PETITIONER: JIVARAJBHAI UJAMSHI SHETH AND OTHERS Vs. RESPONDENT: CHINTAMANRAO BALAJI AND OTHERS DATE OF JUDGMENT: 19/11/1963 BENCH: <NAME>, J.C. BENCH: <NAME>, J.C. SARKAR, A.K. HIDAYATULLAH, M. CITATION: 1965 AIR 214 1964 SCR (5) 480 CITATOR INFO : D 1984 SC1072 (30) R 1988 SC2018 (30) RF 1989 SC 606 (7) R 1989 SC 890 (18,30) R 1990 SC1426 (17) D 1991 SC 945 (6) F 1992 SC 232 (23,29) ACT: Arbitration-Partnership Agreement-Arbitration clause-Formula of valuation on dissolution-Arbitrator appointed by deed of reference-Validity of award questioned-Grounds on which award can be set aside-Error apparent on the face of the records Arbitrator exceeding jurisdiction-Validity of Award- Severability Indian Arbitration Act, 1940 (X of 1940), s. 30. HEADNOTE: The appellants and the respondents entered into a partnership in the business of manufacturing bidis. Under the agreement a partner was entitled to retire after giving notice of six months to all partners. It contained a clause for reference of disputes between the partners relating to the business or dissolution of the firm to arbitration. It also contained a clause providing how four items including goodwill should be valued. According to this clause goodwill was equal to five years net profits for debts due to the firm were to be taken not at their book value but at 85% of that value, stocks of raw materials were to be valued at book value and immovable properties were to be valued at their purchase price or, their book value. About two years later the appellants desired to retire from the partnership and a deed ,of reference was executed and a sole arbitrator was appointed. This provided that the remaining partners shall continue the firm and they shall make full payment to the retiring partners of such amounts in such manner and on such conditions as shall be decided upon by the arbitrator. The arbitrator gave the award. He fixed the value of the goodwill of the firm at Rs.32 lakhs including in that amount the "depreciation and appreciation of the property, dead stock and dues to be recovered." The award was filed in the <ORG> under s. 14(2) of the Indian Arbitration Act, 1940. 481 The respondents applied for an order setting aside the award on diverse grounds, two out of which survived for consideration in the present appeal. The first was that the arbitrator in making this award exceeded his jurisdiction because in fixing Rs. 32 lakhs as the value of the devisable assets of the firm he included therein the depreciation and appreciation of the property dead stock and outstandings; secondly that the arbitrator was guilty of misconduct. The trial court upheld these and certain other objections and set aside the award. The High <ORG> confirmed the decision of the trial court insofar as it related to the two contentions. The present appeal is on a certificate granted by the High <ORG>. Held:(i) An award made by an arbitrator is conclusive as a judgment between the parties and the court is entitled to set aside an award if the arbitrator has misconducted himself in the proceeding or when the award has been made after the issue of an order by the <ORG> superseding the arbitration or after arbitration proceedings have become invalid under s. 35 of the Arbitration Act or where an award has been improperly procured or is otherwise invalid under s. 30 of the Act. An award may be set aside by the <ORG> on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion. <CITATION> . 50 I.A. 324 and Cruikshank and others v. <NAME> and others, (1923) 92 L.J. Ch. 136, distinguished. (ii)It is not open to the <ORG> to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusions. (iii)In the present case the arbitrator had included depreciation and appreciation of certain assets in the value of the goodwill which he was incompetent to include by virtue of the limits placed upon his authority by the deed of reference. This was not a case in which the arbitrator has committed an error of fact or law in reaching his conclusions on the disputed questions submitted for adjudication. It was a case of assumption of jurisdiction not possessed by him and that rendered the award to the extent to which it was beyond the arbitrators' jurisdiction, invalid. It is, however, impossible to sever from the valuation made by the arbitrator the value of the depreciation and appreciation included by the arbitrator. The award must therefore fail in its entirety. Per <NAME>, J.-(i) If the parties set limits to action by the arbitrator, then the arbitrator had to follow the limits set for him and the court can find that he exceeded his jurisdiction on proof of such excess. (ii)In the present case the arbitrator in working out net profits for four years took into account depreciation of immovable 1/SCI/64-31 482 property. For this reason he must be held to have exceeded his jurisdiction and it is not a question of his having merely interpreted the partnership agreement for himself as to which the Civil <ORG> could have had no say, unless there was an error of law on the face of the award. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 717 of 1963. Appeal from the judgment and order dated April 30, 1962, of <ORG> at Jabalpur in Misc. Appeal No. 75 of 1961.

<NAME> and <NAME>, for the appellants. <NAME> and <NAME>, for respondents Nos. 1 to

3. <NAME> and <NAME>, for respondents nos. 4 and 5.

November 19, 1963. The Judgment of <NAME> and <NAME>. was delivered by <NAME>, <NAME>, J. delivered a separate Opinion.

<NAME>, <ORG>, a firm consisting originally of four partners (1) <NAME>, (2) <NAME>, (3) <NAME>, and (4) <NAME>, has been doing business of manufacturing bidis at Sagar and Delhi since 1944. From time to time fresh partnership deeds were executed readjusting the shares of the partners admitting new partners and adjusting the shares of the partners. In 1954 <NAME> retired from the firm and on January 27,1955, <NAME> died.

On February 16, 1956, a fresh deed of partnership was executed. The firm then consisted of eight partners-<NAME> and his two sons being entitled in the aggregate to annas

-/4/3 share in a rupee in the profits, <NAME> and his two sons to annas -/7/6 share in a rupee, and the two sons of <NAME> to the remaining annas -/4/3 share. By paragraph-7 the books of account were to be maintained by the managing partner, the financial year of the firm being from Diwali to Diwali, and profits and losses were to be ascertained at the close of the year and a copy of the balance-sheet with profits and loss statement was to be supplied to each partner, and if no objection regarding the accounts was raised within four months from the end of the year, the' accounts were to be deemed conclusive and binding unless vitiated by fraud. By paragraph-12 it was stipulated that a partner desiring to retire from the partnership may, unless the other partners agreed to' his retirement otherwise, do so after giving six months notice to all the partners in writing terminable at the' end of the year i.e., the Diwali immediately following the date of the notice. Paragraph-13 provided:

"In case of retirement of any partner the valua-, tion of the <ORG> will be made on the following, basis for the purpose of settling the account of the retiring partner:- "(a) Goodwill of the <ORG>:-That is, right to use the trade marks, trade labels and the name of the <ORG>.

In making the valuation of the above the net profits of the last five years will be taken as the value of the Goodwill of the Firm.

(b) Outstandings, <NAME> (Recoveries) :-That is, loans and debts outstanding against persons other than partner will be calculated at 85 % of the book value of the Firm.

(c) Stock of Raw Materials:-That is, tobacco, bidis, bidi leaves, labels and other moveable property will be valued at the book value of these in the books of the <ORG> and all, such stock and moveables, thus valued shall be given to the remaining partners.

(d) Immoveable Property:-Such as buildings, godowns, gardens, lands etc. will be valued at the parchase price or their book value in the books of the Firm as the case may be, and all these shall be given to the remaining partners."

Paragraph-16 incorporated a clause for reference of disputes between the partners relating to the business or dissolution of the firm to arbitration.

In April 1958 <NAME> and his two sons -appellants in this appeal desired to retire from the partnership, and a deed of reference was executed on April 16, 1958, appointing <NAME>, <NAME> and <NAME> as arbitrators to decide the dispute. It was recited in the deed of reference that since <NAME> and his two sons had expressed a desire to retire and the remaining five partners had agreed to take over the entire business of the firm, it was "necessary to effect the final account of the retiring partners with regard to the matters mentioned below, as far possible, according to and taking into consideration the terms and conditions of the Partnership Agreement.

1. Goodwill of Trade Mark.

2. Property.

3. Credits (Udhari)

4. Dead-stock.

5. Stock-in-trade i.e. the raw material, or the finished goods invested in the business.

6. Other matters connected with these transactions.

7. Profit and Loss Account.

8. The Receipt ond Payments account of the amounts of the partners.

By Paragraph 6 it was provided that the firm shall be continued by the remaining five partners and that those five partners shall make full payment to the retiring partners <NAME> and his two sons of such amounts, in such manner, and on such conditions, as shall be decided upon by the arbitrators. Paragraph 7 set out the powers exercisable by the arbitrators in the matter of calling for production of account books and documents and other information from the parties.

