The Secretary vs Lucky Bidi Company

Barman, J.—In this second appeal the Defendant State of Orissa is the Appellant from a reversing decision of the learned District Judge, Sambalpur, whereby he reversed a decision of the learned Subordinate Judge, Sambalpur, and decreed the suit in favour of the Plaintiff Lucky Bidi Company. The suit was filed by the Plaintiff Lucky Bidi Company against the Secretary, State of Orissa (in charge of Commercial Taxes) for a declaration that the assessment orders and notices of demand for payment of taxes levied on one Gohil Bidi Company for the quarters ending December 31st, 1948 and March 31, 1949 are without jurisdiction and not binding on the Plaintiff Lucky Bidi Company and further that certain proceedings pending in the Court of the Additional Tahsildar, Sambalpur, is without jurisdiction and not binding on the Plaintiff Lucky Bidi Company and for a permanent injunction restraining the Defendant State of Orissa from enforcing the said orders and demand notices against the Plaintiff Lucky Bidi Company.

The relevant facts, shortly stated, are these: Admittedly the said Gohil Bidi Company was a joint family concern consisting of Khodabhai and Walamji Khodabhai, as also three other sons who are minors. On January 16, 1950 a partition is alleged to have taken place in the family under which the two major sons Dayaram and Walamji became separate from their father and the three other brothers who were minors; the said partition is stated to have been registered on the said January 16, 1950 (Ext. 9). Thereafter within two months time on March 25, 1930 the said Lucky Bidi Company appears to have come into existence as a partnership firm under a registered partnership deed (Ext. 10), in which the said two brothers Dayaram and Walamji and two other strangers appear to have become partners. The case of the Plaintiff Lucky Bidi Company is that they constituted a separate legal entity as partnership and had nothing to do with Gohil Bidi Company; accordingly Lucky Bidi Company was not bound by the assessment proceedings in connection with the assessment of Gohil Bidi Company with which Lucky Bidi Company is alleged to have no concern as aforesaid.

In the suit filed by the Plaintiff Lucky Bidi Company as aforesaid, the defence taken by the State of Orissa was that Lucky Bidi Company was a mere name and that the two stranger partners in fact had no connection with the alleged partnership concern Lucky Bidi Company; in other words the defence case is that Lucky Bidi Company and Gohil Bidi Company are the same and identical persons. That apart, a defence was also taken that the suit is barred u/s 22 of the Orissa Sales Tax Act (Act of 1947); furthermore, that the suit is not also maintainable by reason of the provisions of Sections 114 and 152 of the Central Provinces Land Revenue Act (Act XVIII of 1881).

The trial court on evidence found that the partition deed (Ext. 9) could not be accepted and as regards the identity of the two concerns Gohil Bidi Company and Lucky Bidi Company, the learned trial Judge found that they were the same and the two strangers appearing to have taken into the partnership of Lucky Bidi Company had in fact nothing to do with the said partnership. On the points of law taken in defence as aforesaid the learned trial court found that the suit was not maintainable u/s 22 of the Orissa Sales Tax Act; the learned Judge however did not consider the applicability of Sections 114 and 152 of the Central Provinces Land Revenue Act. On these findings both as to merits and the points of law as aforesaid the learned trial Judge dismissed the suit. In appeal, the learned lower appellate Court while not reversing the findings of the learned trial Court dismissed the suit on grounds stated in his judgment. While dealing with the findings of the trial Judge, he commented that the demand notices against the Lucky Bidi Company and the subsequent certificate proceedings have all been initiated on the assumption that the Lucky Bidi Company� is not a fictitious legal entity and the learned lower appellate Court observed that the finding of the learned trial judge that the Lucky Bidi Company is a fictitious company and at the same time the same is liable for the arrear sales tax against Gohil Bidi Company is an inconsistent and untenable finding. On the points of law the learned lower appellate Court found that the provisions of Sections 114 and 152 were not applicable if assessment was without jurisdiction; as regards the bar of civil suit u/s 22 of the Orissa Sales Tax Act, the learned lower appellate Court found that this case did not come within the ambit of the said section. On these findings both on fact and in law the learned lower appellate Court decreed the Plaintiff�s suit as aforesaid. Hence this second appeal.

