# K.C.MaJ/itw and oth.trs v. The State of T ravancore-Cochin

- **Citation:** [1955] 2 S.C.R. 1066
- **Court:** Supreme Court of India
- **Decided:** 1955-10-19
- **Bench:** VIVIAN BosE, Venkatarama Ayyar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/k-c-maj-itw-and-oth-trs-v-the-state-of-t-ravancore-cochin-1234
- **Pages:** 11

## Headnote

Indian Companies Act, 1913 (Vil of 1913), s. 153-C sub-clause
(J)(a)(i) and s. 162(v) and (vi)-Application for an order under
s. 153-C-Validity t!tereof to be judged Oil the facts at the time of
presentation thereof-Subsequent events-Effects thereof-Order under
s. 153-C-Whether competent before facts proved make out a case for
u1inding up under s. 162-Wordsi "just and equitable" in s. 162(vi)
-Whether ejusdem generis with the matters mentionned in clauses (i)
to (v) of the section--Mere misconduct of Directors in misappropriat.
ing funds of a Company-Apart from other circumstances-Whether
warrants an order for the winding up of a Company-CircumstanceJ
under which an order for winding up can be passed by the court.
An application was filed by the first respondent under s. 162
clauses (v) and (vi) of the Indian Companies Act for the winding up
of the Company on the grounds, inter-alia, that the affairs of the
Con1pany were
being mismanaged and that the directors had misappropriated the funds of the Company.
In the alternative it was
prayed that action might be taken
under s. 153-C and appropriate
orders be passed to protect the interests
of the shareholders.
The
High Court held (i) that the charges set out in the application had
been substantially prove~ and that it was a fit case for an order for
winding up being made under s. 162 (vi) and (ii) that under the
circumstances action could be taken under s. 153-C and accordingly
it appointed two administrators
with all the powers of directors to
look after the affairs of the Company. On appeal by special leave
to the Supreme Court by the Company it was contended that the
2S.C.R.
SUPREME COURT REPORTS
1067
application under s. 153-C was not maintainable inasmuch as there
was no proof that the applicant had obtained the consent of requisite
number of shareholders as provided in sub-clause (3)(a)(i) to s. 153-C,
that clause providing that a member applying for relief must obtain
the consent in writing of not less than one hundred members of the
Company or
not
less
than
one-tenth
of the members
of the
Company whichever is less..
It was alleged that thirteen
members
who had given their consent to the filing of the application had subsequently withdrawn their consent.
Held, that the validity of a petition must be judged on the facts
as
they vv· ere at the time of its presentation, and a petition which
was valid when presente<l cannot, in the
absence of a provision to
th:n
effect
in the
statute,
cease to be maintainable by reason of
events subsequent to its presentation. The withdrawal of consent
by thirteen of the members, even if true, could not affect either the
right of the applicant to proceed with
the
application or the jurisdiction of the court to dispose of it on its own merits.
Held further that before taking action under s. 153-C the court
must be satisfied that circumstances exist on which an order for
winding up could be made under s. 162 and where therefore the facts
proved do 10ot make out a case for winding up under s. 162, no order
can be passed under s. 153-C.
The words "just and equitable" in s. 162( vi) are not to be construed ejusdem generis with the matters mentioned ia clauses (i) to
( v) of the section.
If there is merely
a misconduct of the directors in
misappropriating the funds of the Company an order for winding up would
not be just and equitable but if in addition to such misconduct, circumstances exist
which render it desirable in the interests of the
shareholders that the Company should
be
wound up, s. 162( vi)
would be no bar to the jurisdiction of the court to make such an order.
The order for winding up was just and equitable in the circum<tances of the present case.
Jn re Anglo-Greek Steam Company <r 1866] L.R. 2 Eq. 1 ), In re
Diamond Fuel Company ([1879] 13 Ch. D. 400), Spackman's Case
(118491 1 M. & G. 170), Re Suburban Hotel Company ([1867] 2 Ch.
