TMI Blog1972 (3) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... the bar of limitation. For the reasons mentioned above, this appeal fails and it is dismissed - C.A. 1223 OF 1970 - - - Dated:- 9-3-1972 - Judge(s) : K. K. MATHEW., K. S. HEGDE JUDGMENT The judgment of the court was delivered by HEGDE J.--This appeal by certificate is by the plaintiff-appellant, Turner Morrison Co. Ltd. (to be hereinafter referred to as Turner Morrison) from the decision of a Division Bench of the Calcutta High Court. The Division Bench affirmed the decision of the trial court dismissing the plaintiff's suit. In the suit Turner Morrison claimed a decree for a sum of Rs. 1,27,67,052.16. The claim was made on the ground that the plaintiff had paid either as an agent or on behalf of the defendant, Hungerford Investment Trust Ltd. (in voluntary liquidation) (to be hereinafter referred to as the Hungerford), a sum of Rs. 79,70,802 as super-tax which it was entitled to be reimbursed. To that sum a sum of Rs. 47,96,250.16 was added as interest in the shape of damages. In respect of that claim the appellant claimed a paramount lien on the 2,295 shares owned by the Hungerford in the plaintiff-company. The defendant resisted the suit on various grounds. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Morrison itself should discharge that liability. These resolutions were duly implemented by Turner Morrison by paying all the taxes due from Hungerford. In about the middle of 1955, Haridas Mundhra entered into negotiations with Nigel Turner for purchasing all the shares of Turner Morrison. By exchange of letters in November and December of 1955, Hungerford agreed to sell and Mundhra agreed to purchase 49 per cent. shares of Turner Morrison. The agreement also provided for an option to Mundhra to purchase from Hungerford the balance of 51 per cent. shares of Turner Morrison within five years for the price agreed upon. A formal agreement in that regard was entered into between Hungerford, John Geoffrey Turner, Nigel Turner, British India Corporation (a nominee of Mundhra) and Mundhra on October 30, 1956. In pursuance of that agreement Mundhra purchased 49 per cent shares of Hungerford. Thereafter, as contemplated in that agreement, Hungerford went into voluntary liquidation. On October 31, 1957, two documents came to be executed. One is a deed of guarantee and indemnity. That was a tripartite agreement. The first party to that deed was Turner Morrison. The second party was John Geof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with the agreement entered into between Mundhra and Hungerford, Turner Morrison was to discharge the tax liability of Hungerford to the extent of rupees 46 lakhs. After the sale of the 49 per cent. shares referred to earlier, some dispute appears to have arisen between Mundhra and Hungerford in regard to his option to purchase the remaining 51 per cent. shares of the latter. Consequently, Mundhra filed a suit in the Calcutta High Court on its original side for the specific performance of the agreement entered into between him and Hungerford. The suit was resisted by Hungerford. But, it was decreed. It appears that when the learned trial judge was about to conclude his judgment in that case the counsel for Mundhra requested the court to issue an injunction requiring Hungerford to exercise its voting rights in respect of the 51 per cent. shares which was the subject-matter of the suit in accordance with the directions of Mundhra until the implementation of the decree for specific performance. The learned trial judge accepted that prayer and issued the injunction asked for. This led to serious consequences, some of which we have dealt with in our judgment in Civil Appeal N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the suit. From the proceedings of the board of directors, it is clear that they were not even aware of the company against whom the suit was filed. From the two resolutions passed by the board of directors ratifying the action taken by the secretary, it is obvious that either they were callous or they were mere tools in the hands of Mundhra. It is not denied on behalf of Hungerford that the tax due from that company for the assessment years 1939-40 to 1955-56 had been discharged by Turner Morrison. Hungerford's liability to pay tax arose because of the dividends it was deemed to have received from Turner Morrison as a result of section 23A proceedings. But, there is dispute between the parties as to the exact amount paid by Turner Morrison. We have not thought it necessary to go into that controversy as we have, agreeing with the High Court, come to the conclusion that the suit is not maintainable for the reasons to be presently stated. A great deal of controversy centres round the question whether when an assessment is made on the shareholders of a company as a result of an order under section 23A, the company's liability to pay that tax is primary or secondary. