judgement:
minal Appeal No. 64 of 1967.
927 Appeal by special leave from the judgment and order dated March 3, 1967 of the Bombay High Court in Criminal Applica tion No. 24 of 1967.
K. Sen, section G. Sheth and I. N. Shroff, for the appellant.
N. section Bindra and section P. Nayyar, for the respondents.
The Judgment of the Court was delivered by Bachawat, J.
The appellant along with other persons is being tried for an offence under Sec.
120B of the Indian Penal Code read with Sec.
167(81) of the , and Sec.
5 of the Imports and Exports Control Act, 1947.
The offence is bailable.
The appellant was released on bail under orders of Magistrates dated May 11, 1960 and April 1, 1961.
A large number of witnesses have been examined but the trial has not yet been concluded.
By an order dated March 3/6, 1967, the High Court of Maharashtra, Bombay, in the exercise of its inherent jurisdiction cancelled the bail orders and directed him to surrender to his bail.
From this order, the present appeal has been filed by special leave.
In Talab Haji Hussain vs Madhukar Purshottam Mondkar and another(1), this Court held that a High Court has the inhe rent power to cancel a bail granted to a person accused of a bailable offence where such an order is necessary to secure the ends of justice or to prevent the abuse of process of any Court, and this power is preserved by Sec.
561 A of the Code of Criminal Procedure.
On behalf of the appellant it was strenuously argued that this case was wrongly decided.
Having heard full arguments, we find no reason for departing from our earlier decision.
In the matter of admission to bail, the Code of Criminal Procedure makes a distinction between bailable and non bailable offences.
The grant of bail to a person accused of a non bailable offence is discretionary under Sec.
497 of the Code and the person released on bail may again be arrested and committed to custody by an order of the High Court, the Court Session and the Court granting the bail.
Under See.
498 of the Code the High Court and the Court of Session may release any person on bail and by a subsequent order cause any person so admitted to bail to be arrested and committed to custody.
A person accused of a bailable offence is treated differently; at any time while under detention without a warrant and at any stage of the proceedings before the Court before which he is brought, he has the right under Sec.
496 of the Code to be released on bail.
The Code makes no express provision for the cancellation of a bail granted under Sec. 496.
Nevertheless, if at any subsequent stage of the proceedings, it is found that any person accused of a bailable offence is (1) ; 9 2 8 intimidating, bringing or tampering with the prosecution witnesses or is attempting to abscond, the High Court has the power to cause him to be arrested and to commit him to custody for such period as it thinks fit.
This jurisdiction springs from the over riding inherent powers of the High Court and can be invoked in exceptional cases only when the High Court is satisfied that the ends of justice will be, defeated unless the accused is committed to custody.
For the reasons given in Talab Haji Hussain 's case(1), we hold that this inherent power of the High Court exists and is preserved by Sec.
561 A of the Code.
The person committed to custody under the orders of the High Court cannot ask for his release on bail under sec.
496, but the High Court may by a subsequent order admit him to bail again.
Counsel for the appellant argued that the inherent power of the High Court is not conferred by any legislation or statute, and the deprivation of the personal liberty of the appellant by an order of the High Court in the exercise of its inherent powers is violative of the constitutional protection under article 21 of the Constitution.
article 21 is in these terms "No person shall be deprived of his life or personal liberty except according to procedure established by law.
" The term 'law ' in article 21 was the subject of an elaborate discussion in A. K. Gapalan vs The State of Madras( ).
Kania C.J. at pp.
111 113 said that the term 'law ' in that Article must mean the law of the State or enacted law, and not rules of natural justice.
Fazl Ali J. who was in the minority, said at page 169 that 'law ' must include certain principles of natural justice.
Patanjali Sastri J. at p. 1 99 said that 'law ' in article 21 means positive or State made law '.
Mahajan J. at page 226 expressed no opinion on the point.
Mukherjea J. at p. 278 said that "in article 21 the word 'law ' has been used in the sense of State made law and not as an equivalent of law in the abstract or general sense embodying the principles of natural justice.
" Das J. said at page 309 that "there is no scope for introducing the principles of natural justice in Article 21 and 'procedure established by law ' must mean procedure established by law made by the State which, as defined, includes Parliament and the Legislatures of the States." As explained by four of the learned Judges in A. K. Gapalan 's case(1), the expression 'law ' in article 21 means enacted or Statemade law, and not the general principles of natural _justice.
In Pandit M. section M. Sharma vs Shri Sri Krishna Sinha and others(1), this Court held that a deprivation of personal liberty of any person by a Legislative Assembly of a State in exercise (1) ; (2) ; (3) [1959] Stipp.
I S.C.R.8 6.
929, of its power to punish for its contempt is according to a procedure established by law and does not contravene article 21.
Art.194(3) of the Constitution provides that "the powers, privileges and immunities of a House of the Legislature of a State, and of the members and the committees of a House of such Legislature, shall be such as may from time to time be defined by the Legislature by law, and, until so defined, shall be those of the House of Commons of the Parliament of the United Kingdom, and of its members and committees, at the commencement of this Constitution." Article 194(3) thus confers on the Legislative Assembly.
of a State the existing inherent powers enjoyed by the British House of Commons including the power to punish for its contempt.
article 208 (1 ) empowers the Legislative Assembly to make rules regulating its procedure.
As explained in Pandit Sharma 's case(1), these powers and the procedure prescribed by the rules has the sanction of enacted law and an order of committal for contempt of the Assembly is according to procedure established by law.
Das C.J., speaking for four learned Judges said at page 861 : "Art, 194(3) confers on the Legislative Assembly those powers, privileges and immunities and article 208 confers power on it to frame rules.
The Bihar Legislative Assembly has framed rules in exercise of its powers under that Article.
It follows, therefore, that article 194(3) read with the rules so framed has laid down the procedure for enforcing its powers, privileges and im munities.
If, therefore, the Legislative Assembly has the powers, privileges and immunities of the House of Commons and if the petitioner is eventually deprived of his personal liberty as a result of the proceedings before the Committee of Privileges, such deprivation will be in accordance with procedure established by law and the petitioner cannot complain of the breach, 'I 'Actual or threatened, of his fundamental right under article 21." Subba Rao J. in his minority judgment in that case and the Court in Special Reference No. 1 of 1964 2 did not say anything to the contrary an this point.
Now the question is whether the inherent power of tile High Court is conferred by or has the sanction of enacted law.
From its very inception the High Court has possessed and enjoyed its inherent powers including the power to prevent the abuse of the process of any Court within its jurisdiction and to secure the ends of justice.
These powers inherent in the High Court and spring from its very nature and constitution as a court of superior jurisdiction.
All the existing powers of the High Courts were preserved and continued by legislation from time to time,.
