JUDGMENT

1. Second Appeal No. 801 and Second Appeal No. 802 of 1920 are plaintiff's appeals arising out of a suit for sale, on the basis of a mortgage-deed, dated the 16th of November 1905, executed by the father of the present defendants in favour of the plaintiff. The defendants did not put in an appearance in the Court of first instance and no written statement was filed on their behalf. The learned Subordinate Judge, relying on a clause in the mortgage-deed, which entitled the mortgagee to sue for the whole amount of principal and interest on default of payment of annual interest, held that the claim to enforce the charge was barred by time under Article 132 of the Limitation Act , but he was, however, of opinion that the personal remedy was not barred. He, accordingly, granted the plaintiff a simple money decree.

2. Both parties appealed to the learned District Judge who, holding that the personal remedy also was barred, dismissed the whole suit. The plaintiff appealed to this <ORG> from the lower Appellate <ORG>'s decrees and his appeals came up for hearing before <ORG> of this <ORG>, which, in view of some apparent conflict of opinion, has referred these cases to a Fall Bench. There are only two points which arise for our determination:

(1) Whether the plaintiff's claim to enforce the charge by sale of the mortgaged property is barred by time?

(2) Whether, in any case, he is entitled to a simple money-decree?

3. As some argument has turned on the actual wording of the document in suit, we think it desirable to quote the operative portion of it in full. It is as follows:

I hereby covenant and give in writing that I shall pay the money aforesaid with interest at the rate of 8 annas per cent. per mensem, within a period of twelve years and shall pay interest from year to year. In case of non-payment of interest from year to year, the creditor has the option to add the interest to the principal and to charge interest thereon at the aforesaid rate or to recover through <ORG> principal and interest from me and hypothecated property and also from my other moveable or immoveable property and from my person within the stipulated period. The period fixed shall not bar the claim. In case of non-payment within the stipulated period, the creditor shall have the power to recover the money, principal and interest, together with compound interest from me, mortgaged property or other moveable or immoveable property of mine. If I am not able to pay the money within the stipulated period and with the consent of the creditor the money remains unpaid, the interest and com-pound interest at the aforesaid rate shall continue to run at the stipulated rate till the date of realization.

4. It is clear from the terms of this document that the ordinary period fixed for payment was 12 years, and, if no default were made, the mortgagee would not have been entitled to sue for the recovery of his money before the expiry of the period fixed. If, however, a default were made in payment of the annual interest, it would be open to the mortgagee, if he so desired, to sue for the whole amount of principal and interest; and it is clear that, in that case, the mortgagor could not succeed on the plea that the claim was premature. On the other hand, there is nothing in the deed which makes it obligatory on the mortgagee to sue as soon as a default is made.

5. Now, there can be no doubt that a suit for sale on the basis of a mortgage-deed is one to enforce payment of money charged upon immoveable property within the meaning of Article 132 of the Limitation Act of 1908. The previous decisions to the contrary were overruled by their Lordships of <ORG> in the case of <CITATION> 30 M. 426 : 9 Bom.L.R. 1104 : 4 A.L.J. 625 : 11 C.W.N. 1005 : 6 C.L.J. 379 : 2 M.L.T. 333 : 17 M.L.J. 444 : 34 I.A. 186 (P.C.). This view has been accepted by the <ORG> and the wording of Article 132 has remained unaltered and a special period of grace provided for in Section 31 of the new Act.

6. It being beyond question that Article 132 applies, we have to look So the words in the third column of that Article in order to determine the point of time from which limitation begins to run. The period of limitation is 12 years from the time "when the money sued for becomes due." We have, therefore, to answer the simple question, when did the money become due in the present case? Obviously, money becomes due as soon as it becomes payable by the mortgagor to the mortgagee, that is to 'say, as soon as it can be legally recovered by the mortgagee. The question whether the mortgagee chooses to wait and does not sue at once, is wholly immaterial. The money might be due and yet the mortgagee may not like to call it in at once and may safely wait for a period of 12 years. Examining the terms of the mortgage-deed in this light, it is obvious that, as soon as the first default was made, a right accrued to the mortgagee to sue for the whole sum with interest. Whether he chose to avail himself of it or not, is another matter. On default having been made, the money certainly did become due at once; the mere circumstance that the creditor had the option of not sailing in the money cannot wipe out the fact that the money had in fact become due.

7. The view expressed above is undoubtedly in consonance with the rule of law prevailing in England In <NAME> v. <NAME> (1842) 62 E.R. 423 at p. 426 : 4 Q.B. 519 : 3 G. & D. 402 : 12 L.J.Q.B. 134 : 17 Jur. 302 : 114 E.R. 994, it was remarked: "If he those to wait till all the instalments became due, no doubt he might do so; but that which was optional on the part of the plaintiff would not affect the right of the defendant, who might well consider the action as accruing from the time that the plaintiff had a right to maintain it. The Statute of Limitation runs from the time the plaintiff might have brought his action, unless he was subject to any of the disabilities specified in the Statute." This case was followed by <ORG> in <NAME> v. <NAME> (1891) 2 Q.B. 509 : 60 L.J.Q.B. 619 : 65 L.T. 329 : 39 W.R. 262, where money had been lent for a fixed period of five years subject to the power to call in the same at an earlier period" tinder certain events including a default in the payment of any quarterly interest for 21 days. It was held in that case that a claim brought more than six years after the first default was barred by time, inasmuch as the cause of action arose on the first default, and that the time began to run from the earliest time at which the plaintiff could have brought her action. These cases are accepted laws in England (vide, <NAME> Laws of England, Volume XIX, page 44).

8. It has been very strongly urged before us that the effect of holding that time begins to run from the first default would be to strike out an important clause under which the mortgagee is given the option to wait, and this would be going against the express intention of the parties. But it is not quite easy to see what is really meant by saying that the mortgagee has the option of suing or not suing. In slither case, be is not bound to sue at once; he can, in fact, wait for 12 years. If by the word "option" is meant that the parties agree that, although the money does become recoverable. yet the Mortgagee can wait and at the same time keep the Statute of Limitation in abeyance, then it would be a case of contracting cut of the Statute. An agreement of this kind can never have the effect of preventing the period of limitation from running out. But, as a matter of fact, there is in the deed no covenant that limitation will not begin to run, and the option after all might not mean anything more than that a forbearance to sue would not disentitle the mortgagee from claiming interest, but that interest would continue torun though no suit is brought for some time. If this only in the intention of the parties, then no difficulty whatsoever arises.

9. Our attention has not been invited to any Pronouncement of their Lordships of. <ORG> which would cover the point arising in this case. The only <ORG> case to which reference has been made is that of <NAME> v. <NAME>. 1 C. 163 : 25 W.R. 84 : 3 I.A. 1 : 3 Sar.P.C.J. 58 : 3 Suth. P.C.J. 222 : 1 Ind. Dec. (N.S.) 105 (P.C.). Although it is conceded that the point before us did not directly arise in that case and the remark relied upon by the learned <NAME> for the appellant was a mare obiter dictum, nevertheless, any observation of their Lordships is entitled to the greatest weight and should be a guide to us. It is, therefore, necessary for us to consider that case carefully. There was a mortgage-deed executed on the 21st of Jane 1856, which was subsequently registered and under which it was stipulated that the money would be re-paid in June 1886, but that, in the event of the lands being sold in execution of a decree obtained by a third party, the mortgages would be at liberty at once to sue for the recovery of the debt. On the 18th May 1835, the lands mortgaged were actually sold in execution of a simple money-decree. On the 30th of August 1871, that is, more than six years after but within 12 years of the date of the sale, a suit to recover the amount on the mortgage-deed was instituted. The defendants pleaded that Clause 16 of Act XIV of 1859, which was the general clause applicable to suits for which no other limitation was expressly provided, was applicable, and that the claim was barred, by the six years rule. Their Lordships repelled this contention holding that the slangs applicable was Clause 12 which governed suits * for recovery of immoveable property or of any interest in immoveable property to which no other provision of this Act applies." Referring to the contention of the Counsel for the defendants that the six years rule applied, their Lordships remarked that they must not be supposed to give any countenance to the argument that the suit would have bean barred if the limitation of six years under Clause 16 bad been applicable to it.

