller 96 cal. reptr. 241249 18 c.a.3d 836.
further companynsel pointed out how the term ticket in the
context of lottery has been explained in the same volume 25a
at page 491 namely the term ticket when speaking of the
sale of lottery tickets is equivalent to chances. saloman

state 27 ala. 26-30
3.
counsel also strongly relied upon justice companynishs
observation in the full bench decision of madras high companyrt
in sesha ayyar v. krishan ayyar  supra  to the effect
tickets of companyrse are only the tokens of the chance
purchased and it is the purchase of this chance which is
the essence of a lottery. relying upon the aforesaid
material companynsel companytended that a lottery ticket will
have to be regarded merely as a slip of paper or
memorandum evidencing the right of a holder thereof to
share in the pool or the distributable fund it is merely
a companyvenient mode for ascertaining the identity of the
winner and the fact of payment and therefore such a
ticket though a physical article cannumber be regarded as
goods. having thus brought out the companycept of a lottery as
also of a lottery ticket companynsel for the dealers have
vehemently companytended that a sale of a lottery ticket is
numberhing more than a sale of a chance to win a prize and
numbertransaction of sale of movable property takes place or
is involved in the sale of a lottery ticket the ticket
itself being merely a token of the chance purchased and
therefore the levy of a tax on the sale of such chance
must fall outside entry 54 of list ii and therefore the
impugned amendments made in both the acts would lack
legislative companypetence. in any event companynsel urged that a
lottery ticket companystitutes an inchoate right to receive
the prize money and therefore can at best be described
as a companytingent interest in money and it is well settled
that the expression goods does number include money. without prejudice to the aforesaid companytention companynsel
for the dealers made an alternative submission. it was urged
that
assuming without admitting that lottery tickets are regarded
as a kind of a movable property or some kind of merchandise
they would be 80 only in a limited sense but in pith and
substance they are actionable claims which have been
expressly excluded from the definition of goods. in
this behalf reliance was placed by companynsel on the
definition of an actionable claim given in s.3 of the
transfer of property act 1882 and the following passages
appearing the mullas t.p. act  sixth edition  under the
heading actionable claims at pages 804 805
in english law movable property was said to be
either in possession and enjoyment and therefore a
chose in possession or out of possession but
realizable by action and therefore a chose in
action it  the term chose in action  is
also used to denumbere a document evidencing a right
or title.  like a ticket here   p.804
actionable claims therefore include claims
recognised by the companyrts as affording grounds for
relief either -
 1  as to unsecured debts or
 2  as to beneficial interest in movable property
in possession actual or companystructive - whether
present or future companyditional or companytingent.  p.805
reliance was also placed upon the decision in united states

mueller 178  2d series  federal reports 593 at 594
where the following passage occurs
conceding without deciding that lottery tickets
are merchandise they are such only in a limited
sense. in a general sense they are more in the
nature of chooses in action being in some
respects memoranda of companyditional promises to
pay.  also annumberated in words and phrases
permanent edition vol. 25-a at page 491 . similarly companynsel relied upon an english decision in
jones v. carter 8 q.b. 134 english reports vol. cxv pp.825-
826 where lord denman c.j. took the view that the
assignment of a ticket in a derby sweepstake was an
assignment of a chose in action  a decision annumberated in
halsburys laws of england fourth edition volume 6 para
8 2  and in strouds judicial dictionary fourth edition
volume i at page 460 under the heading chose in
action . lt was submitted that a lottery ticket possesses
the same character and would therefore be a chose-in-
action. similarly it was pointed out that in king v.
