# THE ASSOCIATED CEMENT COMPANIES LTD v. THEIR WORKMEN

- **Citation:** [1960] 3 S.C.R. 157
- **Court:** Supreme Court of India
- **Decided:** 1958-03-10
- **Case number:** Civil Appeal No. 404 of 1958
- **Bench:** P. B. Gajendragadkar, A. K. Sarkar, K. c. DAS GUPTA
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-associated-cement-companies-ltd-v-their-workmen-1826
- **Pages:** 11

## Headnote

Industrial, Dispute-Award-Notice of Termination-Whether
can be given by minority union-Industrial, Disputes Act, I947, (I4
of I947), ss.'I8, I9(6).
-
The appellant's workmen were represented by a Union called
Kamdar Mandal Cement Works, Porbandar. The registration
of the said union was cancelled and that led to the formation of
two Unions, the Cement Kamdar Mandal and Cement Employees
Union. The Cement Kamdar Mandal gave two notices one after
another to the appellant, purporting to terminate two previous
awards, wherein the defunct union represented the workmen.
Thereafter the Mandal presented fresh demands and the dispute
was referred to the Tribunal. The second union, the Cement
Employees' Union which represented the majority of the appellant's workmen at Porbandar had been impleaded in the proceedings. The appellant raised preliminary objections before the Tribunal against the competency of the reference inter alia on the
ground that the award in question by which the parties were
bound had not been duly terminated under s. r9(6) of the Act in
as much as the union which purported to terminate the said
award represented only a minority of workmen bound by it. The
Tribunal by its interlocutary judgment found against the appellant.
The dispute between the parties centres round the question as
to who can issue the notice terminating the award on behalf of
workmen who are bound by the award as a result of s. rS of the
Act. The question therefore for decision is whether a registered
trade union representing a minority of workmen governed by an
award can give notice. to the other party intimating its intention
to terminate the award under s. r9(6) of the Industrial Disputes
~tr~~
.
Held, that the effect of s. rS is that an award properly made
by an industrial tribunal governs the employer and all those who
represent him under s. rS(c) and the employees who are parties to
the dispute and all those who are included ins. rS(b) and (d). On
a fair and reasonable reading of s. r9(6), the true position is that,
though the expression "any party bound by the award" refers to all
workmen bound by the award, notice to terminate the said award
can be given not by an individual workman but by a group of
workmen acting collectively either through their union or otherwise, and it is not necessary that such a group of workmen acting
coJlectively either through their union or otherwise, should represent the majority of workmen bound by the award. Thus it is
open to a minority of workmen or a minority union to terminate
r960
March 3
158
SUPREME COURT REPORTS
(1960]
I960
the award by which they, along with other employees, are bound
just as much as it is open to them to raise an industrial dispute
Associated
under the Act.
Cement Companies
The Central Provinces Transport Services Limited v. Raghunath
Ltd.
Gopal Patwardhan, [1956] S.C.R. 956 and The Newspapers Limited
, v.
v. The State Industrial Tribunal, U. P., [1957] S.C.R. 754, referTheir Workmen red to.
CIVIL
APPELLATE
JURISDICTION:
Civil Appeal
No. 404 of 1958.
Appeal by special leave from the decision dated
March 10, 1958, of the Industrial Tribunal, Rajkot, in
Adjudication Case No. 67 of 1955.
M. 0. Setalvad, Attorney-General for India, R. J.
Kolah, S. N. Andley, J. B. Dadachanji, Rameshwar
Nath and P. L. Vohra, for the appellants.
Janardan Sharmii, for respondent No. 2.
1960. March, 3.
The Judgment of the Court was
delivered by
Gajendragadkar ].
GAJENDRAGADKAR, J.-Can a
registered trade
union representing a minority of workmen governed
by an award give notice to the other party intimating
its intention to terminate the award under s. 19(6)
of the Industrial Disputes Act XIV of 194 7 (hereinafter called the Act)? That is the short question
which arises for decision in the present appeal. In
answering the said question it would be necessary to
examine the scheme of the Act and to ascertain the ·
true meaning and effect of s. 19(6) on its fair and
reasonable construction. The controversy thus

## Text

-
3 S.C.R. SUPREME COURT REPORTS
157
THE ASSOCIATED CEMENT COMPANIES LTD.
v.
