STATE OF ORISSA & OTHERS v. • THE TITAGHUR PAPER MILLS COMPANY LTD.

"(n) 'timber' includes trees fallen or felled and all wood cut-up or sawn." F

Prior to the enactment of tbe Orissa Forest Act, 1972, there were two Forest Acts in force in the State of Orissa, namely, the Madras Forest Act, 1882 (Madras Act V of 1882), and the G Indian Forest Act, 1927 (Act XVI of 1927). The Madras Forest Act applied to the districts of Koraput and Ganjam and part of Phulbani District, namely, Baliguda and G. Udaygiri Taluks. The Indian Forest Act applied to the rest of the State. Both these Acts were repealed in their application to the State of H

i06 SUPltEME COURT REPORTS (1985] 3 S.C.R.

A Orissa by the Orissa Forest Act but as prior to the enactment of the Orissa Forest Act, these were the two Acts which provided for the protection and management of forests in the S.tate of Orissa, we may also refer to the definition of the word "timber" given in those Acts. Section 2 of the Madras Forest Act defines"timber" as including trees when they have fallen or have been fallen, B and all wood, whether cut up or fashioned or hollowed out for any purpose or not". Clause (6) of section 2 of the Indian Forest Act defines "timber" in identical terms. Though none of these definitions is an exhaustive one· since each of them uses the word "includes" .and not "means", there is a large and substantial measure if identity in these definitions and it will be c apparent from these definitions that the word "timber" is not · confined merely to felled trees in forestry in the State of Orissa. In this connection, it would not be out of place to see how this word has been defined in subsequent legislation. In August 1981 trade in certain forest produce in Orissa was made a State monopoly and the Orissa Forest Produce (Control of Trade) Act, D 1981 (Orissa Act No. 22 of 1981), was passed to achieve that purpose. The list of forest produce set out in the definition of that term given in clause (c) of section 2 of that Act includes timber of any spcies specified in clause (j) of that section. Clause (j) of section 2 defines "timber " as meaning "marketable wood, round, s1wn or fashioned, straight piece of and above two metres in length, standing or felled (excluding fuel) of the following E categories, namely:-". The portion of the definition omitted above lists the different species of timber. The definition of "timber given in the Orissa Forest Produce (Control of Trade) Act is an exhaustive defi'1ition inasmuch as the object of that Act was to create a State monopoly of trade in specified forest produce and therefore such forest produce had to be particularized. What is, however, pertinent is that even in subsequent legislation the cardinal concept that timber is not merely felled trees has been . underlined and emphasized. ' G Ou turning to various dictionaries, we find that the dictionary meaning largely coincides with the statutory meaning of the word "timber''. While discussing the question of the subject-matter of the impugned provisions we have set out the definition of the word "timber" contained in the Webster Collegiate Dictionary occur- H ring in the passage from the judgment of Vivian Bose, J, in

ORISSA v. TITAGUUR PAPER MILLS (Madon, J.) 107

Shrimati Sliantabai v State of Bombay. The relevant meanings of A the term "timber" given in the Shorter Oxford Dictionary, Third. Edition, are "building material generally; wood used for the building of houses, ships, etc., or for the use of the carpenter, joiner, or other artisan''. This definition also states that the word is "applied to the wood of growing trees capable of being used for structural purposes; hence collectively to the trees themselves". B Amongst the meanings given in the Concise Oxford Dictionary, Sixth Edition, are "wood prepared for building, carpentry, etc;. trees suitable for this; woods, forests, piece of wood, beam". One of _) _ the meanings of the word "timber" given in Webester's Third New , ' International Dictionary, is "wood used for or suitable for building (as a house or boat) for carpentry er joinery". A "Jog" according c to the Shorter Oxford English Dictionary means "a bulky mass of wood; now csually an unhewn portion of a felled tree, or a length cut off for firewood" and according to the Concise Oxford Dictio- nary it means "unhewn piece of felled tree, or similar rough mass of wood especially cnt for firewood". Thus, logs will' be nothing more than wood cut up or sawn and would be timber. D A question which remains is whether beams, rafters and planks would also be logs or timber. The Shorters Oxford English Dictionary defines "beam" inter CJ/ia as "a large piece of squared timber, long in proportion to its breadth and thickness and the Concise Oxford Dictionary defines it as a '·long piece of squared timber supported at both ends, used in houses, ships, etc." E and according to Webester's Third New International Dictionary,.it means "a long piece of heavy often squared timber suitable for use in house construction." A beam is thus timber sawn in a particular way. "Rafter" as shown by the Shorter Oxford English Dictio- nary is nothing but "one of the beams which give shape and form to a roof, and bear the outer covering of slates, tiles, thatch, etc." F Tim Concise Oxford Dictionary and Webster's New International • Dictionary define "refter" in very much the same way; the first defines it as "one of the sloping beams forming framework of a roof" and the seconds as "one of the often sloping beams that sup- port a roof:" Rafter wou1d also, therefore, be timber or Jog put to G a particular use. A ''plank" is defined in Shorter Oxford English Dictionary as "a long fiat piece of smoothed timber, thicker than a board, specially a length of timber sawn to a thickness of from two to six inches, a width of nine inches or more, and eight feet or H

108 SUPRBMB COURT RBPOR1'S [1985] 3 s.c.li..

A upwards in length." According to the Concise Oxford Dictionary it is a "long wide piece of timber, a few inches thick" and accord- ing to Webster's Third New International Dictionary, it is "a heavy thick board that in technical specifications usually has a thickness of 2 to 4 inches and a width of at least 8 inches." The exact th(ck· ness and width of a plank may be of importance in technical specifi- B cations but in ordinary parlance planks would be flattened and smoothed timber. Such flatness and smoothness can only be achie· ved by using a saw and other implements required for that purpose. The same would be the case when timber is rounded or shaped. The statutory definitions of timber extracted above read along with the meaning of the word "timber" given in different dictionaries c would show that the conclusion reached by the Madhya Pradesh High Court in Mohan/al Visliram v. Commissioner of Sales Tax, Madhya Pradesh, Indore, and by the Andhra Pradesh High Court in G. RamaswA,my and others v. The State of Andhra Pradesh and others is more germane to our purpose than the two Orissa cases neither of which has referred to the statutory definition of the word D "timber" in the relevant statutes. The observations of the Orissa High Court in the case of Krupasindhu Sahu & Sons v. State of Orissa that timber in common µarlance in Orissa takes within its ambit only long and big sized logs of wood ordinarily used in house construction as beam; and pillars but not when timber is converted into planks, rafters and other wood products like tables and chairs cannot, therefore, be said to be correct so far as planks E and rafters are concerned. In our opinion, planks and rafters would also be timber.

The result is that sales of dressed or sized Jogs by the Respond· ent Firm having already been assessed to sales tax, the sales to the F First Respondent Firm of timber by the State Government from which logs were made by the Respondent Firm cannot be made liable to sales tax as it would amount to levying tax at two points in the same series of sales by successive dealers assuming without G deciding that the retrospectively substituted definition of "dealer" in clause (c) of section 2 of Orissa Sales Tax Act, 1947, is valid.

Yet another aspect of this question now arises for our consi· deration. During the period from June I, 1977, to December 31, H 1977, by reason of Notification No. S.R.O. 374/77 dated May 23,

ORISSA v. TI.TAGHUR PAPER MILLS (Madon, J.) 109

1977 the rate of sales tax on timber was fixed at ten per cent by the A ' State Government. Since it was the contention of the State Govern- ment that logs are commercially a different commodity. the tax could not have been assessed on the sales of logs by the Respondent Firm during this period at the rate of ten per cent but would have been assessed at the general rate of six per cent specified in section y 5(1) of the Orissa Act. If such was the case, on the findings given B by us above, the Respondent Firm would be liable to pay sales tax not at the rate of six per cent but at the rate of ten per cent and it might be argued that the Respondent Firm has b~en under-assessed or part of its turnover of sales of logs has escaped assessment. The -~) assessment order made on the Respondent Firm referred to earlier c includes both the amount of purchase tax and sales tax but this is not a composite assessment order but a severable one because the turn over of sales as also the turnover of purchases have been shown sepa- rately and the amount of sales tax and purchase tax have equally been shown separately. Thus, though as a result of our holding that the amounts pa id by the Respondent Firm under the Timber Contracts D are not exigible to purchase tax, the assessment order would require to be modified and corrected, such modification and correction would not affect the rest of the assessment order. The question then is "Whether the sales tax authorities can reopen the assessment of the Respondent Firm so far as the turnover of sales of logs is concern- -"'- ed?" Under sub-section (8) of section 12 of the Orissa Act, the E Commissioner of Sales Tax or those sales tax authorities to whom such power is delegated hav.e the power to reopen an assessment . but under section 12(8) the .exercise of this power is subject to a period of limitation, namely, thirty six months from the expiry of the year to which that period for which the assessment is to be reopened relates. Since three years have long since expired from the .F year to which the period in question relates, it would not now be open to the sales tax authorities assuming it was a case for re-open- ing jJie assessment, to reopen the Respondent Firm's assessment and tax the turnover of sales of dressed or sized logs at the rate often per cent instead of six per cent. This question, of course, would not arise for any period on or after January I, 1978, on which date the G substituted sub-section (I) of section 5 ca'rne into force, as under the notification issued under the substituted sub-section (!), no separate _/ rate of tax is specified either for timber or logs or any of the other goods which we have been considering above and all of them would fall for the purpose of payment of sales tax under the residuary

110 SUPREME COURT REPORTS [1 985] 3 S.C.R.

A EntryNo. IOI of the Notification No. 67184-C.T.A. 135/77/F dated December 29, 1977, and would be liable to sales tax at the rate of seven per cent and there would thus be no under-assessment or escapement of assessment.

