JUDGMENT <NAME>, J.

1. This is a phenomenal case. Appeal is against a judgment in O.P. (MV) No. 305 of 1986 under Section 110-A of the Motor Vehicles Act, hereinafter referred to as 'the Act'. It is phenomenal, since the victim in the case is the owner of the vehicle itself. Not only this fact makes the case phenomenal but the legal representatives of the deceased got an award of compensation on the basis that the owner of the vehicle, under strange circumstances, met with a motor accident with his own vehicle, which has taken his life. Now, we shall briefly state the facts of the case.

2. Respondent Nos. 1 to 3 in the appeal are the applicants in the application for compensation before <ORG>, Kottayam. The unfortunate event happened on 10.12.1985 at about 11 a.m. Respondent Nos. 1 to 3 herein are the claimants, the widow and minor children of the deceased. 4th respondent is the person who drove the vehicle, which caused the accident. 5th respondent is the insurance company. Appellant herein is a company engaged in the repairing and servicing of motor vehicles. The vehicle in question is a stage carriage KRO 7200. The bus belonged to the deceased. It was taken by him on hire-purchase from <ORG> The vehicle was brought to the garage of the appellant for servicing.

3. The process of servicing was carried on by the workers engaged by the appellant. The husband of the first respondent herein was in the garage. He was talking with some persons. 4th respondent herein was on the driver's seat of KRO 7200. He started the engine and suddenly the bus moved backwards and it hit the compound wall on the western side of the garage. The husband of the first respondent who was leaning to the side of another bus was struck by the left side of the bus KRO 7200 and in fact, he was sandwiched between the bus and the western wall. 4th respondent, <NAME>, escaped running away from the scene.

4. The employees of the garage and others, after pushing back the bus, extricated the injured person (husband of the first respondent) and he was taken to <ORG>, Kottayam. The injury sustained by him was serious. Since it was an internal injury of the lungs, he was subjected to an operation, but, he succumbed to the injury on 11.12.1985. The husband of the first respondent was aged only 38 years. According to respondent Nos. 1 to 3, the deceased was earning about Rs. 10,000/- per month by operating the bus service from Kottayam to Payyappadi. The widow and children claimed a total compensation of Rs. 4,00,000/- under different heads.

5. Several contentions were taken by the appellant including the contention that the <ORG> has no jurisdiction to try the case. The quantum was also disputed. Their liability to pay the amount was also seriously contested. Further, it was contended that in case the appellant is found liable to pay any compensation, the <ORG> should direct the insurance company to pay the amount.

6. The <ORG> very elaborately considered all the points raised before it. It held that the <ORG> has got the jurisdiction to try the case. It found that the appellant is liable to pay the compensation. It fixed the total compensation at Rs. 1,61,760/- with future interest at 12 per cent per annum. It also held that the insurance company is not liable to pay the compensation amount. Naturally, the appellant is aggrieved by the award of the <ORG>. It appeals.

7. Respondent Nos. 1 to 3 have challenged the quantum of compensation and filed a cross-objection.

8. The court is called upon to consider the following points:

(i) Whether on the facts and circumstances disclosed from the evidence, the <ORG> has got jurisdiction to try the case?

(ii) Whether the <ORG> is right in holding that the appellant is liable to pay the compensation?

(iii) Whether the quantum of compensation fixed by the <ORG> is justifiable or adequate?

(iv) Whether the Tribunal erred in declining to direct the insurance company to pay the compensation found to be payable to respondents?

9. Before considering the first question, viz., whether the <ORG> has got jurisdiction on the basis of the power source of the <ORG> under the statute, viz., Section 110 of the Act, we feel that we must be fully informed about the legal status of the appellant in relation to the vehicle of the deceased.

10. Admittedly, the vehicle was in the custody of the appellant and that custody was that of a <ORG>. Section 148 of the Indian Contract Act, defines bailment. Bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall when the purpose is accomplished be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the bailor. The person to whom they are delivered is called the <ORG>. The obligation and responsibility of a <ORG> are delineated in Section 151 of the Indian Contract Act and it postulates that in all cases of bailment, the <ORG> is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of same bulk, quality and value as the goods bailed. For all intents and purposes as long as the contract of bailment continues, there is nothing wrong in deeming the <ORG> as the owner of the goods bailed. We will consider the effect of a motor accident caused by the employee of the <ORG> in greater detail later, after considering the question whether the legal representatives of the deceased are entitled to maintain an action against the appellant herein for compensation under the Act.

11. It was contended that considering the facts revealed in the case, the <ORG> has no jurisdiction to entertain an application under Section 110-A of the Act. In this context, we have to understand the scope and width of Section 110-A . Section 110-A provides for filing an application for compensation arising out of an accident of the nature specified in Sub-section (1) of Section 110 . Section 110-A further denominates the persons who can make the application under Section 110-A Clause (b) of Section 110-A provides "where death has resulted from the accident, by all or any of the legal representatives of the deceased". Of course, Section 110-A also makes provision regarding the form of the application, the contents of the application and the time within which the application has to be filed. The fundamental requirement to attract Section 110-A is that the compensation should be claimed on account of 'an accident' of the nature specified in Sub-section (1) of Section 110 . The <ORG> can entertain an application only if it relates to an accident of the nature specified in Sub-section (1) of Section 110 . So, naturally, we have to consider the nature, scope and content of Sub-section (1) of Section 110 . In fact, the power source of the Claims <ORG> is Section 110 . We shall quote Section 110 (1) in extenso.

110. Claims Tribunals.-(1) A State Government may, by notification in the Official Gazette, constitute one or more Motor Accidents Claims Tribunals (hereinafter referred to as Claims Tribunals) for such area as may be specified in the notification for the purpose of adjudicating upon claims for compensation in respect of accidents involving the death of, or bodily injury to, persons arising out of the use of motor vehicles, or damages to any property of a third party so arising, or both:

Provided that where such claim includes a claim for compensation in respect of damage to property exceeding rupees two thousand, the claimant may, at his option, refer the claim to a civil court for adjudication and where a reference is so made, <ORG> shall have no jurisdiction to entertain any question relating to such claim.

Explanation.-For the removal of doubts, it is hereby declared that the expression 'claims for compensation in respect of accidents involving the death of, or bodily injury to, persons arising out of the use of motor vehicles' includes claims for compensation under Section 92-A

12. As far as the chief question that has to be decided in the case for the purpose of determining whether the application is maintainable before the <ORG> we feel that the key words to be considered in Section 110 (1) of the Act are "claims for compensation in respect of accidents involving the death of, or bodily injury to, persons arising out of the use of motor vehicles" (emphasis added). The <ORG> is given the power to adjudicate claims for compensation arising out of the use of motor vehicles. The legislature, through Section 110 (1) of the Act, has conferred that power on the <ORG>s and the <ORG>s' power is restricted only to claims arising out of the use of motor vehicles. No other restrictions are imposed by the legislature particularly, for the purpose of the case, we may say no restriction as to the class of victims of the accident. "The Claims <ORG> is a <ORG> constituted by <ORG> for expeditious disposal of the motor accident claims. The general law applicable is only common law and the law of Torts. If under the law a person becomes legally liable then the person suffering the injuries is entitled to be compensated and the <ORG> is authorised to determine the amount of compensation which appears to be just.... Section 110 (1) of the Act empowers <ORG> to constitute one or more Motor Accidents Claims <ORG>s for such area as may be specified for the purpose of adjudicating upon claims for compensation in respect of accidents involving the death of or bodily injury to persons. The power is optional and <ORG> may not constitute a Claims <ORG> for certain areas." <CITATION> 1977 ACJ 118 (SC).

13. The Act does not create a new right or even a new remedy but has simply changed the forum and the process for adjudicating claims for compensation arising from accidents by the use of motor vehicles. Sections 110-A to 110-F of the Act merely deal with the change of forum and the process by <ORG> substituting the civil court and its process. On a reading of Sections 110 to 110-F of the Act, it is plain and clear that Motor Accidents Claims Tribunals when constituted would substitute the civil courts in the matter of adjudicating the question of compensation arising out of accidents due to use of motor vehicles. As we said earlier, Section 110 (1) of the Act postulates accidents "arising out of the use of motor vehicles". Though the fundamental principle on which the liability is fastened can be traced to the law of Torts, many of the crucial aspects of that liability have been now made statutory by the Act. Even then the principles of law of Torts are relevant in the quantification of damages. We feel the word 'use' in Section 110 (1) of the Act has been used in a wider sense. It covers all engagements of the motor vehicle, including driving, parking, keeping stationary, repairing, leaving unattended on the road or for any other purposes. In the case when a vehicle is being driven and is stopped or parked for being repaired, it cannot be said that the vehicle is not being used. [See General Manager, Karnataka State Road Trans. <CITATION> 1979 ACJ 452 (Karnataka) and <NAME> v. <NAME> 1980 ACJ 248 (MP)].

