civil appellate jurisdiction c.a. number 1223 of 1970.
appeal from the judgment and decree dated june 23rd/24th
1969 of the calcutta high companyrt in appeal from original
decree number 203 of 1968.

k. sen shankar ghosh d. n. gupta n. khaitan krishna
sen and b. p. singh for the appellant. v. gupte s. b. mukherjee b. n. garg k. k. jain d. n.
sinha lina seth m. m. n. pombra and h. k. puri for the
respondent. the judgment of the companyrt was delivered by
hedge j. this appeal by certificate is by the plaintiff-
appellant turner morrison company limited  to be hereinafter
referred to as turner morrison  from the decision of a
division bench of the calcutta high companyrt. the division
bench affirmed the decision of the trial companyrt dismissing
the plaintiffs suit. in the suit turner morrison claimed a decree for a sum of
rs. 12767052/16 p. the claim was made on the ground that
the plaintiff had paid either as an agent or on behalf of
the defendant hungerford investment trust limited  in voluntary
liquidation   to be hereinafter referred to as the
hungerford  a sum of rs. 7970802/- as super-tax which it
was entitled to be reimbursed. to that sum a sum of rs. 4796250/16 p. was added as interest in the shape of
damages. in respect of that claim the appellant claimed a
paramount lien on the 2295 shares owned by hungerford in the
plaintiff-company. the defendant resisted the suit on
various grounds. it denied that the plaintiff had paid the
amounts shown in the plaint-schedule or it was liable to be
reimbursed the payments made if any. it also denied its
liability to pay interest on the amounts that might have
been paid. further it pleaded that the suit was barred by
estoppel waiver and acquiescence. it also pleaded the bar
of limitation. in addition it pleaded that the lien claimed
had been waived and that the suit was number properly
instituted. according to the defendant the .suit was number a
bona fide one. it was one of the manipulations of haridas
mundhra to get at the defendants 2295 shares the plaintiff-
company without paying for them. the trial companyrt dismissed the plaintiffs suit holding that
the claim in question was barred by estoppel waiver or
acquiescence. it held that it was also barred by
limitation. it opined
that the liability to pay the tax in question was the joint
liability of turner morrison as well as hungerford and the
same having been discharged by the former it had numberclaim
on hungerford. it opined that the suit was a dishonest
attempt on the part of haridas mundhra to absolve his
liability for paying for the 221-95 shares in respect of
which he had obtained a decree for specific performance. the appellate companyrt affirmed some of the findings of the
trial companyrt. in order to appreciate the various companytentions advanced
before this companyrt it is necessary briefly to refer to the
history of the case. hungerford was the owner of 100 per
cent shares of turner morrison. john geoffrey turner and
nigel frederic turner  both since deceased  were the owners
of the 100 per cent shares of hungerford. as can be seen
from the records turner morrison was a prosperous companypany. though that companypany was making enumbermous profits every year
it did number distribute any portion of those profits as
dividends during the assessment years 1939-1940 to 1955-56.
the profits that should have been available for distributing
as dividends were kept back by the companypany and used as
working capital. in all those years the income-tax
authorities took proceedings under s. 23-a of the indian
income-tax- act 1922. thereafter the deemed dividends
were assessed in the hands of hungerford. but year after
year the directors of turner morrison passed a resolution to
the effect that it would be inequitable to ask hungerford to
pay the tax levied and that turner morrison itself should
discharge that liability. those resolutions were duly
implemented by turner morrison by paying all the taxes due
from hungerford. in about the middle cf 1955 haridas
mundhra entered into negotiation with nigel turner for
purchasing all the shares of turner morrison. by exchange
of letters in numberember and december of 1955 hungerford
agreed to sell and mundhra agreed to purchase 49 per cent
shares of turner morrison. the agreement also provided for
an option to mundhra to purchase from hungerford the balance
of 51 per cent shares of turner morrison within five years
for the price agreed upon. a formal agreement in that
regard was entered between hungerford john geoffrey turner
nigel turner british india companyporation  a numberinee of
mundhra  and mundhra on october 30 1956. in pursuance of
that agreement majndhra. purchased 49 per cent shares of
hungerford. thereafter as- companytemplated in that agreement
hungerford went into voluntary liqui-dation. on october 31
1957 two documents came to be executed. one is a deed of
guarantee and indemnity. that was a tripartite agreement. the first party to that deed was turner morrison. the
second party was john geoffrey turner and nigel frederick
turner and the third party was hungerford. in
that deed after setting out the agreement between hungerford
and mundhra it was stated
now this deed witnesseth that in companysi-
deration of the liquidator having at the
request of the companypany  turner morrison  the
said john geoffrey turner and nigel frederick
turner agreed  as is testified by their being
parties to and executing these presents  to
distribute the assets of hungerford in specie
amongst the companytributories of hungerford  such
contributories being the said john geoffrev
turner and nigel frederick turner  and in
consideration of  the premises. the companypany and the said john geoffrey tur-
ner and nigel frederick turner hereby jointly
and severally undertake to pay and or satisfy
all claims for or in respect of income-tax and
super-tax which is or are number payable or
recoverable or may at any time be payable or
recoverable under the indian income-tax act by
or from hungerford and which payments are in
fact legally enforced and made. the companypany and the said john geoffrey
turner and nigel frederick turner hereby
jointly and severally companyenant with the
liquidators and each of them that the
company and the said john geoffrey turner and
the said nigel frederick turner will jointly
and severally at all times hereinafter keep
indemnified the liquidators and each of them
from all actions proceedings claims or
demands in respect of or in companynection with
any liability of hungerford to income-tax or
super-tax under the indian income-tax act and
also against all companyts damage or expenses
which the liquadators or any of them may pay
incur or sustain in companynection therewith or
arising therefrom or otherwise in relation to
the premises. the second document was a deed of indemnity between the
turner brothers and turner morrison. that deed provided
that in the event of turner morrison paying in terms of the
deed of guarantees and indemnity any sum in excess of 46
lakhs in satisfaction of the income-tax and super-tax which
may at any time be payable or recoverable payment of which
are in fact legally enforced and made under the indian
income-tax act by or from hungerford the guarantors and each
of them in companysideration of the premises undertake to pay to
the companypany  turner morrison  the amount of such excess as
aforesaid. at this stage it may be mentioned that in accordance with
the agreement entered into between mundhra and hungerford
turner morrison was to discharge the tax liability of
hungerford to the extent of rupees 46 lakhs. after the sale
of the 49 per cent shares referred to earlier some dispute
appears to have arisen between mundhra and hungerford in
regard to his option to purchase the remaining 51 per cent
shares of the later. companysequently mundhra filed a suit in
the calcutta high companyrt on its original side for the
specific performance of the agreement entered into between
him and the hungerford. the suit was resisted by
hungerford. but it was decreed. it appears that when the
learned trial judge was about to companyclude his judgment in
that case the companynsel for mundhra requested the companyrt to
issue an injunction requiring hungerford to exercise its
voting rights in respect of the 51 per cent shares which was
the subject matter of the suit in accordance with the
directions of mundhra until the implementation of the decree
for specific performance. the learned trial judge accepted
that prayer and issued the injunction asked for. this led
to serious companysequences some of which we have dealt with in
our judgment in civil appeal number 488 of 1971 which we have
just number pronumbernced. this case appears to be an off-shoot
of that unfortunate injunction. in the suit for specific
performance though turner morrison was a party it did number
plead that it had any lien over the shares with which we are
concerned in this case. by agreement between mundhra and
turner morrison the later was removed from the array of
defendants and the suit proceeded against the remaining
defendants. after obtaining the decree for specific performance and the
injunction mentioned above mundhra appears to have number
been interested in purchasing the 51 per cent shares by
paying for the same evidently because he was in a position
to have an absolute companytrol over turner morrison as a result
of the injunction issued. though hungerford filed an appeal
against the decree in that suit that appeal was withdrawn
for reasons which are number clear. after the withdrawal of
the appeal by a masters summons dated august 30 1965
hungerford moved the trial companyrt for fixing a time within
which mundhra should purchase the 51 per cent shares by
paying for the same. that application was rejected on
september 1965 on the ground that the application being one
for execution it must be in a tabular form and that any
imposition of time limit would be to engraft something on
the decree which does number exist in the decree. the appeal
against that order was also unsuccessful. after the suit for specific performance was decreed
mundhra by himself or through turner morrison appears to
have made
various attempts to see that hungerford is placed in such a
position as number to be able to implement its part of the
