TURNER MORRISON AND CO., LTD.

HUNGERFORQ INVESTMENT TRUST LTD.

March 9. 1972 B . [K. S. HEODE AND K. K. :!VIATH.Ew, 11.]

Estoppti-P!omissory estoppelcope of-App/lcab/ll:y of doctrlru.

I Company Law--lncorp, orated CompanieJ-R'esidmu of-Ultra CompfJIJ authorised by resolution ID dixhmge rax /iob/1/(y of JwldJiw company to which dividends due not distribuud-lf ultra vires tht com- C p<Jny's powers.

 Limitation Ac(. 1963--S'ection 1S(S)~Applicability to lnC07pOrtllu companies--Company-When can be said to be re:ridinll In In.di4 tl1ld constqurntly noJ "absent" from the country.

The rule of estopple has gained new dimensions ln re~:ent years and a new c)as5 of estoppel, vir. .• promis:sory estoppel hu come to be recoc- D ni!l!d by Courts.

Where parties ent.:r into 111 greemeot which il intenlk!d to cte<~!e legal relations between them and in punuaooe of ax:h arrangement om party make; a promise to the other which he kiiOII'S wiU be acted on and which i5 in fact acted on by the pi'001isce, 1be Court will treat the promise at finding on the promisor to the extent that it will not allow him to act inconsi&ttntly with it ven allhoug!i m, mise may not be supported by consideration in the strict .~. n21o, I 723Cl .

Hungerford Investment Co. owo:d hundred per c.ent shares.~~~ Morrison & Co. During the assessment yean 1939-~~ to v~. the lat!er did not disrribute dividends and t~ undtstnbuted. dividc:Dds were utilised by it as working apital. Jn all thoec yean tbe

111~ utboriti~ took proceedings under s. 23-A f tho Income Tf ~!'gertord.

and the deemed dividenc4 were assessed 10. the handl 0 Turner Mor f But, yur after yo:ar trom 1939 to 19S4, the Dtnecto!'.l ot 'ubi to JSk rison PUled a resoltion to the effect that it would be incqUitsel~ sboU!d ~UD&erford to pay the talt levied and that Tume~ Morruon ' b 'I\II1Ief

d~.tharge that liability. The rcaolutions were U[P~~re vidalda , MomSOQ by PlYinll aU the. taxes due from Hunger 0 than two and a n declared Hungerford would have got m~ were not debt~ ,,.... tunea the talt paid on ita behalf.

Tho paymcn as debll dUtJ ftcm 0 the accoont of Hungerford; nor were they sh~oer MorriJoD tude

UO.terford in the btlanoe 1hects. At no tune • 'd. 1o. 195~ tho any dt:inand on Hungerford to rimbune tho rn':J::!e.r by ·~ trol of T~I"'ICT Morrison chang.ed hand•th4u liability' of HUoam_ .. ,1 ... oer Morr110n under-toolc to dt.chuge e n died • - 10 the extent of Ri. 46 lakhs. 14 1965 Turner r.ult wu d!slllt.od r~" Hunpford for recovery of thJ 'd' Pf~ the plea ot It

Clio e 1•PilO:II ro thia Court Hunaeth Of It ra rcsoiU4ioP• w~!" of d'l. pPe • Turner Morrbon ur~ at 1 rcprcJCJtat.iOIII lbeY 1~" to do aomcthlng In future; they ere not anY C()QiidentlOO. r tb8 nd. at those promise• were nor .upportcd 'jr gerford arsued ·~ •t!ord no ltaal bula to reslat the c:lalm. pOl'~ by eoliSid rom,'" malt: under ~~ rc.solut1ons wcro au .

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[1972] 3 S.C.R.

in as mu~~ as Hungelrford, in response to those promises, refrained .. from

enforc!ing the right to hav~ the profits distributed as dividends.

Held, that by acting on the basis of. the representation made by Turner Morrisott Hungerford placed itself in a disadvantageous position,

and therefore, the pleas of promissory estoppel had to be sustained. [122B-CJ

Union of India v . .Indo Afghan Agencies Ltd., {1968] 2 S.C.R. 366, Central London Property Trust Ltd. v. High Trees House Ltd., ~19471 1 K.B. 130, Combe v. Combe, [1951] 2 K.B. 215, Tool Metal Manufacturing Co. Ltd. v. Electric Co. Ltd., [1955] 2 All B.R. 657 and Robuton v. Minister of Pensions [1949] 1 K.B. 227, referred to.

It was urged on beh:ili of Turner Morrison that the authority given to it to discharge the tax liabilities of Hungerford were ultra vires its powers and, therefore, provided no legal basis to resist the plain, claim,

Held, that Turner Morrison had not acted ultra vires its powers. The nondistribution df the dividents had augmented the working capital of the company thus affording it facility to earn more profits. Any step takn

to augment the working capital of the company was undoubtedly incidental to the business of the company and, further, tm same was not for the attainment of e objects mentioru:d in the memorandum. When Turner Morrison paid the tax due from Hungerford, in substance, though not in form, it was distributing a portion of its o:1ssets to the 100 . per cent share holder of the company, but without reducing its capital. P26Hl

Evn on the assumption that the suit claim was otherwise good, Hungerford urged, it was barred by limitation. It was contended o.tf

behalf of Turner Morrison that in view of s. 15(5) of the Limitation Act, 1963, the claim made, leaving aside the claim made in re8pecf of the assessment for the assessment years 1955-1956, was not. barred, because, Hungerford was a non resident company never present in India, and therefore, under the section the time durini which "~ defendant has been absent from India" had to be excluded for the purpose of computing the period of .limitation., Held, that the suit was barred by limitation: (a) Turner Morrison had waived the lien it might have had CNer t~ shares held by Hungerford. Hence the only claim that lilmer Morrison could have made against Hunford was a money claim. (b) The sl, lit was governed by. the l.imition Act 1963, which fixed a period of three years for money payable, The !llllOUnts aimed, except those in teSpect of the asseS&ment fui" the oassessment year 1955-1956, were all paid before November, 15, 1%2.

Thefore; they were barred by limitation. So far as the payment made m respect of the asses!lmcnt yesr

1955-56 was concerned, Turner Morrison h~ no claim against . Hungerford, because, under the amended s. 23A of the Income Tax Act, 1922, that liability was .of the Turner Morrison itself. (c) Section. IS(5) of the share holders of Turner Morrison.

Under these circumstances, it that the provision does not apply to incorporated companies at all or, alt:tnatively, that the incorporated compllllies must be held to reside .in places where they carry on thetadtivities and thus be present in all tboee plac:, es.

Fctually a company cannot either be present in India or abient from India. But it may have a domicile or residence jn India. 1be Board of Directo!l of Hungerford . used to meet in India now and then. It was, through its representatives, atoonding the general mectin~~; of the share holders of Turnet Morrison. Under .these circumstances, it . must be held to have been Ie$iding in this country and con5equently

n<)t a*nt from, this country. Hence, s. 15(5) cannot afford any as&is tance to Hurner Morrison to.Silve the bar of limitation. f727H-728C..730CT

TURNER MORRISON V. HUNGERFORD (Hegde, /.) 113

Dicey's Conflict of Laws, New York Life Insurance Company v.

Public Trustee, f1924] 2 Ch. 201, Carron Iron Co. v. Maclaren, 5 HL.C. 416 and Sayaji Rao Gaikwar of Baroda v. Madhavrao Raghunathrao, A . I. R. 1929 Bom. 14, referred to.

CIVIL APPELLATE JURISDICTION : C, A. No. 1223 of 1970. "

Appeal from the judgment and decree dated June 23rd/24th, 1969 of the Calcutta High Court jR Appeal from Original Decree No. 203 of 1968. A. K. Sen, Shankar Ghosh, D. N. Gupta, N. Khaitan, Krishna Sen and .B. P. Singh, for the appellant

S. V. Gupte, S. B. Mukherjee, B. N. Garg, K. K. Jain, D. N.

Sinha, Lina Seth; M. M. N. Pombra and H. K. Puri, for the respondent.

The Judgment of the Court was delivered by

HEDGE J. This appeal by certificate is by the plaintiffappellant, Turner, Morrison Co. Ltd. (to be hereinafter referred to as Turner Morrison) from. the decision of a Division Bench of the Calcutta High Court. The Division Bench affirmed the decion of the trial cou"rt dismissing the plaintiff's . suit.

In the sult Turner Morrison claimed a decree for a sum of Rs. 1,27,67,052/16 P. The claim was made on the ground that the plaintiff had paid either as an agent or on behalf of the defen-. dant Hungerford Investment Trust Ltd. (in voluntary liquidation) (to be hereinafter refeqed to as the HungerfOrd) a sum of Rs. 79,70,802/- as super-tax which it was entitled t~ be reimbursed. To that sum a sum of Rs. 47,96,250/16 P. was added as interest in the shape of "damages. In respect of that claim the appellant claimed a paramount lien on the 2295 shares owned by Hungerford in the.plaintiff-company. The defendant resisted the ' swt on variops grounds. It denied that the plaintiff had paid the amounts shown in the plaint-schedule or it was liable to be reimbursed the payments made, if any. It also de.nied its liability . to pay 'interest on the amounts that might have been paid. Further

it pleaded that the suit was barred by estoppel, waiver and acquiescence. It also pleaded the bar of limitation. In addition it pleaded that the !ien claimed had been waived and that the suit was not properly instituted. According to the defendant, the suit was not a bona fide one. It was one of the manipulations of Haridas Mundhra to get at the defendants' 2295. shares the plaintiff-company without paying for them.

The trial. court dismissed the plaintiff's suit holding that the claim in question was barred by "estoppel, waiver or acquie- .scence". It held that it was also barred by.limitation. It opmeid

SUPREME COURT REPORT£ [l972J 3 S.C,:~R.

that the liability to pay tl; le tax in question was the joint liability A of Turner Morrison as well as Hungerford and the same having 1:.1een discharged by the fonner, it had no claim on Hungerford.

It opined that the suit was a dishonest attempt on the part of Haridas Mundhra to absolve his liability: for paying for the 2295 shares in respect of which he had obtained a decree for specific perfonnance.

The appellate court affinned some of the findings D of the trial court.

In order to appreciate the various contentions advanced before this Court, it is necessary briefly to refer to the history of the case.

Hungerford was the owner of 100 per cent shares of Turner.

Morrison.

John Geoffrey Turner and Nigel Frederic Turner C (both since deceased) were the owners of the 100 per cent shares of Hungerford. As can be seen from the records, Turner Morrison was a prosperous company. Though that company was making enormous profits every year, it did not distribute any portion of those profits as dividends during the assessment years 1939·1940 to 1955-56.

