PETITIONER: <NAME> Vs. RESPONDENT: THE STATE. DATE OF JUDGMENT: 01/06/1951 BENCH: <NAME>, VIVIAN BENCH: <NAME>, VIVIAN FAZAL ALI, SAIYID SASTRI, <NAME>, SUDHI RANJAN CITATION: 1951 AIR 441 1951 SCR 729 CITATOR INFO : D 1952 SC 214 (19,24) F 1953 SC 76 (8,9) D 1954 SC 692 (2) RF 1956 SC 536 (8) R 1957 SC 740 (14) D 1968 SC1313 (5) RF 1979 SC1791 (19) R 1980 SC 628 (10,11) ACT: Criminal Procedure Code (V of 1898), ss. 173 (1), 190 (1)(b), 340 (1), 342, 288-- Evidence Act (I of 1872), s. 145- -Filing of second challan--Whether vitiates first report--Examination of accused--Importance of--<ORG>ments made in Committal Court--When admissible. HEADNOTE: Where the report made by a police officer to the Magis- trate complies with the requirements of s. 173 (1) of the Criminal Procedure Code the Magistrate can take cognisance of the case 730 under s. 190 (1) (b) of the Code . The fact that a second challan was put in later would not necessarily vitiate the first and invalidate the proceedings taken before the second challan was submitted. The right conferred by s. 340 (1) of the Criminal Proce- dure Code does not extend to a right in an accused person to be provided with a lawyer by the <ORG> or by the <ORG> or by the Magistrate. That is a privilege given to him and it is his duty to ask for a lawyer if he wants to engage one, or to engage one himself, or get his relations to engage one for him. The only duty cast on the Magistrate is to afford him the necessary opportunity. An accused should be properly examined under s. 342 of the Code and, if a point in the evidence is considered important against the accused and the conviction is intended to be based upon it, then it is right and proper that the accused should be questioned about the matter and be given an opportunity of explaining it if he so desires. This is an important and salutary provision and should not be slurred over. It is not a proper compliance of s. 342 to read out a long string of questions and answers made in <ORG> and ask ,the accused whether the statement is correct. A question of that kind is misleading. In the next place, it is not sufficient compliance to string together a long series of facts and ask the accused what he has to say about them. He must be questioned separately about each material circumstance which is intended to be used against him. <CITATION> (A.I.R. 1933 P.C. 124) referred to. In view of the words "subject to the provisions of the Indian Evidence Act " which occur in s. 288 of the Criminal Procedure Code, the evidence given by a witness in <ORG> cannot be used as substantive evidence in <ORG> unless the witness is confronted with those parts of his evidence which are to be used for the purpose of contradicting him, even though, if the only object of the prosecution is to discredit the evidence given in <ORG> by cross-examining him with reference to previous statements made in <ORG>, it is not necessary to do so. JUDGMENT:

CRIMINAL APPELLATE JURISDICTION. Criminal Appeal No. 14 of 1951. Appeal against the Judgment and Order dated the 6th June, 1950, of <ORG> at Simla in Criminal Appeal No. 75 of 1950. <NAME> for the appellant.

<NAME> for the respondent.

1951. June 1. The following Judgments were delivered. <NAME> is an appeal under article 136 (1) of, the Constitution. The appellant, <NAME>, was convicted of murder by the Additional Sessions Judge of Amritsar and sentenced to death. On appeal <ORG> upheld the conviction and confirmed the sentence. <NAME> has made a further appeal to this Court.

As we intend to order a retrial, it will not be desira- ble to say anything about the merits of the case. The case for the prosecution is that two persons, <NAME> and <NAME>, were murdered in the early hours of the morning of Friday, the 30th of September, 1949. The former is the appellant's uncle. He died on the spot. The latter is the appellant's father. He was removed to the hospital and died there on Friday, the 7th of October, 1949.

The murders are said to have been committed about three in the morning. The appellant's brother <NAME> reported the occurrence at the Police Station, about 7 miles distant, at 8.45 the same morning. According to this report, <NAME> was present and he named the appellant as the assailant.

The prosecution alleges that there were three eyewit- nesses to the assault on the father <NAME>, namely the appellant's brother <NAME>, his mother <NAME> and his sister <NAME>, aged 14. They are said to have arrived on the scene while the appellant was still attacking the father with a kripan. The prosecution version is that these three persons saw the uncle <NAME> lying dead on the scene of the occurrence with injuries on his person, and it is said that the appellant admitted to them that he had killed the uncle.

The appellant is also said to have made an extrajudicial confession to three persons, <NAME> (P.W. 8), <NAME> (P.W. 9) and <NAME> (P.W. 10). The prosecu- tion also adduced evidence about three dying declarations made by, the father <NAME> in each of which he impli- cated the appellant.

Two of these were made to the police and the third was recorded by a Magistrate on the 1st of October. The appellant was arrested between 4 and 5 p.m. on Friday, 30th September, the day of the occurrence, and was produced before a Magistrate on the 1st October. The police asked for a remand to police custody till the 2nd as their enquiry was not complete. This was granted and the appellant was produced before another Magistrate on the 3rd. When the appellant was produced on the and October, the police handed over to the Magistrate what they called an incomplete challan dated the 2nd October, 1949, and also produced certain prosecution witnesses. It is not clear whether these witnesses were named in the challan of that date or not, but that is a matter which can be cleared up in the course of the retrial which we intend to order. Among the witnesses so produced were three who are said to have witnessed the occurrence. They were the appellant's brother <NAME>, his mother <NAME> and his sister <NAME>. The Magistrate examined them straightaway and recorded their evidence.

The appellant was not at the time represented by coun- sel.

On the 5th of October, the police put in what they called a complete challan and on the 19th they put in a supplementary challan. The Magistrate committed the appel- lant for trial on the 12th of November, 1949. The first objection taken to the trial is that the Magistrate had no power to take cognizance of the case on the 3rd October. Accordingly, the depositions of the three so-called eye-witnesses which he recorded on the and cannot be received in evidence, and if they are excluded, then, for reasons which I shall set out hereafter, the whole case against the appellant collapses because, according to the learned counsel, there is no other evidence on which the conviction can properly be based.

This part of the argument is based on section 190 , Criminal Procedure Code . It is contended that cogni-

zance of an offence can only be taken in one of ways set out in that section. We are concerned here with the method set out in clause (b)of sub-section (1), namely "upon a report in writing of such facts made by any police officer." It is contended that the police are not permitted to send in an incomplete report because of the provisions of section 173 (1) which runs as follows :--

"Every investigation under this Chapter shall be com- pleted without unnecessary delay, and as soon as it is completed, the officer in charge of the police station shall--

(a) forward to a Magistrate empowered to take cognizance of offence on a police report, a report the in the form prescribed etc ...... "

I need not express any opinion about this because, in my opinion, the challan which the police referred to as an incomplete challan, namely, the one of 2nd October, 1949, was in fact a complete report within the meaning of section 193(1) (b), Criminal Procedure Code , read with section 173(1) .

When the police drew up their challan of the 2nd Octo- ber, 1949, and submitted it to the court on the 3rd, they had in fact completed their investigation except for the report of the Imperial Serologist and the drawing of a sketch map of the occurrence. It is always permissible for the Magistrate to take additional evidence not set out in the challan. Therefore, the mere fact that a second challan was put in on the 5th October would not necessarily vitiate the first. All that section 173(1) (a) requires is that as soon as the police investigation under Chapter XIV of the Code is complete, there should be forwarded to the Magis- trate a report in the prescribed form "setting forth the names of the parties, the nature of the information and the names of the persons who appear to be acquainted with the circumstances of the case." All that appears to have been done in the report of the 2nd October which the police called their incomeplete challan. The witnesses named in the Second challan of the 5th October were not witnesses who were

-acquainted with the circumstances of the case." They were merely formal witnesses on other matters. So also in the supplementary challan of the 19th. The witnesses named are the 1st Class Magistrate, Amritsar, who recorded the dying declaration, and the Assistant Civil Surgeon. They are not witnesses who were acquainted with the circumstances of the case." Accordingly, the challan which the police called an incomplete challan was, in fact a completed report of the kind which section 173 (1) (a) of the Code contemplates. There is no force in this argument. and we hold that the Magistrate took proper cognisance of the matter.

The next point urged was that when the Magistrate re- corded the evidence of the three eye-witnesses, he did not afford the appellant an opportunity of being represented by counsel though he is given that right by section 340 (1) of the Criminal Procedure Code . There might have been force in this contention because the peculiar circumstances of this case, had it not been for the fact that the inquiry continued after the date on which the three eye-witnesses were examined and the appellant made no complaint about this. He did not at any of the subsequent proceedings before the Committing Magistrate ask for permission to engage a counsel or indicate in any way that he desired to be represented by one.

