lN2

!i"rdar s,.'"4 T• Soifa"1i• SdH

T, no, Stai. of Biid.,

Jonu"'JI IJ.

554 SUPREME COURT REPORT8 [I!lti2J SUPP. guarantee under Art. 2.i (I) and rcnderini: thll protection illusory.

Jn my view th" petitio1vr iH entitled to the relief that he seeks and the petition will accordingly be allowed.

}fr Conn : In Ae<ordaiwe with the majority view of this Court, the vetition is allowed. The petitioner is entitled to his costs.

Petition all<JWed. ---

THE JOMMA MASJID, .MERCARA

KODIMANIANDRA DE\'IAH (J. L. KAPUR, M. HIDAYA.TULJ, AH, J. C. SHAH and T. L. VENKA1'ARA.:l!A AJYAH, JJ.)

Tran"fer of Proptrty-Sa/e by ret-ersioner for co11airkration -Fra"Udu/, e.nt or errc>nt:ou.9 repre.lienlati()tz--f'rr.~1 nt transferable

int1.ret, tl1ou9h in/act sprs ,'."ucce~, inni.t .. S11bRr.quenlacquiaition of title-Ejfect-Rult of "''"N><i-11'1.tn lcr uc resort'd to Transfer of Property Act, 18$2(4 of 18821, •· 6(a).

Intuprtlalion of Statute-( 'onsiruing of aertion-1/ nP111 rrvrda wuld be read 1"nto it-11/u.atration to a section When rou/d be ustd lo enlarge the language-If admissiilt ,,, construi1ig a section.

M and S claiming t0 be revenioners to the estate of N sold the property in dispute to G predecessor-in-interest of the re.pondents. The sale dred recited that the property belongcrl to the joint family of two brothers N and B, and on the death of N it was inherited by his widow and on her death it had devolved upon them as reversioners to the stato. G sued to recover possession of the propcrties. The suit was contested by the wiclow of B(brother of N) claiming that the property was the self acquired pnpcrty of her hushand. During the pendency of the litiFatio' the widow died, and G applied to the revenue authoritin to transfer the 'pattas' in his name.

The appellants intervened alleging that the property was gifted to them by the widow, and S one of the reversioners had also executed a release of the said property for a consideration.

This objection was rejected. The appellants then sued for posac!Sion of a half share in the properties held by the widow of B, relying upon the gift by the widow, and the deed of surrender by S one of the two reversioners to the estate of N.

They contended that the Vendors of the property to G had

only a spe.• succcssionis during the life time of the widow of B, and the transfer was on that account void and conferred no title. The heirs of G contended that the property was sold to G by M and S on a rep1esentation that the Vendor had become entitled thereto, and the appellants as transferees from S were <Stopped from asserting that it was in fact the self.acquisition of B and that in ron.•equence he had no title at the date of the sale.

Held, that where a ptrson transfers property representiug that he has a present interest therein, whereas he has, in fact, only a spes successfuru'a, the transferee is entitled to the benefit of s. 43 of lhe Transfrr of Property Act, 1882, if he has taken the transfer for consideration and on the faith of the represen ta ti on.

Htld, further, that apart from the excption in favour of transferees for consideration in good faith and without notice of the rights under the prior transfer s. 43 of the Transfer of Property Act is absolute and unqualified in its operation. It applies to all transfrrs which fulfil the conditions prescribed therein, and it makes no difference in its application whether the defect of title in the transferor arises by reason of his having no interest in the property, or of his interest therein being that of an expectant heir.

The section deals with transfers which fail for want of title in the transferor and not lvant of capacity in him at the time of transfer.

It embodies a nile of estoppel and enacts that a person who makes a representation shall not be heard to allege the contrary as against a 'person who acts on the representation.

It is immaterial whether the transferor acts bona fide or fraudulently in making the representation.

It i; only material to find out whether in fact the transferee has been misled. In view of the sprcific provision of' 43 the principle of c8toppel against a statute does not apply to transfers prohibited by s. 6 (a) of the Act. The two provisions operate in different

fields and under different conditions. There is no necessary conflict between them, and the ambit of one cannot be cut down by reference to the other. Section 6(a) enacts a 'rule of substantive law, while s. 43 enacts a rule of estoppel which is one of evidence.

Held, also, that if rhe language of the section clearly txcludcs from its purview certain matter!Z, it would not be legitimate to use the illustration to the section to enlarge it. It is not to be rradiJy assumed that an illustration to a ction is repugnant to it and rejected.

Vicker& v. EtVJna, (1910)79 L.J.K.B. 955, relied on.

The .fumma Ma.tjidt

M1rc1tr•

K oJimmtiandra

I>evi1h

TAt J 11mmo MasjiJ,

Mnco..•o

•• KMW.Mi1atb•

Dnioh

556 SUPREME OOUR1' REPOR'fS [1962] SU.PP,

Sadiq Ali Khan v.Jai Ki•hori, A.LR. 1928 P.C. 152, Gadigeppa

v. Balangauda, (1931) l.L.R. 5i Born. 741, Ajudhia Prasad v. Chandan fol, l.L.R. ( 1937) All. 860 F. B.; Molwm<d Syedol Arif!in v. Y eoh Ooi Gark; ( 1916) L.R. 43 I.A . 256; I.ovinr v. BrOU!lham, (1909) 25 T.L.J<.. 265; LM'ie [, t1l. v.

Sh<iU, [ 1914] 3 K 13. 607 and Khn Gui v. }; ikh" Singh ( 1928) I.L.R. 9 Lah. 701(F. B.), referred to .

• tl(in11111.aya Kunigari l{abi Sab v. ,\lurukuti Papiah,

(1915) 29 M.L.J. 733, Sl1yam Sarain v. Mungu/ i'ra1md, (1935) l.L.R. 57 All. 474, Vithal!ai v. Malh"r iif.ankar, l.L.R. (1938) Born. 155, Ram .Japan v.Jugeaara KIP'r, A.LR. 1q39 Pat. 116 and Syed Biamil/a v. Munulal Chal.iil•h•, A.IR. 1931 Na~. 51, approved.

Official Assignte, , lfadm .. v. Sam]>'lth .\"ai<lu, 63 M.L.J. 588 and Binde.•hwari Singh v. liar .'{arain Sinq!,, (1'129) 1.L.R. 4 Luck. 622, disapproved.

CrvIL APPELT.ATE Jumsvw1·10;-;: CiYil Appeal No. 207 of 1956.

Appeal from t.he judgment and decree dated November 5, 1952, of the Madras High Court in Appeal No. 852 of 1948.

R. Thiagarajan and G. Gop<ilakrishrum, for the appellant.

Gan apathy 1 yer, for

1962. January' 11.

Court was delivered by

roRpondent No. 3.

The Judgment of the

VENKATARA.~IA AIYAH, J.-This is an appeal against the Judgment of the High Court of Madras, dismissing the suit filed by the appellant, as Muthavalli of the Jumma Masjid, Mercara for possession

of a half-share in the propertie1 specified in the pis.int. The facts are not in dispute. There was a joint family comieting of three brothers, Santhappa, Nanjundappa and B&tiapp.•.. Of these, 8anthappa died unmarried, Ba.sappa died in 190 J, leaving behind a widow Gangamma, and Najundappa died in 1907 leaving him surviving his widow Ammakka, who succeeded to all the family properties as his heir. On the death of Ammakka, which took place in 1910, the estate devolved on Ba.aa.ppa, Mallappa

and Santhappa, the &illter's grandsons of

Nanjundappa ashis next reversioners. The relation ship of the parties is shown in the following gene alogioal table.

Basappa

I I I Santhappa Nanjundappa d. 1907

=Ammakka d. HHO

I Basappa.

d. 1901 =Gangamma

~ Mallammal

I Ramegowda I Mallegowda I I Santhappa I Basappa I Mallappa

On August 5, 1900, Nanjundappa and Basappa executed a usnfructuary mortgage over the properties which form the subject-matter of this litigation, and one Appanna Shetty, having obtained an assign ment thereof, filed a suit to enforce it, 0. S. 9 of 1903, in the court of the Subordinate Judge, Coorg.

That endRd in a compromise decree, which provided that Appanna Shetty was t.o enjoy the nsnfruct from the hypotheca till August, 1920, in full satisfaction of all his claims under the mortgage, and tliat the properties were thereafter to revert to the family

of the mortgagors. By a sale deed dated Novem ber 18, 1920, Ex. III, the three reversiciners, Basappa, Nallappa and Santhappa, sold the suit . properties to one Ganapathi, under whom the respondents claim, for a consideration of Rs. 2,000.

Therein the vendors recite that the properties in question belonged to the joint family of Nanjun- . dappa and bis brother Basappa, that on the death of Nanjundappa, Ammakka inherited them as his widow, and on her death, they had devolved on them as the next reversioners of the last male

- n..J-· llflt"'4 -

JIH I lfHlllW -·

1HZ

l-Jloqii,

M1t, ara

v. '"'"-""" ..

Dniah

AiJ" J,

558 SUPRBME OOURT REFORTS [1962] SUPP.

owner. On March 12, 1921, the vendors executed another deed, Ex. IV, by which Ex. III was rectified by inclusion of certain items of prope1 ti••s which wore stated to have been lcfL out by over'. sight. It is on these documents that tho title of tho respondents rests.

On the strength of these two deeds, Ganapathi sued to recowr pos.<ession of the properties comprised therein.

The suit was contested by Gangamma, who claimed that the properties in question were the self-acquiditions of her husband Basa.ppa, and that she, as his heir, was entitled to them. The Subordinate Judge of Coorg who tried tho suit accepted this rontcntion, and his finding was affirmed by the District , Judge l1n appc.\l, and by the Judicial Commissioner in second appeal. But before the second appeal was finally disposed of, Ganga.mum died on February 17, 1933.

Thereupon Ga.napathi a.pplied to tho rl'vcnue authorities to transfer the patta for tho lands standing in the name of Gangamma to his own name, in accordance with the sale deed Ex. III. The ••ppcllant intervened in these procetding~ and claimed that tho Jumma Masjid, Mercara, had become 1ntitled to the properties hcM by Ga.ngam.na, firstly .. urnler a Sadak® or gift alleged to have been mac!P by hr on Septomher 5, 1932, and, secondly, under a deed of rcleat"J executed on March 3, l93:l, by S1mth.ippa, one t>f the rov<'rsioner~. relinquishini: his half-hare in th., properties to the mosque for a cpn.idcration of Rs. 300.

By an ord<>r dated Sq1tcmlu>r H, l!l3:l, Ex. II, the l'even11e authoritie~ dt, eli1H'd to acePpt the titll' of the appellant and <lin•c:tcd that the name of Ganapathi eh on Id be cntere<l ns the own, r of tho properties.

