Judgment

Chandavarkar, J

[1] This suit was filed on the 1st of December 1904 by Fatmaboo, daughter of one Kallimuddin Amiruddin, deceased, to recover her share in his properties as one of his heirs. It was alleged by her in the plaint that her father had obtained from her, oh the 25th of October l895 a Gujerati writing whereby, in consideration of a sum of Rs. 9,000 which he had agreed to credit to her in his books, she had relinquished and released all her right, present and future, by way of inheritance or otherwise in all his properties, but that the said writing, having not been registered, was inadmissible in evidence against, and not binding upon, her.

[2] Fatmaboo having died on the 21st of April 1905, her husband (Goolam Hussein Abdulalli) and her son (Sumsuddin) were substituted as her heirs and legal representatives on the 17th of July 1905. In Suit No. 460 of 1905, brought by the first defendant against the present plaintiffs as Fatmaboo s heirs, for compelling the Registrar to register the Gujerati writing above referred to, I held that the deed did not fall within the class of documents requiring, under the Registration Act, compulsory registration: Abdool v. Goolain (1905) 7 Bom. L.R. 742. On the 24th of August 1905, when the present suit came on for hearing before me, a prayer was made for amendment of the plaint by inserting the allegation that the Gujerati writing of the 25th of October 1895 had been obtained from Fatmaboo by her father by means of undue influence exercised over her. The amendment prayed for was allowed and the suit has been tried on several issues involving questions both of law and fact.

[3] The first question is as to the validity and binding character of the deed executed by Fatmaboo. That deed, marked Ex. F, was executed at Cambay, where both Kallimudin and Fatmaboo lived. After reciting that Fatmaboo has a right of inheritance to all the properties which her father possesses at Cambay, Bombay, Bakha, Bassein and other places., and of which he may die possessed, and that her mother directed him to give her ornaments, the deed goes on to say that, in consideration of her father having agreed to give her on the terms mentioned in the deed a sum of Rs. 9;000, she relinquishes all her rights and claims, that she shall have no right to any property belonging to her father at his death and that he is at liberty to leave his property to his other heirs “excepting the above-mentioned sum” of Rs. 9,000.

[4] The first point raised in support of the plaintiff s claim to a share in Kallimudin s properties is that the deed in question is void as a nullity, because thereby Fatmaboo relinquished her expectant interest in her father s property, which interest, at the date of the execution of the deed, was a mere spes successionis, and such interest, both according to the Mahomedan law and the Transfer of Property Act, cannot be the subject of a valid transfer. Reliance is placed in support of this contention on Case No. XI cited in the “Precedents of Inheritance” at page 89 of Macnaughten s ” Principles and Precedents of Mahomedan Law” and the case of Mussummaut Khanum Jan v. Mussummaut Jan Beebee (1827) 4 S.D.A. (Beng.) 210. It is clear from his footnote that Macnaughten took his precedent from the latter case. There two sisters executed a deed in favour of their brothers renouncing their right to inherit their mother s property in consideration of Rs. 1,000 received by each sister from the brothers. The mother was alive and in possession of her property at the date of the deed. On the mother s death the two sisters sued the brothers for their legal share of the property left by the mother. The brothers in defence set up the deed of renunciation by the sisters and also an alleged deed of gift by the mother to the brothers, of which mention was made in the former deed. The Provincial Court, where the suit was heard, consulted two of its law officers. One of them was of opinion that the deed of gift being a nullity, the deed of renunciation was also void. The other declared that a renunciation by an expectant heir of his chance or possibility of succession is null and void, “being in point of fact giving up that which had no existence.” The Provincial Court, acting upon these opinions, set aside the deeds and allowed the claim. That decision went up in appeal to the Sudder Divany Adawlut who consulted their law officers. These pronounced in favour of the opinions expressed by the two officers consulted by the Provincial Court. The Sudder Divany Adawlut, however) disposed of the appeal on a different point, leaving the question of the validity of the deed of renunciation untouched. The opinions of the law officers, consulted by the Court, appear, however, to be clearly against the validity of such a deed. According to them, a mere spes successionis. under the Mahomedan Law, cannot be the subject of a valid transfer. That is also the law under the Transfer of Property Act. Section 6(a) of the Act provides that ” the chance of an heir-apparent succeeding to an estate, the chance of a relation obtaining a legacy on the (death of a kinsman, or any other mere possibility of a like nature, cannot be transferred”. To the same effect is the decision of the Judicial Committee of the Privy Council in Sham Sunder Lal v. Aohhan Kunwar (1898) L.T. 25 I.A. 183 at p. 189 where it was held that, under the Hindu Law, a person cannot make a valid disposition of or bind his expectant interests.

[5] The present case, however, is, in my opinion, different. It is not a correct view of the transaction evidenced by the deed, Ex. F, executed by Fatmaboo, that it is either a transfer or a renunciation of her expectant interest. It is true that she speaks in the deed of relinquishment by her of her right of inheritance; but, in the words of Lord Herschell in Me Entire v. Grossley Brothers [1895] A.C. 457 at pp. 462, 463, “the agreement must be regarded as a whole -its substance must be looked at. The parties cannot, by the insertion of any mere words, defeat the effect of the transaction as appearing from the whole of the agreement into which they have entered. If the words in one part of it point in one direction and the words in another part in another direction, you must look at the agreement as a whole and see what its substantial effect is…. It is only by a study of the whole of the language that the substance can be ascertained.” Now, by this deed (Ex. F), Fatmaboo conveys or transfers nothing either in presenti or in futuro. There is no person mentioned to whom any transfer is made. It is neither a sale of, nor an agreement to sell, her expectant interest. Nor is it a gift thereof. The transaction is between her father as owner of certain property and herself as his daughter. In effect the father says to her:-” I wish to leave my property at my death to other heirs than yourself and give you now, in lieu of the legal share to which you may become entitled on my death, certain property. And the daughter agrees. There is no renunciation of her right to inherit. On the other hand, such right is recognised. All that is effected is that in virtue of that right she agrees to take on her father s death particular property carved out of his estate in lieu of her legal share in consideration of the father giving her certain present benefits out of that property. It is a contract between her and her father by which, she agrees to take on his death specific property instead of her legal share and to make no other claim on his estate or against his other heirs taking it. When the father dies, her right to inherit is represented by what she has agreed to take from the estate under the contract. The rest of the estate goes to the other heirs not because she transfers it to them. The contract was not between her and them. She never transferred or agreed to transfer her interest to them. She agreed with her father to accept in his life-time an allotment to her of a specific portion of his estate in recognition of her expectant right as one of his heirs. The transaction was in the nature of a family arrangement by which the father made immediate provision for his daughter, to take effect both in his life-time and after his death, and to which the daughter consented in consideration of the present benefits received and the future benefits to be received by her.

[6] I have been unable to find any principle of Mahomedan Law or decision binding upon me in support of the view that such a transaction is a nullity. On the other hand, if we have regard to the analogous principle of Mahomedan Law, by which an owner of property is allowed to devise the whole of it as he likes, provided he has the consent of his heirs, given, as to Sunnis, on his death, and as to Shias, whether in his lifetime or after his death, it seems reasonable to hold that a transaction of the nature we have here is not opposed to the spirit of that law. The parties in the present case are admittedly Shias. If a Shia can will away his property as he likes with the consent of his expectant heirs, who have no more than a possibility or chance of succession, why should there be any objection on principle to his leaving that property to some of those heirs with the consent of the rest after giving to the latter something out of his property? What is there in either the letter or the spirit of the Mahomedan law which prohibits an owner of property from giving a part of his property in his life-time to one of his heirs in lieu of what he might inherit after his death, in consideration of that heir agreeing to leave the property free to be inherited by the other heirs when the owner dies. It was urged by Mr. Inverarity, on the authority of the decision of the Privy Council in the Tagore case, that the transaction evidenced by the deed, Ex. F, was void because it altered the law of descent as laid down by the Mahomedan Law. But I can see no such alteration. If my view of the transaction is correct, if, that is, Fatmaboo is recognised by the deed as an heir, if she is not disinherited but all that is done is that she is to receive, not her share of the property in specie which her father might leave on his death but as an equivalent of it, something else instead, the course of descent prescribed by the Mahomedan Law, so far from being altered, is substantially complied with. All that is effected is that one of the heirs obtains one kind of property instead of another and that by her own consent given for consideration. It would require very strong and clear authority, whether under the Mahomedan law or other, to justify any Court in holding such a transaction to be a nullity.

[7] The next question is whether the contract, evidenced by Ex. F, is voidable on the ground of undue influence.

[8] Before discussing the evidence as to the circumstances under which the deed, Ex. F, was obtained from Fatmaboo, it is necessary to deal with the transactions between her and her father Kallimuddin and between her and the first defendant which, it is alleged, preceded the transaction under Ex. F.

[9] First, we have the will, Ex. 20, alleged to have been executed by Kallimuddin on the 28th of April 1880 and to have been consented to by Fatmaboo. The first defendant affirms that it is in his handwriting and that it was executed by his father in his own presence and in that of Fatmaboo, Abdul Hussein Abdulally, and Abdoolabhoy Moola Kamruddin. The last two have been examined in the case and identify their attestations on the document and the mark purporting to be Fatmaboos. There are some discrepancies in the evidence of these witnesses, but I think those are natural, considering that they are speaking to events which occurred twenty years ago. I have compared the signature of Kamruddin on Ex. 20 with his signatures on Ex. A17 and the bundle of Chittis in Ex. 39 and I do not see any striking difference in the character of the handwriting. Such dissimilarity as there is can be easily accounted for by the difference of years between the signatures. The appearance of the paper on which the will is written, the way in which it appears to have been folded, the fact that the inside of the fold is fresher than the outside, and the white colour, which has appeared over the writing on some of the folds, are all in favour of the genuineness of the document and leave no doubt that the document is old and was written several years ago. The only thing against it is that it was not produced by the first defendant until December 1905. He states that his solicitor having last December asked him to bring all the papers of his father which he had in his possession., he went to Cambay and looked into all the papers in his house there more carefully than he had done before making his affidavit of documents. It was then, he says, that he discovered this will in a receptacle, wrapped up in a paper among other papers. Though his answers in cross-examination as to where and how he found the will are not quite satisfactory yet I am not prepared to disbelieve his story entirely. Upon the whole, I find Ex. 20 to be the will of Kallimuddin and that Fatmaboo attested it by way of consent. It is doubtful, however, whether Fatmaboo was at that time able to understand the effect of her act. According to the plaintiffs, she was then not more than fifteen years of age. According to the first defendant she was then twenty. The evidence as to her age is not of such a character, on either side, as to enable me to fix it with any degree of precision. The burden of proof lay, under the circumstances, on the first defendant, especially as Fatmaboo could then only make her mark and she could neither read nor write. I am not satisfied, therefore, that the consent was given by her under such circumstances as to make it binding upon her. Moreover, the consent was given in consideration of her receiving Rs. 1500 on the death of Kallimuddin and the first defendant admits that he did not pay that sum to her when that event happened. Kallimuddin has himself by his conduct revoked the will, inasmuch as he died leaving a wakfnama, Ex. A17,in respect of his property. The will, therefore, was not binding on Fatmaboo when her father died. The relevancy of this evidence, however, is this. It shows that from a comparatively early period of her life her father was anxious to arrive at a settlement with her in regard to the devolution of his property on his death.

[10] The next transaction between Kallimuddin and Fatmaboo is evidenced by the deed, Ex. C, executed on the 25th November 1887 by the latter, relinquishing all her claims of inheritance upon the former, in consideration of receiving from him Rs. 5,000. There is no dispute as to the execution of this document by Fatmaboo. It is also admitted that it was never acted upon but was returned to Fatmaboo. The first defendant s statement that as provided in this deed Fatmaboo received Rs. 500 in the shape of gold bangles is not entitled to any weight. The entry as to the gold bangles (Ex. 21) shows that it had been given five months before- on the 27th June 1887-just at the time of the betrothal of his daughter to Fatmaboos son.

[11] Ex. C was followed by another document, Ex. E, in February 1888) executed by Fatmaboo in favour of the first defendant. By that she agreed to sell her right of inheritance to the property of her father, then alive, to the first defendant for Rs. 5,000. The execution of this document by Fatmaboo is admitted. The first defendant states that it was cancelled by the deed, Ex. F, which has given rise to the present litigation.

[12] The evidence of these transactions beginning with the will, Ex. 20, and ending with the agreement, Ex. E, is relevant to this suit so far that it shows that from about 1880 Kallimuddin had Conceived the desire of making some arrangement in his life-time by which he could get rid of Fatmaboos chance of succeeding to his property as one of his heirs and leave it to the first defendant on his death. It appears from those transactions that he was satisfied with none of them. Hence the arrangement evidenced by the deed, Ex. F.

[13] At the date of this deed, Ex. F, Fatmaboo was at least thirty years of age. She was then a married lady, having been married some years before and lived with her husband at Cambay. She had a son, who is plaintiff No. 1 in the present Suit. The evidence recorded in this case and her hand-writing on Exs. C, E and F show that she was not an illiterate lady but that she could read and write Gujerati pretty fairly. The facts so far are not contested; but the plaintiff s case as to undue influence rests upon the following allegations:-(1) that the transaction evidenced by Ex. F was between a daughter and her father; (2) that Fatmaboo was apardanashin; (3) that the deed was not explained to her; (4) that she did not understand the legal nature and effect of her act; (5) that She executed the deed without any independent legal advice and without having all the materials regarding the value of her father s property put before her; and (6) that the consideration moving from the father was grossly inadequate. 14. As to the first of these points, though the transaction was between a daughter and her father, the relation between them at or shortly before the execution of the document was not such as to raise a presumption that the father had any influence over the daughter or that he stood in any fiduciary capacity towards her. “The influence” of a parent over his child, “is deemed to exist, in the language of the cases, until the child becomes emancipated,” (See Ashburner on Equity, page 415). Fatmaboo had been married several years before the date of Ex. F; she lived with and was maintained by her husband; and the father had no control over, or responsibility towards, her. Her husband has in his evidence admitted that when she executed the document, Ex. C, he did not ask her about it when she informed him of its execution, because he knew that “she could manage her household as well as other affairs.”

[14] That she was a pardanashin lady I have no doubt. Witnesses have been examined on either side on this point. Those of the plaintiffs endeavour to make out that she was a strict pardanashin, who never appeared before males without a veil on her face; those of the defendants, that she had no parda. But, substantially, the evidence of both sets of witnesses agrees and the effect of it is decidedly in favour of the view that the parda system prevails among the ladies of the Borah community to which Fatmaboo belonged; that in Horwad, where the Borahs have their quarters at Cambay, the ladies move about with faces uncovered; that they sometimes appear unveiled before strangers in matters of business provided their fathers or husbands or brothers or some other near adult male relative is present. Now the law requires that in the case of deeds taken from a lady of this class the Court must be careful to see “that the party executing them has been a free agent and duly informed of what she was about”; that the deed was explained to and understood by her. See Sudisht Lal v. Mussummat Sheobarat Koer (1881) L.R. 8 I.A. 3 9 and Shambati Koeri v. Jago Bibi (1902) I.L.R. 29 Cal. 749. Here we have the evidence of two witnesses-Mohanlal and Kikabhoy Hasanalli-who depose that the deed was explained to the lady. Their evidence is indeed not free, from defects; but it must be rememberd that they are speaking to events which occurred ten years ago. The deed, Ex. F, is drawn up in the Gujerati language and;, judging from the fact that Fatmaboo could write fairly good Gujerati, it is reasonable to infer that she had no difficulty in understanding the terms of the document and realising its effect. It is said that she had no independent legal advice at or shortly before the execution of the document. The evidence however, shows that a vakil by name Ohunilal drafted it that he had a hand in settling the amount in favour of Fatmaboo and that it was in his presence that the document was executed. I am satisfied upon the evidence that he acted as her vakil and also as that of her father. The probabilities are that he was employed by Kallimuddin; but at this distance of time, when all the three are dead, it would be unfair to assume or presume that Chunilal acted solely as Kallimuddins vakil-especially when we have this undoubted fact, to be presently dealt with at greater length, that Fatmaboo never complained during her life-time that she had executed this deed without the benefit of independent advice. The evidence also shows that nothing was said at the execution as to the value of Kallimuddins property: but these infirmities again in the evidence for the defendants must be weighed along with the fact that Kallimuddin and Fatmaboo, and Chunilal are dead, and that we do not know what had been discussed between them before Ex. F was executed. And the subsequent conduct of Fatmaboo bears stronger testimony in favour of the defendant s case and is absolutely inconsistent with any undue influence having been exercised over her as to the execution of this document.

[15] Immediately after Ex. F had been executed, a copy of it, (Ex. I) was handed over to Fatmaboo. Under the document she became entitled to receive Rs. 250 annually as interest on the principal sum of Rs. 9,000 mentioned in Ex. F. For four years no interest was paid to her. On the 6th of December 1899 she served a notice (Ex. No. 3) upon her father, demanding the four years interest due to her under the deed. In that letter, which her husband; the second plaintiff, has admitted to be in the handwriting of her son, the first plaintiff Shumsuddin, she insists in distinct terms upon her rights under Ex. F. Her husband states that this letter must have been composed by a vakil; and the language of the notice shows that it must have been drafted by a lawyer. Shumsuddin, though present in Court, has not ventured to go into the witness-box and deny that a lawyer had been consulted as to this notice and had drawn it up. It must be presumed under these circumstances that the lawyer had been placed in possession of all the facts before he drafted the notice; that nothing was said to him about undue influence and he saw nothing to suggest it. And in accordance with the demand contained in this notice Ex. 3, Fatmaboo was paid Rs. 1,000 being the four years interest due under Ex. F. In April 1900 Kallimuddin died. During his life-time there was no suggestion that Ex. F was voidable on the ground of undue influence.

[16] After his death, Fatmaboo addressed on the 3rd of June 1901 a letter (Ex. 4) to the first defendant demanding Rs. 400 on account of interest. The first defendant states that this sum was not paid because so much was not due; but that she had received Rs. 1360 odd on the 12th of January 1901; Rs. 800 on the 31st of January 1001; Rs. 1,000 on the 15th March 1901; and on the 24th of June 1901 she was paid Rs. 291. These payments, says her husband) were all made not on account of anything due under Ex. F or out of the principal sum of Rs. 9,000 mentioned in it but because of a verbal promise given to her by her father that he would pay these sums for the marriage expenses of her son. But the husband s authority for that statement is, according to him, Fatmaboo herself: and it is improbable that Fatmaboo could have told him anything of the kind. The story about the father s promise rests solely upon the hearsay evidence of this man and Mr. Inverarity for the plaintiffs has not contended that it must be true. He has admitted for his clients the several payments to Fatmaboo in virtue of Ex. F. The payments are acknowledged by her in Ex. 2, the account opened by Kallimuddin in her name soon after the execution of Ex. 2 and appear below the payment of Rs. 1000 on the 6th of December 1899 which admittedly was under Ex. F. She has by her own hand in well-written Gujerati signed receipts for them and that fact is admitted.

[17] Then there is the further correspondence between the parties (see Exs. 5, 6, 25, and 7) which shows that Fatmaboo firmly stood on her rights under Ex. F. Ex. 28 shows that a statement of account under Ex. F was sent to her. On the 12th of May 1902 the first defendant drew a hundi (Ex. 9) for Rs. 1,000 in Fatmaboo s favour and the receipt of that amount is acknowledged by her in her own hand-writing on the back of the hundi. The hundi in so many words mentions that the amount was paid in virtue of Rs. 9,000 under Ex. F. The circumstances under which this hundi was drawn and the amount was paid to her are detailed by the first defendant in his evidence. He had gone to Cambay for the pregnancy ceremony of his daughter, who was Fatmaboos daughter-in-law. On the day of the ceremony Fatmaboo locked the girl inside her own house because the first defendant would not pay her the sum she demanded under Ex. F. The first defendant would not pay because the terms of Ex. F did not authorize him to pay anything out of the principal of Rs. 9,000 and that was what she wanted. The first defendant with two friends, Kikabhoy Shumsuddin and Yusufally Kikabhoy, went to Fatmaboo to expostulate with her and upon the interven-tion of those friends, Fatmaboo released the girl after receiving a promise from the first defendant to pay her Rs. 1000 out of the sum mentioned in Ex. F. Fatmaboo s husband denies that his daughter-in-law was locked in by Fatmaboo but he admits that the hundi of Rs. 1,000 was drawn by the first defendant in consequence of the intervention of Kikabhoy Shumsooddin and Yusufally Kikabhoy. That intervention could only have been due to some trouble created by Fatmaboo and the fact that the trouble arose just on the day of her daughter-in-law s pregnancy ceremony makes it very probable that she had locked the daughter-in-law in to coerce the first defendant into paying her out of the sum of Rs. 9,000 what she desired. I accept the first defendant s version as true. Again, on the 3rd of September 1903, Fatmaboo wrote a letter (Ex. 10) to the first defendant demanding Rs. 400 on account of interest on the sum of Rs. 9,000 under Ex. F. Next we have her solicitors, Messrs. Bhaishanker, Kanga and Girdharlal, addressing on the 2nd of June 1904 a notice (Ex.XI) on her behalf to the first defendant asserting her rights under Ex. F and demanding payment of interest accordingly. There is not a word there about undue influence, though it is to be presumed that she had placed her case into the hands of her lawyers and the notice was sent on her behalf and under her instructions. Finally, Fatmaboo filed the present suit. In her plaint no plea of undue influence was so much as even hinted at. She repudiated the deed on the sole ground that, not being registered, it was inadmissible in evidence against and not binding upon her. She died on the 21st of April 1905. Her son and husband were substituted in her place as her heirs and legal representatives. And after they had been defeated in another suit on the question of the registration of the deed and when this suit came on for hearing before me in August 1905 her counsel for the first time asked for leave to amend the plaint by inserting the plea of undue influence.

[18] It is perfectly clear to my mind that Fatmaboo during her life-time would not have affirmed by her letters and conduct her rights under Ex. F if any undue influence had been exercised over her in regard to the execution of that document. Her first notice in December 1899 was drafted by a lawyer; her notice (Ex. XI) was given for her by her solicitors: her plaint was drawn up by trained lawyers. She received payments several times under Ex. F. These facts with the evidence as to the circumstances attendant upon the actual execution of Ex. F satisfy me that she was a free agent when she executed that deed, that she knew perfectly well what she was about. Her husband who knew all about the deed and the payments made to her has now given evidence which I decline to believe where it conflicts with the defendant s case. He has professed ignorance of facts which he must have known. His son, the first plaintiff, who wrote the letters for Fatmaboo, has not ventured to go into the witness-box though he was throughout the trial sitting in Court and instructing his solicitors and counsel. The parties are Borahs-a community known for its shrewdness and sagacity. If Fatmaboo had been unduly influenced in executing Ex. F, it is strange that neither her husband nor her son nor she was able to realise it for full ten years; that during eight years she went on treating it as a perfectly valid deed and received payments under it.

[19] It was urged that there were no materials put before Fatmaboo as to the value of her father s property. Evidence has been given for the plaintiffs to show that that property was at Kallimuddin s death worth at least a lac and a half. On the other hand, the defendants have given evidence to show that it was then worth not more than a lac and a little over. But the evidence on both sides is of such a character as to make it difficult for me to fix the precise value of the property. In such a matter the truth must lie somewhere between the two, and I think it was worth a lac and twenty-five thousand rupees, roughly estimated. But assuming that it was, at the date of Kallimuddin s death, worth the amount fixed by the evidence adduced for the plaintiffs, in considering the question whether the consideration was inadequate so as to raise the presumption of undue influence, regard must be had also to the state of things as they existed at the time of the execution of the deed. As observed by the Judicial Committee of the Privy Council in Ganga Bahsh v. Jagat Bahadur Singh (1895) I.L.R. 23 Cal. 15 at p. 25 “Whether the transaction was one that should be set aside as inequitable would depend upon the circumstances at the time when it was made, not upon subsequent events.” To the same effect are the observations of Tindal C.J. in Rannie v. Irvine: (1844) 7 M. & G. 969 at p. 976 “If the contract is a reasonable one at the time it was entered into, we are not bound to look out for improbable and extravagant contingencies in order to make it void”. At the date of the execution of the deed, Fatmaboo had been married to a man, who, upon his own showing, owned a house which brought no income, who had done no business on a large scale, and who had given up such small business as he had done ten years previously. To Fatmaboo any immediate help from the father under such circumstances in 1895 was of greater moment than living on the mere expectation or chance of inheriting any portion of her father s property-an expectation or chance liable to be defeated at any moment by the father selling away the property or diminished by his getting more children. For a chance she was securing a certainty. Looked at in that light, it can hardly be said that the consideration she received under the deed was so inadequate as to strike one as unconscionable or suggest unfairness. It is improbable that Fatmaboo did not know how much property her father possessed. From the fact that she locked in her daughter-in-law and compelled the first defendant to pay her Rs. 1,000 in virtue of Ex. F; from the tone of her letters to him, and from the evidence of Damodherdas, whom I regard as an absolutely reliable and respectable witness, she appears to have been a woman of spirit with some business capacity. Is it likely that she would not know how rich her father was- that her husband would not know it? Having regard to all these considerations and the evidence oral and documentary I have arrived at the conclusion that Fatmaboo executed the document as a free agent, that she well knew what she was doing and that no undue influence was exercised upon her. The plea of undue influence is, in my opinion, a pure afterthought on the part of Fatmaboo s husband and son.

[20] But it is urged that even if Ex. F is a valid and equitable transaction, the plaintiffs have a right to treat it as rescinded and fall back upon Fatmaboo s original right to inherit her father s property because both the father and the first defendant repudiated it and acted contrary to its terms. In support of this contention the wakfnama executed by Kallimudin (Ex. A 17) and the letter of the first defendant Ex. 27 are relied upon. This would have been a valid contention if Fatmaboo, the moment she came to know of the wakfnama and after she had received the letter Ex. 27, had treated herself as discharged from Ex. F. But instead of doing that she went on insisting upon her rights under Ex. F and receiving payments under and in virtue of it. And she received the sum of Rs. 1,000 on the 12th of May 1902 (see Ex. 9) whereas Ex. 27 had been written on the 5th of March 1902. Under these circumstances she could not rely upon the repudiation of Ex. F by the first defendant after she had compelled him to act upon it and when she had deliberately acted upon it herself after the right to inherit her father s property had accrued to her in 1900.

[21] Upon these findings it becomes unnecessary to discuss the question of limitation raised in the case as barring the plaintiff s suit.

[22] I dismiss the suit with costs including those of the Advocate General.

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Ma Yait and Ors
v.
Official Assignee

(Privy Council)

DATE OF JUDGMENT: 28-10-1929

Atkin, J.

1. This is an appeal from the High Court of Judicature at Rangoon in a suit which was brought originally by one Ebrahim Moolla, who was the assignee of one Maung Chit Maung. The plaintiff claimed to have a declaration of the interests of the assignor under a settlement made by the assignor””s father in the year 1908. The defendants, who are the present appellants, are the trustees of the settlement, and the defence to the suit was an allegation that the assignment was invalid by reason of its being in breach of Section 6, T. P. ””Act, Act 4 of 1882, which applies to the dispositions of this particular settlor. The clauses relied on are 01. (a), Section 6, which says:

The chance of an heir-apparent succeeding to an estate, the chance of a relation obtaining a legacy on the death of a kinsman, or any other mere possibility of a like nature, cannot be transferred;

and Clause (e), which says that a mere right to sue cannot be transferred.

2. The question at issue was whether the rights that were given, if any, to the assignor of the plaintiff, the eldest son, were a possibility of a like nature of an heir-apparent succeeding to an estate and so forth, or were a right to sue. That turns upon the construction of the settlement. Without going into it in detail, it may be described as an ordinary settlement made in the settlor””s lifetime, by which the settlor transferred to the trustees a large amount of property, in substance, probably, the whole of his property, in trust to allow the settlor during his lifetime to manage the property, and to have the sole benefit of the income both from the immovable and moveable property. The settlement then proceeded to declare certain trusts that should come into operation after his death. The trusts to come into operation after his death were that, as to the property comprised in three schedules the trustees, during the life of the widow and until the youngest child attained the age of 20, were to distribute the income in the manner provided, namely, that they were to pay Rs. 1,000 a month to the widow, and to divide the remainder amongst the children, including the eldest son, Maung Chit Maung, the assignor of the plaintiff. After the youngest child attained the age of 20, the property was to be sold, and the proceeds were to be divided in equal shares between the children then surviving, the issue of any child who was dead to represent his father””s share. There was a slight alteration in the trusts in relation to the property comprised in the fourth schedule, because in that case the property was not to be distributed until the death of the youngest child, and it was to be divided then amongst the children living at that date.

3. Now, it is plain that the result of this disposition was to create, first of all, a vested interest in all the children in the income of the property; secondly, it created a contingent interest in all the children in the corpus in respect of all the property until, at any rate, the youngest child reached the age of 20. When the youngest child reached the age of 20, the children who were alive at that date obtained a vested interest and a right to have the proceeds distributed among them as to the property in Schs. 1, 2 and 3. As to the property of Schedule 4, all the children took a contingent interest until the death of the youngest child, and, as soon as the youngest child died, the children then surviving, and, of course, their issue, obtained a vested right to have the property distributed among them. That is a very plain and ordinary settlement, and it gives very plain and well understood rights to all the parties who benefit under the settlement : a vested right in the income, contingent rights in the corpus; and it appears to their Lordships to be plain that the contingent interest which the children took, whether they took it under Schs. 1, 2 and 3 or under Schedule 4, was something quite different from mere possibility of a like nature of an heir-apparent succeeding to the estate, or the chance of a relation obtaining a legacy, and also something quite different from a mere right to sue. It is a well-ascertained form of property-it certainly has been transferred in this country for generations-in respect of which it is quite possible to raise money and to dispose of it in any way that the beneficiary chooses.

4. Their Lordships think, therefore, that the defence failed, and that the Courts were perfectly right in making the decree which was eventually asked for, not by the assignee himself, but by his assignee in bankruptcy who succeeded to his rights.

5. Their Lordships think it desirable to say that they are not prepared to accede to the whole of the reasoning of the Courts below, who seem, with great respect, to have treated the interest in the corpus as being a vested interest at the time of the assignment, when, quite plainly, in their Lordships”” view, it was not : nevertheless, it being of the nature that their Lordships have described, it was such an interest as could be assigned, and the Courts were, in their Lordships”” opinion, quite right in making the decrees complained of. It is not unnatural, as it appears to their Lordships, that when the matter comes to be carefully looked at, counsel for the appellants find it impossible to put any different view before their Lordships from that which they have already expressed; the case is indeed unarguable.

6. Their Lordships will humbly advise His Majesty that the appeal be dismissed with costs.

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Second Appeal No. 582 Of 1925

DATE: 23-07-1926

Digambar Tatya Utpat
vs.
Hari Damodar Utpat

Amberson Marten, C J

[1] This case essentially depends on its own particular facts. The point is whether on those facts a certain interest in connection with the offerings at the temple of the Goddess Rukhmini at Pandharpur can be validly mortgaged and sold in execution to a member of the class of Utpats, the owners of the Vritti of officiating as priests in this temple.

[2] The first question is the true construction of the mortgage of January 4, 1888 (Exhibit 28). I will not quote the mortgage in detail, but our construction of it is that it mortgages the share amounting to l/288ths of the mortgagor in the net proceeds of the offerings made by devotees to the Goddess after providing for all the customary expenses of the temple payable out of the funds thus arrived at. We do not think that it gives the mortgagee the right himself to worship the Goddess and to take himself the offerings placed at the foot of the idol. All that the mortgagor is entitled to is this small aliquot share.

[3] The custom in this temple, which is similar to the custom obtaining in the main temple at Pandharpur, (which the appellate Court had to consider exhaustively in another case) is for the Utpats or priests to farm out amongst themselves by auction the actual right of officiating and taking the offerings. Then the proceeds thus arrived at are divided amongst the particular class of priests. We are told, in the present case, that the priests number some forty-seven, while in the case of the main temple at Pandharpur they are far more numerous.

[4] Further, the learned trial Judge has found as a fact that not only are the daily services farmed out in this way, but also that the individual shares have been frequently mortgaged and redeemed. He says:-

I am satisfied that the Utpat Vritti shares have been frequently mortgaged and redeemed, the transaction, however, being confined among the Utpats them” solves, and no outsider being allowed to have a share in the Vritti even temporarily. The system of collecting revenue by farming also shows that legal alienations by one Utpat to another are recognised; for otherwise the farmer would have no right against any sharer who receives his share of the auction money and afterwards insists upon attending the Goddess to the detriment of the farmer s interests. Apart from the question of farming, however, it is clear that Vrittis can be mortgaged and this is sufficient for the purposes of this suit.

[5] So far as the question of custom is concerned it is conceded by counsel for the appellant that he is bound by the finding in the Court below, and that finding is not here challenged.

[6] The next question arises as to whether, on that custom and on the construction which we have placed on the mortgage deed, the mortgage debt can 1)3 enforced by sale and execution. Both Courts below have held that it can be. Prima facie, on the construction which we adopt, the right to receive this fraction of the net proceeds of the offerings conies within Section 60, Sub-section (1), of the Civil Procedure Code. It is, however, alleged that the property falls within proviso (f) as being a right of personal service, and that consequently it cannot be attached or sold. In this particular case, we think that contention is not correct. In our view, all that is mortgaged is the interest in the mortgagor s share in the net balance of the offerings. Consequently the numerous authorities such as Rajaram v. Ganesh (1898) I.L.R. 23 Bom. 131 ; Girijanund Datta Jha v. Sailajanund Datta Jha (1896) I.L.R. 23 Cal. 645 ; Shoilojanwnd Ojha v. Peary Charan Dey (1902) I.L.R. 29 Cal. 470 ; Puncha Thakur v. Bindeswari Thakur (1915) I.L.R. 43 Cal. 28 or Ganesh Ramchandra Date v. Shankar Ramchandra, (1886) I.L.R. 10 Bom. 395 which refer to the right of the officiating priest to worship the idol directly and to receive the offerings directly, are, in our opinion, clearly distinguishable.

[7] In particular we throw no doubt whatever on the propositions there laid down that ordinarily the offerings to an idol are the property of the idol and not the property of the priest, in the absence of any special custom or any express intention to the contrary by the donors. Similarly, we must, in no way, be taken in any way to dissent from the conclusions in those cases that the priests rights of officiating and receiving offerings cannot in those cases be attached or sold. For instance, Ganesh Ramchandra Date v. Shankar Ramchandra is a case of an ordinary outside creditor of a particular priest attempting to attach the latter s right of worship and of a share in particular offerings.

[8] In our judgment, that is very far from the case we have to deal with. Consequently we do not agree with the argument presented to us that if execution were allowed in the present case there is no saying where it would stop and it would open a door which might lead to great injury being caused in the future. In the present case the only practical result will be this. The sale is to be confined to the Utpats themselves, and consequently the mortgagor may either buy in his share at the auction and pay off his mortgagee, in which case no harm is done. or, alternatively, if ho does not do so, he loses henceforth his share in these particular net offerings, and all that will happen will be that there will be one priest less to share in this particular fund.

[9] It was next argued that even if the saleable property fell within the meaning of Section 60, then, under the provisions of the Code dealing with the execution of decrees, Court sales can only be by public auction, and it is not within the power of the Court to limit the bidders to any particular class of persons. In particular Order XXI, Rules 65 and 76, and form 29 in Appendix (E) were relied upon. In our opinion, that contention also is not well founded. Speaking for myself, I see no objection to the bidders being restricted for good reasons to a particular class or classes. We know, for instance, that the Court has power to prevent the judgment-creditor or a mortgagee from bidding. So, too, supposing the attached property consisted of shares in a public company to be sold by public auction and not through a broker under Order XXI, Rule 76, and supposing the articles of association of that company provided that the transferees should only be members of a particular family, I see no reason why the Court should not validly limit the bidders to people, who could validly buy the shares. Otherwise, the result is that no sales can be held at all, and consequently although the main provisions, viz., Section 60, direct a sale, the machinery provided in the rest of the Code is insufficient to carry out the main direction. To my mind, that is giving a construction to the Code which is neither in accordance with common sense nor with common equity.

[10] Accordingly, we think that the lower appellate Court was right in holding that a sale could be held and that the bidders should be confined to those who were actually Utpats. No damage can then possibly be done to the worship, and there can be no question then of any outsider being invited to perform the worship of the idol, or even to take a share in the offerings. Nor will the past custom of this particular temple be infringed. On the contrary, it will only, in my opinion, be carrying out what this particular class of people have been doing for a long series of years. Whether these financial transactions are compatible with the highest notions of divine worship is a matter, which we had to comment on in the Pandharpur case, and I do not wish to repeat some of the observations which were made by the Court in that case. We are only concerned here with the bare questions of law. Accordingly I would dismiss the appeal with costs.

Patkar, J.

[11] I agree.

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S.T. Desai, J.

1. This appeal raises an important question of construction of S.312 of the new Companies Act which section now imposes total prohibition against any assignment of his office by a Director. The prohibition applies in case of both a public and a private limited company. The facts are not in dispute nor disputable. The first appellant (original first defendant) is a private limited company incorporated on 21-5-1955. Prior to that Dadoba Kashinath Thakoor was the sole proprietor of a business of metal pressing works which he carried on in the firm name of Oriental Metal Pressing Works. The first appellant company acquired that business as a going concern. The agreement dated 7-7-1955 between Dadoba and the Company states that Dadoba was appointed Managing Director of the company and was entitled to hold that office for life. Clause 7 of that agreement is as under:

“Mr. Thakoor shall be entitled by deed inter vivos or by will or codicil to appoint any person to be a Managing Director in his place and stead and in default of such appointment the legal representatives of Mr. Thakoor shall be entitled to exercise the said power. Any appointee as aforesaid shall whilst holding office also be designated as a Managing Director and shall be entitled to be paid by the Company the same remuneration and to exercise the same powers and authorities as are vested in Mr. Thakoor and the appointee as aforesaid shall have a power of appointing any person to be Managing Director as his successor on the remuneration of not less than Rs. 1,000 (Rupees one thousand) per month and upon some other terms and conditions as are herein contained.”