agreement. we have had to deal with some of those aspects
in civil appeal 488 of 1971. suffice it to say that
according to hungerford the suit from which this appeal
arises is one of the attempts of mundhra in that direction. one other circumstance that is necessary to be mentioned
before proceeding to companysider the points in companytroversy is
that despite the various resolutions passed by the board of
directors of turner morrison as well as by the shareholders
of that companypany at the general meeting the present suit was
filed by the secretary of turner morrison even without
obtaining the sanction of the board of directors. the board
of directors sanction was sought only after the defendants
objected to the maintainability of the suit. from the
proceedings of the board of directors it is clear that they
were number even aware of the companypany against whom the suit was
filed. from the two resolutions passed by the board of
directors ratifying the action taken by the secretary it is
obvious that either they were callous or they were mere
tools in the hands of mundhra. it is number denied on behalf of hungerford that the tax due
from that companypany for the assessment years 1939-40 to 1955-
56 had been discharged by turner morrison. hungerfords
liability to pay tax arose because of the dividends it was
deemed to have received from turner morrison as a result of
s. 23-a proceedings. but there is dispute between the
parties as to the exact amount paid by turner morrison. we
have number thought it necessary to go into that companytroversy as
we have agreeing with the high companyrt companye to the
conclusion that the suit is number maintainable for the reasons
to be presently stated. a great deal of companytroversy centers round the question
whether when an assessment is made on the shareholders of a
company as a result of an order under s. 23-a the companypanys
liability to pay that tax is primary or secondary. it
was companytended on behalf of hungerford that liability is a
joint liability of both the companypanys as well as that of
the shareholders. but according to the appellant that
liability is primarily that of the shareholders and if the
company is companypelled to discharge that liability it is
entitled to be reimbursed by its shareholders. both the
trial judge as well as the appellate bench have upheld the
contention of hungerford and have companye to the companyclusion
that when turner morrison paid the tax due from hungerford
it was discharging its own liability under law and that
being so it was number entitled to seek reimbursement from
hungerford. section 23-a empowers the income-tax officer to order in
writing if the companyditions prescribed in that section are
satisfied that the undistributed portion of the assessable
income of a companypany earned in the previous year as companyputed
for income-tax purposes and reduced by the amount of income-
tax and super-tax payable by the companypany in respect thereof
shall be deemed to have been distributed as dividends
amongst the shareholders as on the date of the companycerned
general meeting. that deemed income has to be assessed in
the hands of the shareholders either under s.23 or under s.
34 of the indian income-tax act 1922.
the two provisos to s. 23-a that are important for our
present purpose are found in cls.  ii  and  iii  of sub-s.
 2  of s. 23-a. clause  ii  says
where the proportionate share of any member
of a companypany in the undistributedprofits and
gains of the companypany has been included in his
total income under the provisions of sub-
section  1  the tax payable in respect thereof
shall be recoverable from the companypany if it
cannumber be recovered from such member. clause  iii  reads
where tax is recoverable from a companypany
under this sub-section a numberice of demand
shall be served upon it in the prescribed form
showing the sum so payable and such companypany
shall be deemed to be the assessee in respect
of such sum for the purposes of chapter vi. it was urged on behalf of hungerford that the income that
can be brought to tax as a result of an order under s. 23-a
is number a real income it is only a deemed income that
income came to be taxed because of the failure of the
company to declare dividends. it is only for the purpose of
convenience that income is taxed in the hands of the
shareholders hence the liability to pay that tax in equity
must be that of the companypany and it is for that reason s. 23-
a has provided for the realisation of the tax due from the
shareholders from the companypany. the fact that before passing
an order under s. 23-a the shareholders are number even
required to be heard was emphasised. in this companynection our
attention was invited to the amendment of s. 23-a in 1955 as
a result of which number the tax liable to be paid as a result
of an order under s. 23-a is payable exclusively by the
company. in this companynection reliance was also placed on the
language of s. 42 which empowers the revenue to assess the
income of a numberresident assessee in the hands of his agent
but at the same time that section empowers that agent to
retain in his hands a sum
equal to his estimated liability under that section from out
of the. number-residents monies in his hands. it was lastly
urged that if dividends were deemed to have been declared
those deemed dividends remained in the hands of the companypany
and when the companypany paid tax in respect of the same it
must be held to have paid the same out of the dividends of
the shareholders that remained in its hands. on the other
hand it was companytended on behalf of turner morrison that any
assessment made in pursuance of an order under s. 23-a is an
assessment on- the shareholders and number on the companypany the
dividends deemed to have been distributed under s. 23-a is
considered to be the income of the shareholders and number that
of the companypany. it is added on to the other income of the
shareholder for the purpose of assessment. it is
recoverable from the shareholder. it is recoverable from
the companypany only if it cannumber be recovered from the
shareholders and the companypany is deemed to be an assessee in
respect of such sum for the purposes of chapter vt only and
number for all purposes. further the deemed distribution of
dividends as a result of an order under s. 23-a is in no
sense a real distribution of dividends which can be done
only by the shareholders at the general meeting of the
company. we do number propose to pronumbernce on this companytroversy
firstly because this appeal can be decided on other grounds
and secondly for the reason that that companytroversy has number
become more or less academic in view of the amendment of s.
23-a in 1955.
for the assessment years 1940-41 to 1952-53 turner morrison
was assessed as the agent of hungerford as companyld be seen
from the assessment orders. for that reason it was
contended on behalf of turner morrison that it is entitled
to be reimbursed in respect of the tax paid by it. hungerford denies that turner morrison was its agent. according to hungerford the payments in question were made
by turner morrison voluntarily and therefore it is number
entitled to claim any reimbursement. section 43 of the
indian income-tax act 1922 prescribes as to who companyld be
assessed as an agent under s. 42. that section says
any person employed by or on behalf of a
person residing out of the taxable territories
or having any business companynection with such
person or through whom such person is in the
receipt of any income profits or gains upon
whom the income-tax officer has caused a
numberice to be served of his intention treating
him as the agent of the number-resident person
shall for all the purposes of this act be
deemed to be such agent. it was companytended on behalf of hungerford that it was number
residing out of the taxable territories it is a private
limited companypanyhence it must be held to be residing in
all places where it-
eams or deemed to earn any income. it was further urged
that turner morrison was number a person employed by or on
behalf of hungerford number did hungerford have any business
connections with turner morrison. it was also the
contention of hungerford that it did number receive any income
profits or gains through turner morrison. lastly it was
urged that the income-tax officer had number caused any numberice
to be served upon turner morrison intending to treat that
company as the agent of hungerford. on the other hand it
was turner morrison which had volunteered to be assessed on
behalf of hungerford. for all these reasons it was said
that turner morrison cannumber be held to have been taxed as
the agent of hungerford. all these companytentions were taken
for the first time in this companyrt. they do number appear to
have been taken either before the trial companyrt or before the
appellate companyrt. the companytentions raised involve determina-
tion of questions of fact. in the plaint it was
specifically averred that the payments in question were made
by turner morrison as the agent of hungerford. that
averment has number been specifically denied. in that view we
are number called upon to go into the various submissions numbered
above. before going into the other companytentions we may briefly deal
with the companytention that the suit was number properly
instituted. there appears to be basis for hungerfords
contention that this suit was inspired by mundhra and
ardeshir jivanji hormasji the secretary of turner morrison
who signed the plaint on behalf of turner morrison was a
mere tool in his hands. there is also reason to believe
that when the directors of tumer-morrison ratified the
action taken by hormasji they behaved in an irresponsible
manner as seen earlier. but all the same it cannumber be said
the suit is number maintainable. it is true that under the
articles of association of turner morrison a suit on. behalf of that companypany has to be filed with the companysent of
the directors. but the secretary of the companypany held a
general power of attorney from the directors and the action
taken by him was approved by the directors. hence there can
be numbervalid objection to the maintainability of the suit. three important questions remain to be companysidered. they .are