I have referred to the peculiar circumstances of this case. I say that because this is a case in which the ac- cused is said to have killed his father and his uncle. As far as I can gather from the record, his only relatives are his brother <NAME>, his mother <NAME> and his sister <NAME>. Ordinarily, when a man is arrested for murder and is proceeded against and he wants to be represented, his relatives come to his rescue and engage counsel for him, but in a case like this, if the prosecution story is true, the only relatives the man has would not help him because, in their eyes, he was a parricide and they, being filled with indignation against him, took all steps they could to bring him to justice. On the other hand, if the present story of the appellant is correct and the witnesses were intimidated by the police, equally they would take no steps to assist the appellant. Either way, the appellant would, in the peculiar circumstances of the case, be helpless from that point of view. Therefore, had it not been for the fact that there were subsequent proceedings in which the appellant could have raised this objection had there been any sub- stance in it, we might have considered the argument with more favour. But the appellant's subsequent conduct indi- cates that he had no intention of engaging counsel and made no grievance of the fact. I need hardly say that.the right conferred by section 340 (1) does not extend to a right in an accused person to be provided with a lawyer by the <ORG> or by the police or by the Magistrate. That is a privilege given to him and it is his duty to ask for a lawyer if he wants to engage one and to engage one himself or get his relations to engage one for him. The only duty cast on the Magistrate is to afford him the necessary opportunity. There is no force in this contention either. The next point taken regarding the committal stage of the case is that the Committing Magistrate did not examine the appellant properly under sections 209 and 342 of the Criminal Procedure Code. Section 342 (1) states that "for the purpose of enabling the accused to explain any circum- stances appearing in the evidence against him, the <ORG> may etc..." And sub-section (3) states that "the answers given by the accused may be taken into consideration in such inquiry or trial." Further, section 287 requires that "the examination of the accused duly recorded by or before the Committing Magistrate shall be tendered by the prosecutor and read as evidence." (This refers to the sessions trial). It is important therefore that an accused should- be proper- ly examined under section 342 and, as their Lordships of <ORG> indicated in <CITATION> (1) if a. point in the evidence is (1) A.I.R. 1933 P.C. 124 at 130.

considered important against the accused and the conviction is intended to be based upon it, then it is right and proper that the accused should be questioned about the matter and be given an opportunity of explaining it if he so desires. This is an important and salutary provision and I cannot permit it to be slurred over. I regret to find that in many cases scant attention is paid to it, particularly in <ORG>. But whether the matter arises in <ORG> or in that of the Committing Magistrate, it is impor- tant that the provisions of section 342 should be fairly and faithfully observed.

So far as the committal proceedings in this case are concerned, the examination was on the whole fair and full for the purposes of <ORG> though I feel the form of the questions put could have been a little different. As they stand, the questions read more like cross-examination than an examination under section 208 (2). I refer, for example, to the first question which reads as follows:- issueless ''Was <NAME> deceased your uncle issueless and wanted to gift away his land to <ORG>, which fact you resented ?"

and to the second question which reads--

"Did you also resent your father mortgaging his land ?" The proper form in these two cases would have been to. tell the accused who suggested that he resented the fact that his uncle who was issueless wanted to gift away his land, and, in the second question, who said that he resented his father mortgaging his land, and then, after having told him that, to ask him after each question whether he wanted to say anything about the matter. However, the point is trivial in this case because the questions put are based on the evidence of witnesses before the Committing Magistrate and the questioning was sufficient for the <ORG>'s purposes. All that he. had to consider was whether under section 209 (1) there were sufficient grounds for committing the appellant for trial and not whether, on an appreciation of the whole evidence and other material in the case, including witnesses for the defence, the charge against him was proved. I am of opinion that despite some shortcomings the committal was good. I turn next to the proceedings in <ORG>, There are two grave defects there which, in my opinion, vitiate the trial. The first is that the examination of the appellant was not in accordance with the provisions of section 342 . The second is that when the depositions of some of the witnesses examined before the <ORG> were brought on record in <ORG> under section 288 , the witnesses who made the statements were not confronted with their previous statements as required by section 145 of the Evidence Act.

Dealing first with the examination of the appellant by the Sessions Judge, all he did was to read over the examina- tion of the accused in <ORG> and then record the following statements and answers:--

"Q. Did you make the statement on 9th November, 1949, as read out to you, and is it correct ?

A. Yes.

Q. Have you anything else to say ?

A. No. I am innocent and the statement of the witnesses in <ORG> were recorded without any notice to me. I could not, therefore, engage any counsel.

Q. Do you wish to produce any defence ?

A. No."

Section 342 requires the accused to be examined for the purpose of enabling him "to explain any circumstances ap- pearing in the evidene against him." Now it is evident that when <ORG> is required to make the examination under this section, the evidence referred to is the evidence in <ORG> and the circumstances which appear against the accused in that Court. It is not therefore enough to read over the questions and answers put in <ORG> and ask the accused whether he has any- thing to say about them. In the present case, there was not even that. The appellant was not asked to explain the cir- cumstances appearing in the evidence against him but was asked whether the statements made before the Committing Magistrate and his answers given there were correctly re- corded. That does not comply with the requirements of the section. There is also more than that in this case. The evidence recorded in <ORG> is not as full and as complete as the evidence recorded in the trial before the Sessions Judge. Accordingly, it often happens that evidence is given in <ORG> and facts are disclosed which do not appear on the record of the Committing Magistrate. If the Judge intends to use these against the accused, it is clearly not enough to question him about matters which occurred in <ORG>, for material of this kind will not be found in the committal record in these circumstances. That has happened here. The Sessions Judge relied on the following circum- stances. First of all, he characterised as a "most signifi- cant piece of evidence" the fact that the three eyewitnesses had admitted before him that the appellant was present in the Deohri before they went to the scene of the occurrence on hearing the victims' cries and that these witnesses did not suggest that there was anybody else who was responsible for the injuries to the deceased. Now, this was evidence which was recorded exclusively in <ORG>. The eye witnesses before the Sessions Judge had resiled from the previous statements which they made in the committal pro- ceedings. Accordingly, a questioning by the Committing Magistrate would not and could not cover the point made here and, naturally, the Magistrate has not questioned the appel- lant about that circumstance.

As the three eye witnesses had resiled from their state- ments made in the committal proceedings, the Sessions Judge brought their depositions on record under section 288 , Criminal Procedure Code . He next relied on the evidence of these witnesses as recorded in the Court of the Committing Magistrate. One point he used against them was the evidence of motive which these witnesses sup- plied in the committal proceedings. The appellant was not told what that evidence was nor was he asked to explain it. He was questioned about this motive in the committal pro- ceedings by the Committing Magistrate, but even there he was not told who had given the evidence, and the material on which the Committing Magistrate relied to establish the presence of motive was not disclosed.

The Sessions Judge also relied on the fact that the appellant had confessed to the three eye witnesses that he had killed his uncle and injured his father. There is not a single question regarding that either in <ORG> or in <ORG>. Another ground on which the Sessions Judge proceeded was the extra-judicial confessions made by the appellant to <NAME>, <NAME> and <NAME>. The appellant was questioned about an extra judicial confession by the Committing Magistrate but not about one made to these three persons. What the Committing Magistrate asked was :__ "Did you confess on 30th September, 1949, at Timmowal before <NAME>, Mangal Singh P. Ws. etc., that you had killed <NAME> and caused injuries to your father ?"

It will be seen that <NAME> and <NAME> were not mentioned at all, and yet the Sessions Judge con- sidered them "respectables of the village" and said that they were independent witnesses. If the appellant had been asked about them, he might have been able to show that they were not disinterested and that they had some motive for implicating him falsely, or that they were not there. Next, the Sessions Judge considered that "the most important piece of evidence damaging to the accused" was the dying declaration of <NAME> recorded by the Magistrate, P.W. 5. Neither the Sessions Judge nor the Committing Magistrate questioned the appellant about that. The Sessions Judge also relied on the two statements of <NAME> made before the police, one of which the police recorded as his dying declaration. Again, not one word was put to the appellant about this.