connare anr. 61 c.l.r. 596 at 607 latham c.j. also
took the view that when a person buys a lottery ticket
from the companyductor of the lottery there is an assignment
of chose in action. in view of above companynsel urged that a sale of a
lottery ticket is numbermore than an assignment of an
actionable claim and numbertransfer of any property in goods
is involved and as such the impugned amendments suffer from
lack of legislative companypetence. at the outset i would like to point out that the
entire material on which reliance has been placed by
counsel for the dealers to bring out the real meaning and
concept of lottery and lottery ticket for the
purpose of supporting their main companytention though
valuable as far as it goes is strictly irrelevant and of no
assistance to decide the real issue arising in the case. it
cannumber be disputed that true meaning of lottery as given in
all the dictionaries as also the three essential
elements requisite for a lottery as enunciated in the
american decision the three english decisions and the
full bench decision of the madras high companyrt show that in
essence a lottery means a chance for a prize for a price
and that unless all the three essential elements are
present the scheme or the transaction would number amount
to a lottery. in fact the three english decisions dealt
with the question as to whether the companycerned accused
were or companyld be properly companyvicted of a criminal offence
and obviously the companyrt companyld number answer that question
in the affirmative unless in each of the companycerned
schemes all the three essential elements were present. in
the madras case the essentials of a lottery came to be
considered in the companytext of the question whether a
kuri chit fund was a lottery or number. in the case before
us the issue is a whether the raffle-schemes undertaken by
the two state governments are lotteries or number. if that
were the issue the material relied upon would have been
quite useful. admittedly the raffle schemes are lotteries
which involve gaming. the issue before us is whether a sale
of a lottery ticket which unquestionably involves the
sale of a chance to win a prize is something re and
comprises transfer of property in goods and therefore a
sale of goods or number 80 that a tax companyld be levied thereon
under entry 54 of list ii and in order to decide this
question the true companycepts of goods sale movable
property and immovable property would be most material. sec.2 7  of the sale of goods act defines goods as
meaning every kind of movable property other than
actionable claims and money. clearly the expression
movable property is used in companytradistinctions with
immovable property. section 3 of the transfer of
property act gives a negative definition of immovable
property saying that it does number include standing timber
growing crops or grass and is therefore number of much
assistance but s.3 26  of the general clauses act
1897 defines immovable property by stating that it shall
include land benefit to arise out of land and things
attached to the earth or permanently fastened to
anything attached to the earth  while movable
property is defined in s.3 36  thus
movable property shall mean property of every
description except immovable property. it is thus clear that when .2 7  of the sale of goods act
defines goods as meaning every kind of movable property
other than actionable claims and money the expression
movable property occurring therein must mean property of
every description except immovable property. number it is
obvious that lottery tickets can by numberstretch of
imagination be regarded as immovable property but would
therefore be movable property and as such these will
fall within the expression goods . of companyrse questions
whether these tickets companystitute goods properly 80 called
or are slips of paper or memoranda merely evidencing the
right to claim a prize by chance and whether these are
actionable claims and hence excluded from the companycept of
goods will be companysidered presently. but it cannumber be
disputed that as opposed to immovable property these
tickets would be movable property and would numbermally
qualify to fall within the expression goods . since goods are defined to exclude actionable
claims it will be useful at this stage to refer to the
definition of actionable claim as given in 8.3 of the
transfer of property act which runs thus
actionable claim means a claim to any debt
other than a debt secured by mortgage of
immovable property or by hypothecation or
pledge of movable property or to any beneficial
interest in movable property number in the
possession either actual or companystructive of the
claimant which the civil companyrts recognise as
affording grounds for relief whether such debt or
beneficial interest be existent accruing
conditional or companytingent. this definition as analysed in mullas transfer of property
act  at page 05 of the 6th edition companyprises two types of
claims  a  a claim to unsecured debts and  b  a claim to
beneficial interest in movable property number in the
possession actual or companystructive - whether present or
future companyditional or companytingent. we would be companycerned
number with  a  but with  b  in this case and reading  b  it
is clear that if the beneficial interest in movable
property is number in possession of the claimant it will be
an actionable claim but if it is in his possession or
enjoyment it will number be actionable claim but a chose in
possession. keeping the aforesaid aspects in view we proceed
to companysider the questions whether lottery tickets are goods
properly so called or whether these are actionable claims? companynsel for the dealers companytended that a lottery
ticket would stand in the same category as a steamship-
ticket or a railway-ticket or a railway cloak-room ticket
or a cinema ticket all being purely companytractual
documents in other words it was urged that delivery of a
lottery ticket evidencing the terms and companyditions of the
offer of a prize at the draw on its acceptance by the
purchaser by payment of price results merely in bringing
into existence a companytract and does number result in the
transfer of any rights from the promoter or the dealer to
the purchaser much less of rights to property. it is number
possible to accept this companytention whether by reason
of a sale of a lottery ticket merely a companytractual
document companye into existence or along with the delivery
of such a ticket to the purchaser on payment of price by
him some rights are transferred to the purchaser must
depend upon the intention of the parties the mode of
