judgement:
Civil Appeal No. 323 of 196.
Appeal from the judgment and order dated September 25, 1958, of the Bombay High Court in I.T.R. No. 3 of 1958.
K. N. Rajagopal Sastri and D. Gupta, for the appellant.
R. J. Kolah, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for the respondent.
January 31.
The Judgment of the Court was delivered by 904 section K. DAS, J.
The Commissioner of Income tax, Bombay City I, has preferred this appeal to this Court on a certificate of fitness granted by the High Court of Bombay under section 66A (2) of the Indian Income tax Act, 1922.
The assessee, who is the respondent before us, was assessed to income tax as an individual in respect of his income for the assessment year 1954 55.
The taxing authorities included in the assessee 's total income for the year to sums, namely, a sum of Rs. 410/ and a sum of Rs. 14,170/ .
It was stated that these two sums accrued in the relevant account year in the following circumstances.
On January 12, 1953 the assessee created a trust in respect of a sum of Rs, 25,000/ , the trustees whereof were the Central Bank Executor & Trustee Co., the assessee himself his wife and brother.
The scheme of the trust deed was that the said sum of Rs. 25,000/ was set apart by the assessee and it was provided that the interest on that amount should be accumulated and added to the corpus and a minor daughter of the assessee, named Chandrika, was to receive the income from the corpus increased by the addition of interest, when she attained the age of 18 on February 1, 1959.
She was to receive the income during her life time and after her death the corpus was to go to persons with whom we are not concerned.
The income derived from the said trust fund amounted to Rs. 410/ in the relevant account year and the taxing authorities included this amount in the total income of the assessee, purporting to act under section 16(3)(b) and/or section 16(3)(a)(iv) of the Income tax Act.
As regards the second sum of Rs. 14,170/ it appears that on December 1, 1941, the assessee 's father had created a trust in respect of some shares and a cash sum of Rs. 30,000/ for the benefit of his four sons including the assessee.
The trustees were the Central Bank Executor and Trustee Co. Ltd., the assessee himself and one other person.
The said trustees were to hold the trust funds upon trust to 905 pay the net interest and income thereof to the assessee "for the maintenance of himself and his wife and for the maintenance, education and benefit of all his children till his death".
The sum of Rs. 14,170/ .
it was stated, accrued as income in the hands of the assessee in the relevant account year from the said trust funds.
The view of the taxing authorities and the Income tax Appellate Tribunal was that under the aforesaid provision of the trust deed the assessee was the sole beneficiary and that the amount was received by him for his own benefit and he was not accountable to any one in respect of the amount and, therefore, this amount was liable to be included in his total income.
On behalf of the assessee the contention was that the sum of Rs. 410/ aforesaid was not liable to be included in the total income of the assessee inasmuch as Chandrika, the minor daughter of the assessee, had no right to the income nor any beneficial interest therein in the relevant year of account under the provisions of the trust deed and, therefore, neither section 16(2)(a)(iv) nor section 16(3)(b) applied to the case.
As to the sum of Rs. 14,170/ the case of the assessee was that it should not be included in his total income as the sole beneficiary, because the beneficiaries under the trust settlement were not only the assessee but his wife and children as well.
It was contended that the assessee received the amount in trust for himself and his wife and children and it was open to the Department to proceed under the first proviso to section 41 (1) of the Income tax Act and recover tax on a separate assessment made on the assessee as a trustee in respect of the said sum at the maximum rate, because the individual shares of the beneficiaries on whose behalf the money was receivable were indeterminate and not known.
The Income tax Appellate Tribunal, on an appeal by the assessee, did not accept these contentions.
The Tribunal was then moved to state a 906 case to the High Court on two questions of law those questions were: "1.
Whether the sum of Rs. 410/ is properly includible in the assessee 's total income either in accordance with the provisions of section 16(3)(b) and/or section 16(3)(a)(iv) of the Indian Income tax Act, 1922? 2.
Whether the sum of Rs. 14,170/ is properly includible in the total income of the assessee as the sole beneficiary thereof under the trust settlement made on 1 12 1941 by Dhanji Devsi?" On being satisfied that these questions of law arose out of the order of the Tribunal dated April 24, 1957, the Tribunal stated a case under section 66(1) of the Income tax Act.
The High Court answered both the questions in favour of the assessee by its judgment and order dated September 25, 1958.
There after the High Court granted a certificate of fitness under section 66A(2) of the Income tax Act and, as we have already stated, the present appeal has been brought to this Court on the strength of that certificate.
We proceed now to deal with the first question which relates to the sum of Rs. 410/ .
The question is whether this sum was properly includible in the assessee 's total income under the provisions of section 16(3)(b) of the Income tax Act, because Mr. Rajagopal Sastri appearing for the appellant has not pressed the claim which was made before the Tribunal on behalf of the Department under the provisions of section 16(3)(a)(iv).
Before we go to the provisions of section 16(3)(b) it is advisable to set out the material portions of cls.
3 and 4 of the trust deed of January 12, 1953.
Those clauses were in these terms: "3.
The Trustees shall hold and stand possessed of the trust fund and the investments for the time being representing the 907 same and receive the income, divided, interest and rents thereof and invest the same and the resulting income, dividend, interest and rents thereof so as to accumulate at compound interest to the intent that such accumulations shall be added to the principal trust fund until the settler 's daughter Chandrika shall attain the age of eighteen years which age she will attain on the 1st February 1959 and after the expiration of the above named period the Trustees shall deal with and dispose of the trust fund as hereinafter stated.
The Trustees shall hold and stand possessed of the trust fund and the accumulations thereof upon trust to pay the net interest and income thereof after deducting all out goings and charges for collection to the said Chandrika for her life for her maintenance. " It is clear from these clauses that during the minority of Chandrika, the income from the trust funds was to be accumulated and added to the trust funds and after the attained majority on February 1, 1959, she was to get only the income from the enlarged trust funds.
Now, in the relevant year of account Chandrika was still a minor and under the terms of the trust deed she had no right to the trust income nor any beneficial interest therein; she could neither receive nor enjoy the income.
She did not derive any benefit whatsoever from the trust funds during her minority and even after she attained majority, she did not have any right to the trust income which arose during her minority and her only right was to enjoy the income arising from the enlarged trust funds, i. e., the original trust funds and the accumulations of trust income during her minority.
Therefore, the sum of Rs. 410/ was not the income of Chandrika, but was the income of the trustees and the income was impressed with a trust, namely, that it should be added to 908 the trust corpus.
The question is, does section 16(3)(b) apply to such a case ? We shall presently read section 16(3), but before we do so it is necessary to refer to the scheme of section 16 of the Income tax Act.
The section deals with the computation of total income as defined in section 2(15) of the Act, and provides that what sums are to be included or excluded in determining the total income.
The definition of total income in section 2(15) involves two elements (a) the income must comprise the total amount of income, profits and gains referred to in section 4(1), and (b) it must be computed in the manner laid down in the Act.
The exemption granted under the Act is of two kinds; certain classes of income are exempted from tax and also excluded from the computation of total income, while certain other classes of income exempted from tax are to be included in the assessee 's total income.
Now cl.
(a) of sub section
(i) of section 16 provides the sums exempted from tax under certain provisions of the Act should be included in the assessee 's total income.
Clause (b) lays down the mode of computing a partner 's share in the profit or loss of the firm.
Under cl.
(c) income which arises to any person by virtue of any settlement or disposition from assets remaining the property of the settler or disponer etc.
is taxed as his income.
The object of the legislation is clearly designed to overtake and circumvent a tendency on the part of the tax payers to endeavour to avoid or reduce tax liability by means of settlements.
Sub section (2) deals with grossing up of dividend etc.
Then we come to sub section (3).
This sub section aims at foiling an individual 's attempt to avoid or reduce the incidence of tax by transferring his assets to his wife or minor child or admitting his wife as a partner or admitting his minor child to the benefits of a partnership in a firm in which such individual is a partner.
The sub section creates an artificial 909 liability to tax and must be strictly construed.
Now, let us read the sub section.
(3) In computing the total income of any individual for the purpose of assessment there shall be included: (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly: (i) from the membership of the wife in a firm of which her husband is a partner; (ii) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner; (iii)from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agreement to live apart; or (iv) from assets transferred directly or indirectly to the minor child, not being a married daughter by such individual otherwise than for adequate consideration; and (b) so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor child or both.
" The argument on behalf of the appellant is that the conditions laid down in cl.
(b) of sub section
(3) of section 16 are fulfilled in the present case and therefore the Department was intitled to include in the 910 total income of the assessee so much of the income in the hands of the trustees as arose from the assets transferred by the assessee for the benefit of his minor child.
It is pointed out that the conditions laid down in cl.(b)are (1) that there must be income in the hands of any person or association of persons (trustees in the present cases;) (2) the income must arise from assets transferred otherwise than for adequate consideration to the trustees; and (3) the transfer must be for the benefit of the minor child.
It is argued that when the conditions are fulfilled and the only exceptional case, namely, where the transfer is for adequate consideration is out of the way, cl.
(b) must apply and the Department is entitled to include the income in the hands of the trustees in computing the total income of the individual assessee who made the transfer.