561 A of the Criminal Procedure Code declared that "nothing in this Code shall be deemed to limit or affect the inherent power of the High Court to make such orders as may be necessary (1) [1959] Supp.1 S.C.R. 806.
(2) ; 9 30 to give effect to any order passed under this Code, or to prevent the abuse of process of any Court or otherwise to secure the ends of justice.
" The section was inserted in the Code by Act XVIII of 1923 to obviate any doubt that these inherent powers have been taken away 'by the Code.
In terms, this section did not confer any power, it only declared that nothing in the Code shall be deemed to limit or affect the existing inherent powers of the High Court, see King Emperor vs Khwaja Nazir Ahmad(1).
Then came other enactments which were framed differently.
2 2 of the Government of India Act, 1935, provided : "Subject to the provisions of this Part of this Act, to the provisions of any Order in Council made under this or any other Act and to the provisions of any Act of the appropriate Legislature enacted by virtue of powers conferred on that Legislature by this Act, the jurisdiction of and the law administered in, any existing High Court, and the respective powers of the judges thereof in relation to the administration of justice in the court, including any power to make rules of Court and to regulate the sittings of the Court and of members thereof sitting alone or in division courts, shall be the same as immediately before the commencement of Part III of this Act." The Section enacted that the jurisdiction of the existing High Courts and the powers of the judges thereof in relation to the administration of justice "shall be" the same as immediately before the commencement of Part III of the Act.
The statute confirmed and re vested in the High Court all its existing powers and jurisdiction including its inherent powers.
Then came the Constitution.
article 225 of the Constitution provides : "225.
Subject to the provisions of this Constitution and to the provisions of any law of the appropriate legislature made by virtue of powers conferred on that Legislature by this Constitution, the jurisdiction of, and the law administered in, any existing High Court, and the, respective powers of the Judges thereof in relation to the administration of justice in the Court, including any power to make rules of Court and to regulate the sittings of the Court and of members thereof sitting alone or in Division Courts, shall be the same as immediately before the commencement of this Constitution.
The proviso to the article is not material and need not be read.
The irticle enacts that the jurisdiction of the existing High Courts and the powers of the judges thereof in relation to administration of justice "shall be" the same as immediately before the cornmencement of the Constitution.
The Constitution confirmed and (1) L.R. 61 I.A. 203,213.
931 re vested in the High Court all its existing powers and jurisdiction including its inherent powers, and its power to make rules.
When the Constitution or any enacted law has embraced and confirmed the inherent powers and jurisdiction of the High Court which previously existed, that power and jurisdiction has the sanction of an enacted saw" within the meaning of article 21 as explained in A. K. Gopalan 's(l) case.
The inherent powers of the High Court preserved by Sec.
561 A of the Code of Criminal Procedure are thus vested in it by "law" within the meaning of article 21.
The procedure for invoking the inherent powers is regulated by rules framed by the High Court.
The power to make such rules is conferred on the High Court by the Constitution.
The rules previously in force were continued in force by Article 372 of the Constitution.
The order of the High Court canceling the bail and depriving the appellant of his personal liberty is according to procedure established by law and is not violative of article 21.
The High Court cancelled the previous bail orders, as it found that the appellant was intimidating and tampering with certain German citizens whom the prosecution intended to examine as witnesses.
This finding is challenged by the appellant.
Normally, it is not the practice of this Court to re examine findings of fact in an appeal under article 136 of the Constitution.
Having heard full arguments, we are not inclined to interfere with the findings of the High Court.
The High Court reserved liberty to the appellant to move the High Court on or after June 26, 1967, for a fresh order of bail.
It was contemplated that within the time so fixed, the prosecution will examine the German witnesses.
On March 13, 1967, the appellant surrendered to his bail and since then he is in jail custody.
The prosecution has been given ample opportunity to examine the witnesses before June 26, 1967, without any interference from the appellant.
From the correspondence placed before us, it appears that during the pendency of this appeal the prosecution has refrained from taking steps for the examination of the German witness.
This Court did not pass any order staying the proceedings or admitting the appellant to bail.
The delay in the examination of the witnesses is caused entirely by the laches of the prosecution.
Even if the prosecution cannot now examine the witnesses by June 26, 1967, we see no reason why the appellant should remain in custody after that date.
We direct that the appellant be released on bail on June 26, 1967, whether or not the prosecution witnesses are examined by that date.
The bail will be given to the satisfaction of the Presidency Magistrate, 23rd Court, Esplanade, Bombay, before whom the case is pending.
Subject to this modification, the appeal is dismissed.
Order modified and Appeal dismissed.

summary:
The appellant along with others was being tried for an offence under section 120B of the Indian Penal Code read with section 167 (81) of the , and section 5 of the Imports and Exports Control Act, 1947.
Although he was at first released on bail by the Presidency Magistrate, the High Court, by an order dated March 6, 1967 in the exercise of its inherent powers cancelled the previous bail orders, as it found that the appellant was interfering and tampering with certain foreigners whom the prosecution intended to examine as witnesses.
The High Court, however, reserved liberty to the appellant to move the court on or after June 26, 1967 far a fresh order of bail as it was contemplated that within the time so fixed, the prosecution would examine the foreign witnesses.
In the appeal to this Court, the appellant challenged the order of the High Court on the ground that the inherent powers of the High Court were not conferred by any legislation or statute, and the deprivation of the personal liberty of the appellant by an order of the High Court in the exercise of its inherent powers was violative of Art, ' II of the Constitution HELD : The High Court 'has the inherent power to cancel bail granted to a person accused of a bailable offence.
This jurisdiction should be invoked in exceptional cases only when the High Court is satisfied that the ends of justice will be defeated unless the accused is committed to custody.
[928A B] The order of the High Court cancelling the bail and depriving the appellant of his personal liberty was according to procedure established by law was not violative of article 21.
[931C] The existing powers and jurisdiction of the High Court, including its inherent powers, had been confirmed and continued by section 223 of the Government of India Act, 1935, and article 225 of the Constitution.
When the Constitution or any enacted law has embraced and confirmed the inherent power and the jurisdiction of the High Court which previously existed, that power and jurisdiction has the sanction of an en acted 'law ' within the meaning of article 21.
[929H; 93A B] Case law discussed.
[On the facts the court noted that there had been unnecessary delay in the examination of the foreign witnesses and directed that the appellant should be released on bail on June 26, 1967.


judgement:
l Appeals No. 1005 of 1964.
Appeal by special leave from the judgment and order dated July 12, 1962 of the Bombay High Court, Nagpur Bench in appeal No. 16 of 1960 under the Letters Patent.
