Taxation Law - Bad Debt – Section 10(2)(xi), Income-tax Act – Debt of Earlier Firm Taken Over into Assessee’s Money-Lending Business – Deduction Allowed – On dissolution/closing of a prior partnership, assessee took his half share in a decree debt (₹8,197), opened debtor’s account in his own HUF money-lending books, credited later recoveries, and wrote off ₹5,880 as irrecoverable – Held: On the materials (book entries and conduct), the amount became a loan of the assessee’s money-lending business; write-off allowable as bad debt u/s 10(2)(xi) – No novation by debtor was necessary after a final decree; treatment in books sufficed [Paras 2-3, 6-8].

Book Entries and Evidence – There Was Material to Support Tribunal’s Finding – Opening a fresh debtor account for ₹8,197 in assessee’s business, crediting post-transfer recoveries (₹2,332) there, and issuing discharge for such recoveries showed the debt was integrated into the stock-in-trade of the assessee’s business – Tribunal’s conclusion was a possible view; High Court rightly answered reference in assessee’s favour [Paras 2-3, 8-9].

Capital vs. Trading Asset – Contention Rejected – Department’s plea that the decree debt became a capital asset on take-over and thus outside Section 10(2)(xi) was negatived – In money-lending, assigned/allocated receivables can constitute trading assets when brought into the business and dealt with as loans; deduction admissible on write-off [Paras 5, 8-9].

“No Novation” Objection – Not Required Post-Decree – High Court correctly held that after a final decree there is no scope for “novation”; debtor’s assent is unnecessary where the creditor’s business books treat the receivable as a business loan and subsequent recoveries are accounted accordingly [Para 6].

Decision – Reference answered in favour of assessee – Appeal dismissed with costs; bad-debt deduction of ₹5,880 under Section 10(2)(xi) upheld [Para 9-10].

Reassessment – Section 34 of the Income-tax Act – Notice to HUF After Partition – Valid – Escaped income of HUF for year 1939-40 sought to be assessed in 1944 – Though partition order under Section 25A(1) had been passed, ITO issued notice in name of HUF and served on karta – Held: assessment could proceed as if family still existed; no need to issue notice to each member individually – Proceedings valid [Paras 2, 4].

Assessment Procedure – Section 25A(1) and (2) – Apportionment Mandatory – ITO must first assess total income of HUF as if no partition occurred, then apportion tax liability among members according to shares of family property allotted – In present case, omission to apportion was an error; fresh demand notices must be issued individually to members under Section 25A(2) – Such apportionment is imperative [Para 5].

Recovery of Tax – Liability of Divided Members – Not Contingent on Default – Proviso to Section 25A(2) permits recovery from any member without waiting for default by another – Contrasted with Section 26, which expressly provides recovery on default – Absence of similar language in Section 25A(2) shows each member is directly liable for his share of tax; Government can recover from any [Para 6].

Decision – Appeal dismissed – Reassessment under Section 34 valid; however, ITO must apportion tax and issue separate demands in compliance with Section 25A(2) – Appellant to pay costs [Paras 5-7].

Specific performance - Contract Formation – Negotiations and Counter-Offer – Mere Statement of Lowest Price – No Concluded Contract – Specific performance denied – Defendant’s cable “won’t accept less than Rs. 10,000” was not a counter-offer but a statement of minimum price – Plaintiff’s letter of 14th August confirming his “offer” of Rs. 10,000 could not amount to acceptance – Both intermediaries (agents Youngman and White) treated the communication as requiring Defendant’s acceptance – Following Harvey v. Facey, mere statement of lowest price does not amount to offer – No concluded contract existed [Paras 4–6].

Agency – Role of Intermediaries – Interpretation of Correspondence – Agents correctly proceeded on basis that Defendant’s assent was essential – Cable of 26th August (“May I sell?”) confirms no binding authority – No bias proved against Plaintiff; Youngman did not act prejudicially – Allegations of prejudice rejected [Para 7].

