<NAME>, J.

1. These are two consolidated appeals from a judgment and two decrees dated November 13, 1922, of <ORG> at Madras. It is unnecessary to restate the prior procedure or judgments which dealt with a number of contentions in law, and questions of facts now either finally disposed of or no longer insisted upon. It is sufficient to say that when leave to appeal was granted by the order of <ORG> of April 19, 1923, it was on the specific ground that it raised the substantial question of law, namely, "whether an adoption of a son by a Hindu made after the execution and delivery of a deed of gift, but before registration thereof, renders a deed void as against the adopted son." This is the only ground of appeal which is set forth in the appellant's case, and respondents in their case, paragraph 2, take up the same position. Although, therefore, other grounds were indicated in the argument addressed to the <ORG> which might have been equally fatal to the appeal their Lordships think it right, in all the circumstances, to deal only with that which was the ground of judgment of <ORG>, and in respect of which leave to appeal was given.

2. The relevant facts, which are no longer disputed, lie within short compass. On September 9, 1891, a certain <NAME> executed a trust deed by which he appointed trustees to administer a trust for charity in the wide sense, including the maintenance of religious services at certain temples. In order to provide the necessary funds for the maintenance of these services, and for discharging the other duties imposed upon the trustees he set apart certain immovable properties belonging to him, the income of which was to be devoted to the purposes of the trust. At the date of the deed, <NAME> had no son. The deed, however, was executed on the footing that it was his immediate intention to adopt a son for the perpetuation of his lineage, as although he had two wives, one of whom was living with him at the time, he was still childless and despaired of having issue. There is no question now that this constituted a gift of immovable property within the meaning of Section 123 of the Transfer of Property Act, 1882, nor is there any question that the trust deed, on the day of its execution, was duly delivered to the trustees named therein.

3. On September 10, 1891, Vaithilingam, by a deed executed on that day, adopted the appellant, then five years old, as his son. On September 11, he executed a deed of guardianship to the newly adopted son, and on the 12th, a partition deed between himself and the guardian of that son, the effect of which need not, for the purpose of this judgment, be further referred to. On September 15, three days later, the deed of gift was registered. On this it was contended for the appellant that the deed of gift was not complete until registration, and that, as the grantor had before registration adopted the appellant as his son, the latter's rights in the family property had intervened so as to revoke or invalidate the gift. The leading statutory provisions on which the solution of the question depends are Sections 122 and 123 of the Transfer of Property Act, 1882, and Sections 47 and 49 of the Indian Registration Act III of 1877. Section 122 of the Transfer of Property Act is as follows :-

'Gift' is the transfer of certain existing movable or Immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.

Such acceptance must be made during the life-time of the donor and while he is still capable of giving.

If the donee dies before acceptance, the gift is void.

4. Section 123 is in these terms :-

For the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses

5. The controversy in the numerous cases in the Courts of India which have dealt with this point has always centred round the words in this section :-

The transfer must be effected by a registered instrument, and it has been forcibly argued that, until registration, there is no complete gift, and that if the donor dies or revokes or becomes incapable of making the gift before registration, it cannot take effect. On the other hand, attention must be directed to Section 47 of the Indian Registration Act of 1877, which is in these terms :-

A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had bean required or made, and not from the time of its registration.

6. The learned Chief Justice in the <ORG> below, after referring to the above sections, said :-

The effect of these sections in my judgment is that if a title is complete except for registration, no subsequent alienation or dealing with the property by the vendor or donor as the case may be can defeat the title which on registration becomes an absolute title dating from the date of the execution of the document.

7. The other two Judges concurred in this view, making special reference to the case of <CITATION> (1916) I.L.R. 40 Mad. 204, F.B., which, being a decision of <ORG>, was binding upon them. In that case the donor died on the day following the execution of the deed of gift, and the deed was not presented for registration until a period of six months had elapsed from the date of his death; facts which, as it appears to their Lordships, were cartainly not less cogent in favour of imcompleteness than are those in the present case; and there the District Judge held that the gift deed, not having been registered by the donor during her lifetime, was void, and that the post-mortem registration was of no effect. This judgment was, however, reversed on appeal by the unanimous decision of <ORG>. There was no express finding of fact, so far as appears from the report, that the deed of gift had been delivered to and accepted by the donee prior to the death of the donor, although, perhaps, this may be implied from the circumstances. In the present case, fortunately, there is no room for doubt on this point, because the learned Judges of <ORG> remitted this question of fact to the Subordinate Judge and he reported that the deed had been delivered over, on the day of its execution, to one of the trustees appointed under it on behalf of himself and the other trustee. The decision of <ORG> in <NAME> case is thus summarized in the head-note :-

There is nothing in Section 123 of the Transfer of Property Act which requires the donor to have the deed registered; all that is required is that he should have executed the deed. Once such an instrument is duly executed, the Registration Act allows it to be registered even though the donor may not agree to its registration, and upon registration the gift takes effect from the date of execution.

8. Their Lordships think that this statement of the law needs qualification by reference to Section 122 of the Transfer of Property Act, and is only correct upon the footing that the gift had been accepted by or on behalf of the donee during the lifetime of the donor. A deed of gift executed in accordance with the terms of Section 123 of immoveable property but never communicated to the intended donee, and remaining in the possession of the grantor, undelivered, would, in their Lordships' opinion, not come within the ruling of <ORG> in the case in question.

9. The only other case to which it is necessary to refer is a Full Bench decision of <ORG> in 1924, namely, <CITATION> (1924) I.L.R. 49 Bom. 388: s.c. 27 Bom. L.R. 290, F.B. The circumstances in that case were very much the same as in the present, and the decision is thus correctly expressed in the head-note :-

Where the donor of immovable property has handed over to the donee an instrument of gift duly executed and attested, and the gift has been accepted by the donee, the donor has no power to revoke the gift prior to the registration of the instrument.

10. This case was very fully argued and the argument on behalf of the appellant in the present appeal could not be better stated than it was in the dissenting judgments of <NAME> Acting C.J. and <NAME>; and these arguments were all brought very forcibly under their Lordships' notice, and supplemented by the learned counsel for the appellant. Their Lordships, however, cannot accept them. They are unable to see how the provision of Section 123 of the Transfer of Property Act can be reconciled with Section 47 of the Indian Registration Act, except upon the view that, while registration is a necessary solemnity in order to the enforcement of a gift of immoveable property, it does not suspend the gift until registration actually takes place. When the instrument of gift has been handed by the donor to the donee and accepted by him, the former has done everything in his power to complete the donation and to make it effective. Registration does not depend upon his consent, but is the act of an, officer appointed by law for the purpose, who, if the deed is executed by or on behalf of the donor and is attested by at least two witnesses, must register it if it is presented by a person having the necessary interest within the prescribed period. Neither death, nor the express revocation by the donor, is a ground for refusing registration, if the other conditions are complied with. Their Lordships accordingly find themselves in complete agreement with the judgment of <ORG> of <ORG> in the case cited. As this decision, and the similar decision of <ORG> of <ORG>, had settled the law for these Presidencies, it is unnecessary to refer to the various conflicting decisions of inferior tribunals which were overruled. Their Lordships apprehend that the Judges of <ORG>, in allowing leave to the appellant in the present case to proceed with his appeal, desire to elicit an authoritative opinion as to the soundness of the two latest decisions in <ORG> and their Lordships think it desirable that a point which has occasioned so much controversy in the past should be settled by a decision, which will apply to the whole of India.

11. Their Lordships will accordingly humbly advise His Majesty that the judgment and decrees of <ORG> should be affirmed, and that this appeal should be dismissed. The appellant must pay the costs.


