Civil Appeals Nos 324 and 325 of 1957
Appeals by special leave from the judgment and order dated April 10 1953 of the former Hyderabad High Court in EPT References Nos 45215 and 4535 of 1358 F AV Viswanatha Sastri section N Andley J B Dadachanji Rameshwar Nath and P L Vohra for the appellant
KN Rajagopal Sastri and D Gupta for the respondent
April 18
The Judgment of the Court was delivered by SK DAS J
These are two appeals with special leave from the Judgment and Order of the High Court of Hyderabad dated April 10 1953 in two references under section 483 of the Hyderabad Excess Profits Tax Act
The question which the High Court answered against the assesses in the said references was 548  Whether in the circumstances of the case the officers of the Excess Profits Tax Department were right in treating the income of the assessee or the Industrial Trust Fund as income from business  The High Court answered the question in the affirmative
The point for decision before us is if the High Court correctly answered the question
The relevant facts which led to the question and answer are these
There were two cotton mills in the State of Hyderabad as it was then known called Azamjahi mills and Osmanshahi mills
They were public joint stock companies
By a Firman e Mubarak of 1929 issued by the then Ruler of the State was formed an institution called the Industrial Trust Fund the purpose of which was to help large and small industries on behalf of the Government of the State
The management of the Trust was entrusted to a Committee which consisted of three members of the Government who were called Trustees
By two agreements dated April 12 1934 and July 27 1934 made between the Trustees of the one part and the two mills of the other the Trustees were appointed secretaries treasurers and agents of the said mills
Under these agreements the Trustees were given the general conduct and management of the business and affairs of the mills and they were entitled to appoint employees and were also entitled to delegate to other persons all or any of the powers authorities discretions etc under the agreements subject to the approval of the Board of Directors of the respective mills
By two other agreements also dated April 12 1934 and July 27 1934 the Trustees were appointed selling agents of the mills
By two agreements both dated October 16 1938 which were supplemental to the selling agency agreements mentioned above the Trustees were given power to delegate all or any of their powers authorities etc to other persons subject to the approval of the Board of Directors of the respective mills
Till October 1938 the Trustees exercised their powers and performed their functions under the agreements aforesaid through an Advisory Board and Quamar Shaffi Tyabji appellant before us was appointed chairman of the Advisory Board on a remuneration of Rs 1500 549 per month plus a certain commission
Sometime in 1938 the Advisory Board was dissolved and on December 6 1938 an agreement was entered into between the Trustees and the appellant
Clause 11 of the preamble of this agreement recited  The said Trustees are desirous of delegating such of the powers authorities and discretions as such secretaries treasurers and agents as also as such selling agents of the said two mills as aforesaid as are hereinafter mentioned to and appointing the said Quamar Shaffi Tyabjee as the managing agent of the business of the said trustees as such secretaries and treasurers and agents as also as such selling agents of the said two mills as aforesaid in and for the matters and purposes hereinafter mentioned The agreement then recited that the approval of the Board of Directors of the two mills having been obtained the appellant was appointed managing agent of the business of the Trustees as secretaries treasurers and agents and also as selling agents of the two mills
Clause 2 of the agreement detailed the powers of the appellant which were the same as those of the Trustees to conduct and manage the business of the two mills subject however to the general control of the Trustees
In other words the full powers of management and of the selling agency in relation to both the mills were delegated to the appellant
Clause 3 said inter alia that the appellant would hold the office of managing agent and selling agent for the remaining period of the original managing agency and selling agency agreements
The remuneration of the appellant for the managing agency was fixed at Rs 2000 per month and a commission of 21 per cent
out of the commission of 121 per cent
per annum on the annual profits payable to the Trustees subject to the condition that Osmanshahi mills made an annual profit of Rs 150000 and the Azamjahi mills made an annual profit of RE 200000
For the selling agency a separate commission was payable on the sale of different kinds of goods subject again to the condition that the annual profits of the two mills did not fall below a particular figure
