JUDGMENT

1. This is a first appeal from a decree of the learned Subordinate Judge of <ORG> on the basis of a mortgage-deed dated the 5th of November 1906. It appears that the defendant No. 1 <NAME> had been dealing with the plaintiff's firm ever since the early eighties. The accounts between the plaintiff's firm and <NAME> were cast up in June 1891, when a mortgage deed was given to the plaintiff's firm by <NAME> for Rs 2,500. In 1906 a suit was brought on foot of the bond of the 13th Jane 1891 for recovery of the money due upon it. At the time of the institution of the suit one of the sons of the defendant, namely <NAME>, had been born and was alive. There was a compromise between the parties on the 7th of November 1906, under which a fresh bond was given to the plaintiff on the 5th of November 1906. After the completion of the compromise the suit was withdrawn by the plaintiff. Subsequently two more sons were born to <NAME>, namely, <NAME> and <NAME>. On the 22nd of January 1917 the suit out of which this appeal has arisen was filed by the plaintiff for the recovery of Rs. 17,920-11-8 due upon the mortgage deed of the 5th of November 1906. The claim was brought against <NAME> and his three sons. All the defendants resisted the suit and urged various pleas. The defence with which we are concerned in this appeal was advanced on behalf of the sons, to the effect that the loan secured by the deed of the 5th of November 1906 was not taken by <NAME> for the benefit of the family nor was there any legal necessity for the loan. The question of legal necessity was raised by the defence in two ways. First, it was urged that the deed of the 5th of November 1906 was given in lieu of the deed of the 13th of June 1891 and that the debt due upon the deed of say had already become barred in 1905. A father hypothecating a joint family property in lieu of a time barred debt cannot be said to have hypothecated the property for legal necessity. Secondly, it was urged that the debt secured by the deed of 1891 was contracted at a time when <NAME> had a son already alive. The name of that son was <NAME>, who was born on the 13th of January 1887 and who died in 1895. As <NAME> was alive at the time the deed of 1891 was given, it was for the plaintiff to see that the money advanced by him was advanced for legal necessity. The death of <NAME> in 1895 would not in any way affect the question of legal necessity, for prior to his death <NAME> had already been born. If the prior debt of 1891 is to be considered as not warranted by legal necessity, the death of <NAME> would not affect the question at all. The learned Subordinate Judge, after considering the evidence in the case, was of opinion that the deed of the 5th of November 1906 was given for legal necessity; the claim was accordingly decreed.

2. In appeal before us the same two points are urged by the learned Counsel for the defendants-appellants. It is argued by him that the mortgage of 1891 was already barred at the time that the deed now in suit was given by <NAME>. Their Lordships of <ORG> have held in the case of <CITATION> 16 Ind. Cas. 250 : 35 M. 607 : 16 C.W.N. 1009 : 23 M.L.J. 321 : 12 M.L.T. 338 : (1912) M.W.N. 935 : 10 A.L.J. 259 : 14 Bom. L.R. 1034 : 16 C.L.J. 596 : 39 I.A. 218 (P.C.) that in the case of a simple mortgage the time within which a mortgagee can are for the recovery of money is 12 years The period of limitation, therefore, expired in respect of the bond of 1891 in 1903. The grant by <NAME> of a fresh deed to the plaintiff in respect of a time-barred debt would not under the Hindu Law bind his Bona or the ancestral property. In order to appreciate and determine the question raised by the learned <ORG> for the defendants-appellants, we hive to refer to the terms of the deed of the 13th of June 1891. We find the following covenant in the <NAME> deed: "If I fail to pay the whole or part of interest on the aforesaid amount every six months, then at the close of a year the said interest shall be treated as principal and I shall pay interest at the rate fixed above on that amount also. Till payment in full of the debt due under this bond this mode of paying interest shall remain in force. In the event of nonpayment of interest for two consecutive periods of six months, that is, for the entire year, the said creditors have power either to benefit themselves by the condition regarding the compound interest as herein mentioned or to realise in any way they like, without waiting for expiry of the stipulated period fixed for payment of the principal, the whole of the principal and interest in a lump sum or only the interest which under the terms of this bond might be due to them by that time from me as well as by the sale of the hypothecated property mentioned below and also from other moveable and immoveable property of mine, and I shill have no objection whatever."

3. Now it is quite apparent from the terms of this covenant that the creditor was given three options in case of default in the payment of two consecutive instalments of interest, namely, either to sue for the whole, that in the principal and interest, or to 1st the interest mount up or to sue for interest only. If the creditor did not choose to exercise his option of suing for that whole amount due 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. However, the learned Counsel for the appellants contends to the contrary, He has referred as to the case of <CITATION> 28 Ind. Cas. 910 : 37 A. 400 : 13 A.L.J. 510. lie argues that the case of <NAME> 28 Ind. Cas. 910 : 37 A. 400 : 13 A.L.J. 510, is on ail fours with the present case and that in the case of <NAME> 28 Ind. Cas. 910 : 37 A. 400 : 13 A.L.J. 510, it was decided by a Full Bench of this Court that where an option is given to a creditor, that it, on the happening of a certain event, to either sue for the whole amount, principal and interest included, or for interest only, and the creditor omits to exercise his option and sue for the whole amount rule, time will begin to run from the date of the omission to sue for the whole amount. We have carefully considered the case of <NAME> and, in our opinion the facts of that case are quite dissimilar to the facts of the present case. In that case no option, as far as we can see from the recital of the terms of the bond given therein, was given to the creditor. The latter had to sue on the happening of a certain event. He failed to do so and the Full Bench of this Court held that time began to run against him from the date of his omission to sue. It is true that in that case at the end of the bond it was recited that in case the creditor did not sue, are he was entitled to, on default in the payment of interest, the interest will go on running and mounting up in favour of the creditor up to the date of payment. That is quite a different covenant to that given in the deed before us. In the deed of 1891 it is clearly stated that the creditor has three options which we have already mentioned above. The plaintiff seems to have exercised one of the options, tamely, to let the interest mount up at compound rate, and it was due to that fact that Re 2,510 mounted up to more than Rs. 10.000 at the time the deed in suit was given. We, therefore, hold that when the suit was brought by the plaintiff in 1906 in the month of August or when the compromise was entered into and the deed of the 5th of November 1906 was obtained from the defendant No. 1, the debt due on the deed of 1891 had not become barred by time, The argument for the defendants-appellants that tin mortgage-deed of 1906 was given in lieu of a time-barred debt, therefore, falls to the ground.