14. If the vehicle is parked on a dangerous slope and the accident is caused, we feel that Section 110 of the Act would be attracted. When by the opening of the door of a motor vehicle parked on a public road an accident arises, giving rise to a claim for compensation, it could not be said that the accident did not arise out of the use of the motor vehicle concerned. We feel that the words "use of motor vehicles" in Section 110 (1) of the Act are wide enough to comprehend such cases also.

15. Counsel for the appellant submitted that a reading of Section 110-B of the Act would suggest that the <ORG> has no jurisdiction to entertain an application for adjudication of compensation to be paid to the injured or to the legal representatives in a case of death of a person against persons other than the driver, owner or the insurer. It is contended that Section 110-B of the Act makes the jurisdiction of the <ORG> to be confined only against driver, owner or the insurer. A careful reading of Section 110-B of the Act would not permit such an interpretation. Section 110-B only mandates the <ORG> that an apportionment of the liability of the insurer, owner and driver of the vehicle involved in the accident has to be made.

16. In <ORG> v. <NAME> 1988 ACJ 597 (Kerala), a Division Bench of this court had occasion to consider this question relying on the decisions in <CITATION> 1983 ACJ 13 ( <CITATION> 1986 ACJ 334 (Allahabad), [Sic. <CITATION> 1986 ACJ 344 (P&H)] and distinguishing the decisions in <NAME> v. <ORG> 1982 ACJ 374 ( <CITATION> 1986 ACJ 371 (Allahabad). <NAME>, J., has held that the adjudication of all claims for compensation in respect of the accident arising out of the use of motor vehicle is to be done by the <ORG> and that even though under Section 110-B the driver, owner and the insurer are mentioned, it does not curtail the power of the <ORG> to direct payment of compensation to the injured or the legal heirs of the deceased by any person who caused the accident involving the use of the motor vehicle which resulted in death of or injuries to persons claiming compensation.

17. The same view is expressed in <CITATION> 1990 ACJ 1 (Allahabad), wherein the court held that "<ORG> is not confined in its jurisdiction to claims for compensation which are directed only against the driver, owner and insurer of the vehicle. Where the claim is founded on the assertion that the accident was caused by, apart from the use of the motor vehicle, some third party, the <ORG> shall undoubtedly have jurisdiction to entertain the claim even though it is directed against a third party". The crucial aspect to be looked into in deciding the question of jurisdiction, we feel, is that the claim must be in respect of accidents involving the death of or bodily injury to persons caused or contributed by the use of motor vehicle whether wholly or conjointly with some third party. Section 110-B of the Act, we feel, will not militate the view we have expressed above. We may also refer to Section 110-F of the Act, which clearly states that no civil court shall have jurisdiction to entertain any question relating to any claim for compensation which may be adjudicated upon by <ORG>.

18. <CITATION> 1986 ACJ 344 (P&H), a Full Bench of <ORG> had occasion to consider the question of the width of the jurisdiction under Section 110 of the Act. The case considered by <ORG> was a claim petition filed for compensation for personal injuries and damages caused to the applicant's car dismissed by the <ORG> on a preliminary objection that it has no jurisdiction to entertain the same. The accident occurred when the claimant was crossing a railway gate. A train struck against the car and it is alleged that the engine was without light. The railway crossing gate was lying open and there was no red light to stop traffic. It was pleaded that the accident occurred due to the negligence and carelessness of the railway authorities including the driver of the train and gateman. The appeal against the dismissal of the application was confirmed by the majority judgment. <NAME>, J., speaking for <ORG>, came to the conclusion that the claim was against the railway authorities alone alleging that the accident took place entirely due to their carelessness and negligence and that of the driver of the train and the gateman. There being no allegation that the motor vehicle in any way contributed to the cause of the accident, it cannot be said that the same had arisen out of the use of the motor vehicle. It is difficult for us to agree with this reasoning. If the motor vehicle was not used or was not driven, there was no possibility of an accident at all. So the accident has arisen out of the use of the motor vehicle.

19. In a case where the accident occurs solely on account of the negligence of a bullock-cart driver or handcart driver, it will be none the less an accident arising out of the use of the motor vehicle. In fact Section 110 of the Act does not refer to the question of whose negligence caused the accident. The emphasis is given only to the use of the motor vehicle for the purpose of attracting the jurisdiction of <ORG>. The minority judgment by <NAME>, J., has considered all the aspects of the matter. The learned Judge observed [quoting from 1983 ACJ 13 (Allahabad) para 12]:

The words 'in respect of accidents... arising out of the use of motor vehicles occurring in Section 110 (1) are words of the widest possible amplitude. We see no reason either on the plain language of Section 110 or in any other allied provisions or the scheme of the Act as manifested by the relevant provisions, which may have inhibited or barred the jurisdiction of <ORG> to entertain an application for compensation in respect of third parties, in the present case, the railway.

20. Really speaking, the jurisdiction for a complete adjudication of all the claims for compensation in respect of accident occasioned on the use of the motor vehicle was called out from the general jurisdiction of the different and varied tortious actions which would enable parties to seek relief for compensation in ordinary courts in regard to accidents arising out of the use of motor vehicles and entrusted under Section 110 of the Act with <ORG>. A complete adjudication of all the claims for compensation in such circumstances is absolutely necessary. Then alone, the statute will be effective and so, unless all the parties involved in the accident are arrayed as opposite parties before the same forum and heard on the question of negligence, the matter cannot be properly and effectively disposed of. Otherwise, even in respect of accidents arising out of the use of motor vehicles, it will be only a truncated jurisdiction before <ORG>. We feel that this cannot be the intention of the legislature. We respectfully disagree with the majority decision in <CITATION> 1986 ACJ 344 (P&H).

21. The discussions we have made above, we feel, would make it clear that the submission made by counsel for appellant that the application is not maintainable is devoid of any merit.

22. Of course, we have to deal with a subsidiary point raised by counsel for the appellant that the jurisdiction of the <ORG> is attracted only if the accident involving the motor vehicle should have happened in a public place. To substantiate this contention, counsel referred us to Section 95 of the Act. We shall examine the sustainability of the submission.

23. We have to bear in mind the intendment of Section 95 when we examine the correctness of the submission made by counsel for the appellant. The intention of the legislature to introduce Section 95 of the Act has to be understood in the light of Section 94 of the Act. Section 94 of the Act was introduced when the legislature felt the necessity for insurance against third party risk. It is to ensure that third parties who suffer due to user of motor vehicles should be able to get damages and recoverability of the damages should not depend upon the financial condition of the driver or owner of the vehicle who caused the accident and so, Section 94 of the Act obliged the owner of a motor vehicle to keep it insured.

24. In dealing with the necessity for insurance against third party risk, of course, the statute provides that no persons shall use except as a passenger or cause or allow any other person to use a motor vehicle in a public place, unless there is in force in relation to the use of the vehicle by that person or that other person, as the case may be, a policy of insurance complying with the requirements of Chapter VIII of Act 4 of 1939. The statute mandates the necessity for a valid policy in force in regard to the motor vehicle if it is intended or used in a public place. Section 95 of the Act which deals with the requirements of policy and limits of liability also uses the words "arising out of the use of the vehicle in a public place" but it is significant to note that in dealing with the jurisdiction of the <ORG> under Section 110 (1) the statute does not make it a condition that the accident should occur by the use of the motor vehicle in a public place. Section 92-A of the Act is indicative of the fact that liability to pay compensation arising out of the use of a motor vehicle need not be the use of the motor vehicle in a public place.

25. We shall also consider along with the question of the width of term 'public place' the question of insurance company's liability. That has to be answered with reference to Sections 94 and 95 of the Act. As per Section 95 (1) (b) of the Act, insurer is liable to pay compensation to the extent specified in Sub-section (2) of Section 95 of the Act for the death of or bodily injury to any person or damage to any property of a third party if the same is caused by or arises out of the use of the insured vehicle in a public place. Section 2 (24) of the Act defines what is public place. It means a road, street, way or other place, whether a thoroughfare or not to which the public have a right of access and includes any place or stand at which passengers are picked up or set down by a stage carriage. Admittedly, in this case the accident took place not in a road, street or way. If at all, it can be considered as a public place, it can only be a place to which the public have a right of access. In order to attract this part of definition, it must be proved that the public have a right of access to that place. It is not enough that as a matter of fact the public have access. <CITATION> 1970 ACJ 44 (Madras). Even where access to particular road or place is permissive, it cannot be said that public have a right of access to such road or place. Hence such road or place cannot be regarded as public place. <CITATION> 1982 KLT 468. In <NAME> v. <NAME> 1981 ACJ 343 (MP), <ORG> has held that service station premises is not a public place.

