NATHA SINGH &. ORS.

THE FINANCIAL COMMISSIONER, TAXATION, PUNJAB&.

ORS.

March 11, 1976

[A. C. GUPTA AND JASWANT SINGH, JJ.]

Constitution of India~ Art. 226-Error of law absent in concurrent decisions of Revenue authorities-High Court justified in refraining to exercise appellate jurisdiction in writ proceedings.

Code of Civil Procedure, Order 41, r. 27-Reception of additional evidence by appellate courts di'scretionary-Limitations-Test to be applied.

Appellant Natha Singh was recorded as a land owner in revenue records.

Under the Punjab Security of Land Tenures Act, 1953, the Collector, Ferozepore, declared an area of 63 standard acres and 4 units, as surplus land in his hands. The sons of Natha Singh appealed to the Commissioner, Jullundur division, who remanded the case for fresh determination of "surplus area".

On a re-examination of faCts, the Collector, Ferozepore, overruled the pleas of the appellants.

Their appeal to the Commissioner, Jullundur division, and a further revision petition to the Financial Commissioner, Taxation, Punjab, were also dismissed.

All these orders were challenged before the High Court under Art. 226. The High Court dismissed the matter in limine, but granted a certificate under Art. 133(1)(a).

The appellants contended before this Court that in the facts and circumstances of the case, the High Court could not dismiss the writ, petition in limine, as the revenue authorities had wrongly computed the 'surplus area'. They further contended that appellants No. 2 and 3 were not afforded proper and adequate opportunity by the Collector to prove their claims. The appellant9 also applied for permission to adduce additional documentary evidence.

Dismissing the appeal, the Court, HELD : ( 1) In dealing with a petition under Art. 226 of the Constitution, the High Court cannot exercise the jurisdiction of an appellate court. and cannot re-examine or disturb the findings of fact arrived at by an inferior Court or a tribunal in the absence of an error of law. [622E-F]

(2) In the instant case, the orders passed by the revenue authorities did not suffer from any error of law so as to warrant interference in writ proceedings and the High Court was justified in dismissing in limine the writ petition preferred by the appellants.

[623F]

(3) The application of the appellants for additional evidence cannot be allowed in view of the well-established principles of law that the discretion given to the appellate court to receive and admit additional evidence is not an arbitrary one but is a judicial one circumscribed by the limitations specified in order 41 rule 27 of the Code of Civil Procedure.

The true test to be applied in dealing with applications for additional evidence is whether the appellate court is able to pronounce judgment on the materials before it, without taking into consideration the additional evidence sought to be adduced.

[623G-H, 624AJ

Arjun Sing/z alias Puran v. Kartar Singh &: Ors. [1951] SCR 258 referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1308 of 1968.

From the order dated 1st May, 1967 of the Punjab and Haryana High Court at Chandigarh in Civil Writ No. 707 of 1967.

/-.

~ATtt; A SINGH v. FINANCIAL COMMISSIONER (Jaswanl Singh, J.) 62 i

Hardyal Hardy, Naunit Lal and Miss La/ita Kohli, for the appel- A !ants.

0. P. Sharma and P. N. Puri, for the respondents.

The Judgment of the Court was delivered by

JASWANT SINGH, J.-This appeal by certificate under Article 133 (l){a) of the Constitution of India granted by the High Court of Punjab and Haryana at Chandigarh is directed against its order dated May 1, 1967, dismissing in limine the writ petition filed by the appellants herein.

The facts giving rise to this appeal are : Natha Singh, appellant No. 1 herein, was recorded in revenue records as land-owner in respect of 39 standard acres and 9t nnits of land in village Malout, 53 standard acres and St units in village Kanamgarh and 4 standard acres and 2 units in village Bhagwanpur. By his order dated July 5, 1959, the !hen Collector, Ferozepore, acting under the provisions of the Punjab Security of Land Tenures Act, 1953, hereinafter referred to as 'the Act' declared an area of 63 standard acres and H units out of the aforesaid land aggregating 93 standard acres and H units as surplus in the hands of Natha Singh. Rajinder Singh and Jarnail Singh, appellants Nos. 2 and 3 herein, who are the sons of appellant No. 1, went up in appeal against the said order of the Collector to the Commissioner, Jullundur Division, who vide his order dated July 20, 1965 allowed the appeal, set aside the aforesaid order of the Collector and remanded the case for fresh determination of the "Surplus Area." After re-examination of the case on remand, the Collector, ferozepore, vide his order dated December 20, 1965, overruled the plea raised by appellants Nos. 2 and 3 that the area comprised in khasra Nos. 296, 297, 517, 519, 285, 293 and 206 which was in their cultivating possession as tenants under appellant No. I before the commencement of the Act should be treated 'Tenants Permissible Area' and excluded from the surplns pool ancl held that the entries in khasra girdawaries on which the claim of the said appellants was grounded could not be relied upon as they had been tampered with. The Collector further held that even taking the entries at their face value, appellants Nos. 2 and 3 could not be treated tenants as contemplated by the Punjab Tenancy Act, 1887 (Act XVI of 1887) as they were not paying any rent to appellant No. 1. The Collector also overruled the plea raised by appellant No. 1 that there was some 'banjar' land which had to be excluded while reckoning the permissible area.

Dissatisfied with this order, the appellants preferred an appeal to the C0mmissioner, Jullundur Division, who by his order dated November 7, 1966 dismissed the same and upheld the aforesaid order of !he Collector, Ferozepore. Aggrieved by these orders, the appellants took the matter in revision to the Financial Commissioner, Taxation, Punjab,

who also bv his order dated March 3, 1967, affirmed the aforesaid orders of the Collector, Ferozepore, and Commissioner. Jnllnndur Division. All these orders were challenged by the appellants before the High Conrt of Punjab and Harvana by means of a petition under Article 226 of the Constitution but the same, as already stated, was dismissed in limine. The High C:ourt. however. granted a certificate to the appellants under Article 133(1) (a) of the Constitntion.

Appearing in support of the appeal, Mr. Hardayal Hardy has contended that the writ petition filed by the appellants could not, in the facts and circumstances of the case, be a1sm1ssed in limine by the High Court. Elaborating by his submission, the learned counsel has urged that the orders passed by the revenue authorities could not be sustained as they did not, while computing the 'Surplus Area', leave out the permissible area which even according to the khasra girdawaries and Roznamcha Waqaiti which is maintained for the purpose of recording changes in cultivation was being cultivated by appellants Nos. 2 and 3, as tenants of appellant No. 1 since 1951-52; that 30 bighas of land which was recorded as 'banjar' at the time of the commencement of the Act and did not fall within the definition of land as contained in section 2(8) of the Act had not been taken into account while evaluating and assessing the "Surplus Area", and that appellants Nos. 2 and 3 were not afforded proper and adequate opportunity by the Collector to prove the claim put forth by them.

).,.

Mr. Hardayal Hardy has, in conclusion, drawn our attention to _.,. the application made by the appellants for permission to adduce additional documentary evidence in the form of khasra girdawaries for the years 1952 to 1960, the grounds of appeal preferred by the appellants before the Commissioner, the grounds of revision filed by them before the Financial Commissioner, the depositions of appellant No. I and J.

Gurcharan Singh, Patwari, and forms A.D:E. and F. and its inclusion in the record and has emphasized that the aforesaid documents which are relevant and necessary for disposal of the appeal should be allowed to be produced.

With regard to the first contention advanced on behalf of the a.ppellants, it is sufficient to observe that it has been time and again observed by this Court that in dealing with a petition under Article 226 of the Constitution, the High Court cannot exercise the jurisdiction of an appellate court and cannot re-examine or disturb the findings of fact arrived at by an inferior court or a tribunal in the absence of any error of law.

So far as the contention of the learned counsel for the appellants based on the revenue record is concerned, it may be remarked that it has been concurrently found by the Collector and the Commissioner who examined the original khasra girdawaries that they had been tampered with .by the revenue staff in collusion with the appeilants. In the circumstances, it would not be safe to place any reliance on them. The reliance sought to be placed on 'Roznamcha Waqaiti' is also an after thought.

No authenticated copy of the 'Roznamcha Waqaiti' with reference to which we are invited to verify the entries in the khasra girdawaries has been included in the record. It is also significant that no reliance either before the Collector or before the Commissioner or even before the Financial Commissionr seems to have been piaced upon the 'Roznamcha Waqaiti'. It is also to be noted that even in the application for leave to adduce additional evidence, no mention has been made of any entry in 'Roznamcha Waqaiti'. Even if the entries in khasra girdawaries are treated as genuine, they can be of little

>-·

NATH;\ SINGH v. FINANCIAL COMMISSIONER (Jaswant Singh, J.) 62 3

assistance to the appellants as they do not at all, as observed by the Collector, appear to show that any rent was being paid by the appellants Nos. 2 and 3 to appellant No. 1. In the absence of payment of rent or in the absence ot material to show that there was a contract between appellant No. 1 and appellants Nos. 2 and 3 absolving the latter of the liability to pay rent, it is ditlicult to uphold the daim of appellants Nos. 2 and 3 that they were tenants of appellant No. 1.

So far as the claim regarding 'banjar' land is concerned, it would suffice to say that the Collector who examined the revenue record found that there was no land which fell within that category. It cannot

be dIBputed that a land-owner who wishes to claim the benefit of the exclusion of 'banjar qadim' or 'banjar jadid' land from the purview of land has to prove that it was not at the relevant date being put to

any agricultural purpose or a purpose subservient to agriculture or used C for pasture. No such proof seems to have been adduced in the instant case. It is also important to note that even before the Commissioner, the appellant did not plead that any 'banjar' land was not left out of consideration while assessing the 'Surplus Area'. All that was urged before the Commissioner was that the land comprised in khasra No.

864 of village Malout had not been left out of account although it was banjar.

The Commissioner repelled this plea as he found from the D examination of the record that the area comprised in the said khasra number was 'Chair Pumkin Sarak' which had not been taken into account while assessing the 'Surplus Area of appellant No. 1.

The contention raised on behalf of the appellants that they were not allowed an opportunity of establishing their claim cannot also be . countenanced. There is nothing on the record to indicate that the E appellants were denied opportunity to prove their case. The Financial Commissioner has categorically found that appellants Nos. l and :.l bad full opportunity to place on record their evidence to establish that they were cultivating the land of their father as his tenants and that they did not avail of that opportunity by placing any material on the re.'ord to show that, or that there was a private partition as sought to be urged by them before him.