At first sight the argument appears to be attractive and supported by the words used in the clause.
On a closer scrutiny, however; it seems to us that cl.
(b) must be read in the context of the scheme of 16 and the two clauses (a) and (b) of sub section
(3) thereof must be read together.
So read the only reasonable interpretation appears to be the one which the High Court accepted, namely, that the scheme of the section requires that an assessee can only be taxed on the income from a trust fund for the benefit of his minor child, provided that in the year of account the minor child derives some benefit under the trust deed either he receives the income, or the income accrues to him, or he has a beneficial interest in the income in the relevant year of account.
But if no income accrues, or no benefit derived and there is no income at all (so far as the minor child is concerned), then it is not consistent with the scheme of section 16 that the income or benefit which is non existent so far as the minor child is concerned, will be included in the income of his father.
Take, for example, a case where the assets 911 were transferred otherwise than for adequate consideration for the benefit of a minor child, but the child has attained majority before the relevant year of account.
After the child attains majority the sub section would cease to apply and the income from assets transferred for the benefit of the child would no longer be taxable in the parent 's hands.
The reason must be that in the relevant year of account there is no benefit to the minor child by the transfer, even though the transfer was originally made for the benefit of the child.
The same principle may be illustrated by another example which has been dealt with by the High Court.
Take a case where there are intermediate beneficiaries before the minor gets the benefit under the trust deed.
In such a case the learned Advocate for the Department conceded in the High Court that cl.
(b) of sub section
(3) of section 16 would not be attracted till the minor derived benefit under the trust deed.
Mr. Rajagopal Sastri did not make any such concession before us; but seems to us that principle underlying the illustration is incontestable.
If the minor derives no benefit in the relevant year of account, it can hardly be said that for that year the transfer was for the benefit of the minor child.
Section 4, the charging section, of the Income taxs Act makes it clear that what is taxed is the total income of the relevant account year, and total income, according to section 2 (15), is the income, profits and gains referred to in sub section
(1) of section 4 and computed in the manner laid down in the Act.
In other words, the tax is levied on a yearly basis.
It is true that in the present case there was income in the hands of the trustees and the trustees were liable to pay tax thereon.
That, however, is not the question before us.
The question before us is whether such income in the hands of the trustees could be included in the total income of the assessee under cl.
(b) of sub s.(3) of section 16.
In our opinion, when 912 cl.
(b) of sub section
(3) of section 16 talks of benefit of the minor child it refers to benefit which arises or accrues to the minor in the year of account.
If there be no such benefit, the income cannot be included in the total income of the individual who made the transfer.
There is a third type of case which also illustrate the same principle.
If only a portion of the income of the trust is reserved for the minor child, cl, (b) would apply and that portion of the income which is set apart for the benefit for the child would be taxable in the hands of the settler.
All these illustrations only establish the principle that the minor child must derive some benefit in the relevant year of account before cl.
(b) would apply.
Furthermore, we are also of the view that cls.
(a) and (b) of the sub section must be read together, Clause (a) begins with the expression "so much of the income of a wife or minor child of such individual as arises directly or indirectly", and this is followed by the four circumstances numbered (i), (ii), (iii) and (iv).
There is no doubt that so far as cl.
(a) is concerned, there must be income of the wife or minor child.
Mr. Rajagopal Sastri has not disputed this.
The obvious intention of the Legislature in enacting cl.
(b) was to see that the provisions of cl.
(a) were not defeated by the assessee creating a trust and in order to deal with that mischief it enacted cl.
Instead of the expression "so much of the income of a wife or minor child" the expression used in cl.
(b) is "so much of the income of any person or association of persons etc.".
Obviously, when a trust is created the income is income in the hands of the trustees.
But the underlying principle in the two cls.
(a) and (b) appears to be the same, namely, there must be income of the wife or minor child under cl.(a) and there must be some benefit derived by the wife or minor child in the year of account under cl.(b).
This is consistent with the scheme of section 16 913 and particularly sub section
(3) thereof.
which is intended to foil an individual 's attempt to avoid or reduce the incidence of tax by transferring his assets to his wife or minor child etc.
When, however, the minor child derives no benefit under the trust deed in the year of account, it is not consistent with the scheme of section 16 to say that even though there is no accrual of and income or benefit in the year of account in favour of the minor child, yet the income must be included in the total income of the individual concerned.
Our attention has been drawn to section 64 of the Income tax Act, 1961 (43 of 1961).
That section corresponds to section 16 of the Income tax Act, 1922 and cl.
(v) of section 64 has made the position clear by using the expression 'immediate or deferred benefit" so that even a benefit which is postponed and does not arise in the year of account will not entitle the Department to include the income in the hands of the trustees in the total income of the settler.
We do not, however, think that the Act of 1961 can be taken as declaratory of the law which excited previously; nor can s 64 (v) be taken as determinative of the true scope and effect of cl.
(b) of sub section
(3) of section 16.
The Legislature may have thought fit in its wisdom to widen the scope of the law that existed previous to it so as to take in deferred benefits as well.
We think that we must interpret cl.
(b) of sub section
(3) of the context of the section as it occurs in the Income tax Act of 1922.
We have been referred to two English decisions Dale vs Mitcalfe (1) and Mauray vs Commissioners of Inland Revenue (2).
One of the decision Dale vs Mitcalfe (1) related to section 25 of the English Income Tax Act, 1918 (8 & 9 Geo.
V. C. 40) and the other related to section 20(1)(c) of the English Finance Act 1922 (12 and 13 Geo V. C. 17).
Those provisions were differently worded and appear in a different 914 context and decisions of the English Courts given on provisions differently worded and appearing in a different context are not, in our opinion, helpful in determining the true scope and effect of cl.
(b) sub section
(3) of section 16 of the Income tax Act, 1922.
We have therefore, come to the conclusion that on a true construction of cl.
(b) of sub section
(3) of section (3), the view expressed by the High Court was correct and the sum of Rs. 410/ did not form part of the total income of the assessee.
The High Court correctly answered the first question referred to it.
We now turn to the second question.
The relevant clause of the trust deed of December 1, 1941 is cl. 7 which reads as follows: "The trustees shall hold and stand possessed of the Trust Fund mentioned in the second Schedule hereto and the accumulations thereof referred to in clause 3 thereof upon Trust to pay the net interest and income thereof to the Settler 's son MANILAL for the maintenance of himself, his wife and for the maintenance, education and benefit of all his children till his death.
" The question before us is whether under this clause the income received by the assessee is impressed with a trust in favour of himself, his wife and children to whom he is accountable as a trustee for the amount received.
In other words, the question is whether the trust deed of December 1, 1941, created two trusts, the one requiring the trustees to pay the income from the trusts funds to the assessee and the second requiring the assessee to spend the income for the maintenance of himself and his wife and for the maintenance, education and benefit of his children.
In cases where property is given to a parent or other person standing or regarded as in loco parentis, with a direction 915 touching the maintenance of the children, the question often arises whether the settler intended to impose a trust by the direction or whether the direction was only the motive of the gift.
The line between the two classes of cases has not been drawn always very firmly.
It is, however, clear that in construing provisions of this kind the Court will not enforce or treat as obligatory a mere wish or desire or hope on the part of the settler that the donee of the fund should or would ought to or is expected to apply it for the benefit of other persons; on the other hand, the Court does regard as binding and obligatory and does enforce a direction or trust in favour of third parties if such a binding obligation can be clearly ascertained from the document.
Instances of cases where no trust is created and of cases where trust is created and detailed at pages 85 and 86 of Lewin on Trusts (15th Edition).
We are unable to hold that in the case before us cl.
7 of the trust deed merely expressed a wish or desire or hope on the part of the settler.
We are in agreement with the High Court that the direction contained in cl. 7 created a trust in favour of the assessee, his wife and children.
The expression "for the maintenance of himself and his wife and for the maintenance, education and benefit of all his children" is not indicative of a mere desire or hope.
It imposes a binding and obligatory trust.
In re.
Booth, Booth vs Booth (1) a testator gave the residue of his estate to his executors, on trust, to pay to his wife or permit her to receive the annual income thereof during her life, "for her use and benefit and for the maintenance and education of my children".
It was held that the wife took the income subject to a trust for the maintenance and education of the 916 children.
A similar view was expressed in Raikes vs Ward (1) and Woods vs Woods (2) On behalf of the appellant our attention was drawn to section 8 of the (II of 1882) which states that the subject matter of a trust must be property transferable to the beneficiary and it must not be merely beneficial interest under a subsisting trust.
It is contended that the assessee held a beneficial interest in the income from the trust funds under the trust deed of December 1, 1941, and in respect of beneficial interest another trust could not be created in favour of himself, his wife and children.
We think that this argument proceeds on a misconception.
The assessee did not create a second trust in respect of the beneficial interest which he held under the trust deed of December 1, 1914.
The assessee father created two trusts by that trust deed, one requiring the trustees to pay the trust income to the assessee and the other requiring the assessee, who was himself a trustee, to spend the income for the maintenance, education and benefit of his children.
It is not disputed that by a single document more than one trust may be created.