The deed of reference was subsequently modified, and the parties agreed that the reference be " carried out by the sole arbitrator <NAME>". Pursuant to this modified agreement, <NAME> entered upon the reference, and made his award on January 9, 1959. By his award he fixed the value of the goodwill of the entire firm at Rs. 32 lakhs including in that amount the "depreciation and appreciation of the property, dead-stock and dues to be recovered". He also fixed the profits for the broken period of Samvat year 2014 from the commencement of the year till April 19, 1958 at Rs. 2,80,000 and after adjusting the personal accounts of the three retiring partners awarded to <NAME> Rs. 3,46,223.58 nP. to <NAME> son of <NAME> Rs. 4,04,519.99 nP. and to <NAME> son of <NAME> Rs. 3,86,019.14 nP, and directed that the ownership over the assets of the firm i.e. property-moveable and immoveable,--Trade mark, labels, stock-in-trade, long-term leases and contracts etc. shall remain with the remaining partners, subject to the liabilities of the firm, the retiring partners not being responsible for the liabilities of the firm, nor having any interest in the firm or its business. This award was filed in <ORG>, <NAME>, under s. 14(2) of the Indian Arbitration Act, 1940.

<NAME> and his sons then applied for an order setting aside the award on diverse grounds. In this appeal by the retiring partners, two heads of objections only survive for determination and we propose to refer only to those two heads, viz:

(1) That the arbitrator in making his award travelled outside. his jurisdiction delimited by the agreement of reference in that in fixing Rs. 32 lakhs as the value of the di- visible assets of the firm he included therein the depreciation and appreciation of the property, dead-stock and outstandings, which he was by the terms of the reference incom- petent to include.

(2) That the arbitrator was guilty of legal misconduct in that he had in the course of arbitration proceedings admitted in his record a statement of account prepared by <NAME> and his sons without the knowledge of the other partners and without giving them an opportunity to make their submissions thereto.

The retiring partners resisted the petition to set aside the award and submitted that they were entitled to have the assets of the firm in which they had a share, fixed at an amount much in excess of Rs. 32 lakhs and that the arbitrator had not overstepped his jurisdiction in fixing the value of the goodwill at Rs. 32 lakhs, and that the statement of account referred to by the applicants was prepared under the directions of the arbitrator and in his presence and it was admitted in the record of the arbitrator

-to the knowledge of the remaining partners who had assented thereto.

<ORG> upheld these and certain other objections, and set aside the award. <ORG> confirmed the decision of <ORG>, insofar as it related to the two objections hereinbefore set out.

The question which we propose to consider first is: whether in making the valuation of the firm" for determining the share to be paid to the retiring partners, did the arbitrator overstep the limits of his authority under the agreement of reference? It may be recalled that by cl. 6 of the arbitration agreement the remaining partners had to "make full payment to the retiring partners of such amount as may be decided" by the arbitrator. But in determining the amounts to be awarded to the retiring partners, the authority of the arbitrator was restricted. He had, in determining the amounts due to the retiring partners, to take "final accounts with regard to the matters" set out in cl. 4, "as far as possible, according to and taking into consideration the terms and conditions of the Partnership agreement". By this direction the clauses of the partnership agreement were incorporated in the agreement of reference. The "final account" of the retiring partners with regard to the eight matters specified in cl. 4 was undoubtedly to be made, as far as possible, according to and taking into consideration the terms and conditions of the partnership agreement. The language used in the deed of reference is of compulsion, not of, option: it means that if there be in the partnership agreement any term or condition, which deals with any particular matter of which an account was to be taken under cl. 4 of the -agreement of reference, it has to be strictly followed. Use of the expression "as far as possible" did not confer any discretion upon the arbitrator to ignore the terms and conditions of the partnership agreement. In paragraph-13 of the partnership agreement, in making "valuation of the firm" for the purpose of settling accounts, the value of the goodwill, the outstandings, stock of raw material and moveable and immoveable property had to be taken as directed therein. In the matter of valuation of the goodwill of the firm, therefore, no discretion was left to the arbitrator:the value of the goodwill had to be the aggregate ofthe net profits of the last five years. Debts due to the firm from persons other than partners had to be "calculated at 85 % of the book value of the firm". In respect of the stock of raw materials and other moveable property the "book value in the books of the firm" had to be accepted by the arbitrator and in the case of immoveable property such as buildings, godowns, gardens, lands etc. "the book value in the books of the firm" was to be accepted and if none such was available the purchase price as mentioned in the books was to be accepted. In all these matters the arbitrator had by cl. 4 of the arbitration agreement to make the final account of the retiring partners according to and taking into consideration the terms and conditions of the partnership agreement and had no option. It is necessary to remember that the partnership agreement does not grant to a retiring partner a share in the aggregate of the four items mentioned in cls. (a), (b), (c) & (d) of paragraph-13 i.e., goodwill of the firm, outstandings, stock of raw materials including moveable and immoveable property. The partnership agreement merely provides that the "valuation of the firm" shall be made as set out therein for the purpose of settling the account of the retiring partners i.e., in ascertaining the.amount due to the retiring partners valuation of the assets in cls. (a) to (d) of paragraph-13 shall be made in the manner set out therein. The arbitrator was therefore bound to adopt the valuation prescribed by the partnership agreement, but that is not to say that the retiring partner was entitled to a share equal to the aggregate of the values of the four items mentioned in paragraph-13. It is neces- sary to emphasize this matter because on behalf of the retiring partners a considerable argument was advanced before us on the assumption that they were entitled to a share equal to the aggregate of the values of the four items of property mentioned in paragraph- 1 3 of the partnership agreement, and that by the method of valuation adopted by the arbitrator they were awarded much less than what they were under the partnership agreement entitled to. Paragraph-13 merely prescribes the valuation in respect of four out of the items which had to be considered in ascertaining the "valuation of the firm". The phraseology used in paragraph-13 in the opening part of the paragraph makes it clear beyond all doubt that the valuation of the firm had to be made on the basis specified for the purpose of settling the account of the retiring partner. The specific items in paragraph-13 do not prescribe any method of valuation of the debts and liabilities of the firm, but the debts and liabilities must be taken into account in assessing the value of the share of the retiring partners. The arbitrator had to make a valuation of the firm i.e. of all the assets of the firm and of the debts due by the firm and thereafter to settle the account of the retiring partners.

We may now turn to the award made by the arbitrator. The dispute between the parties has to be resolved on a true interpretation of the following clause:

"I assess the value of the goodwill at Rs. 32 lakhs.

<NAME>

This amount includes the depreciation and appreciation of the property, dead-stock and dues to be recovered."

(We have taken this as the correct rendering into English of the original award which is in Hindi. It is accepted by both the parties before us as a true rendering.) The arbitrator has, as he has observed in his award, taken only the value of the goodwill, in determining the amounts to be allotted to the retiring partners, and has not expressly referred to the valuation of the three other items, viz., the outstandings, the stock-in-trade and moveables and the immoveable property mentioned in paragraph-13 of the partnership agreement. Counsel for the retiring partners urged that on the admission made by <NAME>, the value of the goodwill alone was Rs. 21,70,650/10/and if the value of the immoveables, stock-in- trade etc. and outstandings be added thereto, the aggregate would considerably exceed Rs. 32 lakhs. But this argument is founded on the fallacious assumption that the debts and liabilities of the firm have to be ignored in determining the shares of the retiring partners. Counsel for the respondent submitted that in substance the goodwill had alone to be valued by the arbitrator for the property, moveable and immoveable, stockin-trade and the outstandings of the firm were approximately equal to the aggregate of the debts and obligations of the firm. Reliance in this behalf was placed upon a balance-sheet Ext. A-13 of the assets and liabilities of the firm, showing the financial position of the firm on April 16,1958, and the value of the tangible assets, such as the stock of raw-materials, moveable and immoveable property and outstandings, according to the balance-sheet, was approximately equal to the debts and liabilities of the firm.

But it is not necessary for us to decide whether the submission of the respondents is correct. The arbitrator has in his award stated that Rs. 32 lakhs is the value of the goodwill alone, and for some reason not disclosed by him he has not valued the other assets. He has also not disclosed in his award how he has arrived at the valuation of Rs. 32 lakhs. One thing, however, stands out prominently in the award, that in assessing the value of the goodwill, he has included the depreciation and appreciation of the property, dead-stock and the outstandings. The arbitrator could undoubtedly make a lump-sum valuation of the firm in the award made by him. He was not obliged in the absence of a direction in that behalf to set out in his award the valuation of the different components which aggregated to the lumpsum. The arbitrator had to "value the firm", and in doing so to abide by the specific directions, but he was not obliged to set out in the award separate valuations of all or any of the items mentioned in para 4 of the deed of reference, or in paragraph-13 of the partnership agreement, nor to set out the extent of the debts and obligations assessed by him. What then is the effect of the inclusion by the arbitrator in the valuation of Rs. 32 lakhs, of the depreciation and appreciation of the property, deadstock and dues to be recovered? Diverse arguments were submitted by counsel for the appellants in support of the plea that the inclusion of what is called the depreciation and appreciation in respect of the various items does not amount to overstepping the limits of the jurisdiction of the arbitrator. It may be re- iterated that the powers of the arbitrator were, by the terms of cl. 4 of the deed of reference, clearly restricted. He was "to take final account of the retiring partners with regard to the matters mentioned therein, as far as possible, according to and taking into consideration the terms and conditions of the partnership agreement". Restriction on the power of the `rbitrator in valuing the property, dead- stock and outstandings was explicit. He could not therefore adopt any valuation different from the valuation prescribed by paragraph-13 of the partnership agreement. But the arbitrator has, as he has himself stated, in valuing the goodwill at Rs. 32 lakhs included in that amount the value of the depreciation and appreciation of the property, dead- stock and dues to be recovered.