THEIR WORKMEN
(P. B. GAJENDRAGADKAR,' A. K. SARKAR AND
K. c. DAS GUPTA, JJ.)
Industrial, Dispute-Award-Notice of Termination-Whether
can be given by minority union-Industrial, Disputes Act, I947, (I4
of I947), ss.'I8, I9(6).
-
The appellant's workmen were represented by a Union called
Kamdar Mandal Cement Works, Porbandar. The registration
of the said union was cancelled and that led to the formation of
two Unions, the Cement Kamdar Mandal and Cement Employees
Union. The Cement Kamdar Mandal gave two notices one after
another to the appellant, purporting to terminate two previous
awards, wherein the defunct union represented the workmen.
Thereafter the Mandal presented fresh demands and the dispute
was referred to the Tribunal. The second union, the Cement
Employees' Union which represented the majority of the appellant's workmen at Porbandar had been impleaded in the proceedings. The appellant raised preliminary objections before the Tribunal against the competency of the reference inter alia on the
ground that the award in question by which the parties were
bound had not been duly terminated under s. r9(6) of the Act in
as much as the union which purported to terminate the said
award represented only a minority of workmen bound by it. The
Tribunal by its interlocutary judgment found against the appellant.
The dispute between the parties centres round the question as
to who can issue the notice terminating the award on behalf of
workmen who are bound by the award as a result of s. rS of the
Act. The question therefore for decision is whether a registered
trade union representing a minority of workmen governed by an
award can give notice. to the other party intimating its intention
to terminate the award under s. r9(6) of the Industrial Disputes
~tr~~
.
Held, that the effect of s. rS is that an award properly made
by an industrial tribunal governs the employer and all those who
represent him under s. rS(c) and the employees who are parties to
the dispute and all those who are included ins. rS(b) and (d). On
a fair and reasonable reading of s. r9(6), the true position is that,
though the expression "any party bound by the award" refers to all
workmen bound by the award, notice to terminate the said award
can be given not by an individual workman but by a group of
workmen acting collectively either through their union or otherwise, and it is not necessary that such a group of workmen acting
coJlectively either through their union or otherwise, should represent the majority of workmen bound by the award. Thus it is
open to a minority of workmen or a minority union to terminate
r960
March 3
158
SUPREME COURT REPORTS
(1960]
I960
the award by which they, along with other employees, are bound
just as much as it is open to them to raise an industrial dispute
Associated
under the Act.
Cement Companies
The Central Provinces Transport Services Limited v. Raghunath
Ltd.
Gopal Patwardhan, [1956] S.C.R. 956 and The Newspapers Limited
, v.
v. The State Industrial Tribunal, U. P., [1957] S.C.R. 754, referTheir Workmen red to.
CIVIL
APPELLATE
JURISDICTION:
Civil Appeal
No. 404 of 1958.
Appeal by special leave from the decision dated
March 10, 1958, of the Industrial Tribunal, Rajkot, in
Adjudication Case No. 67 of 1955.
M. 0. Setalvad, Attorney-General for India, R. J.
Kolah, S. N. Andley, J. B. Dadachanji, Rameshwar
Nath and P. L. Vohra, for the appellants.
Janardan Sharmii, for respondent No. 2.
1960. March, 3.
The Judgment of the Court was
delivered by
Gajendragadkar ].
GAJENDRAGADKAR, J.-Can a
registered trade
union representing a minority of workmen governed
by an award give notice to the other party intimating
its intention to terminate the award under s. 19(6)
of the Industrial Disputes Act XIV of 194 7 (hereinafter called the Act)? That is the short question
which arises for decision in the present appeal. In
answering the said question it would be necessary to
examine the scheme of the Act and to ascertain the ·
true meaning and effect of s. 19(6) on its fair and
reasonable construction. The controversy thus raised
undoubtedly lies within a narrow compass; but before
addressing ourselves to the merits of tbe dispute, it is
necessary to state the material facts which led to the
present proceedings.
The present appeitl has been brought before this
Court by the Associa.ted Cement Companies Limited
(hereinafter called the appellant) against their workman (hereinafter called the respondents), and it arises
from an industrial dispute between them which was
referred for adjudication to the Industrial Tribunal
for the State of Saurashtra by the Saurashtra Government under s. 10(1) of the Act. Several items of
demand presented by the respondents constituted the
subject-matter of the reference.
When the tribunal
began its proceedings the appellant raised four preliy
r-.