Relief – Compensation for Breach – In absence of concluded contract, no decree for specific performance or damages can be granted – Judicial Commissioner’s decree awarding Rs. 3,000 compensation set aside – Suit dismissed [Para 7].

Decision – Appeal allowed – Judgment and decree of Judicial Commissioner set aside – Plaintiff’s suit dismissed – No order as to costs [Para 7].

Criminal Law - Murder – Section 342 CrPC – Duty to Put Each Incriminating Circumstance – Trial Vitiated – At Sessions, the Judge merely read the committal examination and asked if it was correct – He did not question the accused about material circumstances emerging at trial (presence at Deohri, motive, extra-judicial confessions, dying declarations, and human blood on recovered articles) – Section 342 requires fair, simple, separate questions on each circumstance to enable explanation – Gross non-compliance caused grave likelihood of prejudice – Conviction set aside – Retrial de novo directed [Paras 20-22, 24-33, 39-44].

Prior Depositions – Section 288 CrPC “Subject to” Evidence Act – Confrontation Under Section 145 Mandatory – Depositions of two alleged eye-witnesses recorded at committal were brought on record under Section 288 without confronting them with those prior statements as Section 145 requires – Such prior statements, used to contradict and as substantive evidence, were inadmissible – Only Narindar Singh was properly confronted – Omission further weakened the prosecution case [Paras 33-38].

Cognizance on Police Report – “Incomplete Challan” – Sections 173(1), 190, 193 – Valid – The report of 2 October 1949, though termed “incomplete”, set out parties, nature of information, and witnesses acquainted with the circumstances; later challans named only formal witnesses – Magistrate properly took cognizance – No illegality [Paras 11-13].

Right to Counsel at Committal – Section 340(1) CrPC – Opportunity, Not Obligation to Provide – Accused was unrepresented when three witnesses were examined on 3 October – However, the inquiry continued thereafter; the accused never asked for counsel or complained; Section 340(1) imposes a duty to afford opportunity, not to supply a lawyer – No violation made out [Paras 14-15].

Committal Inquiry – Sections 208(2), 209, 342 – Examination Generally Adequate Though Form Imperfect – Questions resembled cross-examination but sufficiently served the limited purpose of determining whether grounds existed for commitment – Committal upheld [Paras 16-18].

Decision – Conviction and death sentence set aside – Case remanded for retrial de novo in the Sessions Court; committal to stand [Paras 39-44].

Appeal Against Acquittal – Scope of High Court’s Power – Sections 417 & 423 CrPC – Presumption of Innocence Reinforced – The High Court reversed the acquittal and convicted the accused on detailed reappraisal of evidence – Held: Though the High Court’s powers in an appeal against acquittal are as wide as in an appeal against conviction, interference is not justified unless the acquittal is manifestly unreasonable or perverse – The presumption of innocence continues and great weight must be attached to the view of the trial judge who saw and heard witnesses – The High Court erred in setting aside the acquittal [Paras 3, 7].

Appreciation of Evidence – First Information and Conduct of Witnesses – Section 154 CrPC – Telegram Sent Immediately After Incident Omitted Names of Assailants – The omission to name accused in the earliest report and improbabilities in the prosecution version, including sparing use of spears, presence of witnesses at close range despite threat by armed assailant, and unexplained absence of witnesses from the police investigation, support the Sessions Judge’s inference that prosecution witnesses were not eye-witnesses – High Court brushed aside these infirmities without adequate reasons – Sessions Judge’s view more sound [Paras 5-6].

Principle – Interference with Acquittal – Judicial Restraint – Interference with an acquittal should be only for compelling reasons and not on a mere balancing of probabilities or because another view is possible – In the present case, no such compelling reason existed – The Sessions Judge’s acquittal was restored [Paras 6-8].

Decision – Appeal Allowed – Order of High Court Convicting Appellants Set Aside – Order of Acquittal by Sessions Judge Restored – Appellants Acquitted and Directed to be Released [Para 8].