Under the agreement Dadoba was to be allotted a certain number of fully paid up shares of the company. Article 109 of the Articles of Association of the company is material and is as under :

“109 (a). The said Shri Dadoba Kashinath Thakoor shall be the first Managing Director of the company at a remuneration of Rs. 2,500 per month subject to the said remuneration being increased by the Board of Directors of the Company. He shall be entitled to hold such office for life and will not be subject to clauses 87, 88 and 91 of these Articles.

(b) The said Shri Dadoba Kashinath Thakoor may by deed inter vivos or by will or codicil appoint any person to be a Managing Director in his place and stead and in default of such appointment, the legal representatives of the said Shri Dadoba Kashinath Thakoor shall be entitled to exercise the power;

(c) Any appointee as aforesaid shall, whilse holding office, also be designated a Managing Director and shall be entitled to the same remuneration and to exercise the same powers and authorities as were vested in the Managing Director in whose place and stead he is appointed;

(d) The appointee as aforesaid shall have a power of appointing any person to be a Managing Director as his successor on the remuneration of not less than Rs. 1,000 per month and with the same powers as are vested in Shri Dadoba Kashinath Thakoor.”

Dadoba died on 14-1-1957. By his will executed on 18-8-1956, he appointed his son, the second appellant (original 2nd defendant) to be the Managing Director of the company from the date of his demise. The 1st Respondent to the appeal (plaintiff to the suit) is the brother of Dadoba. The 2nd Respondent to the appeal (original 4th Defendant) is another son of Dadoba. The first Directors of the Company were (1) Dadoba; (2) Bhaskar, and (3) Govind, one of the sons of Dadoba. The same persons continued to be directors till 14-1-1957 when Dadoba died. At the time of Dadoba’s death, the shares of the company were held as under :

Dadoba…1971 shares.

Plaintiff…845 shares.

2nd Defendant…844 shares

4th Defendant…843 shares.

We are told that Dadoba died leaving 3 sons and his shares were inherited by his three sons as part of his estate.

2. Dispute arose between the plaintiff and the second Defendant soon after Dadoba’s death when the latter assumed the Managing Directorship and Chairmanship of the Board of Directors of the company on the basis of the appointment made by the will of Dadoba. Defendant No. 2 began to act as the Managing Director and the Chairman of the Board of Directors of the company and also began to draw a salary of Rs. 3,500 per month. The plaintiff addressed letters to the Second Defendant on 23-3-1957 and 29-3-1957 and contended that the 2nd defendant had no right to act as Managing Director and/or Chairman of the Board of Directors of the Company. He also contended that the second defendant had no authority to call a meeting of the Board of Directors as he had purported to do and that the appointment of Defendant No. 2 as Managing Director of the Company by the Will of Dadoba was not valid and not binding on the plaintiff or the Company. Correspondence ensued in the course of which the second defendant contended that he was the Managing Director and entitled to call meetings and conduct the business of the Company as its Managing Director. The plaintiff contended that the power of Dadoba to appoint a Managing Director by his Will given by the Articles of Association and the Agreement was invalid, illegal and inoperative on the ground that in the meantime the new Indian Companies Act had come into force and the provisions of that enactment rendered any such power invalid and illegal. The plaintiff also contended that defendant No. 2 was acting in his own interest and in a manner detrimental to the interest of the company. He made reference to the Agenda of a meeting dated 13-5-1957 which included an item viz. ‘To consider the provision for bonus to late Shri Dadoba Kashinath Thakoor in his capacity as the Managing Director”. The plaintiff also contended that defendant No. 2 claimed to be the beneficiary under the Will of Dadoba and his attempts were to add to the estate of Dadoba to the detriment of the company. In the last week of June, 1957 the plaintiff received a letter dated 28-6-1957 from the second defendant alleging that the plaintiff had ceased to be a Director of the Company under S. 283 (g) of the Companies Act and Art. 85 (f) of the Articles of Association of the Company owing to his absence without leave at three consecutive meetings of the Board of Directors and/or at all such meetings for a continuous period of three months. The plaintiff brought a suit for a declaration that he was and continued to be a Director of the first Defendant Company and was entitled to act as such. He also sought a declaration that the appointment of the second defendant as a Managing Director and/or Chairman of the Board of Directors of the first defendant Company was void, invalid and inoperative. He also sought a declaration that the appointment of the third defendant as a Director was invalid, illegal and inoperative. It seems that some time before the suit was filed, the second defendant in the purported exercise of his powers had co-opted the third defendant as a Director of the Company. The plaintiff also sought relief by way of certain injunctions in that suit. He asked for an injunction restraining defendant No. 2 from acting as Managing Director of the Company and for an injunction against defendant No. 3 restraining him from acting as a Director of the Company. He also sought a further injunction restraining the defendants from holding an annual general meeting of the company which was proposed to be held on 28-11-1957. In the suit, he impleaded the company as Defendant No. 1. Defendant No. 3 to the suit (appellant No. 3) as I have already mentioned, was co-opted by defendant No. 2 as a Director of the Company. Various issues were raised by the learned Judge, City Civil Court, who tried the suit. It is not necessary for the purpose of the present narrative to state them and it will suffice to observe that the main question which had to be determined by the learned Judge was whether the appointment of Defendant No. 2 as the Managing Director of the Company by the Will of Dadoba was invalid and ineffective in law by operation of S. 312 of the new Companies Act. That section, as I shall have occasion to point out little later appears under the heading “Miscellaneous provisions” and is as under :

“Prohibition of assignment of office by a director. – Any assignment of his office made after the commencement of this Act by any director of a company shall be void.”

It will be convenient here to set out S. 9 of the new Companies Act which is as under :

“Act to override memorandum, articles, etc. Save as otherwise expressly provided in the Act –

(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of Directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and

(b) any provision contained in the memorandum articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.”

The expressions “director” and “managing director” are defined in the Act. I shall refer to those definitions a little later when examining one of the arguments urged on behalf of the appellants. It will be noticed that the marginal note to S. 312 suggests that the section lays down a prohibition of assignment of office by a Director and the section is in terms of such prohibition. The learned Judge took the view that the object of the Legislature in imposing the prohibition laid down in S. 312 was that a Director should not be clothed with the power to transfer his office to any person whether by an act inter vivos or by a testamentary instrument. He reached the conclusion that the expression “assignment” in the section should not be given a restricted meaning but must be read in a broad sense as applicable also to an appointment of any person as Managing Director of the Company made by his Will by a Managing Director to come into effect on his demise. He upheld the contentions of the plaintiff and gave the declarations and the injunctions sought by him. The Company and defendants Nos. 2 and 3 have now come to this Court in this appeal.

3. The first and the principal contention of the appellants pressed before us by Mr. Manekshaw, learned counsel for the appellants, is that the appointment of the second defendant as a Managing Director made by Dadoba by his Will is not “an assignment of an office” within the meaning of that expression in S. 312. It is said that what Art. 109 conferred on Dadoba is not any power of assignment but merely a power of appointment. It is also said that the word “assignment” means actual transfer. A transfer of office by a Director, it is stressed can only be by an act inter vivos and in no circumstances by a testamentary instrument. The greatest emphasis has been laid on the factor that on his death Dadoba naturally ceased to be a Managing Director. The argument has been stressed in the form of an interrogation : By Will a person can bequeath any property; he can by an act inter vivos transfer any property. But how can a person transfer something which is non-existent? – something he ceased to hold immediately on his demise? It will be noticed that the argument is founded in the context of property and not of an office of a director which is purely personal and is not property. It is impossible to contend, says Mr. Manekshaw, that there could be any assignment when Dadoba’s appointment as Managing Director was only for his life and nothing was left for him to give at the point of time of his death. It is said that this is the most crucial question.

4. At first blush the argument, under the latter head, that a person cannot transfer what he has not got may perhaps seem somewhat attractive from a sheer legal point of view, however repugnant it may be to the object of the Legislature in laying down the absolute bar against the transfer of an office of a Director. But on closer examination I think it defective even from the legal standpoint in paying too little attention to a number of relevant and material considerations, which, in my judgment, must weigh with the Court on this question of interpretation of the rule which aims to prevent use and abuse of a power. The argument, if I may so describe it, asks us to apply to the situation before us the maxim Nemo dat cuod non habet – you cannot give what you do not have; you cannot give what you do not have the right to give. The equivalent maxim is assignatus utitur jure auctoris – An assignee is clothed only with the right of his principal. Now, these maxims pithily express one of the leading rules as to titles and tersely state the well-known general rule that no man can transfer a greater right or interest in property than he himself possesses and if he has none he can give no title whatever to the property which is the subject matter of the transaction.

5. The principle of these maxims is indubitably sound and it has bearing firstly on the quantity and secondly on the quality or nature of interest in property which can be assigned by the owner to another party. Now, what Mr. Manekshaw contends for is the same principle but the contention assumes as a major premise an equivalent between the nature of a right or interest in properly and the office of a Director which by no stretch of argument can be termed as property or any interest or right in property. Such an equation, to my mind, is impermissible. We have nothing to do with any right or interest in property nor are we concerned with any question of title or transmission of a title which could or could not vest in Dadoba. The question before us is not whether a person can or cannot give what he has not got. The question is whether a Director in a public or private company who is empowered by the Articles of Association of a company to appoint another person in his place and stead by an act inter vivos or by his will can be said to assign that office to the latter when he does so by an act inter vivos or by his will. It has not been possible for Mr. Manekshaw to dispute that if this was done during the life-time of the Director by an act inter vivos it would be an assignment and hit by S. 312, though at one stage of the argument that position was not accepted. But that line had to be abandoned in view of the language of certain sections in the Act and particularly S. 86B of the repealed Act of 1913 and the proviso to the same to which I shall refer a little later. This present argument of learned counsel for the appellants is founded on certain observations of the learned editors of Gore-Browne’s work on Companies law and it will be necessary for me to quote the same and examine them when I refer to S. 86B of our repealed Act of 1913. It will suffice here to state that those observations are made in the context of a private company and not a Director of a public company and even in the context of a Director of a private company the opinion of editors of standard treatise on Companies law in England, as I shall point out, is to treat that point as one in dubio. Besides the point has little cogency since there is no section in the English law analogous to S. 312 of our Act of 1956.

6. We are concerned primarily and principally with the connotation of the expression “assignment of his office……..by a Director” and the legal inhibition contained in the section which is applicable in case of a Director both in a public and a private company and the question is can he, if the Articles of Association permit it, appoint a person to be the Director of the company in his place and stead by making such appointment by his will or is he prohibited by S. 312 from doing so notwithstanding such Articles since S. 9 renders void any such Articles which are repugnant to any provisions of the Act. (Section 312 applies equally to a Director in a public and a private company and I have stressed that aspect because considerable emphasis was laid on behalf of the appellants on the fact that there are cases where an owner of a business transfers it to a private limited company and he is appointed a Managing Director of the company with powers to appoint any person in his place and stead by a deed or will as for instance in the case before us. I am not concerned with the object of giving such powers but with the validity of such powers and the considerations relating to the object of conferring such powers in case of a private company would mostly be irrelevant in the case of a Director of a public company. The prohibition in S. 312 i3 imposed for an object which I shall point out little later can be gathered from the enactment itself. I prefer in the first place to examine the language of the section itself and shall turn to an enquiry as to its object only in so far as it is permissible and required by the well-known canon of construction that the meaning of the words of a statute is to be found not so much in strictly grammatical or in etymological propriety of language, nor even in its popular use, as in the subject, or in the occasion on which they are used and the object to be attained. Of this more hereafter.

7. The crucial consideration, therefore, is not that a person cannot transfer something which he has not got. But it must be as to what is the connotation of the expression “assignment” in the context of an office of a Director which, indisputably, is not property or any right or interest in property. The Legislature has said that a Director cannot assign his office, meaning thereby that he cannot transfer it to any other person. It is not questioned and could not be questioned that transfer of the office of a Director in any shape or form is expressly prohibited by the Statute. The crux of the matter, therefore, is what is it that is prohibited when it is enacted that you cannot assign the office of a Director of a company. Now, one thing is clear that in a case of a prohibition or restriction of this nature which is absolute and unqualified, the intention and object of the law-giver is to restrain and prevent a Director from putting some one in his place and stead by any act on his part or doing any act which would have the same effect. The question of course must be : Has the intended object been carried out in a appropriate language capable of bringing out that result? I put to myself the question : Is this word “assignment” to be read in the narrow sense – in a sense wanting in breadth in which it is used in conveyancing language and by conveyancing men in the context of rights m property where it may mean only a transfer by an act inter vivos or is to be understood in the broad comprehensive sense that the holder of the office is not to give it by any act of his in presenti and also not to give it to another by any testamentary disposition or direction or appointment. I have perhaps dwelt little longer than I need have done on the argument of learned counsel for the appellants that Dadoba could not transfer what he did not have at the point of time of his death because his office came to an end that very time and therefore, the appointment by him of the second defendant cannot be called an assignment of the office of a Director. The argument would have cogency if there was any dispute about the quantity or quality or the nature of any interest or right in property when such consideration would certainly have had bearing on the enquiry. But in the context of an assignment of an office of the nature before us. it has little import.

8. The argument suffers from a patent weakness and it is this. It is indubitable that a right can be transferred by assignment of the nature of transfer inter vivos or by operation of law provided the transfer of that right is not prohibited by law and it is made in accordance with the requirements of law as to form such as writing, registration etc. In respect of a right not ordinarily transferable, for instance one which involves personal element and which ceases on death or disablement, the law lays down that the right cannot be transferred unless other parties interested in the matter gave their consent to the transference of the right or imposes conditions subject to which alone the right may be transferred, as for instance in a case of a company if it is accepted in a meeting of the shareholders. In all such cases there is in the first instance no right of transfer either by an act inter vivos or by a testamentary instrument. But when the right is given and the condition necessary for the exercise of the power of transference is fulfilled as required by law, it is extremely difficult to see how it can be said that there cannot be a transfer of the right by testamentary disposition. To my mind, there is here no justification for any over-refined distinction between appointment and assignment. In the first place, we are not dealing with property. We are dealing with an office which can only be the subject matter of an appointment. Whether you call it an assignment or transfer or alienation or appointment, it has the same meaning and the effect is the same. I fail to see how in such a case it can be said that what is done is not a transfer because the right to transfer was not there. Of course it was not there at the inception but it was there when the power to transfer the right was conferred. This, to my mind, is the weakness underlying the argument of learned counsel so strongly pressed for our acceptance.

9. To turn to the former head of the argument of Mr. Manekshaw relating to the connotation of “assignment of an office” within the meaning of that expression as used in S. 312. Now, it is well understood that the expressions “assign” and “transfer” are often used in our statutes to convey the same meaning and the same sense and that the primary meaning of the word “assign” is to legally transfer or to legally make over any property or any right. It is equally well understood that the expression “transfer” is one of wide import and embraces both a transfer by an act inter vivos as well as a transfer by operation of law, that is by sale in execution, forfeiture, insolvency, intestate succession or testamentary disposition. In view of this connotation of the word “transfer” the argument on behalf of the appellants was that a distinction must be drawn between an assignment of the office of a Director and appointment of another person as a Director by a person holding the office of Director. Learned counsel, however, had to agree that if a Director in a private company appointed for life and clothed with the power to appoint any other person in his place and stead were to exercise that power by an act inter vivos that would be an assignment of an office and hit by S. 312 even though it might be called an appointment. But it was said that appointment by a will in such a case would be wholly a different matter. It would not be within the ambit of the section because that would not be an assignment. The argument of necessity had to rest on the principle “one cannot give what one has not got”. 1 have already examined that argument.

10. It has been argued by Mr. Khambatta, learned counsel for the respondents that there is no justification for giving a limited and narrow construction to the expression “assignment of office” which can mean passing of any right from one person to another. Counsel has referred to Law Lexicons and to Murray’s English Dictionary. In Wharton’s Law Lexicon, 14th Edition, as to the verb “assign” it is stated that the verb is variously applied and the meaning given, in that Lexicon to the word “assign” is “generally to transfer property, especially personal estate, or set over a right to another, or appoint a deputy”. It is common knowledge that the draftsmen of our Indian Statutes do not prefer to use the expression “assign” in the context of property and have for a long time since the enactment of the Transfer of Property Act chosen to use the expression “transfer”. Wharton defines “assignee” as a person appointed by another to do an act or perform’ any business. The expression “assignment” is defined as transfer of an estate or interest in property”. Mr. Khambatta has strongly relied on the meaning of the verb “assign” given in Murray’s Dictionary and one of the meanings is “to appoint”. He has also relied on the meaning of that verb given in that Dictionary as “to transfer or formally make over to another”. He has also relied on the meaning given there as “to appoint authoritatively” as also another meaning which is “to appoint, designate, ordain, depute”. Counsel has also referred to certain provisions of the Transfer of Property Act. But I do not think it necessary to refer to those provisions because it has not been disputed and could not be disputed by Mr. Manekshaw that the meaning of the expression “transfer” includes a transfer by an act inter vivos as well as by a testamentary disposition or direction. Great reliance has been placed by Mr. Khambatta on the meaning of the verb “assign” as to “appoint or to designate”. Mr. Khambatta has also argued that the contention on behalf of the appellants in asking the Court to give a restricted meaning to the expression “assignment” ignores the existence of a third party viz. the company. It is said that this is not a case of an ordinary assignment between an assignor and an assignee whereby some property is transferred by the assignor to the assignee. Here, what was being done, though called an assignment, was really an appointment to the post of the office of a Director and which had the effect of imposing the will of one person on a third party and the third party was affected. This aspect of the matter, to my mind, cannot be ignored. It is not a bilateral act pure and simple with which we are concerned in this case. We are concerned with the office of a Director in a company and one person is clothed with the power to appoint another person and the appointee is the third party. Therefore, the ordinary sense in which the expression “assignment” may be used in the context of transfer of property by an act inter vivos is a concept which need not be introduced in reading the expression “assignment” in S. 312. Learned counsel has also drawn our attention to the scheme of the Act. He has referred to S. 253 which lays down that only an individual can be a Director of a public or a private company and not any body corporate or association or firm of partners : and he has also drawn our attention to S. 254 which requires that subscribers to the Memorandum of any company can only be individuals and in default of and subject to any regulations in the articles of a company, subscribers of the memorandum who are individuals shall be deemed to be the Directors of the company until the Directors are duly appointed under S. 255. He has also drawn our attention to S. 255(2). These sections have been referred to for the purpose of showing that the Act does not contemplate any continuity in the matter as must accur if the Director could be a body corporate or an association or a firm of partners. It is urged that it is clear from various provisions of the Act that the intention of the Legislature was to prevent the mischief of any Director introducing into the company any other person as a Director at his own volition even though he might have been authorised by an agreement between him and the company to do so and even though the Articles of Association of a company may expressly permit that to be done. Numerous prohibitions have been laid down by the new Companies Act in case of Managing Agents, Managing Directors, Managers and Directors of the Company and other officers of a company. It is not necessary for me to examine the scheme of the Act in any detail since it is now well-understood that the new Companies Act aims at eradicating many serious mischiefs which the principle of perpetual management of companies had caused in the past. The argument of counsel is : Why permit that mischief to continue by reading S. 312 in a narrow sense by attributing any undue restricted meaning to the words “assignment of his office”? It is stressed that the real meaning of this expression and one to be gathered from the section itself is that a person cannot introduce another person as a Director in that company even though authorised to do so by the Articles of Association of the Company. This it is urged is the effect of reading S. 9 with S. 312. Then it is said that if the argument urged on behalf of the appellants were to be accepted, an inconsistent and incongruous position is bound to arise.

11. In my opinion, Mr. Khambatta is right when he says that an inconsistent and incongruous position must arise if the argument urged on behalf of the appellants is to be accepted by us. Of course the Court will not attach any undue importance to this consideration but any inconsistent or incongruous position that might arise has to be borne in mind even in interpreting a statute the language of which is plain and unambiguous. Moreover it is not possible to say that the expression “assignment” is capable of only one meaning and one meaning alone nor has any such attempt been seriously made before to suggest that the word “assignment” is capable of only one meaning. The inconsistent and incongruous position that can arise if the argument for the appellants is accepted is that while a Director cannot during his life time appoint another person as a Director in his place and stead, though authorised by an agreement between him and the company and the Articles of Association to do so, he can do so by an appointment which is to be effective immediately on his demise. Of course where the language of the section is plain, unambiguous and is not capable of more than one meaning, then ordinarily that meaning would have to be given by the Court. But in such a case, question of interpretation can hardly be said to arise. There will be no need of interpretation. The language itself being clear and manifest best declares the intention of the Legislature – Absoluta sententia expositore non indiget . But it is not possible to say that the expression “assignment” which is usually used in the context of property law and which has been pitchforked in a provision relating to the Companies Act in the context of a personal office which is neither an interest nor a right in any property and obviously is not an office of profit can be said to have a plain and simple meaning and which, as Wharton has said, is variously applied even in England.

12. Learned counsel for the Respondents has also drawn our attention to S. 317 of the Companies Act. That section rules that a Managing Director of a company cannot be appointed for more than 5 years at a time. The argument has been that a Managing Director of a public company if clothed by any agreement between him and the company and the Articles of Association to appoint a successor would have power to make a Will and appoint a successor and in such a case on his demise within the period of the allotted span of five years mentioned in S. 317 the appointee would step in as a Managing Director. The suggestion is that in case of a public company such a position would be inconceivable and intolerable. It is not necessary for me however, to examine in any detail what would happen in case of a Managing Director clothed with any power as in the illustration suggested by learned counsel. But it does seem that such a strange and impermissible situation can arise and it does seem that the present argument lends support to the contention pressed on behalf of the respondents.

13. The next argument of Mr. Khambatta turns on the meaning and effect of Art. 10

9. It is said that clause (b) of that Article authorised Dadoba to appoint any person to be a Managing Director in his place and stead and in default of such appointment the legal representatives of Dadoba were entitled to exercise the power. It is said that the appointment by Dadoba by an act inter vivos of any person as Managing Director in his place and stead would be within the mischief of S. 312 and if he appointed any person to be a Managing Director in his place and stead by a Will or Codicil, the appointment would be valid if the contention of the other side were to be accepted. The argument here is that there is no warrant for splitting Art. 109 under two heads of “appointment by Deed” and “an appointment by Will or Codicil”. It is said that if one part of Art. 109 is bad, then the whole of Art. 109 is bad. It is also said that not merely Dadoba but the legal representatives of Dadoba have also been given the power to appoint a Managing Director. The contention is that for this reason the whole of Art. 109 (b) must be treated as bad because it is not divisible. Now, this argument can have force only in case of matters which are not severable. I do not think that an appointment by a Deed inter vivos and an appointment by a Will or Codicil are matters which are not severable. Therefore, there is little scope for the present argument urged before us by Mr. Khambatta. There is, however, considerable force in the argument of learned counsel that a restricted meaning should not be given to the expression “assignment” in the context of the personal office of a Director of Company under our Company law. Evidently, the construction pressed for our acceptance by learned counsel for the appellants relies – to put it in his own words on “the rule of literal construction”. It has been strenuously urged that S. 312 must be literally construed and so construed the expression “assignment” must be given the meaning pressed for our acceptance on behalf of the appellants. Not only that, but the argument asks us to put a restricted meaning on an expression ordinarily used in the context of property and rights and interest in property, whereas in the section which we have to interpret, it is not used with reference to property but a personal right involving confidence as a main element as well as the character, credit and substance of the person who is a Director and who is sought to be appointed as a Director in his place and stead. It also involves a third party viz. the company.

14. We have to construe an expression which is capable of a sufficiently flexible meaning as well as a restricted and narrow meaning. The elementary rule of literal construction, as has so often been said, is confined to cases where the language is precise and capable of but one construction or where neither the history nor the cause of the enactment, nor the context, nor the consequences to which the literal interpretation would lead, show that that interpretation does not embrace the real intention. It has also been repeatedly said that language is so often capable of being used in more than one sense and to adhere rigidly to its literal and primary meaning in all cases would be to miss its real meaning in many words if sufficiently flexible must be construed in the sense which, if less correct grammatically, is more in harmony with the intention of the law-maker. These are well settled principles of interpretation of a Statute.

15. To turn to examine the object of the enactment. The expression “director” includes any person occupying the position of Director by whatever name called and “Managing Director” means a Director who is entrusted with any powers of management which would not otherwise be exercisable by him, and includes a Director occupying the position of a Managing Director by whatever name called. Only an individual can be a Managing Director of a company. It is plain from Art. 109 that the right to appoint a Director was given to Dadoba and the right could be exercised from generation to generation. A company is a perpetual body and the effect of accepting the construction pressed on behalf of the appellants would be that in this private limited company which is a perpetual body the Managing Director was given a right to appoint the future managing director and if the right was not exercised by him, then his legal representatives could exercise that right so that the same process of appointment could continue from generation to generation. That, to my mind, is wholly foreign to the object and scheme of the new Companies law. I entertain no doubt that the object of the mandatory prohibition in sec. 312 was to prevent any such appointment being operative in the lifetime of the director as well as after his death and the only doubt that must naturally arise is from the fact that my brother K. T. Desai holds a view different from mine. This type of perpetual management whether in the form of a director, manager, managing agent or managing director was an evil which had to be eradicated and the precise object of the whole Act read in the context of sec. 9 was to eradicate that evil. I do not propose to burden this judgment by referring to the numerous sections of the Act which leave no doubt that such was the intent and object of the law-giver. I shall have occasion to refer a little later to sec. 86B of the repealed Act of 1913 the language of which when compared with sec. 312 does throw considerable light on this point. According to the argrument of learned Counsel for the appellant, the Legislature, although it has dealt with the matter of appointment of the nature before us made by a director in his life time, has not dealt at all with the matter of such appointment if it is to operate after death. It is said that if there is any lacuna in the Act, it is for the Legislature to remedy the defect. Of course the court cannot reach a casus omissus and no canon of construction permits the court to cure a lacuna in a statute. That is simple. But it is equally true that omissions are not to be readily inferred. The court, it is firmly established, will not wrest the language of a Statute and will not lightly create or infer a lacuna. It will at the same time see “that the true meaning of any passage is to be found not merely in the words of the passage, but in ascertaining also among other things what was the circumstance with reference to which the words are used, in what context they are used and what was the object which the Legislature had in view.”

16. There is another aspect of the same question. We are not dealing with a codifying enactment but with an Act to consolidate and amend the law relating to Companies and certain other Associations. It is well-settled that in an enactment of this nature, it is legitimate to refer to the previous state of the law for the purpose of ascertaining the intention of the Legislature. Many provisions of the Indian Companies Act of 1913 were adopted from analogous provisions in the English Companies Acts. A number of provisions in our Companies Act of 1956 have been adopted from the English Act of 194

8. It is also true that there are numerous sections in which the language of the English enactment has only partially been adopted. There is no section in the analogous English enactment similar to sec. 312 of our Act which, as I have already said, enforces prohibition of assignment of office of a director and that prohibition is absolute and unqualified. Under our repealed Companies Act. there was some analogous provision in sec. 86B, the relevant part of which was as under :-

“If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall notwithstanding anything to the contrary contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company :

Provided that the exercise by a director of a power to appoint an alternate or substitute director to act for him during an absence of not less than three months from the district in which meetings of the directors are ordinarily held, if done with the approval of the board of directors, shall not be deemed to be an assignment of office within the meaning of this section :

XX XX XX”.

That section was one of a group of secs. 86A to 861 which were inserted in 1936 in the Companies Act of 1913. The corresponding provision in the English enactment was sec. 151 of the Act of 19

9. Section 204 of the English Act of 1948 was in part materia with sec. 151 of the earlier English enactment. Section 151 of the English enactment was as under :-

“If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall, notwithstanding anything to the contrary contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company.”

It is noticeable and it is of some importance to observe that the first proviso to our sec. 86B which I have quoted above did not find place in sec. 151 of the English Act of 1929 nor did it find place in the later English enactment of 194

8. Section 86B laid down certain restrictions on the powers of a director or a manager of a company to assign his office as such to another person. The restriction was that even though the Articles of the Company might have permitted it, no such power could be exercised unless and until the assignment was approved by a special resolution of the company. The proviso engrafted a material rule on the section. The effect of the proviso was that the power to make a temporary appointment of an alternate or substituted director to act for him which could be exercised by a director in favour of another person during his absence from the district could be exercised without any special resolution of the company and it was sufficient if the Board of Directors gave its approval to the same. Such a case, the proviso expressly stated, would not be deemed to be an assignment of office. It is clear from the language of the proviso that the Legislature took the view that there was ample scope for the suggestion that even such a temporary appointment of alternate and substituted director for a short period may be regarded as an assignment of office by a director. Therefore, one thing is clear from the language of that proviso read with the section that it was thought possible that a temporary appointment for a short period of a substituted director to act for him during his temporary absence made by a director could fall within the meaning of the expression “assignment of office”. It is implicit in the proviso that even though the Articles of Association may permit it, a director or a manager of a company had no right to put in his place and stead another person as a director even during his temporary absence. I have referred to that section to show what the intention of the Legislature was even under the provisions contained in sec 86B. Although Articles of Company do in some cases empower a director to appoint an alternate or a substituted director, the Legislature did not approve of any such right being created in favour of a director by an agreement between the director and the company or by recognising that right in the Articles of Association and laid down conditions which were restrictive of that right. It is a well-established principle of construction that when one finds a proviso to a section, the presumption is that but for the proviso the enacting part of the section would have included the subject matter of the proviso. Of course, that presumption need not arise where it is clear that the proviso was inserted only ex abundanti cautela. A comparison of sec. 86B and the first proviso to the same with the language of section 312 with which we are here concerned seems very instructive. In section 312 the Legislature not being content with the restrictions imposed under the old section, decided to lay down an absolute and unqualified prohibition against the assignment of the office of a director in any circumstance and the only qualification that it has made is contained in sec. 313, the relevant part of which is as under :

“313. Appointment and term of office of alternate directors. –

(1). The Board of Directors of a company may, if so authorised by its articles or by a resolution passed by the company in general meeting, appoint an alternate director to act for a director (hereinafter in this section called ‘the original director’) during his absence for a period of not less than three months from the State in which the meetings of the Board are ordinarily held.”

Now, I have already pointed out that sec. 86B followed the language of sec. 151 of the English Act of 1929 and sec. 204 of the English Act of 1949 is in pari materia with sec. 151, and neither that section nor the earlier section 151 contained any proviso of the nature engrafted on sec. 86B of our Act of 1913. I have referred to the sections of the English enactment for the purpose of showing that the language of sec. 86B without the proviso had been borrowed from the English Act of 19

9. I may observe that sec. 204 of the English Act of 1949 does not impose any rigid bar on the assignment of his office by a director but the condition it imposes is that there should be a special resolution of the company. A curious and somewhat interesting position emerges if one turns to the standard text books on the English Companies Act. The note of the editors of Palmer’s Company Precedents under sec. 204 of the Act of 1949 is as under:

“The precise connotation of a power ‘to assign office’ as mentioned in the section is not clear. It is not thought that it would refer to a provision for the appointment of a successor; see. for example, paragraph (4) of Form 255 ante.”

Now, Form 255 is in respect of a peculiar type of Managing Directorship and the person who holds that directorship is referred to in England as a Governing Director. It is not necessary for me to examine the Form 255 which is given in Palmer’s Company Precedents. No clear opinion seems to have been expressed by the editors but they say that it is not thought that sec. 204 would refer to a provision for the appointment of a successor by a governing director. They also say that the precise connotation of a power “to assign office” is not clear. Therefore, one thing is certain that the Editors of that Book were not inclined to state any definite opinion about the meaning of the expression “to assign office” in sec. 204 and left the matter as one in dubio. Since the greatest reliance has been placed by Mr. Manekshaw, learned Counsel for the appellants, on certain observations made by the editors of the forty-first edition of Gore-Browne’s Text Book of Companies law I shall set out those observations in extenso:

“Where in the case of a private company, the vendor of a business to the company is appointed a director by the Articles, he is frequently styled a ‘governing director’, and has conferred upon him all the powers of a Board of Directors, with a right from time to time to appoint a successor during his life or by his will, or for his legal personal representatives to make such appointment after his death. In connection with such powers to appoint a successor the question whether its exercise constitutes an ‘assignment’ of the office within sec. 204 may arise. That section renders the assignment of the office of director as such to another person of no effect unless and until it is approved by a special resolution of the company. It is difficult to see how a deceased person or his legal personal representatives could assign an office, and possibly in no case would the exercise of a power to appoint a successor under such an Article constitute an ‘assignment’ of the office, unless the appointment is made by the governing director during his life. The point is, however, a doubtful one and it would be advisable for any person appointed as successor under such a power to obtain the support of a special resolution.”

I do not think these observations are helpful in interpreting section 312 of our Act of 1956. The, argument on behalf of the appellants leans heavily on the very insecure foundation of these observations of the learned editors made in the context of a section (204) which does not contain any proviso similar to that under the repealed sec. 86B of our Act of 1913. What is more important is that sec. 204 is not in pari materia with sec. 312 with which we are really concerned and which lays down a stricter prohibition on the powers of a director. It is also noticeable that in England this point is not one of particular importance because there is no provision in the English Act similar to our sec. 312 which imposes an absolute prohibition on the assignment of the office of a director. All that is required there is a special resolution of the company. None of the two statements of the learned editors of Palmer’s Company Precedents or Gore-Browne’s work claim the high authority of the illustrious authors of the works and the editors also have left the matter in doubt. It is well-known that Buckley who’ was later Lord Wrenbury was conservative in the matter of expressing his opinion and the editors of that work have been conservative in the matter of expression, of opinions and that is one reason why Buckley’s work has been very often referred to by courts both in England and India. Now, the editors of the present edition of Buckley’s work on Company law have made a significant note under sec. 204 and the note is this :

“Quere, what is meant by the expression ‘assignment of office’ used in this section which reproduces sec. 151 of the 1929 Act.”

Mr. Manekshaw says that the expression “quere” only means that a question is put by the editors. To my mind, it is more than that. It is a question of the nature of objection. It is used at times to question accuracy of what has been said or written by another. In any case one thing is plain that the opinions of these editors expressed in the context of a rule which is different from the rule laid down in sec. 312 would be slender support for the construction urged on behalf of the appellants.

17. We have here an express and unqualified rule in sec. 312 which is manifestly intended to set at nought the mischief which must result if a director of a Company public or private were to be permitted to exercise the power of introducing another person of his own choice as a director in his place and stead by assigning his office in favour of such person. The expression “assignment” so dear to the heart of English conveyancing lawyers is not used here in any context of conveyancing or transfer of any property or any right or interest in property but in the context of making over of an office of director by one person to another. The expression is capable of being variously applied and I see no reason and no principle why its connotation should be confined to transference of any right by an act inter vivos. It is an expression of larger import than that. In reference to something which is not property or right or interest in property it can certainly mean making over or setting over of any right by one person to another or appointment to an office by one person of another when the person holding the office makes it over to another by appointing him to hold that office. The argument pressed for our acceptance, as I have already mentioned, could not go to the length of suggesting that a director can during his life time make over his office to another person by calling it an appointment and not an assignment. It makes no difference to my mind whether he does it in his life time by an act inter vivos or by a will so that it operates from the date of his death. In either case it is an appointment to the office of director. In the course of the arguments I put it to learned counsel for the appellants if he could suggest any reason why the Legislature should deem it necessary to prohibit a director of a company from appointing another person as a director in his place and stead by an act inter vivos, that is, during his lifetime and should not deem it necessary to prevent him from doing so by a will. No answer was given save that it would be entering the region of speculation. It would be strange indeed to attribute to the Legislature the intention to create the anomalous position that must arise if it were to be accepted that sec. 312 prohibits appointment by a director to his office of another person in his place and stead by an act inter vivos and yet permits such appointment to be made by him by his will. Moreover this incongruous position can arise not only in case of a director in a private company but also in case of a director in a public company if the construction urged on behalf of the appellants is to be accepted. To take the simple illustration of a case where by Articles of Association of a public company the promoters or managing agents are given the power to appoint one or more ex-officio directors for life. Such a power would be valid under sec. 255 of the Companies Act so long as the number of such directors does not exceed one-third of the total number of directors of the company. Section 255 is as under :

“255. Appointment of directors and proportion of those who are to retire by rotation – (1) Not less than two-thirds of the total number of directors of a public company, or of a private company which as a subsidiary of a public company, shall –

(a) be persons whose period of office is liable to determination by retirement of directors by rotation; and

(b) save as otherwise expressly provided in this Act, be appointed by the company in general meeting

(2) The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of and subject to any regulations in the articles of the company. also be appointed by the company in general meeting.”

So if the regulations in the Articles of the company empower the promoters or managing agents to appoint a director or directors within the number permissible under sub-sec. (2) for the life-time of such director or directors the appointment would be valid. Now in such a case if the Articles were to provide that a director or directors so appointed will have the power to appoint another person to his or their office of director by an act inter vivos or by will the position would be that the appointment by an act inter vivos would be void while the appointment, by will would be valid if the construction which we are asked to put on the expression “assignment” were to be accepted. It is inconceivable to my mind that such is the object or effect of sec. 312 of the Act of 1956. It seems indubitable to me that any such appointment of a director in a public company by will is within the prohibition imposed by the section. Cadit question it is within the ambit of the prohibition in case of appointment of a director in a private company. The only answer to this suggested by learned Counsel for the appellants was that section 317 prevents appointment of a managing director of a public company for a term exceeding five years at a time. But that section has no bearing whatever on the present discussion about assignment of his office by a director. It is extremely difficult for me to see why an intention should be attributed to the law-giver of laying down a rule the effect of which would be to rule that a director in a public or private company, authorised by the Articles of the Company, cannot make any such appointment five minutes before his death – that would be by an act inter vivos – and yet he can do it by inserting a clause to that effect in his will. It was, however, said that sec. 255(2) has the effect of permitting appointment of a director in a public or private company A. I. R. being made by a third person who may be a total outsider and not a director of the company and the argument was that an appointment made by such third person cannot be called an “assignment” of the office of director. The argument ran that there was no difference between any such appointment made by a third party and an appointment made by a person who happens to be a director. The argument to my mind is not sound. The section speaks of assignment of his office by a director and the prohibition is evidently imposed on a person who is a director. It is the office held by a person as a director that is not permitted to be assigned by any act on his part. Therefore, there is a difference between an appointment made by a third party and one made by a director. In the former case it cannot be said that there is an assignment of his office by the person exercising the power. On a consideration of the whole matter it seems to me that having regard to the nature of the office of a director it cannot make any difference whether the act is called an assignment of his office by a director or transfer of his office by a director or appointment by such director of another person to that office in his place and stead either by a deed or will. I fail to see any reason why we should recognise the over-refined distinction sought to be made in case of an appointment by will by attributing any restricted and technical conveyancing meaning to the expression “assignment” of the nature suggested on behalf of the appellants. This is not a matter of doctrinaire technicalities but a matter to be considered on broad principles and rules of interpretation.