4. The disposal of the second contention for the defendants appellants depends upon the evidence in the case. The allegation for the defense is that <NAME> had a son born to him on the 13th of January 1887 of the name of <NAME>, who died on the 21th of August 1895. In support of this allegation the defense examined two witnesses, <NAME> and <NAME>, and produced two registers, one the register of births of 1887 and the other the register of deaths of 1895. The oral evidence of <NAME> and <NAME> has only to be read to be discarded. They seem to remember things which happened in the family of other people and are not quite certain of the dates with which they are more closely connected. As remarked by the learned Subordinate Judge, it is so easy to produce oral evidence on a matter like this that a curtain person had a son at once time and that son died a few years afterwards. We have examined the to registers very carefully. It appears to us that the register of births has been tampered with, The entry with regard to <NAME> is given at the bottom if a page, the total of the births for the month has been tampered with and dearly altered; the alteration seems to have been made for the benefit of the defendants, If the entries of the 13th of January 1887 where two names are giver, that of <NAME> and another person just above his, are taken out, then the total of the month as first given would be correct. But the register of deaths gives a complete lie to the case for the defense. In the register of deaths the name is given as <NAME> and not as <NAME>, and the original parentage stood as that of <NAME> <NAME> and the word <NAME> has been altered to Mister. In the column of the age of the child who died, the age is given as between 10 and 15, while ex-hypothsi <NAME> would only be just about eight years. We agree with the learned Subordinate Judge that the evidence for the defense, in support of the allegation that <NAME> had a son born to him in 1887 of the name, of <NAME> who died in August 1895, in quite unreliable. The case therefore stands thus: At the time that <NAME> contracted debts with the firm of the plaintiff he had no sod. He was the sole owner of the property and could deal with it as he liked. On the 13th of June 1891 when he executed the first mortgage-deed he had no son. It is however, said that defendant No. 2 was born only a few months after the execution of that deed. We find we are unable to agree with the contention of the defendants on this point also. The lower <ORG> has shown conclusively that <NAME> was born sometime in 1893. The learned Subordinate Judge has marshalled the evidence on the point, and we agree with him in the appreciation of the evidence as to the date of the birth of <NAME>. The deed of 1891, having been executed long before the birth of any of the sons of defendant No. 1, would be considered a valid deed. The deed now in suit, that is, of the 5th of November 1906, was given in lieu of the former deed and would, therefore, be taken to be for antecedent debt. Defendants Nos. 2 to 4 are, therefore, in our opinion, not entitled to object to the deed in suit. The appeal, therefore, fails and is dismissed with costs, including fees in this <ORG> on the higher scale.


JUDGMENT <NAME> and <NAME>, <NAME>.

1. This is an appeal against an appellate order. The facts are that a decree for foreclosure was passed in favour of the respondent on the 7th June 1898. It was made absolute on the 22nd December 1898. Possession was taken on the 30th January 1899. On the 8th February 1899 the defendant applied for a rehearing under Section 108, Civil Procedure Code. The <NAME> refused her application. She appealed to the Subordinate Judge, who remanded the case for re-enquiry under Section 562, Civil Procedure Code. The <NAME> then adhered to his former decision. The Subordinate Judge on a further appeal to him being made passed an order, allowing the defendant to pay a sum of Rs. 380, and on her doing so, directed her restoration to possession of the land. The plaintiff prefers this second appeal. A preliminary objection is raised that no second appeal lies under the provisions of Section 588. This objection would seem to be valid. The learned Advocate-General contends for the appellant that a second appeal lies because the order of the <NAME> was an order passed in execution. This contention, however, cannot prevail in face of the decision in <CITATION> (1897) I. L. R. 25 Calc. 133. We therefore dismiss the appeal, but without costs.

2. The learned Advocate-General on our intimating our intention of taking this course presented an application under Section 622, Civil Procedure Code, and prayed that we should deal with the matter under that section. We think that in the interests of justice we should do so.

3. The Subordinate Judge held that the respondent could not impugn the order making the decree for foreclosure absolute on the ground that no notice had been served upon her before it was passed, but was of opinion that the plaintiff had given the defendant some assurance that he would deal leniently with her, and therefore the defendant should be allowed another opportunity of paying off the debt due by her notwithstanding that the decree for foreclosure had been made abslute.

4. It is clear, we think, that the Subordinate Judge was right in holding that the order absolute was not invalid by Reason of no notice having been given to the defendant before it was made. The defendant was present when the decree for foreclosure was passed. She knew she would be foreclosed, if she did not pay within six months. No further notice to her was necessary, and Section 87 of the Transfer of Property Act does not require that any such further notice should be given before the order absolute is made.

5. We are of opinion that in these circumstances the Subordinate Judge was wrong in allowing the defendant to pay off the debt after the order absolute had been made and in directing her to be restored to possession. The Subordinate Judge has held that the plaintiff gave the defendant some assurance, but he does not definitely find what assurance the plaintiff gave the defendant, nor that it was of such a nature as to make his conduct fraudulent in applying for the order for foreclosure being made absolute. The Subordinate Judge seems to have allowed his feelings of sympathy with the defendant to influence him. We do not think this was right, and we can see no reason which can justify his setting aside the order absolute and allowing the defendant to pay off the debt long after the time for doing so had elapsed.

6. We must therefore, under Section 622 , Civil Procedure Code, set aside the order of the Subordinate Judge in the case and restore that of the <NAME>, which we accordingly do. The applicant is entitled to costs.


PETITIONER: <ORG> (1953) PRIVATE LTD. Vs. RESPONDENT: COMMISSIONER OF INCOME-TAX, BOMBAY DATE OF JUDGMENT: 21/10/1964 BENCH: <NAME>, J.C. BENCH: <NAME>, J.C. SUBBARAO, K. SIKRI, S.M. CITATION: 1965 AIR 1201 1965 SCR (1) 770 CITATOR INFO : R 1966 SC1053 (8) R 1968 SC 745 (5) RF 1970 SC1586 (5) RF 1977 SC2394 (6) RF 1980 SC1946 (11) R 1989 SC1866 (13) R 1991 SC 227 (8) ACT: Income Tax Act , 1922 , s. 10(2)(iii) -Interest paid on unpaid balance of purchase price of assets acquired for a business-Whether such unpaid balance amounts to a loan-Therefore whether interest allowable as a deduction on borrowed capital--Or whether allowable as a deduction under s. 10 (2) (xv). HEADNOTE: The assessee company was incorporated with the object of taking over certain passenger and ferry services on the Konkan Coast. The ass company purchased the assets required for its business from <ORG> and paid part of the consideration by allotting its own fully paid shares, leaving the -balance unpaid. It was provided in the contract of purchase that interest at 6 per cent per annum would be paid to <ORG> on any unpaid balance until the whole of it was fully paid. The Income Tax authorities disallowed the claim of the assessee company in the computation of its profits and gains for deduction of such interest paid to <ORG>, and <ORG> affirmed that -view. HELD : Interest paid by the assessee company was a permissible deduction under s. 10(2) (xv). [779 F-G] Per Shah and Sikri JJ.-BY s. 10(2) (iii) only interest paid in respect of capital actually borrowed for the purpose of the business, profession or vocation, is a permissible allowance. An agreement to pay the balance of consideration due by the purchaser does not give rise to a loan. Although a loan of money undoubtedly results in a debt, every debt does not involve a loan. In this case the unpaid balance did not amount to capital borrowed and the interest paid thereon could not therefore be allowed as a deduction under s. 10(2) (iii). [774 H; 775 B-C; 776 <CITATION> ., (1946) 14 I.T.R. 638 and <CITATION> , (1950) 18 I.T.R. 150, referred to and approved. <CITATION> , (1947) 15 I.T.R. 87, distinguished <NAME> reserved his opinion on the application of cl. (iii) of sub-s. (2) of s. 10 of the Indian Income-tax Act, 1922 to the claim for deduction of the interest paid. [771 B] JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 1023-1024 of 1963.

