# NATIONAL & GRINDLAYS BANK LTD v. THE MUNICIPAL CORPORATION OF GREATER BOMBAY

- **Citation:** [1969] 3 S.C.R. 565
- **Court:** Supreme Court of India
- **Decided:** 1969-02-05
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/national-grindlays-bank-ltd-v-the-municipal-corporation-of-greater-bombay-4614
- **Pages:** 9

## Headnote

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NATIONAL & GRINDLAYS BANK LTD.
v.
THE MUNICIPAL CORPORATION OF GREATER
BOMBAY
February 5, 1969
· [V. RAMASWAMI AND. A. N. GROVER, JJ.)
Bombay Muaisipa/ Corparation Act 3 of 1888, S. 14&-Landlord leasi11g land to tenant who constructs thereon-Whether se~ti?n conte1nplates
conzposite assess.men! of property tax on land ·and bulldlng-If prin1ary
liability to tax that of landlord.
The appellant had leased a plot of land situated in the Malad Area in
Greater Bombay at a rental on a monthly basis.
The lessee had constructed a house on the plot of land at his own cost. Prior to the merger
of the Malad Area into Greater Bombay in February, 1947, the Malad
District Municipality assessed and levied taxes on the land and the structures separately and recovered the same from the landlo:-d and the tenant.
After the merger, the respondent Bombay Municipal Corporation issued
a notice to the appellant upcter section 167 of the Bombay Municipal
Corporation Act No. 3 of 1883, informing him that there would be a
composite assessment on him.
An appeal against the order to the Chief
Judge, Small Causes Court. Bombay, under section 217 of the Act was
dismissed.
A single bench of the High Court dismissed a further appeal
on the view that it was bound by the decision in Rcmji Keshavji v .
. \fonicipal Corporation of Bombay 56 B.L.R. 1132.
A Letters Patent
appeal \Vas also dismissed.
In the appeal to this Court it was contended on behalf of the appellant
that on a prope'r construction of section 146 (2) of th::: Act there should
have been a separate assessment in respect of the building and the land;
alternatively even if section 146(2) contemplates a composite assessment
of the building and the land, a preliminary liability should be imposed
upon the owner of the building in whom the right to let the building
vests and not on the owner of the land; the appellant c;ou~d not be treated
as a lessor under section 146(2) because it did not let the land with the
building thereon as one unit to the lessee.
HELD : (I) The scheme under section 146 is that when the land is
let a:id the tenant has built upon the land, there should be a composite
assessment of tax: upon the land and the building taken together. In the
case of such a composite unit the p'rimary liability of assessment of tax
is intended to be on the lessor of the land under section 146 (2) (a) of
the Act. [57 J F]
In .section 146(1) and (2) the word "premises" is used in contrast
to section 146( 3) where the words "la!!d and building" are separately
mentioned.
Section 146(3) which is admittedly not applicable in the
present c'.ascs. furnishes a key to the interpretation of ~~ction 146(2) (a) .
. In the. cont~xt of section 146(3) the lessor of the premises, as mentioned
n1 -;ectio:i 146('.!)(a) must be construed to mean the lessor Of the land on
"hich the building has been constructed by the tenant. [571 DJ
Section 147 ptQvides for an apportionment of responsibility to property t~x when the 'premises are let or sub-let; it is clear the intention of
the legislature was to 'impose the primary liability for payment of property
tax upon the kssor of'the land to facilitate its collection and to give him
the right to recoupment under section 147. [571 Fl
566
SUPREME COURT REPORTS
[1969) 3 S.C.R.
Rt11njl Keshavji
v.
Muncicipal Corporation for Gr<'ater Bo111hay,
56
A
B&m. L.R. 1132. approved.
(2) Even assuming that the meaning of section 146(2) is obscure and
that it is possible to interpret it as throwing the primary liability for pa)'·
meat of property tax upon the lessee who has constructed a buildini on
the laod, this was not a case where the law expressed by the High
Court
in Ra111ji Kt!shavji's case, should be interfered with.
That is the construction which the authorities have put upon it by· their usage and conB
duct for a long period of time. and the Court may. the'refore resort tL1
contemporary construction by applying the principle "'optilnr. fegz1111 in1erpres est cons11et11do"

## Text

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NATIONAL & GRINDLAYS BANK LTD.
v.