8. I have not yet made any reference to another argument urged before us by learned Counsel for the appellants. It has been argued that sec. 312 speaks only of a director and the prohibition imposed is against the assignment of office of a director and not against the assignment of office of a managing director. Section 312 is one of a group of three sections headed “miscellaneous provisions”. Chapter II of the Companies Act deals with Directors. Learned Counsel for the appellants has drawn our attention to certain sections where the Legislature has referred to a director and certain sections where reference is made to a managing director. The suggestion is that in respect of every provision of law affecting a managing director, the framers of the Act have taken care to lay down separate rules affecting them and where they have only referred to a director, the rule is only applicable to a director, though a managing director being a director the rule may also apply to him. But that, it is said, would be in a distinguishable capacity as a director and not as a managing director. An examination of the relevant provisions of the Companies Act would show that such is not the position. There are sections which apply to a director and are equally applicable to a managing director. Moreover in section which speaks of a director the Legislature has taken special care to state necessary qualifications to the rule there stated if the section is not to apply to the case of a managing director. Before I examine one or two of such sections I should refer to the definitions of “director” and “managing director” which are as under :

“Section 2(13) “director” includes any person occupying the position of director, by whatever name called.”

“Section 2(26) “managing director” means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of Directors or by virtue of its memorandum or articles of association, is entrusted with any powers of management which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called.”

The definition of “managing director” makes it abundantly clear that a managing director is necessarily a director entrusted with powers of management and that the expression managing director includes a director occupying the position of a managing director by whatever name called. In certain sections the Legislature has drawn a distinction between a director and a managing director by express words of qualification and it is impossible to say that the expression “director” wherever it is used in the Act excludes a managing director. The definition of “director” is rather comprehensive than restrictive. Now these expressions which are defined by the Legislature are always to be read in their context and as is usual in modern legislative practice sec. 2 which gives definitions begins with the words “Unless the context otherwise requires”. The expression “director” is not to be read in sec. 312 or any other section as if it could apply only to a person who is a director and not to one who is also a managing director or to put it slightly differently as if it excluded per se a director who is also a managing director. When question arises whether the expression “director” in any section is to be understood in a comprehensive or exclusive sense it would be necessary to examine the scope and ambit of the particular section and the nature and object of the rule and the context in which it is used. Now as I have already pointed out sec. 312 is one of the sections under the heading of “Miscellaneous Provisions”. That itself to my mind is some indication that the expression director is used in the sections under that head in a comprehensive and not an exclusive sense. What is more important is that there is ample support to be derived for the view that the expression director in these miscellaneous provisions is used in a general sense. Section 313 must evidently apply to a managing director although only the expression “director” is used there. Then if sec. 314 is scrutinised it is clear that the Legislature having used the expression director has expressly mode reference to a managing director. Now one thing is quite clear that secs. 312 and 313 are to be read as dealing with a matter of the same nature and that the expression “director” in those sections must have the same meaning. Section 307 also lends support to the same view and it is not possible to rule out consideration of that section by saying that a managing director is also a director, and that it must be read as applicable to a managing director only in his capacity of a director and not of a managing director. The point is whether the expression is always used in the exclusive sense contended for on behalf of the appellants. I may permit myself to refer to sec. 86B of the repealed Act for the purpose of examining the present argument. That section applied both to a director and a managing director. Section 2(24) of the Act of 1956 defines “manager” to mean :-

“an individual (not being the managing agent) who, subject to the superintendence, control and direction of the Board of Directors, has the manage ment of the whole, or substantially the whole of the affairs of a company and includes a director or any other person occupying the position of a manager, by whatever name called and whether under a contract of service or not.”

Section 86B to which I have already made reference placed certain restriction on the powers of a director as well as a manager of a company. Section 383 of the Act of 1956 rules that the provisions of section 312 shall apply in relation to a manager of the company as they apply to a director thereof. If we accept the argument urged on behalf of the appellants, the effect of the rule read with sec. 312 would be that the manager of a company who is a paid employee or servant of a company can by his will ap-point another person to occupy the post of manager after his death if the Articles of Association of the company authorise him to do so. It is extremely difficult for me to see that such could be the intention or object of the law-maker. The prohibition in sec. 312 applies equally to a director as to a manager and not only in a private company but also in a public company. No reason whatever could be suggested why the Legislature should have wanted to exclude a managing director and that too of a public as well as a private company from the salutary prohibition laid down in sec. 312. Here also it was said on behalf of the appellants that sec. 317 lays down that a managing director of a public company cannot be appointed for more than five years at a time and that it does not apply to a private company. I do not think that advances the contention urged on behalf of the appellants. I need not pursue the examination, of some other sections which, to my mind, support the view that the expression “director” when used without any qualifying words is to be read in a comprehensive sense as inclusive of a managing director and not in the exclusive sense in which we are asked to read it. These considerations, in my judgment, lead to the result that the expression “director” in sec. 312 includes a managing director of a public or a private company.

9. Another phase of the argument on behalf of the appellants on the question of construction of the expression “assignment” in sec. 312 was that Article 109 only amounts to delegation of power by the directors to one of them viz. Dadoba. I have read the relevant Articles 105 to 109 of the Articles of Association of the company more than once and I see no support whatever in them for the present argument. There is nothing in those articles which even faintly suggests anything like delegation nor any exercise by Dadoba of any delegated power. The present argument must therefore fail.

20. For all these reasons, the conclusion seems to me inescapable that the expression “assignment of his office” cannot be read in the narrow restricted sense in which we have been asked to read it on behalf of the appellants and sec. 312 must be read as applicable to a director including a managing director and in the comprehensive sense in which it would include appointment by any testamentary disposition or direction. In my judgment the learned Judge was right in the conclusion reached by him.

21. I now turn to examine another contention urged before us by Mr. Manekshaw. It has been argued that in any event the plaintiff ceased to be a director of the company because he failed to attend certain meetings of the directors and became disqualified from acting as a director by operation of Art. 85(f) and sec. 283(g). A few dates and facts are necessary to dispose of this contention. There was a meeting of the Board of Directors soon after the death of Dadoba which was in the nature of a condolence meeting and it was attended by the plaintiff. That was on 13-2-1957. On 14-2-1957 the second defendant sent out a notice calling a meeting of the Board of Directors of the company for 14-2-1957. He sent that notice as Chairman of the company. The next notice sent out by the second defendant was signed by him as a director and was on 19-3-1957. By his letter dated 23-3-1957 the plaintiff protested against the notice of 19-3-1957 which had been sent out by the second defendant. A notice dated 27-3-1957 convening a meeting of the Board of Directors was sent by the second defendant as a managing director of the company. A notice dated 4-5-1957 was also sent by the second defendant describing himself as a managing director. A notice dated 21-5-1957 was also sent by the second defendant as a managing director of the company. So also a notice dated 23-5-1957 was sent by the second defendant as the Managing Director of the company. It will be seen that all but one of the notices relating to the convening of the meeting of Board of Directors were sent by the second defendant as Chairman or managing director and at all relevant period the plaintiff protested against the right of the second defendant to convene any meeting in his capacity as Managing Director or Chairman of the Board of Directors of the company. Since I have taken the view that the appointment of the second defendant as the Managing Director was invalid and bad in law, it must follow as a necessary corollary to that conclusion that the second defendant had in law no power to convene any meeting as a managing director of the company and if he did so, those meetings were not duly and legally convened meetings and if they were not duly and legally convened meetings, it cannot be said that the plaintiff absented himself from any properly convened meeting of the Board of Directors of the company. I must point out that it was also argued by Mr. Manekshaw that in any event the second defendant had continued all along to be a director of the company and even if it be held by the Court that he had no right to convene the meetings as a managing director of the company, he had the right to convene those meetings as a director and on that ground the plaintiff should be disqualified because he had failed to attend the meetings as required by the Articles of Association and by the provisions of law. I do not think this argument is tenable. In express terms, the meetings were called by the second defendant in his alleged capacity as a managing director and there is nothing on the record to show that he called those meetings simply as a director of the company. It is not, therefore, necessary to examine this argument at any length. The meetings being called by him in the exercise of a capacity which he did not have, were bad and it is not open to him now to fall back on his position as a director of the company. I may also refer to Article 94 of the Articles of Association of the company which deals with the question as to when a director may summon a meeting. That article lays down that the managing director may at any time and shall upon request of any Director convene a meeting of the directors. The power to call a meeting of the directors is primarily with the managing director and the second defendant in terms called those meetings as managing director. Mr, Manekshaw has also drawn out attention to Form No. 184 from Palmer’s Company Precedents and relied on the following observation :

“In the absence of any article otherwise providing or a contrary practice established by the directors it would seem that any director may summon a meeting.”

There is nothing before us to show that any contrary practice has been established and Art. 94 is the relevant article which must be taken into consideration in this matter. There is no other article in the Articles of Association of the company which can be said to deal with the matter. The present contention fails and must be negatived.

22. There remains to consider one more contention urged before us by Mr. Manekshaw. It is said that the appointment of the third defendant has been erroneously declared by the trial court to be bad in law. It is not necessary to refer to what I have already said in my judgment about the appointment of the second defendant as a managing director being invalid and bad in law. If his appointment was invalid and bad in law, he had no power to appoint the third defendant as a director by co-option.. That contention also must be rejected.

23. In the result I agree with the conclusion reached by the learned Judge that the plaintiff was entitled to the reliefs sought by him. I would hold that the appeal fails and should be dismissed with costs.

24. K.T. Desai:

A point of law involving the construction of Section 312 of the Companies Act, 1956, arises in this appeal. The facts are few and are not in dispute. One Dadoba Kashinath Thakoor was carrying on business at Bombay under the name and style of the Oriental Metal Pressing Works. On 26-5-1955 a private limited company was, floated named The Oriental Metal Pressing Works Ltd. The subscribers to its Memorandum were, Dadoba, his son Govind, who is the second defendant in the suit, and his brother Bhaskar who is the plaintiff in the suit. One of the principal objects of the company was to acquire and take over as a going concern the business then carried on at Bombay by the said Dadoba Kashinath Thakoor under the name and style of Oriental Metal Pressing Works, and enter into an agreement in that connection and to carry into effect such agreement. After the company was formed, a meeting of the Board of Directors was held on 7-7-1955. At that meeting Dadoba was appointed as Chairman of the Board of Directors for the period of his life-time. At that meeting Dadoba was appointed as the Managing Director of the company for the period at the remuneration and upon the other terms and conditions contained in the draft agreement which was placed before the meeting of the Board of Directors which was to be entered into by the company with Dadoba. It was resolved at that meeting that the company should enter into that agreement. On that very day, an agreement was entered into between the company on the one hand and Dadoba on the other in terms’ of the said draft. By clause 1 of the agreement it was provided that Dadoba was appointed Managing Director of the company with powers and upon the terms and subject to the conditions thereafter set out. By cl. 2 of the agreement it was provided that he was to hold the said office of Managing Director for life from the date of the incorporation of the company. By cl. 4 of that agreement it was provided that Dadoba as such Managing Director shall be one of the Principal Officers of the company and subject to the control and supervision of the Directors he shall have the general control and management of the business and affairs of the company. Clause 7 of that agreement, which is material for the purpose of the present appeal, runs as follows :

“Mr. Thakoor (Dadoba) shall be entitled by deed inter vivos or by will or codicil to appoint any person to be a Managing Director in his place and stead and in default of such appointment the legal representatives of Mr. Thakoor shall be entitled to exercise the said power. Any appointee as aforesaid shall whilst holding office also be designated as a Managing Director and shall be entitled to be paid by the company the same remuneration and to exercise the same powers and authorities as are vested in Mr. Thakoor and the appointee as aforesaid shall have a power of appointing any person to be Managing Director as his successor on the remuneration of not less than Rs. 1,000 (Rs. one thousand) per month and upon the same other terms and conditions as are herein contained.”

Article 109 of the Articles of Association of the company also provided as follows.

“109 (a). The said Shri Dadoba Kashinath Thakoor shall be the first Managing Director of the company at a remuneration of Rs. 2,500 per month, subject to the said remuneration being increased by the Board of Directors of the Company. He shall be entitled to hold such office for life and will not be subject to cls. 87, 88 and 91 of these Articles.

(b) The said Shri Dadoba Kashinath Thakoor may by deed inter vivos or by will or codicil appoint any person to be a Managing Director in his place and stead and in default of such appointment, the legal representatives of the said Shri Dadoba Kashinath Thakoor shall be entitled to exercise the power;

(c) Any appointee as aforesaid shall, whilst holding office, also be designated a managing director and shall be entitled to the same remuneration and to exercise the same power; and authorities as were vested in the Managing Director in whose place and stead he is appointed.

(d) The appointee as aforesaid shall have a power of appointing any person to be a Managing Director as his successor on the remuneration of not less than Rs. 1,000 per month and with the same powers as are vested in Shri Dadoba Kashinath Thakoor.”

The said Dadoba continued to be the Managing Director of the company right up to the date of his death. On 18-8-1956 the said Dadoba made his last will and testament. The relevant provision of that will so far as it concerns the present appeal, is as under :

“I am the Managing Director of The Oriental Metal Pressing Works Private Limited on the remuneration and subject to the terms and conditions contained in an Agreement, dated the 7th day of July 1955 and made between the said Company of the one part and myself of the other. Under the Articles of Association of the said Company and under the said Agreement dated the 7th day of July 1955, I am entitled by deed inter vivos or by will or codicil to appoint any person to’ be a Managing Director in my place and stead. Accordingly, I hereby appoint my said son Govind Dadoba Thakoor to be a Managing Director of the said Company from the date of my demise.”

The said Dadoba died on 14-1-1957. Govind Dadoba, the second defendant, claimed that he had been validly appointed as a Managing Director of the company under the provisions contained in the will of the said Dadoba set out above. It is this appointment of Govind as the Managing Director of the company which is sought to be challenged by the plaintiff in the suit.

25. The plaintiff contends that this appointment is bad having regard to the provisions contained in sec. 312 of the Companies Act. 1956. That section provides as follows :

“Any assignment of his office made after the commencement of this Act by any director of a company shall be void.”

Reliance has also been placed upon the provisions contained in sec. 9 of the Act. That section runs as follows :

“9. Save as otherwise expressly provided in the Act – (a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of directors, whether the same be registered, executed or passed, as the case may be, before of after the commencement of this Act; and

(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.”

It is not disputed that the appointment that was made by Dadoba by his will was an appointment that fell within the terms of Article 109 and the terms of the agreement referred to by me above. what is contended is that to the extent that this Article and the agreement provide for such an appointment being made by a will, the provisions contained in the Article and in the agreement are void in law and are inoperative and that the power thereby conferred cannot be exercised. It is urged that the expression “director” in sec. 312 is wide enough to cover a Managing Director and that the appointment of the second defendant, who was already a director of the company, as the Managing Director was void by reason of the provisions contained in sec. 312 of the Act. It may be mentioned here that Govind, the second defendant, is and has continued to be a Director of the company since the date of its incorporation.

26. It is streneously urged by Mr. Manecksha, the learned counsel for the appellants, that sec. 312, of the Companies Act, 1956, has no application to the facts of the present case. He says that the only thing done by Dadoba by his will was to appoint Govind, who was already a director of the company, as the Managing Director and that the appointment was to take effect from the date of the demise of Dadoba. He says that in order to invoke the provisions of sec, 312, it is necessary that there must be an assignor, that such assignor must be the holder of the office of a director and that he should assign his office as such director. He says that Govind was already a director of the company and that there cannot be an assignment of the office of a director to a person who already holds that office. He further says that there cannot be the assignment of his office by a director to operate after his death. The argument is that office of a director is personal to the holder and that his office would, in any event end with his death. Mr. Manecksha urges that the office of a director is by its very nature such that it must of necessity cease, so far as the holder is concerned, on his death, and that it is an office which cannot be assigned by will which can only operate on the death of the holder. He says that the words of the section read in their context must necessarily refer to an assignment of office by an act inter vivos.

27. As against these weighty arguments, it has been contended that the expression “assignment” is an expression of wide import. Diverse meanings of the expressions “assignment”, “assignee”, “assigns” appearing in various dictionaries and lexicons were cited at the Bar and it was urged that as the word “assignment” would include an assignment by a will or a testamentary instrument, there was no reason, why the ambit of the section should be confined to an assignment only by act inter vivos. It was further urged that this section was enacted in order to prevent the ill effects which might result from the assignment of his office by a director and that if the expression “assignment” was wide enough to cover an assignment by a testamentary writing, full effect should be given to that expression. It is said that if persons are permitted to appoint others as directors by will and if the persons so appointed could equally have the power to appoint others by will, there would result a perpetuity which it must have been the object of the legislature to prevent. Reference in this connection was made to the provisions of law contained in S. 86B of the Indian Companies Act, 1913. Section 86B was introduced by the legislature in the year 1936. That section provided inter alia as follows :

“86B. If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall, notwithstanding anything to the contrary contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company.”

This provision was enacted as a remedial measure. This remedial measure being found insufficient, the legislature when it passed the consolidating and amending Act of 1956 laid down by S. 312 that after the commencement of the Act the assignment of his office by any director would be void.

8. The question that falls for consideration in the present case is whether the assignment that is contemplated by the section is the assignment of his office held by a director whose term has not expired or whether it contemplates the appointment of a person to fill that office after the holder of that office is to cease to hold it by reason of lapse of time or by reason of his death. In my view, when the legislature uses the expression “assignment of office”, it is of the essence that the office was one which not merely the assignor was holding at the moment of the assignment, but was one which he would have continued to hold if the assignment had not been made. In the case of an appointment which is to take effect after the period of office of the assignor expires by reason of lapse of time or death, it would be inappropriate to use the expression “assignment of his office”. If a person has the power to appoint another as a director after the appointor ceases to be a director by reason of lapse of time or death, it would be purely the exercise of the power of appointment and not an assignment of his office. In the present case, the appointment of Govind as a Managing Director was to take effect after the period of office of Dadoba was to expire on the death of Dadoba and it cannot be said that there is an assignment of his office by Dadoba within the meaning of S. 312.

9. In determining the meaning to be attached to the words “assignment of his office X X X by any director of a company” within the meaning of S. 312, one has to bear in mind the scheme of the Act. Under the Act the office of a director is personal to him. Section 253 of the Companies Act, 1956, in terms provides that no body corporate, association or firm shall be appointed director of a public or private company, and only an individual shall be so appointed. The legislature has now confined the appointment of directors to individuals. Not merely that, but by S. 280 of the Companies Act. 1956, an age limit for directors is sought to be provided in the case of a public company and of a private company which is subsidiary of a public company except in cases provided by S. 2

81. When the legislature was dealing with the question of the assignment by a director of his office as a director in the context of the company law of 1956, it was only dealing with the assignment of an office which must of necessity in all events terminate on the death of the assignor. The assignment by a director of his office cannot possibly operate beyond the period for which the assignor could have held that office. If that period is limited to the life of the assignor, there is no scope for effecting an assignment by means of a testamentary instrument, which must of necessity operate on the death of the person executing that instrument. In this view of the matter, it is not necessary for me to examine the dictionary meaning of the expression “assignment” and it is not necessary to consider whether an assignment in the abstract can or cannot be effected by a testamentary instrument.

30. Even if the expression ”assignment” was wide enough to include an assignment by devise i.e., by means of a will or testamentary instrument, having a regard to the context in which that expression is used it cannot refer to any assignment that may be made by a testamentary instrument. It can refer only to an assignment by act inter vivos. It is urged that the expression “assignment” has not been used in the context of property law and that it is used in connection with an office. It is undoubtedly true that the expression “assignment” has been used in connection with an office. It is because it is used in connection with an office, which the assignor must cease to hold on his death, that it is possible to say that the section only contemplates an assignment by act inter vivos. The appointment of Govind as a Managing Director by Dadoba by his will does not fall within the ambit of S. 312.

31. It is then urged that the expression “assignment” may be equated with appointment, and that in the context in which that expression is used in S. 312 of the Companies Act, the parties involved are not merely the assignor and the assignee, but a third party viz., the company and that quake the company the assignment must of necessity operate as an appointment to the office of a director. It is no doubt true that when an assignment by a director of his office is permitted by an agreement with the company or under the Articles of Association of the company, it must of necessity result in the appointment of the assignee as a director of the company. But that does not mean that every appointment must result in the assignment of his office by a director. The power of appointment can be exercised by a person who is not a director. Such appointments are contemplated under the company law and do take place. The power may be reserved to third parties to appoint directors. See British Murac Syndicate Ltd. v. The Alperton Rubber Co. Limited, (1915) 2 Ch 186. Sometimes a vendor who sells his property to a company may be given a right to appoint directors by the articles. Sometimes a person who advances moneys to the company may be given a right to appoint his nominee on the Board. It is usual for banking companies and finance corporations making loans to companies to acquire a right to appoint a representative on the Board of Directors to see to the proper utilisation of the funds for the purpose for which they are lent. Debenture-holders are often given such a right. So far as the Act is concerned power is given to the Government in certain circumstances and in the case of certain companies to appoint directors. It is not every appointment that is covered by S. 312. The section is operative only when that appointment is made by a director by the assignment of his office.

32. It is urged by the learned counsel for the appellants that in the present case the second defendant was the holder of the office of a director, that he had been a director since the date of the incorporation of the company and that there could not possibly be an assignment to him of the office of a director which he already held. It is urged that S. 312 is applicable to these cases where the office of a director is assigned by the holder of that office to a person who is not a director of the company. There is considerable force in this argument of Mr. Manecksha. It is urged on behalf of the respondents that the expression “assignment of his office*** by any director” in S. 312 is wide enough to cover the case of the assignment of the office of a Managing Director. It is no doubt true that a managing director is a director. But the converse is not true. A director need not be a managing director. All cases of transfer of the office of a managing director are not covered by the section. It may be possible for a person, who is a managing director, to appoint another person who is a director to be the managing director of the company, he himself ceasing to be the managing director and remaining only as a director. In such a case, there can only be an assignment of the office of a managing director without there being an assignment of the office of a director. The section, as it is worded, is not wide enough to cover such an assignment. There are separate provisions in the Act dealing with directors and managing directors. A director is defined by S. 2(13) of the Act to include any person occupying the position of director, by whatever name called. A managing director is defined by S. 2(26) of the Act to mean a director who by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of directors or by virtue of its memorandum or articles of association, is entrusted with any powers of management which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called. Sections 267, 269, 316 and 317 deal with managing directors. It is not necessary for the purpose of the present case to consider the effect of these sections. It is sufficient to say that in a case where an assignment of his office by a managing director to another operates as an assignment by such managing director of his office as a director to another person, who does not hold any office as a director, it would fall within the ambit of the provisions contained in S. 312. In cases where there is no such assignment of the office of a director, they would fall outside the ambit of that section. In the present case, the person appointed was already a director. The person appointed was to hold office from the date of the demise of the person appointing and in my view it is not possible to say that there was any assignment of his office by a director within the meaning of S. 312 of the Act.

33. Some support for the conclusion to which I have reached may be derived from a statement by the editors of Gore-Browne’s Hand-book on Joint Stock Companies, 41st Edition, at p. 341, 342 and of Palmer’s Company Precedents, 17th Edition at page 736. There the editors were dealing with the provisions contained in S. 204 of the English Companies Act, 194

8. That section is in these terms:

“204. If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall, notwithstanding anything to the contrary contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company”.

In connection with this section, the editors of Gore-Browne’s Hand-book on Joint Stock Companies observe at pages 341 and 342 as follows :

“Where, in the case of a private company, the vendor of a business to the company is appointed a director by the Articles, he is frequently styled a governing director’ and has conferred upon him all the powers of a board of directors, with a right from time to time to appoint and remove other directors, and with a power to appoint a successor during his life, or by his will, or for his legal personal representatives to make such appointment after his death. In connection with such powers to appoint a successor the question whether its exercise constitutes an ‘assignment’ of the office within S. 204 may arise. That section renders the assignment of the office of director as such to another person of no effect, unless and until it is approved by a special resolution of the company. It is difficult to see how a deceased person or his legal personal representative could assign an office, and possibly in no case would the exercise of a power to appoint a successor under such an Article constitute an ‘assignment’ of the office, unless the appointment is made by the governing director during his life”.

After expressing themselves in these terms, they further proceed to observe that the point was, however, a doubtful one and that it would be advisable for any person appointed as successor under such a power to obtain the support of a special resolution.

34. In Palmer’s Company Precedents, 17th Edition, at p. 874, the editors of that work observe in connection with S. 204 as follows :

“The precise connotation of a power ‘to assign office’ as mentioned in the section is not clear. It is not thought that it would refer to a provision for the appointment of a successor”.

The editors of Buckley on the Companies Acts, 13th Edition, have in connection with S. 204 merely observed at page 401 as follows :

“Quaere, what is meant by the expression ‘assignment of office’ used in this section, which reproduces S. 151 of the 1929 Act”.

The editors of Palmer’s Company Precedents and Gore-Browne’s Hand-book on Joint Stock Companies prefer to express their individual opinions on the subject. The editors of Buckley on Companies Acts have chosen to remain silent.

35. It is urged on behalf of the respondents that in construing the provisions of S. 312 which appear in a consolidating and amending Act, the Court must consider the mischief which was sought to be avoided and the evil which was sought to be remedied. It is well known that persons when making advances to companies or persons when transferring properties to companies reserve to themselves the power to appoint directors by act inter vivos as well as by will. As observed by the learned editors in Palmer’s Company Precedents, 17th Edition, at page 736 :

“The most natural persons, by reason of their interest, to fill the office of director, as well as the most competent, are generally the original owners of the business, and accordingly the articles of a private company commonly provide that some or one of such owners shall be the directors. The terms of their tenure of office vary. Sometimes it is provided that the owner or owners shall be entitled to hold office, for instance, for so many years, or for life, provided he or they continue to hold a certain number of shares; sometimes an owner is empowered at any time, and from time to time, to act, so long and whenever he chooses, as sole director and at his discretion to appoint and remove other directors. Occasionally an owner is empowered to authorise his executors or trustees, whilst holding a certain number of shares, to appoint directors, and to define and restrict their powers and give them their share qualification”.

Reservation of such powers had been so extensive and so common that in Form No. 255 contained in Palmer’s Company Precedents, 17th Edition, at pages 734 to 736 there is an express clause which runs as follows :

“If the said A B dies whilst he holds the office of Governing Director he may by his will or any codicil thereto appoint any person to be Governing Director in his place, and direct and determine within the limit of this article what shall be the powers, authorities and discretions of such Governing Director, and his remuneration and qualification, and how long he shall be entitled to hold office, and in default of such direction and determination such appointee shall only have the powers of an ordinary Director”,

Now, what I have to consider in this case is the extent to which this was regarded as an evil by the legislature and the extent to which the legislature has sought to interfere with the freedom of persons to enter into contracts with companies when transferring properties to companies or lending moneys to companies. As I have already stated, it is well known that powers of appointment were being conferred which could be exercised by a testamentary instrument. Is there anything in the Act to show that the. exercise of such a power to appoint directors by testamentary instruments has been rendered void by the legislature? Now, so far as the power to appoint a director by a person, who does not hold the office of a director, by will is concerned, one does not find a single section, in the Act which prohibits such an appointment in toto. The restrictions which have been put by the legislature on the powers of appointment of directors are contained in Chapter II. Section 255 which deals with appointment oi directors provides as follows :

“255. (1) Not less than two-thirds of the total number of directors of a public company, or of a private company which is a subsidiary of a public company, shall

(a) be persons whose period of office is liable to determination by retirement of directors by rotation; and

(b) save as otherwise expressly provided in this Act be appointed by the company in general meeting.

(2) The remaining directors in the case of any such company, and the directors generally in the case of a private company which is not a subsidiary of a public company, shall, in default of and subject to any regulations in the articles of the company also be appointed by the company in general meeting.”

This provision makes it abundantly clear that so far as a public company and a private company which is a subsidiary of a public company are concerned, two-thirds of the directors have to be appointed by the company in general meeting. There is a fetter imposed to that extent upon the powers of appointment. As regards the remaining one-third, it is provided that such appointments can be made in accordance with the regulations in the articles of the company, and it is only in those cases where there is an absence of a provision in the articles of the company that such appointments have to be made by the company in general meeting. As regards a private company which is not a subsidiary of a public company, that section provides that all the directors of the company have to be appointed in accordance with the regulations in the articles of the company, and it is only in default of any provision therein contained that they are to be appointed by the company in general meeting. The result is that the power to appoint directors in accordance with the articles, whether it vests in a stranger or in the directors, whether it is exercisable by act inter vivos or by will has been kept intact and has been preserved quae a public company and a private company which is a subsidiary of a public company to the extent of one-third of the directors, and quake a private company which is not the subsidiary of a public company, to the fullest extent. If such a power is so preserved, there is nothing in the policy of the Act or the scheme of the Act which can make me infer that when such a power of appointment is vested in a director, the same cannot be exercised by will. It is no doubt true that when as a result of the exercise of such a power by act inter vivos there is the assignment by the appointing director of his office as a director, then S. 312 will supervene and nullify the said appointment. There is nothing in the scheme of the Act which would lead to the conclusion that the legislature by S. 312 sought to render a testamentary appointment by a director invalid.

36. As regards the scheme of the Act, it may be observed that there are various provisions in the Act dealing with the assignment of his office by the holder thereof. Section 312 is the section which deals with assignment by a director of his office. Section 343 is the section which deals with transfer of his office by a managing agent. That section provides as under :

“A transfer of his office by the managing agent of a company shall not take effect unless it is approved both by the company in general meeting and by the Central Government”.

In the case of transfer of his office by a managing agent there is no total prohibition, but safeguards are provided in the shape of an approval by the company in general meeting and an approval by the Central Government. So far as managers of companies are concerned, S. 388 provides that the provisions of S. 312 shall apply in relation to the manager of a company, as they apply to a director thereof. It is somewhat interesting to observe that when the legislature was considering the case of a managing agent, it has thought fit to enact two other sections which deal with the question of succession to the office of a managing agent by inheritance or device. Section 344 runs as follows :

“Any agreement made by a company other than a private company which is not a subsidiary of a public company, with its managing agent after the commencement of this Act shall be void in so far as it provides for succession to the office by inheritance or device”.

Section 345 runs as follows :

“345. (1) Where the office of the managing agent of a company is held by an individual at the commencement of this Act and the managing agency agreement provides for succession to the office by inheritance or device, no person shall succeed to the office on the death of the holder thereof, unless the succession of such person thereto is approved by the Central Government; and that Government shall not accord such approval unless in its opinion, such person is a fit and proper person to hold the office of managing agent of the company.

2. The provisions of sub-section (1) shall not apply to a private company which is not a subsidiary of a public company”.

These provisions make it clear that the legislature contemplated in the case of a managing agent the question both of transfer of his office by a managing agent and of the succession to that office by inheritance or devise. The legislature in the case of a director of a company has not sought to legislate specifically for succession to the office by inheritance or devise. The question is whether the legislature not having done so, the Court should so interpret section 312 as to see in it the expression of the will or the intention of the legislature to legislate also in connection with succession to die office of a director by inheritance or device. I see no warrant for doing so. The words used in the section are not wide enough to include the case of appointment of a director by will or by a testamentary instrument and I do not see anything in the scheme of the Act which would enable me to give an extended meaning to those words in furtherance of what is stated to be the object of the legislature which I, speaking for myself, am unable to see. The provisions contained in section 312 are provisions which are intended to take away the rights thitherto exercised by directors of companies. If there is to be any interference with such rights and if any of such rights are intended to be taken away, the legislature must use appropriate language. Where such language has not been used by the legislature, it is not for the Court to speculate about the intention of the legislature and attempt to give effect to. it. In the view which I take of the matter, the appointment of the 2nd defendant as a managing director from the date of the demise of Dadoba is a valid appointment as a managing director and is not rendered void by S. 312 of the Companies Act, 1956.

37. Mr. Maneksha urged that S. 312 does not apply to private companies. I am unable to see how the operation of the provisions of Section 612 can be so excluded. Wherever the legislature has thought it fit not to apply any particular provision of the Act to a private company or to apply a particular provision of the Act only to a public company or to a private company which is a subsidiary of a public company, it has expressly stated so. In the Chapter in which S. 312 appears S. 315 also appears. That section in terms says that sections 318 and 317 shall not apply to a private company unless it is a subsidiary of a public company. There is no such reservation in connection with S. 312 and there is nothing in the language of S. 312 which would exclude its operation in relations to private companies.

8. It has also been urged by Mr. Manekshaw that the provisions of Article 109 of the Articles of Association of the company tantamount to a delegation of the power of appointing a managing director by the directors of the company. Article 105 of the Articles of the company provides that the directors may, from time to time, appoint one or more of their body to be Managing Director Or Managing Directors of the company, either for a fixed term or without any limitation as to the period for which he or they is or are to hold such office, and may from time to time (subject to the provisions of any contract between him or them and the company) remove or dismiss him or them from office and appoint another or others in his or their place or places. The power conferred on Dadoba is an express power conferred by the Articles of Association themselves and cannot be regarded as a power which arises by virtue of any delegation by the directors of their power. The instrument giving rise to the power of the directors to appoint a managing director and to the power of Dadoba to appoint a managing director is one and the same. The source of the power being the same, it is not possible to say that the directors having derived their power under that instrument have thereafter delegated it to Dadoba.

9. It has been urged on behalf of the respondents that Article 109 contains provisions which are rendered void under Sec. 312. It is said that Article 109 deals with the power of Dadoba, who was the managing director for life, to appoint by deed inter vivos a managing director in his place and stead, that such appointment is rendered void under Sec. 312 and that if that be so, no other power under Article 109 can be exercised. In my view, this argument is not well founded. The power to appoint by will is severable from the power to appoint by deed inter vivos. One power can be exercised without exercising the other.

40. The next point that has been urged on behalf of the appellants is that the plaintiff has ceased to hold his office as a director. Reliance has been placed for this purpose on section 283(l)(g) of the Companies Act, 1956, and Article 85(f) of the Articles of Association of the company. Sec. 283(l)(g) runs as follows :-

“283(1). The office of a director shall be vacated if * * *

(g) he absents himself from three consecutive meetings of the Board of directors, or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board.”

Article 85(f) is to the same effect. After the death of Dadoba various meetings of the Board of Directors of the company had been called by the second defendant. On 19th March 1957 the second defendant purporting to act as a director of the company called a meeting of the Board of Directors on 25th March 1957. On 23rd March 1957 the plaintiff addressed a letter to the second defendant protesting against the action of the second defendant in calling that meeting. He contended that under the Articles of Association of the company the second defendant was not entitled to call a meeting of the Board of Directors of the company. In the course of the letter it was stated that as the second defendant was neither the Chairman nor the Managing Director, he was not entitled to call a meeting of the Directors. The plaintiff did not attend that meeting. On 27th March 1957 the seconds defendant purporting to act as the managing director of the company called a meeting of the Board of Directors of the company on 2nd April 1957. On 29th March 1957 the plaintiff addressed a letter to the second defendant contending that the notice convening the meeting on 2nd April 1957 was invalid as the second defendant was neither the Chairman nor the Managing Director of the company and was not entitled to call a meeting of the Directors without the consent or concurrence of the plaintiff. The plaintiff did not attend the meeting of the Board of Directors on 2nd April 1957. On 4th May 1957, the second defendant purporting to act as the managing director of the company called a meeting of the Board of Directors on 13th May 1957. On 8-th May 1957 the plaintiff addressed a letter to the second defendant reiterating his earlier stand. The plaintiff did not attend that meeting. On 21st May 1957 the second defendant purporting to act as such managing director called a meeting of the Board of Directors on 29th May 1957. The notice was duly served on the plaintiff. On 23rd May 1957 the second defendant as such Managing Director issued another notice stating that the meeting of the Board of Directors of 29th May 1957 was postponed to 31st May 1957. The said notice was duly served on the plaintiff. The plaintiff did not attend that meeting. If these meetings had been validly convened, it is not disputed that the plaintiff would cease to be a director of the company having regard to the provisions contained in Article 85(f) and section 283(1)(g) of the Companies Act. 1956. Article 94 of the Articles of Association of the company which deals with the summoning of meetings of the Board of Directors provides as follows :-

“94. The Managing Director may at any time and shall upon the request of any Director convene a meeting of the Directors.”

As I have already held that the second defendant was duly appointed as a managing director of the company at the time when the notices for calling these meetings were given by the second defendant and these meetings were called, he had the right under the provisions of the Articles to call such meetings. Such meetings were validly convened and held. The plaintiff absented himself from these meetings without leave of absence from the Board of Directors and in my judgment he ceased to be a director of the company. On 28th June 1957 a letter was rightly addressed by the company to the plaintiff stating that he had ceased to be a director of the company.