App. 737), Re European Life Assurance Society ([ 1869] L.R. 9 Eq.
122), In i·e Amalgamated Syndicate ([18

## Text

1955
K.C.MaJ/itw
and oth.trs
v.
The State of
T ravancore-Cochin
Bolt J.
1955
Decembtr 16.
1066
SUPREME CO:URT REPORTS
(1955]
but when it allowed the appeal by the State and
passed
the lesser sentence it said
that "the sentences
passed on each
accused
will
run
con~rrently". We
are not sure
whether the learned Judges meant that
the sentences
imposed by
ihem should run concurrently with the others or whether they meant to
allow the appeal to that extent. In order to remove
all doubts, we allow the appeal to the extent of directing that the sentences
imposed on each accused shall
run concurrently
and not
consecutively.
Except for
that, the appeal is dismissed.
RAJAHMUNDRY ELECTRIC SUPPLY
CORPORATION LTD.
ti.
A. NAGESWARA RAO AND OTHERS.
[VIVIAN BosE and VENKATARAMA AYYAR JJ.]
Indian Companies Act, 1913 (Vil of 1913), s. 153-C sub-clause
(J)(a)(i) and s. 162(v) and (vi)-Application for an order under
s. 153-C-Validity t!tereof to be judged Oil the facts at the time of
presentation thereof-Subsequent events-Effects thereof-Order under
s. 153-C-Whether competent before facts proved make out a case for
u1inding up under s. 162-Wordsi "just and equitable" in s. 162(vi)
-Whether ejusdem generis with the matters mentionned in clauses (i)
to (v) of the section--Mere misconduct of Directors in misappropriat.
ing funds of a Company-Apart from other circumstances-Whether
warrants an order for the winding up of a Company-CircumstanceJ
under which an order for winding up can be passed by the court.
An application was filed by the first respondent under s. 162
clauses (v) and (vi) of the Indian Companies Act for the winding up
of the Company on the grounds, inter-alia, that the affairs of the
Con1pany were
being mismanaged and that the directors had misappropriated the funds of the Company.
In the alternative it was
prayed that action might be taken
under s. 153-C and appropriate
orders be passed to protect the interests
of the shareholders.
The
High Court held (i) that the charges set out in the application had
been substantially prove~ and that it was a fit case for an order for
winding up being made under s. 162 (vi) and (ii) that under the
circumstances action could be taken under s. 153-C and accordingly
it appointed two administrators
with all the powers of directors to
look after the affairs of the Company. On appeal by special leave
to the Supreme Court by the Company it was contended that the
2S.C.R.
SUPREME COURT REPORTS
1067
application under s. 153-C was not maintainable inasmuch as there
was no proof that the applicant had obtained the consent of requisite
number of shareholders as provided in sub-clause (3)(a)(i) to s. 153-C,
that clause providing that a member applying for relief must obtain
the consent in writing of not less than one hundred members of the
Company or
not
less
than
one-tenth
of the members
of the
Company whichever is less..
It was alleged that thirteen
members
who had given their consent to the filing of the application had subsequently withdrawn their consent.
Held, that the validity of a petition must be judged on the facts
as
they vv· ere at the time of its presentation, and a petition which
was valid when presente<l cannot, in the
absence of a provision to
th:n
effect
in the
statute,
cease to be maintainable by reason of
events subsequent to its presentation. The withdrawal of consent
by thirteen of the members, even if true, could not affect either the
right of the applicant to proceed with
the
application or the jurisdiction of the court to dispose of it on its own merits.
Held further that before taking action under s. 153-C the court
must be satisfied that circumstances exist on which an order for
winding up could be made under s. 162 and where therefore the facts
proved do 10ot make out a case for winding up under s. 162, no order
can be passed under s. 153-C.
The words "just and equitable" in s. 162( vi) are not to be construed ejusdem generis with the matters mentioned ia clauses (i) to
( v) of the section.
