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BHAWANIPORE BANKING CORPORA- TION, LTC. Vv. GOURI SHANKAR SHARMA [Suri Harman Kanra C.J., Sarvip Faz Aut, PaTANJALI SastRi, MeuR CHanp Managan, Muxnersea and 5. R. Das JJ.) Limitation Act (IX of 1908), Art. 182, cls. 2and 3—LHxe- aution of decree—Limitation—Starting point—“Where there has been a review”, meaning of—Application for re-opening decree under 5. 36, Bengal Money-lenders Act dismissed for default and appeal from order of dismissal—Whether give fresh starting for limitation for execution of decree—Interpretation of Art. 182, els. 2 and 8. A preliminary decree on a mortgage was passed ex parte on the 2ist August, 1940. The judgment debtor made an application under s. 36 of tho Bengal Money-lenders Act for re-opening the 1950 Maroh 14, 1950 Bhawanipore Banking Cor- poration, Lid, v. Gowrt Shankar Sharma — Faz Ali J. 26 SUPREME COURT REPORTS [1950} decree and the application was dismissed for default of appear- ance on the 30th December, 1941, and an application under 0. IX, r. 9, C.P.C., for restoration of this application was also dismissed on the Ist June, 1942. In the meanwhile on the 22nd December, 1941, a final decree was passed. The judgment-debtor preferred an appeal from the order dismissing his application under QO. IX, r. 9, C.P.C., and this appeal was dismissed for non-prosecution on the 3rd July, 1944. On the 9th April, 1945, the decree-holder applied for execution of the decree: Held that, even assuming that the word “review" has heen used in Art. 182 of the Indian Limitation Act, 1908, in a wide sense and that the application under s. 36 of the Bengal Money- lenders Act was an application for review, cl. 3 of Art. 182 was not applicable to the case inasmuch as the application under s. 36 having been dismissed for default the court had no oecasion to apply its mind to the question whether the decree could or should be re-opened and it could uot therefore be suid that “there has been a review’ of the decree within tha meaning of the said clause. Held also, that the words “‘where there bas beeu un appeal” in ol. 2 of Art. 182 must be read with the words “for the exe- cution of a decree or order’ in the Ist column of the Article and the fact that there was an appeal from the order dismissing the application under O. IX, r. 9, made in connection with the pro- ceeding under s. 360f Money-lenders Act, could rot therefore give a fresh starting point for liniitation under Art. 182, cl. 2. AppgaL from the High Court of Judicature at Cal- cutta: Civil Appeal No. LI of 1949. Manohar Lal, (H. K. Mitter with him), for the appellant.
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AppgaL from the High Court of Judicature at Cal- cutta: Civil Appeal No. LI of 1949. Manohar Lal, (H. K. Mitter with him), for the appellant. B. C. Mutter, for the respondent. 1950. March 14. The Judgment of the Court was delivered by. : Fazz Att J.—The only question to be decided in this appeal, which arises out of an execution proceed- ing, is whether the decree under execution is barred by limitation. The first court held that the decree was not barred, but the High Court has come to the opposite conclusion, and the decree-holder has, after obtaining a certificate under Section 110 of the Civil Procedure Code, appealed to this Court. The facts may be briefly stated as follows. On the 218 August, 1940, a preliminary mortgage decree was S.C.R. SUPREME COURT REPORTS 27 passed ex parte in a suit instituted by the appellant to enforce a mortgage. On the 19th September, 1940, the judgment-debtor made an application under Order IX, rule 13, of the Civil Procedure Code for setting aside the ex parte decree, but this application was rejetted on the 7th June, 1941. On the 110 July, 1941, the judgment-debtor filed an application under Section 36 of the Bengal Moneylenders Act, for reopening the preliminary decree, but this appli- cation was dismissed for default of appearance on the 20th December, 1941. Thereafter, a final mortgage decree was passed in favour of the appellant, on the 22nd December. The judgment-debtor then made an application under Order IX, rule 9, of the Civil Proce- dure Code for the restoration of the proceedings under Section 36 of the Moneylenders Act. The application was however dismissed on the Ist June, 1942, both on the ground that no sufficient cause for. the non- appearance of the applicant and his failure to take steps in the proceedings was shown and on the ground that no purpose would be served by reopening the preliminary decree after the final decree had ‘been passed. The judgment-debtor thereafter preferred an appeal to the High Court at Calcutta from the deci- sion dismissing his application under Order IX, rule9, but the appeal was dismissed for non-prosecution, on the 3rd July, 1944. On the 9th April, 1945, the appellant filed an application for executing the decree against the original judgment-debtor, though he had died previously, and this application was dismissed for default on the 110 May, 1945. On the 2nd June, 1945, the present application for execution was filed, and the question which we have to decide is whether this application is in time. It is quite clear that the application for execution having been made more than three years after the date of the final decree, it must be held to be time- barred, unless, as has been contended before us, the case falls under either clause 2 orclause 3 of article 182 - of the Indian Limitation Act. Under these clauses, time to make the application begins to run from-— i960 Bhawanipore Banking Cor- poration, Léd, v. Gouri Shankar Sharma,
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It is quite clear that the application for execution having been made more than three years after the date of the final decree, it must be held to be time- barred, unless, as has been contended before us, the case falls under either clause 2 orclause 3 of article 182 - of the Indian Limitation Act. Under these clauses, time to make the application begins to run from-— i960 Bhawanipore Banking Cor- poration, Léd, v. Gouri Shankar Sharma, Faal Alt J. 1950 Bhawanipore Banking Cor- poration Ltd, v. Gowri Shankar Sharma, Fust Ali J. 28 SUPREME COURT REPORTS [1980] “2, (Where there has been an appeal) the date of the final decree or order of the appellate Court, or the withdrawal of the appeal, or 3. (Where there has been a review of judgment) the date of the decision passed on the review....” It is contended that the case is covered by clause 3, and the ground urged in support of this contention is that the application made by the judgment-debtor for reopening the preliminary mortgage decree under Section 36 of the Moneylenders Act must be regarded as an application for review and time should be held to run from the date of the final order passed in the proceedings connected with that application. In our opinion, there is no substance in this contention. The important words in clause 3 of article 182 are: (1) ** where there has been a review” and (2) * the decision passed on the review’’. These words show that before a case can be brought under article 182, clause 3, it must be shown firstly that the court had undertaken to review the relevant decree or order and secondly, that there has been a decision on the review. In the present case, even if it be assumed that the word ‘review’ has been used in article 182 in a large sense and that the application for reopening the decree under Section 36 of the Bengal Moneylenders Act was an application for review, the appellant cannot succeed, because the court never undertook or purport- ed to review the decree in question. What actually happened was that the application under Section 36 for. reopening the preliminary decree (not the final decree which is the decree saught to be executed) was dismissed for default and the application under Order IX, cule 9, of the Civil Procedure Code for the restor- ation of the proceedings under Section 36 of the Moneylenders Act was also dismissed. Even if the fact that the judgment-debtor’s application under Section 36 was directed against the preliminary mort- gage decree is overlooked, that application having been dismissed for default, the court never had occa- sion to apply its mind to the question as to whether the decree could or should be reopened, and hence it cannot be said that * there has been a review” of the 8.C.R. SUPREME COURT REPORTS 29
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decree. The proceedings under Order IT, rule 9, of the Code of Civil Procedure are not material to the pre- sent discussion, because they did not involve a review of the decree under execution but a review, if it is at all possible to call it a review, (which, in our opinion, it is not), of the order dismissing the judgment- debtor’s application under Section 36 for default. It was also suggested by the learned counsel for the appellant that the case might be held to be covered by clause 2 of article 182 on the ground that, even though no appeal was preferred from the final mortgage decree, the words ‘“‘where there has been an appeal” are comprehensive enough toinclude in this case the appeal from the order dismissing the application under Order IX, rule 9, of the Civil Procedure Code, made in connec- tion with the proceedings under Section 36 of the Moneylenders Act. This argument also isa highly far-fetched one, because the expression ‘ where there has been an appeal” must be read with the words in column 1 of article 182, viz., “for the execution of a decree or order of any civil Court........ ”, and, however broadly we may construe it, it cannot be held to cover an appeal from an’ order which is passed in a collateral proceeding or which has no direct or immediate connection with the decree under execution. In our view, this appeal has no substance, and we accordingly dismiss it with costs. Appeal dismissed. Agent for the appellant: P. K. Chatterji. Agent for the respondent: R.R. Biswas. ' 1960 Bhawanipore Banking Cor. poration Lid. v. Gouri Shankar Sharma. Fazl Alt J.
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1950 Dee, 21, COMMISSIONER OF INCOME-TAX, WEST BENGAL v. CALCUTTA AGENCY LTD. (Suri Harivat Kania C.J., PATAN} ALI SASTRI and Das JJ.) Inlin Income-tax Aci (XT of 1922), ss. 10 (2) (xv), 66 —Refer- ence—Jurisdiction of High Court—Duty to decide case on facts stated by Tribunal—Accepting arguments of counsel as proved facts and basing decision on them, impropriety of —~Business expenditure— Payments to avoid disclosure of misfeasance of directors—Burden of preof. The jurisdiction of the High Court in the matter of income- tax references is an advisory jurisdiction and under the Incomne- tax Act the decision of the Appellate Tribunal on facts is final unless it can be successfully assailed on the ground that there was $.C.R. SUPREME COURT REPORTS 1009 no evidence for the conclusions on facts recorded by the Tribunal. 1950 Té is therefore the duty of the High Court to start by looking at —_— the facts found by the Tribunal and answez the questions of law Commissioner of on that footing. Itigs not proper to depart from this rule of law /"come-taz, asit will convert the High Court into a fact finding authority, West Bengal which it is not, under the advisory jurisdiction v. As tha statement of the case prepared by the Appellate Tri- Calcutta Agency bunal in accordance with the rules framed under the Income-tax Lid Act is prepared with the knowledge of the parties concerned and they have full opportunity to apply for any addition or deletion from that statement, if they bave approved of the statement made by the Tribunal, it is the agreed statement of facts by the parties on which the High Court has to pronounce its judgment, The High Court would be acting improperly if it takes the arguments of the counsel for the assessee as if they were facts and bases its conclusion on those arguments,
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Act is prepared with the knowledge of the parties concerned and they have full opportunity to apply for any addition or deletion from that statement, if they bave approved of the statement made by the Tribunal, it is the agreed statement of facts by the parties on which the High Court has to pronounce its judgment, The High Court would be acting improperly if it takes the arguments of the counsel for the assessee as if they were facts and bases its conclusion on those arguments, One of the directors of the assesgee company, acting in the capacity of managing agents of certain Mills, had drawn some hundis in the name of the Mills, and as the Mills repudiated lia- bility, suits were filed on the hundis against the Milis and the assessees. The assessees thereupon agreed to reimburse the Mills by permitting the latter to deduct a moiety of the commission payable to them under the agreement of managing agency, againat payments which the Mills may have to make under the decrees. In their assessment fo income-tax the assessees claimed that the amounts 60 deducted should be excluded from their assessable income as business expenditure under s. 10 (2) (xv) of the Income- tax Act. The Appellate Tribunal found that the assessees had agreed to pay off the decree amount from the remuneration due to them, that the decree was passed against them evidently for some misfeasance committed by their directors, that the books of both companies showed that the assessees were paid their remunera- tion in full, and that the expenditure was not therefore laid out for the purpose of carrying on the business, and also that, as the payment was made for the liquidation of a debt, it was not a revenue expenditure. In the High Court the assessees’ counsel argued, relying on the case of Mitchell v. B. W. Noble Lid.(’), that the payments were made by the assessees to avoid the publicity of an action against them and the consequent exposure and loss of reputation as a managing agency company, and 88 such the payments were deductible as business expenditure. The High Court accepted this argument and reversed the decision of the Tribunal. Held, that the High Court acted wrongly in accepting the arguments of the assessees’ counsel asif they were proved facts and basing its decision on them; and, as the facts necessary to support the claim for exemption under s. 10 (2) (xv) had not been established at any stage of the case, the asseasees were not entitled to the deduction claimed. (1! [1927] 1 K.B. 719, 129 1950 Commissioner of Income-tax, West Bengal v. Caleutia Agency Ltd, Kama 0. नं. 1010 SUPREME COURT REPORTS [1950] Judgment of the Calcutta High Court reversed. APPELLATE JURISDICTION: Civil Appeal No. 59 of 0. Appeal from a Judgment of the High Court of Judi- cature at Calcutta (Harries C.J. and Chatterjea J.) dated 9th Septeniber, 1949, in a reference under section 66 (2) of the Indian Income-tax Act, 1922, (Reference No. 8 of 1949).
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1010 SUPREME COURT REPORTS [1950] Judgment of the Calcutta High Court reversed. APPELLATE JURISDICTION: Civil Appeal No. 59 of 0. Appeal from a Judgment of the High Court of Judi- cature at Calcutta (Harries C.J. and Chatterjea J.) dated 9th Septeniber, 1949, in a reference under section 66 (2) of the Indian Income-tax Act, 1922, (Reference No. 8 of 1949). M.C. Setalvad, Attorney-General for India (G.N. joshi, with him) for the appellant, S. Mitra (B. Banerjee, with him) for the respond- ents. 1950. December 21. The Judgment of the Court was delivered by Kania C.J.—This is an appeal from the judgment of the High Court at Calcutta (Harries C.J. and Chatterjea J.) pronounced on a reference made to it by the Income.tax Tribunal under section 66 (2) of the Indian Income-tax Act. The relevant facts are these. The respondents are a private limited company which was brought into existence to float various companies including cotton mills. In November, 1932, the Basanti Cotton Mills Ltd. was incorporated and the respondents were appointed their managing agents. Their remuneration was fixed at a monthly allowance of Rs. 500.and a commission of 3 per cent. on all gross sales of goods manufactured by the Mills Company. The fixed monthly allowance was liable to be increased in the event of the capital of the company being increased. The details are immaterial. It appears that certain hundis were drawn by one of the directors of the respondent company, acting in the capacity of the managing agents of the Mill Company, in the name of the Mill Company and the same were negotiated to others. The Nath Bank Ltd. claimed payment of these hundis. The Mill Company repudiated its liability as it appeared from the books of the Mill Company that they had not the use of the sum of Rs. 1,80,000 claimed by the Nath Bank Ltd. under the hundis. The Nath Bank Ltd. instituted four suits S.C.R. SUPREME COURT REPORTS 1011 against the Mill Company, in two of which theres. 19% pondent company were party-defendants. The Mill o,amissioner of Company was advised to settle the suits and the res- — Income-taz. pondent company entered into an agreement with the West Bengal Mill Company, the material part of the terms of which ca! % runs as follows :— alone oat
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against the Mill Company, in two of which theres. 19% pondent company were party-defendants. The Mill o,amissioner of Company was advised to settle the suits and the res- — Income-taz. pondent company entered into an agreement with the West Bengal Mill Company, the material part of the terms of which ca! % runs as follows :— alone oat Lid. ‘‘Memorandum of Agreement made between the “ Calcutta Agency Limited of the one part and Basanti Kanu. J. Cotton Mills Ltd. of the other part. WHEREAS the Nath Bank Limited demanded from the Mills the payment of the sum of Rs. 1,80,000 and interest there- on AND WHEREAS the said Mills repudiated their liability in respect thereof as it appeared from the books of the said Mills that the said Mills did not have the use of the said sum of Rs. 1,80 000 or any part there- of AND WHEREAS the said Nath Bank Ltd. there- upon instituted four suits in High Court being suit Nos. 1683, 1720, 1735 and 1757 of 1939 for the said aggregate sum of Rs. 1,80,000 and the interest thereon AND WHEREAS the said Mills have been advised to settle the said suits amicably AND WHEREAS the Calcutta Agency Limited by its Directors, S.N. Mitter or S.C. Mitter, having been and being still the Manag- ing Agents of the said Mills have undertaken to reimburse the said Mills in respect of the decrees to be made in the said four suits in the manner hereinafter appearing NOW THESE PRESENTS WITNESS AND IT IS HEREBY AGREED AND DECLARED (i) That out of the commission of 3% payable by the said Mills to the said Agency under Regulation 131 of the Articles of Association of the Company, the Company shall have paramount lien on and deduct and set off a moiety thereof against any payment which the said Mills may make in respect of the decrees or any of them and/or costs of the said suits. (it) The said moiety shall be one halfof the commission so payable less such sum as the Directors of the Mills may from time to time allow to be deducted.”’ Under the said agreement, the respondent company paid to the Mill Company Rs. 22,500 made up of 1012 SUPREME COURT REPORTS [1950] 1950 Rs. 18,107 as principal and Rs. 4,393 as interest in the Commissioner 0 accounting year. The assessee company claimed this Income-tax, before the Income-tax Appellate Tribunal as a deduc- West Bengat tion permitted under section 10 (2) (xv) of the Indian v. Income-tax Act. The relevant part of that section Caleutta Agency runs as follows :— a “10. (1) “The tax shall be payable by an assessee Kania c.g. under the head ‘Profits and gains of business, pro- fession or vocation’ in respect of the profits or gains of any business, profession or vocation carried on by him. (2) Such profits or gains shall be computed after making the following allowances, namely :— Beene eee ean eee reser eFasensenetses
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Beene eee ean eee reser eFasensenetses (xv) any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or voca- tion.” In the statement of the case submitted by the Tribunal after reciting the fact of the incorporation of the company and the terms of the compromise mention- ed above, the arguments urged on behalf of the assessee company have been recapitulated. The first argument was that under the first proviso to section 7 of the Indian Income-tax Act, this payment was liable to be exempted. The Tribunal rejected that argument. On the reference, the High Court also rejected the same and it wasnot presented before us. The next argu- ment of the respondents was that in respect of Rs. 22,500 it was entitled toexemption under section 10(2) (xv) of the Income-tax Acton the ground that the payment was an expenditure which was not in the nature of a capital expenditure or personal expenses of the applicant company but was an expenditure laid out wholly and exclusively for the purpose of its busi- ness, They urged that ifthe applicant company did not agree to pay this amount, Basanti Cotton Mills Ltd. could have brought a suit against the company to realise this amount due on the hundis which would S.C.R. SUPREME COURT REPORTS 1013 have exposed the applicant company to the public and 1950 in order to save themselves from the scandal and main- — tain the managing agency they agreed to the deduction Commissioner of of certain amounts from the managing agency commis. ome lay sion due to it and thereby brought it within the “7° principles of the decision of Mitchell v. B. W. Noble catentta Agency Lid.) The Tribunal found as facts: (1) That the — zed applicant company agreed to pay off the decretal ला amount from the remuneration which they areentitled किन 0. व. to get from the Basanti Cotton Mills. (2) The decree was passed against the applicant company evidently for certain misfeasance committed by its directors and the applicant company agreed to pay it off from its remuneration. (3) The books of account of Basanti Cotton Mills Ltd. would show that they were paying the applicant company in full its remuneration and the books of the applicant company also show that it was entitled to its remuneration in full. (वी In the circumstances the Tribunal held that the expenditure was not laid out wholly and exclusively for the purpose of carrying on the business. (5) Besides, the Tribunal was of the opinion that in this case it was not a revenue expenditure at all. As the payment had to be made towards liquidation of the decretal amount the Tribunal held, in the circumstances of this case, that it was a capital payment. On behalfof the res- pondent it was argued inthe further alternative that the Privy Council decision in Raja Bijoy Singh Dudhuria’s case(*) would cover the present case. That contention was rejected by the Tribunal.
