# The Centr11l Bank of India v. Their WorktiZeJJ

- **Citation:** [1960] 1 S.C.R. 236
- **Court:** Supreme Court of India
- **Decided:** 1960
- **Case number:** Civil Appeal Nos. 681 and 682 of 1957
- **Bench:** S. R. l>As, N.H. Bhagwatt, M. HIDAYA'l'ULLAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-centr11l-bank-of-india-v-their-worktizejj-1751
- **Pages:** 13

## Headnote

Income~tctx-Assessee company manufacturing and supplying
goods from outside British India-Stipulation for payment by cheque
-Cheques remitted by post from British India-Post Office, if ccn
agent of the assessee-Income, if received in taxable territoriesIndiat' Imome~tax Act (XI of I922), s. 4(1)(a).
The appellant company, carrying on business in manufactur ~
ing and st:lling textiles at Baroda, received in the assessment
years 1942-43 and 1943~44 payments in cheques from the Government of India for the supply of such goods on bills submitted, as
agreed upon in prescribed printed forms which provided that the
Government should pay the amount due to the appellant by
cheque. The appellant, however, did not request or write to the
Government indicating in what way the payment by cheque was
S.C.R.
SUPREME COURT REPORTS
237
to be made. The Government sent the cheques from Delhi by
I959
post to the appellant at Baroda and it received and accepted
-.
them in Baroda in full and unconditional satisfaction of its claim Jagdisll Mills Uti.
and cashed them through its bank accounts in Bombay and
v. . .
Ahmedabad. The question was whether the amounts of the The CommuSWfUt'
cheques were income, profits and gains received by the appellant
of Income-tax
in the taxable territories and were as such liable to tax under
s. 4(1)(a) of the Indian Income-tax Act. The Income-tax Officer
held that the amounts were received in British India as the
cheques were drawn on banks in British India and the Appellate
Assistant Commissioner on appeal affirmed his order. The
Income-tax Appellate Tribunal on appeal held that even though
the appellant did not ask the Government to send the cheques by
post, there was an implied request to do so and following the
decision of this Court in Commissioner of Income-tax, Bombay
South v. Messrs. Ogale Glass Works Ltd. [1955] I S.C.R. I85, held
that the amounts of the cheques were received in the taxable
territories and as such the appellant was liable to tax under
s. 4(r)(a) of the Act. " Hence these appeals by special leave. The
question ior decision was whether in the facts and circumstances
of the case the stipulation that payments should be made by
cheques implied a request by the appellant to the Government to
send the cheques by post so as to constitute the Post Office its
agent for receiving such payments.
Held, that regard being had to the general course of business
usage which was followed in this case, there could be no doubt
that the parties intended that the cheques should be sent by post
which was the normat·agency for transmission of such articles
and, consequently, there was an implied request~ the appellant
to the Government to send the cheques by post so as to constitute
the Post Office its agent for the purpose of receiving those
payments.
.
Commissioner of ~ncome-tax, Bombay South v. Messrs. Ogalc
Glass Works Ltd. [1955] I S.C.R. 185 and Norman v. Rickets, (I886)
3 T.L.R. I82, applied.
Pe1mington v. Crossley and Sons (Limited), (I879] 13 T.L.R.
5I3, considered.
Thorappa v. Umedmalji (1923) 25 Born. L.R. 604 and Ex parte
Cote In re Deveza, (1873) L.R. 9 Ch. 27, distinguished.
CIVIL
APPELLATE
JURISDICTION: Civil Appeal
Nos. 681 and 682 of 1957.
Appeals by special leave from the order dated
August 2, 1954, of the Income-tax Appellate Tribunal
of India., Bombay Bench 'A' in Income-tax Appeals
Nos. 3756 of 1948-49 and 2161 of 1950-51.
R. J. Kokih and I . N. Shroff, for the appellants.
H. N. Sanyal, Additional Solicitor-General of India,
K.N. Bajagopal Sa.stri a.nd D. Gupta, for the respondent.