Bamboo Contr:J ct B We will now ascertain the nature of the Bamboo Contract. Unlike the Timber Contracts, the Bamboo Contract is not in a pre- scribed statutory form but it appears from the judgment of the High Court that all the Bamboo Contracts before it contained identical terms and conditions except with respect to the contract area, the c period of the contract and th' amJuut of royalty. The parties io the Bamboo Contract were the Governor of the State of Orissa referred to in the said Contract as "the Grantor" and the Respondent Com- pany. The Bamboo Contract is headed "Agreement of Bamboo Are1s in Bonai Forest Division to the Titaghur Paper Mills Com- p.my Limited." The second 1nd the third recitals of the Bamboo D Contract arc as follows :

·"AND WHERAER the Company is desirous of obtain- ing grant from the Grant or of exclusive right and licence to fell, cut, obtain and remove bamboos from all felling series of Bamboos Working Circle in the Bonai Forest Division in the State of Orissa for the purpose of converting the bam- boos into paper pulp or for purposes connected with the nianufactnrc of paper or in any connection incidental. therewith.

AND WHEREAS the Grantor has agreed to grant the said licence to the Company subject to the restrictions, terms and conditions hereinafter appearing."

Clause I ofthc Bamboo Contract is headed "Area over which the grant operates". Sub-clause (a) of clause I sets out the dates of commencement of the Bamboo Contract in respect of different contract areas. Under Sub-clause (bl of clause I, the forest produce "sold and purchased" is stated to be as specified in Schedule I and to be situated i.n the areas ini:licated in Schedule V. Under the said sub-clause, the grantor understood to render at all times to the Respondent Company all possible facilities to enable it to extract and obtain its requirements of banihoos upto the limit imposed by

ORISSA l'. 1!TAGHUR PAPER MILLS (Madon, J.) 111

the Bamboo Contract. Under clause II, the quantity of forest produce "sold and purchased" is stated to be "all the said forest produce which now exist or may come into existence in the cantract area which the Company may fell, cut, obtain and remove from the said area in accordance with the time-table given in Schedule V during the period ... " and then the periods in respect of different areas, already mentioned while reciting the facts of Civil Appeal B No. 219 of 1982, have been set out. Clause III provides that the Bamboo Contract can be terminated in accordance with the provi- sions in that behalf contained in the Forest Contract Rules subject to the right of the Respondent Company to appeal to the State Government in which case the Respondent Company could with the previous permission of the State Government, on such conditions as c the Government might think fit to impose, be entitled '"to carry on its business in terms of the agreement" until the final decision by the Government. Under clause IV, the Respondent Company is given an option to renew the Bamboo Contract for a further term of twelve years. Under clause V, the Respondent Company was to D perform all acts and duties and to refrain from doing any act forbidden by the Orissa Forest Act, 1972, and to give a sum of Rs. 58, 190 as security for the due performance and observance by it of the terms of the Bamboo Contract, which sum was to be return- ed to it on the expiry of six months after the termination or expiry of the Bamboo Contract. The Granter was to be entitled to for- E feit the said deposit and to appropriate the whole or part thereof in the event of the Respon1ent Comp.my committing a breach of the terms of the Bamboo Contract such as would entitle the Gran- ter to terminace the Bamboo Contract. Clause VI provided that "this licence shall be subject to the Orissa Forest Contract Rules as modified from time to time" subject to the amendments thereto set F out in the said clause which are not material for our purpose. Clause Vlll stated that "the forest produce sold and purchased under this Agreement consists of all Salia and Daba bamboos subject to the cutting rules in the annual coupe of the felling series" • Clauses IX to Xlll deal with the payment of royalty. What is pertinent (o note about these clauses is that under clause XI fl, the G Respondent Company was to pay an annual minimum royalty in the sums mentioned therein and was not to be entitled to the refui1d of the whole or any part of such minimum royalty should it fail to cut the minimum quantity- of b11nboos in any year except on the ground that the yield of the area fell below the quantity required to ff

112 SUPREME COURT REPORTS [1985] 3 s.c.R.

A make up the minimum royalty payable for the year owing to gre- garious or sporadic flowering of bamboos in the contract areas or from any cause whatsoever not being due to the negligence on the part of the Respondent Company or failure on its part to extract the minimum number of bamboos. The amount of royalty was to be calculated on all bamboos which the Respondent Company B would cut from the contract area, whether such bamboos were r,i:moved or not, to be ascertained as provided in clauses XI and XII. Under clause XI, for ascertaining the quantity of the bamboos so cut, the Respondent Company was to remove the bamboos through such river ghats, railway, motor and other transport depots as may be agreed upo i between the parties from time to time and c under clause XII, the royalty was to be paid in advance in such manner that it would always be in excess of the royalty actually due. Under clause XIV, for the purpose of checking the felling and keeping an account of all bamboos to be cut by the Respondent Company, the Forest Department had the right to employ such staff as it might deem necessary and was to have free access to the con- D tract area and to the books and other records of the Respondent Company. Further, the Respondent Company was to submit to the Divisional Forest Officer a yearly account of bamboos cut and removed from the contract area and under clause XV the company was to issue to the carter of each cart or the driver of each truck on its leaving the forest a machine numbered pass of a pattern to be approved by the Chief Conservator of Forests, Orissa. Such pass was to state the number of bamboos which each cart or truck would carry. Clause XVI prescribed the rputes by which the bamboos were to be removed as also the depots at which they were to be presented for examination, Under clause XVll,[at every naka the checking staff was to· check each cart or truck with the pass referred to in clause XV before such cart or truck left the depot. Clause XVIII gave to the Respondent Company, subject to such restrictions as might be imposed from time to time by the Divisional Forest Officer, Bonai Division, the right during the continuance of the Bamboo Contract to use any lands, roads or streams outside • the licensed areas which belonged to or were under the control of the Gran tor for the purposes of having free ingrees to or egrees from the contract areas and also to such lands, roads or streams within the contract areas. Under clause XIX, the Respondent Company was bound to meet the local demands of b1mboos in which event r H the royalty on such bamboos was not to be paid by the Respondent

ORISSA v. TITAGHUR PAPER MILLS (Madon, J,) 113 Company but was to be paid by the local people. Under clause XX, A subject to obtaining prior written consent of the Grantor, the Respondent Company was to be at liberty to make dams across streams, cut canais, m::ike water courses, irrigation works, roads, bridges, buildings, tramways and any other work useful or necessary "for the purpose of th.: said business" in or upon the licensed areas and also with the like consent to widen or deepen existing streams, B · channels or waterways "for the purpose of the said business" and all timber and other forest produce required for this purpose was to be paid for by the Respondent Company at current schedule of. rates. All such dams, canals, irrigation works, roads, bridges, building and other works which were not removed by the Respondent Com- pany within six months from the expiry of or ·earlier termination of 0 the contract were to become the property of the Grantor. Clause XXI prohibited the Respondent Company from interferring with the surface of the land except in so far as it might be necessary for immediate purpose of "carrying on the necessary operations in connection with the said business". Clause XXII expressly reserved and excepted to the Grantor in regard to the contract area granted D fo the Respondent Company (I) the possession and beneficial owner- ship in the soil and all mines and minerals upon, in or under the contract area and the right to make .such nse of the soil, to erect such buildings or structures and install such plant upon it and sub- ject it to such operations for the purpose of ext!'1lction of minerals or otherwise as the Qrantor might deem proper, (2) the surface of , . the licensed areas and all grazing, cultivating and other surface . nghts other than those expressly granted to the Respondent Com- . E

pany by the Bamboo Contract, (3) the right to all trees other than trees made over to the Respondent Company and the natural pro- ducts of the soil other than bamboos, (4) the right of the Grantor to destroy bamboos in any portion of the contract areas for silvicul- F tural purposes Including the raising of plantations subject in each case to the minimum area limit of 500 acres per annum and further subject to giving in place of such area equal facilities for bamboos extraction in other convenient areas, and (5) the right to extract G bamboos from any portion in the contract areas for departmental works in Bonai Forest Division subject to a limit of 5,000 bamboos yearly. Clause XXIII prescribed cutting rules for bamboos. Clause XXIV conferred upon the Respondent Company the right to extract fuel from areas allotted for that 'purpose in order to meet the fuel requirements of domestic consumption in the houses and offices of H

114 SUPREME COURT REPORTS [1985) 3 s.c.~.

A the persons employed by it in "connection with its business in the contract areas" subject to the payment of a fixed royalty per tonne. Under that clause, the Respondent Company had the right to cut and collect such poles of unreserved species and creepers as might be necessary for construction of rafts on obtaining a permit in that B behalf and on payment of royalty according to the schedule of rates. Under clause XXV, the Grantor, if so required by the Respondent Company, was to lease to it a suitable site or sites to be selected by it out of such sites as were at the disposal of the Gran tor within the licensed areas for the erection of store houses, sheds,. depots, c bungalows, staff offices, agencies and other buildings of a like nature bonafide Frequired by it "for the purposes of the business connected with" the Bamboo Contract rent free for the term of such contract. Under clause XVI, in the event of the Grantor setting fire to the forest for silvicultural purposes, it was to give to the Respondent D Company as long a notice as possible of the commencement of such · operations and it was the Respondent Company which was to be re.sponsible for safeguarding the forest produce which was the subject matter of the Bamboo Contract. Under clause XX!X, the contract areas were to be worked on four years cutting cycle for Salia and twelve ·years cutting cycle for Daba and were to comprise the areas stated in the said clause. E

It was submitted on behalf of tho Appellant that the Bamboo Contract was a composite contract of sale, in that it was an agree- ment to sell existing goods, namely, bamboos standing in the contract areas at the date of the Bamboo Contract, coupled with an agreement to sell future goods, namely, bamboos to come into existence in the future. According lo the Appellant the property in the existing l!amboos would pass after they were ripe for cutting and under Rule 12 of the Forest Cm1tract Rules the Divisional Forest Officer had delineated the boundaries and limits of the annual coupe from which hamboos were to be cut for the Respondent Company to take delivery of them in as much as the bamboos then became ascertained goods. In the alternative it was submitted that the property passed when the Respondent Company started the work of cutting bamboos. According to the Appellant, in either event property passed before the bamboos· were severed. So far as the bamboos which were not in existence at the date of the Bamboo y, Contract but were to come into existence thereafter were concerned, it was submitted that as they were future goods, once they came.