Counsel for the appellant submitted that reduction of outstandings of the firm by 15 % in respect of the dues from persons other than the partners was a mode of ascertaining the depreciation in respect of that item provided by cl. (b) of paragraph-13 of the partnership agreement, and the arbitrator in taking into consideration that depreciation has not acted outside his jurisdiction. It would be difficult to regard the method of valuation as prescribed in respect of the outstandings as "including depreciation". Even assuming that the reduction of the outstandings of the firm from persons other than the partners by 15 % as directed in cl. (b) of paragraph-13 of the partnership agreement be regarded as depreciation of the assets, inclusion of depreciation and appreciation in respect of the other assets was not permitted by the deed of partnership. In valuing the moveable property including the stock of raw materials, the arbitrator could not adopt any valuation other than that mentioned in cl. (c) of paragraph -1 3 of the partnership agreement, namely, the book value as given in the books of the firm. Similarly, in the valuation of immoveables such as buildings, godowns, gardens, lands etc., he had to accept the book value as mentioned in the books of account of the firm and if no book value was available the. purchase price as mentioned in the books was to be accepted. The arbitrator had no power to make any adjustment in respect of those items by including depreciation or appreciation in their value.

The principle of Cruikshank and others v. <NAME> and others(1) on which reliance was placed by counsel for the retiring partners, has, in our judgment no application to this case, because in that case though there was an article of the partnership providing that the share of a deceased partner in the assets of the partnership should be ascertained by reference to the annual account made up on April 30 next after the death, the articles were wholly silent as to the (1) [1923] 92 L.J. Ch. 136 principle to be adopted in preparing a full and general account of the property. There was no usage or course of dealings between the partners from which an inference could be drawn that on the death of a partner his share shall be paid out on the footing of book value. The executors of the deceased partner claimed that his share be determined "at the fair value of the firm". At p. 138 it was observed by Lord <NAME>.

"Even if there were a usage to state an account for one purpose in one way, that is not a usage to state it for another purpose in the same way. There is a passage in <NAME> v. <NAME> (10 Hare, at p. 515) which is useful reading in this connection. An account stated for one purpose is not necessarily stated for another purpose. The fact is, that in this partnership an account has never been stated with a view to fitting the case of a retiring partner, or a deceased partner, or a senior partner who is going to exercise an option of taking over all the assets. The partners have never had any such event in view in making the account which they have made. There has never been an account prepared which was intended to meet all the various contingencies of events such as these.

In the case before us there is no dispute that the duty of the arbitrator was to make "valuation of the firm" subject to paragraph-13 of the partnership agreement and it may even be granted that in arriving at that valuation he was not bound by paragraph-7, but on this question we express no opinion. But the values as mentioned in the different clauses had to be accepted in making up the partnership account in respect of the four matters specifically enumerated. The principle of <ORG>'s case(1) did not apply, because the partnership agreement in this case itself provides that the book value in the books of the firm shall be accepted.

(1) [1923] 92 L.J. Ch. 136.

The expression "book value" in the context in which it occurs in the partnership agreement means, the value entered in the books of account. Adoption of the book value is therefore obligatory and there is no scope. of any adjustment in the value in the light of any depreciation or appreciation of the property, outstandings, stock-in-trade or dead-stock, apart from what may actually be included in the book value, in the books. It is the book value alone which has to be taken. If the depreciation or appreciation has been taken into account by the partners in assessing the book value, that was evidently part of the book value as entered in the books of account. If there was no book value entered in respect of any immoveable property, the decisive value was to be the purchase price.

It was then urged that it was for the arbitrator to adjudicate upon the true meaning of the partnership agreement and to give effect thereto, and if in making a "valuation of the firm" he was of the opinion that depreciation and appreciation in respect of certain items of assets should be included for the purpose of making up the account of the partners, the <ORG> had no jurisdiction to set aside the award on that account, merely because the <ORG> took a different view as to the true meaning of the arbitration agreement. But if the partnership agreement was incorporated in the deed of reference, the limits of the jurisdiction of the arbitrator must be determined by the <ORG> and not by the arbitrator. By assuming that he was entitled to include, beside the value of the four items as mentioned in paragraph-13, some amount by way of appreciation in the value of those items, the arbitrator purported to set at naught the specific directions given in that behalf An award made by an arbitrator is conclusive as a judgment between the parties and the <ORG> is entitled to set aside an award if the arbitrator has misconducted himself in the proceedings or when the award has been made after the issue of an order by the <ORG> superseding the arbitration or after arbitration proceedings have become invalid under s.35 of the Arbitration Act or where an award has been improperly procured or is otherwise invalid: s.30 of the Arbitration Act . An award may be set aside by the <ORG> on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has com- mitted some mistake in arriving at his conclusion. As observed in <CITATION> .(" at p. 331:

"An error in law on the face of the award means, in their Lordships' view, that you can find in the award or a document actually incorporated thereto, as for instance a note appended by the "arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if. in a narrative a reference is made to a contention of one party, that opens the door to seeing first what that contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound."

The <ORG> in dealing with an application to set aside an award has not to consider whether the view of the arbitrator on the evidence is justified. The arbitrator's adjudication is generally considered binding between the parties, for he is a tribunal selected by the parties and the power of the <ORG> to set aside the award is restricted to cases set out in s. 30 . It is not open to the <ORG> to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. On the assump- tion that the arbitrator must have arrived at his conclusion by a certain process of reasoning, the <ORG> cannot proceed to determine whether the conclusion is right or wrong. It is not open to the <ORG> to attempt to probe the mental process by which the arbitrator has reached his conclusion where it (1) L.R. 50 I.A. 324.

is not disclosed by the terms of his award. But the arbitrator has in the present case expressly stated in his award that in arriving at his valuation, he has included the depreciation and appreciation of the property, outstandings and dead-stock, and in so doing in our judgment the arbitrator has travelled outside his jurisdiction and the award is on that account liable to be set aside. The question is not. one of interpretation of paragraph-13 of the partnership agreement but of ascertaining the limits of his jurisdiction. The primary duty of the arbitrator under the deed of reference in which was incorporated the partnership agreement, was to value the net assets of the firm and to award to the retiring partners a share therein. In making the "valuation of the firm". his jurisdiction was restricted in the manner provided by paragraph-13 of the partnership agreement.

It was next urged that the depreciation or appreciation which had been entered in the assessment of the book value were "other matters connected with" the "transactions" mentioned in the deed of reference. But manifestly those other matters were apart from the valuation of the goodwill, property, outstandings and the dead-stock. It was then urged that when the arbitrator stated that he had included depreciation and appreciation of certain assets in the value of the goodwill in the award, he merely meant that such depreciation and appreciation was included as was in the circumstances permissible. But that would be ignoring the express recital in the award. In fact under the scheme of valuation envisaged by the partnership agreement and therefore the deed of reference, there was no scope for including in the valuation, appreciation of the assets. Again to argue, as was sought to be done, that even though the arbitrator stated that he had included in the amount of Rs. 32 lakhs "the depreciation and appreciation" of the property, dead-stock and dues, there being no power to include appreciation, appreciation in the property and the dead-stock could not have been included amounts to reaching a conclusion from an assumed premise of which the conclusion was a component.