In view of the foregoing reasons we are satisfied that tne orders passed by the revenue authorities did not suffer from any error of law so as to warrant interference in writ proceedings and the High Court was justified in dismissing in limine that writ petition preferred by the appellants.

So far as the application of the appellants for additional evidence is concerned it cannot be allowed in view of the well settled principles of law that the discretion given to the appellate court to receive and admit additional evidence is not an arbitrary one but is a judicial one circumscribed by the limitations specified in Order 41, Rule 27 of the Code of Civil Procedure. If the additional evidence is allowed to be adduced contrary to the principles governing the reception of such evidence, it will be a case of improper exercise of discretion and the additional evidence so brought on the record will have to be ignored.

The true test to be applied in dealing with applications for additional

evidence i; whether the appellate court is able to pronounce judgment un the materials before It, Without taking mto consideration the additional evidence sought to be adduced. (See Arjun Singh Alias J>uran

v. Kartar Singh and Ors.('). In the instant case, we have not been able to experience any difficulty in rendering the judgment on the material already before us. Instead we feel that the prayer for adducing additional evidence has been made merely to fill up gaps on the basis of some revenue record which has been found by the Collector and the Commissioner to the spurious. ·

We also do not find any other substantial reason to accede to the request of the appellants to allow them to adduce additional evidence.

There is no inherent lacuna or obscurity which we reqwre to be filled up or removed to be able to pronounce judgment.

The application of the appellants is accordingly rejected.

In the result we do not find any merit in this appeal which is also

~. ..

hereby dismissed but in the circumstances of the case without any .... order as to costs.

M.R.

Appeal dismissed.

(I) [1951] S. C. R. 258.

NATHA SINGH &. ORS

THE FINANCIAL COMMISSIONER, TAXATION, PUNJAB &. ORS

A. C. GUPTA

Constitution of India

Art. 226

Code of Civil Procedure

Natha Singh

Ferozepore

Art. 226

Art. 133(1)(a)

Art. 226

order 41 rule 27

the Code of Civil Procedure

Hardyal Hardy

Naunit Lal

La/ita Kohli

P. Sharma

P. N. Puri

Article 133

Constitution of India

Malout

Kanamgarh

Bhagwanpur

July 5, 1959

Rajinder Singh

Jarnail Singh

July 20, 1965

ferozepore

December 20, 1965

Punjab Tenancy Act, 1887

High Conrt of Punjab and Harvana

Article 226

Article 133(1)

Hardayal Hardy

Roznamcha Waqaiti

section 2(8)

Article 226

Roznamcha Waqaiti

Order 41, Rule 27

the Code of Civil Procedure


SANTI RANJAN DASS GUPTA

M/S DASIJRAM MIRZAMAL

March 11, 1976

[A. N. RAY, C.J., M. JI. BEG AND JASWANT SINGH, JJ.]

~25

Indian Limitation Act, 1908, :1. 15, whether attachment of decree amount1 to •stay' within the meaning of-Execution application struck off-Another application on decree becoming executable, if continuation of t.he previous one.

The respondent obtained a m.oney-decree against the appellant, from the Subordinate judge, Gauhati, and applied for its execution. The appellant applied for an adjustment of the decree, <:IIld the respondent's application for execution was dismissed.

The appellant then obtained a' decree from the Subordinate C Judge, Nowgong, against the respondent, and in its execution, got his cGauhati decree attached. The appellant then withdrew his adjustment-application.

The High Court allowed the respondent's appeal for execution of the Gauhati decree. The Subordinate Judge, Gauhati, struck off his original executionapplication from the file.

Thereafter, the attachment order ceased to be operative on account of the High Court's allowance of the respondent's appeal in the Nowgong matter, and the respondent again applied for execution of the Gauhati decree, but the SuborJinate Judge, Gauhati, dismissed the application D

as time-barred. The High Court allowed his appeal and directed the execution to proceed. The appellant contended before this Court that attachment of the respondent's decree did not amount to a 'stay' within the meaning of S. 15 of the Indian Limitation Act, and therefore, his second application for execution was barred by limitation, not having been filed within three years of the first one being struck off by the Subordinate Judge, Gauhati.

Dismissing the appeal, the Court

HELD : ( 1) The order obtained by the appellant attaching the decree of the respondent precluded the respon.dent from executing the decree during the Y time th.: rittnchnicnt \\'as in fore::.

There was no question of limitation because the application was filed within three years from 28 April, 1964, when the bar against execution was raised and the attachment order ceased to be operative.

[627B~]

(2) The order striking off the execution application was mere consigning

it to the record-room for statistical purposes. The application for execution F on 27th July, 1965, is a continuation of the old application.

L627D-E]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 858 of 1968.

From the Judgment and Decree dated 7-7-67 of the Assam and Nagaland High Court at Gauhati in Misc.

Appeal Nos. 36 and 37 of 1966.

Sarjoo Prasad and A. K. Nag for the appellant.

B. P. Maheshwari for the respondent.

The Judgment of the Court was delivered by

RAY, CJ. Thi• appeal by certificate is from the order dated 26 . July, 1967 of the High Court of Assam.

The only question in this appeal is whether the responden:'s application filed on 27 July, 1965 for excution of !he decree obtamed by him is barred by limitation.

SUPREME COURT REPORTS

(1976] 3 S.C.R.

The respondent on 7 January, 1952 obtained a decree against the appellant for the sum of Rs. 71,980 in a money suit filed in the Court of Subordinate Jndge, Gauhati. On 8 December, 1956 the respondent decree-holder filed an application No. 89/56 for executing the said decree. On 15 July, 1957 the appellant, the judgment debtor, filed an application pleading adjustment of the decree. On 15 April, 1958 the judgment debtor withdrew the said application.

On 18 December, 1957 the Subordinate Judge Gauhati dismissed the decree-holder's application No. 89 /56. The decree-holder preferred an appeal. The High Court at Gauhati on 1 July, 1959 set aside the order of the Subordinate Judge and allowed the appeal for execution of the decree.

Meanwhile on 18 January, 1958 the appellant judgment debtor in the Gauhati suit obtained a decree against the respondent for the sum of Rs. 1,22,000 in the Court of the Subordinate Judge at Nowgong.

In execution of the decree in the Nowgong suit the appellant on or about 29 January, 1958 obtained an attachment of the respondent's decree passed in the Gauhati suit.

On 13 August, 1959 the Subordinate Judge, Gauhati struck off the execution application No. 89/56 from the file.

The respond, ent filed an appeal against the decree obtained by the • appellant in the Nowgong suit.

The High Court on 28 April 1964 accepted the appeal filed by the respondent and dismissed the N owgong

suit filed by the appellant.

On 27 July, 1965 the respondent filed an application for execution E in the Court of the Subordinate Judge, Gauhati. The appellant preferred an objection contending that the application is barred by limitation.

On 4 March, 1966 the Subordinate Judge dismissed the execution ---1,'

application as barred by time.

On 26 July, 1967 the High Court accepted the appeal filed by the respondent and directed the execution to proceed.

The contention of the appellant is that the order obtained by the appellant attaching the respondent's decree did not amount to a stay within the meaning of section 15 of the Indian Limitation Act, 1908, and therefore, the respondent's application for execution which was filed on 27 July, 1965 was barred by limitation. The appellant contended that when the Subordinate Judge, Gauhati on 13 August, 1959' struck off the execution application of the respondent the respondent should have filed an application for execution within three years from that date.

The High Court referred to the order dated 29 January, 1958 passed by the N owgong Court attaching the decree obtained by the respondent. The High Court relied on the provisions contained in Order 21 Rule 53 (1) (b) of the Code of Civil Procedure and held that the attachment continued restraining the respondent from executing the decree until the notice issued by the Court attaching the decree was recalled.

The Nowgong court did not pass any order recalling tho

S. R. DASS GUPTA V. DASURAM MIRZAMAL (Ray, C.J.) 627

order.

On l March, 1958 the Nowgong court passed an order which A. was as follows :

"Notice served.

No objection filed by J. D. (meaning thereby judgment debtor). Heard both parties. Execution case is struck off for the present. Attachment to continue until further orders."

In the context of this order of attachment passed by the Nowgong court the attachment continued until the Nowgong suit was dismissed by the High Court on 28 April, 1964.

The High Court rightly held that there was no question of limitation because the application was filed within three years from 28 April, 1964 when the bar against execution was raised and the order restraining the respondent decree holder from executing the decree in the Gauhati suit ceased to be operative.

Another contention which had been raised by the appellant and repeated here is that when the Gauhati court on 13 Angust, 1959 struck off the execution case No. 89/56 the execution application filed on 27 July, 1965 was barred by time. The High Court held that the Gauhati Court on 13 August, 1959 merely struck off the execution application, and, therefore, the subsequent application which was made I) was a continuation of the execution proceedings.

The High Court held that striking off. the application did not amount to any order deciding the merits of the application.

The order obtained by the appellant attaching the decree of the respondent in the Gauhati suit has been rightly held by the High Court to have precluded the respondent from executing the decree during the time the attachment was in force. The other conclusion of the High Court that the execution application dated 27 July, 1965 was a continuation of the earlier application is also correct. The order striking

off the execution application has been rightly construed by the High Court as merely consigning the application to the Record Room for statistical purposes. The application dated 27 July, 1965 indicates in column 2 as the respondent rightly stated that the previous application for execution was struck off on 13 August, 1959 because of the order of attachment passed by the Nowgong court. The attachment order was nullified only when the appellant's suit was dismissed by the High Court on 28 April, 1964. The respondent's decree became execntable at that time. The inescapable conclusion is that the application for execution on 27 July, 1965 is a continuation of the old application.

For these reasons, the judgment of the High Court is affirmed. The appeal is dismissed with costs. ·

M.R.

Appeal dismissed.

SANTI RANJAN DASS GUPTA

M/S DASIJRAM MIRZAMAL

March 11, 1976

A. N. RAY, C.J.

M. JI. BEG

JASWANT SINGH, JJ.