PETITIONER: INDIAN AND EASTERN NEWSPAPER SOCIETY NEW DELHI Vs. RESPONDENT: COMMISSIONER OF INCOME TAX, NEW DELHI DATE OF JUDGMENT31/08/1979 BENCH: <NAME>, R.S. BENCH: <NAME>, R.S. BHAGWATI, P.N. TULZAPURKAR, V.D. CITATION: 1979 AIR 1960 1980 SCR (1) 442 1979 SCC (4) 248 ACT: Income Tax Act 1961-S. 147(b)-Scope of-"Information" "Reason to believe"-Meaning of-Opinion of audit party of <ORG>-If would constitute "information". HEADNOTE: Section 147(b) of the Income Tax Act, 1961 provides that if an Income Tax officer has, in consequence of information in his possession, reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may assess or reassess such income. The internal audit organisation of the income tax department, in the course of auditing the income tax records pertaining to the assessee for certain assessment years stated that the assessee's income on account of letting out of halls and rooms should not have been assessed as income from business but an assessment should have been made under the head "Income from property". Treating the report as information in his possession under s. 147(b) the Income Tax officer re-assessed the assessee's income The Appellate Assistant Commissioner reversed the Income Tax officers order. On the other hand, <ORG> took the view that the Income Tax officer had jurisdiction to proceed under s.147(b). In a reference under s.257 of the Income Tax Act the question was whether the Income Tax officer was legally justified in reopening the assessment under s. 147(b) on the basis of the view expressed by the Internal Audit party received by him subsequent to the original assessment. Allowing the appeal, ^ HELD: The opinion of the internal audit organization of the <ORG> on a point of law cannot be regarded as information within the meaning of s. 147(b) of the Act. [455A]. 1. (a) An assessment proceeding, which is a quasi- judicial proceeding, acquires finality on the assessment order being made. The finality of such an order can be disturbed only in proceedings, and within the confines, provided by law. An appeal, revision and rectification are proceedings in which the finality of the assessment may be questioned. Section 147 , under which an assessment may be reopened, is a proceeding for assessing income which has escaped assessment. [446F-G] 2. In cases falling under s. 147(b) "information" is an indispensable ingredient. The word ''information'' has been interpreted by this Court to mean not only facts or factual material but include information as to the true and correct state of the law and, therefore, information as to relevant judicial decisions. The term is also defined as "instruction" or Knowledge derived from an external source concerning facts or particular, or as to law, relating to n matter bearing on the assessment. [447D- <CITATION> 35 I.T.R. 1 (S.C.)=  Sup. I SCR 10, <CITATION> 67 I.T.R. Il(SC)= I SCR 10, referred to. 443 3.(a) By its inherent nature, a fact has concrete existence. It influences the determination of an issue by the mere circumstance of its relevance. It requires no further authority to make it significant. [447-H]. (b) The term 'law' is used in the sense of norms or guiding principles having legal effect and legal consequences. To possess legal significance for that purpose, law must be enacted or declared by a competent authority. The legal sanction vivifying it imparts to it its force and validity and binding nature. Law may be statutory law enacted by a competent legislative authority, or it may be judge made law emanating from a declaration or exposition of the content of a legal principle or the interpretation of a statue and may in particular cases extend to a definition of the status of a party or the legal relationship between the parties, the declaration being rendered by a competent judicial or quasi-judicial authority empowered to decide questions of law between contending parties. The declaration or exposition is ordinarily set forth in the judgment of a court or the order of a tribunal. Such declaration or exposition in itself bears the character of law. In every case, therefore, to be law it must be a creation by a formal source, either legislative or judicial authority. A statement by a person or body not competent to create, or define the law cannot be regarded as law. [448A-D] (c) Where s. 147(b) is read as referring to 'information' as to law, what is contemplated is 'information' as to the law created by a formal source. It is law which, because it issues from a competent legislature or a competent judicial or quasi-judicial authority, influences the course of the assessment and decides any one or more of these matters which determine the assessee's tax liability [448G] 4. The Internal Audit organisation of the <ORG> was set up primarily for imposing a check over the arithmetical accuracy of the computation of income and the determination of tax. The audit of income tax receipts having been entrusted to the Comptroller and Auditor-General of India, it is intended as an exercise in removing mistakes and errors in income tax records before they are submitted to the scrutiny of the Comptroller and Auditor General. The audit by the Comptroller and Auditor General is, by virtue of s. 16 of the Comptroller and Auditor General (Duties, Powers and Conditions of Service) Act, 1971 intended to ensure the sufficiency or otherwise of the rules and procedures prescribed for the purpose of securing an effective check on the assessment, collection and proper allocation of revenue and to ascertain whether the rules and procedure are being fully observed and L nothing more. Therefore the contents of an internal audit report cannot be construed as enjoying the status of a declaration of law binding on the Income Tax Officer. Both the internal audit party of the <ORG> and the Audit report of the Comptroller and Auditor General perform essentially administrative or executive functions and cannot be attributed the power of judicial supervision over the quasi-judicial acts of income tax authorities. The statute does not contemplate such power The opinion of the audit party in regard to the application of one section of the Income Tax Act instead of another by the Income Tax officer is not law because it is rot a declaration by a body authorised to declare the law. [450B-F] 444 5. While the law may be enacted or laid down only by a. body or person with authority in that behalf, knowledge or awareness of the law may be communicated by any one. No authority is required for the purpose of communicating knowledge or awareness of the law. [450G] 6 (a) In every case the Income Tax officer must determine for himself what the effect and consequence of the law mentioned in the audit note are and whether in consequence of the law which has come to his notice he can reasonably believe that income had escaped assessment. The basis of his belief must be the law of which he has now become aware. The true evaluation of the law in its bearing on the assessment must be made directly and solely by the Income Tax officer. [451C- <CITATION> 35 I.T.R. I (SC)=  Sup. I SCR 10, <CITATION> 67 I.T.R. 11 (SC)= 1 SCR 10, <CITATION>  82 I.T.R. 831 followed <NAME>, Income Tax officer, Croup Circle 11(1), <CITATION> , 109 I.T.R. 537, <CITATION> , 102 I.T.R. 287, over-ruled. Assistant Controller of Estate Duty Y. Nawab Sir Mir Osman Ali Khan Bahadur, 72 I.T.R, 376 referred to. <CITATION> 84 I.T.R 584, Commissioner of Income Tax v. <NAME> 85 I.T.R 102, <CITATION> officer, 99 I.T.R. 148, <NAME> v Com missioner of Income Tax, Kerala, 90 I.T.R 503, <CITATION> . 107 I.T.R. 570, <CITATION> officer, Companies Circle, 'A' Ward, Kanpur, 111 I.T.R. 287 not approved. (b) The error discovered by the Income Tax Officer on a. reconsideration of the same material (and nothing more) does not give the Income Tax Officer the power to reopen the assessment. [451G] (c) The submission of the <ORG> that upon receipt of the audit note the Income Tax officer discovers or realises that a mistake has been committed in the original assessment and therefore the discovery of the mistake would be "information" within the meaning of s. 147(b) is inconsistent with the terms of the section. What the section envisages is that the Income Tax officer must first have information in his possession and then in consequence of such information he must have reason to believe that income has 'escaped assessment. The realisation that income has escaped assessment is covered by the words "reason to believe", and it follows from the "information" received by him. The information is not the realisation; the information gives birth to the realisation. [452C-D] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Tax Reference Case Nos. 1 to 4 of 1973.

Income Tax Reference under section 257 of Income Tax Act 1961 made by <ORG> Delhi Bench 'C' in R.A. Nos. 491 to 494 of 1971-72 (I.T.A. NOS. 6992,19629- 19631 of 1967-68).

<NAME>, (Mrs.) <NAME>, <NAME> an(3 J. B. Dadachanji for the appellant.

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

(Dr.) <NAME>, <NAME> and <NAME> for the Intervener.

The Judgement of the Court was delivered by <NAME>, J.-Can the view expressed by an internal audit party of <ORG> on a point of law be regarded as ''information' for the purpose of initiating proceedings under section 147(b) of the Income Tax Act, 1961 ? opinion on the question has been divided among the High Courts, and accordingly the present cases have been referred by <ORG> under s. 257 of the Act.

The assessee, Messrs. <ORG>, is a society registered under the Indian Companies Act . It is a professional association of newspapers established with the principal object of promoting the welfare and interest of all newspapers. The assessee owns a building in which a conference hall and rooms are let out on rent lo its members as well as to outsiders. Certain other services are also provided to the members. The income from that source was assessed to tax all along as income from business. It was so assessed for the years 1960-61, 1961-62, 1962-63 and 1963-64 also.

<ORG> includes an internal audit organisation whose function it is to examine income-tax records and check mistakes made therein with a view ultimately to improve the quality of assessments. In the course of auditing the income-tax records pertaining to the assessee for the assessment years 1960-61 to 1963-64, the internal audit party expressed the view that the money realised by the assessee on account of the occupation of its conference hall and rooms should not have been assessed as income from business. It said that an assessment should have been made under the head "Income from property". The Income Tax Officer treated the contents of the report as "information" in his possession for the purpose of s. 147(b) of the Income Tax Act. 1961, and reassessed the income on that basis. The Appellate Assistant Commissioner allowed the appeals filed by the assessee holding, inter alia, that in law it could not be said that the Income Tax officer had any "information" in his possession enabling him to take action under s. 147(b) . On appeal by the <ORG>, <ORG>, Delhi Bench noticed a conflict of judicial opinion on the question whether the internal audit report could be treated as "information" for the purpose of s. 147(b). <ORG> in <CITATION> 11(1), Ahmedabad had held that an internal audit report could not be regarded as "information", while <ORG> in <CITATION> has expressed a contrary view. Following the view adopted by <ORG>, the Tribunal held that the Income Tax officer had jurisdiction to proceed under s. 147(b) . The assessee applied for a reference, and having regard to the difference between the High Courts on the point, the Tribunal has considered it expedient to refer the following question of law directly to this Court:-

"Whether, on the facts and in the circumstances of the case, the Income-tax officer was legally justified in reopening the assessments under section 147 (b) for the years 1960-61, 1961-62, 1962-63 and 1963-64 on the basis of the view expressed by the Internal Audit party and received by him subsequent to the original assessment ?"

Since then, the judgment of <ORG> in <NAME> case (supra) has, on appeal, been reversed by this Court in <NAME>, Income Tax Officer, Group Circle 11(1) <CITATION> . It has been strenuously contended that the view taken by this Court calls for further consideration. Having regard to the dimensions of the controversy and the importance of the question, we have been persuaded to take a fresh look at the point.

