Prevention of Corruption Act

November 30, 2014

Section 1. Short title and extent.

[Act No. 49 of 1988]

[12th September 1988]

An act to consolidate and amend the law relating to the prevention of corruption and for matters connected therewith.

Be it enacted by Parliament in the Thirty-ninth Year of the Republic of India as follows.

(1) This Act may be called the, Prevention of Corruption Act, 1988,

(2) It extends to the whole of India except the State of Jammu and Kashmir and it applies also to all citizens of India outside India.

Section 2. Definitions.

In this Act, unless the context otherwise requires, -

(a) “Election” means any election, by whatever means held under any law for the purpose of selecting members of Parliament or of any legislature, local authority or other public authority;

(b) “Public duty” means a duty in the discharge of which the State, the public or the community at large has an interest-

Explanation. -In this clause “State” includes a corporation established by or under a Central, Provincial or State Act, or an authority or a body owned controlled or aided by the Government company as defined in Section 617 of’ the Companies Act, 1956 (I of 1956),

(c) “Public Servant” means

(i) Any person in the service or pay of’ the Government or remunerated by the Government by fees or commission for the performance of any public duty;

(ii) Any person in the service or pay of a local authority.

(iii) Any person in the service or pay of a corporation established by or under a Central, Provincial or State Act, or an authority or a body owned or controlled or aided by the Government or a Government company as defined in section 617 of the Companies Act, 1956.

(iv) Any Judge, including any person empowered by law to discharge, whether by himself or as a member of any body of persons, any adjudicatory functions.

(v) Any person authorised by a court of justice to perform any duty, in connection with, including a liquidator, receiver or commissioner appointed by such court.

(vi) Any arbitrator or other person to whom any cause or matter has been referred for decision or report by a court of justice or by a competent public authority.

(vii) Any person who holds an office by virtue of which he is empowered to prepare, publish, maintain or revise an electoral roll or to conduct an election of part of an election;

(viii) Any person who holds an officer by virtue of which be is authorised or required to perform any public duty.

(ix) Any person who is the president, secretary or other office-bearer of a registered co-operative society engaged in agriculture, industry, trade or banking, receiving or having received any financial aid front the Central Government or State Government or from any corporation established by or under a Central, Provincial or State Act, or any authority or body owned or controlled or aided by the Government or a Government company as defined in Section 617 of the Companies Act, 1956;

(x) Any person who is a chairman, member or employee of any Service Commission or Board, by whatever name called, or a member of any selection committee appointed by such Commission or Board for the conduct of any examination or making any selection on behalf of such Commission or Board;

(xi) Any person who is a Vice-Chancellor or member of any governing body, professor, reader, lecturer or any other teacher or employee, by whatever (resignation called, of any university and any person whose services have been availed of by a University or any other public authority in connection with holding or conducting examinations;

(xii) Any person who is an office-bearer or an employee of an educational, scientific, social, cultural or other institution, in whatever manner established, receiving or having received any financial assistance from the Central Government or any State Government or local or other public authority.

Explanation I. – Persons falling under any of the above sub-clauses are public servants, whether appointed by the government or not.

Explanation 2. -Whenever the words “public servant” occur, they shall be understood of every person who is in actual possession of the situation of a public servant, whatever legal defect there may be in his right to hold that situation.

Section 3. Power to appoint special Judges.

(1) The Central Government or the State Government may, by notification in the official Gazette, appoint as many Special Judges as may be necessary for such area or areas or for such case or group of cases as may be specified in the notification to try the following offences, namely: -

(a) Any offence punishable under this Act; and

(b) Any conspiracy to commit, any attempt to commit, or any abetment of any of the offences specified in clause (a).

(2) A person shall not be qualified for appointment as a special Judge under this Act unless he is or has been a Sessions Judge or an Additional Session Judge or an Assistant Session Judge under the Code of Criminal Procedure 1973 (2 of 1974).

Section 4. Cases triable by special Judges.

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), or in any other law for the time being in force, the offences specified in sub-section (1) of Section 3 shall be tried by special Judges only.

(2) Every offence specified in sub-section (1) of Section 3 shall be tried by the special Judge for the area within which it was committed, or, as the case may be, by the special Judge appointed for the case, or where there are more special Judges than one for such one of them as may be specified in this behalf by the Central Government.

(3) When trying any case, a special Judge may also try any offence, other than the offence specified in Section 3, with which the accused may, under the Code of Criminal Procedure, 1973, be charged at the same trial.

(4) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, a special Judge shall, as far as practicable, hold the trial of an offence on day-to-day basis. 5.

Section 5. Procedure and powers of special Judge.

(1) A special Judge may take cognizance of offences without the accused being committed to him for trial and, in trying the accused persons, shall follow the procedure prescribed by the Code of Criminal Procedure, 1973, for the trial of warrant cases by Magistrates.

(2) A special Judge may, with a view to obtaining the evidence of any person supposed to have been directly or indirectly concerned in, or privy to, an offence, tender a pardon to such person on condition of his making a full and true disclosure of the whole circumstances within his knowledge relating to the offence and to every other person concerned, whether as principal or abettor, in the commission thereof and any pardon so tendered shall, for the purposes of sub-sections (1) to (5) of Section 308 of the Code of Criminal Procedure, 1973, be deemed to have been tendered under Section 307 of that Code.

(3) Save as provided in sub-section (1) or sub-section (2), the provisions of the Code of Criminal Procedure, 1973, shall, so far as they are not inconsistent with this Act, apply to the proceedings before a special Judge; and for the purposes of the said provisions, the Court of the special Judge shall be deemed to be a Court of Session and the person conducting a prosecution before a special Judge shall be deemed to be a public prosecutor.

(4) In particular and without prejudice to the generality of the provisions contained in subsection (3), the provisions of Sections 326 and 475 of the Code of Criminal Procedure, 1973, shall, so far as may be, apply to the proceedings before a special Judge and for the purposes of the said provisions, a special Judge shall be deemed to be a Magistrate.

(5) A special Judge may pass upon any person convicted by him any sentence authorised by law for the punishment of the offence of which such person is convicted,

(6) A special Judge, while trying all offence punishable under this Act, shall exercise all the powers and functions exercisable by a District Judge under the Criminal Law Amendment Ordinance, 1944 (Ordinance 38 of 1944).

Section 6. Power to try summarily.

(1) Where a special Judge tries any offence specified in sub-section (1) of Section 3, alleged to have been committed by a public servant in relation to the contravention of any special order referred to in sub-section (1) of Section 12-A of the Essential Commodities Act, 1955, or of all order referred to in Clause (a) of subsection (2) of that section, then, notwithstanding anything contained in sub-section (1) of Section 5 of this Act or Section 260 of the Code of Criminal Procedure, 1973, the special Judge shall try the offence in a summarily way, and the provisions of Sections 262 to 265 (both inclusive) of the said Code shall, as far as may be, apply to such trial:

Provided that, in the case of any conviction in a summary trial under this section, it shall be lawful for the special Judge to pass a sentence of imprisonment for a term not exceeding one year:

Provided further that when at the commencement of, or in the course of, a summary trial under this section, it appears to the special Judge that the nature of the case is such that a sentence of imprisonment for a term exceeding one year may have to be passed or that it is, for any other reason, undesirable to try the case summarily, the Special Judge shall, after hearing the parties, record all order to that effect and thereafter recall any witnesses who may have been examined and proceed to hear or re-hear the case in accordance with the procedure prescribed by the said Code for the trial of warrant cases by Magistrates.

(2) Notwithstanding anything to the contrary contained in this Act or in the Code of Criminal Procedure, 1973, there shall be no appeal by a convicted person in any case tried summarily under this section in which the Special Judge passes a sentence of imprisonment not exceeding one month, and of fine not exceeding two thousand rupees whether or not any order under Section 452 of the said Code is made in addition to such sentence, but an appeal shall lie whether any sentence in excess of the aforesaid limits is passed by the special Judge.

Section 7. Public servant taking gratification other than legal remuneration in respect of an official act.

Whoever, being, or expecting to be a public servant, accepts or obtains or agrees to accept or attempts to obtain from any person, for himself or for any other person, any gratification whatever, other than legal remuneration, as a motive or reward for doing or forbearing to do any official act or for showing or forbearing to show, in the exercise of his official functions, favour or disfavor to any person or for rendering or attempting to render any service or disservice to any person, with the Central Government or any State Government or Parliament or the Legislature of any State or with any local authority, corporation or Government company referred to in Clause (c) of Section 2, or with any public servant, whether named or otherwise shall, be punishable with imprisonment which shall be not less than six months but which may extend to five years and shall also be liable to fine.

Explanation. -

(a) “Expecting to be a public servant”. If a person not expecting to be in office obtains a gratification by deceiving others into a belief that he is about to be in office, and that he will then serve them, he may be guilty of cheating, but he is not guilty of the offence defined in this section.

(b) “Gratification. -The word “gratification” is not restricted to pecuniary gratification or to gratifications estimable in money.

(c) “Legal remuneration”. -The words “legal remuneration” are not restricted to remunerations which a public servant can lawfully demand, but include all remuneration which he is permitted by the Government or the Organisation, which he serves, to accept.

(d) “A motive or reward for doing”. -A person who receives a gratification as motive or reward for doing what he does not intend or is not in a position to do, or has not one, comes within this expression;

(e) Where a public servant induces a person erroneously to believe that his influence with the Government has obtained a title for that person and thus induces that person to give the public servant, money or any other gratification as a reward for this service, the public servant has committed an offence under this section.

Section 8. Taking gratification, in order, by corrupt or illegal means, to influence public servant.