Pur•uant to thi~ order, C:anapathi got into posRession of tho propcrti< s.

The suit out of whirh the prC'srnt appeal arise.~ was instituted by the appdlant on Janu'"Lr.v '.!, 1945, for recovery of a half.sh,..rn in the propcrliC's that

l - '

.. " ,

had been held by Gangamma and for mesne profits.

In the plaint, the title of the appellant to the properties is based both on the . gift which Gangamma is alleged to have made on September 5, 1932, and on the release deed executed by Santhappa, the reversioner, on March 3, 1933. With reference to the title put forward by the respondents on the basis of Ex. UI and Ex. IV, the claim made in the plaint is that as tho vendors had only a apes successionis in the properties during the lifetime of Gangamnil!>, the transfer was void and conferred no title. The defence of the respondents to the suit was that as

Santhappa had sold the properties to Ganapathi on

& representation that he had become entitled to them as reversioner of Nanjundappa, on the death of Ammakka in 1910, he was estopped from asserting that they were in fact the self-aoquisitions of Basappa, and that he had, in consequence, no title at the dates of Ex. III and Ex. IV. The appellant, it was contended, could, therefore, got no title as against them under the release deed Ex. A, dated March 3, 1933.

The District Judge of Coorg who heard the action he Id that the alleged gift by Gangamma on September 5, 1932, had not been established, and as this ground of title was abandoned by the appellant in the High Court, no further notice will be taken of it. Dealing next with tho title claimed by the appellant under the release deed, Ex. A. executecl by Santhappa, the District Judge hold that as Ganapathi had purchased the properties under Ex.

III on tho faith of the representation contained therein that the vendors had become entitled to them on th" death of Ammakka in HJIO, he acquired a good title under s. 43 of the Transfer of Property Act, and that Ex. A could not prevail as against it. l:Je accordingly dismissed the suit. The plaintiff took the matter in appeal to the High Court, Madras, an1l in view of the conflict of authorities on the question in that Court, the case was refer

IftB: n, J,,,,,.,, llltitJiili

Ml'llNv.

K otlimqia-4.1*.

D•iliiiA.

.ii.>t!r I,

"· rt ''" Dioid - A{loor J,

IS60

SUPREME OOURT REPORTS [1962] SUPP.

red for the decision of a. Full Bench.

The lea.med Judges who heard the refer•moe agreed with the court below that the purcha.ser under Ex. III ha.d, in ta.king the sa.le, aeted on the representa.tion a.s to titl!I conta.ined therein, a.nd held tha.t as the sa.le by the vendors was of properties in which they claimed a. preaent interest and not of a. mere right to succeed in future, s. 43 of the Tra.nsfer of Property Act a.pplied, and the sale bees.me opera.tive when the vendors acquired title to the properties on the death of Gangamma on February 17, 1933.

In the roault, the appeal was dismissed. The appellant then applied for leave to appeal to this Court under Art. l33(l)(e), and the same was granted by the High Court of Mysore to which the matter had become transferred under s. 4 of Act 72 of 1952. That is how the appeal comes before us.

The sole point for determination in this appeal is, whether a transfer of property for consideration made by a person who rcpre•ents that he ha.s a

present and transferable int-0rest therein, while he posseBBes, in fact, only a spes .'IUccessionis, is within the protection of s. 43 of the Trnnsfer of Property Act. If it is, then on the facts found by t.hc courts below, the title of the rcspond0nts und<r Ex. III and Ex. IV must prevail over tluit of the appellant under Ex. A.

If it is not, th"n the RJ•pellant succeeds on the basis of J<x A.

Section 43 of the Tra.nsfor of Property Act runs as follows :-

"Where a. person frauuul<>ntl.v or erroneously represents th'.\t h" i 1 nuthorised to transfer eertain irmnovablc property and

professes to t.rn.n, fer H11ch property for consideration such tranfrr slrn.11, at. the option of the transferee, op<'rato on any interest which the transferor may n.cquire in such property at any timo during which the contact of trall8fer su heists.

Nothing in this section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.''

Considering the scope of the section on its terms, it clearly applies whenever a person transfers property to which he bas no title on a representation that be bas a present and transferable interest therein, and acting on that representation, the transferee takes a transfer for consideration.

When these conditions are satisfied, the section enacts that if the transferor subsequently acquires the property, the transferee becomes entitled to it, if the transfer bas not meantime been thrown up or cancelled and is subsisting.

There is an exception in favour of transferees for consideration in good faith and without notice of the rights under the prior transfer.

But apart from that, the section ia absolute and unqualified in its operation.

It applies to all transfers which fulfil the condit.ions prescribed therein, and it makes 1. 0 difference in its application, whether the defect of title in the transferor arises by reason 1lf bis having no interest whatsoever in the property, or or bis interest therein being that of an expectant heir.

The contention on behalf of the appellant is that e. 43 must be read subject to s. 6 (a) of the Transfer of Property Act which enacts that "The

chance of an heir apparent succeeding to an estate, the chance of a relation obtaining a legacy on the death of a kinsman or any other mere possibility of a like nature, cannot be transferred." Th~ argument is that if s. 43 is to be interp.reted as having application to cases of what are in fact transfers of spes successiunis, that will have the effect of nullifying s. 6 (a), and that therefore it :wo.uld be proper to construe s. 43 as limited to cases of transfors other than those falling within s. 6(a). In effect, this argument involves importing

196Z

The iumma lfasjid,

-fercar•

v . . Ko1ima. 1 iJndra

Devi ah

Aiyar J.

ll!tZ

~ .,·..,,,,,," M rujid,

Mc•ro

Kodilnaimu/, a

Ihoi.h

SUPREME OOURT REPORTS [1!162] SUPP. into the section a new oxception to the following cfftict ; "Nothing in this section shall operate to confer on the transforee any tit!(', if the trans

furor ha<l at tho date of the transfer an interest of the kind mentioned ins. 6 (a)." If we accede to this contention wo will not be construing .a.43. but rewriting it. "\\To arc not ontitled", obsorved Lord Loreburn

L. C., in Vickers

v. Evans ('), "to read words into an Act of Parlia mcnt unless clear reason for it is to be found within the four corners of the Act itself."

No~ the compelling reason urged by the appellant for reading a further exception in s. 43 is that if it is construed 118 applicable to transfers by persons who have only spu succea.sWnis at the date of transfer, it would have the effect of nullify: ing s, G(a).

But section 6(a) ands. 43 relate to two difforont. subjects, an<l there is no necessary conflict between them; Section 6 (a) deals with certain kinds of interests in property mentioned therein, and prohibits a transfer simpliciter of those interests.

Section 43 deals with representations as to title made by a transferor who had no title at tho time of transf<r, and provides that.. the transfer shall fasten itRc!f on the title which the transferor subsequently acquires. oction 6 (a) enarta a rule of substanth-e law, whil<l s. 4;~ enact~ a rule of estoppel which is one of evidencP.

Tho two provisions operate on different fidds, and under different conditions, and wo sec no ground for reading a conflict between them or for cutting down the ambit of the one by reference to the other. In our opinion, both of.them can be given full effect on their own term~. in their respective spheres. To hold that transfers by persons who have only a spe, s S'UCCe.sionis at the date of tr.ansfer are not within the protection afforded by s. 43 would destroy its utility to a large exwnt.

It is alao contended that as under the law there can be no eetoppel against a statute transfers

(I) (1910) 79 L. I. K. B. ~5.

2S.C.R.

SUPREME COURT REPORTS, 563 which are prohibited by s. ( 6a) could not be held to be protected by s. 43.

There would have been considerable force in this argument if the question fell to be decided solely on the terms of s. 6 (a).

Rules of estoppel are not to be resorted to for defeating or circumventing prohibitions enacted by statutes on grounds of public policy. But here the matter does not rest only on s. 6 (a).

We have in addition, s. 43, which enacts a special provision for the protection of transferees for c0nsideration from persons who represent that they have a present t.itle, which, in fact, they have not. And the point for decision is simply whether on the facts the respondents are entitled to the benefit of this section.

If they are, as found by the eourt_s below, then the plea of estoppel raised by them on the terms of the section is one pleaded under, and not against the statute.

The appellant also sought to rely on the decisions wherein it has been held that a plea of estoppel could not be raised against a miuor who had transferred property on a representation that he was of age, and that s. 43 was inapplicable to such trnnsfers, m'de Sadiq Ali Khan v. Jai Kishori (') Gadigeppa v. Balanagawlrt (') Ajttdhia Prasad v.

Ghandan Lal(') But the short answer to this contention is thats. 43 deals with transfers which fail for want of title in the transferor" and not want of capacity in him at the timo of transfer.

It may further be observed in this connection that the doctrine of estoppel has been held to have no application to persons who have no contractual capacity where the c\aim is based on contract, vide Mahomed Sye, dol Ar{ffin v. Yeoh Ooi Gark ('); Levine v. Brougham ('}, Le.slie Ltd. v. Sheill ('); Khan Gul v. Lakita Singh (').

Decisions on transfer8 by minors therefore a.re of no assbtance in ascertaining the true scope of s. 43.

(l) A.I.R. 1928 PC. 152

(2) (1931) I.L.R. 55 Bom. 741,

(3) l, L.R. (1937) All. 860 F.D. (4)(1916) L.R. 43 I.A.256; [ l 916]2A.C.S75, (5)

(1909) 25 I.L.R. 265.

(6) [19H) 3 K. B. 607.

(7) (1928) LL.R. 9 Lab, 701 (F. B,).

Th. Jumma Marjid,

Mncara

Kodimaniandra

Deviah

- 77w JutftlM Ma .ji1,

M1rca1a

Kotlima11iant/ra

D1V14'r

564 SUPREME OOURT REPORTS [1!162] SUPP.

So far we havo discussed the question on the langua.go of the section and on the principle~ applica.hle thereto. There is an illustration appended to s. 43, and we h!!.ve deferred consideration thereof to tho la.st &R there has been a controversy as to how far it is admissible in construing the section.

It is as follows:-

"A, a Hindu, who has separated from his father B, sells to C three fields, X, Y and Z, representing tha.t A is authorized to transfer the ea.mo.

Of these fields Z does not be long to A, it having been retained by Bon the partition ; but on B's dying A as heir obtains Z.

C, not having rescinded the contract of salt\ may require A tn deliver Z to him."

In this illustration, when A sold the field Z to C, he had only a speJJ successionis.

