Patntalal Jankid-:u

v, Mohanlal and

Another,

Pata1tjali S11stri J.

!950

Deo, 21.

SUPREME COURT REPORTS [1950]

of section 14, it seems to me, they would be bringing themselves under the bar of section 18 (2).

The respondents cannot therefore claim that the loss of the goods was explosion damage within the meaning of the Ordinance so as to bring the case within section 14 and at the same time contend that the loss was not "due to or did not in any way arise ont of the explosion" in order to a void the bar under section 18.

Both section 14 and section 18 have in view the physical cause for the loss or damage to property for which compensation is claimed and not the cause of action in relation to the person against whom relief is sought. The respondents cannot, in my opinion, be allowed to take up inconsistent positions in order to bring themselves within the one and to get out of the other.

I would therefore allow the appeal and dismiss the counter-claim.

DAS J. agreed with the Chief Justice.

Appeal dismissed.

Agent for the appellants: Mohan Behari Lal.

Agent for the respondents : I. N. Shroff.

COMMISSIONER OF INCOME-TAX,

WEST BENGAL v.

CALCUTTA AGENCY LTD.

[SHRI HARILAL KANIA CJ., PATANJAL! SASTRI

and DAS JJ.]

foli.tn Income-tax Act (XI of 1922), ss. 10 (2) (xv), 66-Reference-Jwrisdiction of High Ooilft-Duty to decide case ori facts stated by Tribuna.l-Accepting arauments of CO'ltnsel as proved fa.cts and basing decision on them, impropriety of-Business expenditnre- Payments to avoid disclosure of misfeasance of director.~-Burden of prcof.

The jurisdiction of the High Court in the matter of incometax references is an advisory jurisdiction and under the Inco:netax Act the decision of the Appellate Tribunal on facts is final unless it can be successfully assailed on the ground tha~ there was

no evidence for the conclusions on facts recorded by the Tribnnal. 1950 It is therefore the duty of the High Court to start by looking at tbe facts found by the Tribunal and ans~'e!: the questions of lHW Cornmiss:oritr of on that footing.

It is not p1oper to depart fron1 this rule of law Incnme-tax, as it will convert the High Court into a fact finding authority, Wcst Bengal which it is not, under the advisory jurisdiction. v.

As the statement of the case prepared by the Appellate Tri Calcutta Ag•ncy bunal in accordance v.'ith the rules fran1ed under the Income-tax Ltd.

Act is prepared with the knowledge of the parties concerned and they have full opportunity to apply for any addition or deletion from that statement, if they have approved of the state1nent n1ade by the Tribunal, it iR the agreed etatement of facts by the parties on w bich the Iligh Court has to pronouncs its judgment.

The High Court would be acting improperly if it takes the arguments of the counsel for the assessee as if they were facts and bases its conclusion on tboso arguments.

One of the directors of the assessee company, acting in the capacity of managing agents of certain l\'fills, had dra\vn some hundis in the name of tho Mills, aod as the Mills repudiated liability, suits were filed on the hundis against the Mills and the assessees. The assessees thereupon agreed to reimburse the Mills by permitting the latter to deduct a moiety of the commission pa.yable to them under the agreement of managing agency, against payments which the Mills may have to make under the decrees.

In their assessment fio income-tnx the assessees claimed that the amounts so deducted should bo excluded from their asRessable income as business cxpenditme under s. 10 (2) (xv) of tbe Incometax Act.

The Appellate Tribunal found that the assessees had agreed to pay off the decree a1nount from the remuneration due to them, that the decre.e was passed against them evidently for some misfeasance committed by their directors, that the books of both companies showed that the assessees were paid their remuneration in full, and that the expenditure was not therefore laid out for the purpose of carrying on the business, and also that, as the payment was made for the liquidation of a debt, it was not a revenue expenditure. In the High Court the assessees' counsel argued, relying on the case cf Mitchell v. B. W. Noble Ltd.(1), that the payments were made by th• assessees to avoid the publicity of an action against them and the consequent exposure and loss of reputation as a. managing agency company, and as such the payments were deductible as business expenditure. The High Court accepted this argument and reversed the decision of the Tribunal.

Held, that the High Court acted wrongly in accepting the argurr1ents of the assessees' counsel as if they were proved facts and basing its decision on them ; and, as the facts necessary to support the claim for exemption under s. 10 (2) (xv) had not been established at any stage of the case, the assessees were not entitled to the deduction cJ.imed.

(11 (1927] l K.B. 719,

1~9

1950 Judgment of the Calcutta High Court reversed.

0 . . / APPELLATE JumsDICTION : Civil Appeal No. 59 of onimissioner o

1"come-tax, 1950.

West Bengal Appeal from a Judgment of the High Court of Judiv. cature at Calcutta (Harries C.J. and Chatterjea J.)

Galcu~~/Y'"'Y dated 9th Septern ber, 1949, in a reference under

 section 66 (2) of the Indian Income-tax Act, 1922. (Reference No. 8 of 1949).

M. C. Setalvad, Attorney-General for India (G. N. ] oshi, with him) for the appellant.

S. Mitra (B. Banerjee, with him) for the respondents.

1950. December 21. The Judgment of the Court was delivered by

Kan•a o. J.

KANIA C.J.-This is an appeal from the judgment of the High Court at Calcutta (Harries C.J. and Chatterjea J.) pronounced on a reference made to it by the Income.tax Tribunal under section 66 (2) of the Indian Income.tax Act.

The relevant facts are these. The respondents are a private limited company which was brought into existence to float various companies including cotton mills. In November, 1932, the Basanti Cotton Mills Ltd. was incorporated and the respondents were appointed their managing agents.

Their remuneration was fixed at a monthly allowance of Rs. 500 and a commission of 3 per cent. on all gross sales of goods manufactured by the Mills Company.

The fixed monthly allowance was liable to be increased in the event of the capital of the company being increased. The details are immaterial. lt appears that certain hundis were drawn by one of the directors of the respondent company, acting in the capacity of the managing agents of the :Mill Company, in the name of the Mill Company and the same were negotiated to others. The Nath Bank Ltd. claimed payment of these hundis.

The Mill Company repudiated its liability as it appeared from the books of the Mill Company that they had not the use of the sum of Rs. 1.80,000 claimed by the Nath Bank Ltd. under the hundis. The Nath Bank Ltd. instituted four suits

I'

against the Mill Company, in two of which the res- 1950 pondent company were party-defendants. The Mill Comm;:.;;; n.,· of Company was advised to settle the suits and the res- Incom•ta:r:. pondent company entered into an agreement with the w .. t Bengal Mill Company, the material part of the terms of which •. rnns as follows ·- Calcutta Agency • Ltd. " Memorandum of Agreement made between the Calcutta Agency Limited of the one part and Basanti Kama c. J.

