JUDGMENT <NAME>, C.J.

1. This reference has been made by the Commissioner of Income-tax, Madras, in accordance with a direction given to' him by this Court under Section 66(3) of the Indian Income-tax Act, 1922.

2. The reference involves the interpretation of Section 25(3) of the Act.

3. The petitioner and his brothers were members of an undivided Hindu family, and when joint the family carried on a money-lending business in India and in the Federated Malay Slates. The business was of long standing and had been assessed to income-tax under the Act of 1918. On the 2nd June, 1938, the joint status was severed. Thereafter the members of the family continued the business in the same places as partners. The financial year with which this reference is concerned commenced on the 13th April, 1938. On the 22nd December, 1939, the petitioner claimed that the income of the family from the 13th April, 1938, to the 2nd June, 1938, was not liable to be taxed by reason of the provisions of Sub-sections (3) and (4) of Section 25 . The Income-tax Officer accepted the petitioner's statement that there had been a partition, but he rejected the contention that the family was not liable to pay the tax on the profits earned between the 13th April and the and June, 1938. The petitioner appealed to the Appellate Assistant Commissioner who agreed with the Income-tax Officer. The petitioner then asked the Commissioner to make a reference to the <ORG> under Section 6 .6.(2) and as the Commissioner refused to do so, the petitioner moved the <ORG> for an ' order under Sub-section (3) of that section directing the Commissioner to make a reference. The <ORG> directed the Commissioner to refer for decision the following question:

Whether the income of the family from the 13th April, 1938, to the and June, 1938, is not liable to be taxed by virtue of Section 25(3) of the Income-tax Act? " In his statement of the case the Commissioner has suggested that the application of the petitioner made to the Income-tax Officer on the 22nd December, 1939, was out of time, and it is necessary to decide this question as well, because naturally the Court is not prepared to embark upon an academic discussion of the question referred if the petitioner has delayed beyond the period allowed by law in raising his objection. To decide the question of limitation .regard must be had .to the provisions of Sub-section (5) as well as the provisions of Sub-section (3) of Section 25 . Sub-section (3) reads as follows:

Where any business, profession or vocation on which tax was at any time charged under the provisions of the Indian Income-tax Act , 1918, is discontinued, then, unless there has been a succession by virtue of which the provisions of Sub-section (4) have been rendered applicable, no tax shall be payable in respect of the income, profits and gains of the period between the end of the previous year and the date of such discontinuance, and the assessee may further claim that the income, profits and gains of the previous year shall be deemed to have been the income, profits and gains of the said period. Where any such claim is made an assessment shall be made on the basis of the income, profits and gains of the said period, and if an amount of tax has already been paid in respect of the income, profits and gains of the previous year exceeding the amount payable on the basis of such ' assessment, a refund shall be given of the difference.

4. Sub-section (5) states:

No claim to the relief afforded under Sub-section (3) or Sub-section (4) shall be entertained unless it is made before the expiry of one year from the date on which the business, profession or vocation was discontinued or the succession took place, as the case may be.

5. The Commissioner says that by his application of the 22nd December, 1939, the petitioner was claiming "relief" under Sub-section (3) and as the application was made more than one year from the date on which the family ceased doing business? as a family the sands had rim out. On the other hand, the petitioner says that the word " relief" in Sub-section (5) has, so far as Sub-section (3) is concerned, reference only to the words " and the assessee may further claim that the income, profits and gains of the previous year shall be deemed to have been the income, profits and gains of the said period " which are to be found therein. He points to the fact that Sub-section (3) states emphatically that a business on which a tax was charged under the provisions of the Act of 1918 shall not be chargeable in respect of the income of the period between the end of the previous. year and. The date of discontinuance and he says that "relief" cannot be contemplated in this connection because it must be presumed that the Income-tax Officer will Carry out his duties in accordance with the provisions of the Act. Besides being exempt from tax during this peviod the assessee is allowed to claim a refund if an amount of tax has already been paid in respect of the income of the previous year exceeding the amount payable on the basis of the income received in the year of discontinuance. He is entitled to recover the whole of the difference. It is said that it is here that a provision for relief is necessary and Sub-section (5.) has been inserted in order to impose a time limit.

6. In my judgment the petitioner's contentions are sound. The Legislatuue could only contemplate the Income-tax Officer doing his duty and therefore would not consider it necessary to provide for " relief'" against an illegal order. The provisions to be found in the Act with regard to appeal and reference are there for that purpose. Under the Act of 1918 an assessee paid the tax for a particular year on the income actually earned in that year. The Act of 1922 effected a great change. An assessee now pays the tax in the year of assessment on the income earned in the previous year. Sub-section (3) of Section 25 of the present Act is designed to prevent the injustice of double taxation and in order to do this it is necessary to give the assessee a refund should his income in the year of discontinuance be less than his income for the previous year. It seems to me that it is only in this connection that the word "relief" is used in Sub-section (5).