The profits that should have been aaib. o able for distributing as dividends were kept back by the .company

and used as working capital. In all those years the income-tax authorities took proceedings under s. 23-A of the Indian Incometax- Act, 1922. Thereafter the "deemed dividends" were assessed in the hands of Hungerford.

But year after year the Directors of Turner Morrison passed a resolution to the effect that it would be inequitable to ask Hungerford to pay the tax levied. and .that E Turner Morrison itself should discharge that liability.

Those resolutions were duly implemented by Turner Morrison by paying aH-the taxes due from Hunerford. In about the middle cf 1955. Haridas Mundhra entered mto negotition with Nigel Tur.ner for purchasing all the shares of Turner Morrison.

By exchange . of letters in November and December of 1955, Hungerford agreed F to sell and Mundhra agreed to purchase 49 pe; r cent shares of Turner Morrison.

The agreement also prQvided for an option to Mundhra to purchase from Hungerford the balance of 51 per cent shares of Turner Morrison within five years for the price agreed upon.

A formal agreement in that regard was entered between Hungerford, John Geoffrey Turner, Nigel Turner, British G India Corporation (a nominee of Mundhra) and Mundhra on October 30, 1_956.

In pursuance of that agreement Mu!ldhra purchased 49 per cent shares of Hungerford. Thereafter as con

templated in that agreement Hungerford went into voluntary liquidation.

On October 3 L 1957 two documents came to be executed.

One is a deed of guarantee and indemnity.

That was a 'tripartite agreement.

The first party to that deed was Turner 8 : Morrison.

The second party was John Geoffrey Turner and Nigel Frederick Turner and the third party was Hungerford.

. !

------~

••• l. ;,]' =f

TURNER MORRISON V. HUNGERFORD (Hegde; J.) 715

that deed after setting uut thl! agreement between Hungerford and Mundhra, it was stated:

"~OW TijlS DEED WITNESSETH that in consideration of the liquidators having at the request of the Company (Turner Morrison).; the said John Geoffrey Turner and Nigel Frederick Turner agreed (as is testified by their being parties to and executing these presents) to distribute the assets of Hungerford in specie

amongt the contributories of Hungerford (such contributories being the said John Geoffrey Turner and Nigel Frederick Turner) and in consideration of the premises.

1. The Company and the said John Geoffrey Tur-· ner and Nigel Frederick Turner hereby jointly and severally undertake to pay and/or satisfy all claims for or in respect of Income-tax and Super-tax which is or are not payable or recoverable or may at any time be payable 0r recoverable under the Indian Income-tax. Act by or from Hungerford and which payments are in fact'legally

enforced and made.

2. The Company and the said John Geoffrey Turner and. Nigel Frederick Turner hereby jointly and .. severally -covenant with the Liquidators and each of.

them that the company and the said John :Geofftey Turner and e said Nigel Frederick Turner will iointly and severally at all times hereinafter keep indemnified _. the Liquidators and each of them .from all actions, proceedings, claims or demands in respect of or in connec-· tion with any liability of Hungerford to Income-tax or Super-tax under the Indian Income-tax. Act and also against all costs, damage or. expenses which the Liquadators or any of them may pay, incur or sustain in con nection therewith or arisirig therefrom or otherwise in relation to the premises."

The second document was a deed of indemnity between the Turner brothers and Turner Morrison. That deed provided that in the event of Turner Morrison "paying in tenns of the deed of

guarantees and indemnity any suin in excess of 46 lakhs in satisfaction of the income-tax and super-tax. which. may at any . time be payable or recoverable,· payment of which are in fact legally enforced and made under the Indian Income-tax. Act by or from II Hungerford the Guarantors and each of them in consideration of the premises undertake to pay to the company (Turner Morrison) the amount of such excess as af6resaid" .· ·

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Atthis stage, it may be mentioned that in accordance with the .agreement entered into between Mundhra and Hungerford Turner

Mofrlson was to discharge the tax liability of Hungerford to the extent of Rupees 46 lakhs. After the sale of the 49 per cent shares referred to earlier, some dispute appears to have arisen between Mundhra. and Hungerford in regard to his option to pur- .chase the remaining 51 per cent shares of thelater.

Consequently Mundhra filed a suit in the Calcutta High CoUrt on its original side for the specific pe, rformance of the agreement entered into between him and the Hungerford. Tlie suit was resisted by Hungerford.. But; it was decreed., It. appears· that when the leame.d trial judge was about to conclude his judgment, in that case the Coun.Sel for Mundhra requested the court to issue

.an injunction requiring Hungedord to exercise its voting rights in

respect'of the 51 per cent shares which was the subject matter of 1he suit in accordance with the directions of 'Mund.hra until the

implemetation of the .decree for specific performance. . The learned trial judge accepted tht prayer and issued the injunction asked for. This led to serious consequences, some of which we have dealt with in our judgment in Civil Appeal No. 488 of 1971 which we have just now pronounced.

This case appears to be an off-shoot of that unfortunate injunction. In the suit for :specific performance, though Turner Morrison was a party, it did not plead that it any lien over the shares with whiCh We are .concerned ill this case. By agreement between Mundhra and Turner Morrison, the latr was removed frOm. the array of defen- <iants aid the suit proceeded against the remaining defendants.

After obtaining the decree for specific performance and the injunction mentioned above, Mundhra appears to have not been

interested in purchasing the 51 per cent shares by paying for the same evidently use he was in a position to have an absolute , F control 6\rer Turner Morrison as a result of the injunction issued.

Though Hungerford.filed an appeal.against.the dec~ in that suit, that appeal as withdrawn for which are not clear .. After 1he withdrawal'of the appeal, by a Master's sons dated August 30, 1965 Hungerford moved the trial court for :fixing a time within which Mundhra shpu1d purchase the 51 per cent -shareS by paying for the same. That application was rejected G -on September 1965 on the ground .that the application being on~ for execution; it must be in a tabular form and "that anyimpositiO!D of time limit would be to engraft something on the decree which. does. not .exist in the decree".. The appeal against . that crder was-also unsuccessful.

After the sUit for :st*ific performan6e was decreed, Mundhra by himself or through Turner· MOrrison appears to have made ·

TURNER MORRISON \', HUNGERFORD (Hegde, J.) 717

various attempts to see that Hungerford is placed in such a position as not to be able to implement its part of the agreement.

We have had to deal with some of those aspects in Civil Appeal 488 of 1971.

Suffice it to say that according to Hungerford, the suit from which this appeal arises is one of the attempts of Mundhra in that direction.

One other circumstance that is necessary to be mentioned before proceeding to conside~ the points in controversy is that despite the various resolutions passed by the Board of Directors of Turner Morrison as well as by the shareholders of that company at the general meeting, ihe present suit was filed by the Secretary of Turner Morrison even without obtaining the sanction of the Board of Directors.

The Board of Directors' sanction was sought only after the defendants' objected to the maintainability of the suit.

From the proceedings of the Board of Directors,

~ it is clear that they were not even aware of the company against whom the suit was filed.

From the two resolutions passed by the Board of Directors ratifying the action taken by the Secretary, it is obvious that either they were callous or they were mere tools in the hands of Mundhra.

It is not de.nied on behalf .of Hungerford that the tax due from that company for the assessment years 1939-40 to 1955-56 had been discharged by Turner Morrison.

Hungerford's liability to pay tax arose because of the dividends it was deemed to have received from Turner .Morrison as a result of s. 23-A proceedings.

But there is dispute between the parties as to the exact amount paid by Turner Morrison.

We have not thought it necessary to go into that controversy as we have, agreeing with the High Court, come to the conclusion that the suit is not maintainable for the reasons to be presently stated.

A great deal of controversy centres round the question whether when an assessment is made on the shareholders of a company as a result of an order under s. 23-A, lhe company's liability to pay that tax is primary or secondary. It was contended on behalf of Hungerford that that liability is a joint liability of both

the company's as well as that of the shareholders.

But according to the appellant that liability is primarily that of the shareholders and if the company is compelled to discharge that liability, it is entitled to be reimbursed by its shareholrs. Both the trial judge as well as the appellate bench have upheld the contention of Hungerford and have come to the conclusion that when Turner Morrison paid the tax due from Hungerford, it was discharging its own liability under law and that being so, it was not entitled to seek reimbursement from Hungerford.

SUPREME COURT REPOR1'S [ 1972] 3 S.C.lt.

Section 23-A empowers the Income-tax Officer to order iir A writing if the conditions prescribed in that section are satisfied that the undistrubuted portion of the assessable income of a com-· pany earned ip. the previous year as computed for income-tax purposes and reduced by the amount of income-tax and super-tax payable by the company in respect thereof, shall be deemed to have been distributed as dividends amongst the shareholders as on B the date of the concerned general meeting.

That deemed income has to be assessed in the hands of the shareholders either under s. 23 or under s. 34 -of the Indian Income-tax Act, 1922.

The two provisos to s. 23-A that are important for our present punx>se are.found in cls. (ii) and (lii) of sub-s. (2) of s. 23-A.

C Clause (ii) says:

"Where the proportionate share of any member of a company in the undistributed profits and .gains of the company has been included in his total income under the provisions of sub-section ( 1 ) the tax payable in respect thereof shall be recoverable from the company, if it cannot be recovered from such member.''

Clause (iii) reads :

"Where tax is recoverable from a company under this sub-section, a notice of demand shall be served

upon it in the prescribed form showing the sum so pay- E able, and such compa~ shall be deemed to be the assessee in respect of such sum, for the purposes of Chapter VI."

It was urged on behalf of Hungerford that the income that can be brought to tax as a result of an order under s. 23-A is not a real income; it is only a deemed income; that income came to· F be taxed because of the failure of the company to declare dividends. It is only for the purpose of convenience that income is taxed1 in the hands of the shareholders; hence the liability to pay that tax in equity must be that of the company and it is for that reason s. 23-A has provided for the realisation of the tax due from the shareholders from the company.

The fact that before G passing an order under s. 23-A the shareholders are. not even required to be heard was emphasised.

In this connection our attention was invited to the amendment of s. 23-A in 1955 as a result of whicp. now the tax liable to be paid as a result of an order under s. 23-A is payable exclusively by the company.

In this connection reliance was also placed on the language of s. 42 1-t which empowers the Revenue to assess the income of a nonresident assessee in the hands of his agent, but at the same time

that section empowers that agent to retain in his hands a sum

TURNER MORRISON V, HUNGERFORD (Hegde, J.) 719

A equal to his estimated liability under that section from out of the.: non-resident's monies in his hands. It was lastly urged that if dividends were deemed to have -been declared, those deemed dividends remained in .. the handS of the company and when the company paid tax in respect of the same, it must be held to have paid the same out of the dividends of the shareholders that remained in B its hands. On the other hand, it was contended on behalf of Turner

Morrison that any assessment made in pursuance of an order

under s. 23-A is an assessment on the shareholders and not on the company. ~Thedividends deemed to have been distributed under

~- 23-A is considered to be the income of the shareholders and

nof that of the company.

