NEW SA VAN SUGAR & GUR REFINING CO. LTD.

COMMISSIONER OF INCOME-TAX, CALCUTTA

February 19, 1969

(J.C. SHAH, V, RAMASWAMI AND A. N. GROVER, JJ.]

Income-tax Act (11 of 1922), ss. 10(2)(vi-a) and (vi-b) Qnd 12(3) and (4)--Scope of s. 10-lf els, (vi-a) and (vi-b) of s. 10(2) could be read bv implication into s. 12.

The assessee-company, carrying on the business of crushing sugar cane and gur refining, apprehending loss, entered into a lease with another company.

Under cl. (7) of the indenture, the consideration of the lease was royalty payable on the manufacture of sugar and molasses and was subject to a minimum payment of Rs. 65,000 per annum. The lease was for a term of 5 years commencttng from !st June 1945 with an option to continue for a further term of 5 years and thereafter with two further options of 5 years on the same terms and conditions subject to payme:.it

of higher rates of royalty.

Clauses 2 to 5 provided that the existing machinery which was owned by the lessor could not be removed and that the lessee would be entitled to set up additional machinery without interference from the lessor and that on the termination of the lease the lessee would be entitled to remove the same without causing any damage to the property demised.

The effect of els. 11 to 14 was that the lessor would have no concernt with the production of the factory which was the principal part of the business pre:viously carried on by the lessor. In assessment

proceedings for the assessment year 1955-56, the assessee contended that the lease was a lease of a commercial asset and therefore the income arising from it should be assessed under s. 10 of the Income-tax Act, 1922, and hence, the assessee should be allowed depreciation and deve1opment rebate in accordance with els. (vi-a) and (vi-b) of s. 10(2). The department and the High Court rejected the assessee's contention and held that the income was liable to be assessed under s. 12 as 'income from other sources' and that no additional depreciation and development rebate could be allowed.

Jn appeal to this Court it was contended that : . (I) the income of the assessee was liable to be assessed under s. 10 of the Income-tax Act and not under. s. 12; and (2) Since the benefit under cl. (vi) of s. 10(2) is allowed to the assessee under s. 12 ( 3), the assessee should be held to be entitled to additional depredation and development rebate under els (vi-a) and (vi-b) even if the assessment was under s. 12, on the groW, d that• those two clauses are ancillary to cl. (vi) and should be taken to have been included ins, 12(3) along with cl. (vi) .

. HELD : ( 1 ) The income of the assessee could not be characterised as income from the activity of the assessee carrying on any business and was therefore, liable to be assessed under s. 12 and not under s. l O of the Income-tax Act. [769 F-G]

The primary condition for the application of s. JO is that the tax is payabl_e by an assessee under the head 'profits and gains of business' in respect. of business carried on by him. When an assessee does not carry on. business at all, s. 10 cannot be applicable and the income that he receives cannot beair the character of profits of business. [769 D-E]

In the present case, a scrutiny of all the clauses of the indenture of lease, shows that the intention of the assessee was to go out of the busi~ ness altogether, so far as the factory and machinery were concerned with effect from !st June 1945, to part with the entire machinery of the factory and the premlses with the purpose of earning rental income, and to use the income arising from tl)e royalty in its capacity as owner of the factory.

It was not the intention of the a:ssessee '"lo treat the factory and machinery as a commercial concern or asset during the subsistence of the lease. The provision fdr payment of minimum royalty indicates that the assessee had no direct interest in the production of the factory. The royalty was not paid for the production in the factory. There was no direct nexus between the inqome of the assessee and the production of the factory. The production was only a measnre of the royalty to be paid and had nothing to do with the character of the payment as a receipt from business or from other sources. [769 C-D, E-F]

Commissioner of Excess Profit Tax, Bomba, v City v. Shri Lakshmi Silk Mills Ltd. 20 I.T.R. 451 (S.C.) and Narain Swadeshi Weaving Mills v.

Commissioner of Excess Profits Tax, 26 I.T.R. 765 (S.C.), distinguished.

(2) Clause (vi-a), which was inserted in the Act in 1949, gives additional depreciation allowance over and above the initial allowance which was previously available under cl. (vi) in respect of buildings newly erected and new machinery and plant but not furnitnre installed after 31st March 1948. The additional allowance is <lonfined to not more than 5 suceessive assessments falling within the period from !st April 1949 and 31st March 1959. It is deductible in determining the written down value,

unlike .the initial allowance granted under cl. (vi).

Clause (vi-b) was inserted by the Finance Act, 1955. It grants developmnt rebate in respect of machinery and plant provided that the machinery or plant is new and has been installed after 31st March 1954, and provided further that it is used wholly for the pnrpose of the assessee's business and the parti- Culars prescribed for the purpose of cl. (vi) have been furnished. Clauses (vi-a) and (vi-b) thus int'roduce a new scheme and ciannot be treated as an integ'ral part. of cl. (vi) by implication. Further, it is not permissible for the Court to read the clauses by implication into s. 12(3) and (4), because, the clauses were not specifically engrafted by Parliament into s. 12 while amending s. 10(2). [771 E-H; 772 A-BJ

Kumar Kamalaranjan Rey v. Secretary of.State, L.R. 66 I.A 1, 10, referred to. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1593 of 1968. ..,,

Appeal from the judgment and order dated, September 20, 1963 of the Calcutta High Court in Income-tax Reference No. 23 Of 1960.

Sachin Chaudhari, T. A. Ramachandran and D. N. Gupta, for the appellant D. Narsara; u, R. N. Sachthey and B. D. Sharma, for the respondent.

The Judgment of the Court was delivered by

Ramaswami, J. This appeal is brought by certificate from the judgment of the Calcutta High Court dated 20th September, 196"1 in Income Tax Reference No. 23 of 1960.

The appellant (hereinafter referred to as the assessee) was carrying on the business oif. crushing sugarcane and gur refining.

M/s. Andrew Yule & Co. were acting as the managing agents of the assessee. In a letter dated 5th February, 1946 addressed to the share-holders of the assessee the managing agents referred to the alarming increase of Government interference in the affairs B of the 1>ugar industry in Bihar and the increase of wages of the workers, as well as the levy of a cess of Government and deterioration in the cane crops. In view of this state of affairs, the managing agents apprehended a loss and suggested that the company's affairs should be put on a "less discouraging basis" by accepting the offer of a lease of the company as a running concern from the Standard Refiinery & Distillery Ltd. At an extra-ordinary general meeting of the share-holders of the assessee company held on 5th March, 1946 it was decided to authorise the directors to enter

into a lease with the said Standard Refinery & Distillery Ltd. By an indenture of 15th March, 1948 the lease was executed to come into effect retrospectively from !st June, 1945. The term of the lease was originally for 5 years commencing from !st June 1945 D with an option to the lessee to continue for further five years and thereafter two further options to the lessee, each for five years, on the same terms and conditions, but subject to the payment of higher rates of royalties and also , subject to the option on the part of the assessee company to terminate the lease by a resolution of the shareholders of the company to be held before 30th November in any year after the first two years. This option of termination of the lease was not exercised by themsessce company. The consideration of the lease as described in clause 7 of the indenture was royalty payable on the manufacture of sugar and molasses. The royalty on sugar was to be, at the rate of Rs. 75 per hundred maunds of sugar manufactured for the first and second term of five years, at the rate of Rs. 82.50 pet hundred maunds of sugar manufactured for .the third five year period and at Rs. 90 for the fourth five year penod. The royalty on molasses was to be calculated at 3 pies per. maund on all molass~ sold during each year of the original penod or the renewed penod of the lease. The computation of the royalty was subject to a minimum payment of Rs. 65,000 per annum.

For the assessment year 1955-56 the relevant accounting year of the essee ended on 31st May, 1954. In the assessment proceedmgs for 1955-56 the assessee's main contention was that the lease granted .under the indenture of 15th March, 1948 was a lease of a commercial asset and therefore the income arising from the lease should be assessed under s 1 O o! t!te Income Tax Act and the see should be allowed dre ciation and development rebate m accordance with clause (vi-a) and clause (vi-b) of sub-section (2) of section 10 of the Income

Tax Act. The Income Tax Officer assessed the income under s. 12 of the Act as being income under the head "other sources" and held that no additional depreciation or development rebate could be allowed as claimed by the assessee. According to the assessee, the income derived from the lease of the sugar factory was income from business because the factory was leased as a going concern and the rent of the building, machinery, plant and spare parts was fixed at a certain rate per maund of sugar produced, and at a certain rate per maund of molasses sold. On appeal, the Appellate Assistant Commissioner found that it was a simple !ease of the building and machinery in a sugar factory, and as such the method of payment based on production .could not affect the character and nature of the income derived under the said lease. In further appeal the Appellate Tribunal came to the conclusion that on the facts stated the case fell under section 12 and not under section 10 and that since sub-section (3) of section 12 did not include clauses (vi-a) and (vi-b) of section 10(2) the claim of additional depreciation and development rebate could not,. be allowed. At the instance of the assessee the Appellate Tribunal stated a case to the High Court on the following questions of law under section 66(1) of the Income Tax Act, 1922 (hereinafter referred to as the Act; :

" ( 1) Whether on the facts and in the circumstances of the case, the income of the assessee company was liable to be assessed under section 12 of the Indian Income Tax Act and not under section 10 of the said Act ?

(2) Whether on the facts and in the circumstances of the case, additional depreciation and development rebate can be allowed as a deduction ?"

The High Court answered both the questions against the assessee holding that the income was liable to be assessed under section 12 and that no additional depreciation and development rebate could be allowed.

Section 10 of the Act stood as follows at the material time :

"10. (1) The tax shall be payable by an assessee under the head 'profits and gains of business, profession or vocation' in respect of the profit or gai.n of any business, profession or vocation carried on by him.