Indian Limitation Act, 1908

Subordinate C Judge, Nowgong

Subordinate Judge, Gauhati

Nowgong

SuborJinate Judge, Gauhati

S. 15

Limitation Act

27th July, 1965

Sarjoo Prasad

A. K. Nag

B. P. Maheshwari

RAY

18 December, 1957

Subordinate Judge Gauhati

High Court at Gauhati

1 July, 1959

18 January, 1958

13 August, 1959

section 15

Indian Limitation Act, 1908

27 July, 1965

29 January, 1958

Order 21 Rule 53

the Code of Civil Procedure

S. R. DASS GUPTA

28 April, 1964

Gauhati court

13 Angust, 1959

Gauhati Court

Nowgong court


HARBANSLAL JAGMOHANDAS & ANR.

PRABHUDAS SHIVLAL

March 12, 1976

[A. N. RAY, C.J., M. H. BEG AND JASWANT SINGH, JJ.]

Bombay Rents Hotel anti Lodging House J?ates Control Act 1947-Exp/a- 11ation I to s. 12-Sec. 11-12(3)(a)(b)-Whether a tenant must raise dispute as to standard rent within one month fron1 receipt of notice or whether can be raised in written statement.

Both the appeals raise a common question as to whether a tenant in order to resist passing of a decree of eviction under the provisions contained in ' 12(3 )(a) of the Bombay Rent Act 1947 must dispute the standard rent within one month from the date of receipt of the notice from the landlord terminating the tenancy on the ground of arrears of rent or \Vhether a tenant can raise such a dispute in the written statement. The Gujarat High Court toot a view that the dispute as to standard rent has to be raised within one month from the service of the notice on the tenant. The Bombay High Court ha,,

taken a contrary view and held that the tenant can raise a dispute as to standard rent in his written statement in answer to the suit and in such a case the provisions of s. 12(3) (a) of the Act will apply.

Jn the Gujarat case. the High Court found that the tenant did not raise the dispute within one montll of the service of the notice terminating the tenancy inter alia, on the ground of arrears of rent for more than 6 months. In the Bombay appeal the dispu1c

was not raised within one month from the date of the receipt of the notice. It was, however, raised in the written statement. Under s. 11 of the Act. the court has power to determine standard rent when there is a dispute between the landlord and tenant regarding the amount of standard rent.

1-IELD: (1) Under s. 12 of the Act the landlord is not entitled to recover possession of the premises so long as the tenant pays or is ready and willing to pay the amount of standnrd rent and !Jermitted increases.

Section 12(2) provides that no suit for recovery of possession shall be instituted by a landlord against a tenant on the ground of non-payment of the standard rent. until the expiration of one month next after notice in writing of the payment of the standard rent.

Section 12(3) (a) provides for passing a decree for cvictiOn of the tenant is in arrears for a period of 6 months and neglects to make t_he payment after the expiration of the notice period provided there is no dispute regarding the amount of standard rent. Clause 12(3)fa) provides that in any other. case no decree for eviction should be pac; sed if the tenant pays or tender" in the court the standard rent and permitted increases which is due and thereafter continues to pay or tender in court regular1y such rent till the suit isfinally decided.

Explanation I to s. 12 provides that where there is a dispute as to the amount of standard rent or permitted increases recoverable under this Act the tenant shall be deemed to be ready and wi11ing to pay such amount if before the expiry of the period of one month from the receipt of the notice he makes an application under s. 11 for the fixation of the t'ltandard rent and thereafter pays the rent fixed by the Court. [632-B, GJ

(2) The Bqmbay High Court view overlookc; the limitation of time within which a dispute is to be raised as to standard rent.

The view of the Bombay High Court that dispute within one month of the service of the notice terminatin• the tenancv is one mode of raisin):! a dispute and there i<i nnother mode of raising the -dispute at anv stage of the suit. nullifies the provisions contained in s. 12 and explanation thereto and confers a right on the tenant where the 1ea:is1ation does not contemplate such right. The provisions in s. 11 (3) of the Act deal with orders which may be passed by the court during the pendency of the application disputing the rent. Provisions of s. 11 ( 4) of the Act deal with orders \vhich may be passed consequent upon dispute as to rent. It is

only when a~ application disputing the rent fa made witi.~ the time contm- A plated by Explanation I to s. 12 of the Act that the provisions on sub-secttona

(3) and (4) of s. 11 are attracted. [635F-H, 636AJ

" CIVIL APPELLA:rE JURISDICTION : Civil Appeal No. 282 of 1971.

Appeal by special Leave from the Judgment and Order dated 22-U-70 of the Gujarat High Court in C.R.A. No. 1353 of 1970 and

CIVIL APPEAL NO. 2068/71

Appeal by Special Leave from the fodgment ad. Order. dated the 31-3-71 of the Bombay High Conrt m Special Civil Apphcat10n No. 859 of 1967.

D. V. Patel, S. K. Dholakia and R. C. Bhatia for Appellants in

C. A. 282/71

V. S. Desai, Makohn F. A. Pereize and H. S. Parihar for Appellants in C. A. 2068/71

V. S. Desai, H. S. Parihar and I. N. Shroff for Respondent in

C.A. 282/71

The Judgment of the Court was delivered by

RAY, C.J.--Civil Appeal No. 282 of 1971 referred to as the Guiarnt Appeal is by special leave from the order dated 22 December,

1970 of the High Court of Gujarat rejecting a revision application agaimt the judgment and decree passed by the Extra Assistant Judge on 17 September, 1970.

Civil Appeal No. 2068 of 1971 hereinafter referred to as the Bombay Appeal is by special leave from the judgment and order dated 21 March, 1971 of the High Court of Bombay.

Both the appeals raise a common question as to whether the provision contained in section 12 (3) (a) of the Bombay Rents, Hotel and Lodging House Rates Control Act, 194 7 hereinafter referred to as the Act applies. The Gujarat High Court took the view that the provisions of section 12 (3) (a) of the Act apply to the suit.

The Bombay High Court took the view that the provisions contained in section 12 (3) (a) of the Act do not apply to the suit, but that the suit is governed by the provisions contained in section 12 (3)

(b) of the Act.

The principal question is whether on receipt of a notice from the landlord terminating the tenancy on the ground of arrears of rent dispute as to standard rent has to be raised before the expiry of the period of one month after the service of the notice.

The Gujarat High Court has taken the view that the dispute as to standard rent is to be raised within one month from the service of the notice on the tenant.

The Bombay High Court has taken a contrary view and held that the tenant can raise a dispute as to standard rent in his written statement in answer to the suit and in

A such a case the provisions of section 12 (3) (b) of the Act will apply.

In the Gujarat appeal the respondent filed a suit for recovery of possession of a portion of the ground floor of a building on the ground that the appellant was iri arrears of rent from 1 September, 1964 and also on the ground that the respondent bonafide required possession of the premises in suit.

The Third Joint Civil Judge in the trial court gave a decree in favour of the respondent for possession of the premises.

The trial court held that the appellants were in arrears of rent from 1 September, 1964 an, t that they were not ready and willing to pay the rent.

The trial Court further held that the contractual rent in respect of the premises was not unreasonable and excessive.

The appellants in the Gujarat appeal filed an appeal in the court of District judge of Surat.

The Appellate Court by judgment dated 17 September, 1970 confirmed the judgment and decreed the suit.

The appellants thereafter filed a revision application before the Gujarat High Court on the ground that the court should have held that the case fell under section 12 (3) (b) of the Act.

The High Court rejected the revision application at sight.

The facts found in the Gujarat appeal are as follows: The appellants paid rent to the respondent up to 31 August, 1964.

The respondent landlord by notice dated 14 November, 1966 terminated the tenancy of the appellants, inter alia, on the ground that the appeUants were in arrears of rent for more than six months.

The appellants received the notice on 6 December, 1966.

The respondent filed the suit on 2 February, 1967.

In the Gujarat appeal appellants contended that they raised the dispute about the standard rent by their letters dated 17 November, 1966; 19 December, 1966 and 11 February, 1967, and therefore, there was a dispute as to standard rent and the provisions contained in section 12 (3) (a) of the Act do not apply.

The Appellate Court found that the letters dated 17 November, 1966 and 19 December, 1966 alleged to have been written by the appellants to the respondent were manufactured by the appellants and the certificate.!

of posting were obtained by unscrupulous means. As to the alleged letter of the appellants dated 11 February, 1967 the Appellate Court found that in that letter the appellants referred to the letters dated 17 November 1966 and 19 December, 1966.

The respondent by his reply datd 16 February, 1967 denied that the respondent ever received any Jetter dated 17 November, 1966 or 19 December, 1966.

On this evidence the Appellate Court found that there was no dispute as to rent within one month of the service of the notice terminatini

the tenancy.

In the Bombay Appeal the notice terminating the tenancy was dated 5 April, 1963 to deliver possession on the expiration of 15 May, 1963. The suit was filed on 11 September, 1963. The

appellants landlords alleged that the tenants were in arrears from 15 A Mardi, 1960 to 15 March, 1963, viz., for over six months. In the Bombay appeal the trial Court gave a decree for possession.

The Appellate Court confirmed the judgment of the trial Court.

In an application under Article 227 of the Constitution the Bombay High Court held that when the respondent paid all arrears and costs of the suit on 23 December, 1964 it could not he said that the respondent did not comply with the provisions of section 12 ( 3) (b) of the Act B The Bombay High Court took the view that the Full Bench of the Bombay High Court in Dattu Subhana Panhalkar v. Gajanan Vithoba Bob hate & A nr. (') held that a tenant could raise a dispute as to standard rent by raising an issue as to standard rent in the written statement.

The provisions contained in sections 12 (3) (a) and (b) of the C Act are as follows:

"(3) (a) Where the rent is payable by the month and there is no dispute regarding the amount of standard rent of permitted increases, if such rent or increases are in arrears for a period of six months or more and the tenant neglects to make payment thereof unlil the expiration of the period of one month after notice referred to in sub- D section (2), the Court shall pass a decree for eviction in any such suit for recovery of possession .

(b) In any other case no decree for eviction shall be passed in any such suit if, on the first day of hearing of the suit or on or before such date as the Court may fix the tenant pays or tenders in Court the standard rent and permitted increase• then due and thereafter continues to E pay or tender in Court regularly such rent and permitted increases till the suit is finally decided and also pays costs of the suit as directed by the Court."

