judgement:
Appeal No. 375 of 1956.
Appeal from the judgment and decree dated July 27, 1953, of the Madras High Court, in A. section No. 623 of 1949.
A. V. Viswanatha Sastri and section Venkata Krishnan, for the appellants.
M. C. Setalvad, Attorney General for India, R. Ganapathy Iyer and G. Gopalakrishnan, for the respondent.
February 27.
The Judgment of the Court was delivered by WANCHOO, J.
This is an appeal on a certificate granted by the Madras High Court.
The brief facts necessary for present purposes are these: The present suit was brought by Muthappa Chettiar (hereinafter referred to as the respondent) against K. Thiagarajan Chettiar (hereinafter called the appellant) and the Saroja Mills Ltd.
In 1939 these two persons thought of doing business jointly by securing managing agencies of some mills.
In that connection they carried on negotiations with two mills, namely, Rajendra Mills Limited, Salem and the Saroja Mills Limited, Coimbatore (hereinafter called the Mills).
The managing agency of the Mills was with the Cotton Corporation Limited.
On October 4, 1939, the said Corporation transferred and assigned its rights to the appellant and the respondent under the name of Muthappa and Co.
On November 15, 1939, the Mills at an extraordinary general meeting of the shareholders accepted Muthappa and Co. as the managing agents and made the necessary changes in the Articles of Association.
Later the appellant and the respondent obtained the managing agency of the Rajendra Mills Limited, Salem.
The managing agents of this mill were Salem Balasubramaniam and Co. Ltd. Muthappa and Co. purchased all the shares of the Salem Balasubramaniam and Co. and thereafter carried on the business of the managing agency of this mill in the name of Salem Balasubramaniam and Co. Ltd. In November 1940 the appellant and the respondent entered into a written partnership agreement with respect to 1001 the managing agency business of the two mills.
We shall consider the terms of this agreement later and all that we need say at this stage is that turns were fixed for the appellant and respondent to look after the actual management of the two mills and the appellant 's turn was the first and he therefore came into actual control of the two mills.
Soon after however disputes arose between the appellant and the respondent with respect to the managing agency of the Rajendra Mills Limited, which resulted in various suits being filed between the partners, to which we shall refer later.
Eventually on March 4, 1943, the appellant gave notice to the respondent terminating the partnership, considering it as a partnership at will.
This was followed by the directors of the Mills terminating the managing agency of Muthappa, and Co. on the ground that company had ceased to exist and also on the ground that quarrels between the partners of the firm were not conducive to good management of the Mills.
This was notified to the respondent on March 22, 1943.
This action of the directors was approved in a meeting of the shareholders of the Mills on September 29, 1943, and necessary modifications were again made in the Articles of Association.
In between on April 17, 1943, the respondent had filed a suit for a declaration that Muthappa and Co. continued to be the managing agents of the Mills and for obtaining possession of the office of managing agents for himself or along with the appellant and also for a permanent injunction restraining the Mills from appointing any other managing agents.
This suit was dismissed by the trial court on the ground that it was not maintainable under section 69 of the Indian Partnership Act, No. IX of 1932 (hereinafter called the Act), though the trial court gave findings on other issues also.
The respon dent went up in appeal to the Madras High Court against the decree in that suit.
This appeal was dismissed on July 8, 1948, as the High Court held that the finding of the subordinate judge that the suit was not maintainable under section 69 of the Act was correct.
The High Court however made it clear that it was 1002 expressing no opinion on the correctness 'or otherwise of the other findings recorded by the subordinate Judge.
While this appeal was pending the respondent brought the present suit on February 28, 1946.
In this suit he prayed for dissolving the firm Muthappa and Co., for accounts and for damages against the appellant and the Mills.
The main contention of the respondent in the suit was that the alleged dissolution of partnership by the appellant and the removal of Muthappa; and Co. from the managing agency of the Mills 'were part of a scheme of fraud conceived by the Appellant which was actively connived at by the mills in order to defeat and defraud the respondent of 'his legitimate dues and his right to continue and act as the 'managing agent of the Mills.
The damages claimed were estimated at the figure of five lacs of rupees to be recovered from both the appellant and the Mills or from either of them.
In the alternative the respondent claimed that even if Muthappa and Co. had been removed validly from the managing agency on September 29, 1943, he was entitled to account from the appellant from November 15, 1939, to September 29, 1943.
The suit was resisted by both the appellant and the Mills and their case was that the partnership was one at will and therefore ',Was validly terminated by the appellant by notice.
It Was further contended that in any case the Mills were within their rights in terminating the managing :,agency of Muthappa and Co., as that firm had ceased to exist and there were interminable disputes between the partners.
Fraud and collusion were denied and it 'was alleged that it was the respondent 's conduct which compelled the appellant to give notice of termination of partnership and the Mills to terminate the managing agency.
The Mills took a further plea, namely, that so far as they were concerned, the suit was barred under section 69 of the Act.
The trial court held that the firm of Muthappa and Co. *as a partnership at will and therefore was legally dissolved by the appellant by giving notice dated March 4, 1943.
It further held that no case of fraud 1003 had proved and that the termination of the managing agency was legal.
As to the Mills the trial court held that the suit against them was barred under section 69 of the Act.
In consequence the suit against the Mills was dismissed in toto and the prayer for damages was also rejected.
The trial court however directed the appellant to account for the profits earned from the inception of the partnership business till March 4, 1943, when the partnership was terminated by the appellant by notice.
Thereupon the respondent went up in appeal to the High Court.
The High Court held that the suit against the Mills was barred under section 69 of the Act, though it was made clear that if there were assets of the partnership firm in possession of the Mills the respondent would be entitled to recover them.
The High Court however ordered the Mills to bear their own costs in both the courts on the ground that the Mills were guilty of fraud.
As to the case against the appellant, the High Court held that the partnership was.
not a partnership at will and therefore it could not be dissolved by notice by the appellant.
It further held that the appellant fraudulently and in collusion with the Mills purported to dissolve the partnership by issuing an illegal notice and to have the managing agency terminated by the Mills, and in consequence the termination of the managing agency was illegal.
On the view therefore that the partnership as well as the managing agency continued and on a review of the circumstances, the High Court held that this was a fit case for dissolving the partnership and fixed March 10, 1949, 'which was the date of the decree of the trial court as the date from which the partnership would be dissolved.
Consequently it modified the decree of the trial court and passed a preliminary decree for accounts against the appellant in respect of the firm Muthappa and Co. from November 15, 1939, to March 10, 1949. and added that the respondent could also recover any amount found due to him on taking accounts against the partnership assets, if any, in the hands of the Mills.
The appellant thou applied for a certificate to 1004 appeal to this Court which was granted; and that is how the matter has come up before us.
The first question therefore that arises for our deter mination is whether the partnership in this case is a partnership at will and it is necessary to refer to the terms of the partnership agreement to determine this question.
After reciting that the management of the.
Mills was being carried on in the name and style of Muthappa and Company and of the Rajendra Mills Limited in the name and style of Salem Balasubramaniam and Co. Limited, the partnership agreement goes on to say that the partners shall get in equal shares the salary, commission, profit, etc.
, that may be realised from the aforesaid managing agencies.
It provides for carrying on the management in rotation once in four years, the appellant to manage for the first four years and thereafter the respondent to manage for the next four years and in the same way thereafter.
It further provides that the partners and their heirs and those getting their 'rights shall carry on the management in rotation.
The accounts were to be made once in every year after the closing of the yearly accounts of the two mills.
There were then provisions as to borrowing with which we are not con cerned.
The agreement further provides that in case either partner thinks of relinquishing his right of management under the agreement it shall be surrendered to the other partner only but shall not be transferred or sold to any other person whatever.
Finally it is provided that the two partners shall carry on the affairs of the firm by rotation, once in four years and the income realised thereby shall be divided year after year and the partners and their heirs shall get the same in equal shares and thus carry on the partnership management.
The contention on behalf of the appellant is that as this partnership does not fall under section 8 of the Act and is not within the two exceptions under section 7, it is a partnership at will.
Section 7 provides that where no provision is made by contract between the partners for the duration of the partnership, or for the determination of the partnership, the partnership is partnership at will.
Section 8 provides that a person may 1005 become a partner with another person in particular adventures or undertakings.
Section 43 provides that where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.
On the other hand if the partnership is not at will, a. 42 applies and is in these terms: "Subject to contract between the partners a firm is dissolved (a) if constituted for a fixed term, by the expiry of that term; (b) if constituted to carry out one or more adventures or undertakings, by the completion thereof; (c) by the death of a partner; and (d) by the adjudication of a partner as an insolvent.
