R & B
Falcon (A) Pty Ltd. Vs. Commissioner of Income Tax [2008] INSC 821 (6 May 2008)
S.B. Sinha & V.S. Sirpurkar &
REPORTABLE CIVIL APPEAL NO. 3326 OF 2008 (Arising out of SLP (C) No.10451 of
2007) S.B. Sinha, J.
1. Leave granted.
2. Interpretation and/or application of the provisions of Section 115WB of
the Income Tax Act, 1961 (for short, 'the Act') providing for imposition of tax
on 'fringe benefits' is in question herein.
3. Before embarking upon the said question, however, we may notice the basic
fact of the matter.
Appellant is incorporated under the laws of the Commonwealth of Australia.
It is engaged in the business of providing Mobile Offshore Drilling Rig (MODR)
along with crew on a day rate charter hire basis to drill offshore wells. The
MODR operates offshore (upto 200 nautical miles off the coast of India).
Allegedly, having regard to the harsh working environment and purported to be
in line with global practices typical to such industry, the employees who may
be residents of various countries including Australia, USA, UK, France etc.
work on the MODR on a 'commuter basis'.
They come to India, stay in the Rig for 28 days and go back to their own
country being their place of residence for a further period of 28 days. The
crew or the employees are transported from their home country to the MODR in
two laps :
- first is from the nearest designated base city at the place of residence
in the home country to a designated city in India for which the petitioner
provides free air tickets of economy class and;
- second is from that city in India to the MODR through helicopter
especially hired by the petitioner for this purpose.
4. Allegedly, on completion of 28 days, they go back from the Rig to the
designated base city in their home country in the same manner. Appellant states
that no conveyance/transport allowance is paid to them.
Appellant entered into a contract of supplying MODR along with equipment and
offshore crew on charter hire basis with Oil and Natural Gas Commission, a
public sector undertaking, on or about 10.10.2003. It filed an application
under Section 245Q(1) of the Income Tax Act, 1961 before the Authority for
Advance Ruling (AAR) on the following question :
"Whether transportation cost incurred by the petitioner in providing
transportation facility for movement of offshore employees from their residence
in home country to the place of work and back is liable to Fringe Benefit
Tax?"
5. Chapter XII of the Act providing for income tax on fringe benefits was
inserted by the Finance Act, 2005. It came into force with effect from
1.4.2006.
6. Section 115W defines "employer" and "fringe benefit
tax". "Fringe Benefit Tax" (FBT) has been defined as a tax
chargeable under Section 115WA.
Section 115 WA(1) provides for the basis for charge of fringe benefit tax in
the following terms :
"115WA.(1) In addition to the income-tax charged under this Act, there
shall be charged for levy assessment year commencing on or after the 1st day of
April, 2006, additional income-tax (in this Act referred to as fringe benefit
tax) in respect of the fringe benefits provided or deemed to have been provided
by an employer to his employees during the previous year at the rate of thirty
per cent on the value of such fringe benefits.
(2) Notwithstanding that no income-tax is payable by an employer on his
total income computed in accordance with the provisions of this Act, the tax on
fringe benefits shall be payable by such employer."
Section 115WB consists of three sub-sections, the relevant clauses whereof
read as under:
"Section 115WB - Fringe benefits (1) For the purposes of this Chapter,
"fringe benefits" means any consideration for employment provided by
way of- (a) any privilege, service, facility or amenity, directly or
indirectly, provided by an employer, whether by way of reimbursement or
otherwise, to his employees (including former employee or employees);
(b) any free or concessional ticket provided by the employer for private
journeys of his employees or their family members; and xxx xxx xxx (2) The fringe
benefits shall be deemed to have been provided by the employer to his
employees, if the employer has, in the course of his business or profession
(including any activity whether or not such activity is carried on with the
object of deriving income, profits or gains) incurred any expense on, or made
any payment for, the following purposes, namely:- (A) entertainment;
xxx xxx xxx (F) conveyance;
xxx xxx xxx (Q) tour and travel (including foreign travel).;
(3) For the purposes of sub-section (1), the privilege, service, facility or
amenity does not include perquisites in respect of which tax is paid or payable
by the employee or any benefit or amenity in the nature of free or subsidised
transport or any such allowance provided by the employer to his employees for
journeys by the employees from their residence to the place of work or such
place of work to the place of residence".
