The Seksaria Cotton Mills Ltd. Vs. The
State of Bombay  INSC 25 (30 March 1953)
BOSE, VIVIAN MAHAJAN, MEHR CHAND
CITATION: 1953 AIR 278 1953 SCR 825
Essential Supplies Act (XXIV of 1946), ss. 7,
9--Notification requiring manufacturers to submit true and accurate
information--"Delivery", meaning of-Possession of del credere
agent-Whether possession of seller-Delivery to such agent, effect of--Penal
statutes -Liberal construction.
A Government Notification issued under the
Essential Sup- plies Act, 1946, required every manufacturer to submit
"true and accurate information relating to his undertakings" and a
note of the printed form stated that "by 'delivered' or 'delivery' is mean
physical delivery of cloth in bales and pieces but not cloth which though paid
for, is still in the physical possession of the seller. The appellant Mills
were manufacturers of cloth and D.K. & Co. were their sole del credere, selling agents who guaranteed payment to the appellant of the price of all
sales made and, on the other side, guaranteed delivery to the purchasers with
whom they dealt direct. One D.M. informed the Mills as the agent of an
up-country quota-holder that he bad been authorised by the latter to take delivery
of 13 bales and on this account paid Rs. 14,000 to D.K. & Co. D.K. &
Co. wrote to the Mills that they bad received payment. The Mills dispatched the
goods to D.M. but meanwhile the quota. holder had changed his agent and D.M.
refused to take delivery. The Mills credited the money which had been received
from D.M. to D.K. godown till the question of delivery was settled. In a return
submitted under the Essential Supplies Act 1946, these 13 bales were shown
&a "delivered" to D. K. & Co. The appellants were prosecuted
and convicted on the ground that physical delivery was not given to D.K. &
Co. and the return, was not therefore true and accurate:
Held, that, as the goods had left the Mill
premises, the price had been paid and the property in them had passed and as
they were in a godown under the control of D. K. & Co., D. K. & Co.
were in the circumstances, the persons to whom the goods were actually
delivered, and the conviction was illegal.
A del credere agent is an agent of the seller
only up to a point. Beyond that he is either a principal or an agent of the
In a penal statute it is the duty of the
Court to interpret words of ambiguous meaning in a, broad and liberal sense,
107 826 & CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 61 of 1952.
Appeal by special leave granted by the
Supreme Court on the 10th September, 1951, from the Judgment and Order dated
the 5th March, 1951, of the High Court of Judicature at Bombay (Chagla C.J. and
Bhagwati J.) in Criminal Appeal No. 394 of 1950 arising out of the Judgment and
Order dated the 29th May, 1950, of the Court of the Presidency Magistrate,
Second Court, Mazagaon, Bombay, in Cases Nos. 630 /P and 635/P of 1949.
M.P. Amin (R. J. Kolah, with him) for
appellants Nos. 1, 2 and 4.
As K. Muthuswami for -appellant No. 3.
C. K. Daphtary, Solicitor-General for India
(Porus A. Mehta, with him) for the respondent.
1953. March 30. The Judgment of the Court was
delivered by BOSE, J.-The appellants have been convicted under sections 7 and 9
of the Essential Supplies Act (No. XXIV of 1946) on two counts. The first
appellant is a registered joint stock company, the Seksaria Mills Ltd. It was
fined Rs. 10,000 on each of the two counts, that is to say, a total fine of Rs.
20,000, and this was upheld in appeal. The second appellant is the Director of
the Mills. He was sentenced to two months' rigorous imprisonment and to a fine
of Rs. 2,00,000 on each count. In appeal the sentence of imprisonment was set
aside and the fine reduced to Rs. 10,000 on each count.