whether the claim made by turner morrison is barredby
the rule of estoppel or waiver or abandonment ? whether the decision of turner morrison to take  over the
liability of hungerford either with or without any guarantee
from turner brothers was ultra vires its powers and
.lm15

whether the claim made in the suit or any portion
thereof is barred by limitation ? the judgments of the trial companyrt. and the appellate companyrt
have number made any distinction between estoppel waiver and
abandonment. the distinction between those three companycepts
is fine but real. in this case there was numberplea of any
release under s. 63 of the companytract act. hence the argument
of mr. a. k. sen learned companynsel for turner morrison on the
scope of that section is irrelevant and we shall number go into
the same. the essential question to be companysidered is
whether the facts established in this case support the plea
of estoppel put forward by hungerford. if the answer to
that question is in the affirmative then there is numberneed to
examine whether there was any waiver or abandonment as
pleaded by hungerford. estoppel is a rule of equity. that rule has gained new
dimensions in recent years. a new class of estoppel i.e. promissory estoppel has companye to be recognised by the companyrts
in this companyntry as well as in england. the full implication
of promissory estoppel is yet to be spelled out. we shall
presently refer to decisions bearing on that topic but
before doing so let us examine whether turner morrison made
any representation to hungerford if so what is that
representation. further whether hungerford acted on the
basis of that representation to its disadvantage. it is number
denied that year after year from 1941 to 1954 turner
morrison passed resolutions undertaking to discharge the tax
liability of hungerford. in pursuance of those resolutions
taxes due from hungerford were paid. there can be numberdoubt
that the steps taken by turner morrison were within the
knumberledge of hungerford as it held 100per cent shares of
turner morrison. the directors of turner morrison must have
been its numberinees. the profit and loss accounts of turner
morrison must have been approved by hungerford year after
year at the general meeting of that companypany. in reality the
turner brothers were the owners of hungerford as well as
turner morrison though each of those companypanies was a
separate legal entity. it may be that turner morrison did
number declare dividends so that hungerford may avoid paying
tax at a high rate. but at the same time hungerford would
number have agreed for number distributing dividends unless turner
morrison took over the responsibility of paying the tax on
the dividends deemed to have been distributed. it is
established that if dividends had been declared hungerford
would have got more than two and half times the tax paid on
its behalf. the undistributed dividends were available to
turner morrison to be utilised as working capital and
thereby earn more profits. the arrangement regarding the
numberdistribution of dividends as well as the payment for the
tax due from hungerford by turner morrison
must have been with the companysent of hungerford as well as
turner brothers. those arrangements had clearly benefited
all the parties. till mundhra entered the scene there
could number have been any companyflict of interest between
hungerford and turner morrison. when turner morrison paid
the tax due from hungerford legal fiction apart it was
really paying from the monies belonging to hungerford. if
for any reason turner morrison had number undertaken the
responsibility to discharge the tax liability of hungerford
the latter companyld have taken steps to companypel the former to
declare dividends or even companypel it to go into voluntary
liquidation. hence there can be numberdoubt that by acting on
the basis of the representation made by turner morrison
hungerford had placed itself in a disadvantageous position. but it was urged on behalf of turner morrison that the
resolutions in question were mere promises to do something
in the future they were number representations of any fact
and as those promises were number supported by any
consideration they afford numberlegal basis to resist the
claim made in the plaint. hungerfords answers to these
contentions are that firstly those resolutions afford a
good basis for raising a plea of promissory estoppel
secondly those representations became representation of fact
as soon as the tax liability of hungerford was discharged by
turner morrison in pursuance of its resolutions and lastly
the promises made under those resolutions were supported by
consideration inasmuch as hungerford in response to those
promises refrained from enforcing its right to have the
profits distributed as dividends. number companying to the
payments made after 1955 it is seen that according to the
agreement between turner morrison hungerford and mundhra
turner morrison was required to set apart a sum of rupees 46
lakhs to discharge the tax liability of hungerford. accordingly turner morrison transferred rupees 46 lakh from
its general reserve to a special reserve. further by the
agreements dated october 31 1957 set out earlier turner
morrison took over the entire tax liability of hungerford and t
he turner brothers agreed to reimburse turner morrison
any payment made on behalf of hungerford in excess of rupees
46 lakhs. all these arrangements clearly enured to the
benefit of turner morrison inasmuch as it allowed that
company to refrain from declaring dividends and utilise that
money for business purposes. there can be numberdoubt that it
was done in the best interest of that companypany and with a
view to further its business interests. it is necessary to numbere that despite turner morrison paying
the tax due from hungerford from 1941 uptill 1953 those
payments were number debited to the account of hungerford number
were they shown as debts due from hungerford in the balance
sheets placed before the general meeting. those balance
sheets were approved by the general meeting. it was plainly
admitted by the
witnesses examined on behalf of turner morrison that the
amounts paid on behalf of hungerford were number companysidered as
debts due from that companypany till about the time of filing
the suit. in the general meeting of turner morrison held on
march 29 1956 the recommendation of the board of
directors to transfer rupees 46 lakhs from the general
reserve to a special reserve for the purpose mentioned
earlier was approved. thereafter turner morrison paid the
tax due from hungerford for the assessment year 1952-53 and
debited the same to that special reserve. while turner
morrison was keeping hungerford informed of the assessments
made on it and the refunds ordered at numbertime it made any
demand on hungerford to reimburse the moneys paid. on
several occasions turner morrison entered into agreements
with the .president of india undertaking to discharge the
tax liabilities of hungerford upto an agreed maximum. turner morrison was representing hungerford in all the
assessment proceedings it used to file appeals on behalf of
hungerford against the orders of the income-tax officers. it had received all the amounts ordered to be refunded. it
was keeping hungerford informed of the various orders passed
by the income-tax authorities but yet without making any
demand for the payment of tax paid by it. the documents
produced in the case and the admissions made by the
witnesses examined on behalf of turner morrison make it
abundantly clear that the idea of claiming back the tax paid
on behalf of hungerford came to be entertained by turner
morrison only after mundhra came to companytrol that companypany. with this background let us number companysider whether turner
morrison is estopped from making the claim in question. in support of its case hungerford relies primarily on the
doctrine of promissory estoppel. this doctrine has assumed
importance in recent years though it was dimly numbericed in
some of the earlier cases. the leading case on the subject
is central london property trust limited v. high trees house
ltd. 1 . the facts of that case are as follows
central london property trust limited let to the high trees
house limited a subsidiary of the former a block of flats for
a term of 99 years from september 29 1937 at a ground rent
of pound 2500 a year. in the early part of 1940 owing to
war companyditions then prevailing only a few of the flats in
the block were let to tenants and it became apparent that
the high trees house limited would be unable to pay the rent
reserved by the lease out of the rent of the flats. discussions took place between the directors of the two
companies and as a result on january 3 1940 a letter was
sent by the lessor to the lessee companyfirming that the ground
rent of the
 1  1947 1 k.b. 130.
premises would be reduced from x- 2500 to x- 1250 as from
the beginning of the term. the lessee thereafter paid the
reduced rent. by the beginning of 1945 all flats were let
but the lessee companytinued to pay only the reduced rent. in
september 1945 the lessor wrote to the lessee demanding
rent at the rate of pounds 2500 per year. it also claimed
at that rate for the quarters ending september 29 and
december 25 1945. the lessee repudiated that claim. the
question for decision was whether the lessor was bound by
the companycession that it had agreed to show as the same was
number supported by any companysideration. answering that question
denning j.  as he then was  held that where parties enter
into an agreement which is intended to create legal
relations between them and in pursuance of such arrangement
one party makes a promise to the other which he knumbers will
be acted on and which is in fact acted on by the promise
the companyrt will treat the promise as binding on the promiser
to the extent that it will number allow him to act
inconsistently with it even although the promise may number be
supported by companysideration in the strict sense. therein the
court divided the claim made in the suit into two categories
one for the period prior to the end of 1945 and the other
for the period thereafter. it disallowed the claim of the
lessor in respect of the former and allowed the claim
relating to the later period. the rule laid down in high trees case 1  again came up for
consideration before the kings bench in companybe v. companybe 2 . therein the companyrt ruled that the principle. stated in high
trees case 1  is that where one party has by his words
or companyduct made to the other a promise or assurance which
was intended to affect the legal relations between them and
to be acted on accordingly then once the other party has
taken him at his word and acted on it the party who gave
the promise or assurance cannumber afterwards be allowed to
revert to the previous legal relationship as if numbersuch
promise or assurance had been made by him but he must
accept their legal relations subject- to the qualification
which he himself has so introduced even though it is number
supported in point of law by any companysideration but only by
his word. but that principle does number create any cause of
action which did number exist before so that where a promise
is made which is number supported by any companysideration the
promises cannumber bring an action on the basis of that
promise.- the principle enunciated in the high trees
case 1  was also recognised by the house of lords in tool
metal manufacturing company limited v. tungsten electric company
ltd. 3 . that principle was adopted by this companyrt in union
of india v. indo afghan agencies limited4 . the facts of that
case in brief are as follows
 2  1951 2 k.b. 215.  1  1947 1 k.b.130
 3  1955 2 all e.r.657
 4  1968 2. s.c.r. 366.
in exercise of its powers under s. 3 of the imports and
exports  companytrol  act 1947 central government issued the
imports  companytrol  order 1955 and other orders setting out
the policy governing the grant of import and export
licences. the central government also evolved an import
trade policy to facilitate the mechanism of the act and the
orders issued thereunder and it was modified from time to
time by issuing fresh schemes in respect of new companymodities. in 1962 the central government promulgated the export
promotion scheme providing incentives to exporters of
woolen textiles and goods. it provided for the grant to an
exporter certificates to import raw materials of a total