7. Before the AAR, a circular issued by the Central Board of Direct Tax
(CBDT) bearing No.8 of 2005, was relied upon by both the parties. We will refer
to a part of it. The circular provides for explanatory notes on provisions
relating to fringe benefit tax.
The object for imposition of the said tax is stated to be as under:
"The taxation of perquisites or fringe benefits is justified both on
grounds of equity and economic efficiency. When fringe benefits are
under-taxed, it violates both horizontal and vertical equity. A taxpayer
receiving his entire income in cash bears a higher tax burden in comparison to
another taxpayer who receives his income partly in cash and partly in kind,
thereby violating horizontal equity. Further, fringe benefits are generally
provided to senior executives in the organization.
Therefore, under-taxation of fringe benefits also violates vertical equity.
It also discriminates between companies which can provide fringe benefits and
those which cannot thereby adversely affecting market structure. However, the
taxation of fringe benefits raises some problems primarily because- (a) all
benefits cannot be individually attributed to employees, particularly in cases
where the benefit is collectively enjoyed;
(b) of the present widespread practice of providing perquisites, wherein
many perquisites are disguised as reimbursements or other miscellaneous expenses
so as to enable the employees to escape/reduce their tax liability;
and (c) of the difficulty in the valuation of the benefits."
8. The heading of paragraph 11 of the said circular is "Frequently
asked questions". The questions which were posed and answered and in turn
are relevant for our purpose read as under :
"In terms of the provisions of sub-section (1) of Section 115WA, an
employer in India is liable to FBT in respect of the value of fringe benefits
(a) Provided by him to his employees; and (b) Deemed to have been provided by
him to his employees.
The scope of fringe benefits provided or deemed to have been provided is
defined in section 115WB.
Sub-section (1) of the said section defines the scope of fringe benefits
provided by the employer to his employees. Similarly, sub-section (2) of the
said section defines the scope of fringe benefits deemed to have been provided
by the employer to his employees. Therefore, sub-section (2) expands the scope
of sub-section (1) through a deeming provision.
The provision relating to the computation of the value of the fringe
benefits is contained in section 115WC. It is a settled principle of law that
where the computation provisions fail, the charging section cannot be
effectuated. Therefore, if there is no provision for computing the value of any
particular fringe benefit, such fringe benefit, even if it may fall within
clause (a) of sub-section (1) of section 115WB, is not liable to FBT.
XXX XXX XXX
19. FBT is payable in the year in which the expenditure is incurred
irrespective of whether the expenditure is capitalized or not. However, the
same expenditure will not be liable to FBT again in the year in which it is
amortized and charged to profit.
Is FBT payable by an Indian Company having employees based both in and
outside India on its total (global) expenditure incurred by it for the purposes
referred to in clauses (A) to (P) of sub- section (2) of section 115B?
20. FBT is payable on the value of fringe benefits provided or deemed to
have been provided to employees based in India and determined on a presumptive
basis in accordance with the provisions of Section 115WC of the Income-tax Act.
The value of such fringe benefits is determined, inter alia, as a proportion of
the total amount of expenses incurred for some identified purposes. In the case
of an Indian company having employees based both in India and in a foreign
country, FBT is payable on the proportion (50 per cent, 20 per cent or 5 per
cent, as the case may be) of the total amount of expenses incurred for the
purposes referred to in clauses (A) to (P) of sub- section (2) of section 115WB
and attributable to the operations in India. If the company maintains separate
books of account for its Indian and foreign operations, FBT would be payable on
the amount of expenses reflected in the books of account relating to the Indian
operations. If however, no separate accounts are maintained, the amount of
expenses attributable to Indian operations would be the proportionate amount of
the global expenditure. Further, such proportionate amount shall be determined
by applying to the global expenditure the proportion which the number of
employees based in India bears to the total worldwide employees of the company.
Whether an Indian company carrying on business outside India would be liable
to FBT even though none of its employees in such business may be liable to pay
income tax in India?
21. An Indian company would be liable to the FBT in India if it has
employees based in India.
Therefore, if an Indian company carries on business outside India but does
not have any employees based in India, such company would not be liable to FBT
in India.
Does FBT apply to foreign companies? XXX XXX XXX 103. FBT is a liability qua
employer. It is an expenditure laid out or expended wholly and exclusively for
the purposes of the business or profession of the employer. However, sub-clause
(ic) of clause (a) of section 40 of the Income-tax Act expressly prohibits the
deduction of the amount of FBT paid, for the purposes of computing the income
under the head profits and gains of business or profession. This prohibition
does not apply to the computation of book profit for the purposes of section
115JB. Accordingly, the FBT is an allowable deduction in the computation of
book profit under section 115JB of the Income-tax Act.