7. Turning now to the main question, in <CITATION> (1937) 2 M.L.J. 43 : L.R. 64 I.A. 102 at 104 : I.L.R. (1937) Nag. 191 (P.C.), this Court held that where a partner carried on the business of the partnership after its dissolution he succeeds to the business within the meaning of Section 26(2) and can be assessed to tax in respect of the profits of the business for the previous year. This decision applies in the present case and the partnership must be deemed to have succeeded to the business of the family. This is not disputed, but the petitioner says that Sub-section (3) of Section 25 stands alone and that the word "discontinued" should not be read as "cessation" of business. Here reliance is placed on the decision of <ORG> in Commissioner of Income-tax, Bombay v. <NAME>1942) Bom. 216, where this argument was accepted. <ORG> considered that the word "discontinued" by itself, and if not controlled by the context, would cover a discontinuance by disposal.

8. I find myself unable to share this opinion. In the first place, the same word is used in Section 44 which says that where a business, profession or vocation carried on by a firm or association of persons has been discontinued, or where an association of persons is dissolved, every person who was at the time of discontinuance or dis-solution a partner or a member shall, in respect of the income, profits and gains of the firm or association, be jointly and severally liable to assessment under Chapter IV and for the amount of tax payable. This section clearly deals with a case of cessation of business. The word "discontinued" in Sub-section (3) of Section 25 cannot be given a different meaning from the meaning it has in Section 44 unless the context in Sub-section (3) demands it, and I can find nothing in subsection (3) which would warrant the <ORG> departing from this well accepted rule of construction. On the other hand, I consider that the words " then, unless there, has been a succession by virtue of which the provisions of Sub-section (4) have been rendered applicable" which follow the word "discontinued" in Section 25(3) give strong indication that the word "discontinued" there means "cessation". As already pointed out, Sub-section (3) has been inserted merely for the purpose of preventing double taxation.

9. Full support for this opinion is to be found in the judgment of <NAME>, J., in <NAME> v. <ORG> (1914) 3 K.B. 686, where it was held that if the owner of a business sells it to a company, the business is not discontinued within the meaning of Section 24(3) of the Finance Act, 1907, which provides. that where a profession, trade, or vocation is discontinued, a person charged or chargeable with income-tax in respect of that profession, trade or vocation shall be chargeable on the actual amount of the profits or gains arising from the profession, trade or vocation in that year. It was there argued that the appellant's trade having been discontinued in the year, he was only Chargeable on the actual amount made in that year, and . there was no power to go back to the three years' average. In dealing with this contention <NAME>, J., said:

The answer to that appears to me to be very simple. The trade was not discontinued in the year. The trade was sold to a company and continued during the whole year.

10. In the present case the business was continued by the same persons, not as members of a joint family, but as partners.

11. For these reasons, I hold that the income of the family from the 13th April, 1938, to the 2nd June, 1938, is liable to be taxed by virtue of Section 25(3) , and I answer the reference accordingly. The Commissioner is entitled to his costs, which I would fix at Rs. 250.

<NAME>, J.

12. I agree that the reference should be answered as suggested in the judgment just delivered by my Lord. In view, however, of the different opinion expressed by <ORG> in <NAME>, In re,1 which was strongly pressed upon us by the assessee's learned counsel, I wish to add a few observations.

13. The question is whether Section 25(3) of the Indian Income-tax Act, 1922, as amended by the Indian Income-tax (Amendment) Act , 1939, providing for certain reliefs in cases of discontinued business, etc., charged to tax under the Indian Income-tax Act , 1918, applies when a Hindu undivided family carrying on business becomes disrupted and the members continue the business thereafter as partners; in other words, does the discontinuance which the provision has in view refer only to the closing down or extinguishment of a business, etc., or cover succession to a business which is continuing. The question of discontinuance or succession was of special importance in England in view of the basis of taxation being different in either case vide Rules 8(2) and 11 of the Rules applicable to Cases I and II, Schedule D of the Income-tax Act, 1918 and the terms have acquired well-recognised meanings in income-tax usage. (See <NAME> v. <ORG> (1942) Bom. 216 and <NAME> and others v. <NAME>. They have accordingly been adopted in the Indian Income-tax Act , 1922, as denoting two different situations for which the Act makes separate provisions in Sections 25 and 26 , and before the Amendment Act of 1939 was passed the Courts in this country, including <ORG> . Court had uniformly held that "discontinuance" for the purpose of Section 25 did not cover mere change of ownership. ( <CITATION> . (1925) I.L.R. 50 Bom. 87, <NAME> v. Commissioner of Income-tax, Punjab 6 I.T.R. 290, <CITATION> 6 I.T.R. 290. But it is argued--and the argument was accepted by <ORG> Court in the case already referred to--that the amendments introduced in Sections 25 and 26 by the Act of, 1939 now compel a different interpretation of the term in Section 25(3) . It seems to me, however, with all respect, that the well-marked distinction for purposes of assessment between discontinuance and succession has not been obliterated by the recent amendments and that it would lead to considerable confusion in working the Act if the provisions specifically relating to the one were understood as applicable to the other. For instance, Section 25(1) provides for an accelerated assessment when a business, etc., which was not at any time charged under the Act of 1918 is "discontinued ", evidently as a safeguard against risk to revenue which the delay in assessing a person who is no longer in business involves as such person might disappear or become insolvent before the normal time for assessment arrives. Now if "discontinuance" is to be understood as covering change of ownership--the word must obviously have the same meaning in both Sub-section (1) and subsection (3)--the special procedure indicated in Section 25(1) would become applicable to cases of succession, for which, however, specific provision is made in sec-tion 26(2) for an apportioned assessment in the normal course, i.e., in the year following the succession, with different safeguards for the protection of revenue in the contingencies aforementioned. This would result in an incoherent scheme of assessment.