" Section 44 provides for dissolution by the court.
The High Court was of the view that looking to the terms of the partnership it could not be held to be a partnership at will and that under section 7 it will be a case of a partnership the duration of which as well as the determination of which were fixed.
The High Court was further of the view that section 8 of the Act would also apply to the partnership in question as the evidence showed that the partners had entered into partnership in order to carry on the business of managing agency of the two mills and such business was an under taking, As we read the terms of the agreement it seems to us clear that the intention could not be to create a partnership at will.
The partners contemplated that the management would be carried on in rotation between them in four yearly periods.
It was also contemplated that the heirs of the partners would also carry on the management in rotation.
Considering this provision as well as the nature of the business of partnership it could not be contemplated that the partnership could be brought to an end by notice by either partner.
The intention obviously was to have a partnership of some duration, though the duration was not expressly fixed in the agreement.
Now section 7 contemplates two exceptions to a partnership at will.
1006 The first exception is where there is a provision in the contract for the duration of partnership; the second exception is where there is provision for the determination of the partnership.
In either of these cases the partnership is not at will.
The duration of a partnership may be expressly provided for in the contract; but even where there is no express provision, courts have held that the partnership will not be at will if the duration can be implied.
See Halsbury 's Laws of England, Third Edition, Vol. 28, p. 502, para.
964, where it is said that where there is no express agreement to continue a partnership for a definite period there may be an implied agreement to do so.
In Crawshay vs Maule (1) the same principle was laid down in these words at p. 483: " The general rules of partnership are well settled.
Where no term is expressly limited for its duration, and there is nothing in the contract to fix it, the partnership may be terminated at a moment 's notice by either party.
Without doubt, in the absence of express, there may be an implied, contract as to the duration of a partnership." The same principle in our opinion applies to a case of determination.
The contract may expressly contain that the partnership will determine in certain circumstances; but even if there is no such express term, an implied term as to when the partnership will determine may be found in the contract.
What we have therefore to see is whether in the present case it is possible to infer from the contract of partnership whether there was an implied term as to its duration or at any rate an implied term as to when it will determine.
It is clear from the terms of the contract of partnership that it was entered into for the purpose of carrying on managing agency business.
Further the term relating to turns of the two partners in the actual management and the further term that these turns will go on even in the case of their heirs in our opinion clearly suggest that the duration of the partnership would be the same as the duration of the managing agency.
We cannot agree that this means that the partnership (1) ; 483. 1007 would become permanent.
In any case even if there is some doubt as to whether the terms of this contract implied any duration of the partnership, there can in our opinion be no doubt that the terms do imply a determination of the partnership when the managing agency agreement comes to an end.
It is clear that ' the partnership was for the sole business of carrying on the managing agency and therefore by necessary implication it must follow that the partnership would determine when the managing agency determines.
Therefore on the terms of the contract in this case, even if there is some doubt whether any duration is implied, there can be no doubt that this contract implies that the partnership will determine when the managing agency terminates.
In this view the partnership will not be a partnership at will as section 7 of the Act makes it clear that a partnership in which there is a term as to its determination is not a partnership at will.
Our attention was drawn in this connection to a term in the contract which lays down that either partner may withdraw from the partner.
ship by relinquishing his right of management to the other partner.
That however does not make the partnership a partnership at will, for the essence of a partnership at will is that it is open to either partner to dissolve the partnership by giving notice.
Relinquishment of one partner 's interest in favour of the other, which is provided in this contract, is a very different matter.
It is true that in this particular case there were only two partners and the partnership will come to an end as soon as one partner relinquishes his right in favour of the other.
That however is a fortuitous circumstance; for, if (for example) there had been four partners in this case and one of them relinquished his right in favour of the other partners, the partnership would not come to an end.
That clearly shows that a term as to relinquishment of a partner 's interest in favour of another would not make the partnership one at will.
We may in this connection refer to Abbott vs Abbott (1).
That was a case where there were more than two partners and it was (1) 1008 provided that the retirement of a partner would not terminate the partnership and there was an option for the purchase of the retiring partner 's share by other partners.
It was held that in the circumstances the partnership was not at will and it was pointed out that only when all the partners except one retired that the partnership would come to an end because there could not be a partnership with only one partner.
We are, therefore, in agreement with the High Court that the contract in this case disclosed a partnership the determination of which is implied, namely, the termination of the managing agency and, therefore, under section 7 of the Act it is not a partnership at will.
In the circumstances it is unnecessary to consider whether the case will also come under section 8 of the Act.
The next question that arises is whether the managing agency has been terminated legally ; for if that is so the partnership would also be determined.
This takes us to the history of the relations between the partners after the partnership came into existence.
It seems that disputes arose between the partners some time in 1941 in connection with the Rajendra Mills Limited which was one of the mills included in the managing agency business.
The respondent filed a suit on March 4, 1942, against the appellant and Salem Balasubramaniam and Co. Limited with respect to the 'allotment of shares in the managing agency company On March 11, 1942, the respondent filed another suit, this time on the basis of debentures which he hold against the Mills, praying for a decree against the Mills with respect to the debenture amount.
, On June 17, 1942, the respondent filed a third suit with respect to the Rajendra Mills Limited for a declaration that the respondent was a partner owning half share in the managing agency of the Rajendra mills Limited ' On the same day the respondent filed a fourth suit against the appellant, his son and Salem Balasubramaniam and Co. Limited with respect to certain actions taken by the managing agency company.
On July 15, 1942, the appellant filed a counter suit against the respondent and the managing agency company relating to the Rajendra Mills Limited for a 1009 declaration that the respondent had no interest in the managing agency company and for further reliefs.
There is no doubt, therefore, that the relations between the partners were very strained in 1942.
The respondent admitted in his statement that from the end of 1941 there was enmity between him and the appellant and there were vital differences between them and litigation was going on, though he said that in spite of the enmity he was willing to co operate with the appellant if the amount of which he had been defrauded were paid to him, on accounting.
So far as the litigation with respect to the Rajendra Mills Limited was concerned the respondent lost and it was held that he had withdrawn from the partnership of the managing agency company with respect to that mill.
As to the suit on debentures, the money was deposited in court and the dispute was only about costs.
That matter also went up to the High Court and finally the High Court refused to allow costs to the respondent.
It was in this strained atmosphere between the partners that the appellant gave notice dated March 4, 1943, terminating the partnership with respect to the Mills considering it as a partnership at will.
We have however held that the partnership was not a partnership at will and the notice given by the appellant could not, therefore, terminate it legally.
But the question still remains whether the managing agency of the Mills was terminated legally ; for if that was so the partnership would also come to an end on the date the managing agency was terminated in view of what we have held above.
The High Court has examined the circumstances in this connection and has come to the conclusion that the appellant fraudulently and collusively with the Mills got the managing agency terminated and, therefore, the termination of the managing agency was illegal.
We are unable to agree with this view of the High Court.
It is, therefore, necessary to examine the circumstances in which the termination came about.
The appellant sent a copy of his notice dated March 4, 1943, terminating the partnership to the Mills also.
The respondent sent a reply to this notice in which he claimed that the partnership was 1010 not at will and the appellant was not entitled to terminate it, and a copy of this reply was also sent to, the Mills on March 16, 1943.
On March 22, 1943, the directors of the Mills held a meeting.
In that meeting the directors decided that as the partners of Muthappa and Company were unable to get on in harmony with each other and were involved in litigation and several suits were going on between them and on account of their differences the work of the Mills was suffering and was, likely to suffer and also because Muthappa and Company had ceased to exist and had lost its right of management and was no longer in a position to manage the Mills, it became necessary to appoint other managing agents.
Thus by this resolution the managing agency of Muthappa and Company was terminated for two reasons: (1) that there were differences between the partners of the managing agency company and the work of the Mills was suffering and was likely to suffer, and (2) that Muthappa and Company had come to an end and, therefore, had lost its right of management.
It appears that before this resolution was passed the appellant had been purchasing shares of the Mills in the market and had acquired a controlling interest therein.
The High Court, therefore, thought that the hidden hand of the appellant was visible behind this resolution of the directors of the Mills, the more so as the appellant 's son was nominated by the same resolution to administer the whole affairs of the Mills subject to the control and direction of the board of directors till such time as suitable managing agents were appointed.
This action of the board of directors was confirmed at a general meeting of the shareholders on September 29, 1943.