THE MUNICIPAL CORPORATION OF GREATER
BOMBAY
February 5, 1969
· [V. RAMASWAMI AND. A. N. GROVER, JJ.)
Bombay Muaisipa/ Corparation Act 3 of 1888, S. 14&-Landlord leasi11g land to tenant who constructs thereon-Whether se~ti?n conte1nplates
conzposite assess.men! of property tax on land ·and bulldlng-If prin1ary
liability to tax that of landlord.
The appellant had leased a plot of land situated in the Malad Area in
Greater Bombay at a rental on a monthly basis.
The lessee had constructed a house on the plot of land at his own cost. Prior to the merger
of the Malad Area into Greater Bombay in February, 1947, the Malad
District Municipality assessed and levied taxes on the land and the structures separately and recovered the same from the landlo:-d and the tenant.
After the merger, the respondent Bombay Municipal Corporation issued
a notice to the appellant upcter section 167 of the Bombay Municipal
Corporation Act No. 3 of 1883, informing him that there would be a
composite assessment on him.
An appeal against the order to the Chief
Judge, Small Causes Court. Bombay, under section 217 of the Act was
dismissed.
A single bench of the High Court dismissed a further appeal
on the view that it was bound by the decision in Rcmji Keshavji v .
. \fonicipal Corporation of Bombay 56 B.L.R. 1132.
A Letters Patent
appeal \Vas also dismissed.
In the appeal to this Court it was contended on behalf of the appellant
that on a prope'r construction of section 146 (2) of th::: Act there should
have been a separate assessment in respect of the building and the land;
alternatively even if section 146(2) contemplates a composite assessment
of the building and the land, a preliminary liability should be imposed
upon the owner of the building in whom the right to let the building
vests and not on the owner of the land; the appellant c;ou~d not be treated
as a lessor under section 146(2) because it did not let the land with the
building thereon as one unit to the lessee.
HELD : (I) The scheme under section 146 is that when the land is
let a:id the tenant has built upon the land, there should be a composite
assessment of tax: upon the land and the building taken together. In the
case of such a composite unit the p'rimary liability of assessment of tax
is intended to be on the lessor of the land under section 146 (2) (a) of
the Act. [57 J F]
In .section 146(1) and (2) the word "premises" is used in contrast
to section 146( 3) where the words "la!!d and building" are separately
mentioned.
Section 146(3) which is admittedly not applicable in the
present c'.ascs. furnishes a key to the interpretation of ~~ction 146(2) (a) .
. In the. cont~xt of section 146(3) the lessor of the premises, as mentioned
n1 -;ectio:i 146('.!)(a) must be construed to mean the lessor Of the land on
"hich the building has been constructed by the tenant. [571 DJ
Section 147 ptQvides for an apportionment of responsibility to property t~x when the 'premises are let or sub-let; it is clear the intention of
the legislature was to 'impose the primary liability for payment of property
tax upon the kssor of'the land to facilitate its collection and to give him
the right to recoupment under section 147. [571 Fl
566
SUPREME COURT REPORTS
[1969) 3 S.C.R.
Rt11njl Keshavji
v.
Muncicipal Corporation for Gr<'ater Bo111hay,
56
A
B&m. L.R. 1132. approved.
(2) Even assuming that the meaning of section 146(2) is obscure and
that it is possible to interpret it as throwing the primary liability for pa)'·
meat of property tax upon the lessee who has constructed a buildini on
the laod, this was not a case where the law expressed by the High
Court
in Ra111ji Kt!shavji's case, should be interfered with.
That is the construction which the authorities have put upon it by· their usage and conB
duct for a long period of time. and the Court may. the'refore resort tL1
contemporary construction by applying the principle "'optilnr. fegz1111 in1erpres est cons11et11do". [572 E]
Oh/son's case, [1891) I Q.B. 485, 489: Clyde Navigation Tm.Wes \'.
Laird, 8 A.C. 658, 670, referred to.
CIVIL APP ELLA TE JuRISDICTION :
Civil Appeal No. 46.2 of
1966.
