# MAHABIR COMMERCIAL CO. LTD v. C.l.T. WEST BENGAL, CALCUTTA - **Citation:** [1973] 2 S.C.R. 134 - **Court:** Supreme Court of India - **Decided:** 1972-09-08 - **Bench:** P. Jaganmohan Reddy, H. R. Khanna• - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mahabir-commercial-co-ltd-v-c-l-t-west-bengal-calcutta-5767 - **Pages:** 23 ## Headnote B /ncome tax Act (11 of 1922) Place, where property passes. Sale of Goods Act (3 of 1930), s. 23(2)-Efject of appropriation on passing of property. utter of Credit and C.l.F. contract-Nature of, explained. In all transactions of sale of goods the time and place of <•?propriation are important elements for determining when the property in the goods passea. In the case of a sale of unascertained goods in a deliverable state, under s.23(2) of the Sale of Goods Act, 1930, if, in pursuance of the con· tract the seller delivers the goods to the buyer or to a car•ier or other bailee, whether named by the buyer or not, for the purpose of transmission to the buyer, and the seller do'S not reserve the right of dispo.btained payment from the bank less freight and insurance which were payable by the buyel"S on account of the sellers. The bank forwarded the documents to its office in Calcutta and the Calcutta office sent them to the purchaser. (138 E-H; 139 A-DJ The Income-tax Officer, and the Appellate Assistant Commissioner held that the property in the goods passed to the buyer in India and hence the a&•essee was liable to t"x on the profits derived from the sales. The Tribunal held in favour of the assessee on the ground that the sales were effected in Pakistan. The High Court, on reference held against the assessee on 1he basis that under els. 7 and 9 of the contract, there was no uncondit'1onal appro" priation of the goods by the buyer a• soon as they were placed on board the steamer on C.l.F. terms, and that the appropriation took place in India where the t:tle to the goods passed to the buyers. Clauses 7 and 9 dealt with the non-acceptance of documents and the buyer's failure to pay against documents and /or in cases where buyers make any claim in res· pect of quality or excess moisture, in which case, an option is given to the buyer either of accepting the ~oods w:th allowances or of ca-celling the contract in respect of a particular lot or lots or of rejecting the particular lot or lots and claiming fresh tender. Allowing the appeal to this court, HELD : A consideration of the terms of the contract and the letter of credit makes it evident that once the bills of lading and documents contemplated under the contract were handed over to the bank to be delivered to the buyer and the seller received the value thereof as shown in the invo:ce r.1d in terms of the contract, he no longer retained any property in the goods. [1550-H] (a) The sale was of unascertai"ed goods in a deliverable state, the letter of credit is a confirmed irrevocable letter of credit and the contract ia a C.I.F. contract. [149C-D] (b) The bill of exchange which the assessee had to draw in accordance with the invoice was for the price of the goods less the premium and fre· ight which the buyer was pay'ng in India on account of the seller. On the presentation of the shipping documents, the bank in Pakistan, u der the irrevocable letter of cccdit, was to make payment of the· invo'ce value to the seller. Once the seller has performed his part and presented the documents for being sent to the buye• 'for acceptance and recei\'ed payment in Pakistan he has no longer any control over the goods and the oropertv in the goods passes to the buyer. The bill of bding when it is handed over to the buyer by the bank. on the buyer accepting the b'll of excha"ge and pay_ in2 the nmount specified in the invo'ce. confer< on him th• ri•~t to take delivery of the goods at the p1e.oe of disembarkation. [153B-D] (c) There is nothing in els. 7 and 9 of the contract which iustified the conclusion that the property passed in lnd'a. Under ct.7, where there is a total failure on the part of the buyer to perform the contract, the seller has a ri2ht to cancel the contract or treot it as cancelled a"d resort to the remedies the·eunder. But that is a condition where the buyer fails or refuses to perform the coritract a1toQether by not acceoti.,g the doc11mpnts or in not paying against the docume.,t'3. Even under cl. 9, the co.,dition as to the quality and of excessive moisture is not a conditio .. 