Wireless signals as under Sale of Goods Act with special reference to

Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

TABLE OF CONTENTS

1 Acknowledgement.......................................................................................2

2 List of abbreviations....................................................................................3

3 Research methodology................................................................................4

4 Introduction, Aims and Objectives............................................................6

5 Chapters

5.1 Facts...........................................................................................................7

5.2 Judgment by High Court........................................................................10

5.3 Analysis.....................................................................................................16

6 Conclusion and suggestions ......................................................................23

7 References and List of cases.......................................................................25

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 Wireless signals as under Sale of Goods Act with special reference to
Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

1 ACKNOWLEDGEMENT

As a child, you acknowledge everything you accomplish, and as you grow older and

more sophisticated, you acknowledge only major achievements but an endeavour of

this magnitude would not have been possible without the invaluable help and support

of Mrs Suchita Nagori who throughout helped me and supported me by putting in her

valuable efforts and knowledge at the time of making of this project and without her

this research would not have materialized. I also express my deep sense of gratitude to

all my friends especially Ajay Bhadu, late night discussion with them helped me a lot

in this project and who have helped me at every point of time. At the same time I’m

also very grateful to God and my family members as without their support and

blessings this project would not have been a reality.

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 Wireless signals as under Sale of Goods Act with special reference to
Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

2 List of Abbreviations

A.I. - All India Reporters

S.C - Supreme Court
L.R - Law Reports
Vol. - Volume
Honble - Honourable
& - And
P. - Page
Ltd. - Limited
V - Versus
Sec. - Section
Co. - Company
H.C. - High Court
SSC - Supreme Court Cases
Bom. - Bombay
Enterp. - Enterprise
QB - Queens Bench
App Cas - Appeal Cases

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 Wireless signals as under Sale of Goods Act with special reference to
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4 RESEARCH METHODOLOGY

3.1 Topic: Wireless signals as under Sale of Goods Act with special reference to Jabalpur
Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

3.2 Area: Contract of Sale of goods

3.3 Introduction:
The project topic deals with studying whether wireless signals can be treated as goods or
not. The judgment of the Jabalpur Cable Network v. E.S.P.N Software’s Pvt. Lmt. case is
analysed so as to discuss Sec. 2(7) of the Sales of Goods Act, its concepts, characteristics and
legal scenario, further looking into the implications and consequences thereof and analyzing
and what the present position is.

3.4 Objective:
With the start of the present project work the following objectives were set out by me :-
 To look into the concept of intangible goods under the definition of Sales of Goods

Act.

 To look into the characteristics, legal background its consequences and the problems

in the above Case and analyse the judgment.

3.5 Theme of the Project:

Theme of my project work is to look into the definition of Goods under the Sales of Goods Act
and critically analyse the same.

3.6 Research Methods:

The methods that have been followed during the course of study (project) are “Library
Method” and “Internet Method” (Sources available on the internet).

3.7 GOAL OF THE STUDY

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 Wireless signals as under Sale of Goods Act with special reference to
Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

The study analysis the Judgment by Honble High Court of Madhya Pradesh in the above
mentioned case in which wireless signals were considered to be goods under the definition of
Sales of Goods Act. The wireless signals were compared to electricity and were termed as
goods. The goal of analysis is to discuss the scope of the definition of goods and legal
consequences and other aspects of this judgment.

3.8 Proposed judicial decisions for Analysis:

 The Commissioner of Sales Tax, Madhya Pradesh, Indore v. Madhya Pradesh

Electricity Board.

 Jabalpur Cable Network v. E.S.P.N. Software Pvt. Lmt.

3.9 Literature Survey:

While reading literature for this project, books by Mulla and Avtar Singh on Sales of goods
Act has been a great help and even article and case laws from different sites have helped to
complete this project.

3.10 Footnoting Style:

The footnoting style and the formatting of the project work is uniform throughout which is in
accordance with NLU, Jodhpur footnoting style.

3.11 Chapterization:

1. Facts of the case

2. Judgment by High Court
3. Analysis
4. Conclusion

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 Wireless signals as under Sale of Goods Act with special reference to
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4 INTRODUCTION

The definition of goods was under constant alteration for a long time until it was
finally codified in the Sale of Goods Act. However many of the newly discovered and
invented things are difficult to categorized under “goods” due to their nature which
makes them difficult to fit in the conditions laid down by conventional definitions.
This made the Courts to interpret the definition in new form and widen the scope of
the term “goods”, so that the disputed items may fall within the preview of “goods”
and dispute may be resolved.

The need for fast and rapid communication and transformation of information lead to
the discovery of wireless signals. However after many years of discovery no case
arose before the court where the question, “can wireless signals be considered to be
movable property?” could had been discussed and argued upon. The Hon’ble
Supreme Court of India in The Commissioner of Sales Tax, Madhya Pradesh, Indore
v. Madhya Pradesh Electricity Board1 case decided that electricity can be considered
to be a good under the definition of Sale of Good Act. This decision proved to be
imperative and was taken into consideration by the High Court of Madhya Pradesh
when the question concerning whether wireless signals can be mulled under the
foretaste of “goods”, in the case Jabalpur Cable Network Ltd. v. E.S.P.N. Softwares
Pvt. Ltd.2 This interpretation made by the High Court of Madhya Pradesh is very
crucial in the present context where wireless goods are replacing many of the
“immovable goods”

The judgment cleared the path for further resolution of future disputes concerning
with the definition of wireless signals but the judgment is also criticisms and can be
termed to be circumstantial and is not possessed with any major authority as it it’s not
given by the Apex Court of India. The case is analyzed mainly for the purpose of
critically studying the interpretation of the High Court that wireless signals can be

1
AIR 1970 SC 732
2
AIR 1999 MP 271

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 Wireless signals as under Sale of Goods Act with special reference to
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considered to be movable goods on basis of its comparison and similarities with

electricity.