Now, section 342(2) requires that the answers given by the accused may be taken into consideration. If the accused had been properly questioned and had given reasonable explana- tions and the Sessions Judge had omitted to take them into consideration, it is obvious that that would have constitut- ed a grave defect in his judgment. How much graver is the defect when the accused is not questioned at all and is not given an opportunity of explaining the circumstances which are intended to be used against him. The unfairness of the Sessions Judge's conclusions can be gathered from the fact that he (the Sessions Judge) considered the evidence of the eye witnesses before him (as distinct from the depositions brought on record under section 288 ) material and then, not having asked the appellant for any explanation, he said :--

"The accused himself has not rendered any explanation as to at whose hands the two deceased had met their death."

This is precisely what <ORG> commented on in <NAME> v..EmPeror.(1) where <ORG> having relied on a piece of evidence which it considered vital went on to say that the accused had not explained it. Their Lordships remarked that that "deprives of any force the suggestion that the doctor's omission to explain what he was never asked to explain supplies evidence on which the jury should infer etc."

<ORG> has fallen into the same error and has based its decision on material which the appellant was not asked to explain. For example, the learned Judges rely on the evidence of the three eye (1) A.I.R. 1933 P.C. 184 at

135. witnesses before the Committing Magistrate. They also rely on the fact that <NAME>'s evidence in <ORG> is corroborated by the First Information which he gave to the police. The appellant was not ques- tioned about these matters either in <ORG> or by the Committing Magistrate. <ORG> also relies on the evidence of the three witnesses who speak about the extra-judicial confession and the learned Judges state that these witnesses "are not suggested to be in any way un- friendly to the appellant and they seem to be persons of respectability." Here, again, if the appellant was not asked whether these witnesses were unfriendly or not, it is not fair to use the absence of such a suggestion as some- thing which tells against the appellant. It is true the accused can cross-examine as to comity but he is not con- fined to that. It may be that in a given case cross-examina- tion would be futile, for it would only elicit a denial, whereas a statement made by the accused which the Code directs should be used as evidence, for or against him, might be of great value. In any event, the Code directs that the accused shall be afforded these opportunities and an omission to do so vitiates the trial if prejudice occurs or is likely to occur.

<ORG> also bases its conclusion on the circum- stantial evidence arising from the production of the <NAME> and the recovery of the shirt from the appellant. Those articles are said to be stained with human blood. The appellant was not asked to give any explanation about this. The Serologist's report had not been received when the appellant was questioned by the Committing Magistrate. Therefore, he could not be asked to explain the presence of human blood stains on the <NAME>. All he was asked was whether the blood-stained <NAME> was recovered at his in- stance. That is not enough. He should also have been asked whether he could explain the presence of blood stains on it. The two are not the same. Then, in <ORG> there was the additional evidence of the Imperial Serologist showing that the <NAME> had stains of human blood on it. That was an additional and very vital piece of evidence which the appellant should have been afforded an opportunity of explaining I cannot stress too strongly the importance of Observing faithfully and fairly the provisions of section 342 , Crimi- nal Procedure Code . It is not a proper compliance to read out a long string of questions and answers made in <ORG> and ask whether the statement is correct. A question of that kind is misleading. It may mean either that the questioner wants to know whether the recording is cor- rect, or whether the answers given are true, or whether there is some mistake or misunderstanding despite the accu- rate recording. In the next place, it is not sufficient compliance to string together a long series of facts and ask the accused what he has to say about them. He must be ques- tioned separately about each material circumstance which is intended to be used against him. The whole object of the section is to afford the accused a fair and proper opportu- nity of explaining circumstances which appear against him. The questioning must therefore be fair and must be couched in a form which an ignorant or illiterate person will be able to appreciate and understand. Even when an accused person is not illiterate, his mind is apt to be perturbed when he is facing a charge of murder. He is therefore in no fit position to understand the significance of a complex question. Fairness therefore requires that each material circumstance should be put simply and separately in a way that an illiterate mind, or one which is perturbed or con- fused, can readily appreciate and understand. I do not suggest that every error or omission in this behalf would necessarily vitiate a trial because I am of opinion that errors of this type fall within the category of Curable irregularities. Therefore, the question in each case depends upon the degree of the error and upon whether prejudice has been occasioned or is likely to have been occasioned. In my opinion, the disregard of the provisions of section 342 , Criminal Procedure Code , is so gross in this case that I feel there is grave likelihood of prejudice.

But this is not the only error. Two of the three eye witnesses whose depositions before the Committing Magistrate were brought on the sessions record under section 288 were not confronted with their former statements in the manner required by section 145 , Evidence Act . All that happened is that they were asked something about their previous state- ments and they replied that they were made under coercion. Now, section 145 of the Evidence Act states that :--

"A witness may be cross-examined as to previous state- ments made by him in writing or reduced into writing, and relevant to matters in question, (without such writing being shown to him) or being proved ..... "

This is all that seems to have occurred in the eases of Bibi Santi (P.W. 8) and Bibi Jito (P.W. 7). But the section goes on :--

"but, if it is intended to contradict him by the writ- ing, his attention must, before the writing can be proved, be called to those parts of it which are to be used for the purpose of contradicting him."

Now, it is evident that one of the main purposes of using the previous statements was to contradict and. dis- place the evidence given before <ORG> because until that evidence was contradicted and displaced, there was no room in this case for permitting the previous state- ments to be brought on record and used under section 288 . Therefore, as these statements were not put to these wit- nesses and as their attention was not drawn to them in the manner required by section 145 , Evidence Act , they were not admissible in evidence. The observations of <ORG> in <CITATION> (1) are relevant here.

In the ease of <NAME>, his previous statement does seem to have been put to him in the proper (1) 42 I.A. 135 at 147.

way. The particular portions on which the prosecution desired to contradict him were read out and he was afforded an opportunity of explaining them. So, the inadmissibility extends only to the other two witnesses.

There is some difference of opinion regarding this matter in the High Courts. Section 288 provides that the evidence recorded by the Committing Magistrate in the presence of the accused may, in the circumstances set out in the section, "be treated as evidence in the case for all purposes subject to the provisions of the Indian Evidence Act , 1872.." One line of reasoning is that section 145 , Evidence Act , is not attracted because that section relates to previous statements in writing which are to be used for the purpose of contradiction alone. Statements of that kind do not become substantive evidence and though the evidence given in the trial can be destroyed by a contradiction of that kind, the previous statements cannot be used as sub- stantive evidence and no decision can be grounded on them. But under section 288 , Criminal Procedure Code , the previous statement becomes evidence for all purposes and can form the basis of a conviction. Therefore, according to this line of reasoning, section 145 of the Evidence Act is not attracted. Judges who hold that view consider that the provisions of the Evidence Act referred to are those relating to hearsay and matters of that kind which touch substantive evidence.

The other line of reasoning is that section 288 makes no exception of any provision in the Evidence Act and there- fore section 145 cannot be excluded. As that section is one of the provisions of the Act, the statements are subject to its provisions as well. All that section 288 does is to import into the law of evidence something which is not to be found in the Evidence Act , namely, to make a statement of this kind substantive evidence, but only when all the provi- sions of the Evidence Act have been duly complied with.

In my opinion, the second line of reasoning is to be preferred. I see no reason why section 145 of the  Evidence Act should be excluded when section 288 states that the previous statements are to be "subject to the provisions of the Indian Evidence Act ." Section 145 falls fairly and squarely within the plain meaning of these words. More than that. This is a fair and proper provision and is in accord with the sense of fairplay to which <ORG> are accustomed. Even the learned Judges who take the first view consider for the most part that though it is not obligatory to confront a witness with his former statement when section 288 is re- sorted to, it is always desirable that that should be done if only for the reason that an omission to do so weakens the value of the testimony. I am of opinion that the matter is deeper than that, and, giving effect to the plain meaning of the words "subject to the provisions of the Indian Evidence Act " as they stand, I hold that the evidence in <ORG> cannot be used in <ORG> unless the witness is confronted with his previous statement as re- quired by section 145 of the Evidence Act. Of course, the witness can be cross-examined about the previous statement and that cross-examination can be used to destroy his testi- mony in <ORG>. If that serves the purpose of the prosecution, then nothing more is required, but if the prosecution wishes to go further and use the previous testi- mony to the contrary as substantive evidence, then it must, in my opinion, confront the witness with those parts of it which are to be used for the purpose of contradicting him. Then only can the matter be brought in as substantive evi- dence under section 288 . As two of the eye witnesses were not confronted in the manner required by section 145 , their statements will have to be ruled out, and if that is done, the material on which the conviction is based is considera- bly weakened.