It was also urged that the expression depreciation and appreciation had no such meaning as decrease or increase in the market value of the property, ,dead-stock and outstandings, and the clause merely meant that in fixing the valuation such depreciation or appreciation as had gone into the assessment of the book value of the different items was taken into consideration. But the arbitrator has not said that he merely took into consideration the depreciation and appreciation which went into the book value assigned by the partners to the assets in the account: he has clearly stated that he had included the depreciation and appreciation in those assets in the valuation of the goodwill. Finally it was urged that the recital about the inclusion of depreciation or appreciation was a mere surplusage and should be discarded. But it would be difficult to regard a statement made by the arbitrator relating to what he says he had included in the valuation of the goodwill, as a mere surplusage, especially having regard to the orders made by him insisting upon the production of documentary evidence and certain books of account from <NAME>. It may be pointed out that by cl. 7 of the deed of reference very wide powers were conferred upon the arbitrator to call upon the disputing parties to produce the accounts etc. which the arbitrator desired and to produce any other papers or documents which the arbitrator would like to inspect, and to reply to any enquiry verbal or written of any sort or in any connection and in any form the arbitrator wanted. The orders passed by the arbitrator in exercise of these powers tend to indicate that in his view he was competent to ascertain and include in the valuation of the firm the depreciation and appreciation on the various items which were taken into account in arriving at the valuation. By order dated September 16, 1958, the arbitrator gave direction, amongst others, to <NAME> to file a statement of houses etc. of immoveable property, valuation of the same as shown in the books of account, i.e. figures regarding it, and "also the approximate value statement as it existed" at the date of demand according to the estimate of <NAME>. In the note to the order, it was stated that <NAME> had produced certain papers but they were incomplete, and therefore he was ordered to bring copies of the incomplete papers and also those papers which were not sent by him. On October 10, 1958, <NAME> produced a statement of the net profits of the five years preceding the date of dissolution-which he called the price of the goodwill-for Samvat years 2009 to 2013. The aggregate of the net profits was Rs. 21,70,650/10/which he called "price of the goodwill". He then submitted a statement of the outstandings of the different shops aggregating to Rs. 9,16,366/- and the value of the goods purchased, and other property, and submitted that the total value of the goodwill of the firm by taking into account the profits of the firm for the last five years "as per the statement filed was Rs. 21,70,650/10/3 and deducting therefrom 15 % of the outstandings of the firm considered as irrecoverable, the balance was Rs. 20,33,295/12/9" and that this was the amount from which the shares of the retiring partners were to be computed. On December 2, 1958, an application was filed by <NAME> inviting the attention of the arbitrator to the agreement of reference and to the terms of the deed of partnership, especially paragraphs 7 and 13, and submitting that the book values of items (2) to (5) in paragraph-4 of the agreement of reference were already in the books of account and could be easily found without any detailed or elaborate examination of the books of account, it was unnecessary to enter upon any detailed inspection of the various entries. On this application an order was passed on December 5, 1958, by the arbitrator that the inspection of the books of account do start on December 21, 1958, in his presence at Sagar in the office of Messrs <NAME> and Company and that <NAME> do 1 SCI/64-32 make arrangements for giving inspection of all the books of account. On December 22, 1958, another application was submitted by <NAME> stating that it was not necessary to produce certain registers and manufacturing accounts and that the orders in that behalf were beyond the jurisdiction of the arbitrator and that he was unable to produce the ,documents demanded. It was submitted by that application that the kind of inspection claimed and granted amounted to re-opening of the accounts for the last five years which were closed with the consent and to the knowledge of all the partners and which could not in law be re-opened. On De- cember 23, 1958, an application was made by <NAME> son of <NAME> (one of the retiring partners) submitting that the arbitrator had to value the goodwill and this had to be done by ascertaining the value of the profits of the five years, and for that purpose the arbitrator was entitled to ascertain yearly profits by scrutinising the account books and finding out the yearly net profits. On these applications on December 25, 1958 the arbitrator gave a direction that <NAME> do produce the papers mentioned in item No. 2 in the order dated September 16, 1958, namely, the gross and net profits of the last five years, and that he do produce the other papers which were ordered to be produced by the order dated September 16, 1958. Thereafter on January 9, 1959, the arbitrator made his award. The insistence of the arbitrator upon production of the gross and net profits of the last five years indicate that it was the opinion of the arbitrator that he was entitled to take into consideration not only the book value of the assets given in the partnership books of account but the depreciation and appreciation of those assets. The specific use of the expression by the arbitrator that he had included the depreciation and appreciation of various items of property and the procedure followed by him including the orders therefore clearly establish that the expression used by him was not a mere surplusage.

It is clear that the arbitrator has included in his valuation some amount which he was incompetent, by virtue of the limits placed upon his authority by the deed of reference, to include. This is not a case in which the arbitrator has committed a mere error of fact or law in reaching his conclusion on the disputed question submitted for his adjudication. It is a case of assumption of jurisdiction not possessed by him, and that renders the award, to the extent to which it is beyond the arbitrator's jurisdiction, invalid. It is, however, impossible to sever from the valuation made by the arbitrator the value of the depreciation and appreciation included by the arbitrator. The award must, therefore, fail in its entirety. In this view of the case, we do not think it necessary to consider whether the plea raised by the remaining partners that the award is vitiated on the ground that the arbitrator accepted from the retiring partners documents prepared from the books of account without giving an opportunity to the remaining partners to explain those documents. It was the case of <NAME> that these documents were prepared and handed over to the arbitrator without giving any notice to him. It was the case of the retiring partners that the documents consisted merely of extracts of entries in the books of account, and that in any event <NAME> had assented to those documents being included in the record of the arbitrator. For the reasons set out by us in dealing with the first plea for setting aside the award, and that plea having succeeded, we do not think it necessary to enter upon the respective contentions of the parties on the second ground.

We accordingly hold that the award was properly set aside by the Courts below.

Counsel for the retiring partners submitted that on the view taken by us, the award should be remitted to the arbitrator under s. 16 of the Arbitration Act, 1940. No such request was, however, made by them in <ORG> or in <ORG>, and we will not be justified in the circumstances of the case in acceding to that request. We may observe that we have not heard counsel on the question whether in the circumstances of the case and on the conclusion recorded, we have the power under s. 16 to remit the award to the arbitrator. The retiring partners have also not asked for an order for supersession of the arbitration agreement in exercise of the powers of the <ORG> under s. 19 . We have, therefore, refrained from considering that question also. The appeal fails and is dismissed with costs in one set. HIDAYATULLAH, J.-This appeal arises out of an arbitration award which was set aside by the Additional District Judge, <NAME> on the objection of the respondents. The judgment of the Additional District Judge was confirmed on appeal by <ORG> and the present appeal has been filed on a certificate granted by <ORG> under Art. 133 (1)(c) of the Constitution. The arbitration was without the intervention of the <ORG>. Previously it proceeded before three arbitrators but the authority of two of the arbitrators was revoked by the Additional District Judge, <NAME>, at the agreed request of the parties to the reference. It then proceeded before one <NAME> who gave his award on January 9, 1959. The arbitration proceedings were necessary because of the retirement of the appellants from a firm called <ORG> which at that time consisted of eight partners in three groups. These groups were the three appellants (<NAME> and his two sons) owning -/4/3 share, respondents Nos. 1-3 (<NAME> and his two sons) owning

-/7/6 share and the two remaining respondents, who are brothers, owning the balance. By agreement this retirement was to take place on April 15, 1958. In revoking the award <ORG>, in concurrence with the court below, has upheld two objections-(a) that the arbitrator exceeded his jurisdiction and (b) that he was guilty of misconduct in receiving some evidence behind the back of <NAME>.

The firm of which the several parties here were partners had a written deed of partnership executed on February 16, 1956. This deed replaced earlier deeds to which reference is not necessary. The partnership kept its accounts from <ORG> to <ORG> and every year it drew up a balance sheet and a profit and loss account, copies of which documents were given to all the partners. The accounts so stated were subject to objection but if none was made, they were conclusive and binding on the partners. All this was provided in the deed of partnership which also provided for the retirement of partners and its 13th paragraph laid down special terms as follows:

"In case of retirement of any partner the valuation of the Firm will be made on the following basis for the purpose of settling the account of the retiring partner:-

(a) Goodwill of the Firm: That is, right to use the trade marks, trade labels and the name of the Firm.

In making the valuation of the above, the net profits of the last five years will be taken as the value of the Goodwill of the Firm.

(b) Outstandings, <NAME> (Recoveries): That is, loans and debts outstanding against persons other than partner will be calculated at 85 % of the book value of the Firm.

(c) Stock of Raw Materials: That is, tobacco, bidis, bidi leaves, labels and other moveable property will be valued at the book value of these in the books of the <ORG> and all such stocks and moveables, thus valued shall be given to the following partners.

(d) Immovable Property: Such as buildings, godowns, gardens, lands etc. will be valued at the purchase price or their book value in the books of the firm as the case may be, and all these shall be given to the re- maining partners."