Chapter 1

5.1 FACTS

Appellants: Jabalpur Cable Network Pvt. Ltd.

Respondent 1: E.S.P.N. Software India Pvt. Ltd. and Ors.

Respondent 2: Regional office of E.S.P.N. at Mumbai.

Respondent 3: Duly appointed Distributer for Jabalpur region by E.S.P.N.

 The respondent No. 1 entered into an agreement on 15th April 1998, titled as "Star Sports
Service Contract", for a period from 15 th April 1998 to 14th April 1999. The respondent No. 1
was named as the "licensor" in the contract and the appellant is known as "affiliate". It
appeared from Clause III of the agreement that the term of one year between the parties was
to expire by efflux of time unless the contract was renewed subject to same terms except for
the fees which could be varied. The amount of fees in the contract was payable at the rate of
Rs. 48,000/-per month by the affiliate to the licensor. However, the licensor reserved its right
to revise the subscription from time to time, Further it appeared from Clause IV of the
agreement that the licensor reserved its right to renegotiate with the affiliate with regard to
amount of monthly subscription payable to it, if it found that there was a substantial change
in the base of the subscribers of the affiliate. For this purpose, the licensor had reserved the
right to give a notice often days and on the failure of talks regarding renegotiation the
licensor had a right to terminate the contract by the end of the month. An important condition
was that the licensor granted to the affiliate a nonexclusive right to distribute the services
provided by Star Sports for reception by the customers of the distribution systems. It was
further agreed that licensor had right to terminate the contract by written notice if it believed
in good faith and reasonable judgment that it was threatened or subject to legal action by the
Government or any of its authorities under the laws of the land and the rules etc.

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 It was further agreed that the suspension of service will be on the basis of no fault liability on
the part of the licensor. Clause 8 of the agreement stated that the licensor had a right to
disconnect the service provided and terminate the agreement without prior notice in case of
non-payment of fees when they became due for payment as per Clause IV of the agreement.
However, the licensor had discretion not to disconnect the service and terminate the
agreement upon such terms and conditions as the licensor may deem fit and proper which
may, inter alia, include the receipt of entire arrears of money along with interest agreed
thereon at the rate of 1-1/2 per cent per month or at the highest lawful rate, whichever is
higher compounded monthly from the date such amounts which became due until they are
fully paid. Clause 10 showed that "Star Sports", "ESPN Swear Sports" were to be treated as
the trade names and the property of "Star Television Products Limited" and the affiliate had
no right to use such names for its own purpose. The right of termination was given in Clause
12. It was provided that contract would be terminated by seven days' prior notice by
registered post on breach of any of the obligations by the concerned party or on bankruptcy
or insolvency of other party. The exception to this Clause was that the licensor was given
absolute right to terminate the agreement without notice to the affiliate upon occurrence of
non-payments of fees as contemplated in Clause IV hereof, non-payment of hire purchase
installments, breach of Representations and warranties set out in Clause 3 hereof."

 The condition No. 15 is being reproduced hereunder as they are necessary for the decision
of this appeal:--

15.1 Entire understanding: This agreement contains the entire understanding between the
parties with respect to the subject-matter covered and supersedes any previous agreements
between the parties regarding such subject-matter.

15.2 Covering Law and Arbitration: The substantive rights and obligations of the parties
under this agreement shall be governed by Indian Law. All claims and controversies
hereunder shall be adjudicated exclusively in the Courts of Delhi,

(b) If any disputes or differences arise between the parties, then they shall endeavor to
resolve the same amicably through negotiations. If the difference are not resolved by means
of negotiations within a period of 30 days of such difference period as is agreed between

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the parties, such difference then shall be referred to and settled by arbitration, in
accordance with the provisions of Arbitration and Conciliation Act, 1996, by three
arbitrators, one to be appointed by each party and the third to be appointed by the two
arbitrators. The venue of the arbitration proceedings shall be New Delhi."

 After the aforesaid agreement was entered into, the appellant made a request to respondent
No. 3, that 80 percent of the cable operators were not paying it the dues and, therefore, it
was discontinuing its service to the cable operators and accordingly, it will not be paying
the respondent No. 3 for Star Sports Services from the date of next renewal. However, the
last line of the letter says that in case, the cable operators were ready and willing to pay the
charges for Star Sports Services, the appellant shall continue its services. It appears that
pursuant to this letter, the respondent deactivated the Star Sports Services on 7th of August,
1998. However, prior to deactivating the Star Sports Services the appellant was informed
by a letter, dated 24th July, 1998 to the following effect:--

 "In case the payment is not made on the date it is due, naturally would be service be
disconnected. However, I am sure you are more than aware as per the STAR Sports service
contract W 00802, the subscription charges are payable even for that period that the STAR
Sports services is discontinued."