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This statement of the case prepared by the Income- tax Tribunal and submitted to the High Court for its opinion was perused by the parties and they had no suggestions to make in respect of the same. ‘The state- ment of the case was thus settled with the knowledge and approval of the parties. When the matter came before the High Court, Mr. Mitra, who argued the case _ for the present respondents, as shown by the judgment of the High Court, urged as follows:—‘‘ If the applicant company had not agreed to pay the amount mentioned {1) [1927] 1 K. B. 719, (23 6 T.T.C, 449, 1950 1014 SUPREME COURT REPORTS [1950] in the aforesaid agreement, then the Basanti Cotton Mills Ltd. would have sued the company for the reali- Commissioner of sation of the amounts due on the hundisand it seems Income-tax, West Bengal that there would have been no defence to the action. This would have subjected the applicant company to Caleutta Agency the danger of public exposure and in order to save Lid. oe Kania C.J. itself from the scandal and in order to maintain the managing agency, the applicant company agreed to deduct certain amounts from the managing agency commission and therefore such expenditure came with- in section 10(2) (xv) of the Act.’ The High Court thereafter noticed several cases including Mitchell’s case(') and towards the close of the judgment delivered by Chatterjea J. observed as follows:—‘‘In this case it is clear that the agreement was entered into with a view to avoid the publicity of an action against the mana- ging agents and consequent exposure and scandal and in order to maintain the managing agency so that the company could carry on its business as before. The payment in question did not bring in any new assets into existence nor in my opinion can it properly be said that it brought into existence an advantage for the enduring benefit of the company’s trade. The Appellate Tribunal observed that the decree was evidently passed against the appellant company forcertain misfeasance by its directors and the appellant company agreed to pay it off from its remuneration......The object of the agree. ment was to enable the company to remove a defect in carrying On the business of the company and to earn profits in its business. Therefore this case is covered by the judgment of the Court of Appeal in Mitchell’s case(?)...... ’’ Applying this line of reasoning the High Court differed from the conclusion of the Tribunal and allowed the deduction to the respondent company under section 10(2) (xv) of the Income-tax Act, as claimed by the respondents. The Commissioner of Income.tax, West Bengal, has come in appeal to us, Now it is clear that this being a claim for exemption of an amount, contended to be an expenditure falling under section 10(2)(xv), the burden of proving the (ए) [1927] 1 K.B, 719. S.C.R. SUPREME COURT REPORTS 1015 necessary facts in that connection was on the assessee, 1950
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Now it is clear that this being a claim for exemption of an amount, contended to be an expenditure falling under section 10(2)(xv), the burden of proving the (ए) [1927] 1 K.B, 719. S.C.R. SUPREME COURT REPORTS 1015 necessary facts in that connection was on the assessee, 1950 it being common ground that the commission was due Soeseaect and had become payable and was therefore the business “nor” a income of the assessee company liable to be taxed in jes Bengal the assessment year. The jurisdiction of the High Court v, in the matter of income-tax references is an advisory Calcutta agency jurisdiction and under the Act the decision of the Tid. Tribunal on facts is final, unless it can be successfully — assailed on the ground that there was no evidence for “°° " the conclusions on facts recorded by the Tribunal, It is therefore the duty of the High Court to start by looking at the facts found by the Tribunal and answer the questions of law on that footing. Any departure from this rule of law will convert the High Court into a fact-finding authority, which itis not under the advisory jurisdiction. The statement of the case under the rules framed under the Income-tax Act is prepared with the knowledge of the parties concerned and they have a full opportunity to apply for any addition or deletion from that statement of thecase. If they approved of that statement that is the agreed state. ment of facts by the parties on which the High Court has to pronounce its judgment. Inthe present case the parties perused the statement ofcase and as disclosed by the note made at the end of it had no sug- gestions to make in respect thereof. It is therefore clear that it was the duty of the High Court to start with that statement of the case as the final statement of facts. Surprisingly, we find that the High Court, in its judgment, has taken the argument of Mr. Mitra as if they were facts and have based their conclusion solely on that argument, Nowhere in the statement of the case prepared by the Tribunal and filed in the High Court, the Tribunal had come to the conclusion that the payment was made by the assessee company to avoid any danger of public exposure or to save itself from scandal or inorder to maintain the managing agency of the appellant company. The whole con- clusion of the High Court is based on this unwarranted assumption of facts which are taken only from the argument of counsel for the present respondents before 1950 Commissioner of Income-tix, West Bengal vy, Caleutta Agency Ltd. Kania C.J. 1016 | SUPREME COURT REPORTS [1950]
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that the payment was made by the assessee company to avoid any danger of public exposure or to save itself from scandal or inorder to maintain the managing agency of the appellant company. The whole con- clusion of the High Court is based on this unwarranted assumption of facts which are taken only from the argument of counsel for the present respondents before 1950 Commissioner of Income-tix, West Bengal vy, Caleutta Agency Ltd. Kania C.J. 1016 | SUPREME COURT REPORTS [1950] the High Court. The danger of failing to recognise that the jurisdiction of the High Court in these matters is only advisory and the conclusions of the Tribunal on facts are the conclusions on which the High Court is to exercise such advisory jurisdiction is illustrated by this case. It seems that unfortunately counsel for the respondents caught hold of Muztchell’s case(') and basing his argument on the circumstances under which a payment could be described as a business expenditure falling within the terms of section 10 (2) (xv), argued that the facts in the present case were the same. Instead of first ascertaining what were the facts found by the Tribunal in the present case, the process was reversed and the procedure adopted was to take Mzt- chell’s case(*) as the law and argue that the facts in the present case covered the situation. In our opinion this isan entirely wrong approach and should not have been permitted by the High Court. The High Court fell into a grave error in omitting first to ascer- tain what were the facts found in the case stated by the Tribunal. The High Court overlooked that in Afvichell’s case(') the whole discussion started with a quotation from the case stated by the Commissioners as the facts of the case. A scrutiny of the record in the present case shows that before the Income-tax Officer the assessees claimed only a deduction of the interest of Rs. 5,582 as a permissible deduction under section 10 (2) (iii) of the Income-tax Act. That claim was rejected by the Income-tax Officer. When the matter went to the Assistant Income-tax Commissioner it was argued that the Income-tax Officer was in error in not allowing the deduction of interest and was also wrong in not allowing the entire sumof Rs. 22,500 as a deduction on the ground that, that portion of the income (v7z., Rs. 22,500) should be treated as not earned or deemed to be earned by the assessees at all, having regard to the decision of the Privy Council in Raja Bijoy Singh Dudhuria's case.(?) The first paragraph of the order of the Appellate Assistant Commissioner contains the following (1) [1927] 1 K, B. 719. (2) 6 I,T.C. 449, S.C.R. SUPREME COURT REPORTS 1017
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(1) [1927] 1 K, B. 719. (2) 6 I,T.C. 449, S.C.R. SUPREME COURT REPORTS 1017 statement :—-‘‘ In disallowing this (interest) claim the 1950 Income-tax Officer was following the decision of my — predecessor in his order dated the 18th March 1942 in Commissioner of Appeal No. 1-C-11 of 1941-42. My predecessor obser- yee" Bongat ved: ‘“‘Nothing is in evidence to show that the managing ’. agency company had surplus money and such money Cateutta Agency ‘was invested or that there was any need to borrow. ae. Thus the need to borrow is not established. Thereis , 00.3 no doubt that money was borrowed but unless it can “7°” to proved that the borrowing is for the purpose of the business and the loan was used in the business, the interest cannot be allowed under section 10(2)(iii).”’ The second objection raised before the Appellate Assistant Commissioner was in these terms :——‘‘ That the Income-tax Officer should have allowed the said sum of Rs, 22,500 as allowable expenditure being alloca- tion of a sum out of the revenue receipt before it became income in the hands of the assessee.’’ The wording of the objection and the argument noticed in the order of the Appellate Assistant Commissioner show that the contention was that this sum should be treated as not having become the income of the assessee at all because it was deducted at the source by the Mill company. Reliance was placed for this contention on Raja Bijoy Singh Dudhuria’s case('). The contention was'rejected. At the third stage, when the assessee urged his conten- tions before the Income Tax Appellate Tribunal, he thought of urging as an argument that this was a per- missible deduction under section 10 (2) (xv) because of the principles laid down in Mitchell’s case(2). No evidence, it appears, was led before the Incomé Tax — Tribunal, norhas the Tribunal recorded any findings of fact on which the principles laid down in Mitchell’s case(*) could be applied. The Tribunal’s conclusions of facts were only as summarized in the earlier part of the judgment. It is therefore clear that the necessary facts required to be established before the principles laid down in Mitchell's case(?} could be applied, have not been found as facts in the present case at any stage of the proceedings and the High Court was in error (1) 6 I.T.C, 449. (3) (19271 1 K.B. 719, 130 थे 1018 SUPREME COURT REPORTS _ [1950] 1950 in applying the principles of Mzichell’s case(1) on the —— assumption of facts which were not proved. The High Commissioner *t Court was carried away, it seems, by the argument of neome-tax,
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not been found as facts in the present case at any stage of the proceedings and the High Court was in error (1) 6 I.T.C, 449. (3) (19271 1 K.B. 719, 130 थे 1018 SUPREME COURT REPORTS _ [1950] 1950 in applying the principles of Mzichell’s case(1) on the —— assumption of facts which were not proved. The High Commissioner *t Court was carried away, it seems, by the argument of neome-tax, West Bengal the counsel and through error accepted the argument s facts. Indeed, if it had noticed the contention Caleutta Agency urged before the Income-tax Officer it would have seen Li at once that the argument was in a measure conflicting — with that contention which was based on the foot- Kania. J. ing of Rs, 1,80,000 being a loan to the assessee on which it had to pay interest, which was sought to be deducted under section 10(2) (iii) of the Income-tax Act. In our opinion, therefore, this appeal should be allowed on the simple ground that the facts necessary to be established by the respondents to support their claim for exemption under section 10 (2) (xv) of the Indian Income-tax Act have not been established at any stage of the proceedings and therefore they are not entitled to the deduction claimed. The appeal is therefore allowed with costs here and before the High Court. Appeal allowed. Agent for the appellant: P.A, Mehta. Agent for the respondents: Ganpat Rat. (1) [1927] 1 K.B. 719.
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S.C.R. SUPREME COURT REPORTS 15 RAM KRISHNA RAMNATH AGARWAL OF KAMPTEE v. SECRETARY, MUNICIPAL COMMITTEE, KAMPTEE. UNION OF INDIA AND GOVERNMENT OF MADHYA PRADESH: INTERVENERS. [Suri Hanan Kania C.J., Saryip Faz Aut, PaTangaLI SastRi, व एप्प CHAND MaHAgANn, MuKHeERJEA, and S.R. Das JJ.] Government of India Act, 1985, ss. 100, 148, 292; Sch. VII List I, Entry 45; List II, Entry 49—Central Hacises and Salt Act (I of 1944), ss. 2,3—Central Provinces Municipalities Act (II of 1922), s. 66 (1) (e)—Import of tobacco within municipality for manu- facturing bidis—Tobacco liable to Central excise duty—Levy of octrot duty by municipality—Legality. Section 66 (1) (७) of the Central Provinces Municipalities Act, 1922, empowered municipalities within the Province to levy an octroi duty on goods brought within their limits- for sale, con- sumption or use within those limits. Section 3 ‘of the Central Excises and Salt Act, 1944, an Act of the Central Legislature,-pro- vided that there shall be levied and collected duties of excise on all excisable goods other than salé which were produced or manu- factured in British India, and included t6bacco in the list of excisable goods. The question being whether a municipality situated in the Central Provinces could levy octroi duty on. tobacco brought within its limits for the purpose of manufactur- ing didis, in view of the exclusive power of the Central Govern- ment to levy excise duty under Entry 45 of List I of the Seventh Schedule to the Government of India Act, 1935, and the provisions of s. 3 of the Central Excises and Salt Act: Held, that excise duty and octroi were taxes essentially diff- erent in their nature and the power of the Province to levy octroi was not inconsistent with the power of the Centre to levy excise duty on the same goods, and a municipality could therefore validly levy an octroi duty on such tobacco under s. 66(1)(e) of the Central Provinces Municipalities Act of 1922. Held further, that there was nothing in the Central Excises and Salt Act or its provisions contrary to the provisions of s. 66(1) (७) of the Central Provinces Municipalities Act or to the levy of octroi duty under the same and s. 143 of the Government of India Act, therefore, preserved the right of the municipality to levy octroi duty under the Act of 1922. Province of Madras v. Boddu Paidanna and Sons (1942] ¥.G.R. 90, Governor-General in Council v. Province of Madras [1942] F.C.R 129, In re the Central Provinces and Berar Act No. XIV of 1938, 1950 March 14 $.C.R. SUPREME COURT REPORTS 17
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Province of Madras v. Boddu Paidanna and Sons (1942] ¥.G.R. 90, Governor-General in Council v. Province of Madras [1942] F.C.R 129, In re the Central Provinces and Berar Act No. XIV of 1938, 1950 March 14 $.C.R. SUPREME COURT REPORTS 17 no right to do so as under Section 3 of the Central Excises and Salt Act, 1944, that excise duty was levied on tobacco by the Central Government and the levy of the octroi duty on the tobacco in question was covered by the excise duty and therefore not. permissi- ble. The Appellate Assistant Commissioner in making the reference to the Nagpur High Court expressed his opinion that the appellant’s contention that as the bidis were not sold within the municipal limits, duty was not leviable, was unsound. He however thought that because under Section 3 of the Excise Act, excise duty was levied by the Central Government the levy of the octroi duty was not in consonance with Sec- tion 100 of the Government of India Act, 1935, and was ultra vires the Provincial Government. The High Court rejected the appellant’s contention and dis- agreed with the view of the Appellate Commissioner. The High Court however granted a certificate under Section 205(1) of the Constitution Act and the appel- lant has come in appeal to this Court. The Central Provinces Municipalities Act was passed in 1922 and the relevant notifications fixing the rates of octroi duty were issuedin 1928. No question about the validity of the Act when passed, or of the notifications issued in pursuance thereof has been raised before us. The argument on behalf of the appellant is that as under the Central Excises and Salt Act, I of 1944, tobacco became excisable goods under Item 9 in Schedule I to that Act and continued to be so tillit got converted into bidis, the Central Government alone was entitled to levy excise duty on it till then. According to the definition of ‘manu- facture’ in the Excise Act that duty could be levied at any stage in the manufacture of bidis and therefore any tax imposed, while tobacco was being converted ‘into bidis, was excise duty. Legislation in connection with excise duty is within the exclusive province of the Central Legislature as shown by Entry 45 of List I in Schedule VII of the Constitution Act. The impost of octroi duty in pursuance of the Municipal Act, before tobacco was made into bidis, is it was argued in con- flict with the legislative powers of the Centre. In this 1950 Ram Krishna Ramnath Agarwal of Kamptee v. Secretary, Muni-+ cipal Conimittee, Kamptee Kania C.J. 18 SUPREME COURT REPORTS [1950]
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1950 Ram Krishna Ramnath Agarwal of Kamptee v. Secretary, Muni-+ cipal Conimittee, Kamptee Kania C.J. 18 SUPREME COURT REPORTS [1950] 1950 connection our attention was drawn to Administrator, RamKrishna Uvhore Municipality v. Daulat Ram Kapur('), i am arising Ramnat, Which it was held that the levy of octroi duty on salt Agarwal of Wwasnot within the powers of the Provincial legislature Kamptee It was argued therefore that under Section 100 of the bi Government of India Act, octroi duty levied on Secretary, Muni- tobacco under the legislative powers of the Provincial cipal Committee, पृ Kamptec, | Government was invalid. The only way to reconcile — the two Entries, namely, Entry 45 in List land Entry Kania C.J. 49 in List II of the Seventh Schedule, was to read the words “‘for consumption or use” in Entry 49 as mean- ing “for consumption or use except for manufacture of excisable articles”. So read, the levy of octroi duty on the facts of this case was invalid. In reply to the argument that Section 292 of the Government of India Act kept alive the old Provincial legislation, namely, the Central Provinces Municipalities Act, and the right to levy octroi duty was saved under Section 143 of the Constitution Act, it was urged on behalf of the appellant that the provisions of the Excise Act were contrary to the right to levy octroi duty and as that Act was passed in 1944 the right to levy octroi daty saved by Section 143 of the Constitution Act had lapsed. It was argued that although there was no express provision in the Excise Act to that effect, the definition of “excisable goods” and ‘‘manufacture” read with Eniry 9 in Schedule I and the charging Section 3 in the Act led to that conclusion. It is clear that both parts of this argument are thus based on the plea that the impost of any duty at any stage before bidis are manufactured is excise duty and therefore the levy of octroi duty is illegal Section 66 (1) (e) of the Central Provinces Munici- palities Act, 1922, runs as follows:— “an octroi on animals, or goods brought within the limits of the municipality for sale, consumption or use within those limits;” The words “excisable goods” and “manufacture are defined in Section 2 of the Central Excises and Salt Act, 1944, as follows:— (1) [1949] F.C,R. 81. 8.C.R. SUPREME COURT REPORTS 19 2. (d) “excisable goods” means goods specified in the First Schedule as being subject to a duty of excise and includes salt;” 2. (f) “manufacture” includes any process inciden- tal or ancillary to the completion of a manu- factured product; and (i) in relation to tobacco includes the prepar- ation of cigarettes, cigars, cherots, bidis, cigarette or pipe or hokkah tobacco, chewing tobacco or snuff; and (ii) eee : Section 3 of the Excise Act runs as follows:—
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2. (f) “manufacture” includes any process inciden- tal or ancillary to the completion of a manu- factured product; and (i) in relation to tobacco includes the prepar- ation of cigarettes, cigars, cherots, bidis, cigarette or pipe or hokkah tobacco, chewing tobacco or snuff; and (ii) eee : Section 3 of the Excise Act runs as follows:— “There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in British India, and a duty on salt manufactured in, orimported by land into any part of British India as, and at the rates, set forth in the First Schedule............ ” Entry 9 to the First Schedule of the Excise Act is in these terms:— “9. TOBACCO, CORED— ‘Tobacco’ means any form of tobacco, whether cured or uncured, and whether manufactured or not, and includes the leaf, stalks and stem of the tobacco plant but does not include any part of a tobacco plant while still attached to the earth;” (Then follows a list of various articles into which tobacco can be converted, like bidis, cigarettes, snuff, etc. with different rates of duty mentioned against each article.) Sections 143 and 292 of the Government of India Act, 1935, run as follows:— 143. (1) Nothing in the foregoing provisions of this Chapter affects any duties or taxes levied in any Federated State otherwise than by virtue of an Act of the Federal Legislature applying in the State. (2) Any taxes, duties, cesses or fees which, immedi- ately before the commencement of Part ITI of this Act 1950 Ram Krishna Ramnath Agarwal of Kambptee v. Secretary, Muni- cipal Committec, Kamptee, — Kania C.J. 1950 Ram Krishna Ramnath Agarwal of _Kamptee VW Secretary, Muni- cipal Commitice, Kamptee. Kania C.J. 20 SUPREME COURT REPORTS [1950] were being lawfully levied by any Provincial Govern- ment, municipality or-other local authority or body for the purposes of the Province, municipality, district or other local area under a law in force on-the first day of January, nineteen hundred and thirty-five, may, notwithstanding that those taxes, duties, cesses or fees are mentioned in the Federal Legislative List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by the Federal Legislature’’. “292. Notwithstanding the repeal by this Act of the Government of India Act, but subject to the other provisions of this Act, all the law in force in British India immediately before the commencement of Part IIT of this Act shall continue in force in British India until altered or repealed or amended by a competent legislature or other competent authority”’.
