February 27.

SUPRE:'.JE COURT REPORTS

M. V. JOSHI

M. U. SHIMP! AND ANOTHER.

ll961]

(K. SuBBA RAO and RAGHUBAR DAYAL, JJ.)

Food A'dulteration-Ritlter-If includes butter mode from curd -No foreign article mixed but below standard prescribed-· If ad11lc terated-Prevcntion of Food Adulteration Act, I954 137 of r954), . ss. z(i)(a), 7(i), I6(r)(a)·-Prevention of Food Adulteration Hules,

1955, Appendix B, r. A-II, 0. 5.

The appellant was selling butter which was found to be below the standard prescribed. He was convicted under s. 16(1) read withs. 7(i) of the Prevention of Fo:id Adulteration Act, 1954, and sentenced to undPrgo rigorous imprisonment for two months and to pay a fine of ls. 25oi-.

He contended (i) that butter prepared from curd was not butter within the meaning of r. A-II, 0. 5 of Appendix B to the Rules which defined butter to mean •the product prepared exclusively from milk or cream ..•. ', and (ii) that the butter was not adulterated as no foreign article had been added to it.

Held, that the appellant had been rightly convicted.

Butter prepared from curd also came within the definition of "butter" in r. A-n, 0. 5 of Appendix B to the Rules. The plain meaning of the words user! in the rule indicated that butter prepared from milk or cream, by whatever process, was comprehended by the definition. Even where milk was first converted into curd and then butter prepared the.efrom, the butter was still".prepared from milk.

Sadashiv v. P. V. Bhalerao, I.LR. [1959] Born. rSoo, approved.

Section 2(i)(l) lays down that an article of food shall be deemed to be adulterated if its quality or purity falls below the prescribed standard or its constituents are present in quantities which are in excess of the prescribed limits of variability.

If the prescribed standard is not attained, the statute treats such article, by fiction, as adulterated food though in fact no foreign article is added to it. Selling butter below the prescribed standard amounted to selling adulterated butter.

Hunt v. Richardson, [1916] 2 K.B. 446, distinguished.

CRIMINAL

APPELLATE JuRISDICTION : Criminal Appeal No. 155 of 1959.

Appeal by special leave from the judgmenj; order dated July 23, 1959, of the Bombay High Court in Criminal Appeal No. 165 of 1959.

H. J. Umrigar, S. N. Andley, J. B. Dadrichanji, Rameshwar Nath and Ravindei Narain, for the appell>111 t.

Naunit Lal, for respondent No. 1.

B. K. Khanna and R. H. Dhebar, for respondent No. 2.

1961. February 27. The Judgment of the Court was delivered by

SuBBA RAO, J.-This appeal by special leave is directed against the judgment of the High Court of Judicature at Bombay allowing the appeal filed by respondent No. 1 against the acquittal of the appellant by the Judicial Magistrate, First Class, Thana, and convicting him unrler s. 16(1), read with s. 7(i), of the Prevention of Food Adulteration Act, 1954 (hereinafter called the Act), and sentencing him to undergo rigorous imprisonment for two months and to pay a fine of Rs. 250/-.

The appellant is the proprietor of a shop at Thana known as the Cottage Industries. He is a dealer in butter. On June 27, 1957, the Food Inspector of the Thana Borough Municipality visited the shop of the appellant and purchased from him some quantity of Khandeshi butter. After purchasing the butter, the Food Inspector notified his intention to the appellant that he was going to get the butter analysed. He divided the butter into three equal parts, put them iri three separate bottles and duly sealed the bottles in the presence of two panchas.

He gave one of those bottles to the appellant, sent one to the Public Analyst and kept the third with himself. The appellant signed the labels on the bottles and also passed a receipt in favour of the Food Inspector in token of the receipt of one of the bottles and that receipt was signed by the appellant and counter-signed by two panch witnesses.

The Public Analyst analysed the butter sent to him and sent his report in due course. In the report it was stated that the butter contained 18:J2% foreign fat, 19·57% moisture and 64·67% milk fat.

On October 5, 1957, the Food Inspector filed a co111plaint jn the Court of the Judicial Magistrate, First Class, Thana, against the appdlant. It was 11-lleed

Joshi

Shimpi

Subba Rao].

Joshi

Shimpi

SvbbaRao ].

therein that the said butter was found to be "adulte. rated" as defined in s. 2(1) (a) of the Act and that the appellant had committed an offence under s. 16 (1) (a) of the Act by selling the adulterated article of food in contravention of s. 7(i) of the Act and the rules made thereunder. The Judicial Magistrate acquitted the appellant on the ground that it had not been proved beyond reasonable doubt that the butter which was purchased from the shop of the appellant was the very same butter which was sent to the Public Analyst and also for the reason that butter prepared out of curd did not come within the mischief of the definition of the word " butter" in rule A.11.05 of Appendix B to the Pre\•ention of Food Adulteration Rules, 1955 (hereinafter called the Rules). The Food Inspector preferred an appeal against that order of acquittal to the High Court. The High Court held that the conclusion of the learned Judicial Magistrate that the buttet' purchased from the appellant might have been tampered with before it was sent to the Public Analyst was not based on any evidence on the record. It further held that butter prepared from curds was covered by the definition of the word " butter " given in the relevant rule. It further held that even if the butter prepared out of curds was not butter as defined in the said rule, the appellant would still be liable under s. 2 (1) (a) of the Act as it contained foreign fat an~, therefore, was an adulterated article of food within the meaning of the said sec.tion.

In the result it set aside the order of acquittal, convicted the appellant under the Act and sentenced him to rigorous imprisonment for two months and to pay a fiire of Rs. 250/ ·. Hence this appeal.

Learned counsel for the appellant raised before us the followiug points; (1) the High Court went wrong in holding that the appellant had committed an offence under the Act, even though the butter in question was not butter within the meaning of the Rules. (2) Butter prepared from curds is not butter within the meaning ofr. A.11.05 of Appendix B to the Rules. (3) Butter sent to the Public Analyst was not the same butter seized from the appellant. (4) Th\l

3 S.C.R.

SUPREME COUR'f l~EPORTS 989

report of the Public Analyst was vague and, therefore, no conviction could be based on it.

For the purpose of this appeal we are assuming in favour of the appellant that he would not be liable for conviction unless the butter seized from him was butter within the meaning of the rule.

We shall proceed to consider the appeal on that basis. In this view, nothing further need be said on the first question raised by learned counsel.

At the outset it would be convenient to consider the ingredients of the offence alleged to have been cotLmitted by the appellant. Section 2(i) of the Act defil)es the word " adulterated " and it says that an article of food shall be deemed to be ad u!Lerated if it satisfies one or other of the conditions prescribed in sub-els. (a.) to (1).

We a.re concerned in this appeal with sub-cl. (1) whereunder a.n article of food shall be deemed to be adulterated if the quality or purity of the article falls below the prescribed standard or its constituents a.re present in quantities which a.re in excess of the prescribed limits of variability. Section 2(xii) defines " prescribed " to mean " prescribed by rules ma.de under this Act." In exerciae of the powers conferred by sub-s. (2) of s. 4 and sub-s. (1) of s. 23 of the Act, the Central Government ma.de rules prescribing, inter alia, the standards of quality of different a.rticl.es of food. Rule 5 says that standards of quality of the various articles of food specified in Appendix B to the Rules a.re as defined in that appendix. Rule A.11.05 of Appendix B to the Rules defines "butter" to mean " the product prepared exclusively from the milk or cream of cow or buffalo, or both, or without the addition of salt and anna.tto and shall contain not less than 80 per cent. of milk fat and not more than 16 per cent. of moisture" and no preservative is permissible in butter. Therefore, if the quality or purity of butter falls below th~ standard prescribed by the said rule or its constituents a.re in excess of the prescribed limits of variability, it shall be deemed to be adulterated within the meaning of ~. 2 of the Act. If the prescribed standard is not attained,

Joshi v, S/iimpi

Sttbba Rao J.

I96I

Joshi

Slt.inipi

Subba Rao J.

990 SUPREME cotJR'r R.El>OR'l'S [1961]

the statute treats such butter, by fiction, as an adulterated food, though in fact it is not adulterated. To pnt it in other words, by reason of the fiction, it is not permissible for an accused to prove that, though the standard prescribed is not attained, the article of food is in fact not adulterated. The non-conformity with the standard prescribed makes such butter an adulterated food.

Section 7 of the Act prohibits the manufacture, sale, storage, or distribution of s1:rh food.