-
'i
-
3 S.C.R. SUPREME COURT REPORTS
159
minary objections against the competence of the
z96o
reference itself. The tribunal heard parties on these
A
. 1 a
preliminary objections, and by its interlocutory judg- cemen~s~;~;anies
ment delivered on March 10, 1958, it has found
·Ltd.
against the appellant on all the points. In the result
v.
it set down the reference for further hearing on the Their Workmen
merits. It is against this interlocutory judgment and G . d--dk
].
d
·
h
h"
C
a1en raga
ar .
or er that the appellant
as come to t is
ourt
.
by special leave. Out of the four points urged by the
appellant as preliminary objections we are concerned
with only one in the present appeal, and that relates
to the 'incompetence of the reference on the ground
that the award in question·by which the parties were
bound has not been duly terminated under s. 19(6) of
the Act inasmuch as the union which purported to
terminate the said award represents only a minority
of workmen bound by it.
The circumstances under which this contention was
raised must now be stated in some detail. The
appellant is a limited company and owns and runs a
number of cement factories spread ou.t in different
States in India as well as in Pakistan. It has a
factory at Porbandar in Saurashtra. The factory is
known as the Porbandar Cement Works. An industrial dispute arose between the appellant and the
respondents in 1949 and it was referred for adjudication to the industrial tribunal on March 22, 1949.
This reference ended in an award made on September 13, 1949. Thereafter the said award was terminated by the appellant; and on disputes arising
between it and the respondents another reference was
made to the same tribunal for adjudication of the said
disputes.
A second award was made on July 24,
1951, by which the earlier award with slight modifications was ordered to continue in operation. In the
proceedings in respect of both the references the
appellant's workmen were represented by their Union
called Kamdar Mandal, Cement Works, Porbandar.
·It appears that the registration of the said u_nion was
cancelled on July 2, 1954, and that led to the formation of two unions of the appellant's workmen, the
Cement Kamdar Manda! whic.h was registered on
160
SUPREME COURT REPORTS
[1960]
z960
July 7, 1954, and the Cement Employees' Union which
was registered on September 18, 1954.
Associated
Th
C
K
d
M
d 1
·
h
Cement Companies
e
ement
am ar
an a gave notice to t e
Ltd.
appellant's manager on September 23, 1954, purportv.
ing to terminate the first award pronounced on
Their Workmen September 13, 1949, at the expiration of two months'
--
notice from the date of the said communication. By
Gajendragadkar J. another letter written on December 20, 1954, the same
union purported to terminate the second award
pronounced on July 24, 1951, in a similar manner.
On November 22, 1954, the said Manda! presented
fresh demands most of which were covered by the two
previous awards. The said demands were referred to
the Conciliation Officer for conciliation but the efforts
at conciliation failed, and on receiving a failure report
from the officer the Saurashtra Government made the
present reference purporting to exercise its jurisdiction under s. lO(l)(c) of the Act. The appellant's case
is that the Cement Kamdar Manda! was not authorised
to terminate either of the two awards under s. 19(6)
of the Act, that the second award is thus still in
operation, and so the reference is invalid.
Meanwhile it appears that the Cement Employees'
Union, which represents the majority of the appellant's workmen at Porbandar, instead of giving notice
of termination under s. 19( 6 ), raised disputes with the
appellant and the same were referred to the Conciliation Officer.
Efforts at conciliation having failed the
conciliation officer made a failure report to the
Government of Saurashtra; the Saurashtra Government, however, did not refer the said dispute for
adjudication. In the present proceedings this Union
has been impleaded and it haK supported the demands
made by the Cement Kamdar Mandal; in other
words, notwithstanding the rivalry between the two
Unions, the demands made by the minority union
were supported by the majority union, and in fact, in
the appeal before us, it is th_e latter union that has
appeared to contest the appeal. The tribunal has
dealt with the point of law raised by the appellant
under s. 19(6) on the assumption that the Cement
Kamdar Manda! which purported to terminate the
awards under the said section represents the minority
< -
'
)
3 S.C.R. SUPREME COURT REPORTS
161
of_ the workmen employed at Porbandar, and we
1960
propose to deal with the point· raised in the appeal on
.
the same assumption.
Associated .