10. Now, it is to be noted that in the old Limitation Act of 1859 there was no clause which in any way corresponded to Article 132 of the present Limitation Act and their Lordships felt constrained to apply the general article far recovery of immoveable property corresponding to the present Article 144 , No one contends that that Article applies in the present case. Furthermore, the Counsel for the appellant was driven to fall back on the omnibus clause 16 for "suits for which no other limitation is hereby expressly provided," corresponding to the present Article 120 , which, it is contended before us, is inapplicable to the present case. In fact, there is a uniform course of decisions in all the <ORG> that Article 116 of the Limitation Act would be applicable to a mere money claim based on a registered bond, and not the general Article 120. Their Lordships of <ORG> also have, in the recent case of <CITATION> 39 Ind. Cas. 156 : 25 C.L.J. 279 : 1 P.L.J. 262 : 15 A.L.J. 217 : 32 M.L.J. 357 : 21 M.L.T. 262 : 21 C.W.N. 577 : (1917) M.W.N. 363 : 5 L.W. 654 : 19 Bom. L.R. 450 : 44 C. 759 : 44 I.A. 65 (P.C., accepted the interpretation put on Article 116 in a long series of Indian decisions, and held "that the compensation for the breach of a contrast" does not only point to a claim for unliquidated damages but is used in a very wide sense and includes a claim for payment of a certain sum. It is, therefore, obvious that the case of <NAME> v. <NAME> 1 C. 163 : 25 W.R. 84 : 3 I.A. 1 : 3 Sar.P.C.J. 58 : 3 Suth. P.C.J. 222 : 1 Ind. Dec. (N.S.) 105 (P.C.) can-not, in any way, be taken to have decided the point which arises before us, nor had their Lordships than to interpret the meaning of the expression when the money sued for becomes due" which we have to consider.

11. Coming to <ORG>, we find that the decisions have by no means been uniform. We do not, however, feel called upon to review the numerous authorities of the <ORG> other than our own. We simply content ourselves with mentioning a few cases holding the two opposite views.

12. <CITATION> 24 C. 281 : 1 C.W.N. 229 : 12 Ind. Dec. (N.S.) 854; <CITATION> 20 M. 245 : 7 M.L.J. 222 : 7 Ind. Dec. (N.S.) 174 and <NAME>. v. <NAME> 2 Ind. Cas. 653 tend to apart the view that time begins to run from the date of the first default.

13. <CITATION> 22 M. 20 : 8 M.L.J. 167 : 8 Ind. Dec. (N.S.) 15 and <CITATION> 35 Ind. Cas. 418 : 89 M. 981 : 4 L.W. 77 : 20 M.L.T. 174 : (I916) 2 M.W.N. 125 : 31 M.L. 865 favour the contrary view,

14. The case of <NAME> v. <NAME> 16 A. 371 : A.W.N. (1894) 115 : 8 Ind. Dec. (N.S.) 241 was the case of execution of an instalment decree for which different considerations altogether might arise. We consider is unnecessary to express any opinion about that case.

15. The case of <CITATION> , 29 A. 431 : 4 A.L.J. 336 : A.W.N. (1907) 139 was the case of an instalment bond which was governed by Article 75 which expressly provides that the payee or obligee may waive the benefit of the provision entitling him to sue for the whole amount on default being made.

16. The cases of <NAME> v. <NAME> 30 A. 123 : 5 A.L.J. 72 A.W.N. 1903 36, and <NAME> v. <NAME> 20 Ind. Cas. 933 : 35 A. 455 : 11 A.L.X. 661 are also oases under Article 75 and have no direct application to the present case.

17. The leading case in point is the case of <CITATION> 28 Ind. Cas. 910 : 37 A. 400 : 13 A.L.J. 510. In that case the majority of the learned Judges held that money "becomes due" within the meaning of Article 132 and time begins to run from the date of the first default. The learned Chief Justice remarked: "It seems to me that the money is due when it can be legally demanded, and it is admitted in the present case that the money secured by this mortgage could have been legally demanded and recovered after the first default, and had a suit been brought for its recovery by sale of the mortgaged property, the defendants could not have pleaded that such a suit was premature." We entirely agree with this view and consider that it lays down the right teat to apply in such cases. <NAME>, J., in his dissenting judgment, was mainly influenced by the circumstance that, under the terms of the mortgage deed then in suit, the mortgagee was "competent to wait for the full period of 10 years stipulated in the bond and it is not obligatory on him to call in the money on the occurrence of a default in the payment of the instalmets". We are, however, distinctly of opinion that the question whether the mortgagee is bound to sue or not and whether he does at once sue or not, is wholly irrelevant to the issue. So long as he can sub, even though he does not choose to sue, the money has become due. We have, therefore, no hesitation in saying that the view taken by the majority of the learned Judges in the <ORG> case referred to above was correct.

18. The case of <CITATION> 63 Ind. Cas. 477 : 19 A.L.J. 406 suggested a rule contrary to that laid down by <ORG>. Neither the re-port nor the judgment, however, shows that the previous <ORG> case was brought to the notice of the learned Judges. We shall have to revert to this case in connection with the second point raised in these appeals.

19. In the case of <CITATION> 63 Ind. Cas. 25 : 19 A.L.J. 456 the mortgage-deed had provided that, in the event of non-payment of interest for two consecutive half-years, the mortgagees would have the power either to benefit themselves by charging compound interest or to sue without waiting for the period fixed for the whole of the principal and interest or to sue for the interest alone. The learned Judges were of opinion that when three options were given to the mortgagees and they did not choose to exercise the option of suing for the whole amount on default of the payment of two consecutive instalments of interest by the debtor, it cannot be said that the time began to run from such abstention". The previous <ORG> case was distinguished on the ground that "in that case no option, be far as we can Bee from the recital of the terms of the bond given therein, was given to the creditor". We think that this ground of distinction is not well-founded. In the <ORG> case the mortgagee was given "the liberty to realise the entire amount with interest" and ''if the mortgagee in his desire for interest does not bring a suit on any default, the interest shall continue" and the judgment of Banerji, J., proceeded on the ground that the mortgagee had such an option. In any case, as we have already remarked above, the mere fact that a mortgagee has the option to sue or to wait would not prevent the money from becoming due and limitation running under Article 132 against him.

20. In the case of <CITATION> 63 Ind. Cas. 441 : 19 A.L.J. 592 : 43 A. 596 the Full Bench case was followed, though presumably in deference to the view expressed in the earlier case of <CITATION> 63 Ind. Cas. 25 : 19 A.L.J. 456, a point was made that in the deed in question no option whatsoever was given to the mortgagee in the matter. We have already said that any distinction based on the existence of an option is a distinction without a difference and wag, moreover, an error of fact. An option was given.

21. In the case of <NAME> v. Turn 63 Ind. Cas. 886 : 19 A.L.J. 712 : 43 A. 671 the view expressed in the case of <CITATION> 63 Ind. Cas. 477 : 19 A.L.J. 406 was dissented from on the ground that it was in conflict with the Full Bench case, and it was held that "the Statute in our view must run from the date of the first default. The liability to pay or, in other words, the Jest of whether money becomes due or not, is the obligation which the borrower has taken upon himself by his signature to the written document. It cannot depend on the volition of the creditor,"

22. The case of <CITATION> 67 Ind. Cas. 160 : 20 A.L.J. 346 : (1922) A.I.R. (A.) 524 is, so far as we have been informed, the latest reported case of this <ORG> following the previous Fall Bench case,

23. Both on principle and the balance of authority, therefore, we are of opinion that the view taken by the <ORG> is correct and that the first default having occurred more than twelve years before the suit, money sued for became due then and the present claim for the enforcement of the charge is barred by time under Article 132 of the Limitation Act .

24. There remains the second question whether even if the mortgagee cannot get a decree for sale he is nevertheless entitled to a simple money-decree, Although the relief for recovery of money otherwise than by enforcing the charge would be governed by another Article with a different period fixed, yet it would be a startling thing to end that the time for recovery of the amount due by sale of the property has begun to run while that for recovering it as a simple debt has not yet started. One would suppose that the cause of action would be the same for both, though different periods might be fixed for the enforcement of the two reliefs. There is one case in which it has been actually held that, although defaults were made yet the mortgagee was not bound to sue for the whole money as soon as there was failure in payment, and, that time did not begin to run till after the date originally fixed. This is the case of <CITATION> 63 Ind. Cas. 477 : 19 A.L.J. 406 already referred to. Let us examine what the decision in this case comes to. The mortgagee has a right to sue for the whole money if a default is made and his suit can-not be thrown out on the ground that it is premature. He has a perfectly good cause of action to sue if he so chooses, yet the limitation does not begin till the date originally fixed arrives The result is that the mortgagee can sue long before the period of limitation for his suit begins to run. This is a reductio ad absurdum, We must, therefore, examine the premises on which the conclusion is based. The learned Judges have not quoted the Article which, in their opinion, was applicable, bat from the remark that the mortgagee had the option to wait till "the period fixed," We take it that they intended to apply Article 66 , read with Article 116 , of the Limitation Act . This would be in harmony with three earlier cases, namely, the case of <CITATION> 39 Ind. Cas. 574 : 15 A.L.J. 313; <CITATION> 50 Ind. Cas. 640 : 17 A.L.J. 647 : 1 U.P.L.R. (A.) 73 : 41 A. 581 and <CITATION> 58 Ind. Cas. 278 : 18 A.L.J. 476 : 2 U.P.L.R. (A) 102. In the last mentioned case <NAME>, J., while referring to the two earlier cases, remarked whether these decisions are right or wrong, we can see no reason whatsoever, in the present case at any rate, for expressing any opinion to the contrary. One of us was a party to one of these decisions and until these decisions are set aside by a larger Bench, we can see no reason why we should not follow them."