The High Court thought that as the appellant had acquired a controlling interest in the Mills he was behind the resolution of the directors of March 22 1943, and the resolution of the general meeting of the shareholders of September 29, 1943.
It may be that the appellant having acquired a controlling interest in the Mills had a good deal to do with the resolutions; but that in our opinion would not necessarily make his 1011 conduct fraudulent and the termination of the managing agency agreement illegal.
It is not in dispute that there was no agreement between the partners that either of them would not purchase shares of the Mills in open market.
We do not therefore see anything improper in the conduct of the appellant when he purchased the shares of the Mills in open market and managed to acquire the controlling interest therein.
The appellant obviously had two capacities: in one capacity he was a partner of the respondent in the managing agency business, in the other capacity he was a large shareholder of the Mills and as such shareholder it was certainly his interest to see that the interest of the Mills did not suffer.
The crucial question therefore is whether the action taken by the Mills by the two resolutions is such as would be taken by any prudent company when faced with the situation with which the Mills was faced in the present case.
There can in our opinion be no doubt that any company when faced with a situation in which the Mills was in this case, and finding that the two partners of its managing agency firm were fighting tooth and nail and there was no love lost between them and also finding that the interest of the Mills was suffering and was likely to suffer because of the bad blood between the two partners of the managing agency, was bound to take steps to protect its own interests.
The fact that the major shareholder in the Mills also happened to be a partner in the managing agency would not disentitle him from acting in the interest of the Mills as a major shareholder.
We may in this connection refer to Morarji Goculdas and Co. vs Sholapur Spinning and Weaving Co. Ltd. and Others(1).
In that case a question arose whether the termination of the managing agency agreement was illegal on the ground of misconduct.
It was found in that case that there were quarrels between the partners of the managing agency firm of such a nature and duration as to impair seriously their capacity to discharge their duty to the company as managing agents and to affect prejudicially the interests of the company.
It was held that : (1) 129 1012 " In each case the question must be whether the misconduct proved, or reasonably apprehended, has such a direct bearing on the employer 's business or on the discharge by the employee of that part of the employer 's business in which he is employed, as to seriously affect or to threaten to seriously affect the employer 's business or the employee 's efficient discharge of his duty to his employer.
" If on the facts and circumstances of the case it was so, the termination of the managing agency would be justified.
In the present case there can be no doubt that the quarrels between the two partners of the managing agency firm were so serious and of such duration as to impair their capacity to discharge their duty to the Mills as managing agents and to affect the interests of the Mills prejudicially.
Therefore, if the directors of the Mills came to that conclusion it is in our opinion not correct to say that conclusion was arrived at fraudulently, simply because a major shareholder happened to be the appellant.
We may in this connection refer to the observations of Younger L.J. in Commissioners of Inland Revenue vs Sansom (1) : " No doubt there are amongst such companies, as amongst any other kind of association, blacksheep; but in my judgment such terms of reproach as I have alluded to should be strictly reserved for those of them and of their directors who are shown to deserve condemnation, and I am quite satisfied that the indiscriminate use of such terms has, not infrequently, led to results which were unfortunate and unjust, and in my judgment this is no case for their use.
" These remarks are in our opinion apposite in the present context.
It is true that the appellant had a hand as a major shareholder in the two resolutions and this was never hidden; but it is equally true that in the circumstances then existing any prudent board of directors and any body of shareholders interested in a company would act in the manner in which the board of directors and the shareholders of the Mills (1) , 514. 1013 acted in the present case.
We cannot therefore agree with the High Court that this is a case where the board of directors and the shareholders acted fraudulently in collusion with the appellant, for we cannot forget that the appellant as a major shareholder of the Mills could legitimately act to protect them and the action taken was such as any board of directors and any body of shareholders would bona fide take.
In the circumstances we are of opinion that the resolution of the board of directors terminating the managing agency agreement, confirmed by the general meeting of the shareholders, did legally terminate the managing agency between the Mills and Muthappa and Company.
It is true that in these resolutions a second reason was given for the termination, viz., that Muthappa and Co. had come to an end because of the notice of March 4.
That legal position is in our view incorrect; but that apart there were otherwise sufficient reasons for the Mills to terminate the managing agency in the circumstances with which it was faced.
The next question that arises is as to when the managing agency can be said to have been terminated, i.e., whether on March 22, 1943, or on September 29, 1943.
Now under s.87 B(f)of the Indian Companies Act, No. VII of 1913, which was then in force, the appointment of a managing agent, the removal of a managing agent and any variation of a managing agent 's contract of management shall Dot be valid unless approved by the company by a resolution at a general meeting of the company.
This provision clearly shows that a managing agent may be appointed and removed by the board of directors, though such appointment and removal is subject to the approval by the company by a resolution at a general meeting of the company.
We agree with the High Court that when the company at its general meeting approves of an appointment or of a removal, the approval takes effect from the date of the appointment or removal by the board of directors.
On this view therefore, when the general meeting in this case approved the action of the board of directors, the removal became valid and came into effect from March 22, 1943.
1014 Therefore, the managing agency agreement in this case was validly terminated on March 22, 1943.
As we have already held that there was an implied term in the contract of partnership that it will determine when the managing agency agreement with the Mills terminates, the partnership in the present case must under the contract be deemed to have determined on March 22, 1943.
Therefore, the respondent will be entitled to an account only from November 15, 1939, to March 22, 1943.
The learned Attorney General however referred us to sections 9, 10 and 13(f) of the Act and his contention was that.
the appellant must account for all the profits made by him out of the managing agency business, even after March 22, 1943.
Unders.10 every partner has to indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm and under section 13(f) a partner has to indemnify the firm for any loss caused to it by his wilful neglect in the conduct of the business of the firm.
In the first place, such a case was not made out in the plaint by the respondent; in the second place we are of opinion that sections 10 and 13(f) have no application to the facts of the present case.
We therefore reject this contention.
That leaves the question of costs.
So far as Saroja Mills Limited are concerned, we are of opinion that they are entitled to their costs throughout from the respondent as their action in terminating the managing agency has been held by us to be legal and valid.
As to Thiagarajan Chettiar we are of opinion that in the circumstances of this case, the order of the subordinate judge that Muthappa Chettiar (respondent) and Thiagarajan Chettiar (appellant) should bear their own costs is just and we order them to bear their own costs throughout.
We therefore allow the appeal in part and order that accounts will be taken from November 15, 1939,.
to March 22, 1943, as between Thiagarajan Chettiar and Muthappa Chettiar.
The respondent will pay the costs of Saroja Mills Limited throughout; but Muthappa Chettiar and Thiagarajan Chettiar will bear their own costs throughout.
Appeal allowed in part.

summary:
The appellant and the respondent entered into a written partnership with respect to the managing agency business of two mills, the terms of which were, inter alia, that the management shall be carried on in rotation once in four years, the appellant to manage for the first four years and thereafter the respondent to manage for the next four years and in the same way thereafter.
999 It further provided that the partners and their heirs and those getting their rights shall carry on the management in rotation.
Soon after disputes arose between the partners and the appellant gave notice to the respondent terminating the partnership treating it as a partnership at will, and the directors of the mills in their turn terminated the managing agency on the ground that the quarrels between the partners were detrimental to the good management of the mills.
Thereafter the respondent brought a suit against the appellant and the mills for dissolution of the partnership firm and damages alleging that dissolution of the partnership by the appellant by notice was fraudulent and connived at by the mills.
The trial court held that the partnership was at will and the termination of the managing agency was, legal and disallowed damages.
On appeal by the respondent the High Court held that the partnership was not a partnership at will and could not be dissolved by notice by the appellant.
The termination of the managing agency was also held to be illegal.
appeal by the appellant with a certificate of the High Court: Held, that considering the provision that the management would be carried on in rotation between the partners in four yearly periods and that the heirs of the partners would also carry on the business in rotation the intention was obviously to have a partnership of some duration, though the duration was not expressly fixed in the agreement.
The duration of a, partnership may be expressly provided for in the contract but even when there is no express provision, courts have held that the partner.
ship will not be at will if the duration can be implied.
Grawshay vs Manle, Swans 495; ; , followed.
The contract in this case disclosed a partnership the deter mination of which was implied, namely, the termination of the managing agency and, therefore, under section 7 of the Partnership Act it was not a partnership at will and was not legally terminable by the notice given by the appellant.
In view of the strained atmosphere between the partners there was sufficient reason for the mill to terminate the managing agency and the resolution of the board of directors terminating the managing agency agreement confirmed by the general meeting of the shareholders, did terminate the managing agency.