I have considered anxiously whether this is a case in which we should direct a retrial de novo or whether the retrial should be from the stage at which the irregularity occurred or whether we should refuse to allow a retrial and acquit the appellant. Having given my anxious thought to this matter, I am of opinion that there should be a retrial de novo in <ORG> either by the same or by some. other Sessions Judge. I consider it inexpedient to say more than this, lest I preju- dice the issue one way or the other.

The conviction and sentence are set aside and the case is sent back to <ORG> with a direction that that Court will order a retrial de novo in <ORG>, treating the committal as good.

<NAME> agree and have nothing to add. <NAME> agree and have nothing further to add.

DAs J. --I agree to the order proposed by my learned brother <NAME>.

Re-trial ordered.

Agent for the appellant: <NAME>.

Agent for the respondent: <NAME>.


PETITIONER: <ORG> LTD. Vs. RESPONDENT: <ORG>. DATE OF JUDGMENT09/03/1972 BENCH: <NAME>, <NAME>: <NAME>, <NAME>, KUTTYIL KURIEN CITATION: 1972 AIR 1311 1972 SCR (3) 711 1972 SCC (1) 857 CITATOR INFO : RF 1979 SC 621 (26,29) RF 1980 SC1285 (36,38) ACT: Estoppel--Promissory estoppel--Scope of--Applicability of doctrine. Company Law--Incorporated Companies--Residence of--Ultra Vires--Company authorised by resolution to discharge tax liability of holding company to which dividends due not distributed--If ultra vires the company's powers. Limitation Act , 1963-- Section 15(5) --Applicability to incorporated companies--Company--When can be said to be residing in India and consequently no "absent" from the country. HEADNOTE: The rule of estopple has gained new dimensions in recent years and a new class of estoppel, viz., promissory estoppel has come to be recognised by <ORG>. Where parties enter into an agreement which is intended to create local relations between them and in pursuance of such arrangement on a party makes a promise to the other which he knows will be acted on and which is in fact acted on by the promise, the <ORG> will treat the promise at finding on the promiser to the extent that it will not allow him to act inconsistently with it even although the promise may not be supported by consideration in the strict sense. [721D, 723C] <ORG> owned hundred per cent shares in <ORG> During the assessment years 1939-1940 to 1955-1956 the latter did not distribute dividends and the undistributed dividends were utilised by it as working capital. In all those years, the income-tax authorities took proceedings under s. 23-A of the Income Tax Act, 1922, and the deemed dividends were assessed in the bands of <ORG>. But. year after year, from 1939 to 1954, the Directors of <ORG> passed a resolution to the effect that it would be in-equitable to ask <ORG> to pay the tax levied and that <ORG> itself should discharge that liability. The resolutions were implemented by <ORG> by playing all the, taxes due from <ORG>. If the dividends had been declared <ORG> would have got more than two and a half times the tax paid on its behalf. The payments were not debited to the account of <ORG>; nor were they shown as debts due from <ORG> in the balance sheets. At no time <ORG> made any demand on <ORG> to reimburse the money paid. In 1955 the control of <ORG> changed hands and, thereafter, by agreement, <ORG> under- took to discharge the tax liability of <ORG> to the extent of Rs. 46 lakhs. In 1965 <ORG> filed a suit against <ORG> for recovery of the tax paid. The suit was dismissed. In the appeal to this <ORG> <ORG> raised the plea of promissory estoppel. <ORG> urged that its resolutions were mere promises to do something in future; they were not representations of any and as those promises were not supported by any consideration, they afforded no legal basis to resist the claim. <ORG> argued that the promises made under those resolutions were supported by consideration 712 in as much as <ORG>, in response to those promises, refrained from enforcing the right to have the profits distributed as dividends. Held, that by acting on the basis of. the representation made by <ORG> <ORG> placed itself in a disadvantageous position, and therefore, the pleas of promissory estoppel had to be sustained. [122B- <CITATION> .,  2 S.C.R. 366, <ORG> v. <ORG>,  1 K.B. 130, <NAME> v. <NAME>,  2 K.B. 215, <ORG> v. <ORG>,  2 All E.R. 657 and Roberton V. Minister of Pensions  1 K.B. 227, referred to. It was urged on behalf of <ORG> that the authority given to it to discharge the tax liabilities of <ORG> were ultra vires its powers and, therefore, provided no legal basis to resist the plain, claim, Held, that <ORG> had not acted ultra vires its powers. The nondistribution of the dividends had augmented the working capital of the company thus affording it facility to earn more profits. Any step taken to augment the working capital of the company was undoubtedly inci- dental to the business of the company and, further, the same was not for the attainment of the objects mentioned in the memorandum. When <ORG> paid the tax due from <ORG>, in substance, though not in form, it was distributing a portion of its assets to the 100 per cent share holder of the company, but without reducing its capital. [726H] Even on the assumption that the suit claim was otherwise good, <ORG> urged, it was barred by limitation. It was contended on behalf of <ORG> that in view of s. 15(5) of the limitation Act,, 1963, the claim made, leaving aside the claim made in respect of the assessment for the assessment years 1955-1956, was not barred, because, <ORG> was a non resident company never present in India, and therefore, under the section the time during which "the defendant has been absent from India" had to be excluded for the purpose of computing the period of limitation. Held, that the suit was barred by limitation : (a) <ORG> had waived the lien it might have had over the shares. held by <ORG>. Hence the only claim that <ORG> could have made against <ORG> was a money claim. (b) The suit was governed by the Limitation Act 1963, which fixed a period of three years for money payable. The amounts claimed, except those in respect of the assessment for the assessment year 1955-1956, were all paid before November 15, 1962. Therefore, they were barred by limitation. So far as the payment made in respect of the assessment year 1955-56 was concerned, <ORG> had no claim against <ORG>, because, under the amended s. 23A of the Income Tax Act, 1922, that liability was of the <ORG> itself. (c) Section 15(5) of the share holders of <ORG>. Under these circumstances, it that the provision does not apply to incorporated companies at all or, alternatively, that the incorporated companies must be held to reside in places where they carry on their activities and thus be present in all those places' Factually a company cannot either be DM-sent in India or absent from India. But it may have a domicile or residence in India. <ORG> of <ORG> used to meet in India now and then. It was, through its representatives, attending the general meeting of the share holders of <ORG>. Under these circumstances, it must be held to have been residing in' this country and consequently not absent from this country. Hence s. 15(5) cannot afford any assistance to <ORG> to save the bar of limitation. [727H-728C-730C] 713 Dicey's Conflict of Laws, <ORG> v. Public Trustee,  2 Ch. 201, <ORG> V. Maclaren, 5 H.L.C. 416 and <CITATION> , A.I.R. 1929 Bom. 14, referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION : C.A. No. 1223 of 1970. Appeal from the judgment and decree dated June 23rd/24th, 1969 of <ORG> in Appeal from Original Decree ,No. 203 of 1968.

<NAME>, <NAME>, <NAME>, <NAME>, <NAME> and <NAME>, for the appellant.

<NAME>, <NAME>, <NAME>, <NAME>, <NAME>, <NAME>, <NAME> and <NAME>, for the respondent.

The Judgment of the Court was delivered by <ORG> This appeal by certificate is by the plaintiff- appellant, <ORG> (to be hereinafter referred to as <ORG>) from the decision of <ORG> of <ORG>. <ORG> affirmed the decision of the trial court dismissing the plaintiff's suit.

In the suit <ORG> claimed a decree for a sum of Rs. 1,27,67,052/16 P. The claim was made on the ground that the plaintiff had paid either as an agent or on behalf of the defendant <ORG> (in voluntary liquidation) (to be hereinafter referred to as the <ORG>) a sum of Rs. 79,70,802/- as super-tax which it was entitled to be reimbursed. To that sum a sum of Rs. 47,96,250/16 P. was added as interest in the shape of damages. In respect of that claim the appellant claimed a paramount lien on the 2295 shares owned by <ORG> in the plaintiff-company. The defendant resisted the suit on Various grounds. It denied that the plaintiff had paid the amounts shown in the plaint-schedule or it was liable to be reimbursed the payments made, if any. It also denied its liability to pay interest on the amounts that might have been paid. Further' it pleaded that the suit was barred by estoppel, waiver and acquiescence. It also pleaded the bar of limitation. In addition it pleaded that the lien claimed had been waived and that the suit was not properly instituted. According to the defendant, the .suit was not a bona fide one. It was one of the manipulations of <NAME> to get at the defendants' 2295 shares the plaintiff- company without paying for them.