But he having subsequently inherited it, C became entitled to it. This would appear to conclude the question aga; nst the appellant: But it is argued th<tt the illustration is repuznant to the section and must be rejected. If the langual!'O of the section clearly excluded from its purvinw tranPfers in which the transforor had only such interest as is specified in s. 6( a), then it would undoubtedly not •be legitimate to use the illustration to enlarge it. But far from being restricted in its scope as contPnded for by the appellant, the section is, in our view, general in its terms and of sufficient amplitude to take in the class of transfers now in question. It is not to be readily asmmed that an illustration to a section is repugnant to it and rejected. Reference may, in this connection, be made to tho following observations of the judicial Committee in Malwrned Sye.dol Arif/in

v. Y eoh Ooi Gark ( 1) as to the value to be given to illustratio11s appended to a section, in &Pcertaining its true scope :

(I) (1916) L. R. 43. I.A.™; (1916] 2 A. C. 575.

"It is the duty of a court of law to accept, if that can be done, the illustrations given as being both of relevance and value in the construction of the text. The illustrations shou)d in no case be rejected because they do not square with ideas possibly derived from another system of jurisprudence as to the law with which they are the sections dea.l. And it would require a very special case to wa.rrant

their rejection on the ground of their assumed repugnancy to the sections themselves. It would be the very last resort of construction to make any such assumption. The great usefulness of the illustrations, which have, although no part of the sections, been expressly furnished by the Legislature as helpful in the working and application of the .statute, should not be thus impaired."

We shall now proceed to consider the more important oases wherein the present question has been considered, One of the earliest of them is the decision of the Madras High Court in Alamanaya Kunigari Nabi Sab v. Murukuti Papiah (1).

That a.rose out of a suit to enforce a mortgage executed by the son over properties belonging to the father while he was alive. The father died pending the suit, and the properties devolved on the son as his

heir. The point for decision was whether the mortgagee could claim the protection of s. 43 of the Transfer of Property Act. The argument against it was that "s. 43 should not be so construed as to nullify s. 6(a) of the Transfer of Property Act, by validating a transfer initi<>lly void underti!' lj( a)" In rejecting this contention, th_e Court observed:-

"This argument, however, neglects the distinction between purporting to transfer 'the chance of an heir-apparent,' and 'erroneously representing that he (the transferor) is

(ll !1915) 29 M.L, J. 733.

J962

'lht Jumma Masj•d,

},; ercara

Kodima'liandra Dtviah

Ai)'a1J,

566 SUPREME OOURT REPORTS (1962) SUPP.

authorised to transfer certain immoveable

property." It is the latter course that wa.s followed in the present ca.se. It wa.s represented to the transferee that the transferor

was in praesenti entitled to and thus authorise to transfer the property." (p. 736) On this reasoning. if a transfer is statedly of an interest of the character mentioned in s. 6( a), it would be void, where&i, if it purports to be of an .interest in praesenti, it is within the protection afforded by s. 4.'i.

Then we come to the decision in The Official Assignee, Madras v. Sampath Naidu ('), where a different view was taken. The facts were that one V. Chetti had executed two mortgages over proper

ties in respect of which he had only spes succesaionis.

Then he succeeded to those properties as heir and then sold them to one Ananda Mohan. A mort gagee claiming under Ananda Moh1m filed a suit for a declaration that the two mortgages created by Chetty oofore he had become entitled to them 88 heir, were void as offending a. 6(a) of the Transfer of Property Aet. The mortgagee contended that in the events that had happened the mortgages had become enforceable under s. 43 of th0 Act. The Court negatived this contention and held that as the mortgages, when executed, contravened s. 6(a), they could not become v:alid under s. 43. Refer ring to the decision in Alamanaya K unigari N obi Sab

v. Murul.-uti Papiah ('), the Court observed that no distinction could be drawn between a transfer of what

is on the faoe of it apes succesaionis, and what pur porU! to be an interest in i. "If such a distinction were allowed", observed Bardewell, J., delivering the Judgment of the Court, "the elfect would be that by a clever description of the pro perty dealt with in a deed of transfer one would be allowed to conceal ho real nature of the tr8Illl80 tion and evade a olear statutory prohibition."

(I) (1933) 65 M.W. 588.

(2) (1915) 29 M. L.J. 733.

-Thia reasoning is open to the criticism that it ignores the principle underlying s. 43. That section embodies, as already stated, a rule of estoppel and enacts that a . peron who makes a representation shall not be heard to allege the contrary as against a person who acts on that representation. It is immateria, J whether the transferor acts lxma fide or fraudulently in making the representation. It is only material to find out whether in fact the transferee has been misled. It is to be noted that when the decision und!'f consideration was given, the relevant words of s. 43 were, "where a person erroneously represents", and now, as amended by Act 20 of 1929, they are "where a person fraudulently or erroneously represents", and that emph~. sises that for the purpose of the section it matters not whether the transferor act fraudulently or innocently in making the representation, and that what is material is that he did made representation and the transferee has acted on it. Where the transferee knew as a fact that the transferor did not possess the title which he represents he has, then he cannot be 8aid to have acted on it when taking a transfer. Section 43 wot1ld then have no application, and the tr'1.nsfer will fail under s. 6(a). But where the transferee does act on the representation, there is no reason why he should not have the benefit of the equitable doctrine embodied in s. 43, however fraudulent the act of the transferor might have been.

The learned Judges were further of the opinion that in view of the decision of the Privy Council in Ananda Mohan Roy v. Gour Mohan Mullick (') and the decision in Sri Jagannada Raju v. Sri Rajah Prasada Rao ('), which was approved therein, the illustration to s. 43 must be rejected as repugnant to it. In Sri Jagannada Raju's case ('), the question was whether a contract entered into by certain

(1) i 1923) L.R. 50 I.A. 239; (1923) l.L.R. 50 Cal. 929.

(2) (1916) I.L.R. 39 Mad. 554

1961 ne Jumma Masji4.

M1rcara

Ko<iimani<Andra

Deviah

A'iyar J.

114 Jw1:111u MaJjid,

Mtrcara

•• hcu/imani .. 11 /r.'1

/J, iah

;'; U8 SCPREME COURT Rli:POR'l'S [196:!] SUPP.

preumptive reversionns to sell the estate which waa then held by a widow as heir could be specifi cally enforced, after the succession had opened. It

was held that as s. 6 (a) forbade transfers of spes s7tCCi'8sionis, contracts to make such transfers would

ho void under s. :!3 of the Contract Act, and could not be enforced. 'J his decision waa approved by the Privy Council in Anmula Mohan Roy v. Gour Mohan Jlullick ('), where also the question was whether a contract by the nearest reversioner to sell property which was in the possrs.ion of a widow as heir wa.s valid and enforcpable, and it was held that the prohibition under s. G(a) would become futile, if agreements to transfer could be enforced. These decisions havo no bearing on the questi<>n now under !'Onsideration, as to the right of a person who for consideration takes a transfer of what is represented to be an interest in prae.senJi.

The decision in The Official Assignee, Madras v. Sompal/; Naidu (') is, in our view, erroncoll3, and was rightly over

rulecl in tho deciilion now under appeal.

Proceeding on to the decisions of the othr High Courts, the point under discussion arose directly for decision in Shyam Narain v. Mangal Prasad ('). The facts were similar to those in 'l'he Ojfici.al Assignee, Madras v. Samp:ith i\"aidu (').

One Ram Karayan, who was the daught<>r's t.on of the last male owner sold the properties in 1910 to tho repondents, while they were vested in the daughtrr Akashi. On her death in 1926, he succeeded to the properties as heir and sold them in

1!127 to tho appellants. The appellants claimed the estate on the ground that the sale in 1910 con forred uo title on the respondents as Ram Narayan had then only a spe, s succes.'lionis.

Tho respondents contended that they became entitled to the properties when Ram Narayan acquired them as heir in

1926. The !Parned , Judges, Sir S. M. Sulaiman, C. J., and Rachhpal Singh, J,, held, agreeing with

(ll (192J: L. R. 501. A. 210; (2)

(1~33) GS M. L. J. 588,

[19231 I. L. R. SO Cal. 929.

(3) l 1935] I.L.R. S7 All, ~7i,

the decision in Alaroonaya Kunigari Nabi Sab v.

Murukuti Papwh ('l, and deffering from The Official Assignee, Madras v. Sampath Naidu (') and Bindeshwari Singh v.Har Narain Singh\'), thatj s.43 applied and that the respondents had acquired a good title. In corning to this conclusion, they relied on the illustration to s. 43 as indicating its true scop~, an'1 observed: -

" Section 6 (a) would, therefore, apply to cases where professedly there is a transfer of a mere spes successionis, the parties knowing that the transferor has no more right than that of a mere expectant heir. The result, of course, would be the same where the parties knowing the full facts fraudulently clothe the transaction in the garb of a an out and out sale of the property, and there is no erroneous representat, ion made by the transferor to the transferee as to his ownership.

" But where an erroneous representation is made by the transferor to the transferee that he is the full owner of the property transferred and is authorized to transfer it and the property trasferred is not a mere chance of succession but immoveable property itself, and the transferee acts upon such erroneous representation, then if the transferor happens later, before the contract of transfer comes to an end, t.o acquire an interest in that property, no matter whether by private purchase, gift, legacy or by inheritance or otherwise, the previous transfer can at the option of the transferee operate on the interest which has been subsequently acquired, although it did not exist at the time of the transfer." (pp. 478,479).

This deciion was followed by the Bombay High Court in Vitluibai v. Jfalhar Shankar (') and by the

(I) [1915] 29 M. L. J. 738.

(3) ( 192 9) l. L. R. f Luck. G22.

(2) [1933] 65 M.L.J. 588.

(4) J. L. R. (1938) Bom.15>.

The Jumma MaJiid,

M,, cara v.

Kodimaniandra_

Devi ah

1/,. J- Jl.V~. "-· •• Koli-*ir• o..w.

A{, iw J.

570 SUPREME COURT REPORTS (1962] SUPP.

Patna High Court in Ram Japan v. Jage.mra Kuer(1).

A similar view had been taken by the Nagpur High Court in Syed Bi, sinilla v. M anul, al Chabildas (').

Tho preponderance of judicial opinion is in favour of the view taken by the Madras High Court in Alamanaya K unigari N ali Sab v. JI urukuti Papiah ('), and approved by the Full Bench in the decision now under appeal. In our judgment, the interpretation placed on s. 43 in those decisions correct and the contrary opinion is erroneous.

Wo accordingly hold .that when a person transfers property representing that hG has a presont interest therein, whereas he has, in fact, only a "pes succe88ianis, tho transferee is entitled to the benefit of s. 43, if he has taken the transfer on the faith of that representation and for consideration. In the

present case, Santhappa, the vendor in Ex. III, represented that he was entitled to the property in praesenli, and it has been found that the pur chaser entered into the transaction acting on that representation. H .. therefore acquired title to the prop1J1tics under s. H of the Transfer of Property Act, when Santhappa became in titulo on the death of Gangamma on Febrnary 17, 1033, and the subsequent dealing with them by Sa.nthappa by way of release undcor Ex. A did not operate to vest any title in the appellant.