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“292. Notwithstanding the repeal by this Act of the Government of India Act, but subject to the other provisions of this Act, all the law in force in British India immediately before the commencement of Part IIT of this Act shall continue in force in British India until altered or repealed or amended by a competent legislature or other competent authority”’. Section 143 can be considered in two ways. If the Government of India Act did not bring the particular impost of tax by the Provincial Government within the legislative powers of the Centre, by reason of the inclusion of such tax in List I of the Seventh Schedule, the pre-existing right of the Provincial Government to levy such tax remained unaffected. If 80, Section 143 of the Government of India Act did not affect such legislation and the same continued to be valid and operative under Section 292 of the Constitution Act. If however the levy of such tax by the Provincial Government was a subject which was within the exclusive legislative power of the Centre by reason of such tax being included in List I of the Seventh Schedule, the levy of such tax under the Provincial legislation continued to be valid until the Central Legislature passed an Act the provisions whereof were contrary to the provisions of the Provincial legis- lature or to the levy of a tax under the Provincial Act. Examining next the contentions of the appellant it seems clear that octroi duty as levied by the respond- ent comes within the exact wording of Entry 49 of List IL of the Seventh Schedule to the Constitution Act. Prima facie, therefore, there is no reason to SOR. SUPREME COURT REPORTS 21
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consider the levy of the octroi duty under the Provin- 1950 cial legislation invalid. Such levy remained unaffect- 2c scana ed by reason of Section 292 of the Constitution Act. ~ Rimmath The argument of the appellant is that the levy of the garwat of octroiduty being at astage after the excisable article, - Kamptce viz., tobacco, came into existence and became liable to v. _! excise duty under the Excise Act, the levy of octroi हक कक की | duty before bidis were made from tobacco, is invalid. Kamptee. ‘ In support of this argument the definition of ‘excisable = — goods’, ‘manufacture’ and the Entry 9in the Schedule Kaniac.J. to that Act were relied upon. The error underlying the argument of the appellant is the assumption that any impost of tax from the time tobacco came into existence till the same was converted into bidis is necessarily excise duty. The Federal Court had.to consider the distinction between the duty of excise and a tax on sale in The Province of Madras ४. Boddu Paidanna and Sons('). It is there observed as follows:—‘‘Plainly, a tax levied on the first sale must, in the nature of things, be a tax on the sale by the manufacturer or producer; but it is levied upon him qua seller and not gua manufacturer or producer. It may well be that a manufacturer or producer is sometimes doubly hit........ If the tax-payer who pays a sales tax 18 8180 a manufacturer or producer of commodities subject to a central duty of excise, there may no doubt be overlapping in one sense, but there is no overlapping in law. The two taxes which he is called on to pay are economically two separate and distinct imposts. There is, in theory, nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be -sold, consumed, destroyed, or given away....... It is the fact of manufacture which attracts the duty even though it may be collected latter. - In the case of a sales tax, the liability to tax arises on the occasion of a sale and a sale has no necessary con- nection with manufacture or production”. The Court further observed that in the Constitution Act the whole (1) [1942] F.C.R. 90. 1950 Ram Krishna Ramnath Agarwai of Kamptee Ve. Secretary, Muni- cipal Commitice, Kamptee, Kania C.J. 22 SUPREME COURT REPORTS [1950]
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(1) [1942] F.C.R. 90. 1950 Ram Krishna Ramnath Agarwai of Kamptee Ve. Secretary, Muni- cipal Commitice, Kamptee, Kania C.J. 22 SUPREME COURT REPORTS [1950] of the taxing power in this particular sphere (power to impose duties of excise) is expressly apportioned between the Centre and the Provinces, tothe one being assigned the power to impose duties of excise, to the other taxes on the sale of goods. It is natura] enough, when considering the ambit of an express power in relation to an unspecified residuary power, to give a broad interpretation to the former at the expense of the latter. The case however is different where as in the Constitution Act there are two complementary powers, each expressed in precise and definite terms. There can be no reason in such a casé for giving a broader interpretation to one power rather than to the other; and there is certainly no reason for extending the meaning of the expression ‘‘duties of excise’ at the expense of the Provincial power to levy taxes on the sale of goods. In The Governor-General in Council v. The Province of Madras('), the Judicial Committee approved of the distinction drawn in this case between the excise duty and atax onsale. There the question arose in res- pect of tax on the sale of excisable goods. Their Lordships observed as follows:—‘An exhaustive dis- cussion of this subject (namely, the meaning of the term ‘duty of excise’) from which their Lordships have obtained valuable assistance is to be found in the judgment of the Federal Court in Re The Central Provinces and Berar Act No. XIV of 1938(*). Consist- ently with this decision their Lordships are of opinion that a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods not on sales or the proceeds of sale of goods. Here, again,» their Lordships find themselves in complete accord with the reasoning and conclusions of the Feder4l Court in Boddu Paidanna case(°). The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may, as is there pointed out, in one sense overlap. But in law there is no overlapping. The taxes are separate and (1) [1942] F.C.B. 129. (8) [1942] F.C.R. 90. (2) [1989] F.C.R. 80. 8.C.R. SUPREME COURT REPORTS 23
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(1) [1942] F.C.B. 129. (8) [1942] F.C.R. 90. (2) [1989] F.C.R. 80. 8.C.R. SUPREME COURT REPORTS 23 distinctimposts. Ifinfact they overlap, that may be because the taxing authority, imposing a duty of ex- cise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale. But that method of collecting the tax is an ac- cident of administration; it is not of the essence of the duty of excise, which is attracted by the manufacture itself. That this is so is clearly exemplified in those excepted cases in which the Provincial, not the Federal, legislature has power to impose a duty of excise. In such cases there appears to be no reason why the Provincial legislature should not impose a duty of excise in respect of the commodity manufac- tured and then a tax on first or other sales of the game commodity. Whether or not such a course is followed appears to be merely a matter of administra- tive convenience. So, by parity of reasoning, may the Federal Legislature impose a duty of excise on the manufacture of excisable goods and the Provincial legislature impose a tax on the sale of the same goods when manufactured.” This discussion clearly shows that the relevant question is what is the nature of the tax. Excise duty is a tax on manufactured goods. Octroi duty is a tax levied on the entry of goods within a particular area. Under the Excise Act, tobacco becomes excisable goods within the meaning of Item 9 in the Schedule. The subsequent use of such manufactured goods in making different articles only affects the rate of tax. There- fore, tobacco becomes subject to excise duty when it reaches the stage of manufacture mentioned in Item 9 of the Schedule to the Excise Act. Even before it is converted into bidis or any other article mentioned in the entry it has become excisable goods and liable to pay excise'duty. The levy of such duty is therefore not in conflict with the levy of an impost on the entry of the goods within a certain area.. It was argued that under the rules framed by the Go- vernment under the Central Excises and Salt Act, 1944, Government retained control over the movement of the 1950 Ram Krishna Ramnath Agarwal of Kamptee v. Secretary, Muns- ctpal Committee. Kamptee. —_— Kania C.J. 1950 Ram Krishsa Rammnath Agarwal of Kamptee v. Secretary, Muni- cipal Conunittee, Kamptee Kania C.J. 24 SUPREME COURT REPORTS [1950]
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1950 Ram Krishna Ramnath Agarwal of Kamptee v. Secretary, Muns- ctpal Committee. Kamptee. —_— Kania C.J. 1950 Ram Krishsa Rammnath Agarwal of Kamptee v. Secretary, Muni- cipal Conunittee, Kamptee Kania C.J. 24 SUPREME COURT REPORTS [1950] goods from the beginning till the end. This.argument is not of assistance in determining the nature of the octroi tax. AsGovernment has to collect excise duty and the rate of duty varies in respect of different shapes in which the excisable goodsare ultimately con- verted, there is nothing unnatural in the Government keeping a control and note of the articles till the manufactured article becomes a commodity, and is mixed up with the commodities used by the people at large. The argument that Entry 49 in List II being in conflict with Entry 45 in List I of Schedule Seven to the Constitution Act, Entry 49 should beread as “for consumption or use, except for manufacture of goods”, in our opinion, is unsound. In thefirst place, the ap- proach to the question itself is wrong. When a parti- cular legislation falls within the exact words of an Entry in the Provincial List, under section 100 it. is valid and no question of reconciliation arises. A similar argument advanced in regard to a supposed conflict between Entry 19 of List land Entry 31 of List II was rejected by us in Case No. 27 of 1949: Miss Kishori Shetty v. The King('). In the present case, if the question of the validity of the Provincial legisla- tion arises, on the interpretation of Entry 49 in List IT, it appears that the answer must be in favour of the validity of the legislation. The decision in Adminis- trator, Lahore Municipality v. Daulat Ram Kapur(*) does not help the appellant because in that case Entry 47 in List I is only “salt”. A comparison with Entry 45 in List I shows distinctly that Entry 45 is limited to excise duty and is not wide enough to cover tobacco or other goods generally for all purposes of legislation. The obsérvations in that case therefore are not helpful to the appellant. On the second part of the contention the appellant can succeed only if he establishes that the provisions of the Excise Act are contrary to the levy and recovery of duty under the Provincial Act of 1922. ‘Thereisno express provision in the Excise Act contrary to the provisions of the Municipal Act. Unless, therefore, it is necessarily implied under the Excise Act, the levy of (1) [1949] F.C.R. 650, (2) 1942] F.C.R, 31. S.C.R. SUPREME COURT REPORTS 26
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On the second part of the contention the appellant can succeed only if he establishes that the provisions of the Excise Act are contrary to the levy and recovery of duty under the Provincial Act of 1922. ‘Thereisno express provision in the Excise Act contrary to the provisions of the Municipal Act. Unless, therefore, it is necessarily implied under the Excise Act, the levy of (1) [1949] F.C.R. 650, (2) 1942] F.C.R, 31. S.C.R. SUPREME COURT REPORTS 26 the octroi duty under the Municipal Act continues to be valid. On this point again the appellant’s argu- ment is that the levy of a duty at any stage of the manufacture of bidis out of tobacco would be the levy of the excise duty and therefore those provisions were contrary to the provisions permitting the levy of the octroi duty. We have already discussed and rejected in the first part of the judgment this contention. It is wrong to think that two independent imposts arising from two different sets of circumstances were not per- mitted in law. In our opinion, therefore, there is nothing in the Excise Act to make its provisions contrary to the provisions of Section 66 (1) (e) of the Central Pro- vinces Municipalities Act or to the levy of octroi duty under the same. The appeal therefore fails and is dis- missed with costs. Appeal dismissed. Agent for the appellants: Rajinder Narain. Agent for the respondent: है, P. Varma. Agent for the Union of India: P. A. Mehta. 1950 Ram Krishna Ramnath Agarwal of Kamptee v. Secretary, Muni- cipal ConentHery Kampftee Kania C.J.
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1950 March 14. 30 SUPREME COURT REPORTS ABDULLA AHMED v. ANIMENDRA KISSEN MITTER. (Suri Harman Kania C. J., Saryrp Fazn Aut, PaTANJALI SASTRI, MEHR CHAND MAHAJAN and 5. R. Das JJ.] Contruct-—Agency—Estate broker—Authority to ‘negotiate a sale’ and ‘ secure purchaser '—Whether empowers broker to conclude contract——Construction of contracty-Broker finding out purchaser ready and willing to buy for price fixed by principal—Principal concluding contract with same purchaser for lower price—Broker's riaht to conumission—Powers of estate agents. The appellant, uu estate broker, was employed by the respondent by a letter dated 5th May, 1943, to negotiate a sale of a certain property on the terms mentioned in a commission note which ran as follows: “I......do hereby authorise you to negotiate the sale of my property 27, Amratolla Street, free from all encumbrances at a price not less than Rs. 1,00,000. I shall make out a good title to the property. If you succeed in secur- ing a buyer for Rs. 1,00,000, I shall pay you Rs. 1,000 as your remuneration. If the price exceeds Rs. 1,05,000 and does not exceed Rs. 1,10,000, I shall pay you the whole of the excess over Rs. 1,05,000 in addition to your remuneration of Rs. 1,000 as stated above. In case you can secure a buyer at a price exceed- ing Rs. 1,10,000 I shall pay you twenty-five: per cent. of the excess amount over Rs. 1,10,000 in addition to Rs. 6,000 as stated above. This authority will remain in foree for one month from date.” In pursuance of this contract the appellant found two persons ready and willing to purchase the property for Rs. 1,10,000 on the 2nd June and by letters exchanged with them he purported to conclude the contract for the sale of the property, and on the 38rd June communicated the same to the respondent. The respondent, however, cancelled the authority of the appellant on the 9th June and on the same date entered into an agreement with a nominee of the said persons for a sale of the property for Rs. 1,05,000 and eventually executed 8 conveyance in their favour for Rs. 1,05,000. The appel- lant instituted a suit against the respondent for Rs. 6,000. Held, per Kania C.J., छोड़ा, Aut, PATANJALI SastRi and Das JJ.—(i) that a house or estate agent is in a different position from a broker at the Stock Exchange owing to the peculiarities of the property with which be has to deal, and an owner employing an estate agent should not, in the absence of clear words to that effect, be taken to have authorised him to conclude a contract of sale; but the lack of such authority is not inconsistent with an understanding that the agent isnot to be entitled to his commis- sion unless the owner and the purchaser introduced by the agent 27
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S8.C.R. SUPREME COURT REPORTS 31 carried the transaction to completion; (ii) that even H the commission note in the present case were to be construed as making payment of commission conditional on the completion of the transaction, the appellant having negotiated the sale and secured buyers’ who made as firm offer to buy for Rs. 1,10,000 acquired the right to the payment of commission on the basis of that price subject only to the condition thatthe buyers should complete the transaction of purchase and sale; and as this condition was fulfilled when the buyers eventually purchased the property in question, the appellant's right to commission on that basis became absolute, and could not be affected by the circumstance that the respondent for some reason of his own sold the property at a lower price. MAHAJAN J.—Under the terms of the commission note in the present case the appellant had authority to enter into a binding contract on behalf of the defendant, and, as he had entered into such a contract he was entitled to the commission of Rs. 6,000 according to the terms of the commission note. Even conceding that he had no such authority, under the terms of the commission note the agent was entitled to his remuneration as soon as he in- troduced a buyer ready and willing to purchase for the price fixed by the owner, whether the owner completed the transaction or not. Luxor (Eastbourne) Ltd. v. Cooper ((1941}] A.C. 108) distin- guished. Chadburn v. Moore (67 L.'T. 257), Rosenbaum v. Belson ({1900] 2 Ch. 267), Durga Charan Mitra v. Rajendra Narain Sinha (36 C.L.J. 467), Wragg v. Lovett ([1948] 2 All E.R. 969) referred to AppEAL from the High Court of Judicature at Cal- cutta: Civil Appeal No. XLIV of 1949. This was an appeal by special leave from a judgment and decree of the High Court of Judicature at Calcutta (Harries C.J. and Mukherjea J.) dated 5th January 1948 which varied a judgment passed by a single Judge sitting on the Original Side of the same High Court (Gentle J.) dated 1160 June, 1945. The facts of the case and the arguments of the Counsel appear fully in the judgment M. C. Setalvad (A. K. Sen with him), for the appellant. B. Sen, for the respondent. 1950. March 14. The judgment of Kania C. J., and Fazl Ali, Patanjali Sastri and Das JJ., was delivered by Patanjali Sastri J.: Mahajan J. delivered a separate judgment 5 1960 Abdulla Ahmed Vv. Animendra Kissen Mitter. 1960 Abdulla Ahmed ve Animendra Hisser. Mitter., Patanjati Sastri J. 32 SUPREME COURT REPORTS [1950]
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B. Sen, for the respondent. 1950. March 14. The judgment of Kania C. J., and Fazl Ali, Patanjali Sastri and Das JJ., was delivered by Patanjali Sastri J.: Mahajan J. delivered a separate judgment 5 1960 Abdulla Ahmed Vv. Animendra Kissen Mitter. 1960 Abdulla Ahmed ve Animendra Hisser. Mitter., Patanjati Sastri J. 32 SUPREME COURT REPORTS [1950] PaTaNJALI SastRi J. This is an appeal by special leave from a judgment and decree of the High Court of Judicature at Fort William in West Bengal dated 5th January, 1948, which varied a judgment and decree passed by a single Judge on 11th June, 1945, on the Original Side of the same Court. The appellant who is carrying on business as an es- tate broker in Calcutta was employed by the respond- ent on the terms mentioned in a commission letter dated the 5th May, 1943, to “negotiate the sale” of premises No. 27, Amratolla Street, Calcutta, belonging to him. In pursuance of this contract the appellant found two persons who were ready and willing to pur- chase the property for Rs. 1,10,000, and by letters exchanged with them on 2nd June, 1943, he purported to conclude a contract for the sale of the property and communicated the same to the respondent by a letter of even date. The respondent, however, entered into an agreement on 9th June, 1943, with a nominee of the said persons for the sale of the property for Rs. 1,05,000 and eventually executed a conveyance in their favour on 8th December, 1943. Thereupon the appellant brought the suit alleging that the contract concluded by him with the purcha- sers for Rs. 1,10,000 on the 2nd June, 1943, was bind- ing on the respondent and claimed that he was entitled to the payment of Rs. 6,000 as remuneration in accordance with the terms of his employment as he had done all that he was required to do on behalf of the respondent. In the alternative he claimed the same sum as damages for breach of contract. In de- fence to the suit the respondent pleaded, inter alia, that the appellant had no authority to conclude a binding contract for sale with any one, that the pur- chasers refused to complete the transaction alleging that they had been induced by the fraudulent mis- representation of the appellant to agree to a price of Rs. 1,10,000, that the subsequent sale was effected independently of the appellant, and that the appel- Jant was not therefore entitled to any remuneration or damages. | + कण « Te 8.C.R. SUPREME COURT REPORTS 33
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| + कण « Te 8.C.R. SUPREME COURT REPORTS 33 Gentle J. who tried the suit found that the terms of the appellant’s employment did not authorise him to conclude a contract of sale and that the letters of 2nd June, 1943, did not effect a contract of sale binding on the respondent. The learned Judge, however, rejected the respondent’s case that the purchasers refused to purchase on the ground of any fraudulent misrepre- sentation by the appellant and that the negotiations were later resumed afresh directly between the respond- ent and the purchasers, and came to the conclusion that the agreement to sell of the 9th June, 1943, and the subsequent conveyance of 8th December, 1943, were due solely to the efforts of the appellant in bring- ing the parties together as potential buyers and seller. The learned Judge refused to accept the suggestion that the sale was in fact effected for Rs. 1,10,000 as not being supported by any evidence but found that the reduction of the price by Ks. 5,000 from Rs. 1,10,000 for which the purchasers were ready and willing to buy the property, was made only for the purpose of depriving the appellant of his legitimate re- muneration of Rs. 6,000. He accordingly held that the appellant, who had performed his part of the con- tract by finding two persons who were ready, able and willing to buy at Rs. 1,10,000 wasentitled to the com- mission claimed. The Division Bench (Harries C.J. and Mukherjea J.) which heard the appeal of the respondent, agreed with the trial Judge that the appellant’s authority did not extend to the concluding of a binding contract for sale of the property, but differed from his view that all that the appellant was required to do was tointroduce a purchaser who was ready and willing to buy for Rs. 1,10,000 and that he was entitled to his commis- sion whether or not the property was sold at that price or at all. They held, following certain observations of Lord Russell of Killowen and Lord Romer in the case next mentioned, that the appellant, having under- taken to “‘negotiate the sale” and to “secure a buyer”, could not be said to have either secured a buyer or negotiated the sale “unless the sale actually took place or at least a contract had been entered into”. As, 1950 Abdulla Ahmed: v. Animendra Kissen Mitter, Patanjali Sastri J. 1950 Abdulia Ahmed Ve Animendra Kissen Mitter. Patanjalé Sastri J. 34 SUPREME COURT REPORTS [1950]
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1950 Abdulla Ahmed: v. Animendra Kissen Mitter, Patanjali Sastri J. 1950 Abdulia Ahmed Ve Animendra Kissen Mitter. Patanjalé Sastri J. 34 SUPREME COURT REPORTS [1950] however, 8 sale did take place between the persons in- troduced by the plaintiff and the defendant, and as that sale, in the viewialso of the learned Judges, was the ‘direct result of the plaintiff’s negotiations’, they held that the appellant was entitled to commission but only on the price mentioned in the sale deed, namely, Rs. 1,05,000 which, they found was the price actually received by the respondent. As.to why the respond- ent accepted a reduced price, Harries C.J., who delivered the judgment of the Court, observed: “Ali that is known is that persons who undoubtedly made a firm offer of Rs. 1,10,000 for this property even- tually bought it for Rs. 5,000 less. I strongly suspect that the price was reduced at the defendant’s instance but I cannot find it as a fact’. In support of their view that the appellant was not entitled to any eom- mission above that payableon a purchase price of Rs. 1,05,000 the learned Judges relied on the decision of the House of Lordsin Luxor (Eastbourne) Lid. v. Cooper ('), where it was held that, in a contract to pay commission upon the completion of the transaction which the agent was asked to bring about, there was no room for implying a term that the principal shall not without just cause prevent the agent from earning his commission, and that it was open to the principal to break off negotiations and refuse to sell even after the agent had produced a customer who was ready and willing to purchase on the principal’s terms. Applying what they conceived to be the principle of that deci- sion, the Appellate Bench varied the decree of the trial Judge by reducing the amount payable to the appellant to a sum of Rs. 1,000. The commission letter runs as follows : “T, Animendra Kissen Mitter of No. 20-B, Nilmoni Mitter Street, Calcutta, do hereby authorise you to negotiate the sale of my property, 27, Amratolla Street, free from all encumbrances at a price not less than Rs. 1,00,000. Ishall make out a good title to the property. If you succeed in-securing a buyer for Rs. 1,00,000 I shall pay you Rs. 1,000 as your remuner- - ation. Ifthe price exceeds Rs. 1,05,000 and does not (1) [19411 A.C, 108, | é 8.C.R. SUPREME COURT REPORTS 35
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Rs. 1,00,000 I shall pay you Rs. 1,000 as your remuner- - ation. Ifthe price exceeds Rs. 1,05,000 and does not (1) [19411 A.C, 108, | é 8.C.R. SUPREME COURT REPORTS 35 exceed Rs. 1,10,000 I shall pay you the whole of the excess over Rs. 1,05,000 in addition to your remuner- ation of Rs. 1,000 as stated above. In case you can secure a buyer at a price exceeding Rs. 1,10,000 I shall pay you twenty-five per cent. of the excess amount over Rs. 1,10,000 in addition to Rs. 6,000 as stated above. This authority will remain in force for one month from date”. In the absence of clear words expressing the inten- tion of the parties it is possible to construe these terms in three different ways corresponding to the three patterns into which commission contracts with real estate brokers may broadly be said to fall. In the first place, the letter may be read as authorising the appel- lant not only to find a purchaser ready and willing to purchase the property at the price required but also to conclude a binding contract with him for the purchase and sale of the property on behalf of the respondent. Secondly, the contract may be construed as promising to reward the appellant for merely introducing a poten- tial buyer who is ready, able and willing to buy at or above the price named, whether or not the deal goes through. And lastly, the commission note may be understood as requiring the appellant to find such a purchaser without authorising him to conclude a bind- ing contract of sale but making commission contingent upon the consummation of the transaction. As stated already, the first of these interpretations was rejected by the learned trial Judge as well as by the Appellate Bench, but it was pressed upon us by Mr. Setalvad on behalf of the appellant. We are unable to accept that view. ‘The contract specifies only the price required by the respondent but does not furnish the broker with other terms such as those relating to the payment of the price, the investigation and approval of title, the execution of the conveyance, the parties who are to join in such conveyance, the costs incidenta! thereto and so on. In fact, the agreement of sale dated the 9th June, 1943, entered into by the respondent with the purchasers contains detailed stipulations on all these and other matters. Mr. Setalvad laid stress on the statement in the commission note that the sale was to 1950 Abdulla Ahmed v. Animendra Kissen Mitter. Patanjali Sastri J+ 1950 Abdilia Ahined v. Aninendra Kissen Mitter, Patanjali Sastri J. 36 SUPREME COURT REPORTS [1950] be free from encumbrances and that a “good title” would be made out, but this is no more than a general indication of the nature of the bargain proposed and is perfectly consistent with an understanding that further details will be subject to negotiation between the res- pondent and the purchaser when found.