1 of the trl\-~fer Ill. property. The right of the buyer thereunder is not a right to cancel the A B D E F G H • c D E r G H MAHABIR COM. co. LTD. v. C.I.T. (Jaganmohan Reddy, /.) I37 contract in toto but only to adjust claims in respect of the quality or moisture for which a remedy has been provided for thereunder. There is nothhg in the agreement which envisages the property in the goods being in the seller even after the value of the invoice had been paid by the bank under the letter of credit in P::.'<.istan. Where a purchase is financed by an irrevocable credit the transaction would not be affected by rejection of the goods after acceptance of the documents if the latter were such as were called for by the credit or where under that credit, the payment of the invoice value is payable on presentation of the documents. [152G-H, 154H; 155A·Dl (d) It is well-settled that an appropriation takes place where the goous arc situated at the time of appropriation and not where the contract ol sak is made. There may be an authority given by one party to the at.her to appropriate and that appropriation is presumed' to be fi1ally made whe.rc by the terms of the contract the party so authorised has determined his clcctio1 by doing such act or thing which cannot be done until the goods arc app·ropriated. Generally, " seller appropriates the goods by delivery of the b:U of lading-the document giving control over the goods-in excha·ge o.f payment af price, by which, he shows that he does not intend to retain the right of disposal of the property in the goods .. (1550-0] (e) The provision in the contract that all drafts drawn 'under the letter of credit are ID be treated as advance bills through their Pak'stan office .does not in any way affect tl1e nature' of the transaction inasmuch as they are intended as advance notice to the buyer who n1ay want to make arrangements regarding the taking of delivery or dealing with the goods. In fact, under the contract, it is provided that immediat,~ notice should be given to the buyer as soon as the seller begins to load the good's. [155H) (f) In any cue, under the letter of credit the bank informed the seller that it guarantees to protect the drawers, endorses and bona fide ho!ders from any consequences which may arise in the event of the no,-acceptance or non-payme.nt of the drafts drawn in accordance with the terms of the credit. Th.'s clause, in the letter of credit, assures the seller of the performance of the contract and does not affect the property ill the goods passing to the buyer in Pakistan. [156B.CJ Commissioner of lncome·tax v. Mysore Chromite Ltd. 27 I.T .. ll. 128, Guaranty Trust Company of New York v. Hannay cl Co., [1918] :?. K.B. 623, Biddell Brothtrs v, E. Clem.ens Horsr Comoa•y, [1911) I K.B. 934, E. Clemens Horst Company v. Bidde/I Brothers, (1912] A.C. 18 -and Kwel '[:,k Chao v. British Traders and Shippers Ltd. [1954] 2 K.B. 459, refen"ed C1v1L APPE~LATE JURISDICTION · Civil Appeal· No 450 Of 1969. . . Appeal by special leave from the judgment and order dated November 15, 1967 of the Calcutta High Court in Inc~mc-tax Reference No. 19 of 1958. A· K. Sen, Leila Seth, 0. P. Khaitan and S. P; Mahe.vliw(iri for the appellant. · ' B. Sen, A. N. Kripal ands. P. Nayar, for the respondent. The Judgment of the Court was ~elivered by IAGA~MOHAN REDDY, J. The following question wM referred to the High Court of Calcutta by the Income-tax Appellate Tri- 138 SUPllEMB COUllT llBPO!lTS [1973) 2 s.c .•. bunal (hereinafter called the 'Tribunal') under s. 66(1) of the Income-tax Act, 1922 : "Whether on the facts and in the circumstances of the case and on a proper construction of the terms of the relevant contracts the sales covered by the bills of lading in the name of the buyers in five cases took place outside India and therefore ~he profits derived from the said sales arose ouiside India ?" The High Court answered the question in the negative and against the assessee against .whim this appeal is by special leave. The ;iforesaid question related to the assessment year 1952-53 of which the accounting year is 1951-52 ending 31st December 1951. The assessee company deals in sale and purchase of jute in Pakistan as well as in India. During the year of account relevant for the· assessment year it sold jute of the value of A B c Rs. 23,93,767 /- out of which Rs .. 