It is not, therefore, true to say that the subject matter of the trust in the present case was merely a beneficial interest under a subsisting trust.
Under section 41 of the Income tax Act it was open to the Department either to tax; the trustees of the trust deed or to tax those on whose behalf the trustees had received the amount.
The true position of the assessee in this case was that he was a trustee and not the sole beneficiary under the trust deed.
He held the income on trust for himself, his wife and his children.
The shares of the beneficiaries were indeterminate and therefore under the first proviso to section 41(1) of the 917 Income tax Act, it was open to the Department to levy and recover the tax at the maximum rate from the assessee; but that did not entitle the Department to include the sum of Rs. 14,170/ in the total income of the assessee as though he was the sole beneficiary under the trust deed, Mr. Rajagopal Sastri made it clear that the intention of the Department was to include the sum in the total income of the assessee in order to levy and charge super tax on him.
This, we do not think, the Department was entitled to do.
In respect of the sum of Rs. 14,170/ the assessee was a trustee, within the meaning of section 41 of the Income tax Act, appointed under a trust declared by a duly executed instrument in writing and as such trustee he had the right to contend that his assessment in respect of the money received by him not as a beneficiary but as a trustee could only be made under the first proviso to section 41 (1).
We have, therefore, come to the conclusion that on the second question also the answer given by the High Court was correct.
The result, therefore, is that the appeal fails and is dismissed with costs.
Appeal dismissed.

summary/full:
In 1953 the assessee created a trust in respect of a sum of money and provided that the interest on that amount was to be accumulated and added to the corpus and that his minor daughter C was to receive the income from the corpus increased by the addition of interest when she attained the age of 18 years.
In the relevant account year, when C was still a minor, the income derived from the trust fund was Rs. 410 Earlier in 1941, the assessee 's father had created a trust in respect of certain shares and money directing the trustees to pay the net interest and income thereof to the assessee "for the maintenance of himself and his wife and for the maintenance, education and benefit of all his children till his death".
In the relevant account year a sum of Rs. 14,170 accrued as income in the hands of the assessee from the said trust funds, 903 The taxing authorities included both these incomes in the total income of the assessee. ^ Held, that neither of these two incomes could be included in the total income of the assessee.
Under section 16(3)(b) of the Indian Income tax Act, upon which the authorities relied, the assessee could only be taxed on the income from the trust funds for the benefit of his minor child if in the year of account the minor child either received the income or it accrued to her or she had a beneficial interest in the income in the relevant year of account.
In the present case though there was income in the hands of the trustees and they were liable to pay tax thereon, there was no benefit to the minor child in that year.
As such the sum of Rs. 410 did not form part of the total income of the assessee.
The trust deed of 1941 created two trusts, the one requiring the trustees to pay the income from the trust funds to the assessee and the second requiring the assessee to spend the income for the maintenance of himself and his wife and for the maintenance, education and benefit of his children.
It was not a case where the settler merely expressed a wish or desire or hope but he gave as direction which created a trust in respect of the income in the hands of the assessee in favour of himself, his wife and children.
The assessee did not create the second trust in respect of the beneficial interest which he held under the trust of 1941 and section 8 of the Indian Trusts Act which forbade the creating of such a trust was inapplicable.
The assessee was a trustee and not the sole beneficiary; and since the shares of the beneficiaries were Indeterminate it was open to the Department to levy and recover tax at the maximum rate from the assessee as trustee under the first proviso to s.41(1) but the Department was not entitled to include the sum of Rs. 14,170 in the total income of the assesse as though he was the sole beneficiary under the trust deed.


judgement:
C.A No. 10 of 1961.
Appeal from the judgment and decree dated March 5, 1956 of the Madras High Court in A.S. No. 256 of 1951, R. Ramamurthi Aiyar and R. Gopalakrishanan, for the appellants.
R. Ganapathy Iyer and D. Gupta, for the Respondent.
February 1.
The Judgment of the Court was delivered by 957 SHAH, J.
Messrs.
Ramalingam & Co. hereinafter called the assessees are a firm doing business principally as exporters of vegetable fibres to foreign countries.
They have their place of business at Tuticorin in the district of Tirunelveli in the State of Madras.
The contracts of sale are made by correspondence on approval of samples sent by the assessees to the foreign buyers.
The contracts are C.I.F. or C.F. and the price is payable by draft upon bank credit to be opened by the buyer.
The course of dealing between the assessees and the foreign buyers was as follows: After the contract for a quantity of goods was finalised by correspondence and the price ascertained the foreign buyer opened with his own bankers an irrevokable Letter of Credit in favour of the assessees for 95% of the net invoice value.
Intimation of the opening of the Letter of Credit was then given to the assessees through a bank operating in the Province of Madras.
The assessees then shipped the goods, obtained Bills of Lading in their own names and lodged the shipping documents endorsed in blank with their own bankers together with the invoice and Bill of Exchange for 95% of the invoice value.
The assessees then discounted the Bills through their own bankers.
The shipping documents were forwarded to the foreign banker who on presentation paid 95% of the invoice amount.
The Bill of Lading was then delivered by the foreign banker to the buyer and the goods were unloaded.
For the year 1945 46 the Commercial Tax Officer, Tirunelveli determined for the purpose of computing tax liability under the Madras General Sales Tax Act, 1939, the turnover of the assessees at Rs. 15,61,200/ .
The Commercial Tax Officer rejected the claim of the assessees that the amount of Rs. 15,22,000/ in respect of overseas transactions 958 was exempt from liability to tax.
He held that the export transactions in respect of which the exemption was claimed were sales within the province of Madras and subject to sales tax under the Madras General Sales Tax Act, 1939.
The order of the Sales tax Officer was confirmed by the Board of Revenue, Madras, except as to the amount of freight.
The Board of Revenue held that the property in the goods passed to the buyers in a large majority of the export transactions when the goods were shipped.
On remand, the commercial Tax Officer recomputed the turnover at Rs. 11,23,603/8/8 inclusive of the local sales of the value of Rs. 75,082/14/0.
After paying the tax the assessees sued the Province of Madras in the Court of the Subordinate Judge, Tuticorin for a decree for Rs. 10,485/ being the amount of tax paid by them on export sales pursuant to the order of assessment and interest thereon at 6% until realisation.
The assessees contended that the export sales were at the material time "totally outside the provisions of the Madras General Sales Tax Act, and the order of assessment was ultra vires and beyond the powers of the authorities".
The Subordinate Judge decreed the claim for Rs. 10,323/ with interest at 6% till realization.
In appeal, the High Court of Madras reversed the decree and dismissed the suit filed by the assessees.
With certificate granted by the High Court this appeal is preferred by the assessees.
It is common ground that in the year 1945 46, under the Madras General Sales Tax Act; 1939, the taxing authorities had no power to levy sales tax on sales which took place outside the Province.
The decision of the appeal, therefore, depends upon the determination of the question whether the export sales took place within the Province.
If they took place within the Province, the sales were properly taxed.
We may observe that the plea that a suit for a decree for refund of tax paid in pursuance of 959 an order of assessment passed by the taxing authorities on the basis that the sales took place within the Province did not lie in the civil court, was not raised in the Court of First Instance, nor in the High Court.
Counsel for the State of Madras has also stated before us that he does not desire to contend in this case that the suit was, in view of the adjudication by the taxing authorities, not maintainable.
We therefore proceed to deal with the only question which was debated before us at the Bar: whether the export sales which are the subject matter of dispute in this appeal were completed within the Province of Madras.
The dispute relates to turnover in respect of seventeen export transactions with merchants in different destinations overseas.
As typical of the transactions the files relating to the shipments to Messrs Begbie Philips and Haylay, London and Messrs Hindley and Company, London were tendered in evidence and the case proceeded to trial on the footing that those transactions were typical of all other transactions.
On April 16, 1945, the Mercantile Bank of India wrote a letter in connection with the shipment to Messrs Begbie Philips and Hayley, London about a contract of sale of five tons palmyra fibre.
The letter is in the following terms: "Dear Sirs, Without any responsibility on the part of this bank we beg to advice receipt of a telegram from our London office reading: "We open irrevocable credit favour Ramalingam Company, Tuticorin, $400 (four hundred pounds) drafts on Mercantile Bank of India Limited, 60 d/st. invoices, full set shipped bills of lading order bank endorsed certificate of origin insurance covered in London about 5 tons palmyra fibre at $80 (eighty pounds) not per ton C and F. Shipment soonest India to 960 United Kingdom by approved ship.
Part shipments allowed expiry 6th October, 1945 a/c Bagbie Phillips Hayley, Limited, licence No. 198281.
" When submitting documents under this credit we would emphasise the fact that the goods must be described both in the bill of lading and invoice identically as advised above and the relative bill marked "Drawn under telegraphic credit No. 88 A/36 of 12th April 1945".
We shall furnish you with further particulars on receipt of written confirmation.
Owing to frequent mutiliations in coded telegrams the above message is subject to any necessary corrections on receipt of confirmation by mail.
Kindly note that the negotiation of bills under this credit is entirely optional on our part and this advice does not release you from the liability attaching to the drawer of a Bill of Exchange.
