judgement:
Civil Appeal Nos. 196 199/ 73.
Appeals by Special Leave from the Judgment and order date 14 7 1972 of the Kerala High Court in Income Tax Reference Nos. 115 118 of 1970.
K section Ramamurthy, P. N. Ramalingam and A. T. M. Sampath for the Appellant.
B. B. Ahuja and Miss A. Subhashini for the Respondent.
The Judgment of The Court was delivered by TULZAPURKAR, J.
These appeals by special leave raise an interesting question of law whether the distribution of assets of a firm consequent on its dissolution amounts to a transfer of assets within the meaning of the expression "otherwise transferred" occurring in section 34 (3) (b) of the Indian Income Tax Act, 1961, having regard: to the definition of 'transfer ' in section 2(47) of the Act ? The facts giving rise to the question lie in a narrow compass.
The appellant (M/s Malabar Fisheries Co.) is a dissolved firm represented by one of its erstwhile partners.
The firm as originally constituted on April ], 1959 consisted of four partners and carried on six different business in six different names and styles namely, (a) Malabar Fisheries Co., (b) Coastal Engineering Co., (c) Cochin Tin Factory, (d) Goodwill Industries, all at Falluruthy, (e) Combine Steel Industries at the Industrial Estate at Alavakkot and (f) Lite Metal Industries at Viskhapatnam in Andhra Pradesh.
The firm was dissolved on March 31, 1963 and under the deed of dissolution executed by and between the partners, the first business concern was taken over by one of the partners, the remaining five concerns by two of the other partners and the fourth partner received a sum of Rs. 3,81,082/ in lieu of his respective shares in the assets of all the businesses of the firm.
It appears that during the four assessment years 1960 61 to 1963 64 the firm had installed various items of machinery in respect of which it received development rebate in its respective tax assessments under section 33 of the Act.
On dissolution of the firm on March 31, 1963, the Income tax Officer took the view that section 34 (3) (b) of the Act applied 700 on the ground that there was a sale or transfer of the machinery by the firm within the period mentioned in that section and accordingly acting under section 155 (5) of the Act he withdrew the development rebate allowed to the firm for the said assessment years, the amending, orders being passed against the dissolved firm.
The assesses i.e., the dissolved firm through one of its erstwhile partners preferred appeals against the order of the Income tax officer withdrawing the development rebate but the appellate Assistant Commissioner by his order dated July 24, 1964 dismissed the appeals holding that section 155(5) was rightly resorted to since section 34 (3) (b) of the Act applied to the case.
The matter was carried in further appeals; by the dissolved firm to the Income tax Appellate Tribunal, Cochin Bench, Ernakulam, and it was contended that the distribution of the assets of the firm consequent on its dissolution did not amount to a sale or transfer and, therefore, the transaction would not come within the purview of section 34 (3) (b).
The Tribunal by its common order dated January 6, 1970 allowed the appeals holding that the case fell within the principle laid down by this Court in the case of Commissioner of Income tax vs Dewas Cine Corporation and that there was no question of any sale or transfer within the meaning of section 34(3) (b) in a transaction involving the adjustment of the rights of the partners of a dissolved firm.
At the instance of the Revenue, the Tribunal referred two questions of law to the High Court for its opinion, namely "(1) Whether on the facts and in the circumstances of this case, the Appellate Tribunal was legally correct in holding that there was no question of sale and that it was only an adjustment of the mutual rights of the partners and that the provisions of section 34 (3) were not applicable ? (2) Whether on the facts and in the circumstances of this case, there was a transfer of assets within the meaning to the words 'otherwise transferred ' occurring in Section 34(3) (b) to the Income Tax Act ?" The High Court answered the second question in the affirmative and against the assessee and in view of that answer, declined to answer first question as being unnecessary.
The High Court took the view that this Court 's decisions in Dewas Cine Corporation case (supra) and Bankey Lal Vaidya 's case to the effect that the distribution, division or allotment of assets between partners of 701 firm consequent on its dissolution amounts to a mutual adjustment of rights of the partners and does not amount to a sale or transfer had been rendered under the Income Tax Act, 1922 wherein the expression 'sale ' or 'transfer ' had not been defined whereas in the 1961 Act by which the case was governed, the expression 'transfer ' had been defined by section 2(47) in a very wide manner so as to include not merely a sale or exchange but also 'extinguishment of any rights ' in capital assets.
The High Court hold that a dissolution of a firm amounted to extinguishment of the rights of the firm in the assets of the partnership and accordingly was a transfer within the meaning of section 2(47) of the Act and that, therefore, the provisions of section 34(3) (b) applied to the case.
It is this view of the High Court that is being challenged before us in these appals by the assessee.
Counsel for the assessee contented that the High Court has clearly erred in taking the view that the dissolution of a firm amounts to extinguishment of the rights of the firm in the assets of the partnership.
be pointed out that in the two decisions referred to above this Court has clearly enunciated what happens in law upon the dissolution of a firm namely, that the distribution, division or allotment of assets between the partners on dissolution of the firm is merely an adjustment of rights inter se between them and that no sale or transfer is involved in such distribution, division or allotment.
According to him there is no change in this legal position even after the enactment of the definition of 'transfer ' in section 2(47) in the 1961 Act.
Reference was made to this Court 's decision in C.I.T. Gujarat vs R. M. Amin where this Court has held that no transfer of capital assets within the meaning of section 2 (47) of the, 1961 Act was involved when a shareholder received money representing his shares on the distribution of the net assets of the company in liquidation, that he must be regarded as having received that money in satisfaction of the rights which belonged to him by virtue of his holding the shares and that the transaction did not amount to any sale, exchange, relinquishment of capital assets or extinguishment of any rights therein.
In any case, he contended that in every case dissolution must be anterior in point of time to the distribution that takes place after making accounts and discharging all debts and.
liabilities and as such there is no transfer of any assets by the assessee (i.e. the dissolved firm) to any person as contemplated by section 34(3) (b), but all that happens is that upon dissolution and upon making up of accounts and discharge of liabilities it is the erstwhile partners who mutually adjust their rights and it is by way of adjustment of such rights 702 that distribution, division or allotment of assets takes place.
He, therefore urged that section 34 (3) (b) was inapplicable to the case.
On the other hand, counsel for the Revenue pressed the High Court 's view for our acceptance.
He urged that the question has to be considered under the 1961 Act in light of the definition of 'transfer ' contained in section 2 (47) which includes within its scope even 'extinguishment of rights in capital assets '.
