We
keep analyzing intellectual property through a narrow prism so much so that we
tend to lose sight of the fundamentals of conventional property jurisprudence. Apart
from need for conceptual depth and clarity, it is important to understand conventional property
jurisprudence to be able to assert property-like rights over subject-matter
which is not covered under existing IP legislations and whose protection under
common law is not expressly prohibited by these legislations.
During
the course of my research on these lines quite some time ago, I came across a
dated yet extremely relevant decision, Vikas
Sales Corporation and Anr. v. Commissioner of Commercial Taxes AIR 1996 SC 2082,
where the Supreme Court has interpreted "property" in the broadest
terms I have come across so far. Before I analyse the decision, here are a few definitions to help understand this post better:
1. The Sale of Goods Act, 1930 defines “goods” to mean
every kind of movable property other than actionable claims among other things
2. The Sale of Goods Act, 1930 defines "'property' to mean “the general property in goods,
and not merely a special property"
3. The General Clauses Act, 1897 defines “movable
property” negatively to mean “property of every
description except immovable property”
4.
The General
Clauses Act, 1897 defines “immovable property” to
"include land, benefits to arise out of land and things attached to the
earth or permanently fastened to anything attached to the earth"
5.
"Actionable
claims" is defined in Section 3 of the Transfer of Property Act to mean a
claim to any debt, other than a debt secured by mortgage of immovable property
or by hypothecation or pledge of movable property, or to any beneficial
interest in movable property not in the possession, either actual or
constructive, of the claimant, which the Civil Courts recognise as affording
grounds for relief, whether such debt or beneficial interest be existent,
accruing, conditional or contingent.
In
the Vikas Sales case, the question
that the Court was faced with was if transfer of an Import Licence/Exam Scrip
by its holder to another person constituted sale of a good for the purpose of levying
sales tax on the transaction.
The
assessee took the view that an import license was neither a “good” within the
meaning of sales tax legislations nor “property”, but was merely an actionable
claim which was excluded from the definition of “goods” in the Sale of Goods
Act, 1930. According to the assessee, “property is a bundle of rights but every
strand in that bundle does not by itself constitute property”.
Consequently, the assessee argued that sales tax did not apply to transfer of
an import licence.
On
the other hand, the Commissioner of Commercial Taxes drew the Supreme Court’s
attention to a decision of the Karnataka High Court involving a similar issue, Bharat Fritz
Werner Ltd. v. Commissioner of Commercial Taxes (1992) 86 S.T.C. 170, where the High Court took the view that an import licence
not only enabled a person to import goods, but also excluded competition. In
other words, it was not a mere beneficial interest or an actionable claim, but
was a valuable right in itself which was freely transferable. Consequently,
according to the High Court, an import licence attracts the definition of “goods”
within the meaning of the Karnataka Sales Tax Act, 1957.
This argument was further affirmed by the Division Bench of
the K’taka High Court which observed that upon transfer of an import licence,
it confers upon the transferee a right which is “choate and perfected and exercisable immediately”.
To establish that sales tax applies to transfer of an import
licence, one could do one of these two things, or both:
A.
Either
prove that an import licence is not an actionable claim, and is therefore “movable
property”, and hence a “good”; or
B.
Positively
prove that an import license is movable property.
The Supreme Court did both. The Court analyzed the definition
of “actionable claim” in the Transfer of Property Act and observed that import licences
were bought and sold freely in the market as goods and since they had a value
of their own which was unrelated to the goods which could be imported under the licence, it was
idle to contend that they were in the nature of actionable claims.
On what constitutes “movable property”, the challenge before
the Court was that movable property is merely defined negatively to mean “property
of every description except immovable property”, which is not of great assistance.
Consequently, the Court reviewed a slew of authorities to understand the
meaning of “property”. A few critical definitions are extracted below:
“19. In Black's Law Dictionary
(6th Edition, 1990), the expression "property" has been given the
following meanings:
Property: That which is peculiar
or proper to any person; that which belongs exclusively to one. In the strict
legal sense, an aggregate of rights which are guaranteed and protected by the
government. Fulton Light, Heat & Power Co. v. State 65 Misc. Rep. 263, 121
N.Y.S. 536. The term is said to extend to every species of valuable right and
interest. More specifically, ownership; the unrestricted and exclusive right to
a thing; the right to dispose of a thing in every legal way, to possess it, to
use it, and to exclude every one else from interfering with it. That dominion
or indefinite right of use or disposition which one may lawfully exercise over
particular things or subjects. The exclusive right of possessing, enjoying, and
disposing of a thing. The highest right of man can have to anything; being used
to refer to that right which one has to lands or tenements, goods or chattels,
which no way depends on another man's courtesy.