Appeals from the judgment and order dated August 9, 1962, of <ORG> in Income-tax Reference No. 3 of 1961. <NAME>, <NAME>, <NAME>, <NAME> and <NAME>, for the Appellant (in both the appeals).

<NAME>, Attorney-General, <NAME>, <NAME> and <NAME>, for the respondent (in both the appeals).

The Judgment of <NAME> and <NAME> was delivered by <NAME>

<NAME> agree with the conclusion, but I would prefer not to express my view on the construction of cl. (iii) of Subs. (2) of s. 10 of the Indian Income-tax Act, 1922. Shah J. <ORG> which plied its passenger and ferry services on the Konkan coast: and in the Bombay harbour was amalgamated with effect from June 30, 1952 with -the Scindia Steam Navigation <ORG> Ltd.-hereinafter called "the <NAME>". The scheme of amalgamation was sanctioned by <ORG> and the <NAME> were authorised by the scheme to float and establish a joint stock company with the object of taking over the services on the Konkan coast and in the Bombay harbour which were originally plied by <ORG> Pursuant to this authority <ORG>1953), Private Ltd.-hereinafter called "<ORG>" was incorporated on August 10, 1953. <ORG> contracted with the <NAME> on August 12, 1953 to purchase certain steamers, launches, boats, barges, buildings, furniture, fixtures and vehicles for a consideration provisionally estimated at Rs. 80 lakhs. It was provided by the agreement that the price of the assets sold will be satisfied by allotment to the <NAME> of 29,900 shares credited as fully paid-up of the face value of Rs. 100 each in the share capital of <ORG>, and the balance will be treated by <ORG> as a loan granted by the <NAME>. The agreement by cl. 3(b) provided for payment of interest at 6% on the unpaid balance of the purchase price. clause stood as follows:

"The balance shall be treated by <ORG> as a loan granted by <ORG> secured by a Promissory Note duly executed by <ORG> in favour of <ORG> and until it is repaid in full it shall carry interest of 6% per annum (simple) and shall be further secured by hypothecation of all movable properties of <ORG> in favour of <ORG>.

L2Sup.165-6 On final valuation of the assets transferred it was found that the assessee Company was liable to pay Rs. 81,55,000 to the <NAME>. By a supplemental agreement dated September 16, 1953, the agreement was rectified and the original cl. 3(b) was substituted with retrospective effect from August 12, 1953 by the following clause:

"The balance shall be paid by <ORG> to <ORG> on completion of the transfer referred to in Clause 2 above and until it is repaid in full the said balance or so much thereof as for the time being remains unpaid shall carry interest of 6% per annum (simple) and shall further be secured by hypothecation of all movable properties of <ORG> in favour of <ORG>.$$ In proceedings for assessment of tax for the assessment years 1955-56 and 1956-57 the Income-tax Officer, Companies Circle II (1), Bombay, disallowed the claim of the assessee <ORG> in the computation of its profits and gains, for allowance of Rs. 2,74,610 paid by it to the <NAME> in the account year ending June 30, 1954, as interest on the outstanding balance of purchase price due by it and for allowance of Rs. 2,86,823 paid as interest in the year ending June 30, 1955. The order of the Income-tax Officer was confirmed by the Appellate Assistant Commissioner and by <ORG>. <ORG> answered the following question submitted by <ORG> in the negative:

"Whether on the facts and in the circumstances of the case the said sum of Rs. 2,74,610 and Rs. 2,96,823 being the interest paid by the assessee is allowable as a deduction under the Income-tax Act under any of the sections 10(2)(iii) , 10(2)(xv) or 10(1) ?"

With certificate of fitness under S. 66A(2) of the Income-

tax Act, <ORG> has appealed to this Court. In the computation of profits and gains of the business carried on by it <ORG> claimed the two amounts paid as permissible allowances under S. 10 (2) (iii) or under S. 10 (2) (xv). Alternatively, <ORG> claimed that in the computation of the true profits of 'the business under S. 10 (1 ) the amounts paid as interest are necessarily allowable. Section 10 , by the first clause, provides :

"The tax shall be payable by an assessee under the head 'Profits 'and gains of business, profession or vocation' in respect of the profit or gains of any business, profession or vocation carried on by him."

Tax is payable under s. 10(1) by an assessee on its profits or gains earned in the business, profession or vocation carried on by him in the year of account. If no business at all is carried on in that year; liability to tax does not arise under s. 10(1) .

Clause (iii) of sub-s. (2) of s. 10 provides : "Such profits or gains shall be computed after making the following allowances, namely :-

(iii) in respect of capital borrowed for the purposes of the business, profession or vocation, the amount of interest paid."

The proviso - and the Explanation with which we are not concerned in these appeals need not be set out. The expression "such profits or gains" in sub-s. (2) on the plain language used by the <ORG> means profits or gains of a business carried on in the year of account. In the computation of profits and gains of a business carried on in the year of account, allowances set out in cls. (i) to

(xv) are permissible : some of these permissible allowances are of the nature of revenue outgoings, and others are of the nature of capital outgoings. Gross profits or gains must undoubtedly be of the nature of revenue receipts. But in the computation of taxable profits from the receipts of the business, not only revenue deductions but certain capital deductions are permitted to be made, e.g. deprecia- tion, sums paid to scientific research associations, expenditure of a capital nature on scientific research and other expenditure of a capital nature. By cl. (iii) of sub- s. (2), interest paid in respect of capital borrowed for the purpose of the business, profession or vocation is a permissible allowance in the computation of the profits or gains. The expression "capital" used in cl. (iii) in the context in which it occurs means money and not any other asset, -for interest is payable on capital borrowed and interest becomes payable on a loan of money and not on any other asset acquired under a contract. Interest paid need not however bear the character of a revenue outgoing. To be admissible as an allowance under cl. (iii), interest must be paid in respect of capital borrowed : interest paid, but not in respect of capital borrowed cannot be allowed. There was in the present case, in truth no capital borrowed by the assessee <ORG>. To recapitulate the facts: the assessee <ORG> purchased the assets required for its business from the <NAME> and paid part of the consideration by allotting shares of the value of Rs. 29,99,000 leaving the balance of Rs. 51,56,000 unpaid. In cl. 3(b) of the contract as originally executed it was recited that this amount was to be treated as a loan by the <NAME> to the assessee <ORG>, but with retrospective operation the covenant was modified, and the amount due was to be treated as balance of purchase money remaining unpaid. Mr. <NAME> argued that the assessee <ORG> owed a debt of Rs. 51,56,000 to the <NAME>, payment of which was secured by the execution of a promissory note and a charge on the assets of the assessee <ORG>. The substance of the transaction, according to Counsel, was a loan given by the <NAME> to its subsidiary-the assessee <ORG>-for procuring the assets required for carrying on the business, even though the formal transaction did not record it as a loan, and as a contractual liability to pay a debt was incurred, the Court would be justified in regarding the transaction as one involving borrowing of the amount agreed to be paid by the assessee <ORG>. It was said that if the assessee <ORG> had borrowed the amount of Rs. 51,56,000 from a stranger and had paid the entire consideration to the <NAME>, interest paid to the stranger would indisputably be an allowance admissible in the computation of taxable profits of the assessee <ORG>, and there was no reason why a different principle should be applied when the <NAME> in substance had made the requisite funds available to enable the assessee <ORG> to purchase the assets. The transaction with the vendor could be regarded, it was also urged, as a composite transaction(i) a transaction of borrowing Rs. 51,56,000 from the <NAME> and (ii) a transaction for payment of the entire consideration due for purchasing the assets from the <NAME>.