According to him , during the continuance of the partnership the machinery undoubtedly belonged to the firm, the firm as a separate taxable entity got the benefit Of development rebate which was sought to be withdrawn in as much as the firm 's rights in the machinery got extinguished upon dissolution and the same got transferred or vested ill individual partner or partners as a result of distribution or allotment made between them be stated qua the.
erstwhile partners there may not be any transfer of assets and there may be mutual adjustment of rights but qua the firm there is certainly extinguishment of its rights in the assets of the partnership and in that sense there is a transfer of assets within the definition under section 2 (47) of the Act.
Since in these appeals the question raised relates to the withdrawal of development rebate under section 34 (3) (b) read with section 155 (5) of the 1961 Act in the light of the definition of the expression transfer given.
under section 2 (47) of the Act, it will be desirable to note what these provisions are.
Section 34 (3) (b) in so far as is material reads: "34.
Conditions for depreciation allowance and development rebate.
x x x x x 3(b) If any ship, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed, any allowance made under section 33 or under the corresponding provisions of the Indian Income tax Act, 1922 (XI of 1922), Gin respect of the ship, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act, and the provisions of sub section (5) of section 155 shall apply accordingly." Section 155(5) is a procedural provision enabling the Income tax Officer in a case falling under section 34(3) (b) to recompute the total income of the assessee for the relevant previous year and make the necessary amendments; in other words, acting under this provision the 703 Income tax officer withdraw is the development rebate already granted A by passing an amending order.
It further provides that such amending order has to be passed within a period of 4 years to be reckoned from the end of the previous year in which the sale or transfer took place.
Section 2(47) defines the expression "transfer" thus: "2(47) "transfer", in relation to a capital asset, includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof, under any law.
" On a plain reading of section 34(3) (b) it will appear clear that before that provision can be invoked or applied three conditions are required to be satisfied: (a) that the ship, machinery or plant must have been sold or otherwise transferred, (b) that such a sale or transfer must be by the assessee and (c) that the same must be before the expiry of 8 years from the end of the previous year in which it was acquired or installed.
It is only when these three conditions are satisfied that any allowance made under section 33 shall be deemed to have been wrongly made and the Income tax officer acting under section 155(5) will be entitled to withdraw such allowance.
Further, section 2(47) gives an artificial extended meaning to the expression 'transfer ' for, it not merely includes transactions of 'sale ' and 'exchange ' which in ordinary par lance would mean transfers but also 'relinquishment ' or 'extinguishment of rights ' which are ordinarily not included in that concept.
The question is whether the distribution, division or allotment of assets of firm consequent on its dissolution amounts to a transfer of assets within the meaning of the words "otherwise transferred" occurring in section 34(3) (b) of the Act, regard being had to the definition of "trans for" contained in section 2(47) ? To put it pithily, the question is whether the dissolution of a firm extinguishes the firm 's rights in the assets of the partnership so as to constitute a transfer of assets under section 2(47) ? In Dewas Cine Corporation case (supra) the concept of distribution of assets consequent upon the dissolution of the firm was considered in the context of the balancing charge arising under the second proviso to section 10(2) (vii) of the 1922 Act.
In that case two individuals, each of whom owne da cinema theatre, formed a partnership to carry on business of exhibition of cinematograph films, bringing the theatres into the books of the firm as its assets.
For the assessment years 1950 51 to 1952 53 the Income Tax Officer allowed depreciation aggregating to Rs. 44,380/ in the assessment of the firm in respect of the two theatres.
On the dissolution of the firm on September 30.
704 1951, the theatres were returned to their original owners.
In the books of the firm the assets were shown as taken over at the original price less the depreciation allowed, the depreciation being equally divided between the two erstwhile partners.
The Tribunal took the view that by restoring the theatres to the original owners there was a transfer by the partnership and the entries adjusting depreciation and writing off the assets at the original value amounted to local recoupment of the entire depreciation by the partnership and on that account the balancing charge arose under the second proviso to section 10(2) (vii) of the Act.
This Court held that on the dissolution of the partnership, each theatre had to be deemed to be returned to the original owner in satisfaction partially or wholly of his claim to a share in the residue of the assets after discharging the debts and other obligations.
But thereby the theaters were not in law sold by the partnership to the individual partners in consideration of their respective shares in the residue, and, therefore, the amount of Rs. 44,380/ could not be included in the total income of the partnership as a balancing charge arising under the second proviso to section 10(2)(vii).
It is true that this Court was concerned with interpreting the expression "sold" used in section 10(2) (vii) and the second proviso thereto, when the expressions "sale or sold" had nowhere been defined in the Act, and, therefore, this Court held that those expressions when used in section 10(2) (vii) and the second proviso thereto must be understood in their ordinary meaning and that "sale" according to its ordinary meaning meant a transfer of property for a price.
This Court further enunciated the proposition that the distribution of surplus upon dissolution of a partnership after discharging its debts and obligations was always by way of adjustment of rights of partners in the assets of the partnership and did not amount to a transfer much less for a price.
It is significant to note that the question of raising a balancing charge against the dissolved firm, a separate taxable entity which had been allowed depreciation in the earlier years, was considered by this Court and this Court took the view that no balancing charge arose against the firm inasmuch as no sale or transfer was involved in the transaction of distribution of the assets to erstwhile partners of the firm consequent upon its dissolution.
In Bankey Lal Vaidya 's case (supra) the concept of distribution of assets to the partners of a firm consequent upon its dissolution was considered in the context of the charge on capital gains arising under 'H section 128(1) of the 1922 Act.
In that case the respondent assessee, the Karta of a Hindu undivided family, entered into a partnership with to carry on business of manufacturing and selling pharmaceutical 705 products and literature relating thereto.
On the dissolution of the partnership, its assets, which included goodwill, machinery, furniture, medicines, library and copyright in respect of certain publications, were valued at Rs. 2,50,000.
Since a large majority of assets was incapable of physical division, it was agreed that the assets be taken over by and the respondent assessee be paid his share of the value of the assets in money and accordingly he was paid Rs. 1,25,000/ .
The question was whether the sum of Rs. 65,000/ , being part of the amount received by the respondent assessee could be brought to tax as capital gains under section 12B(1) of the Act ? This Court held that the arrangement between the partners of the firm amounted to a distribution of the assets of the firm on dissolution, that there was no sale or exchange of the respondent 's share in the capital assets to D, nor did he transfer his share in the capital assets and, therefore, the sum of Rs. 65,000/ could not be taxed as capital gains.
The Court observed that the rights of the parties were adjusted by handing over to one of the partners the entire assets and to the other partner the money value of his share and such a transaction was neither a sale nor exchange nor transfer of assets of the firm.