41. It is urged by Mr. Manekshaw that even if the contention of the plaintiff was correct that the second defendant had not been validly appointed as a managing director of the company, the second defendant was admittedly a director of the company and had a right as such director to call a meeting of the Board of Directors of the company and that the meetings that had been convened by the second defendant were validly convened meetings of the Board of Directors and that the plaintiff having absented himself therefrom had ceased to be a director. He strongly relies upon a passage in Palmer’s Company Precedents, 17th Edn., appearing at page 581 where it has been stated that in the absence of any article otherwise providing or a contrary practice established by the directors it would seem that any director may summon a meeting. It is not anyone’s case that there was any contrary practice established by the directors as regards the calling of the meeting of the Board of Directors. Apart from Article 94, there is no other article dealing with the calling of a meeting of the Board of Directors and if in fact there had not been a validly appointed managing director, a director would have the right to call a meeting of the Board of Directors of the company. It is, however, urged on behalf of the respondents that the meetings other than the meeting called by the notice, dated 19th March 1957, were meetings convened by the second defendant in his capacity as the managing director of the company in the exercise of the powers conferred upon him under Article 94 of the Articles of Association and not in the exercise of his right as a director to call a meeting of the Board of Directors in the absence of the Managing Director and that the plaintiff was under no obligation to attend any meeting convened by the second defendant purporting to act as a Managing Director of the company. Mr. Maneksha urged that if the second defendant had a right as a director to call a meeting, a mere false description of his as a managing director would not render the notices convening the meetings bad. The plaintiff could very well have attended the meetings without prejudice to his contention that the second defendant was not a managing director. There is considerable force in Mr. Maneksha’s argument. However, in the view which I take of the matter that the second defendant was a validly appointed Managing Director of the company, it is not necessary to determine whether if he had not been so appointed the meetings convened by the second defendant as a managing director could be said to be validly convened.

42. The last point that arises for consideration is as regards the validity of the appointment of the third defendant. As the plaintiff ceased to be a director of the company, the second defendant had a right to appoint a director in the place and stead of the plaintiff and the appointment of the third defendant is valid in law.

43. In the view which I take of the matter, the decree would be that the appeal be allowed with costs, and that the suit be dismissed with costs.

44. S.T. Desai, J.

Since we are equally divided on certain points stated below by us, this appeal will have to be heard by one or more of the other Judges of this Court as the Hon’ble the Chief Justice may be pleased to direct. The points on which we are equally divided are:-

(1) Whether the second appellant was validly appointed Managing Director of the first appellant company,

(2) Whether the first respondent (Plaintiff) ceased to be a Director of the company; and

(3) Whether the third appellant has been validly appointed a Director of the company.

45. Mudholkar, J.

This matter has come before me under clause 36 of the Letters Patent on a difference between Mr. Justice S. T. Desai and Mr. Justice K. T. Desai. I have to answer the points on which they have differed, and I shall presently state these points.

46. The appellants before me are original defendants 1 to 3. The suit was instituted by the plaintiff respondent No. 1 for obtaining three declarations: that he is and continues to be a director of the 1st defendant company; that the second defendant’s appointment as the Managing Director of the 1st defendant company was void and that the appointment of the third defendant as a Director of the company is invalid, illegal and inoperative. The plaintiff has also asked for grant of injunctions restraining the defendants from preventing the plaintiff from acting as a director of the company and for restraining defendants 2 and 3 from acting respectively as Managing Director and director of the company. The suit was decreed by the City Civil Court which held that the second defendant was not validly appointed as Managing Director for the first defendant; that the plaintiff has not ceased to be a Director of the company, and that the appointment of the third defendant as a director of the company was illegal and ineffective.

47. The first defendant is a private limited company incorporated under the Indian Companies Act. Prior to the incorporation of the company, the business carried on by it was being carried on by Dadoba, the father of the 2nd and the 4th defendant and the brother of the plaintiff, and this business was sold by Dadoba to the company. That was On 21st May 1955. On 7th July 1955 an agreement was entered into between Dadoba and the company, whereunder Dadoba was appointed Managing Director of the company. Clause 7 of that agreement which is relevant runs as follows:-

“Mr. Thakoor shall be entitled by deed inter vivos or by will or codicil to appoint any person to be a Managing Director in his place and stead and in default of such appointment the legal representatives of Mr. Thakoor shall be entitled to exercise the said power. Any appointee as aforesaid shall whilst holding office also be designated as a Managing Director and shall be entitled to be paid by the company the same remuneration and to exercise the same powers and authorities as are vested in Mr. Thakoor and the appointee as aforesaid shall have a power of appointing any person to be Managing Director as his successor on the remuneration of not less than Rs. 1,000 (Rupees One thousand) per month and upon the same other terms and conditions as are herein contained”.

Under the agreement, Dadoba was to be allotted a certain number of fully paid up shares of the company. The terms of the agreement are embodied in Article 109 of the Articles of Association of the company. The relevant part of the Article is clause (b), and it runs as follows :-

“The said Shri Dadoba Kashinath Thakoor may by deed inter vivos or by will or codicil appoint any person to be a Managing Director in his place and stead and in default of such appointment, the legal representative of the said Shri Dadoba Kashinath Thakoor shall be entitled to exercise the power.”

Dadoba died on 14th January 1957. Prior to his death, he had executed a will whereunder he appointed one of his sons, the second defendant, to be the Managing Director of the company from the date of his demise. It may be mentioned that Dadoba has left three sons: the second defendant Govind, the 4th defendant Harish, and one Deepak, who is a minor and is not party to this suit. Dadoba held 971 shares in the company, while the second and the fourth defendants held 844 and 843 shares respectively. The present plaintiff was also a Director of the company and holds 845 shares. The shares held by Dadoba have devolved, according to the plaintiff, on his three sons.

8. By virtue of his appointment as Managing Director under Dadoba’s will, the second defendant assumed Managing Directorship of the company and commenced to draw a sum of Rs. 3,500 per month as his salary, as provided for under the Articles of Association. The plaintiff challenged the validity of his appointment as a Managing Director and also of his right to convene meetings of the Board of Directors. The plaintiff refused to attend these meetings on the ground that the second defendant was not validly appointed Managing Director and had no right to convene a meeting. Eventually the second defendant informed the plaintiff that he ceased to be a Director of the company because of his failure to attend three consecutive meetings of the Board of Directors and also because of his refusal to attend any meeting for three months. In his place the third defendant Harish was appointed as Director by the 2nd defendant.

9. According to defendants Nos. 1 to 3 the appointment of the second defendant is valid, because Dadoba who made the appointment was given a power to make that appointment both under the agreement entered into between him and the company and the Articles of Association of the company. They also asserted that the meetings of the Board of Directors were lawfully convened by the second defendant and that the plaintiff, by his failure to attend three consecutive meetings as well as to attend any meeting for three months, had incurred a forfeiture of his rights to hold the office of the Director under the Articles of Association. They further contended that because of the vacancy caused by the cessation of the plaintiff as Director, the third defendant was appointed a Director by the second defendant under the powers conferred on him by the Articles of Association and that his appointment is valid.

50. The learned Judge of the City Civil Court upheld the plaintiff’s contentions and negatived those of defendants Nos. 1 to 3 on all these points and decreed the plaintiff’s suit. At this stage, I may mention that the fourth defendant not only did not contest the plaintiff’s claim but actually supported it. That is also his stand in this appeal.

51. It is quite clear from clause 7 of the agreement, as also from clause (b) of Article 109, that Dadoba was empowered to appoint another person as Managing Director in his place. The fact that such power was conferred on Dadoba by the agreement and the Articles of Association is not disputed. It is, however, contended by the plaintiff that subsequent to the coming into force of the Indian Companies Act, 1956, the assignment of the office of Managing Director is prohibited, and that consequently the assignment made by Dadoba of that office which is alleged to have become effective upon Dadoba’s death on 14th January 1957 in favour of the second defendant in his will is void. In the second place the plaintiff contends that the will executed by Dadoba has not been proved; that caveats have actually been entered, and that until the executor of the will obtains the probate thereof, the second defendant cannot be permitted to assert in this suit the right which he claims to have obtained under the will.

52. As regards the second point, it is sufficient to observe that though it was raised before the City Civil Court, it does not appear to have been raised before the Division Bench of this Court, which heard the appeal from the decision of the City Civil Court. The learned Judges of the Division Bench have differed on three points, which are, as follows :-

(1) Whether the second appellant was validly appointed Managing Director of the first appellant company,

(2) Whether the first respondent (plaintiff) ceased to be a Director of the company, and

(3) Whether the third appellant has been validly appointed a Director of the company.

They have not set out any other points of difference. Under clause 36 of the Letters Patent, I have to confine my opinion to these three points, and I do not think that it is open to me to consider any point other than these three points. If the plaintiff thinks it fit so to do, he can raise the point before the Division Bench after my judgment containing the opinion on the points of difference goes back to it.

53. Coming to the main point in the case, the argument of the plaintiff is that Sec. 312 is very widely worded, and it has enacted a prohibition on the assignment of his office by a director, including that by a Managing Director, to any persons, not only by a deed inter vivos but also by a will. Sec. 312 reads thus :-

“Prohibition of assignment of office by director- Any assignment ot his office made after the commencement of this Act by any director of a company shall be void.”

Mr. Maneckshaw, who appears for the contesting defendants, (who hereafter will be referred as defendants), says that what is prohibited by this section is an assignment, that is, a transfer made inter vivos and that the appointment or nomination of a person to an office by a will is not prohibited by it. Further, according to him, the prohibition enacted by this section relates only to the transfer of the office of a director, and not to that of a Managing Director. Also according to him, what the section forbids is the transfer of an office to a person who is not a director, and that consequently it cannot apply to the appointment by a Managing Director of a director to the office of the Managing Director.

54. The first question which falls for consideration is whether the word ‘assignment’ as used in section 312 is to be construed widely, so as to include a transmission of an office of a managing director by will, as contended for by Mr. Khambata on behalf of the plaintiff, or narrowly, so as to mean only transfer inter vivos, as contended for by Mr, Manekshaw. It was contended by Mr. Khambata that the Courts must bear in mind the object which the legislature had in view in enacting the section, and accord to the word ‘assignment’ an appropriate meaning so that that object would be carried out and not frustrated. According to Mr. Manekshaw, every statute which takes away the rights of a citizen must be strictly construed, and that the words used by it should not be construed unduly widely. It is no doubt true that a statute which curtails the liberty of the subject, or which takes away or restricts the rights of a citizen, has to be construed strictly. But it does not follow from that that the Courts are free to ignore the object which the legislature had in view in enacting the statute. It is the primary duty of the Court to give effect to a law made by the legislature, and when the language used by the legislature is not clear it is open to the Court to look into the history of the legislation that led up to the enactment of that law or the particular provision which it has to interpret and to construe the language used by the legislature keeping in view the historical background. In this connection, I would point out that in the Indian Companies Act of 1913 as originally enacted there was no prohibition against transfer of an office by a director. It was for the first time that the legislature by enacting the Amending Act of 1936 added section 86-B, which places a restriction on the assignment of office by a director. The relevant portion of that section is as follows: –

“If in the case of any company provision is made by the articles or by any agreement entered into between any person and the company for empowering a director or manager of the company to assign his office as such to another person, any assignment of office made in pursuance of the said provision shall, notwithstanding anything to the contrary contained in the said provision, be of no effect unless and until it is approved by a special resolution of the company :

Provided that the exercise by a director of a power to appoint an alternate or substitute director to act for him during an absence of not less than three months from the district in which meetings of the director are ordinarily held, if done with the approval of the board of directors, shall not be deemed to be an assignment of office within the meaning of this section.”

This provision was the predecessor of section 312 of the present Act, whereunder the transfer of office by a director is completely prohibited. From the fact that the legislature thought it fit to go further and to engraft an entirely new provision in the existing Act, it is clear that the legislature had decided upon a certain policy, and that policy was to prevent wholly the transfer of an office of a director. It is this policy which the Courts must bear in mind and effectuate while construing the new provision.

55. It has, however, argued by Mr. Manekshaw that though the legislature may have thought it fit to prohibit the transfer of the office of a director, it may not have wanted to do likewise with respect to the office of a managing director. No doubt, the argument proceeded, the managing director enjoys much higher powers than an ordinary director, but so does a managing agent, and transfer of a managing agent’s interest is not forbidden. Therefore, according to him, it would not be proper to place wide construction on the word ‘director’ as well as ‘assignment’. Sec. 343 of the Act does show that a managing agent’s office is capable of being transferred, but that section clearly provides that the transfer of that office cannot take effect, unless it is approved both by the company in general meeting and by the Central Government. Thus, though a transfer of this office is not prohibited, it is expressly subjected to certain restrictions. The object of these restrictions is to safeguard the interest of the company. Then again the managing agents have an interest in the company which is in the nature of property. Therefore, the right to transfer it, which is an ordinary incident of property, is attached to it. No one can be said to have property in an office, and ordinarily an office is not transferable. It has been observed by K. T. Desai J. that there are various provisions in the Act dealing with the assignment of office by the holder thereof, but this fact shows that the transferability of the office had to be provided for. No doubt this could be done by Statute or by a contract which is not repugnant to the provisions of a Statute or is not contrary to public policy. Here, the legislature in its wisdom has enacted a total prohibition in respect of the transfer of the office of a director and has not made any exception with respect to the office of a managing director.

56. Then it was contended by Mr. Manekshaw that since third parties are often given a right to nominate directors and managing directors, the Courts need not look askance at a provision made in an agreement or in the articles of association of a company which permits an existing managing director to transfer his office to another. It is true that financiers, managing agents, Government, etc. are ordinarily given such power to safeguard their interest, but the object underlying the prohibition with respect to directors and managing directors is, apparently, to prevent the establishment of perpetual succession at the will of successive directors or managing directors. There is no danger of this being done where the power to nominate is exercised by a third party from time to time. Apart from that, even if the conferral of power in third parties to make such nominations is open to objection, it cannot be disputed that the legislature, which is aware of the existence of several evils, has the right to select any of them and provide for their suppression though not of others.

57. Since it is the policy of the legislature to prohibit the transfer of an office of a director, it follows that it will not be proper to construe the language of Sec. 312 in such a way as to give only a partial effect to the policy by holding that all that was prohibited by the section was a transfer inter vivos and that it did not apply to a transfer by a will. If we look at the proviso to Sec. 86-B, we find therein a reference to the ‘power to appoint’ a director. The main section, however, refers to the power “to assign the office of a director” and the ‘assignment’ of the office of a director. Reading the section and the proviso together, it is clear that the legislature, when it spoke of such assignment or power to assign, understood each of the expressions to include the ‘power to appoint’. It did not use the words ‘assign’ or ‘assignment’ in this provision in the sense they are used in the law of property. The argument advanced on behalf of the defendant before the Division Bench that the power of assignment of an office must always be distinguished from the power of appointment or for nomination of another to an office, does not therefore appear to be sound.

8. A reference to Murray’s Dictionary as well as to Wharton’s Law Lexicon indeed shows, as was pointed out by Mr. S. T. Desai, J., that one of the meanings of the word ‘assign’ is to ‘appoint, designate, ordain, depute’. One of the meanings of the word ‘assignment’ is ‘appointment to office, nomination, designation.’ The word ‘assign’ therefore is not of a narrow connotation at all.

9. As I have already stated, the legislature, when it used in section 86-B the expressions ‘assign his office’ and ‘assignment of office’, was fully conscious of the fact that the words ‘assign’ and ‘assignment’ include ‘appointment’ or ‘power to appoint’. The legislature consolidated the law relating to companies and amended certain provisions of the preexisting law and enacted the Companies Act of 1956, and it used the same words ‘assign’ and ‘assignment’ in S. 312. It would therefore be reasonable to conclude that by repeating these words, the legislature intended that they should be accorded the same meaning which was ascribable to them under the old law, viz. section 86-B of the Act of 1913. Upon this view, the word ‘assignment’ used in section 312 must not be construed in the narrow sense in which it is used in connection with the law of property, but in a wider sense.

60. It is however strenuously argued by Mr. Manekshaw that the assignment by a director of his office by a will does not fall within the provisions of section 312, because assignment must necessarily be of an existing interest only, and the interest of a director would automatically cease upon his death, and there is thus nothing left for him to transfer or assign. This argument, if accepted, would lead to further difficulties for the second defendant, because on that basis it could be held that even in the absence of a provision such as sec. 312 of the Companies Act a director would not be able to appoint his successor by a will to take his place. With this part of the matter I shall deal presently. At the moment, however, it would be sufficient to say that the words ‘assign’ and ‘assignment’ would include appointment by any mode, whether by deed inter vivos or by a will. If the words are so construed, the question whether the appointer’s interest subsisted when the appointment could take effect becomes immaterial.

61. I may mention that Mr. Manekshaw referred me to Sec. 345 of the Companies Act and section 31-A of the Insurance Act of 1938 for the purpose of showing that wherever the legislature intended to prohibit something from being done by a will it has said so expressly, and that since the legislature has not said expressly that the assignment prohibited by section 312 includes also one made by will, it must be held that the appointment to an office made by a will is permissible though one made inter vivos may not be. In the first place, the legislature has not referred in this section to the modes of transmission of office prohibited by this section. It is only upon the construction sought to be placed on the word ‘assignment’ that the argument is founded, and, as already stated, that construction is not correct. It may further be pointed out that even Mr. Manekshaw conceded that the expression ‘assignment of office’ would also include appointment to the office, provided it was made inter vivos and was not to one who is a director. Once the concession is made as to the scope of the expression, the controversy must be deemed to have ended, because, as already pointed out, the mode of exercising the power is not in any way limited by section 312, and therefore any mode permitted by law can be resorted to. As regards the person in whose favour the exercise of the power is prohibited, section 312 makes no exceptions in favour of a director. It is true that the appointment of a person who is already a director as a director will be meaningless, but such an appointment, if purported ‘to be made, will fail not only because it is meaningless, but also because of Sec. 812, which enacts a total prohibition of transmission of a director’s office. Thus the two limitations attached to the concession made by Mr. Manekshaw must be left out of account. Finally, if this argument is accepted, it would lead to the curious result that what a person cannot do during his life he can, in a sense, do so after his death. I have no doubt that the legislature could not have intended to bring about such a curious result.

62. Apart from these considerations, I may refer to the observations of Lord Goddard, C. J. in Lines v. Hersom, (1951) 2 K. B. 682 at page 686 :-

“A statute, as we know, has to pass through committee in both Houses of Parliament and amendments are moved from time to time, and it is quite possible to find that an amendment which is moved to an early section in the statute may be worded in one way, while an amendment which is moved to a later section having exactly the same idea is worded in another way; but it does not at all follow that the legislature intends something different because the language of the two sections is not exactly the same.’ I may also refer to the following statement of law in Maxwell’s Interpretation of Statutes, 10th Edition, at page 326 :-

“But, just as the presumption that the same meaning is intended for the same expression in every part of an Act is, as we have seen not of much weight, so the presumption of a change of intention from a change of language (of no great weight in the construction of any documents) seems entitled to less weight in the construction of a statute than in any other case, for the variation is sometimes to be accounted for by a mere desire to avoid the repeated use of the same words, sometimes by the circumstance that the Act has been compiled from different sources, and sometimes by the alterations and additions from various hands which Acts undergo in their progress through Parliament. Though the statute is the language of the three estates of the realm, it seems legitimate in construing it, to take into consideration that it may have been the production of many minds and that this may better account for any variety of style and phraseology which is found than a desire to convey a different intention. Even where the variation occurs in different statutes, the change is often not indicative of a change of intention, though, where the variation occurs in two different statutes, the presumption of a change of meaning is rather stronger.”

From these observations it would be clear that the omission to use the words ‘by a will’ in Sec. 312 does not indicate that assignment or transmission of office by will is not prohibited by Sec. 312. Had the words ‘inter vivos’ been mentioned in the section the matter would have stood differently. But the legislature, as already stated, has contented itself by merely stating that “any assignment” is prohibited. These words are comprehensive enough to include every assignment or transfer of the office of a director or of the appointment by a director of a person to the office of a director in his place, whether by a deed inter vivos or by a will.

63. I will make a brief reference here to the opinions of tex-book writers on the company law in England upon which reliance was placed before me by Mr. Manekshaw, though he was at pains to explain, he had cited them before the Division Bench only upon the suggestion of the Judges constituting it. It may be mentioned that the provisions of S. 204 of the English Companies Act, 1948, to some extent correspond to S. 312 of the Indian Companies Act. In that section also the word ‘assignment’ has been used. While commenting on that section, Gore-Browne in his hand-book on Joint Stock Companies observes at pages 341 and 342 as follows :

“That section (S. 204) renders the assignment of the office of director as such to another person of no effect, unless and until it is approved by a special resolution of the company. It is difficult to see how a deceased person or his legal personal representative could assign an office, and possibly in no case would the exercise of a power to appoint a successor under such an Article constitute an “assignment” of the office, unless the appointment is made by the governing director during his life.”

After making these observations, the editor of the book expressed the opinion that the question was a doubtful one and that it would be advisable for any person appointed as successor under such a power to obtain the support of a special resolution.

64. In Palmer’s Company Precedents, 17th Edition, at p. 874, the editors of that work observe while commenting on S. 204 as follows:

“The precise connotation of a power “to assign office” as mentioned in the section is not clear. It is not thought that it would refer to a provision for the appointment of a successor.” The editors of Buckley on the Companies Acts, 13th Edition, have, while commenting on S. 204, stated as follows :

“Quaere, what is meant by the expression assignment of office” used in this section, which reproduces S. 151 of the 1929 Act.”

As pointed out by Mr. Justice K. T. Desai, the Editors of Palmer’s Company Precedents and Gore-Browne’s Hand-book on Joint Stock Companies prefer to express their individual opinions on the subject, The editors of Buckley on Companies Acts have chosen to remain silent.

65. In my opinion, the fact that a doubt is entertained by some of the authors as to the precise scope and meaning of the word ‘assignment’ and the fact that according to the editors of one of the books the word ‘assignment’ must be given a narrow meaning is not very relevant for the purpose of interpreting that word occurring in S. 312 of the Indian Companies Act. It may be mentioned that S. 204 of the English Companies Act does not enact a complete prohibition on a transfer of the office of a director. It merely places a restriction on such a transfer.

66. A reference was also made by Mr. Manekshaw to Form No. 255 in Palmer’s Company Precedents, 17th Edition, at pages 734 to 736, the relevant portion to which runs thus :

“If the said A B dies whilst he holds the office of Governing Director he may by his will or any codicil thereto appoint any person to be Governing Director in his place, and direct and determine within the limit of this article what shall be the powers; authorities and discretions of such Governing Director, and his remuneration and qualification, and how long he shall be entitled to hold office, and in default of such direction and determination such appointee shall only have the powers of an ordinary Director.”

It is no doubt true that in England the practice still prevails of conferring on a “Governing Director” (who corresponds to a managing director in India) power to appoint any person to be Governing Director in his place by a will. It is not possible to ascertain whether this form, which has no statutory authority, was evolved before the provisions of S. 204 were enacted or afterwards.

67. In these cicumstances, I do not think that much assistance can be gained by reference to these opinions and this form.

8. The next question to be considered is whether the prohibition enacted in S. 312 is limited to the assignment of an office of a director only, or whether it also extends to the office of a Managing Director. Now, there is no doubt that a Managing Director enjoys greater powers than a mere director of a company. It would stand to reason that what is prohibited in the case of a director should also be prohibited in respect of a Managing Director. Indeed there may be greater reasons and stronger grounds for prohibiting the assignment of an office which carries with it greater powers than one which does not carry with it such powers.

9. The word “director” has been defined in S. 2(13) of the Act as follows :

“‘Director’ includes any person occupying the position of director, by whatever name called.”

It is not disputed that Managing Directors are a species of directors. Therefore, the expression “Managing Director” would clearly fall within the definition of “director”. It is no doubt true that the expression “Managing Director” has also been defined in the Act. The definition in S. 2(26) is as follows:

“Managing Director” means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or by its Board of Directors or, by virtue of its memorandum of articles of association, is entrusted with any powers of management which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called.”

But as this expression falls within the more general expression ‘director’, it is to be accorded its special meaning only when the context in which it is used so requires. From the fact, therefore, that the expression “Managing Director” is defined in the Act, it cannot be concluded that the definition of the word “director” is in any way curtailed and that it cannot be deemed to include a ‘managing director’.It was contended by Mr. Manekshaw that if it was intended that S. 312 should apply to Managing Directors also, the legislature would have said so expressly. He also said that wherever the legislature wanted to do so, it has mentioned both directors as well as managing directors in certain sections of the Act, and that the failure of the legislature to mention expressly ‘managing director’ in S. 312 must be deemed to indicate that that section was not intended to apply to his case. In support of his argument, he has referred to sections 269, 303, 305, 311 and 316. Section 269 deals with the appointment of managing or whole-time director. That section is clearly intended to apply only to that particular kind of directors and is not one which is intended to apply to directors in general. S. 303 deals with register of directors, managing agents, secretaries and treasurers etc. It provides that a body corporate shall maintain a register of its directors, managing director, managing agents, secretaries and treasurers etc. Here the provision requires that a managing director should also be shown as such (and not merely in his capacity of director), in the register, and that is why the legislature did not limit itself to using the word ‘directors’ for including the word ‘managing director’.’ S. 305 deals with the duty of directors etc. to make certain disclosures. Every director, managing director etc. must disclose certain particulars to the public relating to the office of any other body corporate which such person owns. But the reason why the legislature uses the expression ‘managing director’ also in this section is that the disclosure has to be made by a person within 20 days of his appointment. In order to cover the case of a director who subsequently become managing director and has in the mean while acquired an interest in any other body corporate, it was necessary to make a special mention of ‘managing director’ also. As regards Ss. 311 and 316, a mention is made of managing directors, only and the word ‘director’ is not used in those sections, because those sections are intended to apply only to managing directors and not to non-managing directors. On the other hand, it would be clear that the legislature has in a number of sections contented itself by using the word ‘director’ only. It cannot be disputed that those sections are intended to apply to all directors including managing directors. In this connection, I may refer to Ss. 253, 283, 290, 297, 300 and 312. Mr. Manekshaw indeed conceded that in all these sections the word ‘director’ has to be construed so as to include the managing director also. Now, S. 2, the defining section states: “unless the context otherwise requires”, every word or expression defined therein shall have the meaning given to it in the definition. In S. 312 the word ‘director’ alone appears, and therefore unless the context shows that it is to be given a narrower or different meaning, it must be given the meaning which is contained in the definition. Mr. Manekshaw has not been able to show from the context any reason why the word ‘director’ used in S. 312 should be accorded a meaning narrower than or different from the one given in the definition. He has on the other hand contended that the word ‘director’ should not be deemed to include managing director, unless there were good reasons for doing so. I am afraid there is no warrant for that proposition. It is not supported by any canon of construction. The rule of construction that a general provision must, when inconsistent with a special one, yeild to the latter cannot be pressed in aid when the question is whether an expression defined in one Act is to be given its full meaning or not. I therefore hold that the prohibition enacted in S. 312 applies not merely to the assignment or transmission of the office of a director, but also to that of a Managing Director. I therefore come to the conclusion that S. 312 not only applies to managing directors but also prohibits the transmission of the office of a director as well as a managing director whether inter vivos or by will.

70. The next question which falls for consideration is whether it prohibits the transfer of the office by a managing director to a director. As already pointed out, Mr. Manekshaw has argued that a managing director being merely a director with some additional powers the transfer by him of his office to a person, who is already a director, cannot be regarded as transfer of the office of the director, which would be meaningless but that it is only a transfer of the rights of a managing director of his right of management. He, therefore, contended that such a transfer would not be hit by S. 312, inasmuch as that section does not expressly prohibit the transfer of the right of management. It is no doubt true that a managing director is a director who has the right of management and who is charged with certain responsibilities. It is conceivable that a managing director purports to effect a transfer only of his right of management and nothing more, or he transfers all his rights. Whether he has done one or the other would depend upon the construction of the document by which he makes the transfer. Therefore, what we must ascertain here is whether Dadoba, when he assigned his office to the second defendant, merely assigned his right of management, or the totality of his rights as a managing director.

71. Before doing so, I would, however, like to make one observation, and it is this. S. 312 speaks merely of the assignor or the appointer, and not the assignee or the appointee. What it says in terms is that a director cannot assign his office. It does not say that a director cannot assign the office to persons belonging to a particular class and that it is open to him to assign his office to persons belonging to another class. What is, therefore, to be considered is, what is it that the director is prohibited from doing? That is to say, what is the kind of assignment which a director is precluded from making, and not what is the class of persons in whose favour he cannot make an assignment.

72. What has thus to be ascertained is the power which Dadoba was entitled to exercise under the agreement and under cl. (b) of Art. 109, and what Dadoba did in the exercise of that power. The relevant words of cl. 7 of the agreement and cl. (b) of Art. 109 are conferring the identical power, and therefore it is not necessary to consider these two clauses separately. I will, therefore, content myself by keeping in view cl. (b) of Art. 10

9. Now, that clause, says that Dadoba may, by deed inter vivos or by will or codicil, appoint any person to be a Managing Director in his place and stead. Now, the words “appoint any person” are very important. By using these words an unrestricted or unlimited power was conferred on Dadoba in the matter of making an appointment to the office of Managing Director. This clause did not confine Dadoba’s power to appoint only a director to the office of managing director. Now, if S. 312 is construed to prohibit the appointment of a person as managing director, who is not already a director, as contended for by Mr. Manekshaw, even then the source of Dadoba’s power to make an appointment must be held to be repugnant to the provisions of S.312. If, on the other hand, S. 312 is interpreted as prohibiting the appointment by a managing director of a director as a managing director in his place, then no further question arises.

73. S. 9 of the Act expressly provides that the provisions of the Act shall have effect notwithstanding anything to the contrary contained in the articles of a company, or in any agreement executed by it, and that any provision contained in the articles of the company, to the extent to which it is repugnant to the provisions of the Act, becomes void. Now, in order to consider whether a particular provision in an agreement or articles of association is saved or is rendered void because of any repugnancy to a provision of the Act, what the Court must examine is the provision itself. This provision, as I have already pointed out, is wide in its terms, and is, therefore, even on the argument of Mr. Manekshaw, repugnant to the provisions of S. 312. Mr. Manekshaw, however, argued that the provision would be rendered void only to the extent of the repugnancy, and that that part of he provision which is not repugnant to any of the provisions of the Act would be saved. He further said that though the conferral of any wide power to appoint any person as managing director may be repugnant to the provisions of S. 312, the power to appoint a director to the office of the managing director, which would fall within the power conferred on Dadoba under cl. (b) of Art. 109, will not be repugnant to that section, and will therefore be saved. I am afraid this argument cannot be accepted, because it would involve reading in the clause some words which are not there. It would have been a different matter, if cl. (b) of Art. 109 had read “appoint a director or any other person” to the office of a managing director. No doubt, the power to appoint any person conferred by this clause would include power to appoint a person, who happens to be a director. But that is not the consideration to be borne in mind, while deciding the question as to whether the power conferred by that cl. is saved by S. 9, or is rendered void by it. We must read the clause as it is, and we must give the ful lest meaning to what is said there, and then consider whether the clause as it exists is repugnant to any provision of the Act. Looking at the clause that way, it is clear that the unqualified or unlimited power conferred on Dadoba to appoint any person to be a managing director is wholly repugnant to the provisions of S. 312, and is therefore void. From this it would follow that on the date on which the new Companies Act came into force, the source of Dadoba’s power to make an appointment dried up, inasmuch as the conferral of the power to appoint a person as managing director was rendered void. According to the defendants Dadoba exercised this power in appointing the second defendant as a managing director in his place by will. As the source of the power had dried up Dadoba possessed no power which he could effectively exercise by his will.

74. At this place, it would be convenient to mention another argument advanced by Mr. Manekshaw. He contended that cl. (b) confers two kinds of powers on Dadoba; one is to make an appointment by a deed, and the other, to make one under will or codicil, and that even though the power to make an appointment inter vivos is affected by S. 9 of the Act, that to make an appointment by will or codicil is not so affected. It would be mere repetition to state that S. 312 applies both to appointment inter vivos as well as to any one by will or codicil. Apart from that, I am of opinion that cl. (b) does not confer two powers, but only one, and that is the power to make appointment. No doubt, it prescribes two modes in which that power can be exercised, that is , by deed inter vivos, or by will or codicil. But there is a difference between the conferral of a power to do a thing and prescribing ways or modes in which that thing could be done. Merely because a thing could be done in two Or more different ways, it cannot be said that two or more different powers to do that thing were conferred.

75. One more argument advanced by Mr. Manekshaw must be considered. He says that while interpreting cl. (b) of Art. 109 we must also bear in mind the provisions of Articles 105 and 106 and that if these provisions are considered, it would be clear that only a director can be appointed as a managing director, and therefore the words “any person” used in cl. (b) must be interpreted to mean only a director. Art. 105 deals with the power of the directors to appoint a managing director. It no doubt says that the directors’ power will be confined to appoint only one of them as a managing director. This Article deals with the powers of directors only, and not those of Dadoba, which are separately dealt with in cl. (b) of Art. 10

9. There is nothing in the latter clause to indicate that the provisions thereof are in any way controlled by Art. 105. This article, if I may say so, embodies the relevant terms of the agreement. The agreement makes no reference to the powers of the directors to appoint a managing director, and therefore it would not be correct to hold that what was not in the contemplation of the parties at the time of the agreement ought to be borne in mind while construing cl. (b) of Art. 10

9. Art. 106 specifies the provisions to which a Managing Director will be subject, and says that a Managing Director shall not be reckoned as a Director for the purpose of determining the rotation of retirement of the Directors, or in fixing the number of Directors to retire. Here again, the Article deals with the matter which is independent of Art. 109, and there is no reason why the language used in cl. (b) of Art. 109 should be deemed to be controlled by anything said in Art. 106.

76. Earlier in my judgment I have said that I shall deal with Mr. Manekshaw’s argument to the effect that where a managing director makes the appointment of another as managing director in his place or stead after his death, there can be no effective transmission of office by assignment, because whatever interest Dadoba had had ceased to exist at his death. In connection with this argument, Mr. Khambatta referred to a Madras case, which says that the law knows no vacuum, and that as soon as the managing director, who makes the assignment or appointment of another managing director, died, the assignee or the appointee takes his place and that there is no hiatus. Mr. Manekshaw rightly pointed out that the maxim that law knows no vacuum applies to succession to property, and not to succession to office. I will, therefore, proceed on the basis that Dadoba’s interest as a managing director ceased at the moment of his death, and that in a narrower sense he could not assign that interest to any one by will. But, as already stated, the word “assignment” must be understood in a wide sense, so as to include the power to appoint another in one’s place.

77. However, even if one proceeds on the basis of the argument of Mr. Manekshaw, the result would be almost the same. Now, a will speaks from the death of the testator. The exercise by a person of a power to appoint by will becomes irrevocable only from the moment of death inasmuch as the will is liable to be revoked till death. A power to make appointment by will cannot, therefore, be deemed to have been exercised effectively, until it has been so exercised irrevocably. We have seen that the agreement and the articles of association empowered Dadoba to appoint another person “in his place and stead” as a managing director. The term in this regard, therefore, contemplates Dadoba’s continuing to be a managing director, till he exercised the power to make the appointment. Dadoba was to be a managing director for life, and therefore he ceased to be one upon his death. Since, as already observed, the will operates from death, the power is deemed to have been exercised effectively by Dadoba at the moment of his death. It is true, as contended by the defendants, that Dadoba had no interest left and held no office which he could transfer after the moment of his death. The term in Art. 109, cl. (b), it must be remembered, allowed him to appoint another as managing director only in his place and stead”. This means that he was entitled to substitute another person for himself. Such a substitution is possible only when at the point of time the substitution came into effect Dadoba continued to be a managing director. It was not within the competence of Dadoba to so make an appointment as to bring substitution into effect after he ceased to be a managing director. In my opinion, if the exercise of the power became effective Only after Dadoba’s death, there was nothing existing at the time of his death upon which that power could operate, because at the moment of death he ceased to be a managing director. The conclusion to be drawn from this, therefore, is that the substitution permitted by cl. 7 of the agreement and in Art. 109, cl. (b) of !he articles could be made only during the lifetime of Dadoba and while he continued to be a managing director. No doubt, the agreement does refer to the exercise of the powers to make an appointment by will or codicil; but by reason of the use of the words “in his place and stead”, effect cannot be given to those words which gave him power to make an appointment by will or codicil. I therefore hold that though Dadoba has exercised his power by will; but no effect can be given to the exercise by him of the power, for the reason that at the moment the exercise of the power could become effective Dadoba had ceased to have any interest left.

8. For all these reasons, therefore, agreeing with S. T. Desai, J., I hold that the appointment of the second defendant by will as the managing director was invalid. Accordingly I answer the first question in the negative.

9. Now, coming to the second question on which the learned Judges of the Division Bench have differed, my answer is also in the negative.

80. The contention on behalf of the defendants is that the plaintiff, by his failure to attend certain number of meetings, has forfeited his office of director. Now, if the meetings are validly convened by someone who is empowered to convene them, a director by failing to attend them, may incur a forfeiture of the office of the director. But here the person who convened the meetings as managing director had no right as such to convene them. It is, however, contended by Mr. Manekshaw that meetings of the Board of Directors could be convened by any director, and that since all the meetings during the period in question were convened by the second defendant, who was at least a director then, the plaintiff, by his failure to attend those meetings, has incurred forfeiture. There is no provision in the Act or in the articles which entitles any director to call a meeting. Article 94 of the articles runs thus :

“The Managing Director may at any time and shall upon request of any Director convene a meeting of the. Directors. It shall not be necessary to give notice of a meeting of the Directors to a Director who is not in Bombay. Questions arising at any meeting shall be decided by a majority of votes, and in case of an equality of votes, the Chairman shall have a second or casting vote”.

It is implicit in this article that a meeting can be convened only by a managing director, and that when a director wants a meeting to be convened, he must request the managing director to convene it. This article thus negatives the right of a director to convene a meeting. Mr. Manekshaw has said that if there is no managing director in existence, it would create an impasse if the Court were to hold that no meetings could be convened by a director. Perhaps, such a result would ensue; but even so there is no ground for holding that despite the provisions of Art. 94, any director has a right to convene a meeting. Where there is no managing director, the remaining directors can, by acting jointly, convene a meeting. It may of course happen that there is a disagreement among the directors about this matter; but if there is such disagreement, the parties must necessarily have recourse to the Courts of law. This is what always happens where there is a conflict of rights and disagreement among the parties about any matter.