The third appellant is the General Manager of
the Mills. He was sentenced to a fine of Rs. 2,000 on each count. This has been
upheld. The fourth appellant is the Sales Manager of the Mills. He was
sentenced to four months' rigorous imprisonment and a fine of Rs. 1,00,000 on.
each count. In appeal the sentence of imprisonment was upheld but the fine was
reduced to Rs. 10,000 on each count. The substantive sentences are to run
827 A Government of India Notification dated
2nd February, 1946, required every manufacturer to submit " true and
accurate information relating to his undertakings " to the Textile
Commissioner C.S.T. Section at Bombay. In compliance with this Order the first
appellant submitted a return, signed by the third appellant, on 10th March,
1947. This return is Exhibit A-1. It showed that 13 bales of cloth (20 half
bales and 3 full bales) were delivered to Messrs. Dwarkadas Khetan &
Company of Bombay during the month of February, 1947, on behalf of the
quotaholder Shree Kishan & Company.
Another return of the same date (Exhibit
A-2), also relating to the month of February, 1947, showed that 6 bales were
delivered to the same Dwarkadas Khetan & Company on behalf of another
quota-holder Beharilal Bajirathi.
A note on the back of each printed form
By 'delivered 'or delivery ' is meant
physical delivery of cloth in bales or in pieces but not cloth which though
paid for is still in the I physical possession of the seller." The offence
charged is that this information is not true and accurate. The case for the
prosecution is that the bales remained in the physical possession of the first
appellant at all material times and were not physically delivered to Messrs.
Dwarkadas Khetan & Company.
Before us the learned Solicitor-General added
that even if there was physical delivery to Dwarkadas Khetan-that did not
comply with the requirements of the form because the form requires information
regarding physical delivery to the quota-holder or his agent and as Dwarkadas
Khetan was not the agent of the quota-holder, the statement is inaccurate and
The learned Presidency Magistrate who tried
the case, and also the High Court on appeal, hold that the prosecution have
established their case and so have convicted and upheld the convictions
828 The business procedure of the first
appellant is -explained by Dwarkadas Khetan. His firm, Dwarkadas Khetan &
Company are the first appellant's sole selling agents.' They are del credere
agents and guarantee payment to the first appellant of all sales made and, on
the other side, guarantee delivery to the purchasers with whom they deal
direct. It is necessary at this stage to understand that because -of various
orders and rules made under the Essential Supplies Act the first appellant
could only sell to specified quota-holders and only up to the limits of their
quotas. The two quota-holders which concern us are Shree Kishan & Company
and Beharilal Bairathi. The first appellant's selling procedure is this. When
goods are ready for sale, it sends Dwarkadas Khetan & Company in duplicate
a " ready sale note ". These notes contain particulars -about the
bales and the persons to whom they are to be delivered.
Upon receipt of this Dwarkadas & Company
contact the quota- holders or their agents.
The next step is for the quota-holder to pay
Dwarkadas & Company the price of the goods specified in the " ready
sale note". Upon receipt of the money, one of the two notes is handed over
to the quota-holder or his agent and he is given a receipt for the money paid.
At the same time Dwarkadas & Company send the first appellant an "
advice slip " telling it that the money has been received and asking it to
prepare a delivery order. The first appellant then debits Dwarkadas &
Company with the price and not the purchaser. For payment it looks to Dwarkadas
Upon receipt of this advice slip the first
appellant's office -prepares the delivery order and delivers the goods to the
party concerned. The person receiving the goods then signs the delivery order
in token of receipt and the signed order is sent to Dwarkadas & Company
who, after making the necessary entries in their books, return the order to the
It will be seen that the first appellant has
no direct dealing, with the purchaser. It acts through Dwarkadas & Company
in every case.
829 It will now be necessary to trace the
history of the two consignments relating to the 13 bales and the 6 bales
separately. We will deal with the 13 bales first.