10,06,772 were sales in foreign countries and Rs. 2,44,015/- in India. The balance of sales D worth Rs. 11,42,979/- according to the assessee were effected in Pakistan. The .. Jncome-tax Officer over-ruled the contention of the assessee and found that the quandom sales in India amounted to Rs. 13,86,995 which included Rs. 11,42.979 alleged to have been sold in Pakistan and assessed the appellant accordingly. It appears from the statement of the case that the sale~ were made under a contract executed in Calcutta between the buyer and the seller. The terms of the contract included delivery free to the bt~yer's mill-siding or at the ghat in India. It further contained provisions for weighment and assay of goods for their short weight and quality claimed at the destination in Calcuta. It was also a term of of the contract that before the goods were actually shipped the buyers were required to open an irrevocable letter of F credit with a bank in Calcutta and accordingly the buyers opened letters of credit with the Imperial Bank of India, the ChaJtered Bank of Australia and China and Hind Bank Ltd., Calcutta. All these banks had their branches in Pakistan, at Chittagong and at N&rayanguni. The fact that letters of credit had been opened wa~ communic~ted bv the resnective banks to their branch-s in Pakistan anri the banks in Pakistan in their turn informed the as~essee that thev were prepared to ne'.lotiate the draft a~ per term~ of the contract. On receiving inforrnati0a from the bank E G in Pakistan that thev were prepared· to negotiate the draft drawn as per the term~ of the contract, the assessee placetl the contractei:I goc>ds on boarcl the steamer at Ashurganj_ in Paki•tan. Tmmediatelv the loading 011 the shin had commenced the seller had further to advice the buvers about the qualitv. assertment and the weight of goods in maunds. The assessee had to then obtain a II I I I \_ A B c D E F G H MAIWIIR COM. co. LTD. v. C.I.T. (Jaganmohan Reddy,/.) 139 complete set of shipping documents and present them to the bank for payment of invoices' value in terms of the contract in the equivalent Pakistan currency at the exchange rate prevailing on the presentation of the documents at the bank less freight and insurance which were payable in India by the buyers on account of the sellers. The manner in which this was done was that as soon as the goods were placed on board the steamer the seller obtained the bills of lading in the name of the buyers in five cases and in two cases in the name of Mahabir Trading Co. Ltd., an agent of the assessee company. The assessee then prepared invoices for contracted bills on the basis of the bills of lading and drew bills of exchange on the buyers' bank where the letters of credit had been opened. The bill of exchange together with the bill of lading and the invoices were negothted with the ba'lk and the bank forwarded the documents to their offices in Calcutta which in their turn sent the documents to the purchaser. According to the Income-tax officer these transadions disclosed that the prooertv in the goods had pas~ed to the assessee in India and on this basis he assessed the appellant. In the appeal before the Appellate Assistant Commissioner, the assessee further contended that the Income-tax Officer in Pakistan held that a sum of Rs. Uf,06, 772 represented the sales effected in Pakistan because of the fact that the delivery of the goods had been made to the common carrier and the consideration money was also paid in Pakistan through the State Bank of Pakistan. In this view, the Income-tax Officer assessed the appellant in Pakistan on the ground that he had taken constructive delivery in Pakistan where according to him the sales were made. This finding the asses•ee submitted was correct. The Appellate Assistant Commissioner however rejected the contention and dismissed the appeal. When the matter was a!!itated in appeal before the Tribunal the assessee filed an affidavit disputing the findings. The Tribunal, having regard to the fact~ stated therein remanded the matter to the Income-tax Officer and directed him to enquire and send a report on the facts disputed by the assessee. After the remand report was received, the Tribunal having considered the terms of the contract, the course of the dealings bet· ween the parties and applying the J?rincioles laid down in Com· mi~.1ioner of Tncome-tax v. Mvmre Chromite Ltd.(1) h·~ld th1t in respect of the' five cases in which the assessee drew the bills in favour of the buvers the sales were effected in Pakistan whereas in the two cases ·in which the bills were drown in hvnnr of the assessee's agent at Calcutta, the sales were effected in India. I) 271.T.R. I 28. 