81. Since, in my opinion, the plaintiff has not forfeited his office of a director, it follows that no question arose for appointing another in his place. Furthermore, a vacancy in the office of the director could be filled either by a managing director making an appointment, or by the directors doing so. Here, as already stated, the second defendant, who purported to make the appointment of a director, had no right to make the appointment. Accordingly, my answer to the third question is also in the negative.

82. The papers may now be sent back to the Division Bench with my answers. The matter wilt be dealt with further by the learned Judges constituting the Bench, including the question of costs.

Final Judgment (24-2-1959) of the Court consisting of S. T. Desai and K. T. Desai JJ. was delivered by

83. S.T. Desai, J.

In this appeal from the judgment of Judge Chitale of the City Civil Court, my brother K. T. Desai and I disagreed on three points. As we were equally divided, the points were referred by the directions given by My Lord the Chief Justice to our brother Mudholkar for his decision. He has now delivered his judgment and he agrees with me on those points. Those three points must, therefore, be decided according to the opinion of the majority of the Judges.

84. In the result, the appeal fails and will be dismissed with costs.

Appeal dismissed.

The post Oriental Metal Pressing Works (Private) Ltd. & Others Vs. Bhaskar Kashinath Thakoor & Another appeared first on B&B Associates LLP.

DATE: 07 January 2003

Taparia Overseas (P) Ltd. & Another
vs
Union of India & Others

By, THE HONOURABLE MR. JUSTICE V.C. DAGA & THE HONOURABLE MR. JUSTICE J.P. DEVADHAR

Shri M. Jaykar with S.R. Garud i/b Gagrat & Co. for the petitioners in W.P. Nos. 3343/87, 3501/87 and 3603/87. Shri Shiraj Rustomji with T.N. Tripathi for the petitioners in W.P. N. 3695/87. Shri M.I. Sethna, Senior Counsel with Shri R. Asokan and K.R. Chaudhari i/b T.C. Kaushik for the respondents in all matters.

Judgment

V.C. DAGA, J.

The legal debate raised in these conjoint petitions centers around common saying from law books, that fraud vitiates everything. This debate is raised in the petitions filed under Article 226 of the Constitution of India, challenging the action of the Revenue, the Custom Authorities in withholding the clearance of the goods described as “Polyester Filament Yarn” imported by the petitioners under the licences acquired and held by them as transferees for value without notice of the alleged fraud.

2.The petitioners are different but the issues involved are identical so a single judgment will dispose of all these writ petitions. We propose to discuss the facts drawn from Writ Petition No. 3343 of 1987 (M/s Taparia Overseas (P). Ltd. Vs. Union of India) as the facts involved in all other petitions are more or less similar except with some minor variations which have no bearing on ultimate decision of these petitions.

3.Brief background facts sketched from the above petition are as under:

BACKGROUND FACTS:

The petitioners had acquired 2 licences both dated 2nd March 1987 issued under the provisions of Import (Control) Order, 1955 (the ‘order’ for short) in favour of one M/s Suraj Textiles Traders, New Delhi, in terms of Appendix 21 of Import/Export Policy, Vo.I, 1985-88 by the Deputy Chief Controller of Import/Export, New Delhi, for import of ‘Polyster Filament Yarn’ . It had been acquired by the petitioners in terms of paras 225 and 226 of the Import Export Policy 1985-88 (‘the import export police’ for short).

4.The petitioners before acquiring these two licences had written a letter dated 9th April 1987 furnishing full particulars to the Joint Chief Controller of Import and Export, Delhi and informing him that they have negotiated for the purchase of the same and sought confirmation as to whether the licences were issued as per ITC regulations. It was also made clear that in the event of no reply within 7 days they would finalise transactions and proceed to open letter of credit. The correspondence made in this behalf is not in dispute.

5.The petitioners did not hear anything contrary from the Joint Controller of I. & E., New Delhi, for quite a long time. Consequently, the petitioners went ahead and purchased the said licences from M/s Suraj Textile Traders, New Delhi, and got the same transferred in their name.

6.The office of the Jt. Chief Controller of Imports and Exports, New Delhi vide its letter dated 31 July 1987 confirmed the issuance of the licences as per Appendix 21 of the Import Export Policy 1985-88. By other letters dated 29th June 1987 and 10th August 1987 the office of the Joint Chief Controller & E., New Delhi, expressly confirmed that two licences were issued to M/s. Suraj Textile Traders, New Delhi, for import of Polyster Forament Yarn. These letters and contents thereof are not in dispute.

7.The petitioners had placed orders with foreign suppliers and opened letter of credit in their favour through their bankers Central Bank of India. The said suppliers caused 3 consignments of 8000 Kgs., 2400 Kgs. and 445 Kgs. of Polyster Fimalemt Yarn and shipped the same on the board of two vessels under the different Bills of Leading issued by the Shipping Companies. The said vessels arrived at Bombay some time in the month of July 1987. The petitioners filed prior IAM along with three prior bills of entry dated 12th and 13th July, 1987 in respect of the three consignments.

8.The goods remained to be unloaded for some time but ultimately goods were unloaded somewhere in the month of August 1987. The Customs Authorities inspected these goods on 26th August 1987 and 7th September 1987, but did not clear the same, though they found that the goods imported were as per specification.

9.On 18th September 1987 the petitioners came to be served with the copy of the order dated 11th September 1987 addressed to the original licence holders; whereby the Deputy Chief Controller of I. & E., New Delhi had informed suspension of the operation of the Licences issued to the original licence holder in exercise of powers conferred under clause 9(3) of the Order (as amended).

10.In view of the aforesaid development, the Customs Authorities did not process the Bill of Entry for home consumption. They did not pass any order under section 47 of the Customs Act. In other words, the Customs Authorities had decided to withhold the clearance of the said ‘Polyester Filament Yarn’ imported by the petitioners holding a view that the import was without valid licence. The aforesaid action on the part of the Custom Authorities withholding clearance of goods imported by the petitioners resulted in invoking writ jurisdiction of this Court under Article 226 of the Constitution of India, contending that the goods having been validity imported under validity issued licences could not affect the imports made by them much before the suspension of the licences in question; since suspension would only operate prospectively.

11.This Court whilst granting rule, relying upon para (35) of the judgment of the Apex Court in the case East India Commercial Co. Vs. Collector of Customs, AIR 1962 SC 1893 and Chemicolour Agency Vs. Chief Controller of I.E. 1986 (6) ECR 495 (Calcutta), prima facie, finding that the licences were good till the date of suspension and imports being prior to the date of suspension permitted by interim order dated 29.10.1987 clearance of the goods imported by the petitioners subject to petitioners furnishing bank guarantee for CIF value of the goods. The goods were accordingly allowed to be cleared on the petitioners furnishing bank guarantee.

12.On being noticed, though respondent had promptly appeared but filed their affidavit-in-reply on 13th February 2002 i.e. after about 15 years. The main thrust of the contention raised on behalf of the Revenue is that the licences having been obtained by making misrepresentation and misleading statements by original licence holder which led to the suspension there by order communicated vide letter dated 11.9.1987, passed by the Joint Chief Controller of I. & E., New Delhi. It, ultimately, resulted in issu of show cause notice dated 11.9.1987 and cancellation of licences obtained by M/s Suraj Textile Traders, New Delhi, vide order dated 30.11.1987.

13.The Revenue in support of their action relied upon judgment of the Apex Court in the case of M/s. Fedco (P) Ltd. Vs. S. N. Biligrami, AIR 1960 SC 415. In defence it was pleaded that the entire scheme of control and regulation of imports by licences is on the basis that the licences were granted on the correct statement of the relevant facts. That basis disappears, if the grant of licence is found to be induced by fraud or misrepresentation, whether by the licensee himself or some other party, in such a case, the basis of grant of licence disappears. Consequently, such licence cannot be allowed to continue. That the licence obtained by fraud cannot create any legal right in favour of anybody much less in favour of the transferees for value without notice. That the petitioners cannot be allowed to take advantage of the tainted import licences purchased by them. That they could not get better title or right than what the original licence holder had. Consequently, it was prayed that all the petitioners be directed to pay full import duty at the rate prevailing at the time of import.

SUBMISSIONS:

14.Mr. M. Jayakar learned Counsel opened arguments on behalf of the Petitioners and submitted that the petitioners had acquired licences in question for valuable consideration by paying heavy premium without notice of any fraud alleged to have been played by original licence holder. The Revenue is not disputing that the Petitioners, were the bonafide transferees for value. The licences, though were suspended on 11.9.1987, but prior to that petitioners had filed Bill of Entry for home consumption on 12th and 13th July 1987 as such their imports cannot be said to be without licence. In his submission, suspension cannot be retroactive. Reliance was placed on Clauses (9) and (10) of the Order in support of his contention.

15.Clause (9) thereof provides that the Central Government and Chief Controller of I & E may cancel licence if the same is found to have been obtained by fraud or misrepresentation. Clause 10 of the said Order provides that no such action of cancellation can be taken against importer or any other person unless he has been given a reasonable opportunity of being heard. In his submission, the Joint Chief Controller ought to have given an opportunity of being heard since he was well aware that the Petitioners were transferees of the licences, in view of the two letters addressed by the Petitioner to the office of the Joint Chief Controller on 9th July 1987 and their reply vide their letters dated 29th June, 1987 and 31st July 1987 confirming the genuineness of the licences in question. The copy of the order of suspension issued by the Deputy Chief Controller of I & E, New Delhi was marked to the petitioners who were transferees. In the wake of these facts, learned Counsel for the petitioners emphasised that the authorities passing the suspension order was well aware of the licences of the fact that the petitioners were transferees of the licences. In spite of this, no notice was given to the petitioners, so as to comply with the provision of Clause (10) of the order.

16.For the Petitioners, it was contended that the Bill of Entry for home consumption was filed with the Customs Authorities much before the suspension order was served on them. That, as a matter of fact, the order dated 30th November 1987 purported to be under clause (9) cancelling the licences was never served on the petitioners. According to them, it was made known to them for the first time through their counter affidavit filed on 13.2.2002. Thus, the Respondent cannot be allowed to rely upon the order of cancellation which is clearly in breach of principles of natural justice as such ab initio void. It has got to be ignored for all purposes.

17.Per contra the learned Counsel appearing for the Revenue relied upon judgment of the Apex Court in the case of Fedco (P) Ltd. urged that ‘if grant is induced by fraud or misrepresentation’, whether by licence holder himself or some other party, then the fact remains that in such a case very basis of grant disappears and consequently, the licence cannot be allowed to continue. In other words, his submission is that once licence is held to be obtained by licence holder by fraud, such licence will have to be treated non-est right from the date of its grant. It would be ab initio void. Such licence obtained by fraud cannot create any legal right in favour of anybody much less in favour of the transferees, may have the same for value without notice of fraud. For the Revenue, it was contended that the petitioners cannot be allowed to claim protection or any right if the licences have been obtained by fraud or misrepresentation. He relied upon common saying that the fraud vitiates everything. He, thus prayed for dismissal of the petition with costs.

18.In rejoinder, the learned Counsel for the petitioners contends that the judgment in case of Fedco (P) Ltd. (supra), is not applicable to the facts of the present case. In his submission in that case, petitioners M/s Fedco (P) Ltd. (supra) itself was involved in practising fraud on the concerned authorities while obtaining licences. In that view of the matter, the Apex Court observed that whether licencee himself or some other party is responsible for fraud or misrepresentation, the fact remains that basis of grant of licence disappears. In that light the observations was made that it would be unreasonable to allow such licences to continue. In other words, continuation thereof was snapped by the Supreme Court but till the date, it was snapped, it was allowed to operate. The submission is that the judgment of Fedco (P) Ltd. cannot be read out of context.

19.On behalf of the Petitioners, it was pointed out that in judgment of Fedco (P) Ltd. (supra), the Apex Court has categorically ruled that if reasonable opportunity against proposed cancellation of licence has not been given, the order would be an unjustified interference with the petitioner’s right. He further pointed out that Fedco’ s judgment (para 9) specifies how an action has to be reasonable and how the fair chance is to be given to the concerned affected party. In the instant case, none of these principles were followed. Admittedly, no notice was given to the petitioners despite knowledge of the respondents that petitioners were the transferees of the licences in question. In his submission, Clause (9) does not deal with rendering of any licence void ab-initio but merely permits the licence to be cancelled or rendered ineffective. It has no retroactive operation. Both the cancellation of licence and/or rendering it ineffective can only operate prospectively. It cannot operate retrospectively.

20.The learned Counsel for the petitioners fairly submitted that the petitioners are not really concerned with cancellation of licence as their imports have been completed much prior to the suspension of the licences or for that matter cancellation thereof. The learned Counsel for the petitioners submitted that no doubt Clause (9) of the Order, empowers the Joint Controller of Imports and Export to cancel any licence or to render the same ineffective; if the same was found to be obtained by fraud or misrepresentation but until passing of such order of cancellation or rendering it ineffective, the licences have to be treated as good and any bonafide action done prior to the order of suspension or cancellation could not be held to be bad and illegal. A licence was good till it was avoided. The petitioners while relying upon judgment of the Apex Court in the case of East India Commercial Co. Vs. the Union of India (supra) in support of their proposition pointed out that this judgment has been consistently followed by the Apex Court in all subsequent judgments including that of Union of India Vs. Sampat Raj Durgar JT 1992 (1) SC 554 and the Collector of Customs vs. Sneh Sales Corporation (2000) 121 ELT 577. The Apex Court in all the cases have categorically ruled that even a licence obtained by fraud is at the best voidable and is good until avoided. The contention, therefore, canvassed is that the order in question dated 30th November 1987, purports to cancel licence ab initio is not permissible under clause 9(1)(a) of the Order. In the submission of the Petitioners, the contention canvassed by the respondents, that since the licences were held to be avoid ab initio, there was no necessity of giving a show cause notice, is contrary to the principles of natural justice as there is no such concept of any licence being declared void ab initio under the scheme of the order in general or under clause (9) thereof in particular.

21.The learned Counsel for the petitioners further brought to our notice that Paragraph 225 of the Handbook of Import & Export Procedure which provides that a transfer of a licence does not require any endorsement or permission from the licensing authority i.e. such transfer is to govern by the ordinary law. He further pointed out that imports against replenishment were governed by Handbook on Import Export Procedure 1985-88, which were in the nature of administrative instructions issued by the Central Government. As such transfer of the licence was not to be governed by any statutory provisions but, it was to be governed by Common Law. It was thus pointed out that as a fact the principles of Law of Contract were applied by the Apex Court in the case of East India Commercial Co. (supra). In that view of the matter, the submission is that the licences were good till they were avoided. He, therefore, submitted that a contract or other transaction induced or tainted by fraud is ipso facto not void, but only voidable at the election of the party defrauded. Until it is avoided, the transaction is valid, so that third party without notice of the fraud may in the meantime acquire rights and interest in the matter which would be enforceable in accordance with law.

22.The learned Counsel for the petitioners further submitted that imports against replenishment licences were permitted duty free if the importers produced an Import Replenishment licence when the goods or the materials were imported into India. In the instant case, when the goods were imported into India, and/or even when the Bills of Entry was filed, neither the licence was suspended nor was the same cancelled.

23.The Petitioners further urged that section 46 of the Customs Act enjoins upon an importer a duty to file a bill of entry for home consumption upon the import of goods. The importer is required to produce all documents along with the entry made for home consumption. Section 47 of the Customs Act, the Custom Authorities are required to ascertain that the goods in question are not prohibited and then to make the order for clearance of the goods. On 12th and 13th July 1987 the petitioners had filed the Bill of Entry and furnished all the documents relating to the imports in question including the 2 licences. Right up to 11th September 1987, there was neither a whisper nor any allegation that the licences were in any way tainted. In fact, after filing of the Bill of Entry the Joint Chief Controller of Imports & Exports on 31st July 1987 had informed the Customs Authorities about the genuineness of the issuance of the 2 licences issued to M/s. Suraj Textile Trader. It was further pointed out that on 29th June 1987 and 10th August 1987 the Joint Chief Controller of Imports & Exports Office had also confirmed to the Petitioners about the issuance of such licences. As such under section 47 the proper officer after being satisfied that the goods entered for home consumption were not prohibited goods (were covered by a licence) and had paid the required duty. ought to have made an order directing clearance of goods.

24.The learned Counsel for the petitioners further submitted that satisfaction of the proper under section 47 is in fact administrative in nature and that the officer has only to see that the goods in question are not prohibited and that duty is paid thereon. Such an order permitting the goods to go out of the customs charge does not in any way render the Customs Authorities helpless, if any action is to be taken in future. In his submission not only the provisions of section 28 is available for demanding duty but a notice under section 124 could be issued not only for confiscating goods but also for levying penalty under section 112. He therefore, submitted that although there is no time limit stipulated, but, it is expected that order is to be passed within a reasonable time. In this case, since at the time when the goods were imported and the import was complete, that too of the goods of which the import was not of prohibited, as such a subsequent cancellation of the licence could not make the import bad.

25.The learned Counsel for the petitioners at the cost of repetition submitted that for want of show cause notice or an opportunity of hearing to the transferees the petitioners, order cancelling licence will have to be treated as ab initio void being in breach of principles of natural justice. Though, he fairly conceded that said issue could be of no relevance in the present case as the order of cancellation was made much after the import, but in his submission, at any rate, order ab initio cancelling of licences which is clearly in breach of principles of natural justice cannot be allowed to be put in defence. He placed reliance on the judgment of the Apex Court in Sinha Govindji vs. Deputy Collector of Imports and Exports 1962 (1) SCR 540 and S.L. Kapoor vs. Jagmohan and ors. AIR 1981 SC 136, in support of his contention.

26.Shri Rustomji, learned Counsel appearing for the petitioners in Writ Petition No. 3695 of 1987 adopted all the contentions advanced Shri Jayakar, and further submitted that the petitioners in his case are also purchasers of import licences for valuable consideration without notice of the alleged fraud. He submits that import made by the petitioners in all these petitions have got to be held as legal and valid for the reasons put forth by Mr. Jayakar, as such all the petitions are liable to be allowed declaring and holding that the action of the Customs Authorities withholding clearance of the goods was bad and illegal.

CONSIDERATION

27.Having heard the parties at length and having examined the facts involved in these petitions, it is not in dispute that all the petitioners are transferees for value without notice of the alleged fraud. The main issue which requires consideration is: to what extent the fraud committed by the original licence holders have affected the validity of the licences which were in the hands of the transferees for consideration, without notice. At the relevant time, licences were issued under the provisions of the Order, however, transfers thereof were to be governed by the terms of Import Export Policy of 1985-88, which had no statutory force. Thus, though the grant of licence was to be governed by Statute, but transfer thereof was to be governed by ordinary law. At the relevant time, under Import Export Policy of 1985-88, the transfers of all the licences were subject to the compliance of clauses 225 and 226 thereof, the contents of which are reproduced hereinbelow:

“Utilisation of REP licences.

225. The REP licence will be issued in the name of the Registered Exporter only and will not be subject to ‘Actual User’ conditions, Except for cases covered by para 195(2), 204, 263(2) and 265(1), a licence holder may transfer the licence in full or part in favour of any other person. The licence holder or such transferee may import the goods permitted therein but the facility of paragraph 195(2), 196 and 202 shall not be available to any transferee, unless the transferee is himself a registered exporter and can satisfy the customs authorities at the time of clearance of the goods, of his bona fides.

226. The transfer of the licence will not require any endorsement or permission from the licensing authority i.e., it will be governed by the ordinary law. Accordingly, clearance of the goods covered by a REP licence issued under this policy, will be allowed by the customs authorities on production by the transferee of only the document of transfer of the licence concerned in his name. Whenever an REP licence is transferred, the transferor should give a formal letter to the transferee, giving full particulars regarding number, date and value of the licence transferred and the name and address of the transferee, and complete description of the import items for which the licence is transferred. A copy of the transfer letter should be endorsed to the licensing authority who issued the REP licence, for record. This procedure will also apply to subsequent transfers of the same licence.”

The bare conjoint reading of the above clauses makes it clear that the licences were allowed to be transferred freely without any endorsement or permission from the licensing authority. Such transfers were to be governed by common law subject to the compliance of the conditions laid down under clause 226 referred to above.

28.It is not in dispute that the above procedure was followed by all the petitioners while getting the licences transferred in their respective names. It is, therefore, clear that transfer of licence was to be governed by ordinary law. The Apex Court, had an occasion to deal with one of such similar issues sought to be raised in these petitions. In the leading case of East India Co. (supra), the Apex Court inter alia, observed as follows:

“Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable: it is good till avoided in the manner prescribed by law.” (emphasis supplied)

The aforesaid observations of the Apex Court would show that while dealing with the cancellation of licence principles of law of contract were invoked.

29.In the seventh edition of “Keer on Law of Fraud and Mistake” in Chapter – I dealing with contract induced by fraud said that such contract is voidable but not void and observed as under:

“It further goes on to say that when the subject matter of transaction is to be governed by the contract, no man is bound by a bargain into which has been induced by fraud to enter, because assent is necessary to a valid contract, and there is no real assent when fraud and deception have been used as instruments to control the will and influence the assent. But a contract or other transaction induced or tainted by fraud is not valid, but only voidable at the election of the party defrauded. Until it is avoided, the transaction is valid, so that third parties without notice of the fraud may in the meantime acquire rights and interests in the matters which they may enforce against the party defrauded.

The fact that the contract has been induced by fraud does not make the contract void, or prevent the property passing, but merely gives the party defrauded the right on discovering the fraud to elect whether he shall continue to treat the contract as binding or disaffirm the contract and resume the property. If it can be shown that “the party defrauded” has at any time after knowledge of the fraud either by express words or by unequivocal acts affirmed the contract, “his election is determined for ever. The party defrauded may keep the question open so long as he does nothing to affirm the contract.” The question always is, has the person on whom the fraud has been practised, having notice of the fraud, elected not to avoid the contract? or, has he elected to avoid it? or, has he made no election? As long as he has made no election he retains the right to determine it either way, subject to this that if in the interval whilst he is deliberating, an innocent third party has acquired an interest in the property, or if in consequence of his delay the position even of the wrongdoer is affected, he will lose his right to rescind.”

30. The aforesaid well settled principle of law of Contract was applied to the licence obtained by fraud or misrepresentation by the Apex Court in the case of East India commercial case (supra) in the following words:

“A licence obtained by misrepresentation does not make the licence non-est. with the result that the goods should be deemed to have been imported without licence in contravention of the order issued under S.3 of the Act so as to bring the case within cl.(8) of S. 167 of the Sea Customs Act. Assuming that the principles of law of contract apply to the issue of a licence under the Act, a licence obtained by fraud is only voidable: it is good till avoided in the manner prescribed by law.” (emphasis supplied)

The decision in East India Co. (supra) has been followed in several cases by this Court and also by other High Courts readily available cases are Chemi Colour Agency vs. C.C.I.E., 1987 (30) ELT 175, Bansilal Jesasingh vs. U.C.I., 1988 (36) ELT 52, K. Uttamlal (Exports) vs. U.O.I., 1990 (46) ELT 527.

31. The view taken in the East India Commercial case has also been followed by the Apex Court in the case of Union of India Vs. Sampat Raj Durgar JT 1992 (1) SC 554. In that case, the import licence under which goods had been imported was cancelled before the clearance of the goods and the goods were sought to be confiscated, inter alia on the basis that there was no valid licence for clearance of the same. The Apex Court rejected this contention inter alia observing as follows:

“The next question is whether the import of the said goods was contrary to law in any manner and whether the said goods is liable to be confiscated under the Customs Act. The only provisions relied upon by the Appellants are clauses (d) and (o) in Section 111 of the Customs Act. In our opinion none of these clauses are attracted in the present case. Clause (d) contemplates an import which is contrary to any prohibition imposed either by the Customs Act or any other law for the time being in force. No such prohibition can be pleaded in this case since on the date of the import the said goods were covered by a valid import licence. The subsequent cancellation of licence is of no relevance nor does it retrospectively render the import illegal. (East India Commercial Co. Vs. Collector of Customs 1963 (3) SCR 338 at 372).”

The ratio in the East India Commercial (Supra) case was also followed by the Supreme Court in the another recent case of Collector of Customs vs. Sneha Sales Corporation 2000 (121) ELT 577 (SC), the facts of which are similar to the facts involved in the present petition. It also involved import of Polyester Filament Yarn by the transferee of an REP licence. The contention that the cancellation of the licence by the Controller of Imports and Exports rendered it ab initio void was categorically rejected by the Apex Court in the following words:

“Shri Aroop Choudhary, the learned Senior Counsel appearing in support of the appeal, has urged that the Tribunal was in error in interfering with the order passed by the Collector regarding confiscation of the goods as well as the imposition of penalty. As regards confiscation under section 111(d) of the Act the submission of the learned Counsel is that since the licences have been cancelled by Deputy Controller of Imports and Exports ab initio the Collector was right in holding that there was no valid authorisation for the import of goods and goods have been imported in contravention of the provisions of the Import (Control) Order, 1955 read with Imports and Exports (Control) Act, 1947. We are unable to accept this contention of the learned Counsel in view of the law laid down by this Court in East India Commercial Company Ltd. Vs. Collector of Customs, Calcutta (supra).”

On the above canvas of settled law; recognised by the Apex Court and catena of decisions of the various High Courts including of this Court, it is clear that a licence obtained by fraud is not void ab initio and is merely voidable. It is good till avoided in the manner prescribed by law.

32. With the aforesaid backdrop, let us now turn to another judgment of the Apex Court in Fedco (P) Ltd. Vs. S.N. Bilgrami (supra) upon which heavy reliance was placed by Mr. M.I. Sethna learned Senior counsel for the Revenue. In that case, one of the questions involved was with respect to the cancellation of licence on the ground that it was obtained by fraud. Before any of the goods could be cleared by the company, the licence holder, there were served with a notice stating that whereas there was a reason to believe that five licences had been obtained fraudulently, as such the Government proposed to cancel said licences unless sufficient cause was furnished within stipulated period. In that case, the petitioner company itself was a licence holder. The petitioner company, the licence holder itself was proved to be a party to the fraud. It was proved that the licences were obtained fraudulently. Thus, the licences in question were cancelled after giving reasonable opportunity of hearing to the licensee. In that context the Apex Court as under:

“The entire scheme of control and regulation of imports by licences is on the basis that the licence is granted on a correct statement of relevant facts. That basis disappears if grant of the licence is induced by fraud or misrepresentation. Whether the licensee himself or some other party is responsible for the fraud or misrepresentation, the fact remains that in such cases the basis of the grant of licence has disappeared. It will be absolutely unreasonable that such a licence should be allowed to continue.”

The comparative dissection of two cases of the Apex Court i.e. East India Commercial and Fedco (P) Ltd. (cited supra) would reveal that in the East India Commercial the Court was dealing with the rights of the transferee, who had obtained licence from transferor for value without notice and was not a party to the fraud or misrepresentation, whereas in Fedco (P) Ltd. the Apex Court was dealing with the rights of the licence holder, who was a party to the fraud proved against it. The Court ruled that the person who himself is guilty of fraud shall never be permitted to avail himself any benefit of it. The same is a principle of law of contract. If the contract founded in fraud be questioned between the parties to the contract, in that event, as against a person who has committed fraud and who endeavors to avail himself any benefit of it, the contract is to be considered as null and void but it does not lay down that fraud intended by one man shall overturn a fair and bona fide contract or transaction with others. As a matter of fact, this question did not gerame in the case of Fedco (P) Ltd. (supra). That was a case between the Licensing Authority and the licence holder and the grant of licence was governed by the provisions of the statute. No transfer of licence in favour of third person who involved. The person holding the licence itself had fraudulently obtained licences. In other words the person holding licence itself was a party to the fraud and such person could not have been allowed to rely upon principles of Law of Contract, because no contract was involved. The grant was to be governed by Statute since the fraud practised was a legal fraud, consequently, the Apex Court rightly held that once the fraud is established, whether the licensee himself or some other party is responsible for the fraud or misrepresentation is immaterial but the fact remains that in such cases the basis of grant of licence disappears.

33. The question involved in the present petitions did not arise for consideration in Fedco’s case. The issue whether or not the licence was ab initio void or was voidable was neither raised nor considered by the Apex Court. It is well settled law that a judgment cannot be read as laying down a proposition which was never raised before it or considered in rendering its decision.

34. Having regard to the facts of the Fedco’s case, we are of the opinion that the decision cited by the learned Counsel for the Revenue has no application in the instant cases.

“A decision, as is well-known, is an authority for which it is decided and not what can logically be deduced therefrom. It is also well-settled that a little difference in facts or additional facts may make a lot of difference in the precedential value of a decision (See Smt. Ram Rakhi vs. Union of India & Ors. (AIR 2002 Delhi 458), Delhi Administration (NCT of Delhi) vs. Manoharlal (AIR 2002 SC 3088). Haryana Financial Corporation and Anr. Vs. M/s. Jagdamba Oil Mills & Anr. (JT 2002 (1) SC 482) and Dr.Nalini Mahajan etc. Vs. Director of Income Tax (Investigation) & Ors. ((2002) 257 ITR 123).”

35. For the aforesaid reasons, the reliance sought to be placed by the Revenue on the Fedco’s case is misplaced, considering the facts involved in the cases at hand. In our opinion, Fedco’s case will not be relevant for decision of these petitions.

36. It is true that legal fraud vitiates everything even judgments and orders of the Court, but the question is: as to what extent this concept can be imported in commercial transactions, where question of transfer of properties is life and soul of trade. In a mercantile transaction, as well as in those connected with real properties, the general rule undoubtedly is, that a person cannot transfer to another a right which he does not himself possesses. The rule of cavet emptor spells out two exceptions to the rule, one in cases for encouragement of commerce such as sales in market overt, and other to the transfer of negotiable instruments. Take for example, if the seller has endorsed and delivered to the buyer the Bill of Lading or any other documents of title to the goods and the buyer has endorsed and delivered it to his sub buyer, then the sub buyer, provided he has taken the document in good faith, as well as for valuable consideration, is entitled to the goods free from any right in the original seller to stop them, and thus his position is better than that of the original buyer, same is a position of sales in market-overt.

Without attempting to enumerate the various rights which are assignable, either by the express act of the parties, or by the operation of law, we may observe, generally, the maxim assignatus utitur jure auctoris, i.e. an assignee is clothed with the rights of his assignor is subject to many restrictions, shortly enumerated hereinbelow. (See Broom’s Legal Maxims, tenth Edition p. 302)

Assignatus utitur jure auctoris (Hal. Max., p. 14) – An Assignee is clothed with the rights of his assignor.

“This maxim applies generally to all property, real and personal, and refers to assigns by act of parties, as where the assignment is by deed; and to assigns by operation of law, as in the case of an executor. All rights of the assignor in the thing assigned must pass from him to the assignee by virtue of the assignment, for duo non possunt in solid unam rem possidere. It should be observed, also that the thing assigned takes with it all the liabilities attached to it in the hands of the assignor at the time of the assignment, except in cases for the encouragement of commerce, such as sales in market overt, negotiation of promissory notes, bills of exchange, etc., and, in the case of equities, where the assignee is a bona fide purchaser for value without notice.” (Emphasis supplied)

It is thus no doubt true that as a general rule, if a transaction has been originally founded on fraud, the original vice will continue to taint it, and not only is the person who has committed fraud is precluded from deriving any benefit under it, but an innocent person is so likewise, unless there has been some consideration moving from himself. In the cases at hand, it is not in dispute that all the petitioners had obtained licences for valuable consideration without any notice of the fraud alleged to have been committed by the original licence holders while obtaining licences. If that be so, the concept that fraud vitiates everything would not be applicable to the cases where the transaction of transfer of licence is for value without notice arising out of mercantile transaction, governed by common law and not by provisions of any statute.

In this behalf, we are reminded of the observation of Kings Bench in the case of Master vs. Miller, 4 T.R. 320. (See English Report Vol. 100 pq. 1042) made by Justice Buller, J. while dealing with the case arising out of contract

“I hold that in this case there is no fraud either express or implied: and that, as the plaintiffs have proved that they gave a valuable consideration for the bill, and that it was endorsed to them by those through whose hands it passed, their case is open to no objection whatever.

But I will suppose for a moment, though the case does not warrant it, that Wilkinson and Cooke did mean a fraud; still I am of the opinion that would not effect the case between the plaintiffs and the defendants.

It is a common saying in our law books, that fraud vitiates everything. I do not quarrel with the phrase, or mean in the smallest degree to impeach the various cases which have been founded on the proof of fraud. But still we must recollect that the principle which I have mentioned is always applied ad hominem.

He who is guilty of fraud shall never be permitted to avail himself of it; and if a contract founded in fraud be questioned between the parties to that contract. I agree that, as against the person who has committed the fraud, and who endeavors to avail himself of it, the contract shall be considered as null and void. But there is no case in which a fraud intended by one man shall overturn a fair and bonafide contract between two others. Even as between the parties themselves we must not forget figurative language of Lord Chief Justice Wilmot, who said that “that statute law is like a tyrant; where he comes he makes all void; but a common law is like a nursing father, and makes void only that part where the fault is, and preserves the rest.”

On the above canvas, having examined the well settled established and well recognised concept of law that the effect of fraud is not to render the transaction void ab initio but renders it voidable at the instance of the party defrauded and transaction continues valid until the party defrauded has decided to avoid it.

37. Alternatively, let us consider it from another angle assuming that licence comes to an end upon its suspension and/or cancellation, in catena of cases, it is laid down that the date of import of goods would be the date on which the Bill of Entry was presented under section 46. This legal position is clear from the decision of the Apex Court as laid down in Union of India vs. Apar Ltd. 1999 (112) ELT 3 (SC) and Garden Silk Mills vs. Union of India 1999 (113) ELT 358 (SC). The same is the view taken by of the Apex Court in Sampat Raj Dayar’s case (cited supra). Imports against replenishment Licences were permitted duty free if the importers produced an import Replenishment Licence the goods of the materials were imported into India. In the instant cases when the goods were imported into India, and even when the Bills of Entry were filed, neither were the licences suspended nor the same cancelled. In all these cases, Bills or Entry were filed by the petitioners well before the suspension and/or cancellation of the licences in question, thus the imports were made under valid licences, the goods could not be subjected to levy of customs duty in the peculiar facts and circumstances of the cases in hand.

In the circumstances, we hold that in all cases at hand, the goods were imported, under valid licences. The goods imported were neither prohibited nor restricted by or under the Customs Act, as such, it was not open for the Customs Authorities to withhold clearance thereof.

38. Before closing we may briefly notice few more contentions raised by the petitioners. It is canvassed that principles of natural justice and reasonable opportunity of being heard within the meaning of Clause (10) of the Order have not been extended to the petitioners while suspending the operation of the licences or rendering them ineffective, especially when the same were held by them as transferees in good faith for value without notice as such the impugned action of suspension and/or cancellation of licences is not only bad, illegal but ab initio void. We do not think on the canvas of the view taken by us, this issue canvassed by rival parties needs any consideration in the facts and circumstances of the cases in hand. We do not propose to dwell on this issue, but we need not be understood to have rejected the contention of the petitioners in this behalf. In our opinion, it is not necessary to consider this issue as the imports in all these cases are much prior to making the licences ineffective. We, therefore, do not express any opinion on this question canvassed before us.

So far as the exercise of powers under section 47 are concerned, we only express that the same required to be exercised in a reasonable period depending upon the facts and circumstances of each. No hard and fast rule in this behalf can be laid down. Other questions raised need no consideration in the light of the view taken by us in these petitions.

In the result, all the petitions are allowed. Action of respondents, the Revenue in all these petitions withholding clearance of goods imported by the Petitioners is declared as bad and illegal, consequently, all imports are held to be legal and valid. There will be an order of prohibition against the Customs Authorities from proceeding against the petitioners. Rule in all the petitions is made absolute in terms of this Judgment with no order as to costs.

The post Taparia Overseas (P) Ltd. & Another Vs. Union of India & Others appeared first on B&B Associates LLP.

At, High Court of Judicature at Bombay

By, THE HONOURABLE MR. JUSTICE B.N. SRIKRISHNA

Anil Diwan with N.G. Thakkar and T.K. Cooper i/by M/s. Mehta and Girdharlal, for defendants. S.H. Doctor with Y.B. Pandya i/b. M/s. Pandya and Poonawala, for plaintiffs to show cause.

Judgment

B.N. SRIKRISHNA, J

1. This chamber summons has been taken out by the defendants, seeking the relief that the ex parte decree dated 5th November, 1990, made by Agarwal, J., be declared to be a nullity and/or non executable with the further prayer that the said ex parte decree be set aside.

2. The facts leading to the present chamber summons indicate the considerable legal ingenuity which has gone into avoiding the day of reckoning. They are:

(a) The plaintiffs are financial institutions, which had advanced large sums of money to a Company known as Krimpex Synthetics Ltd., of which the defendants are Directors. While the first plaintiffs had advanced a sum of Rs. 87 lacs, the second plaintiffs had advanced a sum of Rs. 58 lacs. Usual agreements for compounding the interest were entered into between the said Company and the two plaintiffs. The loans were advanced not only against security of the plant, machinery, building and land of the said Company, but were also collaterally guaranteed by personal guarantees given by the defendants in the capacity of Directors of the said Company. The Company defaulted in making payment, and the plaintiffs became entitled, under their respective agreements, to enforce their debts forthwith. The plaintiffs filed a suit against the principal debtor-company on the basis of the mortgage-deeds and they also filed a summary suit, being Summary Suit No. 1935 of 1989, against the present defendants, based upon the guarantees.

(b) The details of the amounts claimed in the summary suit have some relevance, and, therefore, they need to be set out.

(i) The first plaintiffs claimed a sum of Rs. 1,11,30,538/- in the suits, the break-up of which was as under:–

Rs.

Principal sum 87,00,000.00 Simple Interest 21,13,486.00 Compound Interest 2,98,999.00 Other costs (Liquid-ated Damages) 18,053.00 1,11,30,538.00

(ii)The second plaintiffs claimed a total sum of Rs. 73,98,866/-, which comprised the following:

Rs.