Cotton Mills Ltd. of the other part. \;\/HEREAS the Nath Bank Limited demanded from the Mills the payment of the sum of Rs. 1,80,000 and interest thereon AND WHEREAS the said Mills repudiated their liability in respect thereof as it appeared from the books of the said Mills that the said Mills did not have the use of the said sum of Rs. 1,80 000 or any part thereof AND WHEREAS the said Nath Bank Ltd. thereupon instituted four suits in High Court being suit Nos. 1683, 1720, 1735 and 1757 of 1939 for the said aggregate sum of Rs. 1,80,000 and the interest thereon AND WHEREAS the said Mills have been advised to settle the said suits amicably AND WHEREAS the Calcutta Agency Limited by its Directors, S.N. Mitter or S.C. Mitter, having been and being still the Managing Agents of the said Mills have undertaken to reimburse the said Mills in respect of the decrees to oe

made in the said four suits in the manner hereinafter appearing NOW THESE PRESENTS WITNESS

AND IT IS HEREBY AGREED AND DECLARED

(i) That out of the commission of 3% payable by the said Mills to the said Agency under Regulation 131 of the Articles of Association of the Company, the

Company shall have paramount lien on and deduct and set off a moiety thereof against any payment which the said Mills may make in respect of the decrees or any of them and/or costs of the said suits.

(ii) The said moiety shall be one half of the commission so payable less such sum as the Directors of the Mills may from time to time allow to be deducted." ..

Under the said agreement, the respondent company paid to the Mill Company Rs. 22,500 made up of

t9oO Rs. 18,107 as principal and Rs. 4,393 as interest in the

0 -:--:- 1accounting year. The assessee company claimed this omm1ssioner o .

Incomo-ta:c before the Income-tax Appellate Tribunal as a deduc- Weat Benadi tion permitted under section IO (2) (xv) of the Indian v.

Income-tax Act. The relevant part of that section Calcutta Agency runs as follows :-

Ltd. "10. (1) "The tax shall be payable by an assessee

Kania o. J. under the head 'Profits and gains of business, profession or vocation' in respect of the profits or gains of any bminess, profession or vocation carried on by him.

(2) Such profits or gains shall be computed after making the following allowances, namely:- ....................................

(xv) any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or vocation."

In the statement of the case submitted by the Tribunal after reciting the fact of the incorporation of the company and the terms of the compromise mentioned above, the arguments urged on behalf of the assessee company have been recapitulated. The first argument

was that under the first proviso to section 7 of the Indian Income-tax Act, this payment was liable to be exempted. The Tribunal rejected that argument. On the reference, the High Court also rejected the same and it was not presented before us.

The next argument of the respondents was that in respect of

Rs. 22,500 it was entitled to exemption under section 10(2) (xv) of the Income-tax Act on the ground that the payment was an expenditure which was not in the nature of a capital expenditure or personal expenses of the applicant company but was an expenditure laid out wholly and exclusively for the purpose of its business. They urged that if the applicant company did not agree to pay this amount, Basanti Cotton Mills Ltd. could have brought a suit against the company to realise this amount due on the hundis which would •

have exposed the applicant company to the public and 1950 in order to save themselves from the scandal and maintain the managing agency they agreed to the deduction Commissioner of of certain amounts from the managing agency commis. 1"come-ta•, sion due to it and thereby brought it within the West , Bengal principles of the decision of 1Vlitchell v. B. W. Noble Oalcutt."Agency Ltd.(1) The Tribunal found as facts: (1) That the Ltd. applicant company agreed to pay off the decretal amount from the remuneration which they are entitled K., nia o. J. to get from the Basanti Cotton Mills.

(2) The decree was passed against the applicant company evidently for certain misfeasance committed by its directors and the applicant company agreed to pay it off from its remuneration.

(3) The books of account of Basanti Cotton Mills Ltd. would show that they were paying the applicant company in full its remuneration and the books of the applicant company also show that it was entitled to its remuneration in full.

(4) In the circumstances the Tribunal held that the expenditure was not laid out wholly and exclusively for the purpose of carrying on the business. (5) Besides, the Tribunal was of the opinion that in this case it was not a revenue expenditure at all. As the payment had to be made towards liquidation of the decretal amount the Tribunal held, in the circumstances of this case, that it was a capital payment. On behalf of the respondent it was argued in the further alternative that the Privy Council decision in Raja Bijoy Singh Dudhuria's easel.') would cover the present case. That contention was rejected by the Tribunal.

This statement of the case prepared by the Incometax Tribunal and submitted to the High Court for its opinion was perused by the parties and they had no suggestions to make in respect of the same. The statement of the case was thus settled with the knowledge and approval of the parties. When the matter came before the High Court, Mr. Mitra, who argued the case for the present respondents, as shown by the judgment of the High Court, urged as follows:-" If the applicant company had not agreed to pay the amount mentioned

i 1l [J 921) 1 R. B. 719.

12) 61.T, C. 449,

1950 in the aforesaid agreement, then the Basanti Cotton

Mills Ltd. would have sued the company for the reali- Oommi"'•""' of sation of the amounts due on the hundis and it seems

Incom•tax, that there would have been no defence to the action.

West Bengal T .

Jd h b' d th l' t t v his wou ave su iecte e app ican company o Oa!cutt."Ag•ncy the danger of public exposure and in order to save Ltd. itself from the scandal and in order to maintain the managing agency, the applicant company agreed to Kania o. J. deduct certain amounts from the managing agency commission and therefore such expenditure came within section 10(2) (xv) of the Act." The High Court thereafter noticed several cases including 111 itchell' s case(') and towards the close of the judgment delivered by Chatterjea J. observed as follows:-"In this case it is clear that the agreement was entered into with a view to avoid the publicity of an action against the managing agents and consequent exposure and scandal and in order to maintain the managing agency so that the company could carry on its business as before.

The payment in question did not bring in any new assets into existence nor in my opinion can it properly be said that it brought into existence an advantage for the enduring benefit of the company's trade. The Appellate Tribunal observed that the decree was evidently passed against the appellant company for certain misfeasance by its directors and the appellant company agreed to pay it off from its remuneration ...... The object of the agree. ment was to enable the company to remove a defect in carrying on the business of the company and to earn profits in its business. Therefore this case is covered by the judgment of the Court of Appeal in Mitchell's case(') ...... " Applying this line of reasoning the High Court differed from the conclusion of the Tribunal and allowed the deduction to the respondent company under section 10(2) (xv) of the Income-tax Act, as claimed by the respondents.

The Commissioner of Income.tax, West Bengal, has come in appeal to us.

Now it is clear that this being a claim for exemption of an amount, contended to be an expenditure falling under section 10(2)(xv), the burden of proving the

(l) [1927] l K.B. 719. ...

necessary facts in that connection was on the assessee, 1950 it being common ground that the commission was due -:--:- and had become payable and was therefore the business cc7m"" 0;'" of income of the assessee company liable to be taxed in ,;.::m;;:;:.1 the assessment year. The jurisdiction of the High Court v. in the matter of income-tax references is an advisory Calcutta Agency jurisdiction and under the Act the decision of the Ltd.