As a result of an arrangement reached <NAME> by which the businesses of these partners, which were in different firm names and various places, were to be divided between the appellants on the one hand and the respondents on the other, the parties desired an arbitration to separate the shares of the appellants as partners retiring from the firm <ORG> A deed of reference was executed by them on April 16, 1958. After the usual recitals, it provided that a final account of the partners should be taken with regard to eight matters- as far as possible according to and taking into consideration the terms and conditions of the partnership agreement." The eight matters were:

1. Goodwill of Trade Mark.

2. Property.

3. Credits (Udhari).

4. Dead Stock.

5. Stock-in-trade i.e., the raw material or the finished goods invested in the business.

6. Other matters connected with these transactions.

7. Profit and Loss Account.

8. The Receipt and Payments account of the amounts of the partners.

It was further provided that the firm <ORG> was to continue with the respondents after the appellants had retired therefrom and the appellants were to be. paid an amount to be determined by the arbitrator and in such a manner and on such conditions as he might direct. The arbitrator having filed the award in <ORG>, the respondents filed objections, only two of which noticed above succeeded and the award was set aside. I shall therefore proceed straight to those objections of which only the first was fully argued before us. In making his award the arbitrator gave the appellants a -14/3 share from a lump amount of RS. 32 lacs which he described as "goodwill" of the firm, adjusting, in the respective shares of the three appellants in that sum, all amounts standing to their credit or debit, as the case may be, in the account books of the firm. He also assessed the "goodwill" for the period from Diwali to the date of retirement and made suitable additions. His real decision is contained in three or four lines in the award which of course contains other matters and his exact words in Hindi have given rise to some difference because they have been translated in two different ways on the record of the case. The two translations are-

(1) The value of the goodwill of the whole firm 1 assess at Rs. 32,000,00,-- (Rupees thirtytwo lacs). In this sum property, dead stock and depreciation and appreciation of <ORG> are also included;

(2) The value of the goodwill of the whole firm 1 assess at Rs. 32,000,00/- (Rupees thirtytwo lacs). In this sum the depreciation and appreciation of property, dead stock and Udhari is also included."

The second translation is probably more accurate than the first, but to my mind it is not a matter of mere words but of what the arbitrator has done. The award is in Hindi and the two words "appreciation" and "depreciation" are in English. They might well have been used to still all controversy about issues which the parties had raised before him relating to these matters. The arbitrator might, in other words, have used these words loosely without meaning anything except to show that he had looked into everything which the parties desired him to see. The dispute is thus whether the arbitrator exceeded his jurisdiction by adding back depreciation amounts to the book value and/or allowing for appreciation of property which was successfully claimed by the respondents in <ORG> and the <ORG> below to be not open to him?

In this appeal it was contended on behalf of the appellants that the deed of partnership as well as the order of reference left the arbitrator a free hand and even if the arbitrator wrongly interpreted the deed of partnership and did add back the depreciation and/or appreciation, no question of jurisdiction could arise. Reliance is placed upon the observations of <ORG> in the well-known case of <CITATION> .(1) where it was observed:

"An error in law on the face of the award means, in their Lordships' view, that you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party that opens the door to seeing first what that contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound. Here it is impossible to say, from what is shown on the face of the award, what mistake the arbitrators made. The only way that the learned judges have arrived at finding what the mistake was is by saying; "inasmuch as the arbitrators awarded so-and- so, and inasmuch as the letter shows that the buyer rejected the cotton, the arbitrators can only have arrived at that result by totally misinterpreting Rule 52". But they were entitled to give their own interpretation to Rule 52 or any other Article, and the award will stand unless, on the face of it, they have tied themselves .down to some special legal proposition which then, when examined, appears to be unsound."

Mr. <NAME> contends that the arbitrator might have interpreted the partnership deed wrongly but that was a matter within his jurisdiction and the error, if any, not being one of law on the face of the award, <ORG> had no authority or jurisdiction to set aside the award. The other side contends, as has so far been held in the case, that the reference, read with the partnership deed, created an area of (1) I.L.R. 47 Bom. 578 at 586.

jurisdiction which the arbitrator has outstepped. The first point is therefore to decide what were the limits of the arbitrator's action as disclosed by the reference and the deed of partnership and then to see what the arbitrator has actually done and not what be may have stated loosely in his award. This is the only way in which the excess of jurisdiction can be found If the interpretation of the deed of partnership lies with the arbitrator, then there is no question of sitting in appeal over his interpretation, in view of the passage quoted above from <NAME>'s case but if the parties set limits to action by the arbitrator, then the arbitrator had to follow the limits set for him, and the court can find that he has exceeded his jurisdiction on proof of such action.

The arbitrator derived his authority from the reference and we must turn to its terms in the first instance. The material portion has been quoted and it shows that in view of the retirement of <NAME> and his sons, parties considered it necessary "to effect the final account of the retiring partners with regard to the matters mentioned below as.' far possible according to and taking into consideration the terms and conditions of the partnership agreement" and then followed the eight items. The words underlined are in the recitals but they do show that the parties desired a division in accordance with the terms of the partnership agreement. The words "as far possible" show some latitude in one sense, but the force of those words is to be discovered with the aid of the other words "according to and taking to consideration etc." which lay down that the terms of the partnership agreement must prevail over personal opinion. The partners appointed the arbitrators to decide the eight matters and to enable them to give their decision undertook by cl. 7 of the reference to furnish all accounts, documents and information which the arbitrators might require of them.

Now the deed of partnership which was to prevail as far as its terms were applicable provided that to settle the final account of the retiring partners four items of assets should be valued in a particular way. These directions were contained in cl.' 13 of the deed already set out earlier. Thus goodwill was equal to five years' net profits; debts due to the firm were to be taken not at their book value but at 85 % of that value; stocks of raw materials were to be valued at book value; and immovable properties at purchase price or their book value in the books of the firm as the case may be. The goodwill took no account of anything but the net profits. Admittedly, the net profits of the preceding five years were Rs. 21,70,650/ 10/-. This set at rest sub-clause (a) of cl. 13 of the partnership agreement. Admittedly also the outstandings (Udhari) came to Rs. 9,16,366/- at their book value and 15% thereof came to Rs. 137,354/13/6. The net Udhari therefore was Rs. 7,79,011/2/6. Differences really arose in the matter of valuation of raw materials and immovable properties and in this connection. the appellants asked to see an account of gross profits for the past five years which the arbitrator ordered <ORG> to produce. According to the appellants the value of properties given by <ORG> was the written down value and the right figure according to the agreement was not Rs. 6,24,369/- as stated by <ORG> but Rs. 16,57,000/-. In reply <ORG> stated that it was not the practice of the firm to prepare an account of gross profits but he added that gross profits could be calculated from the account books by the other side or by the arbitrator and he offered the services of an accountant to prepare such an account. The documents which the arbitrator is said to have received behind the back of <ORG> (though not some of the other respondents) are the abstracts which show the gross profits and what was excluded to reach the net profits. The net profits in these accounts and the net profits given by <ORG> agree. I do not refer to the dispute about the production of the documents since that part of the case was not argued before us, but these accounts prime facie do show that in working out net profits for the five years, depreciation of immovable property and goods was taken into account. The same depreciation appears to have been taken into account in the balance sheet while valuing the assets against the liabilities. In other words depreciation of immovable properties and goods over the five years for which the goodwill was to be calculated appeared to have been taken twice over.

I would have persuaded myself to go into this matter more deeply but for the fact that such depreciation does not altogether account for the difference between 21 lacs and 32 lacs. The balance sheets show a very slender difference between the assets and liabilities over the five years and it may be taken that the value of <ORG>, raw materials and immovable properties is offset by the liabilities. Nothing remains except a very petty sum as profit to be carried over for addition to the goodwill. The duplicated depreciation does not in fact account for the increase from Rs. 21 lacs to Rs. 32 lacs. The conclusion is therefore inescapable that the arbitrator meant what he said when he spoke of including appreciation and depreciation in the valuation of the properties etc. For this reason he must be held to have exceeded his jurisdiction and it is not a question of his having merely interpreted the partnership agreement for himself as to which <ORG> on authority could have had no say, unless there was an error of law on the face of the award.

Reliance is placed upon the case of <NAME> and others v. <NAME> -and others'-" that if accounts in the past were not prepared to meet the contingency of retiring partners, the accounts must be recast for this special purpose and the arbitrator must necessarily have freedom to value property in his own way and not by accepting old accounts already made by the partners. The intention here was that the arbitrator should prepare the final accounts as the partners would themselves have done under the partnership agreement, and the arbitrator had to follow cl. 13 of the partnership agreement which was binding on (1) [1923] 92 L. J. Ch. 136.

the partners and therefore on him. The partnership agreement did not speak of market value or fair value. It stated that the purchase price or the book value as the case may be alone could be taken into account. This meant that the book value where available and the purchase price in other cases only were to enter in the calculations. There was thus no option to go to fair value or market price at all.

I do not think that we should supersede the arbitration agreement under s.19. No circumstance was made out for such a course. I would have directed a remit to the arbitrator under s. 16 of the Arbitration Act 1940 but my brethren take a different view of the matter and I leave the matter there. The contention of the appellants on the question of juris- diction decided against them must fail and I agree that the appeal should be dismissed with costs.