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shareholder ; hence, the liability to pay that tax in equity must be that of the company and it is for that reason section 23A has provided for the realisation of the tax due from the shareholders from the company. The fact that before passing an order under section 23A the shareholders are not even required to be heard was emphasised. In this connection our attention was invited to the amendment of section 23A in 1955, as a result of which now the tax liable to be paid as a result of an order under section 23A is payable exclusively by the company. In this connection reliance was also placed on the language of section 42 which empowers the revenue to assess the income of a non-resident assessee in the hands of his agent, but at the same time that section empowers that agent to retain in his hands a sum equal to his estimated liability under that section from out of the non-resident's monies in his hands. It was lastly urged that, if dividends were deemed to have been declared, those deemed dividends remained in the hands of the company and when the company paid tax in respect of the same, it must be held to have paid the same out of the dividends of the shareholders that rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in all places where it earns or is deemed to earn any income. It was further urged that Turner Morrison was not a person employed by or on behalf of Hungerford nor did Hungerford have any business connections with Turner Morrison. It was also the contention of Hungerford that it did not receive any income, profits or gains through Turner Morrison. Lastly, it was urged that the Income-tax Officer had not caused any notice to be served upon Turner Morrison intending to treat that company as the agent of Hungerford. On the other hand it was Turner Morrison which had volunteered to be assessed on behalf of Hungerford. For all these reasons, it was said that Turner Morrison cannot be held to have been taxed as the agent of Hungerford. All these contentions were taken for the first time in this court. They do not appear to have been taken either before the trial court or before the appellate court. The contentions raised involve determination of questions of fact. In the plaint, it was specifically averred that the payments in question were made by Turner Morrison as the agent of Hungerford. That averment has not been specifically. denied. In that view, we are not called upon to go int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in England. The full implication of "promissory estoppel" is yet to be spelled out. We shall presently refer to decisions bearing on that topic but before doing so, let us examine whether Turner Morrison made any representation to Hungerford, if so, what is that, representation. Further, whether Hungerford acted on the basis of that representation to its disadvantage. It is not denied that year after year from 1941 to 1954 Turner Morrison passed resolutions undertaking to discharge the tax liability of Hungerford. In pursuance of those resolutions taxes due from Hungerford were paid. There can be no doubt that the steps taken by Turner Morrison is were within the knowledge of Hungerford as it held 100 per cent. shares of Turner Morrison. The directors of Turner Morrison must have been its nominees. The profit and loss accounts of Turner Morrison must have been approved by Hungerford year after year at the general meeting of that company. In reality the Turner brothers were the owners of Hungerford as well as Turner Morrison though each of those companies was a separate legal entity. It may be that Turner Morrison did not declare dividends so that Hungerford may avoid paying tax at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undhra, Turner Morrison was required to set apart a sum of rupees 46 lakhs to discharge the tax liability of Hungerford. Accordingly, Turner Morrison transferred rupees 46 lakhs from its general reserve to a special reserve. Further, by the agreements dated October 31, 1957, set out earlier Turner Morrison took over the entire tax liability of Hungerford and the Turner brothers agreed to reimburse Turner Morrison any payment made on behalf of Hungerford in excess of rupees 46 lakhs. All these arrangements clearly enured to the benefit of Turner Morrison inasmuch as it allowed that company to refrain from declaring dividends and utilise that money for business purposes. There can be no doubt that it was done in the best interest of that company and with a view to further its business interests. It is necessary to note that despite Turner Morrison paying the tax due from Hungerford from 1941 uptil 1953, those payments were not debited to the account of Hungerford ; nor were they shown as debts due from Hungerford in the balance-sheets placed before the general meeting. Those balance-sheets were approved by the general meeting. It was plainly admitted by the witnesses examined on b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rees House Ltd. would be unable to pay the rent reserved by the lease out of the rent of the flats. Discussions took place between the directors of the two companies and as a result on January 3, 1940, a letter was sent by the lessor to the lessee confirming that the ground rent of the premises would be reduced from pound 2,500 to pound 1,250 as from the beginning of the term. The lessee thereafter paid the reduced rent. By the beginning of 1945, all flats were let but the lessee continued to pay only the reduced rent. In September, 1945, the lessor wrote to the lessee demanding rent at the rate of pound 2,500 per year. It also claimed at that rate for the quarters ending September 29 and December 25, 1945. The lessee repudiated that claim. The question for decision was whether the lessor was bound by the concession that it had agreed to show as