If there is merely
a misconduct of the directors in
misappropriating the funds of the Company an order for winding up would
not be just and equitable but if in addition to such misconduct, circumstances exist
which render it desirable in the interests of the
shareholders that the Company should
be
wound up, s. 162( vi)
would be no bar to the jurisdiction of the court to make such an order.
The order for winding up was just and equitable in the circum<tances of the present case.
Jn re Anglo-Greek Steam Company <r 1866] L.R. 2 Eq. 1 ), In re
Diamond Fuel Company ([1879] 13 Ch. D. 400), Spackman's Case
(118491 1 M. & G. 170), Re Suburban Hotel Company ([1867] 2 Ch.
App. 737), Re European Life Assurance Society ([ 1869] L.R. 9 Eq.
122), In i·e Amalgamated Syndicate ([1897] 2 Ch. 600) and Loch v.
/ohn Blackwood Ltd. ( [ 1924] A. C. 783, 790), referred to.
CIVIL
APPELLATE
No 312 of 1955.
JURISDICTION :
Civil
Appeal
On appeal by special leave from the judgment
and order dated the 19th October 1955 of the Andhra
High Court at Guntur in 0. S. Appeal No. 1 of 1955
13 -85 S. c. lndia/59
1955
Rajahmundry
Electric Supply
Corporation Ltd.
v.
A. Nageswara Rao
and others
1955
Rajahmundry
El1ctric Supply
Corporaliot1 IJd.
v .
..4. Nag11wara Rao
and olh1r1
1068
SUPREME COURT REPORTS
[1955]
arising out of the Order dated the 26th day of September
1955 of the said High Court in its Ordinary
Original Civil Jurisdiction in O.P. No. 3 of 1955.
M. S. K. Sastri, for the appellant.
D.
Narasaraju,
Advocate-General,
Andhra (T.
Anantha Babu and T. V. R. Tatachari with him), for
respondent No. 1.
D. Narasaraju,
Advocate-General
Andhra
(A.
Krishnaswami and K. R. Chowdhry with him) for
respondents Nos. 2 and 3.
1955.
December
16.
The
Judgment of the
Court was delivered by
VENKATARAMA
AYYil J.-This appeal arises out
of an application filed by the first respondent under
section 162, clauses (v) and (vi) of the Indian Companies Act for an order that the Rajahmundry Electric Supply Corporation Ltd., be wound up. The
grounds on which the relief was claimed were that
the affairs of the Company were being grossly mismanaged, that large amounts were owing to the Government for charges for electric energy
supplied by
them,
that the directors had
misappropriated
the
funds of the Company, and that the directorate which
had the majority
in voting strength was "riding
roughshod" over the rights
of the shareholders.
In
the alternative, it was prayed that action might be
taken
under
section
153-C and appropriate orders
passed to protect the rights of the shareholders. The
only effective opposition to the application came from
the Chairman of the Company, Appanna Ranga Rao,
who contested it on the ground that it was the ViceChairman, Devata
Ramamohanrao,
who was responsible for the maladministration of the Company, that
he had been removed from the directorate, and steps
were being · taken to call him to account, and that
there was accordingly no ground either for passing
an order under section 162, or for taking action under
section 153-C.
The learned Judge of the Andhra High Court before
whom the application .came up for hearing, held that
2 S.C . .R.
SUPREME COURT REPORTS
1069
the
charges set out therein
had
been substantially
proved, and that it was a fit case for an order for
winding up being made
under section
162(vi). He
also held that under the circumstances
action could
be taken under section 153-C, and accordingly appointed two administrators for
the management of
the Company for a period of six months vesting in
them all the powers of the directorate and authorising
them to take the necessary steps for recovering the
amounts due, paying the debts and for convening a
meeting of the shareholders for the purpose of ascertaining their wishes whether the administration should
continue, or whether a new Board of Directors should
be constituted fo:r the
management of the
Company.
Against this order, the Chairman, Appanna Ranga
Rao, acting in the name of the Company preferred
an appeal to a Bench of the Andhra High Court.