Whether expenditure incurred by the employer for the purposes of providing
free or subsidized transport for journeys to employees from their residence to
the place of work or such place of work to the place of residence would attract
FBT?"
9. AAR by reason of its judgment and order dated 13.12.2006 holding that the
company is liable to pay fringe benefit tax for providing transportation and
movement of offshore employees for their residence and home countries outside
India to the place of rig and back, opined that (1) The exemption provision
contained in sub-section (3) of Section 115WB is restricted to sub-section (1)
whereas the exemption falls under the deeming provision contained in
sub-section (2);
(2) Residence within the meaning of the said provision would mean residence
in India and as the employees concerned are residents of the countries outside
India, sub-section (3) of Section 115WB is not applicable.
10. Mr. S. Ganesh, learned counsel appearing on behalf of the appellant,
would submit;
(1) The AAR committed an error of law insofar as it failed to consider that
sub-section (3) covers both the contingencies envisaged under sub-sections (1)
and (2);
(2) The distinction between sub-sections (1) and (2) is highly artificial
inasmuch as the exemption is provided for in clauses (F) and (Q) of sub-section
(2) of Section 115WB and unless the said provisions are read into sub-section
(3), the same would be rendered otiose;
(3) While granting exemption, the Parliament having not restricted the
operation of sub-section (3) only to the regular employees or the transport
provided by the employer, no restrictive meaning can be given to sub-section
(3).
(4) Residence of an employee being not restricted to the Territory of India,
the AAR committed a serious error of law in passing the impugned judgment.
(5) CBDT itself, in its circular, having clarified that sub-section (2) is
merely an expansion of sub-section (1), it was impermissible for the AAR to
take the said factor into account.
(6) From the questions and answers contained in the said circular, it is
evident that fringe benefit tax would be applicable on the value of fringe
benefit provided or deemed to have been provided to employees based in India
and no fringe benefit tax would be payable in respect of an expenditure
incurred by the employer for an employee who is not based in India and in any
event if the employee is based in a foreign country would also come within the
purview thereof.
(7) The AAR is clearly wrong in holding that the word 'residence' would mean
only residence in India.
11. Mr. G.E. Vahanavati, learned Solicitor General appearing on behalf of
the respondent, on the other hand, would urge:
(A) Fringe benefit tax is a new concept in terms whereof any consideration
for employees provided, inter alia, for facility or amenity comes within the
purview thereof; and (B) The tax is payable only when the employer incurs an
expenditure delineated in sub-section (2) and such exemption is to be granted
only on the tax leviable under sub-section (1).
(C) The terms 'residence', 'transport', 'conveyance' etc. must be given a
broad meaning which would lead to the conclusion that only when employees are
provided for transport on a regular basis for attending to their work from the
place of their residence to the place of work, exemption should be granted.
(D) The Parliament, in its wisdom, having used the words 'employees,
journey, the same would only mean that on any journey undertaken by the employees
for regularly attending the works and not on a work on periodic basis.
12. Fringe benefit tax is a new concept. The taxes to be levied on the
fringe benefit provided or deemed to have been provided by an employer to
employees during the previous year is at the rate of 30 per cent on the value
of such fringe benefits. The object for imposition of the said tax, as is
evident from the said circular dated 29.8.2005, was to bring about an equity.
The intention of the Parliament was to tax the employer who, on the one
hand, deducts the expenditure for the benefit of the employees including
entertainment, etc. and on the other when the employees getting the perks are
to be taxed, those who get direct or indirect benefits from the expenditures
incurred by the employer, no tax is leviable. As stated in the objective, it is
for bringing about a horizontal equity and not a vertical equity.
13. Sub-section (1) of Section 115WB contains the interpretation section.
It is in two parts. It provides for a direct meaning, as also an expanded
meaning. Expanded meaning of the said provision is contained in sub- section
(2). Whereas sub-section (1) takes within its sweep any consideration for
employment, inter alia, by way of privilege service, facility or amenity directly
or indirectly, sub-section (2) thereof expands the said definition stating as
to when the fringe benefit would be deemed to have been provided. The expansive
meaning of the said term 'benefits' by reason of a legal fiction created also
brings within its purview, benefits which would be deemed to have been provided
by the employer to his employees during the previous year. Indisputably,
sub-section (3) refers to sub-section (1) only. Ex facie, it does not have any
application in regard to the matters which have been brought within the purview
of the fringe benefit tax by reason of application of the deeming provision. We
are concerned here with a question in regard to grant of exemption in respect
of 'conveyance' as provided for in clause (F) of sub-section (2) and 'tour and
travel' which is provided for in clause (Q) of sub-section (2) of Section
115WB.