It is added on to the other income of the shareholder for the purpose of assessment.

It is recoverable from the shareholder.· It is recoveable from the company only if it cannot be recovered from the shareholders and the company is deemed to be an assessee in espect of such' sum for the purposes of Chapter VI only and not for all purposes. . Further the

deemed distribution of dividends as a result of an order under s. 23-A is in no sense a real distribution of dividends which can. be Jone only by the shareholders at the general meeting of the company. We, do not propose to pronounce on this controversy firstly because this appeal can be decided on other grounds and secondly for the reason that that controversy has now become more or less academic in view of the amendment of's. 23-A in 1955. . . - For the assessment years 1940-41 to 1952-53, Trime~Moni-· son was assessed as the agent of Hungerford as could be seen from the assessment orders.

For that reason it was contended on beha1f of Turner Morrison that it is entitled to be reimbursed in respect of the tax paid by it.

Hungerford denies that Turner Morrison was its agent.

According to Hungerford, the. payments in F question were made by Turner Morrison voluntarily and therefore

it is not entitled to claim any reimbursement.

Section 43 of the- Indian Income-tax Act, 1922 prescribes as to who could be assessed as an <1gent under s. 42.

That section says :-

"Any person employed by or on behalf of a person residing out of the taxable territories or having any business connection with such person, .or through whom such person is in the receipt of any income, profits or !!ains uoon whom the Income-tax Officer has caused a notice: to b~ ::-erved of hi'\ intention of tteating hinl as the agent of the non-resident person shall for all the purposes of this Act, be deemed to be such agent."

It was contended on behalf of Hungerford that it was not residing out of the taxable territories; it is a private limited company: hence it must be held to be residing in all places where it.

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(1972] 3 S.C.R.

earns or deemed to earn any income.

It was further urged thal A Turner Morrison was not a person employed by or on behalf of

Hungeord nor did Hungerford have any business connections with Turner Morrison.

It was also the contention of Hungerford that it did not rive any income, profits or gains through Turner Morrison.

Lastly it was urged that the lnoome-tax Officer had not caused any notice to be served upon Turner B Morrison intending to treat that company as the agent of Hungerford.

On the other hand it was Turner Morrison which had volunteered to be assessed on behalf of Hungerford.

For all tqese reasons it was said that Turner Morrison cannot be held to have been taxed as the agent of Hungerford.

All these contentions were taken for the first time in this Court.

They do not c appear to have been taken either bef<;>re the trial court or before the appellate court.

The ontentio, PS raised involve determination of questions of fact.

In the'plaint, it was specifically averred that the payments in question were made by .Turner Morrison as the agent of H.JJ.ngerford.

That averment has not been specifically denied.

In that view, we are notcaUed upon to go into the various submissions noted above.

D ,

Befor~ going into the other contentions, we may briefi.y deal with the cotention that the suit was not properly instituted. There

appears to be basis for Hungerford's contention that this suit was inspired by Mundhra and Ardeshir Jivanji Honnasji, the Secretary of Turner Morrison, who signed the plaint on behalf of E Turner Morrison was a mere tool in his hands.

There is also reason to believe that when the Directors of Turner-Morrison ratified the action taken by Hormasji, they behaved in an irresponsible manner as seen earlier.

But all the same it cannot be said, the suit is not maintainable. It is true that under the. Article~ of Association of Turner Morrison, a suit o~ behalf of that company has to be filed with the c.onsent of the Directors. But F the Secretary of the company held a general power of attorney from the Directors and the action taken by him was approved by the Directors.

Hence there can be. no valid objection to the maintainability of the suit.

Three important questions remain to be coru; idered.

They G are:

1. Whether the claim made bv Turner Morrison is barred by the rule of estoppel. or waiver or abandonment?

2. Whether the decision of Turner Morrison to take over the liability of Hungerford either \\'ith or withot any guarantee from Turner brotbyrs was ultra vires its powers and

TURNER MORRISON v. HUNGERPOllD (Hegde, /~) 721

3. Whether the claim made in the , suit or any portion thereof is barred by limitation ?

1)e judgments of the trial cciurt and the appellate court havenot made any distinction between estoppel, waiver and abandonment. The distinction between those three concepts is fine but B real. In this case, there was no plea of any release under s. 63 of

$e Contract Act. Hence the argument of Mr. A. K. Sen, learned Counsel for Turner Morrison on the scope of that section is irrelevant and we shall not go into the same. The essential qties~.

tion to be considered is whether the facts established in this case

support the plea of estoppel put forward by Hungerford. If the C oosw~ to lutt question is in the affirmative then. there is no need to examiae whether there was. any waiver or abandonment as pleaded by Hungerford.

'Estoppel' is a rule of equity.. That rule has gained new dimensions in recent years. A new class of estoppel i.e. prO-· missory estoppel has come to be recognised by the courts in thiS' o country as well as in England. The full implication of 'promissory estoppel', is yet to be speHed out. . We shall presently refer to decisions bearing on that topic but before dOing so, let us whether Turner Morrison made any representation to Hungerford, if so, what is that representation.

Further, whether: Hun3Prfonl' acted on the basis of that representation to its disadvantage. It E is not denied tba:t year after year from 1941 to 1954 Turner

Morrison paSsed resolutions undertaking to discharge the tax lia-. bility of Hungerford. In pursuance of those resolutions taxa due from Hungerford were p&Jd.

There can be no doubt that tht step$ taken by Turner Morrison were within the knowledge ' or Hungerford as it held 100 per cent of Turner Morrison.

Tile Directors 'l'Ui'ner: Morrison must have been its' nominees.

F The profit and loss accoun.b of Turner Morrison must have b!=en approved by Hungerf~ )'eat after. year. at the ge, neral meetihg of that company.. In reality the Turner brothers were the own~

of Hungerford as well 'as 'J; utner MorriSon thoqgli each of those companies was a separate legal entity. It may be that Turner Monison did not declare dividends so t:Jiat Hungerford may avoid G paying tax at a high rate. But at the same tiine Hungerford W®ld not have agrud for not distn"butfug dividendS unless 'Turner.

Moirison took over the responsibi, lity 'of paying th6 tax . on the

dividends deemed to have been distributed. It is blished that 1f dividends had been declared .. HWlgerford would .hve got more than two and ba1f times the tax paid on its behalf~ The un~- B tributed diyidends Mre available to Turner MorriSon. to lle utilis G4·11 workin& capil and-th~ earn more proiits. . The arrangement regarding the 00114istrl.bUtion. ¢ dividendi as well. as, the

payment for the t&X due from HuniJil{~ bf mer Momson

, .SUPREME COURT REPORTS

[1972] 3 S, C.R

must have been with the consent of Hungerford as well as Turner A , brothers.

Those arrangements had clearly benefited all the parties.

Till Mundhra entered the scene, there could not have been any conflict of interest between Hungerford and Turner Morrison.

When Turner Morrison paid the tax due from Hungerford, legal fiction apart, it was really paying from the monies belonging to Hungerford. If for any reason, Turner Morrison had not undern taken the responsibility to discharge the tax liability of Hungerford, the latter could have taken steps to compel the former to declare dividends or even compel it to go into voluntary liquidation. Hence there can be no doubt that by acting on'.the basis of the representation made by Turner Morrison, Hungerford had placed itself in a disadvantageous position. But it was urged c on behalf of Turner Morrison that the resolutions in question were mere promises to do something in the future : They were not representations of any fact and as those promises were not supported by any consideration, they afford no legal basis to resist the claim made in the plaint. Hungerford's answers to these contentio.ns are, that firstly those resolutions -~!lord a good basis for raising a plea of promissory estoppel; secondly those D representations became representation of fact as soon as the . tax liability of Hungerford was discharged by Turner Morrison in pursuance of its resolutions and lastly the promises made under those resolutions were supported by consideration inasmuch as Hungerford in response to those promises refrained from enforcingits right to have the profits distributed as dividends. Now com- E ing to the payme:!U:s made after 1955, it is seen that a9cording to the agreement between Turner Morrison, Hungenord and Mundhra, Turner Morrison was required to set apart a sum of Rupees 46 lakhs to discharge the tax. liability of HuQgerford.

Accordingly Turner Morrison transferred Rupees 46 lakhs from its general reserve to a special reserve.

Further by the agree- F ments dated October 31, 1957 set out earlier Turner Morrison took over the entire tax liability of Hungerford and the Turner brothers agreed to reimburse Turner Morrison any payment . made on behalf of Hungerford in excess of Rupees 46-lakhs. All these arrangements clearly enured to the benefit of Turner Morrison inasmuch as it allowed that company to refrain from declaring dividends and utilise that money for business purposes. - There G can be no doubt that it was done in UJ.e best ipterst of that company and with a view to further its business interests.

It is necessary to note that despite Turner Morrison paying the tax due from Hungerford from 1941 uptill 1953, those pay~ ments were not debited to the account of Hungerford; nor were H they shown as debts due from Hungerford in the balance sheets placed before the general meeting. Those balance sheets were approved by the general meeting. It was plainly admitted by te

TURNER MORRISON \1, HUNGERFORD (Hegde, }.) 723

witns examined on behalf of Turner Morrison that the amounts paid on bt:half of Hungerford were not considered as debts due from that l:Ompany till about the time of filing the suit.

Jn the general meeting of Turner Morrison held on March 29, 1956, tne recornmenoation of the Board of Directors to transfer Rupees 46 lakhs from t)le genera! reserve to a special reserve for the purpose mentioned earlier was approved.

Thereafter Turner Morrison paid .the tax due from Hungerford for the assessment

year 1952-53_ and. debited the sarue to that special reserve. While Turner Morrison was keeping HungerfQrd infonned of the ments made Qn it and the refunds ordered, at no time it made any demand' on Hungerford to reimburse the moneys paid.

