~57

UNION OF INDIA v.

TARACHAND GUPTA & BROS.

January 28, 1971

[J. M. SHELAT AND C. A. VAIDIALINGAM, JJ.]

Civil Courts-Jurisdiction of-Exclusion of jurisdiction-Wiien in i••rred.

Import Tl'ade Control Policy-Jurisdiction of statutory au/Worlty.

Under cl. 3 of the Imports (Control) Order, 19SS, passed under s. 3 of the Imports and Exports (Control) Act, 1947, no person shall import any goods of the description specified. in Sch. l except in accordance with a licence, and if it was found that the goods impolrted did not conform to the description in the licence, then, without prejudice to any action that may be taken against the licensee under the Sea Customs Act, such goods would be treated as having been imported without a valid licence in thai behalf.

Under Entry 294 of s. II of Part IV of Sch. l of the Import Trade Control Pvlicy (July to December 1956), import of motor.cycles

and scooters was permitted under an appropriate licence, but such a licence could not be used for their import in a completety knocked down (C.K.D.) condition except by approved manufacturers. That is, there was no absolute phohibition for their import in C.K.D. condition. The words completely knocked down conditions are not used in any technical sense

and have the dictionary meaning of "made or constructed SQ as to be capable of being knocked down or taken apart as for transp<ittation; in parts ready to be assembled''.

Under Entry 295, except for:Jluhber tyres , md tubes, fdr whose import a separate licence could be obtainOIJ, there are no limitations as to the number or kind of parts or accessorie's of motor cycles and scooters which can be importeil under a license obtained in respect of the goods. There are no remarks against this entry as there are against Entry 294, that the licence would not be Valid for import of sparo..s and accessories which, if assembled, would make motor-cycles and scooters in C.K.D. condition.

The respondents' licence authorised them to import goods coveted by Entry 295, and they imported certain goods which arrived in two different consignments and on two different dates. They did not contain tyres, tube> .ind saddles so thnt it was impossible to say that they constitllted tnOtor <Veles and scooters in C.K.D. condition. The Collector of Customs and the Central Board of Revenue in appeal. however. put the two consignments together and held that trade practiC'e did not require the supply of tyres and tubes and saddles while supplying motor cycles, and that therefore they made up mopeds in C.K.D. condition and were, for that reason, not the articles covered by Enli'y 295 hut articles prohibited under Entry 294.

The gooc15~ were directed to be confiscated with an option to the respondents to pay certain sums in lieu of confisation, aild personal penalties.

The respondent filed a suit in the High Court and the trial Judge dismissed it on the authority of Secretary of Stale v. Mask & Co. [1948] LR. 67 I.A. 222, and that the suit was time barred under art. 14 of the Limita• tion Act. 1908. In appeal. the Divisional Bench followed Anand v. Thakore

& Co .. a decision of that High Court, and allowed the appeal.

In appeal to this Court,

HELD : (1) The mere fact that the goods imported by the respondents were so complete that when put together would make motor-cycles .

and scooters in C.K.D. condition would not amount to a breach of the licence o~ of entry 295.

The restriction not, to import motor-cycles and scooters 1n C.K.D. condition was against all importer holding a licence in respect of the goods covered by entry 294 uder which he could import complete and assembled motor-cycles and scooters, and not against an importer who had a licence to import parts and accessories under entry

295. [5(;5 G-H; 566 E] .

(2) When the Collector examines .goods imported under a licence in respect of goods covered by Entry 295, what he has to ascertain is whether the goods are parts and accessories, and not whether the goods, though parts and accessoHes, are so comprehensive, that if put together .would constitute motor cycles and scooters in C.K.D. condition, because, it would

then mean that there is in the entry a limitation against importation of all parts and accessories of motor-cycles and scooters.

Such an approach, would be acting contrary to and beyond entry 295, and in non-compliance of the entry and woulJ lead to the anomlous result that even if the il!tporter had sold away one consignment or part of it, the Collector i:oUJd still say that had the importer desired it was possible for him to assemble all parts and make motor-cycles and scooters in C.K.D. condition. [566 A-C, H; 567 ABl

(3) This Court in Girdhari Lal Bansidhar v. Union of India, [1964] 7 S.C.R. 62; laid down that the High Court under Art. 226 of the Constitution, could not, on the ground that it was erroneous, interfere with the decision of the authority upon whom jurisdiction wcs conferred to decide the question whether the goods fell under one or other entry, that is, under which of two competing entries the goods fell. This Court also held that the import of parts of a prohibited article was import of the prohibited article, and that the importer cotild not be allowed to do indirectly what he could not do directly, and distinguished the case in Anand v. Thakore & Co. In Anand's case, it was held that. the jurisdiction of the Collector was only to ascertain whether the goods were spare .parts an~ accessories and not to find out whether if put together they would .constitute auto cycles in C.K.D. condition. [567 B-C; 568 B-E]

( 4) In the present case also the question before. the Collector was whether the respondents' licence covered the goods imported by them, that is, whether the goods were parts and accessories. It is not, therefore, one of those cases wllere between two competing entries the statutory authority applied one or the other and where a civil court cannot interfere even if the statutory authority committed an error. [572 C-EJ

(5) Exclusion of jurisdiction of Civil. Courts is. not to be readily inferred.

Such exclusion is inferred when the statute gives finality to the Of*r of the tribunal on which it confers jurisdiction and .provides for adequate remedy to do what the courts woulq normally do, in such a .ro c*iag before it. Even where the st~1!'te gives finality silch 1t prov1s1on dljes not exclude cases where the .prov1s1ons of the paf!iculM' •!a"!te h"; ve nc:lt beta complied with or the tnbunal has not acted m CClllformity with fdlldamental principles of judicial procedure, _and a detel'llliotion ~Y a triblmal of a question other than the one which the statute directs 1t to decide would be a decision not under the provisions of the Act. [571 B-El

Firm //luri Subbayya Ch'et~ & Sons v.

UNION V. TARACHAND (Shelat, 1.) 55&

pensc.tion Commissioner, [1969) l All E.R. 208 and R. v. Fulham, Hammersmith and Kensington Rent Tribunal, [1953) 2 All E.R. 4, referred to.

(6) Thetefore, the decision iii. the present case 'was covered by the exception laid down in Mask & Co.'s case and the provision excluding the jurisdiction of the civil court would not be applicable. Since non-compliance with the provisions of the Act would be acting in excess of jurisdiction the Collector's order was a nullity and Art. 14 of the Limitation Act,

1908, could not be applied. Even if it was applicable, the suit would not be barred if the date of the appellate order of .the customs authorities wu taken into consideration. [572 EFl '

CIVIL APPELLATE JURISDICTION: Civil Appeal No., 344 of 1967.

C Appeal from the judgment and order dated July 8, 1966 of the Bombay High'Court in Appeal No. 17 of 1964.

, V. A. Seyid Muhammad and S. P. Nayar, f0r the appellant.

S. 1. Sorabjee, 1. R. Gagrat and B. R. Agarwala, for the: respondents.

The Judgment of the Court was delivered by-

Shelat, J.

This appeal, by certificate, arises from the respondent's suit in respect of fines and penalties recovered from them by the Collector of Customs, Bombay for the alleged cootravention of s. 3 of the Imports and Exports (Control) Act, 1947 and s. 167(8) of the Sea Customs Act, 1878.

The responden~ held an import licence dated July 10, 1956 permitting them to import parts and accessories of motor cycles and scooters as per appendix XXVI of the Import Policy Book for July-December 1956. Under the said licence, the respondents imported certain goods which arrived in two consignments, each containing 17 cases, by two different ships.

According to the respondents, the goods so iioported by them were motor cyck parts which their licence authorised them to import. The customs authorities, on the contrary. held, on the examination of the goods, that they constituted 51 sets of "Rixe Mopeds cdmplete in a knocked down condition". The Deputy Collector of .Customs. thereupon held an enquiry in pursuance of two show cause notices issued by him. ·

The result of the enquiry was an order under which the Deputy Collec\or directed confiscation of the said goods with 'an option to the respondents to pay certain sums ion lieu of confiscation and also personal penalties.

That order was passed on the basis Uiat the goods imported were not parts and accessories 9f motor cycles and scooters permissible under entry 295 of the SChedule to the

560 SUP.lU!MB COUIT llEPOkTS

Jmpon Control Order but were motor cycles/scooters in completely knocked down condition, prolubited u.nder remark II against entry 294, a licence in respect of goods covered by it would author.ise import of motor cycles and scooters. The order of the Deputy Collector dated November 19, 1957 reads as under :

"On examination of the goods and scrutiny of the documents relating to the Bills of Entry stated above, it was ascertained that M/s. Tarachand Gupta & Bros. had imported 51 sets of "Rixe" Mopeds complete (except

tyics, tubes and saddles) in a knocked down condition.

The total number of consignments covered by the afore said two Bills of Entry were. sufficient to give exactly S 1 sets complete Rixe 'Mopeds' (except for tyres, tubes and sadales which would in anY. case have required a separate licence). The packing was also such as to show that those were nothing but "Mopeds" in adis-assembled

condition, since each of th!) cases contains components relating to three mopeds.

Moreover, it was found that major components such as the frames, completely fitted with electrical wires and control cables and grips had been imported in equal numbers.-All these went to show that the goods were not imported as spare parts but as complete vehicles in a knocked down condition.

The goods were therefore, considered to be correctly classifiable under item 75(2) of the J.C.T. corresponding to S. No. 294, N of the I.T.O. Schedule.

The licence under which clearance was sought, could ; not, therefore, be acc!lpted."

The Deputy Collector rejected the respondents' contention that the two consignments which arrived in two different ships at different dates should be viewed separately, that the machines were

incomplete as they were without tyres, tubes and saddles and therefore they could not be said to constitute motor cycles in knocked down condition. He held, on the other hand, that though the goqds were n()t in completely knocked down condition it made no difference as the tyres, tubes and saddles were easily .obtainable in India and their absence did not prevent the machines being otherwise complete. He also found that there was a trade practice ooder which traders were supplying motor cycles without fyres, tubes and saddles unless the purchaser specially asked for these parts.

According to him, the goods could not be regarded as spare parts but were 'Mopeds in dis-assembled condi- 1ion''.

In the suit filed by the respondents in the Higli. Court against the said-order, the Trial Judge held, on the authority of the

d ....