An assessment proceeding is a quasi judicial proceeding. It acquires finality on the assessment order being made. And the finality of such an order can be disturbed only in proceeding, and within the confines provided by law. An appeal, revision and rectification are proceedings in which the finality may be questioned. The assessment may also be reopened under section 147 of the Act. It is a proceeding for assessing income which has "escaped assessment". Section 147 reads:-

"147. If-

(a) the Income Tax officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income Tax officer or Lo disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or

(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153 , assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned."

In cases falling under section 147(b) , the expression "information" prescribes one of the conditions upon which a concluded assessment may be reopened under that provision. It is an indispensable ingredient which must exist before the section can be availed of. What does "information" in section 147(b) connote ? In <NAME> v. Commissioner of Income-tax this <ORG>, construing the corresponding section 34(1) (b) of the Indian Income Tax Act , 1922 held the word "information" to mean not only facts or factual material but to include also information as to the true and correct state of the law and, therefore, information as to relevant judicial decisions. Thereafter, in <CITATION> , the <ORG> defined the expression "information" in section 147(b) of the Income-Tax Act 1961 as "instruction or knowledge derived from an external source concerning facts or particulars, or as to law, relating to a matter bearing on the assessment." That definition has been reaffirmed in subsequent cases, and with it as the point of departure we shall now proceed.

In so far as the word "information" means instruction or know- ledge concerning facts or particulars, there is little difficulty. By its inherent nature, a fact has concrete existence. It influences the determination of an issue by the mere circumstance of its relevance. It requires no further authority to make it significant. Its quint essential value lies in its definitive vitality.

But when "information" is regarded as meaning instruction or knowledge as to law the position is more complex. When we speak of "law", we ordinarily speak of norms or guiding principles having legal effect and legal consequences. To possess legal significance for that purpose, it must be enacted or declared by competent authority. The legal sanction vivifying it imparts to it its force and validity and binding nature. Law may be statutory law or, what is popularly described as, judge-made law. In the former case, it proceeds from enactment having its source in competent legislative authority. Judge made law emanates from a declaration or exposition of the content of a legal principle or the interpretation of a statute, and may in particular cases extend to a definition of the status of a party or the legal relationship between parties, the declaration being rendered by a competent judicial or quasi- judicial authority empowered to decide questions of law between contending parties. The declaration or exposition is ordinarily set forth in the judgment of a court or the order of a tribunal. Such declaration or exposition in itself bears the character of law. In every case, therefore, to be law it must be a creation by a formal source, either legislative or judicial authority. A statement by a person or body not competent to create or define the law cannot be regarded as law. The suggested interpretation of enacted legislation and the elaboration of legal principles in text books and journals do not enjoy the status of law. They are merely opinions and, at best, evidence in regard to the state of the law and in themselves possess no binding effect as law. The forensic submissions of professional lawyers and the seminal activities of legal academics enjoy no higher status. Perhaps the only exception is provided by the writings of publicists in international law, for in the law of nations the distinction between formal and material sources is difficult to maintain.

In that view, therefore, when section 147(b) of the Income Tax Act is read as referring to "information" as to law, what is contemplated is information as to the law created by a formal source. It is law, we must remember, which because it issues from a competent legislature or a competent judicial or quasi-judicial authority, influence the course of the assessment and decides any one or more of those matters which determine the assessee's tax liability.

In determining the status of an internal audit report, it is necessary to consider the nature and scope of the functions of an internal audit party. The internal audit organisation of <ORG> was set up primarily for imposing a check over the arithmetical accuracy of the computation of income and the determination of tax, and now, because of the audit of income-tax receipts being entrusted to the A Comptroller and Auditor-General of India from 1960, it is intended as an exercise in removing mistakes and errors in income tax records before they are submitted to the scrutiny of the Comptroller and Auditor-General. Consequently, the nature of its work and the scope of audit have assumed a dimension ca-extensive with that of Receipt Audit. The nature and scope of Receipt Audit are defined by section 16 of the Comptroller and Auditor General's-(Duties, Powers and Conditions of Services) Act, 1971.

Under that section, the audit by the Comptroller and Auditor General is principally intended for the purposes of satisfying him with regard to the sufficiency of the rules and procedures prescribed for the purpose of securing an effective check on the assessment, collection and proper allocation of revenue. He is entitled to examine the accounts in order to ascertain whether the rules and procedures are being duly observed, and he is required, upon such examination, to submit a report. His powers in respect of the audit of income-tax receipts and refunds are outlined in the <ORG>'s Circular No. 14/19/ 56-II dated July 28, 1960. Paragraph 2 of the Circular repeats the provisions of section 16 of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971. And paragraph 3 warns that "<ORG> should not in any way substitute itself for the revenue authorities in the performance of their statutory duties." Paragraph 4 declares:

"4. Audit does not consider it any part of its duty to pass in review the judgment exercised or the decision taken in individual cases by officers entrusted with those duties, but it must be recognised that an examination of such cases may be an important factor in judging the effectiveness of assessment procedure .. It is however, to forming a general judgment rather than to the detection of individual errors of assessment, etc. that the audit enquiries should be directed. The detection of individual errors is an incident rather than the object of audit."

Other provisions stress that the primary function of audit in relation to assessments and refunds is the consideration whether the internal procedures are adequate and sufficient. It is not intended that the purpose of audit should go any further. Our attention has been invited to certain provisions of the Internal Audit Manual more specifically defining the functions of internal audit in <ORG>. While they speak of the need to check all assessments and refunds in the light of the relevant tax laws, the orders of the Commissioners of Income Tax and the instructions of <ORG>, nothing contained therein can be construed as conferring on the contents of an internal audit report the status of a declaration of law binding on the Income Tax Officer. Whether it is the internal audit party of <ORG> or an audit party of the Comptroller and Auditor- General, they perform essentially administrative or executive functions and cannot be attributed the powers of judicial supervision over the quasi-judicial acts of income tax authorities. The Income Tax Act does not contemplate such power in any internal audit organisation of <ORG>; it recognises it in those authorities only which are specifically authorised to exercise adjudicatory functions. Nor does section 16 of the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 envisage such a power for the attainment of the objectives incorporated therein. Neither statute supports the conclusion that an audit party can pronounce on the law, and that such pronouncement amounts to "information" within the meaning of section 147(b) of the Income Tax Act, 1961.

But although an audit party does not possess the power to so pronounce on the law, it nevertheless may draw the attention of the Income Tax officer to it. Law is one thing, and its communication another. If the distinction between the source of the law and the communicator of the law is carefully maintained, the confusion which often results in applying section 147(b) may be avoided. While the law may be enacted or laid down only by a person or body with authority in that behalf, the knowledge or awareness of the law may be communicated by anyone. No authority is required for the purpose.

In the present case, an internal audit party of <ORG> expressed the view that the receipts from the occupation of the conference hall and rooms did not attract section 10 of the Act and that the assessment should have been made under section 9 . While  sections 9 and 10 can be described as law, the opinion of the audit A party in regard to their application is not law. It is not a declaration by a body authorised to declare the law. That part alone of the note of an audit party which mentions the law which escaped the notice of the Income Tax officer constitutes "information" within the meaning of section 147(b) ; the part which embodies the opinion of the audit parts in regard to the application or interpretation of the law cannot be taken into account by the Income Tax Officer. In every case, the Income Tax officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot for the purpose of such belief, add to or colour the significance of such law. In short, the true evaluation of the law in its bearing on the assessment must be made directly and solely by the Income Tax officer.

Now, in the case before us, the <ORG> officer had, when he made the original assessment, considered the provisions of sections 9 and 10 . Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion of material already considered by him. The <ORG> contends that it is open to him to do so, and on that basis to reopen the assessment under section 147(b) . Reliance is placed on <ORG> , where a Bench of two learned Judges of this Court observed that a case where income had escaped assessment due to the "oversight, inadvertence or mistake" of the <ORG> officer must fall within section 34(1) (b) of the Indian <ORG> Act , 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the <ORG> officer discovers that he has committed an error in consequence of which income has escaped assessment it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and not more) does not give him that power. That was the view taken by this Court in <ORG> (supra), <ORG> and Company (supra) and <ORG> . and we do not believe that the law has since taken a different course. Any observations in <ORG> v Commissioner of <ORG> (supra) suggesting the contrary do not, we say with respect, lay down the correct law.

A further submission raised by the <ORG> on section 147(b) of the Act may be considered at this stage. It is urged that the expression "information" in section 147(b) refers to the realisation by the <ORG> officer that he has committed an error when making the original assessment. It is said that, when upon receipt of the audit note the <ORG> officer discovers or realizes that a mistake has been committed in the original assessment, the discovery of the mis take would be "information" within the meaning of section 147(b) . The submission appears to us inconsistent with the terms of section 147(b) . Plainly, the statutory provision envisages that the <ORG> officer must first have information in his possession, and then in consequence of such information he must have reason to believe that income has escaped assessment. The realisation that income has escaped assessment is covered by the words "reason to believe'. and it follows from the "information" received by the <ORG> officer. The information is not the realisation, the information gives birth to the realisation.