On several occasions Turner Morrison entered into agreements with the •

President of India undertaking to discharge the tax liabilities of Hungerford upto an agreed maximuru. Turner Morrison was representing Hungerford in all the assessment proceedings. It aised to file appeals on behalf of Hungerford against the orders of the Income-t~ Officers. :It had received all the amounts ordered to be .refunded. lt was keeping Hungerford infonned of the various orders passed by the Income-tax authoritieS: but yet_ without making any demand for the payment of tax paid by it The docii.ments produced in the case and the admissions made by the witnesses examined on'behalf of Turner Morrison make it abundantly clear that the idea of claiming back the tax paid on -behal~ ()f Hungerford caine to be entertained by Turner Morrison only after Mundhra came to control that ompany. With this background let us now. consider whether Turner Morrison is estopped from making the claim in question. ·

In suppart of its case Hungerford relies primarily on the doctrine of Promissory Estoppel. This doctrine ha:s assumed importance in recent years though it was dimly noticed in some of the earlier cases. The leading case on'the subject is Central London Property Trust Ltd. v. High Trees House Ltd. (1). The facts of that cse are as follows : ·

, Central London Prqperty Trust Ltd. let .to the High Trees House Ltd.~ a subsidiary of the former a block of flats for a term of 99 years from September 29, 1937 at a ground rent of £ 2500 a year.

In the early part of 1940, owing to war conditions then prevailing only a few of the flats in the block were let to tenants and it became apparent that the High Ts House Ltd. would be unable to pay the rent reserved by the lease out of the rent of the. flats.

Discussions took 'place between the Directors of the two companies and as a result on January 3, 1940r a letter was sent by the lessor to the lessee confinning that the ground rent. of the . \

(1) [1947] 1 K.B. 130.

[ 1972] 3 S.C.R.

prmises would be reduced from £ 2500 to £ 1250 from the A beginning of the tenn. The lessee thereafter paid the reduced rent By the beginning of 1945, all fiats were let but the lessee continued to pay only the reduced rent. In September 1945, the lessor wrote to the lessee demanding rent at the rate of ·£ 2500 per year. It also claimed at that rate for the quarters ending September 29 and December 25, 1945. The lessee repudiated B that claim. The question for decision was whether tho lessor was bound by the concession that it had agreed to show as the same

as not Sl; lPPorted by any consideration.

Answering that ques. tlon Denmng J. (as he then was) held that where parties enter into an agreement which is intended to create legal relations between tll.em apd .in pursuance of such arrangement one party c makes a promise to the other which he kt.1ows will be acted on and which is in fact acted on by the promise, the court will treat the

promise as binding on the promisor to the extent that it will not atlow him to act inconsistently with it even allhough the promise may :aot be supported y consideratiol'l in the strict sense.

Therein the court divided the claim made in the suit into two categories one for the period prior to the end of 1945 and the other for the D period thereafter. It disallowed the claim of the lessor in respect of the former and allowed the claim relating to the later period.

-- The rule laid down in_High Trees case(!) again came up for consideration before the King's Ben.ch in Combe v. Combe(2). E- Therein the court ruled that the principle stated in High Trees' case( 1) is that, where one party has,, by his words or con ·

duct, made to the other a promise or assurance which was intended to affect tho legal relations between them and to be acted on

accordingly, then, once-the other party has taken him at his word and acted on it, the party who gave the prom.ise or assurance cannot afterwards be allowed to revert to the previous legal relation F! ship as if no seuch:promise or assurance had been made by.him. but he must accept their legal relations sub; ec( to the qualification which he himself has so introduced, even though it is not sup

ported in point of law by any consideration, but only by his word . .

But that principle does not creat~ any ~~ of action. ch did not exis~ before; so that, where a pronnse IS made which IS not -G supported by any consideration, the promises cannot bring an action on the basis of that promise. The principle enunciated in the High Trees' case( 1) was also recognised by the House. of Lords in Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric co. Ltd.(1). That principle was adopted br this Court in

UniQn of India v. Indo Afghtm Agencies Ltd( ) . 'The facts of B that case, in brief, are as follows : . .

(1) [1947)1 K.B: 130.

(2) [19~1] 2!K.B. 215.

(3) [195512 All B.R.. 657;

(4) [1968]2. S.C.R. 366.

. f

TURNER MORRISON V, HUNGERFORD (Hegde, }.) 725

In exercise of its powers under s. 3 of the Imports and Exports (Control) Act, 1947, Central Government issued the. Imports (Control) Order, 1955 and other orders setting out the policy governing the grant of import and export licences. The Central Government also evolved an Import Trade Policy, to faeilitate the mechism of the Act and the orciers issued thereunder, and it was modified from time to time by issuing fresh Schemes in respect of new commodities. In 1962, the Central Govemm.ent promulgated the Export Promotion Scheme providing incentives to exporters of woollen textiles and goods.

It provided for the grant to an exporter certificates to import raw materials of a total amount equal to 100% of the F.O.B. value of his exports.

Clause 10 of the scheme provided that the Textile Commissioner could grant an import certificate for a lesser amount if he is satisfied, after holding an enquiry, that the declared value of the goods exported is higher than' the real value of the goods. The Scheme was extended to exports of woollen textiles and goods to Afghanistan. M/s. Indo-Afghan Agencies Ltd. exported woollen goods to Afghanistan and were issued an Export Entitlement Certificate by the Textile Commissioner not for the full F.O.B. value of the goods exported but for a reduced amount on the basis of some private enquiry supposed to have been held by him hllt not after holding an enquiry as contemplated by the Schenio._~· _The representation made by the Indo-Afghan Agencies in that ·· connection to the Central Goverent was rejected. Thereafter M/s. Indo~Afghan Agencies Ltd. moved-the High Court to set aside the order of the Textile Commissioner and the government and to issue a direction to them to grant licences f<;>r an amount equal to 100% of the F.O.B. value of their exports. That prayer was resisted by the government on various rounds, inter alia, f1tat the Export Promotion Scheme was admimstr'!tive in .. character, that it contained mere executive instructions issued by the government to the Textile Commissioner, and created no. enfrce able rights in the exporters who exported their goods in pursuance · of the scheme and it imposed no obligation on the government to issue import certificates.

The High Court and later this Court in appeal rejectd that contention. This Court held that the government is not exempt from liability to carry out . the represent_ation made by it as to its future conduct. In arriving at that conclusion this Court -placed reliance on the decision of Denning J. in .Robertson v. Minister of Pensions(1). Therein (Denning J.) was dealing with a case of serving army oftieer who wrote to the War Office regarding a disability and received a reply that his disability had been accepted as attributable to "military service".

Relying on that assurance he forebore to obtain .an independent medical opinion. The Minister of Pension~ later decided that his

. (1) t1949)1 K.B. 227.

~ SUPREME COURT REPORTS

disability could not be attributed to Wax Service.

Therein the court held that as between the subjects such an assurance would be enforceable because it was intended to be binding, intended to be acted upon and was in fact acted upon, and the aSsurance was also binding on the ground because no tenn could be implied that the Crown was at liberty to revoke.

The rule laid down in these decisions undoubtedly advance the cause of justice . and hence we have no hesitation in accepting it.

It was urged on behalf of Turner Morrison that the authority given to it to discharge the tax liabilities of Hungerford as well as the agreements entered into by it with Hungerford and the Turner brothel'S were ultra vires its powers, and .. consequently they provide no legal basis to resist the plaint claim.

It is true that a Private Ltd. company cannot exceed the powers conferred on it under its Memorandum of Association.

Therefore, for considering whether Turner Morrison was competent to undertake the liability it did, we have to look to the provisions in the Memorandum.

Clause 3(b) of the Memorandum empowers the Turner Morrison to carry on business in India and elsewhere as merchants, general merchants, agents and traders etc. Sub-clause

( q) of tbat clause gives power to the company "to receive money on dep6sit at interest or otherwise and lend money to such persons, with or without security and on such terms as ay seem expedient and in particular to customers of and ·.other persons having dealing. with the company and to give any guarantee or indemnity as may seem expedient."

Sub-cl. (x) authorises the cC>mP, any:

"to distribute among the members of the company in specie any property of the Company, but no distribution amounting to a reduction of capital shall be made F without the sanction, if any, for the time being required by law."

Sub-cl. ( z) authorises the company to do all such other things as are incidental ()r conducive to the attainment of objects mentioned in Memorandum.

As seen earlier the non-distribution of the. dividends had augmented the working capital. of the company thus affording it facility to earn more profits. Any step taken to augment the working capital of the company is undoubtedly incidental to the business of the company and further the same was e9nducive to H the .attainment of the objects mentioned in the Memorandum.

When Turner Morrison paid the tax due from H\mgerford in substance, though not in fonn, it was distributing a portiou of its

::I'UltNER'MORRISON V, HUNGERFORD (Htgde, J.) 727

. assets to the 100 per cent shareholder of the company but withc.ut reducing its capital.

Hence we are unable to see how it can be said that Turner Morriso11 had acted ultra vires its powers.

Mr. A. K. Sen, learned Counsel for Turner Morrison invited our attention to several decisions wherein the courts had taken the view that the actions taken by the companies concemed were ultra vires their powers.

Those decisions were rendered on the facts of those cases. Whether a transaction entered into by a

compan~ can be said to be within its powers or not has 'to be decided on the basis of the tacts established and the provi5ions 'in its Memorandum a:nd not on the basis of any a}:>stract rule.

The only other question that remains to be considered is whether the suit claim is barred by limitation even on the assumption that claim is otherWise in order. For pronouncing on this question, it is first necessary to decide whether Tumer Morrison had waived its lien over the shares held by Hungerford. There can be no dotlbt that Turner Morrison has the power to waive the paramount lien it has upon all the shares registered in the name of each member, for his debts or liabilities to the company.

That much is clear fm art. 22 of the Articles of Association.

That article provides that :

"Unless otherwise agreed the registration of transfer of shares sMll operate as a waiver of the Company's lien (if any.) upon such shares."

. In Buckley on Companies A,.cts (13th Edn. at p. 797) dealing with the question of lien, it IS observed :

" ... For such a Drovisio.n is for the Drotection of the company, and is capable of being waived by the

comp.any."

We have to see whether the company in fact had waived the lien it had in respect of the suit cl~, assuming that the said claim is otherwise good. As seen earlier .at all stages Turner Morrison took over the responsibility of paying the tax due on behalf of

Hungerford.

There was no idea of recovering the amount paid as tax, from Hungerford. When Hungerford sold 49 per cent of its shares to Mundhra, the same was registered without any objection.

It :was clearly admitted by the Secretary of Turner Morrison and other witnesses examined on behalf of that company that the idea of suing Hungord for recovering the tax paid was conceived for the first time after Mundhra obtained the decree for specific pedonnance.

Under these circumstances, it is clear that Turner Morrison had waived the lien that it might have bad over the shares held,.. by Hungerford .. Hnce the only claim that Turner Morrison could have made against Hungerford was a mobey

7..28

'SUPREME COURT REPORTS

claim. The present suit was tiled on November 15, .1965. Hence it is governed by the provisions of the Liriritation Act, 1963 which came into force on April 1, 1964. Article 23 of that Act fixes a period of three years for instituting a suit "for . money payable to the plaintiff for money paid for the defendant" and the cause of' action for the same commences when the money is paid.