140 SUPREME COURT REPORTS [1973] 2 s.c.R. On hearing the reference the High Court directed the Tribunal to submit a supplementary statement of case because in its view, in order to deal with a rather complicated question raised in that reference in respect of which there was a great divergence of authority, it was absolutely es;;ential for giving an effective answer to it to have before it the exact form of acceptance by Pakistan banks regarding negotiations of the draft drawn as per the terms of the contract. It therefore required the Tribunal to set out "the exact wording and content of the documents", namely, the particular contracts that have to be construed, the exact form of acceptance by Pakistan banks regarding negotiation of the draft drawn as per the terms of the contract and to annex therewith true copies of the contracts, the bills of exchange, bills of lading and the letters of credit. It was also asked to indicate on what bases it came to the conclusion that the Pakistan banks were prepared to negotiate the drafts drawn as per the terms of the contract. The High Court considered and rejecteJ the two contentions urged on behalf of the Revenue that (I) until assay and weighment of the goods at the destination the buyers would not ui1conditionally appropriate the goods and (2) that the bank was not the banker but merely an agent of Thomas Duff & Co. (India) Ltd. and as such the presentation of the documents were made to the principals in Calcutta. The first of these which were said to have been supported by the case of this Court in Commifsioner of Income-tax v. Mysore Chromite Ltd. (supra) was rejected on the ground that this Court did not desire to express any opinion on the "extreme contention" and tbe second on the ground that there is little to establish an agency and even if there is any such agency that it is limited to the extent that the banker stands as agent to the person whose banker it is. After having rejected these contentions it observed "but all these notwithstanding" els. (7) and (9) in the ;:ontract go to show that there was no un. conditional appropriation of the goods by the buyer as soon as they were placed on board the steamer on c.i.f. terms which appropriation took place in India where the title to the goods passed to the buyers. It may be mentioned that els. (7) and ( 9) deal with the non-acceptance of documents in the event of the buyer's failure to accept or pay against documents and/or in cases where buyers make any clainl in respect of quality or i:xcess moisture in which case an option was given to the buyer either of accepting the goods wiih allowances or of cancelling the ·contract in respect of particular lot or lots or of rejecting the particular lot or lots and claiming fresh tender. What is to be considered in this case therefore is, under the terms of the contrnct and the dealings between the parties, where did the property in the goods pass ? Is it in Pakistan where the seller pursuant to an irrevocable letter of credit placed the goods on board the ship, drew the bills of exchange and invoices and along with the A 8 c D E F G H MAHABIR COM. co. LTD. v. c.I.T. (Jaganmohan Reddy, J.) 141 A bill of lading etc. negotiated them through a constituent of the buyer's bant. in Pakistan or as held by the High Court having regard to cJS. ( 7) and ( 9) qf the co .. tract no uncondluonal appropriation of the goods was effected in India even though the goods were placed on board the steamer on c.i.f. terms. B c D E F G H Before we examine the terms of the contract and the dealings between the parties to ascertain where exactly the unconditional appropriation of the goods under the contract was effected, it is, we think appropriate to set out the principles which are applicable for the determination of that question. It would also be useful to an understanding of the terms of the contract and the intention of the parties, if we were to ascertain what. exactly is the significance of an irrevocable letter of credit. In this case we are dealing with the sale of unascertain.ed goods in a deliverable state in respect of which where the property in the goods passes is the question to be determined. Sections 23 and 39 of the Sale of Goods Act which are in identical terms with rule S of s. 18 and s. 32 of the English Sale of Goods Act lay down the principles for 11:1certaining where the property in the goods passes. They are in these terms :- "23. ( 1) Where there is a contract for the sale of unascertained or further goods by description and goods of that description and in a deliverable state are un- .:onditionally 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. 