Th
.
t'
b' h .e ll t
·b
'd
d . Cement Companie~
e mam sec 10ns w 10
1a
o
e cons1 ere
m
Ltd •.
dealing with the dispute are ss. 18 and 19 as they
k . ·W k
stood in 1954. Section 18 provides, inter alia, that T cir ,. or .me'!
a? a; ward which has _become en~orceab~e sh~ll be Gajeridrf'gadk_ar J.
bmdmg on (a) all parties to the mdustr1al dispute, ·
·
(b) all other parti~s summoned to appear in the
proceedings as parties to the dispute, unless the Board
or tribunal, as the case may be, records the opinion
that they were so summoned without proper cause,
(c) where a party referred to in cl. (a) or cl. (b) is an
employer, .his heirs, successors or assigns in respect
of the establishment to which the dispute relates, and
(d) where a party referred to in cl. (a) or cl. (b) is
composed of workmen, all persons who were employed
in the establishment or part of the establishment, as
the case may be, to which the dispute relates on the
date of the dispute, and all persons who subsequently
became employed in that establishment or part. It
is thus clear that though an industrial dispute may be
raised by a group of workmen who may not represent
all or even the majority of workmen, still, if the said
dispute is referred to the industrial tribunal for
adjudication and an award is made, it binds not only
the parties to the dispute or other parties summoned
to appear but. all persons who were employed in the
establishment or who would be employed in future
are also governed by the award ; in other words, the
+
effect of s. 18 is that an award properly· made by an
industrial tribunal governs the employer and all those
who represent him under s. 18(c) and the employees
who are parties to the dispute. and all those who are
included ins. 18(b)_and (d).
.
Section 19' prescribes the period of operation of
settlements and awards. Section 19(3) provides that
an award shall, subject to the provisions of this
section, remain in operation for a period of one year.
This is subject to the provisos to sub-s. (3) as well as
to subs. (4) but we are not concerned with the said
provisions.
Section 19(6) provides that notwithstanding the expiry of the period of operation· under
at
162
SUPREME COURT REPORTS
[1960)
'96°
sub-s. (3) the award shall continue to be binding on
A
.
d
the parties until a period of two months has elapsed
ssoctate
f
th d t
h' h th
·
'
·
b
Cement Companies rom
e
a e on w IC
e notice 1s given
y any
Ltd.
party bound by the award to the other party or
v.
. parties intimating its intention to terminate the
Their Workmen award. The effect of this sub-section is that unless
G . d -dk
· the award is duly terminated as provided by it it
•Je• raga
ar J. shall continue to be binding notwithstanding the
expiration of the period prescribed by sub-s. (3). This
position is not in dispute. The dispute between the
parties centres round the question as to who can issne
the notice terminating the award on behalf of workmen who are bound by the award as a result of s. 18
of the Act. What the sub-section requires is that a
notice shall be given by any party bound by the
award to the other party or parties. To whom the
notice should be given may not present much
difficulty. ·Where the award is sought to be terminated on behalf of the employees the notice has to be
given to the employer and that is the party entitled
to receive notice. Then, as to "the parties" to whom
also notices are required to be given, it may per haps
be that the parties intended are those joined under
s. 10, sub-s. (5) or under s. 18, sub-s. (2) or are .otherwise parties to the dispute; but with that aspect of
the question we are not concerned in the present
appeal, because notice has been given to the appPllant and all the workmen concerned in the dispute
have appeared before the tribunal through the two
respective unions. The question with which we are
concerned and which is not easy to determine is tlie
true interpretation of the word "any party bound by
the award". We have already noticed the effect of
s. 18, and we have seen how wide is the cir.ole of
persons who are bound by the award as a result of the
said section. Literally construed, any party bound
by the award may mean even a single employee who
is bound by the award, and on this literal construction even one dissatisfied employee may be entitled to
give notice terminating the award. On the other
hand, it may be possible to contend that any party
in the context must mean a party that represents the
majority of the persons bound by the award.
'·
-
""'".
0
3 S.C.R. SUPREME COURT REPORTS
163
Terminating the award is a serious step and such a
z96o
• step can be ta~en by a par~y ~nly if it can c.laim to
Associated
represent the will of the maJority on that pomt. It Cement Companies ..
is for this construction that the appellant contends
Ltd ..
v.
before US.
Their Workmen
In construing this provision it would be relevant
__ ·
to remember that an industrial dispute as defined by Gajendrngadkar):
s. 2(k) of the Act means any dispute or difference between employers and employers, or between employers
and workmen, or between workmen and workmen
which is connected with the employment or non-employment, or the terms of employment, or with the
conditions of labour of any person. This definition
emphatically brings out the essential characteristics
of the dispute with which the Act purports to deal.