Mr. G.K. Misra, learned Counsel for the State of Orissa contended that the suit was clearly barred under Sections 114 and 152 of the Central Provinces Land Revenue Act. While going deep into the question of jurisdiction, if it is a case of inherent lack of jurisdiction then Sections 114 and 152 of the Central Provinces Land Revenue Act will not apply. In the present case, however, this Court will have to first decide whether Gohil Bidi Company and Lucky Bidi Company were the same or different persons.

Similarly, on the question whether Section 22 of the Orissa Sales Tax Act is a bar to the present suit, Mr. G.K. Misra contended that the Sale-Tax Officer has jurisdiction to examine the question whether the Plaintiff Lucky Bidi Company and Gohil Bidi Company were the same; the finding of the Sales-Tax authorities can only be challenged in that forum and not in Civil Court by a suit. The learned Counsel contended that by virtue of the provisions in Section 20(a) of the Orissa Sales-Tax Act that the Commissioner shall decide if any question arises (otherwise than in a proceeding before a Court) whether or not for the purposes of this Act any person or firm or any branch or department of any firm is a dealer it is open to the Commissioner, in the present case, to determine whether or not the Lucky Bidi Company is a fictitious person. Then the learned Counsel relied on Section 22 of the Orissa Sales Tax Act relating to bar to certain proceedings, that no assessment made or purporting to have been made an that no order passed or purporting to have been passed under the provisions of the Act and the rules made thereunder by the Commissioner etc, shall be called in question in any Court. The corresponding provision in the income tax law is Section 67 of the Indian income tax Act which provides that no suit can be brought in any Civil Court to set aside or modify an assessment made under this Act. The learned Counsel argued that the question of assessment can only be determined within the ambit of the special statute applicable to such a case and no civil suit will lie. The learned Counsel in support of his contention relied on a decision of the Privy Council in AIR 1947 P.C. 78 Raleigh Investment Co. Ltd. v. The Governor-General in Council, where in the context of Section 67 of the income tax Act, it was held that jurisdiction to question assessment otherwise than by use of the machinery expressly provided by the Act would appear to be inconsistent with the statutory obligation u/s 45 to pay the tax arising by virtue of the assessment.

All these arguments are set at rest on the consideration of the special feature in this particular case that there is no provision in any of the statutes for a stranger to come in and challenge the legality of the assessment. It will depend on the determination of the question of identity of Gohil Bidi Company and Lucky Bidi Company. If they are different legal entities, the assessment against the one cannot be enforced against the other. If however, they are the same and identical different considerations will arise, and the question of jurisdiction is to be determined accordingly. Thus in view of the fundamental principle that the Civil Courts have inherent jurisdiction to examine the cases where the provisions of a particular statute have not been complied with or the statutory tribunal had not acted in conformity with the fundamental principles of judicial procedure, none of the bars to civil suits as contained either in the Central Provinces Land Revenue Act or in the Orissa Sales tax Act will apply. In other words, in such cases the Civil Court has jurisdiction to determine such questions, as in the present case, the question of identity of the Plaintiff Lucky Bidi Company.

This leads us to the consideration of the case, on merits. The simple question of fact is whether Lucky Bidi Company and Gohil Bidi Company are one and the same person. On this point, although the learned lower appellate Court has not reversed the finding that the Lucky Bidi Company and the Gohil Bidi Company are one and the same; but he came to a different conclusion, with which, however, we are unable to agree. The learned lower appellate Court for his finding, relied on the position that it had not been pleaded by the Defendant State of Orissa that the Lucky Bidi Company as it formed consisting of two sons of Khodabhai and two other outsiders was a fictitious company, nor was that the finding of the Sales Tax Officer which formed the basis for cause or action in the present suit, as appears from the judgment. On this, the learned appellate Court commented that the finding of the learned trial Court amounted to holding that, the Lucky Bidi Company was a fictitious one. We, however, do not agree with this view of the learned lower appellate Court.