39. (1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to a wharfinger fo\' safe custody, is prima fade deemed to be delivery of the goods to the buyer. (2) Unless otherwise authorised by the buyer, the seller shall make such contract with the carrier or wharfinger on behalf of the buyer as may be reasonab\e 142 SUPREME COURT REPORTS [1973] 2 S.C.ll. having regard to the nature of the goods and the other circumstances of the case. If the seller omits so to do, and the goods are Jost or damaged in course of transit or while in the custody of the wharfinger, the buyer may decline to treat the delivery to the carrier or wharfinger as a delivery to himself, or may hold the seller responsible in damages. ( 3) Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit, in circumstances in which it is usual to insure, the seller shall give such notice to the buyer as may enable him to insure them during their sea transit, and if the seller fails so to do, the goods shall be deemed to be at his risk during such sea transit." It 1s apparent that for the purposes of sub-s. (1) of s. 23 there should be an unconditional appropriation with the assent of the parties as indicated before the property in the goods passes to the buyer. This sub-section is quite independent of sub-s. ( 2) and does not con:emplate an unconditional appropriation in pursuance of the contract. Sub-s. (2) on the other hand requires the delivery to a carrier in pursuance of a contract which operates or is deemed to operate as an unconditional appropriation. 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 purposes 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 buyer's assent to the passing of the property in the said circumstances is implied and that when the seller despatches the goods and delivers them to the common carrier for purposes of transit to the buyer, the common carrier not only receives the goods as agent of the buyer but also assents to the appropriat:on made by the seller. Where however the intention is clearly indicated and the carrier assents it is immaterial by wliat document the consignment is effected. In cases where the seller bears the freight for the transmission of the goods free of cost to the buyer, the property in the goods passes to the buyer as soon as they are sent to the carrier, though there may be a provision that they are to be paid for 'by the buyer on behalf of the seller after the arrival of the goods. But where however the seller exercises a right of disposal or where he agrees to deliver the goods at their destination, the carrier is the seller's agent and the delivery is not a final appropriation. The intention of the parties is therefore one of the important elements in determining the situs where the property passes to the buyer in pursuance of the contract. The decided cases are of little help and are only A B c D F G H A B c / D E F G H MAHABIR COM, co. LTD. v. C.I.T. (Jaganmohan Reddy, /.) 143 illustrative of the principles which are applicaple for determining when the goods are uncoditionally appropriated to the contract. In the case of transactions of sale of goods between the buyer and seller living in two different countries, the contract may envisage the seller sending the goods through a carrier and the payment being made either at that place or at the place where tb.e buyer resides. In such a transaction the banks have come to play an importl\nt part and the bankers' commercial credit system focilitates merchants domiciled in different countries and assures payment to the seller on the one hand and delivery of the goods contracted for to the buyer on the other. This is done by means of what are known as letters of credit whioh under the terms ef the contract the seller may insist on the buyer to provide for in a bank doing business in the place of the seKer's domicile. This may be effected by the buyer requesting the bank to facilitate a letter of credit in the country of the seller where the bank or its constituent assumes liability for payment of the price for some consideration which may either be by loan or an over-draft arrangement or perhaps on the security by the pledge .£ d~u ments of title to the goods or by some other arrangement arrived at between them. An understanding of the mechanism of credit made available to the buyer and the seller by the banks in: the sale of goods and the manner in which these transactions ttke place through the banking Institutions will greatly facilitate the ascer· tainment of the question when and at what place the propero; in the g;oods passes from the buyer to the seller. Inasmuch as those innovation of commercial credit have been developed by the maritime powers of which England was the leader a reference to English decisions will be of assistance. In Guaranty Trust Company of New York v. Hannay & Co.