 After receiving the aforesaid letter dated 24-7-98, the appellant sent a reply dated 25th of
July, 1998, to the Regional Manager, the respondent No. 2. It was stated in this letter, inter
alia, that the condition of demanding subscription charges even for the period the Star
Sports Services was discontinued, would leave the appellant with no option but never to
restart the Star Sports Services. Thereafter, on 7th of August, 1998 the services of Star
Sports were discontinued. Then again on 30th of October, 1998, after waiting for about two
months, it appears that the appellant again wanted to start a dialogue and stated that the
conditions imposed by the respondent No. 1 were one sided and high handed. Ultimately,
the talks broke down and as a consequence thereof the respondent No. 3, Channel Links
wrote to the appellant that the agreement stood terminated with effect from 4 th April 1999,
and it required the appellant to pay Rs. 2,40,000/- as service charges for the period falling
between 24th July1998 to 24th November1998.

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 Thereupon, the appellant filed an application under Section 9 of the Arbitration and
Conciliation Act, 1996 before the Court-below.

Chapter 2

5.2.1 Questions Raised

1. The first and foremost question raised before the Court was to decide the maintainability of
this appeal, prior to decision of the case on merits.

2. The second question was regarding the territorial jurisdiction of the Trial Court and of The
High Court. It was incumbent upon the Hon’ble High Court to decide the question of its
own jurisdiction first, before embarking upon decision on merits of this case.

3. Third question was raised regarding the nature of the contract. The Court was to decide was
it a Service Contract or an Agreement of Sale of Movable Property? Can wireless signals
be considered as goods under the definition of Sales of Goods Act?

4. Is Section 54 of the Contract Act applicable in this case?

5. Is the contract specifically enforceable?

6. Should the claim, by way of mandatory temporary injunction in order to prevent breach of
contract, be granted in favour of the appellant?

5.2.2 Judgment by High Court

 Regarding the question of maintainability of the appeal Hon’ble High Court decided that
the appeal was maintainable, against the order refusing to grant of an ex parte injunction
given by the Trial Court, under Section 37(1) (a). In this particular case, the Trial Court has
expressed its opinion for not granting ex parte injunction. The High Court held that it was
an order indicating the reason for not exercising the jurisdiction. Therefore, it is a formal
expression of adjudication. It cannot be disputed that under Section 9 of the Arbitration and
Conciliation Act and the Court has power to grant interim injunction or to take such other

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interim measure of protection as may appear to the Court to be just and convenient. The
Clause (d) of Section 9(ii) of the above Act would cover the case of the appellant and in
case it does not so cover the case by Clause (d) the width and amplitude of Clause (e) of
Section 9(ii) of the Act gave the Court-below sufficiently wide power to issue an ex parte
mandatory injunction to the respondents to provide services of Star Sports to the appellant.
If the conclusion of this Court be correct then certainly, an order passed under Section 9 of
the Act would be appealable under Section 37(1)(a) thereof.
 The Honble court while deciding the matter of jurisdiction rejected the second preliminary
objection raised by the respondents, with regard to the jurisdiction of the Civil Court at
Jabalpur, that in view of Clause 15.2 (a) of Annexure P-1, only the Delhi Court had
jurisdiction. The Court discussed the decisions of the Supreme Court in Hakam Singh v.
Gammon (India) Ltd.3, A. B. C. Laminart Pvt. Ltd. v. A. P. Agencies, Salem, 4 and Angile
Insulations v. Davy Ashmore India Ltd.5 that the parties to an agreement cannot confer
jurisdiction on a Court who is not possessed by it under the Code of Civil Procedure, but in
case, there be an agreement between the parties to a contract that out of the two Courts
having concurrent jurisdiction to try the suit, one of such Courts, shall try the suit, it is not
opposed to public policy, within the meaning of Section 23 of the Contract Act; and it does
not contravene Section 28 of the Contract Act.

The Court held that the cause of action did not arise at Delhi and the Courts at Delhi had no
jurisdiction to try the case and it was also averred that Clause (relating to territorial
jurisdiction of the Court in the agreement, Annexure P-l) is not binding and does not oust
the jurisdiction of this Court, meaning thereby the jurisdiction of Civil Court at Jabalpur,
where the cause of action arose. It may also readily be seen that the appellant had made
respondent No. 3 also a party to it. It was stated specifically in this paragraph 7 of the
application that no part of the execution of the agreement took place at New Delhi. The
agreement was signed at Jabalpur and was countersigned on behalf of respondent no. 1 at
Mumbai. There is an ambiguity in the agreement itself. This ambiguity is to the effect
whether the parties to Clause 15.2 (a) of the agreement that the Courts where the agreement
was signed shall have the jurisdiction or the Courts of Delhi (India) shall have only the