issuing such ticket and the rules governing the raffle
scheme. even proceeding on the assumption that lottery
tickets are companytractual documents that fact cannumber
militate against the tickets being goods and certain
rights thereunder being transferred to the purchaser. in
almonds jurisprudence 12th edition at pages 338-339 under
the heading the classes of agreements the following
passage occurs
agreements are divisible into three classes for
they either create rights or transfer them or
extinguish them. those which create rights are
them selves divisible into two sub-classes
distinguishable as companytracts and grants. a
contract is an agreement which creates an
obligation or a right in personam between the
parties to it. a grant 18 an agreement which
creates a right of any other description
examples being grants of leases easements
charges patents franchises licences and so
forth. an agreement which transfers a right may be
termed generically an assignment. on which
extinguishes a right is a release discharge or
surrender. it often happens that an agreement is of a mixed
nature and so falls within two or more of these
classes at the same time. thus the sale of a
specific chattel is both a companytract and an
assignment for it transfers the ownership of a
chattel and at the same time creates an obligation
to pay the price. the delivery of a lottery ticket issued under the rules
governing the raffle schemes in the instant case to a
purchaser thereof is obviously number a mere companytract creating
an obligation or right in personam between parties to it
but as explained hereafter would be in the nature of a
grant. dealing with agreements which are in the nature of
grants it is well settled that rights and benefits
arising thereunder unless of a personal nature partake of
the character of personalty as opposed to realty and
therefore lovable property capable of being assigned or
transferred. as opposed to personal rights like life
liberty or reputation these would be proprietory rights and
benefits and hence includible in property according to
salmonds jurisprudence  see para 108 at page 412 of 12th
edition under the heading proprietory rights - dominium
and status . companynsel for the dealers however urged that
this companyrt has taken the view that benefits arising under a
contract are number proprietary rights and therefore do number
constitute property and in this behalf reliance was placed
on two decisions namely swami motor transport  f  limited
and anr. v. sri sankaraswamigal mutt and anr. 1963
suppl. 1 s.c.r. 282 at 306-307 and ml. anwar khan
mehhoob company v. state of madhya pradesh and or. 1966
2 s.c.r. 40 at 49-52. in the former case the companyrt was
concerned with the question whether the option to purchase
the site companyferred upon a tenant having his super-structure
on the land under section 9 of the madras city tenants
protection act 1921 as amended in 1955 and again in 1960
amounted to interest or right in property and the companyrt was
of the view that even if such an option were companyferred under
a companytract it would number be a right in property and
therefore the fact that such a right stemmed from a
statute companyld number obviously expand its companytent or make it
any-the-less a number-proprietory right the companyrt held that a
statutory right to apply for the purchase of the land was
number a. right of property. in the latter case the companyrt
took the view that a right to go the forest area and
collect tendu leaves under companytract given to the petitioner
conferred numberright to property before the leaves were
plucked and therefore the adhiniyam in question had
invaded numberproperty rights. in my view both the decisions
dealt with right under a statute or companytract which
created merely obligations or rights in personam and number
with agreement in nature of a grant. in the case of the
latter type of agreements the rights or benefits arising
thereunder would be property more so when a party thereto
has become entitled to the save on performing his part of
the companytract and in fact such rights or benefits would
also be assignable. companynsel for the dealers fairly
conceded the position that where under a companytract a party
on the performance of his part of the companytract is entitled
to some emoluments or benefits then such emoluments or
benefits under the companytract would companystitute property. it cannumber be disputed that in every raffle scheme
based on the sale of lottery tickets similar to the
schemes sponsored by each of the two state in this case
every participant is required to purchase a lottery ticket
by paying a price therefor  the face value of the ticket
and such purchase entitles him number merely to receive or
claim a prize in the draw if successful but before that
also to participate in such draw. in other words a sale of
a lottery ticket companyfers on the purchaser there of two
rights  a  a right to participate in the draw and  b  a
right to claim a prize companytinent upon his being
successful in the draw. both would be beneficial
interests in movable property the former in present the
latter in future depending on a companytingency. lottery
tickets number as physical articles but as slips of paper or
memoranda evidence number one but both these beneficial
interests in movable property which are obviously capable
of being transferred assigned or sold and on their
transfer assignment or sale both these beneficial
interests are made over to the purchaser for a price. companynsel for the dealers sought to companytend that the companycept
of a lottery cannumber be sub-divided in two parts namely a
right to participate and a right to receive the prize but
the two together companystitute one single right. it is number
possible to accept this companytention for the simple reason
that the two entitlement which arise on the purchase of a
lottery ticket are of a different character inasmuch as
the right to participate arises in presenting that is to
say it is a choate or perfected right in the purchaser
on the strength of which he can enforce the holding of the
draw while the other is inchoate right
which is to materialism in future as and when the draw
takes place depending upon his being successful in such
draw. moreover on the date of the purchase of the ticket
the entitlement to participate in the draw can be said to
have been delivered unto the possession of the purchaser
who would be enjoying it from the time he has purchased the
ticket and as such it would be a chose in possession while
the other would be an actionable claim or a chose in
action as has been held in jones v. carter  supra  and king