In our judgment this is not a permissible approach in ascertaining the true nature of the transaction. The parties had agreed that assets of the value of Rs. 31,55,000 be taken over by the assessee <ORG> from the <NAME>. Out of that consideration Rs. 29,99,000 were paid by the assessee <ORG> and the balance remained unpaid. For agreeing to deferred payment of a part of the consideration, the <NAME> were to be paid interest. An agreement to pay the balance of consideration due by the purchaser does not in truth give rise to a loan. A loan of money undoubtedly results in a debt, but every debt does not involve a loan. Liability to pay a debt may arise from diverse sources, and a loan is only one of such sources. Every creditor who is entitled to receive a debt cannot be regarded as a lender. If the requisite amount of consideration had been borrowed from a stranger interest paid thereon for the purpose of carrying on the business would have been regarded as a permissible allowance; but that is wholly irrelevant in considering the applicability of cl. (iii) of sub-s. (2) to the problem arising in this case. The <ORG> has under cl. (iii) permitted as an allowance interest paid on capital borrowed for the purposes of the business; if interest be paid, but not on capital borrowed, cl. (iii) will have no application.

<CITATION> - tax(1) <ORG> held that a mere purchase of a capital asset on a long-term credit with a stipulation for payment of interest on the reduced balance did not amount to borrowing capital within the meaning of s. 10(2)(iii) . Under an arrangement to receive a long-term lease of property the assessee in that case agreed to pay the consideration stipulated in half-yearly instalments spread over a number of years with interest at five per cent on the balance outstanding. Interest paid on the balance was disallowed as a permissible deduction in computing the total assessable income. In <ORG> case(1) liability to pay interest arose under an agreement to receive a lease in future, whereas liability in the present case arises under an agreement to pay under a completed sale transaction the balance of consideration unpaid. But that is not a real ground of distinction. The amounts in both the cases were paid as interest, but ih neither case was interest paid in respect of capital borrowed.

<CITATION> (2) the assessee who was carrying on a money-lending business claimed that in computing his business income he was entitled under s. 10(2) (iii) to deduct interest paid on death duty to <ORG> on properties left by a deceased person. The Court negatived the claim for such deduction. The amount which was not paid as death duty was used for the purposes of the business, but it could in no sense be regarded as a borrowing from <ORG>. The Court held that s. 10(2) (iii) contemplates lending of money and borrowing of the lender's money by the borrower with a contractual stipulation for repayment with interest on the loan : if a loan so borrowed is employed in or for the purpose of the business of the assessee interest paid on such loan is a permissible deduction.

(1) (1946) 14 I.T.R. 638.

(2) (1950) 18 I.T.R. 150.

But an amount due under a statute cannot be regarded as borrowed capital, for the expression "capital borrowed" predicates the relation of a borrower and a lender, which relationship did no exist in that case.

The principle of <CITATION> (1) on which strong reliance was placed by Mr. <NAME> does not come to his aid, for in that case the <ORG> held on the facts and circumstances that in substance the transaction which gave rise to the liability to pay interest was one of borrowing capital and therefore the whole of interest debited in the books of the assesses must be allowed as interest paid on such capital. We therefore agree with the High <ORG> that the claim for deduction of the amount of interest under S. 10 (2) (iii) is not admissible.

But in our judgment interest paid by the assessee <ORG> is a permissible deduction under S. 10(2) (xv) which permits "any expenditure not being an allowance of the nature described in any of the clauses (i) to (xiv) inclusive and not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purpose of such business, profession or vocation" as a permissible allowance in the computation of profits or gains of the business carried on in the year of account. Payment of interest is expenditure; but it is not an allowance of the nature described in cl. (iii) and there is no other clause in cls. (i) to (xiv) to which the payment of interest on unpaid balance of consideration for sale of assets may be attracted. The expenditure was incurred after the commencement of the business. Ile expenditure is not for any private or domestic purposes of the assessee <ORG>. It is in the capacity of a person carrying on business that this interest is paid.

The question then is whether the expenditure is of a capital nature. It is not easy ordinarily to evolve a test for ascertaining whether in a given case expenditure is capital or revenue, for the determination of the question must depend upon the facts and circumstances of each case. <ORG> has to consider the nature and ordinary course of business and the objects for which the expenditure is incurred. The assessee Company urged that the payment of interest was revenue expenditure for the purposes of the business of the assessee Company, because in the event of (1) (1947) 15 I.T.R. 87.

failure to pay interest accruing due the <NAME> would enforce the hen, and the business of the assessee Company would come to an -end and that in any event the expenditure was necessary on grounds of business expediency and incurred in order directly -or indirectly to facilitate the carrying on of business. If the principal or the interest accruing due was not paid the <NAME> had undoubtedly a right to enforce their lien against the assets of the assessee Company's business, but that cannot be regarded as a -round for holding that the expenditure fell within s. 10 (2) (xv). Even in respect of a liability wholly unrelated to the business, it would be open to a creditor to sequester the assets of the assessee's business and such sequestration may result in stoppage of the operations of the business. Expenditure for satisfying liability unrelated to the business even if incurred for avoiding danger apprehended or real to the conduct of the business cannot be said to be revenue expenditure. Nor can it be said that because a liability has some relation to the business which is carried on, expenditure incurred for satisfaction of such liability is always to be regarded as falling within s. 10(2) (xv). Whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading. The question must be viewed in the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regarded as an integral part of the profit- earning process and not for acquisition of an asset or a Tight of a permanent character, the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure in a recent case <CITATION> (1) this Court to consider the permissibility of a deduction under s. 5(e) of the Madras Plantations Agricultural Income-tax Act, 1955. Section 5(e) , it may be observer, is in terms similar to s. 10 (2) (xv) of the Income-tax Act . Section 5 Permits deductions of various items of expenditure in the computation of agricultural income. Clause (e) provides for the deduction of any expenditure incurred in the previous year (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or explended wholly and exclusively for the purpose of plantation. The assessee in that case had purchased an estate consisting of tea, coffee and rubber plantations in the Nilgiris mountains for Rs. 3,10,000.