Secretary of State v. Mask & Co.(1) that an order of a statutory tribunal, such as the Col!ector of Customs under the Sea Customs Act, which the statute makes final, subject, of course, to an appeal provided ooder it, can be set aside in a suit before a civil court on two grounds only, namely, where the provisions of the Act have not been complied with, or where the tribunal has failed to act in conformity with the fundamental rules of judicial procedure. He rejected the respondents' contention that the case fell within the first ground and held that however erroneous the- Collector's decision might .be since it was within his jurisdiction to decide whether the goods fell under one entry or the other,, a civil court had no jurisdiction to grant relief.

He also held that the order could not be said to be without or in excess of jurisdiction and was, therefore, not a nullity. 'fhe order consequently required to be set aside if the respondents were to have any relief, and therefore, Art. 14 of the Limitation Act, 1908 applied. On that basis he held the respondents' suit to be time barred and dismissed it.

We may, at this stage, mention that in a similar matter involving import of spare parts and accessories under a licence relating to entry 295, the Collector's order, on the basis that the goods fell under entry 294, as the spare parts in question could. if all the different indents were take.n. together, constituted auto cycles in completely knocked down condition, was held to be bad as "the Collector's approach to the matter was wholly wrong" by a Division Bench of the same High Court in D. P. Anand v. Mis.

T. M. Thakore & Co.(2 ) According to that judgment, the jurisdiction of the Collector was to ascertain whether the goods, such

as they were, were properly imported under the licence relating to goods under entry 295, i.e., whether they were spare parts and

access0ries, and not to go further and find out whether they would.

F when put together, constitute. auto cycles in completely knocked down condition as envisaged by entry 295, and therefore the order was amenable to interference by the High Court. The 'Trial Judge held, on the authority of this judent that on merits the

Colector ?f Customs was in error in holding the respondents guiltv of nnportmg goods not covered by the licence held bv them and that the Collector would have been bound by that judgment had it been delivered before he passed the impugned order. He, how- G

ever, was of the view that whereas the High Court in D. P. Anand's

case(') interfered witlr the order in its writ jurisdiction. a suit could not lie as the imPUITTted order was within the jurisdiction of the Collector and th~ mere fact that he aoplied a wronl! entry did not invest the civil court with the jurisdiction to entertain a suit and set aside such an order.

11) (1940) ~7 T.A. 222

12) Civil AnP<".al No. 4 nf 10~9. rlecid•d o" AU!l'JSt 17. 10"'1. 'H. C.)

The Letters Patent Bench of the High Court, following the A. judgment in Anand's case,( 1) agreed with the Trial Judge that on merits the Collector was in, error. Following that judgment, the Bench also held that the Collector's jurisdiction was limited to ascertain whether or not the goOds imported by the respondents were spare parts and acressories covered by entry 295 in respect of which tl:iey undoubtedly , held the licence, and therefore, he CQU!d not have lumped together the two coasignments which, though imported under one Iicl'nce; arrived separately and were received on different dates and could not have come to the conclusion that tho plaintiffs (i.e. the respondents herein) had imported 51 "Rixe" mopeds in a completely knocked owt11 condition. The Bench also held that upon the principle laid., down in A11and's case(1) it was not for the Collector to ascertain whether the goods, if assembled together, would constitute 51 "Rixe" Mopeds in C.K.D. condition. The respondents were entitled to import the said goods, and therefore, s. 167 ( 8) of the Sea Customs Act did not apply and the respondents consequently could not have been held guilty of. breach either of that section or s. 3 of. the Imports and Exports (Control) Act.

The Bench also held that the decision of this Court in Girdhari/al Bansidhar v. Union of India( 2 ) .• did not over-

rule but only distinguished the judgment in Anand's case, (1) and therefore, the binding force of that decision remained unshaken.

Rarding thejurisdiction of civil courts, the Division Bench held that where the question is simply whether one or 'the other entry applies and the tribunal, to which jurisdiction is entrusted in that 'E behalf. decides it erro.neously, even then its order, made final by the statute conferring such jurisdiction, cannot be made the subject maiter _of a suit.

On the other hand, where its jwisdiction is confined' to see whether the importation is under a µarticular entry or not, but while deciding such a question. the tribunal takes into account extraneous considerations. such as an entry which h_as no bearing upon the question, . the case would fall outside the ambit of the powers of the statutory authority.

The question. in other words, would then be, whether thei tribun'al

has exceeded its jurisdiction and therefore acted jn non-compliance with the provision ot the statute under whlch it has to decide the question. The Division Bench deprecated the attempt on the part Gof the Collector in considering 'th~ two consignments together and making out a case that the two, when put together, would make it possible to regard the goods as ''Pjxe" Moreds in C.K.D. condition.

Such an attempt, the Bench-observed, was "a new classification conjured up by the authorities to rope in .the imports as being illegal which. according to the terms of the licence and entry No. 295 would be clearly legal". Lastly. the Division Bench disagreed with the Trial Judge who had held" that the article

. (I) C.A. No. 4 of 1959 decided on Aus.._ 17, 1'160 (H.C.) (2) (1964] 7 S.C.R. 62.

A in the Limitation Act applicable was At. 14 on the ground that once it was accepted that the order was in excess of jurisdiction it was a nullity, and. therefore, there was no question of its-having to be set aside. Following A. Venkata Subba Rao v. Andhra Pradesh, (1) it held that the suit fell under Art. 62, and therefore, was within time.

Counsel for the Union of India challenged the correctness of. the judgment of the Division Bench and urged that the Sea Customs Act had clearly vested in the Collector the authority to decide whether the goods in question fell within entry 295 or not and for which the respondents had been granted the licence. His decision, subject, of-course, to an appeal and revision provided under the Act, being final, could not be challenged in a suit save under the well recognized exceptions that his decision was not in compliance with the provisions of the Act, or that he had failed to follow the fundamental principles of judicial procedure. The present case, according to him, was one of importing ''Rixe"

Mopeds in C.K.D. condition, not permissible either under entry D 295 or entrr, 294, and therefore, was a case where the importer, misusing his licence, had attempted to do indirectly what he oould

not do directly. There was, according 'to him, no question of the Collector acting in excess of his jurisdiction or.in non-compliance with the provisions of the Act, and therefore, the Trial Judge was

right in holding that no suit lay against his action.

Before we proceed to consider these conteaitions it is expedient first to look at the provisions of the relevant law. Under s. 3 of the Im ports arid Exports (Control) Act, 194 7, the Central Government by an order can provide for prohibiting, restricting or otherwise controlling inter alia the import of goods of aily specified description and all goods to which any such order applies are deemed to be goods of w.hich the import has b, een prohibited by the Sea Customs Act, 1878 and all the provisions of that Act are to have effect accordingly. The Imports (Control) Order 195 5, passed under the power reserved under , the Act, by cl. ( 3) thereof, provides that no person shall import any goods of the description specified in Sch. I thereto except ooder and in accordance with a licence granted by the Central Government or. by an officer specified in Sch. II. Sub-cl. [2) of cl. (3) provides that if it is found that the goods imported iinder a licence do not conform to the description given in such a licence under which they are claimed to have been imported, then without prejudice toany action that may be taken against the licensee under the Sea Customs Act in respect of such importation, the licence may be treated as havii been utilised for importing the said goods.

(I) [1965] 2

.R. 577. ·.

Entties 294 aind 295 of s. II of Part IV of S9h. I of the Import Trade Control Policy for the period July-December 1956 are in this connection the relevant entries.

Entry 294 deals with import of motor-cycles and scooters.

Remark (ii) in its column No. 6 lays down that "Licences granted under this item will not be valid for the import of .motor cycles/ scooters in a completely knocked down condition".

Remark (iii), however, provides that applications from approved manufacturers for import of motor cycles!

cooters in C.K.1). condition will be considered ad hoc by the

Chief Controller, Imports in consultation with Development Wing.

Entry 295 deals with "Articles (other than rubber tyres and tubes) adapted for use as parts and accessories of motor eye Jes and motor scooters, except such articles as are adapted for use as -parts and accessories of motor cars".

Entry 41 in Part V deals with import of rubber tyres and tubes and other manufactures of rubber not otherwise SJY'--Cified.

Section 167 ( 8) of the Sea Customs Act provides that goods shall liable to confiscaition if the goods, the importation of which is for the time being prohibited or restricted by or under Ch. IV, are imported contrary to such prohibition or restriction and any person concerned in any such importation shall be liable to penalty prescribed 1therein.

Section 188 of the Act makes an order, passed in appeal against the Collector's order, final subject only to the power of revision under s. 191.

The position then is, under entry 294 above-cited import under the requisite licence of motor cycles and scooters was permitted.

However, a licence permitting import of motor cycles and scooters could not be used for import of motor cycles and scooters in C.K.D. condition.

Even then, the prohibition was .not absolute because approved manufacturers could apply and get licences to import motor cycles aind scooters in C.K.D. condition, albeit on an ad hoc basis. It is thus clear that entry 294 deals with the import of motor cycles and scooters and the import, though only by approved manufacturers, of motor cycles and scooters in C.K.D. condition.

The entry is complete in itself so far as import of motor cycles a.n& scooters complete and assembled and also in C.K.D. condition is concerned. The words "completely knocked down condition" in the entry are not used in any technical sense, and therefore, must be given tl!eir ordinary dictionary meaning, i.e., "made or constructed so as to be capable of beiqg knocked down or taken apart. as for transporta" tion; in parts ready to be assembled". (see Webster's New International Dictionary, Vol. II. p. 1371 and also Word.I' and Phrases.

Permanent Edition, Vol. 23, p. '60).

Under entry 295, except for rubber tyres and tubes for whose import a separate licence could be obtained under entry 41 of

H ..

Part V, there are no limitations as to the number or kind of parts or accessories which can be imported under a licence obtained in respect of the goods covered thereunder. Prima facie, an importer could import all the parts and acc11swries of motor cycles and scooters and it would not be a ground to say that he has committed breach of entry 2 9 5 or the licence in respect of the goods described therein, that the parts and accessories imported, if assembled, would make motor cycles and scooters in C.K.D. condition.

There are no remarks against entry 295, as there are against entry 294, that a licence in respect of goods covered by entry 295 would not be valid for import of spares and accessories which, if assembled, would make motor cycles and scooters in C.K.D. condition.

Apart from that, the goods in question did not admittedly contain tyres, tubes and saddles, so that it was impossible to say that they constituted motor cycles and scooters in C.K.D. condition.

The first two could not be imported and were in fact not imported because that could not be done under the licence in respect of goods covered by entry 2 9 5 which expressly prohibited their import and a separate licence under entry 41 of Part V would be necessary.

The third, namely, saddles were not' amongst the goods imported.

No doubt, there was, firstly, a . finding by the Collector that a trade practice prevailed under which motor cycles and scooters without tyres, tubes and saddles could be sold.