The Courts ht-low were right in upholding the title of the respoudents, and this appeal must be dismi88e<l with costs of the third respondent, who alone appears.

Appeal di8mi.ssed.

(I) t, I. R.1939. Pat. 116,

(2) A. I. R 1931 Nag. 51.

(3) (1915] 29 M.L.J. 733.

Art. 2

THE JOMMA MASJID, .MERCARA

KODIMANIANDRA DE\'IAH

L. KAPUR

C. SHAH

Transfer of Property Act

s. 43

Transfrr of Property Act, 1882

s. 43

Transfer of Property Act

s. 6

Section 6(a)

s. 43

S. 9

s. 43

Transfer of Property Act

s. 43

s. 4

s. 43

Section 43

s. 6

Transfer of Property Act

s. 43

s. 6

s. 43

s. 6(a)

s. 43

section 6(a)

Section 6

Section 43

s. 4

s. 43

s. 43

s. 6

s. 6

s. 43

s. 43

s. 43

s. 43

s. 6( a)

s. 43

Transfer of Property Act

s. 43

s. 6(a)

Transfer of Property Act

s. 6( a)

s. 4

s. 43

s. 6(a)

s. 43

s. 43

s. 43

Section 43

s. 6(a)

s. 43

s. 43

L.R. 50 I.A. 239

s. 6

s. 43

Section 6

s. 43

s. 43

Transfer of Property Act


2 8.C.R.

SUPREME COURT REPORTS 571

MITHOOLAL NAYAK

LIFE INSURANCE CORPORATION OF INDIA

(S.K. DAs, K. SunnA RAO and RAGHUBAR DAYAL JJ.)

ln•urance-Life Policy-Obtained by deliberate mis-statement and fraudulent suppiusion-Re'JlUdiatio1t by Company <rfter l'JJO yean-Whether proper-Rtfund of money paid. as premium-Insurance Act, 1938 ( 4 of 1938) s. 45-lndian Contract Act, 1/172 (9 of 1872) ss. 64 and 65.

In 1942, one M sent a proposal for the insurance of his life.

He was examined by Dr. D who submitted two reports, one with the proposal form and one confidential. The confidential report showed that M was anaemic, had a dilated heart and his right lung showed indications of an old attack of pneumonia or pleurisy and that he was a total physical wreck. Nothing carr.e out of this proposal and it lapsed. In 1943, M consulted and was treated by one Dr. L for anatrnia orderna of the feet, diarrhoea and panting on exertion.

In 1944, M made a second proposal fur insurance of his life. Against the question in the proposal form whether he had consulted any medical man for any ailment within the last five years, he gave tl:e answer, "'No'.

He also did not disclose any of his ailments. Aft'f medical examination by one Dr. K the proposal was accepted and a policy for Rs. 25,000/- was issued on March 13, 1945.

The policy lapsed for non-payment of premium but was revived in July, 1946.

In November, 1946, M died.

His assignee, the appellant, made a demand for Rs. 26,000/· but the Company on October

10, 1947, repudiated it on the ground that the policy had been obtained by delibernte mis-statem<nt and fraudulent suppression of material facts.

Thereupon, the appellant filed a suit to reco\er the amount of the policy contending that s. 45 Insurance Act, barred the Company from calling in question the policy after two ye'!rs on the ground that any statement made in the proposal was inaccurate or false.

Held, that the policy-holder was guilty of frudulent suppression of material facts relating to his health and the Company was entitled to avoid the contract.

Section 45 Insurance Act applied to the case as two years had lapsed since the policy was effected ; in view of the Ian guage of s.45 the two years could not be count<d from the date of the revival of the policy. The second part of s. 45 entitled the company to repudiate the contract even after the expiry

Jf16S

Jat1110ry JS.

l96Z

MilAH/"1 Jicyal; •.

Li/t 1Mt1'anct Corpor.tion of lnclia

572 SUPREME:; COURT REPORTS [1962] BUPP.

of two years if three conditions were fulfilled viz.

(a) the statement was on a material matter or there was suppression of facts which it WIU material to disclose; (b) the supprcuion was fraudulently made by the policy-holder, and (c} the policy-holdor m, ust have known at the time of the making of the statement that it was false or that it suppressed facts which it was material to disclose.

When M was treated in 1943 by Dr. L he wa• sull'ering from serious ailments.

He must have known that it was material to disclose this but made a false statement that he had not been trated by any doctor for any serious ailment. There was deliberate supprc- 8'ion fraudulmtly made. by M.

Even though the Company had got M examinG!I by four doctors before issuing the policy, it was nlM estoppedirom questioning the policy.

It had no means oflmowing that M had been treated by Dr. L for

srrious ailments.

H•ltl, further, that the appellant was not entitled even to a refund of the money paid as premium as one of the term• of the policy was that all monies paid belonged to the Company if the policy was vitiated by fraudulent suppresalon of matrial facb. To such a contract neither s. 65 nor s. 6-l of the"Indlan Contract had any application.

CIVIL APPELLATE JURISDICTION : C.A. No. 224 of 1959.

Appeal from the judgment and decree dated August 28, 1956, of the Madhya Pradesh High Court in F.A. No. 90 of 1949.

A. V. Vnatha Saatri-, l!J. N. Andley, Ramuhwar Nath and P.L. Vohra, for the appellant.

S. T. Desai, R. GanapatAy Iyer and K. L. Hathi, for the respondent.

1962. January 15-The Judgment of the Olurt was deli v.ered by

o., 1, S. K. DAS, J.-This is an appeal on a oertifioate granted by the High Court of Madhya Pradesh

under Art. 133 (I) (a) of the Constitution, The appellant ill Mithoolal Nayak, who took an &88ignment on Ootober 18, HM5 of a life imuranoe policy on the life of one Mahajan Deolal for a sum of Re. 25,000/- in ciroumstanooe which we shall presently state. Mahajan Deolal died on November 12, 1940

Thereafter, the appellant made a demand against the respondent company for a sum of Rs. 26,000/- and odd on the basis of the life insurance policy which had been assigned to him.

This claim or demand of the appellant was repudiated by the respondent. companv by a letter dated October 10, 1947, which in substance stated that the insured Mahajan Deolal had been guilty of deliberate mis-statements and fraudulent suppression of material information in answers to questions in the proposal form and the personal statement, which formed the basis of the contract between the insurer and the insured. On the repudiation of his claim the appellant brought the suit out of which this appeal has arisen.

The suit was originally instituted against the Oriental Government Security Life Assurance Co. Ltd., Bombay, which issued the policy in favour of Mahajan Deolal on March 13,

1945. Latter, on the passing of the life Insurance Corporation Act, 1956, there was a statutory transfer of the assets and liabilities of the controlled (life) business of all insurance companies and insurers operating in India to a Corporation known as the Life Insurance Corporation of India. By an order of this Court made on February 16, 1960, the sitid Uorporation was substituted in plaP, e of the original respondent. For brevity and convenience we shall ignore the distinction between the oriinal respondent and the said Corporation and refer to the respondent in this judgment as the respondent company. The Suit was decreed by the learned Additional District Judge of Jabalpur by his judgment dated May 7, 1919. The respondent company then preferred an appeal to the Hi!!h Court of Madhya

Pradesh. This appeal was heard by a Division Bench of the said High Court and by a judgment dated August 28, 1956, the appeal was allowed and the suit was dismis8ed with costs. It is from

Jlithoolat NaJalc

" Lif~ l11surance CorporaJion of l 11dic

Das J

JlitA .. W N9•

y, Lif1 1"""""" eo.,.ro1w. •11 "'"1

DasJ.

574 SUPREME OOURT REPORTS [1962] SUPP.

that appellate judgment and decree that the prosent appeal has been brought to this Court.

We now proOP.ed to state some of the relPvant facts relating to tho appeal and the contentions

urged on behalf of the appellant. Mahajan Deolal was a reBident of village Singhpur, Tehsil Narsinghpur. It appears 'hat he was a small land

holder and poBBessed several acres of land. Sometime in December, 1942, Mahajan Deolal submitted a propoeal through one Rahatullah Khan, an agent of the respondent company at Narsin!!'.hpur, for the insurance of his life with tho respondent company for a sum of Hs. 10,000f only. Mahajan Deolal's age at that time was about 45 as stated by him. In the propoal form which was submitted to the respondent company, Mahajan Deolal mentioned the name of one Motilal ayak, by profc88ion a doctor, as a personal friend who best knew the state of the health and habits etc. of the insured. This Motilal Nayak, be it noted, is a brother of th<• appellant, the evidenee in the reC'ord showing that the two brothers lived together in the same house. Wht-n the proposal for msurance of his life Wiil! made by Mal1ajan Deolal in December 1!142, he was examined hy a doctor named Dr. n. D. Desai.

This doctor submitted two reports about Mahajan Deolal; one report, it apy.ears, was submitted with the proposal form through the agent of the reapondent company; anuther report was sent in a confidential cover along with a letter from tho doctor.

Jn this letter (Ex. D-22) the doctor explained why he was submitting two medical reports. In substance he said that the report submitted with the proposal form at the instan<"e of the agent, Rahatullah Khan, was not a correct report and the correct report was the one which he enclosed in the confidential cover. In that rE'port Dr. Desai said that Mahajan Deolal

was anaemic, looked about 55 years old, had a dilated heart and his right lung showed indications of an old attack of pneumonia or pleurisy. The doctor further said that the general health of Mahajan Deolal was very much run down and he was a total physical wreck. The doctor opined that Mahajan Deolal's iife was an uninsurable life. It appears that nothing came out of the proposal made by Mahajan Dcolal for the insurance of his life in December, Hl42.

The evidence of the Inspector of the respondent company shows that on receipt of Dr. Desai's repcn'ts, the respondent company directed that Mahajan Deolal shou Id bP further examined by the Civil Surgeon, Hoshangabad and District l\Iedical Officer, Railways at Jabalpur.

Mahajan Deolal could not, however, be examined by the two doctors aforesaid and according to the rules of the respondent company the proposal lapsed on the expiry of six months for want of completion of the medical examination as required by the re:, pu11dcnt company. Then, on July !ti, HJ44, a second proposal was made through the same agent of the respondent company for the. insurance of the lifo of ilfahajan Deolal, this time for a sum of Rs. 25,000/-. The Inspector of the respondent company said in his evidence that this second proposal was made at the instance of the same a.gent, Raha.tullah Khan, inasmuch as the proposal of 1942 had not been rejected but had only lapsed. It appears that at the time of the first proposal in 1942 Mahajan Dcolal had paid a sum of Rs. 571/- and odd towards the first premium due in case the proposal was accepted. In the personal statement, accompanying the second proposal of July 16, 1944, it was stated that an earlier proposal for insuring tht> life of Mahajan Deolal was pending with the re11pondent company. Now, in the proposal form (Ex. D-ll) there was a question (question no. 13) to the following effect :

Mithoolal Nayak

v, Life lnsuranc1 Corporation of India

Das J.