(1) (1964) 53 I.T.R. 186.

He borrowed Rs. 2,90,000 on interest and claimed to deduct the interest paid out of the income of the plantations in the assessment year 1955-56. The claim was made under <ORG>.

(e) and (k) ,of s. 5 . The claim under cl. (k) was not admissible because interest was not payable on the amounts borrowed and actually spent on the plantations in the previous year, and the sole question which fell to be determined was whether it was a permissible allowance under s. 5 (e). It was held that the payment of interest was not in the nature of capital expenditure in the year of account. The Court held that payment of interest even in respect of capital borrowed for acquiring assets to carry on business must be regarded as revenue expenditure in commercial practice and should not be termed as capital expenditure. Dealing with the application ,of S. 5 (e) it was observed :

"The assessee had bought the plantation for working it as a plantation, i.e. for growing tea, coffee and rubber. The payment of interest on the amount borrowed for the purchase of the plantation when the whole transaction of purchase and the working of the plantation is viewed as an integrated whole, is so closely related to the plantation that the expenditure can be said to be laid out or expended wholly and exclusively for the pur- pose of the plantation. In this connection, it is pertinent to note that what the Act purports to tax is agricultural income and not agricultural receipts. From the agricultural receipts must be deducted all expenses which in ordinary commercial accounting must be debited against the receipts must be deducted all expenses do not see any distinction between interest paid on capital borrowed for the acquisition of a plantation and interest paid on capital borrowed for the purpose of existing plantations : both -are for the purposes of the plantation."

The test laid down by this Court therefore was that expenditure Made under a transaction which is so closely related to the business that it could be viewed as an integral part of the conduct of the business, may be regarded as revenue expenditure laid out wholly and exclusively for the purposes of the business. The assessee Company had undoubtedly acquired the assets by pledging its credit. The assessee Company was formed for the purpose of taking over the business which the <NAME> had acquired and for carrying on that business the assets with which the business was to be carried on were required. For obtaining those assets the assessee Company rendered itself liable for a sum of Rs. 51,56,000 and agreed to pay that sum with interest at the rate stipulated. The transaction of acquisition of the assets was closely related to the commencement and carrying on of the business. Interest paid on the amount remaining due must in the normal course be regarded as expended for the purpose of the business, which was carried on in the year of account. There is no dispute that if interest was paid for the purpose of the business, it was laid out or expended wholly and exclusively for that purpose.

Mr. <NAME> on behalf of the <ORG> contended that as profits which arise after the business is closed are not taxable under s. 10(1) , expenditure the source of which is a liability incurred before the actual commencement of business cannot also be regarded as a permissible outgoing under s. 10(2) (xv.). It is unnecessary to examine the correctness of this argument, for it has no basis in fact. The assessee Company was formed on August 10, 1953, it had entered into an agreement on August 12, 1953, and interest was paid in the years of account ending June 30, 1954 and June 30, 1955. The source of liability cannot be said to have arisen prior to the date on which the business of the assessee Company was commenced. Section 10(2) requires that in computing the taxable profits or gains of a business which is carried on in the year of account allowances of the nature described in cls. (i) to (xv) should be made. If no business was carried on in that year, the allowances are not permissible. But interest in respect of which allowance is claimed was paid at a time when the business was carried on, and the source of liability to pay interest was also incurred within the period in which the business was carried on.

We are, therefore, of the view that the allowance claimed is a permissible deduction under s. 10(2) (xv). We do not, in the circumstances, feel called upon to consider whether in computing the income of the assessee under s. 10(1) interest paid may be regarded as a necessary outgoing for the purpose of the business of the assessee Company.

The appeals are therefore allowed with costs in this <ORG>. One hearing fee.

Appeals allowed.


PETITIONER: GURSHARAN SINGH & ORS. ETC. ETC. Vs. RESPONDENT: <ORG> & ORS. DATE OF JUDGMENT: 02/02/1996 BENCH: SINGH N.P. (J) BENCH: SINGH N.P. (J) MAJMUDAR S.B. (J) CITATION: 1996 AIR 1175 1996 SCC (2) 459 JT 1996 (1) 647 1996 SCALE (1)615 ACT: HEADNOTE: JUDGMENT:

WITH WRIT PETITION NO.5331 OF 1983 Smt. Ashwani Sachdeva V.

<ORG> J U D G M E N T N.P. SINGH. J These appeals along with a writ petition have been filed on behalf of the different licensees of the shops in the shopping complex known as Palika Bazar which was built by the respondent, <ORG> (hereinafter referred to as the '<ORG>') in the year 1976. The whole complex is centrally air-conditioned. It appears that by a resolution dated 29.11.1977, <ORG> decided to allot 98 shops to shopkeepers of Panchkuian Road because the space occupied by them at the said Panchkuian Road was required for widening of the said road. Again on 27.5.1978 <ORG> directed the <ORG>,M.C. to allot shops to 98 stall-holders of Panchkuian Road on the conditions agreed. A plan of the said marketing complex was prepared and published showing 98 shops which had been reserved for the shopkeepers of Panchkuian Road on preferential basis. Tenders were invited for allotment of other 177 shops divided into four zones and further classified in seven groups for proper identification. In the advertisement it was stated that reserved shops were not being put to tender and preference for allotment of a particular shop in a group will be given to the highest tenderers. It was also stated that only those tenders shall be considered which were above the reserved rate. One of the terms of allotment being term No.9 was as follows:

"only those trades such as mentioned in the trade zoning plan shall be permitted to be run in the shop. A copy of the details of the trade zoning is appended to this document as appendix 'A'."

The aforesaid zones were demarcated on the plan of the shopping complex which had been prepared by the <ORG> The persons submitting tenders were required to state the trade which they proposed to run in the shops. In the application forms it had been clearly mentioned that "only such trades as mentioned in the trade zoning plan shall be permitted." The applicant was also required to give an undertaking that he had carefully read the memorandum of information and the terms and conditions of the allotment and that he had agreed to abide by the same. The shops were to be given on licence for a period of five years and thereafter the licence was renewable subject to increase in the licence fee by 10 per cent and on such terms and conditions as may be laid down by the <ORG> Different reserved prices were fixed for different shops. The appellants in different appeals including the writ petitioner filed their tenders and indicated the trade which they wanted to run in the shops to be allotted to them. There is no dispute that the applicants while submitting the tenders, offered the licence fee at a much higher rate than what was mentioned as the reserved rate of licence fee in respect of different shops. Thereafter letters of allotment were issued indicating the trade which such licensee could carry in the shops which had been allotted to them. In other words, the applicants whose tenders were accepted on the rates offered by them were not only required to pay the licence fee offered by them and accepted by the <ORG>, but they undertook to occupy the shops in different trading zones and to carry on the trades which were specified to be carried on in the zones concerned.