This letter must be produced with all bills drawn under this credit.
Yours faithfully (signed).
Manager".
On May 28, 1945, the National Bank of India, Tuticorin wrote a letter to the assessees in regard to a sale of a quantity of fibre, which is as follows: "Dear Sirs, We beg to inform you that we are in receipt of advice by cable of 24th instant 961 from our London office that they have received from Messrs Hindley and Company, Limited, No. 35, Crutched Friars, London, E. C. 3 an undertaking to honour your bills on Messrs. Hindley and Company, Limited No. 35 Crutched Friars, London E. C. to the extent of $370 (three hundred and seventy pounds) sterling being 95 per cent of invoice value on the following conditions: Bill to be drawn payable 90 days after sight and to be accompanied by Invoices.
Full sets of on board bills of lading made out to order and blank endorsed representing shipments of: Five tons Tuticorin medium cut and dyed bassine 7 inches and 7 1/2 inches equally at $78 per ton in 1 Cwt.
(ballots) C and F United Kingdom post Shipment June/July from Cochin freight paid of deducted and credit reduced accordingly Freight basis 22nd May, 1945.
Insurance including was risk with unlimited transshipment covered in London.
Such shipping documents are to be delivered on payment of the bills which should bear the clause "Drawn under N.S.I. credit number 83 cabled 24th May 1945".
Bills fulfilling the above mentioned conditions must be negotiated on or before Extended till 30th April 1946.
Please note that the bank accepts no liability for the above undertaking and this advice does not release you from the liability attaching to the drawer of a Bill of Exchange.
The above message is continued by us on behalf of the opening bank for your information but without any responsibility on our 962 part except for the correctness of this copy of the telegram as received by us.
When negotiating bills please produce this letter to have the amounts recorded on the back hereof.
I am, Dear Sirs, Yours faithfully (Signed). Manager.
" On receipt of intimation the assessees shipped the goods and handed over the Bill of Lading and the invoice to their own bankers, accompanied by a Bill of exchange for the amount for which the Letter of Credit was opened by the foreign banker.
The assessees then discounted the bills for the amount for which credit was opened.
The taxing authorities taxed these transactions, because, in their view, the sales were effected in the Province of Madras and not outside.
The assessees in the plaint in paragraph IV cl.
(e) stated that one of the salient features of the business was that "The bills of lading are handed over to the Plaintiffs bankers with the clear and definite instructions to pass on the shipping documents to the buyers only on payment.
They are what is styled in commercial parlance as D/P bills, i.e., documents to be handed over on payment".
This averment in the plaint was not traversed in their written statement by the defendants.
The only witness examined at the trial was A.V. Samuel, one of the partners of the assessees ' firm.
He deposed to the practice which was followed by the assessees.
He stated. "After shipment we obtain Bill of lading made out in our name as shipper.
We draw a bill of Exchange and along with bill of lading and invoice.
These documents are deposited with National Bank.
We endorse in Bank on the Bill of Lading.
It is only after payment of 963 the Bill of exchange by the foreign Bank on behalf of the purchaser, the Bill of Lading is handed over.
Till the bill is paid for no title in the goods pass and the goods are at our disposal.
If the bill is not honoured the Bank will ask us for directions as regards the disposal of goods.
Under instruction from the buyers foreign banks give instruction to any local Bank to give credit up to a certain limit.
Inspite of letter of credit as drawers we are responsible under the bill of exchange.
We can discount in any bank and not merely in the credit opening bank.
" In cross examination he stated that the "credit opening bank opens credit on behalf of the purchasers.
Those banks are not known to us before.
" It is clear from the terms of the two letters dated April 16, 1945, and May 28, 1945, that the foreign buyers had opened letters of credit for the benefit of the assessees, for the amounts set out therein.
These, it appears, were general credits and intimation thereof was given by the local bankers in India who were agents of the foreign bankers.
The local bankers, however, did not undertake any liability by intimating the opening of the letter of credit and the assessees were expressly informed that they (the assessees) would not be released from their liability under the Bills of Exchange drawn by them.
The assessees negotiated the Bills through their bankers after receiving an intimation of the opening of credit.
Counsel for the State of Madras submits that the property in the goods which were the subject matter of sale passed in Tuticorin when the assesees received an amount which represented the price the goods against delivery of the Bills of Lading endorsed in blank with authority to complete the endorsement.
In substance, the plea is that the oreign bank opening the letter of credit is an agent 964 of the buyer, and that bank authorizes its own branch to pay the price to the shippers and by the arrangements made by opening the letter of credit, price is paid to the vendor in his own country against the bill of Lading endorsed in blank.
It is necessary to appreciate the true nature of the commercial letter of credit extensively used in foreign trade.
During the last few decades, expansion of international trade involving overseas transactions has raised problems of peculiar difficulty.
The parties to a contract to supply goods are generally unknown to each other and the contract is the result of correspondence between the parties.
Often neither the seller nor the buyer is prepared to trust the other.
Again, between the delivery of the goods in such trade on board the ship and its ultimate delivery at the destination, the seller is reluctant to tie up his funds.
The seller himself in generally a purchaser of goods from the local market and has invested funds in purchasing the goods.
The buyer is also unwilling to make payment in advance.
To tide over the problem created by this reluctance of the seller and the buyer, bankers of international repute and credit interpose.
They for a small commission undertake by opinion letters of credit to honour the Bill of Exchange drawn by the seller accompanied by the insurance policy and the invoice relating to the goods forming the subject matter of the contract.
At the instance of the buyer the banker issues a letter of credit which is addressed to the world at large or more frequently to specified person or persons: thereby the banker undertakes to honour the Bills of Exchange drawn on the faith of that letter.
Invariably, the Bills are payable in future but the exporters as the beneficiaries under the contract, have the guarantee of the banker that payment will be forthcoming and are also entitled to discount the bills with any party cognisant of the undertaking of the original 965 banker.
There are generally four parties to such a transaction the buyer, the seller, the banker who issues the letter of credit, called the issuing banker and the intermediary or the negotiating banker who allows credit to the seller on the bills lodged with him.
Between the buyer and the issuing banker, the contract is that he will pay bills drawn by the seller of the goods against delivery of the Bill of Lading, insurance certificate and invoice.
The buyer undertakes to put the banker in funds to enable him to make payment if the documents are presented.
The relation between the buyer and the banker is not of pricipal and agent.
The contract between the issuing banker and the negotiating banker may be of a dual character.
Where the issuing banker 's instructions are merely to advise the credit, and the credit calls for bills to be drawn either on the issuing banker or on the buyer, the intermediary banker may negotiate the beneficiary 's bills.
In such a case he stands qua the issuing banker as principal to principal, for either he succeeds to the rights of the beneficiary under the credit or, if he negotiates relying on the credit alone, as acceptor of the offer it contains.
If the instructions call upon the intermediary banker to pay or to negotiate the beneficiary 's bills, the intermediary banker is the issuing banker 's agent.
Under the terms of the contract between the assessees and the foreign buyer the price was to be paid "by draft after 90 days under bank credit to be opened by the buyer for 95% of the net invoice amount.
" By the letter of credit the foreign banker guaranteed to pay the amount in London.
The issuing bank intimated the opening of the letter of credit, but there is no evidence of any express directions to its agent in India to pay or negotiate the draft.
The letter of credit was general; and it was open to any bank on the faith 966 thereof to negotiate the bill issued by the assessees.
The payment made by the intermediary bank was not and could not therefore be on behalf of the issuing bank much less on behalf of the buyer.
By negotiating the bill, the banker of the assessees became the acceptor of the offer contained in the letter of credit of the issuing bank, and as such acceptor obtained the Bill of Lading, the invoice and the Bill of Exchange and presented them for payment.
This arrangement was not an arrangement for payment of price on behalf of the buyer.
It appears clear from the two letters dated April 4, 1945, and May 28, 1945, that the banks accepted no liability by intimating the opening of the letter of credit and the liability attaching to the assessees by drawing Bills of Exchange was not discharged.
If the liability of the assessees, as drawers of the Bills of Exchange continued, the arrangement made by the buyer could not be regarded as one to pay the price through his banker in India.
As stated hereinbefore, the relation between the buyer and his issuing banker was not of principal and agent, nor was the relation between the issuing bankar and the intermediary banker that of principal and agent.
The two bankers were interposed for the protection of the seller as well as the buyer.
The issuing banker did not purport to act as agent of the buyer and the intermediary banker accepted the general offer of the issuing banker by negotiating the draft.
By so accepting the offer and by taking over the Bill of Lading, the insurance certificate and the invoice which represented title to the goods the intermediary banker did not act as an agent of the seller.
The price in respect of the goods was not received in the Province of Madras, and the property in the goods also did not pass to the buyer 967 within the Province.
Tax in respect of the sale of fibre by the assessees under the disputed transactions was therefore not exigible under the Madras General Sales Tax Act.
The appeal is therefore allowed: the decree of the High Court is set aside, and the decree of the trial Court is restored with costs in this Court and the High Court.
Appeal allowed.

dataset_name: IN-Abs

summary/full:
The assessees were doing business principally as exporters of vegetable fibres to foreign countries.