amount equal to 100 of the f.o.b. value of his exports. clause 10 of the scheme provided that the textile
commissioner companyld grant an import certificate for a lesser
amount if he is satisfied after holding an enquiry that
the-declared value of the goods exported is higher than the
real value of the goods. the scheme was extended to exports
of woolen textiles and goods to afghanistan. m s. indo-
afghan agencies limited exported woolen goods to afghanistan
and were issued an export entitlement certificate by the
textile companymissioner number for the full f.o.b. value of the
goods exported but for a reduced amount on the basis of some
private enquiry supposed to have been held by him but number
after holding an enquiry as companytemplated by the scheme. the
representation made by the indo-afghan agencies in that company-
nection to the central government was rejected. thereafter
m s. indo-afghan agencies limited moved the high companyrt to set
aside the order of the textile companymissioner and the
government and to issue a direction to them to grant
licences for an amount equal to 100 of the f.o.b. value of
their exports. that prayer was resisted by the government
on various grounds inter alia that the export promotion
scheme was administrative in character that it companytained
mere executive instructions issued by the government to the
textile companymissioner and created numberenforceable rights in
the exporters who exported their goods in pursuance of the
scheme and it imposed numberobligation on the government to
issue import certificates. the high companyrt and later this
court in appeal rejected that companytention. this companyrt held
that the government is number exempt from liability to carry
out the representation made by it as to its future companyduct. in arriving at that companyclusion this companyrt placed reliance on
the decision of denning j. in robertson v. minister of
pensions 1 . therein  denning j.  was dealing with a case
of serving army officer who wrote to the war office
regarding a disability and received a reply that his
disability had been accepted as attributable to military
service. relying on that assurance he forbore to obtain an
independent medical opinion. the minister of pensions later
decided that his
 1  1949 1 k.b. 227.
disability companyld number be attributed to war service. therein
the companyrt held that as between the subjects such an
assurance would be enforceable because it was intended to be
binding intended to be acted upon and was in fact acted
upon. and the assurance was also binding on the ground
because numberterm companyld be implied that the crown was at
liberty to revoke. the rule laid down in these decisions
undoubtedly advance the cause of justice and hence we have
numberhesitation in accepting it. it was urged on behalf of turner morrison that the authority
given to it to discharge the tax liabilities of hungerford
as well as the agreements entered into by it with hungerford
and the turner brothers were ultra vires its powers and
consequently they provide numberlegal basis to resist the
plaint claim. it is true that a private limited companypany cannumber
exceed the powers companyferred on it under its memorandum of
association. therefore for companysidering whether turner
morrison was companypetent to undertake the liability it did we
have to look to the provisions in the memorandum. clause
3 b  of the memorandum empowers the turner morrison to carry
on business in india and elsewhere as merchants general
merchants agents and traders etc. sub-clause  q  of that
clause gives power to  the companypany to receive money on
deposit at interest or otherwise and lend money to such per-
sons with or without security and on such terms as may seem
expedient and in particular to customers of and other
persons having dealing with the companypany and to give any
guarantee or indemnity as may seem expedient. sub-cl.  x  authorises the companypany
to distribute among the members of the
company in specie any property of the companypany
but numberdistribution amounting to a reduction
of capital shall be made without the sanction
if any for the time being required by law. sub-cl.  z  authorises the companypany to do all
such other things as are incidental or
conducive to the attainment of objects men-
tioned in memorandum. as seen earlier the number-distribution of the dividends had
augmented the working capital of the companypany thus affording
it facility to earn more profits. any step taken to augment
the working capital of the companypany is undoubtedly incidental
to the business of the companypany and further the same was
conducive to the attainment of the objects mentioned in the
memorandum. when turner morrison paid the tax due from
hungerford in substance though number in form it was
distributing a portion of its
assets to the 100 per cent shareholder of the companypany but
without reducing its capital. hence we are unable to see
how it can be said that turner morrison had acted ultra
vires its powers. mr. a. k. sen learned companynsel for turner
morrison invited our attention to several decisions wherein
the companyrts had taken the view that the actions taken by the
companies companycerned were ultra vires their powers. those
decisions were rendered on the facts of those cases. whether a transaction entered into by a companypany can be said
to be within its powers or number has to be decided on the
basis of the facts established and the provisions in its
memorandum and number on the basis of any abstract rule. the only other question that remains to be companysidered is
whether the suit claim is barred by limitation even on the
assumption that claim is otherwise in order. for
pronumberncing on this question it is first necessary to
decide whether turner morrison had waived its lien over the
shares held by hungerford. there can be numberdoubt that
turner morrison has the power to waive the paramount lien it
has upon all the shares registered in the name of each
member for his debts or liabilities to the companypany. that
much is clear from art. 22 of the articles of association. that article provides that
unless otherwise agreed the registration of
transfer of shares shall operate as a waiver
of the companypanys lien  if any  upon such
shares. in buckley on companypanies acts  13th edn. at p. 797  dealing
with the question of lien it is observed
for such a provision is for the prote
ction of the companypany and is capable of
being waived by the companypany. we have to see whether the companypany in fact had waived the
lien it had in respect of the suit claim assuming that the
said claim is otherwise good. as seen earlier at all stages
turner morrison took over the responsibility of paying the
tax due on behalf of hungerford. there was numberidea of
recovering the amount paid as tax from hungerford. when
hungerford sold 49 per cent of its shares to mundhra the
same was registered without any objection. it was clearly
admitted by the secretary of turner morrison and other
witnesses examined on behalf of that companypany that the idea
of suing hungerford for recovering the tax paid was company-
ceived for the first time after mundhra obtained the decree
for specific performance. under these circumstances it
is.clear that turner morrison had waived the lien that it
might have had over the shares held by hungerford. hence
the only claim that turner morrison companyld have made against
hungerford was a money
claim. the present suit was filed on numberember 15 1965.
hence it is governed by the provisions of the limitation
act 1963 which came into force on april 1 1964. article
23 of that act fixes a period of three years for instituting
a suit for money payable to the plaintiff for money paid
for the defendant and the cause of action for the same companyme
nces when the money is paid. to the same effect was
art. 63 of the limitation act 1908. the amounts claimed in
the present suit except those in respect of the assessment
for the assessment year 1955-56 were all admittedly paid
before numberember 15 1962. hence they are prima facie barred
by limitation. so far as the payments made in respect of
the assessment for the assessment year 1955-56 is companycerned
turner morrison can have numberclaim against hungerford
because under the amended s. 23-a of the income-tax act
1922 that liability was that of turner morrison itself. but it was urged on behalf of turner morrison that in view
of s. 15  5  of the limitation act 1963 the claim made
leaving aside the claim made in respect of the assessment
for the assessment year 1955-56 is number barred. section
15 5  prescribes
in companyputing the period of limitation for any
suit the time during which the defendant has
been absent from india and from the
territories outside india under the
administration of the central government shall
be excluded. it was urged on behalf of turner morrison that hungerford is
a number-resident companypany. therefore it cannumber be said that at
any time it was present in india. hence the suit is number
barred. if this argument is companyrect then there can be no
period of limitation for filing a suit against a number-
resident companypany a proposition which is prima facie
startling. can we hold that s. 15 15  applies to a suit of
the type with which we are companycerned ? that provision
contemplates the case of a defendant who has been absent
from india. that article presupposes that defendant was at
one time present in india and later he has been absent from
india. a person who was never in india cannumber be companysidered
is having been absent from india. factually a companypany
cannumber either be present in india or absent from india. but
it may have a domicile or residence in india. sometime
questions have arisen as to what is the place of residence
of an incorporated companypany. dicey in his companyflict of laws
 4th edn. p. 152 rule 19  pointing out the difference
between the domicile of a natural person and that of a
corporation says
the domicil of a human being is a fact which
on certain points subjects him to the law of
a particular companyntry. the domicil of a
corporation is a fiction suggested by the fact
that a companyporation is on certain points
e.g. the jurisdiction of the companyrts subject
to the law of a particular companyntry. a man
that is to say is in some respects subject to
the law of england because he has in fact an
english domicil a companyporation is by a fiction
supposed to have an english residence or
domicil because it is in certain respects
subject to the law of england. hence a
corporation may very well be companysidered
domiciled or resident in a companyntry for one
purpose and number for anumberher and hence too
the great uncertainty as to the facts which
determine the domicil or residence of a
corporation. in each case the particular
question is number at bottom whether a
corporation has in reality a permanent
residence in a particular companyntry but
whether for certain purposes  e.g. submission
to the jurisdiction of the companyrts or liability
to taxation  a companyporation is to be c
onsidered
as resident in england or in some other
country. the question of residence of an insurance companypany
registered and having its registered office in a foreign
country came up for companysideration before the chancery
division in new york life insurance companypany v. public
trustee 1 . there in pollock m.r. quoted with approval the
following passage from the judgment of lord st. leonards in
carron iron company v. maclaren 2 . i think that this companypany may properly be
deemed both scotch and english. it may for
the purposes of jurisdiction be deemed to
have two domiciles. its business is
necessarily carried on by agents and i do number
knumber why its domicile should be companysidered to
be companyfined to the place where the goods are
manufactured there may be two domiciles and
two jurisdictions and in this case there are
as i companyceive two domiciles and a double sort
of jurisdiction one in scotland and one in
england and for the purpose of carrying on
their business one is just as much a domicile
of the companyporation as the other. the same view was expressed in that case by warrington l.j. and atkin l.j. a division bench of the bombay high companyrt in sayaji rao
gaikwar of baroda v. madhavrao raghunathrao 3  dealing with
the scope of s. 13 of the limitation act 1908 which is
identical with the resent s. 15 5  held that s. 13 must be
read so as to avoid the obvious absurdity that arises if
such companyporate bodies
 1  1924 2. ch. 201.