.v;11Nolal Nay"

LiJ• 1 ruiua11ee c .. ,,,.,;.,. of llllii•

Das J,

576 St"PREMECOURT REPORTS [1962) SUPP.

"Have you within the past five yeal'll consulted an:v medical man for any ailment, not neC<'ssarily confining you to your house7 If so, givn details and state names and dddre.eeea of medical man consulted."

The &nswor given to the question was-"No".

This answer, 'MJCording to the case of the resp on dent, w:i.e false and deliberately false, because, according to the evidence of one Dr. P.N Lakshma nan, Consulting Physician at Jabalpur, Mahajan Deolal was examined and treated by the said doctor between the dates September 7, 1943, and October 6, 1943, when the doctor found that Mahajan Deolal was suffering from anaemia, oedema of the feet, diarrhoea and panting on exertion. Wo shall advert in greater det, ail to the evidence of Dr. Laksbmanan at a later stage. In his personal statement acoompanying the second prop088.I Mahajan Deolal answered in the negative question l 2(b), the queation boing as to when he was last under medical treat. ment and for what ailment and how long.

In the samo personal st11.tement with regard to questions, for example, question nos. 5(a); 5(b) eto., as to whei.ber he snffored from shortness of breath, anaemia, asthma eto., Mahajan Deolal gave negative answel'll. The contention on behalf of the respon dent oompany was that these answers in the personal statement were alao deliberately false and constituted a fraudulent supprei; eiort of material particulars relating to the health of the insured.

With regard to' the second proposal and the pel'llonal

statemnt accompanying it, Dr. Motilal Nayak, brother of the appellant, gave a friend's report, in which he aid that Mahajan Deolal's health lvas good and that he had never heard that Mohajan Deolal suffered from any illness.

It is worthy of note here that Dr. Motilal Nayak himself took .Mahajan Deolal to Dr. Lakshmanan for trf'atmcnt at Jabalpur in September.October,· 1943. On reocipt

of the second proposal in July, 1944, Mahajan Deolal was examined by Dr. Kapadia, who was the District Medical Officer of the Railways at Jabalpur.

Dr. Ka, Padia reported that Mahajan Deolal was a

helthy man and looked about 52 to 54 years old.

He recommended that Mahajan Di; olal might be given a policy of fourteen years. In his report Dr.

Kapadia noted that Mahajan Deolal had stated that he had suffered from pneumonia four or five years ago, and that he had also cholera some years ago.

No mention, however, was made of anaemia, asthma, shortness of breath etc. On December 29, 1944, Mahajan Deolal made a further declaration of his good health and so also on February 12, 1945.

On March 13, 1945, the policy was issued by the respondent company. It contained the usual terms of such life insurance policies, one of which was that in case it would appear that any untrue or incorrect averment had been made in the proposal form or personal statement, the policy would be void. The first premium due on the policy was taken from the amount which was already in deposit with the respondent company in connection with the proposal made in 1942.

Then, on May 22, 1945, Mahajan Deolal wrote a letter to the respondent company in which he said that his financial condition had become suddenly wors9 and that he would not be able to pay the premium for the policy. He requested that the policy be cancelled.

In the meantime the premium for l 945 not having been paid, the policy lapsed. Then, on October 28, 1945, Mahajan Deolal made a request for revival of . the policy, but a few days before that, namely cm

October 18,-1945, the policy was assigned in favour of the appellant, by an endorsement made on the policy itself. This assignment was duly registered by the respondent company by means of its letter dated November 1, 1945 in which the respondent company said that . it accepted the assignment without expressing any opinion as to its validity or

IHI

M ith,./al N 9alo

•• Life I nSVfdfUI CorJ>ottJliota of IUi11

Da1J.

lHI

llu"-"'N•Jd

•• Lift lruw-• c .. ;.rolilA o/ IMW.

o., J.

578 SUPREME COURT REPORTS [1962) SUPP.

eff6Ct.

The respondent company also made an enquiry from the appeflant as to whether the latter had any insurable interest in the life of the insured and what consideration had passed from him to the

insured. To this the appellant replied that he had no insurable interest in the life of Mahajan Deolal except that the latter waa a. friend and he (the appellant) had purchased the policy for a sum of Re. 427.12 nP. being the premium paid by him so

far, because Mahajan Deolal did not wish to continue the policy.

On his request for a revival of the policy Mahajan Deola.l was again medically examined, this time by one Dr. Belapurkar. Later on February 25, 1946, he was examined by Dr.

Clarke. The policy was then revived on payment of all arrears of premium, these arrears having been paid by the present appellant. On receipt of the revival fee, the policy appears to have been revived some time in July, 1946. We have already stated

that Mahajan Deola.I died in November, 1946. The certificate of Dr. Cla.rke, who was the medical attendant at the time when Mahajan Deolal died, showed that the primacy cause of death of Mahajan Deolal . was malaria. followed by Bt>vere type of diarrhoea. ; the secondary cause was anaemia, chronic bronchitis and enlargement of liver. In the certificate which Dr. Clarke gave there was mention of certain other medical practitioners who had attended Mahajan Deolal at t.lle tiine of his <lea.th.

One of such medical practitioners mentioned in the certificate was Dr. Lakshmanan. On r6Ceipt of this certificate the respondent company got into touch with Dr. Lakshmana.n and discovered from him that Mahajan Deolal had been treated in September October, 1943, by Dr. Lakahmana.n for ailments which, according to the doctor, were of a 1erioua nature.

Several iuul!ll were tried between the partiea in the trial court. But the four questions which

were argued iu the High Court and on which the fate of the appeal depends were these :-

( l) Whether the policy was vitiated by fraudulent suppression of material facts by Mahajan Deolal ?

(2) Whether the preeent appellant had no insurable interest in the life of the insured, and if so, can he sue on the policy ?

(3) Whether the Fespondent company had issued the policy with full knowledge of the facts relating to the health of the insured and if so, is it estopped from cont.eating the validity of the policy ? and

(4) Whether in any event the appellant is entitled to refund of the money he had paid to the respondent company ?

These are the four questions which have been agitated before us and we shall deal with such of them as are necessary for deciding this appeal.

So far as the first question is concerned, the learned trial Judge found that though Mahajan Deolal had given a negative answer to question no, 13 in the proposal form and to questions nos. 5(a), 5(b), 5 (f) and l2(b) in the personal statement, these answers though not strictly accurate, furnished no grounds for repudiating the claim of the appellant by the respondent company, in as much as s.45 of the Insurance Act, 1938 (4 of 1938) applied and the answers did not amount to a fraudulent suppression of material facts by the policy-holder within the meaning of that section.

The learned trial Judge fonnd that the ailments for which Dr. Lakshmanan treated Mahajan Deolal in

September-October, 19.43, were of a casual or trivial nature and the failure of the policy-hG!der to disclose those ailments did not attract the second part of

Mil/too/al Nlf)d v.

Life 1 nJ:uranu Cortia 4f India

DasJ,

,,,,

M~N~

•• LVw , __ c.,_, i. •Ir..-

D .. 1.

580 SUPREME OOURT REPORTS (1962] SUPP.

s. 45 of the Insnr&nce Act. The High Court came

to a contrary conclusion and held that even applying s. 45 of the Insurance Act, the policy-holder was guilty of a fraudulent suppression of material facts relating to his health within the meaning of that section and the respondent oomp'lny was entitled to avoid the contract on that ground.

On behalf of the appellant it has been argued before us that the finding of the learned trial Judge on thiA question was the correct finding and that the High Court was wrong in arriving at a contrary finding on this question in view of the evidence given in the case.

The judgment of the High Court is a judgment in reversal and the appellant has a right of appeal under Art. 133( l )(a) of the Constitution in as much as the value of the subject matter of the dispute in the court of first instance and still in dispute is more t.han Ra. 20,000f-.

We have, therefore, allowed learned counsel for the parties to take us through the evidence in the case.

On a consideration of that evidcnoe we have come to the conclusion that the finding of the .High Court is the oorreot finding.

We shall presently consider the evidlliloe, but it may be advantageous to read first s. 45 of the Insnranoe Act, 1938, as it stood at the relevant time. The eeution, so far as it is relevant for our purpoee, is in these terms :

"No policy of life insurance effected before the commencement of this Act shall after the expiry of two yea.rs from the date of commencement of this Act and no policy of life insuranoe effected after the coming iu to force of this Act shall, after the expiry of two years from the date on which it was effected, be oalled in question by an insurer on the ground that a statement m9.de in the proposal for insurance or in any report of a medical officer, or referee, or friend of the inlllred, or in any other dooument le&dilli to

the issue of the policy, was inaccurate or false, unless the insurer shows that such state ment was on a material matter or suppressed facts which it was material to disclose and th11t it was fraudulently made by the policy holder and that the policy-holder knew at the time of making it that the statement was false or that it suppressed facts which it wu material to disclose. x x x x x x" It would be noticed that the operating part of s. 45 states in effect (so far as is relevant for our purpose) that no policy of life insurance effected after the coming into force of the Act shall, after the expiry of two. years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal for insurance or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to the issue of the policy, was

inaccurate or false ; the second part of the section is in the nature of a proviso which creates an excep tion. It says in effect that if the insurer shows that such statement was on a material matter or suppressed facts which it was material to dicclose and t.hat it was fraudulently made by the policyholder and that the policy-holder knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose, . then the insurer can call in question the policy

effected as a result of such inaccurate or false statement. In the case before us the policy was issued on March 13, 1945, and it was tci come into effect from January 15, 1945. The amount insured was payable after January 15, 1968, or at the death of the insured, if earlier. The respondent company repudiated the claim by its letter dated October 10, 1947.

Obviously, therefore, two years had expired from the date on which the policy was effected. We are clearly of the opinion thats. 45 of the Insurance Act applies in the present caae in

IHB

M itA.olal N .,.,,

•• Lifel.,.,..., Corp.ratioo of 1.-.

Das J,

MW1Do/ol }.'nyak ...

M lttJttronc. l:MJHwalion "' 1"4 ;,/

DaaJ.

582 SUPREME COURT REPORTS [1962) SUPP.

view of the clear terms in whkh the s11ction is worded, though learned counsrl for the resporident company S'•ught, at one stage>, to arf!ue that the revi\'al of the poli0y somP time in July, 1946, constituted in law a new contract between the parties and if two yrars were to be counted from July, 1916, then the period of two years had not

expired from the date of tl1c revival. 'Whether the revival of a lapsed policy constitutes a new contract or not for other purposeB, it is clear from the wording of the operative part of s. 45 thnt the period of two years for the purpooe of the sfction has to be calculated from the date on vhirh the policy was origirndl.v cffeced ; in the present case this can only mean the date on whieh the policy (Ex. P-2) was effected.