The trial court dismissed the plaintiff's suit holding that the claim in question was barred by estoppel, waiver or acquiescence". It held that it was also barred by limitation. It opined that the liability to pay the tax in question was the joint liability of <ORG> as well as <ORG> and the same having been discharged by the former, it had no claim on <ORG>. It opined that the suit was a dishonest attempt on the part of <NAME> to absolve his liability for paying for the 221-95 shares in respect of which he had obtained a decree for specific performance.' The appellate court affirmed some of the findings of the trial court.

In order to appreciate the various contentions advanced before this <ORG>, it is necessary briefly to refer to the history of the case. <ORG> was the owner of 100 per cent shares of <ORG>. <NAME> and <NAME> (both since deceased) were the owners of the 100 per cent shares of <ORG>. As can be seen from the records, <ORG> was a prosperous company. Though that company was making enormous profits every year, it did not distribute any portion of those profits as dividends during the assessment years 1939-1940 to 1955-56. The profits that should have been available for distributing as dividends were kept back by the company and used as working capital. In all those years the, income-tax authorities took proceedings under s. 23-A of the Indian Income-tax- Act, 1922. Thereafter the "deemed dividends" were assessed in the hands of <ORG>. But year after year the Directors of <ORG> passed a resolution to the effect that it would be inequitable to ask <ORG> to pay the tax levied and that <ORG> itself should discharge that liability. Those resolutions were duly implemented by <ORG> by paying all the taxes due from <ORG>. In about the middle cf 1955, <NAME> entered into negotiation with <NAME> for purchasing all the shares of <ORG>. By exchange of letters in November and December of 1955, <ORG> agreed to sell and <NAME> agreed to purchase 49 per cent shares of <ORG>. The agreement also provided for an option to <NAME> to purchase from <ORG> the balance of 51 per cent shares of <ORG> within five years for the price agreed upon. A formal agreement in that regard was entered between <ORG>, <NAME>, <NAME>, British, <ORG> (a nominee of <NAME>) and <NAME> on October 30, 1956. In pursuance of that agreement <ORG>. purchased 49 per cent shares of <ORG>. Thereafter as- contemplated in that agreement <ORG> went into voluntary liqui-dation. On October 31, 1957 two documents came to be executed. One is a deed of guarantee and indemnity. That was a tripartite agreement. The, first party to, that deed was <ORG>. The second party was <NAME> and <NAME> and the third party was <ORG>. In that deed after setting out the agreement between <ORG> and <NAME>, it was stated :

"NOW THIS DEED WITNESSETH that in consi- deration of the liquidator$ having at the request of the Company (<NAME>) the said <NAME> and <NAME> agreed (as is testified by their being parties to and executing these presents) to distribute the assets of <ORG> in specie amongst the contributories of <ORG> (such contributories being <NAME> and <NAME>) and in consideration of , the premises.

1. The Company and the said <NAME> and <NAME> hereby jointly and severally undertake to pay and/or satisfy all claims for or in respect of Income-tax and Super-tax which is or are not payable or recoverable or may at any time be payable or recoverable under the Indian Income-tax Act by or from <ORG> and which payments are in fact legally enforced and made.

2. The Company and the said <NAME> and <NAME> hereby jointly and severally covenant with the Liquidators and' 'each of them that the company and the said <NAME> and the said <NAME> will jointly and severally at all times hereinafter keep indemnified the Liquidators and each of them from all actions, proceedings, claims or demands in respect of or in connection with any liability of <ORG> to Income-tax or Super-tax under the Indian Income-tax Act and also against all costs, damage or expenses which the Liquadators or any of them may pay, incur or sustain in connection therewith or arising therefrom or otherwise in relation to the premises."

The second document was a deed of indemnity between the <NAME> brothers and <NAME> Morrison. That deed provided that in the event of <NAME> Morrison "Paying in terms of the deed of guarantees and indemnity any sum in excess of 46 lakhs in satisfaction of the income-tax and super-tax which may at any time be payable or recoverable, payment of which are in fact legally enforced and made under the Indian Income-tax Act by or from <ORG> and each of them in consideration of the premises undertake to pay to the company (,<NAME> Morrison) the amount of such excess as aforesaid".

At this stage, it may be mentioned that in accordance with the agreement entered into between <ORG> and <ORG> <ORG> was to discharge the tax liability of <ORG> to the extent of Rupees 46 lakhs. After the sale of the 49 per cent shares referred to earlier, some dispute appears to have arisen between <ORG> and <ORG> in regard to his option to purchase the remaining 51 per cent shares of the later. Consequently <ORG> filed a suit in <ORG> on its original side for the specific performance of the agreement entered into between him and the <ORG>. The suit was resisted by <ORG>. But it was decreed. It appears that when the learned trial judge was about to conclude his judgment, in that case the Counsel for <ORG> requested the court to issue an injunction requiring <ORG> to exercise its voting rights in respect of the 51 per cent shares which was the subject matter of the suit in accordance with the directions of <ORG> until the implementation of the decree for specific performance. The learned trial judge accepted that prayer and issued the injunction asked for. This led to serious consequences, some of which we have dealt with in our judgment in Civil Appeal No. 488 of 1971 which we have just now pronounced. This case appears to be an off-shoot of that unfortunate injunction. In the suit for specific performance, though <ORG> was a party, it did not plead that it had any lien over the shares with which we are concerned in this case. By agreement between <ORG> and <ORG>, the later was removed from the array of defendants and the suit, proceeded against the remaining defendants.

After obtaining the decree for specific performance and the ,injunction mentioned above, <ORG> appears to have not been interested in purchasing the 51 per cent shares by paying for the same evidently because he was in a position to have an absolute control over <NAME> as a result of the injunction issued. Though <ORG> filed an appeal against the decree in that suit, that appeal was withdrawn for reasons which are not clear. After the withdrawal of the appeal, by a Master's summons dated August 30, 1965 <ORG> moved the trial court for fixing a time within which <ORG> should purchase the 51 per cent shares by paying for the same. That application was rejected ,on September 1965 on the ground that the application being one for execution, it must be in a tabular form and "that any imposition of time limit would be to engraft something on the decree which does not exist in the decree". The appeal against that ,order was also unsuccessful. After the suit for specific performance was, decreed, <ORG> by himself or through <NAME> appears to have made various attempts to see that <ORG> is placed in such a position as not to be able to implement its part of the agreement. We have had to deal with some of those aspects in Civil Appeal 488 of 1971. Suffice it to say that according to <ORG>, the suit from which this appeal arises is one of the attempts of <ORG> in that direction. One other circumstance that is necessary to be mentioned before proceeding to consider the points in controversy is that despite the various resolutions passed by <ORG> of <NAME> as well as by the shareholders of that company at the general meeting, the present suit was filed by the Secretary of <NAME> even without obtaining the sanction of <ORG>. <ORG> sanction was sought only after the defendants' objected to the maintainability of the suit. From the Proceedings of <ORG>, it is clear that they were not even aware of the company against whom the suit was filed. From the two resolutions passed by <ORG> ratifying the action taken by the Secretary, it is obvious that either they were callous or they were mere tools in the hands of <ORG>.

It is not denied on behalf of <ORG> that the tax due from that company for the assessment years 1939-40 to 1955- 56 had been discharged by <ORG>. <ORG>'s liability to pay tax arose because of the' dividends it was deemed to have received from <ORG> as a result of s. 23-A proceedings. But there is dispute between the parties as to the exact amount paid by <ORG>. We have not thought it necessary to go into that controversy as we have, agreeing with <ORG>, come to the conclusion that the suit is not maintainable for the reasons to be presently stated.

A great deal of controversy centers round the question whether when an assessment is made on the shareholders of a company as a result of an order under s. 23-A , the company's liability to pay that tax is primary or secondary. It was contended on behalf of <ORG> that liability is a joint liability of both the company's as well as that of the shareholders. But according to the appellant that liability is primarily that of the shareholders and if the company is compelled to discharge that liability, it is entitled to be reimbursed by its shareholders. Both the trial judge as well as the appellate bench have upheld the contention of <ORG> and have come to the conclusion that When <ORG> paid the tax due from <ORG>, it was discharging its own liability under law and that being so, it was not entitled to seek reimbursement from <ORG>.

Section 23-A empowers the Income-tax Officer to order in writing if the conditions prescribed in that section are satisfied that the undistributed portion of the assessable income of a company earned 'in the previous year as computed for income-tax purposes and reduced by the amount of income- tax and super-tax payable by the company in respect thereof, shall be deemed to have been distributed as dividends amongst the shareholders as on the date of the concerned general meeting. That deemed income has to be assessed in the hands of the, shareholders either under s.23 or under s. 34 of the Indian Income-tax Act, 1922.