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36 SUPREME COURT REPORTS [1950] be free from encumbrances and that a “good title” would be made out, but this is no more than a general indication of the nature of the bargain proposed and is perfectly consistent with an understanding that further details will be subject to negotiation between the res- pondent and the purchaser when found. As pointed out by Kekewich J. in Chudburn v. Moore(') a house or estate agent is iu a different position from a broker at the stock exchange owing to the peculiarities of the property with which he is to deal which does not pass by a short instrument as stocks and shares do but has to be transferred after investi- gation of title as to which various special stipulations, which might be of particular concern to the owner, may have to be inserted in a concluded contract relating to such property. The parties therefore do not ordinarily contemplate that the agent should have the authority to complete the transaction in such cases. That is why it has been held, both in England and here, that authority given to a broker to negotiate a sale and find a purchaser, without furnishing him with all the terms, means “‘to find a man willing to become a purchaser and not to find him and make him a _pur- chaser”: see Rosenbaum v. Belson(?) and Durga Charan Mitra v. Rajendra Narayan Sinkha(’). Mr. Setalvad next suggested, in the alternative, that the second interpretation referred to above, which was favoured by the trial Judge, should be adopted, and that, inasmuch as, in that view also, the appellant had done all that he was required to do when he introduced to the respondent two prospective buyers who were ready and willing to buy the premises for Rs. 1,10,000, _he was entitled to commission on that basis. Learned counsel criticised the view of the Appellate Bench, who adopted the third construction, as illogical and incon- sistent, and argued that, if authority to secure a buyer were to be taken to mean authority to find one who is not only ready and willing to buy but also becomes eventually a buyer in order to entitle the agent to his commission, then such authority must of necessity (1) 67 LT. 257, (2) [1900] 2 Ch. 267. (8) 36 0.1... 467. S.C.R. SUPREME COURT REPORTS 37 extend tothe concluding of a contract of sale, as other- wise the agent could not possibly accomplish the task assigned to him. We do not see much force in this criticism. As already indicated there are cogent reasons why an owner employing an estate agent to secure a purchaser should not, in the absence of clear words to that effect, be taken to have authorised him to conclude a contract of sale, and we cannot see how the lack of such authority is inconsistent with an understanding © that the agent is not to be entitled to his commission ‘unless the owner and the purchaser introduced by the agent carried the transaction to completion.
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such authority is inconsistent with an understanding © that the agent is not to be entitled to his commission ‘unless the owner and the purchaser introduced by the agent carried the transaction to completion. In the present case, however, it is not necessary to decide whether or not the commission note imports such an understanding, for a sale wasin fact concluded with the purchasers introduced by. the appellant who has thus, in any view, earned his commission, both the trial Judge and the Appellate Bench having found that the appellant’s efforts were the effective cause of that sale. The only question is whether the commis- sion is payable on the basis of Rs. 1,10,000 for which the appellant brought a firm offer from the purchasers, or on the basis of Rs. 1,05,000 which is the price men- tioned in the conveyance. As already stated, the Appellate Bench based their decision on the ruling in the Luxor case. The learned Judges reasoned thus: “In that case the principal had refused to sell in circumstances which afforded no reason- able excuse. Nevertheless, the House of Lords, revers- ing the Court of Appeal, held that no commission was payable. It appears to me that the principle is applicable to this case. Though the agent introduced a purchaser ready and willing to buy for Rs. 1,10,000 the sale for some reason took place at a lower figure. Even if the defendant unreasonably or without just cause re- fused to conclude the sale at the higher figure, never- _ theless the plaintiff has no right to commission based on that higher figure.” We are unable to agree with this reasoning and conclusion. The ground of deci- sion in the Zugor case was that, where commission was made payable on the completion of the transac- tion, the agent’s right to. commission was ‘a purely 1950 Abdulla Ahmed v. Animendra Kissen Mitter, Patanjali Sastri J. 1950 dbdulia Ahmed ve Anismendra Kissen Mitter, Patanjali Sastri J. Mahajan J. 38 SUPREME COURT REPORTS [1950]
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1950 Abdulla Ahmed v. Animendra Kissen Mitter, Patanjali Sastri J. 1950 dbdulia Ahmed ve Anismendra Kissen Mitter, Patanjali Sastri J. Mahajan J. 38 SUPREME COURT REPORTS [1950] contingent right’’ and arose only when the purchase materialised. As Lord Simon put it “The agent is promised a reward in return for an event and the event has not happened”. But the position is differ- ent where the principal, availing himself of the efforts of the agent, concludes the sale with the pur- chaser introduced by him, as the respondent did in the present case. As observed by Lord Russell of Killowen in the same case, ‘“‘ where a contract is con- cluded with the purchaser, the event has happened upon the occurrence of which a right to the promised commission has become vested in the agent. From that moment no act or omission by the principal can deprive the agent of his vested right”. Applying that principle, (even if the commission note in the present case were to be construed as making payment of com- mission conditional on the completion of the transac- tion, as it was in the English case) the appellant, having “ negotiated the 8916 * and ‘secured buyers” who made a firm offer to buy for Rs. 1,10,000 had done everything he was required by the respondent to do and acquired a right to the payment of commis- sion on the basis of that price which he had success- fully negotiated, subject only to the condition that the buyers should complete the transaction of purchase and sale. The condition was fulfilled when those buyers eventually purchased the property in question, and the appellant’s right to commission on that basis be- came absolute and could not be affected by the cir- cumstance that the respondent “ for some reason” of his own sold the property at a lower price. We accordingly hold that the appellant is entitled to the full commission of Rs. 6,000. The appeal is allowed, the decree passed on appeal in the Court below is set aside and that of the trial Judge restored. The appellant will have the costs of this appeal including the costs incurred in the lower court as well as his costs of the appeal in that court. ManaJAn J.—This is an appeal by special! leave from a, judgment and decree of the High Court at Calcutta, dated 5th January 1948, By that judgment the High mi én S.C.R. SUPREME COURT REPORTS 39 Court varied the judgment and decree of Gentle J. dated 11th June 1945 made in exercise of his original jurisdiction, decreeing the plaintiff’s suit for recovery of a sum of Rs. 6,000. The appellant is a broker by profession residing at No. 81/1 Phear Lane, Calcutta, and carries on the business of a house agent. The respondent, Animendra Kissen Mitter, resides in No. 20B, Nilmony Mitter Street, Calcutta.
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S.C.R. SUPREME COURT REPORTS 39 Court varied the judgment and decree of Gentle J. dated 11th June 1945 made in exercise of his original jurisdiction, decreeing the plaintiff’s suit for recovery of a sum of Rs. 6,000. The appellant is a broker by profession residing at No. 81/1 Phear Lane, Calcutta, and carries on the business of a house agent. The respondent, Animendra Kissen Mitter, resides in No. 20B, Nilmony Mitter Street, Calcutta. Tke appellant was employed by the respondent to negotiate the sale of the respondent’s premises, No. 27, Amratolla Street, Calcutta, on certain terms and condi- tions on commission and the questioh raised by this appeal is whether the appellant is entitled to his com- mission under the circumstances hereinafter men- tioned. The facts are substantially admitted. By a letter dated 5th May, 1943, the appellant was employed by the respondent for arranging a sale of the premises above mentioned. This letter is in the following terms :— “T, Animendra Kissen Mitter of No. 20B, Nilmoni Mitter Street, Calcutta, do hereby authorize you to negotiate the sale of my above property free from all encumbrances at a price not less than Rs. 1,00,000. I shall make out a good title to the property. If you succeed in securing a buyer for Rs. 1,00,000 I shall pay you Rs. 1,000 as your remuneration. If the price exceeds Rs. 1,05,000 and does not exceed Rs. 1,10,000 I shall pay you the whole of the excess over Rs. 1,05,000 in addition to yourremuneration of Rs. 1,000 as stated above. Ip case you can secure a buyer at a price exceeding Rs. 1,10,000 I shall pay you twenty-five per cent. of the excess amount over Rs. 1,10,000in addition to Rs. 6,000 as stated above. This authority will remain in force for one month from date.” As recited in the letter, the authority given to the appellant was to remain in force for one month from 5th May 1943. Three days before the termination of the appellant’s authority, on 2nd June 1943 the plaintiff- appellant obtained an offer from two persons, namely, 6 1950 Abdulla Ahmed ve Animendra Kissen Mitter, Mahajan J. 1950 Abdulla Ahmed v. Animendra Kissen Mitter. Mahajan J. 40 SUPREME COURT REPORTS [1950] Kishorilal Mahawar and Ramkumar Mahor, for the purchase of the premises regarding which the plaintiff had been authorized to arrange a sale. This letter is in these terms :— ‘We are willing to purchase the above house, land and premises at and for the price of Rs. 1,10,000 only free from all encumbrances.
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Mahajan J. 1950 Abdulla Ahmed v. Animendra Kissen Mitter. Mahajan J. 40 SUPREME COURT REPORTS [1950] Kishorilal Mahawar and Ramkumar Mahor, for the purchase of the premises regarding which the plaintiff had been authorized to arrange a sale. This letter is in these terms :— ‘We are willing to purchase the above house, land and premises at and for the price of Rs. 1,10,000 only free from all encumbrances. We hereby authorize you to accept the offer for sale of the above permises from Mr. A. K. Mitter for Rs. 1,10,000 on our behalf and send the confirmation to the vendor Mr. A. K. Mitter on our behalf.” On the same date the plaintiff gave a reply which runs thus :— "लि am in receipt of your letter of date and under authority from the owner Mr. A. K. Mitter, I hereby confirm your offer for the purchase of the above permises at and for the price of Rs. 1,10,000 free from all encum- brances.”’ Simultaneously with the issue of this letter he gave intimation of this contract to the respondent in the following terms :— ‘* Under the authority given to me by you I made an offer for the sale of the above premises to Messrs. Kishorilal Mahawar and Ram Kumar Mahorof No.27, Amratolla Street, Calcutta, for rupees on lakh and ten thousand only and they have accepted the offer and they have authorized me to send a confirmation to you of the said offer. I accordingly confirm the offer made by you for the sale of the above premises for rupees one lakh and ten thousand only. The draft agreement for sale will be sent to you in the usual course. A copy of the letter of Messrs. Kishori Lal Mahawar and Ram Kumar Mahor accepting your offer is enclosed herewith.” The letter,was received by Mitter on 3rd June 1943, two days bofore the termination of the plaintiffs authority. The respondent made no reply and kept silent. He did not question the agent’s authority in effecting a binding contract of sale with the purchasers. He did not repudiate the transaction nor did he 8.C.R. SUPREME COURT REPORTS 41 expressly ratify it. It was the plaintiff’s case that he had accepted the purchasers’ offer after getting express instructions from the respondent. That case, however, was not accepted in the two courts below.
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expressly ratify it. It was the plaintiff’s case that he had accepted the purchasers’ offer after getting express instructions from the respondent. That case, however, was not accepted in the two courts below. On 3rd June, 1943, the solicitor for the purchasers wrote to the solicitor for the agent that as the offer of his client for the purchase of 27, Amratolla Street had already been accepted and acceptance communicated to him, the title deeds should be sent so thata convey- ance may be prepared. At his request inspection of the letter of authority was offered bythe plaintiff and a copy of the letter was sent to him by post. On receipt of this copy the purchasers’ solicitor assumed 8 curious attitude. He said that the copy of the letter sent contained different terms as to commission than those contained in the letter of authority originally shown to his client. The plaintiff was charged with making a secret illegal gain. In spite of these allega- tions it was asserted that the contract was a concluded one and that being so, the plaintiff was bound to refund to the purchasers whatever moneys he would receive from the vendor. It appears that the purchasers’ attorney did not like the idea of the plaintiff pocketing a sum of Rs. 6,000 out of the purchase price, and this dislike on the part of the purchasers for the broker's commission has led to further complications resulting in this litigation. On 9th June, 1943, the purchasers’ solicitor wrote to the plaintiff’s solicitor that his client had cancelled the agreement of purchase. Immediately on receipt of this communication the plaintiff's solicitor replied expressing surprise at this attitude and accused the other party of a change of front with an ulterior motive. It was said that further instructions would be given after getting instructions from Mitter to whom these letters were forwarded. It seems that the plaintiff was in the dark while writing the letter of 9th June, 1943, of the negotiations that were going on behind the scene directly between the pur- chasers and the vendor who had kept absolutely silent all this time. On 9th June the date of the alleged 1950 Abdulla Ahmed v. Animendra Kissen Mitter. Mahajan J 1950 Abdulla Ahmed v Animendra Kissen Mitter. Mahajan J. 42 SUPREME COURT REPORTS [1950]
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1950 Abdulla Ahmed v. Animendra Kissen Mitter. Mahajan J 1950 Abdulla Ahmed v Animendra Kissen Mitter. Mahajan J. 42 SUPREME COURT REPORTS [1950] cancellation of the bargain already made, an agree- ment was executed between Animendra Kissen Mitter, the vendor, and Makkanlal, a benamidar of Kishorilal Mahawar and Ramkumar Mahor (the purchasers) for sale of the premises for a sum of Rs. 1,05,000. The sale deed in pursuance of this agreement was actually executed on 8th December, 1943, in favour of the ori- ginal purchasers and not in favour of the benamidar. As pointed out by the learned Chief Justice who de- livered the judgment of the appellate Bench, possibly some arrangement was made whereby both the defend- ant and the purchasers benefited by the insertion of a lower price in the contract of sale and the transfer deed. It seems obvious enough that the defendant having received a firm offer of Rs. 1,10,000 for this property could not have parted with it for Rs. 5,000 less except on the basis of some arrangement between himself and the purchasers under which both of them shared the commission instead of paying it to the broker. It was to the advantage of both of them. On 14th August, 1943, the appellant filed the suit out of which this appeal arises for recovery of Rs. 6,000, brokerage payable under the commission note. He also claimed relief by way of damages in the alternative. The defendant resisted the suit and denied the appellant’s claim. Gentle J. who heard the suit, gave judgment for the plaintiff and passed a decree for a sum of Rs. 6,000, with interest and costs in his favour. He held that on a true construction of the commission note the appellant’s authority was to find a purchaser, namely, a man ready, able and _ will- ing to buy at a price acceptable to the respondent and that the appellant had accomplished this when he in- troduced to the res; ondent the purchasers and that he had done all that was required of him. It was held that the appellant lad no authority to concludeacon- tract of sale and no binding contract of sale was made on 2nd and 3rd June, 1943, that the transaction effected nominally in the name of Makkanlal and com- pleted on 8th December, 1943, in favour of Kishorilal Mahawar and Ramkumar Mahor, was effected solely through the intervention of the appellant who brought 8.C.R. SUPREME COURT REPORTS 43 the parties together in the capacity at least ofa potential buyer and seller, that the reduction of the price by Rs. 5,000 from Rs. 1,10,000 was more than peculiar and that this reduction was made for one purpose and that was to deprive the plaintiff of his remuneration.