14. Turning now to the amendments introduced by the Act of 1939 on which the assessee's learned counsel relies in support of his contention, it is true that Section 26(2) has been amended so as to provide, in the case of a succession in business, etc., for the assessment of the predecessor and the successor each in respect of his actual share of the profits of the previous year, instead of, as before, assessing the successor in respect of the profits earned even by the predecessor. The predecessor having thus been made liable for tax in respect of his share of profits in the year of succession, it is only fair that he should be relieved from this burden, in cases where his business, etc., had been charged under the Act of 1918, for precisely the same reason as in the case of discontinuance of a business, etc.,so charged, namely, to redress the hard-ship involved in the assessment of the profits of the year 1921-22, twice over, once in that year as the income thereof on adjustment under the Act of 1918, and once in the next year as the income of the previous year under the Act of 1922. Hence the enactment of the new Sub-section (4) of Section 25 extending the benefit conferred under Section 25(3) to cases of succession to a business, profession, etc., charged under the Act of 1918. This provision, however, would make it possible for the relief in respect of the double assessment referred to above being claimed more than once if the change of ownership occurred after 1st April, 1939, once by the predecessor at the time of succession and once by the successor when the latter closes down the business in any subsequent year. This had to be provided against, as such relief has to be granted only once and that to the predecessor who suffered the double assessment, and Section 25(3) was accordingly amended so as to exclude the successor from its benefits when he discontinues the business subsequently as, so far as he is concerned, he will have suffered tax only for the exact number of years for which he has carried on the business. Hence the insertion of the words " then unless there has been a succession by virtue of which the provisions of subsection (4) have been rendered applicable " after the word "discontinued" in Sub-section (3). The learned Judges in P.E. Poison, In re1, apparently thought that this exception applied only where succession and subsequent discontinuance both occurred in the same year as they referred to it as contemplating a case " very unlikely to occur but at the same time possible." But the exception clearly covers a wider ground and operates to exclude the successor from the benefits of the subsection whenever he may discontinue the business.

15. Such being the objects and reasons of the relevant amendments introduced in 1939, I find it difficult, with all respect, to see why they should be regarded as having the effect of widening the scope of the term "discontinuance" in Section 25(3) so as to cover cases of succession. It is true that after the amendments the predecessor in the case of a change of ownership is put on the same footing as if he had closed down his business on the date of succession for purposes of relief in respect of the double assessment of the profits of 1921-22. But this is done by enacting the new Sub-section (4) of Section 25 which provides such reliefs subject to the condition that the predecessor is one who was carrying on the business, profession, etc., at the commencement of the Amendment Act . To ignore this condition and to bring the case of a succession occurring before the commencement of that Act within the purview of Section 25(3) as covered by the word " discontinued "seems to me opposed alike to sound canons of construction and to the scheme of assessment laid down in the principal Act. It«must be remembered that in England a provision for apportionment of the tax burden between the predecessor and the successor in cases of succession (rule 9 of the rules applicable to cases I and II, Schedule D, of the Income-tax Act , 1918, corresponding to Section 2 , Taxes Management Act, 1800) has been in existence side by side with a provision for relief in cases of discontinuance Rule 8(2) of the same rules corresponding to Section 25(3) , Finance Act , 1907, but this has not,been considered to warrant the wider interpretation of the word 'discontinued' favoured by <ORG> (see <NAME> v. <ORG> I.L.R. (1942) Bom. 216 and <NAME> and others v. <NAME> (1914) 3 K.B. 686, already referred to).