Explanation I to section 12 of the Act is as follows :-

"In any case where there is a dispute as to the amount of standard rent or permitted increases recoverable under F this Act the tenant shall be deemed to be ready and willing to pay such amount if, before the expiry of the period of one month after notice referred to in sub-section (2) he makes an application to the Court under sub-section (3) of section 11 and !hereafter pays or tenders the amount of rent or permitted increases specified in the order made by the Court." G The following provisions with regard to standard re1_1t re found in section 11 of the Act.

The Court may, upon an application made to it for that purpose, or in any suit or proceedings, fix the standard rent, inter alia, where there is any dispute between the landlo'.d nd the tenant regarding the amont of standard rent. If any apphca.tion for fixing the standard rent 1s made by a tenant who has received H a notice from the landlord under sub-section (2) of section 12,, the Court shall forthwith specify the amount of rent or permitted

(l) A.l.R. 1971 Born. 396 .

increases which are to be deposited in Court by the tenant and make an order directing the tenant to deposit such amount in Court cir at the option of the tenant make an order to pay to the landlord such amount thereof as the Court may specify, pending the final decision of the application.

Out of any amount deposited in Court, the Court may make an order for payment of such reasonable sum to the landlord towards payment of rent or increases due to him as it thinks fit.

If the tenant fails to deposit such amount or, as the case may be, to pay such amount thereof to the landlord, his application shall be dismissed.

Under section 12 of the Act the landlord shall not be entitled to the recovery of possession of any premises so long as the tenant pays, or is ready and willing to pay, the amount of the standard rent and permitted increases, if any, and observes and performs the other conditions of the tenancy, in so far as they are consistent with the provisions of the Act.

Sub-section (2) of section 12 of the Act states that no suit for recovery of possession shall be instituted by a landlord against the tenant on the ground of non-payment of the standard rent or permitted increases due, until the expiration of one month next after notice in writing of the demand of the standard rent or permitted increases has been served upon the tenant in the manner provided in section 106 of the Transfer of Property Act.

Clause (a) of sub-section (3) of section 12 of the Act provides for the passing of a decree for eviction first, where the rent is payable by the month; second, there is no dispute regarding the amount of standard rent or permitted increases; third, the rent or increases are in arrears for a period of six months; and fourth, the tenant neglects to make payment thereof until the expiration of the period of one month after notice referred to in sub-section (2) of section 12 of the Act.

Clause (b) of sub-section (3) of section 12 of the Act, states that in any other case, no decree for eviction shall be passed in any such suit if, on the first day of hearing of the suit or on or before such other date as the Court may, fix, the tenant pays or tenders in Court the standard rent and permitted increases then due and thereafter continues to pay or tender in Court regularly such rent and permitted increases till the suit is finally decided and also pays costs of the suit as directed by the Court.

Explanation I to section 12 of the Act provides that where there is a dispute as to the amount of standard rent or permitted increases recoverable under this Act the tenant shaII be deemed to be ready and willing to pay such amount if, before the expiry of the period of one month after notice referred to in sub-section (2), he makes an application to the Court under sub-section (3) of section 11 and thereafter pays or tenders the amount of rent or permitted increases specified in the order made by the Court.

Counsel for the appellant in the Gujarat appeal relied on the Bombay view that there is no limitation of time during which a disc pute must be raised and none can be implied from the Explanation.

The Bombay High Court has not agreed with the view of the Gujarat

High Court in Amba/a/ v. Badaldas('). The Bombay view is that the A dispute in section 12(,3) (a) is not limited only to a dispute raised within one' month of the notice as contemplllted in section 12(3) (b) of the Act.

The Bombay High Court relied on section 11 ( 4) of the Act the provisions whereof are as follows :-

"Where at any stage of a suit for recovery of rent whether with or without. a claim for possession of the pre- B mises, the Court is satisfied that the tenant is withholding the rent on the ground that the rent is excessive and standard rent should be fixed, the Court Shall and in any other case if it appears to the Court that it is just and proper to make such an order the Court may make an order directing the nant to deposit in Court forthwith such amount of the rent as the Court considers c to be reasonably due to the land_lord, or at the option of the tenant an order directing him to pay to the landlord such amount thereof as the Court may specify.

The Court may further make an order directing the tenant to deposit in Court periodically, such amount as it considers proper as interim standard rent, or at the option of the tenant an order to pay to the landlord such arnonnt thereof, as the Court D may specify, during the pendency of the suit.

The Court may also direct if the tenant fails to comply with any order made as aforsaid, within such time as may be allowed by it, he shall not be entitled to appear in or defend the suit except with leave of the Court, which leave may be granted subject to such terms and conditions as the Court may specify." E

The Bombay High Court held that to limit raising a dispute within one month from the service of notice would render the provisions of section 11 ( 4) nugatory. The Bombay High Court held that the effect of sections 11 and 12 of the Act is to give the tenant a right to dispute the standard rent in the event of a suit and if the tenant raises a dispute in answer to a suit for recovery of rent it would be a dis-

F . pute within the meaning of section 12(3) (a) of the Act and would take the suit out of the provisions of that sub-section.

The Gujarat High Court in the decision in Ambalal's case

(supra) and in Chum/al Shiv/al v. Chimanlal Nagindas(') took the view that in order to avoid the operation of section 12(3) (a) of the Act the dispute in regard to standard rent or permitted increases must G be raised at the latest before the expiry of one month from the date of service of notice nnder section 12(2) of the Act and it is not enough to raise a dispute for the first time in the written statement.

In Ambalal's case (supra) the question was as to what Should be stage at which the dispute in regard to standard rent or permitted increases must be raised in order to take the case out of ection 12(3) (a) of the Act. The Gujarat High Court held that.the dispute is one which H is in existence at the date of the notice or at any rate before the ex-

(I) A.1.R. 1964 Guj. 9.

8-608SCI/76

(2) (1966) VII Gujarat Law Reporters 945.

A piry of one month from the date of.its service and not the one raised subsequently in a written statement with a view to avoiding the operation of section 12(3) (a) of the Act.

Counsel for the appellants' in the Gujarat appeal contended that the decision in Vora Abbasbhai v.

Haji Gulamnabi(') has overruled Amblal's case (supra). In Vora Abbasbhai's case the notice terminating the tenancy was dated 1 December, 1956. - The tenant by reply dated 7 December, 1956 contended that the contractual rent was excessive.

The tenantmade an application on 5 Janvary 1957 for fixation of standard rent nnder section 11 (1) of the Act.

While the application was pending the landlord filed the suit on 27 January, 1957 for ejectment. The tenant in the written statement reiterated the contention that the contractual rent was excessive andthat the standard rent should be fixed by the Court. On these facts the question in Vora Abbasbhai's case (supra) was whether the case fall within section 12(3) (a) or section 12(3) (b) of the Act.

The only point in controversy in Vora Abbasbhai's case (supra) was whether the second condition in section 12(3) (a) of the Act, viz., that there was no dispute regarding the amount of standard rent was fulfilled.

The landlord's contention was that the dispute concerning standard rent is oue which must have been raised before service of the notice and since there was admittedly no dispute in regard to standard rent or permitted increases at the date of service of the notice under section 12 -(2) of the Act the second condition in section 12(3) (a) that there was no dispute was satisfied.

This Court did not accept the landlord's contention there and held that the defendant in that case raised the contention by reply dated 7 December, 1956 that the contractual rent was excessive and raised the same contention in the application filed for fixation of standard rent.

The Gujarat High Court in Ambalal's case (supra) held that in order to attract the applicability of section 12 (3) (a) of the Act there must be non-existence of the dispute at the date of the notice and such non-existence must continue right up to the expiration of one month from the date of service of the notice so that if the dispute is raised at any time prior to the expiration of the said period on one month, the operation of section 12(3) (a) would be excluded. The latest point of time when according to Ambalal's case (supra) the dispute in re.gard to the standard rent must be raised in order to avoid the operation of section 12(3) (a) of the Act is the expiry of one month from the date of service of the notice. Ambalal's case (supra) rl!d not say that the dispute concerning standard rent must be raised before service of the notice in order to repel the applicability of section 12(3) (a) of the Act. If the dispute is in existence prior to the expiry of one month after service of the notice though subsequent to the date of th!' notice that would be sufficient to oust the operation of section 12(3) (a) of the Act. The decision of this Court in Vora Abbasbhai's case (supra) has not overruled the decision in Ambalal's case (supra). In Ambalal's case (supra) the conclusion is a single

(1) [1964] 5 S.C.R. 157.

one and it is that in order to exclude the operation of section 12(3)

(a) of the Act the dispute must be in existence latest within one month after service of the notice.

The question as to when a dispute is to be raised came up for consideration in Shah Dhansukhlal Chhangan- /al v.

Dalichand Virchand Shroff & Ors.(').

The appellant fell into arrears of rent in that case.

The landlord gave a notice to the tenant on 18 April, 1955 demanding the arrears of rent and also terminating the tenancy of the defendant with effect from 31 May, 1955. The notice was received by the defendant on 21 April, 1955, The suit for ejectment was filed on 15 March, 1956 on the ground that the defendent was in arrears of payment of rent and permitted increases and as such not entitled to the protection of the Act.

This Court held that section 12 (1) of the Act must be read with Explanation and so read it means that the tenant can only be considered to be ready and willing to pay if, before the expiry of the period of one month after notice referred to in sub-section (2), he makes an application to the Court under sub-section ( 3) of section 11 and thereafter pays or tenders the amount of rent or permitted increases specified by the Court.

This Court found in Chhaganlal's case (supra) that the tenant made no payment within the period of one month of the notice of ejectment and further that although in his written statement he raised a dispute about the standard rent he made no application in terms of section 11 (3) of the Act.

The tenant can claim protection from the operation of section 12(3) (a) of the Act only if the tenant makes an application within one month of the service of the notice terminating the tenancy by raising a dispute as to standard rent.

The view of the Bombay High Court overlooks the limitation of time within which a dispute is to be raised as to standard rent. The view of the Bombay High Court is that disputing within one month of the service of the notice terminating the tenancy is one mode of raising a dispute and there is another mode of raising the dispute at any stage of the suit.