There was neither any fraud nor collusion by the mills with the appellant.
Morarji Gokuldas and Co. vs Sholapur Spinning and Weaving Co. Ltd. and Others, and Commissioners of Inland Revenue vs Sansom, , referred to.
The partnership in the present case must be deemed to have determined on the date of the passing of the resolution by the board of directors terminating the managing agency.
Sections 10 and 13(f) of the Partnership Act have no application to the facts of the case.


judgement:
87 of 1957.
Petition under article 32 of the Constitution of India for enforcement of fundamental rights.
B. D. Sharma, for the petitioner.
N. section Bindra, R H. Dhebar and T. M. Sen, for the respondents.
March 7.
The Judgment of the Court was delivered by MUDHOLKAR, J.
In this petition under article 32 of the Constitution the petitioner contends that the provisions of the (XXXI of 1950) and in particular those of section 2 (d) and sub section
(4) of section 40 are unconstitutional.
According to him the effect of the order passed against him by the Custodian of Evacuee Properties under sub section
(4) of section 40 of the Act is to take away his 191 property without the authority of law.
He further contends that the order of the Custodian amounts to discrimination in practice against the petitioner.
These are the two main heads under which the arguments advanced before us could be classified.
The relevant facts may now be stated.
The petitioner purchased 195 51 acres of land in the former Bhopal State from one Babu Rehmatullah on June 23, 1950, for a consideration of Rs. 3,500.
Rehmatullah was declared to be an intending evacuee by the Assistant Custodian of Evacuee Property.
Eventually he left India for Pakistan on June 20, 1951.
On June 12, 1951, the Assistant Custodian of Evacuee Property issued a notice to the petitioner to show cause why the land which he had purchased from Rehmatullah should not be declared to be "evacuee property".
After hearing the petitioner the property was declared to be evacuee property on August 8, 1951.
The petitioner challenged that order in appeal as well as in revision as provided in the Act but was unsuccessful.
A writ petition preferred by him before the Judicial Commissioner, Bhopal, was dismissed in limine on July 14, 1954.
He has, therefore, come up to this Court under article 32 of the Constitution.
The first point pressed 'before us by Mr. B. D. Sharma, on behalf of the petitioner is that the provisions of the Evacuee Property Act and particularly those of sections 2 (d) and 40 (4) are unconstitutional, because they enable the State to take away property without paying any compensation therefore as required by article 31 (2) of the Constitution.
The short answer to this contention is that the provisions of a law made in pursuance of any agreement entered into between the Government of India and the Government of any other country or otherwise With respect to property declared by law to be evacuee property will not be affected by the provisions of cl. 2 of article 31.
This is clear from the provisions of article 31(5)(b)(iii) which rules is thus: "Nothing in clause (2) shall affect 192 (b) the provisions of any law which the State may hereafter make (iii) in pursuance of any agreement entered into between the Government of the Dominion of India or the Government of India and the Government of any other country, or otherwise, with respect to property declared by law to be evacuee property.
Mr. Sharma, however, contends that the protection afforded by the aforesaid clause must be limited to a law which itself declares any property to be evacuee property and not to a law which empowers an authority to declare any property as evacuee property.
We cannot accept the contention.
The words "property declared by law to be evacuee property" would necessarily include property which could be declared as evacuee property.
A law relating to evacuee property would concern itself with laying down the criteria for determining what property is to be considered as evacuee property and could not be expected to specify the particular properties which are to be treated as evacuee properties.
The protection afforded by the constitutional provision which we have quoted above is not restricted as suggested by Mr. Sharma but extends to a law which provides for the determination of the criteria for declaring property to be evacuee property.
The next argument of learned counsel is that the property in question is not evacuee property and that the provisions of article 31(1) of the Constitution are a bar against taking it away.
It is difficult to appreciate the argument.
What article 31(1) prohibits is "deprivation of property save by authority of law".
No doubt the petitioner can say that he is deprived of his property because of the declaration made by the Custodian that it is evacuee property.
But then this declaration has been made in pursuance of a law enacted by Parliament.
If, as contended by him, we had held that the law is unconstitutional the position would have been different.
The next contention of learned counsel is that cls.
(a) and (c) of section 40, sub section
(4) are ultra vires because 193 they confer arbitrary power upon the Custodian.
The reason for raising the contention is that an application made by the petitioner to the Custodian under section 40 for confirming the sale in his favour was rejected by him on the ground that the evacuee did not act , in good faith in effecting the sale.
Sub section
(4) of section 40 P.reads thus: "The Custodian shall hold an inquiry into the application in the prescribed manner and may reject the application, if the is of opinion that: (a) the transaction has not been entered into in good faith or for valuable consideration, or (b) the transaction is prohibited under any law for the time being in force, or (c) the transaction ought not to be confirmed for any other reason.
" We are concerned here only with cl.
(a) of section 40(4) to which the Custodian resorted and not with cl.
We would, therefore, limit our remarks to el.
Subsection (4) of section 40 enables the Custodian to hold an inquiry regarding the genuineness or validity of a transaction sought to be confirmed and cl.
(a) empowers him to refuse to confirm it if he finds that it was not entered into in good faith.
According to learned counsel the words "good faith" are vague and "slippery" and do not furnish any standard or a norm which has to be conformed to by the Custodian.
Apart from the fact that the words "good faith" occur in a number of statutes and have acquired a definite meaning in courts of law, it may be pointed out that the power conferred by sub section
(4) of section 40 is in the nature of a judicial power and, therefore, the absence of a standard for the determination of the question would not render the provision unconstitutional.
Learned counsel wanted to contend that the absence of good faith on the part of the transferee was not sufficient and could not be regarded as a ground for refusing recognition to the transfer and that unless it is shown that the transferee was also lacking in good faith the transfer had to be confirmed under sub section
(4) of section 40.
He, however, did not press the contention 194 when it was pointed out to him that in Rabia Bai vs The Custodian General of Evacuee Property (1), this Court has upheld the order of the Custodian refusing to confirm the transfer on the ground that the evacuee had effected it in bad faith.
The last contention of learned counsel is that he has been discriminated against by the Custodian in the matter of confirmation of the transaction.
He said that prior to the sale of the land to him by Rehmatullah, the latter had sold a house to some nurses and that sale was found to be for inadequate consideration but in spite of that it was confirmed by the Custodian while the sale in his favour, though found to be for an adequate consideration was not confirmed.
We would repeat that the order of the Custodian is a judicial order and merely because he may have gone wrong in dealing with one case we cannot hold that the petitioner has been discriminated against.
The petition is wholly without basis and is accordingly dismissed without costs.
Petition dismissed.

dataset_name: IN-Abs

summary:
The petitioner purchased some land from R. R. was declared to be an intending evacuee and be left for Pakistan.
The Assistant Custodian issued a 'notice to the petitioner to show cause why the land should not be declared to be evacuee property, and after hearing the petitioner he declared the land to be evacuee property.
An appeal and a revision against the order were unsuccessful.
The petitioner also applied to the Custodian under section 40 Of the , for confirmation of the sale but his application was rejected under section 40(4)(a) on the ground that the evacuee did not act in good faith in effecting the sale.
The petitioner contended that section 2(d) of the Act defining evacuee property and section 40(4) empowering the custodian to reject an application for confirmation violated article 31(2) as they enabled the State to take away property without the authority of law.
Held, that the provisions Of SS. 2(d) and 40(4) were not affected by article 31(2) in view of article 31(5)(b)(iii) of the Constitution.
The protection of article 31 (5)(b)(iii) was not limited to a law which itself declared any property to be evacuee property but extended to a law which empowered an authority to declare any property as evacuee property and laid down the criteria for the declaration.
Section 40(4)(a) of the Act which empowered the Custodian to reject an application for confirmation on the ground that the transaction had not been entered into in good faith could not be challenged as conferring arbitrary powers on the Custodian.
The power was in the nature of a judicial power and the absence of a standard for the determination of the question could not render the provision unconstitutional.


judgement:
Appeal No 621 of 1960.
Appeal.
by special leave from the Award dated January 15, 1960, of the Industrial Tribunal, Bombay, in Reference (I.T.) No. 94 of 1959, 712 B. Sen and I. N. Shroff, for the appellant.
C. L. Dhudia and K. L. Hathi, for the respondent.
April 3.
The Judgment of the Court was delivered by GAJENDRAGADKAR, J.
Two demands made by the respondents, the workmen of the appellant company, the Garment Cleaning Works, Bombay, were referred for industrial adjudication to the industrial tribunal under section 12(5) of the , XIV of 1947.