16. The question of limitation raised by the Commissioner of Income-tax turns on the proper interpretation of the newly introduced Sub-section (5) of Section 25 which provides:

That no claim to the relief afforded by Sub-section (3) or Sub-section (4) shall be entertained unless it is made before the expiry of one year from the date from which the business, profession or vocation was discontinued or the succession took place as the case may be.

17. It will be seen that Sub-sections (3) and (4) of Section 25 , provide for two concessions in respect of a business, etc., charged under the Act of 1918, namely, (1) an exemption from tax of the income of the period between the end of the previous year and the date of the discontinuance or succession and (2) an adjustment, at the option of the assessee, of the tax levied on the income of the previous year with reference to the profits of the said period and a refund of the excess tax if any, already collected. In the present case the petitioner sought only concession (1). To obtain that concession, the assessee does not have to call upon the Income-tax Officer to do anything. The Act exempts the income of the period in question and the Officer has merely to take note of the exemption and abstain from assessing such income; while for concession (2) the assessee has to make a "claim" before the Officer, as it involves the Officer doing something, namely, an assessment of the income of the said period and adjustment of the tax paid on the income of the previous year with reference to the income so assessed and a refund of the excess tax, if any, already paid. If the Income-tax Officer has to take action in this manner for granting this relief, it stands to reason that a time limit should be imposed for a claim to be made in that behalf, as the task of making a proper assessment for the relevant period might become increasingly difficult with the lapse of time. But what reason could there be for imposing a time limit for asking the Income-tax authorities to abstain from doing a thing which the Act directs them not to do? A time limit for this purpose would, indeed, mean that the Income-tax authorities would be free to disregard the plain duty imposed on them by the Act, leaving the assessee without a remedy, if only they assess and levy the tax on the exempted profits, either under Section 23 or Section 34 , after the expiry of the time limited. It seems to me that a construction of Section 25(5) which leads to such anomalous results ought not to be readily accepted. It is said that the word "relief" is wide enough to cover both the benefits afforded under Sub-sections (3) and (4). It may be so in ordinary usage uncontrolled by context, though the assessee may well retort that not much relief is afforded to him when the <ORG>, having already taxed him for as many years as he carried on the business, merely abstains from taxing once more. But in the context of Section 25 I am of opinion that it would be a reasonable construction of the words "claim to the relief afforded under Sub-section (3) or Sub-section (4)" to hold that they refer only to the relief by way of adjustment of the tax levied on the income of the previous year and the consequential refund, if any, for which the assessee has to make a "claim" under Sub-sections (3) and (4). The plea of limitation cannot therefore prevail. I concur also in the order for costs.


PETITIONER: <NAME> Vs. RESPONDENT: THE CO-OPERATIVE MARKETING SOCIETY LTD. DATE OF JUDGMENT: 28/08/1964 BENCH: AYYANGAR, N. RAJAGOPALA BENCH: AYYANGAR, N. RAJAGOPALA GAJENDRAGADKAR, P.B. (CJ) SHAH, J.C. CITATION: 1965 AIR 621 1965 SCR (1) 186 CITATOR INFO : R 1991 SC2254 (5,7) ACT: <ORG>-Moneys earned by alleged illegal transactions--Retention by members of management--Claim-If "a dispute touching the business of the society"--Whether claim could be made-Proceedings whether under s. 51 or s. 49-Madras <ORG> Act, 1932, (Mad. 6 of 1932) ss. 49, 51. HEADNOTE: The appellant was the President of <ORG> constituted mainly for the purpose of enabling its members to obtain credit facilities and to arrange for the sale of agricultural products at reasonable prices. On complaints, an enquiry was instituted into the affairs of the society by the Registrar of <ORG> and as a result, the committee, then in management of the society was, after due notice to show cause and a hearing, superseded by the Registrar. A special officer was appointed to take charge of the affairs of the society and this officer filed a, claim before the Registrar, inter alia, against the appellant. The main item of the claim was commission stated to have been actually earned by the society on the sales effected by it of jaggery belonging to its producer members but which was not credited to the society. It was alleged that while on paper the transactions entered into between the members of the society and the purchasers showed sales at the prices fixed by law, in reality, higher prices were charged. The society was entitled to charge commission on the sales effected through it. As regards this it was stated that commission was earned on the entire price at which gur was sold, and while the amount of commission payable on the basis of controlled prices was credited to the society, the commission earned in respect of the extra price which its members obtained was, it was stated, not brought to the credit of the society in its accounts but appropriated by members of the management. On receipt of the claim, the Registrar appointed, under S. 51(2) of the Madras <ORG> Act, the Deputy Registrar of <ORG> to act as an arbitrator to adjudicate the claim. Thereupon, the appellant filed a petition in <ORG> for the issue of a writ of prohibition under Art. 226 of the Constitution, prohibiting the Deputy Registrar from dealing with the claim which he was directed to try. The Single Judge allowed the petition. On appeal by the respondent <ORG> allowed the appeal and dismissed the writ petition. On appeal by special leave,it was contended by the appellant, that (1) the Registrar should have proceeded under s. 49 and not under s. 51 of the Act, (2) the dispute about the retention of money belonging to the Society by the appellant was not "a dispute touching the business of the society", and (3)the transaction of sale which gave rise to the commission alleged to be improperly retained was illegal and that therefore the society could not, in law, make a claim on the basis of such an illegal transaction. HELD : (i) The case did not fall under s. 49 of the Act. If s. 49 did not apply, subject to other arguments about the illegality of the order of the Registrar, proceedings under s. 51 was not open to objection. [192D]. Besides the factors that the claim was one "against a person in management of the society" and "for the fraudulent retention of money or other 187 property of the society", there was also another condition which had to be satisfied before s. 49(1) could be attracted. The facts giving rise to the charge had to be disclosed in the course of an audit under s. 37 or am enquiry under s. 38 or an inspection under a. 39 or on the winding up of the society. [191 G-H] <NAME> v. The Deputy Registrar of <ORG>, I.L.R. (1957) Mad. 371, referred to. (ii) The claim made before the arbitrator was "a dispute touching the business of society". It could not be disputed that the sale of the produce belonging to the members of the society was part of the business of the society, and then the charging of the commission would equally be the business of the society; and [192 G-H] (iii) No illegality attached to the contract between the appellant and the society; that was perfectly legal. It arose out of his, position as the President of the Society and he was in law, bound to account for the moneys he received on behalf of the society. [193 <CITATION> ,  1 S.C.R. 861, followed. JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 193 of 1962. Appeal by special leave from the judgment and order dated August 18, 1959, of <ORG> in Writ Appeal No. 111 of 1957.