To the same effect was Art 63 of the Limitation Act, 1908. The

amounts claimed in the present suit except thpse in respect of the assessment f()( the assessment year 1955-56 were all admittedly paid before November 15, 1962. Hence they are prima facie barred , by limitation. So far as the payments made in respect of the assessment for the assessment year 195$-56 is conce1J1ed, Turner Morrison can have no caim a_gainst Hungerford because under the amended s. 23-A of the Income-tax Act, 1922, that liabi).ity was that of Turner Morrison itself. But it was urged on behalf of Turner Morrison that iil view of s. 15(5) of the Limitation Act, 1963, th~ claim made, leavittg aside the claimmade in

i'espect of the assessmen.t:for the assessment year 1~55-56, is not barred. Section 1 S ( 5) prescribes :

. "In computing the period of limitation for any suit the time during which the defendant has . been absent from India and from the territories outside India under tbe administration of the Central Government shall be

excluded ...

It was urged on behalf of Tumtr Morrison that Hungerford is a lion-resident company. Therefore it caJ)lldt be said that at , any time it was present in India. Hencel the suit is not bamd.

If this argument IS correct then there can oe no. period of limitation for filing a suit against a non-resident company-a proposition which is prima facie startling. Can we hold that s.

15 (S) app)i~ to a suit of th~ type with which 'We are conceined ? That provision contompJates the ca8e of a defendant who . has been absent from India: That article presupposes that defendant was at one time present in: India and later he has been absent from India. A rson: who was never in India cannot l>e considered as having 'l:i"e!n absent. from India.

Fctually a company cannot either be present in India or absent from India.

But it may have: a , domicile or residence in lndia. . Sometime . questions have 'G a.rlSen as to what is the place Of residenc'e of an incorporated oomp&.!ty~ Dicey hi hiS Conftict of Laws (4th Edn; p. 152 rule 19) pointmR out the cMereilte between the domicil of a natural per- .son.attd that of a OOrpOiatiOn. says : · ''The domicil. of a human beiJl& is a fact wch on pOtilts, . ubj~.ts h~ to. e. aw .O..f a plrticulai .frY; '~'¥domicil of a COf'P.'Ol'::ttion 1S a fictiC?Jl.&bgpsted\y the tact that a corporation is, on cert~ points.

TURNER MORRISON v. HUNGERFORD (Hegde, J.) 729

e.g., the jurisdiction of the Courts, subject to the law of

particular country.

A man, that is to say, is in some respects subject to the law of England because he has in fact an English domicil; a corporation is by a fiction supposed to have an English rellidence or domicil because it is in cet1ain respects subject to the law of England.

Hence a corporation may very well be considered domiciled or resident, in a country for one purpose and not fo.r another, and hence, too, the great uncertainty as to the facts which determine the domicil, or residence of a corporation.

In each case the particular question is not, at bottom, whether_ a corporation has in reality a permanent residence in a particular country, but whether, for certain purposes (e.g. submission to the JUrisdiction of the Courts or liability to taxation), a corporation is to be considered as resident in England or in some other country."

The question of residence of an insurance company registered and having its registered office in a foreign country came up for consideration before the Chancery Division in New York Life Insurance Company v. Public Trustee(l).

Therein Pollock M.R. quoted with .approval the following passage from the judgment of Lord S_t. Leonards in Carron Iron Co. v. Maclaren( ).

''I think that this company may properly be deemed both Scotch and English. It may, for the purposes of jurisdiction, be deemed to have two domiciles.

Its pusiness is necessarily carried on by agents, and I do not know why its domicile should be considered to be con fined to the place where the goods are manufactured ...

Tiiere may be two domiciles and two jurisdictions; and in this case there are, as I conceive, two domiciles and a double sort of jurisdiction, one in Scotland and one in England; and for the purpose of carrying on their busi ness, one is just as much a domicile of the corporation

as the other."

The same view was expressed in that case by Warrington L.J. and Atkin L.J.

A division bench of the Bombay High Court in Sayaji Rao Gaikwar of Baroda v. Madhavraa Raghunathrao(3) dealing with

1hc scope of s. 13 of the Limitation Act 1908 which is identical with the present s. 15 ( 5) held that s. 13 must be read so as. to

avoid t11e obvious absurdity that arises ii such corporate bodies

(1) [1924] 2. Ch. 201.

(2) 5, H.L.C. 416.

(3) A.T.R. 1929 Born. p, 14.

730 SUP:UME COUR'l' REPORTS

[1972]' 3 S.C.R.

are deemed to reside out of British India so that suits against them can never be barred at all.

And this can be done by treating thein as defendants, who by reason of their special character, are not absent from British India within the meaning of the section, because they have not got the same liberty as private individuals to reside personally in British India and attend to their affairs and they must do so through agents or representatives. Under those circumstances, they can be held to reside in British India in so_ far as they actually carry on business through their representatives

in B.titish India.

Section 15(5) of the Limitation Act, 1963 can be viewed in cne of the two ways i.e. that that' provision does not apply to incorporated companies al all or alternatively that the incorporated compailies must be held to reside in places where they carry on their activities and thus being present in all. those places.

Hungerford is an Investment company. It had invested large sums of monies in Turner Morrison.

Its Board of Directors used . to J!lOOt in India now and then. It was, (through its representa~ tives) attending the general meeting of the shareholders of Turner Morrison.

Under these circumstances, it must be held to have been residing in this country and consequently was . not absent from this country. .. Hence s. 15 ( 5) cannot afford any assistance to Turner Morrison to save the bar of limitation.

For the reasons mentioned above, this appeal fails and it is dismissed.

Turning to the question of costs, from what we have said earlier, it is clear that there was no justification for bringing the suit.

The suit was clearly engineered by Mundhra to attain certain ulterior purposes of his.

But unfortunately neither he nor his likely collaborators the Directors of Turner Morrison, are before us.

The only accessory _of Mundhra who is before us is the Secretary of Turner Morrison, Hormasji.

There is no jstifi cation to make Turner Morrison in which Mundhra has only 49 per cent shares to bear the costs. In the circumstances, we think it proper to direct Hormasji to be~ the costs of both the parties in this Court.

The order made by the High Coilrt as regards costs will stand. ·

K.B.N.

Appeal' dismissea~

TURNER MORRISON AND CO.

HUNGERFORQ INVESTMENT TRUST LTD

March 9. 1972

K. K.

s. 23

1968] 2 S.C.R. 366

Turner Morrison

Hungerford

s. 15(5)

Limitation Act, 1963

India

Hunford

s. 23A

Income Tax Act, 1922

Turnet Morrison

s. 15(5)

Hurner Morrison

CIVIL APPELLATE JURISDICTION

CIVIL APPELLATE JURISDICTION : C, A. No.

A. K. Sen

Shankar Ghosh

D. N. Gupta

N. Khaitan

Krishna Sen

.B. P. Singh

S. V. Gupte

S. B. Mukherjee

B. N. Garg

K. K. Jain

D. N.

Sinha

Lina Seth

M. M. N. Pombra

H. K. Puri

Turner, Morrison Co. Ltd.

Hungerford Investment Trust Ltd.

Haridas Mundhra

Turner.

Morrison

Hungerford was the owner of 100 per cent shares of Turner.

John Geoffrey Turner

Nigel Frederic Turner

Turner Morrison

s. 23

Hunerford

Nigel Tur.ner

Mundhra

Nigel Turner

British G India Corporation

October 30, 1_956.

Mu!ldhra

October 3 L 1957

On October 3 L 1957 two documents came to be executed.

Morrison

The first party to that deed was Turner 8 : Morrison.

Nigel Frederick Turner

TURNER MORRISON V. HUNGERFORD

John Geoffrey Tur-· ner

Mofrlson

Calcutta High CoUrt

Hungedord

Hungerford

Turner .Morrison

s. 23

s. 23

SUPREME COURT REPOR1'S [ 1972] 3 S.C.lt

SUPREME COURT REPOR1'S [ 1972] 3 S.C.lt.

Section 23

s. 23

s. 34

Indian Income-tax Act, 1922

s. 23

s. 23

s. 23

s. 23

s. 23

s. 23

s. 23

s. 42

Turner

Morrison

s. 23

s. 23

s. 23

Section 43

Indian Income-tax Act, 1922

s. 42

A Turner Morrison

Hungeord

Turner B Morrison

.Turner Morrison

H.JJ.ngerford

Ardeshir Jivanji Honnasji

E Turner Morrison

Hormasji

s. 63

A. K. Sen

England

Turner Monison

Moirison

Moirison took over the responsibi, lity 'of paying th6 tax .

Turner MorriSon

Turner A

Till Mundhra

Hungerford

Hungenord

HuQgerford

October 31, 1957

March 29, 1956

Central London Prqperty Trust Ltd.

High Trees House Ltd.~

September 29, 1937

High Ts House Ltd.

January 3, 1940r

September 29 and December 25, 1945

Denmng

s. 3

Central Government

Central Govemm.ent

Clause 10

Afghanistan

Indo-Afghan Agencies Ltd.

M/s. Indo-Afghan Agencies Ltd. exported woollen goods to Afghanistan and were issued an Export Entitlement Certificate by the Textile Commissioner not for the full F.O.B. value of the goods exported but for a reduced amount on the basis of some private enquiry supposed to have been held by him hllt not after holding an enquiry as contemplated by the Schenio.~· The representation made by the Indo-Afghan Agencies in that ·· connection to the Central Goverent was rejected.

Indo~Afghan Agencies Ltd.

Denning

Clause 3(b)

I'UltNER'MORRISON V, HUNGERFORD

Htgde

Turner Morriso11

Tumer Morrison

art. 22

Buckley

In Buckley on Companies A,.cts (13th Edn.

Hungord

November 15, .1965

The present suit was tiled on November 15, .1965.

April 1, 1964

Article 23

Hence it is governed by the provisions of the Liriritation Act, 1963

Hence it is governed by the provisions of the Liriritation Act, 1963

Art 63

Limitation Act, 1908

November 15, 1962

s. 23

Income-tax Act, 1922

s. 15(5)

Limitation Act, 1963

Section 1

Tumtr Morrison

s.

15

Therein Pollock

S_t. Leonards in

Scotland

Warrington L.J.

Atkin

Bombay High Court

s. 13

Limitation Act 1908

s. 15

s. 13

British India

B.titish India

Section 15(5)

Limitation Act, 1963

s. 15

K.B.N.


TALKESHWARI DEVI

-'AM RAN BI.KAT PRASAD SINGH & ANR.