These demands were for gratuity and provident fund respectively.
The tribunal has framed a gratuity scheme and has passed an order that the appellant should draw up a scheme of provident fund on the lines of the model provident fund scheme drawn by the Government under the Employees ' Provident Funds Act, 1952 (XIX of 1952), with a rate of contribution of 6 1/4 per cent.
of total wages.
Both the gratuity scheme as drawn up and the directions as to the drawing up of a provident fund scheme are challenged by the appellant by its present appeal which it has brought to this Court by special leave.
In regard to the direction as to the gratuity scheme the argument which has been urged before us by Mr. Sen is that the problem of starting such a scheme should have been considered on an industry cum region basis and considerations relevant to the said basis should have been taken into account.
In support of this argument he has relied upon a judgment of this Court in The Bharatkhand Textile Mfg. Co. Ltd. & Ors.
vs The Textile Labour Association, Ahmedabad (1).
In that case the industrial court had no doubt dealt with a claim for gratuity made by the workmen on the industry cum region basis, and an attack against the validity of the said approach made by the employer in regard to the scheme was repelled by this Court.
It would, however, be noticed that all that this Court decided in that case was that it was erroneous to contend that a gratuity scheme could never be based on industry cum region basis, and in support of this conclusion several considerations were set forth in the (1) [1960]3 S.C.R. 329. 713 judgment.
It is clear that it is one thing to hold that the gratuity scheme can in a proper case be framed on industry cum region basis, and another thing to say that industry cum region basis is the only basis on which gratuity scheme can be framed.
In fact, in a large majority of cases gratuity schemes are drafted on the basis of the units and it has never been suggested or held that such schemes are not permissible.
Therefore the decision in the case of the Bharatkhand Textile Mfg. Co. Ltd.( ') does not support the proposition for which Mr. Sen contends.
Mr. Sen has then criticised some of the provisions in the gratuity scheme.
Clause (ii) (a) of the gratuity scheme provides that on retirement or resignation of a workman after ten years ' service ten day 's consolidated wages for each year 's service should be awarded as gratuity.
Mr. Sen quarrels with this provision.
He contends that no gratuity should be admissible under this clause until and unless fifteen years ' service has been put in by the employee.
In support of this argument Mr. Sen has referred us to certain observations made by this Court in the case of The Express Newspapers (Private) Ltd. & Anr.
vs The Union of India & Ors.
In that case the provisions of section 5 (1)(a) (iii) of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955), was struck down on the ground that its provisions violated the fundamental right guaranteed by article 19(l)(g) The conclusion of this Court was that the provision for gratuity made by the said clause to an employee who had put in three years ' service imposes an unreasonable restriction on the employer 's right to carry on business and is therefore liable to be struck down as unconstitutional.
Dealing with that provision this Court incidentally observed that where the employee has been in continuous service of the employer for a period of more than fifteen years he would be entitled to gratuity on his resigning his post.
Mr. Sen contends that this observation indicates that an employee who resigns his post cannot be entitled to any gratuity (1) ; (2) , 154.
90 714 unless he has put in fifteen years ' service.
In our opinion, the observation on which this argument is based was not intended to lay down a rule of universal application in regard to all gratuity schemes, and so it cannot be made the basis of an attack against a gratuity scheme where instead of fifteen years ' service 10 years ' minimum service is prescribed to enable an employee to claim gratuity at the rate determined if he resigns after ten years, service.
Therefore, we do not think that the provision of cl.
(ii)(a) can be successfully challenged as being unreasonable.
Clause (iv) is then challenged by Mr. Sen.
This clause provides that if a workman is dismissed or discharged for misconduct causing financial loss to the works gratuity to the extent of the loss should not be paid to the workman concerned.
Mr. Sen contends that this clause is inconsistent with the principles on which gratuity claims are generally based.
Gratuity which is in the nature of retrial benefit is based on long and meritorious service, and the argument is that if the service of an employee is terminated on the ground of misconduct it would not be open to him on principle to claim gratuity because misconduct puts a blot on the character of his service and that disqualifies him from any claim of gratuity.
In this connection he has referred us to the definition of 'retrenchment ' contained in section 2 (oo) of the .
Retrenchment, according to the definition, means, inter alia, the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action.
Mr. Sen suggests that the retrenchment benefit and gratuity are payments made to the employee for a similar purpose, and if dismissal of an employee for misconduct does not entitle him to a claim for retrenchment benefit so should gratuity be denied to him in case he is dismissed for misconduct.
A similar argument is based on the rules framed under the Employees ' Provident Funds Act, 1952.
Rule 71 of the Provident Funds Scheme Rules provides for certain deductions from the account of a member dismissed for Serious and willful misconduct.
By analogy 715 it is urged that this rule also shows that a dismissed employee is not entitled to gratuity.
We are not impressed by these arguments.
On principle if gratuity is earned by an employee for long and meritorious service it is difficult to under,stand why the benefit thus earned by long and meritorious )service should not be available to the employee even though at the end of such service lie may have been found guilty of misconduct which entails his dismissal.
Gratuity is not paid to the employee gratuitously or merely as a matter of boon.
It is paid to him for the service rendered by him to the employer, and when it is once earned it is difficult to understand why it should necessarily be denied to him whatever may be the nature of misconduct for his dismissal.
Then, as to the definition of retrenchment in the , we are not satisfied that gratuity and retrenchment compensation stand exactly on the same footing in regard to the effect of misconduct on the rights of workmen.
The rule of the provident fund scheme shows not that the whole provident fund is denied to the employee even if he is dismissed but it merely authorises certain deductions to be made and then too the deductions thus made do not revert to the employer either.
Therefore we do not think that it would be possible to accede to the general argument that in all cases where the service of an employee is terminated for misconduct gratuity should not be paid to him.
It appears that in awards which framed gratuity schemes sometimes simple misconduct is distinguished from gross misconduct and a penalty of forfeiture of gratuity benefit is denied in the latter case but not in the former, but latterly industrial tribunals appear generally to have adopted the rule which is contained in el.
(ii) (b) of the present scheme.
If the misconduct for which the service of an employee is terminated has caused financial loss to the works, then before gratuity could be paid to the employee he is called upon to compensate the employer for the whole of the financial loss caused by his misconduct, and after this compensation is paid to the employer if any balance from the gratuity claimable 716 by the employee remains that is paid to him.
On the whole we are not satisfied that the clause thus framed by the Industrial Tribunal in the present case needs to be revised.
The last contention raised by Mr. Sen in regard to the gratuity scheme has reference to cl.
(v) of the scheme.
This clause provides that for calculating years of service the entire service of the workmen should be taken into account.
Mr. Sen contends that though the word "continuous" has not been used either in cl.
(v) or in clauses (i), (ii) and (iii) we should make it clear that the service referred to in all the said clauses referred to continuous service.
This position is not disputed by Mr. Dudhia for the respon dents.
We would accordingly make it clear that the service referred to in clauses (i), (ii) and (iii) refers to continuous service.
That takes us to the appellant 's grievance against the direction issued by the Tribunal in regard to the framing of the provident fund scheme on the lines of the model provident fund scheme drawn by the Government in the Employees ' Provident Funds Act.
Mr. Sen contends that in issuing this direction the tribunal has not properly assessed the extent of the financial obligation which the scheme would impose upon the appellant and the limited nature of its financial capacity.
It appears that when the appellant produced its balance sheet and other relevant papers it claimed privilege under section 21 of the .
Inevitably the Tribunal could not discuss the figures disclosed by the said books in its award though it must have examined the said figures carefully.
In the result the tribunal has naturally contented itself with the general observation as to the financial position of the appellant.
It has observed that the question to consider in framing the provident fund scheme is whether the employer has made good profits, whether its future is assured, whether it has capacity to build up adequate reserves.
Having thus posed the question the Tribunal ha, , come to the conclusion that the appellant satisfies all these requirements.
Mr. Sen contends that the 717 tribunal did not take into account the fact that the appellant has no reserve&, and that it had borrowed large loans.
We do not see how that would enable the appellant now to agitate a question which is purely a question of fact.
Mr. Sen realised the difficulties in his way because, since his client had claimed the privilege of section 21 the Tribunal was fully justified in not discussing the figures in its award.
He, therefore, faintly suggested that we may remand the case subject to any order as to costs that we may deem fit to make and ask the Tribunal to reconsider the matter in the light of the relevant documents, and he assured us that he would not claim privilege under section 21 after remand.
This request is plainly untenable.