<NAME> and <NAME>, for the appellant. <NAME>, for the respondent No. 1.

<NAME> and <NAME>, for respondent No. 2. The Judgment of the Court was delivered by <NAME> The appellant was the President of <ORG> A <ORG> constituted mainly for the purpose of enabling its members to obtain 'credit facilities and to arrange for the sale of agricultural products at reasonable prices. There were complaints regarding the working of the <ORG> and accordingly an enquiry was instituted into its affairs by the Registrar of <ORG>, Madras at a time when Anakapalli, now in Andhra Pradesh, was in the State of Madras. As a result of the facts disclosed in the inquiry the Committee then in management of the <ORG> was, after due notice to show cause and a hearing, superseded by order of the Registrar dated February 15, 1952, such supersession being authorised by s. 43 of the Madras <ORG> Act (Act 6 of 1932) hereinafter called die Act. A special officer was appointed to take charge of the affairs of the <ORG> and this officer filed a claim before the Registrar, inter alia, against the appellant. 'The amount claimed was Rs. 13,000 and odd and details were given as to how this sum was made up. The main item of the claim was commission stated to have been actually earned by the <ORG> on the sales effected by it of jaggery belonging to its producer-members but which was not credited to the <ORG>. On receipt of this claim the Registrar appointed, under S. 51(2) of the Act, the Deputy Registrar of <ORG>, Visakhapatnam to act as an arbitrator to adjudicate the claim.

Immediately this order was passed the appellant filed a petition in <ORG> Andhra Pradesh for the issue of a writ ,of prohibition under Art. 226 of the Constitution, prohibiting the Deputy Registrar from dealing with the claim which he was directed to try. The learned Single Judge who heard the petition allowed the petition and granted the appellant the relief he sought. '<ORG> took the matter in appeal to <ORG> of <ORG> which allowed the appeal and dismissed the writ petition. Thereafter the appellant moved this Court for special leave (certificate of fitness having been refused by <ORG>) and has preferred the present appeal.

Before adverting to the arguments addressed to us by Mr. <NAME>, learned counsel for the appellant, it is necessary to state a few facts concerning the transactions which have given rise to these proceedings. <ORG> of which the appellant was the President till November, 1951, held a licence, under the Madras General Sales Tax Act for doing business as a Commission Agent and the Society was earning commission on the turnover of the sales effected of the agricultural produce of its members and others. In October, 1950 <ORG> promulgated the Gur Control Order fixing the maximum price at which gur could be sold in different States. The prices fixed varied from State to State. The prices fixed for sale at Anakapalli, then in the State of Madras, were somewhat lower than those