A. section Bobde, G. L. Sanghi, and O. C. Mathur, for the appellant.
N. C. Chatterjee and M. section Gupte, for respondents Nos. 1 and 2.
W. section Barlingay and A. G. Ratnaparkhi, for respondent No. 4.
The Judgment of the Court was delivered by Wanchoo, C.J.
This is an appeal by special leave from the judgment of the Bombay High Court and arises in the following circumstances.
The respondents were members of a Co operative Housing Society and had created a mortgage on their property in favour of the society.
As the amount due under the mortgage was not paid, the matter was referred to the Registrar, Co operative Societies, and he made an order dated May 1, 1957 that the respondents should pay a sum of Rs. 9,000 and odd and interest at Rs. 12 per cent per annum from August 1, 1953 till satisfaction of the debt due to the Society.
The Registrar further directed that if the amount was not paid in cash to the society, the property mentioned in his order would be sold in satisfaction of the amount.
The order also provided that in case the amount due was not realised from the sale of the property, 'the society would have the right to proceed against the respondents for the balance.
The amount was not paid as directed in the order.
Consequently an application was made to the civil court as provided by law for recovery of the amount under the order of the Registrar which amounted to a decree.
In consequence the property on which charge was created by the order of the Registrar was brought 'to 697 sale.
The sale was held on April 7, 1958 and the appellant being the highest bidder, the sale was concluded in his favour.
Normally the sale would have been confirmed after 30 days, if no application had been made under O. XXI r. 90 of the Code of Civil Procedure, for O. XXI r. 92 inter alia provides that "where no application is made under r. 89, r. 90 or r. 91, or where such application is made and disallowed, the court shall make an order confirming the sale and thereupon the sale shall become absolute".
As an application had been made on May 3, 1958 under O. XXI r. 90, the sale could not be confirmed till that application was disposed of.
Proceedings under O. XXI rule 90 seem to have gone on upto October 7, 1958.
On that day it appears that one of the respondents gave evidence as a witness.
Thereafter it was the turn of the Society decree holder to give evidence.
But before the evidence of the society began, it appears that respondents requested for one month 's time to deposit the decretal amount along with the auction purchaser 's commission.
They also appear to have stated that in that event they were prepared to withdraw their application under O. XXI r. 90.
The society as well as the auction purchaser had no objection to time being allowed.
The executing court therefore granted time to the respondents till November 21, 1958 to deposit the entire decretal amount along with the auction purchaser 's commission.
After time was thus allowed with consent of the parties, the application under O. XXI r. 90 was dismissed as withdrawn with no order as to costs.
On November 20, 1958, an application was made by he respondents in which they referred to what had been ordered on October 7, 1958.
They further stated that November 21, 1958 was a holiday and it was not possible to deposit the amount on that day though they were prepared to do so.
They consequently prayed for time for one day so that the deposit might be made on November 22, 1958.
No order was passed on this application on November 20, 1958 though it bears an endorsement of the executing court to the effect that it had been filed on November 20, 1958.
November 21, 1958 being a holiday it appears that the matter came before the executing court on November 22.
On that day the court noted that no amount had been deposited.
The order sheet also shows that counsel for the respondents prayed for time for a fortnight.
The society decree holder as well 'as the auction purchaser (appellant) opposed the prayer for extension of time.
The executing court held that as the society decree holder and the auction purchaser were not willing to extend time the court could not extend time which had been given under an agreement of the parties by way of compromise.
The court therefore rejected the prayer for extension of time and thereafter confirmed the sale as required by 0 XXI r. 92 as the application under O. XXI r. 90 had already been dismissed on October 7, 1958.
698 The respondents went in appeal to the District Judge.
He held that the court had always the power whether under section 148 of the Code of Civil Procedure or otherwise, to postpone passing of orders confirming sale of immovable properties.
He, went on to hold that the executing court erred in holding that it had no power to grant further extension of time.
The appeal was therefore allowed, the order of the executing court set aside and the case remitted to.
the executing court for deciding the application for extension of time on merits.
It may be mentioned that though the District Judge said in the order that the application presented on November 22, 1958 for granting further time would be disposed of after hearing parties and considering the merits of the case, there was in fact no written application on November 22, 1958 and there was only an oral prayer.
That however makes no difference to the main question before us.
There was then a second appeal 'by the appellant to the High Court.
A question was raised in the High Court whether O. XXXIV r. 5 applied to the present case.
The learned Single Judge seems to have held that O. XXXIV r. 5 did not apply.
He further held that in view.
of the provisions of O. XXI r. 92, the sale was rightly confirmed and section 148 of the Code of Civil Procedure could not under the circumstances be invoked.
The appeal therefore was allowed and the order of the executing court restored.
Then there was a Letters Patent Appeal by the respondents.
The Division Bench appears to have held that O. XXXIV r. 5 would apply in a case of this kind.
It also went on to say that even if O. XXXIV r. 5 did not apply, it was a fundamental principle that before a mortgagor could be prevented from making the payment and redeeming the property, his rights must have come to an end and they would come to an end only when his title was lost by confirmation of sale.
It went on to hold that if the application for extension of time was wrongly rejected if the mortgagor had the right and the court had 'the power to grant adjournment it would be open in appeal to consider whether the executing court refused the adjournment properly or not.
If in appeal the court came 'to the conclusion that the order of the executing court refusing extension of time was wrong, the confirmation which followed on such wrong order would fall and the mortgagor judgment debtor would be entitled to deposit the amount.
It appears that as the respondents had deposited some money after the order of the District Judge in appeal, the Letters Patent Bench allowed the appeal, set aside the order of the learned Single Judge and restored the order of the District Judge and further set aside the order of confirmation made by the executing court on November 22, 1958.
It also ordered that the amount lying in deposit should be paid to the decree holder mortgagee and the auction purchaser.
It may be added that this deposit was not made before the confirmation 69 9 of sale on November 22, 1958 but long afterwards in 1959.
It further directed that if on making up the accounts, it was found that any additional amount had to be deposited, the court would give reasonable time to the judgment debtors, namely, the present respondents before us.
The High Court having refused leave to appeal, the appellant obtained special leave from this Court, and that is how the matter has come before us.
The principal question that arises for decision in this case is whether the executing court was right in the view that it could not extend time which had been given by consent of parties on October7, 1958.
If that view is correct, there would be no difficulty in holding, in view of O. XXI r. 92, that the order confirming sale was proper.
We shall proceed on that assumption that O. XXXIV c. 5 applies in the present case and that the order of the Registrar which was under execution was a final decree in a mortgage suit.
O. XXXIV r. 5(1) gives an opportunity to the judgment ' debtor in a mortgage decree for sale to deposit the amount due under the mortgage decree at any time before the confirmation of sale made in pursuance of the final decree, and if such a deposit is made the court executing the decree has to accept the payment and make an order in favour of the judgment debtor in terms of ' O. XXXIV r. 5 (1).