ORISSA v. TITAGHOR PAPER MILLS (Madon, J.) 115 into existence and became ripe for cutting, the property in them .A passed to the Respondent Company in the same way as in the case of bamboos in existence at the date of the Bamboo Contract.

While discussing the subject-matter of the impugned provisions we have already held that they apply where there is a completed con· B . tract of purchase aud.the property in the goods which are the subject· matter of the contract passes froni the seller to the buyer when the contract is made. In oth;r words, the purchase would be complete when the standing trees or 'bomboos are specific goods, that is, when they are identified and agreed upon at the time the . contract of sale c is made~ and the contract is unconditional and further such standing trees or bamboos arc in a deliverable state, that is, nothing remains to be done except for buyer to enter upon the land of the seller and to fell and remove the trees or bamboos, as the case· may be, without any let or hin_drance. The very submission of the Appellant with respect to when the property passes to the Respondent .Company in the case of the Bamboo Contract are sufficient to show that the impugned provisions cannot have any application to the case. The Bamboo Contract like the Timber Contract is also made subject to the !'orest Contract Ruies and while dealing with Timber Contract we have pointed out that by reason o,f the operation of those Rules property in the trees passed to the forest contractor after the trees were felled and taken to the depots at.inspection points and there checked and. examined and thereafter removed from the contract area. The same position would apply to the case of the Bamboo Contract assuming for the sake of argument that it is a contract of sale of goods. F In this view of the matter, the impugned provisions would have no application and the amounts payable under the Bamboo Contract would not be exigible to purchase tax. By reason, however, of the substitution of the dclinition of the term "dealer" in clause (c, of section 2 of the O;·issa Act with retrospective effect, it may be argued that if the Bamboo Contract was a contract of sale of goods, G then on the sale taking place to the Respondent Company, sales tax would become payabb and the Respondent Company would be bound to reimburse to the Forest Department the amount payable by it as sales tax. In order to avoid future legal controversy and particularly in view of the fact that the High Court has held the jlamboo Contract to be a ~rant of a pm/it a prendre it becomes ff

H.6 SUPREME COURT REPORTS (1985] 3 S.C.R.

;A .necessary to determine whether the Bamboo Contract is at all a contract of sale of goods. According to the Respondent Company the High Court was right in holding that Bamboo Contract was not a contract of sale of goods but was a grant of a profit a prei;dre.

B The meaning and nature of a profit a prendre have been thus described in Halsbury's Laws of England, Fourth Edition, Volume 14, paragraphs 240 to 242 at pages 115to117:

"24.0. Meaning of'pr0 fit a prendre'

c A profit a prendre is a right to take something off another person's land. It may be more fully defined as a right to enter another's land to take some profit of the soil, or a portion of the soil itseif, for the use of the owner of the right. The term 'profit a prendre' is used in contradis- tinction to the term 'profit a prendre', which signified a benefit which had' to be rendered by the possessor of land after it had come into his possession. A profit a prendre ·is a servitude.

"241. Profit a prendre as an interest in land.

A profit a prendre is an interest in land and for this reason any disposition of it must be in writing. A profit a prendre which gives a right to paiticipate in a portion only of some specified produce of the land is jmt as much an interest in the land as a right to take the whole of that produce ... "242. What ma.v be taken as a profit a prendre. F The subject matter of a profit a prendre, namely the substance which the owner of the right is by virtue of the right entitled to take, may consist of animals, including fish and fowl, which are on the land, or of vegetable matter growing or deposited on the land by some agency other than that of man, or of any part of the soil itself, including G mineral accretions to the soil by natural forces. The right may extend to the taking of the whole of such animal or vegetable matters or merely a part of them. Rights have been established as profits a prendre to take acorns and beech mast, brakes, fern, heather and litter, thorns, turf and peat, boughs and branches of growing .trees, rushes, H

bidssA v. TITAGHUR PAPER MILLS (Madon, J.) i 17 freshwater fish, stone, sand and shingle from the seashore A and ice from a canal; also the right of pasture and of shooting pheasants. There is, however, no right to take seacoal from the foreshore. The right to take animals ferae naturae while they are upon the. soil belongs to the owner of the soil, who may grant to others as a profit a B prendre a right to come and take them by a grant of hunting, shooting, fowling and so forth."

A profit a prendre is a servitude for it burdens the land or rather a person's ownership of land by separating from tbe rest c certain portions or fragments of the right of ownership to be enjoyed by persons other than the owner of the thing itself (see· Jowitt's Dictionary of English Law, Second Edition, Volume 2; page 1640. under the heading "Servitude"). "Servitude" is a wider term and includes both easements and profits a prendre (see Halsbury's Laws of England, Fourth Edition, Volume 14, paragraph 3, page 4). The D distinction between a profit a prendre and an easement has been thus stated in Halsbury's Laws of England, Fourth Edition, paragraph 43 at pages 21 to 22:

"The chief distinction between an easement and a profit a prendre is that whereas an easement only confers a right . E' to utilise the servicnt tenement in a particular manner or prevent the commission of some act on that tenement, a profit a prendre confers a right to take from the servient tenement some part of the soil of that tenement or minerals under it or some part of its natural produce or the animals ferae naturae existing upon it. What is taken must be F ·,- capable of ownership, for otherwise the right amounts to a mere easement'~.

In Inilian law an easement is defined by section 4 of the Indian Easement Act, 1882 (Act No. V of 1882) as being ''a right which the owner or occupier of certain laud possesses, as such: for the G beneficial enjoyment of that land, to do and continue to do some· thing, or to prevent and continue to prevent something being done, in or upon, or in respect Of, certain other land not his own". A profit a prendre when granted in favour of the owner of a dominant heritage for the beneficial enjoyment of such heritage would, therefore, be an easement but it would not be so if the grant was not for the beneficial enjoyment of the grantee's heritage. H

118 SUPREME COURT REPORTS {1985] 3 s.c.R.

A Clause (26) of section 3 of the General Clauses Act, 1897, defines "immovable property" as including inter alia "benefit to arise out of land". The definition of "immovable property" in clause (f) of section 2 of the Registration Act 1908, illustrates a benefit to arise out of land by stating that immovable property "includes ... rights to ways, lights ferries, fisheries or any other benefit B to arise out of land". As we have seen earlier, the Transfer of Pro- perty Act, 1882, does not give any definition of "immovable pro- perty" except negatively by stating that immovable property does not include standing timber, growing crops, or grass. The Transfer of Propety Act was enacted about fifteen years prior to the General \_ c Clauses Act, However, by section 4 of the General Clauses Act, the lleliaitions of certain words and expressions, including "immovable property': and "movable property", given in section 3 of that Act are directed to apply also, unless there is anything repugnant in the subject or context, to all Central Acts made after January 3 1968, and the definitions of these two terms, therefore. apply when they occur in the Transfer of Property Act. In Ananda Behra and another v. The State of Orissa and a11other(') this Court has held that a profit a prendre is a benefit arising out land and that in view of clause (26) of section 3 of the General Clauses Act, it is immovable property within the meaning of the Transfer of Property Act. E The earlier decisions showing what constitutes benefits arising out of land have been summarized ill Mulla on The Transfer of Property Act, 1882", and it wonld be pertinent to· reproduce the whole of that passage. That passage (at pages 16-17 of the Fifth Edition) is as follows: F "A 'benefit to arise out of land' is an interest in land and"therefore immovable property. The first Indian Law Commissioners in their report of 1879 said that they bad 'abstained from the almost impracticable task of defining the various kinds of interests in immovable things which are considered immovable property. The Registration G Act, however, expressly includes as immovable property benefits to arise out of land, herediary allowances, rights of way lights, ferries and fisheries'. The definition of immovable property in the General Clauses Act applies to r this Act. The following have been held to be immovable

H (1) (1955] 2 S. c. R. 919

ORIS SA. v. TITA.GIIUR PA.PER MiLLS (Madon, J.) 119 property:-varashasan or annual allowance charged on land; A a right to collect dues at a fair held on a plot of land; a hat or market; a right to possession and management of a saranjam; a malikana; a right to collect rent· or jana: a life interest in the [income of immovable property; a right of way; a ferry; and a fishery; a lease of land". B Having seen what the distinctive features of a profit a prendre are, we will now turn to the Bamboo Contract to ascertain whether it can be described as a grant of a profit a prendre and thereafter to examine the authorities cited at the Bar in this connection. Though both the Bamboo Contract in some of its clauses and the Timber c Contracts ipeak of "the forest produce sold and purchased under this Agreement", there are strong countervailing factors which go to show that the Bamboo Contract is not a contract of sale of goo.ds. While each of the Timber Contracts is described in its body as "an agreement for the sale and purchase of forest produce", the Bamboo Contract is in express terms described as "a grant of exclusive right and licence to fell, cut, obtain and remove bamboos ... for the pur- D pose of converting the bamboos into Paper pulp or for purposes connected with the manufacture of paper .... " Further, throughout the Bamboo Contract, the person who is giving the grant, namely, ·the Governor of the State of Orissa, is referred to as the "Gran- tor." While the Timber Contracts speak of the consideration. pay- able by .the forest contractor; the Bamboo Contract provides for payment of royalty. "Royalty" is not a term used in legal parlance for the price of goods sold. "Royalty" is defined in Jowites Dic- tionary of English Law, Fifth Edition, Volume 2, page 1595, as follows.