Secondly, the tyres and tubes could be had in the market here and so also saddles, so that if an importer desired, he could have sold these goods as motor cycles and scooters in C.K.D. condition.

The argument was that since there was a restriction in entry 294 against imports of motor cycles and scooters in C.KD. condition, the importer could not be allowed to do indirectly what he could not do directly.

The argument apparently looks attractive.

But the question is what have the respondents done indirectly what they could not have done directly. In the absence of any restrictions in entry 2 9 5, namely, that a licence in respect of goods covered by entry 295 would not be valid for import of parts and accessories which, y; hen taken toge!er, would make them motor .cycles and scooters m C.K.D. cond1t1on, the respondents could rmport uncle1 their licence all kinds and types of parts and accessories. Therefore, ' the mere fact, that the goods imported by them were so complete

that when put together would make them motor cycles and scooters in C.K.D. condition, would not amount to a breach of the licence or of entry 295.

Were that to be so, the position would be anomalous as aptly described by the High Court.

Suppose that an importer were to import equal number of various parts from different countries under different indents and at different times . and the goods were to reach here in different consigliments and on different dates instead of two consignments from the same

566 SUl'REME COURT REPORTS

country as in the present case. If the contention urged before us were to be correct, the Collector can treat them ogether and say that they would constitute motor cycles and scooters in C.K.D. condition. Such an approach would mean thM there is in entry 295 a limitation against importation of all parts and accessories of motor cycles and scooters_, Under that contention, even if the importer had sold away the first consignment or part of it, it would still be possible for the Collector to say that had the importer desired it was possible for him to assemble all the parts and make motor cycles and scooters in C.K.D. condition. Surely, such a meaning has not to be, given to entry 295 unless there is in_it or in the licence a condition that a licensee is not to import parts in such a fashion that his consignments, different though they may be, when put together would make motor cycles and scooters in C.K.D. condition.

Such a conditioQ was advisedly not placed in entry 295but was put in entry 294 only.

The reason was that import _ of both motor cycles and scooters as also parts and accessories thereof was permitted, of the first under entry 2941 and of the other under entry 295.

A trader having a licence in respect of goods covered by entry 294 could import assembled motor cycles . and scooters, but not those vehicles in C.K.D. condition, 1llllless

he. was a manufacturer and had obtained a separate licence there- , for from the Controller of Imports who, as aforesaid, was authorised to issue such a licence. on an ad hoc basis.

Thus the restriction not to import motor cycles and scooters in. C.K.D. condition was against an importer holding a licence in respect of goods covered by entry 294 under which he could import complete motor cycles and scooters and not against an importer who had a licence to import parts and accessries under entry 295.

If Dr. Syed Mohamad's contentiQn were to be right we would have to import remark (ii) against entry 294 into entry 295, a thing which obviously is 111ot permissible while construing these entries.

Further, such a condition, if one were to be implied in entry 295, would not fit in, as it is a restriction against import of motor cycles and scooters in C.K.D. condition and not their parts and accessories.

There is, therefore, no question of a licensee under entry 295 doing indirectly what he was not allowed to do directly.

What he was not allowed to do directly was importing motor cycles aind scooters in C.K.D. condition under a licence under which he could import complete motor cycles and scooters only.

That restriction, as already observed, applied to a licensee in respect of. goods described in entry 294 and not a licensee in respect of goods covered by entry 295.

The result is that when the Collector examm~ goods imported under a licence in respect of goods covered by entry 295 what he has. to ascertain is whether the goods are parts and accessories,

H -\j;

( 567

and not whether the goods, though parts and accessors, are so comprehensive that if put together would constitute motor cycles and scooters in C.K.D. condition. Were he to adopt such 3ill approach, he would be acting contrary to and beyond entry 295 under which he had to find out whether the goods imported were of the description in that entry.

Such an approach would, in other B words, be in non-compliance of entry 295.

The question then is whether such a reading of the two entries is in any way contrary to the decisions of this Court.

In Girdharilal Bansidhar,(1) the principle laid down was that the High Court in its writ jurisdiction does not sit in appeal over the correctness of the decision of the authorities under the Sea Customs' Act on appreciation of entries in the Hand Book or in the Indian Tariff

Act. In that case, the appellant, who had a licence to import iron and steel bolts, nuts, etc., imported nuts and bolts which were the components of 'Jackson Type Single bolt oval plate belts fasteners", which were described in the bill of entry as 'store bolts and nuti;'.

The Customs found that these were in reality the actual components of Jackson 11ype Single belt oval plate belts fastemers, import whereof was totally prohibited. The Collector, while arriving at his decision, took into account also the fact that washers, the third component of the prohibited article, were imported by a firm owned by the appellant's relations.

On these facts, this Court )leld ( 1) that importing components of a prohibited article was importing the prohibited article, (2) that the evidence that washers impo~ by the relatioms of the appellant was considered by the Collector as evidence to confirm his conclusion that the nuts and bolts imported . by him were in reality the components of the prohibited article, and (3) that where the decision of the statutory authority is whether an item falls under one or the other entry, the High Court could not interfere with that decisioo on the ground that it is erroneous. That is because when a statute confers power on an authority to decide a particular question, its decision, even if it is ¥rroneous, is still within its jurisdiction.

What needs to be observed in that decision is that the Collector's decision was, under which of the two competing entries the imported items fell, that is, whethet the gOOds were bolts and nuts or were components of the prohibited article.

And the Court there laid down the well established principle that the High Court, under Art. 226, could not interfere with the decision of the authority upon whom jurisdiction to decide the question, whether the

good~ fe:J under one or the other entry, was conferred on the

ground thaHt was erroneous. Further, the nuts and bolts imported by the atiPellant could only be used as Components of the prohibited 'article. In other words, the import was of parts of the

(I) (1964]7 S.CR. 62.

prohibited article and therefore of the prohibited article. It was, therefore, that the Court held ( 1 ) that the Customs' decision was not incorrect, and ( 2) that the importer could, not allowed to do indirectly what he could not do directly.

It will be noticed that the Bombay decision in l>. P. Anand's case(') was not dissented from but only distinguished, and therefore, the High Court in the present case was justified in follow- B ing it.

It is true, however, that counsel for the appellant there relied on that decision in support of his pro~on a completed article cannot be read as a ban on the importation of its constituents, which, when assembled, would result in the prohibited article, and this Court pointed out in answer that in D. P. Anand's case,(1) the imported components could not have when assembled, made up the completed article because of the lack of certain essentjat' parts whicl; t admittedly were not available in India and could not be imported. The real distinotion, however, between the two cases was that the decision of the Collector

in D. P. Anand' s case ( 1) was not, as was the decision in Girdharic

lal's case,(2) under which of the two comwting entries the import- 0 ed goods fell but that the imported goods in question, if assembl_. ed, together, would not be the goods covered by the entry, and therefore, not the goods in respect of which the licence was granted.

Further, the articles in question, even when assembled together, were not prohibited articles as in Girdharilars case('). Girdharilal's case(2 ) is clearly distinguishable because it is not as if motor cycles and scooters are prohibited articles as was the case there.

The restriction is not against licensees importing motpr cycles and scooters under entry 294 and parts and accessories under entry 295 but against the licensees under entry 294 importing motor cycles and scooters in C.K.D. condition. The question in the instant case was not under which of the two entries, 294 or 295, the goods fell, but whether the goods were parts and accessories covered by entry 295.

In Firm Illuri Subbayya Chetty & Sons v. Andhra Pradesh,(3 ) the suit filed by the appellants was for recovery of a sum paid by way of purchase tax under the Madras General Sales Tax Act,

1939. The cause of action was that the amount had been illegally recovered.

Relying on s. 18A of the Act, this Court held that the expression "any assessment made under this Act" in that section was wide enough to cover all assessments made by the appropriate authorities under the Act and even if an assessment was incorrect, so long as it was within the jurisdiction of the authorities, it was not non-c.ompliance of the statute, and therefore, was not covered by the principle laid down in the case of Mask & Co.(') The\Court observed:

(I) C.A. 4of1959 dt. Aug. 17, 1960 (H.C.)

(2) [1964]7 S.C.R. 62.

(3) [1964] l.S.C.R. 752.

(4) [1948] LR. 67 I.A. 222. r

"There is no justification for the assumption that if a decision has been made by a taxing authority under the provisions of a taxing statute, its validity can be challenged by a suit on the ground that it is incorrect on merits and as such it can be claimed that the provisions of the said statute have not been compiled with."

This principle was repeated in Dhulabhai v. Madhya Pradesh(1) where it was held that where a statute gives finality to the orders of the special tribunal the civil court's jurisdiction must be held to be excluded if there is adequate remedy to do what the civil c:Ourts .would normally do in a suit, i.e., to correct an assessment which is rronus. The Court also pointed out that in the 'Firm

ll/uri Subbayya Chetty & Sons' case,(~) it had been said that Mask & Co.'s case(8 ) was an authority for the proposition that non-compliance with the provisions of the statute would render the entire proceedings before the authority illegal and without jurisdiction.

The case of Panthulu v. Andhra Pradesh (4 ) illustrates as to when an authority can be said to have acted in non-compliance with the provisions of the statute under which it derives its authority. Section 3(2) of the Madras Estates Land (Reduction of Rent) Act, XXX of 1947 authorised the State Government to fix the rates of rent in respect of each class of ryoti land in each village in the State after considering the recommendwtions of the special officer and the remarks of the Board of Revenue. Section 8(1) provided that no order passed under s. 3(2) could be challenged in a civil court. The suit filed by the appellants disputed the legality of the notification reducing the rates of land in respect of the dry delta ryoti lands in a village on the grou.nd that the class of land had been determined to be delta ryoti lands on the basis only of the setilement register which did. not contain any entry with respect to the village in question, that the settlement register could not be treated as conclusive and that proper factual enquiry was necessary. The High Court held that the suit was not maintainable by reason of s. 8(1). Dua, J., speaking for the Bench. held that under s. 2 the special officer had to determine the average rate of cash rent per acre for each class of ryoti land such as wet, dry or garden.

This could only be done on relevant material.

The special officer, however, _had based his determination on a report of his assistant, who had considered the entry in the settlement register of another village. That meant that the special officer had made his determination on irrelevant evidence, i.e .. on the register which did not contain any data with respect tothe land in the village in q11estion.

On these tacts he held that the

(2) (1964) 1 S.C.R. 752.

(3) [1948] L.R.67 I.A. 222. (4)

[~970] 2 S.C.R. 714

-570 SUPREME COURT REl'ORTS

[1971 J 3 S.C.R.