From that date a period of two years had clearly expired when the respondent company rtpudiated the claim. As we think that s. -t.'i of the Insurance Act. applies in the present case, we aro relieved <; f the tl\8k of examining the lagal position thll.t W<l\llcl follow as a. result of ina.ccnrn te catl'mt'nts mu<lt' by the insured in the proposal form or the !)(•rsonal statement etc. in a case where b. 4ii docs not apply and where the aver111e11ts made in the proposal form and in the personal statement art' made the basis of the contrnct.

The three conditions for the application of the second pa.rt of s. 45 arf'-

(a) the statemPnt must he on a. material matter or must supprcBB facts which it was material to disclose ;

(b) the suppreBBion must be frau<iulently made by the poliry-holder ; and (c} the policy-holder must have known at the time of 111aking the stakment that it waa false or that it suppreBSed facts which it was material to disclose.

The crucial question before us is whether these three conditione were fulfilled in the present

case. We think that they were. We are llnable to agree with the learned trial Judge that the ailments for which Mahajan Deolal was trnaterl by Dr.

Lakshmanan in September-October, 1943, were trivia I or casual ailments. Nor do we think that Mahajan Deolal was likely to forget in July, 1944, that he had been treated by Dr. Lakshmanan for certain seriouR ailments only a few months before that rlate. This brings us to a consideration of the evidenee of Dr. Lakshmanan. That evidence is clear and unequivocal. Dr. Lakshmanan says that Dr.

Motilal Nayak brought the patient to him atJabalpur.

We have already referred to the fact that Dr.

Motilal Na.yak had himself made a false statement in his friend's report dated July 17, 1944, when he said that he had never heard that the insured had suffered from any illness.

It is impossible to believe that Dr. Moti!al Nayak would not remember that he had himself taken the insured to Jabalpur for treatment by Dr. Lakshmanan who was an experienced consulting physician. Dr. Lakshmanan said that when he first examined Mahajan Deolal on September 7. 1943, he found that his condition was serious as a result of the impoverished condition of his blood, anrl that Mahajan Deolal was suffering from anaemia, oedema of the feet, diarrhoea and panting on exertion. The doctor ask<'d for an examination of the blood. The pathological report supported the diagnoeis that Mahajan Deolal was suffering from secondary anaemia meaning thereby that anaemia was due to lack of iron and malnutrition. Dr. Laksbmanan further found that from the symptoms disclosed the disease was a major one. Mahajan Deolal had also cardiac asthma which was a symptom of anaemia and due to dilatation of heart. Dr. Lakshmanan saw the patient again on Septomb<'r 9, 1!14:~, and then a"ain on September J6, W-t::.

On October 6, 1943 :M:,.hajan Deolul Lilll3ei f :.Vent to Dr. Laksh manan. On that date Dr. Lakshmanan found that

IUU

Millu>olal N~

Li/elnsur- Corpo<alion of In4i.

Da.r J.

J~Z

.11.ilWWN~

Lift '"""•11t1 c..p...,;,. of /Nlia

/las 1.

SUPREME COURT REPORTS [1962) SUPP.

anaemia bad very greatly diea ppeared. In croesexamina.tion Dr.

Lakhm1man admitted that the anaemia, dilatation of heart and cardiac asthma from which Mahajan Dola.l was suffering constitued a pa.ssing phase which might disa.ppcar by treatment. He furthllr admitted that he did not mention cardiac asthma in his letter addressed to the respondent company. We have given our very earnest consideration to the evidence of Dr. Lakshma.nan and we arc unable to hold that the ailments from which Mahajan Deolal was then suffering were either trivial or casual in nature. The ailments were serious though amenable to treatment.

Mahajan Daolal's son gave ovidence in the case

and he sa.id in hiR ovidence that though Dr.

Laksb.manan prescribed some medicine, his father did not tuko it. He further said that his father was a. strict vegetarian. Tl.is evidence was given by thll son with regard to what the doctor had 11&id that he prescribed fresh liver juice made a.t home according to his directions three times a day.

He also prescribed iroa sulphate in tnblet from with plenty of water. Tho son furth1>r said that during his stay at Jabalpur his fathn frlt weakneBB, though he used to move about freely and was never confined to bt>d.

The son tried to make it appear in his evidence that his father was suffering from nothing eerious. Dr. Lakshma.nan said in his evidence that his fees for visiting a. patient a.t Jaba.lpur were Rs. 16/· per visit. We agree with the High Court that if Mahajan Deolal was not suffering from any serious ailment, he would not have been ta.ken by his physican, Dr. Motile.I Na.yak from his village to Jabalpur nor would he have consulted Dr. Lakshmanan, a consulting physioian

of repute, for so many days on payment of Rs.16/- per visit. No doubt, Mahajan Deola.l's son now tries to make light of the illness of his father but Dr. Lakshmana.n's ovidcnco shows olearly enough that in September-October, 1943. Mahajan

Deolal was suffering from a serious type of anaemia for which he was treated by Dr., Lakshmanan.

Mahajan Deolal could not have forgotten in July, 1944, that he was so treated only a few months earlier and furthermore, Mahajan Deolal must have known that it was material to disclose this fact to the respondAnt company. In his answers to the questions put to him he not only failed to disclose what it was material for him to disclose, but he made a false statement to the effect that he had not been treated.by any doctor for any such serious ailment as anaemia or shortness of breath or ast

hma. In other words, there was a deliberate suppression fraudnlently made by Mahajan Deolal.

Fraud, according to s. l 7 of the Indian Contract Act, 1872 (IX of 1872), means and includes Inter ttUa any of the following acts committed by a party to a contract. wit.h intent to deeive another party or to induce him to enter into a contract- (!) the suggestion, as to a fact, of that which is not true by one who does not believe it to be true; and

(2) the active concealqient of a fact by one having knowledge or belief of the fact.

Judged by the standard laid down in s. 17, Mahajan Deolal was clearly guilty of a fraudulent suppression of material facts when he made his

statements on July 16, 1944, statements which he must have known were delibarately false.

Therefore, we are in agreement with the High Court

in answering the first question against the appellant.

We may here dispose of the third qu\)stion.

Learned counsel for the appellant has argued before us that Mahajan Deolal was ex? mined under the direction of the respondent company by as many as four doctors, namely, Dr. Desai, Dr. Kapadia, Dr. Belapurkar and Dr. Clarke. It is further pointed out that Mahajan Deolal had correctly

J&62

Milhoolal Na; ak

Life IRJUrante Copo1"1ion o/'f•li•

Dad.

1118!

Jlillll>OW N9" v.

Lif1.i-_, c.p.,.,;. •f 11"U.

D.s }.

586 SUPREME OOURT REPORTS [1962] SUPP.

disclosed that he had suffered previously from malaria, pneumonia. and cholera.

Dr. Kapadia, it is pointod out, was specifica.Jly asked t.o oxamine Mahajan Deolal in viow of the conflictiniz reports which Dr. Desai had earlier submitted. On theee facts, the a.rgumE'nt has been that the repondent company had full knowledge of a.II facts relevant to the state of health of llfahajan Deola.I and having knowledge of the full facts, it was not open to the respondent company to call the policy in question on tho basis of the answers given by Mahajan Deolal in the proposal form and the personal statement, even though those answers were inaccurate. Learned counsel for th<' a.ppell1mt has referred us to th~ Explanation to s. 19 of the Indian Contract Act in support of his argument. We are unable to accept this argument ns correct.. It is indeed trne that llfahajan Deolal was examinPd by as many as four doctors. It is also tnri> that the respondent company had before it the eonflfoting reports of Dr. Desai and it specially asked Dr. Kapadia to examine Mahajan Deolal in view of the rl'ports submitted by Dr. Desai.

Yet, it muRt be pointed out that the respondent comprmy had no means of knowing that Mahajan Deolal had been treated for the serious ailment of secondarv anaemia followed by dilatation of heart etc. in"Septcmber- October, 1943 by Dr. Lakshmane.n. Xor e:in it be 11aid that if the respondent company had know ledge of those facts, they would not have made any difference. The principle underlying tho Ex planation to s. 19 of the Contract Act ie that a false representation. whether fraudulent or innocent is irre

levant if it has not induced the party to whom it is made to act upon it by enteriniz into a contract.

We do not think that that principle applies in the present ca11C. The terms of the policy make it-clear thai the avermunts ma<le as to the state of health of the insured in the proposal form and the personal statement were the basis of tho contract l>etween the

2 $.C.R.

SUPREME OOURT REPORTS f187

parties, and the circumstance that Mahajan Deolal had taken pains to falsify or. conceal that he had been treated for a serious ailment by Dr. Lakshmanan only a few months before the policy was taken shows that the falsification or concealment had an important bearing in obtaining the other party's consent. A man who has so acted cannot afterwards turn round and say: "It could have made no difference if you had known the truth." In our opinion, no question of waiver arises in the circu mstanoes of this case, nor can the appellant take advantage of the Explanation to s. 19 of the Indian Contract Act.

Our finding on the first question makee it un necessary for us to decide the second question, """. namely, whether the present appellant merely gambled on the life of Mahajan Deolal when he took the assignment on October 18, 1945. The contention of the respondent company was that appellant had no insurable interest in the life of Mahajan Deolal and when be took the assignment of the policy on October. 18, 1945 he was merely indulging in a gamble on Mahajan Deolal's life; the contract waq therefore, void by reason of s. 30 of the Indian Contract Act. On behalf of the appellant, however, the contention was that s. 38 of the insurance Act provided a complete code for assignment and transfer of insurance policies and the assignment made in favour of the appellant by Mahajan Deolli.l was a valid assignment in accord. ance with the provisions of s. 38 aforesaid. The High Court, it appears, proceeded on the footing that from the very inception the policy was taken for the benefit of the appellant on the basis of a gamble on the life of Mahajan Deolal ; it said that the appellant and his brother, Dr. Motilal Nayak, knew very well that Mahajan Deolal was not likely to live very long aud when the policy was taken out in 1944, it was really for the benefit of the persent appellant, who soon after took an assignment

M it/JNlal ll8'11k

•• Ufa'"'"'~ OorfJ"alW.. of .tndil

Dos J,

.llilMolol Jf9olf

Lif• 1.,.,,_,

ll'f81io1 •/ l1 1lio

Doll.