Section 16 provides a penalty for the contravention of the provisions of s. 7. The first question, therefore, that falls for consideration is whether the, butter seized from the appellaritwa~ butter as defined by rule A.11.05 of Appendix B to the Rules.

Learned counsel for the appellant argues that butter prepared from curd is not butter as defined in the Act for the following reasons: (1) the definition of the word "butter" . does not include the product which is obtained from curd, as it refers only to a product which is prepared from milk or cream; (2) the three words," milk"," cream" and" curd", are separately and exhaustively defined in the Rules and, therefore, the omission of the word "curd" in the said rule is a clear legislative indication that butter prepared from curd is not butter within the meaning of that rule; and (3) the word "exclusively" found in the rule emphasizes the fact that butter to come under the definition in the Act should have been prepared from milk or cream and from no other product.

Before considering the argument advanced, it would be necessary to notice how butter is made. In England butter is made as follows:

" ... as quickly as the milk is separated the cream is cooled. The cream is delivered to the creamery, where it is graded according to at least two classes, sweet and sour ......... Then it is pasteurized, and if ripened cream butter is to be made a pure cultu_re of Streptococcus lactis is introduced to start th~ desirable souring process. If sweet cream butter 1s to be made no starter is added. The best storage butter is made from unripened or sweet cruam.

After

pasteurization and ripening the cream is held overnight, when it is churned, washed, salted and worked in the combined churn and worker."

(See Encyolopaedia Britannica, Vol. 4, p. 469.) In India butter is prepared in the rural areas by the indigenous process out of soured milk and cream, i.e., curd. In some cities butter is also made directly out of milk and cream; but tbe percentage of the said production is insignificant compared with the indigenous system obtaining throughout India. Whatever process is adopted, whether butter is taken directly out of milk or taken out of soured milk or cream, it is prepared only from milk. The only difference between the two is that in the case of butter prepared from curd there is an intervening souring process which is not necessary in the case of butter directly prepared from milk or cream. Shortly stated, butter, by whatever process it is prepared, is a product prepared from milk.

Now let us look at the relevant rules to consider whether they provide any reasonable basis for sustaining the argument advanced by learned counsel for the appellant. We shall now read the relevant rules of Appendix B to the Rules.

A. 11.01. Milk means the normal clean and fresh secretion obtained by complete milking of the udder of a healthy cow, buffalo, goat or sheep during the period following at least 72 hours after calving or until colostrum free whether such secretion has been

proc{, ssed or not.

A. 11.05.

Butter means the product prepared exclusively from the milk or cream of cow or buffalo, or both, or without the addition of salt and annatto and shall contain not less than 80 per cent. of milk fat and not more than 16 per cent. of moisture. No preservative is permissible in butter.

A. 11.06. Dahi or curd: (a) Whole milk dahi or curd means the product obtained from fresh whole milk either of cow or buffalo by souring. It shall not contain any ingredient not found in milk.

A. 11.10. Cream means the portion of milk rich in milk fat which has risen to the surface of milk on

Jodi

SAimP•

Subba Rao J.

Jo.shi

v. $AiMpi

Suhb• Rao J.

standing and ha.s been removed or which.has been separated from milk by centriiugal force. It shall contain not less than 40 per cent. of milk fat and shall not contain any added substance. The fat separated from cream shall conform to the specification prescribed for ghee.

A. 11.14. Ghee means the pure clarified fat derived solely from milk or from milk curds or from cream to which no colouring matter or preservatiYe has been added.

It wa.s asked with some plausibility that if the rule ma.king authority did not intend to make a. distinction, in the context of making butter, .between milk, cream and curd, why did it define the said three products separately, a.nd why, in the case of butter, curd wa.s not shown as one of the products from which it could be prepared, while in the case of ghee, it was shown a.s a separate produce from which ghee could be prepared. The first criticism ca.n easily be answered.

Milk, cream a.nd butter have got to be sepa.ra.tely defined, for they a.re sold in those three different forms, a.nd the question ofadulteration of the said products would have to be considered separately in regard to the standards prescribed for them. There is also no force in the second criticism. The original rules were framed on September 12, 1955, and the definition of ghee was introduced therein in 1956. The authority making the subsequent rule might have thought of clarifying the definition of ghee to steer clear of the difficulties raised in the case of the definition of butter.

Putting aside the general argument, let us now look a.t the relevant provisions. The following words in the definition stand out prominently: "product prepared exclusively from milk or cream of cow or buff a.lo, or both." To be butter it should comply with the following conditions: (i) it shall be a. product from milk or cream ; (ii) the said milk or cream shall be the, t of cow or buffalo, or of both ; (iii) the product sha.11 be prepared from the said milk; a.nd (iv) it shall be prepared exclusively from the said milk. "Product" means " a. thing produced by nature or a. na.tura.l process or manufacture." What is the meaning of the

...

word "prepared" ? The Rules use different words for different milk products. In the case of butter, milk and curd, the word used is "obtained"; and in the case of ghee the word used is "derived ". The dictionary meaning of the word " prepare " is, "to bring into proper state for use by some special or tech, nice.I process, to manufacture, to make or compound ": (see The Shorter Oxford Dictionary, 3rd edn., at

ii. 1571). The word has a comprehensive meaning and t><kes in different processes involved in making a thing ready for use or consumption in a particular form.

Butter is a product prepared by a process out of milk, whether the process involved is a simple or a complicated one, aad, therefore, butter drawn from curd is a product prepared from milk.

The word " exclusively", in our view, refers to the milk or cream of cow or buffalo. " Milk " has been defined as secretion obtained by milking of the udder of a healthy cow, buffalo, goat or sheep, whereas the definition of " butter " is confined exclusively to the milk of cow or buffalo. The word "exclusively ", thPrefore, has no relation to other milk products. The plain meaning of the words used in the section indicates that butter prepared from miik or cream, by whatever process, is comprehended by the definition.

Learned counsel for the appellant contends that the rule being a part of a pena]statute, it should be construed in favour of the accused.

When it is said that all penal statutes are to be construed strictly it only means that the court must see that the thing charged is an offence within the plain meaning of the words . used and must not strain the words. To put it in other words, the rule of. strict construction requires that the language of a statute should be so construed that no case shall be held to fall within it which does not come within the reasonable interpretation of the statute. It has also been held that in construing a penal statute it is a cardinal principle that in case of doubt, the construction favourable to the subject should be preferred. But these rules do not in any way affect the fundamental principles of interpretation, namely, that the primary test is the language

J-0shi

SlliMJ>i

Subba Rao].

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Subb• Roo ].

employed in the Act and when the words are clear and plain the court is bound to accept the expressed intention of the Legislature.

The latest view on the relevant rule of construction is found in "Maxwell on'the Interpretation of Statutes",

10th edn., at p. 262, which reads,

" ......... it is now recognized that the paramount duty of the judicial interpreter is to put upon the language of the Legislature, honestly and faithfully,

its plain and rational meaning and to promote its object. " Adverting to Acts against adulteration, the learned author quotes Day, J., in Newby v. Sims(•) as follows:

"I cannot concur in the contention that because these acts (against adulteration) impose penalties, therefore, their construction should, necessarily, be strict. I think that neither greater nor less strict. ness should be applied to those than to other statutes." So judged, we have no doubt that the butter prepared out of curd falls within the plain meaning of the words in the said rule.

Reliance is placed by learned counsel for the appellant on the decision of Miabhoy, J., i11 Narshir!ha

Bhaskar v. State of Bombay(•). The decision is certainly in favour of the appellant. But a full bench of the same High Court in Sarlashiv v. P. V. Bhalerao (3) overruled the said decision. In the latter decision Chainani, C. J., after considering the arguments, observed at p. 1804 thus :

" The emphasis is, therefore, on the basic material from which butter is prepared and not on the process by which it is made. Dahi is prepared from milk by souring it. Butter prepared from De.hi can, therefore, be said to be butter prepared from milk itself, after it has undergone the process of souring ................... ,..... There is also a third method, which is used in some dairies and that is produce butter directly from milk itself. In a.II these three oases, the basic material from which butter is

!•> [•89tl 63.L.J.M:c. 229.

(2) I.L.R. [1958] Bom. 63?, <3) I.L.R. [1959] Bom. 1800.

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made is milk. Only the processes adopted for making it are different. In one case it is produced from milk directly. In the other two cases, cream and curd are first prepared and these aru then churned to obtain butter. The preparation of cream or curd is only an intermediate process in the manufacture of butter from milk. Butter made from Dahi or curd, is therefore also butter made from milk." We entirely agree with these observations.