.determination by the special officer was based on no evidence with the result that it was in violation of the fundamental principles of judicial procedure. A fortiori, the order of the Government made under s. 3(2) on the basis of the recommendations of the special .officer was not iii confonnity with the provisions of the Act and was therefore outside the purview of s. 3(2) and consequently s. 8 ( 1) was inapplicable.

Thus, sec. 8 ( 1) was held not to apply because the Government's determination could not be said to be one under s. 3(2).

- The words."a decision or order passed by an officer of Customs under this Act" used in s. 188 of the Sea Customs Act must mean a real and 111ot a purported determination.

A determination, which takes into consideration factors which the officer has no right to take into account, is no determination.

This is also the view taken by courts in England. In such cases the provision excluding jurisdiction of civil courts cannot operate so as to exclude an inquiry by them._ In Anisminic Ltd. v. The Foreign Compensation Commission (1) Lord Reid at pages 213 and 214 of the Report stated as follows :

"It has somet:'lles been said that it is only where a , tribunal acts without jurisdiction that its decision is a:

nullity. But in such cases the word "jurisdiction" has been used in a very wide sense, and I have come to the conclusion that it is better not to use the term except in the narrow and original sense of the tribunal being entitled to enter on the enquiry in question. But there are many cases where, although the tribunal had jurisdiction to enter on the enquiry, it has done or failed to do something in the course of the enquiry which is of such a nature that its decision is a nullity.

It may have given its decision in bad faith. It may have made a decision which it had no power to make. It may have failed in the course of the enquiry to comply with the requirements of natural justice.

It may in perfect good faith have misconstrued the provisions giving it power to act so that it failed to deal with the question remitted to it and decided some question which was not remitted to it.

It may have refused to take into account something which it was required to take irrto account. Or it may have based its decision on some matter which, under the provisions setting it up, it had no right to take into account. I do not intend this list to be exhaustive. But if it decides a question remitted 1o it for decision without committing any of these errors it is as much entitled

rto decide that question wrongly as it is to decide it rightly."

(!) [1969] l All E.R. 208.

/' .,

....

''

To the same effect are also the observations of Lord Pearce at page 233. R. v. Fulham, Hammersmith and Kensington Rent Tribuna/( 1) is yet another decision of a tribunal properly embark

ing on an enquiry, that is, within its jurisdiction, but at the end of it making an order in excess of its jurisdiction which was held to be anullity though it was an order of the kind which it was entitled to make in a proper case.

The principle thus is that exclusion of the jurisdiction of the civil courts is not to be readily inferred.

Such exclusion, however, is inferred where the statute gives finality to the order of the tribunal on which it confers jurisdiction and provides for adequate remedy to do what the courts would normally do in such a proceeding before it. Even where a statute gives finality, such a provision does not exclude cases where the provisions of the particular statute have not been complied wvth or the tribunal has not acted in conformity with the fundamental principles of judicial procedure.

The word "jurisdiction" has both a narrow and a wider meaning..

In the se.nse of the former, it means the authority to embark upon an enquiry; in the sense of the latter it is used in several aspects, one of such aspects being that the decision of the tribunal is in non-compliance with the provisions of the Act. Accordingly, a determination by a tribunal ol. a question other than the one which the statute directs it to decide would be a decision not under the provisions of the Act, and therefore, in excess of its jurisdic- E tion.

The respondents' licence adlillttedly authorised them to import goods covered by entry 295. they could, therefore, legitimately import, on the strength of that licence, all and several kinds of parts and accessories of motor cycles and scooters.

The only question, therefore, before the Collector was whether the respondents' licence covered the goods imported by .th_em, ).e., whether the goods were parts and accessories. If they were, the imports were legitimat~ and no question of their being not covered by the licence or the respondents having committed breach of s. 3 of the Imports and Exports (Control) Act ors. 167(8) of the Sea Customs Act could possibly arise.

What the Collector, however, did was that he put the two consignments together 'lllld held that they made up 51 'Rixe' Mopeds in C.K.D. condition and were, for that reason, not the articles covered by entry 295 but articles prohibited under remark (ii) of entry 294. But entry 294 deals with the motor cycles an~ scooters complete and assembled. Re• mark (ii) against that entry prohibits an importer who held a licence to import motor cycles and scooters from importing motor cycles and scooters in C.K.D. condition. Remark (ii) containing that prohibition h.ad nothing to do with entry 295 which did not

(I) [1953] 2 AU E.R. 4 7-918 Sup.C.l./71

contain any limitations or restrictions whatsoever against imports A of parts and accessories.

That being so, if an importer has imported parts and accesi; ories, his. import would be of the articles covered by entry 295.

The Collector could not say, if they were so covered by entry 295, that, when Jumped together, they would constitute other articles, namely, motor cycles and scooters In C.K.D. condition.

Such a process, if adopted by the Collector, would mean that he was inserting in entry 295 a restriction which was not there.

That obviously he had no power to do. Such a restriction would mean that though under a lironcc in respect of goods covered by entry 295 an importer could import parts and accessories of all kinds .and types, he silall not import all of them but only some, so that when pu.t together they would not make them motor cycles and scooters in C.K.D. condition. In the present case even that was not so because he would have to buy tyres, tubes and saddles to convert them into motor cycles and scooters into C.K.D. condition. "That would be tantamount to the Collector making a new entry

in place of entry 2951 which must mean non-compliance of that -entry and acting in excess of jursidiction during the course of his enquiry even though he had embarked upon the enquiry with jurisdiction" In our view that was precisely what the Collector did.

This is, therefore, lllOt one of those cases where between .two competing entries the statutory authority applied one or the other, though in error, and where a civil court cannot interfere.

In this view the order was in non-compliance of the provisions of the statute, and therefore, was covered by the exceptions laid down in Mask & Co.'s case('). It was not an order in respect of which the Collector was invested with jurisdiction.

That being so, the provision excluding the jurisdiction of the civil courts was not applicable. Indeed, the order was a nullity and Art. 14 of F . the Limitation Act of 1908 could not be applied to hold the suit time barred. Even if Art, 14 applied, it would not be time-barred, if, as the High Court pointed out, the date of the appellate order was taken into consideration.

The judgment of the Division Bench of t)le High Court, ther~,- G fore, must be upheld. Conse.quently, the appeal fails and is dismissed with ctS.

V.P.S.

Appeal dismissed.

(i-) [1948] L.R. 67 IA. 222.

57

UNION OF INDIA

TARACHAND GUPTA & BROS

M. SHELAT

cl. 3

s. 3

Customs Act

LR. 67 I.A. 222

art. 14

[1964] 7 S.C.R. 62

Art. 226

Anand

Mask & Co.

Art. 14

Limitation Act

V. A. Seyid Muhammad

S. P. Nayar

S. 1

Sorabjee

R. Gagrat

B. R. Agarwala

Shelat

s. 3

s. 167(8)

Sea Customs Act, 1878

November 19, 1957

Tarachand Gupta

S 1

India

Higli. Court

Customs under the Sea Customs Act

Art. 14

Limitation Act, 1908

D. P. Anand

s. 167

Customs Act

s. 3

(1964] 7 S.C.R. 62

Limitation Act

Art. 62

Union of India

Customs Act

s. 3

Central Government

Sea Customs Act, 1878

Customs Act

Section 167

Customs Act

Section 188

s. 191

Syed Mohamad

Girdharilal Bansidhar,(1

Art. 226

P. Anand

Girdharic

lal

Girdharilars

Girdharilal

Madras General Sales Tax Act

s. 18A

Aug. 17, 1960

LR. 67 I.A. 222

Firm

ll/uri Subbayya Chetty & Sons

Section 3(2)

Section 8(1)

s. 3(2)

s. 8(1)

Dua

s. 2

(1964) 1 S.C.R. 752

s. 3(2)

s. 3(2)

s. 8

sec. 8

s. 3(2)

s. 188

Customs Act

England

Pearce

s. 3

Customs Act

Art. 14

Limitation Act

L.R. 67 IA. 222


RAM JANKI DEVI & ANR. v.

M/S. JUGGILAL KAMLAPAT

January 28, 1971

[G. K. MITTER AND A. N. RAY, JJ.]

Deposit and Loan-Difference between-Tests-Demand for part of loan whether sftlrts limitation.

Two groups known as the Singhania group and the Gupta Group were partners in M/ s. India Supplies. Both were also interested in the ; business of Lakshmi Ratan Cotton Mills. In the present litigation the GJpta group

was represented by the appellants and the Singhania group bY the respondent.

In the year 1942 Lakshmi Rattan Cotton Mills was the creditor of Ml s. India Supplies for the approximate sum of Rs. 4,00,000. Lakshmi Ratan Cotton Mills was a debtor to the respondent for the approximate sum of Rs. 4,00,000. Lakshmi Ratan Cotton Mills demanded the sum of Rs. 4,00,000 from India Supplies. India Supplies could not repay Lakshmi Ratan Cotton Mills. Thereafte\' India Supplies proposed that the respondent should deposit a sum of Rs. 4,00,000 with India Supplies to wipe out the indebtedness of the India Supplies to Lakshmi Ratan Cotton Mills.

The respon<Jent accepted the said proposal and thereafter a letter dated 29, September 1942 was written by the head of the Gupta group on behalf of India SJ!pplies to the respondent recording the agreement that "a sum of Rs. 4,00,000 should be debited to India Supplies as deposit at the usual rate of interest as agreed upon." The resiondent was to place to the credit of Lakshmi Ratan Cotton Mills a sum o . Rs. 4,00,000 in its account with tho respondent thus reducing the indeb dness of Lakshmi Ratan Cotton Mills from Rs. 9,00,000 to Rs. 5,00,000. Disputes and differences arose between the two groups thereafter.

In 1944 there was an arbitration award.

The Singhanias went out of both India Supplies and Lakshmi Ratan Cotton Mills, and the Gupta group earned on both the businesses.

The present suit was filed by the respondent in 1953. The claim was based on the aforesaid deposit of Rs. 4,00,000. The suit though originally filed in the court of the Cvil Judge, Kanpur w.as tried by the Allahabad High Court in its original jurisdiction. The suit was decreed in favour of the respondent. With certificate appeal was filed {n this Court. The stions for consideration \Vere ; (i) whether the money was deposited under an agreement and payable on demand so that limitation would commence from the date of demand within three years of which it was filed, or whether it Wlls a loan made on 30th December 1942 in respect of which the suit was barred under Art. 59 by limitation, the same not having been filed within three years from the date of the loan; (ii) whether there was a demand for a part of the amount in 1943 and therefare limitation would start from that date.

HELD : (i) The amount was a deposit and not a loan.