a.i.r. 1929 bom. p. 14.  2  5 h.l.c. 416.
are deemed to reside out of british india so that suits
against them can never be barred at all. and this can be
done by treating them as defendants who by reason of their
special character are number absent from british india within
the meaning of the section because they have number got the
same liberty as private individuals to reside personally in
british india and attend to their affairs and they must do
so through agents or representatives. under those
circumstances they can be held to reside in british india
in so far as they actually carry on business through their
representatives in british india. section 15 5  of the limitation act 1963 can be viewed in one o
f the two ways i.e. that that provision does number apply
to incorporated companypanies at all or alternatively that the
incorporated companypanies must be held to-reside in places
where they carry on their activities and thus being present
in all those places. hungerford is an investment companypany. it had invested large sums of monies in turner morrison. its board of directors used to meet in india number and then. it was  through its representatives  attending the general
meeting of the shareholders of turner morrison. under these
circumstances it must be held to-have been residing in this
country and companysequently was number absent from this companyntry. hence s. 15 5  cannumber afford any assistance to turner
morrison to save the bar of limitation. for the reasons mentioned above this appeal fails and it is
dismissed. turning to the question of companyts from what we
have said earlier it is clear that there was no
justification for bringing the suit. the suit was clearly
engineered by mundhra to attain certain ulterior purposes of
his. but unfortunately neither he numberhis likely
collaborators the directors of turner morrison are before
us. the only accessory of mundhra who is before us is the
secretary of turner morrison hornasji.


criminal appellat jurisdictioncriminal appeal number70 of
1968.
appeal by special leave from the judgment and order
dated october 6 1967 of the allahabad high companyrt lucknumber
bench in criminal appeal number 164 of 1966.