238
SUPREME COURT REPORTS [1960(1)]
z959
1959. May 12. The Judgment of the Court was
-.
delivered by
Jagdish Mills Ltd.
v.
BHAGWATI J.-These two appeals with special
The Commissioner leave under Art. 136 of the Constitution are directof Income-tax
Bhagwati].
ed against the order of the Income-tax Appellate
Tribunal of India, Bombay Bench "A" (hereinafter
referred to as" the Tribunal"} dated August 3, 1954,
in Income-ta

## Text

1959
The Centr11l Bank
of India
v.
Their WorktiZeJJ
S.K. Das J.
I9S9
May u.
2~6
SUPREM.E COURT REPORTS [1960(1)]
to any other law for the time being in force, provided
there is no express provision to the contrary in the
Banking Act. If, as we hold. unamended s. 10 of the
Banking Act expressly prohibits the employment of
any person by a bank whose remuneration takes the
form of a share in the profits of the compa~y, then s. 2
of the Banking Act is of no help and cannot permit
something which i~ expressly prohibited by s. 10.
For the reasons given above, we allow these seven
appeals to the extent already indicated, namely, (1)
the reference of 1952 is not now pending for determin~
ing the question of bonus for the relevant years in
respect of particular banks and (2) section 10 of the
Banking Act prior to the amendment of 1956 pro~
hib~ts the grant of industrial bonus to bank employees
when such bonus is remuneration which takes the form
of a share in the profits of the banking company. In
the circumstances of these cases and in view of the
long drawn out nature of the dispute, we make no
direction as to costs.
Appeal.s aUCYWed in part.
SHlU JAGDISH MILLS LTD.
v.
THE COMMISSIONEH OE, INCOME-TAX, BOMBAY
NORTH, KUTCH AND SAURASHTRA,
AHMEDABAD
(S. R. l>As, C .• J., N.H. BHAGWATT, and
M. HIDAYA'l'ULLAH, JJ.)
Income~tctx-Assessee company manufacturing and supplying
goods from outside British India-Stipulation for payment by cheque
-Cheques remitted by post from British India-Post Office, if ccn
agent of the assessee-Income, if received in taxable territoriesIndiat' Imome~tax Act (XI of I922), s. 4(1)(a).
The appellant company, carrying on business in manufactur ~
ing and st:lling textiles at Baroda, received in the assessment
years 1942-43 and 1943~44 payments in cheques from the Government of India for the supply of such goods on bills submitted, as
agreed upon in prescribed printed forms which provided that the
Government should pay the amount due to the appellant by
cheque. The appellant, however, did not request or write to the
Government indicating in what way the payment by cheque was
S.C.R.
SUPREME COURT REPORTS
237
to be made. The Government sent the cheques from Delhi by
I959
post to the appellant at Baroda and it received and accepted
-.
them in Baroda in full and unconditional satisfaction of its claim Jagdisll Mills Uti.
and cashed them through its bank accounts in Bombay and
v. . .
Ahmedabad. The question was whether the amounts of the The CommuSWfUt'
cheques were income, profits and gains received by the appellant
of Income-tax
in the taxable territories and were as such liable to tax under
s. 4(1)(a) of the Indian Income-tax Act. The Income-tax Officer
held that the amounts were received in British India as the
cheques were drawn on banks in British India and the Appellate
Assistant Commissioner on appeal affirmed his order. The
Income-tax Appellate Tribunal on appeal held that even though
the appellant did not ask the Government to send the cheques by
post, there was an implied request to do so and following the
decision of this Court in Commissioner of Income-tax, Bombay
South v. Messrs. Ogale Glass Works Ltd. [1955] I S.C.R. I85, held
that the amounts of the cheques were received in the taxable
territories and as such the appellant was liable to tax under
s. 4(r)(a) of the Act. " Hence these appeals by special leave. The
question ior decision was whether in the facts and circumstances
of the case the stipulation that payments should be made by
cheques implied a request by the appellant to the Government to
send the cheques by post so as to constitute the Post Office its
agent for receiving such payments.