The case of a deposit is something more than a mere lQiln of money.

It will aepend on the facts of each case whether the transactiOn is clothed with the character of a deposit of money. The surrounding circumstances the relationship and character of the transaction and the manner in which the partfos treated the transaction will throw light on the true form of the transaction. !577 HJ

574 SUPllEME COUllT REPOR; I'S

[1971} 3 S.C.R..

V. E. A. Annamalai Chettiar & Anr. v. S. V. Y. S. Veerappa Chettlar, A.LR. 1956 S.C. 12 and Nawab Major Sir Mohammad Akbar Khan v.

Attar Singh & Ors., 63 I.A. 279, referred to.

Some of the partners of the appellant and the respondent in the year 1942 wel"e common. It would be more explicable and na(Jlfal course of events that monies would be ke, Pt in deposit with the appellant in order to enable them to have financ1al accommodation without immediate worry of repayment. 1be mere fact that money in specie was not paid wou Id not be destructive of the case of deposit. The r<; spondent acted as bankers. The way in 'which the respondent made entries in the pass-book of the appellant was consistent with. the roznamcha, f!hata and nakalbahi books. It was \lot a .case of the respondent giving loan to the appellant for the obvious reason .tbat the histdry of the . transaction between the appellant and LakshmtCotton Mills showed that the appellant had to be put on a footing of financial: stability by giving the appellanHhe use of the sum of Rs. 4,00,000 for a jong time. The absence of aµy negotiable instrument was significant, A hundi Or a11(omissory note would. have been consistent with the case o! a loan. . The :relationship between the parties the Sll!l'OUDding circumstances at. the time Qf die transaction, the pecuniary position of the appellant were 118 overwhelming features to corroborate the oral ·•s well as the documentary .evidence of the respondent that the amount was deposited with the appellant. "[580 E-H] '

 The arbitration .award in the dispute between the parties gave directions on the basis that there were advances between the parties which were in the nature of deposit and 'were not covered by the award. [581 A-BJ

In contemporarious documents the appellant never said that it was a case of advancing loan. The non-production of the appellant's accounts coupled with the appellant's staying away fr0111 the witness box mdicated the inherent infirmities cf the appellant's case. [581 DJ

(ii) There is a consensus among the High Cotirts that there must be an unqualified demand for the whole sum before the limitation can start in case of demand for return of the amount deposited. Further, a demand in the year 1943 for a part of the amou11t would not be effective because there were common partners in the firms of respondent and the appellant; ·

(581 E.-GJ

Jogendranath Chakerbutty v. Dinkar RGm,

A.LR. 1921 Cal. 644, Motigauri v. Naran; i; A.LR. 1927 Born. 362 and Subbalh "Chetty & Ors ..

v. Visalakshi Achi, A.l.R. 1932 Mad. 685, referred to,

The 1 appeal must accordingly be dismissed.

CIVIL APPELLATE JURISDICRION: Civil Appeal No. 2151 of G 1966. ~

Appeal from the judgment and order dated August 3, 1965 of the Allahabad High Coun in Original Suit No. 1of1964.

S. V. Gupte aiid /, P. Gopal, for the appellants.

A. 'K. Sen, Rameshwar Nath and Swaraniit Sodhi, for the

respondnt.

.JAN"1 DEVI V • .JUOOILAL (Ray,/,) 575

The Judgment of Ille Court was delivered by

Ray, J.,..-This is an appeal by certificate from the judgment and.decree jl.ated 3 August, 1965 of the High Court of Allahabad decreeing the respolldent's suit for the suui of Rs. 4,11,367.92.

The respondent filed the suit on 16 May, 1953 against the appellant for the recovery of Rs. 4,11,367.92 with interest and costs.

The respondent's case in short was that the J:espondent on 30 September, 1942 deposited a sum of Rs. 4,00,000 with M/s India Supplies whereof the appellants were the partners on the condition that interest would be payable @..,'J, flf I'll~ cent per month and that the respondent would be entitled to withdraw the deposit on . demand. 1..

The suit was filed in the court of the First Civil Ju4ge. Kanpur. .

The evidence was concluded before the Civil. Juil&C, Kanpur. 'J;'hereafter by an order dated 12 May, l~ of tlie•l[@'Court lit Allahabad the suit was transferred to the HigheQurtiiimiginal civil jurisdiction. The High Court heard the suit and'bn:$August,. 1965 decreed the suit in favour of the respondent. · !, ·

. . .. . . .· . ·:·'."r /< At the trial the issues were first whether the respondent deposit•.·:.'.,'.·,,, ed the sum. of Rs. 4,00,000 ith the appellant l\lld secondly w~.l.~,, th er the suit was barrec! by time. · oi

The entire controversy in the suit is whether it was a case whece money was deposited under an agreement and that it was payable on demand or whether Jt was a case of an ordinary loan of Rs. 4~00.000. The respondent contended that Article 60 of the r Indian Limitation Act, 1908 was the relevant Article because it was a case of money deposited under an agreement that it was payable on demand and therefore the limitation would commence from the date of demand and the suit was filed within three years from the demand. The rival contention of the appellant was that it was money lent under an agreement that it was payable on de- Gi mand and the loan was made on 30 December, 1942 and therefore the suit not having been filed within 3 years from the date of the loan under Article 59 was barred by limitation.

In the year 1942 Kailashpat Singhania and Pushpa De\li wife of Lakshrnipat Singhania were partners of. India Suppl\es 'along with the defendants. Defendant Ram Janki Devi is the wife of H Ram Ratan. Gupta and the other defendant Lal Ram Gopal Gupta is a brother of Ram Ratan Gupta and married Padampat Singhania's sister's daughter. The Singhania group and the Gupta

group were the partners of India Supplies.

The Singhania and the Gupta groups were also bQtb interested in the business of Lakshmi Ratan Cotton Mills. T&e evidence on behalf of the respondent is that Lakshmi Rattan Cotton Mills a limited Company acted as financiers ®d bankers of India Supplies.

In the year 1942, Lakshmi Ratan Cotton Mills was the creditor of M/s. India Supplies for the approximate sum of Rs. 4,00,000. Lakshmi Ratan B Cotton Mills was a debtor to the respondent for the approximate sum of Rs. 4,00,000. Lakshmi Ratan Cotton Mills demanded the sum of Rs. 4,00,000 from India Supplies. India Supplies could not repay Lakshmi Ratan Cotton Mills.

Thereafter India Supplies proposed that the respondent should deposit a sum of Rs. 4,00,000 with India Supplies to wipe out the indebtedness of India Supplies c to Lakshmi Ratan Cotton Mills.

The respondent accepted the said proposal and thereafter a letter dated 29 September, J 942 was written by Ram Ratan Gupta head of the Gupta group on behalf of India Supplies to the respondent recording the agreement that "a sum of Rs. 4,00,000 should be debited to India Supplies as deposit at the usual rafil of interest as agreed upon". The respondept was to place to the credit of Lakshmi Ratan Cotton Mills a sum of Rs. 4,00,000 in its account with the respondent thus re, ducing _the indebtedness of Lakshmi Ratan Cotton Mills from Rs. 9,00,000 to Rs. 5,00,000.

Disputes and differences arose between the two groups thereafter. In 1944 there was an arbitration award. The Singhanias went out of both India Supplies and Lakshmi Ratan Cotton Mills and the Gupta groups carried on both the businesses.

One of the books of account of the respondent, namely, the rozuamcha (daily ];>ook) under the entry 30 September, 1942 shows that according to the letter of India Supplies the sum of Rs. 4,00,000 was deposited in the name of lndil\ Supplies. The other books of account of the plaintiff are khata (ledger) and nakalbahi (journal).

The respondent also relied on the pass book entry being Ex-A-4 which shows that a sum of Rs. 4,00,000 was withdrawn on 30 September, 1942 by the appellant from the respondent as a banker and along with the interest from time to time the amount of Rs. 4,00,000 stood with the appellant in the deposit account. The balance-sheet of the appellant as on 30 June, 1943 being Ex.A-4 showed that a sum. of Rs. 4,00,000 was unsecured loan from the respondent.

Counsel on behalf of the appellant contended that the use of the word 'deposit by itself occurr4tg eiter in the roznamcha or in the letter dated 29 September, 1942 wntten by Ram Ratan Gupta would not be decisive of the question whether it was a case of deposit of the sum of Rs,_ 4,00,000 by the respondent with the

appt'llant under an agreement that the same would be paid on

A demand. At one stage in the proceedings there was a controversy as '(O whether Ram Ratan Gupta had authority to bind the appell:mt by the letter dated 29 Sepmber, 1942. There i> evidence that Ram Ratan Gupta looked after the business of the appellant and acted on behalf of the firm of the appellant in ordinary mercantile transaction. Counsel for the appellant in all fairness did B not question the authority of Ram Ratan Gupta to bind the firm of the appellant.

It was said by counsel for the appellant that there were six principal reasons to indicate that it was a case of an ordinary loan of Rs. 4,00,000 and not an instance of the sum of Rs. 4,00,000 being deposited by the respondent with the appellant under an agreement that the same would be paid on demand. The primary and pre-eminent point emphasized by the appellant was the backgJ'OUnd of the transaction between M/s India Supplies on the one hand and Lakshmi Ratan Cotton Mills on the other, that moneys were lent and advanced by Lakshmi Ratan Cotton Mills to India Supplies from time to time and aU that happened was that in place of Lakshmi Ratan Cotton Mills the respondent became the creditor of the firm of the appellants. There was just a substitution of the creditor debitor relationship by substituting the respondent in place of Lakshmi Ratan Cotton Mills as the creditor. Secondly, it was said that there was never any payment of money in cash and adjustment entries were made in thei books of the respondent. Thirdly, monies were not given notionally for the convenience of the respondent banker. Fourthly, monies were required by the appellant for his own business because Lakshmi Ratan Cotton Mills refused to help the appellant any more. Fifthly, Ex. A-4 the pass book would show that it was a case of advance of Rs. 4,00,000 by the respondent to the appellant, and finally, the appellants were not bankers and therefore it was improbable that the respondents who were bankers would deposit with the traders the sum of Rs. 4,00,000.

Counsel for the appellant relied on the deciion of this Court in V. E. A. Annama/ai Chettiar & Anr, v. S. V. V. S. Veerappa Chettiar(') in support of the proposition that the answer to ihe question as to whether it was a loan or deposit would not deoend merely on the terms of the document but had to be judged from !he intentfon of the parties and the circumstances of the case. That 1s manifestly the correct approach.