14. CBDT categorically states in answer to question number 7 that sub-
section (2) provides for an expansive definition.
Does it mean that sub-section (2) is merely an extension of sub- section (1)
or it is an independent provision? If sub-section (2) is merely an extension of
sub-section (1), Mr. Ganesh may be right but we must notice that Section 115WA
provides for imposition of tax on expenditure incurred by the employer or
providing its employees certain benefits. Those benefits which are directly
provided are contained in sub-section (1). Some other benefits, however, which
the employer provides to the employees by incurring any expenditure or making any
payment for the purpose enumerated therein in the course of his business or
profession, irrespective of the fact as to whether any such activity would be
carried on a regular basis or not, e.g., entertainment would, by reason of the
legal fiction created, also be deemed to have been provided by the employer for
the purpose of sub-section (2). Whereas sub-section (1) envisages any amount
paid to the employee by way of consideration for employment, what would be the
limits thereof are only enumerated in sub-Section (2). We, therefore, are of
the opinion that sub-sections (1) and (2), having regard to the provisions of
Section 115WA as also sub-section (3) of Section 115WB, must be held to be
operating in different fields.
15. We must test the submissions of Mr. Ganesh from another angle. The
learned counsel contended that any benefit or amenity in the nature of free or
subsidized transport provided by the employer to his employee for the purposes
mentioned in sub-section (3) are to be found only in clauses (F) and (Q) of
sub-section (2) and if that be so, the statute must be held to envisage grant
of exemption in respect of matters which do not form the subject matter
thereof.
We have noticed the factual matrix of the instant case. The employees
concerned are experts in their field. They are necessarily residents of other
country. They are brought to the Rig by providing air tickets for their coming
from their place of residence to the Rig.
The employer incurs the said expenditure as of necessity. It, therefore,
clearly falls within the purview of the words 'consideration for employment'.
If fringe benefits are provided for consideration for employment, which is
given or provided to the employee by way of an amenity, reimbursement or
otherwise; clearly clause (a) of sub-section (1) shall be attracted.
A statute, as is well known, must be read in its entirety. What would be the
subject matter of tax is contained in sub-sections (1) and (2). Sub- section
(3), therefore, provides for an exemption. There cannot be any doubt or dispute
that the latter part of the contents of sub-section (3) must be given its
logical meaning. What is sought to be excluded must be held to be included
first. If the submission of learned Solicitor General is accepted, there would
not be any provision for exclusion from payment of tax any amenity in the
nature of free or subsidized transport.
16. Thus, when the expenditure incurred by the employer so as to enable the
employee to undertake a journey from his place of residence to the place of
work or either reimbursement of the amount of journey or free tickets therefor
are provided by him, the same, in our opinion, would come within the purview of
the term 'by way of reimbursement or otherwise'.
The Advanced Law Lexicon defines "otherwise" as:
"By other like means; contrarily; different from that to which it
relates; in a different manner; in another way; in any other way; differently
in other respects in different respects; in some other like capacity."
"Otherwise" is defined by the Standard Dictionary as meaning 'in a
different manner, in another way; differently in other respects'; by Webster,
'in a different manner; in other respects'.
As a general rule, 'otherwise' when following an enumeration, should receive
an ejusdem generis interpretation (per CLEASBY, B. Monck v.
Hilton, 46 LJMC 167, The words 'or otherwise', in law, when used as a
general phrase following an enumeration of particulars, are commonly
interpreted in a restricted sense, as referring to such other matters as a are
kindred to the classes before mentioned, (Cent. Dict.)"
17. It is now a well settled principle of law that a statute should
ordinarily be given a purposive construction. {See New India Assurance Company
Ltd. v. Nusli Neville Wadia and Anr. [2007 (14) SCALE 556]; Tanna and Modi v.
C.I.T., Mumbai XXV and Ors. [2007 (8) SCALE 511] and Udai Singh Dagar and Ors.
v. Union of India (UOI) and Ors. [2007 (7) SCALE 278]}.