Clause 6 of the agreement related to the appointment and duties of a mill expert Clause 7 72 550 provided for the termination of the agreement and said that the agreement shall terminate on the Trustees terminating the earlier agreements in their favour provided however that in the event of the said Trustees deciding to transfer the said respective agreements and the rights thereunder to any one they shall in the first instance offer the same to the said managing agent on the same terms and conditions as may have been offered to them and on the further term that the managing agent shall make arrangement to the satisfaction of the said Trustees for the payment to them in cash or otherwise of the moneys they have spent in purchasing the managing agency rights of the said two mills as also the balance then due of the unsecured loans ie other than first debenture loan they have and may hereafter advance to the said two mills so that the said managing agent shall have the first refusal thereof in the manner aforesaid provided always that the said managing agent shall intimate to the said Trustees his acceptance of the said term within six weeks of the communication to him of the said offer and in the event of his omission to do so he shall be deemed to have not accepted the same
Clause 9 of the agreement is also important
It said   The managing agent shall not assign the benefit of this agreement the same being personal to himself Clauses 10 and II related to the eventuality of winding up of the mills and its effect on the appellant s right under the agreement
Under the terms of the agreement dated December 6 1938 the appellant conducted the business of the mills both as to management and selling
He was assessed to excess profits tax for the two chargeable accounting periods 1351F and 1352F corresponding to October 1 1941 to September 30 1942 and October 1 1942 to September 30 1943 respectively
The total income assessed for 1351F was Rs 237451 which included a sum of Rs 211230 representing the appellant s managing agency allowance and commission
The total income for 1352F was Rs 490027 which included Rs 445775 being the managing agency commission and allowance of the appellant
551 Before the Excess Profits Tax authorities the appellant contended that he was only an employee of the Industrial Trust Fund and his remuneration under the agreement dated December 6 1938 was merely salary and not income derived from business and therefore not liable to excess profits tax
The Excess Profits Tax authorities negatived this contention and as required by the High Court the Commissioner of Income tax Hyderabad referred the question of law which we have set out at the beginning of this judg ment to the High Court for decision
On behalf of the appellant it has been submitted that on a true construction of the relevant agreements the Industrial Trust Fund was the managing agent as also the selling agent of the two mills the Trustees employed the appellant on certain terms and gave him certain powers and therefore the appellant an individual and not a firm was not carrying on an independent business of his own be was just carrying out the duties of an employee of the Trustees in spite of his being described as managing agent in the agreement of December 6 1938
His income therefore was not income derived from business
We are unable to accept this line of argument a correct
In Lakshminarayan Ram Gopal and Son Ltd V The Government of Hyderabad 1 this Court had occasion to explain the position of an agent a servant and an independent contractor
It was there pointed out that the difference between the relations of master and servant and of principal and agent lay in this a principal has the right to direct what work the agent has to do but a master has the further right to direct how the work is to be done
An agent has to be distinguished on the one hand from a servant and on the other from an independent contractor
A servant acts under the direct control and supervision of his master and is bound to conform to all reason
able orders given in the course of his work
An agent though bound to exercise his authority in accordance with all lawfull instructions which may be given to him from time to time by his principal is not subject in its exercise to the direct control or supervision of the principal
Indeed learned counsel for the appel 1  552 lant accepts as correct the distinction made above and also accepts that the true relation between the Mills and the Trustees was that of principal and agent but be contends that as between the Trustees and the appellant the relation was one of master and servant
We consider that this contention is wholly unsound
We have examined the original agreement between the Mills and the Trustees dated April 12 1934
Clause 9 of that agreement said that the agents may regulate and conduct their proceedings in such manner as they may from time to time determine and may delegate all or any of their powers authorities and discretions as secretaries treasurers and agents of the company to such person or persons and on such terms and conditions as they may think fit subject to the approval of the Board of Directors of the company
 The delegation in favour of the appellant was made under this clause
The position was therefore this the Trustees as agents had express authority to name another person to act for the principal in the business of the agency and they named the appellant with the approval of the Board of Directors
Therefore the appellant was neither a servant nor a mere sub agent
He was an agent of the principal for such part of the business of the agency as was entrusted to him