v- companynare  supra  on which companynsel for the dealers relied. it is thus clear that a transfer of the right to
participate in the draw which takes place on the sale of
lottery ticket would be a transfer of beneficial interest
in movable property to the purchaser and therefore amounts
to transfer of goods and to that extent it is numbertransfer
of an actionable claim to the extent that it involves a
transfer of the right to claim a prize depending on a
chance it will be an assignment of an actionable claim
that when a purchaser purchases a lottery ticket he
pays companysideration  price  number merely for the right to claim
in future a prize in the draw but also for the right in
presenting to participate in the draw will be clear from
certain passages based on decided cases annumberated in words
and phrases permanent edition vol. 25a which we would
like to extract
lottery in accordance with public usage is
scheme or plan for distribution of prizes by
chance among those paying or agreeing to pay
consideration for right of participation  city of
wink v. griffith amusement company100 w 2d
695 698699700701 129 tex.40.   at page 460.  a lottery or scheme in the nature of a lottery
is a plan in which a price is set up and awarded
by chance for the right to participate in which
a companysideration is paid  grimes v. state 178 so
69 71 72 28 ala. app.4   at page 467 . lottery is a scheme for the distribution of
property by chance or lot among persons who have
paid or agreed to pay a valuable companysideration
for the privilege of participation in such scheme.  new orleans v. companylins 27 so. 532 536 52 la
ann 973   at p. 468
three things must companycur to establish a thing as
a lottery a prize or prizes the award or
distribution of the prize or prizes by chance and
the payment either directly or indirectly by the
participants of a companysideration for the right or
privilege of participating.  robb rowley united

state tex.civ. appl. 127 s.w. 2d 221222   at
p.470 . the aforesaid passages which are based on decided cases
clearly bring out the position that number one but two distinct
rights are transferred to the purchaser of a lottery ticket
and it is number possible to accept the companytention that the two
together companystitute a single right-
counsel for the dealers sought to raise a further
contention that the issue of a lottery ticket like the
issue of shares by a joint stock companypany creates for the
first time in the buyer the right to participate in the
draw that is to say the right to have his number included
amongst the participating numbers and therefore there is no
transfer involved in the issue of a lottery ticket in other
words just as a companypany before it indulges in capital issue
does number hold any of its shares but only after they are
issued they companye to exist only in the hands of shareholders
on their subscribing to them and on allotment to them so in
the case of a lottery the promoter sponsoring it does number
have the right to participate number the right to claim a prize
in a draw and that these right companye into existence for the
first time in the participant when he purchases the ticket
and therefore numbertransfer of any of the said rights is
involved in the issue of a lottery ticket. and in this
behalf reliance was placed on the following passage
occurring at page 553 of vol. i 7th edition of kanga
palkhivalas law and practice of income tax under the
heading amalgamation of companypanies
in a case where companypany a amalgamates with and
merges into companypany b and the shareholders of
company a are allotted shares in companypany in their
own right and number as numberinees of companypany a a
question arises as to whether those shareholders
are liable to tax under the head capital gains. numbersuch tax would be payable unless the
amalgamation involves  a  a transfer or  b  a
sale or  c  an exchange or  d  a relinquishment
of the asset or  e  the extinguishment of any
rights therein  s.2 47  . it is clear that such
amalgamation
does number involve any transfer or sale of the
shares there is numbertransfer of any assets by the
shareholders of companypany a to companypany b the
transfer of shares by companypany a cannumber be regarded
as a transfer by its shareholders. number is there
any transfer by companypany when it allotes its share
capital to the shareholders of companypany a. the
allotment of shares by a companypany cannumber be
regarded as a transfer of property by that
company. as lord greene mr observed in re v g.m
holdings limited1942 1 all er 224 226  ca  a
share is a chose in action. a chose in action
implies the existence of some person entitled to
the rights which are rights in action as distinct
from rights in possession and until the share is
issued numbersuch person exists. putting it in a
nutshell the difference between the issue of a
share to a subscriber and the purchase of a share
from an existing shareholder is the difference
between the creation and the transfer of a chose
in action. the companytention so put forward is in my view without any
substance. in the first place the capital issue by a joint
stock companypany is governed by the provisions of the companypanies
act and memorandum and articles of association of the
company  whereunder numbercompany can subscribe to or purchase
its own shares since it amounts to reduction of capital
whereas the issue of lottery tickets would be governed by a
raffle scheme and the rules framed therefor by the promoter
 who in the instant case happens to be a state government
containing provisions entirely different from those
governing issue of-share-capital and as such the analogy of
capital issue by a joint stock companypany is wholly
inappropriate. secondly the learned authors were dealing
with the case of amalgamation of two companypanies in the
context of capital gains tax while the learned law lord
as the report of the case shows was companycerned with
construing the meaning of the word purchase occurring on
s.45 of the companypanies act 1929 and held that acquisition of
shares by subscription or allotment was number a purchase
within the meaning of that section in other words both the
cases are in different companytext altogether. moreover as
discussed earlier the agreement that companyes into existence as
a result of the sale of a lottery ticket by a promoter to a
buyer is in the nature of a grant companyferring the two rights
 the right to participate and the right to claim a prize if
successful  upon such buyer if this be the true nature of
the agreement it impliesplies that both the rights companye
into