The contracts of sale were C.I.F. or C.F. and were made by correspondence on approval of samples sent by the assessees to the foreign buyers.
The price was payable by draft upon bank credit to be opened by the buyer; who opened with his own bankers 955 an irrevocable letter of credit in favour of the assessees for 95% of the net invoice value.
Intimation of the opening of the letter of credit was then given to the assessees by the local bankers in India who were the agents of the foreign bankers.
The local bankers, however, did not by intimating the opening of the letter of credit undertake any liability, and the assessees were expressly informed that they would not be released from their liability under the Bill of Exchange drawn by them.
On receipt of the information about opening of the letter of credit the assessees shipped the goods, obtained bills of leading in their own names and lodged the shipping documents endorsed in blank with their own bankers together with the invoice and Bill of Exchange for 95% of the invoice value.
Bills of lading were handed over to the assessees bankers with the definite instructions to pass on the shipping documents to the buyers only on payment.
The assessees then discounted the Bills through their own bankers.
The shipping documents were forwarded to the foreign bankers who on presentation paid 95% of the invoice amount.
The Bill of lading was then delivered by the foreign banker to the buyer and goods were unloaded.
For the year 1945 46 the Commercial Tax officer taxed the assessees under the Madras General Sales Tax Act, 1930.
The Commercial Tax officer rejected the claim of the assessees that the amounts in respect of overseas transactions was exempt from liability to tax, because in his view the export transactions were sales within the province of Madras.
The Board of Revenue confirmed the order and held that the property in the goods passed to the buyers in a large majority of the export transaction when the goods were shipped.
The assessees contended that the export sales were at the material time totally outside the provisions of the Madras General Sales Tax Act and the order of the assessment was ultra vires and beyond the powers of the Authority.
The plea of the State of Madras was that the foreign bank opening the letter of credit is an agent of the buyer, and that the bank authorises its own branch to pay the price to the shippers and by the arrangements made by opening the letter of credit, price is paid to the vendor in his own country against the Bill of lading endorsed in blank.
^ Held, that the price in respect of the goods was not received in the Province of Madras and the property in the goods also did not pass to the buyer within the province.
Therefore tax in respect of the sale transactions was not exigible under the Madras General Sales Tax Act 1939.
The expansion of international trade involving overseas transactions has raised problems of peculiar difficulty.
The 956 parties to a contract (which is as a result of correspondence) are generally unknown to each other; often neither the seller nor the buyer is prepared to trust the other and the seller is reluctant to tie up his funds and the buyer is also unwilling to make payment in advance.
To tide over the problem created by this reluctance of the seller and the buyer, bankers of international repute and credit interpose.
They for small commission undertake by opening letters of credit to honour the bill of exchange drawn by the seller accompanied by the insurance policy and the invoice relating to goods forming the subject matter of the contract.
At the instance of the buyers the bank issues a letter of credit which is addressed to the world at large or more frequently to specified person or persons thereby the bank undertakes to honour the Bills of Exchange drawn on the faith of that letter.
Invariably the bills are payable in future but the exporters as the benefit ciaries under the contract, have the guarantee of the banker that payment will be forthcoming and are also entitled to discount the Bills with any party cognisant of the undertaking of the original banker.
The relation between the buyer and his issuing banker was not of principal and agent, nor was the relation between the issuing banker and the intermediary banker that of principal and agent.
The two bankers were interposed for the protection of the seller as well as the buyer.
The issuing banker did not purport to act as agent of the buyer and the intermediary bankers accepted the general offer of the issuing banker negotiating the draft.
By so accepting the offer and by taking over the Bill of Lading, the insurance certificate and the invoice which represented title to the goods the intermediary banker did not act as an agent of the seller.


judgement:
minal Appeal No. 103 of 1952.
Appeal under article 134(l) (c) of the Constitution of India from the Judgment and Order dated the 27th October, 1952, of the High Court of Judicature for the State of Rajasthan at Jodhpur (Wanchoo C.J. and Bapna J.) in D.B. Criminal Murder Reference No. 2 of 1952, arising out of the Judgment and Order dated the 1st July, 1952, of the Court of the Sessions Judge, Pali, in Criminal Original Case No. 2 of 1951.
H. J. Umrigar for the appellants.
Porus A. Mehta for the respondent.
February 16.
The Judgment of the Court was delivered by MAHAJAN J.
This is an appeal under article 134(l) (c) of the Constitution of India, by Magga and Bhagga,who have been convicted under section 302, Indian Penal Code, for the triple murders of Ganesh, Gheesa and Hardas.
The case relates to an incident which took place on the night between the 3rd and 4th April, 1951 Gheesa and Ganesh, deceased, Ratna, Govind, another Ganesh who is a witness in the case, and Hardas had gone to " Imaratia " a well in village Gadwara on that night to keep watch over the crops there.
Gheesa slept in one shed near the well, while Hardas slept in another shed some distance away, and Ratna slept in a third shed near the entrance gate.
Ganesh, deceased, Ganesh (P. W.), and Govind slept on the threshing floor further away from the well.
Some time after midnight Ratna woke up on hearing the cries of Gheesa.
It is alleged that he then saw the two accused beating Gheesa, accused Magga having in his hand a farsi and accused Bhagga having a katari and an axe.
Hardas, who woke up on hearing the cries, rushed to the aid of Gheesa and thereupon the two accused, Magga and Bhagga, fell upon him and attacked him with farsi and axe.
Ratna 975 ran away and hid himself near the well.
On an alarm being raised, one Krishna who was working on a nearby well came and witnessed the attack on Hardas.
The accused, after finishing Gheesa and Hardas went to the threshing floor where Ganesh, deceased, was sleeping.
There Magga asked Bhagga to hit Ganesh with the axe and Bhagga immediately hit Ganesh with the axe and he fell down.
Thereafter Magga hit Ganesh two or three times with the farsi on the legs and Bhagga cut the neck of Ganesh with the katari.
Govind (P.W.) entreated on behalf of Ganesh but he was threatened and was told, that if he did not keep quiet he would also be killed.
Without injuring Govind and Ganesh (P.Ws.) the accused then left the place.
Information of the incident was carried to the village by Ratna and a report of it was made to the police at 11 30 a.m. on 4th April, 1951.
In the report it was stated that " Bhagga and Magga are standing at their house with swords and are saying that they would kill more persons.
Village people are surrounding them outside the house ".
The sub inspector of police, when he arrived at the village, found the house of the accused surrounded by the village people.
The door of the house was closed from inside and the accused were standing on the chabutra inside.
Magga had a farsi in his hand and Bhagga had an unsheathed sword.
The sub inspector got the door opened, arrested the accused, and took possession of the farsi and the sword.
He also recovered the axe and a katari which were bloodstained.
The clothes of the accused were also taken possession of after the arrest and they appeared to have bloodstains on them.
The accused pleaded not guilty.
They admitted their partnership in cultivation at " Imaratia " well with the deceased but denied that any quarrel took place between them and the other partners about the cutting of the crop.
They also denied that they had gone to the well armed with various weapons and had committed the murder of Gheesa, Hardas and Ganesh.
The sessions judge on the evidence led by the prosecution felt satisfied that the prosecution case was 976 proved beyond all reasonable doubt.
It was held that the murder was brutal and advantage had been taken of the persons who were sleeping to kill them.
In the result the appellants were convicted under section 302, Indian Penal Code, and sentenced to death.
The sentence of death passed on them by the sessions judge was confirmed by the High Court after examining the evidence afresh.
In the High Court a contention was raised that the whole trial was vitiated inasmuch as it had not been conducted in accordance with procedure prescribed by law.
This contention was negatived on the ground that the irregularities committed in the course of the trial were such as were cured by the pro visions of section 537, Criminal Procedure Code.
As the objection raised concerned the validity of the trial the case was certified as a fit one for appeal to this Court.
The facts which concern the validity of the trial, shortly stated, are these: The trial began on 22nd March, 1952.
Three assessors had been summoned for that date.
Of these two were present while the third did not come.
Thereupon one person who was present in the court premises and whose name was in the list of assessors but who had not been summoned in the manner prescribed by the Code of Criminal Procedure was chosen as an assessor.
The trial then began with the three assessors so chosen, viz., Jethmal, Balkrishna and Asharam.
On the 6th June, 1952, Jethmal, one of the assessors absented himself and for some reason, which is not clear from the record, one Chimniram was asked to sit in place of Jethmal as an assessor with the result that on the 6th June, 1952, there were three assessors, viz., Balkrishna and Asharam, who had been sitting from the beginning of the trial, and Chimniram who was introduced for the first time that day.
On the 23rd June also Chimniram, Balkrishna and Asharam sat as assessors.
On 27th June, however, Jethmal reappeared and was allowed to sit and since that date four assessors sat throughout, viz., Jethmal, Chimniram, Balkrishna and Asharam.
Eventually all these four assessors gave their opinion on the first 977 July, 1952, when the trial came to an end.
It was con tended that the trial was bad as it took place in defiance of the provisions of sections 284 and 285 of the Code of Criminal Procedure and that such an illegality could not be cured by the provisions of section 537 of the Code.