Reliance is then placed upon a decision in Hunt v.

Richardson(1) in support of the argument that if the standard prescribed was not maintained, the appellant did not commit any offence, as there was no adulteration of milk fat with other products. In the above case, by s. 6 of the Sale of Food and Drugs Act, 1875, " no person shall sell t.o the prejudice of the purchaser any article of food which is not of the nature, substance, and quality of the article demanded by the purchaser, under a penalty." By s. 4 of the said Act, the Board of Agriculture were empowered to make regulations for determining what deficiency in any of the normal constituents of genuine milk should for the purposes of the Sale of Food and Drugs Acts raise a presumption, until the contrary was proved, that the milk was not genuine. In exercise of their power, the Boa.rd of Agriculture made a regulation prescribing that where a sample of milk contained less than 3 per cent. of milk fat it was to be presumed that the milk was not genuine by reason of the abstraction therefrom of milk fat or the addition thereto of water. A dealer in milk sold pure milk and the deficiency in the milk fat was not due to any abstraction from the milk or addition thereto, but because of the herbage on which the cows were fed.

The court, by a majority, held that no offence was committed by the dealer. The reason given for the decision is found at p. 452 and it is,

" This section does not authorize the Boa.rd of Agriculture to define what is milk, or to fix a standard of the normal constituents below which

(1) (1916] 2 K.B. 446.

Joshi v.

Shim pi

Subba llao J.

Joshi v.

Shim pi

St4bba Rao].

an article shall be deemed not to be milk, . and the regulation providing that where a sample of milk contains less then 3 per cent. of milk fat it shall be presumed, until the contrary is proved, not to be genuine of necessity implies that it may be proved to be genuine although it contains less than 3 per cent. of milk fat. It is to be observed that s. 1 of the same Act of 1899, which deals with the import ation of adulterated or impoverished milk, provides in sub-s. 7 that for the purposes of that section milk shall be deemed to be adulterated or impoverished if it has been mixed with any other substance, or if any part of it has been abstracted so as in either case to affect injuriously its quality, substance, or nature. This, I think, confirms the view implied in the regulation that milk which has not been so treated although it be deficient in milk fat is none the less deemed to be milk for the purposes of s. 6 of the Sale of Food and Drugs Act, 1875." It is, therefore, obvious that under the English Act selling milk below a particular standard is not an offence. The gist of the offence is mixing with milk any other substance or abstracting any part from it so as to affect injuriously the quality, substance, or nature of the milk. The regulation prescribing that milk shall contain not less than 3 per cent. of milk fat raises only a rebuttable presumption, and the dealer, notwithstanding such deficiency, can prove that the milk has not been adulterated or impoveri shed within the meaning of the said Act. But in the Indian Act selling butter below the prescribed standard is deemed to be adulteration. If the standard is not maintained, the butter, by a fiction, becomes an 11.dulterated food.

A dealer in such butter cannot adduce evidence to prove that notwithstanding the deficiency in the standard, it is not adulterated.

The conclusion we have arrived at is not only supported by the plain words of the rule, but also carries out the clear intention of the Legislature. The Act was passed to make provis10ns for the prevention of adulteration of food.

Butter is a favourite edible fat and is consumed in different ways by innumerable

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persons in this country. As we have already pointed out, butter is prepared in the rural areas throughout this country by the indigenous process of churning soured milk, whereas only in a few cities butter is prepared directly from milk. The interpretation suggested by learned counsel for the appellant, if accepted, would make the rule a dead-letter, for all practical purposes, and the object of the Legislature would be defeated. In our view, the intention of the Legislature has been clearly expressed in the rule.

We, therefore, hold that butter prepared from curd comes within the definition of "butter" in r. A.11.05 of Appendix B to the Rules.

The second contention turns upon a question of fact., The High Court considered the entire evidence and accepting the evidence of the Food Inspector and the Health Officer, held that the bottle sent to the Public Analyst was the sample seized from the appellant. There are no permissible grounds for allowing the appellant to canvass the correctness of this finding. We, therefore, accept the finding. ' The last contention is that the report of the Public Analyst is ambiguous and, therefore, the benefit of doubt should be given to the appellant. What is stated is that in the report it is stated that the butter contained 19·57% of moisture, 64·67% of milk fat and 18'32% of foreign fat, totalling 102·56% i.e., more than 100%. It is, therefore, argued that the report on the face of it is incorrect and therefore should not be acted upon. There is an obvious fallacy underlying this argument. 18·32 per cent. of foreign fat is not a percentage in relation to the milk but only in relation to the fat. Out of the fat in the milk, the analyst says that 18·32 per cent. is foreign fat. In his own words, ".The butter fat in the sample contains 18·32% foreign fat." If that be so, there is no mistake on the face of the report. The report clearly indicates that the butter sold by the appellant was below the standard prescribed under the rule. If so, it follows that the appellant is guilty of the offence with which he was charged.

Joshi v.

Shim pi

Subba Rao].

joslu

Shimpi

Subba Ilao ] .

I96I

February :i7.

The High Court sentenced the accused to undergo rigorous imprisonment for two months and also to pay a fine of Rs. 250/-. We agree with the High Court that the offence committed by the appellant is a serious one and that ordinarily the punishment should be deterrent. In mqst of the cases of this kind imprisonment would certainly be a suitable sentence.

But in this case, there was a conflict of view even in the Bombay High Court as regards the question whether butter made from curd would be butter within the meaning of the rule. Indeed, it was brought to our notice that on April 16, 1960, the Central Government made another rule amending rule {\-11.05 by inserting the word " curd " in the definition of butter and the amended definition reads, " butter means the product prepared exclusively from milk, cream or curd of cow or buffalo ......... " This must have been made to clarify the position in view of the conflicting decisions: In the circumstances, we think that a sentence of fine would meet the ends of justice in the present case. We, therefore, set aside the sentence of two months' rigorous imprisonment and a fine of Rs. 250/- and instead sentence the appellant to pay a fine of Rs. 500/·.

With this modification, the appeal is dismissed.

A.JYPeal di81nissed.

KARUMUTHU THIAGARAJAN CHETTIAR

AND ANOTHER

E. M. MUTHAPP A CHETTIAR. (P. B. GAJENDRAGADKAR and K. N. WANcnoo, JJ.)

Part1'ership-Duration not expressly provided-When can be

implied~Terminatien of partnership by notice-Partnership Act,

I9J2 (IX of 1932). ss. 7, IO, r3(g).

The appellant and the respondent entered into a written partnership with respect to the managing agency business of two mills, the terms of which were, inter alia, that the management shall be carried on in rotation once in four years, the appellant to manage for the first four years and thereafter the respondent to manage for the next four years and in the same way thereafter,

l )

M. V. JOSHI

M. U. SHIMP! AND ANOTHER

K. SuBBA RAO

RAGHUBAR DAYAL, JJ.

Prevcntion of Food Adulteration Act

s. 16(1)

Adulteration Act, 1954

Appendix B to the Rules

Appendix B to the Rules

Section 2(i)(l)

H. J. Umrigar

S. N. Andley

J. B. Dadrichanji

Rameshwar Nath

Ravindei Narain

Naunit Lal

B. K. Khanna

R. H. Dhebar

SuBBA RAO

High Court of Judicature at Bombay

s. 16(1)

s. 7(i)

Thana

June 27, 1957

Thana Borough Municipality

October 5, 1957

s. 2(1)

s. 16

s. 7(i)

Food Adulteration Rules, 1955

s. 2

Appendix B to the Rules

Section 2(i)

Section 2(xii)

s. 4

s. 23

Central Government

Appendix B to the Rules

Appendix B to the Rules

Section 7

Section 16

s. 7

Appendix B to the Rules

England

India

Subba Rao

September 12, 1955

Day

Miabhoy

Chainani

s. 6

Sale of Food and Drugs Act, 1875

s. 4

s. 1

s. 7

s. 6

Sale of Food and Drugs Act, 1875

Indian Act

Appendix B to the Rules

Bombay High Court

April 16, 1960

A.JYPeal

KARUMUTHU THIAGARAJAN CHETTIAR

E. M. MUTHAPP A CHETTIAR

P. B. GAJENDRAGADKAR

K. N. WANcnoo

ss. 7


joslu

Shimpi

Subba Ilao ] .

I96I

February :i7.