Though O. XXXIV r. 5 (1) recognises the right of the judgment debtor to pay the decretal amount in an execution relating to a mortgage decree for sale at any time before, the confirmation of sale, that in our opinion does not mean that be said rule gives power to the court to extend time for payment on an application made by the judgment ;debtor.
There is no pro vision in O. XXXIV r. 5 (1) like that contained in O. XXXIV r. 4 (2) to extend time for payment after the final decree is passed in a mortgage suit.
As we read O. XXXIV r. 5 it only permits he judgment debtor to deposit the amount due.
under the decree and such other amount as may be due in consequence of a sale having taken place, provided the deposit is made before the confirmation of sale.
But there is no power in O. XXXIV r. 5 (1) to grant extension of time and postpone confirmation of sale there:or.
The observation of the District Judge that the court has always the power to postpone passing orders confirming sale of immovable property is in our view incorrect, in the face of the provisions contained in O. XXI r. 92 (1).
That provision makes it absolutely clear that if no application is made under r. 89, r. 90 or r. 91 or where such application is made and disallowed, the court has to make an order confirming the sale and thereupon the ,ale becomes absolute.
It is not open to the court to go on fixing late after date and postponing confirmation of sale merely to accommodate a judgment debtor.
If that were so, the court may go on postponing confirmation of sale for years in order to accommodate a judgment debtor.
What O. XXI r. 92 contemplates is that where conditions thereunder are satisfied an order for confirmation 700 must follow. ' Further we have already indicated that O. XXXIV r. 5 does not give any power to court to rant time to deposit the money after the final decree has been passed.
All that it permits is that a judgment debtor can deposit the amount even after the final decree is passed at any time before the confirmation of sale and if he does so, an order in terms of O. XXXIV r. 5 (1) in his favour has to be passed.
With respect we cannot understand what the Letters Patent Bench meant by saying that before a mortgagor could be prevented from making payment and redeeming the property, his rights must have come to an end and that they could not come to an end unless his title to the property had been lost by confirmation of sale.
It is true that so long as his right to redeem subsists the mortgagor may redeem the property.
It is this principle which is recognised in O. XXXIV r. 5 which provides that the mortgagor judgment debtor can deposit the amount due even after the final decree has been passed but this deposit must be made at any time before confirmation of sale.
It may be noted that there is no power under O. XXXIV r. 5 to extend time and all that it does is to permit the mortgagor judgment debtor to deposit the amount before confirmation of sale.
It does not give any right to the mortgagor judgment debtor to ask for postponement of confirmation of sale in order to enable him to deposit the amount.
We have to interpret O. XXXIV r. 5 and O. XXI r. 92 harmoniously and on a harmonious interpretation of the two provisions it is clear that though the mortgagor has the right to deposit the. amount due at any time before confirmation of sale, there is no question of his being granted time under O. XXXIV r. 5 and if the provisions of O. XXI r. 92 (1) apply the sale must be confirmed unless before the confirmation the mortgagor judg ment debtor has deposited the amount as permitted by O. XXXIV r. 5.
We may in this connection refer to the decision of this Court in Janak Rai vs Gurdial Singh(1), where it has been laid down that once the conditions of O. XXI r. 92 (1) are complied with, the executing court must confirm the sale.
It is on these principles that we have to decide whether the trial court was correct.
We have already indicated that the sale was held on April 7, 1958, and in the normal course it would have been confirmed after 30 days unless an application under r. 89, r. 90, or r. 91 of O. XXI was made.
Besides, this case is, as we have already assumed, analogous to the case of a final mortgage decree.
The judgment debtor mortgagor had the right to deposit the amount at any time before confirmation of sale within 30 days after the sale or even more than 30 days after the sale under O. XXXIV r. 5 (1 ) so long as the sale was not confirmed.
If the amount had been deposited before the confirmation of sale, the judgment debtors had the right to ask for an order in terms of (1) ; 70 1 O. XXXIV r. 5 (1) in their favour.
In this case an application under O. XXI r. 90 had been made and therefore the sale could not be confirmed immediately after 30 days which would be the normal course; the confirmation had to await the disposal of the application under O. XXI r. 90.
O Chat application was disposed of on October 7, 1958 and was dismissed.
It is obvious from the order sheet of October 7, 1958 that an oral compromise was arrived at between the parties in court on that day.
By that compromise time was granted to the respondents to deposit the entire amount due to the decree holder and the auction purchaser by November 21, 1958.
Obviously the basis of the compromise was that the respondents withdrew their application under O. XXI r. 90 while the decree holder society and the auction purchaser appellant agreed that time might be given to deposit the amount up to November 21, 1958.
If this agreement had 'not been arrived at and if the application under O. XXI r. 90 bad been dismissed (for example, on merits) on October 7, 1958, the court was bound under O. XXI r. 92(1) to confirm the sale at once.
But because of the compromise between the parties by which the respondents were given time up to November 21, 1958, the court rightly postponed the question of confirmation of sale till that date by consent of parties.
But the fact remains that the application under O. XXI r. 90 had been dismissed on October 7, 1958 and thereafter the court was bound to confirm the sale but for the compromise between the parties giving time upto November 21, 1958.
Now let us see what happened about November 21, 1958.
On November 20, 1958, an application was made by the respondents praying that they might be given one day more as November 21, 1958 was a holiday.
No order was passed on that date, but it is remarkable that no money was deposited on November 20, 1958.
When the matter came up before the court on November 22, 1958 no money was deposited even on that day.
Now under O. XXXIV r. 5 it was open to the respondents to deposit the entire amount on November 22, 1958 before the sale was confirmed, but no such deposit was made on November 22, 1958.
On the other hand, counsel for the respondents prayed to the executing court for extension of time by 14 days.
The executing court refused that holding that time upto November 21, 1958 had been granted by consent and it was no longer open to it to extend that time.
The executing court has not referred to O. XXI r. 92 in its order, but it is obvious that the executing court held that it could not grant time in the absence of an agreement between the parties, because O. XXI r. 92 required that as the application under O. XXI r. 90 had been dismissed, the sale must be confirmed.
We are of the view that in the circumstances it was not open to the executing court to extend time without consent of parties for time between October 7, 1958 to November 21, 1958 was granted by consent of parties.
Section 148 of the Code Civil Procedure would not apply 702 in these circumstances, and the executing court was right in holding that it could not extend time.
Thereafter it rightly the sale as required under O. XXI r. 92, there being no question of the application of O. XXXIV r. 5, for the money had not been deposited on November 22, 1958 before the order of confirmation confirmed was passed.