26. We do not propose to give in this case a final verdict as to the question whether the premises of the service station is a public place within the meaning of the definition of public place in the Act. The phrase "right of access" mentioned in the definition of public place has to be given a meaningful interpretation, taking into account the purpose of the legislation. The general principle now accepted in regard to question of interpretation is purposive interpretation as against the literal interpretation. In this case, apart from the fact that the insurance company can put forward a defence that the accident took place not in a public place, there can be a valid defence for the insurance company to get itself exonerated from the liability on the ground that the contract of insurance is a contract of indemnity and by the insurance policy, the company has undertaken to indemnify the loss that would have been occasioned to the owner, in case he is compelled to pay damages on account of the accident. Certainly, in this case the owner who is the victim is not compelled to pay compensation to the legal representatives of the victim and so, there is no question of indemnifying the insured and so, the insurance company is not in any way liable to pay compensation that has to be awarded in this case.

27. We have said that the liability to pay compensation is a liability under the general law of <ORG>. We have already determined in paragraph 10 the status of the appellant in this case as that of a bailee. What happened is clear. An employee of the bailee caused the accident by his negligence. Allowing the employees to sit in the driver's seat also is an act of imprudence and negligence on the part of the appellant. If the accident has occurred in the same way as it has occurred in this case and if the victim is not the owner of the vehicle, but a stranger, it will be difficult for the bailee to say that he is not liable for compensation. Perhaps, that stranger victim may have a cause of action against the owner of the vehicle also. If circumstances are brought out to fasten liability on the owner of the vehicle or in case the owner fails to get himself extricated from the liability on the basis of exceptions that can be claimed when the accident has occurred on account of the negligence of the bailee both the owner and the bailee may be liable to pay compensation to the injured or legal representatives of the deceased. Anyhow, in general law it is not difficult to find liability for the negligence of the person who was on the driver's seat. There is no dispute that the person who was on the driver's seat, was solely responsible for the accident and that he was the employee of the appellant. We have no hesitation to hold that the person who actually caused the accident by his negligence has no defence to escape liability to pay compensation. He is bound to account for his negligence. If the person who is primarily bound to account for the negligence is the employee of the appellant, the appellant is also vicariously liable to account for the negligence of his employee.

28. There are decisions to the effect which would show that the bailee's sole interest is essentially possessory and it is demonstrated by his ability to recover for injury to the goods without proof of personal loss against a stranger and is consistent with the principles of bailment generally. A right to immediate possession is better characterised as generating a constructive rather than an actual possession.

29. In <NAME> v. <NAME> (1877) 3 NZ Jur (NS) CA 10 at 16 per <NAME>, <NAME> said:

Until I heard Mr. <NAME>'s able and ingenious argument, it never occurred to me to doubt that the law is that either <NAME> or bailor may sue a wrongdoer for the entire damage done to the chattel bailed. And after careful consideration of the argument and examination of the authorities, I adhere to my previous opinion.

There is no dispute that a bailee's possession is a prerequisite or to which it is one of several grounds of potential qualification. His lack of full ownership does not preclude him from recovering the full value of the chattel or the full cost of its impairment; the rule in such circumstances is that "as against a wrongdoer, possession is title", Vide The Winkfield, (1902) p. 42 at 60 and Bailment by Palmer, 1979 <ORG>., p. 177.

30. <NAME> in his book Bailment says:

It was only in the present century that the bailee's rights of action against a wrongdoer were finally established, although decisions granting him an action in trover for full value of the goods can be traced from the beginning of the 19th century. It was at first unclear whether his use of this or any remedy was conditional upon his liability to the bailor; if it were not, he would stand to recover more than he had lost, while the wrongdoer would be forfeiting more than the extent of his immediate damage.

31. We have considered now only the <ORG>'s right to recover damages from a wrongdoer in regard to the goods bailed. But the question that has to be focussed is the liability of <ORG> to third parties. Again we rely on Bailment by Palmer at p. 966. Referring to decided cases, the learned author has epitomized the rule thus:

The bailee's responsibility for injury or loss inflicted upon a stranger to the bailment by the chattel is a simple facet of the ordinary law of negligence or trespass and does not necessitate exhaustive discussion. He will be liable if, through the negligent misuse of the chattel by himself or his servants acting in the course of their employment, a third party is foresee-ably injured or property is foreseeably damaged.

We feel that the appellant whose status is that of a <ORG>, in the circumstances, is accountable for the negligence of his employee. So, necessarily, we have to hold that the appellant is liable to pay compensation to the claimants.

32. Now, we have answered the points regarding jurisdiction and other question of law against the appellant and the question of the liability to pay compensation by the insurer in favour of the insurance company. So we have to dismiss the appeal, M.F.A. No. 175 of 1990. The appellant has challenged the quantum of compensation allowed by the <ORG>. The question of quantum of compensation we will be dealing when we deal with the cross-objection.

33. Now we have to consider the cross-objection filed by the claimants, we have upheld the finding that the first and second respondents are liable to pay compensation to the claimants, the petitioners in the cross-objection. The claimants have claimed a total amount of Rs. 4,00,000/- as compensation. By the award, the <ORG> determined a total compensation of Rs. 1,61,760/- with interest at 12 per cent per annum from 2.5.1986 till date of realisation and proportionate costs from respondent Nos. 1 and 2 in O.P. (MV) No. 305 of 1986. The claimants submit that the compensation awarded is inadequate, insufficient and not fair. Of course, in the matter of determining compensation, the court should approach the question on the basis that it must be fair and reasonable. The court is not expected to approach the problem as if the respondents are wrongdoers in the sense that they have to be penalised.

34. The petitioners in cross-objection claimed a total compensation of Rs. 4,00,000/-under different heads. In part I claimants wanted the compensation under three heads:

(i) Transport to and from hospital Rs. 250/- (ii) Damage to clothing and articles Rs. 250/- (iii) Funeral expenses Rs. 7,500/-

On the above three heads, the <ORG> allowed the first two claims in toto and for the third claim, viz., funeral expenses, the <ORG> allowed an amount of Rs. 1,500/-. Strictly speaking funeral expenses is not an item which can be claimed. This is on account of the fact that death is a certain event, though we cannot predicate when exactly it will happen and when it happens it is the duty of the living to bury the dead. But, in the case of death due to an accident as against the natural death, unforeseen expenses have to be incurred and there is nothing wrong in allowing a small amount under this head and that is what has been done in this case. The <ORG> has awarded only Rs. 1,500/-.

35. In part II, the claimants have claimed an amount of Rs. 25,000/- as compensation for pain and suffering, Rs. 25,000/- as compensation for loss of consortium to the 1st petitioner and Rs. 3,40,000/- as compensation for loss of income on account of death. The <ORG> awarded Rs. 5,000/- as compensation for pain and suffering of the deceased. The accident had occurred at about 2 p.m. At the time, when the victim was taken to the hospital, he was conscious. That is clear from the evidence of PW 1. The end came on 11.12.1985, at about 11 a.m. and considering the serious injury suffered by the victim which resulted in his death, the amount of Rs. 5,000/- as compensation for the pain and suffering of the deceased allowed by the <ORG> is only fair and reasonable and we confirm <ORG>'s determination of compensation on this count.

36. Though in the petition Rs. 25,000/- is claimed for loss of consortium to the 1st claimant, there is no specific claim for the loss of filial affection and care for the two minor children. The deceased was aged only 38 years. He seems to be a successful businessman, who was conducting a bus service. The <ORG> has awarded only Rs. 5,000/- as compensation for loss of consortium to the 1st claimant. We feel that the amount awarded is inadequate. We are of opinion that in the circumstances of the case, the 1st claimant is entitled to an amount of Rs. 7,500/- for the loss of consortium and the children together are definitely entitled to an amount of Rs. 5,000/- for the loss of love and affection of their father.

37. There is no separate claim for loss of expectation of life, which is an allowable claim in determining compensation payable in the case of death on account of motor vehicle accident. Though there was no specific claim on this count, <ORG> has held that in the total claim made by the claimants if a legitimate count has not been specifically mentioned, the court is not precluded from allowing a reasonable amount under a legitimate count if by allowing, the total amount will not exceed the claim. We feel, in the circumstances, considering the age of the victim, the claimants are entitled to an amount of Rs. 5,000/- on account of the loss of expectation of the life of the deceased. Of course, the amount goes to the estate of the deceased and the estate naturally devolves on the legal representatives, who are the claimants before us.