SUPREME COURT REPORTS [1961]

The High Court sentenced the accused to undergo rigorous imprisonment for two months and also to pay a fine of Rs. 250/-. We agree with the High Court that the offence committed by the appellant is a serious one and that ordinarily the punishment should be deterrent. In mqst of the cases of this kind imprisonment would certainly be a suitable sentence.

But in this case, there was a conflict of view even in the Bombay High Court as regards the question whether butter made from curd would be butter within the meaning of the rule. Indeed, it was brought to our notice that on April 16, 1960, the Central Government made another rule amending rule {\-11.05 by inserting the word " curd " in the definition of butter and the amended definition reads, " butter means the product prepared exclusively from milk, cream or curd of cow or buffalo ......... " This must have been made to clarify the position in view of the conflicting decisions: In the circumstances, we think that a sentence of fine would meet the ends of justice in the present case. We, therefore, set aside the sentence of two months' rigorous imprisonment and a fine of Rs. 250/- and instead sentence the appellant to pay a fine of Rs. 500/·.

With this modification, the appeal is dismissed.

A.JYPeal di81nissed.

KARUMUTHU THIAGARAJAN CHETTIAR

AND ANOTHER

E. M. MUTHAPP A CHETTIAR. (P. B. GAJENDRAGADKAR and K. N. WANcnoo, JJ.)

Part1'ership-Duration not expressly provided-When can be

implied~Terminatien of partnership by notice-Partnership Act,

I9J2 (IX of 1932). ss. 7, IO, r3(g).

The appellant and the respondent entered into a written partnership with respect to the managing agency business of two mills, the terms of which were, inter alia, that the management shall be carried on in rotation once in four years, the appellant to manage for the first four years and thereafter the respondent to manage for the next four years and in the same way thereafter,

l )

It further provided that the partners and their heirs and those getting their rights shall carry on the management in rotation.

Soon after disputes arose between the partners and the appellant gave notice to the respondent terminating the partnership treating it as a partnership at will, and the directors of the mills in

Karuniutku Thiagarajan

CheUiar their turn terminated the managing agency on the ground that > v. . the quarrels between the partners were detrimental to the good' futhappa Chell••• management of the mills. Thereafter the respondent brought a suit against the appellant and the mills for dissolution of the partnership firm and damages alleging that dissolution of the partnership by the appellant by notice was fraudulent and connived at by the mills.

The trial court held that the partnership was at will and the termination of the managing agency was legal and disallowed damages. On appeal by the respondent the High

Court held that the partnership was not a partnership at will and could not be dissolve~. by notice by the appellant. The termination of the managing agency was also held to be illegal. On appeal by the appellant with a certificate of the High Court:

Held, that considering the provision that the management would be carried on in rotation between the partners in four yearly periods and that the heirs of the partners would also carry an the business in rotation the intention was obviously to have a partnership of some duration, though the duration was not expressly fixed in the agreement. The duration of a partnership may be expressly provided for in the contract but even when there is no express provision, courts have held that the partnership will not be at will if the duration can be implied.

Grawshay v. Manie, l Swans 495; 36 E.R. 479, followed.

The contract in this case disclosed a partnership the determination of which was implied, namely, the termination of the managing agency and, therefore, under s. 7 of the Partnership Act it was not a partnership at will and was not legally terminable by the notice given by the appellant.

In view of the strained atmosphere between the partners there was sufficient reason for the mill to terminate the managing agency and the resolution of the board of directors terminating the managing agency agreement confirmed by the general meeting of the shareholders, did terminate the managing agency.

There was neither any fraud nor collusion by the mills with the appellant.

M orarji Gokuldas and Co. v. Sholapur Spinning and Weaving Co. Ltd. and Others, A.LR. 1944 P.C. 17 and Commissioners of Inland Revenue v. Sansom, [1921] K.B. 492, referred to.

The partnership in the present case must be deemed to have determined on the date of the passing of the resolution by the board of directors terminating the managing agency.

Sections ro and 13(1) of the Partnership'Act have no application to the facts of the case.

196I

Karumuthu

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 375of1956.

Thiagarajan Appeal from the judgment and decree dated Chettiar July 27, 1953, of the Madras High Court, in A. S. No.

Muthapp:· Chettiar 623 of 1949.

A. V. Viswanatha Sastri and S. Venkata Krishnan, for the appellants.

M. C. Setalvad, Attarney.General for India, R. Gana pathy Iyer and G. Gopalakrishnan, for the respondent.

1961. Februay 27. The Judgment of the Court was delivered by

Wanchoo J.

WANCHOO, J.-This is an appeal on a certificate granted by the Madras High Court. The brief facts necessary for present purposes are these : The present suit was brought by Muthappa Chettiar (hereinafter referred to as the respondent) against K. Thiagarajan Chettiar (hereinafter called the appellant) and the Saroja Mills Ltd. In 1939 these two persons thought of doing business jointly by securing ma.naging agencies of some mills. In that connection they carried on negotiations with two mills, namely, Rajendra Mills Limited, Salem and the Saroja Mills Limite~, Coimbatore (hereinafter called the Mills). The ma.nag. ing agency of the MillA was with the Cotton . Corpora. tion Limited. On October 4, 1939, the said Corporation transferred and assigned its rights to the appellant and the respondent under the name of Muthappa and Co. On November 15, 1939, the Mills at an extra. ordinary general meeting of the shareholders accepted Muthappa and Co. as the managing agents and made the necessary changes in the Articles of Association.

Later the appellant and the respondent obtained the managing agency of the Rajendra Mills Limited, Salem. The managing agents of this mill were Salem

Balasubramaniam and Co. Ltd. Mnthappa and Co. purchased all the shares of th$ Salem Balasubramaniam and Co. and thereafter carried on the business of the managing .agency of this mill in the name of Salem Balasubramaniam and Co. Ltd. In November 1940 the appellant and the respondent entered into a written partnership agreement with respect to

the managing agency business of the two mills. We I96r shall consider the terms of this agreement later and Ka, umuthu all thitt we need say at this stage is that turns were Thiagarajan fixed for the appellant and respondent to look after Chettiar the actual management of the two mills and the v appellant's turn was the first and he therefore came Muthappa Cl>ettiar into actual control of the two mills. Soon after how- --- H' anrhno ]. ever disputes arose between the appellant and the respondent with respect to the managing agency of the Rajendra Mills Limited, which resulted in various suits being filed between the partners, to which we shall refer later. Eventually on March 4, 1943, the appellant gave notice to the respondent terminating the partnership, considering it as a partnership at will. This was followed by the directors of the Mills terminating the managing agency of Muthappa and Co. on the ground that that company had ceased to exist and also on the ground that quarrels between the partners of the firm were not conducive to good management of the Mills.

This was notified to the respondent on March 22, 1943. This action of the directors was approved in a meeting of the shareholders of the Mills on September 29, 1943, and necessary modifications were a.gain made in the Articles of Association. In between on April 17, 1943, the respondent had filed a suit for a declaration that Muthappa and Co. continued to be the managing agents of the Mills and for obtaining possession of the office of managing agents for himself or along with the appellant and also for a permanent injunction restraining the Mills from appointing any other managing agents. This suit was dismissed by the trial court on the ground that it was not maintainable under s. 69 of the Indian Partnership Act, No. IX of 1932 (hereinafter called the Act), though the trial court gave findings on other issues also. The respondent went up in appeal to the Madras High Court against the decree in that suit. This appeal was dismissed on July 8, 1948, as the High Court held that the finding of the subordinate judge that the snit was not maintainable under s. 69 of the Act was correct.

The High Court however made it clear that it was

SUPHEME COURT REPORTS [l\!61]

,96r expressing no opinion on the correctness or otherwise of the other findings recorded by the subordinate f(arumuthu d Thiaga•ajan ju ge. c11, 11; a,· While this appeal was pending the respondent v. brought the present suit on February 28, 1946. In .Huthappa Chelliarthis suit he prayed for dissolving the firm Muthappa . - and Co., for accounts and for damages. against the R awhao I appellant and the Mills.

The main contention of the respondent in the suit was that the alleged dissolution of partnership by the appellant and the removal of Muthappa and Co. from the managing agency of the Mills were part of a scheme of fraud conceived by the appellant which was actively connived at by the Mills in order to defeat and defraud the respondent of his legitimate dues and his right to continue and act as the mana.ing agent of the Mills.