In order to judge of the validity of this objection it is necessary to set out the provisions of the Code relevant to this matter.
Section 284 provides that, "When the trial is to be held with the aid of assessors, not less than three and, if possible, four shall be chosen from the persons summoned to act as such" .
The section as it originally stood required that " two or more shall be chosen as the Judge thinks fit ", so that there had to be a minimum of two assessors.
In the year 1923, that provision was amended so as to make a minimum of three assessors an essential requisite for a trial to be held with the aid of assessors.
A trial commenced with less than three assessors is not authorised by the provisions of this section as it now stands.
Therefore, unless a case comes within the provisions of the next following section 285, a trial held in defiance of the provisions of section 284 would not be legal.
Section 285, however, has no application to cases where a trial is commenced with less than three assessors.
[Vide Balak Singh vs Emperor (1); Sipattar Singh vs King Emperor (2)].
Section 285 provides : "(1) If in the course of a trial with the aid of assessors, at any time before the finding, any assessor is from any sufficient cause, prevented from attending throughout the trial, or absents himself, and it is not practicable to enforce his attendance, the trial shall proceed with the aid of the other assessor or assessors.
(2)If all the assessors are prevented from attending or absent themselves, the proceedings shall be stayed and a new trial shall be held with the aid of fresh assessors.
" In cases contemplated by this section a trial commenced with the aid of three assessors can be (1) A.I.R. 1918 Pat.
(2) A.I.R. 1942 All, 140.
978 continued and finished with the aid of less than three assessors.
This section, however, does neither authorize the substitution of an assessor for an absent assessor, nor does it authorise an addition of an assessor to the number of assessors during the course of the trial.
The effect of the provisions of sections 284 and 285 is that a trial cannot be validly commenced with less than three assessors chosen in the manner prescribed by the Code, but once validly commenced it can be continued in certain cases to a finish if some, though not all, of the persons originally appointed, attend throughout the trial.
If all of them do not attend, then a fresh trial has to be held.
An addition in the number of the assessors or a change or substitution in their personnel during the course of the trial is not warranted by the Code; on the other hand, it is implicitly prohibited.
The procedure prescribed by section 285(l) is not of a permissive nature.
It has to be followed if the conditions prescribed are fulfilled, and like section 285(2) it is of a mandatory character.
No scope is left in these provisions for the exercise of the discretion of the judge for supplementing these provisions and for holding a trial in a manner different from the one prescribed and for conducting it with the aid of some assessors originally appointed, and also with the aid of some others recruited during the trial.
Section 309 provides that when a trial is concluded, the court may sum up the evidence for the prosecution and defence and shall then require each of the assessors to state his opinion orally and shall record such opinions.
Sub clause (2) of this section enacts that the judge shall then give judgment, but in doing so shall not be bound to conform to the opinions of the assessors.
Sections 326 and 327 enact the method and manner of summoning assessors and jurors.
Section 537 provides as follows: "Subject to the provisions hereinbefore contained, no finding, sentence or order passed by a Court of competent jurisdiction shall be reversed or altered under Chapter XXVII or on appeal or revision on account 979 (a)of any error, omission or irregularity in the complaint, summons, warrant, charge, proclamation, order, judgment or other proceedings before or during trial or in any inquiry or other proceedings under this Code, or. (c)of the omission to revise any list of jurors or assessors in accordance with section 324, or (d)of any misdirection in any charge to a jury, unless such error, omission, irregularity or misdirection has in fact occasioned a failure of justice.
" The first objection that was taken in the High Court to the validity of the trial was that Asharam who had not been summoned as an assessor could not be appointed as such and hence it should be held that the trial commenced with a minimum of two assessors in defiance of the provisions of section 284.
What happened was this: On the date fixed for the trial there was a deficiency in the number of persons who had been summoned and who appeared to act as assessors, the court then sent for Asharam whose name was in the list of assessors and ordered him to sit as an assessor.
The High Court took the view, and we think rightly, that the circumstance that the formality of issuing a summons was not gone through was a mere irregularity which was curable under section 537 of the Code, as there was no failure of justice caused on account of that irregularity and that the trial on that account could not be held to be bad.
This view is in accord with the decision of the Calcutta High Court in King Emperor vs Ramsidh Rai(1) with which we agree.
We are constrained, however, to observe that the High Court did not fully appreciate the decision of the Patna High Court in Balak Singh vs Emperor(2), when it said that that decision held a trial bad where a person was chosen as an assessor who had not been summoned.
In that case during the examination of the first witness only one qualified assessor was present in court and capable of acting as such, the judge ordered another person who happened to be present in court but was not in the official list of assessors to act as an (1) 30 Crl.
L. J .
(2) A.I.R. 1918 Pat.
420. 980 assessor, and it was held that as the trial commenced with only one assessor and not with two duly qualified assessors the trial was abortive and contrary to law.
No exception could therefore be taken to the rule stated in this decision.
The second objection against the validity of the trial taken before the High Court was founded on section 285.
It was contended that when one of the assessors appointed absented himself the court was bound, under section 285, to ascertain before proceeding further with the trial whether the absence of the assessor was due to sufficient cause and whether it was practicable to enforce his attendance and that the judge in this case failed to observe this condition which alone entitled him to continue the trial with the remaining assessors and that the defect was fatal to the validity of the trial.
The High Court held that though there was non compliance with the provisions of section 285 in the case, this irregularity was cured by section 537 as it had not in fact caused failure of justice.
We agree with the High Court in this conclusion.
It is no doubt true that the section enjoins on the judge a duty to find whether there is a sufficient cause for the non attendance of an assessor and whether it is not practicable to enforce his attendance, and ordinarily the proceedings must represent on their face whether this duty has been performed, but we think that such an omission on his part does not necessarily vitiate the trial.
We are further of the opinion that when a judge proceeds with a trial in the absence of one or two of the assessors with the aid of the remaining assessor or assessors, it may be presumed that he has done so because he was satisfied that it was not practicable to enforce the attendance of the absent assessor or assessors and that there was sufficient cause for his or their non attendance.
If, however, there is evidence to a contrary effect, the matter maybe different.
Failure to record an order indicating the reasons for proceeding with the trial with the aid of the remaining assessors can at best be an irregularity or an omission which must be held to 981 be such as to come within the reach of section 537 unless it has in fact occasioned a failure of justice.
It could not be seriously argued that such an omission can lead to such a result.
Finally the learned counsel contended, also relying on section 285, that the sessions judge had no jurisdiction or power to substitute an assessor or to reinstate the absent assessor, or to add to the number of assessors.
When the point was raised before the High Court, it fully realized that there was no provision in law which permitted such substitution of an absent assessor by another assessor or the subsequent reinstatement of an absent assessor as bad been done in this case.
It, however, felt that the irregularity was of the same nature as noncompliance with the provisions of section 285, and as such was cured by section 537 of the Code.
In regard to the addition of an assessor during the trial it said: " We have not been able to find any reported case where an assessor had been added in the middle of the trial as has been done by the learned judge.
That is perhaps due to the fact that no judge ever did such an obviously silly thing, but considering that the trial, in any case, continued with the aid of two assessors who were there throughout, there was, in our opinion, substantial compliance with the mode of trial provided in the Code and the irregularity committed by the addition of Chimniram in June, 1952, is curable under section 537 as it did not occasion any failure of justice.
The sessions judge was still the court of competent jurisdiction to try the case and all that he did was to add unnecessarily one more assessor to advise him when he had no business to do so.
We can ignore his presence altogether and as the irregularity has not caused failure of justice, the trial will not be vitiated".
In our judgment, the High Court was in error in this view.
The sessions judge during the progress of the trial not only made a change in the personnel of the assessors originally appointed and also added to their number, but he.
actually took the opinions 127 982 of all the four assessors as required by the provisions of section 309 of the Code, and acted in accordance with those opinions in convicting the two appellants.
It is plain that a unanimous verdict of four assessors is bound to weigh much more with a judge than the opinion of two persons.
We have not been able to understand how the High Court could ignore the presence of assessors altogether who had given their opinions and which opinions had been accepted by the judge.
The opinion of an assessor is exercised in the judicial function imposed upon him by law, and the judge is bound to take it into consideration and he cannot dispense with it.
The judge considered this trial as if lie had commenced it with the aid of four assessors, and taking into consideration their opinion, he convicted the appellants.
It is difficult to assess the value which the judge gave to the opinions of the assessors at the time of arriving at his finding and the High Court was in error in thinking that it did no harm and caused no prejudice.
We cannot subscribe to the view of the High Court that the trial should be taken as having been conducted with the aid of the two assessors as sanctioned by section 285, Criminal Procedure Code.
That is not what actually happened.
It is difficult to convert a trial held partly with the aid of three assessors and partly with the aid of four assessors into one held with the aid of two assessors only.
At no stage was the trial held with the aid of two assessors only.
The third substituted assessor attended a part of the trial and the added fourth assessor also attended a part of it.
None of these two were present throughout.
Thus the trial when it concluded was a different trial from the one which was commenced under the provisions of section 284, Criminal Procedure Code.