"Royalty, a payment reserved by the grantor of a F patent, lease of a mine or similar right, and payable proportionately to the use made of right by lhe grantee. · It is usually a payment of money, but may be a payment in kind, that is, of part of the produce of the exercise ofthe right. G Royalty also means a payment which is made to an author or compos.er by a publisher in respect of each copy of his work whicl1 is sold, or to an inventor in respect of each article sold under the patent."

We are not concerned with the second meaning of the word H

i2o SUPREME COURT REPORTS [1985} 3 S.C.R.

A "royalty" given in Jowitt. Unlike the Timber Contracts, the Bam- boo Contract is not an agreement to sell bamboos standing in the contract areas with an accessory licence to enter upon such areas for the purpose of felling and removing the bomboos nor is it, un- like the Timber Contracts, in respect of a particular felling season only. It is an agreement for a long period extending to fourteen B years, thirteen years and eleven years with respect to different con- tract areas with an option to the Respondent Company to renew the contract for a further term of twelve years and it embraces not only bamboos which are in existence at the date of the contract but also bamboos which are to grow and come into existence thereafter. The payment of royalty under the Bamboo Contract "-- c bas no relation to the actual quantity of bamboos cut and removed. Further, the Respondent Company is bound to pay a minimum J '\

royalty and the amount of royalty to be paid by it is always to be in excess of the royalty due on the bamboos cut in the contract areas. \ D We may pause here to note what the Judicial Committee of the Privy Council had to sa} in the case of Raja Bahadur Kamkashya Narain Singh of Ramgarh v. Commissioner of Income-tax, Bihar and Orissa' about the payment of minimum royalty under a coal mining lease. The question in that case was whether the annual amounts payable by way of minimum royalty to the lessor were in E his hands capital receipt er revenue receipt. The Judicial Committee held that it was an income flowing from the covenant in the lease. While discussing this question, the Judicial Commictee said (at pages 522-3):

F ''These are periodical payments, to be made by the lessee under his covenants in consideration of the benefits which he is granted by the lessor. What these benefits may be is shown by the extract from the lease quoted above, which illustrates how inadequate and fallacious it is to envisage the royalties as merely the price of the actual G tons of coal. The tonnage royalty is indeed only payable when the coal or coke is gotton and despatched : but that is merely the last stage. As preliminary and ancillary to that culminating act, liberties are granted to enter on the land and search, to dig and sink pits, to erect engines and ' H (I) (1943) 11 I.T.R, 513 P.C.

ORISlA v. TITAGHUR PAPER MILLS (Madon, J.) 121 machinery, coke ovens, furnaces and form railways and A roads. All these and the like liberties show how fallacious it is to treat the lease as merely one for the acquisition of a certain number of tons of coal, or the agreed item of royalty as merely the price of each ton of coal." B Though the case before the Judicial Committee was of a lease of a coal mine and we have before us the case a grant for the purpose of feUing, cutting and removing. bamboos with various

c' other rights and licences ancillary thereto, the above observations of the Judicial co·mmittee are very pertinent and apposite to what we have to decide.

Vnder the Bamboo Contract, the Respondent €ompany has the right to use all lands, roads and· streams within as also outside the contract areas for the purpose of free ingress to and egress from the contract areas. It is also given the right ·to make dams across streams, cut canals, make water courses, irrigation works, roads, bridges, buildings, tramways and other work useful or necessary for the purpose of its business of felling, cutting, and removing bamboos for the purpose of converting the same into paper pulp or for pur- poses connected with the manufacture of paper. For this purpose it has also the right to use timber and other forest produce to be paid for at the current schedule of rates. The Respondent Com- pany has the right to extract fuel from areas allotted for that pur- pose in order to meet the fuel requirements of the domestic consum- ption in the houses and offices of the persons employed by it and .to pay a fixed royalty for this purpose. Further, the Government / , was booud, if required by the Respondent Company, to lease to it a F '\ suitable site or sites selected by it for the erection of store houses, sheds, depots, bungalows, staff offices, agencies and other bnildings of a like nature.

We have highlighted above only the important terms and con-/ ditions which go to show that the Bamboo Contract is not and can- G not be a contract of sale of goods. It confers upon the Respondent Company a benefit to arise out of land, namely, the right to cut and remove bamboos whi ;h would grow from the soil coupled with several ancillary rights and is thus a grant of a profit a prendre. It is equally not possible to view it as a composite contract one, an agreement relating to standing bamboos agreed to be severed ff

122 SUPREME COURT REPORTS . ( 1985) 3 S.C.R.

A and the other, an agreement relating to bamboos to come into existence in the future. The terms of the Bamboo Contract make it clear that it is one, integral and indivisible contrJct which is not capable of being severed in the manner canvassed on behalf of the Appellant. It is·not a lease of the contract areas to the Respondent B Company for its terms clearly show that there is no demise by the State Government of any area to the Respondent Company. The Respondent Company has also no right to the exclusive possession of the contract areas but has only a right to enter upon the land to take a part of tl;e produce thereof for its own benefit. Further, it is c also pertine,nt that while this right to enter upon the contract areas is described as a "licence", under clause XXV of the Bamboo Con- tract tho Respondent Company has the right to takt on leas• a suitable site or sites of its choice within the contract areas for the erection of store houses, sheds, depots, bungalows, staff offices, agencies and other buildings of a like nature required for the pur- D poses of its business.' The terms and conditions of the Bamboo Contract leave no doubt that it confers upon the Respondent Com- pany a benefit to arise out.of land and it would thus be an interest in immovable property. As the grant is of the value exceeding Rs. 100, the Bamboo Contract is compulsorily registrable. It is, in fact, not registered. This is, however, immaterial because it is a grant by E the Government of an interest in land and under section 90 of the Registration Act it is exempt from registration. The High Court was, therefore, right in holding that the Bamboo Contract was a grant of a profit a prendre, though the grant of such right not being for the beneficial enjoyment of any land of the Respondent Com- pany, it would not be an easement. Being a profit a prendre or a F benefit to arise out of land any attempt on the part of the State "._ Government to tax the amounts payable under the Bamboo Con- j tract would not only be ultra l'ires the Orissa Act but also uncon- stitutional as being beyond the State's taxing power under Entry 54 in List II in the Seventh Schedule to the Constitution of _ India. G We will now turn to the authorities cited at the Bar. The cases which have come before the courts on this point have mainly involved the question whether the document before the court required registration. After the coming into force of the Constitution of India and the introduction of land reforms with consequent abolition of 'Zamindari' and other proprietary inte- H rests in land, the question whether a particular document was a

Otl!SSA v. TITAGHUR PAPER MILLS (Madon, J.) ii3 grant of a proprietary interest in land has also fallen for deter- A mination by various courts. It is unnecessary to refer to all the decisions which were cited before us and we propose to confine ourselves to considering only such of them as are directly relevant to the question wh'ch we have to decide. Of the High Court · decisions the one most in point is that of a Fu'! Bench of the Madras High Court in Seeni Chettiar v. Santhanathan. Chettiar and B others.(') The question in that case was whether a document which granted to the defendant a right to enjoy the produce of all the trees on the bank and bed of a tank as also the grass and the reeds and further to cut and remove the trees for a period exceeding four years required registration. The court held that the docu- ment was not a lease because it did not transfer to th• defendant c exclusive possession of the tank but conferred upon him merely a right of access to the place for the reasonable enjoyment of what he was entitled to under the contract The court, however, came to the conclusion that the document required registration as it transferred an interest in immovable property, and that it was not a sale of mere standing timber but it was contemplated by the document, as shown by the fact that a comparatively long period of a little ·more than four years was granted to the defendant for cutting and removing the trees, that"the purchaser should derive a benefit from the furiher growth of the thing sold, from further vegetation and from the nutriment to be afforded by the land". The above words quoted in the judgment in that case were those of Sir Edward Vaughan Williams in the following passage cited with approval by Lord Coleridge, C.J., in Marshall v. Green 2) : -

"The principle of these decisions appears to be this, that wherever at the time of the contract it is contemp- F lated that the purchaser should derive a bcniftt from the further growth of the thing sold, from further vegetation and from the nutriment to be afforded by the land, the contract is to be considered as for an interest in land ; G but where the process of vegetatiol!. is over, or the par- ties agree that the thing sold shall be immediately with- drawn from the land, the land is to be considered as a·

124 SUPREME COURT REPORTS [!985) 3 S.C.R. A mere warehouse of the. thing sold, and the contract is for goods."

So far as the decisions of this Court are concerned, the one which requires consideration first is Firm Chhotabhai Jethabai Patel & Co. (and other cases) v. The State fo Madhya Prade.'h'. B This was one of the two cases strongly relied upon by the Appel- lant, the other being State of Madhya Pradesh & Ors. v, Orient Paper Mills Ltd'. The facts in Chhotabhai's Case were that the petitioners had entered into contracts with the proprietors of certain estates and mahals in the State of Madhya Pradesh under c which they acquired the right to pluck, collect and carry away tendu leaves ; to cultivate, culture and acquire lac ; and to cut and carry away teak and timber and miscellaneous species of trees called hardwood and bamboos. On January 26, 1951, the Madhya Pyadesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950 (Madhya Pradesh Act I of 1951), came into force and on the very next day a notification was issued under the said Act ·putting an end to all proprietary rights in estates, mahals and alienated villages and vesting the same in the State for the purposes of the State free of all encumbrances with effect from March 31, 1952. The petitioners therupon appro- ached this Court under Article 32 of the Constitution of India praying for a writ prohibiting the State of Madhya Pradesh from interfering with the rights which they had acquired under the contracts with the former proprietors. It was averred in the petitions that not only had the petitioners paid the consideration under the said contracts but had al.so spent large sums of money in the exercise of their rights under the said contracts. This Court held that the contracts appeared to be in essence and effect · F licenses granted to the petitioners to cut, gather and carry away the produce in the shape tendu leaves, lac, timber or wood and did not create any interest either in the land or in the trees or plants. In arriving at this conclusion the Court relied upon a decision of the Judicial Committee of the Privy Council in Messrs Moh an/al Hargovind of Jubbulpore v. Commisioner of income-tax, G C.P. & Berar, Nagpur 3 , In that case the assesses carried on