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

(vi) in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent, where the assets are ships

other than ships ordinarily plying on inland waters, to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed. and in any other case, to such percentage on the wntten down value thereof as may in any case or class of cases be prescribed : B and where the buildings have been newly erected, of the machinery or plant being new, IDOi being machinery or plant entitled to the development rebate under clause

(vi-b), has been installed, after the 31st day of March, 1945, a further sum (which shall however not be deductible in detennining the written down value for the pure poses of this clause) in respect of the year of erection or installation equivalent-

(a) in the case of buildings the erection of which is begun and completed between the 1st day of April 1946 and the 31st day of March 1956 (both days inclusive), to fifteen per cent of the cost thereof to the assessee;

(b) in the case of other buildings, to ten per cent of the cost thereof to the assessee;

( c) in the case of machinery or plant, to twenty per cent of the cost thereof to the assessee; Provided that-

( c) the aggregate of all allowances in respect of depreciation made under this clause and clause (vi-a) or under any Act repealed hereby, or under the Indian Income Tax Act, 1886 (II of 1886), shall, in no case, exceed the original cost to the assessee of the buildings, machinery, plant or furniture, as the case may be;

(vi-a) in respect of -Oepreciation of buildings newly erected, or of machinery or plant being new which has been installed, after the 31st day of March, 1948, a further. sum (which shall be deductible in determining the wntten down value) eaual to the amount admissible under clause (vi) (exclusive of the extra allowance for double or multiple shift working of the machinery or plant and the initial depreciation allowance admissible under that clause for the first year of erection of the building or the installation of the machinery or plant) in not more than five successive assessments .for the financial years next following the previous year LIOSup./69-14

in which such buildings are erected and such machinery and plant installed and falling within the period commencing on the 1st day of April 1949 and ending on the 31st day of March, 1959;

( vi-b) in respect of machinery or plant being new, which has been installed after the 31st day of March, 1954, and which is wholly used for the purposes of the business carried on by the assessee, a sum by way of development rebate in respect of the year of installation equivalent to twenty-five per cent of the actual cost of such machinery or plant to the assessee;

Provided that no allowance under this clause shall be made w:iless the particulani prescribed for the purpose

of clause (vi) have been furnished by the assessee in respect of such machinery or plant;

Section 12 was to the following effect :

"12. (1) The tax shall be payable by an assessee under the head 'Income from other sources' in respect of income, profits and gains of every kind which may be included in his total income (if not included under any of the preceding heads) .

( 2) Such income, profits and gains shall be computed after making allowance for any expenditure (not being in the nature of capital expenditure) incurred solely for the purpose of making or earning such income, profits or gains.

( 3) Where an assessee lets on hire machinery, plant or furniture belonging to him, he shall be entitled to allowances in accordance with the provisions of clauses (iv), (v), (vi) and (vii) of sub-section (2) of section 10.

( 4) Where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, he shall be entitled to allowances in accordance with the

provisions of clauses (iv) ' ( v) , (vi) and (vii). o~ suJ; section ( 2) of sectJ.on 10 m respect of such buildings .

The main contention of the assessee was that the lease as contemplated in the indenture dated 15th March, 1948 waa a lease of a commercial asset, and, therefore, the income arising from the lease should be assessed under section 10 ( 1 ) of the Act and not under section 12 (1 ) . In order to examine the validity of this argument it is necessary to set out the relevant . clauses of the indenture of lease. Clause ( 1) of the lease proi vided that the lease was for a term of five years commencing from 1st June 1945 with an option to continue for a further term of five years and thereafter two further options of five years in each case on the same terms and conditions subject to higher payment of rates of royalties.

Clause 2: The lessee shall be entitled to run the said sugar factory and all other machinery annexed to the same and 111e all the tools and implements, buildings and premises, offices, and erections and utensils and all other things which are now in or upon the said premises and which may be added irorn time to time thereto provided always that the lessees shall not at any time remove the plant and/or machinery etc. hereby demised or any part thereof from the said premises elsewhere for the purpose of or in connection with the lessees' other interests.

Clause 3: The lessees shall at the time ot taking over possession of the factory from the lessors be entitled free of payment to the goods already manufactured during the current crushing season, i.e. 1945-46 or in the process of manufacture and/ or to be hereafter manufactured by the lessees and the lessees shall have absolute discretion to sell and deal with the same in such manner as they think fit and proper.

Clause 5:

The lessees shall also be entitled to erect construct maintain any other machinery as the l~ may think fit and proper.

All machinery brought in and erected by the lessees would remain the lessees' property and ter the termination of the lease the lessees shall be entitled to remove the same provided always that the lessees shall forthwith repair and make good all damage caused to the demised premises by such removal of the lessees' machinery.

Clause 7:

Clause 7 provides for the payment of royalty.

The royalty on sugar was to be computed at the rate of Rupees Seventy-five per I 00 maunds of sugar manufactured for the first five yeats as well as next five years then at the rate of Rupees eighty two and annas eight per I 00 maunds of sugar manufactured for the third five years and Rs. 90/- for the fourth five years. The royalty on molasses was computed at three pies per maund on all molasses sold during .each year of the original lease period and any renewals thereof subject to the payment of a mi.nimum royalty oi Rs. 6,500/- per annum.

Clause 8: This clause provides that the lessee shall in addition to the royalty reserved be responsible for all the running expenses of the factory including salaries and wages and all factory staff and labour and shall pay all sugar excise duty etc. excepting the ground rents payable to the landlords and taxes on income chargeable to. the lessors and shall fully reimburse the lessors in respect of such exp.nses which have already been incurred by the lessors since the first day of One thousand nine hundred and forty five and property tax.

Clause 17:

(a) The lessors will keep the demised , premises insured to the full value thereof and shall pay all expenses which will be incurred for insuring the demised premises.

(b) The lessors shall PW all expenses of running the lessors' company e.g. Directors fees, Audit fees, Ground rents etc. but not the running expenses of the factory and premises hereby demied and shall also pay for all the expenditure for additions, alte•ations breakdown and/or renewals and replacement of capital nature (i.e. debitable to block account) to buildings and machineries etc. and other similar expenses of a capital nature on the demised premises.

It appears from clauses 2 and 5 that the existing machinery which was owned by the lessor could not be removed and that the le-see would he entitled to et un additional machinery without interference from the lessor •nd that on the termination of the lease the lessee would be entitled to remove the same without .causing any damage to the property demised.

Clause 3 contemplates that if during the period, 1945-46 the lessors sell the commodity manufactured the price thereof should go back , to the Jessee.

Mr. Choudhury referred to clause 6 which entitled the Jessee to use the railway siding during the period of the lease.

But the light of use of railway siding by the le:see under this clause cannot in any way be construed as the exercise of control over the business of the assessee.

The provision for minimum royalty of Rs. 65,000/- per annum indicates that the assessee had

110 direct interest in the production oi the factory.

The cumulative effect of clauses 11, 12, 13 and 14 is that the lessor wiII have no concern with the production of the factory which is ihe principal part of the business, p1eviously carried on by the lessor.

The provisions in clause 17 are that the lessors shall keep the demised premises insured to the full value and to repair and replace the machines which are of capital nature. On a scrutiny of all the clauses of the indenture of lease, our conclusion is that the intention of the assessee was to part with the entire machinery of the facto1y and the premises with the obvious purpose of earning rental income. It was not the intention of the a'sessee to treat th.~ factory and machinery etc. as a commercial cor.cern during the subsistence of the lease.

The primary condition for the application of s. 10 of the Act is that the tax is payable by an

assessee under the head "profits and gains of business" in respect of business carried on by him. When an assessee docs not carry on business at all, section 10 cannot be applicable and the income that he receives cannot bear the character of profits of business.

As we have already shown there is no direct nexus between the income of the assessce and the production of the factory.

The royalty payable to the assessee was not paid under clause 7 of the indenture of lease for the production in the factory. The production was only a measure of the royalty to be paid and, in any event, the measure of payment had nothing to do with the character of the payment as a receipt from business or from other sources.

It follows that in the circumstances of this case the income of the asscssee cannot be characterised as income from the activity of the assessee carrying on any business.

The High Court was therefore right in holding that the income of

lhe assessee was liable to be ass, essed under section 12 and not wnder section 10 of the Act.

On behalf of the assessee ref.erence was made to the decision of this Court in Commirsioner of Excess Profit Tax, Bnmbay City v. Shri Lakshmi Silk Millr Ltd.(') in which the respondent ">mpany which was formed for the purpose of manufacturing inlk. cloth intalled a plant for dying silk yarn as a part of its busmess . dunng he , rele_vnt carging accounting period. Owing

IO the ddliculty m obtammg silk yam on account of the war it

(1) 20 l.T.R. 45'

770 SUPRB:Ml! COURT REPORTS

[1969] 3 S.C.R.

could not make use of this plant which had remained idle for somo time. In August, 1943, the plant was let out to another company on a monthly rent.

The question arose whether the income received by the respondent company in the chargeable accounting period by way of rent was income from business and aasessable to excess profit tax. It was held by this Court that a part of the assets did not cease to be commercial assets of that business merely because it was temporarily put to a different use or let out to another and accordingly the income from the assets would be profits of the business irrespective of the manner in which the assets were exploited by the company.

But this Court clearly indicated that no general principle could be laid down which would be applicable to all cases and that each case must be decided on its own circumstances according to ordinary commomense principles.

The material facts of l.Akshmi Silk Mills Ltd. ( 1) are that only a part of the machinery was k:t out on lease and the rest of the machinery was worked by the asse8see.

The letting out of the machinery was for a short period of fin months.

There was also no letting out of the premises of the factory by the assessee.

The ratio of the decision in Labhmi Silk Mills Ltd.(') is therefore not applicable to the present case.