Held, that regard being had to the general course of business
usage which was followed in this case, there could be no doubt
that the parties intended that the cheques should be sent by post
which was the normat·agency for transmission of such articles
and, consequently, there was an implied request~ the appellant
to the Government to send the cheques by post so as to constitute
the Post Office its agent for the purpose of receiving those
payments.
.
Commissioner of ~ncome-tax, Bombay South v. Messrs. Ogalc
Glass Works Ltd. [1955] I S.C.R. 185 and Norman v. Rickets, (I886)
3 T.L.R. I82, applied.
Pe1mington v. Crossley and Sons (Limited), (I879] 13 T.L.R.
5I3, considered.
Thorappa v. Umedmalji (1923) 25 Born. L.R. 604 and Ex parte
Cote In re Deveza, (1873) L.R. 9 Ch. 27, distinguished.
CIVIL
APPELLATE
JURISDICTION: Civil Appeal
Nos. 681 and 682 of 1957.
Appeals by special leave from the order dated
August 2, 1954, of the Income-tax Appellate Tribunal
of India., Bombay Bench 'A' in Income-tax Appeals
Nos. 3756 of 1948-49 and 2161 of 1950-51.
R. J. Kokih and I . N. Shroff, for the appellants.
H. N. Sanyal, Additional Solicitor-General of India,
K.N. Bajagopal Sa.stri a.nd D. Gupta, for the respondent.
238
SUPREME COURT REPORTS [1960(1)]
z959
1959. May 12. The Judgment of the Court was
-.
delivered by
Jagdish Mills Ltd.
v.
BHAGWATI J.-These two appeals with special
The Commissioner leave under Art. 136 of the Constitution are directof Income-tax
Bhagwati].
ed against the order of the Income-tax Appellate
Tribunal of India, Bombay Bench "A" (hereinafter
referred to as" the Tribunal"} dated August 3, 1954,
in Income-tax Appeals Nos. 3756 of 1948-49 and 2161
of 1950-51 whereby the Tribunal held that the amounts
of cheques of Rs. 1,98,643 and Rs. 4,96,365 for the
assessment years 1943-44 and 1944-45 were received by
the appellant from th~ Government in the taxable
territories and were as such liable to tax under s .. 4(l)(a)
of the Indian Income Tax Act (XI of 1922) (hereinafter
referred to as "the ACt").
At all material times the ap}Jellant was a 1mhlic
joint · stock company incorporated under the then
Baroda State Companies Act and having its registered
office at Baroda. The appellant was the owner of a
textile mill and carried on business in manufacturing
and selling textiles at Baroda.
In the accounting years 1942 and 1943 tenders were
inviteu bv the Government of India for some of the
articles mannfactured by the appellant and the appellant submitted its tenders to the Government of India
which accepted the tenders and placed orders for
supply of goods manufactured by the appellant. These
orders were accepted by the appellant at Baroda and the
deliveries of the goods manufactured by the appellant
and sold by it to the Government of India ~ere pursuant to the said orders to be and w,ere in fact effected
F. 0:'" B. Ba,roda. In fact so far as the manufacture
and sale of the goods supplied to the Government of
India were concerned, as also the deliveries thereof,
everything took place at Baroda, outside· the then
British India.
According to the condition!3 of the contracts governing the supplies made by the appellant tu the Government, the system of payment was, that unless otherwise agreed upon between the parties, payment for
delivery of the goods would be made on submission
of the bills in the pr<?sC'dbed form in accmdance with
s.c.R .
~UPR.EME COUR1.' REPORTS
239
the instructions given in the acceptance of the tender
1959
by a cheque on a Government Treasury or a Branch
. -iJl L d
of the Reserve Bank of India or the Imperial Bank offagd,sJJ M
5
t ·
India trancacting Government business. The appellant The co,:~zissioner
after effecting deliveries of the goods, submitted bills
of Income-tax
in t.he prescribed printed form which contained the
sen~ence that "Government should pay the amount
Bhagwati f.
due to the appellant by cheque" but the appellant
did not request or write to the Government, in what
way the ·payment by cheque was to be made by
Government to the appellant. After submission of the
bills the appellant received at Baroda, in payment of
its bills cheques through post from the rxavernment
drawn on a Government Treasury or on a branch of
the Reserve Bank of India or the Imperial Bank of
India transacting Government business.