. ORISSA v. TiTAGHUR PAPER MILL' (Madon, J.) 125 business as manufacturers and vendors of bidis composed of A tobacco contained or rolled in tendu leaves. The contracts en· tered into by the assesees were short term contracts under which in consideration of a sum payable by instalments the assessees' were granted the exclusive right to collect and remove tendu leaves from specified areas. Some of the contracts also granted to the assessees a small ancillary right of cultivation. The Judi-· B cial Committee held that the amounts paid by the assessees under the said contracts constituted expenditure in order to secure raw m·aterials for their 'rnsine;s and, therefore, such expenditure was allowable as being on ·revenue account. In Chhotabhai's Case this Court took the view that the contracts before it were similar to the contracts before the Judicial committee and quoted with c approval the following passage from the judgment in Messrs Mohan/a/ Hargovind's Case (at page 241) : ·

''The contracts grant no interest in land and n<l interest in the trees or plants themselves. They are simply and solely contracts giving to the grantees the right to pick and carry away leaves, which, of course, implies the right to appropriate them as .their own property. The small right of cullivation given in the first of the two contracts is me- rely ancillary and is of no more significance than, would be, e.g., a right to spray a fruit tree given to the person who has bought the crop of apples. The contracts are short term contracts. The picking of the leaves under them has to start at once or practically at once and to proceed continuously."

According to this Court, the contracts entered into by the petitioners before it related to goods which had a potential existence and there was a sale of a right to such goods as soon as they came into existence, the question whether the title passed on the date of the contract itself or later depending upon the inte'ntion of the parties. This Court, therefore, came to the conclusion that the State had no right to interfere with the potitioners' rights under the said contracts.

As we will later point out, the authority of the decision in Chhotabhai's Case has been considerably shaken, if not wholly eroded, by subsequent pronouncell]ents of this Co\lrt. For the ff

126 SUPREME COURT REPORTS (1985) 3 S.C.R.

A present it will be sufficient for us to point out that the reliance placed in Chhotabliai's Case on the decision, of the Judicial Committee in Messrs Mohan/a/ Hargovind's Case does not appear to be justified for the contracts before the Judicial Committee and before this Court were different in their contents and this Court ·B appears to have fallen into an error in assuming that they were similar. For instance, the contracts before .the Privy Council were short term contracts while those before the Court in Chhotabhai's Case were for different periods including terms of five to even fifteen years. Apart from this, we have pointed out above the features which go to make the Bamboo Contract a benefit to c · arise out of land. These features were conspicuously ab3ent in the contracts before the court in Caotabhai's Case.

ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 127 for the use of the owner of" the right in and India it would be· A regarded as a benefit arising out of the land and as such would be immovable pcoperty. The Court then pointed out that fish did not come under the category of· property excluded from the definition of "immovable property", The Court further held that if a profit a prendre is regarded as tangible immovable property, then the 'property' being over Rs. 100 in vafue, the document creating such B right would repuire to be registered, and if it was intangible immovable property, then a registered instrument would be necessary whatever the value; but as in the case before the Court the sales were all oral and therefore, there being neither writing nor registration, the transactions passed no title or interest and accordingly the petitioners had no fundamental rights which. they could eoforce, Ananda c Behera's Case was the first decision in which Chhotabhai's Case was distinguished. The relevant passage in the judgment (at pages 923· 4) is as follows :

"It is necessary to advert to Firm Chhotabhai Jethabai Patel & Co .. v. The State of Madhya Pradesh and explain it D because it was held there that a right to pluck, collect and carry away' tendu leaves does not give the owner of th~ right any proprietary interest in the land and so that sort of right was not an 'encumbrance' within the meaning of the Madhya Pradesh Abolition of Proprietary Rights Act. But the contract there was to 'pluck, collect and carry away, the leaves. The only kind of leaves that can be 'plucked' E are those that are growing on trees and it is evident that there must be a fresh drop of leaves at periodic intervals. That would make it a growing prop and a growing crop is expressly exempted from the definition of 'immovable property' in the Transfer of Property Act. That case is distinguishable and does not apply here".

The next decision which was cited and on which a considerable debate took place at the Bar was Shrimati Shantabai v. State of Bombay & Others. The facts in that case were· that by an unregistered document the petitioner's husband had granted to her in consideration of a sum of Rs. 20,000 the right to take and appropriate all kinds of wood from certain forests in his Zamindari. On the coming into force of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950, all proprietary rights iu laud vested in the State of Madhya Pradesh and the petitioner H

128 SUPREME COURT R"PORTS [1985] 3 S.C.R.

could no longer cut any wood. She thereupon applied to the Deputy A Commissioner and obtained from him an order permitting her to work the forest and started cutting the trees. The Divisional Forest Officer took action against her and passed an order directing that the cut materials be forfeited. She made representations to the Government and they proving fruitless, she filed in this Court a B petition under Article 32 of the Constitution of India alleging breach of her fundamental rights under Article 19 (I) (f) and (g) of the Constitution. Four of the five learned Judges who heard the case pointed out that the foundation of the petitioner's claim was an unregistered document and that it was riot necessary to determine the true meaning and effect thereof for whatever construction be put c on it, the petitioner could not complain of breach of any of her fundamental rights. The majority of the learned Judges held that if the document were considered as conveying to the petitioner any part or share in her husband's proprietary right, no such part or share was conveyed to her as the document was not registered and assuming that any such part or share was conveyed, it had become D vested in the State under section 3 of the said Act; if the document were considered as a licence coupled with a grant, then the right acquired by the petitioner would be either in the nature of a profit a prendre which being an interest in land was immovable property and would require registration and as the document was not registered, it did not operate to transmit to her any such profit a E prendre as held in Ananda Behera's Case; and if the document were construed as conferring a purely personal right under a contract, assuming without deciding that a contract was "property" within the meaning of Article 19(l)(f) and 31(1) of the Constitution, she could not complain as the State had not acquired or taken possession of the contract which remained her property and cs the State was not a party to the contract and claimed no benefit under it, the petitioner was free to sue the grantor upon that contract and recover damages by way of compensation; and assuming the State was also bound by the contract; she could only seek to enforce the contract in the ordinary way and sue the State if so advised and claim whatever damages or compensation she might be entitled to for the alleged breach of it. After so holding the majority of the learned Judges observed (at page 269):

"This aspect of the matter docs not appear to have ff been brought to the notice of thi> when it decided the case

OIUSSA v. TITAGHUR PAPER MILLS (Madon, J.) 129

of. Chhotobhai Jethabai Patel and Co. v. The State of A Madhya Psadesh and had it been so done, we have, no doubt that case would not have been decided in the way it was done."

. Unlike the majority of the Judges, Vivian Bose, J,. in his B separate judgment considered in. detail the nat.ure of the document in that case .. Vivian Bose; J,. pointed out the distinction between standing timber and a tree. We have earlier extracted those passages from the learq.ed Judge's judgment. The learned Judge then pointed out that the duration of the grant was for a period of twelve years and that it was evident that trees which would. be fit for cutting c twelve years later would not be fit for felling immediately and; therefore, the document was not a mere sale of trees.as wood. Vivian Bose, J,. held that the transaction was not just a righ!'to cut a tree but also to derive a profit from the soil itself; in the shape of the nourhhment in the soil that went into the tree and made it to grow till it was of a size and age fit for felling as timber and if already of that size, in order to enable it to continue to ·Jive till the petitioner chose to fell it. The learned Judge, therefore, held that though such trees as can be regarded as standing timber at the date of the document; both because of their size and girth and also ' ' because of the intention to fall at an early date would be movable property for the purposes of the Transfer of Property Act and the Registration Act, the remaining trees that were covered by the grant would·be immovable property and as the total value was Rs. 26,000, I the deed required registration and being unregistered, it did not pass any title or interest and, therefore, as in Ananda Behera's Case the petitioner had no fundamental right which she could enforce.·

According to learned Counsel for the Appellant, the judgment of Vivian Bose, J,. in that case was not the judgment of the. Court since the other learned Judges- expressly refrained from expressing any opinion as to the actual nature of the transaction under the document in question. Learned Counsel Sl)bmitted that what the Court really held in that case was that there' was no breach of any fundamental right of the petitioner which would entitle her to appr- oach this Court under Article 32 of the Constitution,.and this decision ....' was, therefore, not an authority for the proposition that a document of the type before the Court was a grant of a profit a prendre as held by Vivian Bose, J. It is true as contended by l~arned Counsel H

130 SUPREME COURT REPORTS (1985] 3 S.C.R.

A that the majority expressly refrained from deciding the nature of the document because, as it pointed out, in any view of the matter, the petition would fail and it would, therefore, be difficult to say that what Vivian Bose, J,. held was that the decision of the Court as such. However, the judgment of Vivian Base, J., is a closely reasoned one which carries instant conviction and cannot, therefore, be lightly B brushed aside as learned Counsel has attempted to do. It is also pertinent to note that the majority in that case pointed out the principal errors into which the Court had fallen in Chhotabhai's Case and disapproved of what was decided in that case. ' \__. The decision to which we must now advert is Mahadeo v. c The State of Bombay (and connected petitions). The facts in that case were that some proprietors of Zamindaris situate in territories, then belonging to the State of Madhya Pradesh and on the reorgani- zation of States traµsferred to the erstwhile State of Bombay, granted to the petitioners right to take forest produce, mainly tendu leaves, .from forests included in their Zamindaris. The agreements conveyed to the petitioners in addition to the tendu leaves other forest produce like timber, bomboos, etc., the soil for making bricks, and the right to build on and occupy land for the purpose of their buisness. In a number of cases, these rights were spread over ,' many years. Some of the agreements were registered and the others unregistered. After the coming into force of the Madhya- Pradesh Abolition of Propreitary Rights (Estates, Mahals, Alienated Lands) Act, 1950, the Government disclaimed the agreements and auctioned the rights afresh, acting under section 3 of the said Act. The petitioners thereupon filed petitions under Article 32 of the Constitution of India challenging the legality of the action taken by the Government on the ground that it was an invasion of their funda- mental rights. The main contention of the petitioners was that the agreements were in essence and effect licenses granted to them to cut, gather and carry away the produce in the shape of tendu leaves, or lac, or timber or wood, and did not grant to them any "interest in land" or 'benefit to arise out of land' and the object of the agree- ments could, therefore, only be described as sale of goods as defined in the Indian Sale of Goods Act. In support of that contention, the petitioners relied upon the dicision in Chhotabhai's case. The Court examined the terms of the agreements in question and conclu- r ded that under none of them was there a naked right to take H leaves of tendu trees together with a right of ingress and of regress

' ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 131 from the land but there were further benefits including the right to accupy the land, to erect buildings and to take other forest produce not necessarily standing timber, growing crop or grass. The Court further held that whether the right to the leaves could be regarded as a right to a growing crop had to be examined with reference to all the terms of the documents and all the rights convey~d thereunder and that if the right conveyed comprised more than the leaves of B the trees, it would not be correct to refer to it as being in respect of growing crops simp/iciter. On an examination of the terms of the documents and the rights conveyed thereunder the Court came to the conclusion that wh1t was granted to the petitioners was an interest in immovable property which was a proprietary right within the meaning of the said Act and, therefore, it vested in the State. c With reference to C 1ih-1tab 1ui C.He relied upJn by the petitioners, Hidayatullah, J., as he then was, speaking for the court, said (at page 346) :

" It is clear from the foregoing analysis of the decision in Chhotabhai's Case that on a canst•uction of the docu- ments there under consideration an adopting . a principle enunciated by the privy Council in Mohan/al Hargovind of Jubbalpure v. Com•nissioner of Income tax Central Pro- )'- vinces and Berar and relying upon a passage each in Benja- min on Sale and the well-known treatise of Baden-Powell, E the Bench came to the conclusion that the documents there under consideration did not create any interest in land and did not constitute any grant of any propreitary interest in

- the estate but were merely contracts or licenses given to the petitioners 'to cut, gather and carry away the produce ~- in the shape of tendu leaves, or lac, or timber or wood'. F -. But then, .it necessarily followed that the Act did not purport to affect the petitioners. rights under the contracts or licences. But what was the nature of those rights of the petitioners? It is plain, that if they were merely contracual rights, then as pointed out in the two later decisions, in G Ananda Behera v. The State of Orissa, Shantabai's case, the State has not acquired or taken possession of those • rights but has only declined to be bound by the agreements to which they were not a party. If, on the other hand, the petitioners were 111erc Jicensces, then also, as pointed out jn \he second of the two <;ases cited, the licences came to ff

i32 SUPREME COURT REPORTS [1985] 3 S.C.R.

A an end on the extinction of the title of the Iicensors. In either case there was no question of the breach of any fundamental right of the petitioners which could support the petitions which were presented under Art. 32 of the B Constituion. It is this aspect ~f the matter which was not brought to the notice of the Court, and the resulting omission to advert to it has seriously impaired, if not completly nullified, the effect and weight of the decis'on in Chhotabhai's case as a precedent."

c We may also usefully reproduce ·the following passages (at page 354) from the concluded portion of the judgment : "From this, it is quite clear that for~sts and trees be- longed to th~ proprietors, and they were items of. proprie- tary rights ... "

"If then the forest and the trees belonged to the pro- D prietors as items in their 'proprietary rights', it is quite clear that these items of proprietary rights have been trans- ferred to the petitioners ... Being a 'proprietary right', it vests in the State under ss. 3 and 4 of the Act. The decision in Chhotabhai's case treated these rights as bare licences, .and it was apparently given per hcu ·iam and cannot; there- E fore; be followed." (Emphasis supplied)

·Faced with this decision, learned Counsel for the Appellant sought to distinguish it on the ground that the terms of the agree-. ments in that case were different from the terms of the Bamboo Contract. We are unable to accept this submission. It is unnecessary ·~· F to set out in detail the terms of the agreements in M1hadeo's Case. ., ·' ."'t- The differences sought to be pointed out by learned Counsel for the Appellant are unsubstantial and make no difforence. The yssen- tial and basic features are the same and the same interpretation as was placed upon the agreeemonts in M 1had9o's Case must, there- fore, apply to the Bamboo Contract. G In State of Madhya Pradesh v. Yakinuddin(1 ) the respondents had entered into agreements with the form or proprietors of certain estates in the State of Madhya Pradesh acquiring the right to pro- pagate lac, collect tendu leaves and gather fruits and flowers of Mahua leaves. Some of these documents were registered and others

H (l) [1963] 3 S.C.R. 13.

ORISSA v. TITAGHUR PAPER MILLS (Madon, I.) 133 unregiste1ed. On the coming into force of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950, the State of Madhya Pradesh took possession of all; the villages comprised in the respective estates of the proprietors • who had granted the aforesaid rights to the respondents and ·refused to recognize the respondents' rights. The respondents thereupo~ filed petitions under Article 226 of the Constitution in the High B • Court of Madhya Pradesh and the High Court relying upon the decision in Chhotabhai's Case, granted to the respondents the reliefs claimed by them. A Bench of five Judges of this Court allowed the appeals filed by the State of Madhya Pradesh. In its judgment, this Court considered its earlier decisions in Shantabai v. State of Bombay and others and Mahadeo v. The State of Bombay and. obse- c ved as follows (at page 21):

"In view of these cpnsiderations, it must be held thaf these cases are equally governed by the decisions afore- said of this Court, which have overruled the earliest deci- sion in the case of Chhotabhai Jethabai Patel and Co. v. The State of Madhya Pradesh.

In Board of Reven.ue Etc. v. A.M. Ansari Etc.(1) the respondents were the highest bidders at an auction of forest produce, namely, timber, fuel, bamboos, minor forest produce, bidi leaves, tanning barks, parks, mohwa, etc., held by the Forest Department of the Government of Andhra Pradesh. They were called upon to pay in terms of the conditions of sale stamp duty on the - agreements to be executed by then as if these documents were leases of immovable property. The respondents there upon filed petitions under Article 226 of the Constitution in the High Court of Andhra Pradesh. In F the said petitions, the State contended that under the agreements, the respondents had acquired an interest in immovable property. The High Court held in favour of the respondents. The State went in appeal to this court. On consideration of the terms of ' the agreements, this Court held that the agreements were licences and not leases. The Court !~id emphasis upon three salient G features of those agreements for reaching its conclusion,· namely, {I) that these were agreements of short duration of nine to ten months, (2) that they did not create any estate or interest in the

(I) (1976] 3 S.C.R. 661.

134 SUPREME COURT REPORTS (1985] 3 S.C.R.

A land, and (3) that they did not grant exclusive possession and control of the land to the respondents but merely granted to them the right to pluck, cut, carry away and appropriate the forest produce that might have been existing at the date of the agreement or which might have come into existence during the short period of B the·currency of the agreements, and that the right of the respondents to go on the land was only ancillary to the real purpose of the contract. The Court obsarved as follows (at page 667) :

" ... Thus the acquisition by the respondents not being c an interest in. the soil but merely a right to cut the fructus naturales, we are clearly of the view that the agreements in question possessed the clo.araotori•tics of licences and did not amount to lease~ so as to attract the applicability of Article 31(c) of the Stamp Act".

"The conclusion arrived "at by us gains strength from D ·the judgment of this Court i:i Firm Chhotabhai Jethabai Patel and Co. d Ors. v. The State of Madhya Pradesh where contracts and agreements entered into by person with the previous proprietors of certain estates and mahals in the State under which they acquired the rights to pluck, collect and carry away tendu leaves, to cultivate, culture, and acquire lac, and to cut and carry away teak and timber and miscellaneous species of trees called hardwood and bamboos were held in essence and effect to be licences." "Thete is, of course, a Judgment of this Court in Mahadeo v. State of Bombay where seemingly a somewhat different view was expressed but the facts of that case were quite distinguishable. In that case apart from the bare right to take the leaves of tendu trees, there were further benefits including the right to occupy the land, to erect buildings and to take away other forest produce not necessarily standing timber, growing crop or grass and the rights were spread over many years·."