3
AIR 1971 SC 740
4
AIR 1989 SC 1239
5
(1995) 4 SCC 153 (AIR 1995 SC 1766).

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jurisdiction. This ambiguity cannot be resolved without ascertaining the intention of the
parties and it would require evidence to determine the ambiguity in the agreement. In this
case it must be assumed that the agreement was not signed at New Delhi. Therefore, it
cannot be assumed that the Court of Delhi shall have jurisdiction despite the presence of
the words in Clause 15.2 (a) of the agreement. It may be remembered that the case of the
appellant will be governed by Section 20(b) of the Code of Civil Procedure for the reason
in this case there are more than one non-applicants in the application under Section 9 of the
Act before the Court-below. It is obvious that the respondent No. 3 is necessary party in
view of the contention of the appellant that the termination of the contract is illegal. It is
clear that respondent No. 3 was a necessary party. It is a clear and distinct legal entity.
However, despite the agreement there was no automatic conferral of exclusive jurisdiction
in the Courts of New Delhi. In this case decision relied upon by the learned counsel for the
respondents would not be applicable to the facts of this case. For all these reasons, the
appellant had a right to file the suit under Section 20(c) of the Code of Civil Procedure at
the place where the cause of action arose wholly or in part.

 The Hon’ble court regarding the nature of the contract decided that whatever be the name
and style of the agreement, it is an agreement for sale of movable property and not of
immovable property. In view of this matter, the argument of the learned counsel for the
appellant that Sections 16 to 19 of the Act shall govern the cause of action in this case was
rejected.

Question whether signals be considered as movable goods or not under the definition of
Sales of Goods act, the Hon’ble Court decided that wireless signals are form of
electromagnetic energy and can be considered as goods. In this connection, it would be
profitable to consider whether the signals issued by the respondent No. 1 can be defined as
"goods" within the meaning of Sale of Goods Act. Section 2(7) of the Sale of Goods Act
defines the "goods" as follows: - "Goods" means every kind of moveable property other
than actionable claims and money; and includes stock and shares, growing crops, grass and
things attached to or forming part of the land which are agreed to be served before sale or
under the contract of sale."

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 Wireless signals as under Sale of Goods Act with special reference to
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The Court said decided that in this case we are not concerned with the latter part of the
definition but one thing is very clear from the above definition of "goods" that "goods"
mean every kind of movable property. It cannot be disputed that even the coded signals
issued by the respondent No. 1 are a form of energy. They contain information in coded
form. The appellant had not only right to decode them but also to distribute the decoded
forms of signals through cable operators. Such an agreement would be an agreement of sale
of goods. It cannot be disputed that these signals are movable and travel across from the
site of programmes to the antenna of the appellant and, thereafter, to the television sets of
the subscribers through the cable operators. These signals are a form of energy, in the shape
of electromagnetic or other kind of waves. These are the goods sold by the respondent No.
1 to the appellant.

In this connection, this Court relied on a decision of Supreme Court in The Commissioner
of Sales Tax, Madhya Pradesh. Indore v. Madhya Pradesh Electricity Board 6, wherein their
Lordships were required to consider whether "electricity" would be goods. The Supreme
Court, reversing the decision of a Division Bench of this Court, rendered in Madhya
Pradesh Electricity Board, Jabalpur v. Commissioner of Sales Tax, Madhya Pradesh 7, ,
held that the "electricity" would be goods. The Supreme Court observed at that;--

"....The term "movable property" when considered with reference to "goods" as defined for
the purposes of sales tax cannot be taken in a narrow sense and merely because electric
entry is not tangible or cannot be moved or touched like, for instance, a piece of wood or a
book, it cannot cease to be movable property when it has all the attributes of such
property.........."

The Supreme Court went on to point out that the electric energy was liable to abstraction,
consumption and use. The signals, issued by the respondent No. 1 are also liable to be
abstracted consumed and used. It may be further pointed out that the Supreme Court was of
the view that electricity could be stolen and, therefore, stealing of electricity was made
punishable for its theft.

6
AIR 1970 SC 732
7
AIR 1968 MP 163

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In this connection certain Clauses of the agreement show that the respondent No. 1 treated
its right of sending signals as its property. It was provided in Clause 3 (f) of General Terms
and Conditions of Annexure P-1 that the programmes issued by the Star Sports Services
shall not be permitted to be copied or reproduced by the appellant. The affiliate is also not
authorized to modify, misuse or tamper with the equipment or any of the signals emanating
there from in a manner that prevents identification of the equipment number or to interfere
with the signals as per Clause 3 (d) of General Terms and Conditions mentioned in the
agreement, Annexure P-1. These precautions were taken by the respondent No. 1 by
providing them specifically in the agreement because he treated the right to show the
signals as its proprietary rights. The learned counsel for the respondents Nos. 1 and 2 is
correct in saying that Section 20 of the Code of Civil Procedure would be attracted for
determining the jurisdiction of the Court. Considering all these points the Court considered
wireless signals to be goods under the definition of Sales of goods Act.

 Regarding the question of nature of the contract the Court was of the view that if the
signals can be held to be goods then the agreement Annexure P-1 is for sale of movable
property produced by the respondent No. 1 for a period of one year. The appellant had not
only right to decode them but also to distribute the decoded forms of signals through cable
operators. Such an agreement would be an agreement of sale of goods.

 On the question of application of Section 54 of the Contract Act in this case the Hon’ble
Court decided that the respondent acquiesced in the act of the appellant and stopped
sending signals at the request of the appellant. In such circumstances, Section 54 of the
Contract Act would not be strictly applicable. Since the respondent No. 1 agreed to stop
issuance of signals, there was no quid pro quo and, therefore, the question of payment of
damages did not arise. The respondent No. 1 had full right to rescind the whole contract
and claim damages for breach of contract. It failed to exercise its option.