The said
cheques were received at Baroda by the appellant
from the Govemment, along with a memo stating :-
" The undersigned has the honour to forward
herewith cheque No.
dated
in payment
of the bills noted below."
then ·followed a tabular statement setting out the
number, amount and date of the bills. On the top of
the memo there was a direction that "it be immediately returned to the Controller of Supplies Accounts,
with the acknowledgment form on the reverse duly
signed and stamped." The acknowledgment form was
expressed as follows :-
" The undersigned has the honour to acknowledge
cheque No.
dated
for Rs.
in
payment of the bills noted in the first column on the
reverse."
The payments made by cheques were acqepted by the
a.ppeJlant unconditionally and in full satisfaction of its
claim for goods supplied to the Government.
On
receipt . of such cheques, the appellant endorsed the
same and sent them either to Bombay or Ahmedabad in
the Banki~g account of the appellant at such p1aces.
By his orders dated September .20, 1945, and March
16, 1943, for the assessment years 1942.43 (account
year being calendar year 1941) and 1943.44 (account
year being calendar year 1942) the Income-tax Officer
240
SUPREME (JOURT REPORTS [1960(1)]
:r959
held that the sums of Rs. 1,98,643 and Rs. 4,96,365
-
L
being the amounts of the cheques received by the
Jagdish !":ills
td. appellant for the goods supplied to the Government of
The Commissioner India amounted to receipt of income, profits and gains
of Income-ta.T
in British India during the said accounting years inasmuch as the said cheques were drawn on banks in
BhagrniUi J.
British India and were liable to tax.
On appeal to the Appel1ate Assistant Commissioner
from the said orders of the Income-tax Officer, the
Appellate Assistant Commissioner confirmed the orders
of the Income-tax Officer and dismissed the appeals.
From the said decision of the Appellate Assistant
Commissioner the Appellant appealed to the Incometax Appellate Tribunal who, after two remand orders
on various points in the case which have no relevance
to the question involved in these appeals, finally by its
order dated August 3, 1954, held that even though the
appellant did not write to the Government saying that
the cheques be sent by post, there was an implied
request to the Government to send the cheques by
post, observing that where a person in Baroda writes
to another in Delhi to send the money due to him by
a cheque there is an implied request to send the
cheque by post.
The appellant could not have
intended that the cheques would be sent otherwise
than by post and it was not the case of the appellant
that the cheques received from the Government were
delivered by hand on behalf of the Government to the
Appellant at Baroda and following the decision of this
Court in Commissioner of Income-tax, Bombay South v.
Messrs. Ogale Glass Works Ltd.(l), the Tribunal held
that the amounts of the cheques referred to above
were received by the appellant in the taxable territories and as such the appellant was liable to tax
under s. 4( 1 )(a) of the Act.
On December 20, 1954, the appellant applied for
special leave to appeal against the said order of the
Tribunal under Art. 136 of the Constitution which
leave was granted by this Court by its order daterl
April15, 1955. By a further order dated September 19,
1955, both the appeals were consolidated for the
purposes of printing of the record and for filing of the
(I) [1955] I S.C.R. 185.
S.C.R.
SUPREME .COURT . REPORTS
241
petitions of appeal and the statements of case therein.
x959
T.hese appeals have now come up for hearing and final Jagdish Mills Lltl.
disposal before us.
v.