The recent decision of this Court in <CITATION> (supra) may be examined now. While making an assessment on a Hindu undivided family, the <ORG> officer allowed a deduction of municipal taxes in determining the annual value of two house properties occupied by the assessee. Subsequently, the <ORG> officer re-opened the assessment on receipt of a report from the office of <ORG> of India that on a true interpretation of s. 23(2) of the <ORG> Act, 1961, the deduction of municipal taxes was not admissible in the computation of the annual value of self- occupied house properties. The assessee contended that the report did not constitute "information" within the meaning of section 147(b) of the Act, and <ORG> accepted the plea in the view that information as to law would consist of a statement by a person, body or authority competent and authorised to pronounce upon the law and invested with the authority to do so, and that <ORG> was not such competent or authorised authority. On appeal by the <ORG>, a Bench of two learned Judges of this Court, although endorsing the principle enunciated by <ORG>, said that the audit department was the proper machinery to scrutinise assessments made by the <ORG> officer and to point out errors of law contained therein, and <ORG> had erred in taking the strict view which it did. The Court rested its decision on <CITATION> , <CITATION> (supra), Commissioner of <ORG> v. <NAME> and <CITATION> officer.

<CITATION> osman Ali Khan Bahadur (supra), this Court held the opinion of <ORG> as regards the correct valuation of securities for the purpose of estate duty to be "information" within the meaning of section 59 of the Estate Duty Act, 1953 on the basis of which the Controller of Estate Duty was held entitled to entertain a reasonable belief that property assessed to estate duty had been under- valued. The circumstance that the opinion of the <ORG> was rendered in an appeal filed before it under the Estate Duty Act against the assessment made by the Assistant Controller of Estate Duty was apparently not brought to the notice of this Court when it heard <CITATION> (supra). The opinion of the <ORG> represented its view as a quasi-judicial authority possessing jurisdiction to lay down the law. Although the <ORG> did not enhance the valuation of the securities in the appellate proceeding because of the argument advanced by the appellant, nonetheless its observations amounted to information as to the law. It was not a case where the <ORG> was functioning as an extrajudicial authority, performing administrative or executive functions, and not competent or authorised to pronounce upon the law. <ORG> in <CITATION> (supra) held that the scrutiny note of <ORG> constituted "information" within the meaning of section 147(b) of the Income Tax Act because the Comptroller and <ORG>or-General of India was empowered by statute to scrutinise the proceedings of <ORG> and to point out defects and mistakes which adversely affected the <ORG>. <ORG> considered that the view that information as to law could be gathered only from the decisions of judicial or quasi- judicial authorities was unduly restrictive. In Commissioner of Income-tax v. <NAME> (supra), <ORG> also regarded the note put up by <ORG> as "information" within the meaning of section 147(b) of the Act, but it appears to have assumed, without anything more, that an audit note would fall within that expression. As regards <CITATION> officer (supra) the "information" consisted in a note of the <ORG> and <ORG> that the payment of interest by the assessee was in fact made to his own account in the <ORG> and, therefore, in law the money paid did not vest in the Government and, consequently, the original assessment was erroneous in so far as it allowed the deduction of the interest as expenditure made by the assessee. <ORG> upheld the reassessment on the finding that the note of the <ORG> and <ORG> had to be taken into account by the Income Tax officer, because in his executive capacity he had to be guided by the advice rendered by <ORG> and he had to pay due regard to the note of the <ORG> because the officers of the <ORG> Department were experts empowered to examine and check upon the work of the Income Tax officers. It seems to us that the considerations on which <ORG> rested its judgment are not correct. But the decision of the case can be supported on the ground that the basic information warranting the re- opening of the assessment was the fact that the payment of interest was made to the <ORG> account of the assesses himself. That the money so paid did not vest in the Government was a conclusion which followed automatically upon that fact, and no controversy in law could possibly arise on that point.

On the considerations prevailing with us, we are of opinion that the view taken by <ORG> and <ORG> in the aforementioned cases is wrong and we must, with great respect, hold that this <ORG> was in error in the conclusion reached by it is. <CITATION> (supra).

Our attention has been drawn to the further decision of <ORG> in <CITATION> and the decisions of <ORG> in <CITATION> and <CITATION> officer, Companies Circle, "A" Ward, Kanpur. <ORG> merely followed its earlier judgment in Commissioner of Income Tax v. <NAME> (supra) and <ORG> was impressed by the same reasons substantially which persuaded <ORG> and <ORG> in the cases referred to above.

Therefore, whether considered on the basis that the. nature and scope of the functions of the internal audit organisation of <ORG> are co-extensive with that of Receipt Audit or on the basis of the provisions specifically detailing its functions in the Internal Audit Manual, we hold that the opinion of an internal audit party of <ORG> on a point of law cannot be regarded as "information" within the meaning of section 147(b) of the Income Tax Act, 1961.

The question referred by <ORG> is answered in the negative, in favour of the assessee and against the <ORG> The assessee is entitled to one set of costs in these appeals.

P.B.R. Appeals allowed .


ORDER <NAME>, J.

1. The defendants have come up in appeal feeling aggrieved by the order dated 12-7-1996 passed by a learned Single Judge of this Court (Original Side) confirming the ex parte order of injunction and rejecting the defendants, application for vacation of the ex parte order of injunction dated 23-5-1996 in a trade mark case.

2. The plaintiff <ORG> is engaged in the manufacture and sale of Ayurvedic medical preparations since 1930. One of the preparation manufactured and marketed by the plaintiff is under the trade mark Liv-52. It is a liver tonic prescribed for liver disorder and to protect the liver against various dysfunction, damage and hepatotoxins. It is also advised for promotion appetite and growth. The trade mark Liv. 52 is registered since 10-7-1957 in Class 5 as medical proportion for the treatment of disorders of liver. The Liv. 52 label is also registered in Class 5 as medical pharmaceutical and Ayurvedic preparation and substances since 15-2-1987.

3. The grievance of the plaintiff is against the use by the defendants of the trade mark LIV-T for its similar product, the defendants are also manufacturers and merchants of Homoeopathic pharmaceutical preparations.

4. According to the plaintiff, the mark Liv. 52 is a coined word. It has acquired tremendous goodwill in the market and is associated exclusively with the plaintiff. The defendants have come to the market in 1996 with the mala fide and fraudulent intention of utilising the goodwill earned by the plaintiff. The mark LIV-T is deceptively similar with the mark Liv. 52 of the plaintiff and is likely to mislead or confuse those who are likely to purchase such preparations in the market. The plaintiff complains of infringement of its trade mark as also passing off by the defendants.

5. According to the defendants they are renowned manufacturers of Homoeopathic and Ayurvedic preparations. They have a collaboration with <ORG> of France from whom they have obtained the technical know-how for many of its Homoeopathic formulations. They obtained a drug licence to manufacture its LIV-T formulation in the year 1987. They also applied for registration of the trade mark LIV-T together with bits packaging carton in April, 1988. The application No. 490010 is pending with the Registrar of the Trade Marks. Ever since 1989 they have been marketing their preparations under their trade mark and figures of sales have risen from Rs. 96,843/- in the year 1988-89 to Rs. 46,68,614/- in 1995-96.

5.1. The defendants have also submitted that the word 'Liv' is an abbreviation of Liver, a human organ. There are a good number of medicines already in the market associated with treatment of liver ailments/disorders using the word Liv as suggestive of liver and prefixing or suffixing words or figures so as to confer a distinction on the name associated with the manufacturer or trader. It is submitted by the defendant that mark Liv-T is neither similar to nor deceptive with the plaintiff's mark Liv-52. Such medicines cannot be manufactured without a drug licence nor sold in retail without any medical prescription. It is not likely that the prospective customer would be deceived or confused. The defendants have also pleaded as their defense the delay is bringing the action by the plaintiff.

5.2. The defendants have filed a certificate issued by Chartered Accountant certifying the figures of sales relied on by them. The defendants have also filed search report dated 31-5-1996 which goes to show hundreds of medical/pharmaceutical preparation available in the market with trade marks, one of the components whereof is 'Liv', used in association with other words or figures. It is not necessary to reproduce entire result of search. It would suffice to mention a few trade marks which are already in the market being used by several companies. LIV as an abbreviation of Liver is a generic term or a descriptive word - its use suggesting reference of the preparation to liver. It has become public juris on which no one can claim proprietory rights or right to exclusive use.

5.3. Yet another plea raised by the defendants in their application seeking vacation of the ex parte order of injunction was based on non-compliance by the plaintiff with the mandatory provisions of Order 39 Rule 3 CPC demanding instantaneous vacating of the order of injunction.

6. The learned Single Judge has held against the defendants on all the relevant issues. This is how the defendants are in appeal.

7. The following questions arise for decision :

(1) Whether the trade mark LIV-T can be said to be deceptively similar to or confusing with the trade mark LIV-52;

(2) Whether the provisions of Order 39 Rule 3 are mandatory ? If so, what is the effect of non-compliance therewith ?