(I) Lord Justice Scrutton set out at p. 659 the manner in which commercial credit opera~s. He s:ll.d:- "The enormous volume of sales of produce by a vendor in one country to a purchaser.Jn another has led to t?!e creation of an equally great financilll system intervening between vendor and purchaser, and designed tCJ 1tt•b• commea:ial transactions tCJ be carried out with the g1eatest money convenience to both parties. The vealor, to help the finance of his business, desires to get hi!> putcbase price as soon as possible after he has despatched ~ ~· to his purchaser; with this object he draws a D of exchange for the price, attaches to the draft the documents of carriage and insurance of the goods sold and sometimes an inovice for the price, and discount!' the bill-that is, sells die bill with ,documents (I) [1918) 2K. B. 623. 144 SUPREME COURT REPORTS [1973] 2 s.c:a. attached to an exchange house. The vendor thus gets his money before the purchaser would, in ordinary course, pay; the excnange house duly presents the bill for acceptance, and has, until the bill is accepted, the security of a pledge of the documents attached and the goods they represent. The buyer on the other hand may not desire. to pay the price till he has resold the goods. If the draft is drawn on him, the vendor or exchange house may not wish to part with the documents of title till the acceptance given by the purchas~r is met at maturity. But if the purchaser can arrange that a bank of high standing shall accept the draft, the exchange house may be willing to part with the documents on receiving the acceptance of the bank. The exchange house will then have the promise of the bank to pay, which, if in the form of a bill of exchange, is negotiable, and can be discounted at once. The bank will have the C:ocunlents of title as security for the liability on the acceptance, and the purchaser can make arrangements to sell and deliver the goods. Before acceptance the documents of title are the security, and an unaccepted bill without documents attached is not readily negotiable. After acceptance the credit of the bank is the security, ....•... ". The operation of the banker's commercial credit is generally and in an increasing manner resorted to by the exporters stipulating in contracts for the sale of goods the responsibility for the payment of price by a banker which is done by means of a documentary credit. It takes the form of a promise by the buyer's bank to accept or honour bills of exchange if drawn on him or his guarantee of payment if drawn on the buyer, the security for which resides in the pledge of the documents of title to the goods exported. Where the device of commercial credit is resorted to as. indeed in all overseas transactions this has become a general practice-there is to be a prior contract for the sale of goods the payment of price fo~ which is to be made by a banker. We are here not concerned for the purpose of this case, with the various intricacies and practical technicalities of different means which are adopted to meet different situations. But a simple example of the device may be indicated. The buyer requests his bank and arranges with it the issuance of credit for payment at the place of the seller's domicile specifying the documents against which it has to make payment. The buyer agrees also to indemnify the bankers in respect of such advances and of any claim arising out of the credit. The letter constitutes the memorandum of the buyer's instructions to the banker. On receipt of this application A n c D E F G H A B c D E MAHABIR COM. co. LTD. v. C.I.'f. (Jaganmohan Reddy, J,p45 the banker issues the credit which is addressed to and sent to the seller or it may take the form of a request to an intermediary banker who is asked either merely to advice the seller or advise and to add his confirmation. The credit may be issued by cable which is later followed by writing. These letters may be given for the purpose of being shown to third parties who may act thereon. Letters of credit are either revocable or irrevocable and where it is the latter it may be confirmed or unconfirmed. If confirmed it means that words of confirmation of another banker is added to it by which that banker also commits himself irrevocably. The letter of credit notifies 1the seller that the issuing banker or his correspondent will (if they are drawn on him) accept or honour drafts drawn for the price of the goods, provided that the documents of title