We fail to see how this authority in any way supports the case of the Appellant before us or resuscitates the authority of Chhotabhai's Case. In Ansari's Case the Court seems to have assumed that Chhotabhai's Case dealt with short term contracts ff while, as we have seen ·above, most of the contracts in Chhotabhai's

ORiSSA v. TITAGHUR PAPER MILLS (Madon, J.) i:B Case were of far greater duration extending even to fifteen years, nor was the Court's attention drawn to the case of State of Madhya Pradesh v. Yakinuddin: While the agreement in Ansari's Case.was a mere right to enter upon the land and take. away tendu . leaves, etc., the right under the Bamboo Contract is of a wholly different nature. Further, the question whether the agreements were a grant of a profit a prendre or a benefit to arise out of land was not raised and, therefore, not considered in Ansari's Case and the only point which fell for decision by the Court was whether th.e agreements were licences or leases. In fact, another question which arose in that case was whether the respondents were liabl.e to pay the amounts demanded from them as reimbursement of sales tax. Affirming the decision of the High Court on this point, c tht Court held that the Forest Department did not carry on. any busines s by holding auctions of forest · produce and was, therefore, not a dealer within the meaning of that term as defined in the Andhra Pradesh General Sales Tax Act, 1957. The question whether the agreements were contracts of sale of goods was, however, not considered in that case. D

We now come to the case of State of Madhya .Pradesh and others v. Orient Paper Mills Ltd., the second of the two cases on which learned Counsel for the Appellant relied so strongly in support of his submission that the Bambo~ Contract was a contract of sale of goods. The facts in that case as appearing from the judgment of the High Court reported as Orient Paper Mills Ltd. v. State of E Madhya Pradesh and Others(') were that the Pr<sident of India acting on behalf of the former Part C State ofVindhya Pradesh had entered into an agreement with the respondent. The said agreement was a ---..:.~ registered instrument and was styled as a lease and under it the ........ \ respondent acpuired the right for a period of twenty years ·with an option of renewal for a further period of twenty years to enter .upon •F "the leased area" to fell, cut or extract bamboos and salai wood and to remove, store and utilize the same for meeting the fuel require- ment of its paper ·mill; copy of the said agree.men! has been produced before us. Some of the terms of the said agreement were the same as those contained in the Bamboo Contracts as also in the case of Mahadeo v. The State of Bombay. The ·said agreement provided for payment of royalty in~luding a minimum royalty. It also ~onferred upon the respondent the right to take on .Jease such

(I) [1972] 28 S.T.C. 532. H

136 SUPREME COURT REPORTS (1985] 3 S.C.R.

A suitable site or sites as were at the disposl of the State Government within "the leased area" for the erection of store houses, sheds, depots, bungalows, staff offices, agencies and other buildings of a like nature bona fide required for the purposes of its business connected with the said agreement as also a right to make dams acrosss reams, cut canals, make water-course, irrigation works, construct roads, railways and tramways and do any other work useful or necessary for the purposes of its business connected with the said agreement in or upon "the leased area" in terms very similar to those in'the Bamboo Contract. After the States Reorganization Act, 1956, came into force, the territories comprised in the State of Vindhya Pradesh became part of the new State of Madhya Pradesh. At the date c when the said agreement was entered into the C. P. and Berar Sales Tax Act, 1947, wa5 in force in the State of Vindhya Pradesh and the definition of "goods" contained in clause (g) of section 2 of that Act as modified and in force in that State excluded from the purview of the said Act forest contracts that gave a right to collect timber or wood to forest produce. The C. P. and Berar Sales Tax Act was repealed by the Madhya Pradesh General Sales Tax Act, 1958, with effect from April 1, 1959, and the new Act did not contain any exclusion of forest contracts from the definitions of "goods''. Further, the terrn "dealer" as defined in the 1958 Act included the Central Government and the State Government or any of its departments. The Forest Department of the State Govern- ment was, however, exempted from the payment of sales tax for ·the period Aprill, 1959, to November 2, 1962. After the period of the said exemption expired, the Forest Departmant got itself registered as a dealer and the Divisional Forest Officer called upon the respondent to reimburse to him the amount which, according to him, he was liable to pay as sales tax in respect of the transaction covered by the said agreement. Challenging his right to do so, the respondent filed in the High Court of Madhya Pradesh a writ petition under Article 226 of the Constitution. Jn the said writ petition the respondent contended that the transaction covered by the said agreement was not a sale of goods and accordingly, no sales tax was payable in respect of bamboos and salai wood extracted by the respondent thereunder, that the said agreement did not provide for the recovery of the amount of sales tax from the respondent, and that· neither the State Government nor the Forest Department of that Goverment was a "dealer" and that even if tbe saler tax was payable, it was not recoverable as arrears of land H

ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 137 revenue. The High Court held that the transaction was one of sale of goods and that if sales tax was payable it would be recoverable under secti0n 64A of the Sale of Goods Act, 1939, but the State Government o.r the Forest Department could not merely· by selling the forest produce grown on its own land be regarded as carrying on any business of buying, selling, supplying or distributing goods and, therefore, in respect of mere sales of forest produce neither the State Government nor the Forest Department was a "dealer" within the meaning of that term as defined in the 1958 Act. In coming to the conclusion that the said agreement was a contract of sale of goods, the High Court proceeded upon the basis that what it had to consider was "the stage when bamboo and salai wood have already been felled and appropriated". By reason of the judgment c of the High Court, the definition of the term "dealer" was amended with retrospective effect by the Madhya Pradesh General Sales Tax (Amendment and Validation) Act, 1971, so as to nullify the find- ing of the High Court that neither the State Government nor its Forest Department was a "dealer". The State of Madhya Pradesh as also the respondent came in appeal to the Supreme Court. D The appeals were heard in the Court by a Division Bench of two teamed Judges. At the hearing of the appeals, the respondent desired to challenge the vi res of the amending Act, but in view of the Presdential Proclamation suspending the operation of Article 14, it could not do so and the court held that after the proclamation lapsed, it was open to the respondent to take up the point but so far E the appeals were concerned that challenge was not available and the appeals must be decided on the basis that the amendment was valid and constitutional. The main point before this Court, therefore, was whether the said agreement was a lease as it was styled or a simple sale of standing timber coupled with a licence to enter and do · F certain' things on another's land. The Court held that the label given to a document was not conclusive of its real nature and that under the said agreement, possession of the land was not given tci the respondent as it would have been had the said agreement been ·a lease and that as the terms of the said agreement showed, it conferred in substance a right to cut and carry away timber of specified species G and till the trees were cut, they remained the property of the owner, namely, the State, and Iha t once the trees were sovered, the property / in them passed to the respondent. The Court further observed that the term used in tbe said agreement, namely, "royalty", was "a feudalistic euphemism for the 'price' of the timber". H

138 SUPREME COURT REPORTS (198)] 3 S.C.it A We arc unable to agree with the interpretation placed by the Court on the document in the Orient Paper Mills' Case. We find that in that case this Court as also the High Court adopted a wrong approach in construing the said document. It is a well-settled rule of interpretation that a document must b~ construed as a whole. This rule is stated in Halsbury's Laws of England, Fourth Edilion, ·B Volume 12, paragraph 1469 at page 602, as follows:

"Instrun;ent construed as whole. < It is a rule of construction applicable to all written instruments that the instrument must be construed as a \__ c whole in order to ascertain th1 tn1e meaning of its _..J. several clauses, and the words of each clauso mast be so interpreted as to bring them into harmony with the other provisions of the instrument, if that interpretation does no violence to the meaning of which they are naturally D susceptible. The best construction of deeds is to make one part of the deed expound the other, and so to make all the parts agree. Effect must as far as possible, be given to every word and every clause".

In Mahadeo v. State of Bombay a five-Judge Bench of this Court ..... E categorically held (at page 349) that "Whether the right to the ' leaves can be regarded as a right to a growing crop has, however, to be examined with reference to all the terms of the documents and all the right.< conveyed thereunder". In spite of this clear and unequivocal pronouncement by a five-Judge Bench of this Court, the learned Judges of the High Court who decidod the Orient Paper Mills' Case F held (at page· 538) that ''we have to consider the stage when bamboos . and salai wood have already been foiled and appropriated", wJiile a two-Judge Bench of this Court evolved for itself in the appeal from that judgment a rule of interpretation which was thus stated (at page 152) by Krishna Iyer, J., who spoke for the Court: G .' "The meat of the matter is the judicial determination of the true character of the transaction of 'lease' from the angle of the MPG ST Act and the Sale of Goods Act whose combined operation is pressed into service for making the tax exigible from the Forest Department and, in turn, from the respondent mills. It is the part of judicial prudence to H

ORISSA v. TITAGHUR PAPER MiLLS (Madon, i.) 139 decide an issue arising under the specific statute by c.onfining .A the focus to that statutary compass as far as possible. Diffusion into wider jurisprudential areas is fraught with unwitting conflict or confusion. We, therefore, warn ourselves against, venturing into the general law of real property except for minimal illumination thrown by rulings cited. In a large sense, there are no absolutes in legal B propositions and human problems and so, in the jural cosmos of relativity, our observations here may not be good currency beyond the factual-legal boundaries of sales-tax situations under a specific statute." -! A little later the learned Judge st~ted (at page 157) as C >-· follows :

"We may also observe that the question before us is not so much as to what nomenclature would aptly describe the deed but as to whether the deed results in sale of trees after they are cut. The answer to that question, as would appear from the above has to be in the affirmative". D

The above rule enunciated by this Court in that case falls into two parts, namely,(!) a document should be so interpreted as to bring it within the ambit of a particular statute relevant for the purpose of the dispute before the Court, and (2) in order to do so, the court can look at only such of the clauses of the document as also to just one or more of the consequences flowing from the. document which would fit in with the interpretation which the court wants to put on the document to make that statute applicable. The above principle of interpretation cannot be accepted as correct in Jaw. It. is fraught with considerable danger and mischief as it may expose documents to the personal predilections and philosophies of individual judges depending upon whether according to them it would be desirable that documents of the type they have to construe should be made subject to a particular statute or not. The result would be .that a document can be construed as amounting to a grant of a benefit to arise out of land when the question .before the Court G is whether proprietary rights and interests in estates have been abolished and the same document or a document having the same tenor could be construed as· a contract of sale of goods when the question is whether .the amounts payable thereunder are exigible to sales tax or purchase tax, making the interpretation of the document dependent upon the personal views of the judges with respect to the H

i40 . SUPREME COURT REPORTS [1985) 3 s.c.R . )