Ref.erence was made on behalf of the assessee to the decision in Narain Swadeshi Weaving Mills v.

Commissione~ of Excm Profits Tax(') in which the assessee firm carrying on a manu

facturing business consisted of three partners, N and his two sons R & G.

In April, 1940, a public limited company was incorporated with the object of taking over the business of the assessee firm. This company was director-controlled and the directors were N, his three sons R, G & S and a brother-in-law of G.

The company purchased only the building and leasehold rights fiom the assessee firm but took over from it on lease at an annual rent th.~ plant and. machinery. The assessee firm did not thereafter manufacture anythin~ and it had accordingly no further trading or commercial acttvity.

In the circumstances, it was held that leiting out of the plant and the machinery by the assessee to the company could not fall within the definitioo of "business" under section 2 ( 5) and as the assessee firm had, no business during the relevant period to which the Act applied, section 1 OA could not be invoked by the Excess Profit Tax Authorities.

It was however pointed out that whether a particular activity amounts to any trade, commerce or manufacture or any adventure in the nature of trade, commerce or manufacture is always a difficult quetion to answer and no general principle

can be laid down which would be applicable to all cases, and each case must be decided in the setting and background of its own facts.

It is evident that the material facts in the present case are somewhat different from those of Narain Swadeslii

(I) 10 l.T.R. 451.

(2) 26 I.T.R. 76S.

Weaving Mills' case(') for there is no out-right sale of the building of the factory but only a lease of the factory premises together with the machinery for a long period of years.

For the reasons already expressed our conclusion is that the intention of the assessee was not to treat the factory etc. as a commercial asset during the subsistence ol the lease. In other words, the intention of the assessee was to go out of the business altogether so far as the factory and the machinery was concerned with effect from 1st June, 1945 and the intention was to use the iincome arising from the royalty in its capacity as the owner of the factory. 1t follows therefore that the first question was rightly answered by the High Court in favour of the Commissioner of Income Tax.

As regards the second question the argument was stressea by Mr. Choudhury that clauses (vi-a) and (vi-b) ol section 10(2)

are ancillary to clause (vi) and should be taken to be included within clause (vi) as mentioned in sub-section ( 3) of section 12.

It appears that clause (vi-a) was inserted by section 11 of the Taxation Laws (Extension to Merged States and Amendment Act, 1949). Clause ( vi-b) was inserted by s. 8 of the Finance Act, 1955 with effect from 1st April, 1955.

At the time of making the amendment under the said Acts, no amendment was made to section 12(3) of the Act. It was argued by Mr. Choudhury that although this was not done specifically it followed by implication that additional depreciation allowance in respect of new assets and development rebate would come within the ambit of section 12(3). It appears to us that clauses (vi-a) and (vi-b) are not ancillary to clause (vi) because the scheme of clauses (vi-a) and (vi-b) is somewhat different.

Clause (vi-a) which was inserted in 1949 gives additional depreciation allowance over and above the initial allowance which was formerly available under the second paragraph of clause (vi) in respect of buildings newly erected and new machinery and plant but not furniture installed after the 31st March, 1948. The additional allowance under this clause is confined to not more than five successive assessments fallin~ within the period from 1st April 1949 and 31st March 1959. Further it is deductible in determining the written down value, unlike the initial allowance

grted un?er the second paragraph of clause (vi). aause (v1-b) was inserted by the Finance Act, 1955. It grants development ebate in respec.t of machinery and plant provided that the machmery or plant 1s new and has been installed after the 31st March, 1954; and provided further that it is used wholly

fo~ the purpose of the assessee's business and the particulars prescnd for the purpose of clause (vi) have been furnished. It is rnamfest that clauses (vi-a) and ( vi-b) introduce a new scheme

(I) 2HT.R. 765.

and cannot be treated as an integral part of clause (vi) by implication. Apart from this consideration it appears to us that these clauses were not specifically engrafted by Parliament in section 12 ( 3) and section 12 ( 4) while amendi11g section 10 ( 2) of the Act. It is therefore not permissible for the Court to read these same clauses by implication in section 12 ( 3) and section 12 ( 4) of the Act. The duty of the Court is to interpret the words

that Parliament has used,· it cannot supply the gap disclosed in an Act or to make up the deficiencies. "Ir', said Lord Brougham, in Gwynne v. Burnell,(') "we depart from the plain and obvious meaning on account of such views (as those pressed in argument on 43. Geo. 3, c. 99) we do not in truth construe the Act, but alter it.. We add words to it or vary the words in which its provisions are couched.

We supply a defect which the legislature could easily have supplied, and are making the law, not interpreting it" (Cf. Kumar Kama/aranian Roy v. Secretary of State(').

Accordingly, we are of opinion that the assessee is not entitled to additional depreciation and development rebate and the second question was rightly answered by the High Court in the negative.

For these reasons we hold that the judgment of the High Court dated 20th September, 1963 is correct and this appeal must be dismissed with costs.

V.P.S.

Appeal dismissed.

(1) (1840) 7 Cle, & F. 572, 696.

(2) 661.A. 1. JO.

NEW SA VAN SUGAR & GUR REFINING CO. LTD

COMMISSIONER OF INCOME-TAX, CALCUTTA

February 19, 1969

C. SHAH

RAMASWAMI

A. N. GROVER, JJ.

Income-tax Act

ss. 10(2)(vi-a)

s. 10

s. 10(2)

s. 12

s. 10

Income-tax Act, 1922

s. 10(2)

s. 12

s. 10

Income-tax Act

s. 12

s. 10(2)

s. 12

s. 12

s. 12

Income-tax Act

s. 10

st June 1945

st April 1949

Finance Act, 1955

31st March 1954

s. 12(3)

Parliament

s. 12

s. 10(2)

L.R. 66 I.A 1

Sachin Chaudhari

T. A. Ramachandran

D. N. Gupta

D. Narsara

R. N. Sachthey

B. D. Sharma

Ramaswami

Calcutta High Court

Andrew Yule & Co.

Bihar

Standard Refiinery & Distillery Ltd.

5th March, 1946

Standard Refinery & Distillery Ltd.

15th March, 1948

clause 7

31st May, 1954

s 1

Income Tax Act

section 10

s. 12

section 12

section 10

section 12

section 10(2)

section 66(1)

Income Tax Act, 1922

section 12

section 10

section 12

Section 10

31st day of March, 1945

1st day of April 1946

31st day of March 1956

Indian Income Tax Act, 1886

31st day of March, 1948

1st day of April 1949

31st day of March, 1959

31st day of March, 1954

Section 12

section 10

section 10

section 12

1st June 1945

Clause 2

Clause 3

Clause 5

Clause 7

Clause 7

Clause 8

Clause 17

Clause 3

Choudhury

clause 6

clause 17

s. 10

section 10

clause 7

section 12

section 10

l.Akshmi Silk Mills Ltd.

Labhmi Silk Mills Ltd.

section 2

section 1

Narain Swadeslii

Weaving Mills

1st June, 1945

section 10(2)

section 12

section 11

s. 8

Finance Act, 1955

1st April, 1955

section 12(3)

section 12(3)

31st March, 1948

1st April 1949

31st March 1959

Finance Act, 1955

31st March, 1954

section 12

section 12

section 10

section 12

section 12

Brougham

20th September, 1963


PRAGA TOOLS CORPORATION

SHRI C. A. IMANUAL & ORS.

February 19, 1969

[J. M. SliELAT AND V. BHARGAVA, JJ.]

Constitution ol India, Art. 226--Wrlt of mandamus whether can be iuued against a company-High Court holding petition under Art. 226 to

be misconceived but still granting declaration to some petitioner1 that action of company agt; inst them was illegal-Competence of High Court to pass such order,

The appellant was a company registered under the Companies Act,

1913. At the material time 56% ol its shares were held by the Union Government, 32% by the Andhra Pradesh Government. and 12% by private iJ:>dividuals. On July 1, 1961 a settlement was arrived at between the company and the workmen's union under which the workmen inter alia agreed to observe industrial truce for a period of three years i.e.

upto July 1, 1964 and not to resort to strikes, stoppage of work or go Blow tactics.

On December 10, 1962 the company and the said union entered into a supplementary settlement under which the company agreed not to retrench or lay-off any of the workmen during the said period of truce.

The said two settlements were arrived at and recorded in the presence of the Commissioner of Labour under s. 2(p) and s. 18(1) of the Industrial Disputes Act, 1947 and were to be in force as aforesaid until July 1, 1964. On December 20, 1963, however, the company en tered into another agreement with the said union.

The effeCtt of this agreement was to enable the company notwithstanding the two earlier llC!tlements to carry out retrenchment of 92 of the workmen with effect from January 1, 1964. Some of the affected workmen filed a writ petition under -Art. 226 of the Censtitution µraying for a writ of mllndamus against the company restraining it from giving effect to the said agreement. The Single Judge dismissed the petition on merits. In appeal the Division Bench held that the company being one registered under the Companies Act and not having any statutory duty or function to perform was no~ one against which a writ µetition for mandamus or any other Writ could be .. No such petition could also lie against the conciliation officer who had signed the agreement, as on the facts of the case it was not he who sought to implement the agreement.

The Division Bench however held th~! th.ough the writ petition was not maintainable it could grant a declarallon. m favour of. three of the petitioners that the impugned agree men! was dlega) and void. The competency of the High Court to make such a dectaratton was challenged by the company . in appeal before this Court.

HELD : ! i) The c<;>nition precedent to the issue of a mandamllJ' jg that there IS m one clatmmg it a legal right to the performance of a legal duty by one against. whom it is sought. An order of mandamllJ' is, in form! .a comand directed to a person, corporation or an inferior tribunal

reQwrig him .or them. to do a particular thing therein specified which !'ppertams to hIS or •theil' office and is in the nature of a public duty. It IS however .no~ necessary that the person or authority on whom the statu tory duty IS nposed need be a public official or an official body.