38. Now we have to decide the question of loss of contribution to the claimants from the earnings that could have been made had the victim survived. This is the main claim. The claimants wanted under this count an amount of Rs. 3,40,000/-. The <ORG> found that the contribution that could have been given for the maintenance of the family by the deceased, if he had survived, is Rs. 960/-per month. The <ORG> has taken 960 as the multiplicand and applied 14 as the muliplier and calculated the amount at Rs. 1,61,280/-. From the said amount for the vicissitudes of life and for lump sum payment a deduction of 1/14th of the total amount has been effected by the <ORG> and found Rs. 1,49,760/- as the net amount. Though PW 1 has given evidence that her husband was earning Rs. 10,000/- per month for six months immediately prior to the accident, by conducting the bus service, the <ORG> did not accept this evidence and determined comparatively a low figure of Rs. 1,200/- stating that it would be a reasonable amount to be fixed as his monthly income. From the amount of Rs. 1,200/- the <ORG> deducted 1/5th for the personal expenses of the deceased and came to the conclusion that the contribution the deceased would have given for maintenance of his family as Rs. 960/- per month. In fixing the multiplier the <ORG> only said the deceased is aged 38. No other basis is given for determining the multiplier as 14. Considering the age of the deceased and the nature of the business the deceased was carrying on and the fact that the widow is aged only 38 at the time of filing the application and other two claimants who are minors aged 13 and 8, we feel that the multiplier adopted by the <ORG> is not justifiable. Further, it has to be remembered that <ORG> has said that the normal expectancy of the life of an Indian is 70. In view of all these facts, we feel that the multiplier, if it should be fair and reasonable, must be 20. Calculating on that basis, the total amount payable under this count will come to Rs. 2,30,400/-. Further taking into account that we have adopted the monthly contribution for the purpose of determining the compensation under this head as Rs. 960/- while the claim of the claimants is Rs. 10,000/- per month, which was attempted to be proved by producing Exh. A-9 we feel that for payment of the amount as a lump sum and the vicissitudes of life 1/6th of the total amount should be deducted. Deducting 1/6th of the total amount the net amount will come to Rs. 1,92,000/-.

39. In the result, the total amount of compensation payable is Rs. 1,92,000/- + Rs. 24,500/- (on other miscellaneous counts) i.e., Rs. 2,16,500/-. We allow the cross-objection and modify the award, directing respondent Nos. 1 and 2 in the application to be jointly and severally liable to pay an amount of Rs. 2,16,500/- with 12 per cent interest from the date of the filing of application till payment to the claimants. We apportion thus:

Rs. 75,000/- with interest at the rate of 12 per cent from the date of application till payment to the widow, the first claimant and Rs. 70,750/- with interest at the rate of 12 per cent to each of the minor children. If any amount has already been paid in this case, it has to be adjusted. The minor's share should be deposited in a nationalised bank for such period till the minors attain majority.


PETITIONER: CHAINRUP SAMPATRAM Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX,WEST BENGAL. DATE OF JUDGMENT: 09/10/1953 BENCH: <NAME>, <NAME> BENCH: <NAME>, <NAME> DAS, <NAME>, VIVIAN HASAN, GHULAM BHAGWATI, NATWARLAL H. CITATION: 1953 AIR 519 1954 SCR 211 CITATOR INFO : RF 1991 SC1338 (17) ACT: Indian Income-tax Act (XI of 1922), ss. 4(1)(b) and 14(2)(c) -Ascertainment of profit by valuation of stock-Stock-in-trade removed to Native State-Place where profit accrues -Exemption under s. 14 (2) (c)-Principles underlying valuation of stock. HEADNOTE: The assesses firm which carried on business at Calcutta in bullion despatched during the accounting year to Bikaner, where its partners resided, a certain quantity of silver bars and showed them a,; having been sold to the partners. The Income-tax authorities disbelieved the story of the sale and, treating the bars as stock-in-trade and valuing them at their market value at the close of the year which was much higher than the cost, assessed the firm's profits at Rs. 2,20,887. The assessee contended that, even admitting that the bars were the stock-in-trade of the business, the increased value at the close of the year accrued at Bikaner and was exempt from tax in British India under s. 14(2)(c) of the Income-tax Act. <ORG> held that the notional profit representing the appreciation in value of the stock-in-trade emerged out of the valuation and the profit accordingly arose at the time when, and at the place where, the valuation was made, and as the valuation was made at Calcutta s. 14(2)(c) did not apply and the profit was taxable. On appeal, 212 Held, that the view of <ORG> that the profit &rose out of the valuation of the closing stock and the situs of its accrual or arising was therefore where the valuation was made, was erroneous. The conclusion of <ORG> that the profit did not accrue in Bikaner but at Calcutta could, however, be supported on another ground, viz., that the source of the profit was the business and as the profit could be correctly ascertained according to the method adopted by the assessee only after bringing into the trading account his closing stock wherever it may exist, the whole of the profits must be taken to accrue or arise at the place of carrying on the business, viz., Calcutta, The principles underlying the method of ascertaining profits by valuation of stock at the beginning and close of the year and of the rule that the closing stock is to be valued at cost or market value, whichever is the lower, explained. <CITATION> (12 Tax Cas. 813) and <CITATION> . 48 Mad. 836) referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION Civil Appeal No. 142 of 1952.

Appeal by special leave granted by <ORG> by its order dated the 14th March, 1952, from the Judgment and Order dated the 4th day of June, 1951, of <ORG> (<NAME> and <NAME>.) Special Jurisdiction (Income-tax) in I.T.R. Nos. 7 and 6 of 1947 arising out of the Order dated the 26th day of March, 1946, of <ORG>, Calcutta Bench, in 66 R.A. No. 3 Bengal 1946-47 and 66 R.A. No. 4 Bengal 1946-47.

<NAME> (<NAME>, with him) for the appellant.

<NAME>, Solicitor-General for India (<NAME>, with him) for the respondent.

1953. October 9. The Judgment of the Court was delivered by <NAME> is an appeal by special leave from a judgment of <ORG> at Calcutta answering a reference by <ORG> under section 66 (2) of the Indian Income-tax Act , 1922, hereinafter referred to as "the Act".

The appellant is a registered firm consisting of two brothers as partners with equal shares. The firm was carrying on business at Calcutta as bullion merchants dealing mainly in silver and kept its books of account on the mercantile basis. In the course of the year of account 1997 (Ramnavami) corresponding to 1941-42, 582 bars of silver (some from the old stock in hand at Calcutta and some purchased elsewhere during the year) were sent to Bikaner where the partners resided, and their value at cost was credited in the books of the firm. In the assessment of the firm for the year 1942-43, it was alleged that the said silver bars had been sold to the partners for their domestic use but the Income-tax authorities held that the alleged sale was not "genuine and that the said silver bars still formed part of the stock-in-trade of the firm at the close of the previous year 1997, and they accordingly included in the taxable profits a sum of Rs. 2,20,887 as the excess arising from the valuation of the said 582 bars at market price on the closing day. They were valued at market rate at which the rest of the closing stock at Calcutta was valued in the books of the firm.

On appeal <ORG>, on a consideration of all the facts and circumstances of the case, recorded its finding as follows:

"All these circumstances make it clear to us that the action of the Income-tax authorities in treating the stock of silver bars in Bikaner as part of the stock-in-trade of the Calcutta business was amply justified. The appellant on account of the panic in Calcutta had to remove the valuable stock-in-trade to a safe place in Bikaner just as many other Calcutta businessmen did at that time. The partners of the firm then noticed the upward trend of the silver market, and decided to take advantage of the camouflage afforded by the entries in the books of account and the story of sale to partners, so that the profit of the year of account could be substantially reduced artificially."

The appeal was accordingly dismissed. The application by the firm under section 66(1) of the Act asking  for a reference to <ORG> of six questions as questions of law arising out of the order of the <ORG> was also rejected.

Thereupon the firm moved <ORG> under section 66(2) , and the court directed the <ORG> to refer the following question of law for its decision:

Whether in the circumstances of the case and on a true construction of section 4 (1) (b) and section 14 (2) (c) of the Indian Income-tax Act , the sum of Rs. 2,20,887 was in law assessable to tax ?

The reference was heard by <NAME> and <NAME>, who answered the question in the affirmative. The firm being admittedly resident and ordinarily resident within the meaning of sections 4-A and 4-B in what was then known as British India, its total income would include also income accruing or arising to it without British India under section 4 (1) (b) (ii). The firm, however, claimed exemption in respect of the said sum under section 14(2)(c) which provided that the tax shall not be payable by an assessee in respect of any income, profits or gains accruing or arising to him within an Indian State. It was contended that even on the finding of the Income-tax authorities that the silver bars in question formed part of the stock-in-trade of the business at Calcutta and their removal to Bikaner had been effected only for reasons of security, the said bars having remained there during the rest of the accounting year, their value at the market rate at the close of the year being an increment to the goods at Bikaner, the profit accrued at Bikaner (their an Indian State), with the result that it was exempted under section 14 (2) (c).