18. The Parliament, in introducing the concept of fringe benefits, was clear
in its mind in so for as on the one hand it avoided imposition of double
taxation, i.e., tax both on the hands of the employees and employers; on the
other, it intended to bring succour to the employers offering some privilege,
service, facility or amenity which was otherwise thought to be necessary or
expedient. If any other construction is put to sub-sections (1) and (3), the
purpose of grant of exemption shall be defeated. If the latter part of sub-
section (3) cannot be given any meaning, it will result in an anomaly or
absurdity. It is also now a well settled principle of law that the court shall
avoid such constructions which would render a part of the statutory provision
otiose or meaningless. [See Visitor and Ors. v. K.S. Misra [(2007) 8 SCC 593];
Commissioner of Sales Tax, Delhi and Ors. v. Shri Krishna Engg. Company and
Ors. [(2005) 2 SCC 692].
19. We, therefore, are of the opinion that AAR was right in its opinion that
the matters enumerated in sub-section (2) of Section 115WB are not covered by
sub-section (3) thereof, and the amenity in the nature of free or subsidized
transport is covered by sub-section (1).
20. It brings us to the next question, namely, whether the employee
concerned should be a resident of India. The statute does not say so. Fringe
benefit tax being a tax on expenditure; the only concern of the revenue
wherefor should be as to whether such expenditure has been made.
Appellant has a permanent establishment in India. It pays income-tax in
India. It carries on business in India. It has for the purpose of carrying out
its business activities engaged persons from within India or outside India. If
it makes any expenditure for bringing any employee from abroad, the same would
also liable to be taken into consideration for the purpose of sub- section (1)
of Section 115WB.
21. AAR with respect was not correct in its view in reading the words 'in
India' after the word residence in sub-section (3).
22. If the reasonings of the AAR are taken to its logical conclusion, the
CBDT circular would not be attracted. An employer cannot afford to loose on
both the fronts. Its right to claim exemptions either would be in respect of
the employees who are based in India or who are not. If the said employees are
required to be based in India, sub-section of Section 115WB would not be
attracted. However, if such expenditure incurred is found to be as
consideration for employment, the same would also bring within its purview the
employees who have been hired from outside the country. For the purpose of
obtaining the benefit of the said exemption, however, the expenditure must be
incurred on the employees directly for the purposes mentioned therein, namely,
they are to be provided transport from their residence to the place of work or
such place of work to the place of residence. Any expenditure incurred for any
other purpose, namely, other than for their transport from their residence to
the place of work or from the place of work to the place of residence would not
attract the exemption provision. The Assessing Authority, therefore, must, in
each case, would have a right to scrutinize the claim.
CBDT has the requisite jurisdiction to interpret the provisions of
Income-tax Act. The interpretation of CBDT being in the realm of executive
construction, should ordinarily be held to be binding, save and except where it
violates any provisions of law or is contrary to any judgment rendered by the
courts. The reason for giving effect to such executive construction is not only
same as contemporaneous which would come within the purview of the maxim
temporania caste pesto, even in certain situation a representation made by an
authority like Minister presenting the Bill before the Parliament may also be
found bound thereby.
23. Rules of executive construction in a situation of this nature may also
be applied. Where a representation is made by the maker of legislation at the
time of introduction of the Bill or construction thereupon is put by the
executive upon its coming into force, the same carries a great weight.
24. In this regard, we may refer to the decision of the House of Lords in
the matter of R.V. National Asylum Support Service [(2002) 1 W.L.R.2956] and
its interpretation of the decision in Pepper v. Hart [(1993) A.C. 593]. on the
question of 'executive estoppel'. In the former decision, Lord Steyn stated:-
"If exceptionally there is found in the Explanatory Notes a clear
assurance by the executive to Parliament about the meaning of a clause, or the
circumstances in which a power will or will not be used, that assurance may in
principle be admitted against the executive in proceedings in which the
executive places a contrary contention before a court."
25. A similar interpretation was rendered by Lord Hope of Craighead in
Wilson v. First County Trust Ltd., [2004] 1 A.C. 816, wherein it was stated:-
"As I understand it [Pepper v. Hart], it recognized a limited exception to
the general rule that resort to 'Hansard' was inadmissible. Its purpose is to
prevent the Executive seeking to place a meaning on words used in legislation
which is different from that which ministers attributed to whose words when
promoting the legislation in Parliament"
For a detailed analysis of the rule of executive estoppel useful reference
may be to the article authored by Francis Bennion entitled "Executive
Estoppel: Pepper v. Hart revisited", published in Public Law, Spring 2007,
pg. 1 which throws a new light on the subject matter.