The learned Judges agreed with the trial Judge that
the affairs of the Company, as they stood, justified
action
being
taken
under section 153-C, and
dismissed the appeal. Against this order, the Company
has preferred this appeal by special leave.
On behalf of the appellant, it was firstly contended
that the application in so far as it was laid under
section 153-C was not maintainable,
as there was no
proof that the applicant had obtained the consent of
the requisite number of shareholders as provided in
sub-clause
( 3) (a) ( i)
to
section
153-C. That clause
provides that a member is entitled to apply for relief
only if he has obtained the consent in writing of not
less than one hundred in number of the members of
the company or not less than one-tenth in ·number of
the members, whichever is less. The first respondent
stated in his application that he had obtained the
consent of 80 shareholders, which was more than onetenth of the total number of members, and had thus
satisfied the condition laid down in section 153-C,
sub-clause (3)(a)(i). To this, an objection was taken
in one of the written statements filed
on behalf of
the respondents that out of the 80 persons who had
consented to the
institution of
the application,
13
were not share-holders at all, and that two members
1955
Rajalunundry
El1ctric Supply
CorporaJion Lid.
v.
A. Nageswara RatJ
and others
V 1nkatarama
AY.)'ar J.
1955
Rajalimund,:Y
El1etric Supply
Corporation LJd.
v .
.A:. N agtswara Rao
and others
Vtnkatarama
A,J.:var J.
1070
SUPREME COURT REPORTS
[1955]
had signed twice. It was further alleged that 13 of
the persons who had given their consent to the filing
of the application
had subsequently
withdrawn
their
consent. In the result, excluding these
28 members,
it was pleaded, the number of persons who had consented would be reduced to 52, and therefore the condition laid down in section 153-C, sub-clause (3)(a)(i)
was not satisfied.
This point is not dealt with in the judgment of the
trial court, and the argument before us is that as the
objection went to the root of the matter and struck
at the
very maintainability of
the application, evidence should have been taken on the matter and a
finding recorded thereon.
We do not find any substance in this contention. Though the objection was
raised in the written statement,
the
respondents did
not press the same
at the trial, and the
question was
never argued before
the
trial Judge. The
learned
Judges before whom this
contention was raised on
appeal declined to entertain it, as it was not pressed
in the trial court_, and there are no grounds fot permitting the appellant to raise it in this appeal. Even
otherwise, we are
of
opinion
that
this
contention
must, on the allegations in the
statement, assuming
them to be true, fail on the merits. Excluding the
names of the
13 persons who are stated to be not
members and the two who are stated to have signed
twice, the number of members who had given consent
to the institution
of
the
application was 65. The
number of members of the Company is stated to be
603.
If, therefore, 65
members
consented
to the
application in writing,
that would be
sufficient to
satisfy the condition laid down in section 153-C, subclause (3) (a) (i). But it is
argued that as 13 of the
members who had consented to the filing of the application
had,
subsequent
to its
presentation, withdrawn their consent, it thereafter ceased to satisfy
the requirements of the st:Hute, and was no longer
maintainable.
We
have
no
hesitation in rejecting
this contention. The validity of a petition must be
iudged on the facts as they were at the time of its
presentation,
and a petition which was valid when
-
'
2S.C.R.
SUPREME COURT REPORTS
1071
presented cannot, in the
absence
of a provision to
that effect in the statute, cease
to be maintainable
by
reason of events
subsequent
to its
presentation.
In our opinion, the withdrawal of consent by 13 of
the members, even if true, canot affect either
the
right of the applicant to proceed with the application
or the jurisdiction of the court to dispose of it on its
own merits.