January 12, 1972 [K. S. Hl!GDE, P. JAGANMOHAN REDDY. AND D. G. PALEKAll, JJ.]

Indian Succession Act 1925-Ss. 124, 131-Scope-Will, construction of.

By clause 4 of a will the testator bequeathed to his grand daughters T and S an absolute right in the properties that were to devolve on them after the death of his wife. Clause 5 further provided that if one of the two grand daughters were to die issueless the other living grand daughter was to enter into possession of the entire pro- C perty as absolute owner. After the death of the testator's wife T and S

divided the properties which devolved on them in equal shares. On S dying issueless T instituted a 1uit for poasession of the properties that fell to the share of S basin& her claim on clause 5 of the will. The suit was dismi!!led. Dismissing the appeal, HELD : Clause 5 of the will relaes to devolution, it does not provide for any divestment of an estate which had vested. The estate that vested D in S under clause 4 of the will was not a conditional estate, it was an absolute one. The will does not provide for the divestment of that estate.

Clause 5 would have come into operation if the contingency mentioned therein had happened before the properties absolutely devol\-ed on T and S. What the testator intended was that if any of his grand daughters died issueless before the devolution took place then the entire property should go to another grand daughter. The intention of the testator is plain E from the language of the will. [73 BJ Section 124 of the Indian Succession Act, 1925 applies to the facts of the case and not s. 131. The legacy claimed by the apllant is unavailable as the contemplated con'ingency did not occur before the fund bequeathed was payable or distributable. Section 131 provides for the divestment of an estate which had already vested; it speaks l}f an estate going over to another peraon. 174 Bl F Norendra Nath Sircar and anr. v. Kamal Basini Dasi, I.L.R. 23, Cal. 563, referred to.

CML APPELLATE JURISDICTION : Civil Appeal No. 213 of 1967.

Appeal from the Judgment and order dated February, 17th 1965 of the Patna High Court in First Appeal No. 113 of 1960.

G M. C. Chagla, D. P. Singh, S. C. Agarwal, V. I. Francis, R. Gqburdhun and D. Goburdhun, lor the appellant.

M. C. Setalvad, Sarjoo Prasad, A. G. Ratnaparkhi and Rajiv Shah, for respondent No. 1.

The Judent of the Court was decided by II Hegde, J, In this appeal by certificate we are to consider the effect of the will executed by one Ral!hunath Prasad Singh, on August 31, 1938. The said testator died very soon after the execution of the will leaving behind him his widow 1ageshwar Kuer,

his dau, ghter Satrupa Kuer and his two grand daughters Talkeshwari Devi (the appellant herein) and Sheorani. The appellant and Sheorani are the dau, ghters of Sukhdeo Prasad Sin, gh, the son

of the testator who had pre-deceased the testator.

Jageshwar Kuer died in November 1948 and Sheorani Devi on November 1, 1949 without Jeavinl!: any issue. The dispute in thiS case is as to who is entitled to the properties devolved on Sheorani under B the provisions of the will left by the testator. For deciding that question we have to refer to the relevant provisions of the will, the l(eni, tineness or validity of which is not in dispute.

The will in ques'.ion provides that after the death of the testator a portion of his properties (detailed in the will) was to C devolve on Jaj!; CShwar Kuer absolutoly and tho remaining pro. perties are also to devolve on her but therein she was to have only a life interest. The will fur.her provides that after her death

"the entire property will be l!reated as 16 annas property out of which S annas 4 pies (five annas four pies) share constituting proprietary interest will pass to Shrimati Satrupa Kuer alias Nan

dau, ghter of me, the executant and her heirs as absolute owners and the remaining 10 annas 8 pies ( annas ten and eight pies) share will pass to both the minor grand daughters, (1) Shrimati Talkeshwari Kuer alias Babu and (2) Sbrimati Sheorani Kuer alias Bachan in equal shares as absolute proprietary interest"

(cl. 4 of the will) . Clause 5 of the will says :

"That if one of the tw0 grand dau, ghters named E abow dies issueless, then under such circumstances the other livinl!; grand dau, ghter will enter into possession and occupation of the entire 10 annas 8 pies and bte come the absolute owner thereof." At the time of the death of the testator, the appellant as . .well as Sheoranl Kuer were minors. After the death of Jageshwar F Kuer, the appellant and her sister Sheorani Kuer divided the ten annas eiht pies share of the properties which devolved on them In equal sharea and each one came into possession of her share of the properties.

Immediately after the death of Sheoranl Kuer, the appellant G instituted a suit for possession of the properties that fell to the share of Sheoranl Kuer purporting to base her claim on cla'JSO

S of the will to which we have earlier made reference. That suit was resisted bv the first defendant, the husband of Sheorani, He claimed that he was entitled to those properties as the heir of hi& .wife. The trial ~.ourt dismissed the plaintiff's suit and the decision of the al court was upheld by the HI~ Court, H It was contended on behalf of the appellant that In ''iew of claUIO S of the will, the appellant Is entitled to the suit properties

TALKESHWARI DEVI v. RAM RAN BIKAT (Hegde, J.) 71

as Sheorani Kuer had died issueless.

This contention, as mentioned earlier, did not find favour either with the trial court or with the appellate court.

They have held that on a proper ieading of the will as a whole, it is clear tha~ clause 5 ceased to be operative on the death of' Jageshwar Kuer, thereafter caluse 4 of \he will was the only operative clause so far as the rights of the appellant and Sheorani were concerned.

It is undisputed 11at the duty of the court is to !ind out the intention of the testator but that intention has t0 be gathered from the langmfge Qf the will read as a whole.

I'. is clear from clause 4 of the will that the testator wanted to give to his grant-daughters an absolute right in the properties that were to devolve on them after 'the death of his wife, J ageshwar Kuer.

The estate bequeathed undcl'r clause 4 Of the will is not a condi1ional estate.

Clause 5 of the will relates to devolu'.ion and it does not provide for anv divestment of an estate which had vested.

The estate that vested on Sheorani was an absolute one. The will does not provide for the divestment of '.hat estate. It is plain from the language of clause 5 of the will that it refers to the devolution, which means when the properties devolved on the two si, ters on the death of

Jaeshwar Kuer..

We are unable '.o accept the contention of Mr. M. C. Chagla, learned Cooosel for the appellant that there is any conflict between clause 4 and clause 5 of the will.

Clause 5 in our judgment would have come into force if the contingency mentioned therein had happened before the properties absolutely devoved on the two sisters.

Clause 5 cannot be considered as a defeasance clause. If the testator wanted that the bequest made to any of his grand-daughters should stand divested on the happening of any contingency, then he would have said so in the will, assuming that he could have made such a provision.

But the will nowhere says that the properties bequeathed to the appellant and her sister should cease to be their properties on their dying issueless.

Obviously what the testator intended was that if any of his grand-daughters dies issueless before the devolution took place then the entire property should go to the other granddaughter.

To. our mind the intention of the testator is plain from the language of the will.

To find out the effect of the will before us we have to look to ss. 124 and 131 of the Indian Succession Act, 1925.

Section 124 says :

"Where a legacy is given if a specified uncertain event shall happen and no time is mentioned in the will for the. occurrence of that event, the legacy cannot take effect; unless such event happens before the period when the fund bequeathed is payable or distributable." 6-L864 Su PC I /72

Illustration (ii) to .that section says :

"A legacy is bequeathed to A, and in the case of.his death without Children, to B. If A survives the testator or dies in his lifetime leaving a child, the legacy to B does not take effect." If s. 124 applies to the facts of' the case, as we think it does, B then it is clear that the legacy claimed by the appellant is unavailable as the contemplaied eontingency did not occur before the fund bequeathed was payable or distributable. Section 124 deals with devolution.

But as we shall presently secs. 131 deals with divestment of an estate that had vested.

Mr. Chagla contends that the governing provision is s. 131. That section says: c

"A bequest may be made to any person with the condition superadded that, in case a specified uncertain event shall happen, the thing bequeathed shall go to another person, or that in case a specified uncertain event shall not happen, .the thing bequeathed shall go over (o another person." D

The section provides for the divestment of an estate which had already vested. It speaks of an estate going over to another person. As seen earlier clause 5 of .the will is not a defeasance clause.

A case somewhat similar to the one before us came up for B consideration before the Judicial Committee of the Privy Council in Norendra Nath Sircar and anr. v. Kamal Basini Dasi(').

Therein a Hindu at his death left three sons, the eldest of full age and the other two minors. In his will were the directions "My three sons shall be entitled to enjoy all the moveable and inunoveable properties left by me equally. Any one of the sons dying JI sonless, the surviving son shall be entitled to all th~ properties equally". Interpreting this clause the Judicial Committee held that those words gave a. legacy to the survivors contingently on the. happening of a specified uncertain event, which had not happened before the Jltlriod when the property bequeathed was distributable, that period of distribution being the time of the testator's death.

In arriving at this conclusion, the Judicial Com- G mittee relied on s. 111 of the Indian Succession Act, 1865. That provision is similar to s. 124 of the Indian Succession Act, 1925.

For the reasons mentioned above we are in a8!"eetllent with the courts below that the suit brout by the appdlant is unsustainable.

This appeal is accordmgly dismissed with costs.

K.B.N.

Appeal dismissed.

(I) 1.L.R. 23. Cal. ,63.

TALKESHWARI DEVI

AM RAN BI.KAT PRASAD SINGH & ANR

January 12, 1972

P. JAGANMOHAN REDDY

Indian Succession Act 1925

Ss. 124, 131

clause 4

Clause 5

clause 5

Clause 5

clause 4

Clause 5

Section 124

Indian Succession Act, 1925

s. 131

Section 131

G M. C. Chagla

D. P. Singh

S. C. Agarwal

V. I. Francis

R. Gqburdhun

D. Goburdhun

M. C. Setalvad

Sarjoo Prasad

A. G. Ratnaparkhi

Rajiv Shah

II Hegde

Ral!hunath Prasad Singh

Talkeshwari Devi

Sheorani

Jageshwar Kuer

Sheorani Devi

November 1, 1949

CShwar Kuer

Shrimati Satrupa Kuer alias Nan

Shrimati Talkeshwari Kuer alias Babu

Sbrimati Sheorani Kuer alias Bachan

cl. 4

Clause 5

Sheoranl Kuer

Jageshwar F Kuer

Sheorani Kuer

Sheorani

clause 5

clause 4

J ageshwar Kuer

clause 4

Clause 5

clause 5

Jaeshwar Kuer

M. C. Chagla

clause 4

clause 5

Clause 5

Clause 5

ss. 124 and 131

Indian Succession Act, 1925

Section 124

s. 124

Section 124

Chagla

s. 131

clause 5

s. 111

Indian Succession Act, 1865

s. 124

Indian Succession Act, 1925


CllHOTOBRAI JETHABRAI PATEL &: CO.