If the appellant wanted the tribunal to consider the figures and state its conclusions in the light of the said figures in its award it need not have claimed privilege under section 21 at the trial.
It is now too late to suggest that the privilege be waived and that the matter be considered afresh by the tribunal or by us in the appeal.
Therefore we see no reason to interfere with the direction given by the Tribunal in regard to the framing of the provident fund scheme.
The result is the appeal fails and is dismissed with costs.
Appeal dismissed.

summary:
The Industrial Tribunal, on a reference under section 12 Of the , framed a gratuity scheme for the appellant company.
The company challenged the validity of some of the provisions of the scheme on the grounds, inter alia, (1) that the scheme was framed on the basis of the units, while it should have been done on industry cum region basis, (2) that the scheme provided for the award of gratuity on the retirement or resignation of a workmen after ten years ' service instead of fixing the period as fifteen years, and (3) that cl.
(ii)(b) of the scheme which provided that if a workman was dismissed or discharged for misconduct causing financial loss to the works, gratuity to the extent of the loss should not be paid to the workman concerned, was erroneous, because, on principle, misconduct put a blot on the character/of his service and that disqualified him from any claim of gratuity.
Held:(1) that industry cum region basis is not the only basis on which a gratuity scheme could be framed and one framed on the basis of the units cannot be challenged as in valid.
The Bharatkhand Textile Manufacturing Co. Ltd. vs The Textile Labour Association, Ahmedabad, ; , explained.
(2) that the clause in the scheme prescribing ten years ' minimum service to enable an employee to claim gratuity is valid.
The Express Newspapers (P.) Ltd. vs Union of India, , explained.
(3) that gratuity is not paid to an employee gratuitously or merely as a matter of boon, but is paid to him for the service rendered by him to the employer; consequently he should not be wholly deprived of the benefit thus earned by long and meritorious service even though at the end of such service he might have been found guilty of misconduct which entailed his dismissal.
Accordingly, cl.
(ii)(b) of the scheme is a valid provision.


judgement:
Appeals Nos.
148 to 150 of 1960.
Appeals by special leave from the judgment and order dated October 31, 1956, of the former Nagpur High Court in Misc.
Civil Case No. 184 of 1953.
K. N. Rajagopala Sastri and D. Gupta, for the appellants.
J. M. Phakar, section N. Andley, J. B. Dadachanji and Bameshwar Nath, for the respondents.
March 7.
The Judgment of the Court was delivered by HIDAYATULLAH, J.
These appeals, by special leave, have been filed by the Commissioner of Income tax, Madhya Pradesh, against the assessee, an individual, by name Seth Khushal Chand Daga.
The assessee was a partner in a firm, Messrs. R. B. Bansilal Abirchand of Nagpur.
In the year of account ending Diwali, 1941, he received his share of assets and property from this firm, and started business of his own.
In the same year, his sources of income were speculation, allowance from Government as treasurer, house property and dividends.
The assessee had received some profits from his share in an unregistered firm against which were set off his losses in his individual business, and the Income tax Officer, who made the assessment, determined the loss to be carried forward, at Rs. 53,840.
The assessee appealed against the assessment, but did not question the loss which had been determined.
For the year, 1942 43, the assessee claimed to reopen the question of the loss to be carried forward, stating that it was Rs. 2,11,760.
This contention was not accepted by the Department, and on appeal, by the Tribunal.
The contention was, however, raised again by him in the assessments for the years, 194849 and 1949 50.
In these years, he had profits from 188 his share in the unregistered firm, Rs. 1,82,773 and Rs. 1,39,922 respectively, against which were set off his losses in his individual business, Rs. 1,18,913 and Rs. 60,589 respectively.
The contention of the assessee was that the profits which he had derived.
from the unregistered firm could not be set off against the loss in his individual business, as the profits of the unregistered firm had borne tax not in his hands but in those of the firm.
This contention was rejected by the Department; but on appeal to the Tribunal, it was accepted.
On the Tribunal being moved to make a reference, it referred four questions.
Two of those questions dealt with matters also arising out of these assessments, but they have not been mentioned by us in this judgment.
The two questions pertaining to these appeals were: "(1) Whether the assessee was competent in law to raise a question with regard to the determination of loss for the assessment year 1941 42 as finally determined in appeal, in the course of proceedings for the assessment year 1942 43 when the loss brought forward from 1941 42 was being set off ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the loss suffered by the assessee from his personal business (including his share of . loss from another firm) cannot be set off under Section 24(1) against his taxed share income from an unregistered firm?" These questions were answered by the High Court against the Commissioner, who has now appealed, with special leave.
It was conceded by the learned counsel for the Commissioner that the second question has now been decided by this Court in Seth Jamnadas Daga vs The Commissioner of Income Tax (1), and that the answer must be against the Department.
That portion of the case was thus not argued.
As regards the first question, the only contention raised was that the loss which had been determined and ordered to be carried forward must be deemed to (1) ; 189 have become final, because no appeal was filed against that determination.
But it appears that the procedure laid down by a. 24(3) under which the Income tax Officer has to notify to the assessee by order in writing the amount of the loss as computed by him for the purposes of that section was not followed.
No doubt, under section 30 an appeal lies, if the assessee objects to the amount of loss computed and notified under section 24; but inasmuch as the Income tax Officer had not notified the loss computed by him by order in writing, an appeal could not be taken on that point.
In our opinion, the assessee was, therefore, entitled to have the loss re determined in a subsequent year.
Learned counsel for the Commissioner stated that the Department was not very anxious for the decision, because this particular assessee has had only losses in the years following, and no loss would be occasioned to the Revenue, if the losses brought forward be redetermined.
But that is a matter, with which we are not concerned.
In our opinion, the judgment of the High Court impugned before us was correct in the circumstances of the case.
The appeals fail, and are dismissed with costs.
One hearing fee.
Appeals dismissed.

summary:
For the accounting year 1941 the assessee 's profits from his share in an unregistered firm were,.
set off against his losses in the individual business and the Income Tax Officer determined the loss to be carried forward at RS.
53,840, but did not notify to the assessee by order in writing the amount of the loss as computed by him as required by section 24(3) of the Act.
The assessee appealed against the assessment but did not question the amount of the loss which had been determined.
In the year 1942 43 the assessee claimed to reopen the question of the loss to be carried forward stating that it was RS.
2,116760.
This contention was rejected by the Tribunal.
The contention was again raised by the assessee in the assessment years 1948 49 and 1949 50.
The question was whether the loss which had been determined and ordered to be carried forward must be deemed to have become final because no appeal was filed against that determination.
Held, that computation of the amount of loss under section 24 Of the Income tax Act does not become final unless the Income tax Officer notifies by order in writing, the amount of the loss as computed by him to the assessee.
The assessee was entitled to have 187 the loss redetermined in a subsequent year though he had not filed an appeal against the determination of the loss but no appeal could be filed in the absence of an order in writing.
Seth jamnadas Daga vs The Commissioner of Income tax, ; , applied.


judgement:
minal Appeal No. 109 of 1960.
Appeal by special leave from the judgment and order dated April 18, 1958, of the Andhra Pradesh High Court in Criminal, Misc.
Petition No. 1421 of 1957.
H. J. Umrigar and T. M. Sen, for the appellant.
The respondent did not appear.
March 8.
The Judgment of the Court was delivered by MUDHOLKAR, J.
The State of Andhra Pradesh has come up in appeal against the order passed in revision by the high Court of Andhra Pradesh quashing the charges framed against nine persons by Mr. Syed Firasath Hussain, Special Judge, Vijayawada.
The revision petition was preferred by only two of those persons.
The accused No. 1 Parthasarathi, who was a lower division clerk in the Central Excise Circle Office at Narasaraopet was in charge of the TP 1 permit books (transport permit) intended for issue to Central Excise Officers for granting permits to persons applying bona fide for licences to transport tobacco.
According to the prosecution two of those books containing 25 permit forms each were found missing from the aforesaid office.
The allegation is that Parthasarathi sold those books to the remaining accused for a consideration of Rs. 400.
It was found during the investigation that seven permit forms from out of these books bad been used for transport of non duty paid tobacco after blanks in those forms had been filled and the signa tures of certain Central Excise Officers forged on them.
Further, according to the prosecution, accused nos.
2 to 8 got authorisation letters prepared with the help of accused No. 9 'by forging the signatures of the supposed consignors of the tobacco.
With the help of 197 these documents the accused nos.
2 to 8 are said to have transported tobacco to the licensed premises of certain persons and received payments for the tobacco delivered to them.