On the facts narrated above it is clear that the mode The Commissi<mer
of payment agreed upon between the appellant and the
of Income·tu
Government of India, as specified in Cl. 21 in the
printed form of tender, was that the payments for the
BhagwatiJ.
delivery of the goods were to be by cheques drawn on
a Government Treasury or on a branch of the Reserve
Bank of India or the Imperial Bank of India transacting Government business. The appellant used to
submit the bills in the prescribed printed form which
mentioned that the Government should pay the
amounts due to the appellant by chequ"J. In paym~nt
of these bills the appellant 11sed to receive at Baroda
cheques drawn by the Government as aforesaid along
. with a memo of acknowledgment which stated that the
cheques ment.ioned therein were forwarded in payment
of the bills noted in the tabular statement setting out
the amount, number and date of the bills. The acknowledgment form on the reverse was .thereafter duly
signed and stamped by the appellant acknowledging
the receipt of the cheques in payment of the said bills
and was despatched by the appellant to the Government. These payments by cheques were accepted by
the appellant unconditionally and in full satisfaction of
its claims for the goods supplied to the Government.
The case of the Revenue in the first instance was
that even though these cheques were received by the
appellant in Baroda they were sent by the appellant
after duly endorsing the same either to Bombay or
Ahmedabad in the banking accounts of. the appellant
at such places and these cheques were cashed and the
proceeds thereof were received by the appellant in
either Bombay or Ahmedabad and a~ordingly the
income, profits and gains were received by the appellant within the taxable territories. This contention
was really of no avail to the Revenue because on the
particular facts of the present case it was common
ground that the payments made by cheques were
.accepted by the appellAnt unconditionally and in fuli
satisfaction of its claims for goods supplied to the
Jl
242
SUPREME COURT REPORTS [1960(1)]
z959
Government and therefore if_ the cheques be held to
-
have been received by the appellant in Baroda the
]agdisll Mills Ltd.·
fit
d
·
1
· d · B
d
mcome, pro san gams were a so rece1ve m
aro a
The co,;:nissioner which was outside the taxable territories. Even if the
of Income·taK
receipts of the cheques at Baroda be treated as a
conditional payment of the appellant's claims for the
Bhagwtai J.
goods supplied to the Government, the position was no
better, for the simple reason that the cheques not
having been dishonoured but having been duly cashed
the payments related back to the dates of the receipts
of the cheques and in law the dates of payments were
the dates of the delivery of the cheques which was
certainly in Baroda.-out side the taxable territories.
In either event, it could not be urged by the Revenue
that the income~ profits and gains were received by
the appellant at any place other than Baroda (Vide the
Commissioner of lncorne.tax, Bombay South v. Messrs ..
Ogale Glass Works Ltd. (1), ibid at 196). The position
which was, however, taken up by the Revenue subsequently was that the cheques were posted by the
Government in Delhi at the implied request of the
appellant and therefore the payments must be held to
have been received by the appellant at Delhi, the Post
Office being thus constituted the agent of the appellant
for the purposes of receiving the same.
Learned
Counsel for the appellant contested this position by
urging that the only thing mentioned by the appellant
was that the payment for the goods supplied by the
appellant to the Government was to be by cheques and
there was no request either express or implied
emanating from the appellant for the despatch
of these cheques by post with the result that if
the Government chose to send these cheques by post
from Delhi it was not in pursuance of any request
express or implied made by the appellant in that behalf
but it was so done by the Government on its own
initiative thus constituting the Post Office the agent of
the Government and there was no receipt of the monies
by the appellant until the cheques reached their destination at Baroda. The case of the Commissione1' of
Income-tax, Bombay South v. Messrs. Oga~e Glass lV orks
Ltd. (1), which was relied upon by Revenue was sought
(1) [1955)1 s.c.R. 185.
S.C.R.
SUPR:E~ME COURT REPORTS
to be distinguished on the ground that in that case the
I959
assessee had written on the bill form the words" Kindly1
d' • M 'll L 4
't th
t b
h
•
f:
ag ISn
1 S
t •
rem1
e amoun
y a c eque m our avour on any
v.
bank in Bombay" which was an express request con- The commissione,.
veyed to the Government by the assessee to send the
of Income-tax
cheque by post thus constituting the Post Office the
agent of the assessee. No such words having been used
Bhagwati J.
by the appellant in this case the only consequence of
the provision contained in the bill form that the pay.
ment be made by cheque was that the Government was
authorised or entitled to make the payment by cheque;
but how to reach those cheques to the appellant was
left to the sweet will and discretion of the Government
and if the Government chose to send those cheques by
post there was no request, express or implied, emanating from the appellant to send the cheques by post so
as to constitute the Post Office the agent of the
appellant for the purposes of receiving the same . .