The quota-holder in respect of the 13 bales
was Shree Kishan & Company. This firm was an up-country firm and so it was
necessary for it to appoint a local agent in Bombay for making payments and
receiving delivery. There was some confusion about the agent so appointed; at first
one Dharsi Moolji was appointed and then P. C. Vora. The letter informing the
first appellant that Dharsi Moolji bad been appointed is not on record but we
were told at the Bar that it is not disputed that I the letter is dated 7th
February, 1947. In any case, Dharsi Moolji wrote to the first appellant on 20th
February, 1947, saying that he had been authorised to take delivery of the
January quota on behalf of Messrs. Shree Kishan & Company and on 21 st
February, 1947, he paid Dwarkadas Khetan & Company a sum of Rs. 14,000 for
this quota. A receipt and an entry in Dwarkadas' books evidence the payment.
The same day Dwarkadas Khetan wrote to the
first appellant telling it that his firm had received payment in advance from
Shree Kishan & Company and that the 13 bales should be sent to "our
godown ", Whether the " our " refers to Dwarkadas' godown or to
a godown jointly shared between Dwarkadas and the first appellant is not clear.
The learned High Court Judges hold that the godown belonged to the first
appellant, but that, in our opinion, is not very material for reasons we shall
On receipt of this " advice slip "
the first appellant prepared what it has called a " ready sale note "
on the same. day, 21st February, 1947, authorising the purchaser to take
delivery within a week. Dharsi Moolji was named as the Commission Agent. (The
man now entered is Prataprai Chunilal, that is, P. C. Vora, but the original
name was Dharsi Moolji. The change was made for reasons which will presently
830 In pursuance of all this, the first
appellant dispatched the 13 bales on 28th February, 1947, and sent them to
Dharsi Moolji. But in the meanwhile other events had taken place.
One P. C. Vora wrote to the first appellant
on 17th February, 1947, and said that he had been authorised to take possession
of these 13 bales. What had happened in the meanwhile was that the,
quota-holder Shree Kishan & Company had changed its local agent.
Accordingly, when the goods reached Dharsi Moolji he refused to take delivery.
The selling agent Dwarkadas thereupon telephoned the first appellant. He
explained that he had actually, received the money for the bales from Dharsi
Moolji and had not received anything from P. C. Vora and so could not deliver
the goods to the latter and equally could not accept money from P. C. Vora
until the matter had been straightened out with Dharsi Moolji. The first
appellant thereupon told Dwarkadas to keep the goods in the Dady Seth godown.
On the same day, apparently before all this occurred, the first appellant
credited Dwarkadas Khetan with the money he had received from Dharsi Moolji on
account of the 13 bales, less Dwarkadas' commission. In other words, this
adjustment in the accounts was the equivalent of payment for the 13 bales by
Dwarkadas Khetan to the first appellant on account of the purchaser Shree
Kisban & Company. It will be remembered that Dwarkadas Khetan & Company
were -the sole selling agents and they alone were responsible to the Mills for
orders' which. were placed through them.
The muddle between Dharsi Moolji and P. C.
Vora was cleared up between 3rd March, 1947, and 14th March, 1947. On 3rd
March, 1947, Dwarkadas Khetan returned the Rs. 14,000 which Dharsi Moolji had
paid and on 14th March, 1947, accepted the money from P. C. Vora. The
alteration in the "ready sale note" of 21st February, 1947, was
presumably made because of these facts. Four days later, Dwarkadas Khetan
delivered the goods to P. C. Vora. (There was no need to make any alterations
in the first 831 appellant's account books because Dwarkadas was responsible
for the-price whatever happened between him and Dharsi and also because in any
event the. goods were sold to Shree Kishan: the only query at that time was who
was his agent to accept delivery for him).
The return with which we are concerned was
made on 10th March, 1947. It will be seen from the above that the position at
that date was as follows: (1) the selling, agent bad informed the first
appellant that he had effected a sale, (2) the selling agent had paid the first
appellant for the goods, (3) specific bales had been set aside and appropriated
to the sale and consequently the property in the goods had passed, (4) the
goods had actually left the Mills' premises, and (5) they were in the Dady Seth
godown under the control of Dwarkadas Khetan.