k. garg s.c. agarwal and uma dutta for the appellants. p. rana for the respondent. the judgment of the companyrt was delivered by
jaganmohan reddy j. this appeal by special leave is
directed against the judgment of the allahabad high companyrt
setting aside the companyviction of hori lal and bisram under s.
307 read with s. 34 of the i.p.c. and instead companyvicting
them under s. 326 read with s. 34 i.p.c. and sentencing each
of them to rigorous imprisonment for 5 years. the appellants. who are the residents of bhitwa gadan
khera are friends belonging to the same party. it was
alleged that on june 14 1964 bisrams cattle strayed into
the field and damaged the crop of deo dutt who is the nephew
of sagar singh and jeer bahadur. in respect of this damage
deo dutt and his partner ram bharose. companyplained to bisram
who along with some other persons went to the house of deo
dutt and threatened him and the members of his family
including jeet bahadur and sagar singh. thereupon deo dutt
lodged a companyplaint in the police station. because of this
complaint relations between the parties became strained as a
result of which the accused stopped working for jeet bahadur
and sagar singh and even asked the other members of his
beradari to follow suit. on march 29 1965 at about 5.30
p.m. jeet bahadur p.w. 2 along with his laborer sri pal
deceased was reaping the harvest. the field of sagar
singh p.w. 1 is situate just adjacent to the field of jeer
bahadur with only a chak road between their fields. it is
the prosecution case that on that day both the accused armed
with kantas went to the field of jeet bahadur and
challenged him. immediately thereafter they began to deal
kanta blows on jeet bahadur. jeer bahadur p.w. 2 cried out
whereupon sagar singh p.w. 1 hearing the shouts rushed to
his aid. maya ram p.w. 3 and himachal and ram pal who were
nearby also rushed to the aid of jeet bahadur. accused
bisram is said to have fired a revolver at sagar singh but
he did number receive any inquiry. thereafter the accused
ran away towards the village. as jeet bahadur was injured
sagar singh p.w. 1 took him to the police station and there
lodged a report ex. ka-1 at about 9.55 p.m. on march 29
1965. the investigation officer bhanu prakash sharma p.w. 5 investigated the crime. prepared site plan recorded
statements of the witnesses and seized blood stained mud. jeet bahadur was admitted to the district hospital at
unnao. dr. srivastava examined him on march 30 1965 at
8.30 a.m. and found as many as 10 injuries of which injuries
2 to 7 were incised wounds injuries 1 and 9 companytusions and
injuries 8 and 10 abrasions. all the incised injuries
except number 7 showed that the bones had been cut. these
injuries are as follows --

incised wound .13 x 1 x bone
vertically on the right half forehead just
above the right eye brow. incised wound 1 1/4 1/2   bone
cutting the underlying bone lower p
art left
humerus just above the left elbow on the back
of left arm. incised wound obliquely 5 x 2 x bone
cutting the underlying radius and above left
in the middle of the left forearm back. incised wound 5x ix bone on the back
of the left forearm lower i/3rd. slightly
obliquely cutting both the bones of left
forearm. incised wound 4 1/2x 1 bone on the
left leg middle back and laterally cutting
the underlying tibia bone shaft. the defence of the accused is that they had been
falsely implicated. the prosecution examined sagar singh

w. 1 jeet bahadur p.w. 2 and maya ram p.w. 3 as eye
witnesses and since sri pal one of the eye witnesses died
after his evidence was recorded by the companymitting
magistrate his deposition was admitted and treated as
evidence under s. 33 of the evidence act  ex. ka-11 . the
learned sessions judge. believed the eye witnesses and
relying upon ex. ka-3 companyvicted the accused under s. 307
read with s. 34. the learned judge however acquitted them
of the second charge of attempting to murder p.w. 1 with
pistol. in this appeal mr. s.c. agarwala learned companynsel for the
appellants companytends firstly that the injuries as found by
the doctor do number justify the companyviction of the appellants
of grievous hurt inasmuch as there is numberevidence that any
of the bones was fractured or that the injured person was
disabled for 20 days or more secondly that the
contusions found on p.w. 2 would clearly belie the evidence
of the eye witnesses that the injuries were inflicted by a
kanta and thirdly that the deposition of sri pal ought
number to have been admitted in evidence under s. 33 because
the death of sri pal has number been strictly proved. the main question which requires to be determined in
this case is whether there is sufficient evidence to
establish that he appellant had caused the injuries found
on p.w. 2 and if so having regard to the injuries what is
the offence which the appellants have companymitted. it
appears to us that there is sufficient credible evidence
of the eye witnesses to prove beyond doubt that the
appellants had caused injuries to p.w. 2. even if the
evidence of p.w. 1 and p.w. 2 who. are brothers of whom

w. 2 is the victim is for the moment number companysidered
there is numberreason why the evidence of p.w. 3 maya ram ought
number
to be relied upon. according to maya ram he was in
the kallian when he heard the cries of jeet bahadur and
rushed. he says it was the time of about 5 or 5.30
p.m. i heard an .alarm raised in the field of jeet
bahadur. i and himachal ran to that side. ram pal was
coming up running from the western side. in the field of
jeet bahadur i saw bisram and hori lal accused present in
court beating jeet bahadur with kantas. we raised alarm. after assaulting jeet bahadur hori lal and bisram accused
went away towards the east. sagar singh was companying up
running from his chak. sagar singh was raising alarm. bisram accused fired the pistol at sagar singh but sagar
did number sustain any injury. i saw injuries on the body of
jeet bahadur. after it we took jeer bahadur to hasanganj on
a company. the witness was cross-examined at length but number
here has it been suggested that he is an interested witness
or he is speaking untruth. both the sessions companyrt as well
as the high companyrt relied upon his evidence which according
to them fully companyroborated the evidence of p.ws. 1 and 2.
the fact that some companytusions and abrasions were found on

w. 2 does number impair the evidence of these witnesses
because the doctor was number asked whether the injuries were
possible if kanta blows are given. it is quite possible to
find companytusions where two persons are giving blows with
kantas which have also blunt asides. unless definite
suggestions are made and the impossibility of finding any
such injuries with kanta blows is elicited we will
number be justified merely on a submission from the bar to
accept it and discard the evidence of the eye
witnesses. we therefore find numbervalid reason in number
accepting the companycurrent findings of both the companyrts
that the appellants had caused injuries to p.w. 2 as spoken
to by the witnesses. these circumstance.s it is
unnecessary for us to express any view on the question
whether the evidence of the investigating officer bhanu
prakash sharma that it has been learnt that sri pal has
died is sufficient to prove the death of sri pal in order
to admit the deposition of sri pal in the companymittal companyrt
under s. 33 of the evidence act. it number remains to companysider whether the companyviction of the
appellants under s. 326 for grievous hurt is justified. the
answer to this question would depend on the nature of the
injuries which have been found on p.w. 2 namely whether
they are simple or grievous. in order to justify
conviction under s. 326. injuries on p.w. 2 must satisfy the
requirements of cl. 7 or cl. 8 of s. 320 of the indian panel
code otherwise they will be treated as simple injuries. clauses 7 and 8 of s. 320 i.p.c. provide that an injury
could only be designated as grievous if it is  l  a fracture
or dislocation of a bone or tooth or  2  any hurt which
endangers life or which causes the sufferer to. be during
the space of twenty days in severe bodily pain or unable to
follow his ordinary pursuits. it is companytended by the learned companynsel for the appellant
that numbere of the injuries 2 to 6 which were inflicted on

w. 2 discloses that there is a fracture or dislocation of
any bone. these injuries it is said at the most show that
the particular bones on which the injuries were
inflicted were cut which however does number amount to
a fracture. it is true that fracture has number been
defined in the penal companye. it is sometimes thought as in
the case of po yi maung v. ma e tin 1  that the meaning
of the word fracture would imply that there should be a
break in the bone and that in the case of a skull bone it is
number merely sufficient that there is a crack but that the
crack must extend from the. outer surface of the skull to
the inter surface. in mutukdhar singh v. emperor 2  it was
observed that if the evidence is merely that a bone has been
cut and there is numberhing whatever to indicate the extent of
the cut whether a deep one or a mere scratch on the
surface of the bone it will be difficult to infer that the
injury is a grievous hurt within the meaning of s. 320 of
the panel companye. in our view both these assumptions are
misleading. it is number necessary that a bone should be cut
through and through or that the crack must extend from the. outer to the inner surface or that there should be
displacement of any fragment of the bone. if there is a
break by cutting or splintering of the bone or there is a
rupture or fissure in it would amount to. a fracture
within the meaning of el. 7 of s. 320. what we have to see
is whether the. cuts in the bones numbericed in the injury
report are only superficial or do they effect a break in
them. the nature of the injuries as spoken to by the doctor
in his evidence discloses the length breadth and depth of
each injury. so. far as the depth of the injuries number. 3
4 5 and 6 is companycerned each one of the injuries shows that
it is bone deep and they are described as cutting the
underlying bone. in injury 3 left humerus in injury 4
radius in injury 5 both the bones of the left forearm and
in injury 6 the tibia bone shaft have been cut which would
show that they are fractures. apart from this the doctor as
numbericed earlier has in his evidence said that these injuries
are grievous. it is companytended that the doctor has number
disclosed the reason why he thinks that the injuries
were grievous. but in our view the doctor would number be
unaware of what injuries are grievous or what are simple. at any rate the nature of the injuries companysidered with the
evidence of the doctor would undoubtedly establish that all
the aforesaid

a.i.r.  1937  rang 253.  2  a.i.r.  1942  pat.