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the parties together in the capacity at least ofa potential buyer and seller, that the reduction of the price by Rs. 5,000 from Rs. 1,10,000 was more than peculiar and that this reduction was made for one purpose and that was to deprive the plaintiff of his remuneration. The respondent preferred an appeal against this decree. This was partially allowed by the learned Chief Justice and Mukherjea J. on the following find- ings: that the appellant procured two persons, v7z., Kishorilal Mahawar and Ramkumar Mahor, on 2nd June, 1943, who were willing to buy the property for Rs. 1,10,000, that on a true construction of the con- tract of agency no commission was payable until at least a binding contract had been entered into bet- ween the appellant and the respondent, that the agent could only be said to have negotiated the sale if he introduced a person willing to buy who eventually bought, that the sale took place between the persons introduced by the appellant and the respondent and it was the direct result of the appellant’s agency, that the commission note gave no authority to the appel- lant to conclude a contract of sale, that Makkanlal with whom the sale agreement dated 9th June was entered into was a benamidar of Kishorilal Mahawar and Ramkumar Mahor, that the appellant had no right to commission on a higher price than for which the sale was actually made and as the sale was act- ually made for Rs. 1,05,000, his remuneration could not exceed a sum larger than Rs. 1,000. On the basis of these findings the appeal was allowed and the decree granted by Gentle J. was modified and the plaintiff’s suit was decreed in the sum of Rs. 1,000. No order for costs was made in the appeal. In this appeal Mr. Setalvad for the plaintiff raised three contentions: (1) That the finding of the court below that on a true construction of the commission note the plaintiff had no authority to make a binding contract regarding the sale of this property with the purchasers was erroneous; (2) That even if that find- ing was correct, the plaintiff was entitled to a decree 1950 Abdulla Ahmed v. Animendra Kissen Mitte. Mahajan J. 1950 Abdulia Ahmed ¥. Animendra Kissen Mitter, Mahajan J. 44 SUPREME COURT REPORTS [1950] - for the sum of Rs. 6,000, because he had done all that he had promised to do for the respondent, viz., he had secured a purchaser for Rs. 1,10,000, who was ready, able and willing to buy the property and that if by reason of his own caprice or in collusion with the pur- chasers, the respondent did not sell the property for Rs, 1,10,000 but chose to receive instead Rs. 1,05,000, the plaintiff could not be made to suffer. (3) That on the evidence it should have been held that the sale was made for a price of Rs. 1,10,000 and that the amount entered in the sale deed was fictitious.
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The first thing to see is what the parties have ex- pressed in the commission note and what is the true effect of the language employed init, read in the light of the material facts. As pointed out by Viscount Simon, Lord Chancellor, in Luxor (Hasibourne), Lid. v. Cooper('), contracts with commission agents do not follow a single pattern and the primary necessity in each instance is to ascertain with precision what are the express terms of the particular contract under discussion. I have very carefully considered the terms of this contract in the light of the material circumstances and with great respect to the Judges who decided this case in the High Court, Iam of the opinion that the authority given by the principal to ' the agent authorized him to enter intoa binding cont- ract of sale on his behalf. It wasnot a mere authority authorizing him to find a purchaser willing, able and ready to buy the premises for a price mentioned in the document. The note, to begin with, confers authority on the plaintiff to negotiate a sale free from all encum- brances at a price not less than Rs. 1,00,000. Then it proceeds to say that the principal undertakes to make out a good title to the property. Jt further provides that if the agent succeeds in securing a buyer for Re. 1,00,000, he will be paid a sum of Rs. 1,000 as remuneration. In the concluding part of the note a scale of commission proportionate to the price has been promised in case a price higher than Rs. 1,00,000 was secured. In express words it is said that if the price exceeds Rs. 1,05,000 and does not exceed Rs. 1,10,000, (1) [1941] A.C, 108, » mm 8.C.R. SUPREME COURT REPORTS 45
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» mm 8.C.R. SUPREME COURT REPORTS 45 “JT shall pay you the whole of the excess over Rs. 1,05,000 in addition to your remuneration of Rs. 1,000”, that if a buyer issecured at a price exceed- ing Rs. 1,10,000, he will be paid 25 per cent. of the excess amount over Rs. 1,10,000 in addition to Rs. 6,000. The authority of the agent was to remain in force for one month. In my opinion, the terms of the note as regards the property being free from encumbrances and in respect of the guarantee about title indicate that the agent was given authority to make a binding contract. In a bare authority confer- ring power ona broker for introducing a customer, these stipulations would ordinarily find no place. The words “to negotiate a sale” standing by themselves may not authorize an agent to make a contract of sale. But here they do not stand by themselves. They are followed by two important conditions adverted to above. The agreement further lays down that if the broker succeeds in securing a buyer, he will get a certain remuneration. Gentle J. observed that the word “securing” here had the meaning of “obtaining a buyer’. I have consulted the same dictionary as the learned Judge did and I find that the true meaning of the expression “securing a buyer” is “‘to_obtain a buyer firmly”. It is not possible in business sense to secure a buyer firmly unless he is bound by an offer and an acceptance. Otherwise, he is entitled to with- draw the offer at any time before acceptance and it cannot in this situation be said that a buyer has been secured firmly. The word “secure” has not the same meaning as the word “find” or “procure”. It gives an idea of safety and certainty. Ifa buyer is ensured he, is said to be secured and no buyer can be said to be ensured till he is bound by his offer and that cannot happen unless it stands accepted. The agent could only secure a buyer in the strict sense of the term if he had authority to enter into a binding contract. The word “buyer” when used in a strict sense also means ‘‘a person who fas actually made the purchase’. The authority givens to an agent to secure a buyer there- fore gives him authority to enter into a binding con- tract of sale with him. Without such an authority it 1950 Abdulla Ahmed v. Animenudra Kissen Mitter. Mahajan J. 1950 Abdulia Ahmed Ve Animendra Kissen Mitter. Mahajan J. 46 SUPREME COURT REPORTS [1950]
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1950 Abdulla Ahmed v. Animenudra Kissen Mitter. Mahajan J. 1950 Abdulia Ahmed Ve Animendra Kissen Mitter. Mahajan J. 46 SUPREME COURT REPORTS [1950] was not possible to secure a buyer. I am further supported in this view by the language employed in the document in respect of the payment of the commis- sion. When the price secured was Rs. 1,10,000, the broker was entitled to 25 per cent. of the excess. It is difficult to think of an excess in relation to price in a stipulation for commission unless thé agent has been given an authority to make a contract of 8816, * If the scope of the authority is only to introduce a customer ready, able and willing to buy the property with an option to the principal to accept or to refuse the offer, then it would have been drawn up in a different language. The subsequent conduct of both the parties to the agreement very strongly supports this view The evid- ence of such conduct is relevant in this case because, as pointed out by Viscount Simon, L. C., in the case already referred to, the phrase “finding a purchaser” is itself not without ambiguity. Here the phrase is “securing a purchaser’. This phrase similarly is not without ambiguity. The evidence of conduct of the parties in this situation as to how they understood the words to mean can be considered in determining the true effect of the contract made between the parties. Extrinsic evidence to determine the effect of an instru- ment is permissible where there remains a doubt as to its true meaning. Evidence of the acts done under it is a guide to the intention of the parties in such a case and particularly when acts are done shortly after the date of the instrument. (Vide para 343 of Hailsham Edn. of Halsbury, Vol. 10, p. 274). So far as the conduct of the agent is concerned, he accepted the offer and under his own signature sent, the letter of acceptance to the purchasers. In the letter written by him to his principal he specifically refers to his authority. The correspondence above mentioned clearly shows that both the purchasers and the agent thought that a concluded contract had been made, Information of this was given to the vendor and though he did not speak, his silence in the circumstan- cea of the case seems as eloquent as speech would have ~ के 4 S.C.R SUPREME COURT REPORTS 47 been. He never repudiated the contract made by the agent but behind his back entered into a fresh contract with the same persons who had been secured by the agent in a surreptitious manner. In the witness box he assumed a dishonest and untruthful attitude. The learned trial Judge pronounced him a liar and rightl too. He asserted complete ignorance about the subse- quent contract of sale and fixed all blame on to his son. _ When asked about the sale price on the contract of 9th
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S.C.R SUPREME COURT REPORTS 47 been. He never repudiated the contract made by the agent but behind his back entered into a fresh contract with the same persons who had been secured by the agent in a surreptitious manner. In the witness box he assumed a dishonest and untruthful attitude. The learned trial Judge pronounced him a liar and rightl too. He asserted complete ignorance about the subse- quent contract of sale and fixed all blame on to his son. _ When asked about the sale price on the contract of 9th June, 1943, his answer was that he knew nothing about this and said that because his son asked him to sign the deed he did sign it and that was all that he knew. When faced with the sale deed, he said that he did not know what his son had told him as to what was written in the deed. He added that he did not know what consideration was paidto him forthe sale. He further professed not to know whether the sale price went into his banking account or waseven entered in the account books. After a great deal of prevarication he was made to accept the document of 5th May, 1943, andits terms. He admitted that on 3rd June he had a conversation with the purchasers and wasinformed by them that they had entered into a bargain with the broker and that the broker had deceived them about the commis- sion and therefore they would not buy the house. He admitted that he got the letter sent by the plaintiff, but gave no explanation as to why he sent no reply to that letter. With great difficulty he was made to accept his signature on the postal acknowledgment about the receipt of the letter sent by the broker to him informing him of the concluded bargain made with the purcbasers, and he had to admit that he got that letter from the broker. He also admitted that he took no objection to the letter written by the broker before Kishoribabu had told him the story about the commission of two per cent. In further cross-examination he admitted that what was stated by the broker in the letter of the 2nd June was correct. The whole evidence given by the defendant consists of evasive statements and his ulti- mate resort wasin lapses of memory. It is quite clear from his deposition that the respondent accepted the contract made by the agent and was clearly under the 7 1950 Abdulla Ahmed v. Animendra Kissen Mitter. Mahajan J. 4 ae gen. Be Y oe | : 48. * SUPREME COURT REPORTS — [1950] . ‘S,, 1950 Abdulla Ahmed v. Animendra Kissen Milter. Mahajan J. belief that the agent had not exceeded his authority in entering into a binding contract with the purchasers am therefore of the opinion that the authority given to the agent in this case was an authority to enter into __a binding contract of saleand this he did and he was therefore entitled to his commission of Rs. 6,000. The learned single Judge and the learned Judges of the Court of Appeal found otherwise on this part of the . case in view of certain decisions of English Courts and a decision of a Division Bench of the Calcutta High Court. In my opinion, none of those cases touch the.
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am therefore of the opinion that the authority given to the agent in this case was an authority to enter into __a binding contract of saleand this he did and he was therefore entitled to his commission of Rs. 6,000. The learned single Judge and the learned Judges of the Court of Appeal found otherwise on this part of the . case in view of certain decisions of English Courts and a decision of a Division Bench of the Calcutta High Court. In my opinion, none of those cases touch the. present case. Unless the language of two documents is identical, an interpretation placed on one document is no authority for the proposition that a document differ- ently drafted, though using partially similar language should be similarly interpreted In Hamer v. Sharp(’) Sir Charles Hall, V.C., con-..- ° sidered the case of an authority of an agent for sale appointed by the owner of an estate.: The document in - that case was in these terms :— “‘T request you to procure a purchaser for the fol- . lowing freehold property, and to insert particulars of - the same in your Monthly Estate Circular till further ' notice, viz., my beer house and shop No. 4 and No. 6 Manchester Road, Tenant. No.4, William Galloway, gilder, and No.6, Albert Vaults, Henry Holmes, beer retailer, and work rooms above. Present net rent £150, price £2800, when I will pay you a commission and expenses of fifty pounds.. About six years’ lease unexpired.” The Vice-Chancellor observed as follows :— * The question is whether, when an owner of an estate puts it into the hands of an estate agent for sale stating a price for and giving particulars of the pro- perty to enable him to inform intending purchasers but giving no instructions as to the absolute disposal and none as to the title of the property, and mentioning none of those special stipulations which it might be proper to insert in conditions in reference to the title (1) L, हि. 19 Eq, 108, ः laa) S.C.R. SUPREME COURT REPORTS 49 that is sufficient authority to the agent to sign a 0011- tract for the sale of the property for the price stated in the instructions, without making any provision whatso- ever asto title. In considering whether the instructions of October, 1872, were a sufficient authority to the agent for that purpose, I cannot help expressing an opinion that such an authority to an agent on the part of a vendor would be highly imprudent, as the purchaser would then be entitled to require, on completion, attest- ed copies of all documents of title, and the expense of -them would swallow up, to a great extent, the purchase money. This estate agent must have known that if this property had been offered for sale by public auction there would have been conditions to guard the vendor against being subject to certain expenses, and to pre- vent the contract becoming abortive by reason of a purchaser requiring a strictly marketable title. Could he suppose that he was invested with authority to sign a contract without considering what it should contain as regards title? As an intelligent and well informed person, he could not suppose that he was properly dis- charging his duty to his principal when he signed the contract which he signed; such a contract was not one within the scope of his authority to sign.”
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The case therefore stood decided on the construction of the document. It was remarked that in those cir- cumstances it was not necessary to decide what words would confer such an authority. Having said so, the learned Vice-Chancellor proceeded to observe as follows :— : ‘but I nevertheless state my opinion to be, that when instructions are given to an agent to find a pur- chaser of landed property, he, not being instructed as to the conditions to be inserted in the contract as to title, is not authorized to sign a contract on the part of the vendor.” 1950 Atdulla Ahmed _ v. | Animendra Kissen Mitter, Mahajan J. This case can hardly be said to be an authority for — the construction of the agreement that we are called up- on to construe in the present case. Considerable empha- sis was laid in that case on the point that no instruc- tions had been given as to the conditions that had to be 1950 Abdulla Ahmed v. Animendra Kissen Mitter. Mahajan J, 50 SUPREME COURT REPORTS [1950] inserted in the agreement as to title. In the present case the agent was told that the principal guaranteed marketable title. He was further told that the sale should be free of encumbrances. All the material conditions of sale were thus contained in the present agreement. The next case on which considerable reliance was placed in the courts below is the case of Chadburn v. Moore('). In this case an advertisement appeared in the Daily Telegraph in these words:— ‘Forced sale by order of the mortgagees—thirty- four well built houses, situated at Grays, close.to the station on the London, Tilbury, and Southend Rail- way, within easy reach of the docks, all let to respect- able tenants at rents amounting to £ 620 per annum. Held for about ninety-five years at ground rents amounting to £ 146; price £ 3500, of which £ 3000 can remain on mortgage. For further particulars apply to Messrs. Pinder, Simpson and Newman, 33 and 34, Savilerow, London, W.” In response to this advertisement the plaintiff in that case, James Chadburn, called on Messrs. Pinder, Simpson and Newman, a firm of surveyors and estate agents, for further information. He then went to see the houses and came back and made an offer to pur- chase them, which was reduced to writing. It appear- ed from the evidence that the offer was to be submitted by Mr. Newman to his client the defendant, and the plaintiff was to return the next day for.an answer. Newman saw the defendant, who gave him instruc- tions to withdraw five ef the houses, and fixed the price, but did not, according to the evidence given in court, give instructions to Newman to enter into a binding contract. Later on the plaintiff called on Messrs. Pinder, Simpson and Newman and two letters were exchanged between them, which were letters of offer and acceptance for the twenty-nine houses at Grays. The offer and acceptance were forwarded by the defendant to the estate agents. The defendant on receiving this offer wrote a letter saying inter alia :— (1) 67 LT. 267. 8.C.R. SUPREME COURT REPORTS 51
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(1) 67 LT. 267. 8.C.R. SUPREME COURT REPORTS 51 “I think you were, as you usually are, a little pre- mature in actually entering into what might be a bind- ing contract. Jt is always best to have an offer and acceptance subject to a formal contract being entered 3} into....”’. To this Newman replied :— “The offer forthe above was accepted under your definite instructions and is a very good get out for ou.” : y Kekewich J., who decided this case, gave the fol- lowing judgment :— “Having heard Mr. Newman, who was called with- out the plaintiff knowing what he was going to say, and having read the correspondence, J have little doubt that I have the real transaction—which is a mere transaction between principal and agent—before me. It might be that a different colour would be put upon the matter by the cross-examination of Mr. Moore, but this was not done, and he is entitled to have judgment upon the point of law. Moore undoubt- edly authorized Newman to find a purchaser for the houses. Jt is true the expression does not come out on the correspondence. On the second occasion Newman appears to have been instructed to negotiate a sale. Whatever else he did do, Moore did not in express terms authorize Newman to enter into a contract. Newmun was to find « purchaser, and to negotiate a sale. Is that sufficient ? No evidence was given as to custom; no evidence was brought to show that the position of a house or estate agent resembles that of a broker on the Stock Exchange or any other exchange. A house or estate agent is in a different position, owing to the peculiarity of the property with which he has to deal, which does not pass by a short instru- ment as stocks and shares do, but has to be transfer- red after investigation of title and in accordance with strict laws. An agent for sale of real estate must be more formally constituted than a seller of stocks and securities of a similar nature. There is no definite authority ; in Hamer v. Sharp('), Hall V.C., does not (1) 19 Bq. 108, 1950 Abdulla Ahmed . Vv. Animendra Wissen Mitter. Mahajan J. 1950 Abdulla Ahined v. Animendra Kissen Mitter, Mahajan J, 52 SUPREME COURT REPORTS [1950] go so far as ७0:88] an estate agent cannot enter into any contract, and does not decide the question of authority, but only states his opinion. I must per- force refer to Prior v. Moore('), where I indicated my own opinion distinctly, that instruction to a house agent fo procure a purchaser and to negotiate a sale does not amount to authority to the agent to bind his principal by contract. Here the circumstance must not be forgotten that Moore on the second occasion told Newman what he was prepared to take for the twenty-nine houses. Newman then jumped at the conclusion that he had power at that price to enter in- to a contract. That is in my opinion not sufficient, and unless express authority is given tothe agent to -sell, and for that purpose to enter into a binding contract, the principal reserves his final right to accept or re- fuse.” ं
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In this case there wasno written document between the principal and the agent. From the correspondence it was inferred that the principal had asked the agent to find a purchaser or to negotiate asale and it was held that within these words an authority to sell could not be spelt out. Not only is the language of the © document with which we are concerned different, but the evidence in the case particularly about the conduct of the parties is materially different. The observations made by the learned Judge must be taken to be limited to the facts found by him. The expressions ‘find a purchaser’, “procure a purchaser’, “nego- tiate a sale’ standing by themselves may not be suffi- cient to confer authority on the agent toenter into a binding contract on behalf of the principal; but as I have indicated above, the words in the present case are such as by necessary implication conferred author- ity on the agent for making a binding contract. The next case is Durga Charan Mitra v. Rajendra Narain Sinha(?), a Bench decision of the Calcutta High Court. The document considered in that case bears considerable resemblance with the document in the present case. (10 8 T.L.R. 684. (2) 36 O.L.J. 467, +) t 8.C.R. SUPREME COURT REPORTS 53 It was in these terms :— “T hereby authorize you to negotiate the sale of the lands at Tolligunge I have recently purchased from Messrs. Martin and Co. If youcan secure a purchaser to purchase the same at the gross value of Rs. 16,000, Ishall pay you Rs. 200 as your remuneration. If you be able to raise the price to any amount above Rs. 16,000, you will be entitled to the excess amount fully and I shall be bound to mention the whole amount in the conveyance. Please note that this letter of authority will remain in force for a fortnight only to complete the trans- action ; after that this letter will stand cancelled.” The agent acting on this authority sold the property. On receipt of this letter the vendor informed the agent that he would not sell the land. On the acceptance of the agent a suit was brought for specific performance. Sir Asutosh Mookerjee who delivered the judgment of the Bench referred to the cases of Hamer v. Sharp (?), Prior v. Moore (*), Chadburn v. Moore (*), and also Rosenbaum v. Belson ('), and observed that it was well settled that an estate or house-agent, authorized to procure a purchaser, has no implied authority to enter into an open contract of sale, because the transaction mentioned is as specified in the letter, viz., to negotiate a sale after securing a purchaser. There is similarity in the language employed in the letter dealt with in this case and the letter of authority with which we are concerned ; but read asa whole, the +wo documentsare drafted with different intents and the
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+wo documentsare drafted with different intents and the true effect of both is not the same. There was no men- tion of the title being guaranteed by the vendor or of the sale being made free of encumbrances in that case. Theré was no evidence of surrounding circumstances or of the conduct of the parties. On the other hand, the plaintiff who was himself a solicitor realized the diffi- culties of the situation and endeavoured to alter the foundation of his claim. He conceded that as a broker he had no authority to sell the property and that he (1) 19 Eq. 108. (8) 67 L.T. 287. (3) 8 T.T.R. 694, (4) (1900) 2 Ch. 267. 1980 Alidulia Ahmed ve Animendra Kissen Mittcr. Mahajan J. 1950 Abdulla Ahmed Ve Anitmendra Wissen Mitter. Mahajan J. 54 SUPREME COURT REPORTS . [190] could not have taken a conveyance of sale of the plot. In the present case the attitude adopted by the parties, as already pointed out, was entirely different. Sir Asutosh Mookerjee also cited the case of Rosenbaum v. Belson (7). In this case the learned Judge made the following observations :— “To my mind there is a substantial difference bet- ween those expressions. .Authorizing a man to sell means an authority to conclude a sale; authorizing him to find a purchaser means less than that—it means to find a man willing to become a purchaser, not to find him and also make him a purchaser.”’ In Saunders. v. Dence(*), Field J. distinguished Hamer v. Sharp (*), saying that ‘all thet Hall, V.C., in that case decided, as I understand it, was that if you go to an estate agent, and tell him you havea property to sell, and that you want a purchaser, and you tell him what you have made up your mind shall be the price, and to a certain extent what shall be the condi- tions, and you instruct him totry and find a purchaser, that is not sufficient, under those circumstances, to authorize the agent to make a contract without any conditions whatever with regard to the title’. I have been unable to find any case in which it has been held that-instructions given by A.B. to sell for him his house, and an agreement to pay so much on the purchase price accepted, are not an authority to make a binding contract, including an authority to sign an agreement. In my opinion, on the terms of the instrument in this case and in view of the relevant evidence the cor- rect conclusion to draw is that the agent had authority to enter into a binding contract with the purchaser and that he did and is therefore entitled to succeed in the case. Reference in this connection may be made to Wragg v. Lovett (*), where Lord Greene, M.R., put the proposition in these words :— ** Whether or not the agents were authorized (or, what in law is the same thing, reasonably understood (1) (1900) 2 Ch. 267. (3) 19 my + 108. (9) 52 L.T, 644. (4) [1948] 2 A.E.R, 969,
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** Whether or not the agents were authorized (or, what in law is the same thing, reasonably understood (1) (1900) 2 Ch. 267. (3) 19 my + 108. (9) 52 L.T, 644. (4) [1948] 2 A.E.R, 969, ct S.C.R. | SUPREME COURT REPORTS 55 themselves to be authorized) to make this particular contract” and it was held that the proper inference from all the facts of the case was that the defendant was satisfied to allow his agents to make whatever contract they thought best and relied on them to protect his interests provided, and provided only, that they obtained the desired statement from the plaintiff as to his intention to remain in the house. The answer to the question depends on the facts of each individual case and though authority to make a binding contract has not to be lightly inferred from vague or ambiguous language but from substantial grounds, that however does not mean that in express words it should be stated that the agent is authorized to sell the property. The learned Chief Justice in the judgment under appeal observed that ‘‘the agent had undertaken to negotiate a sale and secure a buyer. He could not be said to have either secured a buyer or negotiated a sale unless a sale actually took place or at least a contract of sale had been entered into”. If that is the correct construction of the note, then in my judgment, the true implication of the noteis that the agent was authorized to enter into a binding contract, because othewise he could not have secured a buyer. Later on, the learned Chief Justice while referring to the case,of Rosenbaum v. Belson({'), took the view that authorizing a man to sell meant an authority to conclude a sale and authorizing a man to find-a puchaser meant less than that. It meant finding a man willing to become a purchaser, not to find him and also make him a pur- chaser. If that was the duty entrusted to the agent, then he had clearly performed his duty and was entitl- ed to his commission. . For the reasons given above I am of the opinion that the plaintiff had authority to enter into a binding con- tract on behalf of the defendant and he entered into such a contract and thereby. earned the commission which he has claimed in the suit and he is entitled toa (1) [1900] 2 Ch. 267. 5 1960 Abdulla Ahmed v. Animendra Kissen Mitter. Mahajan J. 1950 Abdulla Ahined Ve Animendra Kissen Mitter. Mahajan J. 56 SUPREME COURT REPORTS _ - [1950] decree in the sum of Rs. 6,000 which the trial Judge had given to him, with all costs throughout.