Appeal dismissed.


JUDGMENT <NAME>, J.

1. This is an appeal by special leave by 13 persons, <NAME>, <NAME> alias <NAME>, <NAME>, <NAME>, <NAME>, <NAME>, <NAME>, <NAME>, <NAME>, <NAME>, <NAME>, <NAME> and <NAME>, against the judgment of <ORG>.

2. The 13-appellants and <NAME> were tried in the court of Additional Sessions Judge <NAME> for various offences. The main charge was against <NAME> and <NAME>, who are both brothers, for an offence under Section 302 <ORG> for causing the death of <NAME>. There were also charges under Section 302 read with Section 109 , Section 302 read with Section 149 , Sections 324 , 147 and 148 <ORG>. The charge under Section 324 related to the injuries caused to <NAME>. The trial court acquitted <NAME>. Ram <NAME> and <NAME> were convicted under Sections 302 and 148 <ORG>, and each of them was sentenced to undergo imprisonment for life on the former count and rigorous imprisonment for a period of two years on the latter count. <NAME> was convicted under Section 147 and Section 323 read with Section 109 <ORG>. He was awarded a sentence of rigorous imprisonment for a period of one year on the former count. No sentence was awarded to him for the offence under Section 323 read with Section 109 <ORG>. <NAME> was convicted under Section 148 <ORG> and was sentenced to undergo rigorous imprisonment for a period of two years. <NAME>, <NAME> and <NAME> were convicted under Section 323 <ORG> and were sentenced to undergo rigorous imprisonment for a period of one year. They were also convicted under Section 147 <ORG> and were sentenced to undergo rigorous imprisonment for a period of one year. <NAME>, <NAME>, <NAME>, <NAME>, <NAME> and <NAME> were convicted under Section 147 <ORG>, and each of them, was sentenced to undergo rigorous imprisonment for a period of one year. The sentences awarded to each of the accused were ordered to run concurrently. On appeal <ORG> altered the conviction of <NAME> and <NAME> accused from under Section 302 to that under Section 304 , Part II <ORG> . Each of these two accused was sentenced to undergo imprisonment for a period of eight years on that count. In other respects, the appeals filed by the 13 accused-appellants were dismissed.

3. The prosecution case is that on August 24, 1965 <NAME> deceased, along with his brother <NAME> (PW 9) and <NAME> (PW 2), proceeded from his village Hasanpur to Dhia market. When they passed near the field of <NAME> accused in the area of village Baraini, <NAME> shouted that the enemy was passing that way. On the shout of <NAME> accused, the other accused who were nearby, came there. Four of the accused, namely, <NAME>, <NAME>, <NAME> and <NAME> were armed with gandasas while the others were armed with lathis. <NAME> and <NAME> then gave gandasa blows on the head of <NAME>. <NAME> fell down and was given further gandasa blows by <NAME> and <NAME>. The other accused, who were armed with lathis, also joined in the assault, <NAME> gave a gandasa blow at the back of <NAME> PW. <NAME> was also given lathi blows by <NAME>, <NAME> and <NAME>. <NAME> on receipt of injuries ran away, while <NAME> died at the spot. The occurrence, it is stated, was also witnessed by <NAME> (PW 1), <NAME> (PW 3) and <NAME> (PW 5). These three witnesses were present in the nearby fields at the time of the occurrence, The accused after causing injuries ran away.

4. <NAME> accompanied by <NAME>, went to police station Belaganj at a distance of 8 miles from the place of occurrence and arrived there at about 5 p.m. <NAME> then made statement which was entered by the <NAME> in the daily diary. <NAME> (PW 9), who was Station House Officer, was not present at the police station at that time. On receiving intimation, S.H. O. <NAME> went to the police Station and recorded the statement of <NAME> at 6.30 p.m. The Station House Officer left the police station at, 9 p.m. and arrived at the place of occurrence at about 2 a.m. Delay in arrival at the place of occurrence was due to heavy rains and the fact that the Station House Officer had to cover the distance on foot. On arrival at the place of occurrence, the Station House Officer found the dead body of <NAME> lying there. The Station House Officer prepared the inquest report and sent the dead body for post mortem examination. Post mortem examination on the dead body of <NAME> was performed by Dr. <NAME> on August 25,1965. <NAME> PW was also got examined from the doctor and was found to have six simple injuries on his person. One of those injuries consisted of an incised wound.

5. At the trial <NAME> (PW 1) <NAME> (PW 2), <NAME> (PW 3). <NAME> (PW 5) and <NAME> (PW 8) gave ocular evidence regarding the occurrence in support of the prosecution case.

6. The accused in their statements under Section 342 of the CrPC denied the prosecution allegations and stated that they had been falsely involved in the case. Written statement was also filed on behalf of the accused, according to which <NAME> collected a mob of about 100 persons, including <NAME>, <NAME> and others. The mob then went to the Baithak of <NAME> appellant and assaulted <NAME> and <NAME>. The villagers then came there and caused injuries to <NAME>, <NAME> and <NAME>. In defence, the accused examined Dr. <NAME>, who deposed that <NAME> and Ram <NAME> accused had three injuries each on their persons when the witness examined them on the night of August 24, 1965. Those injuries included incised wounds.

7. The trial court accepted the evidence of the five eye witnesses. It was also held that the common object of the unlawful assembly was only to assault and not to commit murder. Death of <NAME>, it was observed, was due to the individual acts of <NAME> and <NAME> accused. The other accused, it was held, could not be held to be constructively liable for the murder of <NAME>. The accused were accordingly convicted and sentenced as above. On appeal <ORG> took the view that <NAME> and <NAME> could not have the intention of killing <NAME>. At the same time, in the opinion of <ORG>, they had the knowledge that death of <NAME> might result as a result of the blows given by them. <NAME> and <NAME> were accordingly convicted under Section 304 , Part II Indian Penal Code . In other respects the judgment of the trial court was upheld.

8. We have heard Mr. <NAME> on behalf of the accused appellants and Mr. <NAME> on behalf of the State, and are of the opinion that no case has been made for interference with the judgment of <ORG>. It cannot be disputed that <NAME> died as a result of the injuries which were inflicted upon him. Dr. <NAME>, who performed post-mortem examination on the body of <NAME> deceased, found eight injuries on the body. The first injury consisted of an incised wound 4 i/2" x 1/2". It was bone deep on the left side of the head. The injury resulted in the cutting of the skin muscles and the scalp, the left parietal bone and the outer covering of the brain with blood clots on the left lobes of the brain. The second injury consisted of an incised wound 2 1/4" x 1/2" x 1/4" on the right side of the head, just behind the forehead. The third injury was scalp deep on the vault of the head. There were five incised wounds bone deep on the back of the head. In addition to that, there were incised wounds on the left forearm, left wrist and right leg. Bruise was also found on the right shoulder.

9. According to the prosecution case, the incised wounds on the body of Tulsi deceased were caused by <NAME> and <NAME> accused. The prosecution in this respect examined <NAME> (PW 1), <NAME> (PW. 2), <NAME> (PW 3), <NAME> (PW 5) and <NAME> (PW 8). The evidence of these witnesses was accepted by the trial court and <ORG>, and nothing has been brought to our notice as may justify interference with the appraisement of the said evidence in this appeal under Article 136. It may be stated that <NAME> was himself injured during the course of occurrence and there can be hardly any doubt regarding his presence at the spot. Likewise, the other four witnesses have satisfactorily accounted for their presence at or about the place of occurrence.

10. Mr. <NAME> has referred to the fact that injuries were found on the persons of the two of the accused, namely, <NAME> and <NAME>. It is stated that these injuries have not been satisfactorily explained by the prosecution witnesses. No question, however, appears to have been put to any of the prosecution witnesses regarding the injuries caused to <NAME> and <NAME> accused. As such, there arose no occasion for the prosecution witnesses to explain the injuries on the persons of the two of the accused. Apart from that, we find that a cross case was started against the prosecution witnesses in this case regarding the injuries to <NAME> and <NAME> accused. The accused in the cross case, we have been informed by Mr. <NAME>, were acquitted on appeal by <ORG>. It appears that the witnesses refrained from referring to the injuries on the persons of <NAME> and <NAME> because of fear of being implicated in the cross case. Looking to the circumstances of the case, we are of the opinion that the non-mention of the injuries on the persons of the two accused in the prosecution evidence would not justify, interference with the appraisement of the evidence by the trial court and <ORG>.

11. The appeal fails and is dismissed.


JUDGMENT <NAME>, Kt., C.J.