It is true that in the Commissioner of Income-tax,
Bombay South v. Messrs. Ogale Glass Works Ltd.(1), the
words " kindly remit the amount by a cheque .in our
favour on any bank in Bombay" were specifically used
by the assessee and these words were construed to be
an express request by the assessee to the Government
to send the cheques by post.
The various authorities which were discussed, viz.,
Thairlwall v. The Great Northern Railway Co.(g); Badische
Anilin Und Soda Fab1·ik v. The Basle Chemical Works
Bind 8chedler(3}; Comber v. Layland(4)andMitchellHenry v. Nm·wich Union Life Insurance Society (6), were
also cases where the expressions used wert'l construed
as words of express request constituting the Post Office
the agent ?f the party receiving the money or the goods
and went to support the case made by the Revenue
that the post office was constituted the agent of the
assessee for the purposes of receiving the cheques when
they were posted by the Government in Delhi: Where,
however, no such express words were used and the
matter rested merely in the stipulation that the payA
ment would be made by cheques, :would the mere
(1) [1955] 1 S.C.R. 185.
(3) [x898] A.C. 200.
(2) (rgro) 2 K.B. 509·
(4) {r898] A.C. 524.
(5) [1918] 2 K.B. 67.
244
SUPREME COURT UEPORTS [1960(1)]
I!JSJJ
posting of the cheques in Delhi be enough to constitute
. -.
the Post Office the agent of the appellant so that the
Jagdtsh Mzlls Ltd. income, profits and gains may be said to have been
The Co,:;1issioncr received by the appellant within the taxable terriof Income-tax
tories ?
If there was nothing more, the position in law is that
Bhagwati J.
the Post Office would not become the agent of the
addressee and the mere posting of the cheque would
not operate as delivery of the cheque to the addressee
so as to pass the title in the cheque to the addressee.
(Vide Th&rappa v. Umedmalji (1) and the case of Ex~
parte Cote In re Daveza e").
Where, however, on ·the facts and circumstances of
the case an implied request by the creditor to send the
cheque by post can be spelt out, the Post .Office would
be constituted the agent of the addressee for the purposes of receiving such payment. The authority in
support of this proposition is to be found in Norman v.
Ricketts (3). In that case Madame Phillippe, one of the
plaintiffs, carried on business as a milliner in Bondstreet, and one of her customers was the defendant,
Mrs. Ricketts. Between March 1884, and March, 1885,
goods were supplied by Madame Phillippe to Mrs.
Ricketts to the amount of£ 142. Mrs. Ricketts lived
in Suffolk, and at the end of. March, 1885, Madame
Phillippe wrote to her in Suffolk saying, "the favour
of a cheque within a week will oblige". Mrs. Ricketts
accordingly, on April 6, sent Madame Phillippe a
cheque for the amount by post. The cheque was an
open cheque payable to the order of Madame Phillippe.
The cheque was stolen in the transit, and Madame
· Phillippe never received it, but it was paid by Mrs.
Ricketts' bankers to the thief. Madame Phillippe then
commenced this action to recover the amount, and
Mr. Baron Huddleston who tried the case without a
juryt held [(1885) 2 T.L.R. (607)] that the sending of
the cheque was payment and gave judgment for the
defendant. The plaintiffs appealed and the appeal was
dismissed by the Court of Appeal consisting of Lord
Esher, M. R.J Lindley and Lopes, L. JJ. The Master of
the Rolls said that if a debtor had to pay his creditor
(I) (1923) 25 Born. L.R. 6o4.
(2) (1873) L.R. 9 Ch. 27.