THE INDUSTRIAL COURT, MAHARASHTRA NAGPUR

BENCH, NAGPUR &: OTHERS.

March 9, 1972

[C. A. VAIDIALINGAM, J. D. DUA AND G. K. MITTER, JJ.J

Bomba>' Industrial Re/r.1ionr Ac/, 194&-ss. 78(1) D, 42{4)- Compliance wit!h s. 42(4) i/ condition precedent for invoking jurisdic tion of Labour Court under s. 78(1) D.

Against the order of the appellant company dismissing him, an employer filed an application before the Labour Court under secltion 78 of the Bombay Industrial Relations Act, 1946. The Labour Court set aside the order. The Industrial Court ®d the High Court confirm ed the order Of the Labour Court rejecting the appellant's contention that the order of the Labour Court was liable to be set aside on the ground that the employee did not make an application under s. 42( 4) in Ch:lpttl' VIII of the Act which was a condition precedent to apo proaching the Labour Court. On the question whether the Labour Court could exerc.'ise jurisdiction under s. 78(1) D of the Act in a cue where the employee of an industry governed by the Act had not com• plied with the provisions of .sub-oection ( 4) of s. 42 of the Act cad with the provisc to the sub-oection,

HELD : Allowing the appeal.

(i) The scheme of Chapter VIII of the Act is that in regard to any "Change" in an industrial m'ltter there must be compliance with the provisions of that chltpter. There is nothing in the Act: which warrants .the conclusion that the legislattire bv inserting paragraph D in s. 78 ( i) intended to chalk out a wholly different course of acion to that prescribed in Ch1pter VIII dealing with changes.

The 'cheme of s. 78(1) is that Labour Court is to have power to decide all 'the disputes covered by paragraph A. In other words, efforts must first be made. by the employer intending to effect any change in respect of matten cove"'d by s. 42 (I), or an employee desiring a change in respect of any order p:is.ed by the employer under standing order which would of necessity include an order 9f dismissal, to see whether it was possible to come to any agreement and an applicjation , to the Labour Court could only be resorted to after efforts had been made to settle the dispute and no agreement had been arrived at. P39C-Gl ·

(ii) A person who is di, missed would be an employee within the meaning of s. 3(13) of the Act and there is no valid reason for differentiating the case of a dismimd employee from one who complains of some other change. P39Hl · ·

CML APPELLATE JURISDICTION : Civil Appeal No. 12 of 1968.

Appeal from th~ judgment and order dated April 12, 1967 of the Bombay High Court, Nagpur Bench in Special Civil Application No. 812 of 1966.

M. N. Phadke and M ohinder Narain, for the appellant.

The Judgment of the Court was delivered by Mitter, 1.

In this appeal by certificate the question involved is, whetner the Labour Court at Nagpur could exercise jurisdiction under s. 7 8 (1) D of the Bombay Industrial Relations Act in a case where the employee of an industry governed by the Act had not complied with the provisions of s. 42( 4) of the said statute read with the proviso to the said sub-section.

The Bombay High Court has held that it was not necessary for an empl<>- yee first to approach the employer or to follow the procedure laid down in s. 42 ( 4) including the proviso before he could apply to the Labour Court for relief under s. 78 (I) D.

The facts are as follows.

One Nathu, respondent No. 3 herein, was employed as a munshi in the appellant's Bidi factory at Bhandara. The appellant had framed a charge sheet against him in respect of certain acts of misconduct, gross negligence of duty, insubordination etc. on May 13, 1965. Aµ enquiry in respect thereof was held on May 15th after receipt of written statement from Nathu.

Holding that the charges levelled against him were proved, the employer dismissed the third respondent with effect from August I, 1965. The said respondent filed an application challenging the order of dismissal before the Labour Court under s. 78 of the Bombay Industrial Relations Act, 1946, here inafter referred to as the 'Act', on the 5th August.

His complaint was that the charge sheet was not proper, that the Head Office of the appellant had no authority to deal with his case under the Standing Orders, that no evidence was allowed or filed on behalf of the employer and that \he finding was based only on his statement and in particular his cross-examination.

He had been forced to append hi~ signature to a certain paper without the same having been read over to him.

The Labour Court after holding an enquiry took the view that the findings of the enquiry officer 'vere perverse, that the order of dismissal was

pased by a person not authorised to exercise the power and consequently the Labour Court directed the reinstatement of the third respondent with all back wages.

The appellant preferred an appeal to the State Industrial Court contending, inter alia, that the third respondent had failed to comply with the provisions of law in that he did not make an application under s. 42 ( 4) of the Act which was a condition precedent to approaching the Labour Court and prayed that the order of the Labour Court should be sot aside on that ground alone.

The Industrial Court confirn!.ed the order of the Labour Court. The appellant then filed a peti

I j

D I

C. J. PATEL & CO. v. INDUSTRIAL COUR.T (Mitte~, J.) 7331

lion under Art. 227 of the Constitution before the Bombay High • Court. The High Court held against the appellant.

Uiifortu nately, there is no appearance for the resp011dent. before us.

In order to appreciate the scope of the Labour Court's juris- diction under the Act and in particular the attractability of. s. 78 ( 1) D it is necessary to exaniine the scheme of the Act as a whole including the provisions relevant for this appeal.

The Act when first passed in 1946 known as the Bombay Industrial Relations A~ was applicable to a limited area within -the State. In the Vidarbha region of the State, there was anothet similar Act in operation.

The Act suffered numyous amendments from time to time until 1965 when MaharaShtra Act 22 of 1965 was passed.

The new Act was described as an Act .. "to extend the Bombay Industrial Relations Act, 1946 throughout the State of Maharashtra and for that and for certain other pi\tposes further to amend that Act, and to repeal correspQPding laws in force in any part of the State".

Under s. 2 of that Act the Bombay Industrial Relations Act of 1946 as in force immediately . before the commencement of the 1965 Act in the Bombay area of the State of Maharashtra was extended to the rest of the State.

The C.P. and Berar Act was repealed. As a n:Sult, the Act now extends to the whole of the State.

Chapter I contains only .three sections : s. 2 deals with the extent, commencement. and application of the Act and s. 3 is the definition section.

Chapter II sets out tbe authorities . to , be , co, nstituted or appointed under. the ;\ct.

S. 9 provides for the constitution of Labour Courts and s.J!O of Industrial Courts.

Chapter Ill containing ss. 11 to 22 deals with registration of Unions and Chapter IV with approved .:Unions.

Chapter V deals with representatives of employers arid employees. and appearance in ptoceedings on their behalf.

Chapter VI deals with powers and duties of labour officer and Chapter VIII deals with Standing Orders.

Chapter VIII containing ss. 42 to 4 7 deals with "changes".

Chapter IX deals with Joint Committees, Chapter X with Conciliation Proceedings, Chapter XI with Arbitration and Chapter XII with Labour Courts, their territorial jurisdiction, their powers,· commencement of proceedings before the Labour.

Court etc. It is not .necessary to take note of . other Chapters excepting s. 123 in Chapter XIII which deals with the rulemaking power.

The relevant definitive clauses in s. 3 are :- , . . " ( 8) "change" means an alteration in an industrial matter;

(13) "employee" means any person employed to do any skilled or unskilled work for hire or reward in any 'industry, and includes- ( a) a person employed by a contractor to do al)y -work for him in the execution1 of a contract with an

employer within the meaning of sub-clause ( e) of clause (14);

(b) a person who has been dismissed, discharged or retrenched or whose services have been terminated from employment on account of any dispute relating to change in respect of which a notice is given or an application made under section 42 whether before or after bis dismissal. discharge, retrenchment or, as the case may be, termination from employment;

but does not include--

(i) a person employed primarily in a managerial administrative, supervisory or technical capacity drawing basic pay (excluding allowances) exceeding five hUll dred and fifty rupees per month;

(ii) any other person or class. of persons employed in the same capacity as those specified in clause (i) above irrespective of the amount of the pay drawn by such person which the State Government may, by notification in the Official Gazette, specify in this behalf.

( 17) "Industrial dispute" means any dispute or difference between an employer and employee or between employers and employees or between employees and employe.es and which is connected with any _industrial matter;

(18) "industrial matter" means any matter relating to employment, work, wages, hours of work, privileges, rights or duties of employers or employees. or the mode, terms and conditions of employment, and includes--

(a) all matters pertaining to the relationship between employers and employees, or to the dismissal or non-employment of any person;

(b) all .matters pertaining to the demarcation of functions of any employees or class of employees; . .

( c) all matters pertaining to any right or claim under or in respect of or concerning a registered agree ment or a submission, settlement or award made under this Act;

( d) all questions of what is fair and right in rela- H tion to any industrial matter having regard to the person immediately concerned and of the community as a whole;"

Under s. 31 (1) every employer must submit for approval ta the Commissioner of Labour in the prescribed manner standing Orders regulating the relations between him and his employees with regard to the industrial matters mentioned in Schedule I within six weeks from the date of the application of the Act to the industrr- Under sub-s. (5) of the section:

"Until standing orders in respect of an undertaking come into operation u.nder the provisions of sub-section ( 4), model standing orders, if any, notified in the Official Gazette .by the State Government in respect of the industry shall apply to such undertaking."

Schedule I to the Act contains among other matters items IO and 11 relating to termination of employment including notice to be given by the employer and employee and punishment including warning, censure, fine, suspension or dismissal for, misconduct, suspension pending enquiry into alleged misconduct and the acts or omissions .which constitute misconduct.

Normally, therefore, standing orders must deal with misconduct which can lead to dismissal or other punishment.

Under s. 41 the provisions of the Industrial Employment (Standing Orders) Act, 1946 are not to apply to any industry to w]jich the provisions of Chapter VII of the Act apply.

As 'industrial matter' as defined in s. 3(18} includes all matters pertaining to the dismissal or non-employment of any person, an industrial dispute within the meaning of s. 3(17) must

necssarily arise when there is any difference between an -employer and an employee about such dismissal.

The solution to the question before us turns on. the interpretation of the relevant provisions in Chapter Vlli headed "changes". - 'Change' as already noticed means any alteration iii an industrial matter.

Under s. 42(1) any employer.intending fo effect any change in respect of an industrial matter specified in Schedule II of which item 3 reads

. "Dismissal of any employee except as provided lat in the standing orders applicable under this Act'\

must,.give notice of such intention in the prescribed fonn to the representative of the employees.

He must also send a copy of such notice to the Chief Conciliator, the Conciliator for the industry co11cerned for the local area, the Registrar, the Laboiir Officer and such other person as may be prescribed. He has also to affix a copy of such notice at a conspicuous place of the premises where the employees affected by the change are e111ployed. Under sub-s.