The case of a deposit is something: more than a mere loan of money. It will depend on .the facts of each case whether the transaction clothed with the character of a deposit of money. The surrounding circumstances, the relationship and character of the

(1) A.T.ll, 195H.C 12

transaction and the manner in which parties treated the .trans- A • action will throw light on the 'true form of the transaction.

The Judicial Committee in Nawab Major Sir Mohammad Akbar Khan v. Attar Singh & Ors. ( 1) spoke of the distinction between the deposit and loan to be that the two terms were not mutually exclusive but that a deposit not for a fixed term did not B seem to impose an immediate obligation on the deposiee to seek <>ut the depositor and repay him.

Though documentil bl' themselves are not conclusive of the question thy have th~ evidentiary value and if they. corroborate the oral evidence the Importance of the documents is magnified.

The letter Ex. A-5 bears the date 29 September, 1942 and is con- C temporaneous with the entire transaction between the appellant and the respondnt. The letter was as follows :-

"Messrs. Juggilal Kam!apat Koth!, Cawnpore.

Dear Sirs, D

As per my talk with Sir Padampat !shall thank you to credit a sum of Rs. 4 lacs (Rupees four lacs only) to the account of Messrs Lakshmirafan Cotton Mills Co.

Ltd. and debit the same to the account of India Supplies

as deposit at the usual rate of interest as agreed upon by the partners of the said firm.

E ..

Thanking you, Yours faithfully,

Sd/- R. Ra'1n Gupta".

The intrinsic evidence in the letter is that the sum of Rs. 4,00,000 F was debited to India Supplies as deposit. The words "debited as deposit" were criticised by counsel for the appellant to be meaningless. Too much precision cannot always be expeced in. regard to use of foreign language by merchants and traders m their short memorandum. The character of deposit is an inherent impression in the writing. The rozmancha rbfers to the letter and is therefore G corroborative of the letter and the terms threof. The letter further shows that the terms were agreed to by the partners of the firm namely, the partners of India Supplies and of She respondent.

The' respondent's partner Padampat Singhania gave oral evidence and substantiated the terms of the letter and the respqndenfs case.

Padampat Singhania was the person. on ehalf of the respond.ent H who carried on the negotiations. H1sev1dence was therefore llllportant. The appellants did not examine themselves and did not

(I) 63 I.A. 279.

JANK! DEVI V. JUGGJLAL (Ray, J.) 579

give any evidence challenging the oral testimony of the respondent's partner. On the contrary, _the correctness of the letter Ex.

A-5 was accepted by the appellants' witness Ram Ratan Gupta the author of the letter.

The roznamcha entry was proved by Gopi Kishan Saraugi a munim of the plaintiff. The roznamcha entry was as follows :-

' "4,00,000 India Supply Ke nam Asoj Badi Chhat : 30-9-42 Lakshmiratan Cotton Mill Ki Chithi se apke nam mada deposiot karaya panna 2486"

His evidence was that the books wer~ systematically kept on 'mahajani' system in connection with the business. The witness proved the Khata, the raznamcha and the nakalbahi entries. In cross-exanrination of Gop_i Kishan Saraugi it was suggested that the entry under the date 30 September, 1942 in the roznamcha was not written at the same time. The suggestion was that there was interpolation of the words "deposit karaya" in the roznamcha entry.

In cross-examination of Padampat Singhania questions were asked about the rokar, khata, nakal bahi and roznamcha entries.

Padampat Singhania said that the entry of Rs. 4,00,000 was not recorded in the daily cash book but was recorded in the roznamcha. He also said that credit and debit entries were made in the roznamcha.

Padampat Singhania said that the entries were made by Gopi Kishan Jaipuria who was in a dying condition at the time the witness gave evidence.

It was suggested to Padampat Singhania that the words "deposit karaya" in the roznamcha entry were not written at the same sitting. Padampat Singhania denied that, Counsel for the appel- . lant contended that in the absence of Gopi Kishan Jaipuria the F account books were not proved.

This is unacceptable for two reasons. First, the account books were shown in cross-examination of Padampat Singhania and question were asked on the same.

It is not open to the appellant to complain of lack of proof of account books when the documents are shown to the witness in cross-examination. Secondly, both Padampat Singhania and Gopi G Kishan Saraugi spoke of the proper maintenance and keeping of books of account and that it was not possible 1lo arrange the presence of the writer of the entry.

Suggestion of tampering is a serious one. The original entries were called for from the High Court. We had occasion to look into the originals. We are in agreement with the High Court that the suggestion of fabrication is utterly unmeritious. The words 'deposit karaya' appear without H any doubt to have been written at the same time as the rest of thti writing. It is in evidence that the reference to the page of th¢ panna under that entry was written later inasmuch as the page

of the panna was put on when the panna was put on when the A panna book was writte!l.

The most important documentary evidence of the appellant namely. their book of account was not produced. These books of the appellant would have shown how they treated the transaction, namely, whether it was a case of deposit or loan. The irresistible infffence from the non-production of books of the appellant would arise that they would have supported the respondents caS!l and that is why they were not produced. The appellant's contention that the background of the transaction was mercantile loan, would be more a conjectu_re than a conclusion to be arrived at._ The financial transactions between the respondent and Lakshmi Ratan Cotton Mills were running accounts. It would be more consistent to hold that by allowing India Supplies a deposit of Rs. 4,00,000 India Supplies would be relieved of the situation of repaying the money immediately. It is precisely :, Ccause of the then inability of India Supplies to repay Lakshmi Ratan Cotton Mills that the parties resorted to the mode of having the use of the money by way of deposit.· The transaction was between the appellant, the respondent and Lakshmi Ratan Cotton Mills.

All figured in the transaction. A more loan of Rs. 4,00,000 would not have sufficed the needs of the appellant who were then unable to pay the dues of Lakshmi Ratan Cotton Mills.

Some of the partners of the appellant and the respondent in

 the year 1942 were common. It would be more explicable and E natl1ral course of events that monies would be kept in deposit with the appellant in order toenable them to have financial ac.commodation without immediate worry of repay!Ilnt. The mere fact t)lat money in specie was not paid would not be destructive of deposit The respondent acted as bankers.

The way in which t.he respondent made entries in the pass ook of the appellant is F consistent with thdr roznamcha, khata and nakal bahi books. It was not a case of the respondent giving loan to the appellant for the obvious reason that the history of the transactions between the appellant and Lakshmi. Rantan Cotton Mills shows that the appellant.hat! to be j:¥1t on a footing of financial stability by giving the appellant the use of the sum of Rs. 4.00,000 for a long time.

The absence of any negotiable instrument is significant. A hundi G or a promissory note would have been consistent with the case of a loan.

The relationship between the P?rt.ies, the surrounding circumstances at the time of the transaction, the pecuniary position of the appellant are all overwhelming feafures to corroborats the oral as well as the documentary evidence of the respondent that the amount was deposited with the appellant.

The award dated 18 January, 1944 has also a tale to tell. There were disputes between the partners of the various businesses_ , in

which the Singhania and Gupta groups were interested.

These disputes were before the arbitrators.

One of the terms in the award was that the award in respect of Lakshmi Ratan Cotton Mills and India Supplies "do not cover the advances which either party or their separate firms may have made. to all or any of them or their moneys which may be in deposit with them and they shall be payable and paid in their usual course". This direction in the awlird shows that there were advances which were in the nature of deposit and were not covered by the award. The award would have evidentiary value to show as to how the parties treated and understood their financial dealings.

It is also significant t!hat when the respondent demanded the money by a letter dated 27 April 1953 (Ex. 7) the appellant in

their reply dated 5/6 May, 1953 (Ex. 6) totally denied the claim.

The respondent set out aII the facts of deposit of the money with the appellant.

The a12peIIant never said that it was a case of advancing loan. The non-production of the appellant's accounts coupled with the appellan~ staying away from the witness box indicates the inherent infirmities in the appellant's case.

Counsel for the appellant conten<IP.d that there was a demand for a part of .. the amount in the year 1943 because Padampat Singhania said that there was demand in the month of October, 194! and therefore limitation would start from that date.

The view of Calcutta, Bombay and Madras High Courts is that there must be an unqualified demand for the whole sum before the limitation can star in case of demand for return of the amount deposited. (See Jogendranath Chokerbutty v. Dinkar( 1) Ram Motigauri v. Naranji( 2 ) an.d Subbaih Chetty & Ors. v. Visillakshi A chi) (8). That is th~ correct position in law. Counsel for the appellant did not contend to the contrary in view of the comensus of op!nion. of the, different Hig_h Courts. It is also important to bear m mmd that a demand iri the year 1943 for a part of the amount wouid not be effective because there were common partners in the firms of the respondent and the appellant.

For .these reaons we ar~ of opinion that the High Court was correct m decreemg the smt.

The appeal therefore fails and is dismissed with costs.

G.C.

(1) A.1.R. 1921 Cal. 6A4

(2) A.LR. 1927 Bom. 362

(3) A.l.R. 1932 Mad. 685

Appeal dismissed:

RAM JANKI DEVI & ANR

M/S. JUGGILAL KAMLAPAT

January 28, 1971

G. K. MITTER

A. N. RAY, JJ.

Lakshmi Ratan Cotton Mills

Singhania group

Lakshmi Rattan Cotton Mills

India Supplies

Gupta group

Cvil Judge, Kanpur

Allahabad High Court

30th December 1942

Art. 59

LakshmtCotton Mills

S. V. Gupte

P. Gopal

A. 'K. Sen

Rameshwar Nath

Swaraniit Sodhi

.JUOOILAL

Ray

Civil. Juil&C, Kanpur

Article 60

Indian Limitation Act, 1908

30 December, 1942

Article 59

Kailashpat Singhania

Pushpa De\li

Lakshrnipat Singhania

Ram Janki Devi

H Ram Ratan. Gupta

Lal Ram Gopal Gupta

Ram Ratan Gupta

Padampat Singhania

Gupta

Singhania

Lakshmi Ratan B Cotton Mills

29 September, J 942

Gupta groups

30 September, 1942

29 September, 1942

29 Sepmber, 1942

Juggilal Kam!apat Koth

Padampat

Lakshmirafan Cotton Mills Co.

Ltd.

Ram Ratan Gupta

Gopi Kishan Saraugi

Gop_i Kishan Saraugi

Gopi Kishan Jaipuria

Gopi G Kishan Saraugi

Lakshmi

Rantan Cotton Mills

18 January, 1944

Singhania

5/6 May, 1953

Calcutta, Bombay and Madras High Courts


ssa

MANGALA KUNHIMINA UMMA & ORS.

PUTHIVAVEOTIIL PARU AMMA & ORS.