 With respect to the specific enforcement of the contract the Court said the answer to such
problem has to be looked into from the point of view of the nature of the agreement.
Section 7 of the Specific Relief Act provides that a person entitled to the possession of
specific movable property may recover it in the manner provided by the Code of Civil
Procedure. Explanation 2 of Section 7 aforesaid says that a special or temporary right to

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present possession of the movable property is sufficient to support a suit under this section.
In this situation, the Court has to determine the nature of contract. This Court has already
stated the electronic signals in form of waves can be treated as goods and can be held to be
movable property. In view of this matter, the appellant is entitled to hold the movable
property by virtue of the agreement for a period between 15th of April, 1998 to 14th of
April, 1999 provided the agreement subsisted. The application under Section 9 cannot be
treated specifically an application for specific performance of contract. These signals were
not ordinary articles of commerce and were of special value to the appellant and they were
the goods which are not easily obtainable in market. Therefore, there was a presumption
that the breach of a contract to transfer these goods cannot be relieved by payment of
money in lieu thereof. It is also clear that there is no standard of ascertaining the loss
caused to thy appellant by not displaying the live programmes of the Star Sports Channel.
In such cases, the contract of specific performance would be enforceable Under Section 10
of Specific Relief Act read with explanation (ii) (a) thereof. Hence the contract is
specifically enforceable.

 Regarding the grant of mandatory temporary injunction Court was to decided that whether
the Court was confined to the principles under Section 39 Rules 1 and 2 of the Code Civil
Procedure or it had some wide powers under Section 9(ii) (d) and (e) of the Act. Obviously,
the language given in Clause (e) makes the power much wider. The learned counsel for the
appellant referred to the case of Gujarat Bottling Co. Ltd. v. Coca Cola Company8, reported
in. The matter in this case was under Order 39, Rules 1 and 2 of the Code of Civil
Procedure. In this case, the principle laid down was that the conduct of the parties has to be
looked into for grant of injunction. It appears that conduct of both the parties in this case
can be faulted and, therefore, it cannot be said that the appellant alone has to be blamed.
The Court decided that it would be most inequitable not to grant the relief to the appellant
to transmit information which is of great value when it is live and loses its importance after
the telecast is over and, therefore, it would be appropriate to grant injunction to the
appellant subject to certain conditions which shall be spelled out later on.

 Accordingly, in terms of the aforesaid order, this appeal succeeded and was allowed.

8
AIR 1995 SC 2372

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Chapter 3

5.3 Analysis

For analyzing the judgment of the High Court holding in the instant case the contract being
not a service contract but a contract of sale wherein considering wireless signals as movable
goods, it’s imperative to peruse through the relevant definitions and historical background
associated with it.

The primary question necessitating answer is what are goods? – we cannot approach the
subject better than by trying to understand the two expressions” goods” and “sale”. The
definition of the term “goods” could be traced through Section 76 (Now Repealed) of the
Contract Act’ which defines it as: - “Goods” means and include every kind of movable
property”.

“Movable property” has been defined in Section 3, clause 34 of the General clause act, Act X
of 1897: - “movable property shall mean property of every description except immovable
property”. So, it becomes necessary to examine what immovable property is? Section 3,
clause 25 of the General Clauses Act defines immovable property: - “immovable property
shall include, land, benefits to arise out of land, and things attached to the earth or
permanently fastened to anything to the earth.”

Now this definition under old Section 76 gave rise to difficult questions (e.g.,) whether
shares in a joint stock company can be called goods or not. In Lalit Mohan Nandy V.
Haridas Mukharjee9 it was held that goods will not include shares. But in the later case,
Manekji V. Wadilal & Co.10, it has been held that shares are goods. Again, under the
9
(1996)24CLJ 335 : 37 IC 707
10
(1926) 53 IA 92 : 50 Bom.360

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definition under the old section was so wide, that it might include even money. But, current
coins could not be called goods and it was held in Koti Venkataramaniah V. The Official
Assignee11, that current notes are not goods. Coins of antiquity and Jubilee coins, however,
have been held to be goods. Current money is not “goods”, current coins sold, as curiosity
will be goods. The Indian sale of goods act 1930 has combined the definition under the

English act and under the repealed sec. 76 of the contract act and has given a new definition
in the following terms in Sec.2 clause7: “Goods mean every kind of movable property other
than actionable claims, and money and include stock and shares, growing crops, grass and
things attached to or forming part of the land which are agreed to be served before sale or
under the contract or sale”.

The word actionable claim has been defined in Sec. 3 of the transfer of property act as
follows: - “Actionable claim, means a claim to any debt, other than a debt secured by
mortgage of immovable property or by hypothecation or pledge of movable property not in
possession, either actual or constructive, of the claimant, which the civil courts recognizing
as affording grounds of relief, whether such debt or beneficial interest be existing accruing,
conditional or contingent.

