TMI Blog1953 (4) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in this case is partnership called Messrs. Bhurangiya Coal Company. By an agreement dated 16-3-1946 the assessee agreed to transfer to a limited company, Bhurangiya Coal Co. Ltd. the properties described in Schedules 1 and 2 of the agreement consisting of all the movable and immovable properties appertaining to the colliery. The agreement was that the limited company would purchase from the assessee all the properties in Schedules 1 and 2 for a sum of ₹ 6,10,000. Out of this amount a sum of ₹ 2,00,600 was the price fixed for the immovable properties like coal land, buildings and structures included in Schedule 1 and a sum of ₹ 4,09,400 was the price of the movable properties like machinery, plants, tram lines and cables included in Schedule 2. The payment of the price was to be made by allotment of 50,000 shares of the value of ₹ 5,00,000 to the nominees of the vendors and the balance was to be paid in cash in equal shares to the two partnership firms Ramsarandas Brothers and D. R. Rathor. The case of the assessee is that in pursuance of the agreement the limited company took possession of the colliery and of the properties mentioned in the two schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the schedule to the agreement of sale but also to the movable assets mentioned in second part of the schedule. The argument is that the assessee transferred the movable properties mentioned in the second part of schedule not by giving possession to the limited company on 30-3-1946 but by executing the registered document of sale on 17-5-1946. The question therefore turns on the proper construction of the various terms incorporated in the sale deed. The Standing Counsel referred to the fact that the schedule to the sale deed consists of two parts, the first part dealing with coal land, building and structures thereon and the second part dealing with machinery, shafts, tram lines, railway siding etc. But this circumstance is immaterial. The schedule cannot enlarge or restrain the effect of the words in the operative part of the document. On the contrary, the operative part of the document or hahendum states that the vendors do hereby grant, transfer and assign unto the purchaser all their right, title and interest of and in the said lands and mines described in the first part of the schedule hereunder written. In this clause there is no reference to the properties comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... states that specific performance of a contract may be obtained by a company when the promoters have before its incorporation entered into a contract for the purposes of the company, and such a contract is warranted by the terms of incorporation. Section 27 similarly enacts that specific performance of a contract may be enforced against the company when the promoters had entered into the contract before its incorporation. But there are two conditions for the enforcement, viz., the company should have ratified and adopted the contract and the contract should be warranted by the terms of the incorporation. Sections 23 and 27 are based upon the principle developed in the English Court of Equity that the company stands in place of the promoters or to use the language of Lord Jeffery in a Scottish case the fact that a party having passed from the chrysalis to the butterfly stats creates no difficulty in the enforcement of such a contract. The doctrine is not based on the principle of contract through the agency of promoters but on the principle that the Court of Equity will not allow a corporate body to exercise powers acquired by means of a previous contract and arrangement withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that acts which, if done by an individual, would amount to a fraud, ought not to be so considered if done by a company, nor, can I say that it is no prejudice to the plaintiff to have been permitted to take possession on the faith of an agreement, and afterwards to be held liable to-be treated as a trespasser and turned out of possession on the ground that there was no agreement. There is authority for saying that in the eye of this Court it is a fraud to set up the absence of agreement when possession has been given, upon the faith of it. 7. A similar problem has arisen in connection with the question, whether the promoters can be said to be trustees for a company not in existence. Strictly speaking, a person cannot be a trustee for a beneficiary not in existence, but a line of authorities has laid down the principle that on the company being floated, the relationship between a promoter and the company he has started must be deemed to be a fiduciary relationship from the day the work of floating the company started. In this context it is necessary to cite a passage from the judgment of Lindley L. J. in -- 'Lydney and Wig-pool Iron Ore Co. v. Bird (1864) 33 Oil D 85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter. But I am unable to accept the argument of the Standing Counsel that the finding of the Appellate Tribunal on the question of possession is vitiated by any error of law. The finding of the Appellate Tribunal that the limited company had taken possession of the movable assets on 30-3-1946 is a finding on a question of fact and unless the Standing. Counsel is able to establish that there is no evidence to support the finding or that the Appellate Tribunal has applied a wrong legal principle the High Court has no power to interfere. In this connection Mr. Dutt pointed out that on 29-3-1946 the Board of Directors had resolved that the vendor's agreement dated 16-3-1946 should be confirmed and the managing agents should take possession of the movable forthwith . Mr. Dutt also referred to letter, Ex. C, written by the managing agents stating that they had taken possession of the Bhurangiya colliery as per terms of the agreement dated 16-3-1946 . The Appellate Tribunal based their finding on these two documents and it-is difficult to accept the contention of the Standing Counsel that the finding is not supported by any material. As I have already stated the finding of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms were immovable properties and could be validly sold only by a registered sale deed. It was contended that title could not pass by execution of the contract of sale and subsequent delivery of possession. In my opinion this argument cannot be entertained at this stage. The point was never taken before the departmental authorities or before the Appellate Tribunal. The question whether a particular machinery or any particular item of part 2 of the schedule is imbedded in the earth within the meaning of Section 3, T. P. Act is a question which depends upon the circumstances of each case. No evidence was adduced by the parties in this connection and the facts have not therefore been properly investigated by the Appellate Tribunal. As stated by Blackburn J. in -- 'Holland v. Hodgson (1872) LR 7 CP 328 (E) : There is no doubt that the general maxim of the law is that what is annexed to the land becomes part of the land; but it is very difficult if not impossible, to say with precision what constitutes an annexation sufficient for this purpose. It is a question which must depend on the circumstances of each case, and mainly on two circumstances, as indicating the intention, v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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