January 28, 1971

[G. K. MITTER AND A. N. RAY, JJ, J

Kera/a L<11d Reforms Act 1964, s. 2(22)-'Kanam'-Definition of~ Document purporting to be ka11am whether lease or mortgage-Tests- Description indocu1nent not sufficient guide.

The document Ex. B-6 in so far as it related to the suit lands purported to be a kanam executed in favour of the predecessor-in-interest of the present appellants by the predecessors-in-interest of the present respon- <lents.

The document had a counter-part Ex. A-J,. The suit was filed for the redemption of the kanam on payment of the mortgage debt.

The appellants contended in defence that Ex. B-6 was not a mortgage deed but a lease and, therefore, there was no right to redeem. One of the incidents of the kanam as defined in s. 2(22) of the Kerala Land Reforms Act, 1964 was the "payment of michavaram or customary dues on renewal on the expiry of any specified period".

Against the decision of the Kerala High Court in favour of the plaintiffs-respondents, the present appeal was filed by special leave.

The only question for consideration was whether the appellants were protected against eviction by reason of their contention that Ex. B-6 created a tenancy. The decision of this question depended upon the further consideration whether the provision in Ex. B-6 for payment of .laild revenue for properties by the appellants amounted in law to a stipulation as rent or michavaran to the landowner.

HELD : (I ) The mere description of the deed as kanam will not be decisive of the essence of the transaction. The description of the deed by itself, isolated from the terms and provisions may be misleading ;, r a misnomer.

The circumstances and the conduct of the parties are always a very useful guide in ascertaining the true character of the transaction. [587 B-C; El

( 2) The first and foremost element to be four, J for a lease is whether there is lhe intrinsic intention in the "'ritten document for enjoyment of the property by the transferee in lieu of rent or perquisites. Secondly the term of renewal of the enjoyment would indicate the features of a lease.

Thirdly it has to be. found out whether there is any provision for payment of customa.ry dl\es. [587 H; 588 Al

The dom.inant feature of the mortgage transaction on the other hand will be ascertainment of the ratio of the value of land to the amount. advanced, It the ratio of the amount advanced bears a substantial proportion to the value of the property transferred it would be a strong piece of intention and circumstance to indicate loan -and a mortgage. The provision entitling the transferee t0 ask for a return of money by sale of tlte

property would be a very important feature to indicate that the transa.cion is a loan and a mortgage and not a lease. The absence of such a prov1s1on, however would not totally repel the transaction to be a mortgage.

The execution of counterpart is sometimes a common feature in the case of possessory mortgage though the existence of a counter•part by itself will not be conclusive of the question. [588 B-Dl

MANGALA KUNHIMINA UMMA V. PUTHIVAVEOTTIL PARU 583 AMMA (Ray, J.)

(3) The High Court correctly held that a mere direction to pay the revenue of the property by the grantee particularly when no payment is stipulated to be made to the grantor or when the payment is not directed to be made out of anything which is due or payable to the grantor, cannot be considered as a payment or rent or michavaran to the grantor. [588 G] ( 4) In the present case the features which favoured the constructio11, of the transaction to be a molrtgage and not a lease were; fir>l there was no provision for renewal; secondly there was no provision for payment of customary dues; thirdly the property was to be enjoyed by the defendants by way of interest on their advance after payment of land tax to the State;

fourthly the payment of land tax was not a deduction from rent or per quisites; fifthly there was a provision for surrendering the property with a registered release at the cost of the transferee on the_r.eceipt of the consi deration of kanam and the balance amount; sixthly when the consideration was paid back the counter-pattam deeds and prior deeds would be returned; and finally there was liability to pay interest on the advance and possession and enjoyment of the property was in lieu of interest. The proportion of the amount advanced under Ex. B-6 to the value of the property was also substantial [589 E-0; A-Cl

Parameswaran Embranthiri v. Narasimha Nambudri, [1962] K.L.T. 404, Sankunni Variar & Ors. v.

Neelakandlum Nambudripad & Ors., I.L.R. (1944] Mad. 254. Cherumanalil Lakshmi & Ors. \', Mulivil Kunninamkandy Narayani & Ors., (1%7] S..C. R. 314, Kunhiparan v. V. Naicken & Ors.,

(1967] K.L. T. 646 and Kunhirama Nambiar v.

Pairu KutrU<>, [1969] K.L.T. 62, referred to.

Hussain Thangal v. Ali, [1961] K.L. T. 1033, approved.

Pote/ Bhuder Mayji etc. v. lat Mamdaji Ka/aji (deceased) throogh L.

Rs. Jat Singh Khan Mamdaji etc. [1969] 3 S.C. R. 690, applied.

E CIVIL APPELLATE JURISDICTION: Civil Appeal No. 980 of 1967. .

Appeal by special leave from the decree dated the March 29, 1967 of the Kerala High Court in Second Appeal Suit No. 374 of 1965.

T. Narayanan Nambyar and A. V. V. Nair, for the appellants.

K. T. Harindranath and A. S. Nambyar, for respondents Nos. 1 to 4 and 6(1) and 6(2).

The Judgment of th, e Court was delivered by

Ray, J.-This is an appeal by special leave against the judgment dated 29 March, 1967 of the High Court of Kerala confirming the decree of the lower appellate Court declaring that the sum of Rs. 1000/ - is due to defendants No. 10 to 17 as legal representatives of defendant No. 2 on the mortgagimentioned in the plaint and that the plaintiffs having deposited .the said sum of Rs. 1000/- on the file of the Court of the Munsif, Cannanore,

the defendants No. 10 to 17 do surrender Quiet and peaceable

ession of the property described in the plaint ti<' the plaintiff No. 7 with all documl?nts relating to the property in their possession and further that the defendants No. 10 to 17 do pay to the

plaintiff No. 7 half of the mesne profits from 22 December, 1953 till the date of surrender of possession.

The relevant documents are Ex. B-6 and Ex. A-1. Ex. B-6

is a kanam-kuzhikanam. Ex. A-1 is its counter-part. They are both dated 1 December, 1941.

The transaction thereunder is a composite one, a kanam in respect of taks 1 to 3 of-i(em 1 which constitute properties in suit and a kanam kuzhikanam in respect B of tak 4 of item 1 and item 2 which are not the subject matter of this suit. The kanamdars are defendants No. 1 and 2. In partition under Ex. 3 the rights under Ex. B-6 have been divided equally between the defendants No. 1 and 2 but the properties as such are not divided. The appellants being the legal representatives of defendant No. 2 had thus an undivided moiety in the properties in suit. The original plaintiff was an assignee of the jenmi (the land owner) who granted Ex. B-6. On the death of the original plaintiff, her initerest devolved on plaintiffs No. 2 to 6 who assigned the same to plaintiff No. 7. The suit is for redemption of the kanam on the properties in suit. Subsequent to the institution of l!he suit, defendants No. 3 to 9 being the legal representatives of defendant No. 1 and being respondents No. 7 to 13 in this appeal surrendered their moiety in the suit kanam, to plaintiffs No. 2 to 6 and thereafter the suit proceeded in regard to the moiety of the kanam that belonged to defendant No. 2 and his legal representatives, namely, the appellants.

The only question in this appeal is whether the appellants are protected against eviction by reason of their contenl!on that Ex.

P-6 created a tenancy or whether the respondents were entitled to possession of the properties, by reason of their rival co11:C:ntion that Ex. B-6 was a mortgage transaction and the respondents were entitled to redeem the mortgage on the expiry of the rtipulated period.

The Malabar Tenancy Act, 1929 was in force at the time of the institution of the suit but it is common ground that rights and liabilities of the parties are to be juc!ged under the Kerala Land 'Reforms Act, 1964 by reason of the provisions contained in section 132(1)(a) thereof.

The relevant provisions of section 2(22) of the 'Kerala Act of 1964 which defines kanam are as follows :-

"(22) 'kanam' means the transfer for consideration, in G money or in kind or in both, by a landlord of an interest in specific immovable property to another person or the latter's enjoyment, whether described in the document evidencing the transaction as kanam or kanapattam, the incidents of which transfer Include- H

(a) •.••••••• •·•·• •••••••••••• (b)-•..•..••..••.•••••.•••••••••••

MANOALA KUNHIMINA UMMA V. PUTHIVAVEOTTIL PARU 585 AMMA (Ray, J.)

(c) payment of michavaram or customary dues, or renewal on the expiry of any specified

"od " pen ........ .

It is indisputable that a kanam within the above definition

involvs payment of michavaram or customary dues or renewal on t'.1;: expiry of any specified period.

In Ex.B-o there is no provision for renewal or for payment of customary dues.

The pre-eminent question is whether there is a provision for payment of michavaram.

Broadly stated, Ex.B-6 executed by defendants No. I and 2 stipulated that they would pay the kanam of Rs. 1400 charged on taks 1 to 3 of item No. 1 in the Schedule to Ex.B-<i to the 7 persons Narayani and others and their representatives and redeem the same and hold the said taks 1 liO 3 of item No. 1 as kanam and tak 4 and item No. 2 as kanam-kuzhikanam, paying the land revenue for the properties and enjoy them for interest on the kanam, and after the term of 12 years when the kanam of Rs. 2000/- charged on taks 1 to 3 of item No. 1 was offered the defendants shaJI receive and surrender the properties with basic documents by a registered release at their costs.

No rent is stipulated for the property in consideration of advance of Rs. 2000/- whereof Rs. 1400/- was to be paid to the prior mortgagees on taks 1 to 3 of item No. 1.

The suit properties in Ex.B-6 were to be enjoyed by defendants No. 1 and 2 for interest on their advance after payment of the land tax to the State.

It therefore falls for consideration as to whether the prevision in Ex.B-6 for payment of land revenue for the properties by the appellants amounts in law to a stipulation as rent or michavaram to the land owner.

Counsel on behalf lo)f the appellants relied on the decision of the Kerafa High Court in Parameswaran Embranthiri v. Narasimba Nambudiri(1) and the earlier Bench division of the Madras High Court in Sankunni Varriar & Ors. v. Neelakandhan Nambudripad Ors.( 2 ) in support of the proposition that payment of land revenue would amount to payment of rent up.

In the Madras Bench dicision in Sankunni's case (supra) the kanam deed was for 36 years and the deed provided that the jenmi shouldieceive infer alia an annual rental of 411 paras, 4 idangalis and one nazhi of paddy and gingelly oil to the value of six rupees.