Whoever accepts, or obtains, or agrees to accept, or attempts to obtain, front any person, for himself or for any other person, any gratification whatever as a motive or reward for inducing, by corrupt or illegal means, any public servant, whether named or otherwise, to do or to forbear to do any official act, or in the exercise of the official functions of such public servant to show favour or disfavour to any person, or to render or such public servant to show favour or disfavour to any person, or to render or attempt to render any service or disservice to any person with the Central Government or any State Government or Parliament or the Legislature of any State or with any local authority, corporation or Government company referred to in Clause (c) of Section 2, or with any public servant, whether named or otherwise, shall be punishable with imprisonment for a term which shall be not less than six months but which may extend to five years and shall also be liable to fine.

Section 9. Taking gratification for exercise of personal influence with public servant.

Whoever accepts or obtains or agrees to accept or attempts to obtain, from any person, for himself or for any other person, any gratification whatever, as a motive or reward for inducing, by the exercise of personal influence, any public servant whether named or otherwise to do or to forbear to do any official act, or in the exercise of the official functions of such public servant to show favour or disfavour to any person, or to render to attempt to render any service or disservice to any person with the Central Government or any State Government or Parliament or the Legislature of any State or with any local authority, corporation or Government company referred to in Clause (c) of Section 2, or with any public servant, whether named or otherwise, shall be punishable with imprisonment for a term which shall be not less than six months but which may extend to five years and shall also be liable to fine.

Section 10. Punishment for abetment by public servant of offences defined in Section 8 or 9.

Whoever, being a public servant, in respect of whom either of the offences defined in Section 8 or Section 9 is committed, abets the offence, whether or not that offence is committed in consequence of that abetment, shall be punishable with imprisonment for a term which shall be not less than six months but which may extend to five years and shall also be liable to fine.

Section 11. Public servant obtaining valuable thing, without consideration from person concerned in proceeding or business transacted by such public servant.

Whoever, being a public servant, accepts or obtains or agrees to accept or attempts to obtain for himself, of or any other person, any valuable thing without consideration, or for a consideration which he knows to be inadequate, from any person whom he knows to have been, or to be, or to be likely to be concerned in any proceeding or business transacted or about to be transacted by such public servant, or having any connection with the official functions of himself or of any public servant to whom he is subordinate, or from any person whom he knows to be interested in or related to the person so concerned, shall be punishable with imprisonment for a term which shall be not less than six months but which may extend to five years and shall also be liable to fine.

Section 12. Punishment for abetment of offences defined in Section 7 or 11.

Whoever abets any offence punishable under Section 7 or Section 11 whether or not that offence is committed in consequence of that abetment, shall be punishable with imprisonment for a term which shall be not less than six months but which may extend to five years and shall also be liable to fine.

Section 13. Criminal misconduct by a public servant.

(1) A public servant is said to commit the offence of criminal misconduct, -

(a) If he habitually accepts or obtains or agrees to accept or attempts to obtain from any person for himself or for any other person any gratification other than legal remuneration as a motive or reward such as is mentioned in Section 7; or

(b) If he habitually accepts or obtains or agrees to accept or attempts to obtain for himself or for any other person, any valuable thing without consideration or for a consideration which he knows to be inadequate from any person whom he knows to have been, or to be, or to be likely to he concerned in any proceeding or business transacted or about to be transacted by him or having any connection with the official functions of himself or of any public servant to whom he is subordinate, or from any, person whom he knows to be interests in or related to the person so concerned; or

(c) If he dishonestly or fraudulently misappropriates or otherwise converts for his own use any property entrusted to him or under his control as a public servant or allows any other person so to do; or

(d) If he, -

(i) By corrupt or illegal means, obtains for himself or for any other person any valuable thing or Pecuniary advantage; or

(ii) By abusing his position as a public servant, obtains for himself or for any other person any valuable thing or pecuniary advantage; or

(iii) While holding office as a public servant, obtains for any person any valuable thing or pecuniary advantage without any public interest; or

(e) If he or any person on his behalf, is in possession or has, at any time during the Period of his office, been in possession for which the public servant cannot satisfactorily account, of pecuniary resources or property disproportionate to his known sources of income.

Explanation. -For the purposes of this section “known sources of income” means income received from any lawful source and such receipt has been intimated in accordance, With the provisions of any law, rules or orders for the time being applicable to public servant.

(2) Any public servant who commits criminal misconduct shall be punishable with imprisonment for a term which shall be not less than one year but which may extend to seven years and shall also be liable to fine.

Section 14. Habitual committing of offence under Sections 8, 9 and 12. -Whoever habitually commits.

(a) An Offence punishable ‘under Section 8 or Section 9; or

(b) An offence punishable under Section 12, shall be punishable with imprisonment for a term which shall be not less than two years but which may extend to seven years and shall also be liable to fine.

Section 15. Punishment for attempt.

Whoever attempts to commit an offence referred to in Clause (c) or Clause (d) or sub-section (1) of Section 13 shall be punishable with imprisonment for a term which may extend to three years and with fine.

Section 16. Matters to be taken into consideration for fixing Fine.

Where a sentence of fine is imposed under sub-section (2) of Section 13 of Section 14, the Court in fixing the amount of the fine shall take into consideration the amount or the value of the property, if any, which, the accused person has obtained by committing the offence or where the conviction is for an offence referred to in Clause (e) of sub-section (1) of Section 13, the pecuniary resources or property referred to in that clause for which the accused person is unable to account satisfactorily.

Section 17. Persons authorised to investigate.

Notwithstanding anything contained in the Code of Criminal Procedure, 1973, no police officer below the rank, -

(a) In the case of the Delhi Special Police Establishment, of an Inspector of Police;

(b) In the metropolitan areas of Bombay, Calcutta, Madras and Ahmedabad and in any other metropolitan area notified as such under sub-section (1) of Section 9 of the Code of Criminal Procedure, 1973, of an Assistant Commissioner of Police;

(c) Else where, of a Deputy Superintendent of Police or a police officer of equivalent rank, shall investigate any offence punishable under this Act without the order of a Metropolitan Magistrate or a Magistrate of the first class, as the case may be, or make any arrest therefor without a warrant;

Provided that if a police officer not below the rank of an Inspector of Police is authorised by the State Government in this behalf by general or special order, he may also investigate any such offence without the order of a Metropolitan Magistrate or a Magistrate of the first class, as the case may be or make arrest therefor without a warrant:

Provided further that an offence referred to in Clause (e) of sub-section (1) of Section 13 shall not he investigated without the order of a police officer not below the rank of a Superintendent of Police.

Section 18. Power to inspect bankers’ books.

If from information received or otherwise, a police officer has reason to suspect the commission of an offence which he is empowered to investigate under Section 17 and considers that for the purpose of investigation or inquiry into such offence, it is necessary to inspect any bankers, books, then, notwithstanding anything contained in any law for the time being in force, he may inspect any bankers, books in so far as they relate to the accounts of the persons suspected to have committed that offence or of other person suspected to be holding money on behalf of such person, and take or cause or to be taken certified copies of the relevant entries therefrom, and the bank concerned shall be bound to assist the police officer in the exercise of his power under this section.

Provided that no power under this section in relation to the accounts of any person shall be exercised by a police officer below the rank of a Superintendent of Police, unless he is specially authorised in this behalf by a police officer of or above the rank of a Superintendent of Police.

Explanation. -In this section, the expressions “bank” and “bankers books” shall have the meanings respectively assigned to them in the Bankers’ Books Evidence Act, 1891,

Section 19. Previous sanction necessary for prosecution.

(1) No court shall take cognizance of an offence punishable under Sections 7, 10, 11, 13 and 15 alleged to have been committed by a public servant, except with the previous sanction, -

(a) In the case of a person who is employed in connection with the affairs of the Union and is not removable from his office save by or with the sanction of the Central Government, of that Government;

(b) In the case of a person who is employed in connection with the affairs of a State and is not removable from his office save by or with the sanction of the State Government, of that Government;

(c) In the case of any other person, of the authority competent to remove him from his office.

(2) Where for any reason whatsoever any doubt arises as to whether the previous sanction as required under sub-section (1) should be given by the Central Government or the State Government or any other authority, such sanction shall be given by that Government or authority which would have been competent to remove the public servant from his office at the time when the offence was alleged to have been committed.

(3) Notwithstanding anything contained in the Code of Criminal Procedure, 1973-

(a) No finding, sentence or order passed by a Special Judge shall be reversed or altered by a Court in appeal, confirmation or revision on the ground of the absence of, or any error, omission, irregularity in, the sanction required under sub-section (1), unless in the opinion of that court, a failure of justice has, in fact, been occasioned thereby;

(b) No court shall stay the proceedings under this Act on the ground of any error, omission or irregularity in the sanction granted by the authority, unless it is satisfied that such error, omission or irregularity has resulted in a failure of justice;

(c) No court shall stay the proceedings under this Act on any other ground and no court shall exercise the powers of revision in relation to any interlocutory order passed in inquiry, trial, appeal or other proceedings.

(4) In determining under sub-section (3) whether the absence of, or any error, omission or irregularity in, such sanction has occasioned or resulted in a failure of justice the Court shall have regard to the fact whether the objection could and should have been raised at any earlier stage in the proceedings.

Explanation. -For the purposes of this section, -

(a) Error includes competency of the authority to grant sanction;

(b) A sanction required for prosecution includes reference to any requirement that the prosecution shall be at the instance of a specified authority or with the sanction of a specified person or any requirement of a similar nature.