The position in law was as laid down in section 194 of the Indian Contract Act
In similar circumstances this Court has held that managing agency is business see Lakshminarayan Ram Gopal and Son Ltd vs The Government of Hyderabad 1 and J K Trust Bombay vs The Commissioner of Income tax Excess Profits Tax Bombay 2 
A consideration of the terms of the agreement of December 6 1938 also leaves no manner of doubt in the matter
Full powers of the Trustees as managing agents were delegated to the appellant under cl 2 of the agreement subject only to the general control of the Trustees and the clause stated that the appellant was to conduct and manage the business and affairs of the two mills
Clause 3 relating to the tenure of the managing agency cl 4 relating to remuneration cl 7 relating to termination of business and the clauses 1  2 1958 S CR 65 553 relating to the eventuality of winding up of the mills all these were appropriate to a business undertaking only and quite inappropriate to a relation of master and servant
The extent of the delegation of powers was also indicated by cl 5 which said inter alia that the managing agent meaning the appellant must observe and perform ail the terms and conditions of the earlier managing agency and selling agency agreements in favour and on the part of the Trustees in other words the entire managing agency business was handed over to the appellant
Learned counsel for the appellant emphasised el 9 which we had quoted earlier and said that it showed that the appellant could not assign any of the benefits under the agreement which was personal to himself
We do not think that el 9 changed the quality of the relation between the Trustees and the appellant
The managing agency agreement must be read as a whole and so read the conclusion which clearly emerges is that the appellant was undertaking a business of his own in accepting the duties and responsibilities of a managing agent of the two mills under the general control of the Trustees
The appellant was a man with previous business experience and held an agency of the Eastern Federal Union Insurance Co which brought him a substantial income
Learned counsel for the appellant has relied on the decision in Inderchand Hari Ram vs Commissioner of Income tax U P  C P 1 where the distinction between the definitions of managing agent and manager under the Indian Companies Act 1913 was pointed out
We do not think that that decision gives any help to the appellant
The question really is one of construction of the relevant agreements what do their terms show a relation of master and servant or an agency business  We have no doubt in our minds that what clearly emerges from the terms of the agreement of December 6 1938 is a business of managing agency accepted and undertaken by the appellant
Therefore the High Court correctly answered the question in the affirmative
The appeals fail and are dismissed with costs
As the appeals have been heard together there will be one set of costs
Appeals dismissed


Summary:
In 1900 the then proprietor of the Dhalbhum estate who was the predecessor in interest of the first respondent granted a permanent lease of the mining rights for certain metals and minerals in the estate to one Prince Mohammad Bakhtyar Shah
During the lifetime of the said proprietor the management of the estate was taken over by the Deputy Commission of Singhbhum under the Chotanagpur Encumbered Estates Act and after the former s death the manager of the Estate granted to the Official Receiver to the estate of Prince Mohammad Bakhtyar Shah another lease in respect of mining rights in the same area in 1919
The first respondent commenced the present litigation for the purpose of recovering rents and royalties on the basis of the second lease from the heirs and representatives of the estate of Prince Mohammad Bakhtyar Shah and also from the appellant as the Receiver to that Estate
The decision of the case depended upon the construction of the two leases of 1900 and 1919 and the Trial Court and the High Court decided the case in favour of the plaintiff respondents
On appeal by the contesting defendant appellant on a certificate granted by the High Court  Held that the intention of the parties to a dispositive document must be gathered from the words used by the parties themselves and they must be presumed to have used the words in their strict grammatical sense
If the statements made in the earlier part of the document were irreconcilable with those made in the later part the earlier part must prevail
In cases of ambiguity the court should look at all the parts of the document to ascertain the intention of the parties
If ambiguity still remains the Court should interpret the document strictly against the grantor and in favour of the grantee
Under Exp
11 of section 19 of the Limitation Act the words duly authorised  would include duly authorised either by the action of the party indebted or by force of law or order of the court
Annapagonda vs Sangadiappa  Rashbehari vs Anand Ram  Ramcharan Das vs Gaya Prasad 30 All 422 Lakshumanan vs Sadayappa AIR 1919 Mad 816 and Thankamma vs Kunhamma AIR 1919 Mad 370 approved
605 Currimbhai vs Ahmedali and Lakshmanan Chetty vs Sadayappa Chetty 35 MLJ 571 considered