A "'f"'damllJ' can issue, for instance, to an official of a sbcioty to compel

him to carry out the terms ef the statute under or by which the society

is constituted or governed and also to companies or corporations to carry A out duties placed on them by the statutes authorisint! their unctertakings.

A mandamus would also lie against a company_ constituted bv a statute for the purposes of fulfilling public responsibilities. [778 H-779 CJ

In the present case the company being a non-statutory body and one incorporated under the Companies Act there was neither a statutory nor a pubJic duty imposed on it by a statute in respect of which enforcement could be sought bY means of a 1nanda1nus nor \\!JS there in its workmen B any corresponding right for enforcement of any such statutory or public duty. The High Court therefore was right in holding that no writ petition fo'r a mandarnus or an order in the nature of niandanuts could lie against the company. [779 0-El

Sohan Lal v. Union of India, [1957] S.C.R. 738, Regina v. Industrial Court & Ors., [ 19651 l Q.B. 377, R. v. Lewisham Union. [18971 I Q.B. 498, 501, Mc. Clelland v. Northern Irelan,/ General Health Servica C Boards, (1951) l W.L.R. 594, Ridge v. Bc/dwin. [19641 A.C. 40. Short v.

Poole Corooration, [1926], Ch. 66 at pp. 90 to 91 and Attorney-General v.

St. Ives R.D.C. [1961] l Q.B. 366, referred to.

(ii) The High Court was ho\vever in error in granting the declaration in favour of the thr'e workmen. [781 A]

Once the writ petition was hetd to be misconceived on the ground that D it could not lie against a compafly which was neither a statutory company nor oae having public duties or responsibilities imposed on it by statute, no reiief by way of .a declaration as to the invalidity of an impugned agreemt"nt Mtween it and its employees could be granted. The only course open to the High Court was to dismiss the petition and leave the workmen to tho remedies under the Industrial Disputes Act. [780 F-HJ

Bldi, Bidi Leaves' Gnd Tobacco Merchants Association v.

State of E Bom.bzy, [19621 Suvl' l S.C.R. 381 and A. B. Abdulkadir v. State o/

Kuala. [1962] Supp. 2 S.C.R. 741, distinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 612 of 1966.

Appeal by special leave from the judgment and order dated April 16, 1965 of the Andhra Pradesh High Court in Writ Appeal F No. 37 of 1964.

S. V. Gupte and R. Thiagarajan, for the appellant.

Janardan Sharma, for respondents Nos. 1 and 3.

The Judgment of the Court was delivered by G Shelat, J.

The Fraga Tools Corporation (hereinafter referred to as the Company) is a company incorpotated under the Indian Companies Act, 1913.

At the material time however, the Union Government and the Government of Andhra Pradesh between them held 56% and 32% of its shares respectively and the balance of 12 % shares were hel~ by private H individuals.

Being the largest shareholder, the Umon Government had the power to nominate the company's directors. Even

so, being registered under the Companies Act and governed by

PRAGA TOOLS CORP. v. !MANUAL (Shelat, J.) 775 -

A the provisions of that Act, the company is a separate le, gal entity and cannot be said to be either a Government corporation or an indUJtry run by or under the authority of the Union Government.

At the material time there were two rival workmen's u.mons in the company, the Praga Tools Employees Union and the Praga Tools Corporation Mazdoor Sabha (hereinafter referred to as the union and the sabha respectively).

On July 1, 1961 n settlement was arrived at between the company and the said union under which the wnrkmen inter alia agreed to observe indUJtrial truce for a period of three years and not to resort to strikes, stoppage of work or go-slow tactics. On December

I 0 1962 the company and the said union entered into a supplemen- !Ary settlement under which the company agreed not to retrench or lay-off any of the workmen during the said period of truce on an assurance from the said union of coopeation and willingness of the workmen to carry out alternative tasks assigned to

them even if they were in a slightly lower cadre without loss of emoluments.

The said two settlements were arrived at and recorded in the presence of the Commissioner of Labour under

ss. 2(p) and 18(1) of the Industrial Disputes Act, 1947 and were to be in force as aforesaid until July 1, 1964. On December 20, 1963, however, the company entered into an agreement with the said union to which the said sabha was not a party.

The agreement recited that there were several disputes between the company and the union and that s0me of them were the subject-matter of concHiatioin proceedings and some were

pending arbitration or adjudication. Clause ( 1) provided that the said agreements dated July !, 1961 arid December 10, 1962 to the extent that they were inconsistent with this a 'reement would stand automatically repealed or modified by. this

agreement. Clause ( 6) stated that there was an immediate, unavoidable need for reducing substantially the overhead expenditure of the company and for effecting economy and therefore notwithstanding the agreement dated December 10, 1962 "both the parties have preriared a list of the categories and persons who would be retrenched after carful consideration''.

The said list was attached to the agreement as annexure VI. Clause (6) also provided that the agreement dated December 10, 1962 stood modified so as to allow the said retrenchment to take olacc immediately in accordance with law.

The clause further nrovided that in order to mitigate the consequences of the pronosed retrenchment the company had evolved a scheme of voluntary retirement with terminal benefits suoerior to those provided under the Industrl•.1 Disnutes Act, but the r.cheme of Voluntary retirement would be available to the workmen only for a period of 10 days from the date ot the agreement. It further provided

that the company ll\nd the said union had agreed that an attempt A would be made to rehabilitate the retrenched persons by helping them to obtain alternative employment and the company had for that purpose contacted public sector and other industries and in particular the Heavy Engineering Corporation, Ranchi for absorption as far as possible of the retrenched personnel.

The effect of this agreement was to enable the company, notwith- B standing the two earlier settlements, to carry out retrenchment of 92 workmen mentioned in annexure VI thereto with effect from January I, 1964.

Respondent I and 40 other workmen thereupon filed a writ petition under Art. 226 in the High Court of Andhra Pradesh challenging the validity of the said agreement impleading therein the company, the said union and the Regional Assistant Commissioner as respondents.

The petition claimed a writ of mandamm or an order in the nature of mandamus or any other order or direction restraining the respondents to implement or enforce the said agrcmcnt. The writ pe•ition was in the first instance heard by u learned Sin:_!ie Judge of th~ High Court before whom the workmen raised the fo!lowin~ contentions :

(I) that the said agreement dated December 20. 1963 was invalid as it was entered into by the unbn in collusion with the company and was in violation of the said two earlier settlements,

(2) that there could be no industrial dispute within the man ing of s. 2(k) of the Act as the said two earlier settlements, not having been terminated under s. 19(2) were in force, that therefore there could not be a valid conciliation under s. 12 and accordingly the fact of the conciliation officer having signed the impugned agreement gave no binding force to it, (3) that the retrenchment of the 92 workmen was illel!al and void as it wa~ in hreach of s. 25 <Fl inasmuch as no notice thereof was iven to the anpropriate Government. and ( 4) that the comoany bing under the manaqement of the Union Government, the annropriate Government in regard to the disnute was the Central Government and nnt the State Gove"!lment •nd conseauent1v the imouqned ai?reemerit which was signed bv the cl)nciliation rffier appo:nted by the State Government was not vali•l anrl no ret' enchment could validly be effected under the force of such agreement.

The learned Single Judge negatived these contentions holdinii that the comnanv wa~ neither an industry run by or unrler the authority of the Union Government nor under its management but being a comoanv reistered under the Companies Act the annrooriate, Government was the State Government. He also held that there was no nroof of the said union having entered into the imoup.ned a!!reement in collusion with the companv. He further held that the union hy its letter dated April 5, 1963.

H I

~"-

A had raised an industrial dispute and had thereby requested that the question of retrenchment should be settled between the parties, that the said dispute with te. c?nsent of the comp~y and the union was brought for conc1hat1on before the conc1hation officer and that the impugned agreement, having been brought obout in the course of the said conciliation proceeding~, B was binding o.n all workmen including the petitioners in the writ petition despite the fact that they were members of the sabha and not of the union. In this view the learned Single Judge held that it was not necessary for him to decide the preliminary objection raised by the company that no writ petition for a mandamus could lie against it.

He dismissed the writ oetition C on merits on the basis of the aforesaid findings given by him. 28 out of the said 41 workmen who had filed the writ petition filed a letters patent apoeal aainst the said judgment.

The Division Bench of the High Court which heard the appeal held : ( l) that since the dispute relating to the company's right to retrenchment was already sett1e1 under s. 18 (I ) by the said supp!ementary settlement of December I 0, 1952. no industrial D dispute could be said to exist or arise until the said sett'ement was dulv terminated under s. 19(2), that therefore there could be no valid conciliation oroceedings in respect of the ouestioo of retrenchment and that the impuned all-cement permitting the com'>anv to retrench. though it bore the signoture of the conciliation officer, was not a valid agreement: (2) that so ]l)ng as E the earlier settlements were not terminated thv held the field, and

(3) tha• the sai~ JP-tter dated Aoril 5. 1963 relied on bv the

learn~<! Sin~Je J"dge as having rai•ed an inusHal <lisputc rezardinll retrenchment did not in fact C011tain or raise anv such question.