26. We may notice a decision of this Court in Sedco Forex International
Drill. Inc. & Ors. v. Commissioner of Income Tax, Dehradun & Anr.
[(2005) 12 SCC 717], the question which arose therein was as to the salary
paid to the employees of UK National Services for field breaks outside India
would be subjected to tax under Section 9(1)(ii) and explanation appended
thereto as inserted in 1983 w.e.f 1.4.1979. Appellant therein entered into
agreements which are executed in the United Kingdom with each of the said
employees who were residents of the said country. This Court, upon noticing the
explanation appended to Section 9(1)(ii), as regards its retrospective
operation, held:
"16. The departmental understanding of the effect of the 1999 Amendment
even if it were assumed not to bind the respondents under Section 119 of the
Act, nevertheless affords a reasonable construction of it, and there is no
reason why we should not adopt it.
17. As was affirmed by this Court in Goslino Mario a cardinal principle of
the tax law is that the law to be applied is that which is in force in the
relevant assessment year unless otherwise provided expressly or by necessary
implication.
(See also Reliance Jute and Industries Ltd. v. CIT) An Explanation to a
statutory provision may fulfil the purpose of clearing up an ambiguity in the
main provision or an Explanation can add to and widen the scope of the main
section. If it is in its nature clarificatory then the Explanation must be read
into the main provision with effect from the time that the main provision came
into force. But if it changes the law it is not presumed to be retrospective,
irrespective of the fact that the phrases used are "it is declared"
or "for the removal of doubts"."
27. It was categorically held that as the explanation sought to give an
artificial meaning to "earned in India" and brings about a change
effectively in the existing law, it should not be held to have any
retrospective operation.
Section 115WB does not contain such a provision. It must, therefore, be
given its natural meaning. It would, therefore, be difficult to accept the
contention of the learned Solicitor General that the employees must be based in
India.
28. However, it appears that the contention that such expenditure should be
paid on a regular basis or what would be the effect of the words 'employees
journey' did not fall for consideration of AAR. What, therefore, is relevant
would be the nature of expenses. The question as to whether the nature of a
travelling expenditure incurred by the appellant would attract the benefits
sought to be granted by the statute did not and could not fall for consideration
of the AAR. Its opinion was sought for only on one issue. It necessarily had to
confine itself to that one and no other. No material in this behalf was brought
on record by the parties. Whether the payments were made to them on a regular
basis or whether the expenditures incurred which strictly come within the
purview of Section 115WB or not must, therefore, be answered having regard to
the materials placed on records. If any question arises as to whether the
agreement entered into by and between the appellant and the employees concerned
would attract, in given cases, the liability under FBT benefit tax would have,
thus, to be determined by the assessing authority.
29. The appeal is allowed to the aforementioned extent and with the
aforementioned observations. In the facts and circumstances of this case, there
shall be no order as to costs.
+ 5 3322 2008 ! Lachhman Singh (Deceased)through Legal Representatives &
Ors Hazara Singh (Deceased) through Legal Representatives & Ors @ May 6,
2008 S.B. Sinha & Lokeshwar Singh Panta
REPORTABLE CIVIL APPEAL NO. 3322 OF 2008 (Arising out of SLP (C) No.1395 of
2007) S.B. Sinha, J.
1. Leave granted.
2. What would be the period of limitation in a suit for redemption of
mortgage in the factual matrix involved in the present case is the question in
this appeal which arises out of a judgment and order dated 19.7.2006 passed by
the High Court of Punjab and Haryana in RSA No.1340 of 1980.
3. A transaction of mortgage in respect of the suit property admeasuring 58
kanals 11 marlas was entered into by and between the predecessors in the
interest of the parties herein. The actual date of execution of the deed of
mortgage was not known to the plaintiffs-respondents. However, the said
mortgaged properties were mutated in the name of the mortgagees on or about
19.3.1913.
4. A suit for redemption of the said mortgage was filed by the respondents
on or about 30.12.1970. The learned trial court, as also the First Appellate
Court, dismissed the said suit as being barred by limitation opining that the
actual date of mortgage being not known, a decree for redemption of mortgage
could not be passed.
