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Report No. 61

1C.3. Difficulty of applying the test.-

The test mentioned above is, however, a difficult one to apply, and, to avoid controversies, it would be better if the position could be simplified. In a welfare State where the State regulates economic activities in the public interest, controls are likely to continue for sometime, and the problem in question is likely to recur.

As the Supreme Court has observed:1

"the State may compel persons to make contracts, as where, by a series of Road Traffic Acts from 1930 to 1960, a motorist must insure against third-party risks; it may, as by the Rent Restriction Acts, prevent one party to a contract from enforcing his rights under it; or it may empower a Tribunal either to reduce or to increase the rent payable under lease. In many instances a statute prescribes the contents of the contract. The Money-lenders Act, 1927, dictates the terms of any loan caught by its provisions.

The Carriage of Goods by Sea Act, 1924, contains six pages of rules to be incorporated in every contract for "the carriage of goods by sea from any port in Great Britain or Northern Ireland to any other port"; the Hire-purchase Act, 1938, inserts into hire-purchase contracts a number of terms which the parties are forbidden to exclude; successively Landlord and Tenant Acts from 1927 to 1954 contain provisions expressed to apply "notwithstanding any agreement to the contrary."

1. Indian Steel and Wire Products Ltd. v. State of Madras, AIR 1968 SC 478: 21 STC 138.

Certain Problems connected with Powers of the States to Levy a Tax on the Sale of Goods and with the Central Sales Tax Act, 1956 Back

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