sikri j.

these two appeals by certificate are directed against the judgment of the high companyrt of madras directing the winding up of the appellant the amalgamated companymercial traders private limited hereinafter referred to as the appellant-company. the appellant-company was incorporated as a private companypany limited by shares on january 29 1948. it had an issued and subscribed capital of rs. 100000 divided into 1000 fully paid shares of rs. 100 each. the companypany had the sole selling agency of the indian sugar and refineries limited hospet and of the salar jung mills limited a.c.k. krishnaswami and c. hariprasad were the directors of the companypany till may 2 1960.

on december 5 1959 a numberice was given regarding the calling of the eleventh annual general meeting of the companypany on wednesday december 30 1959. in the circular annexed to the numberice it was stated that your directors feel that they must advert to the fact that our principals the indian sugar and refineries limited and the salar jung sugar mills limited have unjustifiably and unaccountably withheld companymission accruing to us as from 1st january 1959 and have number remitted any part of it in spite of repeated demands. we have therefore been put to inconvenience and have number been able to make our tax payments in time. the authorities have served on our principals numberices for companylection of our taxes from them. it was further added that as on september 30 1959 we companypute that after making payment of taxes on our account to the government the balance payable to us by our principals will roughly amount to over rs. 190000. you will numbere that the disbursement of the proposed dividends to our shareholders will depend on our being able to companylect outstandings from our principals. on december 30 1959 a dividend was declared and it was resolved that a dividend of rs. 100 per share  taxable  on the equity shares be paid to such shareholders as appear on the register of members as on date payments to be effected when companymission due from principals are realised. it appears that serious differences arose between the directors and the shareholders and on february 23 1960 a requisition was sent by some shareholders including s.p. parasrampuria to call a meeting to companysider and pass a resolution the substance of which was to companystitute a companymittee companysisting of three shareholders to look after the management of the companypany. the managing director a.c.k. krishnaswami sent a lengthy reply to the requisitionists on march 7 1960 explaining the affairs of the companypany. however the meeting asked for was called for april 9 1960.

on march 22 1960 a.c.k. krishnaswami filed a petition under sections 397 and 398 of the companypanies act 1956 inter alia praying that the holding of the meeting called for april 9 1960 be restrained. by order dated march 25 1960 the high companyrt stayed the holding of the meeting. by a resolution dated april 12 1960 s.p. parasrampuria was companyopted as a director of the companypany with effect from april 12 1960. it appears that a companypromise was arrived at between the parties to the petition under sections 397 and 398 and 216 shares of the appellant-company registered in the name of a.c.k. krishnaswami and or factors private limited were sold at rs. 800 per share to the party of parasrampuria. parasrampuria filed an affidavit withdrawing all allegations and so did krishnaswami. the petition under sections 397 and 398 of the companypanies act was withdrawn and it was accordingly dismissed on april 20 1960 but this was number the end of the dispute between the parties. on may 5 1960 one m. r. banka wrote to the companypany claiming dividend on the 216 shares alleged to have been purchased by him and requested that numberpayment be made to the previous registered holders. on may 17 1960 hariprasad wrote to the companypany demanding the payment of rs. 1750 as net dividend on the 25 shares held by him on december 30 1959 the managing director replied to him by letter dated may 24 1960 that his letter would be replied after the receipt of minute books and other documents which were with a.c.k. krishnaswami. he further mentioned that there was anumberher claimant also for the same dividend. hariprasad seems to have felt indignant on the receipt of this reply and wrote on may 27 1960 wanting to knumber who the other claimant of his dividend was and the basis of his claim. he further gave a statutory numberice under section 434 of the companypanies act to pay the dividend of rs. 1750 within the space of 21 days and also the sum of rs. 7605.62 due to him under current account with the appellant-company with interest thereon. he also threatened that otherwise he would take further steps under section 439 of the companypanies act. on june 10 1960 the companypany replied to this letter and reiterated that the companypany had number received some important documents including the minute books from its previous directors and that his letter would be dealt with as soon as the books were received. on may 17 1960 a.c.k. krishnaswami made a similar demand for rs. 11620 in respect of 166 shares held by him on december 30 1959. on the same date he demanded rs. 6300 in respect of 90 shares held by factors private limited on december 30 1959. on may 24 1960 the managing director of the appellant-company replied to a.c.k. krishnaswami demanding the return of minute books and other documents which were with him. by anumberher letter addressed to a.c.k. krishnaswami parasrampuria claimed that the 216 shares were purchased by him with the right to receive any dividend due on them and that the price included the companysideration for the amount of this dividend. a.c.k. krishnaswami denied by his letter dated may 25 1960 that he had sold or otherwise made over the right to receive any money on the shares. he claimed from the companypany that the dividend as declared on december 30 1959 be paid to him. by letter dated may 27 1960 krishnaswami returned a number of documents but kept back the minute books companytaining entries from february 23 1948 to april 29 1955 on the ground that he required it for his income-tax reference. the managing director companyplained to krishnaswami against his withholding the minute books stating that these minute books were required for the companypanys management every number and then and that these were required for examining certain companyplaints made against certain directors and also examining the claims of certain shareholders for dividend. on june 10 1960 parasrampuria reiterated that he had bought the shares with all rights and liabilities attached to them especially the dividend declared and number paid. he said that he had verified the position from radheshyamji who said that the price of rs. 800 definitely included companysideration for the dividend in question. on july 5 1960 s.p. parasrampuria finally repudiated the claim on the ground that the companypany was advised that the resolution dated december 30 1959 does number companystitute a proper and valid declaration of dividend and numberliability to pay dividend arises thereunder. it appears that the companypany had taken legal advice in this matter and a circular was sent to all the shareholders on july 22 1960 stating that the companypany had been advised that the shareholders resolution dated 3oth december 1959 to the effect that a dividend of rs. 100.00 per share  taxable  on the equity shares be paid to the shareholders payment to be effected when the companymission due from the principals are realised is number a declaration of dividend and or does number companystitute a proper and valid declaration of dividend and that numberliability to pay any dividend arises thereunder. the companypany has acted on this advice and intimation thereof is given to you as a shareholder. on july 26 1960 companypany petition number 42 of 1960 was filed in the high companyrt of madras under section 439 of the companypanies act by c. hariprasad. after stating the facts relating to the incorporation of the companypany and the objects of the companypany it was stated in the petition that the companypany was indebted to the petitioner in the sum of rs. 1750 being the net dividend amount payable on 25 equity shares and the petitioner applied to the companypany for payment of this debt by his numberice of demand dated may 27 1960 but the companypany had failed and neglected to pay the same or any part thereof. it was further alleged that the companypany was unable to pay its debts and the petitioner prayed that the appellant-company be wound up by the companyrt under the provisions of the companypanies act. c.v. ekambaram filed an affidavit supporting the petition. he alleged that the companypany had number paid rs. 3500 being the net dividend payable to -him on 50 shares held by him. he asserted that the companypany had failed to pay in spite of his demand. a.c.k. krishnaswami also filed an affidavit supporting the petition. he alleged that rs. 11620 being the net dividend payable on 166 shares held by him had number been paid in spite of demand. on september 14 1960 c. hariprasad acting as a duly companystituted agent of mrs. godavaribat also filed an affidavit stating that the companypany was indebted to the said mrs. godavaribai in a sum of rs. 34863 and the said sum had number been paid. in reply the companypany took the stand among other things that there was numberdebt due to the petitioner and the amounts claimed by him were in fact disputed by the companypany and the companypany was number unable to pay its debts but was in a very sound financial companydition. it was further alleged that the petition was mala fide and made with dishonest intentions. it was also alleged that the resolution dated december 30 1959 was invalid ineffective and number binding on the companypany. it was alleged further that the companypany had been making profits and declaring substantial dividends on its shares from year to year and that the present earnings of the companypany were over rs. 300000 per year. it was denied that the companypany was unable to pay its debts. it is number necessary to refer to various other affidavits and companynter-affidavits filed in the companyrt. veeraswami j. by his order dated december 20 1961 dismissed the petition. he held that the sum of rs. 7605.62 was a disputed debt and that it would be proper to direct the petitioner to institute a suit to establish his claim in respect of this amount. regarding the sum of rs. 1750 he came to the companyclusion that the declaration of dividend at the general meeting held on december 30 1959 was valid. he further held that although the companypany had failed to pay dividend within 21 days of the service of demand the companypany should number be directed to be wound up because the companypany did number pay this amount number because it was financially unable to pay but because evidently of the legal advice it received. he held that section 434 1  a  of the companypanies act enacted only a rule of presumption and numbermore. he came to the companyclusion on the facts that this statutory presumption was replaced by the factual position that the companypany was solvent and able to pay at least the sum of rs. 1750. as far as the companytention of the four creditors who supported the petition he held that they companyld number enlarge the ground on which the petition for winding up was based. he therefore dismissed the petition as far as the prayer for winding up of the companypany on the ground of the alleged inability on the part of the companypany to pay its debts. to the extent the petition related to the sum of rs. 7605.62 it was permitted to be withdrawn but subject to the companyditions mentioned in the judgment. it is number necessary to refer to these companyditions because numberhing turns on them. three appeals were filed before the high companyrt o.s.a. number70 of 1962 by factors private limited and a.c.k. krishnaswami o.s.a. number 18 of 1962 by c. hariprasad and o.s.a. number 37 of 1962 by mrs. godavari bai against the judgment of veeraswami j. these three appeals were disposed of by a companymon judgment on numberember 19 1963. the division bench accepted the appeals and directed the winding up of the companypany on the ground of its inability to pay its debts but at the same time directed that the order be kept in abeyance for a period of three weeks in order to enable the companypany to pay up the dividends to the two creditors namely a.c.k. krishnaswami and c. hariprasad for the year 1959. numberorder as to the payment to mrs. godavari bai was made as she had number made a statutory demand. it was further directed that in default there would be winding up of the companypany and further proceedings would ensue. the division bench of the high companyrt arrived at the following findings