The damages claimed were estimated at the figure of five lacs of rupees to be recovered from both the appellant and the Mills or from either of them. In the alternative the respondent claimed tha, t even if Muthappa and Co. had been removed validly from the managing agency on September 29, 1943, he was entitled to an account from the appellant from November 15, 1939, to September 29, 1943. The suit was resisted by both the appellant and the Mills and their case was that the partnership was oue :it will and therefore was validly terminated by the appellant by notice .. It was further contended that in any case the Mills were within their rights in terminating the managing agency of Muthappa and Co., as that firm had ceased to exist and there were interminable disputes between the partners. Fraud and collusion were denied and it was alleged that it was the respondent's conduct which compelled the appellant to give notice of termination of partnership and the Mills to terminate the managing agency. The Mills took a further plea, namely, that so far as they were concerned, the suit was barred under s. 69 of the Act.

The trial court held that the firm of l\iuthappa and Co. was a partnership at will and therefore was legally dissolved by the appellant by giving nut.ice dated March 4, 1943. It further held that no case of fraud

had been proved and that the termination of the '96' managing agency was legal. As to the Mills the trial Ka, umuthu . court h!lld that the smt against them was barred Thiagarafan under s. 69 of the Act. In consequence the suit against Chetliar the Mills was dismissed in toto aml the prayer for v. . damages was also rejected. The trial court however.lfothappa Clldltuw <lirected the appellant to account for the profits Wanchoo 1. earned from the inception of the partnership business till March 4, 1943, when the partnership was terminated by the appellant by notice.

Thereupon the respondent. went up in appeal to the High Court. The High Court held that the suit against the Mills was barred uuder s. 69 of the Act, though it was made clear that if there were assets of the partnership firm in possession of the Mills the respondent would be entitled to recover them. The High Court however ordered the Mills to bear their own costs in both the courts on the ground thai, the Mills were guilty of fraud.

As to the case against the appellant, the :ijigh Court held that the partnership was not a partnership at will and therefore it could not be dissolved by notice by the appellant. It further held that the appellant fraudulently and in collusion with the Mills purported to dissolve the partnership by issuing an illegal notice and to have t.he managing agency terminated by the Milb, and in consequence the termination of the managing agency was illegal.

On the view therefore that the partnership as well as the managing agency continued and on a review of the circumstances, the High Court held that this was a fit case for dissolving the partnership and fixed March 10, 1949, which was the date of the decree of the trial court as the date from which the partnership would be dissolved. Coneequently it modified the decree of the trial court and passed a preliminary decree for accounts against the appellant in respect of the firm Mu happa and Co. from November 15, 1939, to March 10, 1949. and added that the respondent could also recover at}y a.mount found due to him on taking accounts against the part.nership assets, if any, in the hands of the ?dills.

Th~ appellant then applied for a certificate to

}:28

1961 appeal to this Court which was granted; and that is how the matter has come up before us.

Karumuthu Thiagarajan The first question therefore that arises for our deter.

CheHiar mina.tion is whether the partnership in this case is a v. partnership at w.ill and it is necessary to refer to the Mutkappa Clieuiarterms of the partnership agreement to determine this

 question.

After reciting that the management of the fVanchoo ].

M"ll b . . d . h I 1 s was erng carne on m t e name and style of Muthappa and Company and of the Rajendra. Mills Limited in the name and style of Salem Balasubramaniam and Co. Limited, the partnership agreement goes on to say that the partners shall get in equal shares the salary, commission, profit, etc., that may be realised from the aforesaid managing agencies. It provides for carrying on the management in rotation once in fonr years, the appellant to manage for the first four years and thereafter the respondent to manage for the next four years and in the same way thereafter. It further provides that the partners and their heirs and those getting their rights shall carry on the management in rotation. The accounts were to be made once in every year after the closing of the yearly accounts of the two mills. There were then provisions as to borrowing with which we are not concerned. The agreement further provides that in case either partner thinks of relinquishing his right of management under the agreement it shall be surrendered to the other partner only but shall not be transferred or sold to any other person whatever. Finally it is provided that the two partners shalt carry on the affairs of the firm by rotation once in four years and the income realised thereby shalt be divided year after year and the partners and their heirs shall get the same in equal shMeR and thus carry on the partnership management.

The contention un he half of the appellant is that as this partnership doPs not fall under s. 8 of the Act and is not within the two excj3ptions under s. 7, it is a partnership at will.

Sectiou 7 provides that where no provision is made by contract between the partners for the duration of the partnership, or for the determination of the partnership. the partnership is partnership at will. ection 8 provides that a person may

...

3 S.C.R. SUPREME COUl{T REPORTS 1005

become a partner with another person in particular ad ventures or undertakings. :Section 43 provides that I<a•umuthu where the partnership is at will, the firm may be Thiagaiajan dissolved by any partner giving notice in writing to Chetti•• all the other partners of his intention to dissolve the v. firm.

On the other hand if the partner;; hip is not at Muthappa Chettiar will, s. 42 applies and is in these terms:- wanchoo ;. "Subject to contract between the partners a firm is dissolved-

(a) if constituted for a fixed term, by the expiry of that term ;

(b) if constituted to carry out one or more adventures or undertakings, by the completion thereof;

(c) by the death of a partner; and

(d) by the adjudication of a partner as an insul vent. " Section 44 provides for dissolution by the court. The High Court was of the view that looking to the terms of the partnership it could not be held to be a partnership at will and that under s. 7 it will be a case of a partnership the duration of which as well as the determination of which were fixed.

The High Court was further of the view that s. 8 of the Act would also apply to the partnership in question as the evidence showed that the partners had entered into partnership in order to carry on the business of managing agency of the two mills and such business was an undertaking. As we read the terms of the agreement it seems to us clear that the intention could not be to create a partnership at will.

The partners contemplated that the management would be carried on in rotation between them in four yearly periods. It was also contemplated that the heirs of the partners would also carry on the management in rotation. Considering this provision as well as the nature of the business of partnership it could not be contemplated that the partnership could. be brought to an end by notice by either partner. The intention obviously was to have

a partnership of some duration, though the duration was nol expressly fixed in the agreement. Now s. 7 contemplates two exceptions to a partnership at will.

I96I The first exception is where there is a. provision in the

Karumuthu contract for the duration of partnership; the second Thiaga.ajan exception is where there 'is provision for the determi- Chettiar nation of the partnership. In either of these cases

v. . the partnership is not at will. The duration of a Muthappa Chettiar partnership may be expressly provided for in the

Wanchoo .f. contract; but even where there is no express provision, courts have held that the partnership will not be at will if the duration can be implied. See Halsbury's Laws of England, Third Edition, Vol. 28, p. 502, para. 964, where it is said that where there is no express agreement to continue a partnership for a definite period there may be an implied agreement to do so. In Grawshay v. Maule(') the same principle was laid down in these words at p. 483 :-

"The general rules of partnership are well-settled.

Where no term is expressly limited for its duration, and there is nothing in the contract to fix it, the partnership may be terminated at a moment's notice by either party ...... Without doubt, in the absence of express, there may be an implied, contract as to the duration of a partnership. " The same principle in our opinion applies to a case of determination. The contract may expressly contain that the partnership will determine in certain circumstances; but even if there is no such express term, an implied term as to when the partnership will determine may be found in the contract. What we have therefore to see is whether in the present case it is possible to infer from the contract of partnership whether there was an implied term as to its duration or at any rate an implied term as to when it will determine. It is clear from the terms of the contract of partnership that it was entered into for the purpose of carrying on managing agency business. Further the term relating to turns of the two partners in the actual management and the further term that these turns will go on even in the case of their heirs in our opinion clearly suggest that the duration of the partnership would be the same as the duration of the managing agency. We cannot agree that this means that the partnership

3 s.c.R.

SUPREME COURT REPOR1'S 1007

would become permanent. In any case even if there i8 1961

some doubt as to whether the terms of this contract Haruniuthu implied any duration of the partnership, there can in Thiagar•jan our opinion be no doubt that the terms do imply a Chettiar determination of the partnership when the managing v. d

I .

J h Jluthappa Chettiar agency agreement comes to an en . t is c ear t at __ the partnership was for the sole business of carrying Wanclwa J. on the managing agency and therefore by necessary implication it must follow that the partnership would determine when the managing agency determines.

Therefore on the terms of the contract in this case, even if there is some doubt whether any duration is implied, there can be no doubt that this contra.ct implies that the partnership will determine when the managing agency terminates.

In this view the partnership will not be a partnership at will as s. 7 of the Act makes it clear that a partnership i.n \\hi ch there is a term as to its determination is not a partnership at will.