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(1) [1900] 2 Ch. 267. 5 1960 Abdulla Ahmed v. Animendra Kissen Mitter. Mahajan J. 1950 Abdulla Ahined Ve Animendra Kissen Mitter. Mahajan J. 56 SUPREME COURT REPORTS _ - [1950] decree in the sum of Rs. 6,000 which the trial Judge had given to him, with all costs throughout. Conceding for the sake of argument that the construc- tion that I have placed on the agreement entered into between the principal and the agent is not the correct one, the question arises whether in that event the deci- sion under appeal can be maintained. I am inclined to the opinion that even on the construction placed by the trial Judge on the commission note the view taken by him was the correct one and the court of appeal arrived at a wrong conclusion by giving too much im- portance to certain obiter observations of Lord Russell of Killowen and Lord Romer in Luzor (Hastbourne) Ltd. v. Cooper('). In this very case it was pointed out by Viscount Simon L. C. that there were at least three different classes of cases in which the question of a right to commission could arise. He states the first of them in these terms :— “There is the class in which the agent is promised a commission by his principal if he succeeds in introduc- ing to his principal a person who makes an adequate offer, usually an offer of not lessthan the stipulated amount. If that is all that is needed in order to earn his reward, it is obvious that he is entitled to be paid when this has been done, whether this principal acce Re the offer and carries through the bargain or not. No implied term is needed to secure this result.” In my opinion, the present case falls within this class of case’ and commission became payable on the introduction of a willing buyer by the agent to the principal. In Burchell v. Cowrie की Blockhouse Collieries Ltd.(*) it was observed by their Lordships of the Privy Coun- cil that if an agent brings a person into relation with his principal as ari intending purchaser, the agent ha done the most effective, and possibly, the most labo- rious and expensive, part of his work, and that if the principal takes advantage of that work, and, behind the back of the agent and unknown to him, sells to the purchaser thus brought into touch with him on terms (1) [1941] A.C, 108. (2) [1910] A.C. 614. S.C.R. SUPREME COURT REPORTS BT which the agent theretofore advised the principal not to accept, the agent’s act may still well be the effective cause of the sale and that there can be no real difference between such a case and those cases where the principal sells to the purchaser intreduced by the agent at a price below the limit given to the agent. In uae eh v. Western Neilgherry Coffee etc. Co.(*) Willes J. thus lays down the rule of law applicable to
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which the agent theretofore advised the principal not to accept, the agent’s act may still well be the effective cause of the sale and that there can be no real difference between such a case and those cases where the principal sells to the purchaser intreduced by the agent at a price below the limit given to the agent. In uae eh v. Western Neilgherry Coffee etc. Co.(*) Willes J. thus lays down the rule of law applicable to such cases :— ’ ..--“T apprehend that wherever money is to be paid by oue man to another upon a given event, the party upon whom is cast the obligation to pay, is liable to the party who is to receive the money if he does any act which prevents or makes it less probable that he should receive it.” The rule has been stated by Story on Agency at page 404 in the following terms :— ‘The general rule of law,-:as to commissions, un- doubtedly is, that the whole service or duty must be performed, before the right to any commissions at- taches, either ordinary or extraordinary ; for an agent must complete the thing required of him, before he is _ entitled to charge for it. In the case of brokers em- ployed to sell real estate, it is well settled that they are entitled to their commission when they have found a. purchaser, even though the negotiations are conducted and concluded by the principal himself; and also where there is a failure to complete the sale in conse- quence of a defect in title and no fault on the part of the brokers.” In my judgment therefore, Gentle J. was right when he held on the interpretation placed by him on the document that the plaintiff had earned his commis- sion in full inasmuch as he had secured a buyer who was ready, able and willing to buy the property for Rs. 1,10,000. As I have indicated above, if the word “buyer” is to — be construed in a strict sense, then it must be held that the broker had authority to secure a buyer of that type and he could only do so by making a binding (1) 17 0.8, (N.S.) 788. ः 1980 Abdulla Ahmed v. Animendra Kissen Mitter. Mahajan J. 1950 Ab-iulla Ahmed ¥. Animendra Hissen Mitter, Mahajan J. 58 SUPREME COURT REPORTS [1950] contract with him. On the other hand, if the word is taken to mean a potential buyer, such a buyer having been secured, the agent was entitled to the commission that had been promised to him. It is now convenient to consider the case of Luxor (Eastbourne) Lid. v. Cooper(') in some detail because certain observations made by Lord Russell of Killowen and Lord Romer are the basis of the decision of the learn- ed Chief Justice. In this case no commission note was addressed to the brokerand thecontract was not contain- edin any document. Evidence in support of the commis- sion agreement was oral and its terms had to be deduced from that evidence. Viscount Simon L. C., out of the materials from which express contract had to be pieced together, reached the result that the bargain was this:
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‘“‘If a party introduced by the respondent should buy the cinemas for at least £1,85,000, each of the two appellants would pay to the respondent £5,000 on the completion of the sale.” No such sale took place, and in those circumstances it was held that there could be nothing due to the res- pondent on the terms of the express bargain. It was then argued that since the proposed purchasers intro- duced by the respondent were and remained willing and able to buy the properties for the minimum price, while the appellants did not close with the offer, the appellants were .liable in damages to the res- pondent for breach of an implied term of the commis- sion contract. In the statement of claim the implied term was said to be that the appellants would ‘‘do nothing to prevent the satisfactory completion of the transaction so as to deprive the respondent of the agreed commission.” The breach pleaded was the failure to complete the contract of sale with the respondent’s client and the disposa! of the subject-matter in another quarter. The Lord Chancellor was of the opinion that the suggested implied term was not necessary in this contract and it was observed that in contracts made with commission agents there was no justification for introducing an implied term unless it was necessary to (1) [1941] A.C..108. 8.C.R. SUPREME COURT REPORTS 59 do so for the purpose of giving to the contract the business effect which both parties to it intended it should have. Lord Russell of Killowen in his opinion said that the only right of the plaintiff was to receive his commission out of the purchase moneys if and when received. His right was a purely contingent right. He stood to earn a very large sum at comparatively small pains, taking the risk of either side withdrawing from the negotia- tions before any binding contract ofsale and purchase was concluded, or of the contract for any reason not being carried to completion. In this view of the case the action was bound to fail and no occasion arose for pronouncing on the correctness or otherwise of the view expressed by the Court of Appeal in Trollope & Sons v. Martyn Brothers('). Then it was said that as the question of these commission contracts was discussed at great length, that furnished an excuse for stating briefly conclusions which his Lordship’s mind, free as it was from the fetter of previous decisions, reached. In dealing with the subject the following observations were made :—
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“I can find no safe ground on which to base the introduction of any such implied term. Implied terms, as we all know, can only be justified under the compul- sion of some necessity. No such compulsion or necessity exists in the case under consideration. The agent is promised a commission if he introduces a purchaser at a specified or minimum price. The owner is desirous of selling. The chances are largely in favour of the deal going through, if a purchaser is introduced. The agent takes the risk in the hope of a substantial remuneration for comparatively small exertion. In the case of the plaintiff his contract was made on Septem- ber 23, 1935 ; his client’s offer was made on October 2, 1935. A sum of £10,000 (the equivalent of the remu- neration of a year’s work by a Lord Chancellor) for work done within 8 period of eight or nine days is no mean reward, and is one well worth a risk. There is no lack of business efficacy in such a contract, even (1) (1984] 9 K.B. 486. 1950 Abdulia Ahmed v. Animendra Kissen Mitter. Mahajan J. 1980 Abdulla Ahmed v. Animendra Késsen Mitter. Mahajan J. 60 SUPREME COURT REPORTS [1950] though the principal is free to refuse to sell to the agent’s client. The position will no doubt be different if the matter has proceeded to the stage of a binding contract having been made between the principal and the agent’s client. In that case it can be said with truth that a ‘purchaser’ has been introduced by the agent; in other words, the event has happened upon the occur- rence of which a right to the promised commission has become vested in the agent. From that moment no act or omission by the principal can deprive the agent of that vested right.” It is the observations last quoted which are the basis of the decision of the learned Chief Justice in the pre- ~sent case. It seems to me that these observations had reference to cases visualized by Lord Russell of Killowen in the earlier part of this quotation with specific refer- ence to the facts found in that case and cannot apply to all cases where the word ‘ purchaser’ or ‘buyer’ has been loosely used in a different context. Lord Romer in his opinion made the following obser- vations :— . ‘But supposing that a contract by one person to pay another a sum of money in the event of the latter performing an unsolicited service to the former is as much subject to an implied condition as if the latter had been employed to perform the service, the condi- - tion is in general one that merely imposes on the
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Lord Romer in his opinion made the following obser- vations :— . ‘But supposing that a contract by one person to pay another a sum of money in the event of the latter performing an unsolicited service to the former is as much subject to an implied condition as if the latter had been employed to perform the service, the condi- - tion is in general one that merely imposes on the former a negative and not a positive obligation. If I employ a man for reward to build a house on my land I subject myself to an implied condition that I will do nothing to prevent him carrying out the work. But I am under no implied obligation to help him earn the reward whether by the supply of building materials or otherwise. But there are exceptional cases where in a contract of employment the employer is under a positive obligation. If, for instance, I employ an artist to paint my portrait I subject myself to the positive obligation of giving him the requisite sittings. The question, then, to be dermined upon the hypothesis that I mentioned just now is this: Where an owner of न 8.C.R. SUPREME COURT REPORTS 61 property employs an agent to find a purchaser, which must mean at least.a person who enters intoabinding , contract to purchase, is it an implied term of the con- tract of agency that, after the agent hasintroduced a person who is ready, willing and able to purchase at a price assented to by the principal, the principal shall enter into a contract with that person to sell at the agreed price subject only to the qualification that he may refuse to do so if he has just cause or reasonable excuse for his refusal ? This qualification must plainly be added, for the respondent does not contend, and no” one could successfully contend, that the obligation of the principal to enter into a contract is an uncondi- tional one.” The learned Chief Justice relying on the last part of the above quotation reached the conclusion that inthe pre- sent case as the duty of the agent was to secure a pur- chaser, it could not be held that the purchaser had been secured till the contract of sale was concluded by the vendor with him and that the actual sale having been ‘concluded for a sum of Rs. 1,05,000, the plaintiff could only get his remuneration on the basis of the price for which the sale was made and not on the basis of the offer the plaintiff had secured. It seems to me that when Lord Romer was laying down that a purchaser in such contracts means at least a person who enters into a binding contract to purchase, he had in mind the contract with which he was dealing in that case.. I am free to think that Lord Romer had not in mind commission notes twherein the word “buyer” or ‘purchaser’ had been employed in a loose sense. In Jones v. Lowe('), wherein the instrument was in these terms— “In the event of my introducing a purchaser, I shall look to you for the payment of the usua) com- mission in accordance with the scale fixed by the Auctioneers and Estate Agents Institute’, ः Hilbery J. said that had he been free of authority, he should have thought that there werestrong grounds for saying that what every owner of a house who desired to (1) (1948) 1K.B. 73. -
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In Jones v. Lowe('), wherein the instrument was in these terms— “In the event of my introducing a purchaser, I shall look to you for the payment of the usua) com- mission in accordance with the scale fixed by the Auctioneers and Estate Agents Institute’, ः Hilbery J. said that had he been free of authority, he should have thought that there werestrong grounds for saying that what every owner of a house who desired to (1) (1948) 1K.B. 73. - 1950 bdulla Ahmed v. Animendra Kissen Mitter. Mahajan J. 1950 Abdulla Ahmed भा. Animendra Kissen Mitter. Mahajan J. 62 SUPREME COURT REPORTS [1950} sell it expected a house agent to do, was to bring the pro- perty fairly to the notice of persons who resorted to him for houses and endeavour to persuade one of them to buy it. The learned Judge further observed as follows :— “If the agent introduces someone who is perfectly willing to go through with the purchase at a price which will satisfy the vendor, it would seem that the agent has done everything that the parties contemplate that he should do, for they do not contemplate that the agent should have anything to do with the actual completion of the transaction. He is to find a person who will pay the price which is asked for the property, and the contract is entered into on the basis that the person so found will be the person to whom the owner of the property will sell. It seems to me hard, if an agent has done to the full extent what the parties contemplated that he should do, that he should not be entitled to say ‘I have done what I contracted to do because I have introduced someone willing to purchase although he never in fact. became the actual purchaser’. I do not feel, however, that it is open to.me to put that construction on the words of the contract in the present case because I ‘think that the observations made in the House of Lords, and particularly those of Lord Russell of Killowen and Lord Romer in Luxor (Hastbourne) Ltd. v.Cooper(*), show that they were clearly of opinion that if an agent is employed tointroduce a purchaser for a house and before the purchaser has entered into a binding and legal contract, the houseis withdrawn from the market, the agent cannot say that he has earned his commission.” In a later case, H. H. Bennett v. Millet(*), the same learned Judge had to deal with a case where the cont- ract was in these terms :— ‘‘We confirm that in the event of our introducing a purchaser who isable and willing to complete the transaction, our commission will be in accordance with the recognized scale....’’. The plaintiffs introduced a prospective purchaser, whom the court found to have been at all times able (2) [1941] A.C. 108. (2) (1948) 2 AN E.R. 929. S8.C.R. SUPREME COURT REPORTS 63
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‘‘We confirm that in the event of our introducing a purchaser who isable and willing to complete the transaction, our commission will be in accordance with the recognized scale....’’. The plaintiffs introduced a prospective purchaser, whom the court found to have been at all times able (2) [1941] A.C. 108. (2) (1948) 2 AN E.R. 929. S8.C.R. SUPREME COURT REPORTS 63 and willing to purchase, but the defendant refused to complete. It was argued by the defendant that the qualification of the word ‘purchaser’ in the plaintiffs’ letter was otiose and therefore should be struck out and the plaintiffs had not performed the contract until they had introduced a person who actually completed the purchase. It was held that the expression ‘‘a purcha- ser who is able and willing to complete the transaction” meant not a person who did, in fact, ultimately pur- chase the property, but one who was prepared to pur- chase it at the seller’s price, and, as the estate agents had found such a person, they were entitled to their commission. The learned Judge further stated that in ordinary parlance we do not usethe word ‘“‘purcha- ser” as necessarily restricted to a person who actually completes a transaction of purchase and sale. In my judgment, therefore, on the alternative interpretation which has been placed by the two courts below on the commission note the word “‘purchaser”’ cannot be read in the strict sense in which it was read in Lwuzor’s case ('), but should be read in the sense in which it is loosely used in common parlance, and that being so, the decision under appeal cannot be sustained. Mr. Setalvad cited a number of Indian authorities where the words ‘“‘buyer’’? and ‘“‘purchaser” had not been given the strict meaning that had been given in Luxor’s case (’). Similarly, the words ‘lender’ and ‘borrower’ had been given the meaning of “potential lender” and “potential borrower’. It is, however, unnecessary to enter into a discussion of all those cases as it does not in any way advance the matter beyond what I have already said. It is unnecessary to go into the third contention of Mr. Setalvad in view of the above decision. For the reasons given above I agree with the conclu- sion reached by my brother, Patanjali Sastri, in the judgment just delivered by him, that the appeal be allowed with costs throughout. Appeal allowed. Agent for the appellant: 8. P. Varma. Agent for the respondent: Sukumar Ghose. (1) [1941] A.C, 108. . 9 1950 Abdulla Ahmed v. Animendra Kissen Mitter. Mahajan J.