The view of the Bombay High Court nullifies the provisions contained in section 12 and Explanation thereto and confers a right on the tenant where the legislation does not contemplate such a right.

The provisions in section 11 (3) of the Act deal with orders which

may be passed by the Court during the pendency of the application disputing the ren(. Provisions in section 11 ( 4) of the Act deal with H orders which may be passed consequent upon dispute as to rent. It is

(I) [1968j 3 S.C.R. 346.

636 SUPttEME COURT REPORTS

[1976} 3 S.C.R.

A only when an application disputing rent is made within the time contemplated by Explanation I to section 12 of the Act that the provisions in sub-section (3) and (4) of section 11 are attracted.

For the foregoing reasons we uphold the view of the Gujarat High Court and we do not accept the view of the Bombay High Court. We B dismiss Civil Appeal No. 282 of 1971 with costs. We accept Civil Appeal No. 2068 of 1971 and the judgment of the Bombay High Court is set aside. The decree passed by the Civil Judge on 31 October, 1964 and affirmed by the Assistant Judge on 27 September, 1966 is restored. The appellants will be entitled to costs.

P.H.P.

C. A. No. 282 of 1971 dismissed.

C. A. No. 206& of 1971 allowed. "\

HARBANSLAL JAGMOHANDAS & ANR

PRABHUDAS SHIVLAL

March 12, 1976

A. N. RAY, C.J.

M. H. BEG

JASWANT SINGH, JJ.

Control Act 1947

s. 12

Sec. 11

Bombay Rent Act 1947

Gujarat High Court

Bombay High Court

s. 12(3)

Gujarat

Bombay

s. 11

s. 12

Section 12(2)

Section 12(3)

Clause 12(3)

s. 12

s. 11

Bqmbay High Court

s. 12

s. 11

s. 11

s. 12

s. 11

D. V. Patel

S. K. Dholakia

R. C. Bhatia

V. S. Desai

Makohn F. A. Pereize

H. S. Parihar

I. N. Shroff

RAY

21 March, 1971

High Court of Bombay

section 12

section 12

section 12

section 12

section 12

District judge of Surat

17 September, 1970

section 12

6 December, 1966

section 12

Article 227

23 December, 1964

section 12

sections 12

section 12

section 11

section 11

section 12

section 12

section 12

section 106

Transfer of Property Act

section 12

section 12

section 12

section 12

section 11

Gujarat

High Court

section 12(,3)

section 12(3)

section 11

section 11

sections 11 and 12

section 12(3)

Ambalal

section 12(3)

section 12(2)

section 12(3)

Amblal

Vora Abbasbhai

section 11

section 12(3)

section 12(3)

section 12(3)

section 12

section 12(3)

7 December, 1956

section 12

section 12(3)

section 12(3)

section 12(3)

section 12(3)

[1964] 5 S.C.R. 157

section 12(3)

section 12

section 11

Chhaganlal

section 11

section 12(3)

section 12

section 11

section 11

section 12

section 11

31 October, 1964

27 September, 1966


K. V. NARAYANAN

K. V. RANGANANDHAN & ORS.

March 12, 1976

[A. C. GUPTA AND JASWANT SINGH, JJ.]

Hindu Law-Joint family and paftition-Allotment to a member of properties for discharge of fan1ily debts-When may be regarded as his exclusive property-Manager'.s liability for account-From lvhich date.

The appellant and V, father of respondents, were brothers. They, together with their cousin, formed a joint Hindu family. In a partition in 1929 between the two branches, certain properties were given to V for discharging C -some family debts.

V took over the management of his branch of the family and after discharging the debts. filed in 1956 a suit for vartition against the appe11ant claiming, inter alia, that one of the items earmarked for the discharge of the debts which remained undisposed of, was his exclusive property as it was given to him absolutely; and also for accounts on the ground that the appellant took over the management from 1938. The trial court negatived the claim in respect of the property, but directed the appellant to give accounts from 1947 when admittedly he took over management.

On appeal, the High Court upheld V's claim with respect to the property and gave rriodified direc- D tions for accounts by the parties.

Dismissing the appeal to this Court,

HELD : ( 1) The properties given to V became his separate properties from the date of the partition deed of 1929 and were not liable to partition. f643Al

(~) The salient features of the deed are, (i) the sole responsibility for discharge of the debts was placed on V; (ii) V's liability was not to the extent E of the properties but was irrespective of the sufficiency or otherwise of the properties and any deficit or surplus was to be met or enjoyed by him exclusively; (iii) the cousin was no longer liable for the debts: (iv) in case there was a default on V's part, and if any loss was caused to the cousin he was to be indemnified by V; and (v) exclusive dominion and control over, and enjoyment of, the properties, was vested in V in consideration of the obligation undertaken by him to discharge the debts. The properties were thus given to V in view of his personal undertaking to discharge the debts, and, the conveyance was iu the nature of remuneration for services to be rendered by him.

{642 C-G]

J<a; Kumar Singh Kukam Chll11.dii v. Co1nmissioner of Income-tax Madhya Pradesh (1971] 1 SCR 748 referred to.

(l:J) The arrang:ement was valid because it was bona fide and its terms were . fair. [643E]

Sahu Madho Das v. Pandit Muka11d Ram [1955] 2 SCR 22, Maturi Pullaiah

v. Maturi Narasimham AIR 1966 SC 1836 and S. Shanmugam Pillai & Ors. v.

G K. Shanmugam Pillai & Ors. AIR 1972 SC 2069 referred to.

(c) There was no blendin~ of the properties by V with other joint family properties. There was no evidence of any intention on V's part to abandon his separate rights over the properties. The mere fct that they were not separately entered by him in the account books or that no separite account of the earnings from them was maintained by him cannot rob them of their separate character. [644B-C]

Lakkireddi Chi1111a Venkata Reddi & Ors. v. Lakkireddi Lakshmama [1964] 2 S.C.R. 172 and G. Naruyana Ram v. C. Chamaraju & Ors. A.1.R. 1968 S.C. 1276 referred to .

(d) If any amount of the joint family funds was used by V for the discharge of the debts, the respondents (legal representatives of V) would . be liable for them, but that would not affect the character of the properties.

[644 C-DJ

(2) It is well-settled that in the absence of proof of misappropriation or fraudulent or improper conversion by the manager, a coparcener, seeking partiti.Qn, cannot call upon the manager to account for his past dealings with the family property.

Since there was no evidence of any misappropriation by V, he was not liable for .accounts during his period of management. [644E-F]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1365 of 196& •

From the Judgment and Decree dated the 8-12-66 of the Madras High Court in Appeal No. 609 of 1961.

K. N. Balasubrahmaniam and Miss Lily Thomas for the Appellant.

K. Jayaram for the Respondent.

The Judgment of the Court was delivered by

JASWANT SINGH, J.-This is an appeal by certificate granted by the High Court of Judicature at Madras under Article 133(1) (a) and (b) of the Constitution of India against its judgment and decree dated December 8, 1966 in A. S. No. 609 of 1961.

The facts culminating in this appeal lie in a short compass and may be briefly stated thus :

Kota Venkatachala Pathy whose legal representatives are the respondents herein and Kota Narayanan, the appellant herein, were real brothers being the sons of one Kola Rangaswami Chettiar.

Together with their cousin _Subramanyam Chettiar, the son of Kota Kuppuswami Chettiar, the brother of Kota Rangaswami Chettiar, they formed a joint family which was a trading one.

Prior to 1927, Subramanyam Chettiar was the manager and karta of the family.

After 1927 Kota Venkatachala Pathy took over the management of the family and its properties.

By registered deed dated May 29, 1929 (Exh. A-1) a partition of joint family properties was effected between Subramanyam Chettiar on the one hand and Kota Venkatachala Pathy and his brother, Kota Narayanan, who was then a minor, on the other, each branch taking a half share.

As karta of the .ioint family.

Subramanyam Chettiar had, before November 20, 1927 incurred debts to the tune cf Rs. 9,506/- from several creditors. Five items of joint family properties detailed in Schedule D-1 to the deed of partition were earmarked for the discharge of the aforesaid debts and were given over to Kota Venkatachala Pathy who was made responsible for the discharge of the debts.

These debts were discharged by Kota Venkatachala Pathy before March 26, 1934. On, September 7, 1956, Kota Venkatachala Pathy brought a suit, being No. 0. S. 87 of 1956, in the Court of the Subordinate Judge of Vellore, North Arcot, for partition and separate possession of 3 /4th of the properties set out in Schedule 'A.' to the plaint, 1/2 of the properties set out in Schedule A-1 to the plaint and whole of the properties set out in Schedule 'B' to the plaint.

One of the items namely, item No. 1 of Schedule

K. V. NARAYANAN v. K. v. RANGANANDHAN (!aswant Singh, !.) 639

'B' to the plaint wliich consists of four shops is what remains undisposed out of the properties mentioned in Schedule 'D-1' to the deed of partition which were set apart for the purpose of discharging the aforesaid debts incurred by Subramanyam Chettiar before 1927.

The case as set out by Kota Veukatachala Pathy in his plaint was that the properties set out in Schedule 'B-1' to Vhe deed of partition were given ovei: to him absolutely for the , discharge of the aforesaid debts set out in Schedule 'D' to the deed of partition and it was provided in the said deed that either he would discharge the debts mentioned in the deed or undertake to pay the same himself within a monrh from the registration of the document and obtain and hand over to Subramanyam Chettiar receipts from the creditors specifically mentioned there that Subramanyam Chettiar was not liable for payment of the aforesaid debts and that if the aforesaid conditions were not satisfied by him i.e. by Kata Venkatachala Pathy and any loss was occasioned to the former, the latter would be liable for those losses.

The case of Kola Veukatachala Pathy further was that since he had discharged the debts detailed in Schedule 'D' to the deed of partition, he was entitled to the exclusive possession of item No. 1 of

Schedule 'B' to the plaint as his self acquired property by virtue of the terms of deed of partition and also to the rest of the properties detailul in the said Schedule 'B' as he had purchased the same with. his own funds.

Kota Veukatachala Pa thy based his claim of 3 I 4rh share in properties detailed in Schedule 'A' to the plaint on the ground that he was entitled to l/4th by birth as a coparcener and the rest of the half share allotted to Subramanyam Chettiar as he had purchased the same from auction purchasers.