The two provisos to s. 23-A that are important for our present purpose are found in cls. (ii) and (iii) of sub-s. (2) of s. 23-A . Clause (ii) says :

"Where the proportionate share of any member of a company in the undistributed,profits and gains of the, company has been included in his total income under the provisions of sub- section (1) the tax payable in respect thereof shall be recoverable from the company, if it cannot be recovered from such member."

Clause (iii) reads :

" Where tax is recoverable from a company under this sub-section, a notice of demand shall be served upon it in the prescribed form showing the sum so, payable, and such company shall be deemed to be the assessee in respect of such sum, for the purposes of Chapter VI."

It was urged on behalf of <ORG> that the income that can be brought to tax as a result of an 'order under s. 23-A is not a real income; it is only a deemed income; that income came to be taxed because of the failure of the company to declare dividends., It is only for the purpose of convenience that income is taxed in the hands of the shareholders; hence the liability to pay that tax in equity must be that of the company and it is for that reason s. 23- A has provided for the realisation of the tax due from the shareholders from the company. The fact that before passing an order under s. 23-A the shareholders are not even required to be heard was emphasised. In this connection our attention was invited to the amendment of s. 23-A in 1955 as a result of which now the tax liable to be paid as a result of an order under s. 23-A is payable exclusively by the company. In this connection reliance was also placed on the language of s. 42 which empowers the <ORG> to assess the income of a nonresident assessee in the hands of his agent, but at the same time that section empowers that agent to retain in his hands a sum equal to his estimated liability under that section from out of the. non-resident's monies in his hands. It was lastly urged that if dividends were deemed to have been declared, those deemed dividends remained in the hands of the company and when the company paid tax in respect of the same, it must be held to have paid the same out of the dividends of the shareholders that remained in its hands. On the other hand, it was contended on behalf of <ORG> that any assessment made in pursuance of an order under s. 23-A is an assessment on- the shareholders and not on the company; The dividends deemed to have been distributed under s. 23-A is considered to be the income of the shareholders and not that of the company. It is added on to the other income of the shareholder for the purpose of assessment. It is recoverable from the shareholder. It is recoverable from the _company only if it cannot be recovered from the shareholders and the company is deemed to be an assessee in respect of such sum for the purposes of Chapter VT only and not for all purposes. Further the deemed distribution of dividends as a result of an order under s. 23-A is in no sense a real distribution of dividends which can be done only by the shareholders at the general meeting of the company. We do not propose to pronounce on this controversy firstly because this appeal can be decided on other grounds and secondly for the reason that that controversy has now become more or less academic in view of the amendment of S. 23-A in 1955.

For the assessment years 1940-41 to 1952-53, <ORG> was assessed as the, agent of <ORG> as could be seen from the assessment orders. For that reason it was contended on behalf of <ORG> that it is entitled to be reimbursed in respect of the tax paid by it. <ORG> denies that <ORG> was its agent. According to <ORG>, the payments in question were made by <ORG> voluntarily and therefore it is not entitled to claim any reimbursement. Section 43 of the Indian Income-tax Act, 1922 prescribes as to who could be assessed as an agent under s. 42 . That section says "Any person employed by or on behalf of a person residing out of the taxable territories or having any business connection with such person, or through whom such person is in the receipt of any income, profits or gains upon whom the Income-tax Officer has caused a notice to be, served of his intention treating him as the agent of the non-resident person shall for all the purposes of this Act, be deemed to be such agent."

It was contended on behalf of <ORG> that it was not, residing out of the taxable, territories; it is a private, limited company:hence it must be held to be residing in all places where it-

eams or deemed to earn any income. It was further urged that <NAME> was not a person employed by or on behalf of <ORG> nor did <ORG> have any business connections with <NAME>. It was also the contention of <ORG> that it did not receive any income, profits or gains through <NAME>. Lastly it was urged that the Income-tax Officer had not caused any notice to be served upon <NAME> intending to treat that company as the agent of <ORG>. On the other hand it was <NAME> which had volunteered to be assessed on behalf of <ORG>. For all these reasons it was said that <NAME> cannot be held to have been taxed as the agent of <ORG>. All these contentions were taken for the first time in this Court. They do not appear to have been taken either before the trial court or before the appellate court. The contentions raised involve determina- tion of questions of fact. In the plaint, it was specifically averred that the payments in question were made by <NAME> as the agent of <ORG>. That averment has not been specifically denied. In that view, we are not called upon to go into the various submissions noted above.

Before going into the other contentions, we may briefly deal with the contention that the suit was not properly instituted. There appears to be basis for <NAME>'s contention that this suit was inspired by <NAME> and <NAME>, the Secretary of <ORG>, who signed the plaint on behalf of <ORG> was a mere tool in his hands. There is also reason to believe that when the Directors of <ORG> ratified the action taken by <NAME>, they behaved in an irresponsible manner as seen earlier. But all the same it cannot be said, the suit is not maintainable. It is true that under the Articles of Association of <ORG>, a suit on. behalf of that company has to be filed with the consent of the Directors. But the Secretary of the company held a general power of attorney from the Directors and the action taken by him was approved by the Directors. Hence there can be no valid objection to the maintainability of the suit. Three important questions remain to be considered. They .are

1. Whether the claim made by <NAME> is barredby the rule of estoppel, or waiver or abandonment ?

2. Whether the decision of <NAME> to take (over the liability of <ORG> either with or without any guarantee from <NAME> brothers was ultra vires its powers and .lm15

3. Whether the claim made in the, suit or any portion thereof is barred by limitation ?

The judgments of the trial court. and the appellate court have not made any distinction between estoppel, waiver and abandonment. The distinction between those three concepts is fine but real. In this case, there was no plea of any release under s. 63 of the Contract Act. Hence the argument of Mr. <NAME>, learned Counsel for <NAME> on the scope of that section is irrelevant and we shall not go into the same. The essential question to be considered is whether the facts established in this case support the plea of estoppel put forward by <NAME>. If the answer to that question is in the affirmative then there is no need to examine whether there was any waiver or abandonment as pleaded by <NAME>.

'Estoppel' is a rule of equity. That rule has gained new dimensions in recent years. A new class of estoppel i.e. promissory estoppel has come to be recognised by the courts in this country as well as in England. The full implication of 'promissory estoppel' is yet to be spelled out. We shall presently refer to decisions bearing on that topic but before doing so, let us examine whether <ORG> made any representation to <ORG>, if so, what is that representation. Further, whether <ORG> acted on the basis of that representation to its disadvantage. It is not denied that year after year from 1941 to 1954 <ORG> passed resolutions undertaking to discharge the tax liability of <ORG>. In pursuance of those resolutions taxes due from <ORG> were paid. There can be no doubt that the steps taken by <ORG> were within the knowledge of <ORG> as it held 100,per cent shares of <ORG>. The Directors of <ORG> must have been its nominees. The profit and loss accounts of <ORG> must have been approved by <ORG> year after year at the general meeting of that company. In reality the <NAME> brothers were the owners of <ORG> as well as <ORG> though each of those companies was a separate legal entity. It may be that <ORG> did not declare dividends so that <ORG> may avoid paying tax at a high rate. But at the same time <ORG> would not have agreed for not distributing dividends unless <ORG> took over the responsibility of paying the tax on the dividends deemed to have been distributed. It is established that if dividends had been declared <ORG> would have got more than two and half times the tax paid on its behalf. The undistributed dividends were available to <ORG> to be utilised as working capital and thereby earn more profits. The arrangement regarding the nondistribution of dividends as well as the payment for the tax due from <ORG> by <ORG> must have been with the consent of <ORG> as well as <NAME> ,brothers. Those arrangements had clearly benefited all the parties. Till <NAME> entered the scene, there could not have been ,any conflict of interest between <ORG> and <ORG>. When <ORG> paid the tax due from <ORG>, legal fiction apart, it was really paying from the monies belonging to <ORG>. If for any reason, <ORG> had not undertaken the responsibility to discharge the tax liability of <ORG>, the latter could have taken steps to compel the former to declare dividends or even compel it to go into voluntary liquidation. Hence there can be no doubt that by acting on the basis of the representation made by <ORG>, <ORG> had placed itself in a disadvantageous position. But it was urged on behalf of <ORG> that the resolutions in question were mere promises to do something in the future : They were not representations of any fact and as those promises were not supported by any consideration, they afford no legal basis to resist the claim made in the plaint. <ORG>'s answers to these contentions are, that firstly those resolutions afford a good basis for raising a plea of promissory estoppel; secondly those representations became representation of fact as soon as the tax liability of <ORG> was discharged by <ORG> in pursuance of its resolutions and lastly the promises made under those resolutions were supported by consideration inasmuch as <ORG> in response to those promises refrained from enforcing its right to have the profits distributed as dividends. Now coming to the payments made after 1955, it is seen that according to the agreement between <ORG>, <ORG> and <NAME>, <ORG> was required to set apart a sum of Rupees 46 lakhs to discharge the tax liability of <ORG>. Accordingly <ORG> transferred Rupees 46 lakh from its general reserve to a special reserve. Further by the agreements dated October 31, 1957 set out earlier <ORG> took over the entire tax liability of <ORG> and t he <NAME> brothers agreed to reimburse <ORG> any payment made on behalf of <ORG> in excess of Rupees 46 lakhs. All these arrangements clearly enured to the benefit of <ORG> inasmuch as it allowed that company to refrain from declaring dividends and utilise that money for business purposes. There can be no doubt that it was done in the best interest of that company and with a view to further its business interests.