-which had been fixed in other States. This gave occasion for the members of the <ORG> to sell their jaggery at higher prices than fixed because there was demand for jaggery from merchants at prices higher than the controlled price. It was alleged that while on paper the transactions entered into between the members of the <ORG> and the purchasers showed sales at the prices fixed by law, in reality, higher prices were charged. As stated already, the <ORG> was entitled to charge commission on the sales effected through it. As regards this it was stated that commission was earned on the entire price at which the gur was sold, and while the amount of commission payable on the basis of controlled prices was credited to the <ORG>, the commission earned in respect of the extra price which its members obtained, was, it was stated, not brought to the credit of the <ORG> in its accounts but appropriated by members of the management. These were, the allegations and it is on the basis of these allegations that the claim against the appellant and others had been made. Their correctness have yet to be tested in the arbitration proceedings. When this claim was made, inter alia, against the appellant viz., of not bringing into the <ORG>'s accounts moneys due to the <ORG> and which had been earned through sales effected by the <ORG>, he filed, as narrated before, a writ petition and there raised three points challenging the legality of the reference to the Deputy Registrar to enquire into and determine the claim. The first was that the transaction on the basis of which the claim was said to have arisen was illegal being contrary to the Gur Control Order issued by <ORG> under the Essential Supplies Act and such an illegal transaction could not fall within the words "Dispute touching the business of the <ORG>" which alone could be referred to arbitration under s. 51 of the Act; the second was that the reference by the Registrar of the dispute to the arbitration of the Deputy Registrar was illegal as contrary to natural justice, because (a) the Deputy Registrar had conducted an enquiry which had resulted in the supersession of the management of the <ORG> under s. 43 of, the Act, and (b) the Deputy Registrar being a subordinate of the Registrar could not be expected to act fairly in this matter; and lastly, that the Registrar should, in this case, have proceeded under s. 49 of the Act and not under s. 51 , the former being more advantageous to him, in that he could challenge any final order against him by resort to the civil courts, where-as an award under s. 51 was subject to departmental appeals and could not be questioned in a civil court. The learned Single Judge rejected the second and the third points but upheld the first. His reasoning was that the transaction of sale above the controlled price was illegal, that illegality was a bar to a claim for accounting by the <ORG> against its officer or agent, notwithstanding that the contract of agency itself was not illegal. On appeal the learned Judges of <ORG> have, as stated earlier, rejected all the three points urged on behalf of the appellant. Mr. <NAME>, learned counsel for the appellant raised before us three points. The first of them was that the Registrar should have proceeded under s. 49 and not under s. 51 of the Act. Section 49 , which learned counsel says, was attracted to the case runs, to quote only the material provision:

Sup/64----13 "49. (1) Where in the course of an audit under section 37 or an inquiry under section 38 or an inspection under section 3  9 or the winding up of a society, it appears that any person who has taken part in the organization or management of the society or any past or present officer of the society has misappropriated or fraudulently retained any money or other property or been guilty of breach of trust in relation to the society, the Registrar may, of his own motion or on the application of the committee or liquidator or of any creditor or contributory, examine, into the conduct of such person or officer and make an order requiring him to repay or restore the money or property or any part thereof with interest at such rate as the Registrar thinks just or to contribute such sum to the assets of the society by way of compensation in respect of the misappropriation, fraudulent retention or breach of trust as the Registrar thinks just.

(2)The order of the Registrar under sub- section (1) shall be final unless it is set aside by the District Court having jurisdiction over the area in which the headquarters of the society are situated or if the headquarters of the society are situated in the City of Madras, by <ORG>, on application made by the party aggrieved within three months of the date of receipt of the order by him."

and s. 5  1 -the other provision-runs "Arbitration :

Disputes:51. If any dispute touching the business of a registered society (other than a dispute regarding disciplinary action taken by the society or its committee against a paid servant of the society) arises-

(a)

(b)

(c) between the society or its committee and any past committee, any officer, agent or servant, or any past officer, past agent or past servant, or the nominee, heirs or legal representatives of any deceased officer, deceased agent or deceased servant, of the society, or

(d) Explanation.-A claim by a registered society for any debt or demand due to it from a member, past member or the nominee, heir or legal representative of a deceased member, whether such debt or demand be admitted or not, is a dispute touching the business of the society within the meaning of this sub-

section.

(2) The Registrar may, on receipt of such reference,-

(a) decide the dispute himself, or

(b) transfer it for disposal to any person who has been invested by <ORG> with powers in that behalf, or

(c) subject to such rules as may be prescribed, refer it for disposal to an arbitrator or arbitrators."