8. Before dealing with the contentions of the parties we may refer to a few statutory provisions and settled principles in the field of trade marks. In particular let us refer to what is a trade mark ? How the rights are acquired therein ? What is the effect of use of common descriptive or generic words as trade mark or as one of the constituents of the word or phrase constituting a trade mark ? How the same principles would apply and operate in the filed of medicinal and pharmaceutical preparations with which we are concerned ? What amounts to infringement of a trade mark and passing off goods as the goods of another person ?

9. First, we may refer to a few provisions of the Trade and Merchandise Marks Act , 1958. A trade mark is a mark used or proposed to be used in relation to goods for the purpose of indicating or so as to indicate a connection in the course of trade between the goods and some person having the right to use the mark. ( Section 2(v) ). A mark shall be deemed to be deceptively similar to another mark if it so nearly resembles that other mark as to be likely to deceive ar cause confusion. ( Section 2(d) ). Name includes any abbreviation of a name. ( Section 2(k) ). A mark the use of which would be likely to deceive or cause confusion is prohibited from being registered. ( Section 11 ) Use of a trade mark which is identical with or deceptively similar to a registered trade mark amounts to infringement of trade mark. ( Section 29 ). The statutory remedy of action for infringement does not take away the Common Law remedy of an action for passing off, which in substance is an action for deceit ( Section 27 ).

10. <CITATION> . Their Lordships have set out the distinction between action for passing off and action for infringement of a trade mark. Their Lordships have then stated the law for the Courts faced with an action for infringement of a trade mark and laid down the following principles :

"(1) Where the two marks are identical, no further questions arise for, then the infringement is made out;

(2) When the two marks are not identical, the plaintiff would have to establish that the mark used by the defendant so nearly resembles the plaintiff's registered trade mark as is likely to deceive or cause confusion and in relation to goods in respect of which it is registered;

(3) The onus would be on the plaintiff;

(4) The court has to compare that two marks - the degree of resemblance which is necessary to exist to cause deception not being capable of definition by laying down objective standard. The persons who would be deceived are of course the purchasers of the goods and it is the likelihood of their being deceived that is the subject for consideration. The purpose of the comparison is for determining whether the essential features of the plaintiff s trade mark are to be found used by the defendant. The ultimate test is whether the mark used by the defendant as a whole is deceptively similar to that of the registered mark of the plaintiff;

(5) The resemblance may be phonetic, visual or in the basic idea represented by the plaintiff's mark;

(6) The identification of the essential features of the mark is in essence a question of fact and depends on the judgment of the <ORG> based on evidence led before it as regards the usage of the trade."

11. The principles deducible from <CITATION> . , are :

(i) Where the infringing trade mark is not identical with the complaining trade mark on the <ORG>, but something similar to it, the test of infringement is the same as in action for passing off.

(ii) In a passing off action the issue is : Is the defendant selling goods so marked as to be designed or calculated to lead purchasers to believe that they are the plaintiff's goods ?

(iii) In an infringement action the issue is : Is the defendant using a mark which is the same as or which is colourable imitation of the plaintiff's registered trade mark ?

(iv) The element of deception or confusion becomes irrelevant in the second issue (as the same is implicit, inherent or presumed to be present).

12. In Parle Products (P.) <CITATION> . Their Lightships have laid emphasis on the test of overall similarity. The broad and essential features of the two are to be considered. One need not place side by side the two to find out if there are any differences in the design, and if so, whether they are of such character as to prevent one from being mistaken for the other. The likelihood of a person usually dealing with the one being mislead to accept the other if offered to him, would be enough. Their Lordships have held that an ordinary purchaser is not gifted with the powers of observation of <NAME> and cited with approval the following statement from Karly's Law of Trade Marks and Trade Names, (9th edition, paragraph 838) :

"Two marks, when placed side by side, may exhibit many and various differences. yet the main idea left on the mind by both may be the same. A person acquainted with one mark, and not having the two side by side for comparison, might well be deceived, if the goods were allowed to be impressed with the second mark, into a belief that he was dealing with goods which before the same mark as that with which he was dealing with goods which bore the same mark as that with he was acquainted. Thus, for example, a mark may represent a game of football; another mark may show players in a different dress, and in very different positions, and yet the idea conveyed by each might be simply a game of football. It could be too much to expect that persons dealing with trade marked goods, and replying, as they frequently do, upon marks should be able to remember the exact details of the marks upon goods with which they are in the habit of dealing. Marks are remembered rather by general impressions or by some significant recollection of the whole. Moreover, variations in detail might well be supposed by customers to have been made by the owners of the trade mark they are already acquainted with for reasons for their own."

13. What is property in trade mark and how it is lost, we dealt with by their Lordships in <CITATION> .) Ltd. and another (AIR 1971 SC 898). Their Lordships have so stated the law :

"The property in a trade mark exists so long as it continues to be distinctive of the goods of the registered proprietor in the eyes of the public or a section of the public. If the proprietor is not in a position to use the mark to distinguish his goods from those of others or has abandoned it or the mark has become so common in the market that it has ceased to connect him with his goods, there remains no jurisdiction in retaining it on the register. The distinctiveness of the trade mark in relation to the goods of a registered proprietor of such a trade mark may be lost in a variety of ways, e.g., by the goods not being capable of being distinguished as the goods of such a proprietor or by extensive piracy so that the marks become public juris."

14. <NAME> on Trade Marks and Unfair Competition. (Third Edn. Vol. 2) states :

"The name of a product or service itself - what it is - is the very antithesis of a mark. In short, a generic name of a product can never function as a trade mark to indicate origin. The terms "generic" and "trade mark" are mutually exclusive ... The concept of "generic name" and "trade name" are-mutually exclusive. Thus, if, in fact a given term is 'generic', it can never function as a mark to identify and distinguish the products of only one seller (para 12.01).

An abbreviation of a generic name which still conveys to the buyer the original generic connotation of the abbreviated name, is still, "generic".

"Acronyms of generic names are often used interchangeable with the full generic name and recognised as equivalent .....".

"If the abbreviation is not recognisable as that original generic term, then the abbreviation is like a fanciful mark and protectable. (para 12.12(1)) "As with misspelling of descriptive terms, a misspelling of a generic name which does not change the generic significance to the buyer, is still "generic". (para 12.12(2))

15. The decision has to be left with the <ORG>, as already noticed in <NAME> case (supra). So is the view taken by the Supreme <ORG> of judicature in <ORG> v. <ORG> and another ((1954) 71 RPC 23), by <ORG> in <ORG> ((1973) RPC 297) case, and also in <ORG>) v. <ORG> (AIR 1939 Rangoon 113).

15.1. In <ORG> Trade Mark case (supra) Lord <NAME> said that the question does not cease to be a "jury question". He (the Judge) too, would be a potential buyer of the goods. He should, of course, be alert to the danger of allowing his own idiosyncratic knowledge or temperament to influence his decision, but the whole of his training in the practice of the law should have accustomed him to this and this should provide the safety which is the case of a jury is provided by their number. That in issue of this kind Judges are entitled to give effect to their own opinions as to the likelihood of deception or confusion and, in doing so, are not confined to the evidence of witnesses called at the trial.

15.2. In <ORG> case (supra) <NAME> said the eye of the judge is the final arbiter, but the Judge must not use, if the expression be allowed, his own eyes; he has got to look at the articles with the eyes of the public who may be expected to buy those articles, especially when, the people who buy those articles include people of all classes including many persons living in the jungle, uneducated, illiterate and who may be regarded as equivalent to the incautious, ignorant, or unwary up-country purchasers.

16. In Halsbury's Laws of England (4th End. Vol. 48 para 163) the subject has been dealt with as under :

"163. Establishing Likelihood of deception or Confusion. - To establish a likelihood of deception or confusion in 'an action for passing off where there has been no direct misrepresentation generally requires the presence of two factual elements :

(1) that a name, mark or other distinctive feature used by the plaintiff has acquired a reputation among a relevant class of persons.; and (2) that members of that class will mistakenly infer from the defendant's use of a name, mark or other feature which is the same or sufficiently similar that the defendant's goods or business are from the same source or are connected.

While it is helpful to think of these two factual elements as two successive hurdles which the plaintiff must surmount, consideration of these two aspects cannot be completely separated from each other, as whether deception or confusion is likely is ultimately a single question of fact.

In arriving at the conclusion of fact as to whether deception or confusion is likely, the court will have regard to :

(a) the nature and extent of the reputation relied upon;

(b) the closeness or otherwise of the respective fields of activity in which the plaintiff and the defendant carry on business;

(c) the similarity of the mark, name etc. used by the defendant to that of the plaintiff;

(d) the manner, in which the defendant makes use of the name, mark etc., complained of and collateral factors; and

(e) the manner in the particular 'trade is carried on the class of persons who it is alleged is likely to be deceived and all other surrounding circumstances.