25. There can be no doubt that the basis of these decisions, namely, that the claim for a personal decree is governed by a different Article and not by Article 132 , and that, therefore, the Full Bench ruling in <CITATION> 28 Ind. Cas. 910 : 37 A. 400 : 13 A.L.J. 510 is inapplicable, is perfectly sound and cannot be questioned. The mistake which was made in <CITATION> 39 Ind. Cas. 574 : 15 A.L.J. 313 was in assuming that it was Article 66 , read with Article 116 , which governed the case. In the subsequent cases referred to above, it was simply taken for granted that Article 66 applied. We think that this was not a correct view. The expression single bond" used in Article 66 is clearly borrowed from the English Law. In Lord <NAME>'s Laws of England, Vol. III, page 80, it is said that a bond merely for the payment of a certain sum of money without any condition in or annexed to it, is called a simple or single bond, and that such instruments are rarely, if ever, met with at the present day"...whereas a "double" or "conditional bond" is a form of bond accompanied by a condition in the nature of a defeasance providing that on due performance of the condition the bond shall be void. This distinction wag very clearly pointed out by <NAME>, L. J., in Dixon In re Heynes v. Dixon (1900) 2 Ch. 561 at p. 582 : 69 L.J.C. 609 : 83 L.T. 129 : 48 W.R. 665.

26. Now, the bond in the present case in marked contrast with that before the Full Bench in <NAME> v. <NAME> 3 A. 600 : A.W.N. (1881) 33 : 6 Ind. Jur. 142 : 2 Ind. Dec. (N.S.) 323 (F.B.) which was obviously a single bond without any condition attached and it was then rightly held that Article 86 , read with Article 116 , applied. The bond in suit in the present case cannot at all be called a single bond within the meaning of Article 66. The period primarily specified for payment is 12 years, but it contains the condition that in case of non-payment from year to year the creditor would either add the interest to the principal and charge interest thereon or sue for the whole money and realise the amount from the property hypothecated as Well as the other property of the mortgagor. It further provides that in case the money is not paid within the stipulated period, compound interest will continue to run till realization. In our opinion such a bond cannot be regarded as a single bond, the time for suing on which runs only from the day specified.

27. The expression "bond subject to a condition" as used in Article 68 seems also to have been borrowed from the English Law and refers to what is there called a double or conditional bond with a condition in the nature of a defeasance. The bond in question is not such & bond either. Nor is it an instalment bond within the meaning of Article 75. In our opinion the case falls under Article 80 which governs a bond not herein expressly provided for" in which case the time begins to run from the date when the bond becomes payable". It is to be noted that in the old Limitation Act XIV of 1859, which governed the sage of <NAME> v. <NAME> 1 C. 163 : 25 W.R. 84 : 3 I.A. 1 : 3 Sar.P.C.J. 58 : 3 Suth. P.C.J. 222 : 1 Ind. Dec. (N.S.) 105 (P.C.), there was no clause similar to Article 80 of the new Act which could take the case out of the general clause. Reading Article £0 with Article 116 , which would be applicable to a registered document, the period for recovery of a simple money-decree on the basis of the registered deed in suit would be six years from the date "when the bond becomes payable." Now, the expression "becomes payable" is, in our opinion, very much the same thing as the words "becomes due" need in Article 132. Consequently, the cause of action for both the reliefs would arise at one and the same time, and the period of limitation for both would begin to run simultaneously. Of course, in the case of the enforcement of the charge, the period would be 12 years, whereas for a simple money decree it would be only 6.

28. In a very old case of <NAME> v. <NAME> 2 A. 322 : 3 Ind. Jur. 461 : 1 Ind Dec. (n.s. ) 763 <NAME>, J. was of opinion that a bond, somewhat similar to the one before us, was neither an instalment bond, nor a single bond, nor a bond subject to a condition, and that, therefore, neither Article 75 nor Article 66 nor Article 68 applied. He accordingly applied Article £0. The other learned Judge, however, took a different view.

29. In the case of <NAME> v. <NAME> 8 O.C. 77 the view of <NAME>, J., was followed by <NAME>, <NAME>, who pointed out that ' a single bond is a deed wherein a party acknowledges himself to be bound or indebted to another in a certain sum of money which he promises to pay. If there is appended to it a condition that upon the performance of a certain act. the bond is to be void, otherwise to remain in force, it is called a bond with a condition."

30. We are aware that opinion in the various <ORG> on this point is sharply divided. But agreeing with <ORG>, and <NAME>, A. J. C. we hold that the present bond does not fall either under Article 66 or Article 68 or Article 75 bat fills under Article 80 read with Article 116. In this view of the case the time began to run against the mortgagee for both the reliefs claimed from the date of the first default when the money became payable. The learned District Judge was, therefore, right in dismissing the suit in Mo.

31. The result is that both these appeals fail and are hereby dismissed with costs in all Courts.


PETITIONER: <NAME> Vs. RESPONDENT: THE COMMISSIONER OF GIFT TAX, DATE OF JUDGMENT: 17/08/2000 BENCH: S.P. Bhuracha , <NAME> , & <NAME> JUDGMENT:

<NAME>

L...I...T.......T.......T.......T.......T.......T.......T..J This appeal is by the assessee against the judgment and order dated 25.4.1988 passed by <ORG> of <ORG>. It relates to the assessment year 1972- 73.

<ORG>, Hyderabad (for short the `Tribunal' ) had referred the following question under 26(1) of the Gift-tax Act , 1958 (for short the `Act') for the opinion of <ORG> :-

"Whether on the facts and in the circumstances of the case, the <ORG> was right in holding that the release by the assessee who was one of the partners in the firm of <ORG>, of his rights in the assets of the firm for a consideration of Rs. 3,00,000/- when the market value of the assets of the firm in proportion to his share was in excess thereof, did not amount to a gift within the meaning of the Gift-tax Act ."

<ORG> by the impugned judgment answered the said question in negative and against the assessee.

Briefly stated, the facts leading to the filing of this appeal are as follows.

The appellant and his brother <NAME> were the partners of a partnership firm constituted on 9.1.1965 under the name and style of "<ORG>". The firm was engaged in the business of a restaurant in a building known as "Mohsin-ul-Mulk Kothi" situated at Abid Road, Hyderabad.

An agreement was entered into between the appellant and his brother <NAME> on 15.4.1971. The terms of the said agreement are set out below: -

"(i) Sri Jagatram (assessee) is to retire before December 31,1971.

(ii) Steps are to be taken to finalise accounts relating to the partnership and determination of the amount due to Sri <NAME> on retirement.

(iii)Sri <ORG> agreed to pay a sum of Rs. 1,50,000 to <ORG> towards the value of 50% share of the goodwill of the firm.

(iv) The above sum of Rs. 1,50,000 payable by Sri Bishanlal to Sri <NAME> shall be in addition to the sum due to Sri <NAME> from the partnership at the time of retirement.

(v) If the total sum including 50% share value of the goodwill, i.e., Rs. 1,50,000/-, payable to Sri <NAME> falls below Rs. 3,00,000, the amount in excess of the balance actually due to Sri <NAME> at the time of retirement shall be treated as the sale value of 50% share of the goodwill belonging to Sri <NAME>.

(vi) Sri <NAME> shall execute proper conveyance in favour of <NAME> conveying 50% share in the land and building in which the business of 3-Aces is carried on.

(vii)It is open to Sri Bishanlal to classify the sum payable to Sri <NAME> as between movable and immovable properties and get necessary documents executed by Sri <NAME>."

Pursuant to the said agreement, a Deed of Dissolution of the partnership was executed on 22.11.1971 w.e.f. that date. The relevant terms contained in the Deed of Dissolution are given below:-

"(i) All the assets and liabilities of the partnership including the land and building are taken by Sri Bishanlal from November 22, 1971.

(ii) Sri <NAME> renounced his interest, share and interest in the said assets and liabilities from November 22, 1971.