588 SUPREME OOURT REPORTS [1962] SUPP.

on payment of the premium already pa.id by Ma.ha.ja.n Deolal a.nd s11ch arrears of premium aa were then outstanding. It iB unneoesea.ry for us to give our decision on these contentions; becuse if Ma.ha.ja.n Deolal wa.s himelf guilty of a fraudulent supprossion of mterial facts on which the respon dent company w~ <lisch<1.rged from pJrforming its pa.rt of the contract, th~ appellant who holds an assignment of the policy cannot stand on a. better footing than Mahajan Do!R.I himself. It wa.s argued before us tha.t if the policy was valid in its inception, that ii to say, if it was in fa.ct effecte<l for the use nn<l bandit of Mahajan Ddolal, who undoubtedly had an insurable interest in his own lifo, it could not afr.erwards be invalidated by R.Bsign. ment to a person who had no interest but who merely took it IH a speculation. Ollr attention was drawn to SE>v<ral decisions on t.his quest.ion, American e.nd English, noticed in para 502 of Ma.cGillivray on Insurance law (fourth Edition).

We consider it mmecessary to examine those decisions or to go into tho question posed therein.

That question must be left to be determined in a. ca.so where it properly a.rises.

As we have stated earlier, on our conclusion on the first question, the appellant is clearly out of Court and can not claim the bendit of a contra.ct which had been entered into R.B a result of 1~ fraudulent suppression of material facts by Mahajan Deolal.

This brings us to the last question, namely, whether the appellant is entitled to a refund of the money he had paid to tbu respondent company.

Here again one of the tcr:n~ of the policy was that all moneyR that had bren pa.id in consequence of the policy would belong to the company if the policy was vitiated by reason of a fra.11d11lent suppression of material fact8 h~· t lH' iusur1·1l.

We agree with the High Court that where t be contract is had on the groun<i of fran<i, the party who hn.s been guilty of fraud or a. person whc, cln.ims under him ca.n not

2 S.C.R. SUPREME OOURT REPORTS 589

ask for a refund of the money pa.id. It is a wellestablished principal that courts will not entertain an action for money had and received, where, in order to succeed, the plaintiff has to prove his own fraud. We are further in agreement with the High Court that in oases in which there is stipulation that by reason of a breach of warrantyby one of the parties to the contract, the other party shall be discharged from the performance of his part of the contract, neither s. 65 nor s. 64 of the Indian Contract Act has any application.

For the reasons giv.en above we have come to the conclusion that there in no merit in the appeal.

The appeal is accordingly dismissed with costs.

Appeal dismissed.

M/s. STEELWORTH LTD.

'!)8.

STATE OF ASSAM lB. P. SINHA, c. J., J. L. KAPUR, M. 1IIDAYATULLAH'

J.C. SHAH and J. R.MuDHOLKAR, JJ.)

Saki Tax-Provincial legialation imposing Un; in certain circu111.!lancea-Oonstitutional validity-Amendment-Effect-- Assam Sales T1J11: Act, 1947 (Act, XVII of 1947), as amended by

Assam Sale8 T1J11: (Amendment Act, 1960) (Act, XIII of 1960) s. 15 (1) (b) (i) (b) and (c)-Oonstitution of India, Arts. 14, 19 (l)(f).

The petitioner carried on business of manufacturing, selling and supplying iron and steel materials in the State of Assam. Before the Assam Sales Tax Amendment Act of 1960, it held a registration certificate under which all its purchases for use in manufacture or production of goods taxable under the Act were exempted from Sales Tax, but after the amendment it became liable to pay tax on those goods. It was contended that by omission of sub-cl. (b), discrimination was introduced by differentiating between materials bought for articles to be supplied against a contract and articles produced and sold by the petitioner and that this was not a reasonable classification

Mithoolol Na]Oi

Li/• Inm011U Corporation of lnii<

Dos 1.

....

1....,.,,. 16.

571

MITHOOLAL NAYAK

LIFE INSURANCE CORPORATION OF INDIA

S.K. DAs

K. SunnA RAO

RAGHUBAR DAYAL JJ.

Insurance Act, 1938

s. 45

ss. 64 and 65

s. 45

Insurance Act

Section 45

Insurance Act

s. 45

s. 65

s. 6

Art. 133

Insurance Corporation Act, 1956

Insurance Act, 1938

s. 45

s. 45

Insurance Act

Art. 133( l )(a)

s. 45

Insnranoe Act, 1938

s. 45

Insurance Act

s. 45

Insurance Act

s. 45

Indian Contract Act, 1872

s. 17

s. 19

Indian Contract Act

s. 19

s. 19

Indian Contract Act

s. 30

Indian Contract Act

s. 38

insurance Act

s. 38

s. 65

s. 64

Indian Contract Act

Amendment Act, 1960

s. 15

Arts. 14, 19


2 S.C.R. SUPREME OOURT REPORTS 589

ask for a refund of the money pa.id. It is a wellestablished principal that courts will not entertain an action for money had and received, where, in order to succeed, the plaintiff has to prove his own fraud. We are further in agreement with the High Court that in oases in which there is stipulation that by reason of a breach of warrantyby one of the parties to the contract, the other party shall be discharged from the performance of his part of the contract, neither s. 65 nor s. 64 of the Indian Contract Act has any application.

For the reasons giv.en above we have come to the conclusion that there in no merit in the appeal.

The appeal is accordingly dismissed with costs.

Appeal dismissed.

M/s. STEELWORTH LTD.

'!)8.

STATE OF ASSAM lB. P. SINHA, c. J., J. L. KAPUR, M. 1IIDAYATULLAH'

J.C. SHAH and J. R.MuDHOLKAR, JJ.)

Saki Tax-Provincial legialation imposing Un; in certain circu111.!lancea-Oonstitutional validity-Amendment-Effect-- Assam Sales T1J11: Act, 1947 (Act, XVII of 1947), as amended by

Assam Sale8 T1J11: (Amendment Act, 1960) (Act, XIII of 1960) s. 15 (1) (b) (i) (b) and (c)-Oonstitution of India, Arts. 14, 19 (l)(f).

The petitioner carried on business of manufacturing, selling and supplying iron and steel materials in the State of Assam. Before the Assam Sales Tax Amendment Act of 1960, it held a registration certificate under which all its purchases for use in manufacture or production of goods taxable under the Act were exempted from Sales Tax, but after the amendment it became liable to pay tax on those goods. It was contended that by omission of sub-cl. (b), discrimination was introduced by differentiating between materials bought for articles to be supplied against a contract and articles produced and sold by the petitioner and that this was not a reasonable classification

Mithoolol Na]Oi

Li/• Inm011U Corporation of lnii<

Dos 1.

....

1....,.,,. 16.

"'' Jl(AIW-llt

l.U'.

v • .,.,...,,,,.,, ..

x.., .1.

hued on any intelligible differentia and therefore, the amendment by Act XIII of 1960, was violative of Aris. 14 and 19(1)

(f) of the Constitution.

Held, that the object of the amending Act was to raiJe revenue for the State.

It was for the legislature to decide aa to what articles it should tax and what articlci it should not i.x and if it dccidrd to Impose the tax on certain articles it thought necessary, that was a question of policy into which the courts cannot enter and in such circumstances per ll there is no discrimination.

Besides, the provision against diJCrimination waa not on articles but on pcrst>ns and the petitioner failed to show how the imposition of this tax was an unreasonable restricti<>n on the right to carry on trade.

ORIGINAL Junrsn1CTION Writ Petition No. 184 of 1961.

Petition under Art. 32 of the Constitution of India for enforcement of Fundamental Rights.

C. B. Agancala, R. L. AgaTUXJ/a and P. C.

Agarwala, for the petitioner.

Naunit Lal, for the respondents.

1962. January Hi. The Judgment of tho Court was delivered by

KAPUR J.-This is a petition under Art. 32 of the Constitution challenging the legality of the amendment introduced in s. 15 of the Assam Se.Jes Tax Act, 1947 (Act XVII of 1947), by s. 2 of the ABBam Sales T .. x (Amendment) Act, 1960 (Act XIII of 1960), by which sub-s. (b) of item (i) of sub-cl. (b) of cl. ( l) was deleted and thereby sales of goods to a registered dealer intended for use in production of goods for sale became liable to sales tax.

The apptllant Company is a limited company carrying on in the 8tate of Assam its busin088 of manufacturing, selling and supplying iron and steel materials. It held a Registration Certificate under the A88am Sa.lee Tax Act, as it was before the amendment of 1960. Under that Act all its purehe.ses for use in manufacture or production of goods taxable

undf'lr the Act were exempt from sales tax but after the amendment of the Act there was a deletion in

the Registration Cert.ificate of certain goods, e.g., cast iron, iron plates, steel ha.rs and galvanised wire which were used by the petitioner in the manufacture of its finished products which were also taxable in the State. Consequently it has become liable to pay tax on those goods purchased for use in the manufacture of goods and the cost of production has thereby gone up.

Three points were raised by the petitioner :-

(I) that the amendment introduced by Act XIII of 1960 is violative of Art. 14 because it discriminates between manufacturers who supply goods according to orders received and others who manufacture goods on their own account and sell them;

(2) that the restriction imposed by the Amending 4ct is excessive and violative of Art. 19 (I )(f) ; and

(3) that the refusal to a.mend the Registration Certificate by not reinstating the articles mentioned above affects th9 rights of the petitioner Company under Art. 19( I)( f).

For the purpose of deciding these questions it is necessary to refer to the scheme of the Assam Sales

Tax Act, l!J47 (Act XVII of 1917); Bys. 2(2)(a)(b) of that Act 'Contract' is defined as :

"2. In this Act, unless there is anything repugnant in the subject or context,-

(2) "contract'' means any agreement for carrying out for cash or deferred payment or other valuable consideration,-

(a) the preparation, contructlon, fitting out, improvement or repair of any moveable property or of any b'uilding, road, bridge or other immoveable property, or

.Ill/,, SlulwM'th

Lta.

Biiiie of Ass,,,..

JIU

11/s . • Yt.1-U.

Lid.

B•r. q/ ..tss-

-J.

(b) the insta

0 llation or repair of any machinery affixed to a building or other immoveable property." . Sec_tion 9 o~ tht Act provides for compulsory regJBtrat1on.

Sect1011 1 :l providtlll that a dealer registered under s. 9 shall be ranted a certificate of

registration which shall specify the class or clasees of goods in which the said dealer carries on business and such other particulars M may be prescribed.

Section 15(1 l( b)(il( b) an<l ( c) deals with exemptions.

It reads:-

" 15 The net turnover shall be determined by deducting from dealer's gr088 turnover during any given period- ( I) his turnovlr during that period on.

(a) •..

(b) sale to a registered dealer of-

(i) goods specified in the purchasing dealer's certificate of registration as being intended by him for- ( a) •.• . ..