So far the Panchkuian Road stall-holders were concerned, allotment of shops were made to them in the zones reserved for them, but they were not subjected to zoning restriction, the only restriction which was imposed on them was that they had to carry on only the permissible trade specified in Appendix 'A' to the terms and conditions of the allotment. They were to pay the licence fee also at a different rate which was admittedly at a lower rate than the licence fee which had been offered and accepted from the applicants who were allotted shops out of 177 shops referred to above. It is the case of the <ORG> that special consideration in respect of licence fee as well as the zoning restriction in respect of Panchkuian stall-holders was made to induce and persuade them to move from Panchkuian Road to the Palika Bazar Shopping Complex so that the stalls occupied by them could be removed and the widening of the road was facilitated. Similar concession was offered to some Tibetan stall-holders at Janpath requesting them to move from Janpath to Palika Bazar where shops had been reserved for them in an area known as Mini Market. The total number of the stalls in the Mini Market was 58. It is an admitted position that the allottees of the stalls in the Mini Market were not subjected to any zoning system, but like Panchkuian Road allottees they were permitted to carry on only those trades which were permissible and had been enumerated in the aforesaid Appendix 'A'.

Later some of the allottees out of 177 shops which had been subjected to zoning system, so far the nature of the trade was concerned and who had specifically agreed in writing to carry on the trades which had been specified for the trade zones of the marketing complex, in which shops had undertaking given by them and opened shops in those zones in respect of trades which had not been specified for those zones. In other words, they opened shops to carry on trades of their own choice which was not permissible under the terms of the allotment made in their favour by <ORG> Because of this, notices were issued to such shopkeepers who had violated the zoning system of the marketing complex.

The validity of such notices issued by the <ORG> were questioned by them before <ORG>. A learned Judge of <ORG> came to the conclusion that the action of the <ORG> was discriminatory and arbitrary while insisting the writ petitioners to conform and abide the agreement in respect of trade zoning restrictions and to relax the same restrictions so far the stall-holders of Panchkuian Road were concerned who had been allotted shops in the same marketing complex. It was also pointed out by the learned Judge that when several allottees out of 177 shops had changed the trade and had not followed the trade zoning restrictions, there was no justification to insist others to follow the same trade zoning restrictions. On the aforesaid finding, the notices issued by the <ORG> to different shopkeepers were quashed and the writ petitions were allowed.

On appeal being filed by <ORG>, <ORG> set aside the judgment of the learned single Judge and reversed the finding that the action of the <ORG> while insisting for the trade zoning restriction, was discriminatory and violative of Article 14 of the Constitution, According to <ORG>, the stall- holders of PanchKuian Road formed a class separate from the class of allottees who had been allotted shops out of 177 shops. On the finding aforesaid, writ petitions filed on behalf of the appellants were dismissed. However, three months time was granted to them to revert back to their trade zoning restriction and to start the trade for which the shops had been allotted to them in different zones within the marketing complex.

In the counter-affidavit which had been filed on behalf of the <ORG>,M.C. (vide Civil Appeal No. 7503/83) it had been stated that since 1950 onwards stalls had been put up on roads mentioned in the said counter-affidavit including Panchkuian Road and Janpath. In PanchKuian Road and 98 stalls had been put. It has been further stated that a decision was taken that shops be reserved for such stall holders of PanchKuian Road in lieu of their surrendering the stalls, because the lands beneath these stalls were required for use of public convenience. They were occupying such stalls for more than three decades and as such a decision was taken after proper examination by the Delhi Administration along with <ORG> to allot 98 shops to such 98 stall-holders for their rehabilitation.They were offered the shops in the aforesaid marketing complex, which had been reserved for them and shown in the Plan also. The relaxation of the trade zoning restrictions was meant to induce them to move from the Panchkuian Road. For the same object even the licence fee in their case was reduced. Because of the same reason no tenders were invited for the 98 shops and tenders were invited only in respect of 177 shops, which were allotted to the appellants and others on basis of tenders submitted by them. It was pointed out that appellants and other allottees of 177 shops knew very well from the Plan published and the notice inviting tenders that 98 shops had been reserved for stall-holders of Panchkuian Road. In spite of that the appellants and others offered their tenders at different rates higher than reserved rates which were accepted by the <ORG>.M.G. and allotments of shops were made in their favour. In this background, it was not open to them to violate and contravene the trade zoning restrictions to which each one of them had specifically agreed.

The learned counsel appearing in different appeals took the same stand before this Court that there was no justification on the part of the <ORG> to make allotments of the different shops in the same marketing complex not only on different rates of licensing fee, but even with different trade zoning restrictions which per se was arbitrary as equals had been treated as unequals, as such violative of Article 14 of the Constitution. According to the appellants, the Panchkuian Road stall-holders were in no way different from the appellants so far their claim for allotment of the shops in the said marketing complex was concerned. They should also have been subjected to the same trade zoning restrictions as are specified in the Annexure 'A' to the terms and conditions of allotment and should not have been allowed to carry on trades of their choice in the shops allotted to them. Similarly, there could not be any conceivable justification for charging from them the licence fee at a lower rate than what has been charged from the appellants and others similarly situated.

It appears the Panchkuian Road stall-holders wererunning the stalls on the lands for more than threedecades which were later required for widening of the road and a question arose before the <ORG> as to how to offer them some attractive proposal to rehabilitate them so that they can move from Panchkuian Road. This object was achieved after proper negotiation<ORG> discussion and decision having been taken in consultation with <ORG> and <ORG> to offer shops to them in the new marketing complex at a concessional licence fee and without trade zoning restrictions subject to the condition that they shall carry any of the trades specified in Annexure 'A' to the terms and conditions of offer. According to us<ORG> the allotment of 98 shops to the stall- holders of Panchkuian Road was made treating them as a separate class<ORG> on a reasonable and rational basis. The land occupied by their stalls were required by the <ORG><ORG><ORG> for a public purpose i.e. for the widening of the road. It was otherwise not easy for the <ORG> to throw them out of Panchkuian Road and after proper deliberation a decision appears to have been taken to induce them to move out of Panchkuian Road to Palika Bazar. This object was achieved by lowering the licence fee and making relaxation in the trade zoning restrictions to some extent which cannot be held in any manner as irrational<ORG> partial or biased so as to be held to unreasonable.