Principal Outstanding 58,00,000.00 Simple Interest 13,93.347.00 Compound Interest 1,93,784.00 Liquidated Damages 11,735.00 73,98,866.00

(c) The plaintiffs also prayed for further interest at the rate of 12% per annum from the date of filing of the suit until payment of both the said sums.

(d) Summonses for judgment were taken out against the defendants. By an order dated 16th January, 1990, Variava, J., granted leave to the defendants to defend the suit, conditional upon depositing Rs. 50 lacs within a period of six months. The defendants appealed against the said order granting them conditional leave, and their appeal No. 567 of 1990, was summarily dismissed on 25th June, 1990, by the Division Bench (Mukherjee, C.J., and Bharucha, J.).

(e) On 20th July, 1990, the Prothonotary & Senior Master certified that the deposit, as required under the order of Variava, J., had not been made.

(f) In the meanwhile, the plaintiffs had, carried an appeal under Art, 136 of the Constitution, of India, to the Supreme Court of India, and the said appeal came to be dismissed by the Supreme Court on 26th July, 1990, wherein the Supreme Court made only a modification in the order to the effect that the defendants were permitted to furnish Bank Guarantee in the sum of Rs. 50 lacs, instead of depositing the said amount, within 8 weeks from the date of the said order, i.e., 26th July, 1990.

(g) the defendants failed to furnish the Bank Guarantee within the period prescribed by the Supreme Court.

(h) The plaintiffs obtained a Certificate of the Prothonotary dated 12th October, 1990, to this effect, and moved the learned Chamber Judge for an ex parte decree.

(i) On 5th November, 1990, the learned Chamber Judge (Agarwal, J.) made an order granting a decree as prayed, together with costs quantified at Rs. 10,001/-. A further order was made by the learned Chamber Judge on 7th October, 1991, for the issue of certified copy of the decree expeditiously.

(j) When the decree was to be drawn up and certified, the office objected to the draft decree as drawn up on the ground that the decree granted interest upon interest and that it was not permissible. The plaintiffs, therefore, moved the learned Chamber Judge, and, by an order dated 10th July, 1991, Agarwal, J., directed the Office of the Prothonotary and Senior Master to draw the decree in terms of prayer contained in the plaint.

(k) The decree was finally drawn up on 1st August, 1991. The drawn up decree, undoubtedly, directs payment of the amounts, referred to hereinabove, to the respective plaintiffs, and further directs interest at 121/2 per annum thereupon from the date of the filing of the suit until recovery.

(l) In the meanwhile, a Full Bench of this Court (Sukumaran, Saraf and Cazi, JJ.) decided in Union Bank of India y. Dalpat Gaurishankar Upadyay, ; the issue as to whether S. 34 of the Code of Civil Procedure, 1908, empowers the Court to direct payment of interest, which might have been claimed up to the date of the suit as part of the decretal amount. I shall have occasion to refer to this judgment in detail, but, for the present, continuing the narration of events, it might be pointed out that the Full Bench took the view that S. 34 of the Code of Civil Procedure did not empower the Court to grant interest upon interest, and that the expression “principal sum” used in S. 34, must be restricted to the original sum which was due, without adding the interest calculated thereupon up to the date of the suit.

(m) On 27th August, 1991, the plaintiffs took out Insolvency Notice No. 108 of 1991, and had it served on the judgment-debtors (the defendants).

(n) On 7th October, 1991 the defendants took out notice of motion to set aside the said insolvency notice by their Notices of Motion 107 of 1991 and 108 of 1991, which are still pending before the Insolvency Court.

(o) On 28th April, 1992, the defendants took out a draft notice of motion for setting aside the ex parte decree as well as for interim order staying the decree, pending hearing and disposal. The draft notice of motion was moved before Dhanuka, J., for ad-interim reliefs on 28th April, 1992, and the learned Judge was of the view that the appropriate remedy was by way of a chamber summons, and, accordingly, the said notice of motion was directed to be converted into the chamber summons, which is the present chamber summons. The present chamber summons was moved before me also on an earlier occasion for ad-interim relief, which I have refused.

(p) I may mention here that, though the defendants carried the matter of the order of conditional leave to defend all the way to the Supreme Court, for reasons known to them, they did not appeal against the ex parte order dated 5th November, 1990, passed by Agarwal, J., which has become final and binding.

3. The main contention of the defendants, vigorously canvassed by Mr. Diwan, learned counsel for the defendants, is that the decree dated 1st August, 1991, based on the ex parte order dated 5th November, 1990, of Agarwal, J., is a nullity, is nonest, and, therefore, despite the fact that the decree might have become otherwise final and conclusive, the defendants are entitled to challenge it, wherever and whenever the said decree is sought to be enforced against them. One of the modes of enforcing the decree is by taking out an insolvency notice, which has been done by the plaintiffs; the defendants contend that they arc entitled to object to a decree, which is non est and a nullity, wherever and whenever it is sought to be relied upon. Consequently, the defendants have moved this Court for a declaration that the decree is a nullity and non est.

4. Mr. Diwan contended that three questions basically arise in the present proceedings :

(a) Whether the Court can, in exercise of its powers under S.34 of the Code of Civil Procedure, direct interest to be awarded upon interest in a claim before it?

(b) If not, what is legal status of an order or decree awarding interest, not on the principal sum, but also on the interest claimed up to the date of the suit?

(c) Whether the defendants are entitled to raise this question at this juncture?

5. There is also an incidental question of delay, which is the subject-matter of prayer (a) in the chamber summons, which is easily disposed of.

6. It is the case of the defendants, as made out in the affidavit-in-support, that they came to know of the judgment of the Full Bench only by a newspaper report, which appeared in “The Economic Times” of the 23rd April, 1992, and immediately thereafter, they have taken out the draft notice of motion on 24th April, 1992, and, therefore, there is no delay. I am not inclined to hold against the defendants on the question of delay. I hold that the chamber summons is not likely to be dismissed on this ground alone, as the delay, if any, is liable to be condoned in the facts and circumstances of the case.

7. The first question raised by the learned counsel for the defendants has been settled by the Full Bench judgment of this Court in Dalpat’s case (supra). Expatiating on this contention, Mr. Diwan contended that S.34 of the Code of Civil Procedure, as interpreted in Dalpat’s case, puts a fetter on the Court’s power to award interest upon interest. If a Court were to make a decree contrary to the law as laid down by the Full Bench (which must be taken to have been so laid down as from the date on which S.34, as amended, stands on the statute book), such a decree is not merely erroneous, but one without jurisdiction, made by a Corum non judice, and, hence, the decree would be a nullity or non est. Such a decree, made by a Coram non judice, can be challenged, wherever and whenever it is sought to be relied upon. This is the crux of the argument of Mr. Diwan, in support of which, the learned counsel cited a number of authorities; which shall presently be noticed.

8. In Sushil Kumar Mehta v. Gobind Ram Bohra, , the Supreme Court’ was confronted with somewhat similar arguments. There was certain municipal land, on which some structures were constructed by a lessee, and the small portion in front of the building was left as open land. The lessor moved the Civil Court and obtained a decree for eviction. On appeal, the High Court took the view that the provisions of the Haryana Urban (Control of Rent and Eviction) Act? 1973 were applicable to the premises, and, as such, the Civil Court had no jurisdiction, whatsoever, to make a decree for eviction. The matter came up to the Supreme Court in appeal. The Supreme Court accepted the contention of the respondent that the Rent Control Restriction Act applied to the premises. After examining the provisions of the said Rent Control Legislation, the Supreme Court also took the view that the jurisdiction of the Civil Court was barred and exclusive jurisdiction was vested in the special forum created under the special Act, which could exercise the power of eviction of a tenant protected by the Act only in accordance with the stringent provisions of the Act, The Supreme Court, consequently, held that the decree made by the Civil Court was a total nullity, as the Civil Court completely lacked jurisdiction to make such a decree; that the issue between the parties was not res judicata, as an issue of jurisdiction did not bind the parties merely because the Court had taken an erroneous view of law and usurped the jurisdiction.

9. The Supreme Court, reiterating the principle laid down in an earlier judgment in Vasude v. Dhanjibhai Modi v.Rajabhai Abdul Rehman, , held that a decree, even if it be erroneous, is still binding between the parties, and it could be objected to in execution or collateral proceedings if the decree’ was passed by a Court which totally lacked jurisdiction, such objection as to basic lack of jurisdiction being incurable even by consent of parties or by resort to the principle of estoppel, Mr. Diwan has highlighted, rightly, the observations in paragraph 26 of the judgment (in the Supreme Court Report) as laying down the law. The law is laid down in the following words:–

“26. Thus it is settled law that normally a decree passed by a Court of competent jurisdiction, after adjudication on merits of the rights of the parlies, operates as res – judicata in a subsequent suit or proceedings and binds the parties or the persons claiming right, title or interest from the parties. Us validity should be assailed-only in an appeal or revision as the case may be. In subsequent proceedings, its validity cannot be questioned. A decree passed by a Court without jurisdiction over the subject matter or on other grounds which goes to the root of its exercise or jurisdiction, lacks inherent jurisdiction. It is a coram non judice. A decree passed by such a Court is a nullity and is non est. Its invalidity can be set up whenever it is sought to be enforced or is acted upon as a foundation for a right, even at the stage of execution or in collateral proceedings. The defect of jurisdiction strikes at the authority of the Court to pass a decree which cannot be cured by consent or waiver of the party. If the Court has jurisdiction but there is defect in its exercise which does not go to the root of its authority, such a defect like pecuniary or territorial could be waived by the party. They could be corrected by way of appropriate plea at its inception or in appellate or revisional forums, provided law permits. The doctrine of res judicata under S. 11, C.P.C. is founded on public policy. An issue of fact or law or mixed question of fact and law, which are in issue in an earlier suit or might and ought to be raised between the same parties or persons claiming under them and was adjudicated or allowed uncontesled becomes final and binds the parties or persons claiming under them. Thus the decision of a competent Court over the matter in issue may operate as res judicata in subsequent suit or proceedings or in other proceedings between the same parties and those claiming under them. But the question relating to the interpretation of a statute touching the jurisdiction of a Court unrelated to questions of fact or law or mixed questions does not operate as res judicata even between the parties or persons claiming under them. The reason is obvious: a pure right, cannot be deemed to be a matter in issue. The principle of res judicata is a facet of procedure but not of substantive law. The decision on an issue of law founded on fact in issue would operate as res judicata. But when the law has since the earlier decision been altered by a competent authority or when the earlier decision declares a transaction to be valid despite prohibition by law it does not operate as res judicata. Thus a question of jurisdiction of a Court or of a procedure or a pure question of law unrelated to the right of the parties founded purely on question of fact in the previous suit, is not res judicata in the subsequent suit. A question relating to jurisdiction of a Court or interpretation of provisions of a statute cannot be deemed to have been finally determined by an erroneous decision of a Court. Therefore, the doctrine of res judicata does not apply to a case of decree of nullity. If the Court inherently lacks jurisdiction consent cannot confer jurisdiction. Where certain statutory rights in a welfare legislation are created, the doctrine of waiver also does not apply to a case of decree where the Court inherently lacks jurisdiction.”

10. Relying strongly upon the law laid down in Sushil Kumar’s case (supra), Mr. Diwan contends that the decree made in the case of the defendants is not merely vitiated by an error of law but is completely non est and a nullity, as it has been made by a Court which lacks the basic jurisdiction or power to make the decree, and, further, such Court would be Coram non judice, as explained by the Supreme Court in Sushil Kumar’s case. This contention needs an in-depth and critical examination.

11. The defendants have also relied on Bahadur Singh v. Muni Subrat Dass ; K. K. Chari v. R. M. Sheshadri, ; Kaushalya Devi v. K.I. Bansal, ; Nagindas v. Dalpatram, . Isabella Jahnion v. M. A. Susai and Gnanendra Mohao Bhadun v. Rabindra Nath Chakravarty in support.

12. Bahadur Singh’s case (supra) was a case where a dispute between a landlord and tenant was referred to arbitration, and an award was made directing the tenant to occupy the property for seeking time and thereafter to vacate the same. The award was filed in Court, and a decree was obtained in terms of the award. When the decree was sought to be executed, the tenant objected to it on the ground, inter alia, that the decree was invalid and void, as, it had been passed in contravention of the provisions of the Delhi and Amjer Rent Control, Act, 1952 and, Therefore, the landlord could not execute the decree. In upholding this contention, the Supreme Court held that, under the applicable Rent Control Act, the Court was prohibited from passing a decree for order of recovery of possession of any premises in favour of the landlord against a tenant, except in such suit or proceedings instituted by the landlord against the tenant for recovery of possession on one of the grounds stated therein, and unless the Court was satisfied that the ground of eviction existed. Since the decree, on the face of it, did not comply with the provisions of the Delhi and Ajmer Rent Control Act, the Supreme Court held that the decree was a nullity, and, therefore, it could be validly objected to during the execution proceedings.

13. Chari’s case (supra) was also a case under the Rent Control Legislation as applicable in Tamil Nadu. There also a compromise decree for eviction of the tenant had been made. The decree and the record, per se, did not indicate that one of the statutory grounds for eviction of the tenant existed. The Supreme Court, therefore, held that such a decree was prohibited under the applicable Rent Control Legislation, and, therefore, the Court could not have made a decree in terms of the compromise in the absence of the existence of a statutory ground, which was neither admitted nor clearly demonstrable from the records. The decree was therefore, held to be a nullity and capable of being objected to in execution.

14. Kaushalya Devi’s case (supra) was also a case of similar nature where the provisions of the Delhi and Ajmer Rent Control Act, 1952, were invoked to contend that a compromise decree passed by the Court in an ejectment suit, without satisfying itself as to the existence of ground for eviction, was a nullity, and could not be executed.

15. In Nagindas (supra) also, the issue was very much the same. Existence of one or the other statutory ground mentioned in Ss. 12 and 13 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947, was held to be a sine qua non for passing a decree of eviction. The statute contains a prohibitory mandate to the Rent Court that it shall not travel beyond the statutory grounds mentioned in Ss. 12 and 13 and to the parties that they shall not contract out of those statutory grounds. This was spelt out as being inherent in the public policy built into the statute. Merely because 0.23, R. 3 of the Code of Civil Procedure, was applicable to the proceedings in a suit under the Bombay Rent Act, the prohibition in-built into the statute could neither be waived, nor compromised, and any decree for eviction of a tenant, otherwise than upon the existence of a statutory ground, was held by the Supreme Court to be a nullity, capable of being objected to at all stages.

16. In Isabell’s case (supra) also, the same issue was considered by the Supreme Court, which reiterated the principle laid down in Sushil Kumar’s case (supra).

17. One feature is common to all these cases. They all arose under the Rent Control Legislation, which, as a matter of public policy, prohibils an eviction decree being passed against a tenant, except upon the existence of one or the other statutory ground. These were all cases where the Court had passed an ‘eviction decree either on a compromise or upon an arbitration award or by ignoring the statutory restrictions on its jurisdiction. In my view, these judgments are clearly distinguishable. The jurisdiction of the Civil Court was barred in all these cases by the applicable Rent Control Legislation, and, simultaneously, jurisdiction was vested in a special forum. This special forum also could pass a decree for eviction only if certain statutory conditions existed. In these circumstances, if a Court, whether relying on a compromise by consent terms, proceeded to pass a decree for eviction of a tenant, except upon a statutory ground, it would obviously, be traversing beyond its jurisdiction, which was not possessed of even by the special Court. Thus, in these cases, the Supreme Court took the view that the Civil Court, which has passed the decree, lacked inherent jurisdiction to entertain the subject-matter of the suit, and, therefore, it was held that the decree passed by the Civil Court was a nuility. Consequently, its invalidity could be set up in any proceedings, including execution proceedings.

18. The cases arising under Rent Control Legislation or any other Slate Legislation, where a special forum has been created to adjudicate the rights of parties and the jurisdiction of a Civil Court is barred, either expressly or by implication, create no difficulty. It is easy to sec that a Court whose jurisdiction is barred expressly or impliedly is coram non judice, and, therefore, its order or decree would be non est.

19. The Special forum having limited jurisdiction under the statute, its decree would be a nullity if it aets beyond the statutory restrictive limits.

20. In the case of the defendants, however, the decree was not passed by a Court which lacked inherent jurisdiction. It is not disputed, indeed it could not be, that this Court had jurisdiction to entertain the summary suit, in which the ex parte order was passed. What is, however, contended is that, under S. 34 of the Code of Civil Procedure, 1908, as expounded by the Full Bench, this Court lacked inherent power to award interest upon interest, and, therefore, this situation was no different from the situation of lack of jurisdiction, which was considered by the Supreme Court in the cases cited hereinabove.

21. It is difficult to agree with this contention advanced by the learned counsel. A situation, where a statute mandates the Court of plenary jurisdiction to do or not to do something, and the Court breaches the mandate, cannot be equated with a situation where the Court inherently lacks jurisdiction to adjudicate upon the subject-matter of the dispute or with the case of a special forum of limited jurisdiction acting out of bounds of its jurisdictional limits. The former results in an erroneous decree; the latter in a decree which is a nullity.

22. The Rent Control cases are, therefore, distinguishable and, in my view, they do not support the proposition canvassed by the defendants.

23. Mr. Diwan then cited an authority of the Privy Council in Gnanendra Mohan Bhaduri v. Rabindra Nath Chakravarty, AIR 1933 PC 611 in support. This was a case which “arose under the Arbitration Act, 1899, under which there was no provision for the Court to make a decree in terms of an award. Under the said Act, an award was enforceable, per se, as a decree of the Court. The award was filed in Court and there were no proceedings taken out for setting aside the award. Parties, however, were aggrieved by a certain direction in the award, and, by consent, agreed that the award shall be modified as agreed between them. Consent Terms were filed before the High Court, and they applied for a decree in terms of the award, as modified by their Consent Terms. A decree was granted in terms of the Consent Terms. One of the parties was a minor at the time the decree was made. Much later, after attaining majority, he challenged the decree as a nullity. The Privy Council pointed out that the only jurisdiction of the High Court, under the Arbitration Act of 1899, was to remit or set aside the award, and that, in the absence of an order setting aside or remitting the award for reconsideration of the Arbitrator, the Award, which had been filed in the Court, was enforceable, as if it were a decree of the Court. The Act did not contain any provision for making a decree on an award, much less, on an award as modified by consent terms, and, therefore, the decree, if made, was one without jurisdiction and, therefore, a nullity. The Privy Council, therefore, upheld the judgment of the High Court that the decree had been passed without jurisdiction and was, therefore, incapable of execution as such. Mr. Diwan contends that this, at least, is a situation where the Court, which made the decree, had jurisdiction to entertain the subject-matter. Since it had been entertained in a manner contrary to statute, the Privy Council had found that the decree was one without jurisdiction, and, therefore, non est. In my view, this judgment is also capable of being distinguished. Under the Act of 1899, in the absence of a provision for making a decree in terms of the award, the decree, upon its being filed in the High Court, was capable of being enforced, as if it were a decree of the Court. Thus, the situation was one where the parties concerned could have enforced the award as it stood. However, in the absence of any provision of law under which the Court could modify the award, even by consent of parties, the Privy Council found that such order of the Court was one wholly without jurisdiction, and, therefore, a nullity. This was also a case where the jurisdiction of the Court was limited by the statute, viz.. to remit or set aside the award. There was no further jurisdiction to make a decree in terms of the award, or for a modification of the award, even by consent of parties. It cannot be forgotten that arbitrators derive jurisdiction by consent of parties and not by statute. The parties, by consent, had conferred jurisdic-

tion on the Arbitrator and agreed to be bound by it. No one — not even a Court, in the absence of a specific statutory power — could usurp it. The power granted to the Civil Court under law, as it then stood was to set aside the award or to remit the award for re-consideration, on extremely limited grounds. It was in these circumstances that the Privy Council held that the decree made by the Court in terms of award and that too by introducing a modification in the award, was a nullity, as it lacked inherent jurisdiction to do so. 1 am, therefore, unable to accept the contention of Mr. Diwan that his judgment is an authority for the proposition he canvasses.

24. Mr. Diwan then contended that a careful reading of the Full Bench judgment would indicate that the Full Bench has held that the Court is ‘prohibited’ from granting interest upon interest, that the decision deals with the interpretation of S. 34 of the C.P.C., which “empowered” the Court to award interest. It is also pointed out that the Full Bench heavily relied upon the Report of the Joint Committee on the Bill, which preceded the 1956 amendment of S. 34 of the C.P.C. The relevant part of the report states, “the Committee are of; the opinion that interest should not be awarded on interest, but only on the principal sum. Suitable amendment has, accordingly, been incorporated in this clause.” Learned counsel emphasized the observations of the Full Bench on the Report of the Joint Committee to the effect:

“The aforesaid observations of the Joint Committee make it abundantly clear that the intention of the legislature was not to allow the award of compound interest by the Court…..”

He also drew my attention to the further observations of the Full Bench :

“The object of the amendment, as is evident from the report of the Joint Committee, was to prohibit award of interest on interest and was to restrict it only on the principal sum. Under S. 34, as amended, the interest can be awarded only on the principal sum and not on the aggregate sum comprising the principal and interest accrued thereon.”

Highlighting the emphatic language used by the Full Bench, in expounding the amplitude of the power of the Court under S. 34 of the C.P.C., Mr. Diwan was at pains to contend that the Full Bench, by the law it declared, has circumscribed the jurisdiction of the Court under S. 34 of the C.P.C. to award interest. Traversing out of these limits, the Court would not only be traversing the limits set by the statute, but traversing the limits of its jurisdiction. Out of bounds is out of jurisdiction, contends counsel.

25. It is difficult to agree with the contention of the learned counsel for the defendants that, if a Court, while exercising jurisdiction under S. 34, awards interest on the aggregate of the principal sum plus interest, it would be an exercise lacking in inherent jurisdiction and not one merely of an erroneous exercise within its jurisdiction. A Court, which otherwise has jurisdiction to entertain a dispute, equally has jurisdiction to decide it erroneously. The remedy, in such a situation, is by way of appeal, if one is provided, or other constitutional one. If there is no resort to them, or, as in the instant case, the resort to them draws a blank, the order of the Court becomes final and it is not capable of being ignored on the ground of its being noh est or a nullity. In my view, the Court, in such a situation, cannot and does not became coram non judice.

26. It would be useful, at this juncture, to refer to a judgment of the Supreme Court in Hiralal v. Kali. Nath, , This was a case where the decision of the High Court was challenged on the ground that the suit filed on the Original. Side was wholly incompetent for want of territorial jurisdiction, and, therefore, the award which followed on the reference to arbitration, and the decree of the Court under execution, were all null and void. The Supreme Court, repelling the contention, observed (at page 200):

“The validity of a decree can be challenged in execution proceedings only on the ground that the Court which passed the decree was lacking in inherent jurisdiction in the sense that it could not have seized of the case because the subject-matter was wholly foreign to its jurisdiction or that the defendant was dead at the time the suit had been instituted or decree passed, or some such other ground which could have the effect of rendering the Court entirely lacking in jurisdiction in’ respect of the subject matter of the suit or over the parties to it.”

The Supreme Court turned down the objection based on territorial jurisdiction as deemed to have been waived and held that the parties were estopped from raising such objection at the execution stage.

27. Following upon this judgment, Madon, J., of this Court (as his Lordship then was) has, in Erandol Taluka Gramodyog Utpadak Sahakari Society v. M/s. Sunil Waste Corporation, AIR 1971 Borrf 91 considered and laid down what 1 consider, with respect, the correct test to be adopted for deciding if the decree is capable of being objected to in collateral proceedings as a nullity. In this case, a suit was filed in the Court of the Subordinate Judge, Delhi, against a co-operative society registered under the Maharashtra Co-operative Societies Act with regard to a dispute touching the business of the society. The respondent, which had filed the suit, obtained a money decree which was passed ex parte. After obtaining the ex parte decree, it was transferred to the Civil Judge, Junior Division, Erandol, for execution. During the Darkhast proceeding, an objection was raised that the decree was a nullity, as the condition precedent in S. 164 of the Maharashtra Co-operative Societies Act, of a previous notice to Registrar, had not been complied with. The trial Court held that a failure to give the notice, required under S. 164 of the Societies Act, was not a question which affected the jurisdiction of the Court to pass a decree, and, hence, this could not be gone into by the executing Court. The appeal to District Judge also failed. While dismissing the second appeal, in which the only ground urged was that the respondent had instituted a suit without giving the requisite notice under S. 164 of the Societies Act, and, hence, the trial Court had no jurisdiction to entertain the suit or to pass a decree therein, and that the decree was incapable of being executed as it was a nullity, reiterating the principle adopted in Rana Harkishandas Lallubhai v. Rana Gurabdas Kalyandas, the learned Judge (Madan, J.) pointed out (at page 516):

“…… .It is always necessary to make a distinction between pleas that tend to show that the decree in question is a nullity and pleas that merely challenge the validity or the propriety of the decree on the ground that it is contrary to the provisions of law. If the plea is that the decree is contrary to law in the sense that in passing the said decree certain provisions of the law have been ignored or contravened, that would not necessarily make the decree a nulity and allegations about the impropriety or the illegality of the decree cannot be entertained in execution proceedings.”

The learned Judge derived support from the judgment of the Supreme Court in Seth Hiralal Patni’s case (supra) and also from the judgment of the Supreme Court in Ittyavira Mathai v. Varkey Varkey, , where it was held that, though S. 3 of the Limitation. Act is peremptory and casts a duty on the Court to take notice of the said provision and give effect to it, though the point of limitation is not raised in the pleadings. Even so, it cannot be said that, where the Court fails to perform its duty and fails to dismiss the suit on the ground of limitation, it acts without jurisdiction. If it fails to do its duty, it merely commits an error of law and an error of law can be corrected only in the manner laid down in the Code of Civil Procedure. If the party aggrieved does not take appropriate steps by way of preferring an appeal to have that error corrected, the erroneous decree will hold good and will not be open to challenge on the basis of its being a nullity.

28. With respect, the approach adopted by Madon, J., in the Erandol Taluka’s case commands itself to me as eminently rational and conducive to justice, and I would prefer to adopt it.

29. For a moment, even assuming the correctness of the contention of Mr. Diwan that the Full Bench judgment has expounded the law and held that the “power” of the Court under S. 34 of the Code of Civil Procedure is “restricted” and that the Court is “prohibited” from granting interest upon interest, a Court, which acts contrary thereto, does not act without inherent jurisdiction; it may act erroneously. Thus, a decree, which grants interest upon interest, cannot be said to be a nullity, nor can the Court, which passes the decree, be said to be coram non judice. In my view, therefore, the ex parte decree dated 5th November, 1990, made by Agarwal, J., does not amount to nullity, nor is it “non est”; much less can be Court be said to have been coram non judice.

30. Mr. Doctor, learned counsel for the plaintiffs, contends that, at the highest, even if the contention of the defendants were to be upheld, only that part of the decree which awards interest upon interest would be bad and that there is no reason to hold that the entire decree is bad. Since the portion of the decree which grants interest is clearly severable, there is no reason why the entire decre’e should be declared to be a nullity.

31. Mr. Doctor, learned counsel for the plaintiffs, placed reliance on a judgment of the learned single Judge of this Court in Fattechand Murlidhar Shop v. Shrikrishna Tejmalji Chandak’, a judgment of the Madras High Court in Ganapathi v. Balasubrammania Gounder,, AIR 1987 Mad and a Division Bench judgment of this Court in D. Shanalai v. Bank of Maharashtra, to repeal the contentions of the defendants.

32. Mr. Doctor cited the judgment of the Supreme Court in Smt Ujjam Bai v. State of Uttar Pradesh, AIR 1962 SC, 1621 part-cularly, in paragraph 15 as under:–

”It is necessary first to clarify the concept of jurisdiction. Jurisdiction means authority to decide. Whenever a judicial or quasi-judicial Tribunal is empowered or required to enquire into a question of law or fact for the purpose of giving a decision on it, its findings thereon cannot be impeached collaterally or on an application for certiorari but are binding until reversed on appeal. Where a quasi-judicial authority has jurisdiction to decide a matter, it does not lose its jurisdiction by coming to a wrong conclusion, whether it is wrong in law or in fact. The question whether a Tribunal has jurisdiction depends not on the truth or falsehood of the facts into which it has to enquire, or upon the correctness of its findings on the these facts, but upon their nature, and it is determinable ‘at the commencement, not at the conclusion, of the inquiry.”

This appears a test of what is a jurisdictional issue.

33. Mr. Doctor also relied on a judgment of a Division Bench of this Court in D. Shanalal v. Bank of Maharashtra, 1988 Mah LJ 956 and contended that, once leave to defend is refused or made conditional and the condition is not fulfilled, the party could not be heard in appeal against the ex parte decree. In my view, the contention canvassed for the defendants is somewhat larger, and, therefore, this authority is not much of help.

34. Mr. Doctor also relied on ajudgment of the learned single Judge of the Madras High Court in Ganapathi v. Balasubramania Gounder , which takes the view that the question of validity of a decree is not one which can be agitated in execution, because it does not relate to the satisfactory discharge of the decree. It is only where a decree is passed by a Court, which lacks inherent jurisdiction to pass the decree, that the objection to the validity of the decree may be raised in a proceeding in execution, if such an objection appears on the face of the record.

35. Reliance is also placed on behalf of the plaintiffs on a judgment of the learned single Judge of this Court in Fattechand Murlidhar Shop v. Shrikrishna Tejmalji Chandak, this was a case arising under the Maharashtra Slum Areas (Improvement, Clearance and Redevelop-

ment) Act, 197], under which, no suit for eviction of any occupier from any building or land in a slum area could be instituted without permission of the Competent Authority and, on an objection being raised, or the Court noticing the non-compliance thereof, the suit would not be entertained. A suit had been instituted without obtaining the permis-sion of the Competent Authority, as required under S. 22 of the said Act, An objection was raise in the executing Court that the decree was a nullity, as it has been passed contrary to the provisions of S. 22 of the said Act, and this Court negatived the objection by holding that the executing Court could not entertain and allow the objection to the executability of the decree, since it could not be said that the decree was passed by this Court having no inherent jurisdiction, and was, therefore, a nullity.

36. In my view, the true principle of the matter is the one which has been adopted in the judgment of Madon, J., in Erandol Taluka’s case (supra). Applying the said principle, I am unable to accept or uphold the contentions of the learned counsel for the defendants.

37. In the result, I hold that the ex parte Decree dated 5th November, 1990, made by Agarwal, J., is not a nullity, nor is it non est. The Court which passed the said decree was not coram non judice. Consequently, it is not open to the defendants in these proceedings or in other collateral proceedings to object to the validity of the said decree.

38. In the premises, the chamber summons must fail. Although prayer (a) was granted by me by condoning the delay, the chamber summons fails on merits, and it is, consequently, hereby dismissed with costs.

39. Mr. Diwan applies for an order to stay further proceedings in insolvency to enable the defendants to canvass the matter in appeal. Mr. Pandya, learned counsel for the plaintiffs, makes a statement that the Insolvency Notice would be on board on 4th August, 1992, and, on that day, it would, by consent, be adjourned by a period of two weeks. This should give sufficient time to the defendants. Hence, no order of stay.

40. Chamber summons dismissed.

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JUDGEMENT

G.G. LONEY, J.

( 1 ) THIS appeal is preferred by the unsuccessful couple, having lost their complaint before the District Forum, Akola, alleging negligence in the treatment of their only son during his illness. A complaint No. 90 of 1993 filed by complainant came to be dismissed by the District Forum, Akola by the impugned order dated 21st August, 1993.

( 2 ) THE facts giving rise to the consumer dispute are that the complainant couples only son, Sachin, aged about 9 years was suffering from fever and was admitted in the private hospital, owned by Dr. Vinayak Deshmukh of Akola. The hospital is known as “Deshmukhs Children Hospital”. Sachin was admitted on 9-10-1992. On the next day of admission, a sample of his blood was tested for pathological examination. On 3rd day, i. e. on 11-10-1992, Dr. V. Deshmukh, opposite party, left away for Mehekar town at about 6. 20 p. m. Thereafter Sachin died in the hospital. These are the admitted facts. The complainant alleged that Sachin was diagnosed having “typhoid”. The complainants alleged that after the admission of Sachin, in private nursing home of opposite party, it was his responsibility to take reasonable care about Sachins treatment during hospitalization but Sachin died due to the negligence of opposite party. According to complainants, opposite party never informed them that he will be away from his hospital after admission of Sachin. It is also alleged that Dr. Vinayak Deshmukh personally was to treat Sachin but he left for another town on 11-10-1992 at 6. 20 p. m. knowing the condition of Sachin which was deteriorating. There was no responsible medical person available to attend on Sachin, in the hospital during the absence of opposite party. It is also alleged that one Mohd. Bhai, an employee of Dr. Vinayak Deshmukh, was acting as a compounder in the hospital in absence of opposite party and was not competent to treat Sachin. It is proved fact that in absence of Dr. Vinayak Deshmukh, the said MohammadBhai on 11-10-1992 prescribed an injection “Nvaquine” and `Dyppacil tablets under his own signature on the letter pad of Dr. Vinayak Deshmukh. The said document is at Annexure `a. The aforesaid medicines were told to be purchased by complainant by said Mohd. Bhai and he injected the full vial of “Navaquine” injection to Sachin at about 6. 00 p. m. in his presence. The complainant alleged that immediately within 20 minutes Sachin died as a result of that injection. Before his death, Sachin vomited blood. Thereafter, Mohd. Bhai sent for Dr. Anoop Kothari and he declared Sachin dead. The complainant alleged that his only son died due to negligent medical treatment during the hospitalization in O. Ps hospital.

( 3 ) COMPLAINANTS further alleged that they undergone family planning operation and due to the loss of their only male child, they have received severe mental shock and therefore, claimed Rs. 70,000/- towards compensation, apart from Rs. 5,000/- for medical expenses and Rs. 200 towards notice charges.

( 4 ) IN written version, the opposite party admitted the admission of Sachin in his hospital and stated that Sachin was treated in September, as outdoor patient and was diagnosed at that time having enteric fever. It is further admitted that again on 9-10-1992, at 8. 30 p. m. Sachin was admitted for high fever as an indoor patient and was treated for high grade fever of unknown origin. On the next day, the child showed some improvement and the fever came down to 100 to 101 of. The opposite party admitted that as per his prior appointment, he went away to Mehekar town on 11-10-1992. However, he had approached Dr. Anoop Kothari, a reputed childrens specialist to look after the indoor patients of his hospital including Sachin. It is further admitted that on 11-10-1992, in absence of opposite party, Dr. Anoop Kothari, took the round in the hospital and attended on the patients. It is further submitted that Dr. Anoop Kothari found that Sachin had developed rigors. It is further admitted that Dr. Kothari had advised injection “Navaquin 2 ML” to be repeated after 6 hours, and that injection was administered at about 10. 30 a. m. and was repeated at 4. 00 p. m. It is also admitted that at 5. 15 p. m. the patient (Sachin) suddenly became serious. Dr. Kothari attended on the patient at 5. 30 p. m. and used all emergency measures to save the patient. However, Sachin expired at 6. 00 p. m. Thus, it is submitted that there was no negligence in the treatment of Sachin, in the hospital of opposite party. The District Forum, Akola accepted the defence of the opposite party and concluded that from the facts stated by the opposite party, there was no negligence while treating Sachin in the Hospital.

( 5 ) ACCORDING to the District Forum, the “Navaquin” injection was administered to Sachin, twice by Dr. Anoop Kothari and rejected the contentions of complainant that it was administered by MohammadBhai, compounder. While dismissing the complaint, the District Forum also concluded that since alternative arrangement was made by Dr. Deshmukh, in his absence by instructing Dr. Kothari, there can not be a case of negligence on the part of Dr. Deshmukh while treating Sachin.

( 6 ) WE have heard Shri Lahoti, Advocate for appellant and Shri Santani, Advocate for respondent, Dr. Deshmukh. The admitted facts clearly show that Sachin was admitted in private nursing home of Dr. Vinayak Deshmukh, who had agreed to render the service for consideration. The administration of `Navaquin injection to Sachin in the hospital is also admitted by the opposite party. It is also admitted fact that MohammadBhai has been in the employment of the Dr. Vinayak Deshmukh as a compounder. It is admitted fact that Dr. Deshmukh had left for Mehekar town on the next day of admission of Sachin. It is an admitted fact that Sachin was the only male child of complainants. The other being the daughter. No postmortem was performed on the dead body of Sachin.

( 7 ) THE main disputed point in this case is as to whether there has been deficiency in the service of opposite party, Dr. Deshmukh, who had agreed to render the necessary service in his hospital to treat Sachin. Consequently, it is to be found whether the administration of injection of “Nivaquin” in absence of Dr. Deshmukh by his compounder if proved amounts to deficiency in the service.