Appeal by special leave from the order dated March 25, 1964
-Of the Bombay High Court in Letters Patent Appeal No. 28 of
1964.
S. V. Gupte, P. P. Khambatta, D. P. 'Mehta, Bhuvnesh Kumari
and O. C. Mathur, for the appellant.
M. C. Chagla and I. N. Shroff, for the respondent. '
The Judgment of the Court was delivered by
Ramaswami, J.-The question of law involved in this appeal
is whether the primary liability is imposed on the appellant under
the Bombay Municipal Corporation Act, 1888 (Act No. 3 of
1888) to pay property taxes to the r,~spondent i.e .. the Municipal
Corporation of Greater Bombay in respect of lam!" owned by the
appellant and let on a monthly basis to a third party who has constructed a building thereon.
The appellant is a banking company
incorporated in
the
United Kingdom and has established places of business in
India. The appellant is the sole trustee of the estate of the late
Mr. F. E. Dinshaw and in that capacity is the owner of a plot of
land at Manchubhai Road. Malad. Greater Bombay in the State
of Maharashtra. bearing No. P-Ward No. 6418, Street No. 299B.
The said plot of land had been leased by the former trustee of
the estate to one· Mr. R. R. Pande (hereinafter referred to as the
lessee) since a number of years at a monthly rent of Rs. 12.50.
The Jessee had constructed at his own cost a tiled house on the
said plot of land. The Malad area merged into Greater Bombay
on !st February. 1957. Upto the date of the merger the Malad
District Municipality was assessing and levying taxes on the land
and the structure separately and recovering the same from the
landlord and the tenant.
After the merger, the Bombay Municipal Corporation issued a notice to the appellant under section
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GRINDLAYS BANK V, MUNIC. CORP, (Ramaswami, J.)
567
167 of the Act informing him that the assessment book had been
amended by inserting the name of the appellant and that the rateable value of the house had been fixe~ at Rs. 43'0/-. Being aggrieved by this order the appellant preferred an ap~al to the
Chief Judge, Small Causes Court, Bombay under section 217 of
the Act.
The appeal was dismissed by the Chief Judge, Small
Causes Court by his order dated 3rd August, 1960. The appellant took the matter in further appeal to the Bombay High Court.
The appeal was heard by Mr. Justice Patel and was dismissed on
the 14th January, 1964. The learned Judge felt that he was
bound by the decision of Chagla, C.J.
and Shah, J. in Ramji
li.eshav11 v. Municipal Corporation for Greater Bombay(').
fhe
appellant thereafter preferred a Letters Patent Appeal 1'/o. 28 of
1964 which was summarily dismissed by Chief Justice H. K.
Chainani and Mr. Justice Gokhale on 25th March, 1964. The
pr=nt appeal is brought by special leave from the judgment of the
Bombay High Court dated 25th March, 1964.
Section '3(r) of the Bombay Municipal Corporation Act, 1888
(Act No. 3 of 1888) (hereinafter called the Act) defines 'land'
as including "land which is being built upon or is built upon or
covered with water ...... ". Section 3(s) defines 'buildings' as
including a house, out-house, stable. shed, hut and every other
such structure. whether of masonry bricks, wood. mud, metal or
llllY other material whatever.
Section 3(gg) defines 'premises'
as including messuages, buildings and lands of any tenure, whether
OJJOll or enclosed, whether built on or not and whether public or
private. Section 140 states :
"140. The following taxes shall be levied on buildings
and lands in Greater Bombay and shall be cal~ "property taxes", namely :-
(a) a water tax of so many pet centum of their rateable value as the
corporation shall deem reasonable
for providing a water-supply for Greater Bombay.
(b) a halalkhor-tax of so many per centum, not ex-
~ding five of their. rateable value as will, in the opimo~ of the corporatton, suffice to provide for the collectmn, remoy~l and disposal, by municipal agency, of
all. excrement11tous and polluted matter from privies,
urm~l~ and cessP<J<?l~ and for efficiently maintaining and
repamng the mumc1pal drains constructed or used for
the receiptions or conveyance of such matter, subject
however, to the provisions that the minimum amount of
~uch tax to be levied in respect of any one separate hold1~g of land'. o_r of a~y one building or of any one portion of a bmldmg which is let as a separate holding, shall
(I) 56 Born. L.R. 1132.