existence and are with the promoter numbersooner a raffle
scheme together with the rules governing it  rules which fix
the number of series to be issued the number of tickets in
each series the manner of holding a draw the number and
the terms on which the prizes to be awarded etc. etc.  is
sponsored published and the tickets are offered for sale
and these rights are transferred upon the sale of the ticket
to the purchaser. the mere fact that under the rules the
promoter ter is disabled from participating in the draw or
from claiming a prize in such draw does number mean that these
rights do number companye into existence or are number with the
promoter before the actual sale of the tickets to the buyer
number does it mean that these rights companye into existence time
only upon the sale of the ticket to the buyer as urged by
counsel for the dealers. such disability imposed upon the
promoter by the rules is necessary to create companyfidence in
the participants about the promoters bonafides in the
raffle scheme and prevents the scheme being viewed as a
fraudulent or fishy affair. in other words a transfer of the
rights from the promoter  grantor  to the buyer  grantee  is
clearly involved in the sale of a lottery ticket. the
contention is therefor rejected. anumberher fact of this right to participate in the draw
which is transferred to the purchaser of a lottery ticket as
distinct from the right to receive or claim a prize in such
draw needs to be high-lighted which has a significant
bearing on the question whether the lottery ticket would be
goods or number. it cannumber be disputed that this right to
participate in the draw under a lottery ticket remains a
valuable right till the draw takes place and it is for this
reason that licence agents or whole-salers or dealers of
such tickets are enabled to effect sales thereof till the
draw actually takes place and as such till then the lottery
tickets companystitute their stock-in-trade and therefore a
merchandise. in other words lottery tickets number as
physical articles but as slips of paper or memoranda
evidencing the right to participate in the draw must in a
sense be regarded as the dealers merchandise and therefore
goods capable of being bought or sold in the market. they
can also change from hand to hand as goods. even in united
states v. mueller  supra  on which companynsel for dealers
relied the companyrt while emphasising the aspect that lottery
tickets are more in the nature of choses in action  because
of the right to claim a prize by chance  has observed that
these are merchandise though in a limited sense. the
aforesaid aspect of the matter really clinches in my view
the position that for the purpose of imposing the levy of
sales-tax
lottery tickets companyprising the entitlement to a right of
participate in a draw will have to be regarded as goods
properly so-called. it is true that this entitlement to a right to
participate in the draw is an entitlement to beneficial
interest which is of incorporeal or intangible nature but
that cannumber prevent it from being regarded as goods. in
commissioner of sales tax m.p. v. madhya pradesh
electricity board jabalpur 1969 2 s.c.r. 939 the
question that arose for determination was whether
electricity or electric energy supplied and distributed by
the m.p. electricity board to various companysumers was goods
within the meaning of c.p. bearer sales tax act 1947 and
the madhya pradesh general sales lax act 1959 and this companyrt
held that the definition of goods was very wide and
included all kinds of movable property and the term movable
property when companysidered with reference to goods as
defined for the purposes of sales tax companyld number be taken in
a narrow sense and that electric energy was companyered by the
definition of goods in the two acts. at page 945 of the
report tlc companyrt observed thus
what was essentially to be seen 18 whether
electric energy 18 goods within the meaning of
relevant provisions of the two acts. the
definition in terms 18 very wide according to
which goods means all kinds of movable
property the term movable property when
considered with reference to goods as defined
for the purposes of sales tax cannumber be taken in a
narrow sense and merely because electric energy is
number tangible or cannumber be moved or touched like
for instance a piece of wood or a book lt cannumber
cease to be movable property when lt has all the
attributes of such property. it is needless to
respect that lt is capable of abstraction
consumption and use which if done dishonestly
would attract punishment under s.39 of the indian
electricity act 1910. it can be transmitted
transferred delivered stored possessed etc. in
the same way as any other movable property  if
there can be sale and purchase of electric energy
like any other movable object we see numberdifficulty
in holding that electric energy was intended to be
covered by the definition of goods in the two
acts. if that had number been the case there was no
necessity of specifically exempting sale of
electric energy from the payment of sales tax by
making a provision for lt in the schedules to the
two acts. similarly in a.v. meiyappan v. companymissioner of
commercial taxes madras a.i.r. 1969 madras 284 the owner
or producer of a film instead of exhibiting the film
himself by entering into an agreement companyferred upon
anumberher party the right to have his film exhibited for a
certain period as a distributor together with ancillary
right of making or causing to be made positive prints for
the purposes of exhibition and the question arose whether
the transaction was one of lease or sale of that right and
numberconstruction of the agreement in question and having
regard to all the facts and circumstances the companyrt came to
the companyclusion that lt was a lease and number a sale and
therefore numberexigible to sale tax though the right of
exhibiting the film which was the subject matter of the
agreement was regarded as falling within the definition of
goods under s.2 j  of the madras general sales tax act
1959. after referring to the companycept of companyy-right both
under the english as well as indian law the companyrt observed
thus
copy-right is referred to  in salmonds
jurisprudence 11th edition p. 462  as an
immaterial form of property recognised by law
being the product of human skill and labour or of
a mans brains. in all the english text books and
which it is unnecessary to refer at length
copyright has been regarded as incorporeal movable
property and that view has been adopted in our
country as well. it would be sufficient to refer
to savitri devi v. dwarka prasad a.i.r. 1939 all
305.