Revision Against Acquittal – Scope of High Court’s Power – Sections 417 and 439 CrPC – High Court exceeded jurisdiction – Appeal lay to High Court against acquittal only at the instance of Government under Section 417 – A private complainant cannot secure reversal of acquittal through revision under Section 439 by re-appraisal of evidence – Findings of fact of Sessions Judge could not be disturbed merely because the High Court considered them “perverse” – High Court acted beyond its revisional powers [Paras 6-7].

Power of High Court in Revision – Section 439(4) CrPC – Prohibition against Conversion of Acquittal into Conviction – Although the High Court formally directed only a retrial, its strong observations branding the Sessions Judge’s judgment as perverse and defective in perspective virtually prejudged the matter – This amounted to indirectly converting an acquittal into conviction, contrary to Section 439(4) – Such interference is impermissible [Paras 7-8].

Principle – Findings of Trial Court – Trial Court’s appreciation of evidence must ordinarily prevail unless there is clear error of law – Characterising judgment as perverse is not by itself sufficient to justify revisional interference – High Court cannot sit in appeal over acquittal under the guise of revision [Paras 6-7].

Decision – Appeal Allowed – Order of High Court setting aside acquittal and directing retrial set aside – Acquittal by Sessions Judge restored [Para 8].

Criminal Law - Merchandise Marks Act – False Trade Description – Overall Result – Company’s Conviction under Section 6 Sustained – Directors Acquitted – IPC Convictions Set Aside – The label “Anne French Cleansing Milk – 4 Old Bond St. London W1” on goods admittedly manufactured in India amounted (at least indirectly) to a description of the place/country of manufacture and was untrue in a material respect – Company failed to bring itself within Section 6 exceptions – However, convictions under IPC Sections 486/482/487 and under Section 7 of the Act were unsustainable for want of foundational proof – Directors’ convictions set aside for lack of evidence of guilty intention – Costs order also set aside [Paras 1-2, 4, 7-11].

Directors’ Liability – Mens Rea and Evidentiary Burden – Acquittal of Directors – Sections 6 M.M. Act & 486 IPC – Convictions of directors could not stand where the record disclosed no evidence of guilty intention beyond their status as directors – High Court’s later observation that it would not have convicted them if review were possible underscored the evidentiary lacuna – Prosecution cannot be permitted to fill gaps by remand or additional evidence at a late stage – Convictions and sentences of directors quashed; costs order against them revoked [Paras 3-4].

False Trade Description – “Place or Country” of Manufacture – Construction of Label – Sections 2(2)(b), 2(3) & 6, Merchandise Marks Act – The address “4 Old Bond St. London W1,” placed as it was on a toilet preparation label, directly or at least indirectly indicated the place/country where the goods were made – With the goods made in India, the description was untrue in a material respect – In absence of proof of any exception under Section 6, company rightly convicted [Paras 7-9].

Application of False Description – Proof by Circumstantial Evidence – Section 6, M.M. Act – It is not necessary to prove by direct evidence that the company physically affixed the labels – Admission that the company manufactured and sold the goods with the printed labels sufficed; a company acts through agents and the “application” element can be established circumstantially – Conviction under Section 6 upheld [Para 10].

IPC Offences and Section 7 of the Act – Foundational Requirement of Genuine/Counterfeit Mark or True Article – Failure of Proof – Convictions under IPC Sections 486, 482, 487 and under Section 7 of the Act unsustainable where there was no evidence of any genuine mark/true article against which counterfeit/false marking could be assessed – Those convictions and sentences set aside; costs order also set aside [Para 11].

Hindu Widow’s Surrender – Mesne Profits – Limitation – Appeal Dismissed – Deed styled “release” by widow in favour of daughter (next reversioner) and son-in-law (stranger) held not to amount to valid surrender accelerating inheritance – Plaintiffs, as nearest reversioners, entitled to possession; mesne profits award from date of widow’s death sustained under Order 20 Rule 12 CPC – Reversioner’s suit governed by Article 141 Limitation Act; no prior setting aside of alienation required – Conditional decree against certain defendants coupled with interest on reimbursable sum upheld – Appeal dismissed with costs [Paras 7-11, 17, 22-24, 25].