In this connection learned Counsel relied on a decision of <ORG> in <CITATION> .(1) There it was held that it was only in case where the provisions of s. 49 were inapplicable that recourse could be had to s. 5  1 . In cases where a matter fell both within ss. 49 and 51 , the two provisions were not intended to operate on parallel lines. As s. 51 excluded the jurisdiction of civil courts, it must be strictly construed and for that reason, in cases where s. 49 was applicable, s. 51 would be excluded. Further, it was held s. 51 was of a general nature providing for a variety of matters and was almost exhaustive of the parties between whom as well as the disputes that could arise in cooperative societies. Section 49 on the other hand dealt with special types of disputes which arise in exceptional circumstances, segregated out of the larger group dealt with under s. 51 . When there was thus an overlapping of the terms of both the sections the provisions of S. 49 alone it was held would be applicable. Based on this line of reasoning, the submission of learned counsel was that the claim in the present case was one "against a person in management of the <ORG>" and "for the fraudulent retention of money or other property of the <ORG>" and, therefore, it was completely covered by s. 49 and that in consequence the Registrar had no jurisdiction to direct an enquiry by the Deputy Registrar under s. 51 of the Act. This argument, however, proceeds on ignoring one further essential requisite for the application of s. 49(1) . Besides the two factors to which learned counsel referred and which we have just set out, there is also another condition which has to be satisfied before s' 49(1) could be attracted. The facts giving rise to the charge have to be disclosed in the course of an audit under s. 37 or an enquiry under s. 38 or an inspection under s. 39 or on the winding up of the <ORG>. Mr. <NAME>, while not disputing that unless this condition is also satisfied s. 49 would not be attrac-

(1) I.L.R. [1957] Mad. 371.

ted, however submitted that there was an enquiry under S. 38 preceding the supersession and that in consequence the condition was fulfilled. It is true that there was an enquiry conducted the affairs of the <ORG> under s. 38 , but that by itself is not sufficient. It has further to be proved that the facts alleged in the claim, and on which it is based, were disclosed at that enquiry. This can be proved or established only if the enquiry report which was submitted to the Registrar was placed before the, <ORG> and the facts disclosed therein corresponded with the facts alleged in the statement of claim. Mr. <NAME> admitted that the enquiry report was not before the <ORG> and is not in the record of these proceedings. It is not, therefore, possible to say that there is correspondence between the facts disclosed in that report as a result of the enquiry under s. 38 and those found in the Statement of Claim which was referred by the Registrar to the Deputy Registrar for arbitration under s. 5  1 . The case must, therefore, be held not to fall under s. 49 of the Act. 'Mere can be no doubt that if S. 49 does not apply, subject to the other argument about illegality to which we shall advert, the order of the Registrar proceeding under s. 51 is not open to objection. This first point,, therefore, has to be rejected. The next contention of learned Counsel was that the dispute about the retention of money belonging to the <ORG> by the appellant was not "a dispute touching the business of the <ORG>." The argument was that the expression "business of the society included only what was legally permissible as the legitimate business of the <ORG> and since the business activity out of which the claim against the appellant was alleged to arise involved a contravention of the Gur Control Order it was not "a dispute touching the business of the society. We are unable to agree with this submission. In so far as it impinges on the third point urged by learned counsel based on the maxim Ex turpi causa non oritur actio we shall deal with it in considering that submission. But that apart, we do not see any basis for the argument that the claim made before the arbitrator was not a dispute touching the business of the <ORG>. It could not be disputed that the sale of the produce belonging to the members of the <ORG> was part of the business of the <ORG>, and then the charging of commission for those sales and the crediting of the <ORG>'s accounts with that commission would equally be the business of the <ORG>. Apart, therefore, from the question of illegality raised by reason of the sale being it prices in excess of the controlled price. it is not capable of Argument that the failure on the part of the appellant to credit to the <ORG> the full amount of commission due on the sales effected by him on behalf of the <ORG> and the resistance by him of that demand, would not be a dispute touching the business of the <ORG>. This objection is clearly without substance and must be rejected. The last of the points urged by learned counsel was that the transaction of sale which gave rise to the commission alleged to be improperly retained was illegal and that therefore the <ORG> could not, in law, make a claim on the basis of such an illegal transaction. We see no substance in this point either. No illegality attached to the contract between the appellant and the <ORG>; that was perfectly legal. It arose out of his position as the President of the <ORG> and he was, in law, bound to account for the moneys he received on behalf of the <ORG>. The fact that he entered into illegal transactions would have no bearing on the right of the <ORG> to make the claim for an account of the commission due to the <ORG> which he unjustly withheld. We consider the reasoning of the learned Judges of <ORG> rejecting this argument to be correct. Moreover this matter has been examined by this <ORG> in a decision reported as <CITATION> (1) and in view of this decision learned counsel for the appellant did not himself press this point very seriously.

Before parting with this case, however, there is one matter to which it is necessary to advert. The learned Judges, after allowing the appeal. of the Society, stated in their judgment :

"Lastly, we must observe that this <ORG> is averse to lend its helping hand to persons who want to defraud others. Even assuming that any error of law was committed by <ORG>, that would not be a ground for invoking the extraordinary jurisdiction of this <ORG> under Art. 226 of the Constitution, when it is not in furtherance of justice but tends to encourage dishonesty."

