JUDGMENT

(Delivered by Off., Chief Justice.)

The appellant company was the defendant in a suit for damages for breach of contract for sale of yarn. Most of the facts are not in dispute. The plaintiff company has its office in Bangalore and works in conjunction with a mill in Cochin State. The defendant company has an office at Coimbatore. On the 14th May 1943 under Ex. P-1 the plaintiff agreed to sell to the defendant 200 bales 40s of Cochin Egyptian Special D.H.X.C.R yarn at a price of Rs. 49 per bundle of 10 1bs. ex-mill site, delivery July 1943, payment cash against goods or railway receipt. There was trouble between the parties about the performance of this contract and on the 31st July 1943 the parties met at Coimbatore and entered into a fresh agreement, Ex. P-1(a), the relevant portion of which provides that the defendant withdraws all complaints regarding quality and count which have been raised so far and agrees to accept and take immediate delivery of 150 bales of yarn of the same description as originally accepted without any objection as to quality and count or ticket. The bales are to be despatched from “tomorrow” from Pudukad (which is in Cochin State) to Cochin harbour or Wadibunder as the case may be; and it is mutually agreed that the balance of the original contract should be treated as cancelled without liability on either side. In pursuance of this revised agreement 85 bales were despatched to the order of the defendant and delivery was taken without complaint. With reference to the remaining 65 bales, the defendant gave instructions for their despatch to Calcutta and on the 17th August 1943 an invoice for these goods of the total price of Rs. 1,27,416-4-0 was tendered to the defendant's agent at Coimbatore by the agent of the plaintiff together with the railway receipt relating to the consignment of these goods from Pudukad to Calcutta. This railway receipt, unfortunately, is not in evidence and we do not know whether it was made out to “self” or to the consignee—a point which has a considerable bearing on the contentions in appeal. The defendant refused to take delivery, nominally because of a counter claim relating to another transaction. In the end the railway receipt was auctioned at the risk of the defendant and the goods were sold at the price of Rs. 26-8-0 per bale as compared with the contract price of Rs. 49. The plaintiff claimed damages measured by the difference between the contract price and the price fetched at the re-sale.

Various contentions were raised in the suit. We are now concerned with only two of these contentions, firstly, a contention that the contract is illegal because neither the plaintiff nor the defendant had licences as required under the Madras Yarn (Dealers) Control Order, 1943, and secondly a contention that in any case the defendant is entitled to a rebate by reason of the subsequent fixing of the ceiling prices under the Cotton Cloth and Yarn (Control) Order 1943 read along with the Cotton Cloth and Yarn (Contracts) Ordinance, 1944. It is common ground that although the plaintiff had a licence to deal in Yarn issued by the Mysore Government and although the defendant had licences to deal in yarn issued by the Governments of Bombay and Calcutta, neither the plaintiff nor the defendant had a licence from the government of Madras. The Madras Yarn (Dealers) Control Order, 1943, in terms extends to the whole of the Province of Madras. It defines “dealer” as “a person who sells or stores for sale yarn, whether wholesale or retail, whether on his own account or as a commission agent, and whether or not in conjunction with any other business, but” it “does not include a cotton spinning mill or its authorized agent selling on its behalf yarn produced by it.” Cl. 3 of the Order states that except as provided in Cl. 10 (which has no application here) no person shall carry on business as a dealer in this Province unless he has a licence issued under this order by the Provincial Textile Commissioner. Reading this clause along with the definition we may take it that it prohibits unlicensed person from either selling within the Province of Madras or storing for sale within the Province of Madras otherwise than as a proprietor or an authorized agent of a cotton spinning mill.

Now, it is not contended that the plaintiff was the proprietor or agent of a cotton spinning mill with reference to this transaction. The contract governing the transaction is the original contract, Ex. P-1 embodied in a document addressed from Bangalore, as modified by the subsequent agreement, Ex. P-1(a), which was signed in Coimbatore. Neither of these contracts amounts to a completed sale. By S. 4(3) of the Sale of Goods Act, 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. The passage of the property in the goods is controlled by S. 23 of the Sale of Goods Act which runs as follows:

“(1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made.

(2) Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.”

The question is whether with reference to the terms of this section the sale of the goods which form the subject of this suit was in the Province of Madras. If it was in the Province of Madras, then clearly the plaintiff must be deemed to have done business as a dealer in contravention of the Madras Yarn (Dealers) Control Order, 1943, and the transaction would be an illegal transaction which could not form the basis of an action for damages.

We do not think that the mere making of an agreement to sell in futuro within the Province of Madras would of itself be sufficient to bring the transaction within the mischief of the Madras Yarn (Dealers) Control Order, 1943. That order is obviously designed to deal mainly with the physical storage and sale of goods within the Province; and it has been contended before us that even if there was a sale within the Province, if the sale related to goods which were to be delivered outside the Province, it would not offend against the provisions of the Order. For the purpose of the present case it is unnecessary to decide this extreme contention one way or the other; but if the defendant is unable to establish that there was a sale within the Province, it seems to us that the illegality of the transaction upon which the suit is based could not be made out. Clearly the burden lies upon the defendant to establish that the plaintiff's suit must fail because of the illegality of the transaction.

Having regard to the terms of S. 23(2) of the Act it must, we think, be held that the sale would be completed by the delivery of the goods to the railway for the purpose of transmitting them to the buyer, provided that the seller did not reserve the right of disposal. Translating this into the terms of ordinary commerce, if the seller delivered the goods to the railway for conveyance to “self” at Calcutta, there would not be such an appropriation as would pass title to the purchaser. In order to complete the transaction it would be necessary to endorse the railway receipt and deliver it to the buyer. If, on the other hand when this consignment was booked at the railway station in Cochin State the railway receipt was made out to the buyer, this would become a document of title vesting in the buyer alone the right of ownership in the goods while in transit. The mere fact that the document of title was retained in the custody of the seller, though it might give him some equitable lien over the goods, would not prevent the title from passing to the buyer.

The result therefore is that the question whether this sale was a sale in the Cochin State or a sale in the Province of Madras reduces itself to the question, whether when the goods were consigned to the railway at Pudukad in Cochin State, they were consigned to the railway for transmission to the buyer unconditionally or whether they were consigned for transmission to the seller or some agent of his. This is a point upon which we have no evidence and as it is incumbent upon the defendant to prove the illegality of the contract, the defendant not having proved that the contract of sale was completed within the Province, we must hold that its illegality has not been established.

It is unnecessary to go at length into the further contention that the defendant would be entitled to a rebate having regard to the retrospective operation of the Cotton Cloth and Yarn (Contracts) Ordinance. 1944; S. 2 of that Ordinance deals with the position when the contract for sale has taken place before the coming into force of the Cotton Cloth and Yarn (Control) Order, 1943, and delivery has taken place on or after the date of fixing the maximum price by an order under that provision. In such circumstances the buyer is entitled to the refund of any excess over the maxim price fixed under that order. Admittedly the fixing of the maximum price in the present case was after the date on which the sale is alleged to have been completed. This Ordinance will therefore confer no benefit upon the defendant.

While therefore we do not agree with the grounds upon which the lower Court held the contract of sale not to be illegal and it seems to us clear that the mere fact that the plaintiff has a licence in Mysore could not authorise him to sell goods in the Madras Province, we dismiss the appeal with costs.

N.R.R