<ORG> rejected this contention on the ground that the " notional profit " represented by the appreciation in value of the stock-in-trade " emerges out of the valuation and only when it so emerges it arises or accrues. The source of the profit is thus the valuation, and its situs is where the valuation is made. What is valued is the firm's business at the site of the firm and all the stock-in-trade of the firm is necessarily drawn into the valuation wherever they may be physically situated. The profit which is the result of the stock valuation of a business is thus sui generis, a type by itself, to which the ordinary notions of a physical accrual will not apply. It comes into existence when the valuation is made and since it arises out of the valuation, it arises, in respect of the whole stock-in-trade, at the site of the firm whose stock-in-trade is being valued irrespective of where parts of the stock-in-trade may be."

While we agree with the conclusion that no part of the profits of the firm in the accounting year can be said to have accrued or arisen at Bikaner, the reasoning by which the learned Judges arrived at that conclusion seems to us, with all respect, to proceed on a misconception. It is wrong to assume that the valuation of the closing stock at market rate has, for its object, the bringing into charge any appreciation in the value of such stock. The true purpose of crediting the value of unsold stock is to balance the cost of those goods entered on the other side of the account at the time of their purchase, so that the cancelling out of the entries relating to the same stock from both sides of the account would leave only the transactions on which there have been actual sales in the course of the year showing the profit or loss actually realised on the year's trading. As pointed out in paragraph 8 of the Report of the Committee on Financial Risks attaching to the holding of Trading Stocks, 1919, " As the entry for stock which appears in a trading account is merely intended to cancel the charge for the goods purchased which have not been sold, it should necessarily represent the cost of the goods. If it is more or less than the cost, then the effect is to state the profit on the goods which actually have been sold at the incorrect figure...... From this rigid doctrine one exception is very generally recognised on prudential grounds and is now fully sanctioned by custom, viz., the adoption of market value at the date of making -up accounts, if that value is less than cost. It is of course an anticipation of the loss that may be made on those goods in the following year, and may even have the effect, if prices rise again, of attributing to the following year's results a greater amount of profit than the difference between the actual sale price and the actual cost price of the goods in question" (extracted in paragraph 281 of the Report of <ORG> presented to British <ORG> in April, 1951). While anticipated loss is thus taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into the account, as no prudent trader would care to show increased profit before its actual realisation. This is the theory underlying the rule that the closing stock is to be valued at cost or market price whichever is the lower, and it is now generally accepted as an established rule of commercial practice and accountancy. As profits for income-tax purposes are to be computed in conformity with the ordinary principles of commercial accounting, unless, of course, such principles have been superseded or modified by legislative enactments, unrealised profits in the shape of appreciated value of goods remaining unsold at the end of an accounting year and carried over to the following year's account in a business that is continuing are not brought into the charge as a matter of practice, though, as already stated, loss due to a fall in price below cost is allowed even if such loss has not been actually realised. As truly observed by one of the learned Judges in <CITATION> (1), " Under this law (Revenue law) the profits are the profits realised in the course of the year. What seems an exception is recognised where a trader purchased and still holds goods or stocks which have fallen in value. No loss has been realised. Loss may not occur. Nevertheless, at the close of the year he is permitted to treat these goods or stocks as of their market value."

An illustration of the rule in its practical working is to be found in the case of the <CITATION> (2). In 1921 the (1) 12 Tax Cas. 813, 827. (2) (1925) I.L.R. 48 Mad. 836.

assessee purchased a large stock of piece-goods at Rs. 13-8 a piece. At the end of the year the market value fell to Rs. 6 a piece, and he made out a loss by valuing the whole stock at the market rate, including the unsold pieces in hand at the end of the year. The loss was allowed in his assessment to income-tax. In the following year (1922), however, he entered the same unsold goods as opening stock at the cost price of Rs. 13-8. Some of those pieces remained unsold at the end of 1922 also and he credited their value at Rs. 8-8 a piece, the market rate then prevailing, and showed a loss on the year's trading. The Income-tax authorities refused to allow the loss thus calculated, and assessed him as having made a profit on the footing that the opening stock of 1922 should have been valued at Rs. 6 a piece and the unsold pieces at Rs. 8-8 a piece. The assessment was upheld as properly made, though, it will be seen, the transactions of 1922, or even of the two years taken together, ended actually in a loss. Thus, while the valuation of the unsold stock at the end of each year at market rate which was less than cost was accepted, the valuation of the unsold goods carried over as opening stock of 1922 at Rs. 6 a piece consistently with their valuation as the closing stock of 1921 was insisted upon in order to rectify the distorted picture of the trading results of 1921 which were not correctly reflected in the accounts by reason of the assessee having adopted the lower market rate instead of cost as the value of the closing stock in 1921. If the market had risen to, say, Rs. 15 instead of to Rs. 8-8 a piece at the end of 1922, then' on the principles indicated above, it would have been open to the assessee to value the closing stock at cost (Rs. 13-8), and the Income-tax authorities could not have claimed to bring into the assessment the appreciated value of the unsold goods. It will thus be seen that no question of charging the-appreciated value of closing stock as " notional profits " can really arise. In the present case, although it would appear that the cost price of part of the silver despatched to Bikaner was less than the market price at the end of the year, the reference did not raise any question regarding the basis on which the amount in dispute, viz., Rs. 2,20,887, was arrived at. On the other hand, the question referred assumed that the said sum was correctly computed and put in issue only its assessability in law on a true construction of section 4(1) (b) and section 14(2) (c) of the Act. Again, it is a misconception to think that any -profit " arises out of the valuation of the closing stock and the situs of its arising or accrual is where the valuation is made. As already stated, valuation of unsold stock at the close of an accounting period is a necessary part of the process of determining the trading results of that period, and can in no sense be regarded as the " source " of such profits. Nor can the place where such valuation is made be regarded as the " situs of their accrual ". The source of the profits and gains of a business is indubitably the business, and the place of their accrual is where the business is carried on. As such profits can be correctly ascertained according to the method adopted by an assessee only after bringing into the trading account his closing stock wherever it may exist, the whole of the profits must be taken to accrue or arise at the place of carrying on the business. On the finding of the Income-tax authorities that the 582 bars of silver lying at Bikaner had not been really sold but remained part of the unsold stock of the firm's business at the end of the accounting year, the whole of the profits of that year must be taken to have accrued or arisen at Calcutta where the business was carried on, no part of that business having admittedly been transacted at Bikaner.

We agree with <ORG> that the question referred should be answered in the affirmative though on different grounds. The appeal is accordingly dismissed with costs.

Appeal dismissed.

Agent for the appellant: <NAME>.

Agent for the respondent: <NAME>.


PETITIONER: THE SALES TAX OFFICER, PILIBHIT Vs. RESPONDENT: MESSRS. BUDH PRAKASH JAI PRAKASH. DATE OF JUDGMENT: 03/05/1954 BENCH: <NAME>, T.L. VENKATARAMA BENCH: <NAME>, T.L. VENKATARAMA MAHAJAN, MEHAR CHAND (CJ) <NAME>, B.K. BOSE, VIVIAN BHAGWATI, NATWARLAL H. CITATION: 1954 AIR 459 1955 SCR 1133 CITATOR INFO : R 1955 SC 661 (88,131,147) D 1958 SC 452 (9) R 1958 SC 560 (14,21) F 1958 SC 764 (5,6,8) E 1959 SC 135 (4,27) RF 1961 SC1065 (4) RF 1961 SC1534 (11) R 1962 SC1037 (10) F 1963 SC1207 (43,50) R 1965 SC1082 (9,14,16) RF 1967 SC1895 (247) RF 1970 SC 898 (46) R 1976 SC1016 (9) E 1978 SC 449 (29,42,52) D 1985 SC1293 (43) RF 1986 SC1556 (4,23,29) RF 1990 SC 313 (23) ACT: Government of India Act, 1935, Schedule VII, List II, entry No. 48-Sale of goods-Meaning of---U. P. Sales Tax Act (Xv Of 1948), s. 2(h)-Explanation III to s. 2(h) and s. 3B--Ultra vires Provincial Legislature. HEADNOTE: Held, that there is a well-defined and well-established distinction between a sale and an agreement to sell. The words "Taxes on the sale of goods" in entry No. 48, List II, Schedule VII of the Government of India Act, 1935, confer power on <ORG> to impose a tax only when there has been a completed sale and not when there is only an agreement to sell. Accordingly section 2(b) of the Uttar Pradesh Sales Tax Act, XV of 1948, enlarging the definition of "sale" so as to include forward contracts must, to that extent, be declared ultra vires. For the same reason Explanation III to section 2(h) which provides that forward contracts "shall be deemed to have been completed on the date originally agreed upon for delivery" and section 3B of the Act must also be held to be ultra vires. <NAME> v. Overseas Exporters ([1921] 3 K. B. 302 at 309, 310 referred to. JUDGMENT:

CIVIL APPELATE JURISDICTION: Civil Appeal No. 23 of 1954. Appeal under article 133(1) of the Constitution of India from the Judgment and Decree dated the 28th February, 1952, of <ORG> at Allahabad in Writ Application No. 7297 of 1951.