( 8 ) THE most crucial document on record is a prescription signed by Mohd. Bhai dated 11th August, 1992 under his own signature and on the letter pad of Dr. Vinayak Deshmukh. A copy of which is placed at Annexture `a. On perusal the said document shows that the prescription of `Nivaquin injection is signed by Mohd. Bhai, the compounder of Dr. Vinayak Deshmukh in his own handwriting. It is also not mentioned therein that the said “Nivaquin” injection was prescribed by Dr. Kothari or Dr. Deshmukh. This crucial document has not been controverted specifically by the O. P. or his witnesses including Mohd. Bhai. There is an affidavit filed by Shri Nivruti More, in which he has stated in para 3, that on 11-10-1992 at 2. 30 p. m. Mohd. Bhai wrote a prescription in his own hand on the chit and advised him to purchase injection. Shri Nivrutti More, further stated that the prescribed injection was purchased and handed over to Mohd. Bhai and it was administered to his son at about 6. 00 p. m. by said Mohd. Bhai, compounder and thereafter suddenly at 6. 20 p. m. his son became serious, vomitted and expired and thereafter Dr. Kothari was called. He further stated that when Dr. Kothari saw Sachin, he told that the lungs of the child were affected and damaged and due to that the child died. There is also an affidavit of complainant Nirmala More. In reply to the complainants allegations, the O. P. also filed some affidavits. There is an affidavit of Dr. Vinayak Deshmukh in which he has not denied the fact of Mohd. Bhai having prescribed the injection `Nivaquin. However, it is stated in para 6 that Mohd. Bhai might have asked the relatives of patient to bring the medicine on the advice of Dr. Anoop Kothari. The reply is vague and evasive and is based on hear say information. There is another affidavit of Dr. Anoop Kothari. He does not deny the fact of injection being prescribed and injected by Mohd. Bhai. These witnesses came to the rescue of Dr. Deshmukh stating that the injection was prescribed by him and also administered by him on six hourly basis. He also admitted that Sachin suddenly became serious. There is another affidavit of Shri Ruprao Wankhade, another medical practitioner but he is not concerned so far as the prescription given by the Mohd. Bhai is concerned. There is the affidavit of Mohd. Bhai himself. He has clearly stated that he has been working in the hospital of Dr. Deshmukh as a compounder. He stated that Dr. Deshmukh had admitted Sachin in that hospital and on 11-10-1992 and he had left for Mehekar. In para 2 of his affidavit, he admitted that he has executed the prescription at Annx. `a to purchase the injection but it was on the advice of Dr. Kothari. We do not believe that Mohd. Bhai wrote the prescription on the advice of Dr. Kothari. When it is the case of Dr. Deshmukh that Dr. Kothari was to look after the patients in his absence and Dr. Kothari administered injection `nivaquine then why the prescription should be signed by Mohd. Bhai. To prescribe an injection is the duty of a medical practitioner but we are surprised to find Dr. Kothari did not prescribe `nivaquine. We therefore, do not believe that Mohd. Bhai wrote prescription on instruction by Dr. Kothari. We also do not attach credence to the papers of medical treatments which are obviously got tailored to suit the defence of opposite party. There is no noting of Dr. Kothari that he gave six hourly injection to Sachin. In 1st para Mohd. Bhai has stated that Sachin was given `navaquine injection but he does not say that it was given by Dr. Kothari. Thus the evidence of Mohd. Bhai is totally untrustworthy. It is very clear to us that Mohd. Bhai who having admitted to have written the prescription at Annx. `a it was on his own and not on any direction from Dr. Kothari. The question of Dr. Deshmukh, directing Mohd. Bhai does not arise since the prescription was written in absence of Dr. Deshmukh. On consideration of the evidence of affidavits, we clearly find that the decision to prescribe `nivaquin injection is of Mohd. Bhai and he alone on his own had written the prescription of injection `nivaquine alongwith other tablets and it was not the decision of Dr. Kothari or Dr. Deshmukh. We fail to understand when Dr. Kothari is said to have prescribed `nivaquine then why he failed to prescribe it in his own hand and on his own pad.

( 9 ) IT will be useful to know the effect and side effects of `nivaquine and the precautions which are required to be taken into consideration. During the course of appeal, the literature of `nivaquine Chloroquine Sulphate has been placed before us. The printed literature is issued by May and Baker Phamarceuticals. The opening sentence is “for use under medical direction”. Special instruction is “keep out of the reach of children”. It is prescribed for the suppression and treatment of all types. . . . . . of malaria”. It is stated that the `instramuscular Administration when parenteral administration (injection) is necessary dosage must be adjusted according to bodyweight, particularly in children. There is table given to adjust the doses according to age and weight of the patient. The age of Sachin was about 9 years and according to Dr. Deshmukh, he was under his treatment in the month of September, for enteric fever. Thus his weight at the most could be 15 Kg. Under the table, the maximum dose that could be give to him was 75 mg. or 1. 80 ml. It is important to note that the prescription given by Mohd. Bhai do not mention whether it was 2 ml. or 5 ml. which are available in market as stated in presentation.

( 10 ) IN the said literature under heading “side effects and precautions” is stated that when parenteral administration is used, care is necessary to prevent the occurence of convulsions or cardiovascular collapse, this is especially necessary in childern. Doses must be based on actual body weight in accordance with the table provided”. It is not the case of opposite party that Sachins weight was measured and the doses were administered on actual body weight of Sachin. Even this is not stated by Dr. Kothari in his affidavit. Under the heading “treatment of Over dosage” it is stated that gross overdosage with chloroquine requires prompt action to counteract its depressive effect on the respiratory and cardiovascular systems, as soon as possible followed by appropriate resuscitative measures, including tracheal intubation with artificial respiration”. There is also placed on record printed extract of `goodman and Gilmans. The Pharmacological basis of Therapeutics Eighth Edition. The chemistry of Chloroquine and its congeners are printed and illustrated at page 983, `toxicity and Side Effects of Chloroquine are given. Manifestations of severe acute chloroquine toxicity relate primarily to the cardiovascular system : these include hypotension, vasodilatation. . . . . and eventual cardiac arrest. Doses of more than 5 mg. are usually fatal. Prompt treatment with mechanical ventilation equinephrine and diazepam may be life saving. A reading of the aforesaid literature will show that the use of `nivaquine has to be made under medical supervision of a competent medical practitioner, and in case of side effects, the preparation must be made to counter the side effects. In the instant case for the sake of argument, if it is assumed that `nivaquine injection was given by Dr. Kothari, even then no such precautions were observed to adjust the doses according to the body weight of Sachin. Thus in our view, Dr. Kothari, as a fellow medical practitioner is obviously obliging Dr. Deshmukh by giving evidence to suit his defence. It is proved from the documentary evidence that Dr. Kothari, although mentioned in the case papers that he prescribed `nivaquine yet Annx. `a clearly proves that `nivaquine was actually prescribed by Mohd. Bhai under his own signature and he himself administered the complete injection to Sachin and never bothered to adjust the doses according to the body weight of Sachin. In fact Mohd. Bhai seems to be totally uneducated as regards the administering of `nivaquine injection. There is no evidence whatsoever, either in the affidavit of Dr. Deshmukh or any of his witnesses including Mohd. Bhai as to what measures they used when the condition of Sachin became serious to counter the reaction. No necessary measures were taken and no tracheal intubation was used. No artificial respiration was done. The so called hospital papers produced by O. P. do not inspire confidence as they are tailored to suit the defence of Dr. Deshmukh, opposite party. Sachins vomiting blood is a clear proof of his internal system being damaged due to the high dose of `nivaquine given by Mohd. Bhai. There is yet another evidence which nails the lie of opposite party. In prescription `a there is also a mention of `dymoil tablets but that is never prescribed by any medical practitioner. It is the sole decision of Mohd. Bhai to prescribe it as found in Annx. `a. This also clearly indicates that the O. P. was totally negligent while rendering promised service to Sachin. It is important to note that when Dr. Deshmukh had prior appointment at Mehekar, yet knowing full well his programme why he should promise complainant to treat Sachin who was having high fever. He did not inform complainant this fact while admitting Sachin. It is found that after his admission in the hospital, Dr. Deshmukh without giving proper instructions as regards the condition of Sachin left for Mehekar. There is no documentary evidence on record to show that Dr. Deshmukh had given any such instruction for treatment of Sachin in his absence. It is found that Sachin was left to the care of Mohd. Bhai a compunder, an untrained person not even qualified to be called as a para-medical person and Mohd. Bhai on his own gave the prescription of `nivaquine and Dymoil and administered the injection to Sachin and was not aware how to counter the reaction of Nivaquine, as a result of which Sachin immediately died after the injection. These facts are proved and established from the affidavit of complainant. Under these circumstances, we find that the negligence in the service of opposite party has been abundantly proved.

( 11 ) SHRI Santani, learned advocate for opposite party submitted that Dr. Kothari did his M. D. and is a qualified Doctor and was entrusted to look after Sachin in the absence of Dr. Deshmukh. We have no doubt about the qualifications of Dr. Kothari. But on consideration of material on record, we find that Dr. Kothari had not prescribed `nivaquine injection and not administered it himself, as claimed. His evidence is tendered with a view to oblige his colleague in the profession. Shri Santani, learned Advocate, further admitted that Mohd. Bhai who is admittedly a compounder of Dr. Deshmukh is not a qualified person. It is clearly seen that Dr. Deshmukh has been negligent while rendering necessary service to the complainant for the proper treatment of his son. Dr. Deshmukh was further found negligent in as much as he left for Mehekar ignoring the serious condition of Sachin and without making proper arrangement for his treatment. When he was aware of his going away to Mehekar, he could refuse admission to Sachin in his hospital, so that he could get required treatment from other medical practitioner. The deficiencies in the service are further aggravated from the fact that Mohd. Bhai, a compounder was in charge of the hospital, who recklessly used the letter pad of Dr. Deshmukh, while prescribing `nivaquine injection, a medical product, which has to be used under medical supervision and care. Under these circumstances, we find that the District Forum did not consider this aspect and committed an error in dismissing the complaint. We are therefore, satisfied from the material on record that the complainants have proved their allegations and established the negligence in the treatment of Dr. Deshmukh while treating Sachin. It is very apparant that Dr. Deshmukh did not demonstrate reasonable care to treat Sachin who needed the presence of qualified medical person during his hospitalizaton. The faith deposed by complainants in Dr. Deshmukhs ability was completely shattered.

( 12 ) THE complainant has claimed compensation of only Rs. 70,000/- towards loss of his only male child. The seriousness of the loss of the complainants can be found from the fact that after the birth of Sachin and one daughter, the couple underwent family planning operation. Under these circumstances, in our view, the claim of Rs. 70,000/- for compensation is based on very conservative and humble estimate and therefore, we are inclined to accept it in toto. We find that complainants in this case are not motivated to claim frivolous compensation from opposite party but are compelled to claim a very reasonable and humble amount as compensation. Similarly, we also accept the claim of complainant for spending Rs. 5,000/- for medical treatment. Hence, we allow this appeal and pass the following order. Order the appeal is allowed. The impugned order is set aside. The complaint is allowed, and the opposite party, Dr. Vinayak Deshmukh through “deshmukh Children Hospital” is directed to pay to the complainants Rs. 70,000/- towards compensation for the loss of life of Sachin and further pay Rs. 5,000/- for medical expenses and Rs. 2,000/- (Rupees Two Thousand Only) towards cost of the complaint and appeal. The total amount of Rs. 77,000/- be paid to the complainant within 30 days from the receipt of this order failing which the amount shall carry interest at the rate of 18% till realisation. Appeal allowed.

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Judgment

Michael Westropp, C.J.

1. On behalf of the defendants it is contended that as the mortgage (Exhibit 3) of the 1st November 1867 was for a sum of Rs. 5, with interest at Rs. 1-9 per cent, per mensem–i.e., upwards of 18 per cent, per annum–and was not redeemable for five years from its date, the right, title, and interest thereby created exceeded Rs. 100 in value, and, therefore, according to Act XX of 1866, Section 17, Clause 2, required registration, not having been registered, could not lawfully be received in evidence, or acted on by the lower Court (section 49). In support of this contention, Darshan Singh v. Hanwanta I.L.B. 1 All. 274 was cited. The Court, in its judgment in that case, stated that the instrument, the necessity for registration of which was there in question, ‘secured the repayment of Rs. 99 plus Rs. 6, the interest for three months.’ Hence we infer that the whole consideration, shown by the instrument to have been received by the mortgagor, was Rs. 99. The statement of facts made by the reporter, though not quite so clear on that point as might be, leads us to the same conclusion. If we be right in inferring, that the mortgagor did not receive any larger consideration than Rs. 99, we are unable to concur in the decision of the High Court at Allahabad, that, assuming the instrument to charge the mortgagor’s immoveable property, registration was compulsory. That decision was rested on the ground that Rs. 99 plus Rs. 6, the interest for three months, ‘was the least sum that could have been recovered under the instrument.’ The registration value was there gauged, not by what the mortgagor received from the mortgagee as consideration for granting the alleged mortgage, but by what the Court regarded as the minimum sum which the mortgagee could have recovered under it. In this Court, however, in considering whether a mortgage is of the value of Rs. 100 or upwards, the value of ‘the right, title, or interest’ created by the mortgage has always been estimated by the amount of the principal money thereby secured: that being assumed to be the sum received by the mortgagor as consideration for making the grant by way of mortgage, or, so to speak, the purchase-money of the mortgage. When it is necessary to determine whether an instrument, other than a deed of gift, purports or operates to create, etc., any right, title, or interest, of the value of Rs. 100 or upwards, to or in immoveable property, the test of value which we adopt is the consideration stated in the instrument, whether it be one of sale or of mortgage, to be given to the grantor, and not either the minimum, or maximum, or other benefit which may result from the transaction to the grantee, whether he be vendee or mortgagee. There are reported cases in which the High Court of Calcutta [Rohinee Debia v. Shib Chunder Chatterjee, 15 Cal. W.R. 558 and this Court [Vasudev Moreshvar v. Rama Babaji), 11 Bom H.C. Rep. 149, Satra Kamaji v. Vishram I.L.R. 2 Bom. 97 have ruled that the purchase-money mentioned in a deed of sale must be regarded as showing the value of the interest conveyed, for the purpose of determining whether or not the registration is compulsory. The circumstance that there is nothing in the terms of the Registration Acts to impose upon the Courts the duty of instituting any inquiry, as to the actual value of an interest in immoveable property affected by an unregistered instrument, previously to the admission of that instrument in evidence, and the many and great inconveniences and difficulties which would attend upon such an inquiry, are clearly pointed out in the judgments of Ainslie and Loch, JJ., in the first-mentioned of those cases. There is nought in those Acts to suggest that there should be one mode of ascertaining the value in the case of deeds of sale, and another for testing the value in the case of a deed of mortgage, or of rent charge, or of annuity, or creating or conveying any other minor interest in, or charge or incumbrance upon, immoveable property. We do not know any good reason for making such a distinction, and can perceive many for refraining from its introduction. If the necessity for registration of a mortgage is to be ascertained, not by the consideration given by the mortgagee for it, but by the actual value of the transaction to the mortgagee, the test would, at the time of making the contract and when the parties would most need to know whether the mortgage must be registered, be wholly impracticable if. the interest, or profits in lieu of interest, receivable by the mortgagee is to form one of the elements of value. The rate of interest might, of course, and usually would be then fixed, but the amount of it could only be known when the mortgage was redeemed or foreclosed. The time of redemption or foreclosure would depend on the pleasure or convenience of the parties or of one of them. Why should the first three or six months’ interest, merely because it is specially noticed in the mortgage, be taken into account more than any subsequent interest receivable by the mortgagee? If the mortgagee be not, entitled to interest under the mortgage, and the stipulation be that, in lieu thereof, he is to enter into occupation of the land and to cultivate it, and retain the profits arising from the cultivation, how, at the date of the contract, could the actual value of the mortgage to the mortgagee be ascertained? These are amongst the grounds upon which rests the practice, which has uniformly prevailed here, of estimating the value of a mortgage as well under Act XVI of 1864, Act XX of 1866, and Act VIII of 1871 by the amount of the principal money lent, and without any regard to the duration of the relation of mortgagor and mortgagee, or to the rate or continuance of the interest payable. Had we put a different construction on Section 13 of Act XVI of 1864, Section 17 of Act XX of 1866, or Section 17 of Act VIII of 1871, we should, we think, have converted those enactments into so many ‘traps for the unwary, which could not have been the intention of the Indian Legislature. The words ‘or in future,’ which occur in the two last-mentioned enactments, have reference, as we think, to estates in remainder or in reversion in immoveable property, or to estates otherwise deferred in enjoyment, and not to interest payable in future on principal moneys lent on the security of immovable. For these reasons we must affirm the decree of the District Judge.

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Decided On: Mar-13-2008

Case Number: W.P. No. 2766 of 2005

Judge: Swatanter Kumar, C.J. and R.M. Borde, J.

Reported in: 2008(5)BomCR284; 2008(4)MhLj471

Appellant: Satpuda Tapi Parisar Sahakari Sakhar Karkhana Ltd.

Respondent: Jagruti Industries and anr.

Appellant Advocate: Anil Kasliwal, Adv., i/b., J.R. Shah, Adv.

Respondent Advocate: P.M. Shah, Sr. Counsel, i/b., Girish Mane, Adv. for Respondent No. 2

Acts: Partnership Act, 1932 – Sections 69; Bombay Public Trusts Act – Sections 51; Bombay Rents Hotel and Lodging House Rates Control Act, 1947 – Sections 28; Code of Civil Procedure (CPC) , 1908 – Sections 9, 9A, 9A(2) and 20 – Order 7, Rules 7 and 11 – Order 14, Rules 1, 1(5), 2, 2(1), 2(2) and 5 – Order 15, Rule 3 – Order 41, Rules 23, 24 and 25; Code of Civil Procedure (CPC) (Amendment) Act, 1999 – Sections 32; Code of Civil Procedure (CPC) (Amendment) Act, 2002 – Sections 16; Code of Civil Procedure (CPC) (Amendment) Act, 1976; Limitation Act – Schedule – Article 113; Transfer of Property Act; Maharashtra Co-operative Societies Act – Sections 91; Maharashtra Code of Civil Procedure (CPC) (Amendment) Act, 1970; Maharashtra Code of Civil Procedure (CPC) (Amendment) Act, 1976; Maharashtra

Judgment:

Swatanter Kumar, C.J.

1. In the case of Ujawalaben Mahindra Shah and Anr. v. Kesharchand Gulabchand and Ors. : 2002(1)MhLj378 , learned single Judge of this Court at Aurangabad Bench took the view that objection with regard to maintainability of a suit, on the plea that the plaintiff, a partnership firm, was not a registered partnership firm and thus the suit was hit by the provisions of Section 69 of the Partnership Act, 1932, was not a pure question of law and thus could not be tried and decided as a preliminary issue. In this case, the objections of the defendants in the suit was that there was no firm in the plaintiffs name registered with the Registrar of Firms at the time of filing of the suit and a firm with the name of ‘M/s Kesharchand Gulabchand Munot’ was in existence and subsequent to the filing of the suit, the plaintiff had approached the Registrar of Firms for deletion of the name ‘Munot’ from the firm’s name. Thus, the suit was not maintainable and the trial Court ought to have taken note of the fact and decided it as a preliminary issue. On the pleadings of the parties in that suit, the following issue was framed.

Does plaintiff prove that it is a registered partnership firm with Registrar of Firms?

The application filed by the defendants in the suit for deciding this issue as a preliminary issue was rejected by the learned trial Court vide its order dated 10th April, 2000 which was impugned before the High Court. The learned single Judge noticed difference of opinion between two learned single Judges’ in the case of Kranti Mohan Guruprasad Mehra and Anr. v. Fatehchand Vasuram Behal 1983 Mh.L.J. 141 and the view of another single Judge in the case of Maharashtra State Warehousing Corporation Limited, Pune v. Bhujang Krishnaji Kohale 1999(3) Mh.L.J. 652, and also discussing the impact of Section 9-A of the Code of Civil Procedure, 1908 (hereinafter referred to as ‘the Code’) by Maharashtra State amendment to the Code held that this issue was not with regard to the jurisdiction of the Court but maintainability of the suit before the Court and as such could not be tried as a preliminary issue at the threshold. Resultantly, the revision application was dismissed.

2. In the case of Arjun Dada Gadage v. Mallapa Gurappa Chougule and Anr. : AIR2003Bom441 , another learned single Judge of the Court, while referring to the cases of Meher Singh v. Deepak Sawhny : 1999(1)BomCR107 and Smithkline Beecham Consumer Healthcare GMBH v. Hindustan Lever Ltd. 2002(1) Mh.L.J. 453 : 2003(2) Bom.L.R. 547, expressed a somewhat divergent view and held that the provisions of Section 9-A of the Code, as applicable to the State of Maharashtra, was not in conflict with the provisions of Order 14 of the Code. In the appeal filed before the Appellate Court, an objection was raised that the presentation of the suit before the Court was barred as the plaintiff had not obtained consent of the Charity Commissioner as required by Section 51 of the Bombay Public Trusts Act. The Appellate Court accepted the contention which resulted in filing the writ petition before the High Court. In the writ petition, the High Court took the view that the trial Court was obliged to decide the issue of jurisdiction before deciding the application for interim relief application. The suit as presented being barred by jurisdiction, the issue ought to have been framed and decided at the very threshold and before deciding the interim relief application. The trial Court was thus directed to decide the issue expeditiously.

3. Somewhat similar view was taken earlier by a single Judge of this Court in the case of Shakuntala Balwant Gadgil v. Shubhada Suhas Kulkarni 1985 Mh.L.J. 77 : 1985(2) Bom.C.R. 231. While referring to Section 9-A of the Code and the objection taken by the defendants in the suit that the suit was not maintainable, the Court had no jurisdiction to try the suit on the ground that the provisions of the Bombay Rents Hotel and Lodging House Rates Control Act, 1947, does not apply to those premises and termination of tenancy was essential. On the pleadings of the parties, the trial Court had framed, amongst others, the following issue.

Whether the plaintiff proves that the Bombay Rents Act is not applicable to the suit premises?

The request of the defendant that the said issue be tried as a preliminary issue expeditiously, the Court even framed an additional issue as to whether the Court had jurisdiction under Section 28 of the Rent Act or its ordinary jurisdiction under the Transfer of Property Act. The application was dismissed by the learned trial Judge. The Court held that the trial Judge had taken a hyper-technical view of the matter, though under Section 9-A of the Code it may not be strictly incumbent upon the Court to try a particular issue as a preliminary issue but the Court should not have lost sight of the fact that the Court always had jurisdiction to treat a particular issue as a preliminary issue if it goes to the root of the jurisdiction of the Court. The question of jurisdiction is to be decided by the Court as it would decide the suit finally and once and for all. In these circumstances, while making the rule absolute and setting aside the order of the learned Judge, the learned single Judge remanded the matter for the issue being tried as a preliminary issue expeditiously.

4. The facts giving rise to the filing of present petition under Article 227 of the Constitution of India before the learned single Judge were that a suit for recovery of Rs. 6,10,748.15 was filed by the plaintiff which was a registered partnership firm. Upon service of summons, the defendants filed their written statement contesting the claim and also took up an objection that the Court had no jurisdiction to decide the suit in view of the provisions of Section 91 of Maharashtra Co-operative Societies Act. Upon pleading of the parties, the Court framed the issues and issue No. 3 read as under:

3. Whether this Court has jurisdiction to decide this suit considering the provisions under Section 91 of the Co-operative Societies Act.

4.1 Thereafter the defendant on 15th June, 2001 filed an application requesting the Court to recast the issues and frame an issue with regard to territorial jurisdiction as the entire transaction had taken place at Nandurbar and the Court at Shrirampur had no territorial jurisdiction to entertain and decide the suit. The defendant also prayed that the issue be tried as a preliminary issue and its determination be done right at the threshold. The trial Court declined the prayer for trying the issue as preliminary issue resulting in filing of the petition before the High Court.

4.2 As already mentioned, the learned single Judge found that the different single Judges of this Court had expressed divergent views and, therefore, referred the following two questions to be answered by the larger Bench.

1. Whether an application for framing of issue regarding jurisdiction whether pecuniary or territorial can be framed at a latter stage and whether the Court is obliged to decide that issue then as preliminary one?

2. Whether the object of introduction of Section 9-A in the Code can be made applicable to the applications that may be filed at latter stage of the suit?

5. As is clear from the above order of reference, the question in regard to the jurisdiction of the Court to decide the suit in face of bar contained in Section 91 of the Maharashtra Co-operative Societies Act was raised. Thereafter, an application was also filed for taking up the issue of territorial jurisdiction as the transaction had taken place at Nandurbar and the Court at Srirampur had no territorial jurisdiction. As the issues were recasted, the defendant had prayed that the issues be treated as preliminary issues. This application was rejected by the learned Civil Judge who accepted the argument of the plaintiff in the suit that the issue of territorial jurisdiction was an issue of mixed question of fact and law and, therefore, could not be tried as a preliminary issue. In view of Section 9-A, Order 14, Rule 2 of the Code and the various judgments cited, the learned single Judge was persuaded to make a reference to the larger Bench referring the above two questions for answering as questions of law.

6. At the very outset, we may dissect the referred questions into different parts so as to provide answer to the questions of law with clarity. Question No. 1 firstly requires the Court to examine whether an application for framing of issues regarding jurisdiction, pecuniary or territorial, can be filed and should the Court frame issue to that effect even at a later stage. Secondly, whether the Court is obliged to decide that issue as a preliminary one. The second question then, therefore, requires the Court to examine and answer the question as to whether provisions of Section 9-A of the Code can be made applicable to such application which is filed at a later stage of the suit.

7. It needs to be examined as to what is the impact of Order 14, Rule 2 which was introduced in the Code on 1st February, 1977. Section 9-A of the Code was introduced by the State of Maharashtra in the year 1970 by the Code of Civil Procedure (Maharashtra Amendment), 1970. However, Maharashtra Amendment Act of 1976 was repealed and Section 9-A was again added in the Code in relation to its application in State of Maharashtra by the Code of Civil Procedure (Maharashtra Amendment) Act, 1977 and the same was published in Maharashtra Government Gazette on 9th December, 1977 after having received the assent of the President of India. The other aspect which the Court is required to advert is in the background of answer to the earlier part as to whether object behind provisions of Section 9-A would be applicable to the applications filed at the subsequent stage.

8. (DDDD of Versus). Before we proceed to discuss the other legal facets of the propositions of law referred for answer, we must notice that the view taken by the learned single Judge of this Court in the case of Arjun Dada (supra) was held to be a correct exposition of law by a Division Bench of this Court in the case of Madhuri Prabhakar Patole v. Aruna Satishchandra Gaikwad (Civil Revision Application No. 54 of 2006) (since reported in : 2008(1)BomCR709 ) where the reference was made by the learned single Judge to a larger Bench on the following issue:

Whether Section 9A of the Code of Civil Procedure, 1908 (hereinafter referred to as CPC) in relation to its applicability in the State of Maharashtra, stands repealed by Section 32 of the Code of Civil Procedure (Amendment Act, 1999) i.e. Central Act No. 46 of 1999 and/or by Section 16 of the Code of Civil Procedure (Amendment) Act, 2002 i.e. Central Act No. 22 of 2002?

The Division Bench held that there was no conflict between the orders under the provisions of Order 14, Rule 2 and Section 9A of the Code and it applied the rule of harmonious construction. The Division Bench held as under:

18. Bare reading of the above mentioned two provisions namely Section 9-A and Order 14, Rule 2 indicate that they are not operating in the same field. The same are required to be invoked at different stages. From opening sentence of Section 9A namely ‘where at the hearing of application relating to ad interim relief in suit, objection to jurisdiction is taken such issue to be decided by the Court as preliminary issue’ and further language, namely, ‘if at the hearing of any application for granting or setting aside the order granting any interim relief, whether by way of stay, injunction, appointment of receiver or otherwise made in any suit, an objection to the jurisdiction of the Court to entertain such suit is taken by way of the parties to the suit, the Court shall proceed to determine at the hearing of such application’ it is clear that Section 9A comes into play much earlier than the stage when suit is required to be dealt with by the provisions of Order 14. In fact, if we see the provisions of Order 14, Rule 2 of Civil Procedure Code then we find that there is nothing in the said provision which specifically says that issue with regard to jurisdiction cannot be tried as preliminary issue at any stage. On the contrary, Order 14, Rule 2(2) makes exception to the main rule and says that when issue both of laws and of facts arise in the same suit and Court is of the opinion that the case or many part thereof may be disposed of on an issue of law only it may try that issue first, if that issue relates to jurisdiction of the Court. So, by no stretch of imagination it can be said that the provision of Section 9A is inconsistent with the provision of Order 14, Rule 2. The main object or the underlying idea under both the provisions is that if the relief claimed cannot be granted on the point of jurisdiction then it is better to decide that issue first. We cannot ignore the fact that there is any specific provision in the Central Act laying down procedure as to what should be done at the time of interim relief if objection is taken on the ground of jurisdiction. If any such specific provision would have been in the said Central Act, then it was possible to compare Maharashtra Amendment in respect of Section 9A with such provision but when we find that there is in fact no similar provision in the Central Act, there is no question of any inconsistency with the provisions of Central Act. Even after going through the entire judgment in Meher Singh v. Deepak Sawhney reported in 1991(1) Bom.C.R. 107, we do not find that it has been held in the said case that the provision of Section 9-A is inconsistent with the provisions of the Central Act. Merely because the Division Bench observed that there is departure from the procedure it wanted to convey inconsistency. On the contrary, the word ‘departure’ is used to convey that there is deviation from earlier procedure. Deviation does not necessarily mean inconsistency..

20. Applying the above principle also it can very well be said that as there was no specific provision in the Central Act for dealing with the objection regarding jurisdiction of the Court, raised at the time of injunction application or receiver application, State of Maharashtra has made the above mentioned provision of Section 9A. So, it cannot be said that it overlaps any of the provisions of the Central Act.

21. It must be noted that when the provisions of Section 9A of Civil Procedure Code is not at all inconsistent with the Central Act there was in fact no need for the State of Maharashtra to obtain assent of the President. However, we find that such assent was obtained earlier only by way of abundant precaution. This is clear even from the 4th recital of the preamble of the Maharashtra Amendment Act, 1977 wherein it is clearly mentioned that to leave no room for any doubt the said provision was being reintroduced. In other words, reintroduction of Section 9A by the State Legislature and action of obtaining assent from the Hon’ble President was on the principle of ‘Abundans cautela non nocet’. So, merely because such assent is not obtained after coming into force the Central Amendment Act of 1999 and Central Amendment Act of 2002, it cannot be said that the provisions of Section 9A stands repealed by virtue of Sections 32 and 16 of the respective Acts because basically the said provision is not at all inconsistent with any of the provisions of Central Act..

23…However, in the case at hand we are of the considered view that basically Section 9A is not at all inconsistent with or repugnant to the provisions of Order 14, Rule 2 of Civil Procedure Code or any other provision of the Central Amendment Act, 1999 or 2002. So, the above cited rulings are of no use to the respondent.

24. Thus, having regard to the position of law and considering the object of Section 9A as well as the object of Order 14, Rule 2 of Civil Procedure Code and applying all the tests to determine as to whether there is any inconsistency between the two statutes, we have no hesitation to hold that Section 9A of Civil Procedure Code, introduced by State of Maharashtra is not at all inconsistent or repugnant with the provisions of Order 14, Rule 2 of the Central Act. On the contrary, it supports and supplements the basic idea of Order 14, Rule 2(2) and provides additional provision to further the cause which does not in any way damages or destroys the provision under Order 14, Rule 2 of the Central Act. We, therefore, endorse the view expressed by the learned Single Judge (Coram : A.M. Khanwilkar, J.) that Section 9A of Civil Procedure Code is not inconsistent with the provision of Order 14, Rule 2 or any other provision in Central Act and as such it cannot be said that Section 9A stands repealed as a result of Sections 32 and 16 of the Central Amendment Act of 1999 and 2002 respectively.

9. The questions of law answered by another Division Bench of this Court in Mehar Singh’s case (supra) can also be usefully referred to at this stage itself. The Court was concerned in that case as to whether the parties to a lis should or should not be granted an opportunity to lead evidence while deciding a preliminary issue as contemplated under Section 9A of the Code of Civil Procedure (Maharashtra Amendment) Act, 1977. While answering that question, the Court also considered the provisions of Order 14, Rule 2 and held as under.

9. The question, therefore is, when the Legislature directs that objection with regard to jurisdiction is to be decided as a preliminary issue at the time of hearing of the application for grant of interim relief or for vacating interim relief or for appointing Receiver, whether the parties should be permitted to lead evidence. In our view, this question is to be considered in the light of Order XIV, Rule 2 of Civil Procedure Code. Order XIV, Rule 2 of the Civil Procedure Code reads as under:

(1) Notwithstanding that a case may be disposed of on a preliminary issue, the Court shall, subject to the provisions of Sub-rule (2) pronounce judgment on all issues.

(2) Where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that suit first if that issue relates to:

(a) the jurisdiction of the Court, or

(b) a bar to the suit created by any law for the time being in force, and for that purpose may, if it thinks fit, postpone the settlement of the other issues until after the issue has been determined and may deal with the suit in accordance with the decision on that issue.

Sub-rule (1) of Rule 2 specifically provides that notwithstanding that a case may be disposed of on a preliminary issue, the Court shall, subject to the provisions of Sub-rule (2), pronounce judgment on all issues. The mandate of Order XIV, Rule 2 is to decide, as far as possible, all the issues and pronounce judgment on all issues. However, it is subject to Sub-rule (2), which gives discretion that if the Court is of the opinion that the case or any part thereof can be disposed of on the issue of law only, it may ‘try’ that issue first, if that issue relates to the jurisdiction of the Court or bar to the suit. As against this, Section 9A specifically gives a mandate that notwithstanding anything contained in the Code or in any other law for time being in force, if the objection to jurisdiction of the Court to entertain such suit is taken by any of the parties to the suit, the Court is required to determine the issue as to jurisdiction as a preliminary issue before granting or setting aside the order of interim relief.

10. Section 9A is a departure from the procedure established for deciding the preliminary issue as prescribed under Order XIV, Rule 2 of Civil Procedure Code. On many occasions, it is not always proper to pass an order of hearing the preliminary issue with regard to maintainability of a suit at the time of final hearing of the suit. If such issue is decided at an earlier stage, rights of the parties can be crystallized. As stated earlier, Section 9A is a departure from the procedure prescribed under Order XIV, Rule 2 of the Code of Civil Procedure for achieving that object. For determination of the preliminary issue, which may be mixed question of law and facts, the parties are required to lead evidence. Without permitting the parties to lead evidence the issue of jurisdiction cannot be finally determined. If it was to be decided only for prima facie purpose for granting interim relief, then there was no necessity of adding Section 9A in the Civil Procedure Code. Secondly, on the basis of prima facie determination without proper adjudication, in our view, suit cannot be disposed of. The plaintiff cannot be non-suited on the basis of the averments made in the plaint or in the written statement. If the issue is a pure question of law, then it may be decided without recording evidence, but if it is a mixed question of law and fact, then parties should be permitted to lead evidence on the facts of the case. Question of jurisdiction, even if it is a mixed question of law and fact, it is required to be decided first. For deciding the said issue, the parties are entitled to lead evidence, oral as well as documentary, as that issue is required to be tried and adjudicated finally by the Court. The determination of the said issue is not only for the limited purpose of granting interim relief or vacating interim relief. It is true that this procedure requires piecemeal determination of the suit, but that cannot be avoided because of the mandate of Section 9A.

11. In this view of the matter, the ratio laid down in the case of Dattatraya Jangam v. Jairam Gore reported in 1964 Mh.L.J. 750 : 1964 (66) BLR 645, that ‘the jurisdiction of the Court should ordinarily be determined at the time of institution of a suit when the plaint is filed, that the plea of the defendant will not determine or change the forum’ or that ‘in order to determine which Court has jurisdiction to try a suit, the Court should read the plaint as a whole and ascertain the real nature of the suit and what in substance the plaintiff has asked for’ is not required to be applied in a case where issue with regard to jurisdiction is required to be raised and determined. Raising and determination of the issue would certainly require adjudication as per the procedure prescribed in the Civil Procedure Code that is, after giving an opportunity of leading evidence to both parties. In this view of the matter we are not referring to various other judgments, which lay down that to determine the nature of the suit what is to be looked into is the real substance of the suit and not legal ingenuity in drafting the plaint or that the question of jurisdiction for the prima facie purpose is to be decided by examining the substance of the case in the plaint. The said judgments are only for the purpose of determining whether the Court has jurisdiction at the prima facie stage to try the suit. But if the issue of jurisdiction is required to be raised and finally determined, then it would require giving an opportunity of leading evidence and hearing to both the parties.

12. We would, at this stage, refer to the precise principle laid down by this Court in the case of Fazlehussein v. Yusufally : (1995)ILLJ833Bom , wherein the Court has, after observing that the averments made in the plaint would be sufficient to decide the question of jurisdiction, held as under:

In considering the preliminary issue, the Court must look into the averments in the plaint and consider any objections which the defendant may choose to raise against the maintainability of the action on those averments. The question of jurisdiction which is raised by way of a demurrer has always to be decided on the allegations made in the plaint and not on the contentions that the defendant may raise. It is true that if the jurisdiction of the Court depends upon the proof of a fact and the question as to the existence or otherwise of that fact is canvassed, the parties may lead evidence in support of their respective cases before the preliminary issue as to jurisdiction of the Court is decided.In this view of the matter, we agree with the decision in the case of Kranti Mohan Guruprasad Mehra and Anr. v. Fatehchand Vasuram Behal : AIR1982Bom263 and in the case of Dinyar Behramji Irani v. Kshirsagar Construction Co. Pvt. Ltd. Bombay reported in 1993(2) Mh.L.J. 1812 : 1994(3) BCR 264.

13. In the result we hold that if Section 9A is not added, then at interim stage, the Court is not required to decide the issue of jurisdiction finally and the Court by referring to the averments made in the plaint, would ordinarily determine whether or not the Court has jurisdiction to try the suit. However, it is apparent that Section 9A is added with a specific object to see that objection with regard to jurisdiction of the Court is decided as a preliminary issue. According to the legislature, the practice of granting injunctions, without going into the question of jurisdiction even though raised, has led to grave abuse. Hence the said Section is added to see that issue of jurisdiction is decided as a preliminary issue notwithstanding anything contained in the Civil Procedure Code, including Order XIV, Rule 2. Once the issue is to be decided by raising it as a preliminary issue, it is required to be determined after proper adjudication. Adjudication would required giving of opportunity to the parties to lead evidence, if required.

10. In the light of the above two Division Bench judgments of this Court, we shall now proceed to discuss the scheme under the Civil Procedure Code. The Courts are vested with wide jurisdiction to try all suits of civil nature except the suits of which their cognizance is either expressly or impliedly barred. State of Maharashtra added Section 9-A to the Code with an intention to permit a party to take objection to the jurisdiction of the Court to entertain a suit and the Court is required to proceed to determine the issue as a preliminary issue even before granting or setting aside the order granting the interim relief prayed for in the suit. Besides this, the Section also requires the Court to dispose of such an application expeditiously and shall not to be adjourned to the hearing of the suit. Section 9-A of the Code opens with the non-obstante clause. It is notwithstanding anything contained in the Code or any other law for the time being in force. Sub-section (2) is an exception in terms of which even where pending determination of a preliminary issue as to jurisdiction, the Court may grant interim relief. The objection, in any case, has to be in regard to the jurisdiction of the Court to invoke the provisions of Section 9A of the Code. The object of Section 9-A of the Code is, therefore, to avoid hardship and injustice to a party affected by the grant or otherwise of an interim order when the Court has no jurisdiction to entertain and decide the suit.