It cannot, however, be disputed that both these decisions were rendered under the 1922 Act which did not define expressions like "sale" or "transfer" and the question is whether any difference is E; made in the legal position under the 1961 Act by reason of the enactment of the definition of the expression "transfer" in section 2(47), which includes within its scope a transaction by way of 'extinguishment of any rights in a capital asset ' ? The precise argument which has been advanced by the counsel for the Revenue before us, and which found Favour with the High Court is that during the continuance of the partnership the machinery belonged to the firm, that the firm as a taxable entity received the benefit of development rebate in respect thereof under section 33 of the Act and that upon dissolution the firm 's rights in the machinery got extinguished and became vested in the partner or partners to whom it was allotted in the distribution of assets, and, therefore, the transaction so far as the firm is concerned amounts to a transfer of assets under section 2(47).
The question is how far is it correct to say that in law the firm as such has rights in the partnership assets liable to extinguishment upon dissolution ? It is well known that commercial men and accountants on the one hand and lawyers on the other have different notions respecting the nature of the firm and this difference between the mercantile view and 706 the legal view has been explained in Lindley on Partnership 12th Edn.
at pages 27 and 28 thus: "Partners are called collectively a firm.
Merchants and lawyers have different notions respecting the nature of a firm Commercial man and accountants are apt to look upon a firm in the light in which lawyers look upon a corporation i.e., as a body distinct from the members composing it, and having rights and obligations distinct from those of its members.
Hence, in keeping partnership accounts, the firm is made debtor to each partner for what he brings into the common stock, and each partner is made debtor to the firm for all that he takes out of that stock.
In the mercantile view, partners are never indebted to each other in respect of partnership transactions; but are always either debtors to or creditors of the firm Owing to this impersonification of the firm, there is tendency to regard its rights and obligations as unaffected by the introduction of a new partner, or by the death or retirement of an old one.
Notwithstanding such changes among its members, the firm is considered as continuing the same; and the rights and obligations of the old firm are regarded as continuing in favour of or against the new firm as if no changes had occurred.
The partners are the agents and sureties of the firm, its agent for the transaction of its business, its sureties for the liquidation of its liabilities so far as the assets of the firm are insufficient to meet them.
The liabilities of the firm are regarded as the liabilities of the partners only in case they cannot be met by the firm and discharged out of its assets.
But this is not the legal notion of a firm.
The firm is not recognised by English lawyers as distinct from the members composing it.
In taking partnership accounts and in administering partnership assets, Courts have to some extent adopted the mercantile view, and actions may now, speaking generally, be brought by or against partners in the name of their firm; but speaking generally, the firm as such has no legal recognition.
The law, ignoring the firm, looks to the partners com posing it; any change amongst them destroys the identity of the firm; what is called the property of the firm is their property, and what are called the debts and liabilities of the firm are their debts and their liabilities.
In point of law, a partner may be the debtor or the creditor of his co partners, 707 but he cannot be either debtor or creditor of the firm of which he is himself a member, nor can he be employed by his firm, for a man cannot be his own employer".
(Emphasis supplied) .
Unlike the Scottish system of law where the firm is a legal person distinct from the partners composing it, the English Partnership Act, 1890, avoids making a firm a distinct legal entity.
In English jurisprudence a firm is only a compendious name for certain persons who carry on business, or have authorised one or more of their number to carry it on, in such a way that they are jointly entitled to the profits and jointly liable for the debts and losses of the business.
Further it is true that partnership property is regarded as belonging to the firm, but that is only for the purpose of distinguishing the same form the separate property of the partners.
But, in law the partnership property is jointly owned by all the partners composing the firm.
In Lindley on Partnership at page 359 the following statement of law occurs: "The expression partnership property, partnership stock, partnership assets, joint stock, and joint estate, are used indiscriminately to denote everything to which the firm, or in other words all the partners composing it, can be considered to be entitled as such.
" Again at page 375 the following statement of law occurs: "In the absence of a special agreement to that effect, all the members of an ordinary partnership are interested in the whole of the partnership property, but it is not quite clear whether they are interested therein as tenants in com mon, or as joint tenants without benefit of survivorship, if indeed there is any difference between the two.
It follows from this community of interest that no partner has a right to take any portion of the partnership property and to say that it is his exclusively.
No partner has any such right, either during the existence of the partnership or after it has been dissolved.
" As regards the nature of a share of a partner in a firm the following passage in Lindley on Partnership at page 375 brings out legal position very clearly: "What is meant by the share of a partner in his proportion of the partnership assets after they have been all realised and converted into money, and all the partnership debts and 708 liabilities have been paid and discharged.
This it is, and this only, which on the death of a partner passes to his representative, or to a legatee of his share. and which ; on his bankruptcy passes to his trustee.
" The position as regards the nature of a firm and its property in Indian .
law under the is almost the same as in English law.
Here also a partnership firm is not a distinct legal entity and the partnership property in law belongs to all the partners constituting the firm.
In Bhagwanji Morarji Goculdas vs Alembic Chemcial Works Co. Ltd. and others the Privy Council in para 10 of the judgment observed thus: "Before the Board it was argued that under the , a firm is recognised as an entity apart from the persons constituting it, and that the entity continues so long as the firm exists and continues to carry on its business.
It is true that the goes further than the English Partnership Act, 1890, in recognising that a firm may possess a personality distinct from the persons constituting it; the law in India in that respect being more in accordance with the law of Scotland, than with that of England.
But the fact that a firm possesses a distinct personality does not involve that the personality continues unchanged so long as the business of the firm continues.
The Indian Act, like the English Act, avoids making a firm a corporate body enjoying the right of perpetual succession.
(Emphasis supplied).
It is true that under the Civil Procedure Code order XXX, as under the English Rules of Court, actions may be brought by or against partners in the name of the firm and even between firms and their members but that is only a matter of procedure.
It is also true that the firm 's property is recognised in more than one way (sections 14 and 15 of the Partnership Act) but only as that which is "joint estate" of all the partners as distinguished from the "separate estate" of any of them, and not as belonging to a body distinct in law from its members.
In Addanki Narayanappa & Anr.
vs Bhaskara Krishnappa and 13 Ors, this Court after quoting with approval the aforementioned passages occurring in Lindley on Partnership, 12th Edn., made the following observations in the context of partners ' right during the subsistence as well as upon the dissolution of a firm: 709 "No doubt since a firm has no legal existence, the partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership.
During the subsistence of the partnership, how ever, no partner can deal with any portion of the property as his own nor can he assign his interest in a specific item of property of any one.
His right is to obtain such profits, if R any, as fall to his share from time to time and upon the dissolution of the firm to a share in the assets of the firm which remain after satisfying the liabilities set out in cl.
(a) and sub cls.
(i), (ii) and (iii) of cl.
(b) of section 48.
" Having regard to the above discussion, it seems to us clear that a partnership firm under the is not a distinct legal entity apart from the partners constituting it and equally in law the firm as such has no separate rights of its own in the partnership assets and when one talks of the firm 's property.