A. · legislation in question. In the very case which we are considering, namely, the Orient Paper Mill's Case as shown by the very first sentence in the judgment, this Court obliquely expressed its disappro- val of the transactions of the type represent by the document before it. That sentence is as follows (at page 150) ~ B "The State of Madhya Pradesh, blessed with abundant forest wealth, whose exvloitation, for reasons best known to that goverement, was left in part to the private sector. viz., the respondent, Orient Paper Mills ... "

c We may point out here that in making this observation the Court overlooked three important aspects of the m~tter, namely, (I) it was a matter of policy for the State to decide whether such transatctions should be entered into or not, (2) the transaction was entered into by the State so that a paper mill could be started in the D State as shown by the various terms of the said agreement and thus was an encouragement to settmg up of industries in the State, and (3) the transaction ensured employment for the people of the area because the said agreement expressly provided that the respondent was to engage minim m 50 per cent of the labour for the working of the contract area from the local source if available. E Just as a document .cannot be interpreted by picking out only a few clauses ignoring the other relevant ones, in the same way the nature and meaning of a document connot be determined by its end- result or one of the results or consequences which flow from it. If the second part of the above rule were correct, the result would be startling. There would be almost no agreement releting to immovable property which cannot be construed as a contract of sale of goods. Two instances would suffice to show this. If a man were to sell his building to another and the deed of sale were to provide that the building should be demolished and reconstructed and the price should be paid to the vendor partly in money and partly by givin3 him accommodation in the new building, according to this rule of interpretation adopted by the Court in the Orient Paper Mills Case it would for the purpose of sales tax be a sale of goods because the old building when demolished would result in movable property, namely, debris, doors, windows, water pipes: d.rainage pipes, water tanks, etc., which would be sold by the purchaser as movables. Similarly, if a man were to give a lease of his orchard or field, the lessee would be entitled to the fruits already in existence as also to

ORISSA v. T!TAGHUR PAPER MILLS (Madon, J.) 141' the fruits which would come into existence in the future and equally. in the case of a field the same would be the case with respect to the crop growing in the field as also the crops to grow thereafter. The . fruits and crop, whether existing or future, when plucked or harvested, would be movable property and would be sold as such by the lessee; but on the second part of the rule of interpretation laid down in the B. Orient Paper Mills' Case, the document, indisputably a lease of immovable property, would for the purposes of sales tax law be· a sale of goods. In looking merely at the end-result of the agreement. before it, namely, that the bamboos would be cut and then would be. goods in the hands of the respondent and holding therefrom that the transaction was exigible to sales tax, the Court overlooked what c. bad been firmly established by the decision of the five-Judge Bench· of this Court in State of Madras v. Gannon Dunker/y Co. (Madras) Ltd. that both the agreement and the sale must relate ·to the same subject-matter and, therefore, there cannot be an agreement relating to one \::ind of property and a sale as regards another. This principle bas been consistently followed and applied by this Court (see; for D' instance. Commissioner of Sales Tax. M. P. v. Purshottam Premji).( 1) Incidentally, we may also point out that in the Orient Paper Mills Case this Court itself had reservations as regards what it ·was decid- ing as is shown '>Y its statement that "in the jural cosmos of relativity, our observations here may not be good currency beyond the factual legal bou·1daries of sales-tax situations under a specific statute." We are constrained to observe that they are not "good currency" so far as even those situations are concerned.

It is true that the nomenclature and description given to a contract is not determinative of the real nature of the document or ~- of the fransactionlthereu~der. These, however, have to be determined ~ \. from all the terms and clauses of the document and all the rights and results flowing therefrom and not by picking and choosing certain clauses and the ultimate effect or result as the Court did in the Orient Paper Mills' Case. Thus, In coming to the conclusion that the term "royalty" used in the document before it was merely "a feudalistic euphemism for the 'price' of the timber", the Court overlooked the fact that the amount of royalty payable by the respondent was consideration for all the rights conferred upon the respondent under the contract though it was to be calculated according to the quantity

(1) [1970] 46 S.T.C. 38, 41 s.c. H

142 SUPREME COURT REPORTS [\985] 3 S.C.R.

A of the bamboos felted, and the Court also overlooked the fact that. this was made further clear by the provision for payment of a minimum royalty.

It is also true that a~ interpretation pbced by the court on a document is not binding up~n. it when another document comes to B' be interpreted by it but that is so w:10re the two dJcuments are of different tenors and not where they have the same tenor. On the ground that they dealt with the ·general law of real property, the. Court in Orient Paper ·Mills' case did not advert to the earlier decisions of this Court relating to documents with similar tenor even though those cases referred to in the judgment of the Madhya c Pradesh High Court under app~a\ before it. In view of this, the Orissa High Court in the judgment under appeal before us held that the Orient Paper Mill's Case was decided by this Couri per in- curium because it did not take into consideration decisions of larger Benches of this Court •. In Union of India and another v. K. S. D. Subramanian<'> this Court held as follows : .- . "But, ·we do not think that the High Court acted correctly in skirting the views expressed by. larger benches of this Court in the manner in which it had done this.· The proper course for a High Court, in such a case, is to try to E find out and follow the opinions expressed by larger benches of this Court in preference to those expressed by smaller benches of the Court. That is the practice foll wed by this Court itself. The practice has now crystallized in to rule of law declared by this Court."

F Ha;,f the Court looked at these decisions of.larger Benches, it would have appreciated that the only question before it could not be whether the document was a lease or a contract of sale of goods and that even though the document was not a lease it could be a grant of a· profit a prendre and that where there is .a grant of a profit a prendre 'that is, a .benefit to arise out of land, it is imma- G terial wheth_er the possession of the land is given to the grant.ee or whether the grantee is given only a licence to enter upon the land to . receive the benefit. The bacic and salient features of the agreement before the Court in the Orient Paper Mills' Case were the same as in the case of.JlfohaJco State of Bnmbay and this Cour\ was not

tt (I) (1977) I S.C.R. 871 92,

ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 143

justified in not adverting to that case and the other cases referred to by us earlier on the ground that these cases dealr with the general.• law of real property .. • A chameleon may change its surroundings but document .,.... is not a chameleon to change its meaning according to the purpose of the statute with reference to which it falls to be interpreted and • . if documents having the same tenor are not to be construed by courts in the same way, it would make for great uncertainty and . /' would introduce confusion, leaving people bewildered as to how they _) should manage their affairs so as, to make. their transactions valid . c and legal in eye of the law. ·~ The authorities discussed above show that the case of Firm Chhotabhai Jethabai Patel & Co. v. The State of Madhya Pradesh.· is not good· law and has been overruled by · deCisions of larger Benches of this Court. They equally show that the case of State of D Madhya Pradesh v. Orient Paper Mills Ltd., is also not good law and that this decision was given per incurium and laid down principles of interpretation which are wrong in law and cannot be assented to. The discussion of the above authorities also confirm us in our opinion that the Bamboo Contract is not a contract of sale of goods bat is a grant of a Pnfit a prmdre, that is, of a benefit to arise out E ·of la~d and that it is n)t p>nibb to bifurc1te the Bamb)) Contract into two : one for the sale· of bamboos existing at the date of the contract and the other for the sale of future goods, that is, of bamboos to come into existence in the future. In order to ascertain the true nature and meaning of the Bamboo Contract,. we have to examine the said contract as a whole with reference to all its terms F and all the rights conferred ~y it and not with reference to only a few terms or with just one of the rights flowing therefrom. On a proper interpretation, the Bomboo Contract dose not confer upon the Respondent Company merely a right to enter upon the !arid and cut bamboos and take them away. In addition to the right to enter upon the land for the above purpose, there are other important rights flowing from the Bamboo Contract it which we G' have already summarized earlier and which make in clear that what the Bamboo C'lntract granted was a benefit to arise out of land which is an interest in immovable property.. The attemp on the part of the State Government· and the officer ·or ··its Sales Tax . Department to brinil to tax the amounts payable un<Ier the Bmboo

144 SUPREME COURT REPORTS. · [1985] 3 S.C.R.

A' Contract was, therefore, not only unconstitutional but ultra vires· · the Orissa Act. Works Contract • The.only point which now remains to be considered fs the B one canvassed by the. contesting Respondents namely, that the : . .., Bamboo Contract as also the Timber Contracts arc works contracts and the amount• payable thereunder ·cannot, therefore, be .made • exigible to any tax under the Orissa Act. A . works contract is a· . compendiou.s...t.erni t<> describe conveniently a contract for the per- .\ formance of .work or services in which the supply of materials or . c some other goods is incidental. The simplest example .of·this. \_ type of contract .would be where an order is given to a tailor to .~ make a suit from suiting supplied by:the customer. This would be a· contract of work or se< vies in which the suyply of materials, namely, thread, lining, and buttons used in making the· suit, would be mrely incidental. Similarly, if an artist is 'commissioned to paint D a potrait, it would be a contract of work ahd services in which the canvass· on which the portrait· iS painted and the paint used in. painting the portrait would be merely incidental. In Commissioner ofSale Tax, M.P. v. Pushottam Premji, this Court pointed out the distinction between a works contract and a contract for the sale of ·goods as follows (at page 41) : "E " The primary difference between a contract for work or serviCe and a contract for ·sale of goods is that in ··the former there is in the person performing work or .rendering service no property in the thing produced as a ···whole .notwithstanding ·.that a. part or·even the whole of the materials used by him may hay.e beeri his property. In the. case of a contract for sale, the.thing produced as a whole has individual existence as the· sole property of the party . who produced it, at some time before delivery, and the property therein passes only under the contract relating • G thereto . to the other party for price.". As pointed out above. the Timber Centrals are agreement~ relating to movabl.s while lhc Bamboo Contract fa a grant of an interest in immovable property. The question, therefore, whether there is a works ccntract or a contract of sale of go.ods can arise R only with respect tc;> the Timber C9ntrac\s but the very meanin!J.

ORISSA v. TITAGHUR PAPER MILLS (Madon, J.) 145 of a works contract would show that the Timber Contracts cannot be A works contracts. The payee of the price, namely, the Government has not undertaken to do any work or labour. The work or ·labour • under the Timber Contracts is to be done by the payer of ihe price, namely, the forest contractor, that is, the Respondent Firm. It is the Respondent Firm which has to enter upon the land and to fell ·the standing trees and to remove them. Assuming for the sake of B • argument that the Bamboo Contract were a. contract relating to movables, the same position would apply to it. This contention of the Respondents is, therefore, without any substance •.

Conclusions c To summuize our conchisions :

(1) The impugned provisions, '!amely,