Mineral oil extracted and removed from the soil is goods.12Stones won in the process of
quarrying either in their then condition or after breaking up are “goods”.13 Standing timber on
the land agreed to be served from the land before the sale will be covered by definition of
goods.14 Slag, clinder tips or other artificially formed mounds may, in the process of time, so
accede to the soil as to become incapable of forming the subject-matter of a contract of the
sale within the meaning of the sale of Goods Act.15 According to Indian law shares are also
“goods” within the meaning of the definition of the Act. 16 Under Sec. 3(34) of the General
Clauses Act, a decree is movable property and “goods” within the meaning of the Sales of

11
(1909) 19 MLJ 283 : 2 IC 611
12
Anglo-iranian oil co. v. jaffrate,(1953) 1WLR 246, 250.
13
Kulkarni v. The State, AIR 1957 MP 45.
14
State of Maharasthra v. Champalal Kishan lal Mohta, AIR 1971 SC 908.
15
Organ v. Russell, (1909) 1 KB 357.
16
Mnekji v. Wadilal, AIR 1926 PC 538.

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 Wireless signals as under Sale of Goods Act with special reference to
Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

Goods Act.17 Patents, copyrights, goodwill, trademark, are all considered goods, which can
be the subject matter of a Contract.18 Copyright in songs have been included in the definition
of goods.19 A ship also has been considered to come within the definition of the words
“goods”.20 Water was also considered as “good” in Ferens v. Brien. 21 Electricity was
considered as good by Hon’ble Supreme Court in Commissioner of Sales Tax, Madhya
Pradesh. Indore v. Madhya Pradesh Electricity Board22.

The next question to be answered is what is Sale? – the repealed Sect. 77 of the Indian
Contract Act defined a sale thus : - “Sale is an exchange of property for a price. It involves a
transfer of ownership of the thing sold from the seller to the buyer”.

Section 4 of the Indian Sale of Goods Act as follows: “A contract of sale of goods is a
contract whereby the seller transfers or agrees to transfer the property in goods to the buyer
for a price. There may be a contract of sale between one part-owner and another”. It is not
essential that any immediate right to possession should be passed by the contract. What is
essential is that the title passed there under is absolute and not merely possessory. Sale is a
translative fact and involves the transfer of the entire interest of the person in whatever is
sold. A transaction will be sale only where for money consideration; property is transferred
under a contract for sale.23

The High Court in this case considered the definition of "goods" in the Sale of Goods Act
given in Section 2(7) which defines the "goods" as follows: - "Goods" means every kind of
moveable property other than actionable claims and money; and includes stock and shares,
growing crops, grass and things attached to or forming part of the land which are agreed to be
served before sale or under the contract of sale."

The Court was not concerned with the latter part of the definition and concluded that in the
above definition "goods" mean every kind of movable property and even the coded signals
issued by the respondent No. 1 are a form of energy. They contain information in coded

17
Madholal Sindhu v. Official Assignee, AIR 1950 FC 21.
18
Hooper v. Gumm, (1867) 2 Ch. App 282.
19
Ramiah Asari v. Chidambara Mudaliar, (1920) 39 MLJ 341.
20
Behnke v. Bede Shipping Co. (1927) 1 KB 649.
21
1882 QBD 21
22
AIR 1970 SC 732
231
New India Sugar Mills Ltd. V. Commissioner of Sales Tax, AIR 1963 SC 1207.

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 Wireless signals as under Sale of Goods Act with special reference to
Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

form. The appellant had not only right to decode them but also to distribute the decoded
forms of signals through cable operators. Such an agreement would be an agreement of sale
of goods. There can be no dispute that these signals are movable and travel across from the
site of programmes to the antenna of the appellant and, thereafter, to the television sets of the
subscribers through the cable operators. These signals are a form of energy, in the shape of
electromagnetic or other kind of waves. These are the goods sold by the respondent No. 1 to
the appellant.

In this connection, this Court relied on a decision of Supreme Court in The Commissioner of
Sales Tax, Madhya Pradesh. Indore v. Madhya Pradesh Electricity Board 24, , wherein the
Supreme Court decided that "electricity" would be goods. Here the important point to note is
that the Supreme Court gave a 3 point test to decide whether electricity can be goods or not.
This point test can be applied to decide about other intangible things.

The first stage is Abstraction. Here the Court observed that electricity can be abstracted. The
second stage is Consumption. The Court pointed out that electricity is a consumable thing.
The third and the last stage being Use, the Hon’ble Court said that electricity is subject to use
only.

Relying upon this test the High Court said compared wireless signals to be a form of
electromagnetic energy and further said that wireless signals issued by the Respondent no. 1
are also liable to abstracted, consume and use. Information in wireless signals is in form of
coded form which is sent from a base station, these signals are received at different stations
and the signal is decoded there and information is transferred.