STATE AMENDMENT

UTTAR PRADESH

In Section 19 of Prevention Corruption Act, 1988 in sub-section (1), after clause (c), the following clause shall be inserted, namely: -

(d) Notwithstanding anything contained in clause (c), the State Government may, where it considers necessary so to do, requires the authority referred to in clause (c), to give previous sanction within the specified in this behalf and if the said authority fails to give the previous sanction within such period, the previous sanction may be given by the State Government.

Explanation-

(1) For the purposes of this clause “authority” does not include any authority under the control of the Central Government.

(2) For removal of doubts it is hereby declared that the power of the State Government under this clause may be exercised also in a case where the authority referred to in clause (c) has earlier refused to give the previous sanction.

Section 20. Presumption where public servant accepts gratification other than legal remuneration.

(1) Where, in any trial of an offence punishable under Section 7 or Section 11 or Clause (a) or Clause (b) of sub-section (1) of Section 13 it is proved that an accused person has accepted or obtained or has agreed to accept or attempted to obtain from himself, or for any other person, any gratification (other than legal remuneration) or any valuable thing from any person, it shall be presumed, unless the contrary is proved, that he accepted or obtained or agreed to accept or attempted to obtain that gratification or that valuable thing, as the case may be, as a motive or reward such as is mentioned in Section 7 or, as the case may, without consideration or for a consideration which he knows to be inadequate.

(2) Where in any trial of an offence punishable under Section 12 or under Clause (b) of Section 14, it is proved that any gratification (other than legal remuneration) or any valuable thing has been given or offered to be given or attempted to be given by an accused person, it shall be presumed, unless the contrary is proved, that he gave or offered to give or attempted to give that gratification or the valuable thing, as the case may be, as a motive or reward such as is mentioned in Section 7, or, as the case may be, without consideration or for a consideration which he knows to be inadequate.

(3) Notwithstanding anything contained in sub-sections (1) and (2), the court may decline to draw the presumption referred to in either of the said sub-sections, if the gratification or thing aforesaid is, in its opinion, so trivial that no inference of corruption may fairly be drawn.

Section 21. Accused person to be a competent witness.

Any person charged with an offence punishable under this Act, shall be a competent witness for the defence and may give evidence on oath in disproof of the charges made against him or any person charged together with him at the same trial:

Provided that-

(a) He shall not be called as a witness except at his own request;

(b) His failure to give evidence shall not be made the subject of any comment by the prosecution or give rise to any presumption against himself or any person charged together with him at the same trial;

(c) He shall not be asked, and if asked shall not be required to answer, any question tending to show that he has committed or been convicted of any offence other than the offence with which he is charged, or is of bad character, unless-

(i) The proof that he has committed or been convicted of such offence is admissible evidence to show that he is guilty of the offence with which he is charged, or

(ii) He has personally or by his pleader asked any question of any witness for the prosecution with a view to establish his own good character, or has given evidence of his good character, or the nature or conduct of the defence is such as to involve amputations on the character of the prosecutor or of any witness for the prosecution, or

(iii) He has given evidence against any other person charged with the same offence.

Section 22. The Code of Criminal Procedure, 1973 to apply subject to certain modifications.

The provisions of the Code of Criminal Procedure, 1973, shall in their application to any proceeding in relation to an offence punishable under this Act have effect as if,

(a) In sub-section (1) of Section 243, for the words “The accused shall then he called upon,” the words “The accused shall then be required to give in writing at once or within such time as the court may allow, a list of the persons (if any) whom he proposes to examine as his witnesses and of the documents (if any) on which he proposes to rely and he shall then he called upon” had been substituted;

(b) In sub-section (2) of Section 309, after the third proviso, the following proviso had been inserted, namely: -

“Provided also that the proceeding shall not be adjourned or postponed merely on the ground that an application under Section 397 has been made by a party to the proceeding.”

(c) After sub-section (2) of Section 317, the following sub-section had been inserted, namely: -

“(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), the Judge may, if he thinks fit and for reasons to be recorded by him, proceed with inquiry or trial in the absence of the accused or his pleader and record the evidence of any witness subject to the right of the accused to recall the witness for cross-examination.”

(d) In sub-section (1) of Section 397, before the Explanation, the following proviso had been inserted, namely: -

“Provided that where the powers under this section are exercised by a court on an application made by a party to such proceedings, the court shall not ordinarily call for the record of the proceedings-

(a) Without giving the other party an opportunity of showing cause why the record should not be called for; or

(b) If it is satisfied that an examination of the record of the proceedings may be made from the certified copies.”

Section 23. Particulars in a charge in relation to an offence under Section 13. (1) (c).

Notwithstanding anything contained in the Code of Criminal Procedure, 1973, when an accused in charged with an offence under Clause (c) of sub-section (1) of Section 13, it shall be sufficient to describe in the charge the property in respect of which the offence is alleged to have been committed and the dates between which the offence is alleged to have been committed, without specifying particular items or exact dates, and the charge so framed shall be deemed to be a charge of one offence within the meaning of Section 219 of the said Code.

Provided that the time included between the first and last of such dates shall not exceed one year.

Section 24. Statement by bribe-giver not to subject him to prosecution.

Notwithstanding anything contained in any law for the time being in force, a statement made by person in any proceeding against a public servant for an offence under Sections 7 to 11 or under Sections 13 or Section 15, that he offender agreed to offer any gratification (other than legal remuneration) or any valuable thing to the public servant, shall not subject such person to a prosecution under Section 12.

Section 25. Military, Naval and Air force or other law not to be, affected.

(1) Notwithstanding in this Act shall affect the jurisdiction exercisable by, or the procedure applicable to, any court or other authority under the Army Act, 1950, the Air Force Act, 1950, the Navy Act, 1957, the Border Security Force Act, 1968, the Coast Guard Act, 1978 and the National Security Guard Act, 1986.

(2) For the removal of doubts, it is hereby declared that for the purposes of any such law as is referred to in sub-section (1), the Court of a Special Judge shall be deemed to be a court of ordinarily criminal justice.

Section 26. Special Judges appointed under Act 46 of 1952 to be special Judges appointed under this Act.

Every Special Judge appointed under the Criminal law Amendment Act, 1952 for any area or areas and is holding office on the commencement of this Act shall be deemed to be a Special Judge, appointed under Section 3 of this Act for that area or areas and, accordingly, on and from such commencement, every such Judge shall continue to deal with all the proceedings pending before him on such commencement in accordance with the provisions of this Act.

Section 27. Appeal and revision.

Subject to the provisions of this Act, the High Court may exercise, so far as they may be applicable, all the powers of appeal and revision conferred by the Code of Criminal Procedure, 1973, on a High court as if the Court of the special Judge were a Court of Session trying cases within the local limits of the High Court.

Section 28. Act to be in addition-to any other law.

The provisions of this Act shall be in addition to, and not in derogation of, any other law for the time beings in force, and nothing contained herein shall exempt any public servant from any proceeding, which might, apart from this Act, be instituted against him.

Section 29. Amendment of Ordinance 38 of 1944.

In the Criminal Law Amendment Ordinance, 1944, -

(a) In sub-section (1) of Section 3, sub-section (1) of Section 9 Clause (a) of Section 10, sub-section (1) of Section 11 and sub-section (1) of Section 13, for the words “State Government,” wherever they occur, the words “State Government or, as the case may be, the Central Government” shall be substituted;

(b) In Section 10, in Clause (a), for the words “three months”, the words “one year” shall be substituted;

(c) In the Schedule, -

(i) Paragraph I shall be omitted;

(ii) In paragraphs 2 and 4-

(a) After words “a local authority”, the words and figures “or a corporation established by or under a Central, Provincial or State Act, or an authority or a body owned or controlled or aided by Government or a Government company as defined in Section 617 of the Companies Act, 1956 (1 of 1956) or a society aided by a such corporation, authority, body or Government company” shall be inserted;

(b) After the words “or authority”, the words “or corporation or body or Government Company or Society” shall be inserted;

(iii) For paragraph 4-A, the following paragraph shall be substituted, namely-

“4-A”. An offence punishable under the Prevention of Corruption Act, 1988″;

(iv) In paragraph 5, for the words and figures “items 2, 3 and 4″, the words, figures and letter items 2, 3, 4 and 4- A” shall be substituted.

Section 30. Repeal and saving.

(1) The Prevention of Corruption Act, 1947 (2 of 1947) and the Criminal Law Amendment Act, 1952 (46 of 1952) are hereby repealed.

(2) Notwithstanding such repeal, but without prejudice to the application of Section 6 of the General Clauses Act, 1897, anything done or any action taken or purported to have been done or taken under or in pursuance of the Acts so repealed shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under or in pursuance of the corresponding provisions of this Act.

Section 31. Omission of certain sections of Act 45 of 1860.

Section 161 to 165-A (both inclusive) of the Indian Penal Code shall be omitted, and Section 6 of the General Clauses Act, 1897, shall apply to such omission as if the said section had been repealed by a Central Act.

Limitation Act

November 30, 2014

Section 1. Short title, extent, and commencement

1. This Act may be called the Limitation Act,1963.

2. It extends to the whole of India except the State of Jammu and Kashmir.

3. It shall come into force on such date as the Central Government may be notification in the Official Gazette, appoint.

Section 2. Definitions:

In this Act, unless the context otherwise requires.