In this view of the matter, we are of opinion that the order of the executing court refusing grant of time and confirming the sale was correct.
it is however urged that it does not appear that the time was , ranted on October 7, 1958 by consent of parties because the respondents had only asked for one month 's time and the court gave time for about six weeks.
It appears however that the grant of 'time on October 7, 1958 was as a result of an oral compromise between the parties.
This is quite, clear from the fact that the application under O. XXI r. 90 was withdrawn on the basis that time would be granted.
The fact that time was actually granted for six weeks does not mean that that was done without the consent of the parties.
It seems to us that the whole thing took place in the presence of the court and the order granting time upto November 21, 1958 must in the circumstances be read as a consent order.
It is borne out by the fact that on November 22, 1958 the same presiding judge of the executing court said that time had been granted with the consent of the parties by way of compromise.
We cannot therefore accept the contention that time was not granted by consent of parties and therefore the court had power under section 148 to extend time which had already been granted.
We, allow the appeal, set aside the order of the Letters Patent Bench and of the District Judge and restore that of the executing court dated November 22, 1958.
It follows that the sale stood confirmed in favour of the appellant on November 22, 1958.
We direct that the respondents (judgment debtors) will pay the costs of the appellant throughout.
The money deposited by the respondent can be taken back by them.
R.K.P.S. Appeal allowed.
L7 Sup/67 17 5 68 2,500 GIPF.

dataset_name: IN-Abs

summary:
The respondents were members of a Cooperative housing society and 'had created a mortgage on their property in favour of the society.
As an amount due under the mortgage was not paid, the matter was referred to the Registrar of Cooperative Societies and he made an order on May 1, 1957 directing the respondent to pay the amount due from August f. 1953 till the debt was discharged.
He further directed that if the amount was not paid, the property could be sold in satisfaction of the amount.
The amount was not paid as directed and the property was therefore sold on April 7, 1958 to the appellant.
As an application was made by the respondents on May 3, 1958 under O. XXI, r. 90 the sale could not be confirmed under O. XXI, r. 92 until this application was disposed of.
The proceedings on the application continued up to October 7, 1958 when an order was passed with the consent of the parties whereby the respondents were granted time till November 21, 1958 to deposit the amount due and the application under O. XXI r. 90 was dismissed as withdrawn.
When the matter came up before the executing court on November 22, the court noted that no amount bad been deposited and although an application was made on behalf of the respondents for a further extension of time, the executing court held that as the society decree holder and the auction purchaser were not willing to extend time, the court could not extend time which had been given under an agreement of the parties by way of compromise.
The court therefore confirmed the sale under O. XXI r. 92.
After appeals to the District Judge and a single bench of the High Court, a Division Bench, in a Letters Patent Appeal, held that O. XXXIV r. 5 would apply in a case of 'this kind and that even if it did not apply.
it was a fundamental principle that before a mortgagor could be pre vented from making the payment and redeeming 'the property.
his rights must have come to an end and they would come to an end only when his title was lost by confirmation of sale.
The court allowed the appeal holding that the application for extension of time was wrongly rejected by the executing court as it had the power to grant an extension.
It further directed that as some amount had been paid by he respon dents, if on making up the accounts it was found that any additional amount was due the court would give reasonable time for this to be deposited.
On appeal to this Court, HELD : The order of the executing court refusing extension of time and confirming the sale in favour of the appellant under O. XXI r. 92 was correct.
[702B] 696 It was not open to the executing court to extend time without the consent of parties, for time between October 7, 1958 to November 21, 1958 was granted by consent of parties.
Section 148 of the Code of Civil Procedure would not apply in these circumstances.
[701H] Though O. XXXIV r. 5(1) recognises the right of the judgment debtor to pay the decretal amount in an execution relating to a mortage decree for sale at any time before the confirmation of sale, the rule does not give any power to the court to grant time to deposit the money after the final decree has been passed.
It is not open to the court to go on fixing date after date and postponing confirmation of sale merely to accommodate a judgment debtor.
A harmonious construction of O. XXXIV r. 5 and O. XXI r. 92 makes it clear that if the provisions of O. XXI r. 92(1) apply the sale must be confirmed unless before the confirmation the mortgagor judgment debtor has deposited the amount as permitted by O. XXXIV r. 5.
[699D E. H; 700E] Janak Rai vs Gurdial Singh ; , referred to.


judgement:
Appeal Nos.
474 477 966.
Appeals by special leave from the judgment and order dated September 5, 1963 of the Gujarat High Court in Income tax Reference No. 19 of 1962.
S.T. Desai, A. N. Kirpal, R.N. Sachthey and S.P. Nayyar for the appellant (in all the appeals).
R.J. Kolah, M.L. Bhakta and O.C. Mathur, for the respondents (in all the appeals).
The Judgment of the Court was delivered by Sikri, J.
These four appeals by special leave are ' directed against the judgment of the Gujarat High Court in Income Tax Reference No. 19 of 1962, whereby the High Court answered the questions referred to it by the Income tax Appellate Tribunal against the Commissioner of Income tax, who is the appellant before us.
The reference was in respect of assessment years 1955 56 and 1956 57 in the case of Shri Jayantilal Amratlai (Individual) and in respect of assessments years 1958 59 and 1959 60 in the case of Jayantilal Amratlal Charitable Trust Ahamedabad.
The questions referred are: (1 ) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the income of Jayantilal Amratlal Charitable Trust was not assessable in the hands of the settlor Jayantilal Amratlal under the first proviso to Sec.
16(1)(c) of the Income tax Act for the assessment years 1955 56 and 1956 57 ? (2) Whether on 1he facts and in the circumstances of the case, the Tribunal was right in holding that the income of the Trust should be considered in the assessment of the trustees and that they were entitled to the benefits of the refunds attached to the dividends from the Trust properties for 'the assessment years 1958 59 and 1959 60 ? The answer to these quest.ions depends on the true interpretation of section 16(1)(c) of the Indian Income tax Act, 1922, and the interpretation of the Trust Deed dated June 19, 1947, and 948 to appreciate the points fully it is necessary to give a few facts which are stated in the statement of the case.
Jayantilal Amratlal, individual, hereinafter referred to as the settlor, executed a trust deed whereby he settled 80 ordinary shares of M/s Jayantilal Amratlal Ltd., on trust and created a trust known as "Jayantilal Amratlal Charitable Trust" to carry out the following various objects set out in the Trust Deed : "For the relief of poor, for education, for medical relief, for advancement of religion, knowledge, commerce, health, safety or any other objects beneficial to mankind." This Trust Deed was registered with the Charity Commissioner under the Bombay Public Trust Act, 1950.
The Department accepted this trust as a valid charitable trust and gave the necessary relief to the trustees in respect of the income of the Trust.
till the assessment year 1957 58.