568
SUPREME COURT REPORTS
[1969] 3. S.C.R.
be six annas per month, and that the amount of such
tax to be levied in respect of any hotel, club or other
large premises may be. specially fixed under section 172;
( c) a general tax of not less than eight and not more
than twenty-six per centum of their rateable value, together with not less than one-eighth and not more than
three-quarters per centum of their rateable value added
thereto in order to provide for the expense necessary
for fulfilling the duties of the corporation arising under
clause (k) of section 61 and Chapter XIV;
(ca) the education cess leviable under s. 195E;
(d) betterment charges leviable under Chapter XIIA."
Section 146 provides :-
. "146. ( 1) Property taxes shall be leviable primarily
from the actual occupier of the premises upon which the
said taxes are assessed, if such occupier holds the said
premises immediately from the Government or from the
corporation or from a fazend\lf.
Provided that the property taxes due in respect of
any premises owned by or vested in the Government and
occupied by a Government servant or any other person
on behalf of the Government for residential purposes
shall be le viable primarily from the Government and not
the occupier thereof.
(2) Otherwise the said taxes shall be primarily leviable as follows, namely :-
(a) if the premises are let, from the lessor;
(b) if the premises are sub-let, from the superior
lessor; and
(c) if the premises are unfet, from the person in
whom the right to let the· same vests.
(3) But if any land has been let for any term exceeding one year to a tenant, and such tenant on any
person deriving title howsoever from such tenant has
built upon the land, the property taxes assessed upon
the said land and upon the building erected thereon shall
be leviable primarily from the said tenant or such person,· whether or not the premises be in the occupation of
the said tenant or such person".
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GR!NDLAYS BANK v. MUNIC. CORP, (Ramaswami, J.)
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Section 14 7 states :
"147. (1) If any premises assessed to any property
tax are let, and their rateable value exceeds the amount
of rent payable in respect thereof to the person from
whom, undm- the provisions of the last preceding section, the said tax is leviable, the said person shall be
entitled to receive from his tenant the difference between the amount of the property tax levied from him,
and the amount of which would be leviable from him it
the said tax were calculated on the amount of rent payable to him.
(2) If the premises are sub-let and their rateable
value exceeds the amount of rent payable in respect
thereof to the tenant by his sub-tenant, or the amount
of rent payable in ~spect thereof to a sub-tenant by the
person holding under him, the said tenant shall be entitled to receive from his sub-tenant or the said subtenant shall be entitled to receive from the person holdin.1t under him, as the case may be, the difference between any sum recovered under this section from such
tenant or sub-tenant and , the amount of property-tax
which would be leviable in respect of the said premises
if the rateable value thereof were equal to the difference
between the amount of rent which such tenant or subtenant receives and the amount of rent wpich he pays.
(3) Any person entitled to receive any sum under
this section shall have, ·tor the recovery thereof, the
same rights and remedies as if such sum were rent payable to him by the person from whom he is· entitled to
receive the same".
Section 154(1) enacts as follows:-
"In order to fix the rateable value of any building
or land assessable to a property-tax, there shall be deducted from the amount of the annual rent for which
such land or building might reasonably be expected to
let fro?J year to year a sum equal to ten per centum of
1!1e said annual rent and the said deduction shall be in
heu of all allowances for repairs or on any other account
whatever".
Section 155 enacts :-
"155. (1) To enable him to determine the rateable
~alue of any bu.ilding or land and the person primarily
hable for the payment of any property tax leviable in
respect ~ereof the Commissioner may require the owner
or occupier of s~ch building or land, or of any portion
thereof, to furmsh him, within such reasonable period
570
SUPREME COURT REPORTS
[1969] 3 S.C.R.
as the Commissioner prescribes in this behalf, with in-
"formation or with a written return signed by such owner
or occupier-
(a) as to the name and place of abode of the owner
or occupier, or of both the owner and occupier of such
building or land; and
(b) as to the dimensions of such building or l~nd,
or of any portion thereof, and the rent, if a!/-Y, obtamed
for such building, or -land, or any portion therc;of.