Tribunal on facts is final, unless it can be successfully

Ka1ita C. J, assailed on the ground that there was no evidence for the conclusions on facts recorded by the Tribunal. It is therefore the duty of the High Court to start by looking at the facts found by the Tribunal and answer the questions of law on that footing. Any departure from this rule of law will convert the High Court into a fact-finding authority, which it is not under the advisory jurisdiction. The statement of the case under the rules framed under the Income-tax Act is prepared with the knowledge of the parties concerned and they have a full opportunity to apply for any addition or deletion from that statement of the case. If they approved of that statement that is the agreed state. ment of facts by the parties on which the High

Court has to pronounce its judgment. In the present case the parties perused the statement of case and as disclosed by the note made at the end of it had no suggestions to make in respect thereof. It is therefore clear that it was the duty of the High Court to start with that statement of the case as the final statement of facts.

Surprisingly, we find that the High Court, in its judgment, has taken the argument of Mr. Mitra as if they were facts and have based their conclusion solely on that argument. Nowhere in the statement of the case prepared by the Tribunal and filed in the High Court, the Tribunal had come to the conclusion that the payment was made by the assessee company to avoid any danger of public exposure or to save itself from scandal or in order to maintain the managing agency of the appellant company. The whole conclusion of the High Court is based on this unwarranted assumption of facts which are taken only from the argument of counsel for the present respondents before

1950 the High Court. The danger of failing to recognise -. -. that the jurisdiction of the High Court in these matters Commm•onu of l d d 1 l f J T 'b 1 1 t " is on y a v1sory an t ie cone uswns o t ie n una

;,;:; m;~:az on facts are the conclusions on which the High Conrt

v, is to exercise such advisory jurisdiction is illustrated Oa'cutta Agency by this case. It seems that unfortunately counsel for

Ltd. the respondents caught hold of Mitchell's case(1) and - basing his argument on the circumstances under which Ka, zia 0. J. d a payment could be escribed as a business expenditure falling within the terms of section 10 (2) (xv), argued that the facts in the present case were the same.

Instead of first ascertaining what were the facts found by the Tribunal in the present case, the process was reversed and the procedure adopted was to take Mitchell's case(1) as the law and argue that the facts in the present case covered the situation. In our opinion this is an entirely wrong approach and should not have been permitted by the High Court. The High Court fell into a grave error in omitting first to ascertain what were the facts found in the case stated by the Tribunal. The High Court overlooked that in Afitchell's case(') the whole discussion started with a quotation from the case stated by the Commissioners as the facts of the case.

A scrutiny of the record in the present case shows that before the Income-tax Officer the assessees claimed only a deduction of the interest of Rs. 5,582 as a permissible deduction under section 10 (2) (iii) of the Income-tax Act. That claim was rejected by the Income-tax Officer.

When the matter went to the Assistant Income-tax Commissioner it was argued that the Income-tax Officer was in error in not allowing the deduction of interest and was also wrong in not allowing the entire sum of Rs. 22,500 as a deduction on the ground that, that portion of the income (viz., Rs . .'22,500) should be treated as not earned or deemed to be earned by the assessees at all, having regard to the decision of the Privy Council in Raja Bijoy Singh Dudhuria's case.(') The first paragraph of the order of the Appellate Assistant Commissioner contains the following

(ll [1927) I K, B. 719.

12) 6 I.T.C. '49,

• •

S.C.R.

SUPREME COURT REPORTS l017

statement:-" In disallowing this (interest) claim the 1950 Income-tax Officer was following the decision of my .-- predecessor in his order dated the 18th March 1942 in Oommimoner 0!

Appeal No._ 1-~-~ 1 of.1941-42. My predecessor obser- ~:~·;;~~~1 • ved: "Nothmg 1s m evidence to show that the managmg v. agency company had surplus money and such money Calcutta Ag••cv was invested or that there was any need to borrow.

Ltd.

Thus the need to borrow is not established. There is no doubt that money was borrowed but lmless it can Kania c. J. to proved that the borrowing is for the purpose of the business and the loan was u:sed in the business, the interest cannot be allowed under section 10(2)(iii)."

The second objection raised before the Appellate Assistant Commissioner was in these terms:-' That the Income-tax Officer should have allowed the said sum of Rs. 22,500 as allowable expenditure being allocation of a sum out of the revenue receipt before it became income in the hands of the assessee." The wording of the objection and the argument noticed in the order of the Appellate Assistant Commissioner show that the contention was that this sum should be treated as not having become the income of the assessee at all because it was deducted at the source by the Mill company.

Reliance was placed for this contention on Raja Bijoy Singh Dudhuria's case('). The contention was rejected.

At the third stage, when the assessee urged his contentions before the Income Tax Appellate Tribunal, he thought of urging as an argument that this was a permissible deduction under section 10 (2) (xv) because of the principles laid down in Mitchell's case(2).

No evidence, it appears, was led before the Income Tax Tribunal, nor has the Tribunal recorded any findings of fact on which the principles laid down in Mitchell's case(') could be applied. The Tribunal's conclusions of facts were only as summarized in the earlier part of the judgment. It is therefore clear that the necessary facts required to be established before the principles laid down in Mitchell's case(2) could be applied, have not been found as facts in the present case at any stage of the proceedings and the High Court was in error

il) 6 I.T.C. H9.

(~) [19271 I K.B. 719.

SUPREME COURT REPORTS [1950]

1950 in applying the principles of Mitchell's case(1) on the -. -. assumption of facts which were not proved. The High OomI missioner of Court was carried away, it seems, by the argument of

ncometax, West Bengal the counsel and through error accepted the argument v. as facts.

Indeed, if it had noticed the contention

Calcutta Agenoy urged before the Income-tax Officer it would have seen Ltd, at once that the argument was in a measure conflicting with that contention which was based on the foot- Kania a. 1 ing of Rs. 1,80,000 being a loan to the assessee on which it had to pay interest, which was sought to be deducted under section 10 (2) (iii) of the Income-tax Act. In our opinion. therefore, this appeal should be allowed on the simple ground that the facts necessary to be established by the respondents to support their claim for exemption under section 10 (2) (xv) of the Indian Income-tax Act have not been established at any stage of the proceedings and therefore they are not entitled to the deduction claimed. The appeal is therefore allowed with costs here and before the High Court.

Appeal allowed.

Agent for the appellant : P.A. Mehta.

Agent for the respondents: Ganpat Rai.

(1) [19~1] 1 K.B. 719 .

'J'

Patntalal Jankid-:u

section 14

section 18

section 14

section 18

section 14

section 18

DAS J.

Mohan Behari Lal

I. N. Shroff

COMMISSIONER OF INCOME-TAX,

WEST BENGAL

COMMISSIONER OF INCOME-TAX,

WEST BENGAL

CALCUTTA AGENCY LTD

SHRI HARILAL KANIA CJ.

PATANJAL! SASTRI

Income-tax Act

ss. 10

Tri Calcutta Ag•ncy bunal

s. 10

s. 10

High Court of Judiv. cature at Calcutta

Harries C.J.

Chatterjea

section 66

Indian Income-tax Act, 1922

M. C. Setalvad

S. Mitra

B. Banerjee

Kan•a

KANIA

High Court at Calcutta

Harries

section 66

Basanti Cotton Mills Ltd.

Nath Bank Ltd.

Bengal Mill Company

Calcutta Agency • Ltd.