The D; vision Bench held that the said Jetter raised onlv the ouestion o' revision of wage-structure and other demonds F bnt nt the ouestin., of retrenchment. The le'tr of Ju•v 29,

191i1 of the cdia•ion oftkefl) the com,, anv relied on bv the cl)m'>•n" also ,.,.ferre-< to the, deman.J, containei in the sa; d Jetter of Anr; I 5, 1963. nomely, the revision. cf wage-structi1re. tle•rness allowance. nro!'l()tlon and ('lther m•tters. hut not the question of the commnv•, ri<?ht of retrenhment. The o; visicm Bencb

therefore held that there was nothing on reco-d to show •'111 G retrenchment was t'1e subject-m"tter of anv cudliation befo1 the conciliation officer and therefore anv ~~P-ement conferrini on the comoanv the rfoht to retrench so '""" a, the said elie1 s;•.tl•!Jlent• were not terrninMe~ was invalid ;,., snite of •h• con

c1lit1on nfficr havl,,.,'! iven his assent ti) •nd affie-l his •i<!M., Jre on it. '!'he Jearne<l Tu<les. hl)wever. held that the comn•nv ing ff one re11istered uncler the Comnanies Act an.J nnt !revi'1~ •nv statu!orv ~~IV or function to nerforrn wa• not one again•t. whie.h a writ pet!tton for a m.an-famur or anv other writ coul<! lie. No such petition could also lie against the conciliation officer as on . '

the facts of the case that officer did not have to implement the impugned agreement. The Division Bench, however, held that though the writ petition was not mairitainable it could grant a declaration iiIJ. favour of three workmeq, namely, appellants 6, 16 and 25 before it, that the impugned agreement was illegal and void and dismissed the writ petition subject to the said declaration. The company challenges in this appeal by special leave the va1idity of this judgment making such a declaration .

. Thus the only question which arises in this appeal is whether in the view that it took that the writ petition was not maintainable against the company the High Court could still grant the said declaration.

In our view the High Court was correct in holding that the writ petition filed under Art. 226 claiming against the company mandamus or an order in the nature of mandamus was misconceived and noi maintainable. The writ obviusly was claimed against the company and not against the conciliation officer in respect of any public or statutory duty imposed on him by the Act as it was not he but the company who sought to implement the impugned agreement. No doubt, Art. 226 provides that every High Court shall have power to issue to any person or authority orders :wd writs including writs in the nature of habeas corpus. mandamus etc., or any of them for the enforcement of any of the rights conforred by Part III of the Constitution and for any other purpose.

But it is well understood that a mandamus lies to secure the performance of a public or statutory duty in the performance of which the one who applies for it. has a sufficient legal interest.

Thus, an application for mandamus will not lie for an order of restatement to an office which is essentially of a private character nor can such an application be maintained to secure performance of obligations owed by a compiny towards its workmen or to resolve any private dispute. (see Sohan Lal v.

Union of India)(').

Jin Regina v.olndustrial Court & Ors.(') mandamus was refused against the Industrial court though set up under the Industrial Courts Act, 1919 on the ground that the reference for arbitration made to it by a minister was not one under the Act but a private reference. "This CoUrt has never exercised a general power" said Bruce, J., in R. v. Lewisham Union(') "to enforce th.e perfomiance of their statutory duties by public bodies on the application of anybody who chooses to apply for a mandamus. It has always required that the applicant for a mandamus should have a legal and a specific right to enforce the perforrnnce of those duties". Therefore, e ndition re7e de11t for the issue of mandamus is that there ts m one claunmg

(1) [l957J s.c.R. 738.

(2) [\965J 1Q.tl.377.

(3) (\897] \ Q.ll. 498, 501.

PRAG 'fOOLS CORP. v. !MANUAL (Shelat, /.) 779

it a legal right to the performance of a legal duty by one against whom it is sought. An order of mandamus is, in form, a command directed to a person, corporation or an inferior tribl requiring him or them to do a particular thing therein specified which appertains to his or their office and is in the nature of a public duty. It is, however, not necessary that the person or the auth<;>- rity on whom the statutory duty is imposed need be a public official or an official body.

A mandamus can issue, for im!ani; e, to an official of a society to compel him to carry out the terms of the statute unde~ or by which the socie•y is constituted or governed and also to companies or corporations to carry out duties placed on them by the statutes authorising their undertakings.

A mandamus would also lie against a company constituted by a statute for the purposes oi fulfilling public resp<ll!ISibilities. (cf. Halsbury's Laws of England, (3rd ed.) Vol.

II, p. 52 and onwards).

The company being a non-statutory body and one incorporated under the Companies Act there was neither a statutory nor a public duty imposed on it by a statute in respect of which enforcemeint could be sought by means of a mandamus, nor was there in its workmen any corresponding legal right for enforcement of any such statutory or public duty.

The High Court, therefore, was right in holding that no writ petition for a mandamus or an order in the nature of mandamus could lie against the company.

The grievance o.f the company, however, is that though the High Court held rightly that .no such petition was maintainable, it nevertheless granted a declaration in favour of three of the said workmen, a declaratiqn which it could not issue once it held that the said writ petition was misconceived.

The argument was that such a declaration, if at all, could only issue against public bodies or companies or corporations set up or controlled by statutes in respect of acts done by them contrary to or in breach of the provisions of such statutes. If a public authority purports to dismiss ain employee otherwise than in accordance with mandatory procedural requirements or on grounds other

~!II! those sanctiond by the statte the courts would have ill!1sd1ction to declare its act a nullity. Thus, where a Hospital Services' Board dismissed a clerk for reasons not authorised by the relevant ccmditions of service a declaration was granted to the applicant by the House of Lords. (Mc. Clelland v. Northern [re-

/and General Health Services Boards)('). Even where the statutory power of dismissal is not made subject to express procedural requirements or limited to prescribed grounds courts have granted a declaration that it was invalidly exercised if the autho-

0 l [1957] I W.L.R. 594.

"780

SUPREME COURT :REPORTS

[1969] 3 S.C.IL

rity has failed to observe rules of natural justice or has acted A capriciously or in bad faith or for impliedly unauthorised purposes. (see Ridge v. Baldwin(') and Short v. Poole Corpora- 1ion)(2). Declarations of invalidity have often been founded on successful assertions that a public duty has not been complied with. (see Attorney-General v. St. Ives R.D.C.) (3). It is, therefore, fairly clear that such a declaration can be issued against a B person or an authority or a corporation where the impugned act is in violation of or contrary to a statute under which it is set up or governed or a public duty or responsibility imposed on such person, authority or body by such a statute.

The High Court, however, relied on two decisions of this Court as justifyiing it to issue the said declaration. The two decisions are Bidi, Bidi Leaves' and Tobacco Merchants Ass0ciation v. The State of Bomba, v(') and A. B. Abdulkadir v.

The State of Kera/a ( "). But neither of these two decisions is a parallel case which could be relied on. In the first case, the declaration was granted not against a company, as i~ the present case, but against the State Govel1lUilent and the declaration was as regards the invalidity of certain clauses of a notification issued by the Government in pursuance of power under s. 5 of the Minimum Wages Act, 1948 on the ground that the said clauses were beyond the purview of that section. In the second case also, certai.n rules made under the Cochin Tobacco Act of 1081 (M.E.) and the Travancore Tobacco Regulation of 1087 (M.E.) were declared void ab initio. These cases were therefore not

ases where writ petitions were held to be not maintainable as having been filed against a company and despite that fac~ a declaration of invalidity of an impual!].ed agreement having been grantc

ed.

In our view once the writ petition was held to be misconceived on the ground that it could not lie against a company . which was neither a statutory company nor one having public F duties or responsibil, ities imposed on it by a statute, no relief by way of a declaration as to invalidity of an impugned agreement between it and its employees could be granted. The High Court in these circumstances ougl!t to have left the wo-kmen to resort to the remedy available to them under the !industrial Disputes Act by raising an industrial dispute thereunder. The ooly course left open to the High Court was therefore to dismiss it.

No such declaration against a company re!!istered under the Companies Act and not set up under any statute or having any public duities and responsibilities to perform under such a statute could be issued in writ proceedings in respect of an agreement which was il-ntially of a private character between it and its workmen. The

(I) [l%4] A.C. 40.

(2) [1921] Ch. 66 at PP. 90 to 91.

(3) (1961] I Q.B. 366.

(4) (1962] Supp. 1 S.C.R. 381. (S) [\962] Supp. 2 S.C.R. 741.

High Court, therefore, was in error in granting the said declaration. ·

The result is that the appeal must allowed and the said declaration set aside. the circumstances of the case we make no order as to costs.

B G.C.

Appeal allowed.

PRAGA TOOLS CORPORATION

C. A. IMANUAL & ORS

February 19, 1969

V. BHARGAVA, JJ.

Art. 226

Art. 226

Andhra Pradesh Government

July 1, 1961

December 10, 1962

s. 2(p)

s. 18(1)

Industrial Disputes Act, 1947

July 1, 1964

December 20, 1963

January 1, 1964

Art. 226

Companies Act

Industrial Disputes Act

CIVIL APPELLATE JURISDICTION

S. V. Gupte

R. Thiagarajan

Janardan Sharma

G Shelat

Fraga Tools Corporation

Indian Companies Act, 1913

Union Government

Government of Andhra Pradesh

Umon Government

Companies Act

Praga Tools Employees Union

Praga Tools Corporation Mazdoor Sabha

December

I 0 1962

ss. 2(p) and 18(1)

Industrial Disputes Act, 1947

Heavy Engineering Corporation, Ranchi

Art. 226

High Court of Andhra Pradesh

December 20. 1963

s. 2(k)

s. 19(2)

s. 12

s. 25

Companies Act

April 5, 1963

s. 18

s. 19(2)

Art. 226

Art. 226

Bruce

Companies Act

rity

s. 5

Minimum Wages Act, 1948

industrial Disputes Act

Companies Act


COMMISSIONER OJ!' INCOME-TAX, ANDHRA PRADESH, A

HYDERABAD • v.

A. DHARMA REDDY, MORTHAD

February 19, 1969

(J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.]

Income-tax Act (11 of 1922). s. 24(2)(ii) as amended in 1955- Loss sustained by a partner in a dissolved firm, if can be set ofi against profit earned in anuther firm in the subsequent year.