(iii)In full settlement and satisfaction of the share, right and interest of Sri <NAME> in the partnership including land and buildings, profits and goodwill and the amounts standing to the credit of Sri <NAME> in the partnership accounts as on November 21, 1971, Sri <NAME> has agreed to receive Rs. 3,00,000.

(iv) Out of the said Rs. 3,00,000, Rs. 1,00,000 has already been paid. The balance of Rs. 2,00,000 is payable by <ORG> against the sale consideration of the undivided 50% share in the land and building known as "Mohsin-ul-Mulk Kothi".

(v) Sri <NAME> should immediately execute a sale deed and register the same in favour of Sri <NAME> conveying his 50% share in the land and building for Rs. 2,00,000."

It was on 10.3.1972 that the appellant and <NAME> executed a document styled as `Release Deed' pursuant to and consistent with the aforementioned two documents.

Originally assessment of gift tax was made on 12.2.1972 on a total gift of Rs. 70,000/. After allowing exemption of Rs. 5,000/- it was determined at Rs. 65,000/-. Subsequently, the Gift Tax Officer took up the proceedings under Section 16 of the Act, 1958 by re-opening the assessment already made. He valued the share of the appellant in the partnership assets at Rs. 12,67,015/-. An amount of Rs. 3,00,000/- paid by <NAME> to the appellant was deducted and thus the value of the property alleged to have been gifted by the appellant to his brother <NAME> was arrived at Rs. 9,67,015/-. On appeal by the appellant, the Commissioner of Gift-tax (Appeals) confirmed the order of the Gift-tax Officer. However, he reduced the total value of the gift by Rs.3,77,000/-. The appellant took up the matter in further appeal before the <ORG>. The <ORG> accepted the appeal holding that the distribution of assets between partners on the dissolution of the firm, even though unequal, does not amount to "transfer of property" within the meaning of Section 2(xxiv) and therefore, did not amount to "gift" as defined in Section 2(xii) of the Act.

At the instance of the <ORG>, the <ORG> referred the above stated question under Section 26(1) of the Act for the opinion of <ORG>. <ORG> referring to the various decisions and for the reasons stated in the impugned judgment took the view in favour of the <ORG>.

In doing so, <ORG> relied on <ORG> vs. <NAME> [1987]166 ITR 124(SC), <NAME> vs. <ORG> [1985] 153 ITR 481 (Mad) and <ORG> vs. <NAME> [ 1982] 133 ITR 317 (Bom.) distinguishing the other cases, particularly the case of <ORG> vs. <NAME> [ 1971] 82 ITR 599(SC) strongly relied on in support of the case of the appellant.

At the outset, the learned counsel for the appellant submitted that the appellant is not challenging the valuation of property of alleged gift. Hence, it is unnecessary for us to go into that question. The learned counsel for the appellant seriously contended that <ORG> manifestly erred in answering the question in favour of the <ORG> contrary to the ratio and principles stated in the case of <NAME> (supra). He further submitted that the decisions relied on by <ORG> in support of its conclusion were not directly on the point and some of them arose under the Estate Duty Act .

Per contra, the learned senior counsel for the respondent argued supporting the view taken by <ORG>.

We have carefully considered the submissions made by the learned counsel for the parties. In order to appreciate the respective contentions of the parties and to resolve the controversy we consider it appropriate to extract definitions of "Gift" and "Transfer of property" from Section 2 of the Act: -

"2 (xii) "gift" means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer or conversion of any property referred to in section 4 , deemed to be a gift under that section;

Explanation. -- A transfer of any building or part thereof referred to in clause (iii), clause (iiia) or clause (iiib) of section 27 of the Income-tax Act, by the person who is deemed under the said clause to be the owner thereof made voluntarily and without consideration in money or money's worth, shall be deemed to be a gift made by such person."

"2 (xxiv) "transfer of property" means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes --

(a) the creation of a trust in property;

(b) the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property;

(c) the exercise of a power of appointment (whether general, special or subject to any restrictions as to the persons in whose favour the appointment may be made) of property vested in any person; not the owner of the property, to determine its disposition in favour of any person other than the donee of the power; and

(d) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person;"

This Court in <CITATION>  82 ITR 599 SC ], arising under the Act itself construing and considering the very same provisions held that in a Hindu Joint Family by allotting greater share to other members of coparcenary than that to which they were entitled, the assessee could not be held to have made a gift. Facts of the case were that the assessee was the <NAME> of <ORG> consisting of himself, his son and his six grandsons. There was a partition in the family property. The total value of the properties divided was Rs.8,51,440/- but the assessee, the <NAME> took properties worth only Rs.1,78,343/- allotting the remaining properties to other coparceners. After considering various decisions and provisions of law, this Court arrived at the following conclusions:-

i) That the partition did not effect any transfer as generally understood in law and did not, therefore, fall within the definition of gift in Section 2(xii) of the Act.

ii) That the partition in the family could not be considered to be a disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property within the meaning of those words in Section 2(xxiv) of the Act. iii) That the partition was not a transaction entered into by the assessee with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person and, therefore, Section 2(xxiv)(d) did not apply. (iv) That, therefore, there was no gift by the assessee of which he was liable to pay gift tax. On the reason that a member of Hindu Undivided Family has no definite share in the family property before the division and he cannot be said to diminish directly or indirectly the value of his property or to increase the value of the property of any other coparcener by agreeing to take a share lesser than what he would have got if he would have gone to a court to enforce his claim.

The word 'transaction' in clause (d) of Section 2(xxiv) takes its colour from the main clause; it must be a transfer of property in some way. The words disposition, conveyance, assignment, settlement, delivery and payment are all used to indicate some kind of transfer of property. An interpretation clause which extends the meaning of a word does not take away its ordinary and popular meaning.

It is settled position in law that a partition of Hindu Undivided Family cannot be considered as a transfer in the strict sense. <CITATION> [(1965) 2 SCR 100 = 55 ITR 637] this Court stated thus: -

"But, is a partition of joint Hindu family property a transfer in the strict sense? We are of the opinion that it is not. This was so held in <CITATION> 1951 Mad. 607]. <NAME> (then a judge of <ORG>), after examining several authorities, came to the conclusion that 'partition is really a process in and by which a joint enjoyment is transformed into an enjoyment in severalty. Each one of the shares had an antecedent title and, therefore, no conveyance is involved in the process, as a conferment of a new title is not necessary.' <ORG> again examined the question in <CITATION> [41 ITR 297 (Mad.)], with reference to section 16(3)(a)(iv) . It observed that 'obviously no question of transfer of assets can arise when all that happens is separation in status, though the result of such severance in status is that the property hitherto held by the coparcenary is held thereafter by the separated members as tenants-in-common. Subsequent partition between the divided members of the family does not amount either to a transfer of assets from that body of the tenants-in-common to each of such tenants-in-common'."

This <ORG> in <NAME> case aforementioned has stated thus: -

"A reading of this section clearly goes to show that the words "disposition", "conveyance", "assignment", "settlement", "delivery" and "payment" are used as some of the modes of transfer of property. The dictionary gives various meanings for those words but those meanings do not help us. We have to understand the meaning of those words in the context in which they are used. Words in a section of a statute are not to be interpreted by having those words in one hand and the dictionary in the other. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purpose that they are intended to serve. If so understood, it is clear that the word "disposition" in the context means giving away or giving up by a person of something which was his own, "conveyance" means transfer of ownership, "assignment" means the transfer of the claim, right or property to another, "settlement" means settling the property, right or claim conveyance or disposition of property for the benefit of another, "delivery" contemplated therein is the delivery of one's property to another for no consideration and "payment" implies gift of money by someone to another. We do not think that a partition in a Hindu Undivided Family can be considered either as "disposition" or "conveyance" or "assignment" or "settlement" or "delivery" or "payment" or "alienation" within the meaning of those words in s. 2 (xxiv).

This leaves us with cl. (d) of S. 2 (xxiv) which speaks of a transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of another person. A member of <ORG> who, as mentioned earlier, has no definite share in the family property before division, cannot be said to diminish directly or indirectly the value of his property or to increase the value of the property of any other coparcener by agreeing to take a share lesser than what he would have got if he had gone to court to enforce his claim. Till partition, his share in the family property is indeterminate. He becomes entitled to a share in the family property only after the partition. Therefore there is no question of his either diminishing directly or indirectly the value of his own property or of increasing the value of the property of anyone else. The "transaction" referred to in cl. (d) of s. 2 (xxiv) takes its colour from the main clause viz., it must be a transfer of property in some way. This conclusion of ours gets support from sub-clause (a) to

(c) of clause (xxiv) of s. 2 , each of which deals with one or the other mode of transfer. If <ORG> intended to bring within the scope of that provision partitions of the type with which we are concerned, nothing was easier than to say so. In interpreting tax laws, courts merely look at the words of the section. If a case clearly comes within the section, the subject is taxed and not otherwise."