(3) (1886) 3 T.L.R. 182.
KC.R.
~UPREME COURT REPORTS
245
money, as a general rule the debtor must come and pay
1959
his ~reditor. But if the credi.tor asked him to pay in a Jagdish Mills Ltd.
particular way, the debtor m1ght do so. If asked to pay
v.
through the post, the put.ting the letter in the post with The Commissicnw
the money was a sufficient. The only question here was
of Imome-la%
whether the plaintiffs asked the defendant in effect to
send the money through the post. An express request
Bhagwati f.
to send through the post was not necessary. If what
the plaintiffs said amounted to a request to send the
cheque by the post, then there was payment. To
answer that question the existing circumstances must
be looked a.t.
A milliner in London wrote to a lady in
Suffolk asking for a cheque. Did that letter reasonably
lead the lady to suppose and did she suppose that she
might send the cheque by post ? She could not suppose
that she was to send a. messenger with it or come up to
London herself. The only reasonable and proper meaning to be attached to it, whatever Madame Phillippe
might ha:ve intended, was that she was to send the
cheque by post. She, therefore, reasonably believed that
she was invited to send her cheque by post, and she did
what she was asked to do. Consequently, what she did
amounted 'to payment to the appellant. The Lords
Justices concurred with this judgment.
Resting itself upon the observations in this case this
Court observed in Commissioner of Income-tax, Bombay
South v. Messrs. Ogale Glass Works Ltd. (1) at p. 295:-
" According to the course of business usage in
general to which, as part of the surrounding circumstances, attention has to be paid under the authorities cited above, the parties must have intended that
the cheques should be sent by post which is the
usual and normal agency for transmission of such
articles ·and according to the Tribunal's findings they
were in fact received by the assessee by post."
Learned Counsel for the appellant particularly drew
our attention to the case of Pennington v. Crossley and .
Sans (Limited) C
1) a decision of the Court of Appeal
consisting of Lord Esher, M.R., A.L. Smith and
Rigby, L. JJ., where Nrn·man v. Ricketts(3) was distinguished. In that case the plaintiff sold ou December 10,
(1) (1955] r S.C.R. 185.
(2) (1897 j 13T.L.R. 513.
(3) (1886) 3 T.L.R. 182.
246
SUPREME COURT REPORTS [1960(1)]
r959
1896 the goods in question to the defendants· and
-
on the same date an invoice was sent to the defendants
f agdish Mills Led. under which the defendants were entitled to discount if
The co;:~issioner the payment was made within 14 days. Upon Decemof Income-tax
her 24 the defendants posted a cross cheque made
payable to the plaintiff or his order; and with the
Bllagwati J.
cheque was sent a form of receipt for signature by the
plaintiff. The envelope containing the cheque was
properly addressed to the plaintiff, but was not registered. There was no express request to send the cheque
by post. The cheque was never received by the plaintiff but was cashed by a stranger on the strength of a
forged endorsement of the plaintiff's name thereupon.
On an action to recover the price of the goods sold and
delivere~ the defendants contended that the posting of
the cheque amounting in law to payment, and gave
evidence that for about 20 years before this transaction payments for goods in question, as between the
plaintiff and the defendants were always made by
cheque sent by post in the form of receipt given
above. The learned Judge held that the course of
business showed that the parties had agreed that the
payment should be made by cheque, and that the posting of the cheque amounted to payment, and accordingly gave judgment for the defendants. The Court of
Appeal reversed this decision. The Master of the Rolls
in his judgment distinguished the case of Norman v.
Ricketts (1), stating that in that case there was what
amounted to a request to send a cheque by post and
the Court held that the posting of the cheque was
payment. There was no such request here. The course
of business between the plaintiff and the defendants
was not taken to mean that there was a request to the
defendants to send the cheque by post and that
the plaintiffs would run the risk of the cheq\leS
miscarrying in the transit. The defendants sent to
the plaintiff <.Jheques by post on the various sales,
together with a form of receipt to be signed by him
independently of any arrangement. There was nothing
in the circumstances to warrant the conclusion that
putting the cheque in the post was to b<: taken a.s the
delivery of the cheque to the· plaintiff, the only facts
(1) (1886) 3 T.L.R. 182
S.C.R.