The disputes must relate to the terms of employment
or with the conditions of labour and they must arise,
inter alia, between workmen and their employer.
Ordinarily, an individual dispute which is not sponsored by the union or is otherwise not supported by any
group of workmen is not regarded as an industrial
dispute for the purposes of the Act. A provision like
that contained in s. 33A is of course an exception to
this rule.
The basis of industrial adjudication
recognised by the provisions of the Act clearly appears
to be· that disputes between employers and their
employees would be governed by the Act where such
disputes have assumed the character of an industrial
dispute. An element of collective bargaining which
is the essential feature of modern trade union movemenl' is necessarily involved in industria1 adjudication.
That is why industrial courts deal with disputes in
relation to i,ndividual eases only where such disputes
-assume the character of an industrial dispute by
reason of the fact that they are sponsored by the
union or have otherwise been taken up by a group or
body of employees. In The Central Provinces Transport Services Limited v. Raghunath Gopal Patwardhan
( 1) this Court has observed that" the preponderence
of judicial opinion is clearly in favour of the view.
that an individual dispute cannot per se be an industrial dispute but may become one if taken up by a
[1) {1956JS.C,R. 956,
164
SUPREME COURT REPORTS
[1960)
r960
trade union or a number of persons". These observations have been cited with approval by this Court in
Associated
f Th N
L · · d
Th S
Cement Companies the cas.e o
. e
ewspapers
irni_te
v.
e
ta~e
Ltd.
lrulustrial Tribunal, U. P. (1 ).
Havmg regard to this
v.
aspect of the matter it would be difficult to hold that
Their Workmen "any party bound by the award" can include an
. . -
individual workman, though speaking literally he is
Ga;endragadkar ].
b
d b
h
d
I
· ·
h
a party oun
y t e awar .
n our opm10n, t erefore, "the said expression cannot include an individual
workman. We ought to add that this position is
fairly conceded by Mr. Sharma for the respondents.
That takes us to the question as to whether the
expression " any party bound by the award " must
mean a union representing the majority of the workmen bound by it or a group of workmen constituting
such majority acting otherwise than through the
union. The expression •· aGy party bound by the
award" obviously refers to, and includes, all persons
bound by the award under s. 18. The learned AttorneyGeneral has urged before us that we should construe
s. 19(6) so . as to preclude a minority of workmen
bound by the award from disturbing the smooth
working of the award and thereby creating an industrial dispute. When an award is made it binds the
parties for the statutory period under s. 19(3); and
even after the expiration of the said period it continues to be binding on the parties under s. 19(6)
unless it is duly terminated. The policy of the Act,
therefore, appears to be that the smooth working of
the award even after the prescribed statutory period
should not be· disturbed unless the majority o'f the
workmen bound by it feel that it should be terminated
and fresh demands should be made. If a minority of
workmen or a minority union is allowed to terminate
the award it would lead to the anomalous result that
despite the willingness of the majority of workmen
to abide by the award the minority can create disturbance and raise an industrial dispute and that cannot
be within the contemplation of the Legislature when
it enacted s. 19(6) of the Act.
That in substance is
the argument urged before us ; thus presented the
argument no doubt appears prima facie attractive;
(1) [1957] S.C.R. 754·
' -
. ..,
•
/
'
-
3 S.C.R. SUPREME COURT B.EPORTS
165
but, in our opinion, it would be unreasonable to
z960
accept this construction and impose the limitation of
. d
the majority vote in the matter of the termination of Cem::is~;:;anies
the award.
Ltd.
The effect of imposing such a limitation would, in
v.
our opinion, seriously prejudice the interests of the Their Workmen
e;nployees. It is well-known that the trade union
-
·
t · th"
t
t
t l ·
t
Gajendtagadkar ].
movemen m
1s coun ry canno ye c aim o cover
·
all employees engaged in several branches of industry.
Membership of the important trade unions no doubt
shows an appreciable increase and progress, but the
stage when trade unions can claim to have covered
all employees or even a majority of them has still not
been reached. If the majority rule for which . the
appellant contends is accepted ands. 19(6) is accordingly construed, termination of the award would,
we apprehend, become very difficult, if not impossible, in a very large number of cases. It is in this
context that the effect of s. 18 has to be borne in
1 mind. As we have already indicated the class of
employees bound by the award under s. 18 is very
much wider than the parties to the industrial dispute
in which the award is made; the said class includes
not only all the persons employed in the establishment at the date of the award but it covers even the
subsequent employees in the said establishment. It is,
therefore, obvious that if the majority rule is adopted
very few awards, if any, could be terminated.because·
very few unions would be able to claim a majority of
members on their rolls, and in their present stage of
organisation in very few cases would a majority of
workmen be able to meet, decide . and act together
otherwise than through their unions. That is why
the majority rule would very seriously prejudice the
rights of employees to terminate awards when they
feel that they ·need to be modified or changed. That
is one aspect of the matter which cannot be ignored
in construing the material words in s. 19(6).