Calcutta Agency Limited

Basanti Kama

Cotton Mills Ltd.

Nath Bank Limited

S.N. Mitter

S.C. Mitter

Income-tax Act

Kania

section 7

Income-tax Act

section 10(2)

Income-tax Act

Basanti Cotton Mills

Raja Bijoy Singh Dudhuria

Mitra

Basanti Cotton

Mills Ltd.

West Bengal

section 10(2)

Mitchell

section 10(2)

Income-tax Act

Commissioner of Income.tax, West Bengal

section 10(2)(xv)

Ka1ita C.

Income-tax Act

section 10

Afitchell

section 10

Income-tax Act

section 10(2)(iii)

Income Tax Appellate Tribunal

section 10

Income Tax Tribunal

Calcutta Agenoy

section 10

Income-tax Act

section 10

Income-tax Act

P.A. Mehta

Ganpat Rai


S.C.R.

SUPREME COURT REPORTS

RAM KRISHNA RAMNATH AGARWAL

OF KAMPTEE v.

SECRETARY, MUNICIPAL COMMITTEE,

KAMP TEE.

UNION OF INDIA AND GOVERNMENT OF

MAD HY A PRADESH : INTERVENERS.

[SHRI HARILAL KANIA C.J., SAIYID FAZL ALI,

PATANJALI SASTRI, MEHR CHAND MAHAJAN, MuKHERJEA, and S.R. DAS JJ.]

Govl!rnment of India Act, 1985, ss. 100, 148, 292; Sch. VII List I, Entry 45; List II, Entry 49-0entral Exciieli and Salt Act (I of 1944), SS. 2, a-Central Provinces Municipalities Act (II of 1922), s. 66 (1) (e)-I mport of tobacco within municipality for manu faoturing bidis-Tobaoco liable to Central excise duty-Levy of ootroi duty by municipality-Legality.

Section 66 (1) (e) of the Central Provinces Municipalities Act, 1922, empowered municipalities within the Province to levy an octroi duty on goods brought within their .limits for sale, con su.mption or use within those limits. Section 3 of the Centr&l Excises and S&lt Act, 1944, an Act of the Central Legislature,. provided that there shall be levied and. collected duties of excise on all excisable goods other than salt which were produced or manu factured in British India, and included tbbacco in the list of excisable goods. The question being whether a municipality situated in the Central Pro•inces could levy octroi duty on tobacco brought within its limits for the purpose of manufactur ing bidis, in view of the exclusive power of the Central Govern ment to levy excise duty under Entry 45 of List I of the Seventh Schedule to the Government of India Act, 1935, and the provisions of s. 3 of the Central Excises and Salt Act: Held, that excise .duty and octroi were taxes essentially diff erent in their nature and tho power of the Province to levy octroi was not inconsistent with the power of the Centre to levy excise duty on the same goods, and a municipality could therefore validly levy an octroi duty on such tobacco under s. 66(1)(e) of the Central Provinces Municipalities Act of 1922.

Held further, that there was nothing in the Central Excises and Salt Act or its provisions contrary to the provisions of s. 66(1) (e) of the Central Provinces .Municipalities Act or to the levy of octroi duty under the same and s. 143 of the Government of India Act, therefore, preserved the right of the municipality to levy octroi duty under the Act of 1922.

Province of Madras v. Boddu Paidanna and Sons (1942) Ji'.C.R. 90; Governor-General in Council v. Province of Madras (1942] F.C.R 129, In re the Central Provinces and Berar Act No. XIV of 1938,

March 14

Ram Krisltna

[1939] F.C.R. 80, Mi,. Kishori Shetty v. The King [1949) F.C.R. 650 referred to.

Administrator, Laho1'e Municipality v. Daulat Ram [1942] Ramnatl• F.0.R. 31 distinguished.

Agarwal of Kamptce Judgment of the High Court of Nagpur affirmed. v.

APPEAL from the High Court of Judicature at Nag- Srmtary, Mun;. pur: Case No. III of 1948. cipal Comn1ittee,

Kampt" This was an appeal from a judgment and order of

Kanf4 C.J.

the High Court of Nagpur (Mis .. Civil No.158 of 1946) dated 9th April, 1948, made on a reference under s. 83 (2) of the Central Provinces Municipalities Act (II of 1922) by the Extra Assistant Commissioner, Nagpur. The facts of the case and the, arguments of counsel appear in the judgment.

T.J. Kedar and B. B. Tawakley (Sri Narain AndJey with them) for the appellant.

Lobo, for the respondent.

M. 0.

Setalvad, Attorney-General of India, (8. M. Sikri with him) for the Union of India.

1950. March, 14. The Judgment of the Court was delivered by KANIA C. J.-This is an appeal from the judgment and order of the High Court at Nagpur, made on a reference under Section 83 (2) of the Central Provinces Municipalities Act II of 1922, by the Extra Assistant Commissioner, Nagpur. The appellant is a trader in Kamptee who manufactures bidis. On the 30th of November, 1945, he brought to Kamptee from outside tobacco to make bidis. A declaration form signed on his behalf stated that the 254 bags of tobacco liable to octroi duty, which had that day arrived at octroi post No. 3, had been brought for use and consumption within the limits of the Municipality. He however put on record his protest against the recovery o'f the duty which was fixed at Rs. 1,128-2-0. Against the order claiming the amount, the appellant filed an appeal to the Extra Assistant Commissioner with , revenue appellate powers, Nagpu[. He contended that the municipality claimed to levy the duty under

Section 66 (1) (e) of the Municipal Act, but they had

no right to do so as under Section 3 of the Central I9l50 Excises and Salt Act, 1944, that excise duty was Ram Krishna levied on tobacco by the Central Government and the Ramnath levy of the octroi duty on the tobacco in question was Agarwal of covered by the excise duty and therefore not.permissi- Kamptee ble. The Appellate Assistant Commissioner in making v. . the reference to the Nagpur High Court expressed his scretary, M~·· · h h 11 > • h h ciPal Committee op1mon t at t e appe ant s content10n t at as t e Kamptee ' bidis were not sold within the municipal limits, duty was not leviable, was unsound. He however thought I<aniaC.J. that because under Section 3 of the Excise Act, e:lcise duty was levied by the Central Government the levy of the octroi duty was not in consonance with Section 100 of the Government of India Act, 1935, and was ultra vires the Provincial Government. The High Court rejected the appellant's contention and disagreed with the view of the Appellate Commissioner.

The High Court however granted a certificate under Section 205(1) of the Constitution Act and the appellant har. come in appeal to this Court.

The Central Provinces Municipalities Act was passed in 1922 and the relevant notifications fixing the rates of octroi duty were issued in 1928.

No question about the validity of the Act when passed, or of the notifications issued in pursuance thereof has been raised before us.

The argument on behalf of the

- appellant is that as under the Central Excises and

Salt .Act, I of 1944, tobacco became excisable goods under Item 9 in Schedule I to that Act and continued to be so till it got converted into bidis, the Central Government alone was entitled to levy excise duty on it till then.