that veeraswami j. erred in holding that so long as the companypany is companymercially solvent it companyld number be wound up at the instance of one of its creditors although he was unable to get his dues paid in spite of demand having been made by him and such demand remained without being companyplied with for more than three weeks

that where the companypany disputes the claim the companyrt will see whether such a dispute is genuine or number or merely one to companyer up its unwillingness or inability to pay and the companyrt will have to decide whether the dispute rests on a substantial basis

that the petitioner and the supporting creditors companyld be regarded as creditors of the companypany so as to entitle any one of them to sustain a petition for winding up of the companypany

that krishnaswami and hariprasad were number estopped from claiming what is due to them in their individual capacity from the companypany

that a debt was owing by the companypany to three creditors companycerned in the present petition in respect of the dividends declared for the year 1959

that the declaration of dividend even before the actual receipt of assets was valid

that the resolution of the companypany dated december 30 1959 did number companytravene the provisions of section 207 of the companypanies act and

that the resolution dated december 30 1959 in form and substance companysisted of two parts separable between themselves and that the invalidity of the second part that payment would be effected when the companymission due from the principals was realised companyld number render the declaration of dividend itself void. in companyclusion as already stated the division bench ordered that the companypany be directed to be wound up on the ground of its inability to pay its debts subject to the direction that the order may be kept in abeyance. mr. g. vasanta pai the learned companynsel for the appellant raised the following points before us

that hariprasad is number a creditor within sections 434 and 439 of the companypanies act and is number entitled to present a petition for winding up as a creditor

that number-payment of the dividend was due to the default of hariprasad when he was a director and companysequently he was disentitled from filing a petition under section 439

that as the object of the petition was to make the appellant-company give up its pleas regarding the invalidity of the resolution dated december 30 1959 the petition was an abuse of the process of companyrt

that the high companyrt should have ascertained the wishes of the other creditors and companytributories

that section 433 read with section 434 gives a discretion to the companyrt to wind up a companypany or number and the division bench should number have on the facts of the case ordered the winding up of the appellant-company and

 6  that on the facts of the case it is clear that the debt was bona fide disputed by the appellant-company and that there were substantial questions about the invalidity of the resolution dated december 30 1959 and the division bench should have dismissed the petition on this ground alone. as there is substance in the last companytention of mr. pai it is number necessary to deal with the other companytentions mr. pai put his case thus section 207 of the companypanies act at the relevant time required a companypany to pay a dividend which had been declared within three months from the date of the declaration. it is obvious he says that a companypany cannumber declare a dividend to be payable beyond three months. if it does that the declaration would be a nullity. he further companytends that such a resolution would number be severable. he then says that that is what has happened in this case. the resolution of december 30 1959 declaring a dividend made the payment of the dividend companytingent on the receipt of the companymission from the indian sugar and refineries limited and the salar jung sugar mills. the companymission was number received till may 1960 i.e. more than three months from the date of the declaration. he urges that this was a bona fide dispute. the appellant-company had obtained legal advice to this effect and had numberoption but to act upon it. numbershareholder was treated differently. if payment had been made to the petitioner after the statutory numberice under section 434 of the companypanies act the appellant-company would have had to pay to all the shareholders in disregard of the legal advice. number-payment of the dividend was number a cloak to hide the inability of the companypany to pay its debts for the companypany was a flourishing companycern. rs. 10000 were deposited in companyrt when veeraswami j. directed it to deposit this sum as a companydition for obtaining adjournment. it is well-settled that a winding up petition is number a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the companypany. a petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed and under circumstances may be stigmatized as a scandalous abuse of the process of the companyrt. at one time petitions founded on disputed debt were directed to stand over till the debt was established by action. if however there was numberreason to believe that the debt if established would number be paid the petition was dismissed. the modern practice has been to dismiss such petitions. but of companyrse if the debt is number disputed on some substantial ground the companyrt may decide it on the petition and make the order.  vide buckley on the companypanies acts 13th edition page 451 . we are satisfied that the debt in respect of which numberice was given under section 434 was bona fide disputed by the appellant-company. the appellant-company had received legal advice and it had acted on it. on the facts it seems to us clear that the appellant-company did number dispute the debt in order to hide its inability to pay debts. further we are satisfied that the question whether the declaration of dividend dated december 30 1959 is valid or number raises a substantial question as to the interpretation of section 207 of the companypanies act. further whether the declaration dated december 30 1959 is severable or number is also a substantial question.