SUPREME COURT REPORTS
247
being that the defendants always se~t cheques by post
I959
and that when the pla.intiffreceived them he sent back Jagdish Mills Lid.
the receipt duly signed.
v.
This case ~oes not militate against the ratio of the The Commissioner
decision in Norman v. Ricketts (1), but really confirms
of Income-tax
the same. If on the facts and circumstances of that
case the Court of Appeal had been able to find any
Bltagwali f .
request, express or implied, to send the cheques by
post the decision would certainly have been confirmed
but in so far as there was nothing in the circumstances
of the case from which such an inference could be
raised the Court of Appeal observed:-
" It would be most monstrous to infer from those
circumstances a request to send a cheque by post
and that the plaintiff would consider that he had
received it as soon as it· was posted."
The other Lord Justices delivered judgment to the
same effect and the appeal was allowed.
The above ratio is really determinative of the question before us. The stipulation in the contract between
the appellant ~nd the Government was that the
payment would be made by cheques. The Government
of India was located in Delhi and the cheques would
be necessarily drawn by it from Delhi. Could it be
imagined that in the normal course of affairs the
cheques thus drawn in Delhi would be sent by a
messenger to Baroda so that they may be delivered to
the appellant in Baroda? Or that the officer concerned
would come to Baroda himself and hand the same
over to the appellant in Baroda? The only reasonable
and proper way of dealing with the situation was that
the payment would be made by cheques which the
Government would send to the appellant at ~aroda by
post. According to the course of business usage in
general which appears to have been followed in this
case, the parties must have intended that the cheques
should be sent by post which is the usual and normal
agency for transmission of such articles. If that were
so, there was imported by necessary implication an
implied request by the appellant to send the cheques
by post from Delhi thus constituting the Post Office.its
agent for the purposes of receiving those payments.
(r) (r886) 3 T.J:.,.R, rSz,
248
SUPREME COURT REPORTS [1960(1)]
I959
Learned Counsel for the appellant further drew our
. h-.ll L d attention to certain provisions of the Post Office Adi,
Jogdss :'
5
1 '1898 and the postal regulations framed thereunder
The Commissioney and tried to argue that the Post Office was really the
of Income-tax
agent of the Government and the Government could
recall the cheques at any time before they actually
Bhagwoti J.
reached the appellant at Baroda. All these provisions were discussed by this Court in the Commissione?·
of lnrome-tax, Bombay South v. Messrs. Ogale GlaBs
Works Ltd. (1), and it was held that these provisions
did not help the assessee. The position as it obtains
was thus summarised at p. 204:-
" there can be no doubt that as between the
sender and the addressee it is the request of the
addressee that the cheque be sent by post that
makes the post office the agent of the addressee.
After such request the addressee cannot be heard to
to say that the post office was not his agent and,
therefore, the loss of the cheque in transit must fall
on the sender on the specious plea that the sender
having the very limited right to reclaim the cheque
under the Post Office Act, 1898, the post-office was
his agent, when in fact there was no such reclamation. Of course if there be no such request, express
or implied, then the delivery of the letter or the
cheque to the post-office is delivery to the agent of
the sender himself.''
In our opinion the principle which has been enunciated by us in the Commissioner of Income-tax; Bombay
South v. Messrs. Ogale Glass· Works Ltd. (1), is applicable to the facts of the present case;' even though the
words "to remit the amount by cheque" have not
been specifically used herein. Non-user of those words
does not make any difference to the position and it is
not possible to distinguish the present case from that
case merely on this ground.
We are, therefore, of opinion, that the Income-tax
Appellate Tribunal was right in the conclusion to which
it ·came and these appeals must accordingly be dismissed with costs, one set between the two appeals.
Appeals dismissed.
(I) [1955] I s.c.R. rss.