Or firm 's assets all that is meant is property or assets in which all partners have a joint or common interest.
If that be the position, it is difficult to accept the contention that upon dissolution the firm 's rights in the partnership assets are extinguished.
The firm as such has no separate rights of its own in the partnership assets but it is the partners who own jointly in common the assets of the partnership and, therefore, the consequences of the distribution, division or allotment of assets to the partners which flows upon dissolution after discharge of liabilities is nothing but a mutual adjustment of rights between the partners and there is no question of any extinguishment of the firm 's rights in the partnership assets amounting to a transfer of assets within the meaning of section (47) of the Act.
In our view, therefore, there is no transfer of assets involved even in the sense of any extinguishment the firm 's rights in the partnership assets when distribution takes place upon dissolution.
Counsel for the Revenue referred us to a decision of the Karnataka High Court in Additional Com missioner of Income Tax vs M. A. J. Vasanaik, where that Court has taken the view that when individual assets are brought in a partnership firm so as to constitute the partnership property, there is a transfer of interest of the individual to the partnership and sections 34(3) (b) and 155(5) of 1961 Act are attracted.
In the first instance, that decision dealt with the converse case and it does not necessarily follow on parity of reasoning that the distribution, division or allotment of partnership assets to partners of a firm upon its dissolution would amount to a transfer of assets as was sought to be contended by the counsel for the Revenue.
Secondly, it is unnecessary 710 for us to express any opinion on the correctness or otherwise of the view taken by the Karnataka High Court in that case.
There is yet another reason for rejecting the contention of the counsel for the Revenue and that is that the second condition required to be satisfied for attracting section 34(3) (b) cannot be said to have been satisfied in the case.
It is necessary that the sale or transfer of assets must be by the assessee to a person.
Now every dissolution must h point of time be anterior to the actual distribution, division or allotment of the assets that takes place after making accounts and discharging the debts and liabilities due by the firm.
Upon dissolution the firm ceases to exist; then follows the making up of accounts, then the discharge of debts and liabilities and there upon Distribution, division or allotment of assets takes place inter se between the erstwhile partners by way of mutual adjustment of rights between them.
The distribution, division or allotment of assets to the erstwhile partners, is not done by the dissolved firm.
In this sense there is no transfer of assets by the assessee (dissolved firm) to any person.
It Dis not possible to accept the view of the High Court that the distribution of assets effected by a deed takes place eo instanti ' with the dissolution or that it is effected by the dissolved firm.
In the result we are clearly of the view that section 34(3)(b) of the Act was not applicable to the case and we uphold the view of the Tribunal.
The appeals are, therefore, allowed and the Revenue will pay the costs of the appeals to the appellant.

summary:
The appellant, a dissolved firm as originally constituted on April 1, 1959, consisted of four partners and carried on different business in different names and styles.
The firm was dissolved on March 31, 1963 and under the deed of dissolution executed by and between the partners, the first business concern was taken over by one of the partners, the remaining concerns by two of the other partners and the fourth partner received, a sum of money in lieu of his respective shares in the assets of all the businesses of the firm.
During the four assessment years 1960 61 to 1963 64 the firm had installed various items of machinery in respect of which it received development rebate in its respective tax assessments under section 33 of the Act.
On dissolution of the firm on March 31, 1963, the Income tax officer took the view that section 34(3)(b) of the Act applied on the ground that there was a sale or transfer of the machinery by the firm within the period mentioned in that section and accordingly acting under section 155(5) of the Act he withdrew the development rebate allowed to the firm for the said assessment years, the amending orders being passed against the dissolved firm.
The appeals preferred by the dissolved firm through one of its erstwhile partners, were dismissed by the Appellate Assistant Commissioner who held that section 155(5) was rightly resorted to since section 34(3)(b) of the Act applied to the case.
The Income tax Appellate Tribunal allowed the appeals by the dissolved firm holding that there was no question of any sale or transfer within the meaning of section 34(3)(b) in a transaction involving the adjustment of the rights of the partners of a dissolved firm, but at the instance of the Revenue (Respondent) referred two questions of law to the, 'High Court viz. (a) whether there was only an adjustment of the mutual rights of the partners and the provisions of section 34(3) were not applicable and (b) whether there was a transfer of assets with in the meaning of the words 'otherwise transferred ' occurring in section 34(3) (b) of the Act.
The High Court answered the second question in the affirmative and against the assessee holding that a dissolution of a firm amounted to extinguishment of the rights of the firm in the assets of the partnership and accordingly was a transfer within the meaning of section 2(47) of the Act and that, therefore the provisions of section 34(3)(b) applied to the case.
697 Allowing the appeals to this Court, ^ HELD: 1.
There is no transfer of assets involved even in the sense of any extinguishment of the firm 's rights in the partnership assets when distribution takes place upon dissolution.
[709 F] 2.
Section 34(3) (b) of the Act is not applicable to the case an(l the view of the Tribunal is upheld.
[710 E] 3.
The firm as such has no separate rights of its own in the partnership assets but it is the partners who own jointly in common the assets of the partner ship and, therefore, the consequence of the distribution, division or allotment of assets to the partners which flows upon dissolution after discharge of liabilities is nothing but a mutual adjustment of rights between the partners and, there is no question of any extinguishment of the firm 's rights in the partnership assets amounting to a transfer of assets within the meaning of section 2(47) of the Act.
[709 E] 4.
On a plain reading of section 34(3) (b) it will appear clear that before that provision can be invoked or applied three conditions are required to be satisfied: (a) that the ship, machinery or plant must have been sold or otherwise transferred, (b) that such a sale or transfer must be by the assessee and (c) that the same must be before they expiry of eight years from the end of the previous year in which it was acquired or installed.
It is only when these three conditions are satisfied that any allowance made under section 33 shall be deemed to have been wrongly made and the Income tax officer acting under section 155(5) will be entitled to withdraw such allowance.
[703 C D] 5.
Section 2(47) gives an artificial extended meaning to the expression 'transfer ' for, it not merely includes transactions of 'sale ' and 'exchange ' which in ordinary parlance would mean transfers but also 'relinquishment ' or 'extinguishment of rights ' which are ordinarily not included in that concept.
[703 E] 6.
In Commissioner of Income Tax vs Dewas Cine Corporation, , the concept of distribution of assets consequent upon the dissolution of the firm was considered in the context of the balancing charge arising under the second proviso to section 10(2) (vii) of the 1922 Act.
This Court held that the expression "sale or sold" when used in section 10(2)(vii) and the second proviso thereto must be understood in their ordinary meaning and that "sale" according to its ordinary meaning meant a transfer of property for a price, and further enunciated the proposition that the distribution of surplus upon dissolution of a partnership after discharging debts and obligations was always by way of adjustment of rights of partners in the assets of the partnership and did not amount to a transfer such less for a price.