The relief for accounts was based by Kola Veukatachala Pathy on the ground that there was an oral division in status in 193 8 and it was the appellant who was managing the properties either as a co-owner or as an agent since then.

The appellant resisted the claim of extra share made by Kata Venkatachala Pathy and contended that the latter was entitled only to half share in all Vhe suit properties.

According to the appellant, the family debts set out in Schedule 'D' to the aforesaid deed of partition was discharged by Kota Veukatachala Pathy not only by the saie of the properties set out .in Schedule 'D-1' to the deed of partition but also by substantially utilising other joint family properties available for division. It was also contended by the appellant that since Kota Venkatachala Pathy acted as Karta of his branch, the aforesaid deed of partition should be construed as meaning that any item salvaged or saved after the discharge of the aforesaid family debts would be ancestral property and not exclusive property of the plaintiff.

As regards the properties other than item No. 1 of Exhibit 'B' of the plaint, it was contended by the appellant that they were also to be shared half and half between him and Kota Venkatachala Pathy

as they were purchased from the joint family funds.

With regard to the relief for rendition of accounts, the appellant contended that he became the Karta of the joint family in 1947 and Kota Venkatachalit Pathy was not entitled to the relief of rendition of account till the date of the suit when alone there was a division of status and not in 1938 as claimed by Kota Veukatachala Pathy .

ll On a consideration of the evidence adduced in the case, the Tri~!

Court by its j11dgment and decree dated September 12, 1960, held that there was no division in status till the date of the suit.

Wit!h regard to item No. 1 of Schedule 'B' to the plaint, the Trial Court held that the total amount of debts paid was Rs. 15,669-6-2 and out of D-1 Schedule properties of the estimated value of Rs. 9,506/- only Rs. 2,575/- were realized from the sale of four items thereof and the B balance of the debts were discharged from out of the joint family assets like jewels, outstandings realized and other immovable properties allotted to Rangaswamy Chettiar's branch in 1929 partition

and that the conversion of such joint family assets was made by Kola Venkatachala Pathy who was managing the family till 1957.

The Trial Court accordingly held that the properties namely item No. l of Schedule 'B' to the plaint should be deemed to have been salvaged C by detriment to the paternal estate.

The Trial Court alsp found that as the defendant-appellant herein was a minor at the time of 1929 partition and Kota Venkatachala Pathy, the original plaintiff had acted as his guardian, the latter must be deemed to have acted for the former also when he undertook to discharge the debts and that as between the original plaintiff and defendant to whom the properties were jointly allotted under Exhibit A-1, there was a position of implied D , trust in respect of properties set out in Schedule 'A' and 'B' to he plaint.

The Trial Court also upheld the appellant's plea of blending of all the properties by Kata Venkatacha]a Pathy.

The Trial Court also found that properties covered by sale deeds Exhibit B-1 and Exhibit B-4 which originally formed part of the half share allotted to Subramanyam Chettiar though purdhased by the original plaintiff in his own name were joint family properties and as such were liable E to partition in equal shares.

The Trial Court negatived the claim of Kata Venkatachala Pathy for a share in excess of one half in the aforesaid properties and held that he was entitled to only one half of all the suit properties.

The Trial Court also decreed t!hat the . appellant shall render true and proper accounts in respect of the income and expenses regarding half share of the respondents in the properties mentioned in Schedule A, A-1 and B to the plaint from F 194 7 onwards but did not give directions as to the assets and funds of capital nature withdrawn by Kata Venkatachala Pathy from out of the joint family utilised for his own separate and independent bnsiness.

Aggrieved by this judgment, Kata Venkatachala Pathy, the original plaintiff, whose legal representatives are the respondents herein, preferred an appeal to the High Court of Judicature of Madras.

By its judgment dated December 8, 1966, the High Court allowed the appeal in part, set aside the judgment and decree of the Trial .Court and decreed the suit brought by the original plaintiff with regard to item No.

I of Schedule -B to the plaint holding that the properties mentio~ . i_n Schedule D-:1 to the partition deed were conveyed absolutely to the ong1nal plaintiff in lieu of his undertaking to be liable to discharge the entire debts mentioned in Schedule 'D' to the partition deed whether the pr<!"

perties were sufficient .or insufficient to discharge the same and 1f there was any surplus out of the properties he was to have the same absolutely, but if the propeties were not sufficient, be was to discharge the debts on his own re8ponsibility without making Subram- A anyam Chettiar liable for the same; that though a portion of the debts were discharged out of the joint family funds that only cast on the legal representatives of the original plaintiff a liability to account to the appellant for such drawings as the original plaintiff might have made and whatever amount was found to be so drawn would have to be debited against his i.e. the original plaintiff, after giving him credit for whatever amount he might have put into the common fund. The B High Court further held that in determining the net drawals by fue original plaintiff from the joint family funds, credit would be given to him for drawings made by the appellant by way of receipts of ren1s from item No. 1 of Schedule 'B' to the plaint; that the original plaintiff was not 'liable to account for the joint family properties as there was no proof of mismanagement, mishandling or improper application of joint family properties or funds and that the defendant was C also not liable to account to the original plaintiff for the management of the properties of which he was in charge. The High Court affirmed the judgment of the Trial Court in regard to the properties covered by Exhibits B-1 and B-4 holding that these were acquired with the common funds of the original plaintiff and the appellant which he was managing.

Dissatisfied with this judgment and decree, the defendant has come up in appeal to this Court.

The learned counsel for the appellant has, while supporting the appeal, strenuously urged that the properties mentioned in Schedule D-1 to the deed of partition (Exh. A-1) were not intended by the parties thereto to be given to Kota Venkatachala Pathy as his separate properties but were given to him only for a specific purpose viz. for discharging the family debts; that the ancestral properties could not be converted into separate properties by means of an arrangement arrived at between Subramanyam Chettiar and Kota Venkatachala Pathy; that !he character of a property has to be decided after considering whether it is saved as a result of detriment to the paternal estate and as in the instant case, property mentioned at item No. 1 of Schedule D-1 to the deed . of partition was saved by using the joint family assets, the said property could not but be regarded as the ancestral property of the parties which was subject to partition.

He has further urged that in any event D-1 Schedule properties lost the character of separate properties as they were blended by Kota Venkatachala Pathy with the joint family properties.

He has lastly urged that the directions given by the High Court with regard to accounting cannot be sustained as they are neither clear nor justified.

The principal question for determination in this case is whether the properties mentioned in D-1 Schedule to the deed of partition were separate properties of Kota Venkatachala Pathy or retained the character of ancestral properties.

The answer to this question depends largely on the construction of the deed of partition . (Exh. A-1), material portion whereof is reproduced below for facility of refocence :-

"Venkatachala Pathy the individual No. 2 shall discharge the debts described in 'D' Schedule, the debts payable to ouisiders by Subramanyam Chetti amongst us for the

amount borrowed for conducting the family business prior to 20-11-27 and individual No. 2 for discharging the loans, shall enjoy absolutely the properties mentioned in Schedule

D-1.

Venkatachalapathi Chetti, the individual No. 2 shall either discharge the debts within a month from the date of registration of this document and obtain receipt for the creditors stating that Subramanyam Chetti is not liable to the aforesaid loans and shall give those receipts to Subramanyam Chetti. If it is not done so and rhereby any loss is cansed to Subramanyam Chetti by creditors, Venkatachalapathi Chetti shall be liable for those losses.

The aforesaid Venkatachalapathi Chetti himself shall get possession of D-1 Schedule properties given to him in lieu of discharging the aforesaid debts whether rhose properties are adjusted to the aforesaid debts, or whether there remain any balance or auy deficit".

The salient features of the deed as extracted above are : ( 1) sok responsibility for discharge of the debts detailed in Schedule D-1 to the deed of partition which were payable to the outsiders was placed on Kota Venkatachala Pathy.

(2) The liability cast on Kota Venkatachala Pathy for the discharge of the debts was not to the extent of the

poperties detailed in Sdhedule D-1 to the deed of partition but was irrespective of the sufficiency or otherwise of the properties and any deficit or surplus was to be met or enjoyed by him exclusively.

(3) The debts were to be discharged by Kota Venkatachala Pathy . within a month of the registration of the deed and he was required to have it in writing from the creditors that Subramanyam Chettiar was no longer liable fur the debts. ( 4) In case, there was a default on the part of Kota Venkatachala Pathy to discharge the debts as undertaken by him and any loss was caused to Subramanyam Chettiar, to the former was to indemnify the latter. (5) Exclusive dominion, control and enjoyment of the properties mentioned in Schedule D-1 was vested in Kota Venkatachala Patihy in consideration of the obligation undertaken by him to discharge the debts.

The aforesaid salient features leave no manner for doubt that the properties mentioned in D-1 Schedule to the deed of partition were given to Kota Venkatachala Pathy in lie_u of the personal undertaking given by him to discharge the aforesaid debts.

In other words, the conveyance of the properties to Kola Venkatachala Pathy was in the nature of remuneration for the services to be rendered by him.

It will be useful in this connection to refer to the decision of this Court in Ra; Kumar Singh Kukam Chandii v. Commissioner of Income-tax, Madhya Pradesh(') where on the question whether the managing director's remuneration received iJy the assessee was assessable in his individual hands or in rhe hands of the assessee's Hindu undivided family, this Court expressed the view that the remuneration was assessable as the assessee's individual income and not as the income of his Hindu undivided family.

We are, therefore, of the

(I) [1971J 1 S.C.R. 748.

view that Schedule D-1 properties were given absolntely to Kola A Venkatachala Pathy as his separate properties.

Let us now see as to whether the aforesaid arrangement entered between the members of the Hindu undivided family whereby properties mentioned in Schedule D-1 to the deed of partition were made over to Kola Venkatachala Pathy was valid according to Hindu Law.

A reference to page 426 of Mayne's Treatise on Hindu Law and B Usage (11th Edition) makes it clear that while dividing the family estate, it is necessary for the joint family to take account of both the assets and the debts for which the undivided estate is liable and to make provision for discharge of the debts.