It is necessary to note that despite <ORG> paying the tax due from <ORG> from 1941 uptill 1953, those payments were not debited to the account of <ORG>; nor were they shown as debts due from <ORG> in the balance sheets placed before the general meeting. Those, balance sheets were approved by the general meeting. It was plainly admitted by the witnesses examined/ on behalf of <ORG> that the ,amounts paid on behalf of <ORG> were not considered as debts due from that company till about the time of filing the suit. ,In the general meeting of <ORG> held on March 29, 1956, the recommendation of <ORG> to transfer Rupees 46 lakhs from the general reserve to a special reserve for The purpose mentioned earlier was approved. Thereafter <ORG> paid the tax due from <ORG> for the assessment year 1952-53 and debited the same to that special reserve. While <ORG> was keeping <ORG> informed of the assessments made on it and the refunds ordered, at no time it made any ,demand on <ORG> to reimburse the moneys paid. On several occasions <ORG> entered into agreements with the .President of India undertaking to discharge the tax liabilities of <ORG> upto an agreed maximum. <ORG> was representing <ORG> in all the assessment proceedings It used to file appeals on behalf of <ORG> against the orders of the Income-tax Officers. It had received all the amounts ordered to be refunded. It was keeping <ORG> informed of the various orders passed by the Income-tax authorities, but yet without making any demand for the payment of tax paid by it. The documents produced in the case and the admissions made by the witnesses examined on behalf of <ORG> make it abundantly clear that the idea of claiming back the tax paid on behalf of <ORG> came to be entertained by <ORG> only after <NAME> came to control that company. With this background let us now consider whether <ORG> is estopped from making the claim in question. In support of its case <ORG> relies primarily on the doctrine of Promissory Estoppel. This doctrine has assumed importance in recent years though it was dimly noticed in some of the earlier cases. The leading case on the subject is <ORG> v. <ORG>). The facts of that case are as follows : <ORG> let to <ORG>, a subsidiary of the former a block of flats for a term of 99 years from September 29, 1937 at a ground rent of pound 2500 a year. In the early part of 1940, owing to war conditions then prevailing only a few of the flats in the block were let to tenants and it became apparent that <ORG> would be unable to pay the rent reserved by the lease out of the rent of the flats. Discussions took place between the 'Directors of the two companies and as a result on January 3, 1940, a letter was sent by the lessor to the lessee confirming that the ground rent of the (1) [1947] 1 K.B. 130.

premises would be reduced from X- 2500 to X- 1250 as from the beginning of the term. The lessee thereafter paid the reduced rent. By the beginning of 1945, all flats were let but the lessee continued to pay only the reduced rent. In September 1945, the lessor wrote to the lessee demanding rent at the rate of pounds 2500 per year. It also claimed at that rate for the quarters ending September 29 and December 25, 1945. The lessee repudiated that claim. The question for decision was whether the lessor was bound by the concession that it had agreed to show as the same was not supported by any consideration. Answering that question <NAME> (as he then was) held that where parties enter into an agreement which is intended to create legal relations between them and in pursuance of such arrangement one party makes a promise to the other which he knows will be acted on and which is in fact acted on by the promise, the court will treat the promise as binding on the promiser to the extent that it will not allow him to act inconsistently with it even although the promise may not be supported by consideration in the strict sense. Therein the court divided the claim made in the suit into two categories one for the period prior to the end of 1945 and the other for the period thereafter. It disallowed the claim of the lessor in respect of the former and allowed the claim relating to the later period.

The rule laid down in High Trees case(1) again came up for consideration before <ORG> in <NAME> v. <NAME>(2). Therein the court ruled that the principle. stated in High Trees' case(1) is that, where one party has,, by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the party who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relationship as if no such promise or assurance had been made by him, but he must accept their legal relations subject- to the qualification which he himself has so introduced, even though it is not supported in point of law by any consideration, but only by his word. But that principle does not create any cause of action which did not exist before; so that, where a promise is made which is not supported by any consideration, the promises cannot bring an action on the basis of that promise.- The principle enunciated in the High Trees' case(1) was also recognised by <ORG> in <ORG> v. <ORG>). That principle was adopted by this Court in <CITATION> (4). The facts of that case, in brief, are as follows (2)  2 K.B. 215.

(1) [1947] 1 K.B.130 (3) [1955] 2 All E.R.657 (4) [1968] 2. S.C.R. 366.

In exercise of its powers under S. 3 of the Imports and Exports (Control) Act, 1947, <ORG> issued the Imports (Control) Order, 1955 and other orders setting out the policy ,governing the grant of import and export licences. The <ORG> also evolved an Import Trade Policy, to facilitate the mechanism of the Act and the orders issued thereunder, and it was modified from time to time by issuing fresh Schemes in respect of new commodities. In 1962, the <ORG> promulgated the Export Promotion Scheme providing incentives to exporters of woolen textiles and goods. It provided for the grant to an exporter certificates to import raw materials of a total amount equal to 100% of the F.O.B. value of his exports. Clause 10 of the scheme provided that the Textile Commissioner could grant an import certificate for a lesser amount if he is satisfied, after holding an enquiry, that the-declared value of the goods exported is higher than the real value of the goods. The Scheme was extended to exports of woolen textiles and goods to Afghanistan. <ORG>s. Indo- Afghan Agencies Ltd. exported woolen goods to Afghanistan and were issued an Export Entitlement Certificate by the Textile Commissioner not for the full F.O.B. value of the goods exported but for a reduced amount on the basis of some private enquiry supposed to have been held by him but not after holding an enquiry as contemplated by the Scheme. The representation made by <ORG> in that con- nection to the <ORG> was rejected. Thereafter <ORG>s. Indo-Afghan Agencies Ltd. moved <ORG> to set aside the order of the Textile Commissioner and the government and to issue a direction to them to grant licences for an amount equal to 100% of the F.O.B. value of their exports. That prayer was resisted by the government on various grounds, inter alia, that the Export Promotion Scheme was administrative in character, that it contained mere executive instructions issued by the Government to the Textile Commissioner and created no enforceable rights in the exporters who exported their goods in pursuance of the scheme and it imposed no obligation on the government to issue import certificates. <ORG> and later this <ORG> in appeal rejected that contention. This <ORG> held that the government is not exempt from liability to carry out the representation made by it as to its future conduct. In arriving at that conclusion this <ORG> placed reliance on the decision of <NAME> in <NAME> v. Minister of Pensions(1). <NAME> (<NAME>) was dealing with a case of, serving army officer who wrote to <ORG> regarding a disability and received a reply that his: disability had been accepted as attributable to "military service". Relying on that assurance he forbore to obtain an independent medical opinion. The Minister of Pensions later decided that his (1) [1949] 1 K.B. 227.

disability could not be attributed to <ORG>. Therein the court held that as between the subjects such an assurance would be enforceable because it was intended to be binding, intended to be acted upon and was in fact acted upon,. and the assurance was also binding on the ground because no term could be implied that the <ORG> was at liberty to revoke. The rule laid down in these decisions undoubtedly advance the cause of justice and hence we have no hesitation in accepting it.

It was urged on behalf of <ORG> that the authority given to it to discharge the tax liabilities of <ORG> as well as the agreements entered into by it with <ORG> and the <NAME> brothers were ultra vires its powers, and consequently they provide no legal basis to resist the plaint claim. It is true that a <ORG> company cannot exceed the powers conferred on it under its Memorandum of Association. Therefore, for considering whether <ORG> was competent to undertake the liability it did, we have to look to the provisions in the Memorandum. Clause 3(b) of the Memorandum empowers the <ORG> to carry on business in India and elsewhere as merchants, general merchants, agents and traders etc. Sub-clause (q) of that clause gives power to , the company "to receive money on deposit at interest or otherwise and lend money to such per- sons, with or without security and on such terms as may seem expedient and in particular to customers of and other persons having dealing with the company and to give any guarantee or indemnity as may seem expedient."