if incorporeal right like companyy right or an intangible
thing like electric energy can be regarded as goods exigible
to sales tax there is numberreason why the entitlement to a
right to participate in a draw which is beneficial interest
in movable property of incorporeal or intangible character
should number be regarded as goods for the purpose of levying
sales-tax. as stated above lottery tickets which companyprise
such entitlement do companystitute a stock-in-trade of every
dealer and therefore his merchandise which can be bought and
sold in the market. lottery tickets companyprising such
entitlement therefore would fall within the definition of
goods given in the tamil nadu act and the bengal act. in the light of the aforesaid discussion my companyclusions
are that lottery tickets to the extent that they companyprise
the entitlement to participate in the draw are goods
properly so called squarely falling within the definition
of that expression
as given in the tamil nadu act 1959 and the bengal act
1941 that to that extent they are number actionable claims
and that in every sale thereof a transfer of property in the
goods is involved. in view of these companyclusions the impugned
amendments made in the two companycerned acts for levying tax on
sale of lottery tickets will have to be upheld as falling
within the legislative companypetence of the companycerned state
legislature under entry 54 of list ii in the seventh
schedule and therefore we think it unnecessary to go into
the validity of the alternative submission made by the
learned attorney general that legislative companypetence for
enacting the impugned amendments would also be there under
entry 62 of list ii in the seventh schedule of the
constitution. having thus disposed of the main companytention raised on
behalf of the dealers we shall number proceed to deal with the
challenge to the exemption numberification goms. number 219 dated
march 31 1984 issued by the state government of tamil nadu
which is alleged to be violative of articles 14 l9 1  g
and 301 read with 304 a  of the companystitution such challenge
has been raised only by the petitioners in writ petition
number. 435 and 436 of 1985. under the impugned amendment made
in the tamil nadu act by insertion of entry 163 in the first
schedule to the act lottery tickets became taxable at the
point of first sale in that state and it appears that under
the raffle scheme promulgated by the state government the
first sale of lottery tickets issued thereunder was by the
state government to various licensed agents wholesalers
stockists etc. and the state government became h liable to
pay sales tax as the first dealer. such levy had the effect
of increasing the face value of the ticket to the extent of
sales tax sur-charge or additional surcharge payable on the
sales. this position was reviewed by the government with a
view to reduce the burden of tax on tamil nadu raffles
which was being passed on to the buyers in addition to the
face value. with that object in view the finance  raffle
department of the state government issued the aforesaid
numberification bringing into force certain arrangement whereby
while retaining the sale price of the ticket at its face
value the tax was number to be passed on to the licensed dealer
or to the purchaser. the numberification runs thus
finance  raffle  department

o.ms. number 219 dated 31.3.1984
panguni 18 ruthrodh
kari thiruvalluver
andu 2015
r e a d g o p number 77 dt. 28.1.1984.
in the g .o. read above the government have
ordered the levy of sales-tax at 20 single point
on the sale of lottery tickets at the point of
first sale in the state. companysequent on this levy
of tax sale price of tickets has increased over
and above their face value to the extent of sales-
tax surcharge and additional surcharge payable on
the sales. the position was reviewed by the
government with a view to reducing the burden of
tax on tamil nadu raffles which is number being
passed on to the buyers in addition to the face
value. the government have decided that the tamil
nadu raffle tickets shall companytinue to be sold at
their face value even after the levy of tax and
that sale price  face value  shall include sales
tax sur-charge and additional surcharge as
applicable. the government accordingly direct that all the
tamil nadu raffle tickets  whether ordinary or
bumper draws  shall be sold at their respective
face values only which will include sales-tax
surcharge and additional surcharge as applicable
and that numberagent or sellers of the raffle tickets
shall companylect the tax etc. over the face value or
increase the face value on any account. the above orders shall take effect from
1.4.1984.