<NAME> for the appellant.

<NAME> (<NAME>, with him) for the respondent.

1954. May 3. The Judgment of the Court was delivered by <NAME> is an appeal by the Sales Tax Officer, Pilibhit, against the judgment of <ORG> granting firstly, a writ of certiorari quashing certain assessment orders made against the respondent, and secondly, a writ of prohibition in respect of certain other proceedings for assessment of tax under the provisions of the Uttar Pradesh Sales Tax Act (Act XV of 1948). The respondent is a firm doing business in forward contracts, and was assessed in respect of such contracts to a tax of Rs. 1,082-8-0 for the year 1948-1949 by an order dated 27th February, 1950, Exhibit A, and to a tax of Rs. 7,369 for the year 1949-1950 by an order dated 23rd May, 1950, Exhibit B. For the period, 1st April, 1950, to 31st January, 1951, the respondent paid a sum of Rs. 845-4-0 as tax. Assessment proceedings were also started by the appellant in respect of certain forward contracts relating to gur and peas. The respondent challenged the legality of these proceedings and of the assessment orders on the ground that the Act in so far as it imposed a tax on forward contracts was ultra vires the powers of <ORG>. The learned Judges agreed with this contention, and issued a writ of certiorari quashing the orders of assessment, Exhibits A and B, and a writ of prohibition in respect of the proceedings for assessment of tax on forward contracts in gur and peas. The matter now comes before us in appeal under a certificate of <ORG> under article 133(1) of the Constitution.

Under the Government of India Act, 1935, <ORG> derived its power to impose a tax on the sale of goods under entry 48 in List 11 of the Seventh Schedule, and the Uttar Pradesh Sales Tax Act, XV of 1948, was enacted in exercise of this power. Section 2(h) of the Act defines "sale" as follows :

"Sale" means within its grammatical variations and cognate expressions, any transfer of property -in goods for cash or deferred payment or other valuable consideration and includes forward contracts but does not include a mortgage, hypothecation, charge or pledge."

It is the extended definition of sale as including forward contracts in this section that is relied on as conferring authority on the appellant to make the orders in Exhibits A and B. The point for decision in this appeal is whether the power to impose a tax on the sale of goods under entry 48 includes a power to impose a tax on forward contracts.

Under the statute law of India which is based on English law on the subject, a sale of goods and an agreement for the sale of goods are treated as two distinct and separate matters. Section 4 of the Indian Sale of Goods Act (Act III of 1930), runs as follows:

(1) "A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another.

(2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.

(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred." It will be noticed that though the section groups both sales and agreements to sell under the single generic name of "contracts of sale" following in this respect the scheme of the English Sale of Goods Act , 1893, it treats them as separate categories, the vital point of distinction between them being that whereas in a sale there is a transfer of property in the goods from the seller to the buyer, there is none in an agreement to sell. When the contract is to sell future goods, and under section 6(3) of the Sale of Goods Act even if "the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods", there can be no transfer 'of title to the goods until they actually' come into existence ; and even then, the conditions laid down in section 23 of the Act should be satisfied before the property in the goods can pass. That was also the law under the repealed provisions in Chapter VII of the Indian Contract. Act, 1872. Section 77 of the Contract Act defined "sale" as follows:

"Sale" is the exchange of property for a price. It involves the transfer of the ownership of the thing sold from the seller to the buyer."

Section 79 enacted that, "Where there is a contract for the sale of a thing which has yet to be ascertained, made or finished, the ownership of the thing is not transferred to the buyer, until it is ascertained, made or finished."

The corresponding provisions of the English Act are sections 1 , 16 and rule 5 of section 18 . Section I is as follows: (1)"A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price. There may be a contract of sale between one part-owner and another.

(2)A contract of sale may be absolute or conditional. (3)Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled the contract is called an agreement to sell.

(4)An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred." Section 16 enacts that, "Where there is a contract for the sale of unascertained goods no property -in the goods is transferred to the buyer unless and until the goods are ascertained." Section 18 , rule 5, provides for the passing of property is future goods after they are ascertained. The distinction between a sale and an agreement to sell under section 1 of the English Act is thus stated by Benjamin on Sale, Eighth Edition, 1950:

"In order to constitute a sale there must be- (1)An agreement to sell, by which alone the property does not pass; and (2) an actual sale, by which the property passes. It will be observed that the definition of a contract of sale, above cited includes a mere agreement to sell as well as an actual sale."

This distinction between sales and agreements to sell based upon the passing of the property in the goods is of great importance in determining the rights of parties under a contract. The position is thus stated in Halsbury's Laws of England, Volume 29, page 15, paragraph 13: "An agreement to sell, or, as it is often stated, an executory contract of sale, is a contract pure and simple, whereas a sale, or, as it is called for distinction, an executed contract of sale, is a contract plus a conveyance. Thus, by an agreement to sell a mere jus in personam is created, by a sale a jus in rem is transferred. Where goods have been sold, and the buyer makes default in payment, the seller may sue for the contract price, but where an agreement to buy is broken, usually the seller's only remedy is an action for unliquidated damages. Similarly, if an agreement to sell be broken by the seller, the buyer has only a personal remedy against the seller. The goods are the property of the seller and he can dispose of them. They may be taken in execution for his debts, and if he becomes bankrupt they pass to his trustee in bankruptcy. But if there has been a sale, and the seller breaks his engagement to deliver the goods, the buyer has not only a personal remedy against the seller, but also the usual proprietary remedies in respect of the goods them selves, such as the actions for conversion and detinue. Again, if there be an agreement for sale and the goods perish, the loss as a rule falls on the seller, while if there has been a sale the loss as a rule falls upon the buyer."

Thus, there having existed at the time of the enactment of the Government of India Act, 1935, a welldefined and well- established distinction between a sale and an agreement to sell it would be proper to interpret the expression sale of goods" in entry 48 in the sense in which it was used in legislation both in England and India and to hold that it authorises the imposition of a tax only when there is a completed sale involving transfer of title. This conclusion is further strengthened, when regard is hood to the nature of the levy, Section 3 of the, Act provides for a tax being imposed at three pies in the rupee on the turnover of the assessee, and "turnover" is defined in section 2 (i) as "the aggregate of the proceeds of sale by a dealer", and that would consist of the price and any charges paid at the time of the delivery of the goods, as provided in Explanation I. The substance of the matter is that the sales tax is a levy on the price of the goods, and the reason of the thing requires that such a levy should not be made, unless the stage has been reached when the seller can recover the price under the contract. It is well- settled that an action for price is maintainable only when there is a sale involving transfer of the property in the goods to the purchaser. Where there is only an agreement to sell, then the remedy of the seller is to sue for damages for breach of contract and not for the price of the goods. The law was thus stated in <NAME> v. Overseas Exporters(1): In former days an action for the price of goods would only lie upon one or other of two counts. First, upon the indebitatus count for goods sold and delivered, which was pleaded as follows: 'Money payable by the defendant to the plaintiff for goods sold and delivered by the plaintiff to the defendants': <NAME> and <NAME>, Precedents of Pleading, 3rd ed., p. 38. This count would not lie before delivery: <NAME> v. Arnott(2). The count was applicable when upon a sale of goods the property has passed and the goods had been delivered to the purchaser and the price was payable at the time of the action brought. Secondly, upon the indebitatus count for goods bargained and sold, which was pleaded as follows: Money payable by the defendant to the plaintiff for goods bargained and sold by the plaintiff to the defendant': <NAME> and <NAME>, p. 39. This count was applicable where upon a sale of 'goods the property had passed to the purchaser and the contract had been completed in all respects except delivery, and the delivery was not a part of the consideration for the price or a condition precedent to its payment. If the property had not passed the count would not lie: <NAME> v. Bell(3). In my view the law as to the (1)  3 K. B. 302 at 309 310, (2) (1833) 1 Cr, & M. 333.

(3) (1828) 8 B & C. 277, circumstances under which an action will lie for the price of goods has not been changed by the Sale of Goods Act , 1893."

That is also the law in this country under section 55 of the Sale of Goods Act. The only exception to this rule is when, under an agreement between the parties, the price is payable on a day certain irrespective of delivery, and that is not material for the purpose of the present discussion. The position therefore is that a liability to be assessed to sales tax can arise only if there is a completed sale under which price is paid or is payable and not when there is only an agreement to sell, which can only result in a claim for damages. It would be contrary to all principles to hold that damages for breach of contract are liable to be assessed to sales tax on the ground that they are in the same position as sale price. The power conferred under entry 48 to impose a tax on the sale of goods can therefore be exercised only when there is a sale under which there is a transfer of property in the goods, and not when there is a mere agreement to sell. <ORG> cannot, by enlarging the definition of " sale " as including forward contracts, arrogate to itself a power which is not conferred upon it by the Constitution Act , and the definition of "sale" in section 2(h) of Act XV of 1948 must, to that extent, be declared ultra vires. For the same reason, Explanation III to section 2(h) which provides that forward contracts "shall be deemed to have been completed on the date originally agreed upon for delivery", and section 3-B which enacts that, "Notwithstanding anything contained in section 3 , the turnover of any dealer in respect of transactions of forward contracts, in which goods are not actually delivered, shall be taxed at a rate not exceeding rupees two per unit as may be prescribed " must also be held to be ultra vires. In the result, the decision of <ORG> must be affirmed and this appeal dismissed with costs. Appeal dismissed,


JUDGMENT <NAME>, C.J.