(2) Every owner or occupier on whom any such requisition is made shall be bound to comply with the
same and, to give true information or to make a true
return to the best. of his knowledge or belief.
(3) The Commissioner may
also· for the purpose
aforesaid make an inspection of any such building or
land".
Section 156 states:
"The Commissioner shall keep a book, to be called
"the assessment book" in which shall be entered every
official year-
( a) a list of all buildings and lands in Greater Bombay
distinguishing each either by name or number, as he
shall think fit;
(b) the rateable value of each such building and land
determined in accordance with the foregoing provisions
of this Act;
(c) the name of the person primarily liable for the
payment of the pro'perty taxes, if any, leviable on each
such building or land ..... .
"
It was contended by Mr. Khambatta that on a· proper COllStruction of section 146(2) of the Act there should have been
separate assessments in respect of the building and the fand in the
present case. It was argued in the alternative that even· if section
146(2) of the Act contemplates a composite assessment of th.e
building and the land, the primary liability should be imposed
upon the owner of the building and not on the owner of the land.
It was said that the right to Jet the building vests in the les$ce of
the land and not in the appellant, and so, the primary liability was
upon the Jessee under section 146(2) of the Act. The argument
was pressed that the appellant cannot be treated as a lessor under
section 146(2) of the Act, because the appellant has not let the
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GRINDLAYS BANK v. MUNIC. CORP. (Ramaswami, J.)
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land with the building thereon as one unit to the lessee. The opposite viewpoint was presented on behalf of the respondent. It was
argued, in the first place, that section 146(2) of the Act c0ntemplates that there should be a composite asse~ment of the land
and the building taken as one unit. In the case of such a composite assessment, the primary liability of the p~yment of tax
was on the.landlord under sub-section (2)(a) of section 146 except
in the case referred to in sub-section (3) where the primary liability was upon the tenant and not upon the landlord. Admittedly,
the present case did not fall under section 146(3), and, therefor7,
the primary liability was placed upon the appellant. In our op~
nion, .the argument put forward on behalf of the respondent is
well-founded and must be accepted as correct. In the first place,
the language of section 146(2) indicates that the Legislarure contemplated that in a case where the land and the building are owned by different persons there should be a composite assessment of
property tax. The reason is that in section 146( 1) and (2) the
word 'premises' is used in contrast to section 146(3) where the
words 'land and building' are separately mentioned. . In section
154( 1) of the Act again, the Legislature uses the expression 'building or land'.
Then section 155 provides for the right of the
Commissioner to call information from the owner or the occupier
in order to enable him to determine the rateable value of any
building or land and the person primarily liable for the payment
of any property tax levied in respect thereof.
Section 156 provides that the CommiSsioner shall maintain a book to be called
'the assessment book' which book is to contain among other
things a list of all lands and buildings. Therefore, the scheme of
section 146 is ~hat when the land is let and the tenant has built
upon the land, there should be a composite assessment of tax upon
the land and building taken together. We are further of opinion
that in the case of such a composite unit the primary liability of
assessment of tax is intended to be on the lessor of the land under
section ! 46(2)(a) of the Act. It was objected by Mr. Khambatta
that the appellant was only the lessor of the land and not of the
building, and so, the appellant cannot be held to be the lessor
within the meaninl( of s.ection 146(2) (a). We do not think that
there is any merit in this objection.
Section 146(3) of the Act
furnishes the key to the interpretation of section 146(2)(a). In
the context of section 146 ( 3) the lessor of the premises as mentioned in section 146(2)( a) must be construed as to mean the
lessor of the land on which the building has been constructed bv
the tenant. In this connection. reference should be made to section 14 7 which provides for an apportionment of responsibility
for property tax when the premises ass~ssed are let or sub-let.