It was next contended that the allegations in the
application were not sufficient to support a winding
up order under section 162, and that therefore no
action could be taken under section 153-C. We agree
with the appellant that before taking action
under
section 153-C, the court must be satisfied that circumstance~ exist on which an order for winding up could
be made under section 162. The true scope of section
153-C is that whereas prior to its enactment the court
had no option but to pass an order for winding up
when the conditions mentioned in section
162 were
satisfied, ir could now in exercise of the powers conferred by that section make an order for its management by the court with a view to its being ultimately
salvaged. Where, therefore, the facts proved do not
make out a case for winding up under section 162, no
order could be passed under section 153-C. The question therefore. to
be determined is whether the facts
found make out a case for passing a winding up order
under section
162.
In this application the first respondent relied on section 162, clauses (v) and (vi) for
an order for winding up. Under section 162(v), such
an order could be made if the company is unable to
pay its debts. It was alleged in the application that
the arrears due to the Government on 25-6-1955 by
way of charges for energy supplied by them amounted
to Rs. 3,10,175-3-6.
But there
was no evidence that
the .COmpany was unable to pay the amount and was
commercially
insolvent,
and the
learned
trial Judge
rightly
held
that
section
162 ( v)
was
inapplicable.
But he was of the opinion that on the facts established
it was just and equitable to make an order for winding up under section 162(vi), and that view has been
affirmed by the learned Judges on appeal.
1955
Rajahmundry
Eltctric Supply
<Arporation lJd.
\'.
A. Nageswara Rao
and others
Venkatarama
..{l!)'ar J.
1955
JMahtnurttby
Elidrie Su/JIJW
Cor/JOtalion -lid.
v.
A..Hagu-a Rao
an4 .,,,,,,
I' lllkala"'""'
4u•r j.
1072
SUPREME COURT REPORTS
[1955]
It was argued for the appellant that the evidence
-only
established
that the
Vice-Chairman, Devata
Ramamohan Rao, who had been in effective management was guilty of misconduct, and that by itself
was not a sufficient ground for making an order for
winding up. It was further argued that the words "just
-and equitable" in clause (vi)
must be construed ejusdem generis with the matters mentioned in clauses (i)
to (v), that mere misconduct of the directors was not
a ground on which a winding up order could be made,
and that it was. a matter of internal management for
which resort must be had to the other remedies provided in the Act. The decisions in In re Anglo-Greek
Steam Company(!) and In re Diamond Fuel Company('}
were relied on in support of this position. In In re
Anglo-Greek Steam Company('), it was held that the
misconduct of the directors of
a company was not a
ground on which the court could order winding up
under the just and equitable clause, unless it was
established
that by reason
of
such
mismanagement
the company had become insolvent.
In In
re Diamond Fuel Company(•), it was observed by Baggallay,
L.J. that,
" ...... mere misconduct or mismanagement on the
part of the directors, even although it might be such
as to justify a suit against them in respect of such
misconduct or mismanagement, is
not of itself sufficient to justify a winding-up order".
The contention of the appellant is that as all the
charges made in the application amounted only to
misconduct on the part of the directors, and as there
was no proof that the Company was unable to pay
its debts, an order for winding up under section 162
could not be made.
The authorities relied on by the appellant reflect
the view which was at one time held in England as
to the true meaning and scope of the words "just and
equitable" in the provisions
corresponding
to
section
162(vi) of the Indian Act In Spackman's Case( ),
Lord Cottenham, L.C.
construed them as
ejusdem
(1) [1866] L.R. 2 Eq. !.
(2) [1879] 13 Ch. D. 400, 408.
(3) [1849] l M. & G. 170; 41E.R.1228, 1230.
2 S.C.R.
SUPREME COURT REPORTS
1073
genem with the
matters mentioned in the other
clauses to the
section, and
that construction was
followed
in a number of cases. Vide Re Suburban
Hotel Co.(1 ), In re Anglo-Greek Steam Company( 2 ), Re
European Life Assurance Society(3)
and In re Diamond
Fuel Company( 4). But a different view came to be
adopted in later decisions
(vide In re Amalgamated
Syndicate( 5 ), and the question must now be taken to
be
settled
by
the
pronouncement of
the
Judicial
Committee in Loch v. John Blackwood Ld.(9 ), where
after an elaborate review of the authorities, Lord
Shaw observed that,
" ...... it is in accordance with the laws of Eng·
land, of Scotland and of Ireland that the ejusdem
generis doctrine (as supposed to. have been laid by
Lord Cottenham) does not operate so as to confine
the cases of winding up to those strictly analogous to
the instances of the first
five sub-sections of
section
129 of the British Act".