1. The suit out of which this appealarises was instituted by the appellants on the original side of this Court for a declaration that they were entitled exclusively to the use of a certain trade mark and for a perpetual injunction restraining the respondents from using a similar mark. The defence was threefold. In the first place it was said that the respondents had the right to use the mark complained by reason of concurrent user. In the second place it was said that the appellants had in any event lost the right to exclusive user by reason of their acquiescence in the respondents using the marks now complained of. The third plea was that the appellants had abandoned any rights they might have had in the mark. The learned trial Judge (<NAME>, J.) held that the use by the respondents of the mark complained of was an infringement of the rights of the appellants, but the appellants had acquiesced in the course of conduct pursued by the respondents and therefore they were not entitled to relief. On this ground he dismissed the suit but without costs. The appellants challenge the finding of the learned Judge that they acquiesced in the use of the mark by the respondents and the respondents support the judgment on the grounds advanced by them at the trial. They further contend that the learned Judge should have allowed them their costs.

2. The appellants are piecegoods merchants carrying on business in Bangalore and the respondents are piecegoods merchants carrying on business in Madras. The parties do not, however, confine their businesses to these places. The appellants deal in long cloth, shirtings and twill of Indian manufacture. Except for one shipment of goods in 1930 they have never dealt in piecegoods manufactured in England. The respondents do not deal in piecegoods of Indian manufacture, but import from England longcloth shirtings, twill and similar goods. The goods dealt in by the respondents are admittedly of superior quality to those dealt in by the appellants and command considerably higher prices. The learned Judge found as a fact that the business of the respondents caused no financial loss to the appellants and it is manifest that anybody who applied to the respondents for cloth would not get an inferior, but a superior article.

3. The mark of which the appellants claim the exclusive right of user consists of a figure of a baby sitting on four pieces of cloth and holding a rattle in the right hand. Above the figure is the word 'baby' in English, and at the sides the same word in Nagiri, Urdu, Kanarese and Tamil. The mark complained of consists of the figure of a baby kneeling with its hand upon a single piece of cloth, partly unrolled, and underneath are the words 'Baby Brand' in English, and the word 'Baby' in Nagiri, Urdu, Telugu and Tamil. It is conceded by the respondents, as it must be, that if the appellants are entitled to the exclusive use of their mark, the mark adopted by the respondent will constitute an infringement of the appellants' right. According to the plaint the appellants adopted their mark in the year 1927, but this has not been proved. Despite the allegations of acquiescence and abandonment advanced by the respondents no one from the appellants' firm has ventured to go into the witness box. Therefore it has not been proved that the appellants adopted the mark in 1927, but the respondents have admitted that the appellants used it in 1929 and. for the purpose of this case it may be taken that it was adopted by the appellants in that year. The respondents decided to use the mark which they now claim as theirs in the early part of 1930 and they used it on goods imported into this country in August of that year. It was conceded by the appellants in the course of the hearing of the appeal that in instructing their suppliers in England to mark their goods with the mark complained of the respondents acted in good faith and in entire ignorance that the appellants had already adopted the mark of a baby. Further, it was accepted that the respondents have never used their mark on piecegoods of Indian manufacture, but that they have confined it exclusively to goods manufactured in and imported from England.

4. In the course of his judgment the learned Judge has observed that it would appear at one time that piecegoods merchants in India were under the impression that if a trade mark were registered in England this would result in protection in India. That there was this impression is shown from the conduct of the parties in this case. On the 25th September, 1930 the respondents wrote to their suppliers in Manchester asking them to obtain the registration of the mark in suit as their own trade mark. The suppliers took steps to carry out their instructions, but it was discovered that other merchants were using a 'Baby' trade mark and that the appellants had themselves applied for registration in England of their mark. It was also ascertained that the appellants' application had not been granted and the mark claimed by them had been placed on the 'Refused list'. In a letter dated 5th February, 1931, the suppliers wrote to the respondents stating that by allowing their mark to go on the 'Refused list' no one could obtain registration of a similar mark and if they continued to use it for two or three years they might make an application for it to be put on the registered trade mark list, this privilege being given as the result of user of the mark. There was lengthy correspondence between the respondents and their suppliers with regard to registration in England and letters also passed between the respondents and a firm of trade mark agents from whom the respondents sought and obtained advice at the suggestion of their suppliers. The result of the advice was that the respondents decided not to proceed with their application for registration in England and not to expend money in advertising their claim to the mark in India, but to continue to use the mark on the goods imported by them. The appellants were confining the use of their mark to goods of Indian manufacture and in following the course which they did I am of the opinion that the respondents considered that they were acting within their rights.

5. On the 18th April 1931 the appellants legal adviser wrote to the respondents complaining of the infringement of their Trade mark. The respondents were called upon to refrain from using the mark, to withdraw all goods bearing the mark from the market and to pay Rs. 5,000/- by way of damages. On the 28th April, 1931, the legal adviser of the respondents replied to this letter and denied that the mark had in the minds of the public become associated with the appellants goods. It was asserted that the respondents were merely using the mark on English goods and that if a suit were filed it would be defended. The appellants took no further steps in the matter and the business of the respondents in the goods bearing the mark complained of continued to increase greatly year by year. From 14th August, 1930 to 31st December, 1935, the total value of the goods imported by the respondents bearing this mark amounted to nearly Rs. 17,000,00, or over £127,000. In addition to the capital which the respondents had to provide for the shipments they expended Rs. 20,000 in advertising and in other ways in popularising their goods. That the appellants knew of this cannot be doubted for a moment and they were content to allow the respondents to use the mark on the imported goods until the 27th July, 1935, when they filed the present suit. For the purpose of stamping the goods which the appellants imported from England in 1930 they sent a block to their suppliers. On the 30th March, 1931, a few, months after they had imported their one and only lot of English manufactured goods, they wrote to the suppliers to return to them the block, which clearly indicated their intention not to deal any more in goods of this class made in England.

6. At this stage it will be convenient to inquire how the doctrine of acquiescence has been applied in trade mark cases. For the appellants it has been contended that before this doctrine can be applied all the conditions stated by <NAME>, J., in <NAME> v. <NAME> (1880) 15 Ch. D. 96 at p. 105, must be complied with. That case did not relate to a trade mark, but to an agreement for the lease of land. After stating that a man is not to be deprived of his legal rights unless he has acted in such a way as would make it fraudulent for him to set up those rights, <NAME>, J., stated in the following words the elements or requisites necessary to constitute fraud of this description:

In the first place the plaintiff must have made a mistake as to his legal rights. Secondly, the plaintiff must have expended some money or must have done some act (not necessarily upon the defendant's land) on the faith of his mistaken belief. Thirdly, the defendant, the possessor of the legal right, must know of the existence of his own right which is inconsistent with the right claimed by the plaintiff. If he does not know of it he is in the same position as the plaintiff, and the doctrine of acquiescence is founded upon conduct with a knowledge of your legal rights. Fourthly,-the defendant, the possessor of the legal right, must know of the plaintiff's mistaken belief of his rights. If he does not, there is nothing which calls upon him to assert his own rights. Lastly, the defendant, the possessor of the Legal right, must have encouraged the plaintiff in his expenditure of money or in the other acts which he has done, either directly or by abstaining from asserting his legal right. Where all these elements exist, there is fraud of such a nature as will entitle the <ORG> to restrain the possessor of the legal right from exercising it, but, in my judgment, nothing short of this will do.

7. These observations relate to a situation in which the plaintiff has in good faith expended money on another's land. They cannot apply in their entirety to an action for passing off where the defence is acquiescence. It is here not a case of the plaintiff being mistaken as to his legal rights and having expended money on the faith of his mistaken belief; the defendant is not the possessor of the legal right, and it cannot matter whether the defendant knows that the plaintiff has a mistaken belief as to his rights. To support a plea of acquiescence in a trade mark case it must be shown that the plaintiff has stood by for a substantial period and thus encouraged the defendant to expend money in building up a business associated with the mark. In <NAME> v. <NAME> 13 R.P.C. 464, <NAME>, J., observed:

If the plaintiff really does stand by and allow a man to carry on business in the manner complained of, to acquire a reputation, and to expend money, he cannot then after a long lapse of time, turn round and say that the business ought to be stopped.