The question of raising a balancing charge against the dissolved firm, a separate taxable entity which had been allowed depreciation in the earlier years, was also considered by the Court and it took the view that no balancing charge arose against the firm inasmuch as no sale or transfer was involved in the transaction of distribution of the assets to erstwhile partners of the firm consequent upon its dissolution.
[703G, 704 E G] 7.
In Bankey Lal Vaidya 's case, , the concept of distribution of assets to the partners of a firm consequent upon its dissolution was considered in the context of the charge on capital gains arising under section 128(1) of the 1922 Act.
This Court observed that the rights of the parties were adjusted by handing 698 over to one of the partners the entire assets and to the other partner the money value of his share and such a transaction was neither a sale nor exchange nor transfer of the assets of the firm.
[704 H, 705 D] 8.
(i) It is well known that commercial men and accountants on the one hand and lawyers on the other have different notions respecting the nature of the firm.
[705 H] (ii) Commercial men and accountants are apt to look upon a film in the light in which lawyers look upon a corporation i.e. as a body distinct from the members composing it, and having rights and obligations distinct from those of its members.
[706 B] (iii) The firm is not recognised by English lawyers as distinct from the members composing it.
What is called the property of the firm is their property, and what are called the debts and liabilities of the firm are their debts and their liabilities.
[706 G, H] Lindley on Partnership 12th Edn.
27 and 28; referred to.
In English jurisprudence a firm is only a compendious name for certain persons who carry on business or have authorised one or more of their number to carry it on, in such a way that they are jointly entitled to the profits and jointly liable for the debts and losses of the business.
Further, partnership property is regarded as belonging to the firm, but this is only for the purpose of distinguishing the same from the separate property of the partners.
But, in law the partnership property is jointly owned by all the partners composing the firm.
[707 B C] 10.
The position as regards the nature of a firm and its property in Indian Law under the is almost the same as in English law.
Here also a partnership firm is not a distinct legal entity and the partner ship property in law belongs to all the partners constituting the firm.
The Indian Act, like the English Act avoids making a firm a corporate body enjoying the right of perpetual succession, [708 B, E] Bhagwanji Morarji Goculdas vs Alembic Chemical Works Co. Ltd. and Ors., ; referred to.
A partnership firm under the is not a distinct legal entity apart from the partners constituting it and equally in law the firm as such has no separate rights of its own in the partnership assets and when one talks of the firm 's property or firm 's assets all that is meant is property in which all partners have a joint or common interest.
[709 C] Addanki Narayannappa and Anr.
vs Bhaskara Krishnappa and 12 Ors., , referred to.
Every dissolution must in point of time he anterior to the actual distribution; division or allotment of the assets that takes place after making accounts and discharging the debts and liabilities due by the firm.
Upon dissolution the firm ceases to exist; then follows the making of accounts, then the discharge of debts and liabilities and thereupon distribution, division or allotment of assets takes place inter se between the erstwhile partners by way of mutual adjustment.
of rights between them.
The distribution, division or allotment of assets to the 699 erstwhile partners, is not done by the dissolved firm.
In this sense there is no transfer of assets by the assessee (dissolved firm) to any person.
[710 C] 13.
The view Of the High Court that thy.
distribution of assets effected by a deed takes Place eo instanti with the dissolution or that it is effected by the dissolved firm not accepted.
[710 D]


judgement:
Civil Appeal No. 1199 of 1978.
Appeal by Special Leave from the Judgment and order dated 6 3 1978 of the Madhya Pradesh High Court in M.P. No. 109/78.
G. B. Pai and section section Khanduja for the Appellant.
section K. Gambhir for Respondents 1 and 2 G. L. Sanghi, R. K. Jain and R. Ramachandran for Respondent No. 3 The following Judgments were delivered: DESAI, J.
This appeal by special leave is directed against the order date 27th December 1977 made by the State of Madhya Pradesh granting a licence for a quasi permanent cinema to respondent No. 3 Prem Narayan son of Ganpatlal Chouksey, proprietor, Chitra Talkies, Lalbagh, Burhanpur (M.P.) against which a petition under 795 Article 226 of the Constitution by the petitioners was dismissed in limine by a speaking order by the High Court of Madhya Pradesh at Jabalpur on 6th March 1978.
Third respondent made an application on 5th December 1975 for grant of a licence for a temporary cinema and the District Magistrate having jurisdiction issued a no objection certificate vide his order dated 10th February 1976 for a period of six months.
This licence was renewed upto 30th June 1976 and there was a further renewal up to 30th September 1976.
A subsequent application for renewal was turned down by the Distt.
Magistrate by his order dated 29th June 1977 on the ground that Paras Talkies with permanent cinema licence which was closed, has now been functioning in the locality and, therefore, a renewal of the licence for a temporary cinema in the same locality would not be proper.
Respondent 3 carried the matter in appeal to the State Government which by its order dated 27th December 1977 granted a licence for a quasi permanent cinema under the M.P. Cinemas Regulation Rules to the third respondent Present petitioners filed a petition under Article 226 questioning the validity of the aforementioned order of the State Government conceding, inter alia, that they were the residents of the locality and that they had objected to the grant/renewal of licence on the ground that there is a mosque a madrasa and a temple in the vicinity or the place where the cinema house is to be constructed, and even though their objections were upheld by the licensing authority, the District Magistrate, they were not heard in the appeal preferred by the third respondent and, therefore the order of the first respondent State of Madhya Pradesh suffers, inter alia, from the vice of violation of the principles of natural justice.
The High Court was of the opinion that District Magistrate was not influenced by the fact that there was a mosque, and a temple in the vicinity of the place where the proposed cinema house was to be constructed but he was influenced by an extraneous consideration that a cinema having a permanent cinema licence having been re opened in the locality there was no need for a cinema house with a 'temporary ' licence and that it being a matter left to the subjective satisfaction of the State Government, the State Government on being satisfied that there was no impediment to the grant of such a licence, was perfectly justified in granting the same and, therefore, it is not a fit case for the interference of the High Court.
The appellants thereupon filed this appeal by special leave.
Mr. G. B. Pai, learned counsel who appeared for the petitioners, contended that if before the grant of a quasi permanent cinema 796 licence to the third respondent the appellants filed their objections which were taken into consideration by the Distt.
Magistrate, the licensing authority, and if the Distt.
Magistrate was impressed by the objections and, therefore, turned down the request for 'temporary cinema licence, in an appeal against this order preferred by the third respondent, the appellants as objectors should have been heard and the decision arrived at by the State Government appeal at their back was violative of the principles of natural justice and the order granting licence for quasi permanent cinema by the State Government is invalid.