In the present case, in order to show that Lucky Bidi Company was a different entity from Gohil Bidi Company, Mr. L.K. Dasgupta, learned Counsel appearing for Lucky Bidi Company relied on the registered partition deed dated January 16, 1950 (ext. 9) showing that the two brothers Dayaram and Walamji had separated from the family and started on their own as a partnership with two other outsiders as partners along with them; he further relied on the partnership deed dated March 25, 150 (ext. 10) showing the constitution of the partnership with two outsiders as partners with the said two brothers. The learned Counsel further relied on the registration certificate of Lucky Bidi Company (ext. 2 and ext. 2-a); the Assessment Order dated 11-9-1951 of the income tax Officer, Special Survey Circle III, Calcutta (ext. 3); Challans showing deposit of monies in the treasury (exts. 4 and 5 series). He also relied on ext. 11 series showing the receipts granted in respect of rents for the room where the business of the Lucky Bidi Company is alleged to be Located. It appears to us that none of the documents, relied on behalf of the Lucky Bidi Company, are conclusive as to the separate character of the business as a different entity from Gohil Bidi Company. These documents are quite consistent with the position that the two concerns are being run under two different names, although essentially they are the same. On the other hand, there are certain documents, relied on behalf of the Defendant State of Orissa which give a key to the real nature of the two concerns. For instance ext. G series being two applications for licence in tobacco, show that the business was in the Flame house. Ext. H series, namely the applications for licence to the Central Excise Department, Sambalpur, clearly indicate the mixed up character of the two concerns Gohil Bidi Company and Lucky Bidi Company and also another concern called Sambalpur Bidi Works which also appears to be a concern of theirs in which this Gohil family consisting of the father and the son appear to be interested. In fact in some of these applications included (sic) ext. H series, there is a specific reference to Sambalpur Bidi Works and also in some to Lucky Bidi Company. These documents, on the face of them, clearly show that they were being run under the same control and management.

Mr. L.K. Dasgupta, however, strongly relied on the aspect that some of these documents (exts. H-9 to H-11) appear to show different location of Lucky Bidi Company. He also relied on ext. 1 and ext. I(a) respectively being summons to dealer u/s 21 of the Orissa Sales Tax Act, 1947 issued to Dayaram Khodabhai, proprietor, Lucky Bidi Works, and summons issued to Lucky Bidi Works, Sambalpur both purporting to show that the Sales-tax authorities had recognised Lucky Bidi Company as a separate entity. He also relied on the circumstance that the income tax authorities had also accepted Lucky Bidi Company as a partnership registered u/s 26-A of the Indian income tax Act; but all these arguments made on behalf of the Plaintiff Lucky Bidi Company overlook the essential question that these documents are not conclusive or decisive as to the legal entity of Lucky Bidi Company as a concern separate from Gohil Bidi Company. For this purpose, we have to consider the surrounding circumstances and the back ground in which Lucky Bidi Company came into existence. It clearly appears that within two months after the alleged partition, this partnership was launched upon as a venture by the two brothers at a point of time when assessment of Gohil Bidi Company was still pending. It clearly appears to us that the partnership in March, 1950 within two months after the partition was a contrivance a device taken recourse to by the Gohil family to escape liability under assessment of the Gohil Bidi Company.