The word is also commonly used to
denote everything which is the subject of ownership, corporeal or incorporeal,
tangible or intangible, visible or invisible, real or personal; everything that has an exchangeable
value or which goes to make up wealth or estate. It extends to every species of
valuable right and interest, and includes real and personal property,
easements, franchises, and incorporeal hereditaments, and includes every
invasion of one's property rights by actionable wrong. Labberton v.
General Cas. Co. of America, 53 Wash. 2d 180, 332 p. 2d. 250, 252, 254.
Property embraces everything
which is or may be the subject of ownership, whether a legal ownership, or
whether beneficial, or a private ownership. Davis v. Davis. Tax Civ. App., 495
S.W. 2d 607,611. Term includes not only ownership and possession but also the
right of use and enjoyment of lawful purposes. Hoffmann v. Kinealy, Mo., 389
S.W. 2d. 745, 752.
Goodwill
is property,
Howell v. Bowden, Tex Civ App., 368 S.W. 2d 842, 848; as is an insurance policy
and rights incident thereto, including a right to the proceeds, Harris v.
Harris 83 N.M. 441,493 P. 2d 407, 408.
The Dictionary further says
"property is either: real or immovable; or personal or movable". It
then proceeds to give the meaning of the expression "absolute
property", "common property", "intangible property",
"movable property", "personal property" "private
property" and "public property" among others. The above
definition shows the wide meaning attached to the expression. It is said to
extend to every species of valuable right and interest. It denotes everything
which is the subject of ownership, corporeal or incorporeal, tangible or
intangible, visible or invisible, real or personal. It includes
"everything that has an extendable value". It extends to every
species of valuable right and interest.
....Under the Law of Property
Act, 1925, Section 205, "property" includes anything in action and
any interest in real or personal property. There
must be a definite interest; a mere expectancy as distinguished from a
conditional interest is not a subject of property.
....'Property' also signifies a beneficial right in or to a thing.
Sometimes the term is used as equivalent to ownership; as where we speak of the
right of property as opposed to the right of possession (q.v.), or where we
speak of the property in the goods of a deceased person being vested in his
executor. The term was chiefly used in this sense with reference to chattels
(Finch, Law 176).
...This definition also shows that the expression signifies
"things and rights considered as having a money value". Even
incorporeal rights like trademarks, copyrights, patents and rights in personam
capable of transfer or transmission, such as debts, are also included in its
ambit.”
After reviewing these definitions, the Supreme Court observed
thus:
“21. The above material
uniformly emphasises the expansive manner in which the expression
"property" is understood. Learned counsel for the petitioners brought
to our notice the meanings of the term "property" set out in
Chapter-13, "The Law of Property", in Salmond's Jurisprudence (12th
Edition, 1966). In this chapter, several meanings attributed to
"property" are discussed in extenso, to all of which it may not be
necessary to refer. Suffice to say that property is defined to include material
things and immaterial things (Jura in re propria) and leases, servitudes and
securities etc. (jura in re aliena).
The material things are said to comprise
land and chattels while immaterial things include patents, copyrights and trademarks,
which along with leases, servitudes and securities are described as incorporeal
property. The expression "movable property" is stated to include
(Page 421) corporeal as well as incorporeal property. Debts, contracts and
other choses-in-action are said to be chattels, no less than furniture or
stock-in-trade. Similarly, patents, copyrights and other rights in rem which
are not rights over land are also included within the meaning of movable
property.
We are unable to see anything in the said Chapter-13, which militates
against the meanings ascribed to the said expression in the judicial dictionaries
referred to above. Indeed, they are consistent with each other.”
The Court then reviewed the terms of the Import Licence to
ascertain its nature and concluded that such a licence had its own value, could be freely bought and sold which lent it the character of a “good”.
Consequently, the Court concluded that sales tax was applicable when such a license was sold.