the same was not supported by any consideration. Answering that question Denning J. (as he then was) held that where parties enter into an agreement which is intended to create legal relations between them and in pursuance of such arrangement one party makes a promise to the other which he knows will be acted on and which is in fact acted o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oviding incentives to exporters of woollen textiles and goods. It provided for the grant to an exporter of certificates to import raw materials of a total amount equal to 100% of the f.o.b. value of his exports. Clause 10 of the Scheme provided that the Textile Commissioner could grant an import certificate for a lesser amount if he is satisfied, after holding an enquiry, that the declared value of the goods exported is higher than the real value of the goods. The Scheme was extended to exports of woollen textiles and goods to Afghanistan. M/s. Indo-Afghan Agencies Ltd. exported woollen goods to Afghanistan and were issued an Export Entitlement Certificate by the Textile Commissioner not for the full f.o.b. value of the goods exported but for a reduced amount on the basis of some private enquiry supposed to have been held by him but not after holding an enquiry as contemplated by the Scheme. The representation made by the Indo-Afghan Agencies in that connection to the Central Government was rejected. Thereafter, M/s. Indo-Afghan Agencies Ltd. moved the High Court to set aside the order of the Textile Commissioner and the Government and to issue a direction to them to grant licences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (q) of that clause gives power to the company "to receive money on deposit at interest or otherwise and lend money to such persons, with or without security and on such terms as may seem expedient and in particular to customers of and other persons having dealings with the company and to give any guarantee or indemnity as may seem expedient." Sub-clause (x) authorises the company : " to distribute among the members of the company in specie any property of the company, but no distribution amounting to a reduction of capital shall be made without the sanction, if any, for the time being required by law. Sub-clause (z) authorises the company to do all such other things as are incidental or conducive to the attainment of objects mentioned in the memorandum. As seen earlier the non-distribution of the dividends had augmented the working capital of the company thus affording it facility to earn more profits. Any step taken to augment the working capital of the company is undoubtedly incidental to the business of the company and further the same was conducive to the attainment of the objects mentioned in the memorandum. When Turner Morrison paid the tax due from Hungerford ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first time after Mundhra obtained the decree for specific performance. Under these circumstances, it is clear that Turner Morrison had waived the lien that it might have had over the shares held by Hungerford. Hence, the only claim that Turner Morrison could have made against Hungerford was money claim. The present suit was filed on November 15, 1965. Hence, it is governed by the provisions of the Limitation Act 1963, which came into force on April 1, 1964. Article 23 of that Act fixes a period of three years for instituting a suit "for money payable to the plaintiff for money paid for the defendant" and the cause of action for the same commences when the money is paid. To the same effect was article 63 of the Limitation Act, 1908. The amounts claimed in the present suit except those in respect of the assessment for the assessment year 1955-56 were all admittedly paid before November 15, 1962. Hence, they are, prima facie, barred by limitation. So far as the payments made in respect of the assessment for the assessment year 1955-56 is concerned, Turner Morrison can have no claim against Hungerford because under the amended section 23A of the Income-tax Act, 1922, that liability was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the domicil, or residence of a corporation. In each case the particular question is not, at bottom, whether a corporation has in reality a permanent residence in a particular country, but whether, for certain purposes (e.g., submission to the jurisdiction of the courts or liability to taxation), a corporation is to be considered as resident in England or in some other country." The question of residence of an insurance company registered and having its registered office in a foreign country came up for consideration before the Chancery Division in New York Life Insurance Company v. Public Trustee. Therein, Pollock M.R. quoted with approval the following passage from the judgment of Lord St. Leonards in, Carron Iron Co. v. Maclaren : " I think that this company may properly be deemed both Scotch and English. It may, for the purposes of jurisdiction, be deemed to have two domiciles. Its business is necessarily carried on by agents, and I do not know why its domicile should be considered to be confined to the place where the goods are manufactured .......There may be two domiciles and two jurisdictions ; and in this case there are, as I conceive, two domiciles and a double sort ..... X X X X Extracts X X X X X X X X Extracts X X X X
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