The assessee carried on two businesses in Didi leaves as partner in

two different firms.

The first firm consisted of two partners, and the C second of four; both these firms were assessed to income tax separately and it was admitted that the two finns had nothing to do with each other.

The first firm sustained losses and was dissolved.

The assessee claimed that the losses sustained by him in the previous year (sustained in the first firm) should be carried forward and set off against his profit in the subsequent year (earned in the second firm) under s. 24 (2) (ii) of the Income-tax Ac~ !922 as the assessee carried on the business in Bidi leaves durin11 that year.

The Income-tax Officer rejected the claim, and D his order was upheld by the Appellate Assistant Commissioner.

But the Appellate Tribunal accepted the claim and the question was answered by the High Court in the assessee'a favour.

The Revenue appealed to this Court and contended that for gettillll the benefit under s. 24(2)(ii) the same concern or partnership which carried on in the previous year would continue to function in the year of assessment.

HELD : The appeal must be dismissed.

In order to &Ct the benefit of a. 24(2) (ii) of the Act especially after the amendment made by the Finance Act 1955 it was not necessary that the assessee should carry on the same business in the year of assessment.

The change in the language of the provision substituted by the Amending Act was significant and all that the assessee had to show was that the business in which Joss was originally sustained continued to be carried on by him in the assessment year.

If the first partnership wa• dissolved it did not mean that his business i• Bidi leaves came to an end so long •• he continued to dp that business either individually or in partnership with -others.

During the assessment year in question he was carryina on that business in partnership with three others. According to the provisions of s. 24(2) as they stood before the amendment made by the Finance Act of 1955 he continued to carry on the same business but for the purpose of the present case s.

G 24(2) (ii) as it stood after the amendment was relevant and on the plain language Of the aforesaid provision the _business in which the loss was originally sustained was continued during the assessment year. The word "business" bas been defined in s. 2( 4) of the Act as including any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture.

These words are of wide import the underlying idea being of continuous exercise of an activity.

In the present case, the business did not depend on the constitution of a partnership }l firm through which it was carried on nor could it come to an end so long

as the a, sseuec carried on the aame ryatematic or or1,.'l.niled coune of activity with a set purpose. [786 G--787 CJ

When the profits of a registered firm are ascertained, the as.., ssee for the purpose of paying tax is not the registered firm but each partner .of that firm.

The Identity of the business for the purpose of s. 24(2) (u) does not change by reason of the change in persons who carry on that business since it continues to be carried on by the same individual.

A set off for loss which had been carried forward from the earlier years under the provisions of s. 24 would only be available to the individual partner who had suffered the loss and not to the other partners of the firm or the firm. (787 FJ

Narain Swadeshi Weaving Mills v. Comn1issioner of Excess Profits Tax, (1954] 26 I.T.R. 765, 773, Dwarkadas Lee/adhar v.

Commissioner of Jncome .. tax,' Kerala, 47 l.T.R. 619, S. Narain Singh v. Cpmmissioner of

Income-tax, Delhi, 66 I.T.R. 341 and Sitaram Motirani JGin v. Commissioner of Income-tax, 43 I.T.R. 405, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1057 of 1966.

Appeal from the judgment and order dated April 17, 1964 of the Andhra Pradesh High Court in Case Referred No. 48 of 1962.

S. Mitra, R. N. Sachthey and B. D. Sharma, for the appellant.

S. T. Desai and K. Jayaram, for the respondent.

The Judgment of the Court was delivered by

Grover, J. This is an appeal by certificate from a judgment of the High Court of Andhra Pradesh answering the following question referred to it by the Tribunal. arising out of the assessment of the assessee for the assessment year 1956-57 in the affir

mative and in his favour :

"Whether the assessee is entitled under the provisions of Section 24 ( 2) of the Act to set off his share of unabsorbed loss amounting to Rs. 24,532 from the dissolved firm to M/s. A. Dharma Reddy, Morthad brought forward from the assessment year 1955-56 against his other business income for the assessment year 1956-57."

The assessee is an individual whose only sources of income were his. shares !n sever~ partnership concerns.

Apart from the firms which earned on other businesses there were two firms which carried on the business in Bidi leaves.

The first was styled as M/s. A. Dharma Reddy, Mortbad. The secqod firm was called A: Dharma Reddy & Co., Ditchpally.

The first partnership wa> dissolved on March 31, 1955 bUt the second one continued during the assessment year 1956-57. During the assessment year 1955-56 the assessee sustained a loss of Rs. 30,255 in the first firm.

As he was carrying on .several other businesses. after the necessary set off the total loss sustained by him for that year came to Rs. 24,532.

During the assessment year 1956-57 the

assessee's profit in the second firm was estimated at. Rs. 11,853 and his total taxable income was assessed at Rs. 28,758 for that assessment year.

As the assessee carried on the business in Bidi leaves during that year he claimed that the loss sustained by him in the previous year viz;., assessment year 1955-56 should be carried forward add set off agamst his prolit in the subsequent year 1956-57 under s. 24(2) (ii) of the income tax Act 1922,, hereinafter called the "Act". 1'.he Income tax Officer rejected the claim.

His view was that the set off could be allowed only if the business, profession or vocation ill which loss was originally sustained continued to be carried on by the assesssee during the refovant assessment year.

According to him the business in which the loss of Rs. 30,255 had been incurred had ceased to exi>t because of the dissolution of that firm on March 31, 1955. The Appellate Assistant Commissioner in appeal considered the constitution of the two Jirms.

The lirst consisted of two partners in which originally the loss had occurred and which had ceased to exist in the relevant assessment year. 'l'he second firm against whose income the loss was sought to be set off consisted oi four partners.

Both the firms had tiled separate retur, ns and were assessed separately for the assessment year 1955-56. The assessee had admitted in a latter dated September 16, 1960 that

the two firms had nothing to do with each other and there was no material to show that the business of the dissolved firm was taken over by the other firm.

The Appellate Assistant Commissioner, therefore, came to the conclusion that the business in which the . E loss was originally sustained could not be said to have continued during the assessment year 1956-57. The assessee took the matter to the Income tax Appellate Tribunal which upheld the contention of the asscssee that the same business of Bidi leaves continued during the assessment year.

According to the Tribunal the assessee was carrying on two businesses in Bidi leaves as partner in two different firms.

One of these firms was dissolved but he continued to carry on the same business in conjunction with his co-partners in the year unclr appeal.

The High Court disposed of the matter in a fairly simple way.

It was observed : "When a firm carries on business. it is a business

carried on by the partners of that firm and the indivi- <.; dual partners of that firm are assessed to tax.

When the profits of a register¢ firm are ascertained, the

asi; essee, for the purpose of paying the tax, is not the registered firm, but each partner of the registered firm.

In the present case, it was in the business in the beedi leaves that the assessee sustained a loss for the assess- H ment year 1955-56. He carried on the same business in beedi leaves during the accounting year 1955-56 i.e., the assessment year 1956-57 thou&h in partnership

C.J.T. v. DHARMA RIDDY (Grovtr, l.)

with others. Entering into partnership with another in one case and three others in the other case, was only the mode of carrying business; but the business is the same business viz., trade in beedi leaves. Section 24(2) (ii) does not require that the business should be continued to be carried on for the assessment year in question by the same concern or partnership or firm as m the previous year when the loss was originally sustained by the assessee. The only condition prescribed by that clause is that the same business must be continued to be carried on by "him" (the assessee)".

In order to dispose of the contentions of the learned counsel for the Income tax Commissioner who is the appellant before us it is necessary to set out the relevant statutory provisions.

Before the amendment made by the Finance Act of 1955 s. 24(2) was

as follows :-

"(2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year and set off against the profits and gains, if any, of the assessee from the same business, profession 6r vocation of that year ........ "

Sub-section (2) of s. 24 was substituted by s. 16 of the aforesaid Finance Act.

The material portion was in the following terms:-

"{2) .Where any assssee sust11; ins a loss of profits or gams m any year, bemg a prevmus year not earlier

tha~ the previous year for the assessment for the year ending on the 3 lst day of March 1940 in airtv business profession or vocation. and the loss cnnot be wholly set off under sub-s. (1), so much of the loss asc is not set off or the whole loss where the assessee had iOO other

ead of income shall be carried forward to the followmg year, and

(i) .........•....................

t•o••o••ttO••••••••••?·~'!'"'~'

78 6

(ii)

where the loss was sustained by him in any other business. profession or vocation. it shall be set off against the profits and gains, if any, oi any business, profession or vocation carried on by him n that year; provided that the business, profession or vocation in which the Joss was originally sustained continued to be carried on by him in that year."

The arguments of the learned counsel for the appellant are based mainly on the fact that the partners of the two firms were different although the assessee was a partner of both the firms.

It is contended that sjnce the first film was dissolved on March 31, 1955 it could not be said that the business in which the loss was sustained continued to be carried on by the assessee durin~ the assessment year 1956-57 within the meaning of s.24(2)(ii) of the Act.

For getting the benefit under that section it was essential that the business in which the Joss was sustained should be continued to be carried on for the assessment vear ; n question.

This means that the same concern or partrshio which carried on the business in the previous vea" should continue to function in the year of assessment.

There is no warrant for the proposition put forward on behal.f of the appellant that in order to get the benefit of s. 24(2) (ii) of . the Act especially after the amendment made by the Finance Act 1955 the assessee should carry on the same business partnership in the year of assessment.

The change in the lanl(Uage of the provision substituted by the Amending Act is significant and all that the assessee has to show is that the business in which Joss was originally sustained continued to be carried on by him in the assessment year.

Now, in the pcesent case. the assessee carried on the business in bidi leaves apart from other businesses.

This business he was doing in partnership with a, nother person.

Nevertheless the business was of takin~ contracts in respect of or dealing in bidi leaves.