Mr. <NAME> pointed out to us that the correctness of the allegations made in the claim filed before the arbitrator have yet to be decided and there was, therefore, no justification for the learned Judges assuming that the facts stated therein were proved and that the appellant had been guilty of fraud or dishonesty in his conduct of the business of the <ORG>. We see force in this complaint of learned counsel. In the circumstances, we would add that, having regard to the stage at which the matter was before the <ORG>, the learned Judges were in error in making (1) [1960]1 S.C.R. 861.

these observations. It is clear that they did not intend to prejudice the appellant in his defence before the Deputy Registrar in the arbitration proceedings under s. 51 of the Act but it is possible that it might have such an effect. What we have said earlier must suffice to dispel any such apprehension or effect.

The appeal fails and is dismissed with costs, one set. Appeal dismissed


JUDGMENT <NAME>, J.

1. Unless the oral application for an adjournment of the hearing of a previous execution petition, made by the decree-holder on the 7th August 1908 is held to be an application to take a step in aid of execution, the present execution application of 3rd July 1911 is clearly barred by limitation.

2. The question is not free from difficulty. <CITATION> (1900) I.L.R., 27 Calc., 285, there is an obiter dictum showing that an application for adjournment to enable the decree-holder to conduct his petition further with effect is not an application to take a step in aid of execution.

3. A different view was taken in <NAME> v. <NAME> (1909) 14 C.W.N., 486, where the point directly arose.

4. The learned vakil for the judgment-debtors (appellants before us) sought to distinguish <NAME> v. <NAME> (1909) 14 C.W.N., 486 from the present case on two grounds:

(a) that the application for adjournment relied on in <NAME> v. <NAME> (1909) 14 C.W.N., 486 was in writing and not oral;

(b) that the application in that case was an application for an adjournment to enable the decree-holder to produce an affidavit as evidence to carry on those execution proceedings further, whereas it was not so in the present cast).

5. I think that neither of these contentions is sound. There is nothing in Article 179 of the Limitation Act which requires the application to take some step in aid of execution to be in writing. <NAME> v. <NAME> (1880) I.L.R., 3 All., 39 and <NAME> v. <NAME> (1891) I.L.R., 15 Bom., 405 at p. 407 are direct authorities to the contrary and I am prepared to follow them.

6. Then as regards the other distinction sought to be made, I am unable to see that the application for an adjournment to enable the decree-holder to produce affidavit-evidence in aid of further proceedings [which was the application in <NAME> v. <NAME> (1909) 11 C.W.N., 486], stands on a better footing than an application for an adjournment to enable the decree-holder to produce an encumbrance certificate in respect of the attached property in aid of further proceedings in execution.

7. Then reliance is placed by the appellant's vakil on the reason given in the obiter dictum in <CITATION> (1900) I.L.R., 27 Calc. 285. That reason is that an application for adjournment is in retardation of the execution proceedings and not in aid of the execution proceedings. I think that there is a fallacy in this reasoning. When an application for adjournment is made by the judgment-debtor, it is almost invariably to retard the execution proceedings. As regards an application by the decree-holder it may be one of three things:

(a) It may be to get an order in aid or

(b) it may be to get an order in retardation or

(c) it may be to get an order which is neither.

8. An application by the decree-holder to give time to the judgment-debtor merely as a matter of grace is a step in retardation. An application for an adjournment to enable the decree-holder to produce records or evidence necessary to effectively conduct the execution proceedings further will be an application to get an order in aid. <NAME> v. <NAME> (1912) 14 Bom. L.R., 1204; <CITATION> (1912) I.L.R., 36 Bom., 638; <CITATION> (1907) I.L.R., 29 All., 301 at p. 302 and <CITATION> (1882) I.L.R., 5 Mad., 141.

9. An application by the decree-holder to draw money deposited in <ORG> or to obtain copies of sale lists (without anything to indicate that they were necessary to aid further execution) will be application neither in aid nor in retardation.

10. In the present case, I think that the application for an adjournment was for an order in aid.

11. I think that the <ORG> is a little harsh on decree-holders in fixing the date of applying for execution as one of the starting points for limitation for calculating the 'three years' period for the next subsequent application in execution instead of the date on which the proceedings in the previous application for execution terminated, and I should be glad if the Limitation Act is amended so as to fix the latter date. But the harshness is mitigated to some extent by allowing the date of applying to take a step in aid to be also a starting point and I think that if even an oral application is really for an order which will be a step in aid (and not merely for an order which will be indifferent or retarding) a liberal interpretation should be put on the Article 179 so as to enable a decree-holder to obtain the fruits of his decree.

12. In the result I would dismiss the appeal with costs.

Spencer, J.

13. I concur.