To a situation like this we think section 537 cannot be called in aid.
Such a trial is not known to the Code and it seems implicitly prohibited by the provisions of sections 284 and 285.
What happened in this case cannot be described as a mere error, omission or irregularity in the course of the trial.
It is much more serious, It 983 amounts to holding a trial in violation of the provisions of the Code and goes to the root of the matter and the illegality is of a character that it vitiates the whole proceedings.
As observed by their Lordships of the Privy Council in Subramania lyer vs King Emperor( '), disobedience to an express provision as to a mode of trial cannot be regarded as a mere irregularity.
In Abdul Rahman vs King Emperor (2), the distinction between cases which fall within the rule of section 537 and those which are outside it was pointed out by Lord Phillimore.
There it was said that the distinction between Suubramania Iyer 's case (1) and that case in which there was an irregularity in complying with the provisions of section 360 of the Code was fairly obvious.
In Subramania Iyer 's case(1) the procedure adopted was one which the Code positively prohibits and it was possible that it might have worked actual injustice, to the accused but that the error in not reading the statements of witnesses to them was of a different character, and such an omission was not fatal.
In Pulukurti Kotayya vs King Emperor(3) their Lordships again examined this question.
That was a case where there had been a breach of the provisions of section 162, Criminal Procedure Code, and it was held that in the peculiar circumstances of that case it had not prejudiced the accused and the case therefore fell under section 537 and that the trial was valid notwith standing the breach of section 162.
Sir John Beaumont in delivering the decision of the Board made the following observations which bring out the distinction between the two sets of cases: There are, no doubt, authorities in India which lend some support to Mr. Pritt 's contention, and reference may be made to Tirkha vs Nanak (4), in which the court expressed the view that section 537, Criminal Procedure Code, applied only to errors of procedure arising out of mere inadvertence, and not to cases of disregard of, or disobedience to, mandatory provisions of the Code, and to In re Madura Muthu (1) (1901) 28 l.A. 257.
(3) (1947) 74 I.A. 65.
(2) (1927) 54 I.A. 96.
(4) All 475. 984 Vannian(1), in which the view was expressed that any failure to examine the accused under section 342, Criminal Procedure Code, was fatal to the validity of the trial, and could not be cured under section 537.
In their Lordships ' opinion, this argument is based on too narrow a view of the operation of section 537.
When a trial is conducted in a manner different from that prescribed by the Code [as in Subramania lyer 's case(2)], the trial is bad, and no question of curing an irregularity arises: but if the trial is conducted sub stantially in the manner prescribed by the Code, but some irregularity occurs in the course of such conduct, the irregularity can be cured under section 537, and none the less so because the irregularity involves, as must nearly always be the case, a breach of one or more of the very comprehensive provisions of the Code.
The distinction drawn in many of the cases in India between an illegality and an irregularity is one of degree rather than of kind.
This view finds support in the decision of their Lordships ' Board in Abdul Rahman vs King Emperor( '), where failure to comply with section 360, Criminal Procedure Code, was held to be cured by sections 535 and 537.
The present case falls under section 537, and their Lordships hold the trial valid notwithstanding the breach of section 162.
" In our judgment, the trial conducted in the present case was conducted in a manner different from that prescribed by the Code and is bad and no question here arises of curing any irregularity.
The Code does not authorize a trial commenced with the aid of three named assessors to be conducted and completed with the aid of four assessors.
The substitution of one assessor by another and an addition to the number of assessors appointed at the commencement of the trial is not sanctioned by section 285, Criminal Procedure Code, nor is it authorized by section 284.
On the other hand, the language of section 285(l) read with the provisions of section 285(2) implicitly bans the holding of such a trial.
It is not possible to say with any degree (1) Mad. 82o.
(2) (1901) 28 I.A. 257.
(3) (1927) 54 I.A. 96.
985 of certainty to what extent the opinion of the outgoing and the incoming assessors who did not attend the whole of the trial influenced the decision in the case ; but as such a trial is unknown to law, it has to be presumed that it was illegal.
Mr. Mehta for the State Government contended that under section 309(2) the opinion of assessors is not binding on the sessions judge and their presence or absence does not affect the constitution of the court and that as at this trial at least two of the assessors originally appointed sat throughout the trial it should be held that the trial was substantially a trial conducted in accordance with the provisions of the Code.
The learned counsel did not go to the length of urging that a trial without the aid of any assessors whatever was a good trial under the Code.
Such a contention, if raised, would have to be negatived in view of the clear provisions of section 284 and of sub section (2) of section 285.
The appointment of at least three assessors is essential for the validity of a trial of this character at its commencement, and once validly commenced,in certain events, it can be validly concluded if at least one of them remains present throughout, while others drop out; but a trial conducted in the manner in which it was done in this case is wholly outside the contemplation of the Code and it is not possible to hold that it was concluded according to the provisions of the Code.
The provision in the Code that the opinion of the assessor is not binding on the sessions judge cannot lend support to the contention that the sessions judge is entitled to ignore their very existence.
As already pointed out, though he may not be bound to accept their opinions, be is certainly bound to take them into consideration.
The weight to be attached to such opinions may well vary with the number of assessors.
Mr. Mehta to support his contention placed reliance on the majority decision of the Madras High Court in King Emperor vs Tirumal Reddi (1).
In that case the trial continued for about seven weeks.
During that (1) Mad.
986 period one of the assessors was permitted to absent himself during two whole days, and five half days respectively, at first, so that he might visit his mother on her death bed, and subsequently, to perform the daily obsequies rendered necessary by her decease.
He then resumed his seat as an assessor and continued so to act until the termination of the trial, all the depositions recorded in his absence having been read by him on his return.
At the conclusion of the trial the sessions judge invited the opinion of each assessor, and recorded it.
The opinion of each was that all the accused were guilty and the judge concurring in that opinion, convicted.
the accused.
On appeal it was contended that the judge had acted contrary to law in allowing the assessor who had been absent to resume his seat as an assessor and in inviting and taking into consideration his opinion in deciding the case.
It was held by the majority of the court that the finding and the sentence appealed against had been passed by a court of competent jurisdiction within the meaning of section 537 of the Code and that the defect in the trial did not affect its validity and was cured by that section as the irregularity had not in fact occasioned a failure of justice.
Mr. Justice Davies took a different view.
This decision was clearly given on the peculiar facts and circumstances of that case and is no authority in support of the view contended for by Mr. Mehta.
For the reasons given above we are constrained to hold that the trial of the appellants conducted in the manner above stated was bad and the appellants have to be retried in accordance with the procedure prescribed by the Code.
In the result we allow this appeal, quash tile conviction and sentence passed on the appellants, and direct their retrial by the sessions judge in accordance with the procedure prescribed by the Code.
Appeal allowed Retrial ordered.

summary/full:
Section 285 of the Criminal Procedure Code permits a trial commenced with the aid of three assessors to be continued and completed with the aid of less than three if during the course of the trial any assessor is prevented by sufficient cause from attending.
It does not, however, authorise the substitution of an assessor for an absent one nor an addition to the number of assessors during the course of the trial.
A, B and C were summoned to sit as assessors for a murder trial and as C did not appear, D who was in the list of assessors and who was present in court though not summoned, was asked to sit as an assessor, and the trial commenced with three assessors A:, B and D. A absented himself during the course of, the trial and the judge asked E to sit in place of A and proceeded with the trial for some days with B, D and E.
Later on A appeared and the trial continued till the end with the four assessors A, B, D and E: Held, (i) that the mere fact that D who had not been sum moned was allowed to sit as an assessor when the trial commenced did not vitiate the trial as it, was a mere irregularity and did not cause any failure of justice; King Emperor vs Ramsidh Rai approved.
Balak Singh vs Emperor (A.I.R. 1918 Pat.
420) explained.
(ii)though sub section (1) of section 285 imposes a duty on the judge to find out whether there was sufficient cause for the absence of an assessor and to consider whether it is not possible to enforce his attendance, it should be presumed that he has done so when he proceeds with the trial in his absence and a mere omission to record reasons for proceeding with the trial without the absent assessor would not by itself vitiate the trial ; (iii) a sessions judge, however, has no jurisdiction to substitute another person for any assessor who absents himself during the trial or to reinstate the absent assessor when be reappears and continue the trial with four assessors when the trial commenced with three assessors, and the trial in question was there fore illegal.
126 974 King Emperor vs Tirumal Reddi (I.L.R. distin guished.


judgement:
Civil Appeal No. 96 of 1961.
Appeal by special leave from the award dated December 7, 1959, of the central Government Industrial Tribunal Dhanbad in reference No. 42 of 1959.
S.C. Banerjee and P. K. Chatterjee, for the appellant.
Janardan Sharma, for the respondent.
January 30.
The Judgment of the Court was delivered by SARKAR, J.
The appellants, the Bhowra Kankanee Coal Co. Ltd., own the Bhowra and other collieries.
On the Bhowra Colliery there are a number of residential bungalows belonging to the appellants occupied by their officers employed in the colliery.
The appellants employ certain malis for working as such in these bungalows and their duty is to look after and maintain the gardens there.