This business he could do either individually or in partnership with some one else.

If the first partnership was dissolved it did not mean that his business in bidi leaves came to an end so knl! "'' he continued to do that business either individually or in partnership with others.

During the assessment year in question he was admittedly carryin!! on that business in partner5hip with th•ee others.

It could well be said that even according to the provisions of s. 24(2) as they stood before the amendment made bv the Finance Act of 1955 he continued to carrv on the same business but for the purpose of the present case it is s. 24(2)(ii) as it stood after the amendment which is releva1nt and we foil to sre on the plain language of the aforesaid provision how it could be held that the

]'msine; s in which the loss was originally sustained was not con-

G -

·~ , B

E ,,

• r '

tinued during the assessment year 1956-57. The word "business" has been defined in s. 2 ( 4) of the Act as including any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture.

These words are ot wide import the underlying idea being of continuous exercise of an activity. As pointed out by S. R. Das, J. (as he then was) in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits

Tax(''), the word '".business" connotes, some real substantial and systematic or organised course of activity or conduct with a set purpose. The systematic or organised course of activity of the assessee, in the present case, consisted of dealings or taldng of contract in bidi leaves.

That business did not depend on the constitution of a part, nership firm through which it was carried on nor could k come to an end so long as the assessee carried on the sa.'Tie systematic or organised course of activity with a set purpose.

The computation o, f a partner's share in the firm's profits js

delt with by s . .16 ( 1 )(b). The proviso thereto lays down that if his share was computed as a loss such loss may be set off or carried forward and set off in accordance with the provisi0t11 of s. 24.

Under s. 23 (5) when the assessee is a registered firm and the total income of the firm has been assessed under sub-ss. ( 1),

(3) or ( 4) as the case may be, the total income of each partner of the firm including therein his share of its income, profits and gains of the previous year shal! be 'assessed and the sum payable by him on the basis of such assessment shall be determined. There is a proviso which says that if such share of any partner is a loss it shall be set off against his other income or carried forviard and set off in accordance with the. provisions of s. 24.

The High Coun was right in saying that when the profits of .a registered firm are ascertained the assessee for the purpose of paying the tax is .not the registered firm but each partner of that firm.

In a number of decided cases it has been held that the identity of the business for the purpose of s. 24(2)(ii) does not change by reason of the change in persons who carry on that ~>usiness since it continues to be carried on by the same individual. The Kerala

Hih Coun ii!l Dwarkadar Leeladhar v. Commissioner of Income tax. Kera/a('), held that where a registered firm which was working at a loss was dissolved and one of the partners continued the same business as a sole proprietor he was entitled to set off his share cf the loss incurred by the firm against the profits accruine;· tfJ him from the busines• as a sole proprietor. The Delhi High Court in S. Narain Sinf!h v. Commis, ioner of Income tax.

Delhi(') had to deal with a case where an assessee had taken certain liquor contract• and carried on the business of sale of liquor in his' individual name and sustained losses.

Subsequently

Ill f1954) 26 LT.R. 765 •. 773.

0) 47 l.T.R. 619, ()) 66 l.T.R. 341,

788 SUPRllMll COURT R.EPORTS

[1969] 3 S.C.R.

he. carried on the same business with 10 other persons and sought to set off the previous losses against the profits made in the accounting year.

Referring to the meaning the construction of the words "same business" as they stood in s. 24(2) before the amendment made by the Finance Act of 1955, it was held that the assessee was entitled to carry forward the loss~ for the previous year and have them set off against the share of his income of the registered firm during the assessment year became the business in which the loss was sustained was the same business.

In both the above cases reference was made to the decision of the Gujarat High Court in Sitaram Motiram Jain v. Commissioner of Income-tax(').

In that case an assessee had incurred losses in a business carried on, by him as the sole proprietor and a registered firm of which he was a partner took over that business as a run11-ing. concern. . The question was whether he could have the losses incurred by him in the business which he carried on as the sole proprietor carried forward and set off against his share of the profits of the registered firm.

After referring to s. 24(2) (ii) and s. 23 ( 5) it was observed. what has to be <letermined in the case of a registered firm is the total income of each partner in tlie firm as the individual partners are assessed to tax and i!IOt the firm as such. A set off for loss which had been carried forward from the earlier years under the provisions of s. 24 would only be available to the individual partner who had suffered the loss and not to the other partners of the firm or the firm.

In our judgment there could be no manner of doubt that the business in which the Joss had been sustained by the assessee when he was a partner of $e first firm which was dissolved on March 31, 1955 continued to be carried on by him in partnership with three other persons during the assessment year 1956-57, the business, as stated before. being of dealing in or entering into contracts in respect of bidi leaves.

The mode in which he carried on the business in bidi leaves was one of taking other persons as partners.

He did not stop doig that business in the assessment year in question.

The view taken by the High Court. in the nresent case, is un exceptionable and must be upheld.

The appeal fails and it is dismissed with costs.

Y.P.

Appeal dismissed.

-m43 l, T,)l. 405,

COMMISSIONER OJ!' INCOME-TAX, ANDHRA PRADESH, HYDERABAD

A. DHARMA REDDY, MORTHAD

February 19, 1969

C. SHAH

V. RAMASWAMI

A. N. GROVER, JJ.

Income-tax Act

s. 24(2)(ii)

s. 24

s. 24(2)(ii)

Joss

s. 24(2)

s. 2( 4)

s. 24(2)

s. 24

S. Mitra

R. N. Sachthey

B. D. Sharma

S. T. Desai

K. Jayaram

Grover

Section 24

A. Dharma Reddy

A: Dharma Reddy & Co.

Ditchpally

March 31, 1955

s. 24(2)

September 16, 1960

Assistant Commissioner

Section 24(2)

s. 24(2)

s. 24

s. 16

s. 24(2)

s. 24(2)

s. 24(2)(ii)

s. 2

S. R. Das

s. 24

s. 23

s. 24

s. 24(2)(ii)

Delhi High Court

s. 24(2)

Gujarat High Court

s. 24(2)

s. 23

s. 24


RANI BAI v.

SURI YADUNANDAN RAM & ANR.

February 19, 1969

[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.)

Hindu Women's Right to Property A.ct, 1937, s. 3(2)-Righ( of predeceastd son's widow to hold father-in-law's property for maintenanct- Scope of.

J owned certain inherited properties and his son predeoeased him leaving the appellant his widow as hi• heir and legal representative. After the son's death, J married B in 1948. J himself died in 1950 and after his death the first respondent claimed the properties by virtue of a gift deed.

On this basis he obtained posse<sion of the properties from the appellant under s. 145 Cr.P.C. in December 1962.

The appellant, together with J's widow B instituted a suit for declaration in respect of her rights and for pos•ession of the properties. Duririg the pendency of the suit B entered into a compromise with the first respondent giving up all her claims. The Trial Court found that the appellant was in possession until dispDSsessed by the first respondent un.der s. 145 Cr.P.C. and that the respondent had illegally occupied the properties. However, the Court non-suited the appellant on the Jiround that since her husband had died in the life-time of I. the latter's assets devolved on his widow B who would be his only heir. Although the District Judge allowed the first appeal and remanded the case, a further appeal by the first respondent was allowed by the High Court on the view that the appellant could have no interest in the properties left by J and she could not take advantage of the provisions of s. 3(2) of the Hindu Women's Right to Properties Act, 1937 which confe'rred certain rights on the widow of a predeceased son. It further held that the rightful claimant of the properties of J was. B alone and owing to the comproffiise entered into by her, the first respondent was

"clothed with the same rights which were possessed by her".

On appeal to this Court,

HELD : Allowin~ the appeal : The High Court's decision must be reversed and that of the District Judge restored.

It could not be disputed that the appellant who was the widow of the

pe-deceased son of J was entitled to receive maintenance, so long_ as she did. not re-mrry. out of the estate of her father-in-law.

Althouh her claim for maintenance was not a charge uoon the estate until it had been fixed and specifically charged thereupon. her right was not liable to be defeated except by tiansfer to a borra fide purchaser for value without notice of a claim or even with notice of the claim unless the transfer was made with the intention of defeatin~ her right. (793 BJ

The ppellant as presumably in possession of the properties in lieu of her nght of maintenance and could not be deprived of them even by B without first securin11 proper maintenance for her out of the properties.

Rachawa & othm v. Shlvayogappa, I.L.R. 18 Bom. 679 and Y•llawa cl Ors. v. Bhimangavda, I.L.R. 18 Born. 452; referred to.

SUPREME COURT REPORTS [1969] 3 s.c.R.

The Hi2h Court was in error in holdinii that the first respondent WB$ "clothed with the very same rights which were possessed" by B. If the Trial Court's finding that the first respondent was a mere trespasser was right, it was not possible to see how B could effect the transfer of all her rights by merely filing a petition to the effect that she did not wish to prosecute a suit as a plaintiff. [794 E-G]

Ismail Arif] v. Mohomed Ghous., 20 I.A. 99, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 532 of 1966. (In forma pauperis).

Appeal by special leave from the judgment and order dated September 17, 1962 of the Madhya Pradesh High Court in Misc.

Appeal No. 22 of 1962.

M. V. Goswami, for the appellant.

S. C. Agarwala and D. P. Singh, for respondent No. I.

The Judgment of the Court was delivered by Grover, J.

Titis is an appeal in former pauperis by special leave from a judgment of the Madhya Pradesh High Court at J abalpur dismissing the suit of the appellant for a declaration that she was the owner of the suit properties and for possession thereof.

Jangi Jogi had inherited from his father properties consisting of some groves and a house in village MuklJ?Cfpur which was in the erstwhile State of Rewa which later became a oart of the State now called Madhya Pradesh.

He had a son Laldas who is stated to have died in 1945 leavin~ the appe!Jant, hi< widow, as his heir and legal representative.