The law is thus stated in Halsbury's Laws of Eng·
land, Third Edition, Volume 6, page 534,
para 1035 :
"The; words 'just and equitable' in the enactment
specifying the grounds for winding up by the court
are not to be read as being ejusdem generis with the
preceding words of the enactment".
When once it is held that the words "just and equit·
able" are not to be
construed ejusdem generis, then
whether mismanagement of directors is a ground
for
a winding-up order under section 162(vi) becomes a
question to be decided on
the facts of each case.
Where nothing more
is established
than that the
directors have misappropriated the funds of the Com·
pany, an order for winding up would not be just or
equitable, because if it is a sound concern, such an
order must operate harshly on the rights of the share·
holders.
But if,
in addition to such misconduct,
circumstances exist which render it desirable in the
interests of the
shareholders
that
the Company
should be wound up, there is nothing in section 162(vi)
(I) [186~2 Ch. App. 737.
(3) f
1869 L. R. 9 Eq. 122.
(5) 1897 2 Ch. 600.
(2) [1866) L. R 2 Eq. I.
(4) [1879] 13 Ch. D. 400, 408.
(6) [ 1924] A. C. 783, 790.
1955
Rajahmund,,
E/eetrie Supply
Corporation Ud •
v.
A. Nageswara Rao
and others
Ymkatarama
A»ar ].
1955
RaJahmundr)1
Eltch'ic Supply
Curpr>ration Ltd.
v.
A .. Vage1wara Raa
and others
V enkalarama
Ayyar J.
1074
SUPREME COURT REPORTS
[1955]
which
bars
the
jurisdiction of
the
court
to make
such an order. Loch v. fohn Blackwood Ld.(
1
)
was itself a case in which the order for winding up was
asked for on the ground of mismanagement by the
directors, and the law was thus stated at page 788 : ·
'·It is undoubtedly true that at
the foundation
of applications for winding up, on
the 'just and
equitable' rule,
there must lie a
justifiable · lack of
confidence in the conduct and management of the
company's affairs.
But this lack of confidence must
be grounded on conduct of the directors, not in regard to their private
life or affairs, but in regard to
the
company's
business.
Furthermore
the
lack
of
confidence
must spring
not from
dissatisfactio·1
at
being outvoted on the business affairs or on what is
called the domestic policy of the company. On the
other hand, wherever the lack of confidence is rested
on a lack of probity in the conduct of the company's
affairs, then the former is justified by the latter, and
it is under the statute just and equitable that the
company be wound up".
Now, the facts as found by the courts below are
that
the
Vice-Chairman
grossly
mismanaged
the
affairs of the
Company, and had drawn considerable
amounts for l,iis personal purposes, that arrears due
to the Government for supply of electric energy as on
25-6-1955
was
Rs. 3,10,175-3-0,
that
large collections
had to be made, that the machinery was in a state of
disrepair, that by reason of death
and other causes
the directorate
had
become
greatly
attenuated
and
"a powerful local junta was ruling the roost", and
that the shareholders outside the group of the Chairman
were apathetic and powerless
to
set
matters
right. On these findings, the courts below had the
power to direct the winding up of the Company under
section 162(vi), and no grounds have
been shown for
our interfering with their order.
It was urged on behalf of the appellant that as the
Vice-Chairman
who was
responsible
for
the
mismanagement
had
been
removed,
and
the
present
(') [1924] A.G. 783, 790.
2S.C.R.