This Court again in <CITATION> [AIR 1966 SC 1300], considering the provisions of Sections 14 , 15 , 29 , 32 , 37 , 38 and 48 of Partnership Act, 1932 has explained as to the nature of property during subsistence of partnership and after its dissolution. It is held that "from a perusal of these provisions it would be abundantly clear that whatever may be the character of the property which is brought in by the partners, when the partnership is formed or which may be acquired in the course of the business of the partnership it becomes the property of the firm and what a partner is entitled to is his share of profits, if any, accruing to the partnership from the realization of this property, and upon dissolution of the partnership to a share in the money representing the value of the property. No doubt, since a firm has no legal existence, the partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership. During the subsistence of the partnership, however, no partner can deal with any portion of the property as his own. Nor can he assign his interest in a specific item of the partnership property to anyone. His right is to obtain such profits, if any, as fall to his share from time to time, and upon the dissolution of the firm to a share in the assets of the firm which remain after satisfying the liabilities set out in <ORG>.

(a) and sub-Cls. (i), (ii) and (iii) of Cl. (b) of S.48."

<CITATION>  120 ITR 49 SC] this Court considered few provisions of Income-tax Act , 1961. Referring to the case of <NAME> and other cases expressed the view that a partnership firm under the Indian Partnership Act is not a distinct legal entity apart from the partners constituting it and that in law the firm as such has no separate rights of its own. When one talks of the property or assets of the firm all that is meant is property or assets in which all partners have a joint or common interest. Hence the contention that upon dissolution of the firm rights in the partnership assets are extinguished, cannot be accepted. It is further, held that the partners own jointly or in common the assets of the partnership and, therefore, the consequence of the distribution, division or allotment of assets to the partners which flows upon dissolution after discharge of liabilities is nothing but a mutual adjustment of rights between the partners and there is no question of any extinguishment of the firm's rights in the partnership assets amounting to a transfer of assets within the meaning of Section 2(47) of the Income-tax Act, 1961. Although the case arose under the provisions of Income-tax Act , but as to the nature and character of transaction of mutual adjustment of rights between the partners upon dissolution of a firm, it was clearly held that such a transaction did not amount to transfer. If there is a sale or transfer of assets by the assessee to a person, the position would be different. Since a partner in a firm has no exclusive right on any property of the firm he cannot transfer the property. But upon the dissolution of a firm allotment or adjustment of the assets takes place. Hence there was no element of transfer in such a case.

Yet, in another case <CITATION>  68 ITR 240 SC], dealing with the provisions of Section 10(2)(vii) of Income-tax Act again referring to <NAME> case this Court took the view that a partner might in an action for dissolution insist to sell the assets of partnership to realize his share. But where in satisfaction of the claim of a partner to his share in the value of the residue determined on the footing of an actual or notional sale, the properties so allotted cannot be taken to have been sold to him.

On principles and in view of the clear ratio, the decision of <NAME> (supra) of this Court supported the case of the appellant which decision was rightly applied by the <ORG> to the facts of the case. <ORG> in relation to the said decision has stated thus :-

"Be that as it may, it is not for us to express any opinion on the said criticism. By virtue of Article 141 of the Constitution, the said decision and even the observations aforesaid are binding upon us. In our opinion, however, the ratio of the said decision has no application to the distribution of assets as between partners whose shares inter se are specific and determined at any given point of time. Moreover, this decision has to be read and understood in the light of the subsequent decision of <ORG> in CED vs. <NAME>  105 ITR 92, which is, no doubt, a case arising under the Estate Duty Act . Section 2(15) of the Estate Duty Act defines "property" in the following terms."

<ORG> having rightly stated that the said decision and even the observations made were binding on it wrongly did not apply the ratio of the said decision to the facts of the case in hand. Further <ORG> committed an error in stating that the said decision had no application to the distribution of the assets as between the partners whose shares inter-se are specific and determined at any given point of time and that the said decision had to be read and understood in the light of the subsequent decision of this Court in <NAME> case. As in the case of <ORG>, the coparceners do not have exclusive rights on any specific property of the family, the property allotted to their shares become specified only on partition; the same is the position in the case of partner of a firm. No partner of a firm can claim exclusive or specific right in any specific asset of the property of a firm. <ORG> also have definite share in <ORG>. So also the partners have definite share in the partnership. In our considered view, the principles stated in <NAME> case equally apply to case of allotment or adjustment of properties among the partners upon dissolution of a firm. We fail to understand how <NAME> case made any difference. The said case did not show any disagreement with the principles stated in <NAME> case and no distinction was made to take a different view. On the other hand, principles stated in <NAME> case were affirmed. In relation to <NAME> case, in <NAME>, it is stated thus:-

"That a case under the Gift-tax Act , 1958, and the construction of section 2(xxiv) fell for decision. Certainly, many of the observations there, read de hors the particular statute, might reinforce the assessee's stand. This court interpreted the expression "transfer of property" in section 2(xxiv) and held that the expression "disposition" used in that provision should be read in the context and setting of the given statute. The very fact that "disposition" is treated as a mode of transfer takes the legal concept along a different street, if one may use such a phrase, from the one along which that word in the Estate Duty Act is traveling. Mr. Justice <NAME> rightly observed, if we may say so with respect, that:

"Words in the section of a statute are not to be interpreted by having those words in one hand and the dictionary in the other. In spelling out the meaning of the words in a section, one must take into consideration the setting in which those terms are used and the purpose that they are intended to serve." (pp.605-606).

The word" transaction" in section 2(24) of the Gift-tax Act takes its colour from the main clause, that is, it must be a "transfer" of property in some way. Since a partition is not a "transfer" in the ordinary sense of law, the court reached the conclusion that a mere partition with unequal allotments not being a transfer, cannot be covered by section 2(xxiv) . A close reading of that provision and the judgment will dissolve the mist of misunderstanding and discloses the danger of reading observations from that case for application in the instant case. The language of section 2(15) , Explanation 2, is different and wider and the reasoning of <NAME> cannot therefore, control its amplitude. It is perfectly true that in ordinary Hindu law a partition involves no conveyance and no question o transfer arises when all that happens is a severance in status and the common holding of property by the coparcener is converted into separate title of each coparcener as tenant-in-common. Nor does subsequent partition by metes and bounds amount to a transfer. The controlling distinction consists in the difference in definition between the Gift-tax Act ( section 2(xxiv) and the Estate Duty Act ( section 2(15) ."

We find that <NAME> case supports the view taken in <NAME> case. Added to this, Section 2(15) of the Estate Duty Act, defining "property" came up for consideration in <NAME> case. We may state here itself that the words and expressions defined in one statute as judicially interpreted do not afford a guide to construction of the same words or expressions in another statute unless both the statutes are para-materia legislations or it is specifically so provided in one statute to give the same meaning to the words as defined in other statute. The aim and object of the two legislations, namely, the Gift-tax Act and the Estate Duty Act are not similar.

<CITATION>  79 ITR 594 (SC), it is clearly stated that where in the course of dissolution, the assets of the firm are divided between the partners according to the respective shares, by allotting the individual assets or paying the money value equivalent thereof, no transfer is involved and that it is merely a case of distribution of assets.

The same view is taken in Addl. <CITATION>  165 ITR 166 (SC) that where a partner retires from a firm and receives his share of amount calculated on the valuation of the net partnership assets including goodwill of the firm, no transfer is involved.

We now refer to the cases relied on by <ORG> to support its view. In CGT vs. <NAME> [1974] 97 ITR 393 (Guj), this Court reversed the decision of Gujarat <ORG> and in the light of the facts and circumstances of the case, held that there was a gift for the purpose of the Gift-tax Act . In that case, a firm by name M/s. <NAME> came into existence with three partners namely, <NAME>, <ORG> and <ORG> with 7 annas, 4 annas and 5 annas shares respectively. During the assessment year 1963-64, under the new deed, <ORG> retired. The share of <ORG> remained unchanged. One <ORG> became a partner with 4 annas share. The share of assessee <NAME> was reduced to 4 annas. For the remaining 4 annas share, 2 minor sons of <NAME> were admitted to the benefits of the firm with 12% and 13% interest respectively. There was also no change in the share capital standing in the name of the assessee. As can be seen from the facts stated above, <ORG> retired and the firm was reconstituted; two minor sons of <NAME>, one of the partners were admitted to the benefits of the partnership and simultaneously share of said <NAME> was reduced from 7 annas to 4 annas giving 3 annas share to the minor sons. In this situation when at the time of the reconstitution of the firm, a 3 annas share out of <NAME>'s 7 annas share in the partnership firm was given to his minor sons it was taken as transfer of property by way of gift and as such it was taxable. Hence the case of <NAME> did not advance the case of the <ORG> on the facts of the case before us.