After the death of Laldas Jangi Jogi is alleged to have married Mst. Jugli Bai in the year 1948.

Jangi Jogi himself died sometime in 1950.

Respondent No. 1 is state!l to have raised a claim to the properties of Jangi Jogi by virtue of a gift deed.

On the basis of that deed he moved the criminal courts under s. 145, Criminal Procedure Code and on December 29, 1962 an order was made directin, g the possession of the properties to be delivered to the said respondent.

The appellant, therefore. instituted a suit in the coun of Civil Judge at Rewa for a declaration in respect of her ri)!hts and for possession of the properties mentioned in the pfaint.

The suit was instituted by the appellant along with Jugli Bai the widow of Jangi Jogi.

Respondent No. 1 who was the sole defendant in the suit put up several oleas claiming, inter alia. that he had been in continuous oossession of the suit properties for more than twelve years and had become the ow, nl:r.

Alternativelv it was pleaded if any one could have any interest it would be plaintiff No. 2 Jug-Ii Bai but she had as a matter of fact not joined in the suit and her thumb impression on the plaint had been obtained by fraud. On the

pleadings of the parties the trial court framed as many as 12 issues.

DUiing the pendency of the suit plaintiff No. 2 Jugli Bai entered into compromise with respondent No. 1 giving up al! her claims.

The trial -.:ourt found that the thumb impression of plaintiff had not been obtained by fraud but that she had changed side~ much to the disadvantage of the appellant. As regards the deed of gift set up by respondf\!lt No. I, it was found that Jangi Jogi had never made such a gift. It was further found that the appellant was in possession until she had been dispossessed by resoOT•- dent No. I by means of the proceedings under s. 145. Cr.P.C.

According to the trial court the said respondent had illegally occupied the lands for some time since the proceedings under s. 145. Cr.P.C., resulted in his favour he was put into possession through the process taken under those proceedings.

So far as the title of respondent No. 1 was concerned it was found that his position was that of a mere tresoasser.

The trial court, however. nonsuited the aooellant on the- rolll'ld that since her husban~ had died in the Wetime of Jangi Jogi the Jater's estate devolved on his widow Jugli Bai who would be his only heir and she had entered into a compromise with resoondent No. 1.

The appellant went up in appeal to the court of District Judge, Rewa.

The learned District Judge examined the point whether the compromise C\lltered into bv one of the plaintiffs Jugli Bai with the defendant was valid and should have been given effect to by the trial court.

According to him it could not be said that the ap])ellant had no right or interest in the properties left bv Jangi Jogi.

He felt that the compromise which had beC\ll entered into by Jugli Bai and the defendant should not have been accepted as the appellant was not a party to that compromise.

He was further of the view that the trial court had not decided all the matters which arose for decision.

He, therefore, set aside the decree of the trial court and remanded the case with directions to re-admit the suit under its original number and dispose it of in accordance with law. Respondent No. I filed a seco.111:1 aooeal before the High Court. The High Court took the view that the nresent apoelhnt coul<:l h?.Ve no interest in the properties left bv Jani Jogi.

Sbe could D"t t"ke advantage of the orovision of s. 312) of the Hinnu Women's Ri!!ht to Prooertv Act 1937 which conferred certain ri<>hts on the widow of ore-deceased son. in view of the dec; sion of Federal Court i'n Umaya/ Achl v. Lt1kshmi Achi(1). The aforesaid Act had been etended to Rewa State by the Part C (State Laws) Act

1950 which came into force on April 16. 1950. It was urged. inter a/ia before the High Court that the aooellant could take a boy in adootion and as soon as such an adoption was made its effect would be that the adoptee would be the son not only of the

(I) {1945) F.C'.R. I,

SUPREMB COURT REPORTS

[1969] 3 S.C.R.

widow but of her deceased husband as well and further that she had a claim for maintenance over the suit lands.

The High Court disposed of this contention by saying

"It is not possible to prejudge the results of an adoption which may, or may not, be made by Smt.

Ranibai at all.

Similarly, this is not a case in which the right of maintenance was sought to be enforced against Smt. Juglibai on the property which was inherited by her from the last male holder, Jangi Jogi.

It may be possible to take u, p these questions in appropriate proceedings."

According to the High Court the compromise which had been entered into between Jugli Bai and respond(lnt No. 1 did not adversely affect the right, title or interest of the appellant as she had no right, title or interest in the suit lands.

It was contended on behalf of the appellant that she was in possession of the properties at the time respoodent No. 1 dispossessed her by committinl( an act of trespass and, therefore, she was entitled to restoration <>f possession of those properties from the trespasser.

The High Court disposed this of by saying that the rightful claimant on the death of Jangi Jogi was Jugli Bai alone and owing to the compromise entered into by her respondent No. 1 was clothed with the same rights which were possessed by her.

It was further held by the High Court that the compromise had bee.n properly and lawfully recorded and given effect to by the trial court under 0. 23, r. 3 of the Civil Procedure Code.

Now Jugli Bai had filed an application under 0. 23, r. 1, Civil Procedure Code, on February 19, 1959 before the trial court saying, inter alia, that her signature or thumb impression o, n the plaint had been obtained by misrepresentatiQn by the appellant.

The application stated that she was not interested in prosecuting the suit and therefore she was withdrawing the same. The following portion from that application may be reproduced :

" ........ plaintiff No. 2 withdraws her plaint aind the statement of claim made therein, and so far as she is concerned she withdraws the suit and prays that no claim be decreed in her :avour nor any relief mentioned in plaint be granted iin her favour.

On the other hand, the plaint may be dismissed to the extent of her claim.

She i~ also filing herewith a compromise to that effect arrived at with the defendant, which may be accepted ...... "

An application was also filed under 0. 2'.I, r. 3 of CiVJ1. Procedure Code, which purported to bear the thumb unpression of Jugli Bai and was signed by respondent No. 1.

All that was

(!) l.L.ll. 18 Bom. 67'.

(3) 20 I.A. 99.

(2) LL.It. 18 Bom. 452.

794 SUP.IU!ME COUllT llPOllTS

(1969] 3 S.C:R

favour of the plaintiff's possession, and that the defendant was not the mutwali nor possessed of any interest in the land, but differed as to the dedication.

It was held that the plaintiff was entitled to a declaration as against the defendant that he was lawfully entitled to possession and the relief consequent thereon.

The following observation of Sir Richard Couch may be reproduced with advantage:

"It appears to their Lordships that there is here a misapprehqmion of the nature of the plaintiff's case upon the facts stated in the judgment.

The possession of the plaintiff was sufficient evidence of title as owner against the defendant.

By s. 9 of the Specific Relief Act (Act 1 of 1877), if the plaintiff had been dispossessed otherwise than in due course of Jaw, he could, by a suit instituted within six months from the date of the dispossession, have recovered possession, notwithstanding any other title that might be set up in such suit. If he could thus recover possession from person who might be able, to prove a Utle, it is certainly right and just that he should be able, against a person who has no title and is a mere wrong-doer, to obtain a declaration of title as owner, and an injunction to restrain the wrongdoer from interfering with his possession."

Keeping the above statement of law in view it must be held that the High Court was in error in cqooidering that since J ugli Bai had entered into some compromise with respondent No. 1 the trial court was justified in dismissing the appellant's suit.

It is somewhat difficult to understand tl1e observation ot the High Court that respondent No. 1 was "clothed witli tlie very same rights which were possessed by Jugli Bai". If the findmgs of the trial court was right that respopdQllt No. 1 was a mere trespasser, it is no~ possible to see ow Jugli. ai could effect a transfer of a!l her nghts by merely filing a petl!Ion to the effect tliat she clid not wish to prosecute the suit as a co-plaintiff.

As has been pointed out the appellant had a possessory title and was entitled to restoration of possession in case it was found that respondemt No. 1 had no right, title or interest whatsoever and was a mere trespasser.

The appellant was further entitled to remain in possession if she could establish that she had entered into possession by virtue of her claim or right to mainte:nklnce until the person laying a claim to the estate of Jangi Jogi made some proper arrangement for the payment of maintenance to her.

These are, however, matters on which no final opinion need be expressed as the District Judge was of the opinion that the trial court had not given a proper decision on all the issues and for that reason the suit !rad been remanded for a fresh decision on all the questions of fact

and law. In the view that we have taken the decision of the High Court has to be reversed and that of the District Judge restored.

The appeal is thus allowed with costs here and in the High Court.

The amount of court fee shall be recovered by the Government from respondent No. 1 in accordance with Order 17, Rule 8 of the Supreme Court Rules. Costs of appellant's Advocate to be taxed against Respondent No. I and made recoverable from him.

R.K.P.S.

Appeal aNowed.

RANI BAI

YADUNANDAN RAM & ANR

February 19, 1969

C. SHAH

V. RAMASWAMI

A. N. GROVER, JJ.

s. 3(2)

s. 145

Cr.P.C

s. 145

Cr.P.C

s. 3(2)

Right to Properties Act, 1937

CIVIL APPELLATE JURISDICTION

Madhya Pradesh High Court

M. V. Goswami

S. C. Agarwala

D. P. Singh

Grover

Madhya Pradesh High Court at J abalpur

Jangi Jogi

Laldas

Laldas Jangi Jogi

Jugli Bai

Jangi Jogi

s. 145

Criminal Procedure Code

December 29, 1962

Rewa

Jug-Ii Bai

Jugli Bai

s. 145

Cr.P.C

s. 145

Cr.P.C

District Judge, Rewa

s. 312

Prooertv Act 1937

April 16. 1950

Ranibai

Juglibai

Civil Procedure Code

February 19, 1959

Richard Couch

s. 9

Specific Relief Act

J ugli Bai

Order 17, Rule 8

Supreme Court