There is another aspect of the question which is
also relevant and which, in our opinion, is against the .
construction suggested by the appellant. We have
already noticed that an industrial dispute can be
raised by a. group of workmeri or by . a union even
166
SUPREME COURT REPORTS
[1960]
r96o
though neither of them represent the majority of the
.
workmen concerned; in other words, the majority
Cem::,s~~::;:nies rule on which the appellant's construction of s. 19(6)
Ltd.
is based is inapplicable in the matter of the reference
v.
of an Industrial dispute under s. 10 of the Act. Even
Their Workmen a minority group of workmen can make a demand
--
and thereby raise an industrial dispute which in a
Gajendragadkar J. proper case would be referred for adjudication under
s. 10. It is true that an award pronounced on such
reference would bind all the employees under s. J 8;
but logically, if an industrial dispute can be raised by
a minority of workmen or by a minority union why
should it not be open to a minority of workmen or a
minority union to terminate the award which is passed
on reference made at their instance? The anomaly
to which the learned Attorney-General refers has no
practical significance. If the majority of workmen
bound by the award desire that the award should
continue and needs no modification, they may come
to an agreement in that behalf with their employer,
and adopt such course as may be permissible under
the Act to make such agreement effective.
However
that may be, we are satisfied that both logic and
fairplay would justify the conclusion that it is open
to a minority of workmen or a minority union to
terminate the award by which they, along with other
employees, are bound just as much as it is open to
them to raise an industrial dispute under the Act.
That is the view taken by the industrial tribunal in
the present case and we see no reason to differ from it.
It appears that when this question was argued
before the tribunal the appellant strongly relied on
rule 83 framed by the Government of Bombay under
s. 38 of the Act; and it was urged that the said rule is
consistent with the construction sought to be placed
by the appellant on s. 19(6). It is conceded that at
the relevant time this rule was not in force; and so it
is strictly not applicable to the present proceedings.
That being so, we do not propose to consider the
argument based on the said rule and to examine the
question as to whether the rule really supports the
appellant's construction, and, if yes, whether it would
be valid. The question raised before us must obviI•
.....
3 S.C.R. SUPREME COURT REPORTS
167
ously be decided on a fair and reasonable construction
r960
of s. 19(6) itself, and the rule in question, even if
Associated
applicable would not be material in that behalf. We Cement companies
accordingly hold that, on a fair and reasonable
Ltd.
construction of s. 19(6), the true position is that,
v.
though the expression "any party bound by the Their Workmen
award" refers to all workmen bound by the award, G . d-dk 1
,
.
h
'd
d
b
.
a;en raga
ar .
notice to termmate t e sa1
awar
can e given not
·
by an individual workman but by a group of workmen acting collectively either through their union or
otherwise, and it is not necessary that such a group
or the union through which it acts should represent
the majority of workmen bound by the award.
In the result the appeal fails and is dismissed with
costs.
Appeal dismissed.
JAMES ANDERSON, ADMINISTRATOR OF
THE ESTATE OF THE
LATE HENRY GANNON, BOMBAY
.
.
v .
THE COMMISSIONER OF INCOME-TAX,
BOMBAY
(S. K. DAS, J. L. KAPUR AND
M. HIDAYATULLAH, JJ.)
Income-tax-Distribution of capital assets-Whether distribution
mu.st be in specie-Sale of capital assets by administrator for distribution amongst legatees-Profit on such sales, if amounts to capital
gains liable to tax-Income-tax Act, r922 (XI of r922), s. I2B(I),
third proviso.
The appellant was the administrator of the estate of one
Henry Gannon, a resident of British India, who left for the
~ ·
United Kingdom in 1944 and died there in 1945· In the course
of administration the appellant sold certain shares and securities
belonging to the deceased for the purpose of distributing the
assets amongst the legatees and thereby realised more than their
cost price. The excess of sale price over the cost price was
· treated by the Income-tax Officer as capital gain under s. 12B
March 4