Before we examine the contention canvassed on behalf of the appellants it is necessary to glance at the relevant provisions of M.P Cinemas (Regulation) Act, 1952 ( 'Act ' for short).
Section 3 imposes a restriction on exhibition by means of cinematograph at any place other than a licensed place under the Act in compliance with the restrictions or conditions imposed by such licence.
Section 4 nominates the Distt.
Magistrate as the licensing authority.
Section 5 provides for conditions subject to which licence may be granted.
Sub section
(3) of section 5 provides for an appeal at the instance of a person aggrieved by the decision of a licensing authority refusing to grant a licence under the Act to the State Government within the prescribed time.
Section 6 confers power on the State Government or the local authority to suspend exhibition of films.
Section 7 prescribes penalties for breach of the provisions of the Act.
Section 8 confers power to revoke a licence under certain circumstances.
Two things emerge from the Act.
Firstly, that the detailed provisions for the grant of a licence at three distinct stages by the licensing authority in the process of licensing a cinema house, viz., (i) no objection certificate for the site on which the cinema house is to be constructed; (ii) licence for the building conforming to the rules where films are to be exhibited; and (iii) licence for exhibition of films, are made in the rules and there is no reference to any of the three licences in the Act.
Secondly, appeal is provided against the order of a licensing authority only at the instance of a person aggrieved by the decision of the licensing authority refusing to grant a licence.
The Act does not confer any right of appeal on a person who might have raised objections before the licensing authority against the grant of a no objection certificate or a licence, as the case may be.
This last aspect is very relevant because the entire submission is based on a contention that the appellants who had objected to the grant of a no objection certificate to the third respondent and had succeeded in persuading the licensing authority to refuse the grant of no objection certificate to the third respondent, yet in the appeal preferred by the 797 third respondent under sub section
(3) of section 5 the State Government did not give any opportunity to the successful objectors and decided the appeal at their back and thus the decision was rendered in violation of the principles of natural justice.
Next a reference to the relevant rules of M.P. Cinema (Regulation) Rules, 1972 ( 'Rules ' for short), is necessary.
Rule 3(2) provides that any person desirous of erecting a cinema or converting existing premises into a cinema shall first make public his intention to do so by exhibiting a notice in the prescribed form on a board on the proposed site in such position that it can be plainly seen from the public thoroughfare upon which the site of such proposed cinema abuts.
This rule also prescribes the size of the board, the language in which the notice is to be published, etc.
Sub rule (3) of rule 3 provides that such a person shall also give a similar notice in writing to the licensing authority, viz., the Distt.
Magistrate and make an application to him for the grant of a no objection certificate specifying therein whether the application is in respect of a permanent cinema or a touring cinema.
Rule 4 provides that on receipt of notice as envisaged by Rule 3, the licensing authority shall, at the cost of the applicant, notify the public such intention in such manner by publication in newspapers or otherwise that may deem fit for the purpose of inviting objections.
It is also obligatory for the licensing authority to issue a notification inviting objections specifying therein the period within which the objections shall be lodged.
Rule 5 provides that the licensing authority shall on the expiry of the period for receipt of the objections, submit a report to Government in the prescribed form along with his recommendation whether a no objection certificate shall be granted or not.
Sub rule (2) of rule 5 provides that Government may, on consideration o. the report of the licensing authority, grant permission for the issue of no objection certificate to the applicant or may refuse to grant the same.
Rule 6 provides that without prejudice to the right of the licensing authority to refuse or to grant a cinema licence under rules 101 and 102 ', the licensing authority may, with the previous permission of the government, grant a certificate to the applicant that there is no objection to the location of the cinema at the site notified by the applicant under rule 3.
Sub rule (2) of rule 6 provides that such a no objection certificate shall be valid for a period of two years from the date of issue in the case of permanent cinemas and six months in the case of touring cinemas.
Chapter VII of the Rules provides for cinema licence.
Rule 100 provides that an application for a cinema licence shall be accompanied, amongst others, by a copy of the no objection certificate issued under rule 6.
Rule 101 confers power on the licensing authority 798 to grant a cinema licence on being satisfied that all the relevant rules have been complied with and the licence may be granted on such terms and conditions and subject to such restrictions as the licensing authority may determine.
There is a proviso to rule 101 which reads as under: "Provided that a touring cinema licence shall not be beyond the district of issue and ordinarily touring cinema licences shall not be granted for places where there is already a permanent or a quasi permanent cinema, but the licensing authority may in its discretion permit a touring cinema to operate at a place where there is already a permanent or quasi permanent cinema on occasions such as fairs and melas or when the touring cinema exhibits films of a kind different from those exhibited by non touring cinemas such as educational films or where it caters for a different public".
In view of the proviso, it would not be correct to say that District Magistrate was influenced by an extraneous consideration, namely, re opening of Paras Cinema with a permanent cinema licence while rejecting the application of third respondent for renewal of his licence by the order dated 29th June 1977.
Rule 104 provides that a 15 permanent cinema may be licenced for any period not exceeding one year and a quasi permanent cinema or a touring cinema may be licenced for any period not exceeding six months.
A perusal of the relevant provisions of the Act and the Rules extracted above will show that there are various stages through which an application for a cinema licence has to be processed.
It also transpires that the Rules envisage issuance of a licence for a permanent cinema and quasi permanent cinema as well as a touring cinema.
Cinema in this context has been defined to mean any place wherein an exhibition by means of cinematograph is given.
Rule 3 envisages construction of a cinema house and as a first step, selection of a site where the cinema house is to be located.
Selection of the site and its clearance by the licensing authority by the issuance of a no objection certificate is an important step to be taken in the direction of finally constructing a cinema house and obtaining a licence for the same.
In the facts of this case the application is for a quasi permanent cinema licence.
When any person desires to erect a cinema meaning thereby a place where an exhibition by means of cinematograph is to be given, he must apply for a no objection 799 certificate in respect of the site where the cinema house is to be constructed.
When such an application is received, it is to be advertised in the manner prescribed inviting the public to file objections.
After considering the objections the licensing authority has to decide whether to grant or refuse the no objection certificate.
This scheme emerges from the combined reading of rules 3, 5 and 6.
Chapter III in the Rules prescribes rules in respect of the building to be used as a cinema house.
But before one proceeds to construct the cinema, obtaining of a no objection certificate relevant to the site on which cinema to be constructed is a sine qua non.
The grievance of the appellants is that when their objections were invited before issuance of a no objection certificate and they filed the same, the Distt.