The Judgment of the Hon’ble High Court is not very correct and subject to many slip-ups.
The first point of denigration lies in the curtailed interpretation made by the Court. The test
laid down by the Hon’ble Supreme Court is not precise, though electricity is intangible but it
always require a medium and the mediums required by electricity for the process of
extraction, consumption and use have to be tangible. In this aspect they are inseparable and
thereby cannot have separate existence, henceforth electricity couldn’t be completely
intangible good. If we go by this definitions and given by the Court in Commissioner of

24
AIR 1970 SC 732 page 736, paragraph 9

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 Wireless signals as under Sale of Goods Act with special reference to
Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

Sales Tax, Madhya Pradesh. Indore v. Madhya Pradesh Electricity Board, AIR 1970 SC 732,
it does not fulfill the 3 conditional test mentioned above. Since wireless signals were
considered to be goods on the basis of the similar nature and a form of electricity in the
present case the judgment becomes ambiguous. Moreover there is one major difference
between these two regarding transformation things is that wireless signals can even travel in
vacuum, these signals are electromagnetic signals which do not require any medium to travel
so while transferring of signals no medium is required whereas in case of electricity a
medium is always necessary. So even if electricity can be partially termed as goods, wireless
signals don’t even fall in this criterion. During the interpretation of Statutes and Commercial
Laws Courts adopt liberal views. If the definition and meaning of the interpretation done, the
words used while interpretation mean the same and the nature of the case in same then an
interpretation can be applied in the similar case. In Commissioner of Sales Tax, Madhya
Pradesh, Indore v. Madhya Pradesh Electricity Board 25, the aim and the behind terming
electricity was for matters of sales tax and that cannot be taken in a narrow sense. In present
case the matter was of contract of between two parties.

Other point which supports the uncertainty of this judgment is the question whether this
subsidiary requirement of redefining goods was a legal requirement or was it an attempt to
solve the case by fitting in wireless signals within the definitions of goods as when this case
was being tried there was no relevant law in India where this case could be fitted in. There
was no Central source to drive any authority. If there had been any relevant Act else would
had solved the case. Also the main aim of the appellant while arguing to include wireless
signals in definition of goods was to gain compensation. This supports the fact that the
judgment was given just to resolve the disputes of that case with then available laws and not
keeping in mind the future prospective. 9 years have passed and yet there is no legislation
passed to consider wireless signals as goods. An Electricity bill, 2003 clearly terms
electricity as movable goods and its theft is punishable but no act has been passed regarding
the wireless signals. There is one Broadcasting Bill waiting to be passed by the legislature,
may be possible that the entire future disputes regarding Telecommunication will be solved
by this bill. This bill also silent on the fact that should wireless signals be considered as
goods. On one hand where endeavours are being made for The Convention on Contracts for

25
AIR 1970 SC 732,

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 Wireless signals as under Sale of Goods Act with special reference to
Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

the International Sale of Goods to harmonise the laws relating to contract and sale of goods,
the Indian stand on laws regarding sale of goods are not very comprehensible.

Now we take into account the judgment of the court considering that this was not a service
contract and was therefore an agreement of sale under Sales of Goods Act. The main basis
and explanation High Court gave in support of this was that the wireless signals are goods on
the basis of the interpretation given in the above case by Hon’ble Supreme Court so this
contract was for Sale of signals by Respondent No. 1 to the appellant. Now since, the terming
of wireless signals itself is ambiguous it would be profitable to call this as a Service contract.

There has to be a distinction between supply of goods and supply of services. The Electricity
Act includes electricity within the definition of 'goods', this shows that there is always room
for debate even in relation to a basic matter such as what 'goods' comprises. There is certainly
no reason why, today, we should restrict the concept of 'goods' to personal chattels. The
reason for including electricity (and gas) is that electricity is capable of being consumed in
the same way as, for example, food. However, this does not mean that we should treat all
intangibles as goods, or that treating electricity as goods requires all contracts involving
electronic signals to be so treated. In any event, the features which distinguish a licence from
a sale are that ownership is not transferred and that the subject matter is used, not consumed.

The Hon’ble High Court was very correct in deciding the matters relating to question of
jurisdiction and maintainability of the appeal. There was ambiguity in the terms of the
contract as Clause 15.2 (a) of the agreement stated that the Courts where the agreement was
signed shall have the jurisdiction or the Courts of Delhi (India) shall have only the
jurisdiction. This ambiguity cannot be resolved without ascertaining the intention of the
parties and it would require evidence to determine the ambiguity in the agreement. Moreover
Respondent no. 3 was also an important party to the contract. The agreement was signed at
Jabalpur and was counter signed on behalf of Respondent no. 1 at Mumbai. It was very clear
from the facts of the case that Delhi was not the place was contract was signed. The signals
were sent to and collected at Jabalpur so the place of contract was also not Delhi.

Here thing important to note is that the terming of wireless signals can also be treated as a
work of Judiciary to swathe up the incompetence of Legislature to make laws in accordance

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 Wireless signals as under Sale of Goods Act with special reference to
Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

with changing times. The Hon’ble Supreme Court in State of Uttar Pradesh and Anr. etc. Vs.
Union of India (UOI) and Anr. 26 decided that the question whether a given activity is one of
sale or service is a vexed question. The terminology employed to describe an activity as sale
or service is not conclusive in itself. By calling sale as service or vice-versa, the substance of
the transaction will not get altered. The question has to be determined by discerning the
substance of the transaction in the context of the contract between the parties or in a case of
statutory contract in the light of the relevant provisions of the Act and the Rules. If an
activity or activities are comprehensively termed as 'service' but they answer the description
of 'sale' within the meaning of a Statute, they can nonetheless be regarded sale for the
purpose of that Statute. In other words, it is possible; an activity may be service for purposes
of one Act and sale for purposes of another Act. It may also be that in a given case, on the
facts of that case, a particular activity can be treated as 'service' but in a different fact
situation the same could be sale under the same Statute. This decision is very important in
giving a new scope to the definition of goods and deciding cases wherein analogous disputes
arise.