5. The High Court, however, in the second appeal preferred thereagainst by
the respondent herein, formulated the following substantial questions of law :
"1. Whether the finding recorded by the learned first Appellate Court
regarding relationship is sustainable?
2. Whether the suit for possession by way of redemption is within the period
of limitation?"
6. It was held that in view of the fact that the relationship between the
parties as mortgagor and mortgagee was proved, the onus to prove that suit was
barred by limitation was on the defendants.
The said Second Appeal on the said finding was allowed.
7. Mr. Shambhu Prasad Singh, learned counsel appearing on behalf of the
appellant, would submit that the question of limitation being one of
jurisdiction, the High Court committed a serious error in allowing the said
second appeal. It was submitted that as the date of mutation was not the date of
mortgage, the suit should have been held to be barred by limitation.
8. Mr. Manoj Swarup, learned counsel appearing on behalf of the respondents,
on the other hand, has drawn our attention to an application filed by the
respondent for adduction of additional evidence, as envisaged under Order 41
Rule 27 of the Code of Civil Procedure and submitted that the deed of mortgage
which was registered in Village Pangota, Tehsil Taran Taran in the District of
Amritsar, now in Pakistan, could be procured by the respondents which, if taken
into consideration, would clearly establish that the suit was within the
prescribed period of limitation having been executed on 20.2.1913.
The relationship between the parties is not in dispute. Respondents filed
the aforementioned suit for a decree for redemption of mortgage on payment of a
sum as may be found due to the appellants herein. The details of the mortgage
were furnished but the actual date of mortgage being not known could not be
furnished.
Sohan Singh and Bahadur Singh were the original mortgagors. Sohan Singh is
said to have been not seen 10 years prior to the institution of the suit and,
thus, presumed to be dead. Respondents are said to have inherited the
properties of the said mortgagors and, thus, stepped into their shoes. In the
written statement, the respondent denied and disputed the relationship between
the parties, stating :
"1. Para No.1 of the plaint is wrong and incorrect. The suit land is
not of the plaintiffs.
Rather the total land is under the permanent continuing possession of
defendant No.1. The land in dispute as mentioned in para No.1 of the plaint
filed by the plaintiffs never mortgaged with the defendants and the facts
mentioned in para No.1 of the plaint regarding the alleged mortgaged are forged
and fictitious one and the plaint is not with me."
9. The defendant claimed the ownership as also possession of the suit land
in himself. The courts below, as noticed hereinbefore, found that there existed
a relationship of mortgagor and mortgagee between the parties to the lis. The
suit was dismissed only on the ground of being barred by limitation.
The High Court was, in our opinion, entirely wrong in holding that the onus
to prove that the suit was beyond the period of limitation was on the defendants.
Limitation is a question of jurisdiction. Section 3 of the Limitation Act puts
an embargo on the court to entertain a suit if it is found to be barred by
limitation.
10. It appears that before the High Court also, an application for adduction
of additional evidence was filed. No order thereupon was passed.
Respondents, in our opinion, have made out a case for adduction of
additional evidence.
It was stated that the mortgage deed was registered in the year 1913 in the
District of Lahore. As it is a registered document, this Court in a situation
of this nature, keeping in view the findings of the courts below, should allow
the said application.
11. There cannot be any doubt whatsoever that the court should be loathed to
entertain such an application but the respondents have herein made out adequate
grounds therefor.
The jurisdiction of the Appellate Court is to be exercised not only when
clause (a) or clause (aa) of sub-rule (1) of Rule 27 of Order 41 of the Code is
attracted but also when such a document is required by the appellate Court
itself to pronounce judgment or for any other substantial cause. If what the
respondents contended is correct, namely, the mortgage was executed in 1913,
the period of limitation having been prescribed under the old Limitation Act,
namely, 60 years being the period of limitation having regard to the provisions
of the new Limitation Act, the suit could be filed within a period of seven
years from 1.1.1964, i.e. upto 1.1.1971. As the suit was filed on 30.12.1970,
it may be held to be within the prescribed period of limitation.
12. We are of the opinion that keeping in view the peculiar facts and
circumstances of this case, the respondents should be permitted to adduce
evidence. We, therefore, set aside the impugned judgment and remit the matter
back to the High Court directing it to take the additional evidence on record
either allowing the parties to adduce evidence before it or to prove the said
documents by the trial judge in terms of Order 41 Rule 28 of the Code.
Appeal is allowed to the above extent. No costs.
Back
Pages: 1 2 3