The kandamdaras were required by the deed in Sankunni's (supra) ca.<e to pay out of the gross rent to the Government what became due by way of land revenue. The actual words in the kanam deed were that the pattam (gross rent) of the property demised was 2507 paras of paddy and the kanamdars were to

old .the properties in their possession. and ejoyment and pay to iemm a pattam (rent) of 411 paras, 4 1dangahs, 1 nazhi of paddy, of the money value of Rs. 138/- inclusive of paras vasi (allowance

(1) [1962] K.L.T. 404

(2) l.L.R. [1944] Mad. 254

for difference of measurement) duly dried, winnowed, cleaned, A conveyed to the jenmi's residence and measured out by their 1 40 nazhis para, after deduction of \he interes~ due on the mortgage amount and the assessment on te properties due to the Government from the said rent together With sundry payment of one para, two idanglis of gingelly oil of the value of Rs. 6, within the 30th of Makaram (10th February) of each year commencing with the B year 1069 M.E. (1893-94) and duly take receipt therefor.

In Sankunni's case the land revenue was increased as a result of resettlement.

The question was whether the burden of the increased revenue fall upon the jenmi. It was contended in Sankunni's (') case that inasmuch as there was reference in the deed to gross yield of the land and the jenmi was to receive his rent after C deduction of the interest due on the mortgage and the Government revenue, the in1ention was to fix the l\anamiars' liability on tbe basis of the revenue payable to the Government on the date of the kanam. If the revenue payable was to be increased it was said in that case that the jenmi was to be responsible for the payment of the additional amount.

The entire ratio in Sankunni's( 1) case was first that the liability of the jenmi was for the revenue and secondly, the kanamdar was to deduct from the rent the interest on the mortgage amount and the assessment on the properties due to the Government.

The decision of the learned Single Judge of the Kerala High Court in Parameswaran's(2) case was that recital in the deed that the .E defendant was to be in possession of the properties and was to pay the revenue out of the income and appropriare the balance towards interest on the amount of the advance amounted to a stipulation for payment of revenue as michavaran or rent. In Sa11kunni's(1) case the direction to pay revenue out of tho~ rent of the property which was due to the landlord was justifiably held to F be a payment on behalf of the landlord because it was a part of the michavaram.

That reasoning could not apply to Parameswaran's(2) @Se because in that case there was neither any fixation of rent nor any Stipulation for payment of rent or michavaram to the landlord.

This Couvt in Cherumanalil Lakshmi & Ors. v. Mulivil Krtn- G njnamkandy Naravani & Ors. (3 ) considered as to when a transaction would be kanam-kuzhikanam and when a usufractuary Illllrtga.Q; e. In each case it manifestly depends entirely on the terms of thitrnnsaction.

In Lakshmi's case there was a demise of land with fruit bearing trees for 24 years. The transfer was for the enjoyment o( land with trees.

The kanam amount was u

(!) l.L.R. [1944] Mad. 254

(2) [1962] K.L.T. 404 t

(3) [1967] I S.C.R. 314

MANGALA KUNHIMINA UMMA V. PUTHIVAVEOTTIL PARU ~87

AMMA (Ray, /,) A Rs. 5000/- in one case and Rs. 600/· in the other. The transferees were entitled to appropriate the income of the land in lieu of interest on the kanam amount and to hold the land even after the expiry of 24 years until the payment of the kanam amount and the value of the trees planted by them. It was therefore found that all the ingredients of kanam-kuzhikanam were satisfied. The B test to be applied is whether the purpose of the transaction is enjoyment of the propertyby the transferee or whether it is intended to secure the repayment of debt by transfer of interest in the proper.y.

The mere description of the deed as kanam-kuzhikanam will not be decisive of the essence of the transaction. The description c of deed by itself isofated from the terms and provisions may be misleading oi: a misnomer.

Counsel for the respondents relied on the Bench decision of the Kerala High Court in Kunhiparan v. V. Naicken & Ors(1). in support of the propositlion that payment of perquisite would indicate that the relationship was that of land-lord and tenant.and D the name of the document would not be sufficient to displace the real terms. In Kunhiparan's case the transaction was described as a kudiyiruppu to have the flavour of a mortgage but the court found the transaction by the terms, provisions and intention of the parties to be a lease and not a mortgage.

The circumstances and the conduct of the parties are always E a very useful guide in ascertaining the true character and content of the transaction. Counsel for the respondents relied on the Full Bench decision of the Kerala High Court in Kunhirama Nambiar v.Pairu Kurup(') wbere the document was a kanayadharam and in spite of its nomeiiclature it was held to be a mortgage and not a kanam. The elements which are usually considered relevant to F find out the intention of the parties, are first, the proportion of the am?unt advanced to. the value of the securitr; secondly, the rate of mterest payabl_5: c; in the sum advanced; thirdly, the absence of a provision for makin_g improvements and the proportion of the rent or 'purapad'to the income reserved for appropriation towards interest; and fourthly, the surrounding circumstances at the time of the transaction, namely, that the tarward was at the time of G the exectio? of the doc_lllllent in !1ire need of money to discharge debts to mdicate that the transaction was intended to be a mortgage and not a lease. It will always be a significant feature in a document as to whether the jenmoll! right of the tarwad in the properties has been secured for the kanartham by way of mortgage.

H The first and foremost element to be found for a lease is whether there is the intrinsic intention in the written document for en-

(1) [1967]K.L.T. 646.

(2) [1969}K.L.T. 62. 8-918 Sup. C.I./71

joyment of the properfy by the transferee in lieu of rent or perquisites. Secondly,. t~ term of renewal of the enjoyment would indicate the feature of a lease. Thirdly, it has to be found out whether there is any provision for payment of customary dues.

The learned Single Judge in the decision of the Kerala High Court in Hussain Thangal v. Ali(') rightly said that the use of words like 'pattam' meaning profits would be a strong indication of the transaction to be a lease and not a mortgage.

The dominant features of a mortgage transaction on the other har:d would be the ascertainment of the ratio of the value of land to the amount advanced. If the ratio of the amount advanced bears a substantial proportion to the value of the property transferred it would be a strong piece of intention and circumstance to indicate loan and a mortgage. A provision entitling the transferee to ask for a return of money by sale of the property would be a very important feature to indicate that trans_action is a loan and a mortgage and not a lease. The absence of such a prqvision, however, would not totally repel the transactiop fo be a mortgage. The execution of counter part is sometime as common feature in the case of possessory ri10rtgage though the exis!ence of a counterpart by itself will not be conclusive of the question.

The deed understood in the light of the surrounding circumstances will provide the answer in the 'acts and circumstances of each case. In the present case, emphasis was placed by counsel for the appellants on the payment of Government revenue by the transferee. This Court in Patel !Jhunder Mavji etc. v. lat Mamdaji Kalaji (deceased) through L. Rs. lat Saheb Khan Mamdaji(2) etc. said that payment of re"enue . and other dues to the State would not clothe the occupants with the right of the tenants. Ordinarily, mortgagees under section 76(c) of the Transfer of Property Act in the absence of a contract to the contrary pay out of the income of the property the Government revenue and all other charges of a public nature d_uring their possession of such land. The High Court in the present case correctly said that stipulation in the deed of payment of Government revnue by the transferee was -"that by virtue of the grant the liability to pay revenue is transferred to the grantee and the grantee who had accepted the grant und the liability, when he pays the revenue, pays it on his own behalf'.

The High Court also correctly held that a mere direction to pay the revenue of the pronerty by the grantee, particularly when no ment is not directed to be made out of anything which is due or payable to the grantor, cannot be construed as a payment or rent or michavara)Il to the grantor.

The proportion between the amount advanced and the value of the property is one of the important tests to be taken into con-

(!) [1961] K.L.T. 1033.

(2) [1969J 3 S.C.R. 690,

MANGALA KUNHIMINA UMMA V. PUTHIVAVEOTTIL PARU 589 AMMA (Ray, J.) sideration in deciding the nature of the transaction. Where the amount advanced bears a substantial proportion to the value of the property it is an important element indication that the intention was the creation of a mortgage and not a tenancy. In the present Caie, the amount for which the properties included in Ex.B-6 were sold to the first plaintiff under Ex.A.2 was Rs. 5000/- out of which Rs. 2500/- was to go in. discharge of the amount under Ex.B-6.

The advance, therefore, bore a substantial proportion to the value of the property.

This feature when considered along with the fact that the document did not provide P.ayment of any annual purapped to the jenmi and that the annual amount was directed to be paid as reven11e of the property which came to Rs. 10-4-0, a paltry recurring annual liabilify, would be an additional reason to support the intention of the parties that the transaction was a mortgage and

not a tenancy.

It is significant that after the c; xecutin of Ex.B-6 defendants No. 1 and 2 entered into a partition agreement evidenced by Ex.

A-3.

The partition deed included transactions called kanam other than the disputed one forming the subject matter of the suit.

In almost all the properties held u.nder kanam there was division by metes and bounds, but with regard to Ex.B-6 and the amount of Rs. 2000/- there was no division by metes and bounds. This would also point to the conclusion that the defendants No. I and 2 never treated Ex.B-6 as creating a tenancy.

In the present case the features which favour the construction. of the transaction to a mortgage and not a lease are : first, that there is no provision for renewal; secondly, there is no provision for payment of customary dues; thirdly, the property was to be enjoyed by the defendants by way of interest .on their advance after payment of land tax to the State, fourthly, the payment of land tax i~ .not a deduction .from rent or _Qerquisites; fifthly, there is a prov1s1on for surrendenng the property with a registered release at the cost of the transferees oa the receipt of the consideration of an~ and the balance amount; sixthly, when the consideration 1s paid back the counter-pattam !feeds and prior deeds would be returned; and finally, there is liability to pay interest on the advance

an~ possession and enjoyment of profits of the property is in lieu of mterest.

For these reasons we are of opinion that the High Court was correct in its conclusion as to the nature of the transaction being a mortgage and not a lease.

The appeal fails and is dismissed with costs.

G.C.

Appeal dismissed

ssa

MANGALA KUNHIMINA UMMA & ORS

PUTHIVAVEOTIIL PARU AMMA & ORS

G. K. MITTER

A. N. RAY, JJ

Reforms Act 1964

s. 2(22)

s. 2(22)

Kerala Land Reforms Act, 1964

Kerala High Court

Ray

Cherumanalil Lakshmi

[1969] 3 S.C. R. 690

T. Narayanan Nambyar

A. V. V. Nair

K. T. Harindranath

A. S. Nambyar

Malabar Tenancy Act, 1929

Reforms Act, 1964

section 132(1)(a)

section 2(22)

Narayani

Kerafa High Court

Madras High Court

Madras

Sankunni

Cherumanalil Lakshmi

Lakshmi

Kunhiparan

section 76(c)

Transfer of Property Act