The Income tax Officer, while dealing with the assessment of Jayantilal Amratlal Charitable Trust for the year 1958 59, wrote A letter to the Trust to show cause why the income of the Trust should not be included in that of the settlor and why the case of the Trust should not be decided accordingly.
The Managing Trustee submitted his reply.
The Income tax Officer wrote lengthy order holding that on the facts the case was covered by the first proviso to section 16 ( 1 ) (c).
He was impressed both by the wide powers given to the settlor and the way in which the settlor had been utilising his powers under the various clauses of the Trust Deed.
He held : "It is not necessary that there should be diversion of income or assets from char table purposes to noncharitable purposes to constitute "retransfer of assets to or re assumption of power over" the income or assets of the settlor.
It is not even necessary for the purpose of 1st proviso to section 16(1)(c), especially its later part i.e. "give the settlor a right to reassume power directly or indirectly over the income or assets" that income or assets should be used for personal ends.
For diversion of such assets or income from one charitable purpose to another in accordance with the wishes of the settlor and the utilisation of income and investment of income or assets not in full conformity with the desires of the trustees would be enough to drag the Trust property in the ambit of section 16 (I) (c).
In the instant case, the settlor is all in all, he is the managing trustee and in the event of a conflict of opinion amongst the trustees the settlor would exercise predominating 949 influence both as managing trustee as also in his capacity of an arbitrator and his decision would be binding on all.
The most important point which needs consideration is that all the inherent powers and discretion for the income and corpus of the Trust property remain with The settlor, in his capacity as settlor and not by way of his capacity of a trustee.
" The Income tax Officer accordingly held that the income of the Trust would not be computed in the hands of the trustees but would be computed in the hands of the settlor under section 16(1) (c).
For the assessment year 1959 60 he passed a similar order on the same date.
On the same day he also dealt with the assessments of Jayantilal Amratlal, individual, for the years 1955 56 and 1956 57.
Following his reasoning he included the relevant income of the Trust in the hands of Jayantilal Amratlal.
Four appeals were taken to the Appellate Assistant Commis sioner who, by his two orders dated November 8, 1960, dismissed the appeals.
Before him the settlor relied on section 35 of the Bombay Public Trust Act, 1950, but the Appellate Assistant Commissioner held that this did not assist the settlor because the Income tax law did take into consideration income derived directly or indirectly by illegal means.
He felt that the settlor "could not be precluded from utilising funds of the trust directly or indirectly to his benefit since he had a right under the settlement to do so and the Bombay Public Trust Act did not hold any fear for him as the penalties leviable were not of a deterrent nature, compared to the advantages that he could gain directly or indirectly by re assuming control over the investments or its income".
On appeal, Income tax Appellate Tribunal, however, reversed these orders and held that the income from the Trust was not hit by the first proviso to section 16(1)(c).
The Tribunal ignored the factual position relied on by the Income tax Officer and the Appellate Assistant Commissioner and confined itself only to the Trust Deed.
Regarding the offending clauses 4, 10 and 21 of the Trust Deed, which we will presently refer to, the Appellate Tribunal held: "We see nothing in these clauses which confer on the assessee the right to retransfer to the assessee directly or indirectly the income or the assets or to reassume power over them.
He has always to exercise these powers within the framework of the Trust.
There is no doubt power in clause (10) to invest in any manner and thereby in the assessee 's own companies, but this is overridden by clause 35 of the Bombay Trust 9 5 0 Act under which it is registered.
If the Charity Commissioner has chosen not to take action, it may also be that he has considered the matter and approved the action.
It is purely his responsibility.
The. fact that the investment itself has not been made illegal under the Trust Act and that the assessee can offend the provisions with impunity as the penalty is light are all matters extraneous to this consideration which has to be confined only to the provisions in the deed.
" At the instance of the Commissioner of Income tax the Appellate Tribunal stated the case and referred the questions which we have already reproduced above.
The High Court held : "When a statute talks about a right to reassume, it must mean a lawful right which can be lawfully exercised.
a right to reassume must be given to the settlor independently of any third party and dependent upon his own volition.
It is true that the Charity Commissioner may grant leave to the settlor, but he may or may not grant it.
A right to reassume cannot rest dependent upon whether the Charity Commissioner may or may not grant sanction.
" Shelat, C.J., observed "Surely, it must be presumed that the Charity Commissioner would not grant his sanction to an investment which is bound to result in a conflict of duty and interest on the part of the settlor who is also a trustee.
Therefore, such a right, if it can be called a right, is not one of any substance and cannot, therefore, be construed as a right to reassume power over the trust assets or the income thereof, as contemplated by proviso I to section 16(1)(c)." "A loan, by the very nature of it, cannot be said to amount to an exercise of dominion or control over its subject matter.
It is repayable and is given on conditions as to the time of repayment and interest, if any.
By taking a loan a settlor does not exercise over its subject matter power.or dominion which, but for the trust or the settlement, he would have been able to exercise." Section 16(1) (c) reads as follows "16.
Exemptions and exclusions in determining the total income. .
(1) In Computing the total income of an assessee.
(a) . 951 (b). (c) all income arising to any person by virtue of a settlement or disposition whether revocable or not, and whether effected before or after the commencement of the Indian Income tax (Amendment) Act, 1939 (VII of 1939), from assets remaining the property of the settlor or disponer, shall be deemed to be income of the settlor or disponer, and all income arising to any person by virtue of a revocable transfer of assets shall be deemed to be income of the transferor : Provided that for the purposes of this clause a settlement, disposition or transfer shall be deemed to be revocable if it contains any provision for the retransfer directly or indirectly of the income or assets to the settlor, disponer or transferor, or in any way gives the settlor, disponer or transferor a right to reassume power directly or indirectly over the income or assets; Provided further that the expression "settlement or disposition" shall for the purposes of this clause include any disposition, trust, covenant, agreement, or arrangement, and the expression "settlor or dispone r" in relation to a settlement or disposition shall include any person by whom the settlement or disposition was made : Provided further that this clause shall not apply to any income arising to any person by virtue of a settlement or disposition which is not revocable for a period exceeding six years or during the life time of the person and from which income the settlor or disponer derives no direct or indirect benefit but that the settlor shall be liable to be assessed on the said income as and when the power to revoke arises to him." The learned counsel for the appellant, Mr. section T. Desai, has submitted three propositions before us (1) The operation of the first proviso to section 16(1) (c) depends only on the settlement and its terms and not on any provision of the Bombay Public Trusts Act, which may or may not be observed; (2) The absolute powers reserved over the income and corpus of the trust property remain vested in the settlor in his capacity as the settlor and not as trustee, and further they fall within the purview of the first pro.
viso to section 16(l.) (c); and (3) It is a relevant consideration that, as found by the authorities, the settlor has been deriving direct and indirect benefits from the trust properties.