It is also well settled by the decisions of this Court in Sahu Madho Das v. Pandit, Mukand Ram(') Maturi Pullaian v. Maturi Narasimham( 2 ) and S. Shanmugam Pillai & Ors. v. K. Shanmugam Pillai Ors. (3 ) that if family arrangements C which are governed by a special equity peculiar to themselves or entered into bonafide to maintain peace or bring about harmony in th~ family and the terms thereof are fair taking into consideration the circumstances of the case, every effort must be made by the Court to recognise and sustain it.

Examining the matter in the light of these principles, we find that by the aforesaid arrangement both Subramanyam Chettiar and the defendant-appellant were absolved of the respon- I> sibility to discharge the family debts and liability was cast on Kota Venkatachala Pathy alone to discharge the same irrespective of the fact whether the properties mentioned in Schedule D-1 to Exhibit A-1 ultimately turned out to be sufficient or insufficient to meet the burden.

Thus the arrangement being bonafide and its terms being fair, we cannot but hold that it was valid and the properties detailed in Schedule D-1 to the deed of partition became separate properties E. of Kola Venkalachala Pathy from the date of the execution of the deed of prtition and are not liable to partition.

This takes us to the question as to whether there was, as contended by the appellant, any blending of the properties menioned in Schedule D-1 to the deed of partition with the rest of the properties of the joint family consisting of Kota Venkatachala Pathy and the F appellant. It is true that property separate or self-acquired of a member of a joint Hindu family may be impressed with the character of joint family property if it is voluntarily thrown by t'he owner into the common stock with intention of abandoning his separate claim therein but the question whether a coparcener has done so or not is entirely a question of fact to be decided in the light of all the circumstances of the case.

It must be established that there was a clear G intention on the part of the coparcener to waive his separate rights such an intention cannot be inferred merely from the physical mixing of the property with his joint family or from the fact that other members of the family are allowed to use the property jointly with himself or that the income of the separate property is utilised out of generosity or kindness to support persons Whom the holder is not bound to support or from the failure to maintain separate accounts for an Hi

(I) [19551 2 S.C.R. 22.

(2) A.I.R.1966 S.C. \'836.

(3) A.LR. 1972 S.C. 2069 .

SUPREME COURT ~EPORTS [l 97f>] 3 S.C.R.

act of generosity or kindness cannot ordinarily be regarded as an admission of a legal obligation. (See Lakkireddi Chinna Venkata Reddi & Ors. v. Lakkireddi Lakshmama(') and G. Narayana Ram

v. G. Chamaraju & Ors. (').

In the instant case we are unable to find that there was any intention on the part of Kota Venkatachala Pathy of abandoning his separate rights over the properties set out in Schedule D-1 to the deed of partition.

The mere fact that these properties were not separately entered by Kola Venkatachala.Pat'hy in the account books or that no separate account of the earning from these properties was maintained by him cannot rob the properties of their character ad' self acquired properties. We are accordingly of the view that there was no blending of the properties by Kola Venkatachala Pathy as contended by the appellant.

The mere fact that some amount out of the joint family funds was used for discharge of tlhe debts mentioned in Schedule to the deed of partition is also of no consequence. If any amount out of the joint family funds was used for the discharge of the outsta!)dings payable to the outside debtors, the legal representatives of Kota Venkatachala Pathy would, as pointed out by the High Court be liable for them.

There is also no substance in the last contention advanced on behalf of the appellant.

The legal position is well settled that in the absence of proof of misappropriation or fraudulent or improper conversion by the manager of a joint family a coparcener seeking parti- E lion is not entitled to call upon the manager to account for his past dealing with the family property.

The coparcener is entitled only to an account of the joint family property as it exists on the date he demands partition. In the instant case there being no evidence to establish any misappropriation or fraudulent conversion of the joint family property by Kota Venkatachala Pathy during the period he acted as karta of the family, we are unable to interfere with the F direction issued by the High Court which is' just and proper.

For the foregoing reasons, the appeal fails and is hereby dismissed but in the circumstances of the case without any order as to costs.

V.P.S.

(I) {1964] 2 S.C.R. 172.

(2) A.LR. 1968 S.C. 1276.

Appeal dismissed.

K. V. NARAYANAN

K. V. RANGANANDHAN & ORS

March 12, 1976

A. C. GUPTA

JASWANT SINGH, JJ.

(1971] 1 SCR 748

[1955] 2 SCR 22

AIR 1966 SC 1836

AIR 1972 SC 2069

[1964] 2 S.C.R. 172

Madras High Court

K. N. Balasubrahmaniam

Lily Thomas

K. Jayaram

High Court of Judicature at Madras

Article 133(1)

Constitution of India

Kota Narayanan

Kola Rangaswami Chettiar

Subramanyam Chettiar

Kota Kuppuswami Chettiar

Kota Rangaswami Chettiar

Kota Venkatachala Pathy

May 29, 1929

November 20, 1927

Schedule D

March 26, 1934

September 7, 1956

S. 87

Kota Veukatachala Pathy

Kata Venkatachala Pathy

Kola Veukatachala Pathy

Kota Veukatachala Pa

Kota Venkatachalit Pathy

Rangaswamy Chettiar

Kola Venkatachala Pathy

Kata Venkatacha]a Pathy

Kata Venkatachala Pathy

Court of Judicature of Madras

Schedule D

Subram- A anyam Chettiar

Schedule D

Schedule D

Venkatachala Pathy

Subramanyam Chetti

Schedule

D

Venkatachalapathi Chetti

Venkatachalapathi Chetti

Schedule D

Schedule D

Kota Venkatachala Patihy

Schedule D

Kola A Venkatachala Pathy

Schedule D

Subramanyam Chettiar

Schedule D

Schedule D

Kola Venkalachala Pathy

Schedule D

SUPREME COURT

Schedule D

Kola Venkatachala.Pat'hy

1964] 2 S.C.R. 172


AZAMJAHI MILLS LTD. HYDERABAD

Tiffi COMMISSIONER OF INCOME TAX, HYDERABAD

March 17, 1976

[H. R. KHANNA AND P. K. GOSWAMI, JJ.]

Income-tax-Assessee in Princely State-Payment by Government of India by cheque posted in British India-Whether receipt by assessee in British India liable to Indian Income Tax.

The Government of India was placing bulk purchase orders with the assessee-company, a textile mill, which had, during the assessment years 1945-46,

1946·47 and 1947-48, its registered office in the Hyderabad State outside British India. After the despatch of the goods, the assessee was submitting its bill in the prescribed form which also contained the receipt. The receipt had the words 'Please pay by cheque to self/Banker on Bank/Treasury at ...... • and the assessee used to enter the words 'Hyderabad (Dn), in the blank space after 'at'. But on the back of the bulk purchase order form. there were ins true tions that the payment was to be made by the Controller of Supply' Accounts, Bombay, and the Government of India had also issued general instructions to all textile mills in the Princely States that all payments were to be made 'by cheque on Government Treasury in Br. India, or alternatively on a branch in Br. India, which transacts Government business of the Reserve Bank of India.

All payments were made on behalf of the Government of India by cheques which were sent to the assesseeby post. Some of the cheques were drawn on banks in Br. India and others on banks in the Hyderabad State .

HELD : The sale proceeds should be held to have been received by the assessee from the Government of India in British India and not in Hyderabad E

State, and hence were subject to Indian incometax. [647F-G]

In the absence of a request by the creditor or an agreement between the parties regarding the sending of money by cheque by post, the mere posting of the cheque would not operate as delivery of the cheque to the creditor.

Where, however, a cheque is sent by post in pursuance of an agreement between the parties or a request by the creditor that the money be sent by cheque by post, the post office would be treated as the agent of the creditor for the F purpase of receiving such payment. Such an agreement or request need not be express and may be implied from the facts and circumstances.

[648A-CI

The facts of the case and the course of dealings show that it was the understanding between the Government of India and the assessee that the payment would be rllade on account of goods supplied by the assessee, by cheques.

The cheques were in the very nature of things to be sent from British India by post as that is the usual and normal agency for transmis.sion.

As the G cheques were sent to the assesseee on behalf of the Government of India by post from British India in pursuance of an understanding between the parties, the payment to the assessee shall be treated to have been made in British India to the agent of the assessee. [647G-648A]

Indo re Malwa United Mills Ltd. v. Commissioner of Incon1e-tax, 59 ITR 738; Conunissioner of Income-tax, Bombay South, Bombay v. Ogale Glass-

Works Ltd., 25 !TR 529 and Shri lagdish Mills Ltd. v. Commissioner of Income. tax, 37 ITR 114, followed.

Commissioner of Income-tax, Bihar & Orissa v. Patney &: Co. 36 ITR 488, distinguished.

A CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 980-982 of 1971.

Appeals by Special Leave from the Judgment and Order elated the 9-2-70 of the Andhra Pradesh High Court in case Referred No. 1 of ~

1967.

R. Vasudev Pillai and P. K. Pillai for the Appellant.

R. M. Mehta and S. P. Nayar, for the Respondent.

The Judgment of the Court was delivered by

KHANNA, J.-This judgment would disposed of three civil appeals Nos. 980 to 982 of 1971 which have been filed by special leave against c the judgment of the Andhra Pradesh High Court on a reference under section 66 of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act) answering besides two other questions with which we

are not concerned, the following question against the assessee appellant -+ and in favour of the revenue :

"Whether, on the facts and in the circumstances of the case, the sale proceeds were received from Government of India in British India?"

The assessee company is a public limited company registered in what was at the relevant time the Nizam's Dominion (hereinafter referred to as Hyderabad State) outside British India. The matter relates to assessment years 1945-46, 1946-47 and 1947-48 for which the relevant accounting period ended on October 5, 1944, October 5, 1945 and October 5, 1946 1'espectively. ·

The assessee company had a textile mill at Warangal in Hyderabad State.

During the Second World War the company supplied textile goods to the Department of Supplies, Government of India under what was known as "Panel System". The Government used to place bulk purchase orders with the company for the supply of goods according to specifications. The delivery of the goods used to be made by the company FOR Warrangal. After the goods were despatched, the assessee company submitted bill in form W.S.B. 116 giving details of the supply. The prescribed form contained the following receipt :

"Received Payment

Contractor's Signature

One anna stamp on original copy only.