The case of <NAME> was also a case where the assessee's share was reduced and his minor children were admitted to the benefits of the partnership with 8% share in the profits and this case was referred to and approved by this Court in <NAME> case. The case of <NAME> is again a case where in the constitution of a firm, minors were admitted to the benefits of the partnership firm. In all these cases, minors were admitted to the benefits of the partnership and if such partner or minor did not bring in capital of his own into the partnership firm corresponding to his share, it was held that the transaction amounted to a gift. But the present case stands entirely on a different footing. It is clearly and merely a case of adjustment or distribution of assets of the firm in regard to share of the appellant on its dissolution and as such no transfer of property was involved in it.

Thus, in our view, the High court was not right in applying the decisions in (1) <NAME> (2) M.K. Kuppuraj, (3) Premji Trikamji to the facts of the case in hand.

The cases of this Court in (1) <NAME>, ( 2) <ORG>, (3) <ORG>, (4) <NAME> and (5) <NAME> aforementioned fully support the appellant on facts and in the circumstances of the case.

Having regard to all aspects and for the reasons stated above, we conclude that <ORG> committed an error in answering the question in negative i.e. in favour of the <ORG> and against the assessee-appellant. Hence this appeal is entitled to succeed. The judgment and order of <ORG> reported in [1988] 172 ITR 632 (AP) are set aside, upholding the order of the <ORG>. The question aforementioned is answered in the affirmative i.e. against the <ORG> and in favour of the assessee-appellant. The appeal is ordered accordingly. No costs.


<NAME>, J.

1. The question involved in this writ petition is, whether <ORG> constituted under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the Act"), has the power to restrain the company from effecting any change in the composition of the board of directors including top managerial personnel pending decision on the question of rehabilitation of the company? The facts, in brief, are as follows :

2. The petitioner is one of the promoters of the second respondent-company, namely, <ORG>. The company was incorporated in the year 1975 as a public limited company under the Companies Act . Mr. <NAME>, was the managing director from 1975 till May 10, 1985, and Mr. <NAME>, was the managing director of the second respondent-company between May, 1985, and September, 1991. Mr. <NAME>, became the managing director from September 28, 1991, and continued till his death on November 20, 1994. There was no managing director for the respondent-company on the date of filing of the writ petition. The total number of directors is eight out of which six were nominated by the financial institutions and Mr. <NAME>, was appointed by the shareholders and Smt. <NAME>, wife of the late <NAME>, was appointed on November 27, 1994, by the board of directors as an additional director.

3. The second respondent-company incurred losses and after the death of Mr. <NAME>, there was total chaos in the management of the company which resulted in mismanagement and also pilferage of funds. On account of the accumulated losses of the company, the company has been declared a sick industrial company by <ORG> under section 15 of the Act. The first respondent initiated further proceedings under section 17(2) of the Act. On October 30, 1990, the first respondent directed the second respondent to make its net worth positive under section 17(2) of the Act. However, the second respondent could not improve its position even after following the condition laid down by the first respondent and consequently the matter of rehabilitating the second respondent is again before the first respondent. Since the package paid under section 17(2) did not work out the first respondent has decided to take action under section 17(3) of the Act and directed the operating agency to prepare the scheme of rehabilitation by its order dated February 23, 1995. Since the second respondent was functioning without any managing director a section of the shareholders representing more than 10 per cent. of the paid-up capital of the company have lodged a requisition on February 1, 1995, before the second respondent requesting to convene an extraordinary general body meeting of the shareholders for the purpose of appointment of Sri <NAME>, as managing director of the company. On receiving the requisition the second respondent-company had issued a notice on February 15, 1995, convening the extraordinary general body meeting on March 16, 1995. The notice was sent to all the shareholders of the company. However, some of the directors filed civil suits in O.S. Nos. 56 and 62 of 1995, before the Principal District Munsiff, <NAME>, seeking injunction restraining the holding of the meeting. Against the orders of the Principal District Munsiff, C.R.P. Nos. 772 and 773 of 1995, were file under article 227 of the Constitution of India and the suits were stayed. However, the first respondent on March 14, 1995, directed the company secretary of the second respondent not to conduct the meeting on March 16, 1995, and threatened the directors with the imprisonment if its orders are violated. Therefore, on March 16, 1995, the meeting was not held. The petitioner and the other shareholders came to know of the order passed by the first respondent on March 16, 1995 at 10.45 a.m. through the notice of the company secretary of the company. Questioning the validity of the order dated March 14, 1995, the present writ petition was filed on various grounds.

4. One of the shareholders of the second respondent-company got himself impleaded as he and his relatives who are also the promoters of the company hold 45,000 equity shares of Rs. 10 each in the second respondent-company. He filed a counter-affidavit stating that the first respondent has sanctioned the rehabilitation scheme for the revival of units by its order dated October 30, 1990. Since the second respondent failed to revive the company as per the package, the first respondent reviewed its order, by order dated February 23, 1995, and appointed <ORG> as the operating agency under section 17(3) and (4) of the Act to prepare a scheme for rehabilitation and revival of the company. The first respondent directed the promoters to furnish all the necessary material along with the minutes of the general body meeting to the operating agency by March 24, 1995. Pending report by the operating agency the first respondent directed "not to effect any change in the composition of the board of directors including top managerial personnel". The operating agency by its letter dated March 9, 1995, directed the second respondent-company to obtain prior approval of the financial institutions for the appointment of the managing director. It was also directed that the second respondent should inform the institutions if there is any change in the composition of the board of directors for their approval since the company's rehabilitation scheme is pending with the first respondent that the petitioner is a third party who filed the above writ petition for the benefit of one of the directors and, therefore, it is not in good faith and the petitioner has also an alternative remedy under the Act and, therefore, the writ petition is not maintainable; that one of the directors filed a Statutory Appeal No. 38 of 1995 before the appellate authority and while admitting the same the said authority had not granted any stay and the appeal was posted on June 2, 1995. The second respondent-company constituted a managing committee consisting of chairman and some of the directors of the second respondent-company including representatives of the financial institutions, chief executive officer and senior vice-president (technical) in order to take a decision on all the important problems. A full-time finance director was also appointed on May 6, 1995, who happened to be a nominee of <ORG> in compliance with the memorandum of understanding. Therefore, there is no urgency for the appointment of a managing director as the affairs of the company are conducted by various professional people under the managing committee constituted for that purpose. Once a reference is made under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985, by virtue of section 32 , the provisions of the Act will prevail notwithstanding anything contained in the Companies Act . Therefore, the first respondent is competent to pass the impugned order. Further, on a reference made under section 15 an inquiry was conducted under section 16 and the first respondent suggested a package by requesting the management of the company to make its net worth exceed accumulated losses under section 17(2) of the Act on October 30, 1990. Since the company failed to revive the way it was expected, the first respondent appointed <ORG> as operating agency under section 17(3) and (4) of the Act to prepare a report on rehabilitation and reviving of the company as per guidelines. The operating agency was directed to examine the measures including the change of management, amalgamation of the company with other companies as stipulated under section 18 of the Act. Since the matter is seized by the first respondent in view of section 32 of the Act, the question of holding general body meeting in accordance with section 169 of the Companies Act does not arise. In other words, one of the shareholders supports the action of the first respondent directing the management not to effect any change of management till a view is taken on the rehabilitation of the company.

5. Sri <NAME>, who was elected as the managing director of the second respondent-company in the extraordinary general body meeting conducted on June 15, 1995, got impleaded himself in the writ petition and filed a counter-affidavit disputing the power of the first respondent to issue the impugned proceedings.

6. Mrs. <NAME>, wife of late <NAME>, who was appointed as a director on November 27, 1994, also got impleaded as a party to the writ petition. She also adopted the stand that the first respondent is competent to pass the impugned proceedings.