In assessing whether confusion or deception is likely, the court attaches importance to the question as to whether the defendant can be shown to have acted with a fraudulent intent, although a fraudulent intent is not a necessary part of the cause of action."

17. <NAME> in Law of Trade Marks and Trade Names (12th Edn.), deals with proof of likelihood of deception as under (vide para 16-72 at p. 407).

"The <ORG> must in the common case be satisfied that the defendant's conduct is calculated to pass off other goods as those of the plaintiff, or, at least, to produce such confusion in the minds of probable customers or purchasers or other persons with whom the plaintiff has business relations as, would be likely to lead to the other goods being bought and sold for his. This is the foundation of the action."

"The question of likelihood of deception is for the <ORG> (not the witnesses) to decide "looking at the documents and evidence before him." Evidence may be called on the point, but is not essential except in cases of doubt and the assistance it gives to the <ORG> will be of a limited nature unless it includes evidence of actual deception."

18. Vide para 17.05 <NAME> (supra) deals with "whom the mark must be calculated to deceive" as under :

"The persons to be considered in estimating whether the resemblance between the marks in question is likely to deceive are all of those who are likely to become purchasers of the goods upon which the marks are used provided that such persons use ordinary care and intelligence. In some cases confusion, that matters to those concerned may be irrelevant in law since it does not lead the public into receiving the wrong goods or services."

19. The learned counsel for the defendant - appellant submitted that there are two very important relevant considerations which must be kept in view in deciding the case at hand.

19.1. Firstly, he submitted that 'LIV' is an abbreviation of liver. This abbreviation has been used in over 100 registrations as a constituent of the name under which the products relating to treatment associated with liver in the field of medicinal and pharmaceutical preparations - Homoeopathic and Ayurvedic are being marketed. The work 'LIV' is, therefore, generic and common to trade as describing the medicines associated with the treatment of liver. It has become public juris. In the filed of medicines and pharmaceuticals, it is common practice that the drugs are named either by the name of the organ which it treats or by the principal ingredients or the name of the ailment. This enables a doctor to associate a particular trade name with the organ, ingredient or ailment, thereby reducing chances of error. No trader can therefore restrain another trader from using the description of the organ, ingredients or ailment. The learned counsel has cited a host of authorities in support of his submission that a word or its abbreviation having become public juris ceases to be subject matter of proprietorship, also ceases to be source of deception ar confusion for the person likely to deal with such goods would ignore the public juris and go distinguishing the products by the prefixes and/or suffixes.

19.2. Secondly, he submitted that the goods, trade marks whereof are under scrutiny, are medicines. They are sold by the licensed chemists and druggists and that too under prescription by medical practitioners. It is not that airy man in the street would just reach the counter in a shop, ask for the goods by spelling out the trade mark and the salesman would hand over one or the other of the two goods which would be carried away by the unwary customer unmindful of what he intended to purchase and what he in fact got into his hands. Attention was invited to certain provisions of the Drugs and Cosmetics Rules 1945 framed under the Drugs and Cosmetics Act , 1940. No drug may be sold without a licence. A licence to sell stock, exhibit or offer for sale or distribute Homoeopathic medicines by retail or by wholesale has to be under a licence under Rule 67C. One of the conditions of the licence as provided by Clause (2) of Rule 67G is that the sale of Homeopathic medicine shall be conducted under the supervision of a person competent to deal with Homoeopathic medicines. So are the provisions for sale etc. of drugs other than Homoeopathic medicines.

19.3. We find merit in both the contentions so advanced.

20. A mark is said to be common to the trade when (1) it is in common use in the trade, or (2) when it is open to the trade to use.

Any symbol, word or get up commonly used by traders in connection with their trade and in respect of which no particular trader can claim an exclusive right to use may be considered common to that particular trade, or public, juris. Further words, expressions. or devices which are descriptive of particular goods are open to use by all persons engaged in the trade. Such matters which are generally of a non distinctive character may or may not be in actual use at any particular time. What is important is that the trading public has a right to use them in connection with their business.

21. Whether a matter is or is not common to the trade is a question of fact. A feature which is common to one trade may not be so to a different trade. Similarly a mark may continue to be trade mark in some countries and public juris in others. A mark which was common to the trade at one time may in course of time become distinctive and vice versa. A word or words used by a number of firms as part of their designation may be considered as words in common use (See : Law of Trade Mark and Passing Off, P. Narayanan, 4th Edn., para 14.2).

22. We would first deal with the cases generally associated with this aspect and then pass over to the medicinal cases arising in the field of medicinal and pharmaceutical preparations.

22.1. <CITATION> . . Their Lordships have cited with approval the following statement of law from In re : Harrod's Application ((1935) 52 RPC 65).

"Now it is well recognised principle, that has to be taken into account in considering the possibility of confusion arising between any two trade marks, that where those two marks contain a common element; which is also contained in a number of other marks in use in the same market such a common occurrence in the market tends to cause purchasers to pay more attention to the other features of the respective marks and to distinguish between them by those features. This principle clearly requires that the marks comprising the common element shall be in fairly extensive use and as I have mentioned in use in the market in which the marks under consideration are being on will be used."

22.2 <CITATION> ((1994) 3 Suppl. SCC 215 = 1994(2) Arb. LR 274). <ORG> wanted to restrain MICRONIX. The two trade marks were used in respect of electrical and electronic apparatus. Their Lordships held that micro-chip technology being the base of many of the products the word 'Micro' has much relevance in describing the products. It was descriptive of the micro-technology used for production of many electronic goods which daily come to the market. No one can claim monopoly over the use of the said word. Anyone producing any product with the use of micro-chip technology would be justified in using the said word as a prefix to his trade name. It was further held :

"Those who are familiar with the use of electronic goods know fully and well and are not likely to be misguided or confused merely by the prefix 'micro' in the trade name. Phonetically, the words 'tel' and 'nix' being totally dissimilar are not going to create any such confusion in the mind of the users. Secondly, even the visual impression of the said two trade names is different.

In the first instance, the respondent's trade name '<ORG>' is in black and white in slimmer letters and they are ensconced in designs of elongated triangles both above and below the said name. On the other hand, the appellant's trade name 'MICROTEL' is in thick bold letters in red colour without any design around. There is not even the remotest chance of the buyers and users being misguided or confused by the two trade names and logos. Same is the case with the carton which merely reproduces both the trade names and the logos."

22.3. In <ORG> v. <ORG> ((1942) LIX RPC 127), the question arising was if PEPSI-COLA was so similar with COCA-COLA as to be likely to cause confusion. It was found that COLA was not the name of the drink. It has been adopted for beverages in Canada. PEPSI and COLA joined by a hyphen so also COCA and COLA joined by a hyphen, were both written in a script form with flourishes. Both had been used simultaneously and for sometime with wares of the same kind. The judicial <ORG> found that both the trade marks had a descriptive flavour to the trade. On using the word COLA, on the review of the authorities, their Lordships laid down three fundamental propositions. :

(i) In considering similarity comparison must be between the defendant's mark as used and a normally imperfect recollection, of the plaintiff's mark,

(ii) In making a comparison no regard should be paid to the fact that some part of the mark common to both marks has a descriptive flavour unless it is proved that such part is in common use in the trade.

(iii) If after applying the aforesaid propositions the conclusion is reached that the marks are similar it is irrelevant that the defendant had used differentiating features of get-up."

Their Lordships then concluded :

"If it be viewed simply as a word mark consisting COCA and COLA joined by a hyphen, and the fact be borne in mind that COLA is a word in common use in Canada in naming beverages, it is plain that the distinctive feature in the hyphenated word is the first word 'Coca' and not "Cola". "Coca" rather than "Cola" is what would remain in the average memo'. It is difficult, indeed impossible, to imagine that the mark <ORG>-Cola as used by the defendant, in which the distinctive feature is, for the same reason, the first word <ORG> and not Cola, would lead anyone to confuse it with the registered mark of the plaintiff. The trade mark used by the defendant and the registered mark of the plaintiff are not trade marks so nearly resembling each other or so clearly suggesting the idea conveyed by each other, that the contemporaneous use of both in the same area in association with wares of the same kind would be likely to cause dealers in or users of such wares to infer that the same person assumed responsibility for their character, or quality, or for the conditions under which or the class of persons by whom they were produced or for their place of origin."

22.4. In <ORG> (1954 (Vol. LXXI), RPC 136) case, <ORG> had sought for cancellation of <ORG>. Both were intended to be used in connection with aluminium hydroxide and also a substance considered and counted as a gel. <ORG> contained syllables from aluminium and hydroxide. <ORG> had reference to aluminum, get and hydroxide. Their Lordships held :

"When the two words in question in this case are first looked at and regarded as made-up words, as they in fact are, their reason and virtue may elude the mind; but when it is recognised that both are intended to be used in connection with aluminium hydroxide, or a substance substantially composed of aluminum hyproxide, and also a substance which is considered or counted as a gel, it is seen that both words are intended to convey, by their/characteristics, an indication of what it is that is being sold.' It was concluded that the similarity was not great enough to be, likely to cause confusion.