8. In the same case, but on appeal Lord <NAME>, C.J., said <NAME> v. <NAME> 14 R.P.C. 37 at p. 43:

Is the plaintiff disentitled to relief under that head by injunction because of acquiescence? Of course it is involved, in the consideration of that, that the plaintiff has a right against the defendant, and that the defendant has done him a wrong, and the question is whether the plaintiff has so acted as to disentitle him from asserting his right and from seeking redress from the wrong which has been done him. Cases may occasionally lay down principles, and so forth, which are a guide to the <ORG>, but each case depends upon its own circumstances.

9. Dealing with the question of standing by in Codes v. Addis and Son 40 R.P.C. 133 at p. 142, <NAME>, J., said:

For the purpose of determining this issue I must assume that the plaintiffs are traders who have started in this more or less small way in this country, and have been continuously carrying on this business. But I must assume also that they have not, during that, period, been adopting a sort of <NAME> policy of going to sleep and not watching what their rivals and competitors in the same line of business were doing. I accept the evidence of any gentleman who comes into the box and gives his evidence in a way which satisfies me that he is speaking the truth when he says that he individually did not know of the existence of a particular element or a particular factor in the goods marketed by his opponents. But the question is a wider question than that: Ought not he to have known : is he entitled to shut his eyes to everything that is going on around him, and then when his rivals have perhaps built a very important trade by the user of indicia which he might have prevented their using had he moved in time, come to the <ORG> and say : 'Now stop them from doing it further, because a moment of time has arrived when I have awakened to the fact that this is calculated to infringe my rights'. Certainly not. He is bound, like everybody else who wishes to stop that which he says is an invasion of his rights, to adopt a position of aggression at once, and to insist, as soon as the matter is brought to his attention, or as soon as, in the opinion of the <ORG>, it ought to have come to his attention, to take steps to prevent its continuance; it would be an insufferable injustice were the <ORG> to allow a man to lie by while his competitors are building up an important industry and then to come forward, so soon as the importance of the industry has been brought home to his mind, and Endeavour to take from them that of which they had legitimately made use; every day which they used it satisfying them more and more that there was no one who either could or would complain of their so doing. The position might be altogether altered had the user of the factor or the element in question been of a secretive or surreptitious nature; but when a man is Openly using, as part of his business, names and phrases, or other elements, which persons in the same trade would be entitled, if they took steps, to stop him from using, he gets in time a right to sue them which prevents those who could have stopped him at one time from asserting at a later stage their right to an injunction.

10. In <ORG> v. <ORG>, acquiescence for four years was held to be sufficient to preclude the plaintiff from succeeding. In 1897 the plaintiffs in that case registered the word 'Glacier' as a trade mark in respect of transparent paper as a substitute for stained glass. As the result of user the word had become identified with the plaintiffs' goods. Irr 1900 the defendants commenced to sell similar goods under the name 'Glazine'. In 1905 the plaintiffs commenced an action for infringement. The defendants denied that the use of the word 'Glazine' was calculated to deceive and also pleaded acquiescence. A director of the plaintiff company admitted that he had known of the use of the word 'Glazine' by the defendants for four years - he would not say it was not five years. It was held that the plaintiffs failed on the merits and by reason of their delay in bringing the action.

11. Delay simpliciter maybe no defence to a suit for infringement of a trade mark, but the decisions to which I have referred to clearly indicate that where a trader allows a rival trader to expend money over a considerable period in the building up of a business with the aid of a mark similar to his own he will not be allowed to stop his rival's business. If he were permitted to do so great loss would be caused not only to the rival trader but to those who depend on his business for their livelihood. A village may develop into a large town as the result of the building up of a business and most of the inhabitants may be dependent on the business. No hard and fast rule can be Laid down for deciding when a person has, as the result of inaction, lost the right of stopping another using his mark As pointed out in <NAME> v. <NAME> 14 R.P.C. 37 at 43, each case must depend on its own circumstances, but obviously a person cannot be allowed to stand by indefinitely without suffering the consequence.

12. I consider that in this case there is ample material to support the finding that the appellants have lost their right of action against the respondents by reason of their acquiescence in the respondents use of the mark complained of. During a period of four years the respondents built up a very large business and it has not been suggested, indeed it would be idle to do so, that the appellants did not know of all that was going on. In addition to the capital sunk in their business the respondents spent during this period Rs. 20,000 in popularizing the mark. There is no question of the respondents having the intention to steal the appellants' trade. They were dealing in a better class of goods and as I have already stated it was admitted by the appellants in this Court that the respondents adopted the 'Baby' mark in ignorance of the fact that the appellants were using it.

13. On the 27th August, 1934, a Madras piecegoods merchant named <NAME> wrote to the appellants stating that he desired to use the 'Baby' mark on piecegoods and asked whether they had any objection to this course. It was pointed out to the appellants that the respondents were using this mark on their goods and it was suggested that he should be allowed the same privilege. The letter concluded, If, however, you have any objection to my using 'Baby' brand on my goods, kindly let me know of same immediately on receipt of this letter and also let me know as to the reason for your having allowed Messrs. <NAME> and Company, Madras, to use 'Baby' brand. I have addressed this letter to you because I understand that you are the prior user of 'Baby' brand and not Messrs. <NAME> and Company.

14. On the 4th September, 1934, the appellants replied as follows:

You should know that we have long registered our 'Baby' trade mark and running in all the markets. Any colourable imitation of our marks will make you liable under law for penalty for 'infringement of trade marks' which kindly note.

15. No reference was made in this letter to the fact that the respondents had been using the mark. <NAME> wrote again the next day to the appellants as no reference was made to the position of the respondents in the appellants' reply. In this letter he said:

As stated in my letter of the 27th ultimo Messrs. <NAME> and Company, Madras, have been using 'Baby' brand and I am very much surprised to see that since you say that you have long registered your 'Baby' trade mark, they, the said Messrs. <NAME> and Company, Madras also should be using 'Baby' brand. How is this? I am advised that any trade mark used by more than one is a common property, to say plainly, it is not the exclusive property of any one, and can therefore be used by others also. Having regard to the fact, that 'Baby' brand is being used by you and also by Messrs. <NAME> and Company, Madras, I have no hesitation in saying that the said 'Baby' brand is a common property and can therefore be used by me and others also. If you alone had been using 'Baby' brand and not anybody else, then it is different matter altogether, but now there is also another person using the 'Baby' brand.

16. The reply to this letter was sent on the 13th September, 1934 and consisted of these words:

In reply to your letter dated the 10th instant, we wish to refer you to our letter No. 1973, dated the 4th September, 1934.

17. There is here a deliberate evasion of <NAME> pointed question with regard to the respondents' user of the mark and the next day he wrote to the appellants a letter in which he said:

Unless you give me a satisfactory reply to the points raised in my letter of the 5th September, 1934, I am advised that you are not the exclusive owner of the 'Baby' brand, because it is also being used by another party Messrs. <NAME> and Company, and you have therefore no right to prevent me or anybody else from using 'Baby' brand on piecegoods.

18. To this letter no reply at all was sent and the present suit was not launched till some ten months later. Obviously the appellants were unable to give an effective reply to these pointed questions because they knew that the respondents had built up a very large business by the use of this mark.

19. No one from the appellants' firm has ventured to go into the witness box to explain why they stood by for this long period and allowed the respondents to build up this large business associated with the 'Baby' mark. The appellants have also failed to give any indication of the size of their business. In these circumstances and bearing in mind that the respondents' goods are of better quality and higher in price there is ground for the contention raised by the learned Advocate for the respondents in argument that this suit has not been filed bona fide, but for the purpose of enabling the appellants to take advantage of successful efforts made by the respondents to popularize the mark. In my opinion, it would certainly involve grave injustice to the respondents if the appellants were allowed to step in at this late stage and stop a business which, has been built up openly as the result of the energy of the respondents and the expenditure by them of large sums of money.

20. As the appellants' suit fails by reason of their acquiescence in the use of the mark by the respondents I agree with the learned Judge that it is unnecessary to decide whether the respondents' pleas of abandonment and user are well founded.

21. With regard to the memorandum of cross-objections I consider that the respondents should have their costs in the <ORG> below. That they adopted the mark in ignorance of the fact that it was being used by the appellants is not disputed, and in answer to a question put by the <ORG>, Mr. <NAME>, on behalf of the appellants, made it clear that the appellants were not suggesting that the respondents had continued to use this mark in order to seal the appellants' business. Where a plea of acquiescence or abandonment succeeds, especially where the defendant has taken the trade mark of another in ignorance and has used it in the mistaken belief, but sincerely entertained, that he is acting within the law it would be wrong to deprive him of his costs. I would dismiss the appeal with costs and allow the cross-objections with costs. There will be a certificate for two counsel in both <ORG>s.

Horwill, J.

22. I agree.