According to the definition of 'manufacture' in the Excise .Act that duty could be levied at any stage in the manufacture of bidis and therefore any tax imposed, while tobacco was being converted into bidis, was excise duty. Legislation in connection with excise duty is within the exclusive province of the Central Legislature as shown by Entry 45 of List I in Schedule VII of the Constitution Act. The impost of octroi duty in pursuance of the Municipal Act, before tobacco was made into bidis, is it wq, s argued in conflict with the legislative powers of the Centre. In this

1950 connection our attention was drawn to AdminiBtrator, Lahore Municipality v. Daulat Ram Kapur('), in Ram Krishna

Ramnatli which it was held that the levy of octroi duty on salt Agarwal of was not within the powers of the Provincial legislature.

Kamptee It was argued therefore that under Section 100 of the v. . Government of India Act, octroi duty levied on Secretary, Munitobacco under the legislative powers of the Provincial cipal Committee, G t - I'd Th J t 'J Kamptee. overnmen was mva I . e on y way o reconc1 e the two Entries, namely, Entry 45 in List I and Entry Ka,, ia C.J. 49 in List II of the Seventh Schedule, was to read the

wods "for consumption or use" in Entry 49 as meaning "for consumption or use except for manufacture of exciBable article8". So read, the levy of octroi duty on the facts of this case was invalid. In reply to the argument that Section 292 of the Government of India Act kept alive the old Provincial legislation, namely, the Central Provinces Municipalities Act, and the right to levy octroi duty was saved under Section 143 of the Constitution Act, it was urged on behalf of the appellant that the provisions of the Excise Act were contrary to the right to levy octroi duty and as that Act was passed in 1944 the right to levy octroi duty saved by Section 143 of the Constitution Act had lapsed. It was argued that although there was no express provision in the Excise Act to that effect, the definition of "excisable goods" and "manufacture" rea.d with Entry 9 in Schedule I and the charging Section 3 in the Act led to that conclusion. It is clear that both parts of this argument are thus based on the plea that the impost of any duty at any stage before bidis are manufactured is excise duty and therefore the levy of octroi duty is illegal.

Section 66 (1) (e) of the Central Provinces Municipalities Act, 1922, runs as follows:-

"an octroi on animals, or goods bronght within the limits of the municipality for sale, consumption or use within those limits;"

The words "excisable goods" and "manufacture" are defined in Section 2 of the Central Excises and

Salt Act, 1944, as follows:-

(11 [1942] l!'.O.R. 31.

2. ( d) "excisable goods" means goods specified in l950 the First Schedule as being subject to a duty of excise Ram Krishna and includes salt;'~ Ramnath

2. (f) "manufacture" includes any process inciden- Agarwal of tal or ancillary to the completion of a manu- Kamptee factored product; and s t v. M . ecre ary., uni- ( i) in relation to tobacco includes the preparcipal Committee, ation of cigarettes, cigars, cherots, bidis, Kamptee. cigarette or pipe or hokkah tobacco, chewing tobacco or snuff; and Kania C.J.

(1.1") .................

Section 3 of the Excise Act runs as follows:-

"There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods ?ther than salt which are produced or manufactured in British India, and a duty on salt manufactured in, or imported by land into any part of British India as, and at the rates, set forth in the First Schedule ............ "

Entry 9 to the First Schedule of the Excise Act is ' in these terms:-

"9. TOBACCO, CURElJ-

'Tobacco' means any form of tobacco, whether cured or uncured, and whether manufactured or not, and includes the leaf, stalks and stem of the tobacco plant but does not include any part of a tobacco plant while still attached to the earth;"

(Then follows a list of various articles into which

~ tobacco can be converted, like bidis, cigarettes, snuff, etc. with different rates of duty mentioned against each article.)

Sections 143 and 292 of the Government of India Act, 1935, run as follows:-

"143.

(1) Nothing in the foregoing provisions of this Chapter affects any duties or taxes levied in any Federated State otherwise than by virtue of an Act of

~ the Federal Legislature applying in the State.

(2) Any taxes, duties, ceases or fees which, immediately before the commencement of Part III of this Act

SUPREME OOURT REPORTS [1950)

19!50 were being lawfully levied by any Provincial Government, municipality or other local authority or body for Ram Krishna he Ramnath t purposes of the Province, municipality, district or

garwal of ot-her local area under a law in force on-the first day .Kamptee of January, nineteen hundred and thirty-five, may, v. . notwithstanding that those taxes, duties, ceases or Secretary, Munifees are mentioned in the Federal Legislative List cipal Committee • b 1 d d b I' d h ' K mptee. ' contmue to e evie an to e app 1e to t e same a purposes until provision to the contrary is made by Kania c.J. the Federal Legislature" . . "292. Notwithstanding the repeal by this Act of the Government of India Act, but subject to the other provisions of this Act, all the law in force in British India immediately before the commencement of Part III of this Act shall continue in force in British India until altered or repealed or amended by a competent legislature or other competent authority".

Section 143 can be considered in two ways. If the Government of India Act did not bring the particular impost of tax by the Provincial Government within the legislative powers of the Centre, by reason of the , inclusion of such tax in List I of the Seventh Schedule, the pre-existing right of the Provincial Government to levy such tax remained unaffected. If so, Section 143 of the Government of India Act did not affect such legislation and the same continued to be valid and operative under Section 292 of the Constitution Act.

If however the levy of such tax by the Provincial Government was a subject which was within the exclusive legislative power of the Centre by reason of • such tax being included in List I of the Seventh Schedule, the levy of such tax under the Provincial legislation continued to be valid until the Central Legislature passed an Act the provisions whereof were contrary to the provisions of the Provincial legislature or to the levy of a tax under the Provincial Act.

Examining next the contentions of the appellant it seems clear that octroi duty as levied by the respondent comes within the exact wording of Entry 49 of List II of the Seventh Schedule to the Constitution A<Jt.

Prima facie, therefore, there is no reason to

consider the levy of the octroi duty under the Provin- 1950 cial legislation invalid. Such levy remained unaffect- Ram Krishna ed by reason of Section 292 of the Constitution Act.

Ramnath The argument of the appellant is that the levy of the Agamal of octroi duty being at a stage after the excisable article, Kam:Ptee viz., tobacco, came into existence and became liable to v. . excise duty under the Excise Act, the levy of octroi se_re 1 tacry, tutni d b r b d d f t b . . 1.d c1_,, a onmu ee, uty elore i is were ma e rom o acco, ls lnva 1 • Kampteo.

In support of this argument the definition of 'excisable goods', 'manufacture' and the Entry 9 in the Schedule /{ania C.J. to that Act were relied upon. The error underlying the argument of the appellant is the assumption that any impost of tax from the time tobacco came into existence till the same was converted into bidis is necessarily excise duty.

