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TMI Blog1968 (4) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in Damodar Das v. Margan & Co. and Panckridge J. observed : " Mutatis mutandis those words appear to me to apply to the Calcutta High Court. I take the learned Chief Justice's words as amounting to a statement that the rights of an attorney in India are the same as the rights of a solictor in England except in so far as the latter have been diminished or increased by statute. " There are good reasons why the English common law principles should be applied in relation to Indian solicitors. Those principles are based on justice, equity and good conscience and, in the absence of statutory provisions in this country, should govern the relationship between solicitors and clients. This view was expressed by Jenkins J. (as he then was) in Khetter Kristo Mitter v. Kally Prosunno Ghose, in the following language : " These principles appear to me to be the clear result of the authorities in England ; and founded, as they are, on justice, equity and good conscience, I see no reason why they should not apply in this country. " Now, the relationship in which a solicitor stands with his client, under the English common law, particularly in respect of client's money, has been de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves, under the court's inherent jurisdiction over its officers, to account for money received or paid and to pay over to the client, or into court, the balance due to the client after deducting any money owing to the solicitor by the client for costs or other reason. If misconduct was not alleged the application was formerly a proper one to make at chambers, and it is now usually made there by summons under a special rule of court, and the order may be enforced by attachment if it comes within an exception to the Debtors Act, 1869, and the payment is defined with sufficient certainty. " In Cordery's Law Relating to Solicitors (5th edition), at pages 144-145, the same view appears : " The usual relation of solicitor and client is that of agent and principal, and this is so in respect of the client's moneys received by the solicitor in the ordinary course of business. In the absence of special circumstances, therefore, the Limitation Act, 1939, section 2(q), which bars the action in six years, will run from the time of the receipt by the solicitor or last acknowledgment or part payment...... Special circumstances are needed to raise the relation of trustee and cestui q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mself of his character, gains for himself any pecuniary advantage, or where any person so bound enters into any dealings under circumstances in which his own interests are, or may be, adverse to those of such other person and thereby gains for himself a pecuniary advantage, he must hold for the benefit of such other person the advantage so gained. " Now, a solicitor in this country fulfils the description of legal adviser and the advantages, if any, gained by him in his fiduciary character must be governed by the provisions of section 88 of the Trusts Act. Although standing in a fiduciary capacity a solicitor, as an of his principal, namely, the client, has a lien on client's money and over goods bailed to him for his costs. This appears from section 171 of the Indian Contract Act. This is also so in England, as appears from Loescher v. Dean. What happened in this case was that a plaintiff obtained a decree for specific performance of a contract to convey certain property, subject to the payment by him of pound 268 4s. 9d. to the defendant, and was awarded costs. On April 17, 1950, the money was paid to the defendant's solicitors who attended the completion on the defendan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was the relationship between a trustee and a beneficiary and since the Limitation Act did not apply in the matter of recovery of amount deposited by clients, the liability of the assessee continued in spite of the fact that certain unclaimed balances had been written off and transferred to the profit and loss account. The Appellate Assistant Commissioner accepted the assessee's contention and directed the deletion of a sum of Rs. 4,078 from the total income of the assessee. Thereupon, the revenue preferred an appeal before the Appellate Tribunal. It was contended by the revenue that the conduct of the assessee in appropriating the unclaimed balances in the constituent's account raised a strong presumption that the sum of Rs. 4,078 had been earned as professional income. The revenue relied on the decision of the Punjab High Court in Punjab Distilling Industries Ltd. v. Commissioner of Income-tax. The Tribunal distinguished the facts of the Punjab case from the facts of the instant case and, following the principles laid down in Morley v. Tattersall, came to the conclusion that the unclaimed balances in the clients' accounts were " obviously liabilities " of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. Under the partnership deed by which the firm was constituted, part of the unclaimed balance was transferred to the credit of the partners and provision was made for subsequent annual transfers. The deed provided also that any payments which might be claimed and made in respect of the balances should be borne by the partners in proportion to their shares of profits at the date of payment. The question arose whether the unclaimed balances transferred to the partners were trading receipts in respect of which the assessee was assessable to Income-tax under Case I, Schedule D, of the English Income-tax Act. Giving a negative answer to the question, Sir Wilfrid Greene M. R. observed : " Now the Crown put forward arguments. The learned Solicitor-General put forward one argument and adumbrated another argument, which he only sketched and did not develop. Mr. Hills would have none of the solicitor-General's argument and developed at considerable length the argument which the learned Solicitor-General had only adumbrated. Both argument proceeded on the footing that it was impossible to say that the sums when received were trade receipts. That was subject to a qualification, I thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... something, nor does it mean that at that moment they imprinted upon some existing asset a quality different from what it had possessed before. There was no existing asset at all at that time. All that they did, as I have already pointed out, was to write down a liability item in their balance-sheet, and how in the world by effecting that operation you can be said to have converted a sum received years and years ago into something which it never was is a thing which, with all respect, passes my comprehension. " Mr. Pal argued that we should not be guided by Tattersall's case, because in that case there was no money initially paid, as was done in the instant case. He submitted that what was done in that case was to put a horse belonging to a client to auction. The proceeds of the sale was money belonging to the auctioneer's client, as much as the animal itself had belonged to the client. The auctioneer might have been entitled to some remuneration out of the money received but for all practical purposes the sale proceeds did not belong to the auctioneer but to the client. On the other hand, he submitted, when money was made over to the solicitor, in the instant case, the sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow turn to examine the Supreme Court decision in Punjab Distilling Industries Ltd.'s case, on which Mr. Pal so much relied, being the decision in appeal from the Punjab High Court, the decision on which the revenue relied before the Tribunal. What happened in that case was that the assessee carried on business as a distiller of country liquor and sold the produce of its distillery to licensed wholesalers. After World War II difficulty was felt in finding bottles in which liquor was to be sold. To relieve the scarcity, the Government devised a scheme whereby the distiller was entitled to charge the wholesaler a price for the bottles in which liquor was supplied, at rates fixed by the Government, which he was bound to repay when the bottles were returned. In addition to the price fixed under the Government scheme, the assessee took, from the wholesaler certain further amounts, described as " security deposits ", without the Government's sanction and entirely as a condition imposed by the assessee itself for the sale of its liquor. The moneys described as " security deposits " were also returned as and when the bottles were returned but in this case the entire sum taken in one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id on the return of the bottles. They were part of the transactions of sale of liquor which produced the profit and therefore they had a profit-making quality. Again, a wholesaler was quite free to return the bottles or not as he liked and if he did not return them, the appellant had no liability to refund. It would then keep the moneys as its own and they would then certainly be profit. The moneys when paid were the moneys of the appellant and were thereafter in no sense the moneys of the persons who paid them. " We do not think that the principles laid down by the Supreme Court can be applied to the facts of the instant case. In Punjab Distilling Industries case what was received was price of the bottles, which price included the security deposit. There only remained a contingency for which a part of the price was to be returned to the wholesalers. Since the money so received was impressed with the character of price, from the inception, the contingency that the part of the money was refundable did not change the character of the unrefunded money. The receipt thus constituted trading receipt. In the instant case, we have already observed, the money received was money of the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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