(2) of s. 42 an employee desiring a change inrespect of an indus-

736 SUPREMf!, CQURT REPORTS [1972] 3 S.C.ll.

trial matter not specified in Schedule I or Schedule III has to give notice in th~ prescribed form to the employer with similar intimation to others. Under sub-s. ( 4) any employee desiring a change in resj>"t iTJter alia, of any industrial matter specified in Schedule m of which item reads : .

"EmplQyment including-

(i) reinstatement and , recruitnient" must ma)ce au application to the Labour Court. 1bis sub-section has a proviso which runs : .·

"Provided that no such application shall lie unless c the employee or a tepresentative union has in t, be prescribed manner approached the employer with a request for the change and no agreement has been arrived at in respect of the change within the prescribed period."

S. 44 envisages an agreement between the parties regarding "change" at)d registration of the memorandum thereof by the D Registrar. Under s. 44-A a memorandum of agreement arrived lit is to be forwarded by either party to the Registrar' by re.gistered post and an agreement which is registered under s: 44 is to come into operatioµ as laid down in s. 45.

The territQrial jurisdiction of Labour Courts extends to lcical E areas for which they are constitutr.d under s. 77 in Part XII. S. ~8 runs as follows:- ·

"78. ( 1) A Labour Court shall have power to- 1'1.. decide-

(a) displlctes regarding~ ( i) the propriety or legality of an. order passed by an employer ·acting or purporting to act under the standing orders;

(ii) the application and intertiretation of standing orders; ·

(iii) any change made by an employer or desired by an employee in respect of .an industrial matter specified in Schedule III [except item ( 5) thereof] and matters arising out of such change;

(b) industrial disputes-- ( i) referred to it under section 71 or 72; tii) in respect of which It is appointed as an arbitrator by a submission;

(c) whether a strike; lock-out, closure, stoppage or any change is illegal under this Act; B. try offences punishable under this Act where the , payment of compensation on conviction for an offence

is provided for, determine the compensation and order its payment;

B C. require any employer to-

(a) withdraw any change which is held by it to be illegal, O!\ withdraw temporarily any change the legality of which is a matter of issue in any proceeding pend

ng final decision, or c

(b) carry out any change J•rovided such .change is a matter in issue in any proceeding before it under this Act.

D. require an employer, where it finds that the order of dismissal, discharge, removal, retrenchment, ter-

D mination of service or suspension of an empl(l}'ee made by the employer,- ( i) was for fault or misconduct committed by the employee which came to the notice of the employer more than six months prior to the date of such order; or I

(ii) was in contravention of any of the provisions of any law, or of any standing order in force applicable to such employee, or

(iii) was otherwise improper or illegal,

(a) reinstate the employee forthwith or by a date F , specified by it in this behalf and y.-him wages for the period beginning on the date of such , order of dismissal, discharge, removal, retrenchment, termination of

bervice or suspension, as the case may be, and ending on the date on which the Labour Court orders his re- , instatement or on the date cif his reinstatement, which-

'G ever is later, or

(b) to pay to the .employee in addition to wages (being wages for the period commencing on the date of his dismissal, discharge, removal, retrenchment or termination1 of service and ending on the date on which the, Labour Court orders such payment), such sum not ff exceeding four thousand rupees by way of , compensa'. tion, regard being had to loss of employment and possibility of getting suitable employment therea~.

( 2) Every offence punishable under this Act shall be tried by the Labour Court within the local limits of whose jurisdiction it was committed.

Explanation-A dispute falllilg under clause (a) of paragraph A of sub-section ( 1) shall be deemed to have arisen if within the period prescribed under the proviso to sub-section ( 4) of section 42, no agreement is arrived at in respect of an order, matter or change referred to in the said proviso."

Clause D of s. 78(1) was introduced in the Act of Maharashtra Act 22 of 1965.

S. 31 of the Act of 1965 not only introduced Cl. D but also made changes in paragraphs A and C thereof. The c forerunner of Act 22 of 1965 i.e. Bill No. LXVI of 1964, the object of which was to make numerous changes in the Act shows in its Statement of Objects and Reasons that clause 31 of the Bill was meant to "enlarge the power8 of the Labour Court under s. 78".

According to th!s clause ·

"The Labour .Court is empowered (by paragraph D) tq direct temporary withdrawal of any change the legality of which is a matter of issue in i1ny proceedings before it, pending, its finaLdecision."

The LabOur Court was also thereby• fui:ther empowered "to

require an employer to reinstate an employee with full back wages or pay him wages and compensation not exceeding Rs. 2,500/- E .... if the employee was dismissed, discharged" etc.

The Statement of Objects and Reasons amply demonstrate&· that by introducing paragraph D in s. 78 (1) the legislature was on1y seeking to arm the Labour Court with further and more

effective powers to grant relief.

Under s. 79(1) proceediiigs before a Labour Court in respect of disputes fiilling under clause (a) of paragraph A of sub-s. ( 1) of s. 78 must be commenced on an application made by any of

the parties to the dispute etc. and under sub-s. (2) every application under sub-s, ( 1 ) has to be made in the prescribed form and manner.

Under s. 84 an appCal Iies to the Industrial Court G against the decision of. a LaliOur Court .in respect of a matter falling under clause (a) or cl. ( c) of paragraph A of sub-s~ ( 1 ) of s. 78 except in the case of lock-out eto. or a decision of such court under paragraph C of sui;, s. ( 1) of the said section.

Reading s. 78 as a whole, there is no doubt left in our minds that the legislature wanted the provision to be a comprehensive H one. It contains all the powers of the Labour Court in the matter f all disputes mentioned and gives it jurisdiction to punish

certain offences under the Act. It does not lay down the procedure for the attraction of such jurisdiction. So far as disputes are concerned, the procedure is as laid down in s. 79.

. It will be noteyd that no mention is made in s. 84 of paragraph D of s. 78 ( 1) but inasmuch as orders of dismissal, discharge, removal, retrenchment, termination of service or suspension of an employee. would c(ll!le under s. 78 ( 1) paragraph A, the legislature felt it unnecessary to make ai; iy mention of an order under , paragraph .D in s. 84.

Paragraph D, so far as we can see, is not referred to anywhere else in the Act.

The question therefore narrows down to this i.e. whether the legislature by inserting paragraph D in s. 78 ( 1) intended to chalk oulf'a wholly different course of :iction to that prescribed in Chapter VIII dealing with changes.

In our view, there is nothing in the Act which warrants such a conclusion.

The' scheme of Chapter VIII seems to be that in regard to any "change" in an industrial matter there must be compliance with the provisions of that Chapter.

In other words, effort must first be made by the employer intending to effect any change in respect _oL matters covered bys. 42(1) or an employee desiring a change in respect of any order passed by the employe~ under standing orders which would of necessity include an order of dismissal, to see whether it was possible to; come to any agreement and .an application to the labour court could only be resorted to after efforts had been made

 E to settle the dispute and no agreement had been arrived at.

'the scheme of s. 78 (1) seems to be that a Labour Court is to hav1rpower to decide all the disputes covered by paragraph A.

Pph B thereof gives the Labour Court the power to try

olfe\).s punishable under the Act and cognizance of such offences can <lilly be take.n under s. 82.

Paragraphs C and D set out what ll' relief .the Labour Courts are empowered to give including directions .a$ may be found necessary, Jn that behalf.

As already noted. the Statement pf Objects and ons of clause 31 of the J:lill .which later resulted in Act 22 of 1965, shows that the underlymg ldea was to enlarge the powers .of the Labour Court. The Legislaturec nowhere intended to make a complete departure from the G procedure to be adopted when powers under s. 78 ( 1) D were to be exercised.

Rule 55 of the Bombay Industrial Rclatians Rles, 1_9~7 . shows how an application is to be made and the penod w1thm which .it is to be made. ·

ltmust be held that a person who is dismissed would be an emp!Oyee within the meaning of s. 3 ( 13) of the Act and we can

7 40

SUPREME COURT REPORTS

(1'972] 3 S.C.R. , see no villid reason for differentiating the case of a dismissed employee from one who complains of some other hange. As the A scheme of the Act is that disputes should be settled as ell Ill! possible and primarily through conciliation and agreement, it does not stand to reason that an employee should be able to side-step all this by a direct reference to the Labour Court. A Labour Court is a creature of the statute and it can only exercise Sl!Ch jurisdiction as the statute confers on it : if !here are certain pre B

condition~ to the exereise of its jurisdiction, it must refuse to entertain any sµch application unless such pre-conditions are first complied with.

In the result we set aside the order of the High Court, allow the appeal and qul!Sh the orders of the Labour Court and the Industrial Court but do not make any order for CO!!SC<!Uential .C relief, in view of the solemn assurance give!} to this Co&t i?Y Mr.

Phadke, learned counsel for the appellant that his client does not desire to give effect to the order of termination of service passed on the third respondi:nt.

In the ircumstances .of the c::ase, we make no order as to costs. .D

K.B.N.

Appeal al/owed.

CllHOTOBRAI JETHABRAI PATEL &: CO

THE INDUSTRIAL COURT, MAHARASHTRA NAGPUR BENCH, NAGPUR & OTHERS

D. DUA

G. K. MITTER, JJ

ss. 78(1)

s. 42(4)

s. 78(1)

Bombay Industrial Relations Act, 1946

s. 42( 4)

s. 78(1)

s. 42

s. 78

s. 78(1)

s. 42

s. 3(13)

Bombay High Court, Nagpur Bench

M ohinder Narain

Mitter

Nagpur

s. 7

s. 42( 4)

Bombay High Court

s. 42

s. 78

Nathu

Bhandara

May 13, 1965

Nathu

s. 78

Bombay Industrial Relations Act, 1946

s. 42

Art. 227

Bombay High • Court

s. 78

Vidarbha

Bombay Industrial Relations Act, 1946

s. 2

Act the Bombay Industrial Relations Act

Bombay

Maharashtra

s. 2

s. 3

S. 9

ss. 11 to 22

ss. 42 to 4

s. 123

s. 3

section 42

s. 31

Schedule I

Schedule I to the Act

s. 41

Chapter VII of the Act

s. 42(1)

Schedule II

s. 42

Schedule I

Schedule III

S. 44

s. 44

s. 45

s. 77

Schedule III

section 71

section 42

s. 78(1)

S. 31

clause 31

s. 78

s. 78

s. 79(1)

s. 78

s. 84

s. 78

s. 78

s. 79

s. 84

s. 78

s. 78

s. 84

s. 78

s. 78

s. 82

clause 31

s. 78

s. 3

Phadke