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S.C.R. SUPREME COURT REPORTS 15 SHETH MANEKLAL MANSUKHBHAI v. MESSRS. HORMUSJI JAMSHEDJI GINWALLA AND SONS. [Saryip Fazt Aut, MEHR CHanD MAHAJAN and MUKHERJEA JJ.] Transfer of Property Act (IV of 1882), s. 58-A—Agreement to lease evidenced by correspondence—Lessee put in possession— Accep- tance of rent for several years—No registered lease deed—Suit for ejectment of lessee as trespasser—Maintainability—Doctrine of part performance The predecessor in interest of the defendant, being desirous of putting up a factory in certain plots of land situated within a Talugdari estate which was under the management of the Government under the Gujarat Taluqdars Act, 1888, applied in writing to the Taluqdari Settlement Officer for a permsnent lease of the plots. The Taluqdari Officer agreed to grant a lease on certain terms subject to the sanction of the Government and forwarded a letter to the Government stating the offer to take the plots on lease, his provisional acceptance of the same sul- . ject to the sanction of the Government and the terms of the lease and by a Resolution dated 5th September, 1917, the Government granted the sanction. The defendant's predecessor was put in possession and though a formal lease deed was not executed and registered, the Taluqdari Officer and after the release of the estate by the Government, the agent of the talugdar, and the plaintiffs who came in as ijaradars.continued to receive the agreed rent up to 1932. In 1933 the plaintiffs instituted a suit to. eject the defendant alleging that he was a mere trespasser as there was no registered lease deed : Held, that the correspondence which passed between the defendant's predecessor-in-title and the Taluqdari Officer, the letter sent by the latter to the Government, and the Resolution of the Government dated 5th September, 1917, proved that there was a contract in writing to grant a lease on the terms stated in the Taluqdari Officer's letter, and as the defendant's predeces- sor was put in possession in furtherance of this contract and the rents agreed upon were accepted for several years, s. 53-A of _ the Transfer of Property Act was applicable to the case and the plaintiffs were not entitled to eject the defendant. Judgment of the Bombay High Court reversed. 1950 Maroh 21. 1950 Sheth Maneklal Mansukhbhat ¥v. Messrs. Hor- musji Jamshedjt Giawalla and Sons. Mahajan J. 76 SUPREME COURT REPORTS [1950] AppraL from the High Court of Judicature at Bom- bay: Appeal No. XXXVII of 1949. This was an appeal from a judgment and decree of — the Bombay High Court dated 9th March, 1943, in Second Appeal No. 717 of 1940, varying the decree of the Assistant Judge, Ahmedabad, in Appeal No. 173 of 1936 reversing the decree of the joint Sub-Judge, Ahmedabad, in Suit No. 830 of 1933.
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76 SUPREME COURT REPORTS [1950] AppraL from the High Court of Judicature at Bom- bay: Appeal No. XXXVII of 1949. This was an appeal from a judgment and decree of — the Bombay High Court dated 9th March, 1943, in Second Appeal No. 717 of 1940, varying the decree of the Assistant Judge, Ahmedabad, in Appeal No. 173 of 1936 reversing the decree of the joint Sub-Judge, Ahmedabad, in Suit No. 830 of 1933. R.J. Thakur, for the appellant. Nanak Chand Pandit, (Diwan Charanjit Lal, with him), for the respondents. 1950. March 21. The judgment of the Court was de- livered by Manasan J.—This is an appeal from the judgment and decree of the High Court of Bombay dated 9th March 1943, and made in Second Appeal No. 717 of 1940 vary- ing the decree of the Assistant Judge, Ahmedabad, in Appeal No. 173 of 1936 reversing the decree of the Joint Sub-Judge, Ahmedabad, in Suit No. 830 of 1933. The suit out of which this appeal arises was filed by the respondent firm in ejectment to recover possession of survey Nos. 222, 223, 225 and 226 situate in Rampura in Ahmedabad district and for mesne profits, as early as July, 1933, and during its 17 years’ span of life it had a somewhat chequered career. Those res- ponsible for drawing up the pleadings did not take pains to comprehend correctly as to what they were about and the whole litigation was conducted in a slovenly and slipshod manner. Evidence which should have been produced at the beginning was allow- ed to be produced at a much later stage after the case went back on remand and the suit was determined by the Assistant Judge on fresh issues and fresh materials. It was in this confused state of the record that it was eventually decided by the High Court and its judg- ment is by no means satisfactory. The long time _ take in deciding the suit which involved determina- tion of a few simple issues is such as is calculated to bring into ridicule the administration of justice. S.C.R. SUPREME COURT REPORTS 17
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There is a talukdari estate called the Bhankoda estate in Viramgam taluka in Ahmedabad district. It is jointly owned by several talukdars in different shares and comprises twelve villages one of which is Rampura in which the suit lands are situate. By Government Resolution No. 8179, dated 30th August 1912, the estate was taken under Government manage- ment under section 28 of the Gujarat Talukdars Act (Bombay Act VI of 1888). The firm of Shah Manilal Maganlal and Bros. (predecessors in interest of the appellant) desired to erect a ginning factory on survey Nos. 223, 225, and 226 and with that object approached the Talukdari Settlement Officer for a permanent lease of these survey numbers, The said officer agreedto grant a lease subject to sanction of Government. By Resolu- tion No. 10795 of 1917 dated 5th September, 1917, the Government of Bombay granted the requisite sanction. Exhibit 181 is a certified copy of the letter from the Chief Secretary to Government to the Commissioner and to the Talukdari Settlement Officer and in detail it mentions the various steps taken to effect the trans- action. On 9th December 1916 an application was made by Shah Manilal Maganlal in writing signed by him to the Talukdari Settlement Officer offering to take a per- manent lease of the above mentioned survey numbers on an annual rental of Rs. 290 for the purpose of erecting a ginning factory. On 12th July, 1917, the said officer accepted provisionally this offer after taking into con- sideration the objections raised by some of the taluk- dars in respect of the grant of a lease. He submitted the papers to government with the following recom- mendations :-— ‘As the petitioner was in urgent need to start opera- tions during the current ginning: season I have in anticipation of Government sanction permitted him to enter upon the land and have the honour to approach 1950 Sheth Maneklal Mansukhbhai v. Messrs. Hor- musji Jamshedji Ginwalla and Sons. Mahajan J. you for sanction under section 27 (A) of the Court of © Wards Act, the provisions of which have been made applicable to Talukdari Estates by section 29 (G) of the Gujarat Talukdars Act.” 1950 Sheth Maneklal Mansukhbas भा Messrs, Hor- musji Jamshedji Ginwalla and Sons. Mahajan J, 78 SUPREME COURT REPORTS [1950]
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Mahajan J. you for sanction under section 27 (A) of the Court of © Wards Act, the provisions of which have been made applicable to Talukdari Estates by section 29 (G) of the Gujarat Talukdars Act.” 1950 Sheth Maneklal Mansukhbas भा Messrs, Hor- musji Jamshedji Ginwalla and Sons. Mahajan J, 78 SUPREME COURT REPORTS [1950] The conditions of the lease agreed upon by the parties were annexed with this letter and a copy of the offer was also sent to Government. Ex. 181 recites the con- tents of the offer and states the undertaking given by the lessee. There is intrinsicevidence within its contents to show that these writings were signed by. the proposer. The Talukdari Settlement Officer in a signed writing accepted the offer and sent it for Government sanction. It further appears that he communicated his acceptance to the lessee and agreed to give a lease if Government gave sanction. The survey numbers in question were in possession of tenants and it was agreed that the lessee would take possession after making private set- tlements with them. It was also agreed that if no such private arrangement could be made, then the set- tlement officer would take steps to issue ejectment notice against the tenants. On 20th July, 1917, the Commissioner forwarded the papers to Government with his recommendations and the Government on 5th September, 1917, sanctioned the arrangement agreed to by the Talukdari Settlement Officer with Shah Mani- lal Maganlal. The sanction order is signed by the Chief Secretary to the Government and it contains an endorsement of its having been sent to the officers con- cerned. It is thus clear that a binding agreement to lease the survey numbers in question was effected bet- ween the Talukdari Settlement Officer and Shah Mani- lal Maganlal with the sanction of the Government. Though a draft of a formal deed of lease was prepared, no such document was formally executed or registered for reasons which it is not necessary to state herein. Soon after the agreement the lessee took possession of the survey numbers in suit and put up thereupon a ginning anda pressing factory, a bungalow, engine rooms and other structures. He tendered the agreed rent to the Talukdari Settlement Officer who received. it from him. He continued receiving it for about two ‘years when the estate was released from the manage- ment of the Government and came under the manage- ment of thetalukdars. The manager appointed by the talukdars continued to receive rent from the lessee as had been settled by the Talukdari Settlement Officer. S.C.R. SUPREME COURT REPORTS 79
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‘years when the estate was released from the manage- ment of the Government and came under the manage- ment of thetalukdars. The manager appointed by the talukdars continued to receive rent from the lessee as had been settled by the Talukdari Settlement Officer. S.C.R. SUPREME COURT REPORTS 79 On 4th May, 1924, a possessory mortgage of the ginn- ing factory along with all its buildings was effected by Shah Manilal Maganlal in the sum of Rs. 1,40,000 in favour of the defendant. The mortgage included in the schedule of the mortgaged property some other pro- perty as well. The two contestants in the suit, the defendant and the plaintiffs, acquired their rights in this property during the years 1924-25. The defend- ant came in asa mortgagee as above stated, while the plaintiffs came in as ijaradar and assignee of certain mortgage rights. The plaintiffs since then have been receiving the rent according to the grant made by the Talukdari Officer. In the year 1933 the appellant pur- chased the equity of redemption of the suit property at a court auction and became vested with all the rights of Manilal Maganlal in this property, the value of which has now been estimated in the neighbourhood of Rs. 38,000. In the year 1933 the plaintiffs discovered that the defendant had no _ registered lease in his favour and therefore in law he was not entitled to the rights of a permanent tenant in respect of the survey numbers in dispute. They therefore instituted the present suit for ejectment of the defendant. Inthe 2nd and 3rd paragraphs of the plaint it was admitted that in the course of the correspondence with the Government of Bombay a lease was negotiated between the firm of Shah Manilal Maganlal and the Talukdari Settlement Officerin respect of the survey numbers in dispute for a period of fifty years at an annual rental of Rs. 290, but it was stated that because Manila] Maganlal did not execute a formal registered lease they were in possession as trespassers. In the 4th paragraph the authority of the Talukdari Settlement Officer to grant the lease was also challeng- ed. In the 8th paragraph it was seid that the plaint- iffs received the amount of the lease up to 3ist July 1932 and that no notice was necessary to be given, the position of the defendant being that of a trespasser. It was however alleged that a notice was given on 25th December 1930. 1960 Sheth Maneklal Mansukhbhat v. Messrs. Hor- musji fanshedji Ginwalla and Sons. Mahajan J. 1960 80 SUPREME COURT REPORTS [1950] The suit was defended on a number of grounds, Sheth Manekntaa ter alia, it was pleaded that the plaintiffs had no Mansukhbdhai Vv. Messrs, Hor- musji Jamshedji Ginwalla and Sons. Mahajan J.
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1960 Sheth Maneklal Mansukhbhat v. Messrs. Hor- musji fanshedji Ginwalla and Sons. Mahajan J. 1960 80 SUPREME COURT REPORTS [1950] The suit was defended on a number of grounds, Sheth Manekntaa ter alia, it was pleaded that the plaintiffs had no Mansukhbdhai Vv. Messrs, Hor- musji Jamshedji Ginwalla and Sons. Mahajan J. right to sue in ejectment, not being the landlord inas- much as they had not obtained any right in the land itself and had not acquired complete title by an assign- ment of the whole of the interest of the talukdars in the survey numbers in dispute. It was pleaded that the defendant was a permanent tenant ofthe survey num- bers and that the plaintiffs’ own conduct debarred them from claiming ejectment. The trial Judge decreed the suit on the finding that ' as no written lease was forthcoming it’'should be deemed to be non-existent. It was said that no efforts had been made to show that the Settlement Officer had sanctioned with the approval of the Government a permanent lease in respect of survey Nos. 223 and 225 to Shah Manilal Maganlal. In the concluding part of the judg- mentit was remarked that the doctrine of equitable part performance could not apply tothe present case. Though no specific issue was raised on this point, the matter seems to have been argued at some stage before the trial Judge on facts found or admitted. There was an unsuccessful effort to obtain a review of this decision on the ground of discovery of fresh materials. Thereafter the matter was taken to the court of appeal and it was alleged in ground No. 3 that the Subordinate Judge had erred in not considering the position created in the case by the equitable rule of law embodied in section 53-A of the Transfer of Property Act. On 30th July, 1938, the appellate court made an order of remand under Order XLI, Rule 25, and called for a report on the following two issues :— (1) Whether the plaintiff was a mortgagee in occupa- tion of जि, Nos. 222, 223, 225 and 226? (2) Whether the suit was bad for non-joinder of parties ? The trial Judge reported on the remand issues against the plaintiffs. He also admitted in evidence a number of documents produced after remand and one of these is Ex. 181. A point was raised that documents produced after remand were not relevant tothe issues remanded §.C.R. SUPREME COURT REPORTS 81 and should not be admitted. This contention was 1950 overruled. The Assistant Judge allowed theappealon ,,_,, इन 27th April, 1940, He held that the plaintiffs had failed “ye अनार] to establish their right to maintain the suit either as कक, ijaradars or as assignees of mortgage rights. In — jjssys, Hoy. para. 21 of his judgment he observed as follows:— —_»sji_ Jamshedji.
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and should not be admitted. This contention was 1950 overruled. The Assistant Judge allowed theappealon ,,_,, इन 27th April, 1940, He held that the plaintiffs had failed “ye अनार] to establish their right to maintain the suit either as कक, ijaradars or as assignees of mortgage rights. In — jjssys, Hoy. para. 21 of his judgment he observed as follows:— —_»sji_ Jamshedji. “Ex. 181 shows that the terms of the lease have éwalla and been reduced to writing though no regular lease Sons. appears to have been executed. On the question whe- yygnojan J. ther the lease is binding on the plaintiff, I think sec- tion 53-A of the Transfer of the Property Act is a complete answer. Lx. 181 shows that the Talukdari Settlement Officer, with the sanction of the Government, contracted tolease out these lands. The writing is signed by the Government. ‘The terms of the lease can be ascertained clearly from Ex. 181. It is not denied that the defendant’s predecessor-in-title was put in possession of this property in performance of that con- tract. Also the acceptance by the Talukdari Settle- ment Cfficer as well as by the plaintiff of the rent of the property as fixed by that contract shows that the possession of the defendant and his predecessor-in-title was in part performance of the contract of lease. Admittedly, there is no registered lease. The condi- tions of section 53-A of the Transfer of Property Act are- fully satisfied and the plaintiff cannot, therefore, eject the defendant on the ground that there is no registered lease.” Further on the learned Judge said that section 53-A of the Transfer of Property Act embodied the doctrine of estoppel and a plea to that effect had been taken inas- much as the defendant had pleaded that the plaintiffs were estopped by their conduct from asking for posses- sion and that therefore no separate issue was raised on this point. The unsuccessful plaintiffs went. up in second appeal against this decision to the High Court of Bombay. The High Court allowed the appeal and modified the decree of the Assistant Judge. It decreed the plaint- iffs’ suit in respect of survey Nos. 223 and 225 and dismissed the suit in respect of survey Nos. 222 and 226. 1959 Sheth Maneklat Mansukhbai v. Messrs, Hor- masjt Jamshedji Ginwalia and Sons, Mahajan di 82 SUPREME COURT REPORTS [1950] On the question of the plain tiffs’ title to maintain the suit the High Court reached the following decision :—
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Mahajan di 82 SUPREME COURT REPORTS [1950] On the question of the plain tiffs’ title to maintain the suit the High Court reached the following decision :— “Tf it were necessary we would hold that the plaintiff has sufficiently proved that it is entitled to maintain this suit in its capacity as ijaradar as well as assignee from the mortgagees. But we think even apart from that, plaintiff is entitled to bring this suit because on the defendant’s own admission he has paid rent to the plaintiff for three of the suit fields, viz., survey Nos. 223, 225 and 226, and that too not the interest of 84 Dakdas in them but for all the 100 Dakdas. In fact, ever since the plaintiff came on the scene the defendant has treated the plaintiff as the landlord as regards these three survey numbers, and in the present suit, therefore, the defendant cannot dispute the plaintiff's right to sue.” In a later part of the judgment it was observed that in any case Ginwalla asthe manager of the plaintiff firm would be entitled to continue the present suit as recei- ver. On the second question thelearned judges of the High Court observed as follows:— “We do not think it necessary to decide whether if there had been a signed contract by the transferor in the present case,it would have fallen undersection 53-A, ‘because, in our opinion, the correspondence which is summarized in the Government Resolution cannot be regarded as evidence of the contract, and secondly, the terms of the contract also cannot be deduced from the correspondence with any reasonable certainty. We, therefore, hold that the Government Resolution on which the defendant relies is no evidence of the writing of a contract referred to in section 53-A of the Transfer of Property Act, and apart from that the defendant has no legal basis on which he can claim to hold the land either as a permanent lessee or for a particular period.” The principal questions canvassed in this appeal are, whether the plaintiff firm has proved its title to main- tain the present suit in ejectment against the defendant and whether the defendant is entitled to the benefit of the provisions of sec, 53-A of the Transfer of Property Act. The question as to the maintainability of the suit S.C.R. SUPREME COURT REPORTS 83 against the defendant without a proper notice was raised before the High Court but permission to argue it was refused because the matter had not been raised in either of the lower Courts. The appeal was elaborately argued before us by the learned counsel for the parties, butin our view, it is not necessary to consider and decide all the points urged because we consider that the Assistant Judge was right in entertaining and giving effect to the plea under sec, 53-A of the Transfer of Property Act and we are satisfied that no substantial grounds existed for reversing that decision in second appeal. This section introduced in the Transfer of Property Act in 1929 is in these terms :— “Where any person contracts to transfer for con- sideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with rea- sonable certainty,
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“Where any person contracts to transfer for con- sideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with rea- sonable certainty, _ aodthe transferee has, in part-performance of the contract, taken possession of the property or any part thereof......and has done some act in furtherance of the contract; @nd the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered........ the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than aright expressly provided by the terms of the contract........ _ The section is a partial importation in the statute law of India of the English doctrine of part performance. It furnishes a statutory defence to a person who ‘has no registered title deed in his favour to maintain his possession if he can prove a written and signed contract in his favour and some action on his part in part-performance of that contract. In order to find whether the defendant in the present case has satisfied the conditions of the 1960 Sheth Maneklal Mansukhdhai v. Messrs. Hor- musji Jamshedji Ginwallu and Sorts. Mahejan J. 1980 Theth Maneblal Mansukhbat vv Messss. Hor- musji Jamshedji Ginwalla and Sons. Mahajan J. 84 SUPREME COURT REPORTS [1950]
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1960 Sheth Maneklal Mansukhdhai v. Messrs. Hor- musji Jamshedji Ginwallu and Sorts. Mahejan J. 1980 Theth Maneblal Mansukhbat vv Messss. Hor- musji Jamshedji Ginwalla and Sons. Mahajan J. 84 SUPREME COURT REPORTS [1950] section, it has to be held proved that the Talukdari Settlement Officer contracted to give a lease of the survey numbers in suit to Manilal Maganlal by a writing signed by him and that from this writing the terms of the tenancy can be ascertained with reasonable certainty. It has further to be held established that the transferee took possession of the property or did any acts in furtherance of the contract. It may be mentioned that in cases of lease the legislature has recognized that the equity of part performance is an active equity as in English law and is sufficient to support an independent action by the plaintiff. (Vide 8. 27-A of the Specific Relief Act), This section however applies to contracts executed after lst Rpril, 1930,.and has no application in the present case; but there can be no manner of doubt that the defence under Section 53-A is available to a person who has an agreement of lease in his favour though no lease has been executed and registered. We are satisfied that the defendant has fulfilled both the conditions necessary to attract the application of the section in the present case. The High Court was in error when it held that the corres- pondence summarised in Ex. 18} eould not be treated as evidence of the contract and that its terms could not be reasonably deduced from this document. It is no doubt true that Ex. 181 is merely secondary evidence of the agreement of lease but it is equally true that it is a very reliable piece of secondary evidence coming as it does from government records. It furnishes proof of the fact that there was an acceptance in writing: under which the contract to transfer the survey numbers in suit by way of lease was effected by the Talukdari Settlement Officer in favour of Manilal Maganlal. The offer was also in writing signed by the offeror. The Government Resolution which made the agreement binding was also in writing and was signed by compe- tent authority. No objection as to admission of secon- dary evidence could be taken in this case as the primary evidence was in the possession either of the plaintiff or of the talukdars, the predecessors in interest and io spite of notice it was not produced. Reference in this connection may be made to the statement of the 8.C.R. SUPREME. COURT REPORTS 85 plaintiff in the witness box which is to the following effect :— “T must have read the correspondence with T.8.0. since it isso recited in the para. 2 of the plaint. I cannot say whether that correspondence is in my office or with
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plaintiff in the witness box which is to the following effect :— “T must have read the correspondence with T.8.0. since it isso recited in the para. 2 of the plaint. I cannot say whether that correspondence is in my office or with the talukdars. I cannot say without that correspond- ence as to whether T.8.0. has called survey No. .226 as Lalliti and hence the talukdars are-not entitled to any income for it. I also cannot say without that correspondence that the rents of survey Nos. 225 and 223 were fixed at Rs. 135 and Rs. 115 respectively and that Rs. 45 were to be taken by way of sugar...” In another part of the same statement he said that the talukdars had got the records of the time preceding his management. It appears that the original docu- ments were returned to the talukdars after the discharge of the Talukdari Settlement Officer and were in the possession. and power of the plaintiff or his predecessors in interest and they were not produced by him in spite of notice. Para. 2 of the plaint clearly recites that there was correspondence between the TalukdariSettle- ment Officer and the defendant’s predecessor in interest under which'a lease was negotiated. The plaintiff’s knowledge of this correspondence and its contents is thus prima facie established and leads to the conclu- sion that it was in his possession or power and he has intentionally withheld it. Without.a perusal of this correspondence the facts recited in para. 2 of the plaint could not have been mentioned in the plaint. Once it is held that Ex. 181 is good secondary evidence of the agreement of lease, there can then be no hesitation in holding that by an offer and an acceptance made in writing and signed by the respective parties an agreement was completed between the Talukdari Settlement Officer and the predecessor in interest of the defendant and that necessary sanction of the Government was also in writing signed by the officer concerned. It has further to:be held that the terms of the contract can be fairly deduced from the recitals of this document. The only important clause with which we are concerned in the present case is as to the nature of the tenancy. It is clearly recited therein 1980 Sheth ManeMal Mansukhbhas Ve Megsrs. Hov- mus}i Jamshedji Ginwalla and. Mahajan J. 1950 Sheth Maneklai Mansukhbhai v. Messrs, Hor- musjt Jamshedsi Ginwalla and Sons. Mahajan J. 86 SUPREME COURT REPORTS [1950] that the lease was to be of a permanent character and the terms as regards rental could be revised after a period of fifty years. The rent payable is recited in unambiguous terms in the document as Rs. 290 per annum.