Our attention was drawn in this connection to a term in the contract which lays down that either partner may withdraw from the partnership by relinquishing his right of management to the other partner. That however does not make the partnership a partnership at will, for the essence of a partnership at will is that it is open to either partner to dissolve the partnership by giving notice.

Relinquishment of one partner's interest in favour of the other, which is provided in this contra.ct, is a. very different matter. It is true that in this particular case there were only two partners and the partnership will come to an end as soon as one partner relinquishes his right in favonr of the other. That however is a fortuitons circumstance; for, if (for example) there

had been fonr partners in this case and one of them relinquished his right in favour of the other partners, the partnership would not come to an end. That clearly shows that a term as to relinquishment of a partner's interest in favonr of another would not make the partnership one at will. We may in this connection refer to Abbott v. Abbott (' ).

That was a case where there were more thn, n two partners and it was

(1) (1936J 3 All E.R. 8a3.

provided that the retirement of a partner would not

Karumu<ku terminate the partnership and there was au option for

TM1Jgarajan the pllrchase of the retiring partner's sh:tre by other Che1uar partners. It was held that in the cirrn1rn, tances the

Mull••PP:· Cheltiar partnership was not at will and it was poi1t(d out that only when all _the partners except one retired that the wanchoo J. partnership would come to an end beca1rno there could not be a partnership with only one partner. We are, therefore, in agreement with the High Court that the contract in this case disclosed a partnership the determination of which is implied, namely, the termination of the managing agency and, therefore, under s. 7 of the Act it is not a partnership at will. In the circumstances it is unnecessary to consider whether the case will also come under s. 8 of the Act.

The next question that arises is whether the managing agency has been terminated legally ; for if that is so the partnership would also be determined. This takes us to the history of the relations between the partners after the partnership came into existence. It seems that disputes arose between the partners some time in 1941 in connection with the Rajendra Mills Limited which was one of the mills included in the managing agency business. The respondent filed a suit on March 4, 1942, against the appellant and Salem Balasu bramaniam and Co. Limited with respect to the allotment of shares in the managing agency company.

On March 11, 1942, the respondent filed another suit, this time on the basis of debentures which he held against the Mills, praying for a decree against the Mills with respect to t.he debenture amount. On June 17, 1942, the respondent filed a third suit with respect to the Rajendra Milfs Limited for a declaration tha.t the respondent was a partner owning half share in the managing agency of the Ra.jendra Mills Limited.

On the same day the respondent filed a fourth suit against the appellant, his son and Salem Bala.subramaniam and Co. Limited with respect to certain actions ta.ken by the managing agency company. On July 15, 1942, the appellant filed a counter-suit against the respondent and the managing agency company relating to the Rajendra Mills Limited for a

3 S.C.R.

SUPREME COURT REPORTS lOO!l

declaration that the respondent had no interest in the managing agency company and for further reliefs. 1;.,..,,,,.1hu There is no don bt, therPforn, that the relations bet ween lhiagurajan the partners were very strained in 1942. The respondent Ch•tliar admitted in his statement that from the end of 1941 v. h . b h' .I h ]J d Muthappa Chettiar t ere ws enmity et.ween 1m am t e appe ant an __ there were ,-ital differences between them and litigauanchoo J. tion was going on, though he said that in spite of the enmity he was willing to co-operate with the appellant if 1.he <imount. of which he had been defrauded were paid to him on accountiug. So far as the litigation with respect to the Rajendra Mills Limited was concemed the respondent lost and it was held that he had wii.hdrawn from the partuership of the managing agency company with respect to that mill.

As to the suit on debentures, the money was deposited in court and"the dispute was only about costs. That matter also went up to the High Court and finally the High Court refused to allow costs to the respondent.

It was in this strained atmosphere between the partners that. tlw appellant gave notice dated March 4, 1943, terminating t.he partnership with respect to the Mills considering it a~ a partnership at will. We have however held that. the partnership was not a partnership at will :rnd the notice given by the appellant could not, therefore, terminate it legally.

But the question still r8mains whether the managing agency of the Mills was Lmninated legally ; for if that was so the partnel'Ship would also come to an end on the date the managing agency was terminated in view of what we have held abO\'e.

The High Court haH examined the circnmstances in this connection and lrns come to the conclusion that the appellant fraudulently and collusively with the i.\lills got the managing agency terminated and, therefore, r.he termination of the managing agency was illegal.

We are nnahle to agree with this view of the High Court. It is, therefore, necessary to examine the circumstances in which the termination came about. The appellant sent a copy of his notice dated March 4, 1943, terminating the partnership to the Mills also. The respondent sent a reply to this notice in which h" claimed that the partnership w11.e

'96' not at will and the appellant was not entitled to termin.

I<arumuth" ate it, and a copy "of this reply was also sent to the Thiagaraja11 Mills on March 16, 1943. On March 22, 1943, the Chettiar directors of the Mills held a meeting. In that meeting

v. . the directors decided that as the partners of Muthappa 'lfuthappa Chee1iar and Company were unable to get on in harmrmy with

Wanchoo J. each other and were involved in litigation arid several suits were going on between them and on account of their differences the work of the Mills was suffering and

was likely to suffer and also because Muthappa and Company had ceased to exist and had lost its right of management and was no longer in a position to manage the Mills, it became necessary to appoint other managing agents. Thus by this resolution the managing agency of Muthappa and Company was terminated for two reasons: (1) that there were differences between the partners of the managing agency company n.nd the work of the Mills was suffering and was likely to suffer, and

(2) that Muthappa and Company had come to an end and, therefore, had lost its right of management. It appears that before this resolution was passed the appellant had been purchasing shares of the Mills in the market and had acquired a controlling interest thereiri. The High Court, therefore, thought that the hidden hand of the appellant was visible behind this resolution of the directors of the Mills, the more so as the appellant's son was nominated by the same resolu tion to administer the whole affairs of the Mills subject to the control and direction of the boa.rd of directors till such time as suitable managing a.gents were appointed. This action of the board of directors was confirmed at a genera.I meeting of the shareholders on September 29, 1943.

The High Court thought that as the appellant had acquired a controlling interest in the Mills he was behind the resolution of the directors of March 22, 1943, and the resolution of the genera.I meeting of the shareholders of September 29, 1943. It may be that the appellant having acquired a col)trolling interest in the Mills had a good deal to do with the re,90lutions; but. that in our opinion would not necessarily make bis

3 S.C.R.

SUPREME COURT REPORTS lOll

conduct fraudulent and the termination of the managr96r ing agency agreement illegal. It is not in dispute that I\arumuthu there was no agreement between the partners that Thiagarajan either of them would not purchase .shares of the Mills Chcttiar in open market. We do not therefore see anything v. improper in the conduct of the appellant when he Mu1happa Chclli•r purchased the shares of the Mills in open market and wanc;;; o .J. managed to acquire the controlling interest therein.

The appellant obviously had two capacities: in one capacity he was a partner of the respondent in the managing agency business, in the other capacity he was a large shareholder of the Mills and as such shareholder it was certainly his interest to see that the interest of the Mills did not suffer. The crucial question therefore is whether the action taken by the Mills by the two resolutions is such as would be taken by any prudent company when faced with the situation with which the Mills was faced in the present case.

There can in our opinion be no doubt that any company when faced with a situation in which the Mills was in this case, and finding that the two partners of its managing agency firm were fighting tooth and nail ., and there was no love lost between them and also finding that the interest of the Mills was suffering and was likely to suffer because of the bad blood between the two partners of the managing agency, was bound to take steps to protect its own interests. The fact that the major shareholder in the Mills also happened to be a partner. in the managing agency would not disentitle him from acting in the interest of the Mills as a major shareholder. We may in this connection refer to Morarji Goculdas and Go. v. Sholapur Spinning and Weaving Go. Ltd. and Others('). In that case a

question arose whether the termination of the managing agency agreement was illegal on the ground of misconduct. It was found in that case that there were quarrels between the partners of the managing agency firm of such a nature and duration as to impair seriously their capacity to discharge their duty to the company as managing agents and to affect prejudicially the interests of the company.

It was held that:-

(1) A.LR. 1944 P.C. 17.

z96z

Karumuthu Thiagarf1jan

Chettiar v.

Muthappa Chettiai

Wan&hoo ].