(b) use in manufacture or production of any gooos, the sale of which is taxable under this Act,

(c) use in the execution of any contract." Sub-clause (b) hRB now been omitted by the amen ding Act above referred to as a result of which from tho gross turnover of a dealer goods specified in tho certificate of registration as being intended by him for u<e in manufacture or production of any goods for rnle has now been omitted.

The argument raised was that by the omission of sub-cl. (b) discrimination was intended as between materials which were to be used for manufacture of goods and to be sold on their own account by the petitioner Company and materials which wero purchased for uso in the execution of any contra.ct,

It was also contended that the object of the amend- , ment of the Sales Tax Act waa to prevent evasion of Sales Tax by manufacturing goods and sending them out of the State and therefore that object could have been achie\ed by taxing only those material which were so intended. The amending Act is really & part of the General Sales Tax Act of the State of Assam the object of which is to raise revenue in the State. It is for the Legislature to decide as to what articles it should tax and what articles it should not tax and if it decided to tax certain articles in order to effectuate its policy it is difficult to see how that would introduce discrimination. But it was argued that discrimination is introduced by differentiating between materials bought for articles to be 1mpplied against a contract and articles produced and sold by the petitioner and that this was not a reasonable classification nor was there any intelligible differentia in this classification. In our opinion this argument is without force. The Legislature, having chosen the articles on which it thinks necessary to impose a tax, h9.s decided to impoae the tax and it is difficult to see how it can be said that the goods supplied against a contract and goods manufactured and sold by the petitioner are similarly situated.

Besides the provision against discrimination is not on articles but on persons.

It has not been shown how the imposition of this t.ax is an unreasonable restriction on the rights of the petitioner to carry on trade, but it was submitted that by this means the petitioner will not be able to compete with the manufacturers outside

tJ1~. State of Assam. Assuming that thia is so, it is clear that goods which are purchased are put to different uses and if the legislature thinks that

ertain classes of goods should pay the tax and not others that is a question of policy into which the courts cannot enter. We can only say that in rnch circumstanees, 11er se there is no discrimination.

There is no force in the second contention either.

lHJ

111 /•. si..i ... rtA

Lio .

•• Stllk of .4.r-

K•pur J.

1H2

M/,. S-th

Lid.

•• Bt"' o/ ;1.,.., x..., J.

In view of our decision on these two points the third point, that is, the refuse.I of the Sales Tax Officer to amend t.he registration certificate will have no force.

In the re8Ult thiB petition fails and is dismi88ed and the rule is dillche.rged. The petitioner will pay the costs of the respondent.

P e.tition diamisaed.

SOUTHERN ROADWAYS PRIVATE LTD.

UNION OF INDIA AND ANOTHE1t (B. P. S1x1u. C.J., J. L. KAPua, M. HrnAYATULLAH,

J.C. SHAH and J. R. MunnoLKAR, JJ.) lnwme Ta:r-Detelopmtftt Rtbak-DiaallouJanu on offiu appliances and tmnaport V<liic/u I/ di":rimi11atory-J....,,,...taz Act, 1922 (11 of 1922) aR amtndtd by tM. Ta:raliott U.wa (Amendment) Act (28 o/ 1960, a. 10(2) (ri-b) -4 prolli.to.

The as~ company owned a fleet of bmes and carried on the business of transport. The income-tax offiett disallowed development rebate on the transport vehicles owned by the company as provided by the second proviso to s. 10(2) (vi-b) of the Income-tax Act. The company challenged the section on the ground that the said provbo offends Art. 14 In

that it discriminates between machinery which is ofrICe applianc.,. or road transport vehicl.,. and other kinds of machinery.

lleld, that there is nothing in the Constitution which prevents the Legislature from choo.ing the objects of taxation from amonll"t vaiious classes of machinery for purpose of giving development rebate.

OIUGINAL JuruenrCTION: Petition No. 143 of 1961.

Petition under Art. 32 or the Constitution of India for the enforcement of Fundamental rights.

S. Sunminathan and R. GopaJakri., hnan, for the petitioner.

K. N. Rajagopaki Sastri and P. D. Menon, for the respondentAI.

s. 65

s. 64

Indian Contract Act

M/s. STEELWORTH LTD

STATE OF ASSAM lB. P. SINHA

L. KAPUR

C. SHAH

R.MuDHOLKAR, JJ.

Amendment Act, 1960

s. 15

Arts. 14, 19

Art. 32

Constitution of India

Art. 32

s. 15

Jes Tax Act, 1947

s. 2

Art. 14

Art. 19

Art. 19( I)( f)

s. 9

Section 15(1 l( b)(il( b)

s. 10(2)

Income-tax Act

Art. 14

Art. 32

Constitution of India


1H2

M/,. S-th

Lid.

•• Bt"' o/ ;1.,.., x..., J.

594 SUPREME OOURT REPORTS (1962] SUPP.

In view of our decision on these two points the third point, that is, the refuse.I of the Sales Tax Officer to amend t.he registration certificate will have no force.

In the re8Ult thiB petition fails and is dismi88ed and the rule is dillche.rged. The petitioner will pay the costs of the respondent.

P e.tition diamisaed.

SOUTHERN ROADWAYS PRIVATE LTD.

UNION OF INDIA AND ANOTHE1t (B. P. S1x1u. C.J., J. L. KAPua, M. HrnAYATULLAH,

J.C. SHAH and J. R. MunnoLKAR, JJ.) lnwme Ta:r-Detelopmtftt Rtbak-DiaallouJanu on offiu appliances and tmnaport V<liic/u I/ di":rimi11atory-J....,,,...taz Act, 1922 (11 of 1922) aR amtndtd by tM. Ta:raliott U.wa (Amendment) Act (28 o/ 1960, a. 10(2) (ri-b) -4 prolli.to.

The as~ company owned a fleet of bmes and carried on the business of transport. The income-tax offiett disallowed development rebate on the transport vehicles owned by the company as provided by the second proviso to s. 10(2) (vi-b) of the Income-tax Act. The company challenged the section on the ground that the said provbo offends Art. 14 In

that it discriminates between machinery which is ofrICe applianc.,. or road transport vehicl.,. and other kinds of machinery.

lleld, that there is nothing in the Constitution which prevents the Legislature from choo.ing the objects of taxation from amonll"t vaiious classes of machinery for purpose of giving development rebate.

OIUGINAL JuruenrCTION: Petition No. 143 of 1961.

Petition under Art. 32 or the Constitution of India for the enforcement of Fundamental rights.

S. Sunminathan and R. GopaJakri., hnan, for the petitioner.

K. N. Rajagopaki Sastri and P. D. Menon, for the respondentAI.

2 S.C.R.

SUPREME OOURT REPORTS 595

1962. January 16. The Judgment of the Court was delivered by

KAPUR, J.-This is a petition by the asaessee under Art. 3:! of the Constitution challenging the constitutionality of the second proviso to s. 10(2)

(vi-b) of Income tax Act introduced by The Taxation Laws (Amendment) Act (28 of 1960). The relevant section with the proviso is as follows :-

Sou"'4m RoadWt11• p,;-Ltd.

S. 10(1) "The tax shall be payable by an s, ssessee under the head "Profits and gains of business, profession or vocation" in respect of the profits or gains of any business, profession or vocation carried on by him.

(2) Such profit• or uains shall be com puted after making the followin~ allowances, namely: ............................................... ' ............ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............... . (vi-b) in respect, of machinery or plant being nPw, which has been installed after the

3 lst day of March, 1954, and which is wholly used for the purposeR of the business carried on by the assessee, a sum by way of development rebate in respect of the year of installation equivalent to twer.ty-five per cent of the actual cost of such machinery or plant to the assessee : Provided that no allowance under this clause shall be m'lde unless the particulars prescribed for the purpose of clause (vi) have been furnished by the assessee in respect of such machinery or plant; Provided further that no allowance under this clause shall be made in respect of any machinery or plant which consist of office appliances or road transport vPhiclPs." The petitioner is a limited company with its registered office at ;\fadmqi in the Rtate of llfadras

Union of Ind i•

K¥UrJ.

,%1dlu,. BeaiwllJ' ..

PriNJI L1d.

U11Um o/ lntlia

K•pur .J.

J!u;; t

5!16 SUPREME COURT REPORTS [1002) SUPP.

which owna a. fleet of buses a.nd lorries and carriell on the business of transport In res1wot of !IBRl'R~· ment year I !!60-61 it cla.imoo a. development rPbate

on all its plants and machiner.v including buPines.q.

The Income tax Officer diHallowed tho olnim of rebate on transport vehicles under the proviso above quoted and computed the tax payable without such rebatfl. ft was contonderl on behalf of the petitioner that the proviso oft'cnrls Art. 14 in that it discriminates betweon machinery which is office appliance or road transport vehicl<'s and other kind of machinery. It is difficult to accept such a contention because there is nothing in the Constitution which prevents the legislBture from r:hoosing thp, object of taxation from 11mongt various classes of machinery for the purpose of giving d<'vefopment rebate. Tho Constitution rloes not prohibit any sueh cla.ssifica.tion which has l>l'en ma.de in the present case.

The petition is wholly without merit and is thcr1Jforc dismiHSed a.nd the rule is discharged. The

p••titioncr will pny tho costi! of the respondent.

P1iifi(Jn d1'.'IT11i ... 'll'd.

P. V. RAGHAVA REDDI AND AXOTHER

v. ('0lJUIS810XER OF INCOME-TAX ( ll. P. S1~HA, C .. J., , J. L. KAPt:a, M. HrnAYA1..-1.1 .. w,

J. C. S11.\11 nncl .r. R. Mn.>1101.KAH, J.T.)

Nou-n ... i1/1111" f"IH1i/"111.1f. ro111111i"si()11 d1tf' /u-ff1-rr:1•1-1! l1.11 /11rliut, fl1m 11111l 7r-tirl dir1cl/.11 ur tl1rfJu~1/I oll1P.1'-" "' th· 11011.-1,,,.;_ ,/1 111 r'''"J"""!I --1/ lrtlflf(jr!J fllj,..1i, l-/1t1r1111r, ; J 1'tr."i1.'r,/ in t,1.1•111/1' ,,.,.,-itJJry--/111/ian /11rf1111•--fo.r:A.ct, 1922 (ll 11/ JC122),,.,.. 4(1J(t,), I! f)(r), 43.

Theappellant i\ a firn1 '"°hich \\'as oin~ huincss ~11 mica.

To negotiate for ordrrs and I•• hancllc lt-s other affar" th<- appell..ant engaged a company in Japan , vliich 1~ adn111tcdly a "non .. rtllii<lcnt" c<1mpany.

By agTr.c1ncnt l)ClWcr.n tl1c

LTD.

UNION OF INDIA AND ANOTHE1t

C. SHAH

s. 10(2)

Income-tax Act

Art. 14

Art. 32

Constitution of India

Art. 3

s. 10(2)

S. 10(1)

Art. 14