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Mahajan J. 1950 Sheth Maneklai Mansukhbhai v. Messrs, Hor- musjt Jamshedsi Ginwalla and Sons. Mahajan J. 86 SUPREME COURT REPORTS [1950] that the lease was to be of a permanent character and the terms as regards rental could be revised after a period of fifty years. The rent payable is recited in unambiguous terms in the document as Rs. 290 per annum. It was not denied that the lessee took possession after this agreement was arrived at. It was argued that possession was taken before sanction of the Government was obtained in September, 1917. There is however no proof of this except a bare recital in the Talukdari Settlement Officer’s letter to Government that he had permitted the defendant to enter on the land in antici- pation of Government’s sanction. As already pointed out, the possession was with the tenants and had to be taken after entering into an arrangement with them or by issuing notice to them. It is not possible to think that this could have happened in such a short space of time as elapsed between the middle of July and the beginning of September. In any case the factory could not have been built before the sanction of the Govern- ment was received. Not only did the lessee take posses- sion in part-performance of the agreement but he offered the rent agreed upon and paid it not only to the Taluk- dari Settlement Officer but to all those who subse- quently managed the interest of the talukdars in the survey numbers in dispute. The original lessee after having entered into possession of the property effected a mortgage of it in favour of the defendant. The defendant advanced a substantial sum on security of the property to the lessee. The equity of redemption was sold at an auction sale. The defendant and his - predecessor in interest were willing to perform their part of the contract. Asa matter of fact, they have performed the whole of it. All that remains to be done is the execution of a lease deed by the lessor in favour of the lessee and of getting it registered. The plaintiff in para. 6 of the plaint in unambiguous terms admitted that he received the amount of the lease up to 31st July, 1932, in respect of the survey numbers in dispute. It is difficult to imagine what lease he was referring to in the absence of a registered deed of lease. It oould only mean the agreement of lease given in writing S.C.R. SUPREME COURT REPORTS 87 and signed by the ‘Talukdari Settlement Officer. It is in pursuance of this agreement of lease that all the subsequent acts above mentioned were done. It may also be observed that an agreement of lease creating a present demise but not registered is admissible under S. 49 of the Indian Registration Act as evidence of part performance and Ex. 181 is secondary evidence of that agreement. A formed lease is not necessary to attract the application of S. 53-A of the Transfer of Property Act. All that is required is that an agreement in writing signed by the transferor can be gathered from the evidence. The correspondence mentioned in Ex. 181 fully establishes that fact.
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We are therefore of the opinion that the learned Assistant Judge rightly dismissed the plaintiff's suit and the High Court was in error in interfering with that decision in second appeal. The result therefore is that the appeal is allowed, the decision of the Assistant Judge restored and that of the High Court reversed, The circumstances of the case are such that we would make no order as to costs. The defendant was at fault in not producing all the documentary evidence at the proper stage of the case and he has been enabled to avail himself of the defence furnished to him under S. 53-A by reason of the admission in evidence after remand of Ex. 181, which though not properly admit- ted at that stage was not rejected by the High Court and could not be rejected at the stage when we dealt with the case. The parties are therefore left to bear their own costs throughout. Appeal allowed. Agent for the appellant: S. P. Varma. Agent for the respondent: Ganpat Rai. 1950 Sheth Maneklal _Mansukhbhai v. Messrs. Hor- musit Famshedji Ginwalla and Sons. Mahajan 7.
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88 SUPREME COURT REPORTS [1950] A. K. GOPALAN v. THE STATE OF MADRAS. UNION OF INDIA : INTERVENER. [डिक Harmar Kania CJ., Saryw Fazi Att, PatanyaLr Sastrt, MEHR CHAND Manayan, Mouxueryea and 5. है. Das JJ.] Preventive Detention Act (IV of 1950), ss. 3, 7, 10-14-—Valid- ity—-Constitution of India, 1950, Arts. 13, 19 to 22, 32—Law relating to preventive detention—Whether infringes Fundamental Right as to freedom of movement—Whether subject to judicial review as to reasonableness under Art. 19 (5)-—Scope of Art. 19— Right of free movement and Right to personal liberty, nature and incidents of—Art. 22, whether complete code as two preventive deten- tion-—Scope and applicability of Art. 21—“Law,” “procedure established ‘by law,” meanings of—Whether include rules of natural justice-—Construction of Art. 21—American decisions on “due pro- cess of law,” value of—Omission to provide objective standard for satisfaction of authorities, to pravide for oral hearing or leading of evidence, to fix maximum: period of detention, and to specify “cir- cumstances” and “classes of cases” where period of detention may be extended over 3 months, prohibiting detenu from disclosing ’ grounds of detention—Validity of law—Construction of Constitution ~—Reference to: debates and Report of Drafting Committee— Permissibility. , ' The Petitioner who was detained under the Preventive Detention Act (Act IV of 1950) applied under Art. 32 of the Con- stitution for a writ of Aabeas corpus and for his release from detention, on the ground that the said Act contravened the pro- visions of Arts. 13, 19, 21 and 22 of the Constitution and was cea ultra vires and that his detention was therefore illegal : Held, per Kania 0. J., Patanzart Sastat, Muxneryea and Das J}. (Faz Aut and Manayan JJ. dissenting)—that the Preven- tive Detention Act, 1950, with the exception of Sec, 14 thereof did not contravene any of the Articles of the Constitution and even though Sec. 14 was ultra vires inasmuch as it contravened the provisions of Art, 22(5) of the Constitution, as this section was severable from the remaining sections of the’ जला, the invalidity of Sec. 14 ae not affect the validity of the Act as a whole, and the detention of the petitioner was not illegal, Faz. Arr and MAnayan JJ.—Section 12 of the Act was also ultra vires, and since it contravened the very provision in the “" \ S.C.R. SUPREME COURT REPORTS 89 Constitution under which the Parliament derived its competence to enact the law, the detention was illegal.
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Faz. Arr and MAnayan JJ.—Section 12 of the Act was also ultra vires, and since it contravened the very provision in the “" \ S.C.R. SUPREME COURT REPORTS 89 Constitution under which the Parliament derived its competence to enact the law, the detention was illegal. Held, by the Full Court (Kania C. J., Fazi Axi, Patanyart Sastr1, Manajan, Muxueryea and Das JJ.)—Section 14 of the Preventive Detention Act, 1950, contravenes the provisions of Art. 22 (5) of the Constitution in so far as it prohibits a person detained trom disclosing to the Court the grounds on which a detention order has been made or the representation . made by him against the order of detention, and is to that extent uitra vires and void. Per Kania C, J,, Patanyati Sasrri, Manayan, MuKHERJEA and Das Jj. (Fazi Aut J. dissenting)——Article 19 of the Consti- tution has no application to a law which relates directly to preventive detention even though as a result of an order bf detention the rights referred to in sub-cls. (a) to (e) and (g) in gen- eral, and sub-cl. (d) in particular, of ले. (1) of Art. 19 may be res- tricted or abridged; and the constitutional validity of a law relat- ing to such detention cannot therefore, be judged in the light of the test prescribed in cl. (5) of the said Article. Das J.—Article 19 (1) postulates a legal capacity to exercise the rights guaranteed by it and if a citizen loses the -freedom of his person by reason of lawful detention as a result of a con- viction for an offence or otherwise he cannot claim the rights under sub-cls. (a) to (८) and (g) of Art. 19 (1); likewise if a citizen’s property is compulsorily acquired under Art. 31, he cannot claim the right under sub-cl. (f) of Art. 19 (1) with respect to that pro- perty. In short the rights under sub-cls. (a) to (e) and (हु) end where lawful detention begins and therefore the validity of a preventive detention Act cannot be judged by Art. 19 (5) Manajan J.—Whatever bethe precise scope of Art. 19 (1) (d) and Art. 19 (5) the provisions of Art. 19 (5) do not apply to a law relating to preventive detention, inasmuch as there is a special self-contained provision in Art. 22 regulating it. Faz. Axi J.—Preventive detentionis a direct infringement of the right guaranteed in Art. 19.(1) (d), even if a narrow con- struction is placed on the said spb-clause,‘and a law relating to preventive detention is therefore subject to such limited judi- cial review as is permitted by Art. 19 (5).
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Faz. Axi J.—Preventive detentionis a direct infringement of the right guaranteed in Art. 19.(1) (d), even if a narrow con- struction is placed on the said spb-clause,‘and a law relating to preventive detention is therefore subject to such limited judi- cial review as is permitted by Art. 19 (5). Per Kania (0. J., Patangatt Sasrai, Muxueryea and Das Jj. (Fazz Aut J. dissenting)—The concept of the right “to move freely throughout the territory of India” referred to in Art. 19 (1) (d), of the Constitution is entirely different from the concept of the right to “personal liberty” referred to in Art. 21, and Art. 19 should not, therefore, be read as controlled by the provisions of Art. 21. The view that Art. 19 guarantees sub- stantive rights and Art. 21 prescribes the procedure is incorrect. Das. J.—Article 19 protects some of the important attributes of personal liberty as independent rights and the expression “Personal liberty” is used in Art. 21 as a compendious term 1950 A.K. Gopalan Ve The State 1950 A.K. Gopalan Vv. The State 4 90 SUPREME COURT REPORTS [1950] including within .its meaning all varieties of rights which go to make up the personal liberties of men. Fazw Axi J.—Even if it be assumed that Art. 19 (1)(6) does not refer to “personal liberty” and that it. bears the restricted mean- ing attributed to it, that is to say, it signifes merely the right to move from one locality to another, preventive detention must be held to affect this limited right of movement directly and sub- stantially. One of the objects of preventive detention is to res- train a person detained from moving from place to place so that he may not spread disaffection or indulge in dangerous activities in the places he visits. The same consideration applies to the cases of persons who are interned or externed. Hence, extern- ment, internment and certain other forms of restriction on mtovement have always been treated as kindred matters belong. ing to the same group or family, and the rule which applies to one must necessarily apply to the others.
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Per Kania C. J., Paranyaur Sasrat and Das JJ. (Managan J. dissenting).—Article 22. does not form a complete code of consti- tutional safeguards relating to preventive detention. To the extent that provision is made in Art. 22 it cannot be controlled by Art. 21; but on points of procedure which expressly or by necessary implication are not dealt with by Art. 22, Art. 21 will apply. Das J.—Art. 21 protects substantive rights by requiring a procedure and Art. 22 lays down the minimum rules of pro- cedure that even the Parliament cannot abrogate or overlook. Manayan J.—Arst. 22 contains a self-contained code of constitu- tional safeguards relating to preventive detention and cannot be examined or controlled by the provisions of Art. 21, The princi- ples underlying Art. 21 are however kept in view in Art. 22 and there is no conflict between these articles. Muxnerjea J.— Even assuming that Art. 22 is not a self-contained code relating to preventive detention and that Art. 21 would apply, it is not permissible to supplement Art. 22 by the application of rules of natural justice. Faz Axi J.—Art. 22 does’ not form an exhaust- ive code by itself relating to preventive detention. Parliament can make further provisions and if it has done so Art, 19 (5) may be applied to see if those provisions have transgressed the bounds of reasonableness. Per Kanta C. J. Muxneryea and Das JJ. (Faz. Aur J. dissenting)—In Art.21 the word “law” has been used in the sense of State-made law and not as an equivalent of law in the abstract or general sense embodying the principles of natural justice; and “procedure established by law” means procedure established by law made by the State, that is to say, the Union Parliament or the Legislatures of the States. It is not proper to construe this expression in the light of the meaning given to the expression “due process of law” in the American Constitution, by the Supreme Court of America. Paranyaus Sastar J.—“Law” in Art. 21 does not ‘mean the jus naturale of civil law but means S.C.R. SUPREME COURT REPORTS 91 positive or Statemade law. “Procedure established by law” does not however mean any procedure which may be prescribed by a competent legislature, but the ordinary well-established criminal procedure, i.¢., those settled usages and normal modes of procedure sanctioned by the Criminal Procedure Code, which is the general law of criminal procedure in this country. The only alternative to this construction, if a constitutional transgression is to be avoided, is to interpret the reference to “law” as implying a constitutional amendment pro tanto, for it is only a law enacted by the procedure provided for such amendment that could modify or override a fundamental right without contraven- ing Art. 13 (2) .
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Fazt Aur J.—There is nothing revolutionary in the view that “procedure established by law” must include the four principles of elementary justice which inhere in and are at the root of all civi- lized systems of law, and which have been stated by the American Courts and jurists as consisting in (1) notice, (2) opportunity to be heard, (3) impartial tribunal and (4) orderly course of pro- cedure. ‘These four principles are really different aspects of the same right, namely, the right to be heard before one is condemned. Hence the words “procedure established by law”, whatever its exact meaning be, must necessarily include the principle that no person shali be condemned without hearing by an impartial tribunal. Per Kania C. J., Fazt Avi, Patanyatt Sastri, Maayan and Das JJ.—Section 3 of the Preventive Detention Act, 1950, does not delegate any legislative power to an executive officer _ but merely confers on such officer a discretion to enforce the law made by the legislature, and is not therefore invalid on this ground. The fact that the section does not provide an objective standard for determining whether the requirements of law have been complied with, is not a ground for holding that it is invalid. Faz Aur J.—Section 3 is however a reasonable provision only for the first step, i.c., for arrest and initial detention and must be followed by some procedure for testing the so-called subjective satisfaction, which can be done only by providing a suitable machinery for examining the grounds on which the order of detention is made and considering the representations of the persons detained in relation to those grounds. Per Kania C. J.) Manayan and Das JJ.—Section 7 of: the said Act is not invalid merely because it does not provide for an oral hearing or an opportunity to lead evidence but only gives a right to make a representation. Right to an oral hearing and right to give evidence are not necessarily implied in the right to make a representation given “by Art.. 22. — ः Fer Santa C. J. and Manayan J.—The provision contained in Sec. 11 that a person may ‘be detained for such period as the 12-A 1950 AK. Gopalan v. T he Stale. ही 1950 A.K. Gopalan The State 92 SUPREME COURT REPORTS [1950] State thinks fit does not contravene Art. 22 (7) and it is not there- fore invalid,
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Fer Santa C. J. and Manayan J.—The provision contained in Sec. 11 that a person may ‘be detained for such period as the 12-A 1950 AK. Gopalan v. T he Stale. ही 1950 A.K. Gopalan The State 92 SUPREME COURT REPORTS [1950] State thinks fit does not contravene Art. 22 (7) and it is not there- fore invalid, Per Kania C, J., Patanyatr Sastri, Muxueryea and Das Jj. (Faz. Aut and Manayan JJ. dissenting).—Article 22 (7) means that Parliament may prescribe either the circumstances under which, or the class or classes of cases in which, a person may be detained for a period longer than three months without reference to an advisory board. It is not necessary that the Parliament should prescribe both. The matters referred to in clauses (a) and (b) of sub-sec. (1) of Sec. 12 constitute a sufficient descrip- tion of such circumstances or classes of cases and Section 12 is not therefore open to the objection that it does not comply with Art. 22(7). Das J.—Parliament has in fact. and substance pres- cribed both in clauses (a) and (b) of sub-sec. (1) of Sec. 12. Fazx Avi and Manayan Jj.—Article 22(7) means that both the circumstances and the class or classes of cases (which are two different expressions with different meanings and connotations) should be prescribed, and the prescription. of one’ without the other will not be enough. The enumeration of the subjects for reasons connected with which a law of preventive detention could be made contained in cls. (a) and (b) of sub-sec. (1) of Sec. 12 does riot amount to prescribing the circumstances under which, or the class or classes of cases in which, a person can be detained for more than three months. Per Kania C. J.--While it is not proper to take into consi- deration the individual opinions of members of. Parliament or Convention to construe the meaning of a particular clause, when a question ,is raised whether a certain phrase or expression was up for consideration at all or not, a reference to the debates may be permitted. Patanyart Sasrri J.—In construing the provisions of an Act, speeches made in the course of the debates on the bill should not be taken into consideration. Muxueryea J.—In construing the Constitution it is better to leave out of account the debates in the Constituent Assembly, but a higher value may be placed on the report of the Drafting Committee. OrictnaL Jurispicrion : Petition No. XIII oF 1950. Application under Art. 32 (1) of. the Constitution of India for a writ of habeas corpus against the deten- tion. of the appellant in the Madras jail in pursuance of an order of detention made under the Preventive Detention Act, 1950, The material facts of the case and arguments of counsel are set out in detail in the judgments. The relevant provisions of the Preventive Detention Act, 1950, are printed below. S.C.R. SUPREME COURT REPORTS | 93
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