(a) “applicant” includes

(i) petitioner;

(ii) any person from or through whom an applicant derives his right to apply;

(iii) any person whose estate is represented by the applicant as executor, administrator or other representative;

(b) “application” includes a petitions;

(c) “bill of exchange” includes a hundi and a cheque;

(d) “bond” includes any instrument whereby a person obliges himself to pay money to another on condition that the obligation shall be void if a specified act is performed, or is not performed as the case may be;

(e) “defendant” includes

(i) any person from or through whom a defendant derives his liability to be sued;

(ii) any person whose estate is represented by the defendant as executor, administrator or other representative;

(f) “easement” includes a right not arising from contract, by which one person is entitled to remove and appropriate for his own profit any part of the soil belonging to another or anything growing in, or attached to, or subsisting upon the land of another;

(g) “foreign country’” means any country other than India;

(h) “good faith” nothing shall be deemed to be done in good faith which is not done with due care and attention;

(i) “plaintiff” includes

(i) any person from or through whom a plaintiff derives his right to sue; (ii) any person whose estate is represented by the plaintiff as executor, administrator or other representative;

(j) “period of limitation” means the period of limitation prescribed for any suit, appeal or application by the Schedule, and “prescribed period” means the period of limitation computed in accordance with the provisions of this Act;

(k) “promissory-note” means any instrument whereby the maker engages absolutely to pay a specified sum of money to another at time therein limited, or on demand, or at sight;

(l) “suit” does not include an appeal or an application;

(m) “tort” means a civil wrong which is not exclusively the breach of a contract or the breach of trust;

(n) “trustee” does not include a benamidar, a mortgage remaining in possession after the mortgage has been satisfied, or a person in a wrongful possession without title.

Part 3 – Limitation of Suits, Appeals and Applications 

Section 3. Bar of limitation

(1) Subject to the provisions contained in sections 4 to 24 (inclusive) every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed although limitation has not been set up as defense;

(1) For the purposes of this Act,

(a) A suit is instituted,

(i) in an ordinary case, when the plaint is presented to the proper officer;

(ii) in the case of a pauper, when his application for leave to sue is a pauper is made; and

(ii) in the case of a claim against a company which is being wound up by the court, when the claimant first sends in his claim to the official liquidator;

(b) any claim by way of a set-off or a counter claim, shall be treated as a separate suit and shall be deemed to have been instituted-

(i) in the case of a set-off, on the dame date as the suit in which the set off is pleaded;

(ii) in the case a counter claim, on the date on which the counter claim is made in court;

(c) an application by notice of motion in a High Court is made when the application is presented to the proper officer of that court

Section 4. Expiry of prescribed period when court is closed

When the prescribed period for any suit, appeal or application expires on a day when the court is closed, the suit, appeal or application may be instituted, preferred or made on the day when the court reopens.

Explanation – A court shall be deemed to be closed on any day within the meaning of this section if during any part of its normal working hours it remains closed on that day.

Section 5.Extension of prescribed period in certain cases

Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908 (5 of 1908) may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.

Explanation – The fact that the appellant or the applicant was misled by any order, practice or judgment of the High Court in ascertaining or computing the prescribed period may be sufficient cause within the meaning of this section

Section 6.Legal disability

Where a person entitled to institute a suit or make an application for the execution of a decree is, at the time from which the prescribed period is to be reckoned, a minor or insane, or an idiot, he may institute the suit or make the application within the same period after the disability has ceases, as would otherwise have been allowed from the time specified therefore in the third column of the Schedule.

(2) Where such person is, at the time from which the prescribed period it to be reckoned, affected by two such disabilities, or where, before his disability has ceased, he is affected by another disability, he may institute the suit or make the application within the same period after both disabilities have ceased, as would otherwise have been allowed from the time so specified.

(3) Where the disability continues up-to the death of that person, his legal representative may institute the suit or make the application within the same period after the death, as would otherwise have been allowed from the time so specified.

(4) Where the legal representative referred to in sub-section (3) is, at the date of the death of the person whom he represents. affected by any such disability, the rules contained in sub-sections (1) and (2) shall apply.

(5) Where a person under disability dies after the disability ceases but within the period allowed to him under this section, his legal representative may institute the suit or make the application within the same period after the death, as would otherwise have been available to that person had he not died.

Explanation – For the purposes of this section ‘minor’ includes a child in the womb.

Notes – This section corresponds with section 6 of the old Act with some changes.

Section 7. Disability of one of several persons

Where one of several persons jointly entitled to institute a suit or make an application for the execution of a decree is under any such disability, and a discharge can be given without the concurrence of such person, time will run against them all; but, where no such discharge can be given, time will not run as against any of them until one of them becomes capable of giving such discharge without the concurrence of the others or until the disability has cased.

Explanation I – This section applies to a discharge from every kind of liability, including a liability in respect of any immovable property.

Explanation II – For the purposes of this section, the manager of a Hindu undivided family governed by the Mitakshara law shall be deemed to be capable of giving a discharge without the concurrence of the other members of the family only if he is in management of the joint-family property.

Section 8. Special exceptions

Nothing in section 6 or in section 7 applies to suits to enforce rights of pre-emotion, or shall be deemed to extend, for more than three years from the cessation of the disability or the death of the person affected thereby the period of limitation for any suit or application.

Section 9. Continuous running of time 

Where once time has begun to run, no subsequent disability or inability to institute a suit or make an application stops it:

Provided that where letters of administration to the estate of a creditor have been granted to his debtor, the running of the period of limitation for a suit to recover the debt shall be suspended while the administration continues.

Section 10. Suits against trustees and their representatives

Notwithstanding anything contained in the foregoing provisions of this Act, no suit against a person in whom property has become vested if trust for any specific purpose, or against his legal representatives or assigns (not being assigns for valuable consideration), for the purpose of following in his or their hands such property, or the proceeds thereof or for an account of such property or proceeds, shall be barred by any length of time.

Explanation – For the purposes of this section any property comprised in a Hindu, Muslim or Buddhist religious or charitable endowment shall be deemed to be property vested in trust for a specific purpose and the manager of the property shall be deemed to be the trusted thereof.

Section 11. Suits on contracts entered into outside the territories to which the Act extends 

(1) Suits instituted in the territories to which this Act extends on contracts entered into the State of Jammu and Kashmir or in a foreign country shall be rules of limitation contained in this Act.

(2) No rule of limitation in force in the State of Jammu and Kashmir or in a foreign country shall be a defense to a suit instituted in the said territories on a contract entered into in that State or in a foreign country unless –

(a) the rule has extinguished the contract; and

(b) the parties were domiciled in that State or in the foreign country during the period prescribed by such rule.

Part 3 – Computation of Period of Limitation

Section 12. Exclusion of time in legal proceedings

(1) In computing the period of limitation for any suit, appeal or application, the day from which such period is to be reckoned shall be excluded.

(2) In computing the period of limitation for an appeal or an application for leave to appeal or for revision or for review of a judgment, the day on which the judgment complained of was pronounced and the time requisite for obtaining a copy of the decree, sentence or order appealed from or sought to be revised or reviewed shall be excluded.

(3) Where a decree or order is appealed from or sought to be revised or reviewed, or when an application is made for leave to appeal from a decree or order the time requisite for obtaining a copy of the judgment on which the decree or order is founded shall also be excluded.

(4) In computing the period of limitation for an application to set aside an award, the time requisite for obtaining a copy of the award shall be excluded.

Explanation – In computing under this section the time requisite for obtaining a copy of a decree or an order, any time taken by the court to prepare the decree or order before an application for copy thereof is made shall not be excluded.

Section 13. Exclusion of time in cases where leave to sue or appeal as a pauper is applied for

In computing the period of limitation prescribed for any suit or appeal in any case where an application for leave to sue or appeal as a pauper has been made and rejected, the time during which the applicant has been prosecuting in good faith his application for such leave shall be excluded, and the court may, on payment of the court-fees prescribed for such suit or appeal, treat the suit or appeal as having the same force and effect as if the court-fees had been paid in the first instance.

Section 14. Exclusion of time of proceeding bona fide in court without jurisdiction

(1) In computing the period of limitation for any suit the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of the appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(2) In computing the period of limitation for any application, the time during which the applicant has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a count of first instance or of appeal or revision, against the same party for the same relief shall be excluded, where such proceeding is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it.

(3) Notwithstanding anything contained in rule 2 of Order XXIII of the Code of Civil Procedure, 1908 (5 of 1908), the provisions of sub-section (1) shall apply in relation to a fresh suit instituted on permission granted by the court under rule of that Order, where such permission is granted on the ground that the first suit must fail by reason of a defect in the jurisdiction of the court of other cause of a like nature.

Explanation – For the purpose of this section, –

(a) In excluding the time during which a former civil proceeding was pending, the day on which that proceeding was instituted and the day on which it ended shall both be counted;

(b) Plaintiff or an applicant resisting an appeal shall be deemed to be prosecuting a proceeding;

(c) Misjoinder of parties or of causes of action shall be deemed to be a cause of a like nature with defect of jurisdiction.

Related Judgements

FERRO ALLOYS CORPORATION LTD. v. RAJHANS STEEL LTD.

Section 15. Exclusion of time in certain other cases

(1) In computing the period of limitation for any suit or application for the execution of a decree, the institution or execution of which has been stayed by injunction or order, the time of continuance of the injunction or order, the day on which it was issued or made, and the day on which it was withdrawn, shall be excluded.

(2) In computing the period of limitation for any suit of which notice has been given, or for which the previous consent or sanction of the Government or any other authority is required, in accordance with the requirements of any law for the time being in force, the period of such notice or, as the case may be, the time required for obtaining such

consent or sanction shall be excluded.

Explanation – In excluding the time required for obtaining the consent or sanction of the Government or any other authority, the date on which the application was made obtaining the consent or sanction and the date of receipt of the order of the Government or other authority shall both be counted.

(3) In computing the period of limitation for any suit or application for execution of decree by any receiver of interim receiver appointed in proceedings for the adjudication of a person as an insolvent or by any liquidator or provisional lipuidator appointment in proceedings for the winding up of a company, the period beginning with the date of institution of such proceeding and ending with the expiry of three months from the date of appointment of such receiver or liquidator, as the case may be, shall be excluded.