1. One <NAME> is entitled to a one-sixth share in certain property. The plaintiffs in this suit are the fourth mortgagees of 'that one-sixth share. They filed this suit against the mortgagor, and the first, second, third and fifth mortgagees praying (I) that the first defendant might be ordered to pay them the mortgage money with interest; (2) that it might be declared that the third defendant, the second mortgagee, was bound to accept from the plaintiffs the amount of interest in arrears; (3) that the third defendant might be restrained from proceeding further with the sale of the said share, and for further and other relief.

2. The necessity of the suit arose from the fact that the third defendant advertised the mortgaged property for sale subject to the interest of the first mortgagee. The plaintiffs moved for an interim injunction restraining the third defendant from proceeding with the sale, but the lower Court refused to grant the injunction, and the plaintiffs have appealed to this Court against that order.

3. Two questions arise (1) whether the conditions exist which enable the second mortgagee to exercise his power of sale, and (2) whether, assuming those conditions do exist, the <ORG>, on the application of the fourth mortgagee, would stay the sale on the interest due to the second mortgagee being paid. The provisions of the Transfer of Property Act apply to this case, and with regard to the first question, the answer depends entirely upon what the parties had contracted to do subject to the provisions of the Transfer of Property Act . The second mortgage was created by the first defendant on the 6th of May 1920 and the date of repayment of the mortgage money is the 6th day of May 1921. There is a covenant to pay interest by equal quarterly payments by the sixth day of each and every quarter, interest remaining unpaid and in arrears being added to the prinoipal carrying interest at the same rate. Then there is a covenant by the mortgagee to reconvey on the prinoipal and interest being repaid on the due date, but if there was default in such repayment, the mortgagee was not bound thereafter to accept payment of the mortgage debt or to reconvey the mortgaged premises unless three months' notice had been given, provided that if at any time during the continuance of the security any damage would happen to the mortgaged premises by fire, tempest or otherwise to impair the security, or if the mortgagor had become or should be adjudicated insolvent, then the moneys for the time being due and owing on the security of the mortgage should at the option of the mortgagee become payable as if the due date had then elapsed. Then it was further agreed that it should be lawful to the mortgagee to sell the mortgaged premises under the power of sale contained in the mortgage which was deemed to be a power to <NAME> or concur in selling the said mortgaged premises in default of payment of the mortgage debt without the intervention of the <ORG> within the meaning of Section 09 of the Transfer of Property Act. Provided that the power of sale should not be exercised by the mortgagee unless default had been made in payment of the principal sum or any part thereof on the day appointed for the payment thereof and for the space of three calender months next after the notice in writing required by Clause (1) of Section 69 of the Transfer of Property Act or unless and until interest amounting at least to Rs 500 should be in arrears and remain unpaid for three months after becoming due.

4. It is admitted that interest amounting to Rs. 500 was in arrears for three months after becoming due, and the third defendant contended that he was entitled to sell under his power of sale contained in this mortgage. On the other hand the appellants have urged that the power of sale can only be exercised under the deed and under the provisions of the Transfer of Property Act , if there has been default of payment of the mortgage money, and default could only happen if the mortgage money had become payable. It seems to hive been conceded by both sides that the power of sale cannot be exercised unless there has been a default of payment of the mortgage money which includes not only the interest but the principal. But it was argued that if there was default in payment of interest for three months thereupon the principal became payable and that therefore the power of sale could be exercised. But there in nothing in the mortgage deed, which is the contract between the parties, from which we can assume that the parties contracted that if interest remained unpaid for three months the principal also became payable.

5. We have been referred to a number of English cases on the question when the right of foreclosure will accrue to a mortgagee, but as far as I can see, we are bound by the provisions of the Transfer of Property Act , and as it has often been laid down by <ORG>, it is of little use to refer to English cases on the law of mortgage. It had been open to the parties to contract specifically that if interest remained unpaid for three months, then the whole of the principal would become payable and that therefore the mortgagee could exercise his power pi sale. But the parties have refrained from expressly contracting to that effect, and there is nothing, as far as I can see, in the mortgage deed from which it can be presumed, apart from the express contract, that the principal became payable as soon as interest fell into arrears for three months.

6. We have also been referred to the provisions of the Conveyancing Act of 1881 with reference to the statutory power of <NAME>, and it seems that the provisions of Sections 18 and 19 of that Act were before the <ORG> when the Transfer of Property Act was drafted. It has been argued that because the power of sale which is referred to in the first part of Section 69 shall not be exercised inter alia unless interest amounting to at least Rs. 500 is in arrears and unpaid for three months, and because the first part of Section 69 refers to a power of sale in default of payment of the mortgage money, therefore it must follow that the default in payment of interest for three months amounts to default of payment of the mortgage money. It appears to me that that- argument is unsound, and we have been referred to no authority which can support it. The passage in Volume VIII of the Encyclopaedia of Forms and Precedents, p. 471, to which we have been referred, is certainly against the argument.. At p. 472 the author says:

If the mortgage is for a term certain, e. g., seven years, an unskilful draftsman might inadvertently tie the mortgagee's hands for the whole of the period, even although interest were largely in arrear. the proper way to obviate this is to make the principal repayble six months after date, and then to provide that interest is punctually paid and the mortgagor's covenants &c. duly observed and performed other than the covenant for payment of the principal debtl the mortgagee will not call in the money for the agreed period. By this device, if interest is allowed to fall into arrear, the principal becomes immediately due, and the statutory power becomes exercisable when the interest is overdue for two months.

7. Now in this case the period of the mortgage is one year instead of six months and there is no provision that the mortgagee will not call in the money for a further period of years if the interest is paid regulrly. But the conditions in the mortgage are in the usual form, and we may take it that the intention was that the money should be advanced for a year certain, and that if the mortgagee was willing and the mortgagor paid the interest regularly under the terms of the mortgage deed after the expiration of the year, the mortgage would continue. But there is nothing in the deed which would lead us to suppose that the parties intended that the power of sale should be exercised before the expiration of that year, unless either the premises were damaged by fire or some other cause or the mortgagor became or was adjudicated insolvent.

8. Therefore, in my opinion, the conditions do not exist in this case which would entitle the third defendant to exercise the power of sale in his mortgage, and, therefore, there must be an injunction to restrain the third defendant from selling pending the hearing of the suit. Of course that will not prevent the third defendant from exercising any powers which he may have under the mortgage, apart from the conditions which are mentioned in this particular case.

9. We may say a few words with regard to the contention of the appellants, that as puisne incumbrancers they would be entitled to prevent the third defendant from selling on payment of the interest in arrears, If, owing to the interest being in arrears and owing to the agreement between the parties, the whole of the mortgage money has become payable, then it seems obvious to me that the puisne iucumbrancer could only stop the sale it he Paid the money that was due, that is to say, the principal and interest. No authority has been cited for showing that if a prior mortgagee was attempting to sell the mortgage premises because owing to interest being in arrears the whole of the money had become payable, a puisne incumbrancer could stop the sale by payment only of the interest due, that is to say, by removing the cause which gave rise to the power of sale being exercised.

10. It is true that in <NAME> v. <NAME> (1899) 1 Bom. L.R. 273. Mr. Justice <NAME> expressed an opinion that where a mortgagee exercises a power of sale owing to interest having fallen into arrears, the mortgagor, if he wished to stay the sale, need pay up only all the interest that was due up to the date of payment. But in that case it was admitted that the whole of the principal had become due and though on strict principles of equity it might seem reasonable that a mortgagor should be entitled to be relieved from his property being sold if he paid off the interest, still there is no authority on the question either in this country or in <ORG> Courts. Therefore, in this case, it is unnecessary for us to express any opinion upon it.

11. The appeal must be allowed and the injunction must go. The appellants will get their costs of the appeal from the third defendant who must pay his own costs while the costs of all parties in the <ORG> below and the costs of the other parties in appeal other than the appellants and the third defendant will be costs in the cause.

<NAME>, <NAME>

12. I agree.


JUDGMENT <NAME>, C.J.

1. The assessee company was incorporated on the 29th of December, 1945, and it obtained a certificate of commencement of business on the 20th of April, 1946. The business of the assessee company was that of running an oil mill.