(emphasis supplied)

11. Under the scheme of Order 14 of the Code, the issues of fact and issues of law are to be framed with reference to the pleadings of the parties. The provisions of the Code cast an obligation on the Court to frame issues as per the provisions of Order 14 Rule 2. Sub-rule (5) of Rule 1 requires that the Court shall frame and record issues on which the decision is to be made. Sub-rule (1) of Rule 2 of Order 14 contemplates that notwithstanding that a case may be disposed of on a preliminary issue, the Court shall pronounce judgment of all issues. However, this provision is subject to the provisions of Sub-rule (2) of Rule 2. The exception being that where the Court is of the opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first and specifically where it relates to jurisdiction of the Court or a bar to the suit created by law for the time being in force. The Court is further vested with the power that if for that purpose, the Court thinks fit, it may postpone the settlement of other issues until after that issue has been determined and then may proceed to frame and decide other issues arising in the suit. Once issues are framed, the Court is required to apply its mind, whether any of the issues framed by it is required to be tried as a preliminary issue as contemplated under Order 14, Rule 2. In the event the answer is in the affirmative, the Court is required to proceed to decide such an issue and if necessary even by recording evidence and record its finding. In the event it is answered in the negative, the Court shall proceed with the suit in accordance with law and pronounce its judgment on all issues framed by it. Under the provisions of Order 14, Rule 5, the Court has been given the power to amend or even frame additional issues at any time which may be necessary for determining the matter in controversy between the parties before passing a decree. The power of the Court extends even for striking out an issue framed.

12. Order 15, Rule 3 mandates that wherever the parties are at issue on some question of law or fact and issue has been framed by the Court and the Court is satisfied that no further argument or evidence, then the parties can adduce evidence is required upon such of the issues as may be sufficient for the decision of the suit and that no injustice will result from proceeding with the suit forthwith, the Court may proceed to determine such an issue and pronounce judgment accordingly.

13. Under Order 41, Rule 25, power is conferred on the Appellate Court to frame additional issues. The legislative intent and purpose behind this is that the party can raise an objection at any stage of the proceedings. The expression ‘Court’ obviously includes Appellate or Revisional Court. Under the provisions of Rules 23 and 25 of Order 41 of the Code, the Appellate Court has the power to frame additional issues or where it reverses, the finding recorded in a decree on a preliminary issue to remand the matter for determination of all issues in accordance with law. In other words, the Appellate Court has similar powers like the trial Court.

14. The legislative scheme of the Code behind these provisions is that issues of fact and law, for valid reasons, can be raised at any stage in terms of the statutory provision before passing of a decree by a trial Court and even before the Appellate Court. If, in the opinion of the Court, the issue arises and requires determination as a preliminary issue or an issue to be tried with the regular suit, the Court shall order accordingly. All the above provisions of the Code and for that matter even Section 9-A of the Code spells a specific obligation upon the Court to frame issues. It also gives the Court wide discretion to be exercised in consonance with the settled principles to decide, whether an issue ought or ought not to be framed as a preliminary issue and if framed, whether such an issue should or should not be decided at the threshold and/or along with other issues. Section 9-A of the Code, however, makes out a somewhat exception to the procedure stated under Order 14 of the Code in relation to framing of issues and trying to the extent that such an objection could be raised by a defendant at the hearing of an application for setting aside an interim relief relating to stay, injunction, appointment of Receiver or otherwise and raise an objection with regard to jurisdiction of the Court at the very threshold. Such an objection essentially must be raised at the very initial stage and once such an objection is raised, the law requires that the Court shall proceed to determine the issue in regard to jurisdiction as a preliminary issue. But this specific demand of the legislature is also to the exception contained in Section 9-A of the Code. Of course, the Court is expected not to shift the determination of the issue of jurisdiction along with the hearing of the suit. The purpose being that the point of jurisdiction raised at the very initial stage of hearing of injunction application should be decided at the threshold without taking recourse to the regular proceedings in the suit.

15. Both the Division Benches of this Court in the case of Meher Singh (supra) and Madhuri Prabhakar Patole (supra) have enunciated the principles which, with respect, we follow. The adoption of the reasoning given in those two judgments would certainly help us to answer the questions referred more effectively.

16. Under Order XIV, Rule 1 of the Code of Civil Procedure, the term ‘issue’ has been explained and the issue would arise when a material proposition of fact and law is affirmed by one party and denied by the other. Thus, the base of any issue is an affirmation by one and denial by the other. The issues could be of fact and/or of law. However, no provision of the Code either explains or defines the expression ‘preliminary issue’. The Law Lexicon, Second Edition 1997 explains the word ‘issue’ as sending or causing to go forth; the act of passing out, and explains the word ‘preliminary’ as introductory; initiatory; preceding; temporary; provisional; as preliminary examination, injunction, articles of peace, etc. The Black’s Law Dictionary also explains the same meaning of the word ‘preliminary’. The very connotation of the expression ‘preliminary’, therefore, indicates initial or primary stage.

17. The preliminary issue would be one which is framed on the pleadings of the parties and requires to be looked into and to which the Court should apply its mind at the preliminary/initial stage. In contradistinction to fuller it is more important and an essential stage. There has not been much variation in the judicial view prior to the amendment of 1976 in the Code of Civil Procedure. The issues with regard to the jurisdiction were tried as preliminary issues and preferably at the initial stage itself. Prior to the amendments, the Court was to form and express an opinion as to whether the case can be disposed of on the issue of law and the Court first to decide the preliminary issue at that stage and was not to postpone it till the determination of all issues and passing of the judgment delivered by the Court. After 1976, a question of jurisdiction may be a pure question of law, or mixed question of law and fact depending upon the facts of each case. Once the Court forms an opinion that issue of law on which the entire suit could be disposed of and should be treated as preliminary issue, it has a discretion to try that issue or to postpone the final determination of the issue along with other issues.

18. Under the amended provisions, the law requires the Court to form an opinion and exercise its judicial discretion to dispose of the preliminary issues, particularly, in relation to jurisdiction or bar to the suit created by any other law, the Court may dispose of the suit on that issue alone. In and : AIR1992Ker305 , the Court stated that the Code has not defined the term ‘issue of law’. Normally, if answer to an issue is determinable on the basis of some principle of law, that issue is called an issue of law. If the parties want to lead evidence on an issue, it ceases to be an issue of law. Under the old rule all the issues of law were required to be tried as preliminary issues but according to the amended rule only some kinds of issues can be tried as preliminary issues. Thus a discretion has been given to the Court to try or not try an issue as a preliminary issue. Where the Court forms an opinion that the issue raised, that is regarding the jurisdiction of the Court or even bar of law, by which suit is precluded from being entertained, the Court would normally treat it as preliminary issue. Section 9-A only adds the further condition to it that the Court shall decide the issue of jurisdiction at an early stage that is while an application for relief of injunction, Receiver etc. As specified in that provision is pending before the Court. Such an issue is not required to be deferred to the final determination of the suit subject to again opinion and satisfaction of the Court under Sub-section (2) of Section 9-A of the Code.

19. Another aspect which needs to be clarified at this stage itself is that maintainability of a suit is distinct from institution of the suit being barred under any law or when the Court lacks inherent jurisdiction to entertain and decide the suit. For example, the question of limitation is not bar to the institution of the suit but essentially, is a principle which would frustrate the claim as being barred by time.

20. The Supreme Court in the case of : [1964]1SCR495 had clearly enunciated the principle that where a decree was passed in a suit which was barred by time, it would not be a nullity, as a Court has jurisdiction to entertain to decide the suit. While the lack of territorial or pecuniary jurisdiction of the Court and bars contemplated under Order VII, Rule 11 read with Order XIV Sub-rule (2) are the cases where the Court would be exercising the powers without jurisdiction or that the very institution of the suit in that Court was prohibited by other law. Normally, the later class of cases would be based on a question of law and even if they are based upon the mixed question of fact and law, the Courts would normally be inclined to decide such a issue as preliminary issue at the initial stage itself. The Division Bench judgment of this Court in Madhuri Prabhakar Patole ‘s case (supra) has clearly stated that there is no inconsistency or repugnancy in the provisions of Section 9-A of the Code with the provisions of Order XIV, Rule 2 of the Code. In fact, Section 9-A supports the basic idea of Order XIV, Rule 2 and provides additional provisions to further cause which does not, in any way, damage or destroy the object of the provisions.

21. Even in the case of Maharashtra State Warehousing Corporation Ltd. Pune v. Bujang Krishnaji Kohale 1999(3) Mh.L.J. 652, the Single Judge of this Court had taken the view that under Order XIV, Rule 2 of the Code, the discretionary power vested in the Court to form an opinion as to whether an issue should or should not be treated and tried as preliminary issue despite the fact that it is a mixed question of fact and law.

22. In its recent judgment in Ramesh B. Desai and Ors. v. Bipin Vadilal Mehta and Ors. : AIR2006SC3672 , the Supreme Court held that the question of limitation is and can be a mixed question of fact and law and such questions could be decided by the Court at the preliminary stage if the facts of the suit are clear and applying the principle of demurrer, the issue could be decided as a preliminary issue. With reference to the provisions of Order VII, Rule 11, the Court held as under:

13. Sub-rule (2) of Order 14, Rule 2, Civil Procedure Code lays down that where issues both of law and of fact arise in the same suit, and the Court is of the opinion that the case or any part thereof may be disposed of on an issue of law only, it may try that issue first if that issue relates to (a) the jurisdiction of the Court, or (b) a bar to the suit created by any law for the time being in force. The provisions of this Rule came up for consideration before this Court in Major S.S. Khanna v. Brig. F.J. Dillon and it was held as under: (SCR p. 421)

Under Order 14, Rule 2, Code of Civil Procedure where issues both of law and of fact arise in the same suit, and the Court is of opinion that the case or any part thereof may be disposed of on the issues of law only, it shall try those issues first, and for that purpose may, if it thinks fit, postpone the settlement of the issues of fact until after the issues of law have been determined. The jurisdiction to try issues of law apart from the issues of fact may be exercised only where in the opinion of the Court the whole suit may be disposed of on the issues of law alone, but the Code confers no jurisdiction upon the Court to try a suit on mixed issues of law and fact as preliminary issues. Normally all the issues in a suit should be tried by the Court; not to do so, especially when the decision on issues even of law depend upon the decision of issues of fact, would result in a lopsided trial of the suit.

Though there has been a slight amendment in the language of Order 14, Rule 2, Civil Procedure Code by the amending Act, 1976 but the principle enunciated in the abovequoted decision still holds good and there can be no departure from the principle that the Code confers no jurisdiction upon the Court to try a suit on mixed issues of law and fact as a preliminary issue and where the decision on issue of law depends upon decision of fact, it cannot be tried as a preliminary issue.

15. The principle underlying Clause (d) of Order 7, Rule 11 is no different. We will refer here to a recent decision of this Court rendered in Popat and Kotecha Property v. State Bank of India Staff Assn. Where it was held as under in para 10 of the report: (SCC p. 515)

10. Clause (d) of Order 7, Rule 7 speaks of suit, as appears from the statement in the plaint to be barred by any law. Disputed questions cannot be decided at the time of considering an application filed under Order 7, Rule 11, Civil Procedure Code. Clause (d) of Rule 11 of Order 7 applies in those cases only where the statement made by the plaintiff in the plaint, without any doubt or dispute shows that the suit is barred by any law in force.

19. A plea of limitation cannot be decided as an abstract principle of law divorced from facts as in every case the starting point of limitation has to be ascertained which is entirely a question of fact. A plea of limitation is a mixed question of law and fact. The question whether the words ‘barred by law’ occurring in Order 7, Rule 11(d), Civil Procedure Code would also include the ground that it is barred by law of limitation has been recently considered by a two-Judge Bench of this Court to which one of us was a member (Ashok Bhan, J.) in Balasaria Construction (P) Ltd. v. Hanuman Seva Trust it was held: (SCC p. 661, Para 8)

8. After hearing Counsel for the parties, going through the plaint, application under Order 7, Rule 11(d), Civil Procedure Code and the judgments of the trial Court and the High Court, we are of the opinion that the present suit could not be dismissed as barred by limitation without proper pleadings, framing of an issue of limitation and taking of evidence. Question of limitation is a mixed question of law and fact. Ex facie in the present case on the reading of the plaint it cannot be held that the suit is barred by time.

This principle would be equally applicable to a company petition. Therefore, unless it becomes apparent from the reading of the company petition that the same is barred by limitation the petition cannot be rejected under Order 7, Rule 11(d), Indian Penal Code.

23. Somewhat similar view was taken by the Supreme Court in the case of Gunwantbhai Mulchand Shah and Ors. v. Anton Ellis Farel and Ors. : AIR2006SC1556 , that issue of limitation is a mixed question of law and fact and in the facts of that case, insofar as it relates to the prayer for a perpetual injunction restraining the defendants from interfering with the possession of the plaintiffs cannot be held to be barred by limitation. It may be noticed that a suit for injunction would be governed by Article 113 of the Limitation Act and cause of action, for the said relief arises when the right to sue accrues. It would depend upon facts and circumstances before the Court deciding when the right accrued, on the pleadings and the evidence in the case.

24. Single Judge of this Court in the case of Shraddha Associates, Pune and Anr. v. St. Patrick’s Town Co-operative Housing Society Ltd. and Ors. : 2003(3)BomCR814 took the view that issue regarding the fact of bar of limitation can be disposed of as preliminary issue under Order XIV, Rule 2 only in case they can be disposed of as an issue of law and not otherwise.

25. In the case of Dattatraya Krishna v. Jairam Ganesh Gore 1964 Mh.L.J. 750, the Full Bench of this Court prior to insertion of Section 9-A to the Code took the view that jurisdiction of the Court should be determined at the time of institution of the suit when the plaint is filed as defendant’s claim will not alter or change the forum. It is held-

4. Those are the provisions of law which have to be considered in deciding the questions which we have formulated for our consideration. The first question which arises in this connection is whether the jurisdiction of the Special Court depends on the plaintiffs case as made out in the plaint or whether the contentions raised by the defendant are also to be taken into consideration. This question has been finally settled by the Supreme Court in two cases, Raizada Topandas v. Gorakhram (1) and Vasudev v. Board of Liquidators (2). In the former case the Supreme Court approved the view taken by this Court in Govindram Salamatrai v. Dharampal (3) and Jaswantlal v. ‘Western Comp., India’ (4), that the jurisdiction of the Court should ordinarily be determined at the time of the institution of a suit when the plaint is filed, that the plea of the defendant will not determine or change the forum and that in order to decide whether a suit comes within the purview of Section 28 of the Rent Act the exclusive jurisdiction of the Court arises only if the person invoking the jurisdiction of the Court alleges that the other party is a tenant or a landlord and the question is one which is referred to in Section 28, where the person so invoking does not set up the claim that the other party is a tenant or a landlord, the defendant is not entitled to displace the jurisdiction of the ordinary Court by an allegation that he stands in that relation qua the other and on the ground that Court has no jurisdiction to try the suit or proceeding or an application.

26. In another Single Judge judgment of this Court in fedroline Anthoney Joseph v. Vinod Vishanji Dharod : 2002(5)BomCR582 , it is stated that Section 9-A of the Code is a departure from the procedure for deciding a preliminary issue under Order 14, Rule 2 because it is prefaced by a non-obstante clause and once prerequisites of Section 9-A are satisfied, the Court is obliged to decide the application at the stage indicated in the provision itself.

27. As spelled out in the judgment of the Full Bench of this Court in Dattatraya Krishna v. Jairam Ganesh Gore 1964 Mh.L.J. 750, jurisdiction of the Court should ordinarily be determined at the time of the institution of suit, the Full Bench has indicted that the issue in regard to the jurisdiction should be raised and decided at the earliest stage. Describing the scope and effect of Section 9-A of the Code of Civil Procedure, the Supreme Court in the case of Tayabhai M. Bagasarwalla and Anr. v. Hind Rubber Industries Pvt. Ltd. and Ors. : [1997]2SCR152 , held that objection as to the jurisdiction is to be decided by the Court as a preliminary issue but such a mandate would not prevent the Court from passing interim order while the decision on question of jurisdiction is pending. The Court held as under:

16. According to this section, if an objection is raised to the jurisdiction of the Court at the hearing of an application for grant of, or for vacating, interim relief, the Court should determine that issue in the first instance as a preliminary issue before granting or setting aside the relief already granted. An application raising objection to the jurisdiction to the Court is directed to be heard with all expedition. Sub-rule (2), however, says that the command in Sub-rule (1) does not preclude the Court from granting such interim relief as it may consider necessary pending the decision on the question of jurisdiction. In our opinion, the provision merely states the obvious. It makes explicit what is implicit in law. Just because an objection to the jurisdiction is raised, the Court does not become helpless forthwith nor does it become incompetent to grant the interim relief. It can. At the same time, it should also decide the objection to jurisdiction at the earliest possible moment. This is the general principle and this is what Section 9-A reiterates. Take this very case. The plaintiff asked for temporary injunction. An ad interim injunction was granted. Then the defendants came forward objecting to the grant of injunction and also raising an objection to the jurisdiction of the Court. The Court overruled the objection as to jurisdiction and made the interim injunction absolute. The defendants filed an appeal against the decision on the question of jurisdiction. While that appeal was pending, several other interim orders were passed both by the Civil Court as well as by the High Court. Ultimately, no doubt, the High Court has found that the Civil Court had no jurisdiction to entertain the suit but all this took about six years. Can it be said that orders passed by the Civil Court and the High Court during this period of six years were all non est and that it is open to the defendants to flout them merrily, without fear of any consequence. Admittedly, this could not be done until the High Court’s decision on the question of jurisdiction. The question is whether the said decision of the High Court means that no person can be punished for flouting or disobeying the interim/interlocutory orders while they were in force, i.e., for violation and disobedience committed prior to the decision of the High Court on the question of jurisdiction. Holding that by virtue of the said decision of the High Court (on the question of jurisdiction), no one can be punished thereafter for disobedience or violation of the interim orders committed prior to the said decision of the High Court, would indeed be subversive of the Rule of Law and would seriously erode the dignity and the authority of the Courts. We must repeat that this is not even a case where a suit was filed in the wrong Court knowingly or only with a view to snatch an interim order. As pointed out hereinabove, the suit was filed in the Civil Court bona fide. We are of the opinion that in such a case the defendants cannot escape the consequences of their disobedience and violation of the interim injunction committed by them prior to the High Court’s decision on the question of jurisdiction.

28. The correct principle, therefore, is the one recognized and reiterated in Section 9-A to wit, where an objection to jurisdiction of a Civil Court is raised to entertain a suit and to pass any interim orders therein, the Court should decide the question of jurisdiction in the first instance but that does not mean that pending the decision on the question of jurisdiction, the Court has no jurisdiction to pass interim orders as may be called for in the facts and circumstances of the case. A mere objection to jurisdiction does not instantly disable the Court from passing any interim orders. It can yet pass appropriate orders. At the same time, it should also decide the question of jurisdiction at the earliest possible time. The interim orders so passed are orders within jurisdiction when passed and effective till the Court decides that it has no jurisdiction when passed and effective till the Court decides that it has no jurisdiction to entertain the suit. These interim orders undoubtedly come to an end with the decision that this Court had no jurisdiction. It is open to the Court to modify these orders while holding that it has no jurisdiction to try the suit. Indeed, in certain situations, it would be its duty to modify such orders or make appropriate directions. For example, take a case, where a party has been dispossessed from the suit property by appointing a receiver or otherwise; in such a case, the Court should, while holding that it has no jurisdiction to entertain the suit, put back the party in the position he was on the date of suit. But this power or obligation has nothing to do with the proposition that while in force, these orders have to be obeyed and their violation can be punished even after the question of jurisdiction is decided against the plaintiff provided the violation is committed before the decision of the Court on the question of jurisdiction.

28. The view that preliminary objections and at least, which in the opinion of the Court, are issues of law should be decided at the threshold also find support from the observations of the Supreme Court in the case of Pearlite Liner (P) Ltd. v. Manorama Sirsi : (2004)ILLJ1041SC , where again while making reference to the provision of Order VII, Rule 11, the Court held as under:

10. The question arises as to whether in the background of the facts already stated, such reliefs can be granted to the plaintiff. Unless there is a term to the contrary in the contract of service, a transfer order is a normal incidence of service. Further, it is to be considered that if the plaintiff does not comply with the transfer order, it may ultimately lead to termination of service. Therefore, a declaration that the transfer order is illegal and void, in fact amounts to imposing the plaintiff on the defendant in spite of the fact that the plaintiff allegedly does not obey order of her superiors in the management of the defendant Company. Such a relief cannot be granted. Next relief sought in the plaint is for a declaration that she continues to be in service of the defendant Company. Such a declaration again amounts to enforcing a contract of personal service which is barred under the law. The third relief sought by the plaintiff is a permanent injunction to restrain the defendant from holding an enquiry against her. If the management feels that the plaintiff is not complying with its directions it has a right to decide to hold an enquiry against her. The management cannot be restrained from exercising its discretion in this behalf. Ultimately, this relief, if granted, would indirectly mean that the Court is assisting the plaintiff in continuing with her employment with the defendant Company, which is nothing but enforcing a contract of personal service. Thus, none of the reliefs sought in the plaint can be granted to the plaintiff under the law. The question then arises as to whether such a suit should be allowed to continue and go for trial. The answer in our view is clear, that is, such a suit should be thrown out at the threshold. Why should a suit which is bound to be dismissed for want of jurisdiction of a Court to grant the reliefs prayed for, be tried at all? Accordingly, we hold that the trial Court was absolutely right in rejecting the plaint and the lower Appellate Court rightly affirmed the decision of the trial Court in this behalf. The High Court was clearly in error in passing the impugned judgment whereby the suit was restored and remanded to the trial Court for being decided on merits. The judgment of the High Court is hereby set aside and the judgments of the Courts below, that is, the trial Court and the lower Appellate Court are restored. The plaint in the suit stands rejected.

29. In the case of Bahrein Petroleum Co. Ltd. v. P.J. Pappu and Anr. : (1966)IILLJ144SC , the Supreme Court stated that question in relation to the territorial jurisdiction to try the suit under Section 20 of the Code should be decided earlier and even it was open to the defendant to waive this objection and if they do so, they cannot subsequently take the objection.

30. We have already noticed and, in fact, we have no reasons to differ with the view expressed in Madhuri Prabhakar ‘s case (supra) by the Division Bench of this Court that Order 14, Rule 2 and Section 9-A of the Code were not in conflict with or repugnant to each other. On the contrary, they both fall in the ambit of procedural law and to be adopted by the Courts in consonance with the legislative intent. Similar is the view expressed by the other Division Bench in the case of Meher Singh (supra) holding that Section 9-A is added with a specific object that objection in regard to jurisdiction should be taken and decided as a preliminary issue, notwithstanding the provisions of Order 14, Rule 2 of the Code. The view expressed in this judgment is in line with the view taken by a Full Bench of this Court in the case of Dattatraya Jangam (supra) where the Court directed that issue of jurisdiction should be decided at the initial stage itself so as to ensure conclusion of the proceedings rather than their prolongment, in case such issue of jurisdiction is directed to be decided along with the merits of the case at the final stage. Where the issue is of jurisdiction or bar to the institution of the suit, such issues should be decided at the initial stage. Wherever an objection is filed under the provisions of Section 9-A of the Code, the Court is expected to deal with such issue of jurisdiction at the first instance and is not permitted to club it with the decision of the suit on merits. These provisions are to be given harmonious construction to achieve the ends of justice in expeditious disposal of the suit. A legislative intent behind Section 9-A as well as Order 14, Rule 2 is to truncate the prolonged procedure of law wherever the issue of jurisdiction relating to pecuniary or territorial and even a bar to the institution of the suit going to the root of the jurisdiction of the Court is raised. The intention is to save the time of the Court, avoid inconvenience to the parties and to ensure that if the Court has no jurisdiction to try and decide the suit, the parties may receive such an order at the earliest rather than coming to such a conclusion at the end of the suit after the prolonged litigation. To decide an issue at the very threshold, the question of territorial and pecuniary jurisdiction and for that matter lack of jurisdiction resulting from a bar to the very institution of the suit, would normally have to be determined with reference to the plea of demur. The person raising an objection would have to take the averments in the pleadings on its face value or establish by way of proper pleadings or defence that the Court lack jurisdiction. The question relating to jurisdiction would be a question of law or a mixed question of law, and fact, depending on the facts and circumstances of the case. Such an objection can be raised at any stage, subject to the exceptions provided in law. Except where the defendant could waive and actually waives an objection, the same could not be taken at any subsequent stage of the suit. The Court would include Appellate Court as appeal would be continuation of a suit. This point of view can also be supported by the provisions of Order 41, Rule 24 and 25.

31. The language of Order 14, Rule 2 does not mandate any stage at which an application can be filed by the party raising an objection in regard to the jurisdiction of the Court or a bar to the suit created by any law. Objections of this kind could be taken up at any stage but, as already indicated in this judgment, the precedents require that they should be taken at the initial stage of the suit itself. Once such an objection is taken at the initial stage, it enables the Court to form its opinion and exercise its discretion, whether such an issue claimed relates to jurisdiction of the Court or bar to the suit under any law and also whether such an issue should be treated as a preliminary issue. In the event, the opinion of the Court is in the affirmative and its determination would dispose of the suit itself, in that event, the Court should decide such an issue at the very first instance. However, if the objection is taken at a belated stage the Court would have to examine the effect thereof with regard to the facts of each case. Suffice it to note that once an issue is raised the Court is expected to form its opinion and exercise its discretion as per the scheme of the Code and the precedents enunciating the principles governing exercise of such jurisdiction. Section 9A is a departure from the procedure for deciding a preliminary issue under Order 14, Rule 2.

32. Another judgment of a Division Bench of this Court in the case of Jagdish Hari Thatte and Ors. v. Municipal Corporation of Greater Bombay and Anr. 2007(1) Bom.C.R. 577, was also brought to our notice, where on a reference made, the Court took the following view:

Incidentally, it must be noted that recording of findings on all issues while deciding the matter finally after the time the parties have adduced evidence is not dependent on the nature of the final order that is to be passed, means whether finally the suit is to be dismissed on the ground of jurisdiction or whether plaint is to be returned. Whatever be the order, when the same is to be passed finally after the parties have led evidence on all issues, then it is necessary for the Court to decide other issues on merits even if the Court comes to the conclusion that it lacks jurisdiction.

The Division Bench, while coming to the above conclusions, had referred to the provisions of Section 9-A and Order 14, Rule 2. It is apparent that both the stages contemplated under Section 9-A as well as Order 14, Rule 2(2) are an exception to Order 14, Rule 2(1) which makes it obligatory upon the Court to record finding on all issues. It has already been noticed by us, with reference to the various judgments of this Court as well as the Supreme Court, that Section 9A contemplates a stage of deciding a preliminary issue during the pendency of interlocutory applications, that too, for the limited reliefs indicated in that section. Order 14, Rule 2 vests discretion with the Court to decide the issue of jurisdiction raised at the initial stage at the threshold of the proceedings, if the facts and circumstances of the case so require. Once both these stages are over and parties lead evidence on all issues, then obviously the Court is required to record findings on all the issues including the issue of jurisdiction as contemplated under Order 14, Rule 2(1).

33. Discussing the scheme under Section 9A and Order 14, Rule 2 of the Code of Civil Procedure, a Division Bench of this Court in the case of ICICI Limited, Mumbai v. Sri Durga Bansal Fertilizers Ltd. and Ors. : AIR1999Bom402 , which, it appears, was not brought to the notice of the learned Single Bench, impressed upon the need of final decision on issue of jurisdiction by affording opportunity to the parties as the primary object behind both these provisions was to avoid multiplicity of litigation. The Court held as under:

The stage at which the objection raised under Section 9-A of the Code of Civil Procedure is to be considered stands concluded by a Division Bench judgment of this Court in Meher Singh v. Deepak Sawhny and Anr. reported in : 1999(1)BomCR107 . It has been held that Section 9-A has been added to see that issue of jurisdiction is decided as a preliminary issue notwithstanding anything contained in the Code of Civil Procedure, including Order XIV, Rule 2. The Court had further held that once the issue is to be decided by raising it as a preliminary issue, it is required to be determined after proper adjudication. Adjudication would require giving of opportunity to the parties to lead evidence, if required..

10. Under these circumstances, we are of the considered view that when question about the territorial jurisdiction is raised either in an application seeking revocation of leave under Clause XII of the Letters Patent or on an application under Section 9-A of the Code of Civil Procedure, the appropriate procedure to follow is to finally decide the said question by giving opportunity to the parties, if facts and circumstances of the case so require, to lead evidence. Such a course would avoid multiplicity of proceedings and would also be in consonance with the provisions of Section 9 and/or Order XIV, Rule 2 of the Code of Civil Procedure and Clause XII of the Letters Patent. It would also avoid examination of the same question twice over. It is, however, a different matter if the parties agree that for all purposes, the question of jurisdiction may be decided only prima facie and that it should be left to be finally determined at the trial of the suit along with the other issues on merits. As already noticed, in the present case, such a concession was not forthcoming from the defendants.

34. No statute can provide for all situations when legislature enacts a law. It may neither be feasible nor comprehensible to legislate a law which could operate as a straight-jacket formula for all classes, situations and stage of proceedings. It is also neither permissible nor proper for the Court to provide a strait-jacket formula regulating exercise of statutory powers. The provisions of Section 9A of the Code are prefaced with a non-obstate clause. These provisions, as applicable in the State of Maharashtra, are required to be enforced in preference to any other provisions contained in the Code and even any other law for the time being in force. When the provisions of Section 9A can be invoked is reflected in the language of the Section itself. In consonance with the law aforestated in different judgments of this Court, it is essential that an application for injunction or for vacating injunction or grant of such other relief or even an application for setting-aside the orders as spelt out under these provisions, should be pending before the Court. In the proceeding, an objection in regard to the jurisdiction of the Court ought to be taken by the parties who desire to have such issue determined at the initial stage itself. In that event, the Court is expected to deal with the application by framing a preliminary issue of jurisdiction and after granting the parties an opportunity even to lead evidence to decide such an issue at the first instance and not to defer it for determination along with the suit. Thus, it is obvious that once ail application for the relief of injunction, appointment of Court receiver, stay, etc; has been finally decided by the Court in accordance with law, the rigours of Section 9A would lose their significance and statutory application. Thereafter, the test applicable would be that of Order 14, Rule 2 of the Code, where the Court is to form an opinion as to whether along with other issues, the issue relating to the jurisdiction or bar to the maintainability of the suit under any other law should or should not be treated as preliminary issue. Whether it should be decided preferably at the initial stage or along with all issues relating to the merits of the case, is injudicial discretion of the Court. This judicial discretion of the Court is then in no way controlled by the provisions of Section 9A of the Code as the stage indicated by the legislative mandate under Section 9A is over. Similar power obviously could be exercised by the Appellate Court as well. We have already noticed that the consistent view of this Court has been that there is no conflict between the provisions of Section 9A and Order 14, Rule 2 of the Code. On their correct and harmonious interpretation, the said provisions are intended to achieve the same object i.e. expeditious disposal of the preliminary issue relating to the jurisdiction of the Court.

35. The expression ‘jurisdiction of the Court’, in addition to territorial or pecuniary jurisdiction, will also take in its ambit and scope the cases relating to lack of inherent jurisdiction of the Court. For example, if filing of the suit before the Civil Court is barred by any law for the time being in force and such an objection is taken by the defendant under the provisions of Order 7, Rule 11(d), it will be a question which goes to the very root of Courts jurisdiction to entertain and try the suit and, therefore, it should be decided at the threshold. Such a matter could be determined from the averments made in the plaint and the suit, therefore, would be liable to be dismissed at the very initial stage itself. This, besides being a question of law, goes to the very root of the matter relating to the jurisdiction of the Court. For such a purpose, the Court has to examine the plaint and the documents filed in support of the suit claim. Unlike the provisions of law of procedure, which are normally directory, the provisions of Section 9A are mandatory while the provisions of Order 14, Rule 2 are to be exercised in the judicial discretion of the Court. Thus, Section 9A operates at a particular stage of the proceedings of the suit while the provisions of Order 14, Rule 2 are attracted at any stage of the suit. Such a view would be in fact in conformity with the view taken by the earlier Benches of this Court by applying the principle of harmonious construction to both these provisions.

36. In view of the above discussion, we answer the questions as follows:

(i) An application for framing of issue relating to jurisdiction of the Court can be filed at any stage of the proceedings in the suit. The provisions of Section 9-A of the Code are attracted only when the conditions stated in that provision are satisfied at the time when question of jurisdiction is raised before the Court. Once the stage contemplated under Section 9-A of the Code is over (i.e. the application for interim orders has been decided), then these provisions lose their mandatory character and significance. Whereafter the application for framing an issue relating to jurisdiction and its determination in accordance with law would be controlled by the provisions of Order 14, Rule 2 of the Code.

(ii) However, if an application for grant or vacation of reliefs specified under Section 9-A of the Code has already been decided by the Court of competent jurisdiction, in that event, the proceedings in the suit would be controlled by the provisions of Order 14, Rule 2 of the Code. The formation of opinion and exercise of discretion by the Court cannot be regulated by any strait-jacket formula and essentially it must be left in the discretion of the Court, depending on the facts and circumstances of a given case. The Court will obviously exercise such jurisdiction applying the well accepted canons of civil jurisprudence. In other words and construed objectively, the provisions of Section 9-A are not mandatory and subject to what has been stated above, it may not be necessary for the Court to decide the issue at the threshold. If the application for interim relief is pending, Section 9-A of the Code will operate with – all its rigour and irrespective of the stage of such application.

We accordingly answer the reference and direct that the matter now be placed before the Court for disposal in accordance with law.

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P.C.
Heard.
1. Both these Petitions are filed by the wife, questioning the order of denial of maintenance.
The undisputed facts would be noted as under :

2. The parties to the Petition married on 6.5.1980 whereas the Petitioner was divorced by the Respondent in a Hindu Marriage Petition No.252 of 1996 preferred under section 13 of the Hindu Marriage Act, 1956 on 27.4.2000 on the ground of adultery. I am informed that the aforesaid Judgment was subjected to challenge in an Appeal however, the Appeal failed as the delay was not condoned.

3. In the aforesaid background, the Petitioner-wife moved an application for enhancement of maintenance from Rs.150/- and Rs.25/- to the son which was allowed by the impugned order dated 12.8.2010. The learned Magistrate enhanced the maintenance amount to Rs.500/- and Rs.400/- to the wife and son respectively, whereas, the Application for cancellation of the maintenance moved by the husband, pursuant to the provisions of Sub-section (4) of Section 125 of the Code of Criminal Procedure, 1973 came to be rejected. As such, the husband preferred a Criminal Revision Application No.204 of 2010. The aforesaid Revision came to be allowed vide the impugned judgment dated 13.7.2015 by the learned Additional Sessions Judge, Sangli. As such these Petitions.

4. As far as Writ Petition No.2547 of 2016 is concerned, the same is preferred by the Petitioner-wife questioning the Judgment dated 13.7.2015 wherein the Judgment dated 12.8.2010 passed by the learned Magistrate, rejecting the application for cancellation of a maintenance amount, came to be allowed.

5. Learned counsel for the Petitioner-wife would urge that, even if the Petitioner is a divorcee, having regard to the provisions of Sub-section (4) of Section 125 of the Code of Criminal Procedure, 1973 she is entitled for maintenance as she continues, to be a woman, within the meaning of Sub-section (4) of Section 125 of the Act.

6. He would draw support from the Judgments of the Apex Court in VANAMALA VS H.M.RANGANATHA BHATTA reported in 1995 DGLS (SC) 722 and ROHTAS SINGH VS RAMENDRI reported in 2000 DGLS (SC) 450 so as to support his aforesaid contentions. The sum and substance of the submission is even if there is a decree of divorce passed on the allegation of adultery, still bar under Sub-section (4) of Section 125 of the Act, will not be attracted, as even after divorce, she ceases to have the status of a wife but, she continues to be a woman.

7. Per contra, the aforesaid submissions, learned counsel for the Respondent submits that the divorce proceedings initiated by the Respondent-husband came to be allowed, as the allegation of adultery was proved against the Petitioner-wife. According to him, in view of the statutory embargo under Sub-section (4) of Section 125 of the Act, the Court below has rightly held that the Petitioner is not entitled for maintenance.

8. Considered rival submissions.

9. Learned counsel for the Petitioner has tried to rely on the judgments of the Apex Court in VANAMALA and ROHTAS SINGH supra so as to claim the status of the Petitioner-wife as that of a woman continues, inspite of the divorce ordered on 27.4.2000. The fact remains that, there is an expressed embargo on the right of a woman to claim maintenance, pursuant to the provisions under Sub-section (4) of section 125 of the Act. If the allegation of adultery are proved against such a women or inspite of the husband being ready to maintain her and she refuses to cohabit the women/wife can be refused payment of maintenance.

10. As far as factual matrix of the aforesaid case, namely VANAMALA and ROHTASH SINGH is concerned, both these cases are based on identifying and recognizing the right of a woman who was divorced not on the ground of proved adultery.

11. In the aforesaid background, both these Judgments will be hardly of any assistance to the Petitioner. Considering the expressed embargo on the right of the Petitioner, to claim maintenance particularly, divorce was ordered on 27.4.2000 based on the allegation of adultery, the Court below has rightly held that the Petitioner-wife is not entitled for maintenance.

12. In the aforesaid background, no case for interference is made out. Both these Petitions lack merit.

13. Dismissed.

[ NITIN W.SAMBRE, J ]

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