The language of this sub-section ~uggests that the lessor of the
land has the right of recovering from his tenant the amount of tax
572
SUPREME COURT REPORTS
[1969] 3 S.C.R.
which he has paid in excess of the tax which the property is liable
to pay on the basis of the rent recovered by the lessor. It is also
clear that the intention of the Legislature in fixing the primary
liability of property tax upon the owner of the land in a case not
falling under s. 146(3) of the Act is to facilitate the collection of
property tax. In the case of a monthly tenant who puts up a temporary shack or asbestos shed on the land and who may at any
time terminate the lease at a short notice, it is not always possible
for the Corporation to keep track of the lessee and to collect the
property tax from him. It is 'not unreasonable therefore that in a
case of this description the Legislature should impose the primary
liability for the payment of the property tax upon the lessor of
the land and to give him the right of recoupment under section
147. A similar view with regard to the interpretation of section
146 of the Act was expressed by a Division Bench of the Bombay
High Court consisting of Chagla, C.J. and Shah, J. in Ramji
Keshavji's(') case. It was held by the learned judges in that case
that where the owner of a land had leased it to a tenant for a
period of one year and the te~t had put up a structure upon the
land, the owner of the land was primarily liable to pay property
tax together with the. structure constructed thereon.
Counsel on
behalf of the appellant challenged the correctness of this decision,
but for the reasons already expressed we hold that the ratio of this
decisiQn is correct.
We shall, however, assume in favour of the appellant that the
meaning of section 146(2) ot the Act is obscure ·and that it is possible to interpret it as throwing the primary liability for payme¢1.t
of property tax upon the lessee who has constructed a building on
the land.
Even upon that assumption we think that the view of
the law expressed by the Bombay High Court in this case ought
not to be interfered with. The reason is that in a case where the
meaning of an enactment is obscure, the Court may resort to contemporary construction, that is the construction which the authorities have put upon it by their usage and conduct for a long period
of time. The principle applicable is "optima /egum interpres est
consuetudo"('). In Oh/son's case('), "in dealing with the interpretation of section 39 of the Pawnbrokers Act, 1872, Stephen, J.
said :
"What weighs with rile very greatly in coming to the
present conclusion is the practice of the Inland Revenue
Commissioners for the past sixteen year>.
So Jong ago
as f874 this very point was decided by
Sir Thomas
Henry, for whose decisions we all have very great respect; and the least that can be said with regard to the
(1) 56 Born. L. R. 1132.
(2) 2Co.Rep.81.
(3) (18911 1 Q.B. 485, 489.
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case before him is that he pointedly called the attecition
of the commissioners to the case-the learned magistrate
having offered to state a case-an offer refused by the
commissioner, who by their refusal must be taken to have
acquiesced in the decision.
That is a very strong contemporaneous exposition of the meaning of the Act".
B The same principle was referred .to by Lord Blackburn iin Clyde
Navigation Trustees v. Laird('). The question in dispute in that
case was whether the Clyde Navigation Consolidation Act, 185 8
(repealing eight' prior Acts) imposed navigation dues on timber
floated up the Clyde in logs chained together. From 1858 to 1882
·dues had been levied on this class of timber Without resistance from
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the owners; aild some judges in the Court of Session suggested
that this non-resistance might be considered in construing the statute. On this point Lord Blackbum said :
D
"I think that submission raises a strong prima facie
ground for thinking that there must exiSt some legal
ground on which they (the owners) could not resist,
And I think a court should be cautious, and not decide
unnecessarily that there is no such ground. If the Lord
President (Inglis) means no more than this when he
calls it 'contemporanea exposito of the statutes which
is almost irresistible', I agree with him. I do not think
that he mean's that enjoyment at least for llllY period
short of that which gives rise to prescription, if founded
on a mistaken construction of a statute, binds the court so
as to prevent it from gi~ the true construction. If he
did, I should not agree with him, for whom I know of
no !1uthority, and am not aware of any principle, for so
saymg".
F In our opinion, the principle of contemporanea exposito applies
to the present case. The Act was passed in the year 18 8 8 aind
there appears to be a practice followed by the Bombay Municipal
~orporation for a very long time of treating the land and the buildmg c~nstructed upon it as single unit and charging the property
tax upon the owner of the lllllld in a case where the land is let for
G a ~od of less than one year to a tenant who has constructed a
bwlding thereon [See Ramji Keshavji's case(2 )].
For the re115ons expressed, we hold that there is no merit in
this appeal which is accordingly dismissed with costs.
·
R.K.P.S.
Appeal dismissed.
(H SA.C.658,670.
(2) 56 Bom. L.R. 1132.
LIOSup./69-2