This our view is fully supported by two documents which clearly, in our opinion, show the real nature of Lucky Bidi Company. These document are ext. J, a calendar of Lucky Bidi Company for the year 1953 and ext. K, a calendar of Lucky Bidi Company for the year 1951. Ext. J is admittedly a calendar of the Lucky Bidi Company, it bears the �Shankar� label and also registered trade mark 2815; it also bears the name "Gohil Bidi Company" and further ''Prop. Khodabhai Jagmal" clearly showing the close association of one firm name with the other. This calendar of 1951, (ext. K) dearly shows that Gohil Bidi Company and Lucky Bidi Company were the same, for otherwise the name of Gohil Bidi Company and the father�s name Khodabhai Jagmal would not have appeared there. The further circumstance is that subsequently in 1953 they deliberately omitted the names Gohil Bidi Company and proprietor Khodabhai Jagmal from the subsequent calendar, ext. J. It clearly shows that when they realised that the unguarded use of the names of Gohil Bidi Company and proprietor Khodabhai Jagmal in the calendar for 1851, (Ext. K) exposed the real identity of Lucky Bidi Company, they became cautious and omitted the same in the calendar for the subsequent year. In this contest the evidence of P.W. 1 Dayaram and P.W. 2 Walamji should be noticed. They both deny that Ext. K the calendar for 1951 is the calendar of Lucky Bidi Company. In fact the evidence of Dayaram (P.W. 1) in cross-examination is that the calendar Ext. J is of Lucky Bidi Company but the calendar marked ext. K is not of Lucky Bidi Company. Similarly P.W. 2 Walamji Deoji Parmar also denied that ext. K is of Lucky Bidi Company. This denial made by the Plaintiff�s witnesses makes us disbelieve the entire case of the Plaintiff Lucky Bidi Company. It clearly appears that both exts. J and K calendars for 1953 and 1951 respectively from their get-up, both bearing the picture of the eldest brother Dayaram belong to the same concern. It would have been intelligible to us, if the Plaintiff came with a straight case that the name of Gohil Bidi Company and the name of Khodabhai Jagmal as proprietor came to be inadvertently printed in the calendar for 1951. But a palpably false statement, made by the Plaintiff�s witnesses on these calendars, throws doubt on the entire case made as to the alleged separate entity of the two concerns Lucky Bidi Company and Gohil Bidi Company. We think that Ext. J and Ext. K are by themselves sufficient to decide the point of identity of the two concerns. On this aspect, it appears that the learned lower appellate Court has not dealt with any of the documents including Exts. J and nor with the evidence of P.W. 1 and P.W. 2 who gave a categorical denial, saying that Ext. K was not a calendar of Lucky Bidi Company and thus disowning it altogether. The further circumstance that weighed with us is that the calendars belonging to Gohil Bidi Company have not been produced. The non-production of Gohil Bidi Company�s calendar leads us to the natural inference that if Gohil Bidi calendars had been produced, they would have been shown the similarity between the Gohil Bidi and Lucky Bidi calendars.

Thus, considering the broad features of the case with particular reference to the documents including exts. J and K and the evidence of the witnesses, we come to the conclusion that Lucky Bidi-Company and Gohil Bidi Company are one and the same; further that the two outsiders who appear to have been inducted into the alleged partnership had nothing to do with the said alleged partnership, Lucky Bidi Company.

In this view of the matter, we hold that the decision of the learned lower appellate Court is contrary to law and is therefore set aside. The result therefore is that the Plaintiff�s suit is dismissed. This appeal is accordingly allowed with costs throughout.

Mohapatra, J.

I agree as to the conclusion that the Gohil Bidi Factory and the Lucky Bidi Company are one and the same legal entity. The suit therefore must be dismissed and the appeal be allowed with costs throughout.

The judgment of the lower appellate Court is contrary to law and is liable to be set aside in this second appeal as he has missed the real decisive point whether the Companies are one and the same legal entity or not. He has misdirected himself in concentrating his discussion only on the question that it had not been pleaded nor proved that the Plaintiff was not a fictitious Company. The judgment is highly unsatisfactory and not in accordance with law as the lower appellate Court has not touched any of the important grounds on account of which the learned Subordinate Judge in a very well discussed judgment came to the conclusion that the Lucky Bidi Company and the Gohil Bidi Factory are one and the same legal entity. I may also observe, the reasons given by the learned Subordinate Judge for finding that the partition deed is a mere sham transaction and a contrivance to avoid taxes and that the two stranger members of the New Company were name-lenders are quite convincing.

Had we come to a different conclusion that Gohil Bidi Factory and Lucky Bidi Company are two different legal entities, the position is irresistible that the certificate issued against the Plaintiff Lucky Bidi Company was completely without jurisdiction and a nullity as the assessment was only against a different person. In such a case therefore where there is an inherent absence of jurisdiction of the taxing officer to issue a certificate against a complete stranger against whom be bad not taken any procedure under the Taxing Act before passing the assessment order the Civil Court must assume jurisdiction to give relief to the Plaintiff.