22.5. ANCHOLA and ANCHOVETTE in 'In the matter of an Application by <ORG> to Register a Trade Mark' 1916 (XXXIII) RPC 320. MICRONIC and MICROVEE in 'In the matter of <ORG>'s Application to Register a Trade Mark, 1983 LXX RPC 224, were not found to be so similar as likely to deceive.

23. We may now proceed to notice a few cases in the filed of medicines and pharmaceuticals.

23.1. The leading most case in <CITATION> . . The question was whether DROPOVIT and PROTOVIT are deceptively similar. Vide para 12, their Lordships found that the last three letters were common, and in the uncommon part, the first two are consonants, the next is the same vowel "O", the next is a consonant and the fifth is again a common vowel "O". The combined "effect was to produce alliteration. VIT is a well known abbreviation used in pharmaceutical trade to denote vitamin preparation. Thus, the terminal syllable "Vit' in the two marks was both descriptive and common to the trade. Their Lordships held :

"If greater regard is paid to the uncommon element in these two words, it is difficult to hold that one will be mistaken for or confused with the other. The letters 'D' and 'P' in 'DROPOVIT' and the corresponding letters 'P' and 'T' in PROTOVIT cannot possibly be slurred over in pronunciation and the words are so dissimilar that there is no reasonable probability of confusion between the words either from the visual or phonetic point of view."

23.2. In the matter of an application by <ORG> for the registration of a trade mark' (1948) LXV PRC 342. SEDA-SELTZER was sought to be registered for preparations for use in making Seltzer water. It was opposed by the Proprietor of the mark ALKA-STELTZER registered for goods of same description. Both were pharmaceutical preparations. Evidence was adduced to show that the word Seltzer was having general usage in the trade and there were several trade mark using a prefix to the word Seltzer and available in the market. One of the relevant factors relied on by their Lordships for holding the word SELTZER as public juris was that both the parties were using it in specification of goods suggesting that the word is one which is descriptive and well understood. It was held :

"If the fact be borne in mind that the distinctive feature of the mark ALKASELTZER is the first word Alka and not Seltzer, 'Alka' rather than SELTZER is what would remain in the average memory. It is difficult indeed impossible to imagine that the mark Seda Seltzer in which the distinctive feature for the reason in SEDA and not SELTZER would lead anyone to confuse it with Alka-Seltzer." (Para 347) 23.3. In <ORG> v. <ORG> ((1947) LXIV RPC 125), Application to register <ORG> was objected to by proprietor of <ORG>. Both were pharmaceutical preparations consisting of sulphadiazine. The plea as to deception or confusion was turned down. Their Lordship held :

"It is quite obvious that once you get a statutory regulation of the channels of supply, is essential that the court in considering the possibilities of deception should be taken into account the extent to which such a possibility is minimised or perhaps, obliterated altogether by the statutory regulations."

"Once you get the position that only a doctor can order sulphadiazine, that he must give a written prescription and that a chemist cannot supply it without such a prescription, you ensure that the article in question is only going to pass at that stage through the hands of skilled persons who by their training, their experience and their knowledge would be most unlikely to refer to that drug in a way which would admit of any reasonable possibility of confusion. Of course, it is impossible to exclude entirely the risk of confusion. What we are concerned with are not unlikely cases which may happen once in one hundred years but reasonable probabilities and we have to ask ourselves in relation to those facts. Is there such a risk that a doctor or a chemist or the two of them in combination by some carelessness in expression, some obscurity in handwriting, some slip of recollection or some careless mistake which you would not expect highly trained professional people to fail into will refer to the product in such a way as will lead the court to say that there is a reasonable probability of confusion."

In my opinion, there is not. It seems to me that if one is really to give weight to such a risk, it involves attributing to those highly skilled, experienced and careful people to whom the <ORG> has entrusted and to whom alone the <ORG> has entrusted the precautions necessary under the Poisons Act , qualities of carelessness or incompetence which, although may exist in a person here and there on occasions that, of course cannot be denied are not usually found in that class of persons. We are not concerned with hypothetical possibilities but with the ordinary practical business probabilities having regard to the circumstances of the case. (para 137).

23.4. In <ORG> v. <ORG> (AIR 1965 Punjab 17), dispute was between <ORG> and <ORG>. One of the relevant considerations kept in view by the DB (vide para 14) was that the goods being Schedule H drugs were obtainable only on doctor's prescription. It was further held that there was no phonetic similarity and there was no cause for confusion.

23.5. <CITATION> . , there were several medicinal oils using THENNAMARAKKUDI a geographical name as part of trade mark. It was held that word having become public juris nobody could claim any exclusive right to its use.

23.6. We may briefly refer to several other cases throwing light on the point. CURECHLOR and <ORG> both being pharmaceutical preparation of CHLOROMPHENICAL. <CITATION> both being Schedule-H drugs for treatment of Asthma in <CITATION> both brands having the same drug in <ORG> v. <ORG> (1966 RPC 64), <ORG> and <ORG> both being toilet creams in <ORG> Application (1960 RPC 229), were held not liable to cause deception or confusion.

24. The test for judging a case of infringement and/or passing off remains the same when applied to medicines and pharmaceuticals. However, a few additional considerations arise when dealing with cases of such drugs which cannot be sold except on prescription of a doctor and which are sold only by such persons who have special knowledge or expertise in the field. The manner in which trade in such medicines is carried on that is, they can be sold only on prescription and at authorised outlets only and the class of persons who would purchase that is, the patients advised by doctors, chemists and druggists these two facts assume significance and shall have to be kept in view by the courts.

25. To sum up :

(1) The crucial tests to be applied for judging an infringement action or a passing off action in the field of medicinal and pharmaceutical preparations remain the same as are applicable to other goods. However, in the case of preparations trading whereof is governed by statutory rules or regulations, additional considerations become relevant. They are :

(i) the manner in which the trade is carried on, such as sales being made only by authorised or licensed vendors who will be educated, also having special knowledge of medicines and pharmacy;

(ii) the class of persons who would be the purchasers, whether they would be accompanied by doctors' prescription and would in all probability remain in touch with doctor while consuming the medicine purchased.

The court would ask - Is there such a similarity between the two trade marks that a doctor or a chemist or the both by some carelessness in expression, some obscurity in handwriting, some slip of recollection or some careless mistake not expected of a trained professional like doctor or chemist might lead to the one being confused for the other ? Regard shall be had not to the hypothetical possibilities but to ordinary practical business probabilities as applied to the circumstances of an individual case.

(2) The decision on the question of likelihood of deception is to be left to the court.

(3) Nobody can claim exclusive right to use any word, abbreviation, or acronym which has become public juris. In the trade of drugs it is common practice to name a drug, by the name of the organ or ailment which it treats or the main ingredient of the drug. Such organ, ailment or ingredient being public juris or generic cannot be owned by anyone for use as trade mark.

(4) Whether such feature is public juris or geris is a question of fact.

(5) If the two trade marks by two competing traders use a generic word or an expression public juris common to both the trade marks it has to be seen if the customers who purchase the goods would be guided by the use of such word expression or would ignore it and give emphasis to prefixes or suffixes or words used in association therewith. The primary question to be asked is what would remain in the memory or customer ? The surrounding circumstances such as the presentation of goods, colour scheme and lettering style etc., used on the packing also assume significance.

26. Reverting back to the facts of the case, from the documentary evidence filed we are satisfied that here are about 100 drugs in the market using the abbreviation 'Liv' made out of the word Liver-and organ of the human body, as a constituent of names of medicinal/pharmaceutical preparations with some prefix or suffix-mostly suffixes meant for treatment of ailments or diseases associated with liver. Liv has thus become a generic term and public juris. It is descriptive in nature and common in usage. Nobody can claim' an exclusive right to the use of 'Liv' as a constituent of any trade mark. The class of customers dealing with medicines would distinguish the name of the medicines by ignoring 'Liv' and by assigning weight to the prefix or suffix so as to associate the name with the manufacturer. The possibility of deception or confusion is reduced practically to nil in view of the fact that the medicine will be sold on medical prescription and by licensed dealers well versed in the field and having knowledge of medicines. The two rival marks Liv. 52 and LJV-T contain a, common feature Liv which is not only descriptive but also public juris; a customer will tend to ignore the common feature and will pay more attention to uncommon features i.e., 52 and T. The two do not have such phonetic similarity as to make it objectionable.

27. The cartons of the two products respectively of the plaintiff and of the defendant have been filed with the appeal memo at pages 35 and 36 of the paper book. We have carefully examined the same.

27.1. The plaintiffs product Liv. 52 is in a carton with a colour scheme consisting of dark brown, dark yellow and white. On the dark brown background Liv. 52/drops 60 ml are printed in white colour. Also these very words are printed in dark brown on the white background. The other matter is printed in dark brown on yellow background. There is no device used. The size of the presentation is less than half of the size of the defendant's presentation. The carton claims it to be an Ayurvedic proprietory medicine with the ingredients set-out.

27.2. The packing carton including the distinctive features of the defendant appellants is entirely different. The colour scheme is light yellow/single colour scheme whereon the entire matter is printed in black. There is a device of liver also printed. LIV-T/Liver Tonic/net 180 ml also appears in print. The printed matter claims it to be a Homoeopathic medicine with composition set out.