"In each case the question must be whether the misconduct proved, or reasonably apprehended, has such a direct bearing on the employer's business or on the discharge by the employee of that part of the employer's business in which he is employed, as to seriously affect or to threaten to seriously affect the employer's business or the employee's efficient discharge of his duty to his employer." If on the facts and circumstances of the case it was so, the termination of the managing agency would be justified. In the present case there can be no doubt that the quarrels between the two partners of the managing agency firm were so serious and of such duration as to impair their capacity to discharge their duty to the Mills as managing agents and to affect the interests of the Mills prejudicially. Therefore, if the directors of the Mills came to that conclusion it is in our opinion not correct to say that that conclusion was arrived at fraudulently, simply because a. major shareholder happened to be the appellant. We may in this connection refer to the observations of Younger L.J. in Commissioners of Inland Revenue v.

Sansom('):-

"No doubt there are amongst such companies, as amongst any other kind of association, blacksheep; but in my judgment such terms of reproach as I have alluded to should be Rtrictly reserved for those of them and of their directors who a.re shown to deserve condemnation, and I am quite satisfied that the indiscriminate use of such terms has, not infrequently, led to results which were unfortunate and unjust, and in my judgment this is no case for their use." These remarks are in our opinion apposite .in. the present context. It is true that the appellant had a. hand as a major shareholder in the two resolutions and this was never hidden ; but it is equally true that in the circumstances then existin~ any prudent board of directors and any body of shareholders interested in a company would act in the manner iR which the boa.rd of directors and the shareholdets of the Mills

(I) [1921] 2 J\-B. 492, 5Iiacted in the present case. We cannot therefore agree r96r wit.h the High Court that this is a. case where the J<., umuthu boa.rd of directors and the shareholders acted Thiagarajan fraudulently in collusion with the appellant, for we Ch•ttiar oannot forget that the appellant as a major sharev. holder of the Mills could legitimately act to protect Muthappa Chettiar them and the action taken was such as any board of Wanihoo ]. directors and any body ofsharehnlclers would bona fide take. In the circumstances we are of opinion that the resolution of the board of directors terminating the managing agency agreement, confirmed by the general meeting of the shareholders, did legally termincfo the managing agency between the Mills and Muthappa and Company. It is true that in these resoultions a second reason was given for the termination, viz., that Muthappa and Co. had come to an end

bcii.use of the notice of March 4.

That legal position is in our view incorrect; but that apart there were otherwise sufficient reasons for the Mills to terminate the managing agency in the circumstances with which it was faced.

The next question that arises is as to when the managing agency can be said to have been terminated, i.e., whether on March 22, 1943, or on September 29,

1943. Now under s. 87-B (f) of the Indian Companies Act, No. VII of 1913, which was then in force, the appointment of a managing agent, the removal of a managing agent and any variation of a managing agent's contract of management shall not be valid unless approved by the company by a resolution at a general meeting of the company.

This provision clearly shows that a managing agent may be appointed and removed by the board of directors, though such appointment and removal is subject to the approval by the company by a resolution at a general meeting of the company .. We agree with the High Court that when the company at its general meeting approves of an appointment or of a removal, the approval takes

effect from the date of the appointment or removal by the board of directors. On this view therefore, when the general meeting in this case approved the action of the board of directors, the removal became valid a.nd came into effect from March 2::, 1943.

'96z Therefore, the managing agency agreement in this Ka.umuthu case was validly terminated on March 22, 1943. As Thiagar•ian we have already held that .there was an implied term Chettiar in the contract of partnership that it will determine

v, when the managing agency agreement with the Mills Muthappa Chettiar terminates, the partnership in the present case must under the contract be deemed to have determined on Wanchoo], March 22, 1943.

Therefore, the respondent will be entitled to an account only from November 15, 1939, to March 22, 1943.

The learned Attorney-General however referred us to ss. 9, 10 and 13(f) of the Act am! his contention was that the appellant must account for all the profits made by him out of the managing agency business, even after March 22, 1943, Under s. 10 every piirtner has to indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm and under s. 13(f) a partner has to indemnify the firm for any loss caused to it by his wilful neglect in the conduct of the business of the firm.

In the first place, such a case was not made out in the plaint by the respondent; in the second place we are of opinion that ss. 10 and 13(f) have no application to the facts of the present case. We therefore reject this contention.

That leaves the question of costs. So far as Saroja Mills Limited are concerned, we are of opinion that they are entitled to their costs throughout from the respondent as their action in terminating the managing agency has been held by us to be legal and valid.

As to Thiagarajan Chettiar we are of opinion that in the circumstances of this case, the order of the subordinate judge that Muthappa Chettiar (respondent) and Thiagarajan Chettiar (appellant) should bear their own costs is just and we order them to bear their own costs throughout.

We. therefore allow the appeal in part and order that accounts will be taken from November 15, 1939, to March 22, 1943, as between Thiagarajan Chettiar and Muthappa Chettiar. The respondent will pay the costs of Saroja Mills Limited throughout ; but Muthappa. Chettiar and Thiagarajan Chettiar will bear their own costs throughout.

Apptal allowed in part.

~;: ft,,

joslu

Shimpi

Subba Ilao

Bombay High Court

April 16, 1960

Central Government

ss. 7

Karuniutku Thiagarajan

s. 7

Karumuthu

A. V. Viswanatha Sastri

S. Venkata Krishnan

M. C. Setalvad

R. Gana pathy Iyer

G. Gopalakrishnan

Wanchoo

WANCHOO

Muthappa Chettiar

K. Thiagarajan Chettiar

Saroja Mills Ltd.

Rajendra Mills Limited

Salem

Saroja Mills Limite~, Coimbatore

Cotton . Corpora. tion Limited

October 4, 1939

Muthappa and Co.

November 15, 1939

Salem Balasubramaniam and Co.

Salem Balasubramaniam and Co. Ltd.

Chettiar

March 4, 1943

March 22, 1943

September 29, 1943

April 17, 1943

s. 69

Indian Partnership Act

Madras High Court

July 8, 1948

s. 69

February 28, 1946

.Huthappa Chelliarthis

Muthappa . - and Co.

s. 69

l\iuthappa and Co.

s. 69

Chetliar

however.lfothappa Clldltuw

Wanchoo

s. 69

March 10, 1949

Mu happa and Co.

Karumuthu Thiagarajan

Muthappa

Rajendra. Mills Limited

Salem Balasubramaniam and Co. Limited

s. 8

s. 7

S.C.R. SUPREME COUl{T REPORTS 1005

Section 43

Chetti••

s. 42

Section 44

s. 7

s. 8

s. 7

S 1007

Wanclwa J.

t is c ear t at  the partnership was for the sole business of carrying Wanclwa J. on the managing agency and therefore by necessary implication it must follow that the partnership would determine when the managing agency determines.

s. 7

s. 7

s. 8

March 4, 1942

Salem Balasu bramaniam and Co. Limited

March 11, 1942

June 17, 1942

Rajendra Milfs Limited

Ra.jendra Mills Limited

July 15, 1942

Thiagaraja11 Mills

March 16, 1943

Muthappa and Company

I\arumuthu

Thiagarajan

September 29,

1943

s. 87

Companies Act

March 2::, 1943

ss. 9, 10 and 13(f)

s. 10

s. 13(f)

ss. 10 and 13(f)

Saroja Mills Limited

Thiagarajan Chettiar

Muthappa Chettiar

Muthappa. Chettiar


3 S.C.R.

SUPREME COURT REPORTS 1015

SRI RATNAVARAMARAJA v.

SMT. VIMLA. (J. L. KAPUR, M. HIDAYATULLAH and J. C. SHAH, JJ.)

Court Fees-Question of adequacy-If could be raised by defendant in appeal-Madras Court Fees and Suits Valuation Act, r955 (Mad. r4 of I955), s. ra(2)-Code of Civil Procedure (Act V of r908),

S. II5.

The question was whether the defendant was entitled to raise a grievance and contest the valuation of the properties in dispute as if it were a matter in issue between the plain tiff and himself and could seek to invoke the High Court in its revisional jurisdiction against the order adjudging court fees payable on the plaint.

Held, that the Court Fees Act is enacted to collect revenue and not to be used as a technical weapon by the defendant for obstructing the progress of the suit by approaching the High Court in its revisional jurisdiction against the order determining and adjudging court fees payable on the plaint.

That section 12(2) of the Madras Court Fees Act, r955, only enabled the defendant to assist the court in arriving at a just decision on the question of court fees payable on the plaint.

That in the instant case the High Court grievously erred in entertaining revision application on the question of court fees at the instance of the defendant when no question of jurisdiction was involved.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 624of1960.

Appeal by special leave from the judgment and order dated Ma.} 30, 1960 of the Mysore High Court in Civil Revision Petition No. 1098 of 1959.