Sub-cl. (x) authorises the company "to distribute among the members of the company in specie any property of the Company, but no distribution amounting to a reduction of capital shall be made without the sanction, if any, for the time being required by law." Sub-cl. (z) authorises the company to do all such other things as are incidental or conducive to the attainment of objects men- tioned in Memorandum.

As seen earlier the non-distribution of the dividends had augmented the working capital of the company thus affording it facility to earn more profits. Any step taken to augment the working capital of the company is undoubtedly incidental to the business of the company and further the same was conducive to the attainment of the objects mentioned in the Memorandum. When <ORG> paid the tax due from <ORG> in substance, though not in form, it was distributing a portion of its assets to the 100 per cent shareholder of the company but without reducing its capital. Hence we are unable to see how it can be said that <ORG> had acted ultra vires its powers. Mr. <NAME>, learned Counsel for <ORG> invited our attention to several decisions wherein the courts had taken the view that the actions taken by the companies concerned were ultra vires their powers. Those decisions were rendered on the facts of those cases. Whether a transaction entered into by a company can be said to be within its powers or not has to be decided on the basis of the facts established and the provisions in its Memorandum and not on the basis of any abstract rule. The only other question that remains to be considered is whether the suit claim is barred by limitation even on the assumption that claim is otherwise in order. For pronouncing on this question, it is first necessary to decide whether <ORG> had waived its lien over the shares held by <ORG>. There can be no doubt that <ORG> has the power to waive the paramount lien it has upon all the shares registered in the name of each member, for his debts or liabilities to the company. That much is clear from art. 22 of the Articles of Association. That article provides that "Unless otherwise agreed the registration of transfer of shares shall operate as a waiver of the Company's lien (if any) upon such shares."

In <NAME> on Companies Act s (13th Edn. at p. 797) dealing with the question of lien, it is observed ".......For such a provision is for the prote ction of the company, and is capable of being waived by the company. "

We have to see whether the company in fact had waived the lien it had in respect of the suit claim, assuming that the said claim is otherwise good. As seen earlier at all stages <ORG> took over the responsibility of paying the tax due on behalf of <ORG>. There was no idea of recovering the amount paid as tax, from <ORG>. When <ORG> sold 49 per cent of its shares to <ORG>, the same was registered without any objection. It was clearly admitted by the Secretary of <ORG> and other witnesses examined on behalf of that company that the idea of suing <ORG> for recovering the tax paid was con- ceived for the first time after <ORG> obtained the decree for specific performance. Under these circumstances, it is.clear that <ORG> had waived the lien that it might have had over the shares held by <ORG>. Hence the only claim that <ORG> could have made against <ORG> was a money claim. The present suit was filed on November 15, 1965. Hence it is governed by the provisions of the ' Limitation Act , 1963 which came into force on April 1, 1964. Article 23 of that Act fixes a period of three years for instituting a suit "for money payable to, the plaintiff for money paid for the defendant" and the cause of action for the same comme nces when the money is paid. To the same effect was Art. 63 of the Limitation Act , 1908. The amounts claimed in the present suit except those in respect of the assessment for the assessment year 1955-56 were all admittedly paid before November 15, 1962. Hence they are prima facie barred by limitation. So far as the payments made in respect of the assessment for the assessment year 1955-56 is concerned, <ORG> can have no, claim against <ORG> because under the amended s. 23-A of the Income-tax Act, 1922, that liability was that of <ORG> itself. But it was urged on behalf of <ORG> that in view of s. 15 (5) of the Limitation Act , 1963, the claim made, leaving aside the claim made in respect of the assessment for the assessment year 1955-56, is not barred. Section 15(5) prescribes :

"In computing the period of limitation for any suit the time during which the defendant has been absent from India and from the territories outside India under the administration of <ORG> shall be excluded."

It was urged on behalf of <ORG> that <ORG> is a non-resident company. Therefore it cannot be said that at any time it was present in India. Hence the suit is not barred. If this argument is correct then there can be no period of limitation for filing a suit against a non- resident company a proposition which is prima facie startling. Can we hold 'that s. 15(15) applies to a suit of the type with which we are concerned ? That provision contemplates the case of a defendant who has been absent from India. That article presupposes that defendant was at one time present in India and later he has been absent from India. A person who was never in India cannot be considered ,is having been absent from India. Factually a company cannot either be present in India or absent from India. But it may have a domicile or residence in India. Sometime questions have arisen as to what is the place of residence of an incorporated company. <NAME> in his Conflict of Laws (4th Edn. p. 152 rule 19) pointing out the difference between the domicile of a natural person and that of a corporation, says :

"The domicil of a human 'being is a fact which on certain points,, subjects him to the law of a particular country. The domicil of a corporation is a fiction suggested by the fact that a corporation is, on certain points, e.g., the jurisdiction of the <ORG>, subject to, the law of a particular country. A man, that is to say, is in some respects subject to the law of England because he has in fact an English domicil; a corporation is by a fiction supposed to have an English residence or domicil because it is in certain respects subject to the law of England. Hence a corporation may very well be, considered domiciled or resident, in a country for one purpose and not for another, and hence, too, the great uncertainty as to the facts which determine the domicil, or residence of a corporation. In each case the particular question is not, at bottom, whether a corporation has in reality a permanent residence in a particular country, but whether, for certain purposes (e.g. submission to the jurisdiction of the <ORG> or liability to taxation), a corporation is to be c onsidered as resident in England or in some other country."

The question of residence of an insurance company registered and having its registered office in a foreign country came up for consideration before <ORG> in <ORG> v. Public Trustee(1). There in <NAME> <NAME> quoted with approval the following passage from the judgment of Lord <NAME> in <ORG> v. <NAME>).

"I think that this company may properly be deemed both Scotch and English. It may, for the purposes of jurisdiction, be deemed to have two domiciles. Its business is necessarily carried on by agents, and I do not know why its domicile should be considered to be confined to the place where the goods are manufactured... There may be two domiciles and two jurisdictions; and in this case there are, as I conceive, two domiciles and a double sort of jurisdiction, one in Scotland and one in England; and for the purpose of carrying on their business, one is just as much a domicile of the corporation as the other."

The same view was expressed in that case by <ORG> and <ORG>

A division bench of <ORG> in <CITATION> (3) dealing with the scope of s. 13 of the Limitation Act 1908 which is identical with the resent s. 15(5) held that s. 13 must be read so, as to avoid the obvious absurdity that arises if such corporate bodies (1)  2. Ch. 201.

(3) A.I.R. 1929 Bom. p. 14.

(2) 5, H.L.C. 416.

are deemed to reside out of British India so that suits against them can never be barred at all. And this can be done by treating them as defendants, who by reason of their special character, are not absent from British India within the meaning of the section, because they have not got the same liberty as private individuals to reside personally in British India and attend to their affairs and they must do so through agents or representatives. Under those circumstances, they can be held to reside in British India in so far as they actually carry on business through their representatives in British India.

Section 15(5) of the Limitation Act, 1963 can be viewed in one o f the two ways i.e. that that provision does not apply to incorporated companies at all or alternatively that the incorporated companies must be held to-reside in places where they carry on their activities and thus being present in all those places. <ORG> is an Investment company. It had invested large sums of monies in <ORG>. Its Board of Directors used to meet in India now and then. It was, (through its representatives) attending the general meeting of the shareholders of <ORG>. Under these circumstances, it must be held to-have been residing in this country and consequently was not absent from this country. Hence s. 15(5) cannot afford any assistance to <ORG> to save the bar of limitation.

For the reasons mentioned above, this appeal fails and it is dismissed. Turning to the question of costs, 'from what we have said earlier, it is clear that there was no justification for bringing the suit. The suit was clearly engineered by <NAME> to attain certain ulterior purposes of his. But unfortunately neither he no his likely collaborators the Directors, of <ORG>, are before us. The only accessory of <NAME> who is before us is the Secretary of <ORG>, <NAME>. There is no justification to make <ORG> in which <NAME> has only 49 per cent shares to bear the costs. In the circumstances, we think it proper to direct <NAME> to bear the costs of both the parties in this <ORG>. The order made by the High <ORG> as regards costs will stand.

<NAME>

Appeal dismissed.