Magistrate as the licensing authority was persuaded to accept the objections and reject the application for a no objection certificate and thereafter when under section 5(3) of the Act respondent preferred ar.
appeal against the refusal to grant the no objection certificate, the appeal was decided at the back of those who had not only filed objections but whose objections had prevailed with the licensing authority and, therefore, the order granting the no objection certificate is violative of the principles of natural justice.
There is a two fold fallacy in this submission.
Respondent 3 has been granted a quasi permanent cinema licence by the State Government allowing his appeal against the order of the E Distt.
Magistrate refusing such a licence.
The order impugned by the third respondent in the appeal before the State Government is Annexure 'E ' dated 29th June 1977.
A perusal of this particular order would show that initial application for no objection certificate was made by the third respondent on 5th December 1975.
An advertisement was issued in 'Nai Duniya ' dated 5th January 1976 by the licensing authority that an application for a temporary cinema licence akin to quasi permanent cinema licence has been received and that any one who desires that no objection certificate should not he given may file his objections.
After considering those objections no objection certificate was granted by order dated 10th February G. 1976.
No exception appears to have been taken to this order granting no objection certificate.
English rendering of the order raised some doubt whether a no objection certificate was granted or a quasi permanent cinema licence was granted.
Original file was called.
Simultaneously, a certified copy of the original order in Hindi was shown to us at the hearing of the appeal which clearly H. shows that a no objection certificate was granted limited to the duration of six months.
Thereafter a quasi permanent cinema licence 800 was granted.
This licence was renewed twice over up to and inclusive of 30th September 1976.
Subsequently by the impugned order dated 29th June 1977 this licence was not renewed.
Let it again be made clear that the application was for a quasi permanent cinema licence.
This order refusing to renew quasi permanent cinema licence was challenged by the third respondent before the State Government and which appeal was allowed giving rise to the petition by the appellants.
When an application for no objection certificate is made, objections have to be invited in the prescribed manner.
There can conceivably be hundreds of objections.
There is no question of then giving a personal hearing to each objector.
If after taking into consideration the objections.
a no objection certificate is granted, there ends the matter subject, of course, to any properly constituted legal proceedings, conceivably a writ petition under Article 226.
But sub section
(3) of section 5 of the Act is unambiguous when it provides for an appeal only at the instance of a person aggrieved by the decision of the licensing authority refusing licence.
A fortiori, every objector to renewal is not entitled to file an appeal if licence is granted rejecting his objections.
Nor in an appeal by the aggrieved person within the meaning of section 5(3) every objector to the grant of no objection certificate is entitled to be joined as a party respondent or that each objector is entitled to notice of hearing of the appeal.
however, the grievance of the appellants it without merits because initially when no objection certificate was applied for they did not object and one who has not objected cannot subsequently make a grievance [see Jashbhai Motibhai Desai vs Roshan Kumar, Haji Bashir Ahmed & others(1)].
The second fallacy is that rules 3 to 6 envisage an advertisement of an application for a no objection certificate and inviting objections 'hereto and disposal of such an application.
There is, however, nothing in the Act or the rules which requires the licensing authority to invite objections before grant of a quasi permanent cinema licence.
The right to object is at the initial stage when a no objection certificate is applied for by the intending applicant for such a certificate.
But there is no provision for inviting objections when the application is for a permanent or quasi permanent cinema licence or a touring cinema licence.
There is no provision in the Act or Rules which requires advertisement of such an application inviting objections and 801 consideration of the objections before grant of a cinema licence.
In A this case the application which was turned down by the Distt.
Magistrate was one for renewal of a quasi permanent cinema licence.
The application for a no objection certificate and granting of the same had passed muster long before on 10th February 1976 and appellants had not raised any objection to the grant of no objection certificate.
When the present appellants objected to the renewal of a quasi permanent cinema licence it was not the stage for grant of a no objection certificate but it was the stage of renewal of quasi permanent licence subsequent to the stage of granting of a no objection certificate, when there was no statutory obligation on the licensing authority to invite objections nor were the appellants entitled to file objections and nor were they entitled to be heard.
A right to notice by reason of any rule of natural justice, which a party may establish, must depend for its existence upon proof of an interest which is bound to be injured by not hearing the party claiming to be entitled to a notice and to be heard before an order is passed.
If the duty to give notice and to hear the party is not mandatory, the actual order passed on a matter must be shown to have injuriously affected the interest of the party which was given no notice of the matter [see Cosmosteels Private Ltd. vs Jairam Das Gupta & Ors.
There was no statutory or mandatory duty to hear the appellants.
There fore, there is no substance in the grievance that before granting renewal of such licence the State Government in the appeal filed by the third respondent had not heard them and that such a decision was rendered in violation of the principles of natural justice.
Mr. Sanghi, learned counsel for the respondents, wanted to contend that the appellants are not acting bona fide in vindication of their own rights but they are a fence or a cloak for the owners of Paras Cinema, the holders of permanent cinema licence in the locality, and the appellants thus being proxies for such a trade rival, they have no locus standi to file the objections.
Mr. Sanghi heavily drew upon the observations of this Court in Jashbhai Motibhai Desai 's case (supra) to make good the submission.
Undoubtedly, in the aforementioned case this Court in terms held that a rival in cinema business has no locus standi to question the validity of the order under which the other person has been granted a cinema licence, but as the only contention raised on behalf of the appellants does not commend to us and, therefore, the appeal is likely to fail on that ground alone, it is not necessary to explore this contention advanced on behalf of the respondents.
802 There was only one point raised in this appeal and as there is no merit in it, the appeal fails and is dismissed but with no order as to costs.
PATHAK, J. I agree that the appeal should be dismissed, but on a very short ground.
Rules 3 to 6 of the Madhya Pradesh Cinemas (Regulation) Rules, 1972 relate to the grant of a "no objection" certificate, that is to say a certificate that there is no objection to the location of the cinema at the site proposed by the applicant.
The Rules contemplate the filing of objections by local residents.
That is the stage at which opposition to the establishment of a cinema at the proposed site is specifically provided for.
Any person opposing the establishment of a cinema at the proposed location must do so before a "no objection" certificate is granted.
The appellants did not file any objection at that stage "no objection" certificate was granted to the third respondent.
Thereafter, when the third respondent applied for a cinema licence, the appellants for the first time opposed the application.
They opposed it on the ground that there was a mosque, a "madarsa" and a temple in the vicinity and that the cinema, if permitted, would constitute an obstruction and annoyance to the local residents.
Inasmuch as those grounds were available to them during the proceedings for considering the grant of a "no objection" certificate, and they did not file any objection, they cannot now be permitted to plead a right to oppose the grant of a cinema licence.
Had they apposed the grant of the "no objection" certificate and their objection had made out a good case, it is possible that the "no objection" certificate would have been refused, and in that event the applicant would not have applied for a cinema licence.
on that short ground the appeal must fail.