We say the goods were under the control of
Dwarkadas Khetan for three reasons: (1) as shown above, the property in the
goods had passed and so the, first appellant no longer had title to them, (2)
Dwarkadas says that until be received the money for them from P. C. Vora he
would have refused to deliver them, (3). being a del credere agent he would
have been within his rights (a) to refuse delivery to anybody till he was paid
and (b) to deliver them despite anything the first appellant might say once he
received his money;
also because Dwarkadas' Mehtaji says-
"If the goods are not, accepted by the merchants or their agents, the same
are sent to us and we keep them in the godown." Bearing these facts in
mind, we will now examine the offending document. It is a printed form. The
heading is- " Manufacturer's Returns showing detail% of delivery to
quota-holders or other8 of civil cloth." Then there is a note as follows :
" IMPORTANT:-This form should be
completed in accordance with the instructions printed overleaf... giving full
details relating to the previous month, 832 Under that is the following-
"All stocks pledged/hypothecated by manufacturers with banks or others
shall be included in this statement." The only column in the printed form
which could be related to this is column 3 headed " Full name and address
of person to whom delivered." On the back there are the following
instructions:- "II. The word I others' in the heading of the form includes
artificers who are privileged to purchase cloth under General Permission No.
TCS 42 / 1, dated 10th August, 1944, and any person to whom deliveries are made
under any other General or Special Permission or Order of the Textile
Commissioner. The name of artificers or any other persons shall be 'mentioned
in column 3 and against their names, number and date of General or Special
Permission shall be mentioned in column 2.
III. By 'delivered' or 'delivery'is meant physical
delivery of cloth in bales or in pieces but not cloth which, though paid for,
is still in the physical possession of the seller. " The form was filled
in as follows : In the column headed 11 Full name and address of quota-holder
" the name of ShreeKishan & Company is entered. In the column headed
Full name and address of person to whom delivered the name of Dwarkadas Khetan
& Company is entered. The question we,have to decide is whether these two
entries are inaccurate.
Dealing first with the learned
Solicitor-'General's argument regarding the construction of the words used in
the form, we are of opinion that it cannot be accepted. The second clause of
the portion marked "Important" towards the head of the form states
that all stocks pledged or hypothecated with banks or others must also be
included, and Instruction No. II on the back directs that the names of
"any other person" must be entered in column 3 and that the number
and date of the General or Special Permission must be set out in column 2,
Whether this means that goods 833 cannot be pledged without permission or that
only goods allotted to quota-holders can be pledged we do not know, but
whatever it means, it is clear that the entry in column 3 is not intended to be
confined to quota-holders or their agents but means what it says, namely the
person to whom physical delivery of the goods has been made whoever he may be.
The only question therefore is whether there
was physical delivery to Dwarkadas Khetan. In one sense, there can be no doubt
about that. The goods left the Mills' premises, the property in them had passed
and when Dharsi Moolji refused to receive them they were handed over to
Dwarkadas Khetan and not taken back to the Mills. Dwarkadas Khetan asked the
Mills what he should do with them, and in the end he placed them in the Dady
Seth godown. In any ordinary understanding of the term it would be clear that
the goods had been physically delivered to Dwarkadas Khetan. But the learned
High Court Judges do not appear to have concerned themselves with the question
of actual physical possession because they say:- "It would not be true to
say, and the record amply bears it out, that this godown belonged to Dwarkadas
Khetan. Even if Dwarkadas Khetan had control over the godown, the control was
exercised on behalf of and as the agent of the Mills." Therefore, the test
of the sort of possession which they had in mind was not the control over the
goods. But that has always been regarded as one of the tests of physical or de
facto possession. Lancelot Hall distinguishing between possession in law and
possession in fact says that "possession in the popular sense denotes a
state of fact of exclusive physical control". See his treatise on
Possessory Liens in English Law, page 2. See also Pollock and Wright in their
Essay on Possession in the Common Law, page 119.
Drawing the same distinction they say that
"physical possession" may be generally described by stating that 108
834 "when a person is in such a relation to a thing that, so far as
regards the thing, he can assume, exercise or resume manual control of it at
pleasure, and so far as regards other persons, the thing is under the
protection of his personal presence, or in or on a house or land occupied by
him, or in some receptacle belonging to him and under his control." This
would seem exactly to meet the case of Dwarkadas Khetan.
