MODULE 4: SALE OF GOODS ACT

1. R.D. Saxena v. Balaram Prasad Sharma (What are goods ? s.2)

The Supreme Court has laid down in R.D. Saxena v Balram Prasad Sharma that advocates
have no right of lien over clients' papers for their unpaid fee. The Court said that files
containing copies of the records (perhaps some original documents also) could not be equated
with the word "goods" referred in Section 171. It could not be said that files and papers of a
client lying with the advocate were in the category of "goods bailed". In the case of litigation
papers in the hands of the advocate there is neither delivery of goods nor any contract that
they shall be returned or otherwise disposed of. That apart, the word "goods" mentioned in
Section 171 is to be understood in the sense in which that word is defined in the Sale of
Goods Act s.2. Thus, they have to be saleable goods. There is no scope for converting the
case-files into money, nor they can be sold to any buyer. Hence, an advocate cannot place
reliance upon Section 171.

Commissioner of Sales Tax M.P. v. M.P. State Electricity Board

( Dealer and Saleable Goods s.2)

It was the general duty of the Electricity Board to promote coordinated development of the
generation, supply and distribution of electric energy within the State of Madhya Pradesh in
the most efficient and economical manner. In the assessment years in question the Electricity
Board sold, supplied and distributed electric energy to various consumers. It also sold coal-
ash a waste product and Supplied steam to Nepa Mills of Burhanpur. It further supplied
specification and tender forms on payment to persons desirous of submitting tenders for the
works undertaken by the Electricity Board. It purchased articles like Gitti, Murram, sand etc.
from unregistered dealers. It is common ground that under the provisions of Act XXI of 1947
and H of 1959 read with the' Schedule contained therein sale of electricity is exempt from
sales tax. For the purpose of determining the gross turnover, however, the sale of electric
energy is to be taken into account. The Assistant Commissioner of Sales tax assessed the
Electricity Board to tax on its turnover of sale of coal-ash and specification and tender forms
and the supply of steam to Nepa Mills. The Board was further assessed to purchase tax on
Gitti, Murram etc. purchased from unregistered dealers.
Issue: Whether the Electricity Board is a "dealer" within the meaning of the relevant
provisions of the two Acts in respect of its activities of generation, distribution, sale, and
supply of electric energy.
Analysis: Electricity is capable of sale as property and is sold, purchased, and consumed
everywhere. The term "movable property" cannot be taken in a narrow sense and merely
because electric energy is not tangible or cannot be moved or touched like a piece of wood or
a book, it cannot cease to be movable property when it has all the attributes of such property.
The High Court was right in coming to the conclusion, on the finding of the tribunal, that the
real arrangement was for supplying steam on an actual cost basis and in that sense, it was
more akin to a labour contract than to sale.

Conclusion: It is held that the Electricity Board is a "dealer" within the meaning of the
relevant provisions of the two Acts in respect of its activities of generation, distribution, sale,
and supply of electric energy. The appeals are allowed to the extent indicated above. In view
of all the circumstances, the parties are left to bear their own costs.

2. Vishnu Agencies Ltd. V. Commercial Tax Officer (Is It Sale ?)

In this case, Vishnu Agencies Ltd. was involved in transactions related to the sale of cement
and rice. The government had specific rules and regulations in place to control and regulate
these transactions, including setting prices and conditions for selling these products.
The main issue was whether these transactions could be considered as "sales" for the purpose
of taxation.

The appellants argued that these transactions should not be considered as sales because they
were compelled by law to sell the goods at the prices set by the government, and they had no
choice in the matter. They believed that a sale, according to the Sale of Goods Act, requires a
voluntary agreement between the buyer and seller, and since these transactions were not
voluntary, they should not be subject to taxation.

The court, however, disagreed with this argument. They ruled that these transactions still
qualified as sales, even though they were regulated by the government. The key distinction
was that in a true sale, there is a voluntary agreement between the parties, while in this case,
there were regulations and restrictions imposed by the government. However, these
regulations did not eliminate the core nature of the transactions as sales.

in this case, the transactions between the appellants and the buyers retained their essential
character as sales, as there was still an element of choice between the parties involved. They
could agree upon the terms, such as price, even though they were regulated to some extent by
the government. According to the definitions of “Sale” in the two Acts the transactions
between the appellants and the allottees or nominees are patently sales because in one case
the property in cement and in the other property in the paddy and rice was transferred for
cash consideration by the appellants.
In summary, the court concluded that these transactions qualified as sales, and therefore, they
were subject to sales tax or purchase tax as applicable. The appeals made by the appellants
were dismissed, and they were required to pay the taxes and costs associated with the case.

MODULE 5: PARTNERSHIP

1. K.D. Kamath v. CIT (Is It Partnership s.4)

Facts: Kamath had management as well as the control of the business. The business was
entirely left in the hands of the Kamath and other partners used to serve under his directions.
Further, they had no authority to accept any business without his consent and could not
operate a bank account. But all the conditions of partnership were fulfilled.
Issue: Whether the said arrangement is partnership?
The Supreme Court has held that it was a partnership as essential conditions of partnership
are satisfied. Just because the exclusive power to control the parties is vested in one partner
or that one partner can operate the bank account or borrow on behalf of the firm are not
destructive of the theory of partnership provided the conditions are satisfied.

2. Cox v. Hickman (Intention to Partnership s.6)

Facts: Smith & Sons [S. & S.] was a partnership firm. Due to financial difficulties, they
executed a deed of arrangement with the creditors wherein S. & S. agreed that that five
trustees (including Cox) on behalf of creditors would manage the business of S & S. The
trustees had the duty to distribute income between the general creditors. After the creditors
were paid off then the business had to be transferred to S. & S. Some amount of Hickman,
supplier of goods, were unpaid. Therefore, Hickman sued the firm.
Issue: Can Cox be liable in this case?
Held: As per the deed, S. & S. agreed to appointment of trustees for paying off the debt and
when the debt was paid the business had to be transferred. Creditors instead of taking legal
recourse, settled for the arrangement. Therefore, there was no intention of the parties to get
into a partnership.