The prosecution alleged that all this was done by all the accused by entering into a conspiracy, the object of which was to procure and utilise blank TP 1 forms, fill them in, forge the signatures of Central Excise Officers and use them as genuine for the purpose of transporting tobacco without paying duty upon it.
The charge sheet states that the accused nos.
1 to 9 have committed the offence under section 120 B, Indian Penal Code read with a. 5(2) of Prevention of Corruption Act, 1947 (II of 1947).
It further states that the accused No. 1 had committed offenses under section 5(1)(c) and 5(1)(d) of Prevention of Corruption Act, 1947 as also offenses under sections 420, 463 and 464, Indian Penal Code.
The accused nos.
2 to 8 are said to have abetted all these offenses.
Each of these accused is in addition said to have committed offenses under section 420, Indian Penal Code.
The Subordinate Judge, Vijayawada was appointed as Special Judge under the provisions of section 6 of the Criminal Law Amendment Act, 1952 (II of 1952) to try offenses under the Prevention of Corruption Act, 1947.
He framed the following charges: "CHARGE NO.1.
That you, Accused 1 to 9 on or about 19 9 1953 to 5 11 53 agreed to do by illegal means to wit, A 1 being a public servant in the Central Excise Department dishonestly sold two blank T.P. 1 books for Rs. 350 to one late Jogayya and obtained pecuniary advantage for himself and A 2 to A 8 and that A 9 forged 7 T.P. 1 forms, out of the above two books, which forged T.P. 1s were used by A 2, A 3, A 5, A 7, A 8 with the assistance of A 4 and A 6 and cheated the merchants of Markapur and Cumbum by using the said forged T.P. 1s for the above purpose of cheating; and that the above acts were done by all of you in pursuance of a conspiracy and that thereby you A 1 have committed an offence punishable under Section 120B of the I.P.C. read with and (d) punishable under Sec.
5(2) of the Prevention of Corruption Act and also under Sec.
109 I.P.C. read with Sec.
490, 466 and 467 of the I.P.C. and that you,A 2 to A 9 under See.
120 B read with Sec.
5(1)(c) and (d) punishable under See.
5(2) of Act 11 of 1947 and See.
420, 466 and 467 and 471 I.P.C. and within my cognizance.
CHARGE NO.
That you A 1, being a public servant in the Central Excise Department, being a Lower Division Clerk in the office of the Superintendent of Central Excise, Narasaraopet Circle, since 1951 and in such capacity were entrusted since 1951 with blank T.P. 1 books dishonestly sold two of the above said T.P. 1 books under your control to one late Jogayya for Rs. 350, in or about the month of April, 1953 and dishonestly, fraudulently misappropriated the said amount and thereby committed the offence of misconduct punishable under Section 5(2) read with See.
5(1)(c) of the Prevention of Corruption Act, 11 of 1947 and within my cognizance.
CHARGE NO. 111.
That you A 1, in the above capacity, by corrupt and illegal means, and by abusing your position as a public servant, obtained for yourself an amount of Rs. 350 being the sale proceeds of the two Blank T.P. 1 books, from one late Jogayya and obtained for A 2 to A 8, a pecuniary advantage of Rs. 10,120 14 0, th e amount of revenue due to the Central Govern ment and thereby committed the offence of Criminal misconduct punishable under See.
5(2) read with Sec.
5(1)(d) of the Prevention of Corruption Act 11 of 1947 and within my cognizance.
CHARGE TO.
That you, A 9, on or about the days between September and November, 1953 forged 7 blank T.P. ls Nos. 610432, 610443, 610460,610448,61044, 610468, 610446 as if they are documents to have been made by the Central Excise Officials in their official capacity by filling up the same within false particulars and fixing the signatures of different 199 Central Excise Officials so as to show that they are genuine T.P. 1 permits 'hat you thereby committed an offence punishable under Section 466 I.P.C. and within my cognizance.
CHARGE No. V.
That you, A p, on or about the days between September and November, 1953 forged the 7 T.P. 1 permits mentioned in Charge No, IV purporting to be valuable securities with intent and that they may be used for transporting tobacco as duty paid tobacco and that you thereby committed an offence punishable under Section 467 of the I. P. C. and within my cognizance.
CHARGE No. VI.
That you, A 2 to A 8, on, or about the days between 12 9 53 and 5 11 53 at Chodavaram, Satulur, Velpur and Tenali dishonestly used the above seven forged T.P. Is mentioned in Charge No. IV as genuine, Which you know at the time you used them as forged documents and transported 26,989 lbs.
non duty paid tobacco as duty paid tobacco by quoting the above fictitious documents as proof of payment of duty and that you ' thereby committed an offence punishable under Section 465 and 471 of the I.P.C. and within my cognizance.
CHARGE No. VII.
That you, A 2 to A 8, on or about the days between 19 9 53 and 6 11 53 at Cumbum and Mar kapur cheated (1) B. Ranga Subbayya of Cumbum (2) P. C, h. Venkata Subbaiah and (3) Shri B. Seshaiah of Markapur and thereby dishonestly inducing them to deliver you, Rs. 10,994 10.3, was the property of the above said persons; and that you thereby committed an offence punishable under Section 420 I.P.C. and within my cognizance.
" While seven of the accused persons were content with the charges,, two preferred an application for revision before the High Court which, as already stated, accepted it and quashed the charges and directed the Special Judge to frame fresh charges on the lines indicated in the judgment.
200 Mr. Umrigar, who appears for the State of Andhra Pradesh, while conceding that Charge No. 1 as it stands, is involved and obscure and requires to be reframed takes exception to the observation of the High Court that the charge is bad for multiplicity.
,It not quite clear what the High Court me ant.
If it meant that separate charges should be framed for different offenses there can be no objection; but if it meant that all these accused cannot be tried at the same trial then we have no doubt that it was in error.
The High Court pointed out that this is an omnibus charge containing as many as 203 offenses and that it is 'in direct violation of sections 234, 235 and 239 of the Code of Criminal Procedure.
No doubt, sub section
(1) of section 234 provides that not more than three offenses of the same kind committed by an accused person within the space of 12 months can be tried at the same trial.
But then section 235(1) provides that if in any one series of acts so connected together as to form the same transaction more offenses than one are committed by the same person, he may be charged with and tried at one trial for every such offence.
Therefore, where the alleged offenses have been committed in the course of the same transaction the limitation placed by section 2314(1) cannot operate.
No doubt, the offence mentioned, in charge No. 1 is alleged to have been committed not by just one person but by all the accused and the question is ' whether all these persons can be jointly tried in respect of all these offenses".
To this kind of charge s.239 would apply.
This section provides that the following persons may be charged and tried together, namely: (1) persons accused of the same offence committed in the course of the same transaction; (2) persons accused 'of an offence and persons accused of abetment or an attempt to commit such an offence; (3) persons accused of different, offenses committed in the course of the same transaction.
Clearly, therefore, all the accused persons could be tried together in respect of all the offenses now comprised in charge No. 1.
We, however, agree with 201 Mr. Umrigar that it would be desirable to split up charge No. 1 suitably go that the accused persons will not be prejudiced in answering the charges and in defending themselves.
The learned Judge has hold, following a decision of a single Judge in In re Venkataramaiah (1) that no charge of conspiracy is permissible for committing which the conspiracy was entered into and which had actually been committed.
In that case the learned Judge had observed as follows at p. 132: "Where the matter has gone beyond the stage of more conspiracy and offences are alleged to have been actually committed in pursuance thereof, these two sections are wholly irrelevant.
Conspiracy, it should be borne in, mind, is one form of abetment (see section 107 I.P.C.) and where an offence is alleged to have been committed by more than two persons, such of them as actually took part in the commission should be charged with the substantive offence, while those who are alleged to have abetted it by conspiracy should be charged with the offence of abetment under section 109 I.P.C. The Explanation to section 109 makes this quite clear.
An offence is said to be committed in consequence of abetment, when it is committed in pursuance of the conspiracy, and the abettor by conspiracy in made punishable (under section 109) with the punishment provided for the actual offence.
" We are unable to accept this view.
Conspiracy to commit an offence is itself an offence and a person can be separately charged with, respect to such a conspiracy.
There is no analogy between section 120B and section 109 I.P.C. There may be an element of abetment in a conspiracy; but conspiracy is something more than an abetment.
Offences created by section 109 and 120B, I.P.C. are quite distinct and there is no warrant for limiting the prosecution to only one element of con spiracy, that is, abetment when the allegation is that what a person did was something over and above that.