K. R. Karanth and R. Gopalakrishnan, for the appellant.

A. V. Viswanatha Sastri, R. Ganapathy Iyer and G. Gopalakrishnan, for the respondent.

B. R. L. Iyengar and T. M. Sen, for the State of Mysore (On Notice issued by the Court).

1961. February 27. The Judgment of the Court was delivered by

SHAH, J .-Smt. Virola-hereinafter referred to as the plaintiff-filed suit No. 73 of 1956 in the court of the Subordinate Judge, South Kanara, for a. decree for

r96i possession of lands, buildings, house-site.~ described in sch. A and movable properties described in sch. B Ratn•v•;;,,,.,0i• and for mcsne profits in respect of properties desv. cribed in sch. A and for a decree for possession and

SmJ. Vim/a management and for accou; it of the properties described in sch. C and institutions alleged to he the private family religious endowments in sch. D. The plaintiff claimed that on the death of her father Shri Dharmasthala Manjayya Heggade on August 31, 1955, she became entitled to the properties in suit but the defendant wrongfully possessed himself of those properties. The plaintiff valued the properties in schs. C and D under s. 28 of the Madras Court-fees and Suits Valuation Act, 1955 at Ri. 21,000/- and paid a court.fee of Rs. 275/-. She valued the lands in schednle A for purposes of jurisdiction at 30 times the assessment and separately valued the buildings and paid court-fee on that footing. On June 28, 1956, the Subordinate Judge ordered on an objection raised by his office that the amount of Rs. 34,577/- paid as court-fee by the plaintiff was adequate. Then followed a course of proceedings for which not many precedents may be found. On September G, 1950, the defendant filed his written statement raising an objection inter alia to the valuation of the properties in suit and the court-fee exigible on the claim. The trial court then raised an issue about the adequacy of the court-fee, paid by the plaintiff. On February 13, 1957, the defendant applied for the appointment of a Commissioner to value the properties. The court dismissed the application and declared that the court. fee paid was adequate. In Revision Petition 272 of 195i preferred by the defendant to the High Court of Judicature at Bangalore, the order passed by the Subordinate Judge was set aside and it was directed that the trial court do " ascertain the value of the properties for purposes of court-fee in accordance with law after giving full opportunity to the parties and if need be by appointing a Commissioner to ascertii.in the present market value of the suit Schedule properties and decide the issue a.fresh on merits." Pursuant to this direction, a Commissioner was appointed by

Shah].

' •

the Subordinate Judge. The Commissioner submitted his report as to valuation of the properties. Objections were raised by the defendant to that report and a further report was submitted by the Commissioner.

On the direction of the Subordinate Judge, a supplemental report was submitted by the Commissioner.

After hearing the parties, the Subordinate Judge held that the properties described in sch. D were " extra commercium " and fixed court-fee was exigible in respect of the claim for possession thereof, that properties described in sch. D were "trust properties" and s. 28 of the Madras Court-fees and Suits Valuation Act applied thereto as the dispute related to the right of management between persons claiming to be rival trustees, that the houses built on revenue paying lands had to be valued according to their market value and not at 30 times the land assessment and that the lands in sch. A were worth Rs. 7, 74,665( and the house-sites were worth Rs. 27,625/-. The plaintiff paid the additional court-fee as directed by the court.

Against the order passed by the Subordinate Judge, the plaintiff and the defendant applied by separate petitions in revision to the High Court of Mysore.

The High Court heard the Advocate-General of the State and substantially confirmed the order passed by the Subordinate Judge except as to an institution .. d.escribed.as '.' Nelliyadi Beedu '', in respect of which the High Court directed the trial court to determine whether the institution was "extra commercium" after giving an opportunity to both parties to put forth their contentions and to lead evidence in that behalf. Against that order of the High Court, this appeal has been preferred by the defendant with special leave under Art. 136 of the Constitution.

The Court-fees Act was enacted to collect revenue for the benefit of the State and not to arm a contesting party with a weapon of defence to obstruct the trial of an action. By recognising that the defendant

as _entitled t_o ?on test the valuation of the properties m dispute as 1f 1t were a matter in issue between him and the plaintiff and by entertaining petitions preferred by the defendant to the High Court in exercise of

Sri Rcitnavaramaroja

Snit. V imla

Shah].

z96z its revisonal jurisdiction against the order adjudging s . court-fee payable on the plaint, all progress in the

Ratnava;:maraja suit f?r the trial of the dispute on the merits has been v. effectively frustrated for nearly five years. We fail Smt. Vimla to appreciate what grievance the defendant can make by seeking to invoke the revisional jurisdiction of the Shah J.

High Court on the question whether the plaintiff has paid adequate court-fee on his plaint. Whether proper court-fee is paid on a plaint is primarily a

question between the plaintiff and the State. Hpw by an order relating to the adequacy of the court-fee paid by the plaintiff, the defendant may feel aggrieved, it is difficult to appreciate. Again, the jurisdiction in revision exercised by the High Court under s. 115 of the Code of Civil Procedure is strictly conditioned by els. (a) to (c) thereof and may be invoked on the -ground of refusal to exercise jurisdiction vested in the Subordinate Court or assumption of jurisdiction which the court does not possess or on the ground that the court has acted illegally or with .uiaterial irregularity in the exercise of its jurisdiction. The defendant who may believe and even honestly that proper court-fee has not been paid by the plaintiff has still no right to move the superior court by appeal or in revision against the order adjudging payment of court-fee payable on the plaint. But counsel for the defendant says that by Act 14 of 1955 enacted by the Madras Legislature which applied to the suit in question, the defendant has been invested with a right not only to contest in the trial court the issue whether adequate courtcfee has been paid by the plaintiff, but also to move the High Court in revision if an order contrary to his submission is passed by the court. Reliance in support of that contention is placed upon sub-s. (2) of s. 12. That sub-section, in so far as it is material, provides:

" Any defendant may, by his written statement filed before the first hearing of the suit or before evidence is recorded on the merits of the claim ...... plead that the subject-matter of the suit has not been properly valued or that the fee paid is not sufficient. All questions arising on such pleas shall

be heard and decided before evidence is recorded x961 affecting such defendant, on the merits of the claim. .

If the court decides that the subject-matter of the R 5" . . h b l l d h atnavaramaraJa smt as not een proper y va ue or t at the fee v. paid is not sufficient, the court shall fix a date before sm1. Viml• which the plaint shall be amended in accordance with the court's decision and the deficit fee shall be Shah J. "d ,, pa1 ...... .

But this section only enables the defendant to raise a contention as to the proper court-fee payable on a plaint and to assist the court in arriving at a just decision on that question. Our attention has not been invited to any provision of the Madras Court-fees Act or any other statute which enables the defendant to move the Righ Court in revision against the decision of the court of first instance on the matter of courtfee payable on a plaint. The Act, it is true by s. 19, provides that for the purpose of deciding whether the subject-matter of the suit or other proceeding has been properly valued or whether the fee paid is sufficient, the court may hold such enquiry as it considers proper and issue a commission to any other person directing him to make such local or other investigation as may be necessary and report thereon. The anxiety of the Legislature to collect court-fee due from the litigant is manifest from the detailed provisions made in ch. III of the Act, but those 'provisions do not arm the defendant with a weapon of technicality to obstruct the progress of the suit by approaching the High Court in revision, against an order determining the court-fee payable. In our view, the High Court grievously erred in entertaining revision applications on questions of court-fee at the instance of the defendant, when no question of jurisdiction was involved.

The appeal therefore fails and is dismissed with costs.

Appeal dismissed.

SRI RATNAVARAMARAJA

VIMLA

L. KAPUR

M. HIDAYATULLAH

C. SHAH, JJ.

Suits Valuation Act

Code of Civil Procedure

Court Fees Act

section 12(2)

Court Fees Act

Mysore High Court

K. R. Karanth

R. Gopalakrishnan

A. V. Viswanatha Sastri

R. Ganapathy Iyer

G. Gopalakrishnan

B. R. L. Iyengar

T. M. Sen

SHAH

Virola

Dharmasthala Manjayya Heggade

August 31, 1955

s. 28

June 28, 1956

September G, 1950

13, 1957

High Court of Judicature at Bangalore

s. 28

Suits Valuation Act

High Court of Mysore

Art. 136

Court-fees Act

Rcitnavaramaroja

Shah

s. 115

the Code of Civil Procedure

Madras Legislature

s. 12

s. 19