Apart from that even if it is assumed that concession was shown to such stall-holders by the <ORG> the appellants cannot make grievance in respect of discrimination under Article 14 of the Constitution. Having agreed to the terms of allotment they cannot legitimately claim that they should also be treated in the same manner. There appears to be some confusion in respect of the scope of Article 14 of the Constitution which guarantees equality before law to all citizens. This guarantee of equality before law is a positive concept and it cannot be enforced by a citizen or court in a negative manner. To put it in other words, if an illegality or regularity has been committed in favour of any individual or a group of individuals, the others cannot invoke the jurisdiction of <ORG> or of this Court, that the same irregularity or illegality be committed by the <ORG> an authority which can be held to be a <ORG> within the meaning of Article 12 of the Constitution, so far such petitioners are concerned, on the reasoning that they have been denied the benefits which have been extended to others although in an irregular or illegal manner. Such petitioners can question the validity of orders which are said to have been passed in favour of persons who were not entitled to the same, but they cannot claim orders which are not sanctioned by law in their favour on principle of equality before law. Neither Article 14 of the Constitution conceives within the equality clause this concept nor Article 226 empowers <ORG> to enforce such claim of equality before law. If such claims are enforced, it shall amount to directing to continue and perpetuate an illegal procedure or an illegal order for extending similar benefits to others. Before a claim based on equality clause is upheld, it must be established by the petitioner that his claim being just and legal, has been denied to him, while it has been extended to others and in this process there has been a discrimination. None of the 98 stall-holders were impleaded as parties to the writ petitions. The appellants questioned the validity of the allotment of 98 shops on concessional rates, without trade zoning restrictions in favour of the stall-holders of Panchkuian Road, but they were primarily interested that same concessions in respect of licence fee and relaxation in trade zoning restrictions, be also extended to them. Any such claim on their behalf cannot be entertained on the basis of concept of equality before law as enshrined in Article 14 of the Constitution.

<ORG> of <ORG> rightly dismissed the writ petitions filed on behalf of the appellants on the finding that there was proper justification on the part of the <ORG> to make allotments of the shops which had been reserved for stall-holders of the PanchKuian Road.

<ORG> may mentioned that the appellants in some of the appeals had filed writ rot petitions before <ORG> making a grievance that a<ORG>hough they were making payments at the agreed rate in terms of the acceptance of their tenders and were also observing the Drade zoning restrictions, still they were suffering because of the other shopkeepers who had violated the trade zoning restrictions, A direction was sought for on the <ORG> that they should not allow the change of the trade, to those allottees who were violating the scheme of trade zoning restrictions. Those writ petitions were allowed by the learned single Judge along with others. But <ORG> dismissed even such writ petitions.

<ORG> appears that writ petitions were filed as early as in the year 1980 which were allowed by the learned single Judge on 29th May 1981. The appeal filed on behalf of the <ORG> the said judgment was allowed on 18th March 1983. This <ORG> while granting leave passed orders regarding maintenance of status-quo in respect of the trades being carried on by the appellants. Interim directions were given also in respect of payment of licence fee at the reserved rates instead of agreed rates in many ,appeals. Because of these interim orders passed by <ORG> as well as this <ORG> in most of the cases only payment of the licence fee has been made to the <ORG> at the reserved rates and not at the agreed rates. After the dismissal of the appeals and the writ petition, the appellants and the writ petitioner are liable to pay the balance amount of arrears which runs into lakhs of Rupees in different appeals. As such at the close of the hearing of the appeals an a<ORG>ernative submission, was made on behalf of the appellants that in the event of dismissal of appeals and writ petition, this <ORG> should direct payment of the arrears by reasonable instalments. On behalf of the <ORG> claim was made for interest over such arrears contending that <ORG> should not suffer because of the interim orders passed by <ORG> as well as by this <ORG>.

In view of the legal maxim "actus curiae neminem gravabit" which means that an act of court shall prejudice no man, N.D.M.C. is justified in making a claim for interest. Over the arrears which have remained unpaid for more than 12 years because of the interim orders passed by this Court. This aspect of the matter has been examined by this Court in the case of <CITATION> , . Although in the interim orders it has not been stated that in event of dismissal of the appeals and the writ petition, the appellants and the writ petitioner shall be liable to pay interest over the arrears of the licence fee, but that shall not debar this Court from passing any order in respect of payment of reasonable interest over the said amount.

Taking all facts and circumstances into consideration including the lapse of more than 12 years since the appeals were filed before this Court and the equities arising in favour of one party or the other, we direct:

1. The allottees will pay licence fee at the agreed rate subject to revisions as per the terms of the licence deed.

2. If the agreed rate has not been paid either due to interim order passed by any <ORG> or otherwise and payment has been made on the basis of reserved rate, then for the period when the interim order was operative, so far the allottees who have deviated from trade zone shall be liable to pay simple interest over the arrears for that period at the rate of 12 per cent per annum and at the rate of 15 per cent simple interest for the remaining period.

3. Allottees who have not deviated from the trade zone and have paid at the agreed rate throughout except the period when interim orders of the <ORG> were operative, shall pay the balance amount of the arrears of the agreed rate with simple interest at the rate of 6 per cent.

4. Arrears amounting upto Rs.2.25 lacs shall be paid in four equal quarterly instalments on or before 31st December, 1996. But if the arrear is in excess of Rs.2.25 lacs and upto Rs.5 lacs, then it shall be paid in six equal quarterly instalments on or before 30th June, 1997. In case, where the arrears is above Rs.5 lacs, it shall be paid in eight equal quarterly instalments on or before 31st December, 1997. The arrears shall be calculated in terms of the above order for period upto 31st December 1995 by the Respondent - N.D.M.C. against each allottee and notice will be served on such allottees within six weeks from today.

5. From the month of January 1996 the licence fee as revised in terms of the licence deed shall be paid.

6. The allottees who have deviated from the trade zoning restrictions, shall revert back to the trade zone, allotted to them on or before 31st December, 1996.

7. No damage shall be paid as claimed on behalf of the Respondent - N.D.M.C. on account of cancellation of licence.

8. All notices of cancellation shall be deemed to have been withdrawn after the directions aforesaid are complied with by the allottees or the allottee concerned. But in the event of failure to comply with any of the aforesaid directions it shall be open to the <ORG> to proceed with the cancellation of the licence of allottee concerned.

9. This order shall not cover the dispute in respect of the resolution of the Respondent - N.D.M.C. dated 12.9.1991 revising licence fee from 10 per cent to 30 per cent on the expiry of the licence and payment of interest over the arrears from 15 per cent to 24 per cent.

10. In respect of the grievance made on behalf of the allottees that sales are being made from the show windows. Mr. <NAME>,appearing for <ORG> out that before the learned single judge, <ORG> a clear stand in their affidavit filed that no persons shall be allowed to sell any article through the show window, it shall be used only for display purpose and <ORG> shall not implement the resolution No.33 dated 15.1.1985 allowing the persons displaying their articles in the show windows to sell the articles.

Accordingly the appeals and the writ petition are dismissed subject to the directions given above. In the facts and circumstances of the case, there shall be no orders as to costs.


<NAME> N.K. Sen, J.

1. This Rule was issued upon the District Magistrate, Burdwan, and the opposite party to show cause why an order passed under Section 145 of the Code of Criminal Procedure declaring the first party to be in possession of certain plot of land should not be set aside.