The Federal Court had to consider the distinction between the duty of excise and a tax on sale in The Province of Madras v. Boddu Paidanna and Sons(!). It is there observed as follows:-"Plainly, a tax levied on the first sale must, in the nature of things, be a tax on the sale by the manufacturer or producer; but it is levied upon him qua seller and not qua manufacturer or producer. It may well be that a manufacturer or producer is sometimes doubly hit ........ If the tax-payer who pays a sales tax is also a manufacturer or producer of commodities subject to a central duty of excise, there may no doubt be overlapping in one sense, but there is no overlapping in law. The two taxes which he is called on to pay are economically two separate and distinct imposts. There is, in theory, nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed, or given away ....... It is the fact of manufacture which attracts the duty even though it may be collected latter. In the case of a sales tax, the liability to tax arises on the occasion of a sale and a sale has no necessary connection with manufacture or production". The Court further observed that in the Constitution Act the whole

(1) (1942] F.O.R. 90.

1950 of the taxing power in this particular sphere (power to impose duties of excise) is expressly apportioned Ram Krishna

Ramnath between the Centre and the Provinces, to the one being ,1garwal of assigned the power to impose duties of excise, to the Kamptee other taxes on the sale of goods. It is natural enough, v.. . when considering the ambit of an express power in

Smtary, M_umrelation to an unspecified residuary power to give a

ciJutl Committee , . h ,, ' Kamptee ' broad mterpretat1on tot e iormer at the expense of the latter. The case however is different where as in the l{anJa C.J.

Constitution Act there are two complementary powers, each expressed in precise and definite terms.

There can be no reason in such a case for giving a broader interpretation to one power rather than to the other; and there is certainly no reason for extending the meaning of the expression "duties of excise" at the expense of the Provincial power to levy taxes on the sale of goods.

In The Governor-General in Council v. The Province of Madras('), the Judicial Committee approved of the distinction drawn in this case between.the excise duty and a tax on sale.

There the question arose in respect of tax on the sale of excisable goods.

Their Lordships observed as follows:-"An exhaustive discussion of this subject (namely, the meaning of the term 'duty of excise') from which their Lordships have obtained valuable assistance is to be found in the judgment of the Federal Court in Re The Central Provinces arul Berar Act No. XIV of 1938(").

Consistently with this decision their Lordships are of opinion that a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced.

It is a tax on goods not on sales or the proceeds of sale of goods. Here, ago.in, their Lordships find themselves in complete accord with the reasoning and conclusions of the Federil:l Cora-tin Boddu Paidanna case("). The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping.

The taxes are separate and

(!) [1942) F.C.R. 129.

(8) [19U) F.C.R. 90.

(2) [1939] F.0.R. BO.

distinct imposts. If in fact they overlap, that may be 19!50 because the taxing authority, imposing a duty of ex- Ram Krishna cise, finds it convenient to impose that duty at the Ramnalh moment when the excisable article leaves the factory Agarwal of or workshop for the first time on the occasion of its KamJ>lee sale. But that method of collecting the tax is an acv. . cident of administration it is not of the essence of the secretary, Munid t f h" h ' tt t d b th f t cipal Commillee. u yo exmse, w 1c is a rac e y e manu ac ure KamJ>tee. itself. That this is so is clearly exemplified in those excepted cases in which the Provincial, not the Kania C.J.

Federal, legislature has power to impose a duty of excise. In such cases there appears to be no reason why the Provincial legislature should not impose a duty of excise in respect of the commodity manufactured and then a tax on first or other sales of the same commodity. Whether or not such a course is followed appeara to be merely a matter of administrative convenience. So, by parity of reasoning, may the Federal Legislature impose a duty of excise on the manufacture of excisable goods and the Provincial legislature impose a tax on the sale of the same goods when manufactured." This discussion clearly shows that the relevant question is what is the nature of the tax. Excise duty is a tax on manufactured goods. Octroi duty is a tax levied on the entry of goods within a particular area.

Under the Excise Act, tobacco becomes excisable goods within the meaning of Item 9 in the Schedule. The subsequent use of such manufactured goods in making different articles only affects the rate of tax. Therefore, tobacco becomes subject to excise duty when it reaches the stage of manufacture mentioned in Item 9 of the Schedule to the Excise Act. Even before it is converted into bidis or any other article mentioned in the entry it has become excisable goods and liable to pay excise 1duty. The levy of such duty is therefore not in conflict with the levy of an impost on the entry of the goods within a certain area ..

It was argued that under the rules framed by the Goyernment under the Central Excises and Salt Act, 1944, Government retained control over the movement of the

Ram " rishna

Raninaf/1 Agarwal of /{amptee v.

Secretary, M11ni

ciPal Comtnittee, /{ aniptee

Kania C.J.

SUPR!!:ME COURT REPORTS [ 19501

goods from the beginning till the end.

This.argument is not of assistance in determining the nature of the octroi tax. As Government has to collect excise duty and the rate of duty varies in respect of different shapes in which the excisable goods are ultimately converted, there is nothing unnatural in the Government keeping a control and note of the articles till the manufactured article becomes a commodity, and is mixed up with the commodities used by the people at large. 'l'he argument that Entry 49 in List II being in conflict with l<Jntry 45 in List I of Schedule Seven to the Constitution Act, Entry 49 should be read as "for consumption or use, except for manufacture of goods", in our opinion, is unsound. In the first place, the approach to the question itself is wrong. \Vhen a particular legislation falls within the exact words of an Entry in the Provincial List, under section 100 it is valid and no question of reconciliation arises.

A similar argument advanced in regard to a supposed conflict between Entry 19 of List I and Entry 31 of List II was rejected by us in Caae No. 27 of 1949: Miss Kishori Shetty v. The King(1).

In the present case, if the question of the validity of the 'Provinciallegislation arises, on the interpretation of Entry 49 in List II, it appears that the answer must be in favour of the validity of the legislation. The decision in Administrator, Lahore Municipality v. Daulat Ram Kapur(1) does not help the appellant because in that case Entry 47 in List I is only "salt". A comparison with Entry 45 in List I shows distinctly that Entry 45 is limited to excise duty and is not wide enough to cover tobacco or other goods generally for all purposes of legislation.

The observations in that case therefore are not helpful to the appellant.

On the second part of the contention the appellant can succeed only if he est.ablishes that the provisions of the Excise Aet are contrary to the levy and recovery of duty under the Provincial Act of J 922.

There is no express provision in the Excise Act contrary to the provisions of the Municipal Act. Unless, therefore, it is neces8arily implied under the Excise Act, the levy of

(I) [19f9J F, C.R. 600,

1.2\ [1942] F.C.R, 31.

S.C.R.

SUPREME COUR1' REPORTS 25

the octroi duty under the Municipal Act continues to be valid. On this point again the appellant's argument is that the levy of a duty at any stage of the manufacture of bidis out of tobacco would be the levy of the excise duty and therefore those provisions were contrary to the provisions permitting the levy of the octroi duty.

We have already discussed and rejected in the first part of the judgment this contention. It is wrong to think that two independent imposts arising from two different sets of circumstances were not permitted in law. In our opinion, therefore, there is nothing in the Excise Act to make its provisions contrary to the provisions of Section 66 (1) (e) of the Central Provinces Municipalities Act or to the levy of octroi duty under the same. The appeal therefore fails and is dismissed with costs.

Appeal dismissed.

Agent for the appellants: Rajinder Narain.

Agent for the respondent: S. P. Varma.