2. The assessee company was assessed to tax on its business profits for the assessment year 1947-48 and it claimed various expenses as allowable deductions aggregating to Rs. 27,884-11-9. The view taken by the Income-tax Officer was that the assessee company had only commenced business when it purchased the groundnut mill on the 1st of November, 1946, and therefore he disallowed all the expenses which were incurred prior to the 1st of November, 1946. The assessee company went in appeal to the Appellate Assistant Commissioner and substantially the view taken by the Appellate Assistant Commissioner was that the expenses incurred after getting the certificate of commencement of the business should be treated as expenses incurred for the purpose of carrying on the business in the year of account, and therefore barring the sum of Rs. 3,616 in respect of which the assessee had not appealed, the Appellate assistant Commissioner allowed the balance of Rs. 24,269. The department appealed to the <ORG> and the <ORG> took the view that the first purchase of raw material for the purposes of being crushed in the mill which was to be erected was made at the end of September, 1946. They also took the view that some time must have been taken in making arrangements for the purchases and therefore the material date they fixed was the 1st of September, 1946, and they disallowed the expenses previous to the 1st of September, 1946, and allowed expenses subsequent to that date. Therefore it is to be noticed that the three Income-tax authorities had fixed three different dates as the relevant dates. The Income-tax Officer fixed the date as the 1st of November, 1946, on the basis of the purchase of the ground-nut oil mill, the Appellate Assistant Commissioner fixed the 20th of April, 1946, as the date on which the certificate of commencement of business was granted to the company and the <ORG> fixed the 1st of September, 1946, as the date on the basis that some time should be allowed to the assessee company prior to the actual purchase of raw materials. The assessee company asked the <ORG> to make a reference to this Court. The <ORG> having declined, we directed the assessee company to make a reference and to refer to us the following question :

"Whether the mere fact that the first transaction of purchase of raw material took place in September, 1946, is by itself a justification for holding that expenses made from April, 1946, were not for purpose of business of the company ?"

3. Now, having perused the statement of the case, we are inclined to agree with the <ORG> that the appropriate question which should have been referred to us was :

"Whether there was evidence before the <ORG> to hold that the assessee company commenced its business as from 1st of September, 1946 ?"

4. The question that we asked the <ORG> to refer carried in it an implication that the only fact that the <ORG> took into consideration was that the first transaction of purchase of raw materials took place at the end of September, 1946. That underlying assumption seems to be incorrect because in the statement of the case of <ORG> points out that there were many other facts taken into account in fixing the date of the commencement of the business like certificate of commencement of business, the date of the purchase of the mills, the details of the expenses given in the order of the Appellate Assistant Commissioner and so on.

5. Mr. <NAME> has placed strong reliance on the judgment of the Appellate Assistant Commissioner and also on the various items of expenses which have been allowed by the Appellate Assistant Commissioner, and the whole gravamen of Mr. <NAME>'s charge against the <ORG> is that the <ORG> has overlooked the nature of these expenses and has not applied its mind to them, and Mr. <NAME> says that the order of the <ORG> makes it clear that they did not take into consideration these expenses. Now, when we took at the order of the <ORG>, in para. 1 the <ORG> says this :

"Business can only be said to have commenced when some activity in relation to carrying on the business is done. It may be the purchase of raw material, placing an order for raw material, sales and so on."

6. Therefore they are giving illustrations of what a business activity may be. When we asked them to submit a statement of the case they have amplified and elaborated this statement which appeared in para. 1 of the statement and have elaborated the statement. They have told us that they have taken into consideration the details of the expenses given in the order of the Appellate Assistant Commissioner. Now, we are not prepared to reject the statement of a responsible body like <ORG> when it informs us that in arriving at its decision the details of the expenses were taken into consideration. Therefore the question that we have ultimately to answer and which is the real question that arises on the order of the <ORG> is : "whether there was evidence before the <ORG> for holding that the assessee company commenced its business as from the 1st of September, 1946 ?"

7. Now, it is rather unfortunate that in the order of the <ORG> and also in the question which they themselves have suggested really arises they should have used the expression "commenced" although in fairness to the <ORG> it may be pointed out that the very interesting question which has been debated at the <ORG> was never urged, argued or even suggested before the <ORG>, and the question that has been raised before us is that there is a distinction and a clear distinction between a person commencing a business and a person setting up a business, and that for the purposes of the Indian law what we have to consider is the setting up of a business and not the commencement of a business.

8. Now, turning to our statute, the deductions claimed are under Section 10(2) and they are in relation to a business and in order that those deductions can be allowed, the business must be carried on by the assessee. In this case it is not disputed that the business was carried on in the relevant previous year which is the financial year 1946-47, but the important question that has got to be considered is from which date are the expenses of this business to be considered permissible deductions and for that purpose the section that we have got to look to is Section 2(11) and that section defines the "previous year" and for the purpose of a business the previous year begins from the date of the setting up of the business. Therefore it is only after the business is set up that the previous year of that business commences and in that previous year the expenses incurred in the business can be claimed as permissible deductions. Any expenses incurred prior to the setting up of a business would obviously not be permissible deductions because those expenses would be incurred at a point of time when the previous year of the business would not have commenced. We must therefore look at the decision of the <ORG> as really referring to the setting up of the business in the language of Section 2(11) and not expenses connected with the commencement of the business. Mr. <NAME> says that if that be the correct approach, then the <ORG> has misdirected itself in considering the commencement of the business and not the setting up of the business. Let us try and understand whether there is any difference between the two expressions "setting up" and "commenced" and if so, what is the difference. It has often been said that the English language does not contain synonyms and every English expression must mean something different, however slight the difference, from any other expression. English language is full of nuances and if possible we must give a different meaning to the expression "setting up" from the expression "commenced", Mr. <NAME> very strongly relied on a judgment of Mr. Justice <NAME> reported in Birmingham and <ORG> v. <ORG>. In that case the assessee company was incorporated on the 20th of June, 1913, and between that date and the 6th of October, 1913, the directors arranged for the erection of works and the purchase of plant and machinery, and entered into agreements relating to the purchase of products to be used in the business and to the sale of finished products. On the 6th of October, 1913, the installation of plant and machinery being completed, the company commenced to receive raw materials for the purpose of manufacture into finished products. For the purpose of excess profits tax a question arose as to the computation of average amount of capital employed by the company during the accounting period and the company contended that it commenced business on the date of its incorporation, viz., on the 20th of June, 1913, and that the pre-war standard should be based on the profits shown by revised accounts for the period 20th June, 1913, to 30th June, 1914, and Mr. Justice <NAME> held, upholding the view of the Commissioners, that he business of the company had commenced on the 6th of October, 1913. Now, this is indeed a very strong case on facts in support of the Commissioner, because the view taken by Mr. Justice <NAME> is that everything that had been done by the company before the installation of the plant and machinery was completed was preparatory to the commencement of the business and it was only when the company actually started receiving raw materials for the purpose of manufacture into finished products, the plant and machinery being ready, that it could be said that the assessee company had commenced business, and this is what the learned Judge says at page 97 :

"Referring to their minutes having looked round, and having got their machinery and plant, and having also employed their foremen, and having got their works erected and generally got everything ready, then they began to take the raw materials and to turn out their products."

9. Therefore if this case were to be applied to the present assessee, then we would be driven to the conclusion that, if anything, the <ORG> has taken a view of the case very favourable to the assessee because on the facts of this case it would seem that the Income-tax Officer was right in holding that the net expenses prior to the 1st of November, 1946, should not be allowed as permissible deductions. That is why it is important to consider whether the expression used in the Indian statute for setting up a business is different from the expression Mr. Justice <NAME> was considering, viz., "commencing of the business." It seems to us, that the expression "setting up" means, as is defined in the Oxford English Dictionary, "to place on foot" or "to establish", and in contradistinction to "commence". The distinction is this that when a business is established and is ready to commence business then it can be said of that business that it is set up. But before it is ready to commence business it is not set up. But there may be an interregnum, there may be an interval between a business which is set up and a business which is commenced and all expenses incurred after the setting up of the business and before the commencement of the business, all expenses during the interregnum, would be permissible deductions under Section 10(2). Now, applying that test to the facts here, the company actually commenced business only on the 1st of November, 1946, when it purchased a ground-nut oil mill and was in a position to crush ground-nuts and produce oil. But prior to this there was a period when the business could be said to have been set up and the company was ready to commence business, and in the view of the <ORG> one of the main factors was the purchase of raw materials from which an inference could be drawn that the company had set up its business; but that is not the only factor that the <ORG> has taken into consideration. The <ORG> has, as pointed out in the statement of the case, scrutinised the various details of the expenses given in the order of the Appellate Assistant Commissioner and having scrutinised those expenses the <ORG> has come to the conclusion even on an interpretation more favourable to the assessee than the one we are giving to the expression "setting up" that these expenses do not show that the business was set up prior to the 1st of September, 1946. In our opinion, it would be difficult to say that the decision of the <ORG> is based upon a total absence of any evidence. As we have often said, we are not concerned with the sufficiency of evidence on a reference. It is only if there is no evidence which would justify the decision of the <ORG> that a question of law would arise which would invoke our advisory jurisdiction which after all is a very limited jurisdiction.

10. We will, therefore redraft the question submitted by the <ORG> as follows : "whether there was evidence before the <ORG> to hold that the assessee company set up its business as from 1st of September, 1946 ?" and we will answer that in the affirmative. No order as to costs. Notice of motion dismissed with costs.

11. Reference answered in the affirmative.