Fair price shop arrangement treated as sale, not agency; removal of wheat did not establish criminal breach of trust.
A fair price shop arrangement was construed as a sale and purchase transaction, not an agency, because the retailer paid the wholesale price, took delivery of specified wheat, and resold it under controlled conditions without any duty to account for sale proceeds to Government. The price-control, inspection, and termination clauses were treated as collateral restraints on resale and not as evidence that Government retained ownership. The Court also found no term requiring the wheat to remain at the shop premises, so mere removal of the bags did not prove entrustment-based criminal breach of trust under Section 409 IPC. The conviction was therefore unsustainable.
Issues: Whether the fair price shop arrangement created an agency or a sale so that the wheat remained the Government's property, and whether the appellant's removal of wheat from the shop amounted to criminal breach of trust under Section 409 of the Indian Penal Code.
Analysis: The agreement, though styled as one for distribution through fair price shops, required the retailer to deposit the wholesale price, take delivery of specific goods, and resell them at a controlled retail price subject to restrictions on sale, accounts, inspection, and termination. Reading the terms as a whole, the Court held that the parties intended a sale and purchase relationship, not agency. The retailer was not required to account for sale proceeds to Government, and the control clauses operated as collateral restraints on resale, not as indicia of continued Government ownership. The Court further held that no term obligated the retailer to keep the wheat at the shop premises, so mere removal of the bags, without proof of disposal in violation of a contractual duty, did not establish entrustment-based criminal breach of trust.
Conclusion: The appellant was not an agent of Government, the property in the wheat passed to him, and the conviction under Section 409 of the Indian Penal Code was unsustainable.
TaxTMI 
AI Drafter ✕
TaxTMI 