and other documents specified in the credit are simultaneously presMted to the banker. On receipt of the credit the seller ships the goods and insures them, obtaining a bill of Jading normally made out to his order but perhaps to that of the banker, and also a policy of marine insurance. He then draws a draft for the price of the goods and with the. documents i.e. the bill of lading, policy and invoice specified in the credit presents the draft for acceptance, payment and negotiation .. In this way the exporter gains the advantage of receiving payment for his goods without delay. The documents are then sent by the banker to the buyer's bank and on the bill of exchange being accepted by him by payment of the price the bill of lading and the invoice is delivered to him; see Halsbury, Vol. 2, p. 213 and Gutteridge and Megrah on The Law of Commercial Credits (1968 edition). The contract that has been entered into between the buyer ' and the seller in this case is in the form of a sold note by tbe seller's broker in Calcutta in the form of the Indian Jute Mills F Association for jute contracts with variatio:is in respect of some of the temis. Under cl. ( 1) of this contract the amount of tax p~yable under the Bengal Raw Jute Taxation Act, 1941 is to be on the seller's account and to be deducted by the buyers from the price quoted for' payment, to the Provincial Government in the prescribed manner unless at the time of coni:luding the contract the seller satisfies the buyer by means of satisfactory evidence G that tax is not payable on the sale. Any increase or decrease in the existing Bengal Jute Tax or in any other form of tax by whomsoever levied or any new truces on raw jute after the contract also shall be on the buyer's account. It also states that the cont;act is accepted b)'. the buyers on the seller's representation and assurance that the Jute as shown in the margin is under a mark H en!ered in the .said registe;r and that it.s bailing and packing is in strict accord with the particulars contained therein. Should tenders not be in accordance with it the buyers shall be entitled to raject tke goods and the sellers shall be liable for all losses sustained in11-348SopCI/73 • 146 SUPRBMB COUllT 1!.BP~TS [1973] 2 s.c.11.. eluding the difference between the contract and the market pricat. Cl. ( 2) provides for delivery to the mills spec:iied therein and the carrier or carriers through which that delivery should be made to the mills. Cl. ( 3) which is varied deals ·with the transit insurance to be covered by the buyers at contract value plus 10% under their open cover and premium to be paid for by sellers in India. Sellers. to advise buyers the contract and assortment in maunds to be supplied immediately loading is commenced. Cl. ( 4) which deals with reimbursement of cash is again varied by the following:- "Buyers to open letter of credit with the Pakistan Bank in favour of seller's nominee. A complete set of shipping documents to be presented to the bank and payment of invoice valid in terms of the contract to be made to the shippers in the equivalent of Pakistan currency at the exchange rate ruling on the date of presentation of documents at the bank, less freight, if payable in India." Cl. 6 deals 'With non-delivery of documents. Cl. 7 provides for no11-acceptance of documents. Cl. 8 provides for maximum amount of moisture the jute should contain and cl. 9 provides for claims with the variation that the amount of short weight value and claim to be paid by sellers to buyers in Indian currency. The High Court, as we have earlier stated, relied on els. 7 and 9 ( 3) for coming to the conclusion that the appropriation took place in India, These clauses are given below :-, "7. Non-acceptance of documents should buyers fail to accept or pay against documents properly submitted under the terms of the contract Sellers have the right to exercise any of the following options :- (a) Cancelling the• contract. (b) Cancelling the contract and charging buyers the market difference between the contract rate and the market rate of the date of the breach of contract. ( c) Selling against buyers in the open market on the first working day following the default. 9. ( 3) In any case where buyers make any claim in respect of quality and/or excessive moisture and the Award on the dispute being referred to arbitration as provided for in Clau• 13 provides for an allowance of not less than 50 percent on the market, difference between the grades of the goods- contracted for A B c D E F G ll A B c D E F G H MAHABIR COM. co. LTD. v. C.l.T.