Please pay by ChC'que to Sdf

on Bank Bankers at .. _, Treasury Contractor's signature

The assessee used to enter the words "Hyderabad (Dn)" in the blank space after the word "at". On the back of the bulk purchase order form, there were instructions that the payment was to made by the Controller of Supply Accounts Bombay. The Government of India issued general instructions to all textile mills in the Indian States that all payments were to be made "by cheque on Government Treasury in British India, or alternatively on a branch in British India, which •

transacts Government business of the Reserve Bank of India". All payments were made on behlf of the Government of Ind.ia by cheques, which were sent to the assessee by post. Some of these cheques were drawn on banks in British India and the others on banks in Hyderabad

State.

All the cheques received from the Government, including those drawn on banks in British India, were collected through the assessee's bankers in Hyderabad State.

In making the assessment the Income-tax Officer held that the sale proceeds in respect of cheques, which bad been drawn on banks in British India, were received by the assessee in British India and as such the assessee was liable to tax under the Act.

In respect of cheques drawn on the banks in Hyderabad State, the Income-tax Officer held that no income had accrued in British India and was, therefore, not subject to assessment under the Act. The assessee took the matter in appeal to the Assistant Commissioner claiming that no portion of the income had been received in British India. The Appell.. late Assistant Commissioner held that the entire sale proceeds had been I received in British India and he, therefore, passed an order enhancing the assessed amount. On further appeal by the assessee the Income-tax Appellate Tribunal upheld the order of the Assistant Commissioner. At the request of the assessce the question reproduced above along with two other questions relating to the power of the Appellate Assistant Commissioner to enhance the amount of assessable income as nlso the question of limitation were referred to the High Court. The High Court answered the question reproduced above as well as the other two questions with which we are not concerned, in favour of the revenue and against the assessee.

So far as the question reproduced above is concerned, the High Court took the view that the matter was concluded by the decision of this Court in the case of Indore Malwa

United Mills Ltd. v. Commissioner of Income-tax(').

In appeal before us Mr. Vasudev Pillai on behalf of the appellant has •assailed the judgment of the High Court and has contended that on the facts and circumstances of the case, the sale proceeds should be held to have been received by the assessee from the Government of India not in British India but in Hyderabad State. There is, in our opinion, no force in this contention.

It would appear from the resume of facts given above tliat all payments were made on behalf of the Government of India by cheques and those cheques were sent by post from British India to the assessee.

The facts of the case and the course of dealings show that it was the G understanding between the Government of India and the assessee company that the payment would be made on account of the goods supplied by the assessee by cheques. The cheques were in the very nature of things to be sent from British India by post as that is usual and. normal agency for transmission of such articles. As the cheques were sent to the assessee company on behalf of the Government of India by post from British India in pursuance of an understanding bet- H ween the parties, the payment to the assessee shall be treated to' have

(!) 59 LT.R.738.

64$

SUPRBME COURT REPORTS

,. [1976] 3 S.C.R.

been made in British India. The post office in such cases is taken to be an agent of the assessee company. The position in law is that in the: absence of a request by the creditor or an agreement between the parties regarding the sending of money by cheque by post, the mere posting. of cheque would not operate as delivery of the cheque to the creditor. Where, however, a cheque is sent by post iii pursuance of an agreement between the parties or a request by the creditor that the money be sent by cheque by post, the post office would be treated as the agent of the creditor for the purpose of receiving such payment.

The agreement or request need not, however, be express; it may also be implied to be spelt -out from the facts and circumstances of ihe case.

The question of law arising in this case is not res integra and is concluded by three decisions of this Court. In Commissioner of lncometax, Bom/Jay South, Bom/Jay v. Ogale Glass Works Ltd.(') the assessee, a non-resident company carrying on business of manufacturing certain articles in t]\e State of Aundh, secµred some contract for the supply of goods to the Government of India. The contract provided that "unless otherwise agreed between the parties payment for the delivery of the stores will be made on submission of bills in the prescribed form in accordance with instructions given in the acceptance of tender by cheque ou a Government Trea5ury in India or on a branch of the Reserve Bank of India or the Imperial Bank of lndia transacting Government business." The assessee submitted the bill in the prescribed form and wrote on it as follows : "Kindly remit the amount by a cheque in our favour on any bank in Bombay." The assessee received cheques drawn on the Bombay branch of the Reserve Bank of India.

The assessee realised the amount of the cheques through the Aundh Bank. It was held that the posting of cheques in Delhi in law amounted to payment in Delhi. It was further observed that the circumstances of the case revealed an ill!plied agreement under which cheques were accepted unconditionally as payment. Even if the cheques, according to this Court, were taken conditionally the cheques having been not dishonoured, the payment related back to the dates of the receipt of the cheques and in law the dates of payment were the dates of the delivery of the cheques. Income, profifa and gains in respect of the sales made to (he Government of Inilia were accordingly held to have been received by the assessee in British India. Dealing with the question of the understanding between the parties in that case, this Court observed :

"According to the course of business usage in general to which, as part of the surrounding circumstances, attention has to be paid, under the authorities cited above, the parties must have intended that the cheques should be sent by post which is the usual and normal agency for transmission of such articles and according to the Tribunal's findings they were in fact rceived by the assessee by post."

The above case been sought to be distinguished by Mr. Pillai on the ground that in that case the assesee had written on the bill form the

(!) 25I.T.R. 529. •

words : "kindly remit the amount by cheque in our favour on any bank in Bombay." It is said that the bill submitted by the appellant contamed no such writing.

A similar argument was advanced on behalf of the assessee company in the case of Shri Jagdish Mills Ltd.

v. Commissioner of Income-tax(') and it was held that the absence of such an express request would not make material difference if the course of dealings between the parties showed n implied request by the assessee company to send the cheques by post. In Jagdish Mills' case tho assessee company was incorporated in Baroda State outside British India. The company accepted orders for the supply of goods F.O.R.

Baroda to the Government of India.

The manufacture and deli very of goods took place at Baroda. The company after effecting delivery of the goods submitted bills in the prescribed form which contained the sentence that "Government should pay the mount due to the company by cheque." There was, however, nothing in the bills to show in what way the payment by cheque was to be made. The company thereafter received at Baroda, in payment of its bills, cheques through post from the Government drawn on a Government Treasury or on a branch of the Reserve Bank of India or the Imperial Bank of India transacting Government business.

The company endorsed the cheques and sent them either to Bombay or Ahmedabad in its banking account at such places. It was held that according to the course of business usage in general which. was followed in the case,. the parties must have intended that the cheques should be sent by post which was the usual and normal agency for transmission of suoh articles.

An implied request by the company to send the cheques by post from Delhi was accordingly inferred.

The post office was held to have become the agent of the assessee for the purpose of receiving those payments.

ThL> Court consequently came to the conc\u; ion that the amounts of cheques were received by the assessee in British India and as such were liable to be taxed under section 4(1) (a) of the Act.

The facts of the case of Indore Malwa United Mills Ltd. v. Commissioner of l ncome-tax (supra) were similar to those oE the present case. In that case the assessee, a non-resident, carried on the business of manufacturing textile goods at Indore, outside British India.

The assessee supplied textile goods to the Stores Department of the Government of India under orders placed by the latter with the assessee at Indore. The delivery of the goods was F.O.R. Indore. The bills contained the following instruction for payment : "Please pay by cheque to self on a bank at Indore." The Government of India drew cheques in favour of the assessee for the amounts of the bills on the Reserve Bank of India, Bombay and sent them by post to the assessee at Indore.

The assessee deposited the cheques in its account with the Imperial Bank of India, Indore and on clearance. the amounts were credited to that account.

Question which arose for decision was whether the assessee company was liable to pay tax in the taxable territories on the ground that the sale proceeds, which included the profit element therein, were received in the taxable territories. It was held that if by an agreement. express or implied, between the creditor and the debtor or

(l) 37I.T.R. ll4 .

9--608 SCI/76

by request, express or implied, by the creditor, the debtor is authorised to pay tbe debt by a cheque, and to send the cheque to the creditor by post, the post office becomes the agent of the creditor to receive the cheque and the creditor receives payment as soon as the cheque is posted to him. It was also held that there was an implied agreement between the parties that the Government of India wouid send the cheque by post to the assessee. The sale proceeds which included the profit clement therein were, in the opinion of this Court, received in .

British India where the cheques were posted, and the profits in respect of the sales were taxable under section 4(1 )(a) of the Act.

Mr. -Pillai has referred to the case of Commissioner of Income-tax, Bihar & Orissa v. Patney & Co.(1) This case cannot be of much help because in that case the assessee had expressly reqmre:l the commission to be paid at Secunderabad outside British India. It was because of this circumstance that this Court found that the rule laid down in Ogale Glass Works' case (supra) did not apply and the money was not received by the assessee in British India.

So far as the present case is concerned it has already been pointed out above, that the circumstances of the case and the course of dealings between the parties show that there was an implied agreement or understanding between the parties that the money would be sent to, the assessee by cheques posted from British India. The High Court, in our opinion, rightly decided the question reproduced abnve aQainst the assessee appellant and in favour of the revenue. The appeals consequently fail and are dismissed but in the circumstances without costs.

V.P.S.

AppeaL' dismissed.

(!) 36 I.T.R. 488.

. "

AZAMJAHI MILLS LTD. HYDERABAD

THE COMMISSIONER OF INCOME TAX, HYDERABAD

March 17, 1976

H. R. KHANNA

P. K. GOSWAMI, JJ.

Government of India

Hyderabad

Bombay

Br. India

Reserve Bank of India

British India

R. Vasudev Pillai

P. K. Pillai

R. M. Mehta

S. P. Nayar

KHANNA

Andhra Pradesh High Court

section 66

Indian Income-tax Act, 1922

Nizam's Dominion

October 5, 1944

October 5, 1945

October 5, 1946

Warangal

of Supplies, Government of India

Sdf

on Bank Bankers

Government of Ind.ia

Indore Malwa

Vasudev Pillai

SUPRBME COURT REPORTS

Aundh

India

Imperial Bank of lndia

Aundh Bank

Delhi

Government of Inilia

Pillai

Jagdish Mills

Baroda

Imperial Bank of India

Ahmedabad

section 4(1)

Indore

Reserve Bank of India, Bombay

Imperial Bank of India, Indore

section 4(1 )(a)

-Pillai

Secunderabad

Ogale Glass Works