(4) In computing the period of limitation for a suit for possession by a purchaser at a sale in execution of a decree, the time during which a proceeding to set aside the sale has been prosecuted shall be excluded.

(5) In computing the period of limitation for any suit the time during which the defendant has been absent from India and from the territories outside India under the administration of the Central Government, shall be excluded.

Related Judgements

FERRO ALLOYS CORPORATION LTD. v. RAJHANS STEEL LTD.

Section 16. Effect of death on or before the accrual of the right to sue

(1) Where a person who would, if he were living, have a right to institute a suit or make an application dies before the right accrues, or where a right to institute a suit or make an application accrues only on the death of a person, the period of limitation shall be computed from the time when there is a legal representative of the deceased capable of instituting such suit or making such application.

(2) Where a person against whom, if he were living, a right to institute a suit or make an application would have accrued dies before the right accrues, or where a right to institute a suit or make an application against any person accrues on the death of such person, the period of limitation shall be computed from the time when there is a legal representative of the deceased against whom the plaintiff may institute such suit or make such application.

(3) Nothing in sub-section (1) or sub-section (2) applies to suits to enforce rights of preemption or to suit for the possession of immovable property or of a hereditary office.

Section 17. Effect of fraud or mistake

(1) Where, in the case of any suit or application for which a period of limitation is prescribed by this Act-

(a) The suit or application is based upon the fraud of the defendant or respondent or his agent; or

(b) The knowledge of the right or title on which a suit or application is founded is concealed by the fraud of any such person as aforesaid; or

(c) The suit or application is for relief from the consequences of a mistake; or

(d) Where any document necessary to establish the right of the plaintiff or applicant has been fraudulently concealed from him;

The period of limitation shall not begin to run until the plaintiff or applicant has discovered the fraud or the mistake or could, with reasonable diligence, has discovered it, or in the case of concealed document, until the plaintiff or the applicant first had the means of producing the concealed document or compelling its production:

Provided that nothing in this section shall enable any suit to be instituted or application to be made to recover or enforce any charge against or set aside any transaction affecting, any property which-

(i) In the case of fraud, has been purchased for valuable consideration by a person who was not a party to the fraud and did not at the time of the purchase know, or have reason to believe, that any fraud had been committed, or

(ii) In the case of mistake, has been purchased for valuable consideration subsequently to the transaction in which the mistake was made, by a person who did not know, or have reason to believe, that the mistake had

been made, or

(iii) In the case of a concealed document, has been purchased for valuable consideration by a person who was not a party to the concealment and, did not at the time of purchase know, or have reason to believe, that the document had been concealed.

(2) Where a judgment-debtor has, by fraud or force, prevented the execution of a decree or order within the period of limitation, the court may, on the application of the judgment-creditor made after the expiry of the said period extend the period for execution of the decree or order:

Provided that such application is made within one year from the date of the discovery of the fraud or the cessation of force, as the case may be.

Section 18. Effect of acknowledgment in writing

(1) Where before the expiration of the prescribed period for a suit or application in respect or any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derived his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed.

(2) Where the writing containing thee acknowledgement is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act,1872 ( 1 of 1872), oral evidence of its contents shall not be received.

Explanation – For the purposes of this section, –

(a) An acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or night;

(b) The word “signed” means signed either personally or by an agent duly Authorised in this behalf ; and

(c) An application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right.

NOTES – It is not necessary that an acknowledgment within Section 18 must contain a promise pay or should amount to a promise to pay. (Subbarsadya v.Narashimha, AIR 1936 Mad.939)

The above section corresponds to S.19 of the old Act and makes slight changes.

Section 19. Effect of payment on account of debt or of interest on legacy

Where payment on account of a debt or of interest on a legacy is made before the expiration of the prescribed period by the person liable to pay the debt or legacy or by his agent duly Authorised in this behalf, a fresh period of limitation shall be computed from the time when payment was made:

Provided that, save in the case of payment of interest made before the 1st day of January,1928, an acknowledgment of the payment appears in the hand-writing of, or in a writing signed by the person making the payment.

Explanation – For the purposes of this section, –

(a) Where mortgaged land is in the possession of the mortgage, the receipt of the rent of produce of such land be deemed to be a payment;

(b) “Debt” does not include money payable under a decree or order of a court.

Related Judgements

FERRO ALLOYS CORPORATION LTD. v. RAJHANS STEEL LTD.

Section 20. Effect of acknowledgment or payment by another person

(1) The expression “agent duly Authorised in this behalf” in sections 18 and 19 shall in the case of a person under disability, include his lawful guardian, committee or manager or an agent duly Authorised by such guardian, committee or manager to sign the acknowledgment or make the payment. (2) Nothing in the said sections renders one of several joint contractors, partners, executors or mortgages chargeable by reason only of a written acknowledgment signed by, or of a payment made by, or by the agent of, any other or others of them.

(3) For the purposes of the said sections, –

(a) an acknowledgment signed or a payment made in respect of any liability by, or by the duly Authorised agent of, any limited owner of property who is governed by Hindu Law, shall be a valid acknowledgment or payment, as the case may be, against a reversionary succeeding to such liability; and

where a liability has been incurred by, or on behalf of a Hindu undivided family as such, an acknowledgment or payment made by, or by the duly Authorised agent or, the manager of the family for the time being shall be deemed to have been made on behalf of the whole family.

Section 21. Effect of substituting or adding new plaintiff or defendant

(1) Where after the institution of a suit, a new plaintiff or defendant is substituted or added, the suit shall, as regards him, be deemed to have been instituted when he was made a party:

Provided that were the court is satisfied that the omission to include a new plaintiff or defendant was due to a mistake in good faith it may direct that the suit as regards such plaintiff or defendant shall be deemed to have been instituted on any earlier date.

(2) Nothing in sub-section (1) shall apply to a case where a party is added or substituted owing to assignment or devolution of any interest during the tendency of a suit or where a plaintiff is made a defendant or a defendant is made a plaintiff.

Section 22. Continuing breaches and torts

In the case of a continuing breach of contract or in the case of a continuing tort, a fresh period of limitation beings to run at every moment of the time during the breach or the tort, as the case may be, continues.

Section 23. Suits for compensation for acts not actionable without special damage

In the case of suit for compensation for an act which does not give rise to a cause of action unless some specific injury actually results there from, the period of limitation shall be computed from the time when the injury results.

Section 24. Computation of time mentioned in instrument

All instruments shall for purposes of this Act, be deemed to be made with reference to the Gregorian calendar.

Part 4 – Acquisition of ownership by possession

Section 25. Acquisition of easement by prescription

(1) Where the access and use of light or air to and for any building have been peaceable enjoyed there with as an easement, and as of right, without interruption and for twenty years, and where any way or watercourse or the use of any water or any other easement (whether affirmative or negative) has been peaceably and openly enjoyed by any person claiming title thereto as an easement and as of right without interruption and for twenty years, the right to such access and use of light or air, way, watercourse, use of other easement shall be absolute and indefeasible.

(2) Each of the said periods of twenty years shall be taken to be a period ending within two years next before the institution of the suit wherein claim to which such period relates is contested.

(3) Where property over which a right is claimed under sub-section (1) belongs to the Government that sub-section shall be read as if for the words “twenty years” the words “thirty years” were substituted.

Explanation – Nothing is an interruption within the meaning of the section, unless where there is an actual discontinuance of the possession or enjoyment by reason of an obstruction by the act of some person other than the claimant and unless such obstruction is submitted to or acquiesced in for one year after the claimant has notice thereof and of the person making or authorizing the same to be made.

Section 26. Exclusion in favour of reversionary of servant tenement

Where any land or water upon, over or from, which any easement has been enjoyed or derived has been held under or by virtue of any interest for life or in terms of years exceeding three years from the granting thereof the time of the enjoyment of such easement during the continuance of such interest or term shall be excluded in the computation of the period of twenty years in case the claim is, within three years next after the determination of such interest or term, resisted by the person entitled on such determination to the said land or water.

Section 27. Extinguishments of right to property

At the determination of the period hereby limited to any person for instituting a suit for possession of any property, his right to such property shall be extinguished.

Part 5 – Miscellaneous

Section 28.  Amendment of Certain Acts. (Repealed)

Section 29. Savings

(1) Nothing in this Act, shall affect section 25 of the Indian Contract Act,1872.

(2) Where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period prescribed by the Schedule, the provisions of section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any sit, appeal or application by any special or local law, the provisions contained in section 5 to 24 (inclusive shall apply only in so far, as and to the extent to which, they are not expressly excluded by such special or local law.

(3) Save as otherwise provided in any law for the time being in force with respect to marriage and divorce, nothing in this Act shall apply to any suit or other proceeding under any such law.

(4) Sections 25 and 26 and the definition of “easement” in section 2 shall not apply to cases arising in the territories to which the Indian Easements Act,1882 may for the time being extend.

Section 30. Provision for suits, etc., for which the prescribed period is shorter than the period prescribed by the Indian Limitation Act,1908

Notwithstanding anything contained in this Act, (a) any suit for which the period of limitation is shorter than the period of limitation prescribed by the Indian Limitation Act,1908, may be instituted within a period of (Note: Substituted for the words “five years” by Act No.10 of 1969) (Seven years) next after the commencement of this Act or within the period prescribed for such suit by the Indian Limitation Act,1908, whichever period expires earlier;

(Note: Substituted for the Words “five years” by Act No.10 of 1969)

[Provided that if in respect of any such suit, the said period of seven years expires earlier than the period of limitation prescribed therefore under the Indian Limitation Act,1908 and the said period of seven years together with so much of the period of limitation in repeat of such suit under the Indian Limitation Act,1908, as has already expired before the commencement of this Act is shorter than the period prescribed for such suit under this Act, then, the suit may be instituted within the period of limitation prescribed therefore under this Act].