Where,& number of offences are committed by (1) A.I.R. 1935 Mad. 130, 132. 202 several persons in pursuance of a conspiracy it is usual to charge them with those, offences as well as with the offence of conspiracy to commit those offences.
As an instance of this we may refer to the case in section Swaminatham vs State of Madras (1).
Though the point was not argued before this Court in the way it appears to have been argued before the Madras High Court and before the High Court of Andhra Pradesh, this Court did not see anything wrong in the trial of several persons accused of offences under section 120B and section 420 I.P.C. We cannot, therefore, accept the view taken by the High Court of Andhra Pradesh that the charge of conspiracy was bad.
If the alleged offences are said to leave flown out of the conspiracy the appropriate form of charge would be a, specific charge in respect of each of those offences along with the charge of conspiracy.
Before leaving this point we would like to refer to the decision in R. vs Dawson (2) which Mr. Umrigar very fairly brought to our notice, respondents being ex parte.
In that case Finnemore J. who delivered the judgment of the Court observed: "Now with regard to the first count for con spiracy. . this court feels it is desirable 'Jo say something.
This court has more than once warned of the dangers of conspiracy counts, especially these long Conspiracy counts, which one counsel referred to as a mammoth conspiracy.
Several reasons have been given.
First of all if there are substantive charges which can be proved, it is in general undesirable to complicate matters and to lengthen matters by adding a charge of conspiracy.
Secondly, it can work injustice because it means that evidence, which otherwise would be inadmissible on the substantive charges against certain people, becomes inadmissible.
Thirdly, it adds to the length and complexity of the case so that the trial may easily be well High unworkable and impose a quite intolerable strain both on the Court and on the jury.
The learned Judges in fact quashed the conviction (1) A.I.R. 1957 S.C. 340, 343, 344.
(2) [1960] 1 All.
E.R. 558, 563.
203 for conspiracy in the case before them.
We agree that it is not desirable to charge the accused persons with conspiracy with the ulterior object of letting in an evidence which would otherwise be inadmissible and that it is undesirable to complicate a trial by introducing a large number of charges spread over a long period.
But then this is only a question of propriety and it should be left to the Judge or the magistrate trying the case to adopt, the course which he thinks to be appropriate in the facts and circumstances of the case.
It cannot be said as a matter of law that such a trial is prohibited by the Code of Criminal Procedure.
The High Court has further held that the learned Special Judge had no jurisdiction to try the offences under section 120B read with sections 466, 467 and 420 because he was appointed a Special Judge under the Criminal Law Amendment Act only for trying offences under the Prevention of Corruption Act.
No doubt, he was appointed in the circumstances stated by the High Court, and therefore he will have that jurisdiction which he is competent to exercise under the Prevention of Corruption Act or the Criminal Law Amendment Act.
Section 6 of the former provides that the State Government may appoint a Special Judge to try the following offences: (a) an offence punishable under section 161, section 165 or section 165A of the Indian Penal Code (Act XLV of 1860) or sub section (2) of section 5 of the Prevention of Corruption Act, 1947 (11 of 1947); (b) any conspiracy to commit or any attempt to commit or any abetment of any of the offences specified in clause (a).
Sub section
(1) of section 7 provides that notwithstanding any.
thing contained in the Code of Criminal Procedure, 1898 or in any other law the offences specified in sub section
(1) of section 6 shall be triable by special judges only.
Sub section
(3) of section 7 provides that when trying any case, a special judge may also try any offences other than an offence specified in section 6 with which the accused may under the Code of Criminal Procedure, 1898 be charged at the same trial.
204 Clearly, therefore, accused No. 1 could be tried by the Special Judge for offences under 'section ' 120 B read With sections 466, 467 and 420 I.P.C. Similarly the other accused who are, said to have abetted these offences could also be tried by the Special Judge.
The view of the High Court is thus erroneous and its directions with respect to these offences are set aside.
The High Court has further held that the provisions of a 196A(2) of the Code of Criminal Procedure have not been complied with and therefore the charges in respect of offences under as.
466 and 467 could not be enquired into by the Special Judge; section 196A(2) of the Code of Criminal Procedure reads thus: "No Court shall take cognizance of the offence of criminal conspiracy punishable under section 120B of the Indian Penal Code, (2) in a case where the object of the conspiracy is to commit any non cognizable offence, or a cognizable offence not punishable with death, imprisonment for life or rigorous imprisonment for a term of two years, or upwards, unless the State Govern ment, or a Chief Presidency Magistrate or District Magistrate empowered in this behalf by the State Government, has, by order in writing, consented to the initiation of the proceedings: Offences under sections 466 and 467 are admittedly non cognizable and, therefore, it would seem from the plain language of sub section
(2) that for the offences under section 120 B read with sections 466 and 467, I.P.C. the sanction of the Government will be necessary.
Mr. Umrigar referred us to the decision in Durgadas Tulsiram Sood vs State (1) and said that since the object of the conspiracy was to cheat the Government, that is, to commit an offence under section 420 I.P.C. and the offences under as.
466 and 467 were only means to that end, the trial was not vitiated simply because no sanction was obtained for prosecuting the accused for offences of criminal conspiracy to commit non cognizable offences; under as.
466 and 467 I.P.C.
We do not think it necessary to say anything on the point because in (1) I.L.R. 205 any case the case has to go back to the Special Judge for re framing the charges and there is time enough for the Government to consider whether it should accord sanction to the prosecution of the various accused for the non cognizable offences alleged to have been committed by them in pursuance of conspiracy, assuming of course, that sanction is necessary.
In the result we allow the appeal and set.aside the order of the High Court and direct the Special Judge to, frame fresh charges and proceed with the trial.
The matter has been pending for a long time and we direct that the trial will proceed with.
all expedition.
Appeal allowed.
Retrial ordered.

summary:
The High Court quashed the charges framed against the respondents.
The charge sheet stated that accused 1 to 9 had committed offenses under section 12oB of the Indian Penal Code and section 5(2) of the Prevention of Corruption Act, 1947, and that accused No. had committed offenses under SS.
5(1)(c) and 5, (i)(d) of the Prevention of Corruption Act and SS. 463, 464 Of the Indian Penal Code and accused 2 to 8 abetted all the offenses and each of the accused in addition had committed offenses under section 420 Of the Indian Penal Code.
The High Court directed the Special judge to frame fresh charges inter alia on the ground that charge No. 1 was an omnibus charge containing as many as 203 offenses and that it was direct violation of SS. 234, 235 and 239 Of the Code of Criminal Procedure.
Further that the Special judge had no jurisdiction to try the offenses under section 120B read with SS.
466, 467 and 420 Of the Indian Penal Code because he was appointed a Special judge under the Criminal Law Amendment Act, only for trying offenses under Prevention of Corruption Act.
The question was whether all the accused, persons could be jointly tried in respect of all these offenses.
Held, that when several persons had committed offenses, in the course of the same transaction, they could jointly be tried in respect of all those offenses under section 239 Of the Code of Criminal Procedure and the limitation placed by section 234 Of the Code could not come into operation, but the charges should be suitably split up so that the accused persons would not be prejudiced in answering the charges and defending themselves.
Held, further, there is no analogy between section 120B and section Log of the Indian Penal Code.
There may be an element of abetment in a conspiracy which is an offence by itself but conspiracy is something more than abetment for which a person could separately be charged.
Offenses created under SS.
109 and 120B of the Indian Penal Code are quite distinct and there is no warrant for limiting the prosecution to only one element of conspiracy, that is, abetment when the allegation is that what a person did was something over and above that.
If the alleged offenses flow out of the conspiracy the appropriate form of charge would be a specific charge in respect of each of those offenses along with the charge of conspiracy.
Held, further, that the introduction of a large number of charges spread over a long period was a question of propriety and it should be left to the judge or the Magistrate trying the case to adopt the course which he thought to be appropriate in the facts and circumstances of the case.
Held, also, that while a special judge appointed under section 6 of the Criminal Law Amendment Act has jurisdiction to try cases under section 5 of the Prevention of Corruption Act he can under section 7(3) Of the Criminal Law Amendment Act try other offenses under the Criminal Procedure Code for which the accused can be charged at the same trial.
196 In re Venkataramaiah, A.I.R. 1938 Mad. 130, disapproved.
section Swaminatham vs State of Madras, A.I.R. 1957 S.C. 340, R. vs Dawson, [1960] 1 All E.R. 558 and Durgadas Tulsiram Sood vs State, I.L.R. , referred to.