2. It appears that the disputed land belonged to the deity Sree Madan Gopal Jiu of which the petitioners (second party in the proceedings) and the father of the first party (opposite party in this rule) are the shebaits. The opposite party claimed to be in possession of the disputed land as tenant under the deity represented by the shebaits while the petitioners contended that the disputed lands were the khas lands of the said deity and were in actual possession of the bargadars of the deity.

3. A point was taken that the petitioners did not claim actual possession of all the disputed lands which they stated were in the actual possession of the bargadars of the deity and hence on the admission of the petitioners the learned Magistrate had no jurisdiction to initiate any proceedings under Section 145 of the Code of Criminal Procedure. In the proceedings the second party disputed the above point and asserted that they claimed possession in respect of the disputed lands as shebaits of the deity.

4. The proceedings in this case were drawn up on 6-6-1956, and the parties filed their affidavits. In substance, the second party petitioners denied that the opposite party had ever been in possession of the lands in dispute. The learned Magistrate on a consideration of the case of both sides was unable to decide which side was in possession and therefore sent the case to <ORG> under the provisions of Section 146(1) of the Code of Criminal Procedure to decide the question whether any or which of the parties was in possession of the subject of the dispute at the date of the order. Thereafter the learned <NAME> under the provisions of Sub-section 1(a) of Section 146 considered the evidence and after hearing the parties came to the conclusion that the petitioners were in possession of plots Nos. 3773 and 3786 of khatian No. 981 of Mouza Keranda and that none of the parties was in possession of plots Nos. 4923 and 4980 of Khatian No. 619 of Mouza Khargram and that the remaining, plots were in possession of the first party. Thereafter the learned Magistrate proceeded to dispose of the proceedings under Section 145 in conformity with the decision of the civil court.

5. A point has been taken there has been no finding by the trial court as to who was in possession of the land in dispute on the date of the proceeding. A reference to Sub-section (4) of Section 145 of the Code will show that "the Magistrate shall............ .and i possible decide the question whether any and which of the parties was at the date of the order before mentioned in such possession of the said subject. Now, if the Magistrate was unable to decide as to which of them was then in such possession, the Magistrate was under the provisions of Section 146 of the Code of Criminal Procedure to forward the records of the proceedings to a civil court of competent jurisdiction to decide the question whether any and which of the parties was in possession of the subject of dispute at the date of the order as explained in Sub-section (4) of Section 145 of the Code of Criminal Procedure. This the Magistrate has done in the present case.

6. It is next urged that inasmuch as some shebaits of the deity and some bargadars who were actually cultivating the land had not been made parties, an order under Section 145 of the Code of Criminal Procedure will not be binding upon those who have not been made parties to the proceeding, I have been referred to two unreported decisions of this Court. The case of Tarapada Nag Choudhury Cri. Revn. No. 193 of 1957 (Cal) decided by <NAME> is on the point that if a person entitled to a disputed land be not impleaded, an order under Section 145 of the Code of Criminal Procedure will not bind him at all. In the case of <NAME>. Revn. No. 275 of 1957 (Cal) <NAME> remanded the case to enable the lessees who applied for being made parties for being impleaded. Another case cited was the case of <CITATION> , . of the report (CWN): (at p. 780 of AIR) their Lordships held that "an order under Section 145 of the Code of Criminal Procedure is not bad merely because all interested persons are not made parties. So, on this ground there is no reason to set aside the final order of the learned Magistrate. The order is valid so far as the parties actually before the learned Magistrate are concerned."

7. I respectfully agree with their Lordships and I hold that if the parties who are now alleged to be necessary parties are not impleaded, they will not be bound by this order and nothing more.

8. Two other points have been taken and may be disposed of together. It is argued that the learned Magistrate had not recorded an independent finding nor did he appreciate the evidence properly.

9. Appreciation of evidence is a question of fact and I will not interfere with a finding of fact in a case under Section 145 of the Code of Criminal Procedure. See in this connection the case of <NAME> v. <NAME> 93 Ind Cas 695 (Lah) and the case of <CITATION> . So far as the question of the Magistrate not having come to an independent finding of his own is concerned, the amended Procedure Code indeed stands in the way of accepting this argument. Sub-section (1) (B) of Section 146 enjoins upon the trying Magistrate to dispose of the proceeding under Section 145 in conformity with the decision of <ORG>. So long, therefore, the finding of the Magistrate is in conformity with the decision of <ORG>, an order under Section 145 of the Code of Criminal Procedure on the question of possession cannot be challenged. It seems clear that once a matter is referred to the civil court and such court decides the question of possession so referred to it, the referring Magistrate has no option other than to dispose of the proceeding in conformity with the decision of the civil court. It, therefore, follows that the trying Magistrate was not entitled to come to any other finding of his own.

10. The second party petitioner have made another grievance before this Court that the learned Magistrate should not have passed the order that he did inasmuch as the first party did not examine some other witnesses and did not produce home of the documents at the time of the attestation proceedings which, according to the petitioners, would have shown that the opposite party was not in possession. It was further contended that under the provisions of Sub-section (1) (B) of Section 146 it was the duty of the civil court to have concluded the enquiry within a period of three months which not being done the order of the civil court was of no avail.

11. So far as the period of three months is concerned, I do not think if an enquiry is not concluded within that period, it cannot at all vitiate the decision of the court. In this connection Mr. <NAME> who appeared in this case for the opposite party cited before the case of <CITATION> , decided by <NAME> and <NAME>.

In that case the requirement of Rule 7(3) of the Rules framed under the West Bengal Bargadars Act came up for consideration and it was held that "the rule that 'every application before the <ORG> shall be disposed of within three weeks from the filing of the application' was rot a mandatory provision but a directory provision and a decision may he given within a reasonable time. To invalidate a decision merely because it was given at a time beyond three months would work serious general inconvenience or injustice to persons who have no control over the <ORG> and hence the rule is to be taken only as a rule of guidance." The language of Sub-section (1)(B) of Section 140 of the Code of Criminal Procedure is that "the civil court shall, as far as practicable, within a period of three months from the date of appearance of the parties before it conclude the enquiry". The significant words are "as far as practicable". This argument, therefore, is of no substance.

12. It will be next section a reference to Sub-section (1)(D) of Section 140 of the Code of Criminal Procedure trust there was to be no appeal from the finding of the civil court given on reference under this section nor shall any review or revision of any such finding be allowed. In this view of the matter also the finding of the civil court must be held to be i conclusive.

13. It therefore follows that the judgment of the learned Magistrate in the proceedings being in conformity with the findings of the civil court, there is no merit in the application made before this Court. As I have said, the decision of the civil court on a reference under Section 146 of the Criminal Procedure Code cannot even be challenged, Sub-section (1) (D) of Section 146 of the Code of Criminal Procedure being a bar. The only remedy left would be to go to a court of competent jurisdiction under Sub-section (1)(E) of Section 146 of the Code of Criminal Procedure. The petitioners, if they feel aggrieved, must go to the civil court or take such other steps as they may be advised.

14. The Rule is therefore discharged. Let the records be sent down as early as possible.