(b) any appeal or application for which the period of limitation is shorter than the period of limitation prescribed by the Indian Limitation Act, 1908 may be preferred or made within a period of ninety days next after the commencement of this Act or within the period prescribed for such appeal or application by the Indian Limitation Act,1908, whichever period expires earlier.

Section 31. Provision as to barred or pending suits, etc.

Nothing in this Act shall,

(a) enable any suit, appeal or application to be instituted, preferred or made for which the period of limitation prescribed by the Indian Limitation Act,1908, expired before the commencement of this Act; or

(b) affect any suit, appeal or application instituted, preferred or made before, and pending at, such commencement.

Section 32. Repeal

Rep. By the Repealing and Amending Act,1974 (56 of 1974), section 2 and Schedule I.

Schedule – Period of Limitations

Division I – Suits

PART I – Suits Relating to Accounts

PART II – Suits relating to Contracts

PART III-Suits relating to Declarations

PART IV – Suits relating to Declarations.

PART V – Suits relating to Immovable Property

PART VI – Suits relating to movable property

PART VII – Suits relating to torts

PART VIII – Suits relating to trust and trust property

 PART IX – Suits relating to miscellaneous matters

PART X – Suits for which there is no prescribed period

  Division II

Division III – Applications

PART I

PART II

Other applications

Payment of Bonus Act

November 30, 2014

Section 1. Short title, extent, and application

(1) This Act may be called the Payment of Bonus Act,1965

(2) It extends to the whole of India [Note: The words “except the State of Jammu and Kashmir” omitted by Act 51 of 1970, Sec.2 and Schedule (w.e.f. 1st September,1971).

(3) Save as otherwise provided in this Act, it shall apply to -

(a) Every factory; and

(b) Every other establishment in which twenty or more persons are employed on any day during an accounting year:

[(Note: Ins. by Act 23 of 1976, Sec.3 (w.e.f. 25th September, 1975) Provided that the appropriate Government may, after giving not less than two months’ notice of its intention so to do, by notification in the official Gazette, apply the provisions of this Act with effect from such accounting year as may be specified in the notification, to any establishment or class establishments [including an establishment being a factory within the meaning of sub-clause (ii) of Cl. (m) of Sec.2 of the Factories Act, 1948 (63 of 1948)] employing such number of persons less than twenty as may be specified in the notification ; so however, that number of persons so specified shall in no case be less than ten.]

(4) Save as otherwise provided in this Act, the provisions of this Act shall in relation to a factory or other establishment to which this Act applies, have effect in respect of the accounting year commencing on any day in the year 1964 and in respect of every subsequent accounting year:

[(Note: Added by Act 51 of 1970, Sec.2 and Schedule (w.e.f. 1st September, 1971) Provided that in relation to the State of Jammu and Kashmir, the reference to the accounting year commencing on any day in the year 1964 and every subsequent accounting year shall be construed as reference to the accounting year commencing on any day in the year 1968 and every subsequent accounting year:]

[(Note: Ins. by Act 23 of 1976, Sec.3 (w.e.f. 25th September, 1975) Provided further that when the provisions of this Act have been made applicable to any establishment or class of establishments by the issue of a notification under the proviso to sub-section (3), the reference to the accounting year commencing on any day in the year 1964 and every subsequent accounting year or, as the case may be, the reference to the accounting year commencing on any day in the year 1968 and every subsequent accounting year shall in relation to such establishment or class of establishments, be construed as a reference to the accounting year specified in such notification and every subsequent accounting year.]

(5) An establishment to which this Act applies [Note: The words, brackets, letter and figure “under Cl. (b) of sub-section (3)” omitted by Act 23 of 1976, Sec.8 (w.e.f. 25th September, 1975)] shall continue to be governed by this Act notwithstanding that the number of persons employed therein falls below twenty [(Note: Ins. by Act 23 of 1976, Sec-3, (w.e.f. 25th September, 1975) or, as the case may be, the number specified in the notification issued under the proviso to sub-section (3)].

NOTES

Section 1 and 2 of Payment of Bonus (Amendment) Act No.43 of 1977 provides as under :

1. Shot title and commencement – (1) This Act may be called the Payment of Bonus (Amendment) Act, 1977.

(2) It shall come into force on the third day of September, 1977.

2. Act 21 of 1965 to have modified effect for a particular period – The Payment of Bonus Act, 1965 (hereinafter referred to as the principal Act) shall, -

(a) In relation to a factory or other establishment to which the principal Act applies immediately before the commencement of this Act and

(b) In relation to a banking company and the Industrial Reconstruction Corporation of India to which the principal Act applies on and from such commencement by virtue of this Act,

Have effect in respect of the accounting year commencing on any day in the year 1976 [and in respect of the accounting year commencing on any day in the year 1977], as if the amendments specified in Sections 3 to 19 has been made in that Act.

Explanation – In this section, the expressions “banking company” and “accounting year” shall have the meanings respectively assigned to them in clauses (8) and (1) of Section 2 of the principal Act”.

Section 2. Definitions

In this Act, unless the context otherwise requires, -

(1) “Accounting year” means -

(i) In relation to a corporation, the year ending on the day on which the books and accounts of the corporation are to be closed and balanced :

(ii) In relation to a company, the period in respect of which any profit and loss account of the company laid before it in annual general meeting is made up, whether that period is a year or not; (iii) In any other case -

(a) The year commencing on the 1st day of April ; or

(b) If the accounts of an establishment maintained by the employer thereof are closed and balanced on any day other than the 31st day of March, then, at the option of the employer, the year ending on the day on which its accounts are so closed and balanced :

Provided that an option once exercised by the employer under para. (b) of this sub-clause shall not again be exercised except with the previous permission in writing of the prescribed authority and upon such conditions as that authority may think fit :

(2) “Agricultural income” shall have the same meaning as in the Income-tax Act ; (3) “Agricultural income-tax law” means any law for the time being in force relating to the levy of tax on agricultural income ; (4) “Allocable surplus” means -

(a) In relation to an employer, being a company [(Note: Ins. by Act 66 of 1980 (w.e.f. 21st August,1980) (other than a banking company)] which has not made the arrangements prescribed under the Income-tax Act for the declaration and payment within Indian of the dividends payable out of its profits in accordance with the provisions of Sec.194 of that Act, sixty-seven per cent of the available surplus in an accounting year ;

(5) In any other case, sixty per cent of such available surplus ; (Note: Certain words omitted by Act 23 of 1976, Sec.4 (w.e.f. 25th September, 1975)

(6) “Available surplus” means the available surplus computed under Sec.5 ;

(7) “Award” means an interim or a final determination of any industrial dispute or of any question relating thereto ny any Labour Court. Industrial Tribunal or National Tribunal constituted under the Industrial Disputes Act, 1947 (14 of 1947), or by any other authority constituted under any corresponding law relating to investigation and settlement of industrial disputes in force in a State and includes an arbitration award made under Sec. 10-A of that Act or under that law;

(8) “Banking company” means a banking company as defined in Sec.5 of the Banking Companies Act, 1949 (10 of 1949), and includes the State Bank of India, any subsidiary bank as defined in the State Bank of India (Subsidiary Bank) Act, 1959 (38 of 1959), [(Note: Ins. by Act 23 of 1976 Sec.4 (w.e.f. 25th September, 1975) any corresponding new bank specified in the First Schedule to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, (5 of 1970), [Note: Ins. by Act 66 of 1980, (w.e.f. 21st August, 1980) any corresponding new bank constituted under Sec.3 of Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980] any co-operative bank as defined in Cl. (bii) of Sec.2 of the Reserve Bank of India Act, 1934 (2 of 1934),] and any other banking institution which may be notified in this behalf by the Central Government.

(9) “Company” means any company as defined in Sec.3 of the Companies Act, 1956 (1 of 1956), and includes a foreign company within the meaning of Sec.591 of that Act;

(10) “Co-operative society” means a society registered or deemed to be registered under the Co-operative Societies Act, 1912 (2 of 1912), or any other law for the time being in force in any State relating to co-operative societies;

(11) “Corporation” means any body corporate established by or under any Central, Provincial or State Act but does not include a company or a co-operative society :

(12) “Direct tax” means -

(a) Any tax chargeable under – (i) The Income-tax Act;

(ii) The Super Profits Tax Act, 1963 (14 of 1963);

(iii) The Companies (Profits) Surtax Act, 1964 (7 of 1964);

(iv) The agricultural income-tax law; and

(b) Any other tax which, having regard to its nature or incidence, may be declared by the Central Government, by notification in the official Gazette to be a direct tax for the purposes of this Act;

(13) “Employee” means any person (other than an apprentice) employed on a salary or wage not exceeding [(Note: Subs. by Act No.67 of 1985, Sec.2, for the words “one thousand and six hundred rupees” (w.e.f. 7th November, (1985)) two thousand and five hundred rupees] per mensem in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied;

(14) “Employer” includes -

(i) In relation to an establishment which is factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier and where a person has been named as a manager of the factory under Cl. (f) of sub-section (1) of Sec.7 of the Factories Act, 1948, the person named; and (ii) In relation to any other establishment, the person who, or the authority which, has the ultimate control over the affairs of the establishment and where the said affairs are entrusted to a manager, managing director or managing agent, such manager, managing director or managing agent ;

(15) “Establishment in private section” means any establishment other than an establishment in public sector;