He relies on clauses 4, 6, 8, 10, 11 and 21 of the Trust Deed to show that the Trust Deed gives the settlor right to re assume power directly 9 Sup.
CI/67 17 952 or indirectly over the income or assets of the Trust within the first proviso to section 16(1)(c).
Let us now examine the Trust Deed.
This indenture was made between Jayantilal Amratlal, hereinafter called the settlor, and Jayantilal Amratlal, Padmavati wife of the said Jayantilal Amratlal, Ramanlal Amratlal, Hariprasad Amratlal, Kasturlal Chandulal Parikh and Bhagubhai Chandulal, hereinafter called the Trustees.
Clause, 1 vests the shares and the other trust properties and income in the trustees.
Clause 2 gives the name of the trust Clause 3 obliges the trustees to get and collect income ,of the trust properties and pay expenses, etc.
Clause 4 creates the trust for the relief of poor, and for education, medical relief, etc.
It further provides : "The Trustees shall at the direction of the Settlor during, his lifetime and after his death at their discretion set aside any portion of the income of the Trust Premises to provide cash, food and clothes for any temple or temples of the Pushti Marg Sampradaya.
In applying.
the income of the Trust Premises for all or any of the objects hereinbefore specified the Trustees may consider the claims of any needy or poor person belonging to the Visa Porwad Community.
" Clause 5 enables the settlor to give direction to the trustees to accept contributions ,or donations to the Trust from other persons.
Clause 6 provides as follows : "The Setflor may at any time or times by writing direct that any specific funds or investments or property forming part of the Trust Premises and/or the income thereof shall be utilised and applied exclusively for any one more of the aforesaid ,charitable objects and the Settlor may by writing at any time or times vary or revoke any such directions previously given by him and Trustees shall be bound to carry into effect all such directions given by the Settlor.
" Clause 7 enables the Trustees to utilise the whole or any portion of the Trust Premises for all or any of the charitable object ,,, if the Settlor so directs.
Clause 8 may be set out in full : "8.
The Trustees shall from time to time at the direction of the settlor during his life time and after his death may at any time at their discretion deliver or hand over the income of the Trust Premises or any part of such income to any institution, association or society to be applied for all or any of the purposes of these presents without being bound to see to the application thereof or being liable for the loss or misapplication thereof.
" Clause 9 enables the Trustees to invest the residue, etc., and to accumulate the same and apply towards the objects of the Trust.
Clause 10 inter alia empowers the Settlor to give directions regardin the investment of moneys "as are authorised by law for invest 953 ment of trust premises or in ordinary or preference shares of joint stock companies, whether partly or fully paid, or in debentures or in giving loans to any public company or firm of good standing and reputation or in the purchase or mortgage of any movable or immovable property with power to the Trustees with the like direction to vary or transpose the said investments into or for others of the same or of a like nature.
" Clause II inter alia enables the Settlor to direct the Trustees to vary the investments.
Out of the other clauses we need only mention clause 21 which reads as follows : "All questions arising in the management and administration of the trusts or powers hereof and all differences of opinion amongst the Trustees shall be disposed of in accordance with the opinion of the Settlor during his lifetime and on and after the death of the settlor in accordance with the opinion of the majority of the Trustees in the case of their being equally divided the trustee senior most in age shall have a casting vote.
" The learned counsel for the appellant says that these clauses read fairly would enable the Settlor to direct the Trustees to give a loan to him and he could give directions to the Trustees in 'such a way as to re assume control over the assets.
He says that as a matter of fact the Income tax Officer did find that the Settlor has been utilising these powers for his own benefit.
There is no doubt that under the Trust Deed the Settlor has very wide powers and the Settlor could direct the Trustees to grant loan to him.
The Trustees could even grant loan to a firm in which be was interested.
But this would be contrary to the provisions of the Bombay Public Trust Act.
Section 35 (I) of the Bombay Public Trust Act provides : "35(1) : Investment of Public Trust Money Where the trust property consists of money and cannot be applied immediately or at an early date for the purposes of the public trusts the trustee shall be bound (notwithstanding any direction contained in the Instrument of the Trust) to deposit the money in any scheduled bank as defined in the , in the Postal Savings Bank or in a Cooperative Bank approved by the State Government for the purpose or to invest it in Public security; Provided.
Provided further that the Charity Commissioner may by general or special order permit the Trustee of any public trust or classes of such trusts to invest the money in any other manner.
" 9 54 Mr. section T. Desai submits that we cannot take into consideration the provisions of the Bombay Public Trust Act.
We are unable to accept this submission.
The Bombay Public Trust Act must, to the extent it operates, override any provisions in the Trust Deed.
As Shelat, J., observed, "when proviso 1 talks about a right to reassume power, prima facie, that must mean that there, is such power lawfully given under the deed of trust.
" It seems to us that the Legislature, in proviso I to section 16(1)(c) is thinking of powers lawfully given and powers lawfully exercised.
Any person can commit breach of trust and assume power over the income or assets but for that reason the income of the trust cannot be treated as the Income of the settlor under the proviso.
The Calcutta High Court in Commissioner of Income tax, West Bengal vs Sir section M. Bose(1) observed "The first proviso to Section 16(1)(c) only contemplates cases where the settlor can lawfully reassume power over the income or the assets.
Unless that was so, the proviso would cover every trust where a settlor has made himself trustee because a trustee acting dis honestly could always assume control over the income.
" We agree with these observations.
Similarly, in an unreported judgment (Commissioner of Income tax, Bombay North vs Mathuradas Mangaldas Parekh ( 2 ) the Bombay High Court repelled a similar argument by observing : "The first answer to this contention is that them trustees would be committing a breach of the law if they were to advance moneys to themselves.
There is a clear prohibition under Section 54 of the Trusts Act.
" If we do not ignore the provisions of the Bombay Public Trust Act and the general principles applicable to public trusts, the question arises whether on a true interpretation of the first proviso to section 16 ( 1 ) (c) the powers reserved to the settlor under the Trust Deed come within its mischief.
The learned counsel says that the words of the proviso are very wide.
I He points out the reasons why Parliament has inserted this proviso.
He draws our atten tion to the following observations of Lord Macmillan in Chamberlain vs Inland Revenue Commissioners(1), quoted in.
Tulsidas Kilachand vs Commissioner of Income tax(1) (1) at p. 141.
(2) I.T. Ref.
No. 4 of 1954, judgment dated August 26, 1954, reported in "unreported Income tax Judgmenis of the Bombay High Court, Book One, Published by Western India Regional Council of the Institute of Chartered Accountants of India, Bombay" p. 314 at p. 316.