Possession is an ambiguous term. The law
books divide its concept into two broad categories, (1) physical possession or
possession in fact and (2) legal possession which need not coincide with
possession in fact. The offending form with which we are concerned draws the
same broad line. But even on the factual side of the border niceties creep in
and so the possession of a servant is called custody rather than possession.
But what of an agent ? If a man lives abroad over a period of years and leaves
his house and furniture in charge of an agent who has the keys of the house and
immedi- ate access to and physical control over the furniture, it would be
difficult to say that the agent was not in physical possession. It is true the
legal possession would continue to reside in the owner but the actual physical
possession would surely be that of the agent. And so with a del credere agent,
because such a person is the agent of the seller only up to a point. Beyond
that he is either a principal or an agent of the buyer. This distinction was
discussed by one of us in the Nagpur High Court in Kalyanji Kuwarji v. Tirkaram
Sheolal(1) and was accepted by the Madras High Court in Kandula -Radhakrishna
Rao v. The Province of Madras(2).
But we need not go into all this. Here is an
Order which is to affect the business of hundreds of persons, many of whom are
small petty merchants and traders, the sort of meni who would not have lawyers
constantly at their elbow; and even if they did, the more learned their advisers
were in the law the more puzzled (1) A.I.R. 1938 Nag. 254.
(2) (1952) M.L.J. 494.
835 they would be as to what advice to give for
it is not till one is learned in the law that subtleties of thought and
bewilderment arise at the meaning of plain English words which any ordinary man
of average intelligence, not versed in the law, would have no difficulty in
understanding. In a penal statute of this kind it is our duty to interpret
words of ambiguous meaning in a broad and liberal sense so that they will not
become traps for honest, unlearned (in the law) and unwary men. If there is
honest and substantial compliance with an array of puzzling directions, that
should be enough even if on some hypercritical view of the law other ingenious
meanings can be devised. In our opinion, Dwarkadas Khetan could, in the
circumstances given above, be described, without any straining of language, as
the person to whom the goods were actually delivered. It follows the conviction
on this count cannot stand.
We would like to add that in any event, even
if ultra technical notions regarding the concept of possession were to be
incorporated into the case, it would be wrong to say that there had been
anything beyond a technical and unintentional breach of the law. The facts are
truly and accurately given according to the popular and natural meaning of the
words used; nothing was hidden. The goods did reach the quota holder in the
end, or rather his proper agent, and we cannot see what anyone could stand to
gain in an unauthorised way over the very natural mistake which occurred owing
to what seems to have been a time-lag in the consequences of a change of
agency. So, even if there was a technical breach of the law, it was not one
which called for the severe strictures which are to be found in the trial
court's judgment and certainly not for the savage sentences which the learned
Magistrate imposed. In the High Court also we feel a nominal fine would have
met the ends of justice even on the view the learned Judges took of the law.
The charge on the second count relating to
the 6 bales is a similar one and the facts follow the same pattern. They have
been detailed in the High Court's 836 judgment, so it is not necessary to do
more than outline them here. The quota-holder here is Beharilal Bairathi. In
this case also, Dharsi Moolji paid Dwarkadas Khetan for the goods and the Mills
sent the bales to Dharsi Moolji for- delivery in the same truck as the 13
bales. Dharsi Moolji refused to accept these bales also, so they were deposited
in the Dady Seth godown along with the other thirteen.
Dwarkadas Khetan & Company has been
entered as the person to whom delivery was made. For the reasons given above,
we hold that this was a true and accurate return.
The appeal is allowed. The conviction and
sentence in each of the four cases is set aside. The fines, if paid, will be
Agent for appellants Nos. 1, 2 & 4:
Agent for appellant No. 3: Ganpat Rai.
Agent for the respondent: G. H. Rajadhyaksha.