SUPREME COURT REPORTS
1075
management was taking steps to set things right and
to put an end to the matters complained of, there was
no need to take action under section 153-C. But the
findings of the courts below are that the Chairman
himself either
actively
co-operated with the ViceChairman in
various
acts
of misconduct
and
maladministration or that he had, at any rate, on his
own showing abdicated the entire management to
him, and that as the affairs of the Company where in
a state of confusion and embarrassment, it was necessary to take action under section 153-C. We are of
opinion that the
~earned Judges were justified on the
above findings in passing the order which they did.
It was also contended that the appointment of
administrators
in supersession
of the directorate
and
vesting power in them to manage the Company was
an interference· with its internal management. It is
no doubt the law that courts will not, in general,
intervene
at
the
instance
of
shareholders
in
matters
of
internal
administration,
and
will
not
interfere with the management of a company by its
directors, so long as they are acting within the power
conferred on them under the Articles of Association.
But this rule can by its very nature apply only when
the company
is a running concern, and it is
sought
to interfere with its affairs as a running concern. But
when an application is presented to wind up a company, its very object is to put an end to its existence,
and for that purpose to terminate its management in
accordance with the Articles of Association and to
vest it in the court. In that situation, there is no
scope for the rule that the court should not
interfere
in
matters
of
internal
management.
And where
accordingly a case
had been made out for an order
for winding up under section 162, the appointment of
administrators under section '153-C cannot be attacked
on the ground that it is an interference with the internal management of the affairs of the Company. If a
Liquidator can be appointed to manage the affairs of
a
company when an order for
winding
up
1s
made under section 162, administrators could also be
1955
Rajahmund1y
Electrie Supply
Corporation Ltd.
V·
A. Nageswara Rao
and others
Vmkatarama
Ay.var J.
1955
Rajalzmundry
Eketric Supp/;!
Corporation Ltd.
v.
A· Nageswara Rao
and others
1955
D1tnnbt' 19.
1076
SUPREME COURT REPORTS
appointed to manage its affairs,
when action
under
section 153-C.
This
contention
must
ingly be rejected.
[1955]
is taken
accordIn the result, the appeal fails and is dismissed
with costs, of the
first respondent. The costs of the
administrator will come out of the estate.
THE UNION OF INDIA
v.
THE COMMERCIAL TAX OFFICER, WEST
BENGAL AND OTHERS
(WITH CONNECTED APPEAL)
[S, R. DAs, ACTING C. J., VIVIAN BosE, BHAGWATI,
JAGANNADHADAS and B. P. SINHA JJ.]
Sales
Tax-Sale of hessian to the Ministry of Industry and
Supplies of the Government of India-If exempt from payment of
sales tax-Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of
1941), s. 5(2)(•)(iii).
.
-Per S. R. DAs,
AcTING
C.J.,
V1v1AN
BosE,
BHAGWATI
AND
JAGANNADHADAS JJ., SINHA
J. · dissenting.-The exemption
created
by the provisions of s. 5(2)(a)(iii) of the Bengal Finance (Sales Tax)
Act of 1941 must be
construed strictly and cannot be extended to
sales to Government departments other than those mentioned therein.
The Department of Industries and Supplies,
which was subsequently rcdesignated as the Ministry of Industries and Supplies, was
not ·the same as the Indian Stores Department or the Supply Dc--
partmcnt of the Government. of India and~ consequently, sales _made
to the Ministry of Industries and. Supplies are not exempt from pay~
ment of sales tax under that section.
In a welfare State with
ever
expanding activities in different
fields including trade and commerce,
Government departments arc
often entrusted with the performance of well~defined activities and
are authorised to deal with the outside world and enter into transactions in the .same way as an ordinary person or a Company may do
and may well
0be. regarded as distinct units or quasi-legal entities for
μie ·purpose for which they are created.
Consequently,
the. sales _of hessian made to the Ministry of
Industries and Supplies of the Government of India by the appellant Mills were hot exempt from payment of sales tax under the
Act and the State of West Bengal was entitled to levy the same.