7. Before referring to the issues raised by various parties the facts which are not disputed are as follows :

The managing director of the second respondent-company was Mr. <NAME>, who expired on November 20, 1994. There are eight directors on the board of directors, out of which six directors are nominated by the financial institutions and out of the remaining two directors are Mr. <NAME>, appointed by the shareholders and Mrs. <NAME>, wife of late Sri <NAME>, appointed on November 27, 1994, by the board of directors as an additional director. The second respondent has been declared as a sick industrial company by the first respondent under section 15 of the Act. The first respondent suggested a package for the purpose of reviving the second respondent-company under section 17(2) of the Act. However, the second respondent-company could not revive itself and, therefore, the first respondent by its order dated February 23, 1995, appointed <ORG> (<ORG>) as an operating agency and directed to prepare a scheme in Case No. 67 of 1989 in accordance with the provisions of the Act for the purpose of rehabilitating the second respondent-company. By the same order while appointing the <ORG> as an operating agency on the representation made by Mrs. <NAME>, stating that no managing director was appointed after the death of the managing director and the company proposing to hold an extraordinary general body meeting on March 16, 1995, and also offering to bring funds for the purpose of rehabilitation which was opposed by the co-promoters, the Board directed that "no change of management should be made at this stage till the Bench takes a view on the rehabilitation of the company." Thereafter, on March 14, 1995, on an application filed by Mrs. <NAME>, on March 13, 1995, complaining that despite a direction issued by the Board not to make any change in the management, the company was proceeding with the holding of the extraordinary general body meeting for the appointment of the managing director, the Bench passed the following order :

"The Bench has directed you and the board of directors of the company to ensure that the directions given by it at the hearing held on February 23, 1995, restraining the company from effecting any change in the composition of board of directors including top managerial personnel, should be strictly carried out and in the case of failure to comply with the directions <NAME>, company secretary, who has convened the extraordinary general meeting or any member of the board of directors of the company holding the extraordinary general meeting contrary to the orders of the <ORG> shall be liable for action."

8. The petitioner challenges the above proceedings on the ground that the action of the first respondent is contrary to the judgment of <ORG> in <CITATION> . . Counsel Submitted that under section 169 of the Companies Act it is an absolute right of the shareholders of the company to call for an extraordinary general body meeting and the action of the first respondent is contrary to section 169 of the Companies Act. Counsel also submitted that the first respondent has no power to restrain the company from holding the extraordinary general body meeting as the stage has not yet arisen. Section 32 of the Act, no doubt, says that the provisions of the Act have application notwithstanding anything contained in the Companies Act , but it will be applicable only from the stage when the scheme is framed and not at the stage before framing of the scheme. Counsel submitted in this case the first respondent appointed the <ORG> and the <ORG> has not yet framed the scheme and it is in the process of framing the scheme and, therefore, the impugned proceedings are without jurisdiction and are liable to be set aside.

9. The question, therefore, is whether the first respondent is competent to issue the impugned proceedings directing the second respondent-company not to make any change in the management of the company.

10. In order to consider the issue, it is necessary to refer to the provisions of the Act. The Sick Industrial Companies (Special Provisions) Act , 1985, was constituted for the purpose of detecting the sick and potentially sick companies owning industrial undertakings and to determine preventive, ameliorative, remedial and other measures and for expeditious enforcement of those measures. Section 4 of the Act provides for appointment of a <ORG> known as <ORG> to exercise the jurisdiction and powers and discharge the functions and duties conferred or imposed on the <ORG> by or under the Act. It consists of a chairman and not less than two and not more than fourteen other members, to be appointed by <ORG>. An appeal lies against the decision of the <ORG> to <ORG> constituted under section 5 of the Act. <ORG> consists of a chairman and not more than three other members, who is or has been a judge of <ORG> or who is or has been a judge of <ORG> for not less than five years, and a person who is or has been a judge of <ORG> or who is or has been an officer not below the rank of secretary to <ORG> or who is or has been a member of the <ORG> for not less than three years respectively. Section 13 provides for the procedure of the <ORG> and <ORG>. Under section 14 , the proceedings before the <ORG> or <ORG> are deemed to be judicial proceedings within the meaning of sections 193 and 228 and for the purposes of section 196 of the Indian Penal Code. Section 15 provides for a reference to be made to the <ORG> where an industrial company has become a sick industrial company, the board of directors of the company within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company for the purpose of determining the measures to be adopted for its revival. Under section 15(2) , <ORG> or <ORG> or <ORG> or a public financial institution or a State level institution or a scheduled bank is authorised to make a reference to the <ORG> for determination of the measures to be adopted if it has reason to believe that any industrial company has become sick. On such reference having been made the <ORG> has to make an inquiry under section 16 for determining whether any industrial company has become a sick industrial company. The <ORG> is also competent to entrust the inquiry to an operating agency and requesting the operating agency to submit a report. The <ORG> is also empowered to appoint a special director notwithstanding anything contained in the Companies Act under section 16 pending inquiry into the sickness of the company either by itself or by the operating agency. Under section 17 , the <ORG> is empowered to make suitable orders on the completion of the inquiry. Under section 17(1) , after making an inquiry under section 16 if the <ORG> is satisfied that a company has become a sick industrial company it shall after considering all the relevant facts and circumstances, decide by order in writing whether it is practicable for the company to make its net worth positive within a reasonable time. The <ORG> shall by order in writing and subject to such restrictions or conditions as may be specified in the order, give such time to the company as it may deem fit to make its net worth positive. Under sub-section (3) of section 17 , if the <ORG> decided under sub-section (1) that it is not practicable for a sick industrial company to make its net worth positive within a reasonable time and that it is necessary or expedient in public interest to adopt all or any of the measures specified in section 18 in relation to the said company it may, as soon as may be, by order in writing, direct any operating agency specified in the order to prepare, having regard to such guidelines as may be specified in the order, a scheme providing for such measures in relation to such company. Under section 18 the operating agency has to prepare a scheme providing for various measures mentioned in the said section. Under section 32 , the provisions of the Act and of any rule or schemes made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act , 1973 , and the Urban Land (Ceiling and Regulation) Act , 1976 , for the time being in force or in the memorandum or articles of association of an industrial company or in any other instrument having effect by virtue of any law other than this Act.

11. The scheme of the Act is, therefore, in the case of a sick industrial company, the board of directors of the company have to make a reference to the <ORG> for the determination of the measures to be adopted for its revival. On a reference being made under section 15 either by the board of directors or the <ORG> or <ORG> or the State <ORG> or a public financial institution or a State level institution or a scheduled bank, the <ORG> has to hold an inquiry or it may appoint an operating agency for the purpose of holding an inquiry to determine whether the company has become a sick industrial company or not. On such inquiry being made and on consideration of the relevant facts and circumstances of the case and the report submitted by the operating agency if the <ORG> is of the view that the company can be revived on its own a reasonable time should be given for making its net worth positive. This is known as package under section 17(1) of the Act. If the company fails on its own or fails to make its net worth positive, within a reasonable time mentioned in the package, the <ORG> has to appoint an operating agency for the purpose of preparing a scheme for its revival. The operating agency taking into account various circumstances has to suggest measures for its revival. One of the measures to be suggested by the operating agency under section 18 is the change of management of the company. Under section 14 of the Act, the proceedings before the <ORG> are judicial proceedings, and the provisions of the Act will apply under section 32 of the Act notwithstanding anything contained in any other law for the time being in force except the provisions of the Foreign Exchange Regulation Act , 1973 , and the Urban Land (Ceiling and Regulation) Act , 1976 .

12. The facts narrated above disclose that a reference was made by the second respondent-company to the first respondent and the first respondent after holding an inquiry under section 16 of the Act found that the second respondent is a sick industrial company, suggested a package to make its net worth positive within a reasonable time by its order dated October 30, 1990. However, the second respondent-company could not revive itself and, therefore, by its order dated February 23, 1995, the first respondent reviewed its order and appointed <ORG> as the operating agency for the purpose of framing a scheme under section 18 of the Act. While doing so, the Board directed the second respondent not to bring about any change in the management which was confirmed by its proceedings dated March 14, 1995.

13. However, in spite of the directions issued by the first respondent not to effect any change in the management, the shareholders called for an extraordinary general body meeting for the purpose of electing the managing director and, in fact, the election was held on May 16, 1995, and <NAME>, one of the respondents who was sought to be impleaded was elected as managing director.

14. From the facts referred to above, on a reference being made under section 15 of the Act, the <ORG> is seized of the matter. When the <ORG> is seized of the matter by virtue of section 32 , the provisions of the Act will prevail notwithstanding anything contained in section 169 of the Companies Act. The argument of learned counsel for the petitioner that section 32 will apply only after the framing of the scheme under section 17 read with section 18 cannot be countenanced as the first respondent enters the picture the moment a reference is made by the board of directors of the company under section 15 or by any financial institutions referred to in section 15(2) for determining the measures to be adopted for reviving the company. The interpretation sought to be placed that section 32 is applicable only when a scheme is framed in accordance with section 17(2) read with section 18 by the operating agency cannot be accepted in view of the express language that "the provisions of this Act shall have effect notwithstanding anything inconsistent therewith in any other law for the time being in force." On the facts of the instant case, a reference was made by the board of directors of the company, an inquiry was conducted and the first respondent found that the company is a sick company and suggested a package and the company could not revive itself and, therefore, the <ORG> appointed the <ORG> as the operating agency. In other words, the company, i.e., the second respondent-company invoked the provisions of the Act by making a reference under section 15 of the Act. The first respondent is seized of the matter when a reference is made under section 15 of the Act. The Act is applicable from the day on which a reference is made under section 15 of the Act, i.e., the first stage. It does not say that the provisions of this Act shall have effect after the framing of the scheme. If the intention of the <ORG> is to give effect to the provisions of the Act notwithstanding anything contained in any other law only after the framing of the scheme then the section would have been differently worded. On the face of the language used in the section, it cannot be said that the provisions of this Act will effect notwithstanding anything inconsistent in any other law only after the framing of the scheme and not before that.