Agent for the Union of India: P. A. Mehta.

BHA W ANIPORE BANKING CORPORA-

TION, LTD. v.

GOURISHANKARSHARMA

[SHRI HARILAJ, KANIA C.J., SAIYID l!'AZL ALI,

PATANJALI SASTRI, MEHR CHAND MAHAJAN,

MuKHJmn; A and S. I~. DAS JJ.]

Limitation Act (IX of 1908j, Art. 152, els. 2 and 3-Exe 1mtion of decree-Limitation-Starting point-" TVhe1e the1e has been a re, view", meaning of-Applicatit!n for 1eope11in(I decree under s. 30, Benr; al Money-lenders Act dismissed /01: default and appeal from order of <lis11iissal-lVhether afre fresh startina for liinitntion

~ :(or execution f decree-Interpretation of Art. 182, els. 2 and a.

A preliminary decree on a mortgage was pa~ed ex 1ia.rtn on the 2lt August, 1940.

The judgment debtor made an application uurlet ij, 36 of tho Bengal MoneylenderR Act for reopeuing the

Rani J(rishna

RamHath AgaYWal of

KamJ>tee

Secretary, Mt1ni .. ciJ>al Committee,/

KamJ>tee

Kania C.J.

l\Iaroh 1'.

RAM KRISHNA RAMNATH AGARWAL

OF KAMPTEE

SHRI HARILAL KANIA C.J.

SAIYID FAZL ALI

PATANJALI SASTRI

ss. 100, 148, 292

Exciieli and Salt Act

SS. 2

Central Provinces Municipalities Act

s. 66

Section 66

Section 3

India

s. 3

s. 66(1)(e)

s. 66(1)

s. 143

(1942] F.C.R 129

Ram Krisltna

[1939] F.C.R. 80

[1949) F.C.R. 650

APPEAL

High Court of Nagpur

s. 83

T.J. Kedar

B. B. Tawakley

Narain AndJey

Lobo

Setalvad

M. Sikri

KANIA

High Court at Nagpur

Section 83

Municipalities Act II of 1922

Nagpur

Kamptee

30th of November, 1945

Nagpu

Section 66

Section 3

Excises and Salt Act, 1944

Nagpur High Court

Section 3

Central Government

Section 100

Government of India Act, 1935

Section 205(1)

Schedule I to that Act

Ram Krishna

Ramnatli

Section 100

Government of India Act

Seventh Schedule

Section 292

Section 143

Section 143

Schedule I

Section 3

Section 66

Section 2

Salt Act, 1944

First Schedule

Ramnath

Kania

Section 3

British India

First Schedule

First Schedule

TOBACCO

Sections 143 and 292

Government of India Act, 1935

Part III of this Act

Ram Krishna he Ramnath

Section 143

Seventh Schedule

Section 143

Section 292

Seventh Schedule

Seventh Schedule

Ram Krishna

Section 292

Ramnath

Ram Krishna

Ramnath

[1942) F.C.R. 129

Secretary, M11ni

ciPal Comtnittee

section 100

Section 66

Rajinder Narain

S. P. Varma

P. A. Mehta

SHRI HARILAJ

KANIA C.J.

SAIYID l!'AZL ALI

Limitation Act

Art. 152

s. 30

Art. 182

Bengal MoneylenderR Act


S.C.R.

SUPREME COUR1' REPORTS 25

the octroi duty under the Municipal Act continues to be valid. On this point again the appellant's argument is that the levy of a duty at any stage of the manufacture of bidis out of tobacco would be the levy of the excise duty and therefore those provisions were contrary to the provisions permitting the levy of the octroi duty.

We have already discussed and rejected in the first part of the judgment this contention. It is wrong to think that two independent imposts arising from two different sets of circumstances were not permitted in law. In our opinion, therefore, there is nothing in the Excise Act to make its provisions contrary to the provisions of Section 66 (1) (e) of the Central Provinces Municipalities Act or to the levy of octroi duty under the same. The appeal therefore fails and is dismissed with costs.

Appeal dismissed.

Agent for the appellants: Rajinder Narain.

Agent for the respondent: S. P. Varma.

Agent for the Union of India: P. A. Mehta.

BHA W ANIPORE BANKING CORPORA-

TION, LTD. v.

GOURISHANKARSHARMA

[SHRI HARILAJ, KANIA C.J., SAIYID l!'AZL ALI,

PATANJALI SASTRI, MEHR CHAND MAHAJAN,

MuKHJmn; A and S. I~. DAS JJ.]

Limitation Act (IX of 1908j, Art. 152, els. 2 and 3-Exe 1mtion of decree-Limitation-Starting point-" TVhe1e the1e has been a re, view", meaning of-Applicatit!n for 1eope11in(I decree under s. 30, Benr; al Money-lenders Act dismissed /01: default and appeal from order of <lis11iissal-lVhether afre fresh startina for liinitntion

~ :(or execution f decree-Interpretation of Art. 182, els. 2 and a.

A preliminary decree on a mortgage was pa~ed ex 1ia.rtn on the 2lt August, 1940.

The judgment debtor made an application uurlet ij, 36 of tho Bengal MoneylenderR Act for reopeuing the

Rani J(rishna

RamHath AgaYWal of

KamJ>tee

Secretary, Mt1ni .. ciJ>al Committee,/

KamJ>tee

Kania C.J.

l\Iaroh 1'.

1915()

BhawanijJore Banking Cor- J>oration, Ltd,

Gowri Shankar

Sharma

Fazl AliJ,

SUPREME COURT REPORTS (1950]

decree and the application was dismissed for default of appear ance on the ~0th December, 1941, and an application under O. IX, r. 9, C.P.C .• for restoration of this application was also dismissed on the 1st June, 1942. In the meanwhile on the ~2nd December, 1941, a final decree was passed.

The judgmentdebtor preferred an appeal from the order dismissing his application under o. IX, r. 9, C.P.C., a.nd this appeal was disn1issed for nonprosecution on the 3rd July, 1944. On the 9th April, 1945, the decree-holder applied for execution of the decree: Held that, even assuming that the Y/Ortl "review" has been used in Art. 182 of the Indian Limit:ttion Act, 1908, in a wide sense and that the application under ,. 36 of the Bengal Money lenders Act was an application for revibw. cl. 3 of Art. 182 was not a.pplica.ble to the case inasmuch a,; tbe application under s. 36 having been dismissed fo1 default the court had no occasion to apply its mind to the question \vhether the decree could or should be re-opened ancl it could 11ot therefore be sidd t.ha, t ''there has been a review" of the decrer \Yithin the n1eaning of the !'ai<l clause.

Held also, that; the \\"Ord~

0 \vhere there bas beeu !ill appeal" in cl. 2 of Art. 182 must Le read with the word> "for the exe cution of a decree or order" iu the 1st coluwn of the Article and the fa.ct that there was a.n appeal from the order rlis1nissing the application under O. IX. r. 9, wade in connection with the proceeding under s. 36 of Money-lender• Act, could c.ot thernfore give

a fresh starting point for limitation under Art. 18~, cl. \!.