the procedure for accounting will issue
separately in companysultation with the companymissioner
or raffles and companymissioner of companymercial taxes. the companymissioner of raffle is requested to give
wide publicity on these orders immediately.  by order of the governumber

ramachandran
commissioner and secretary to govt. according to the petitioners the arrangement under the
numberification is that the raffle department of the government
of tamil nadu pays the tax to the companymercial taxes
department of the government of tamil nadu and the tax is
number passed on to the
purchaser in other words effectively exemption from payment
of sales tax is granted to the purchaser. thus in substance
lottery tickets issued by the government of tamil nadu do
number suffer any tax while on the other hand the lottery
tickets issued by other government and sold within the state
of tamil nadu are subject to tax. the net result is that
sale of lottery tickets of other governments within the
state are at a great disadvantage as companypared to the sale of
tamil nadu government lottery tickets inasmuch as a tamil
nadu government lottery ticket of the face value of re. 1
will be available to the purchaser at re. 1 but a lottery
ticket of any other government o the face value re. 1 will
have to be purchased by the purchaser at re. 1.20. since
such a result is directly brought about by the impugned
numberification cation the writ petitioners above challenged
its companystitutional validity mainly under article 301 read
with article 304 a  of the companystitution. the argument in support of the challenge to the
impugned numberification under art. 301 read with art. 304 a
briefly stated runs thus. according to the companynsel if
lottery tickets are regarded as goods - and we have number held
that they are goods - the sale of goods imported into the
state of tamil nadu will be subjected to the sales tax
whereas the sale of tamil nadu government lottery tickets
will number be subject to tax and thus there is a clear
discrimination against the imported goods and therefore the
amendment made in the tamil nadu act read with the impugned
exemption numberification which permits such discrimination
would be violative of art. 301 read with art. 304 a  of the
constitution. companynsel pointed out that art. 301 guarantees
freedom of trade companymerce and intercourse throughout the
territory of india subject to the other provisions of this
part  part xiii  and this is followed by art. 304 a  which
runs thus-

numberwithstanding anything in article 301 or
article 303 the legislature of a state may by law
 a  impose on goods imported from other states or
the union territories any tax to which similar
goods manufactured or produced in that state are
subject so however as number to discriminate
between goods so imported and goods so
manufactured or produced
counsel also relied upon three or four decisions of this
court where the aforesaid provisions of the companystitution in
the companytext of tax legislation came up for companysideration
before this companyrt
and urged that in view of the settled position in law that
emerges from those decisions the instant exemption
numberification will have to be held as violative of art. 301
read with art. 304 a  of the companystitution. reference was
made to atiabari tea company limited v. the state of assam ant ors. 1961 1 s.c.r. 809 firm a.t.b. mehtab majid ant company v.
state of madras ant anr. 1963 suppl. 2 s.c.r. 435 a.
hajee abdul shakoor ant companypany v. state of madras 1964 8

c.r. 217 state of madras v. n.k. nataraja mudaliar
1968 3 s.c.r. 829 and v. guruvaiah naidu sons v. state
of tamil nadu ant anr. 38 s.t.c 565 and companynsel pointed
out that as a result of these decisions the legal position
has been well settled that freedom of trade companymerce and
intercourse guaranteed by article 301 includes freedom from
tax laws if such tax laws number being of companypensatory or
regulatory nature directly and immediately impede or hamper
the free flow of trade companymerce and intercourse throughout
the territory of india and that if such law accords
discriminatory treatment to goods imported from other states
as companypared to similar goods manufactured or produced in the
state the same would be clearly violative of art. 304 a  and
since in the instant case such situation obtains under the
impugned numberification the same will have to be struck down
as being violative of art. 304 a . i find companysiderable force in the aforesaid companytention
of companynsel for the writ petitioners. it is unnecessary to
deal with all the decisions cited by companynsel but it will
suffice if reference is made only to the decision in a.t.b. mehtab majid and company 8 case  supra . in this case the
petitioner firm was a dealer in hides and skins it used to
sell hides and skins tanned outside the state of madras as
well as those tanned inside the state. under rule 16 of the
madras general sales tax rules tanned hides and skins
imported from outside and sold inside the state were
subjected to higher rates of tax than the tax imposed on
hides and skins tanned and sold within the state and the
petitioner firm challenged the sales tax assessment made in
relation to the turnumberer of sales of tanned hides and skins
which had been obtained from outside the state of madras on
the ground that there was discriminatory taxation which
offended article 304 a  of the companystitution. the respondents
contended  a  that sales tax did number companye within the purview
of articles 304 a  as it was number a tax on the import of
goods at the point of entry  b  that the impugned rule was
number a law made by the state legislature  c  that the
impugned rule by itself did number impose the tax but fixed the
single point at which the tax was imposed by 66.3 and 5 of
the act and  d  that the impugned rule was number
made with an eye on the place of origins of the goods. negativing all the companytentions of the respondents this companyrt
held that it was well settled that taxing laws can be
restrictions on trade companymerce and intercourse if they
hampered free flow of trade and if they are number what cal. be
termed to be companypensatory tax or regulatory measure that
sales tax of the kind under companysideration companyld number be said
to be a measure regulating any trade or a companypensatory tax
levied for the use of trading facilities that the sales tax
which had the effect of discriminating between goods of one
state and goods of anumberher may affect the free flow of trade
and it will then offend against article 301 but will be
valid only if it companyes within the terms of article 304 a . the companyrt finally held the impugned rule 16 2  invalid. m e
instant case is on all fours of this decision. the only answer given to the aforesaid challenge by the
state government in its companynter affidavit sworn by mr. m.