Taking up the question of application of Section 54 the High Courts judgment was very
correct, argument that it was the appellant who was required to pay the money first under the
agreement and as a consequence thereof he was entitled to receive the signals and under
Section 54 of the Contract Act if the appellant failed to perform his part of the contract, the
reciprocal promise on the part of the respondent No. 1 of issuing signals could not be claimed
was very weak. On the basis of Section 54 of the Contract Act the respondent No. 1 was not
entitled to claim compensation for the period the services were not utilized as this section
would not apply unless the respondent No. 1 suffered any loss on account of non-payment of
fees by the appellant. On the other hand, it acquiesced in the act of the appellant and stopped
sending signals at the request of the appellant. In such circumstances, Section 54 of the
Contract Act would not be strictly applicable. There was no quid pro quo and, therefore, the
question of payment of damages did not arise. The respondent No. 1 had full right to rescind
the whole contract and claim damages for breach of contract. It failed to exercise its option.

26
AIR 2003 SC 1147,

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 Wireless signals as under Sale of Goods Act with special reference to
Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

6 Conclusion

The judgment delivered by the Honorable High Court of Madhya Pradesh apparently seems
to be ambiguous wherein the wireless signals have been incorporated within the ambit of
goods under the sales of goods act. The judgment also appears to be farcical prima facie as
the judgment of the instant case is inspired from Commissioner of Sales Tax, Madhya
Pradesh. Indore v. Madhya Pradesh Electricity Board27. wherein electricity was construed to
be within the sphere of goods and the courts have blatantly incorporated its ratio without
deciding the instant case on its merits. The court failed to appreciate the fundamental premise
which distinguishes electricity from wireless signals. The difference between the two is
imperative to be considered because it establishes the reason behind holding electricity to be
as moveable goods and why wireless signals constitute class apart. It is submitted that for
transmission of the electricity a medium is required unlike wireless signals wherein the
primary test behind adjudging electricity to be as goods was that it needs a medium to travel
which interlay includes the material form of wire to transmit the energy for the consumers to
use it unlike wireless wherein no medium is required. Thus court failed to appreciate this fact
and moreover the judgment does not touch upon the instant point in its entirety. The
judgment in the Jabalpur Cable Network case is ambiguous on the point of inclusion of
wireless signals within the definition of goods under the sales of goods act The Electricity
bill came in 2003 after 33 years of the historical judgment by the Supreme Court. 9 years
have passed and there is still no codified law to deal with the tribulations concerning
transaction of intangible items. In respect of the articles which are of special value like
wireless signals and which were not easily obtainable in the market the attitude of the Sale of
Goods Act is quite traditional. In present scenario where X is being talked about to
harmonize the different laws of the different countries regarding the sale of goods, India’s
27
AIR 1970 SC 732

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 Wireless signals as under Sale of Goods Act with special reference to
Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

stand is still ambiguous. in the present picture of global trade, trade between different
countries is only possible if the parties are clear with the terms of the contract and the
procedure that would be followed if dispute arises. How can we expect an industrial giant of
U.S. in wireless sector to enter into trade in India when there is not law for the same? A new

concept of what are 'unique' goods” with a test of uniqueness that “must be made in terms of
the total situation which characterizes the contract should be developed for these
sophisticated articles instead of fitting them in conventional laws. The inclusion of wireless
signals in the definition of goods would result in repeated interpretations of the definition of
goods by the Court. As I have already mentioned above, sale of goods is the single most
important contract for the consumer and the question of conformity is the most important
problem with which he is confronted.

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 Wireless signals as under Sale of Goods Act with special reference to
Jabalpur Cable Network v. E.S.P.N. Software’s Pvt. Lmt case.

7.1 REFERENCES:

1. The Law of Contracts & Tenders; 10th Edn.; T.S.Venkatesa Iyer’s / S Gogia & Co.
Hyderabad 2004.

2. Indian Contracts & Specific Relief Acts; 13th Edn. Vol II / Pollock & Mulla/ Lexis Nexis
Publication 2006

3. Law of Contracts I & II 8th Edn / G C V Subba Rao; S Gogia & Co. 2006

4. Law of Contract / 9th Edn / Avtar Singh / Eastern Book Co. Lucknow 2006

5. Chitty on Contracts / Sweet & Maxwell Ltd. / 29th Edn. Vol II / U.K. 2006

6. www.manupatra.com

7.2 List of Cases:

1.The Commissioner of Sales Tax, Madhya Pradesh, Indore v. Madhya Pradesh Electricity
Board, AIR 1970 SC 732
2.Madhya Pradesh Electricity Board, Jabalpur v. Commissioner of Sales Tax, Madhya
Pradesh, AIR 1968 MP 163

3. Hakam Singh v. Gammon (India) Ltd., AIR 1971 SC 740

4. A.B.C. Laminart Pvt. Ltd. v. A.P. Agencies, Salem, AIR 1989 SC 1239

5. Angile Insulations v. Davy Ashmore India Ltd., (1995) 4 SCC 153, AIR 1995 SC 1766

6. Fatehchand Ganeshram Agrawal v. Wasudeo Shrawan Dalal, AIR 1948 Nagpur 334

7. Gujrat Bottling Co. Ltd. v. Coca Cola Company, AIR 1995 SC 2372

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