APPEAL from the High Court of Judicature' at Calcutta: Civil Appeal No. LI of 1949.

Manohar Lal, (H. K. Mitter with him), for the appellant.

B. G. Mitter, for the respondent.

1950. March 14.

The Judgment of the Court was delivered by.

FAZL ALI , J.-The only question to be decided in this appeal, which arises out of an execution proceeding, is whether the decree under execution is barred by limitation. The first court held that the decree was not barred, but the High Court has come to the opposite conclusion, and the decree-holder has, after obtaining a certificate under Section 110 of the Civil Procedure Code, appealed fo this Court. • The facts may be briefly stated as follows.

On the 21st August, 1940, a preliminary mortgage decree was

S.C.R.

SUPREME COBRT REPORTS 27

passed ex parte in a suit instituted by the appellant to enforce a mortgage. On the 19th September, 1940, the judgment-debtor made an application under Order IX, rule 13, of the Civil Procedure Code for setting aside the ex parte decree, but this application was rejeMed on the 7th June, 1941. On the 11th July, 1941, the judgment-debtor filed an application under Section 36 of the Bengal Moneylendtirs Act, for reopening the preliminary decree, but this application was dismissed for defal}lt of appearance on the 20th December, 1941. Thereafter, a final mortgage decree was passed in favour of the appellant, on the 22nd December. The judgment-debtor then made an applicationunder Order IX, rule 9, of the Civil Procedure Code for the restoration of the proceedings under Section 36 of the Moneylenders Act. The application was however dismissed on the 1st June, 1942, both on the ground that no sufficient cause for the nonappearance of the applicant and his failure to take steps in the proceedings was shown and on the ground that no purpose would be served by reopening the preliminary decree after . the final decree had been passed. The judgment-debtor thereafter preferred an appeal to the High Court at Calcutta from the dedsion dismissing his application under Order IX, rule9, but the appeal was dismissed for non-prosecution, on the 3rd July, 1944. On the 9th April, 1945, the appellant filed an application for executing the decree against the original judgment-debtor, though he .had died previously, and this application was dismissed for default on the 11th May, 1945. On the 2nd June, 1945, the present application for execution was .filed, and the question which we have to decide is whether this application is in time.

It is quite clear that the application for execution having been macje more than three years after the date of the final decree, it must be held to be timebarred, unless, as has been contended before us, the

6. case falls under either clause 2 or clause 3 of article 182 of the Indian Limitation Act.

Under these clauses, t.ime to make the applic1ttfon begins t.o run fromi980

BhawaHij>orc BaffliHgCor j>oratiMS, Ltd.

Gowi ShaHkar

Sharma.

Faz/ Ali].

19ll0

Bha.wanipore BaHking Cor-

J>oratio1i Ltd.

Go11Yi Sl1ankar

Shartna,

Fusl AUJ.

SUPREME COURT REPORTS ll950] • "2. (Where there has been an appeal) the date of the final decree or order of the appellate Court, or the withdrawal of the appeal, or

3. (Where there has been a review of judgment) the date of the decision passed on the review .... "

It is contended that the case is covered by clause 3, and the ground urged in support of this contention is • that the application made by tbe judgment-debtor for reopening the preliminary mortgage decree under Section 36 of the Moneylenders Act must be regarded as an application for review and time should be held to run from the date of the final order passed in the proceedings connected with that application. In our opinion, there is no substance in this contention. The important words in clause 3 of article 182 are : '

(1) " where there has been a review " and (2) " the decision passed on the review ". These words show that before a case can be brought under article 182, clause 3, it must be shown firstly that the court had undertaken to review the relevant decree or order and secondly, that there has been a decision on the review.

In the present case, even if it be assumed that the • word "review" has been used in article 182 in a large sense and that the application for reopening the decree under Section 36 of the Bengal Moneylenders Act was an application for review, the appellant cannot succeed, because the court never undertook or purported to review the decree in question.

What actually happened was that the application under Section 36 for. reopening the prt>liminary decree (not the final decree which is the decree sought to be executed) was dismissed for default and the application under Order IX, rule 9, ofthe Civil Procedure Code for the restoration of the proceedings under Section 36 of the Moneylenders Act was also dismissed. Even if the fact that the judgment-debtor's application under Section 36 was directed against the preliminary mortgage decree is overlooked, that application having been dismissed for default, the court never had occa- J sion to apply its mind to the question as to whether the decree could or should be reopened, and hence it

cannot be said that " there has been a review " of the

S.O.R.

SUPREME OOUR1' REPORTS 29

decree. The proceedings under Order II, rule 9, of the Code of Civil Procedure are not material to the present discussion, because they did not involve a review of the decree under execution but a review, if it is at

e.11 possb~ to call it a review, (which, in our opinion, it is not), of the order dismissing the judgment- •· debtor's application under Section 36 for default.

It was also suggested by the learned counsel for the appellant.that the case mig'b.t be held to be covered by clause 2 of article 182 on the ground that, even though no appeal was preferred from the final mortgage decree, the words " where there has been an appeal " are comprehensive enough toinchide in this case the appeal • from the order dismissing the application under Order

IX, rule 9, of the Civil Procedure Code, made in connection with the proceedings under Section 36 of the Moneylenders Act. This argument also is.a highly far-fetched one, because the expression "where there has been an appeal" must be read with the. words in column 1 of article 182, viz., "for the execution of a ; decree or order of any civil Court ........ ", and, however

•.\.

broadly we may constrµe it, it cannot be held to cover an appeal from an/ order which is passed in a coll1Lteral proceeding o\r w)lich ha.a no direct or immediate connection with tne decree under execution.

In our view, this appeal has no substance, and we accordingly dililmiss it with costs.

Appeal dismissed.

Agent for the appellant : P. K. Ghatterji.

Agent for the respondent: R.R. Biswas.

Bhawaniport Banking Cor. poration Lid.

Go11ri Shat1kar

Sharma.

Paz/ All j.

Section 66

Rajinder Narain

S. P. Varma

P. A. Mehta

GOURISHANKARSHARMA

KANIA C.J.

SAIYID l!'AZL ALI

PATANJALI SASTRI

MEHR CHAND MAHAJAN

S. I~. DAS JJ.

Limitation Act

Art. 152

s. 30

Art. 182

Bengal MoneylenderR Act

Kania

C.P.C

C.P.C

3rd July, 1944

9th April, 1945

Art. 182

cl. 3

Art. 182

s. 36

cl. 2

Art. 182

s. 36

Art. 18

High Court of Judicature' at Calcutta

Manohar Lal

H. K. Mitter

B. G. Mitter

FAZL ALI

Section 110

21st August, 1940

11th July, 1941

Section 36

20th December, 1941

Section 36

1st June, 1942

High Court at Calcutta

11th May, 1945

clause 2

clause 3

article 182

Limitation Act

Bha.wanipore BaHking

clause 3

Section 36

clause 3

article 182

article 182

clause 3

article 182

Section 36

Section 36

Section 36

Section 36

the Code of Civil Procedure

Section 36

clause 2

article 182

Section 36

article 182

P. K. Ghatterji

R.R. Biswas

Shat1kar

Sharma