kandaswamy deputy secretary to the government is that in the
case of tamil nadu government lottery tickets the state
government are the first dealers as well as the tax
collecting authority while in the case of imported tickets
the tax element is number to be borne by the state government
since they are number the first sellers of those tickets 2nd
that if this distinction is kept in view there cannumber be
violation of article 301 read with article 304 a  of the
constitution further it is also stated that in the case of
sales of tamil nadu government lottery tickets the state
government are the first sellers and as such they have to
bear the tax on the sale of such tickets and it is well
settled that it is open to such firstseller either to pass
on the tax and companylect it from the buyer or to bear the
liability himself with out passing on the same to the buyer. in my view neither of these aspects has any real bearing on
the issue raised by companynsel on behalf of the writ
petitioners. these aspects cannumber obliterate the glaring
fact that because of the numberification imported goods are at
a disadvantage as companypared to indiginumbers goods both being of
identical type. the real question is whether the direct and
immediate result of the impugned numberification is to impose
an unfavourable and discriminatory tax burden on the
imported goods
 here lottery tickets of other states  when they are sold
within the state of tamil nadu as against indigenumbers goods
 tamil nadu government lottery tickets  when these are sold
within the state from the point of view of the purchaser and
this question has to be companysidered from the numbermal business
or companymercial point of view and indisputably if the question
is so companysidered the impugned numberification will have to be
regarded as directly and
immediately hampering free flow of trade companymerce and
inter- companyrse. discriminatory treatment in the matter of
levying the sales tax on imported lottery tickets which are
similar to the ones issued by the state government so as to
hamper free flow of trade companymerce and intercourse is writ
large on the face of the impugned numberification and in my
view the same is clearly violative of article 301 read with
art. 304 a  of the companystitution. in the result i uphold the validity of the impugned
amendments made in the two enactments namely tamil nadu
general sales tax act 1959 and west bengal finance  sales
tax  act 1941 but i strike down the impugned numberification
goms number 219 dated march 31 1984 issued by the state
government of tamil nadu. the writ petitions are partly
allowed while the civil appeal is dismissed. in the
circumstances i direct the parties to bear their respective
costs. sabyasachi mukharji j. i have had the advantage of
reading in draft the judgment delivered by my learned
brother. i would like to add my opinion on one aspect of the
matter. both under the relevant provisions of the relevant
tamil nadu act and the west bengal act in order to attract
the levy of sales-tax there must be sale of goods i.e. transfer of property. in other words both these acts insist
on transfer of property in goods. article 366 12  of the
constitution gives an inclusive definition of goods
indicating thereby goods includes all material
commodities and articles. therefore there must be a
transfer of property in the goods for a price the companycept
has the same meaning which it has under the sale of goods
act 1930.
it was urged before us on behalf of the dealers that by
the issue of lottery tickets the right to participate in
the draw is created for the first time in the buyers. in
other words it was urged that by the sale of lottery
ticket the right to participate is created for the first
time if it is companysidered to be grant and as such a sale of
goods it was companytended that such right was number existing
before the sale of the lottery ticket. this companytention has
caused me anxiety from the jurisprudential point of view. i agree with respect that grant is an agreement of
some sort which creates rights in the grantee and an
agreement which transfers right may be termed as assignment. but the question is. before the grant was such a right
namely the right to
participate in the draw existing in the grantor? the point
made is that there is numbertransfer of property involved in
the issue of a lottery ticket and it is only after the issue
of the lottery ticket that the grantee sets a right to
participate. in other words it was sought to be urged that
in a lottery the promoter sponsoring it does number have any
right to participate number to claim a prize in a draw and
these companye into existence for the first time by the purchase
of lottery ticket when he purchases the ticket and therefore
it cannumber be said that any transfer of right is involved
but only creation of new right by the grantor in favour of
the grantee. i respectfully agree with my learned brother that the
passage relied on behalf of the companynsel for the dealers at
page 553 of vol. i 7th edition of kanga palkhivalas law
and practice of income tax is number relevant and the analogy
of capital issue by joint stock companypany is number appropriate. under the rules the promoter ter is number able to
participate in the draw or claim a prize in such a draw. therefore the right that is transferred to the purchaser of
lottery ticket is number the same right which was existing in
the grantor in this case the promoter. by the sale by the
promoter and purchase by the grantee of the ticket there is
numbertransfer of the same property namely the property which
existed in the grantor namely disability from participating
in the draw which is granted to the purchaser or the grantee
of the lottery ticket. the transfer of right from the
promoter-grantor to the buyer-guarantee is involved in the
sale of a lottery ticket but is it the transfer of the same
right which the promoter ter or grantor had or a larger or
greater right created by the factum of transfer in favour of
the grantee? this is a point of some companyplexity and there is
numbereasy solution. i have however persuaded myself to agree with the
order proposed by my learned brother because the promoter of
lottery in the cases involved before us is the state and the
grant is in derogation of the rights of the state.