(16) “Establishment in public sector” means an establishment owned, controlled or managed by-

(a) A Government company as defined in Sec. 617 of the Companies Act,

1956 (1 of 1956) ; (b) A corporation in which not less than forty per cent of its capital is held (whether singly or taken together) by -

(i) The Government; or

(ii) The Reserve Bank of India; or

(iii) A corporation owned by the Government or the Reserve Bank of India ;

(17) “Factory” shall have the same meaning as in Cl. (m) of Sec.2 of the Factories Act, 1948 (63 of 1948) ;

(18) “Gross profits” means the gross profits calculated under Sec.4 ;

(19) “Income-tax Act” means the Income-tax Act, 1961 (43 of 1961) ;

(20) “Prescribed” means prescribed by rules made under this Act ;

(21) “Salary or wage” means all remuneration (other than remuneration in respect of overtime work) capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employment or of work done in such employment and includes dearness allowance (that is to say, all cash payments, by whatever name called, paid to an employee on account of a rise in the cost of living, but does not include -

(i) Any other allowance which the employee is for the time being entitled to

(ii) The value of any house accommodation or of such of light, water, medical attendance or other amenity or of any service of any confessional supply of food grains or other articles;

(iii) Any traveling concession;

(iv) Any bonus (including incentive, production and attendance bonus) ;

(v) Any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employees under any law for the time being in force ;

(vi) Any retrenchment compensation or any gratuity or other retirement benefit payable to the employees or any ex gratia payment made to him ;

(vii) Any commission payable to the employee.

(viii) Any commission payable to the employee.

Explanation – Where an employee is given in lieu of the whole or part of the salary or wage payable to him, free food allowance or free food by his employer, such food allowance or the value of such food shall, for the purpose of this clause, be deemed to form part of the salary or wage of such employees.

(22) Words and expressions used but not defined in this Act and defined in the Industrial Disputes Act, 1947 (14 of 1947), shall have the meanings respectively assigned to them in that Act.

Section 3. Establishments to include departments, undertakings and branches

Where an establishment consists of different departments or undertakings or has branches, whether situated in the same place or in different places, all such departments or undertakings or branches shall be treated as parts of the same establishment for the purpose of computation of bonus under this Act :

Provided that where for any accounting year a separate balance-sheet and profit and loss account are prepared and maintained in respect of any such department or undertaking or branch, then, such department or undertaking or breach shall be treated as separate establishment for the purpose of computation of bonus under this Act for that year, unless such department or undertaking or branch was immediately before the commencement of that accounting year treated as part of the establishment for the purpose of computation of bonus.

NOTES

When there is integral link and unity of management between the two division of a company it cannot be said as a separate undertaking although it is 60 miles away from one division. Gawlior Rayon Silk Mfg. Co. v. Industrial Tribunal 1975 Lab. I.C. 820.

Section 4. Computation of gross profits.

The gross profits derived by an employer from an establishment in respect of any accounting year shall -

(a) In the case of a banking company, be calculated in the manner specified in the First Schedule ; (b) In any other case, be calculated in the manner specified in the Second Schedule.

Section 5. Computation of available surplus

The available surplus in respect of any accounting year shall be the gross profits for that year after deducting therefrom the sums referred to in Sec.6.

[(Note: Added by Act 8 of 1969, Sec.2) Provided that the available surplus in respect of the accounting year commencing on any day in the year 1968 and in respect of every subsequent accounting year shall be the aggregate of -

(a) The gross profits for that accounting year after deducting therefrom the sums referred to in Section 6; and (b) An amount equal to the difference between -

(i) The direct tax, calculated in accordance with the provisions of Section 7, in respect of an amount equal to the gross profits of the employer for the immediately preceding accounting year; and

(ii) The direct tax, calculated in accordance with the provisions of Section 7, in respect of an amount equal to the gross profits of the employer for such preceding accounting year after deducting therefrom the amount of bonus which the employer has paid or is liable to pay to his employees in accordance with the provisions of this Act for that year.]

NOTES

The burden of proving that the depreciation claimed is the correct amount admissible under Section 32 (1) of Income-tax Act lies on the party claiming such amount. Workmen of National and Grindlays Bank Ltd. v. National and Grindlays Bank Ltd., AIR 1976 S.C. 611.

Section 6. Sums deductible from gross profits

The following sums shall be deducted from the gross profits as prior charges, namely:

(a) Any amount by way of depreciation admissible in accordance with the provisions of sub-section (1) of Section 32 of the Income-tax Act, or in accordance with the provisions of the agricultural Income-tax law, as the case may be : Provided that where an employer has been paying bonus of his employees under a settlement or an award or agreement made before the 29th May, 1965, and subsisting on that date after deducting from the gross profits notional normal depreciation, then the amount of depreciation to be deducted under this clause shall, at the option of such employer (such option to be exercised once and within one year from that date) continue to be such notional normal depreciation;

(b) Any amount by way of [(Note: Subs. by Act 66 of 1980) development rebate or investment allowance or development allowance] which the employer is entitled to deduction from his income under the Income-tax Act; (c) Subject to the provisions of Section 7, any direct tax which the employer is liable to pay for the accounting year in respect of his income, profits and gains during the year;

(d) Such further sums as are specified in respect of the employer in the [(Note: Ibid) Third Schedule].

Section 7. Calculation of direct tax payable by the employer

(Note: Subs. by Act 68 of 1969) Any direct tax payable by the employer] for any accounting year shall, subject to the following provisions, be calculated at the rates applicable to the income of the employer for that year, namely:

(a) In calculating such tax no account shall be taken of -

(i) Any loss incurred by the employer in respect of any previous accounting year and carried forward under any law for time being in force relating to direct taxes ;

(ii) Any arrears of depreciation which the employer is entitled to add to the amount of the allowance for depreciation for any following accounting year or years under sub-section (2) of Section 32 of the Income-tax Act ;

(iii) Any exemption conferred on the employer under Section 84 of the Income-tax Act or of any deduction The Orient Tavern which he is entitled under sub-section (1) of Section 101 of that Act, as in force immediately before the commencement of the Finance Act, 1965 (10 of 1965) ;

(b) Where the employer is a religious or a charitable institution to which the provisions of Section 32 do not apply and the whole or any part of its income is exempt from tax under the Income-tax Act, then, with respect The Orient Tavern the income so exempted, such institution shall be treated as if it were a company in which the public are substantially interested within the meaning of that Act ;

(c) Where the employer is an individual or a Hindu undivided family, the tax payable by such employer under the Income-tax Act shall be calculated on the basis that the income derived by him from the establishment is his only income ;

(d) Where the income of any employer includes any profits and gains derived from the export of any goods or merchandise out of India any rebate on such income is allowed under any law for the time being in force relating to direct taxes, then, no account shall be taken of such rebate ;

(e) No account shall be taken of any rebate [(Note: Subs. by Act 66 of 1980) other than development rebate or investment allowance or development allowance)] or credit or relief or deduction (not hereinafter mentioned in this section) in the payment of any direct tax allowed under nay law for the time being in force relating to direct taxes or under the relevant annual Finance Act, for the development of any industry.

Section 8. Eligibility for bonus

Every employee shall be entitled to be paid by his employer in an accounting year, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year.

Section 9. Disqualification for bonus

Notwithstanding anything contained in this Act, an employee shall be disqualified from receiving bonus under this Act, if he is dismissed from service for-

(a) Fraud; or (b) Riotous or violent behaviour while on the premises of the establishment; or

(c) Theft, misappropriation or sabotage of any property of the establishment.

Section 10. Payment of minimum bonus

Subject to the other provisions of this Act, every employer shall be bound to pay to every employee in respect of the accounting year commencing on any day in the year 1979 and in respect of every subsequent accounting year, a minimum bonus which shall be 8.33 per cent of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year:

Provided that there an employee has not employed fifteen years of age at the beginning of the accounting year, the provision of this section shall have effect in relation to such employee as if for the words “one hundred rupees”, the words “sixty rupees” were substituted.

Section 11. Payment of maximum bonus

(1) Where in respect of any accounting year referred to in Sec.10, the allocable surplus exceeds the amount of minimum bonus payable to the employees under that section, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent of such salary or wage.

(2) In computing the allocable surplus under this section, the amount set on or the amount set-off under the provisions of Sec.15 shall be taken into account in accordance with the provisions of that section.

Section 12. Calculation of bonus with respect to certain employees

Where the salary or wage of an employee exceeds one thousand and six hundred rupees per mensem, the bonus payable to such employee under Sec.10, or as the case may be, under Sec.11, shall be calculated as if his salary or wage were one thousand and six hundred rupees per mensem.

Section 13. Proportionate reduction in bonus in certain cases

Where an employee has not worked for all the working days in an accounting year, the minimum bonus of one hundred rupees or, as the case may be, of sixty rupees, if such bonus is higher than 8.33 per cent of his salary or wage for the days he has worked in that accounting year, shall be proportionately reduced.

NOTES

Working days – Words ‘working day in any accounting year’ – meaning of – factory working in a particular season only and not during the whole year in such a case the ‘working days’ only mean those days of the year during which the employee concerned is actually allowed to work. (Shakkar Mills Mazdoor Sangh v. Gwalior Sugar Co. Ltd., 1985 JLJ 294 = AIR 1985 SC 758).

Section 14. Computation of number of working days.

For the purposes of Sec. 13, an employee shall be deemed to have worked in an establishment in any accounting year also on the days on which -

(a) He has been laid off under an agreement or as permitted by standing orders under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947) or under any other law applicable to the establishment ;

(b) He has been on leave with salary or wage;

(c) He has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and

(d) The employee has been on maternity leave with salary or wage, during the accounting year.