27.3. The respective packing prominently contain the name of the two contesting parties written in capital letters in bold and prominent fashion. The defendant's carton clearly mentions it to be the product of <ORG>/collaboration BIORN France. The carton in the middle features an artistic impression of the organ liver.

27.4. Each of the two cartons has unique placement of lettering and other features constituting each an original artistic work under the Copyright Act .

27.5. Having examined the two cartons we are clearly of the opinion that there is no possibility of one being accused of deceptively similar with the other and the likely customer mistaking one with the, other, even by recollecting faint impressions.

28. We are, therefore, unhesitatingly of the opinion that the proprietor of Liv. 52 was not entitled to the grant of an injunction restraining the use of LIV-T.

29. The learned Counsel for the plaintiff respondent cited a host of authorities which we must catalogue to be fair to him :

(1) <CITATION> . (1990 (Suppl.) SCC 727 = 1990(2) Arb. LR 399).

(2) <CITATION> .

(3) <CITATION> .

(4) <CITATION> . (AIR 1971 SC 898).

(5) Kaveri P. T. Durga Dutta v. <ORG> .

(6) <CITATION> .

(7) <CITATION> (supra).

(8) <CITATION> .

(9) <CITATION> . (1992(1) Arb. LR 297).

(10) <CITATION> (1992(2) Arb. LR 174).

(11) <CITATION> .

(12) <CITATION> (AIR 1990 Delhi 109).

(13) <CITATION> (1989(2) Arb. LR 242).

(14) <ORG> v. <NAME> (1988 PTC 192).

(15) <NAME> Trading as <CITATION> .

(16) <ORG> v. <ORG> .

(17) <CITATION> .

(18) <CITATION> .

We have perused the cited cases. We do not think that any of the above cited cases lays down law at variance with the view which we have taken on a review of several authorities as already stated. Sufficient it to observe that it was in the facts and circumstances of each of the above said cases that the defendant's trade name/trade mark was found to be offending and hence restrained.

30. <ORG> case (supra) is usually cited on behalf of the defendants opposing the prayer for injunction. Therein also, their Lordships have held :

"The act does not lay down any criteria for determining what is likely to deceive or cause confusion within the meaning of Section 8(c) and Section 19(1) . Therefore, every case must depend on its own particular facts, and the value of authorities lies not so much in the actual decision as in the tests applied for determining what is likely to deceive or cause confusion.

A trade mark is likely to deceive or cause confusion by its resemblance to another already on the Register, it is likely to do so in the course of its legitimate use in a market where the two marks are assumed to be in use by traders in that market. In considering the matter, all the circumstances of the case must be considered.

What degree of resemblance is necessary to deceive or cause confusion must in the nature of thing be incapable of definition a priori. For deceptive resemblance two important questions are (1) who are the persons whom the resemblance must be likely to deceive or confuse, and (2) what rules of comparison are to be adopted in judging whether such resemblance exists.

As to confusion, it is perhaps an appropriate description of the state of mind of a customer who on seeing a mark thinks that it differs from the mark on goods which he had previously bought, but is doubtful whether that impression is not due to imperfect recollection."

30.1. Their Lordships held <ORG> and Laxmandhara likely to deceive or cause confusion because of the overall structural and phonetic similarity. The goods were such as are largely sold to illiterate or badly educated persons. Their Lordships formed an opinion that the use of the word DHARA was not of itself decisive of the matter, in the facts found in that case.

31. In view of our finding that the defendant's trade mark is neither deceptive with nor confusingly similar to the plaintiff's trade mark, a case for the grant of injunction is not made out, it is not necessary to deal with the plea of the defendant appellant disputing the plaintiff respondent's entitlement to the grant of ad interim injunction on the ground of delay in bringing the action.

32. However, we would like to deal with the plea raised on behalf of the defendant-appellant before us, just as it was raised before the learned Single Judge though unsuccessfully, demanding instantaneous vacating of the ex parte order of injunction even without going into the merits of the case solely because the plaintiff-respondent had failed to discharge its obligation mandatorily cast by the proviso to Rule 3 of Order 39 of <ORG>.

33. The plea was set out in para 4 of the defendant's application under Order 39 Rule 4. CPC in the following words :

"By virtue of the order of <ORG> dated May 23, 1996 the plaintiff was required to comply with the provisions of Order 39 Rule 3 within 3 days. The plaintiff till date has deliberately failed to comply with the said order. The defendant through their attorneys have made repeated telephone calls to the office of the attorneys of the plaintiff, despite which the plaintiff till date has supplied the defendant with a complete set. The defendant's attorney M/s. <NAME> and <NAME> also sent a facsimile message dated May 30, 1996 to Mr. <NAME> Counsel for the plaintiff, requesting Mr. <NAME> to supply the complete set to enable the defendants to file an appropriate reply, but no reply has been received to the same till dated. A copy of the said letter was also delivered personally to Mr. <NAME>'s office. A copy of the facsimile message is attached as Annexure-A hereto. Only an incomplete set was received by the defendant by post and that too as late as on May 31, 1996. The said set does not even have a complete index and there are only 43 pages in the same. The injunction granted in favour of the plaintiff is liable to set aside on this ground alone."

34. Looking to the scheme of Order 39, CPC it is clear that ordinarily an order of injunction may not be granted ex parte. The opposite party must be noticed and heard before an injunction may be granted. Rule 3 carves out an exception in favour of granting an injunction without notice to the opposite party where it appears that the object of granting injunction would be defeated by the delay. Conferment of this privilege on the party seeking an injunction is accompanied by an obligation cast on the court to record reasons for its opinion and an obligation cast on the applicant to comply with the requirements of Clauses (a) and (b) of the proviso. Both the provisions are mandatory. The applicant gets an injunction without notice but subject to the condition of complying with Clauses (a) and (b) above said.

35. We may refer to several observations made by their Lordships of <ORG> in <CITATION> . Though the observations have been, made primarily on the obligation of the <ORG> to record the reasons but in our opinion they equally apply to the obligation cast on the applicant by the proviso. The provisions are mandatory. Their Lordships have observed :

"The imperative nature of the proviso has to be judged in the context of Rule 3 of Order 39 of the Code. Before the proviso aforesaid was introduced, Rule 3 said "the court shall in all cases, except where it appears that the object of granting the injunction would be defeated by the delay, before granting an injunction, direct notice of the application for the same to be given to the opposite party". The proviso was introduced to provide a condition, where court proposes to grant an injunction without giving notice of the application to the opposite party being of the opinion that the subject of granting injunction itself shall be defeated by delay. The condition so introduced is that the court "shall record the reasons" why an ex parte order of injunction was being passed in the facts and circumstances of a particular case. In this background, the requirement for recording the reasons for grant of ex parte injunction cannot be held to be a mere formality. This requirement is consistent with the principle, that a party to a suit, who is being restrained from exercising a right which such party claims to exercise either under a statute or under the common law, must be informed why instead of following the requirement of Rule 3 the procedure prescribed under the proviso has been followed. The party which invokes the jurisdiction of the court for grant of an order of restraint against a party, without affording an opportunity to him of being heard, must satisfy the court about the gravity of the situation and court has to consider briefly these factors in the ex parte order. We are quite conscious of the fact that there are other statutes which contain similar provisions requiring the court or the authorities concerned to record reasons before exercising power vested in them. In respect of some of such non-compliance therewith will not vitiate the order so passed. But same cannot be said in respect of the proviso to Rule 3 of Order 39. The <ORG> has prescribed a particular procedure for passing of an order of injunction without notice to the other side under exceptional circumstances. Such ex parte orders have far-reaching effect, as such a condition has been imposed that court must record reasons before passing such order. If it is held that the compliance with the proviso aforesaid is optional and not obligatory, then the proviso by the <ORG> shall be a futile exercise and that part of Rule 3 will be a surplusage for all practical purposes. Proviso to Rule 3 of Order 39 of the Code, attracts the principle that if a statute requires a thing to be done in a particular manner it should be done in that manner or not all." (<NAME>

36. We are of the opinion that if the court is satisfied of non-compliance by the applicant with the provisions contained in the proviso then on being so satisfied the court which was persuaded to grant an ex parte ad interim injunction confiding in the applicant that having been shown indulgence by the court he would comply with the requirements of the proviso, it would simply vacate the ex parte order of injunction without expressing any opinion of the merits of the case leaving it open to the parties to have a hearing on the grant or otherwise on the order of injunction but bi-part only. The applicant would be told that by this conduct (mis-conduct to be more appropriate) he has deprived the opponent of an opportunity of having an early or urgent hearing on merits and, therefore, the ex parte order of injunction cannot be allowed to operate any more.

37. The appeal is allowed. The impugned order of injunction granted by the learned Single Judge is set aside. The plaintiff respondent's seeking the injunction is dismissed. Defendant-appellants' application seeking vacating of the ex parte injunction is allowed. No order as to costs.

38. Appeal allowed.