That being so, I need not consider the further question whether in an appeal filed by an applicant, who has been refused a cinema licence, the local residents, who had objected to the grant of a "no objection" certificate and had been over ruled, can contest the claim of the applicant to a cinema licence.
Rule 102 empowers the licensing authority to refuse a cinema licence if the cinema is likely to cause obstruction, inconvenience, annoyance, risk, danger or damage to residents, or passers by in the vicinity of the cinema.
Rule 6 declares that the.
grant of a "no objection" certificate is without prejudice to the right of the licensing authority to refuse a cinema licence under Rule 102.
I leave the question open whether a person who has objected to the grant of a "no objection" certificate when that grant was under consideration 803 can subsequently oppose the grant of a cinema licence on the same grounds which he took against the "no objection" certificate.
The appellants not being entitled to challenge the grant of the cinema licence to the third respondent, I need express no opinion on the validity of that grant.
The appeal is dismissed but without any order as to costs.
N.V.K. Appeal dismissed.

dataset_name: IN-Abs

summary:
The third respondent made an application for the grant of a licence for a temporary cinema and the District Magistrate issued a no objection certificate for a period of six months.
This licence was renewed twice but a subsequent application for renewal was turned down by the District Magistrate on the ground that the 'Paras Talkies ' with a permanent cinema Licence in the locality which was hitherto closed had started functioning and, therefore, a renewal of the licence for a temporary cinema in the same locality would not be proper.
In appeal, the State Government granted respondent 3 a licence for a quasi permanent cinema.
The appellants in their writ petition questioned the validity of the State Government 's order on the ground that they were the residents of the locality and that they had objected to the grant/renewal of licence on the ground that there was a mosque, a madrasa and a temple in the vicinity of the place, where the cinema house was to be constructed and even though their objections were upheld by the licensing authority, the District Magistrate, they were not heard in the appeal preferred by the third respondent and therefore, the order of the first respondent, State of M.P. suffers from the vice of violation of the principles of natural justice.
The High Court held that since the matter was left to the subjective satisfaction of the State Government, the State Government on being satisfied that there was no impediment to the grant of such a licence, was perfectly justified in granting the same, and that this was not a fit case for interference by the High Court.
In the appeal to this Court it was contended on behalf of the appellants, that as objectors they should have been heard and the decision arrived at by the State Government in appeal at their back was violative of the principles of natural justice and the order granting licence for a quasi permanent cinema by the State Government was invalid.
Dismissing the appeal, ^ HELD: ( per Desai, J.) 1.
There is nothing in M.P. Cinema (Regulation) Act, 1952 or the M.P. Cinema (Regulation) Rules 1972 which require the licensing authority 793 to invite objections before grant of a quasi permanent cinema licence.
The right to object is at the initial stage when a no objection certificate is applied for by the intending applicant for such a certificate.
But there is no provision for inviting objections when the application is for a permanent or quasi permanent cinema licence or a touring cinema licence.
[800 G] 2.
There is no provision in the Act or Rules which requires advertisement of such an application inviting objections and consideration of the objections before grant of a cinema licence.
[800 H] 3.
When an application for no objection certificate is made, objections have to be invited in the prescribed manner.
There can conceivably be hundred of objections.
There is no question of giving a personal hearing to each objector.
If after taking into consideration the objections a no objection certificate is granted, there ends the matter subject, of course, to any properly constituted legal proceedings, conceivably a writ petition under Article 226.
[800 Cl 4.
Sub section
(3) of section 5 of the Act is unambiguous when it provides for an appeal only at the instance of a person aggrieved by the decision of the licensing authority refusing licence.
A fortiori every objector to grant of a no objection certificate is not entitled to file an appeal if such certificate is granted rejecting his objections.
Nor in an appeal by the aggrieved person within the meaning of section 5(3) every objector to the grant of a no objection certificate is entitled to be joined as a party respondent or that each objector is entitled to notice of hearing of the appeal.
[800 D E] 5.
The grievance of the appellants is without merits because initially when no objection certificate was applied for they did not object and one who has not objected cannot subsequently make a grievance.
[800 F] Jasbhai Motibhai Desai vs Roshan Kumar, Haji Bashir Ahmed & others ; referred to.
A right to notice by reason of any rule of natural justice, which a party may establish, must depend for its existence upon proof of an.
interest which is bound to be injured by not hearing the party claiming to be entitled to a notice and to be heard before an order is passed.
If the duty to give notice and to hear the party is not mandatory, the actual order passed on a matter must be shown to have injuriously affected the interest of the party which was given no notice of the matter.
[1801 C D] Cosmosteels Private Ltd. vs Jairam Das Gupta & Ors.
; at 431, referred to 7.
There is no substance in the grievance that before granting renewal of quasi permanent cinema licence the State Government in the appeal filed by the third respondent had not heard them and that such a decision was rendered in violation of the principles of natural justice.
[801 E] In the instance case, the application for a no objection certificate and granting of the same had passed muster long before, and appellants had not raised any objection to the grant of no objection certificate.
When the present appellants objected to the renewal of a quasi permanent cinema licence it was not the 794 stage for grant of a no objection certificate but it was the stage of renewal of quasi permanent licence subsequent to the stage of granting of a no objection certificate, when there was no statutory obligation in the licensing authority to invite objections nor were the appellants entitled to file objections and nor were they entitled to be heard.
[801 A B] (per Pathak J. concurring) 1.
Rules 3 to 6 of the M.P. Cinema (Regulation) Rules 1972, relate to the grant of a "No objection" certificate.
The Rules contemplate the filing of objections by local residents.
That is the stage at which opposition to the establishment of a cinema at the proposed side is specifically provide for.
Any person opposing the establishment of a cinema at the proposed location must do so before a 'No objection ' certificate is granted.
[802 B C] In the instant case, the appellants did not file any objections opposing the establishment of a cinema A "No objection certificate" was granted to the third respondent.
When the third respondent applied for a cinema licence, the appellants for the first time opposed the application on the grounds that there was a mosque, a madras and a temple in the vicinity.
Inasmuch as these grounds were available to them during the proceedings for considering the grant of a 'No objection ' certificate, and they did not file any objection, they cannot now be permitted to plead a right to oppose the grant of a cinema licence.
Had they, opposed the grant of the 'no objection ' certificate and their objection had make out a good case, it is possible that the 'no objection ' certificate would have been refused, and in that event the applicant would not have applied for a cinema licence.
[802 D F] 2.
The question whether a person who has objected to the grant of a "NO objection certificate" certificate when that grant was under consideration can subsequently oppose the grant of a cinema licence on the same grounds which he took against a 'no objection ' certificate left open.
[802 H 803 A]