Hindu Law – Surrender/Relinquishment by Widow – Surrender must efface widow’s estate wholly in favour of husband’s next heir alone – A composite “release” in favour of next heir jointly with a stranger is not a valid surrender – No acceleration in favour of daughter when the instrument simultaneously carves out interest for son-in-law – Transaction at most evidences intent to benefit the stranger, not legal renunciation – High Court view affirmed [Paras 11-13, 17].

Nobokishore Principle – No Further Extension – Alienation by Widow with Reversioner’s Consent – The Bengal doctrine (Nobokishore v. Harinath) treats widow’s alienation of the whole estate to a stranger with immediate reversioner’s consent as resting on a double fiction; even assuming its correctness, it is not to be extended – Present case falls outside it: (i) no conveyance of the entire estate to a stranger with reversioner’s consent, (ii) daughter did not execute or consent as transferor, (iii) instrument purported to benefit daughter and stranger jointly – Attempt to validate partial transfer to a stranger via implied surrender rejected [Paras 14-17, 19-21].

Mesne Profits – Reversioner vs. Widow’s Alienee – Starting Point – A widow’s alienation is voidable at reversioner’s election; upon widow’s death, reversioner may sue for possession without first setting aside the alienation – Suit governed by Article 141; transferee’s possession is unlawful from date of widow’s death – Mesne profits therefore awardable from that date – Distinction drawn from Mitakshara father’s alienation cases (Article 125) – Conditional decree against defendants 2 & 3 appropriately balances equities by allowing interest on reimbursable amount while awarding mesne profits [Paras 22-23].

Decision – Appeal Dismissed – High Court decree for possession and mesne profits affirmed; conditional deposit and interest directions maintained – Costs to respondents [Paras 24-25].

Hindu Joint Family – Separation vs. Joint Status – Burden of Proof – Where one coparcener’s separation is admitted, no presumption of continued jointness among others – Separation or unity must be proved on facts – In present case, mortgage deeds of 1879, 1885, and 1898 (Exs. 2, 2(a), 2(b)) recited partition among all three brothers – Clear evidence of separation during lifetime of father Sheo Narain – Later joint business and acquisitions created tenancy-in-common, not Mitakshara coparcenary – Defendant no. 1 acquired no right by survivorship; plaintiff entitled to succeed [Paras 8, 11-15, 23].

Evidence – Admissibility of Statements in Old Documents – Section 32(3) Evidence Act – Statements in mortgage deeds by deceased coparcener admitting separation are admissible as declarations against proprietary interest – Such statements regarding separation among all coparceners treated as integral part of same declaration – Admissibility upheld; earlier documents decisive against claim of jointness [Paras 13-14].

Joint Dealings and Business – No Proof of Coparcenary – Ram Narain and Ram Saran carried on cloth and money-lending business jointly; jointly purchased properties; described in suits as “joint family” – Such transactions only evidence of joint dealings, not proof of legal coparcenary – Expressions used in plaints and depositions explained as for business convenience; references to shares inconsistent with Mitakshara coparcenary – Do not negate earlier separation [Paras 16-21].

Settlement Records and Accounts – Entries Inconclusive – Mixed recording of lands in sole and joint names indicated tenancy-in-common rather than coparcenary – Relinquishment and endowment deeds (Exs. G and 1) showed Ram Narain’s absolute ownership and power of disposition – Accounts and minor expense entries equivocal; do not establish joint family status [Paras 22].

Decree and Remand – Plaintiff entitled to succeed as heir, but properties and mesne profits not adjudicated – High Court erred in granting decree without deciding issues on correctness of schedule and claim for mesne profits – Case remanded for determination of issues 7 and 8 by High Court or Trial Court – Findings of separation affirmed; decree for possession and mesne profits to be settled accordingly [Paras 24-26].

Decision:

Findings of High Court affirmed that Ram Narain died separate from defendant no. 1 – Defendant’s claim of survivorship rejected – Case remanded for determination of properties properly recoverable and ascertainment of mesne profits – Plaintiff entitled to costs of appeal; further costs to abide result [Paras 25-26].