(3) 329.
(4) , 4. 955 .lm15 "This legislation. (is) designed to overtake and circumvent a growing tendency on the part of taxpayers to endeavour to avoid or reduce tax liability.
by means of settlements.
Stated quite generally, the method consisted in the disposal by the taxpayer of part of his property in such a way that the income should no longer be receivable by him, while at the same time he retained certain powers over, or interests in, the property or its income.
The Legislature 's counter was to declare that the income of which the taxpayer had thus sought to disembarrass himself should, notwithstanding, be treated as still his income and taxed in his hands accordingly.
" This Court held in that case, that these observations applied also to the section under consideration, and the Indian provision is enacted with the, same intent and for the same purpose.
But even so, Lord Simonds observed while construing a similar provision in Wolfson vs Commissioners of Inland Revenue(1) : "It was urged that the construction that I favour leaves an easy loophole through which the evasive taxpayer may find escape.
That may be so; but I will repeat what has been said before.
It is not the function of a court of law to give to words a strained and unnatural meaning because only thus will a taxing section apply to a transaction which, had the Legislature thought, of it, would have been covered by appropriate words." Viscount Simonds observed again in Saunders vs Commissioners of Inland Revenue(1) in construing a similar provision occurring in the English Act : "I am assuredly not going to depart from the fair meaning of words in a taxing Section in order that tax may be exacted.
" What then is the fair meaning of section 16(1)(c) proviso.1 ? It seems to us that the words "reassume power ' give indication to the correct meaning of the proviso.
The latter part of the proviso contemplated that the settlor should be able by virtue of something contained in the Trust Deed, to take back the power he had over the assets or income previous to the execution of the Trust Deed.
A provision enabling the settlor to give directions to trustees to employ the assets or funds of the trust in a particular manner or for a particular charitable object contemplated by the trust cannot be said to confer a right to reassume power within the first proviso.
Otherwise a settlor could never name himself a sole trustee.
It seems to us that the latter part of the proviso contemplates a provision which would enable the settlor (1) , 169.
(2) ,431, 956 to take the income or assets outside the provisions of the Trust Deed.
Mr. Desai says that if a settlor can derive some direct or indirect benefit under a trust deed the trust would fall within first proviso.
But the first proviso does not use these words.
The words "direct or indirect benefit" occur only in the third proviso.
This Court held in Commissioner of Income tax, Punjab vs section Raghbir Singh(1) that although the settlor in that case obtained a benefit from the trust payment of his debts the first proviso was not attracted.
Coming to the various clauses of the Trust Deed there is no doubt that the settlor has retained power to see that his wishes are carried out while he is alive.
But he can only direct the carrying out of his wishes within the terms of the Trust Deed.
What he can direct under clause 4 is the application of income to a particular charitable purpose.
Similarly under clause 6 he can nominate the charitable object and the fund or investment which should be utilised for that object.
This is in no sense a power to reassume control.
Clause 8 enables the settlor to delegate the carrying out of a particular charitable object.
For instance, he could direct some contributions to be made to a hospital or a school without obliging the trustees to see that the hospital or the school does not misapply the funds.
Clauses 10 and It which enable the settlor to give directions regarding the investment must be read subject to the provisions of the Bombay Public Trust Act and the general principles of law relating to trusts.
We have already said that he could not legally direct a loan to be made to himself.
Further it is difficult to subscribe to the,, proposition that a loan to a company in which the settlor is interested would give power to the settlor over the assets within the meaning of the first proviso.
Clause 21 only shows the wide powers which the settlor has reserved to himself.
None of these clauses comes within the purview of Proviso 1.
In the result we agree with the conclusions of the High Court.
The appeals accordingly fail and are dismissed with costs.
One hearing fee.
G.C. Appleas dismissed.

summary:
J executed a trust deed whereby he created a charitable trust.
The 4iced was registered with the Charity Commissioner under the Bombay Public Trust Act, 1950.
For the year 1958 59 the Income tax Officer held that since the settlor had reserved to himself wide powers for own benefit and had also utilised those powers to his benefit, the case was coveted by section 16(1)(c) of the Income tax Act, 1922.
Accordingly the Income tax Officer taxed the income of the trust in the hands of the 'settlor.
A similar order was passed for the year 1959 60.
In his appeal before the Appellate Assistant Commissioner the settlor relied on section 35 of the Bombay Public Trusts Act, 1950 to .show that he was thereby precluded from utilising the funds for his own benefit but his plea was not accepted.
The Appellate Tribunal, however, relying on the terms .of the deed itself decided in favour of the settlor and.
the High Court in reference did the same.
The revenue appealed.
HELD: (i) There was no doubt ' that under the Trust Deed the settlor had very wide powers and could direct ' the Trustees to.
grant loan him.
The Trustees could even grant a loan to a firm in which he was interested.
But this would be contrary to the provisions of section 35 the Bombay Trust Act.
The said Act to the extent it operates must override provisions in the Trust Deed.
[953E 954A B] The Legislature in proviso 1 to section 16(1)(c) is thinking of powers lawfully given and powers lawfully exercised.
Any person can commit breach of trust and assume power over income or assets but for that reason the income of the trust cannot be treated as the income of the settlor under the proviso.
Commissioner of Income tax, West Bengal vs Sir S.M. Bose, 21 ].T.R. 135 and Commissioner of Income tax, Bombay North vs Mathuradas Mangaldas Parekh, I.T. Ref.
No. 4/54, Judgment by Bombay High Court dated August 26, 1954, referred to.
(ii) The words 're assume power ' give indication to the correct meaning of section 16(1)(c) proviso 1.
The latter part of the proviso contemplates that the settlor should be able by virtue of something contained in the Trust Deed, to take back the power he had over the assets or income previous to the execution of the Trust Deed.
A provision enabling the settlor to give directions to.
trustees to employ the assets or funds of the trust in a particular manner or for a particular charitable object contemplated by the trust cannot be said to confer a right to re assume power within the first proviso.
Otherwise a settlor could never name himself a sole trustee.
The mere fact that the settlor can derive some direct or indirect benefit under a trust deed would not ' bring the deed within the first proviso.
[955G H; 966A B] 947 Chamberlain vs Inland Revenue Commissioner , Tulsidar Kalichand vs Commissioner of Income tax, 42 I.T.R. 1, WoIfson vs Commissoners Inland Reventte, , Saunders vs Commissioners Inland Revenue, , referred to.
Commissioner of Income tax, Punjab vs
section Raghbir Singh, 57/.T.R., followed.
On an examination of terms of the Trust Deed the Court held none of its clauses came within the purview of Proviso 1.
[956C F]