A dispute along between the appellants and their workmen as to whether these malis, who were fourteen in number, were entitled to bonus.
By an order made on June 23, 1959, under the , the Government of India referred this dispute along with another with which we are not concerned in this case, for adjudication to the Industrial Tribunal, Dhanbad.
The Points referred concerning the dispute above mentioned were in these terms: (1) Whether the withdrawal of the benefit of bonus provided in the Coal Mines Bonus 885 Scheme by the management of the Bhowra Colliery from the following garden mazdoor/malis is justified.
If not, to what relief are they entitled and from what date? (2) Whether the garden mazdoors/malis referred to above are employed on domestic and personal work within the meaning of paragraph 3 (b) of the Coal Mines bonus Scheme, 1948 and if not, to what relief are they entitled and from what dates The points so referred were decided by the Tribunal against the appellants by an award made on December 7, 1959, and the present appeal is against that award.
Till January 1, 1955, the Bhowra and certain other collieries managed as a group, were owned by the Eastern Coal Company Ltd., and on that date these collieries were sold to the appellants.
At the time when this sale was being arranged, the workmen in these collieries raised a dispute that their services should be treated as continuous inspite of the transfer of the collieries from one owner to another by the sale and that the conditions of their service and the facilities which they were enjoying under the previous owners should be guaranteed and continued by the succeeding owners, that is the appellants, after the latter took over the collieries.
At the instance of the conciliation officer appointed under the Act this dispute was settled by an agreement made on January 14, 1955, to which the Conciliation officer the workmen the previous owners and the appellants were parties.
Paragraph 3 of this agreement provided as follows: "Agreed that the existing service conditions and the facilities will be continued, excepting pension." Now in 1948 an Act called the Coal Mines Provident Fund and Bonus Schemes Act had been passed by section 5 of which the Central Government was 886 empowered to frame a bonus scheme for the payment of bonus to the employees of coal mines, The Central Government had framed a Bonus Scheme under this provision in 1948 and since then the previous owners had been paying the malis employed for the bungalow gardens belonging to the Bhowra Colliery, bonus in terms of it.
In 1951 they once stopped the bonus but that caused an industrial dispute and they thereupon restored the bonus.
Upto the acquisition of the Bhowra Colliery by the appellants they position thus was that these malis had been receiving bonus since 1948 excepting for a short period during which it had been stopped as earlier mentioned.
After they became the owners of the Bhowra Colliery, the appellants however stopped the payment of bonus to these malis.
This raised the industrial dispute which had led to this appeal.
Paragraph 3 of the Bonus Scheme framed under the Act, so far as relevant for this case, is in these terms: Paragraph 3.
Except as hereinafter provided every employee in a coal mine to which this Scheme applies shall be eligible to qualify for a bonus, Exceptions: An employee in a coal mine shall not be entitled to a bonus under the Scheme for the period during which (a) . . . . . . . . (b) he is employed as a mali, sweeper or demestic servant on demestic and personal work; (c) . . . . . . . .
One of the questions raised in this appeal is whether the bungalow malis were entitled to bonus under this paragraph.
The appellants contended before the Tribunal that malis as a class were excepted from the benefit of the Bonus Scheme by the provision 887 in exception (b) in this paragraph.
They further contended in the alternative that these malis were excepted in any event because they were In malis employed on domestic and personal work within the meaning of the exception.
The Tribunal rejected these contentions of the appellants and held (a) that these malis were entitled to bonus under paragraph 3 of the agreement of January 14, 1955 and (b) that they were not employed on domestic and personal work and were therefore not within the exception.
For these reasons the Tribunal held that the withdrawal of the bonus by the appellants was not justified.
It is not clear on what ground the Tribunal held that the malis were entitled to bonus under paragraph 3.
of the agreement of January 14, 1955.
It may be that the Tribunal thought that the Bonus Scheme framed by the Central Government formed a condition of service of the malis or a facility to which they were entitled and which the appellants undertook by the agreement of January 14, 1955, to continue.
If this was the point of view, then of course the further question still remains whether the malis were on domestic and personal work for if they were, then they would not be entitled to the bonus as a facility or a condition of their service under the Scheme.
It was however contended on behalf of the respondent workmen in this Court that the right to bonus was a condition of the service of the malis and a facility to which they were entitled independently of the Bonus Scheme and that this is what the Tribunal had held.
The record however is not very clear on this question.
The appellants dispute the contention of the workmen and further say that in any event the Tribunal had no jurisdiction to decide that question for the question referred to it was the right of the malis to bonus under the Bonus Scheme.
888 We think that the appellants ' contention is well founded.
What had been referred was the question "whether the withdrawal of the benefit of bonus Provided in the Coal Mines Bonus Scheme . is justified".
On the language of the order of reference it seems to us that the dispute referred was as to the right as provided in the Bonus Scheme and not as to any other right.
This also was the workmen 's case before the Tribunal as appears from its written statement filed there.
In the statement of case filed in this appeal also, the respondent took the same position.
We therefore think that if the Tribunal had held that the malis were entitled to the bonus under the agreement of January 14, 1955 independently of the Bonus Scheme it had exceeded its jurisdiction and its award cannot be upheld.
The question still remains as to whether on a proper construction of paragraph 3 of the Bonus Scheme these malis had any right to bonus.
That was undubitably the question referred to the Tribunal.
The words requiring construction are "on domestic and personal work".
The Tribunal held that malis working in bungalows belonging to the appellants were not working for the home or household of private persons or individuals and were therefore not on domestic work.
It also held that as the malis work under the direction and control of the appellants and were liable to be transferred from one bungalow to another or to some other work they were not on personal work.
We are unable to accept this construction of paragraph 3 of the Bonus Scheme.
Domestic means as of the home.
We feel no doubt that the malis who were working in the bungalows occupied by the officers were working in the home of the officers.
They were, therefore, on domestic work.
The work they were doing would not cease to be domestic work because the bungalows belonged not to the officers but to the appellants.
Whether a work 889 is domestic or not would depend on its nature.
Suppose an officer has employed his own mali for working in the bungalow garden, that mali would surely be on domestic work.
This is not disputed.
The nature of that work would not change because the the mali was working not under the orders of the officer occupying the bungalow but under the appellants, nor because the bungalow did not belong to the officer but to the appellants.
Nor for the same reason does the fact that the malis were employed by the appellants and not by the officers make any differences The fact that Malis might be transferred to other jobs and cease to be malis altogether is also irrelevant.
On such transfer they might become entitled to bonus.
The exception in paragraph 3 deprives them of the bonus only for the time they are malis on domestic and personal work.
Paragraph 3, of the Bonus Scheme contemplated malis who were employees of the colliery owners and were yet on domestic work.
The Tribunal thought that paragraph 3 only contemplated cases of malis appointed by the officers who were paid some allowance by the colliery owners for keeping malis in the gardens of the bungalows occupied by them.
It may be that malis to engaged would be the employees of the colliery owners, as the term employee is defined in the Act under which the Bonus Scheme was framed, but we see no reason to restrict malis on domestic work referred to in paragraph 3 to such malis only.
As we have said earlier, whether a malis on domestic work or not would depend on the nature of the work.
As the work which the malis with whom we are concerned did, was domestic work.
these malis must be deemed to be within the exception mentioned in paragraph 3.
They would not cease to be malis on domestic work because they had been working in the bungalows belonging to the appellants or were under their control and orders.
We further feel no difficulty in holding that 890 these malis were on personal work.
The word "personal" is obviously used in the sence of work for an individual as distinguished from work for the Coal mine as an institution.
These malis were undoubtedly working for the officers as individuals.
Therefore they were on personal work.
For these reasons in our view the malis in the present case were not entitled to any bonus under the Bonus Scheme.
As in our opinion the order of reference does not raise any question as to whether the malis were entitled to bonus apart from the Bonus Scheme, it is unnecessary for us to express any opinion on that question and we do not do so.
The result is that this appeal allowed and we set aside the award of the Tribunal in so far as it is concerned with the two points of dispute earlier set out which had been referred to it.
We do not think it a fit case to make any order for costs.
Appeal allowed.

summary/full:
In exercise of the power conferred by 5. 5 of the Coal Mines Provident Fund and Bonus Schemes Act, 1948, the Central Government framed a Bonus Scheme for the payment of bonus to employees of coal mines.
Paragraph 3 of the scheme made every employee in a coal mine eligible for a bonus except, infer alia, "a mali on domestic and personal work".
The question for consideration was whether under this paragraph the malis working in the officers ' bungalows had any right to bonus. ^ Held, that these malis were not entitled to any bonus under the Bonus Scheme.
Paragraph 3 contemplated malis who were employees of the colliery owners and were yet on domestic work.
Domestic meant as of the home.
The malis 884 who were working in the bungalows occupied by the officers, were working in the homes of the officers.
They were therefore, on domestic work.
The work they were doing did not cease to be domestic work because the bungalows belonged not to the officers but to the appellant or because they were under the control and orders of the appellant.
Further, these malis were on personal work.
The word "personal" was used in the sense of work for an individual as distinguished from work for the coal mine as an institution.
These malis were undoubtedly working for the officers as individuals.