15. The next question to be considered is, whether the <ORG> is exercising quasi-judicial powers? I have already pointed out that an appeal lies to <ORG> from the decision of the <ORG> under section 25 of the Act. The <ORG> or <ORG> shall, for the purposes of any inquiry or for any other purpose under this Act, have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying suits as well as <ORG> are conferred with the powers of the Civil Procedure Code, 1908, namely, summoning and enforcing the attendance of any witness and examining him on oath; the discovery and production of document or other material object producible as evidence; the reception of evidence on affidavit and requisitioning of any public record from any court or office; the issuing of any commission for the examination of witness and any other matter which may be prescribed. I have already pointed out that under section 14 of the Act the proceedings before the <ORG> or <ORG> shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purposes of section 196 of the Indian Penal Code. The question, therefore, is whether the <ORG> can be held to be exercising quasi-judicial powers on the ground that the provisions of the Civil Procedure Code were made applicable for various purposes mentioned in section 13(3) of the Act and that the proceedings before the <ORG> are judicial proceedings within the meaning of sections 193 , 228 and 196 of the Indian Penal Code and that an appeal lies to <ORG> against any order of the <ORG>. In this context a classic judgment in <ORG> v. Federal Commissioner of Taxation  AC 275 is relevant, wherein it was observed :

"1. A <ORG> is not necessarily a court in this strict sense because it gives a final decision. 2. Nor because it hears witnesses on oath. 3. Nor because two or more contending parties appear before it between whom it has to decide. 4. Nor because it gives decisions which affect the rights of subjects. 5. Nor because there is an appeal to a court. 6. Nor because it is a body to which a matter is referred by another body. See <NAME> v. <ORG> [1924] 1 KB 171."

16. The above, no doubt, are the negative propositions for the purpose of determining whether it is a court or a <ORG>.

17. The next decision is the judgment in Cooper v. <NAME> [1937] 1 KB 309. The relevant observations are as follows :

"In the Report of the Minister's Power Committee (Command Paper 4060 of 1932), P. 73 (S. III, Para. 3) an attempt was made to define the words 'judicial' and 'quasi-judicial' : 'A true judicial decision pre-supposes an existing dispute between two or more parties, and then involves four requisites : (1) The presentation (nor necessarily orally) of their case by the parties to the dispute; (2) if the dispute between them is a question of fact, the ascertainment of the fact by means of evidence adduced by the parties to the dispute and often with the assistance of argument by or on behalf of the parties on the evidence; (3) if the dispute between them is a question of law, the submission of legal argument by the parties; and (4) a decision which disposes of the whole matter by a finding upon the facts in dispute and an application of the law of the land to the facts in dispute and an application of the law of the land to the facts so found, including where required a ruling upon any disputed question of law. A quasi-judicial decision equally pre-supposes an existing dispute between two or more parties and involves (1) and (2), but does not necessarily involve (3) and never involves (4). The place of (4) is in fact taken by administrative action, the character of which is determined by the Minister's free choice."

18. The next decision to be considered is <ORG> <CITATION> , 69 CLR 185. The brief facts of the case are as follows :

The Women's Employment Regulations set up <ORG>, with power to decide whether females may be employed on certain classes of work and to decide matters with respect, inter alia, to their hours and conditions of employment and their rates of pay. The board's decision is to be binding on specified employers and employees and organizations of employees and upon being filed in <ORG> is to have effect as if it were an award or order of that court. Regulation 5c in its original form (as inserted into the Regulations by Statutory Rules 1943, No. 251) authorized committees of reference to determine, in relation to the decisions of <ORG>, certain facts - namely, facts as to what females are or were employed on work specified in a decision of the board and as to the nature of the work upon which they are or were employed. The regulation made the determinations of committees binding on the employers and on females specified in the determinations, but by amendment made by Statutory Rules, 1944, No. 42, this provision was replaced by a provision that a determination of a committee should be deemed to form part of the decision of the board in relation to which it was made. It was held that neither in its original form nor as amended did regulation 5c have purport to confer judicial power upon committees of reference. The observations made by the majority was :

"These considerations are not conclusive of the case. An industrial award lays down rules of conduct for the future. It does not purport to ascertain and enforce existing rights; it is directed to the creation of new rights."

19. The next decision to be considered is the judgment in <CITATION> ., . The majority, after referring to the judgments in <ORG> v. Federal Commissioner of Taxation  AC 275, <NAME> v. <NAME>  1 KB 309 and <ORG>. <CITATION> , 69 CLR 185, held that the industrial tribunal is directed within the meaning of article 136 of the Constitution of India. The relevant observations are as follows (p. 196) :

"Such a dispute concerns the rights of employers and employees. Its decision affects the terms of a contract of service or the conditions of employment. Not only may the pecuniary liability of an employer be considerably affected by the adjudication of such dispute but it may even result in the imposition of punishments on him ....

It is difficult to conceive in view of these provisions that the industrial tribunal performs any functions other than that of a judicial nature. The tribunal has certainly the first three requisites and characteristics of a court."

20. It follows from the above decision that the fact that the <ORG> hears the witnesses on oath or that an appeal is provided against the order of the <ORG> or because it gives decisions which affect rights of the parties does not make it a quasi-judicial body. The <ORG> ascertains on a reference made under section 15 of the Act either by the financial institutions of the <ORG> or <ORG> or <ORG> or the board of directors whether a company is a sick company and determine the measures to be adopted for its revival. The <ORG> may delegate the power to an operating agency to inquire into and report as to the sickness of the company. If, after making such an inquiry under section 16 of the Act, the <ORG> is satisfied that the company has become sick, it may give an opportunity to the company to make its net worth positive within a reasonable time. If the sick company fails to revive itself on the opportunity given by the <ORG>, the <ORG> may appoint an operating agency to suggest measures of revival under section 18 of the Act. The operating agency is appointed under section 17(3) of the Act. One of the measures of revival is any change in the board of directors. Therefore, though, no doubt, the <ORG> comes into the picture only on an application made to it by the board of directors of the company or <ORG> or <ORG> or a <ORG> Government or a public institution or a <ORG> level institution or a scheduled bank, the <ORG> does not decide any dispute between the institutions referred to above or the company as under section 15 of the Act. The object of reference is to ascertain whether the company is sick within the meaning of the Act. As stated in the earlier paragraphs, is suggests a package for its revival to relieve it of its sickness and after it fails to revive itself on the package suggested by the <ORG> the scheme is prepared. Therefore, the <ORG> while determining whether a company is a sick company does not exercise any judicial or quasi-judicial powers. In the language of <ORG>, it lays down the rules of conduct for the future. It does not purport to ascertain and enforce existing rights. Perhaps it is directed to the creation of new rights. Therefore, the <ORG> does not exercise quasi-judicial powers. If the <ORG> does not exercise quasi-judicial powers the question of exercising implied or inherent power in the interest of the company does not arise. In other words, the <ORG> exercises only an administrative function of ascertaining the sickness of the company and framing of a scheme for the purpose of its revival. However, under section 18(1)(f) of the Act while framing a scheme for the purpose of reviving of the company the <ORG> may exercise such incidental, consequential or supplemental measures as may be necessary or expedient in connection with or for the purposes of the measures specified in clauses (a) to (e). As pointed out, section 18 comes into the picture only when a scheme is framed. Before the scheme is framed the question of exercising incidental, consequential or supplemental measures does not arise. Evidently on the facts of the present case, the scheme has not yet been framed. It is only in the process of framing the scheme. In the light of the view that the board only exercises administrative powers, namely, ascertaining the sickness of the company and suggesting a package for its revival and appoints an operating agency for the purpose of framing a scheme, the board cannot exercise any incidental or consequential or supplemental measure of directing the company not to effect any change in the management. Therefore, the impugned action is outside the scope of sections 15 , 16 and 17 of the Act. Thus it follows from the above that the impugned proceeding is without jurisdiction. In the light of the above, there is no other alternative except to allow the writ petition.

21. The writ petition is accordingly allowed. No costs.