Section 15. Set-on and set-off of allocable surplus

(1) Where for any accounting year, the allocable surplus exceeds the amount of maximum bonus payable to the employees in the establishment under Sec.11, the, the excess shall, subject to a limit of twenty per cent of the total salary or wage of the employees employed in the establishment in that accounting year, be carried forward for being set-on in the succeeding accounting year and so on up to and inclusive of the fourth accounting year to be utilized for the purpose of payment of bonus in the manner illustrated in the Fourth Schedule.

(2) Where for any accounting year, there is no available surplus or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees in the establishment under Section 10, and there is no amount or sufficient amount carried forward and set on under sub-section (1) which could be utilized for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, shall be carried forward for being set-off in the succeeding accounting year and so on up to and inclusive of the fourth accounting year in the manner illustrated in the Fourth Schedule.

(3) The principle of set-on and set-off as illustrated in the Fourth Schedule shall apply to all other cases not covered by sub-section (1) or sub-section (2) for the purpose of payment of bonus under this Act.

(4) Where in any accounting year any amount has been carried forward and set-on or set-off under this section, then, in calculating bonus for the succeeding accounting year, the amount of set-on or set-off carried forward from the earliest accounting year shall first be taken into account.

Section 16. Special provisions with respect to certain establishments

(1) Where an establishment is newly set up, whether before or after the commencement of this Act, the employees of such establishment shall be entitled to be paid bonus under this Act in accordance with the provisions of sub-section (1-A), (1-B) and (1-C).

(1-A) In the first five accounting years following the accounting year in which the employee sells the goods produced or manufactured by him or renders services, as the case may be, from such establishment, bonus shall be payable only in respect of the accounting year in which the employer derives profit from such establishment and such bonus shall be calculated in accordance with the provisions of this Act in relation to that year, but without applying the provisions of Sec.15.

(1-B) For the sixth and seventh accounting years following the accounting year in which the employer sells the goods produced or manufactured by him or renders services, as the case may be, from such establishment, the provisions of Sec.15 shall apply subject to the following modifications namely :

(i) For the sixth accounting year – Set on or set-off, as the case may be, shall be made in the manner illustrated in the [(Note: Subs. by Act 66 of 1980, (w.e.f. 25th September,1975) Fourth Schedule] taking into account the excess or deficiency, if any, as the case may be, of the allocable surplus set-on or set-off in respect of the fifth and sixth accounting year ;

(ii) For the seventh accounting year – Set-on or set-off, as the case may be, shall be made in the manner illustrated the [(Note: Subs. by Act 66 of 1980, (w.e.f. 25th September,1975) Fourth Schedule] taking into account the excess of deficiency, if any, as the case may be, of the allocable surplus set-on or set-off in respect of the fifth, sixth and seventh accounting years.

(1-C) From the eighth accounting year following the accounting year in which the employer sells the goods produced or manufactured by him or renders services, as the case may be, from such establishment, the provisions of Sec.15 shall apply in relation to such establishment as they apply in relation to any other establishment.

Explanation I – For the purpose of sub-section (1), an establishment shall not be deemed to be newly set up merely by reason of a change in its location, management, name or ownership.

Explanation II – For the purpose of sub-section (1-A), an employer shall not be deemed to have derived profit in any accounting year unless -

(a) He has made provision for that year’s depreciation, to which he is entitled under the Income-tax Act or, as the case may be, under the agricultural income-tax law ; and (b) The arrears of such depreciation and losses incurred by him in respect of the establishment for the previous accounting years have been fully set-off against his profits.

Explanation III – For the purposes of sub-sections (1-A), (1-B) and (1-C) sale of the goods produced or manufactured during the course of the trail running of any factory or of the prospecting stage or an oil-field shall not be taken into consideration and where any question arises with regard to such production or manufacture, the decision of the appropriate Government, made after giving the parties reasonable opportunity of representing the case, shall be final and shall not be called in question by any court or other authority.]

(2) The provisions of [(Note: Subs. by Act 23 of 1976, (w.e.f. 25th September, 1975) sub-sections (1), (1-A), (1-B) and (1-C) shall, so far as may be, apply to new departments or undertakings or branches set up by existing establishments :

Provided that if an employer in relation to an existing establishment consisting of different departments or undertakings or branches (whether or not in the same industry) set up at different periods has, before the 29th May, 1965, been paying bonus to the employees of all such departments or undertakings or branches irrespective of the date on which such departments or undertakings or branches were set up, on the basis of the consolidated profits computed in respect of all such departments or undertakings or branches, then, such employer shall be liable to pay bonus in accordance with the provisions of this Act to the employees of all such departments or undertakings or branches (whether set up before or after that date) on the basis of the consolidated profits computed as aforesaid.

Section 17. Adjustment of customary or interim bonus against bonus payable under the Act.

Where in any accounting year -

(a) An employer has paid any puja bonus or other customary bonus to an employees ; or (b) An employer has paid a part of the bonus payable under this Act to an employee before the date on which such bonus becomes payable;

Then, the employer shall be entitled to deduct the amount of bonus so paid from the amount of bonus payable by him to the employee under this Act in respect of that accounting year and the employee shall be entitled to receive only the balance.

Section 18. Deduction of certain amounts from bonus payable under the Act.

Where in any accounting year, an employee is found guilty of misconduct causing financial loss to the employer, then, it shall, be lawful for the employer to deduct the amount of loss from the amount of bonus payable by him to the employee under this Act in respect of that accounting year only and the employee shall be entitled to receive the balance, if any.

Section 19. Time-limit for payment of bonus

[(Note: Subs. by Act 23 of 1976, (w.e.f. 25th September, 1975) All amounts] payable to an employee by way of bonus under this Act shall be paid in cash by hi employer.

(a) Where there is a dispute regarding payment of bonus pending before any authority under Sec.22, within a month from the date on which the award becomes enforceable or the settlement comes into operation, in respect of such dispute; (b) In any other case, within a period of eight months from the close of the accounting year :

Provided that the appropriate Government or such authority as the appropriate Government may specify in this behalf may, upon an application made to it by the employer and for sufficient reasons, by order, extend the said period of eight months to such further period or periods as it thinks fit ; so, however, that the total period so extended shall not in any case exceed two years.

(Note: Sub-sections (2) to (7) inserted by Act 68 of 1972, Sec.4 omitted by Act 23 of 1976, Sec.13 (w.e.f. 25th September, 1975).

(Note: Sub-section (8) inserted by Act 39 of 1973, Sec.4, omitted by Act 55 of 1973, Sec.2 (w.e.f. 1st September, 1973).

NOTES

Sub-Section (8) of Section 19 was omitted by Payment of Bonus (Amendment) Act No. 55 of 1973 w.e.f. 1.9.1973 and Section 3 of the above Amendment Act is given below:

3. Portion of bonus credited in the provident fund account to be refunded. – Where in pursuance of the provisions of Section 19 of the principal Act, any portion of the bonus paid to an employee in respect of the accounting year commencing on any day in the year 1972 has been remitted by the employer before the commencement of this Act to the authority maintaining the provident fund account of such employee for crediting the same in that account, such authority shall, notwithstanding anything contained in any other law (including any scheme) for the time being in force, refund such portion to the employee”.

Section 20. Application of Act to establishments in public section in certain cases

[(Note: Renumbered by Act 66 of 1980)1] If in any accounting year an establishment in public section sells any goods produced or manufactured by it or renders any services, in competition with an establishment in private sector, and the income from such sale or services or both is not less than twenty per cent of the gross income of the establishment in public sector for that year, then, the provisions of this Act shall apply in relation to such establishment in public sector as they apply in relation to a like establishment in private sector.

[(Note: Ins. by Sec.11, ibid) (2) Save as otherwise provided in sub-section (1), nothing in this Act shall apply to employees employed by any establishment in public sector.]

Section 21. Recovery of bonus due from an employer

Where any money is due to an employee by way of bonus from his employer under a settlement or an award or agreement, the employee himself, or any other person authorised by him in writing in this behalf, or in the case of the death of the employee, his assignee or heirs may, without prejudice to any other mode of recovery made an application to the appropriate Government for the recovery, of the money due to him, and if the appropriate Government or such authority as the appropriate Government may specify in this behalf is satisfied that any money is so due, it shall issue a certificate for that amount to the Collector who shall proceed to recover the same in the same manner as an arrear of land revenue:

Provided that every such application shall be made within one year from the date on which the money became due to the employee from the employer:

Provided further that any such application may be entertained after the expiry of the said period of one year, if the appropriate Government is satisfied that the applicant had sufficient cause for not making the application within the said period.

Explanation – In this section and in [(Note: Subs. by Act 66 of 1980, (w.e.f. 21st August, 1980) Secs. 22, 23, 24 and 25], “employee” includes a person who is entitled to the payment of bonus under this Act but who is no longer in employment.

Section 22. Reference of dispute under this Act.

Where any dispute arises between an employer and his employees with respect to the bonus payable under this Act or with respect to the application of this Act to an establishment in public sector, then, such dispute shall be deemed to be an industrial dispute within the meaning of the Industrial Dispute Act, 1947 (14 of 1947), or of any corresponding law relating to investigation and settlement of industrial disputes in force in a State and the provisions of that Act or, as the case may be, such law, save as otherwise expressly provided, apply accordingly.

Section 23. Presumption about accuracy of balance-sheet and profit and loss account of corporations and companies

(1) Where, during the course of proceedings before any arbitrator or tribunal under the Industrial Disputes Act, 1947 (14 of 1947), or under any corresponding law relating to investigation and settlement of industrial disputes in force in a State (hereinafter in this section [(Note: Subs. by Act 23 of 1976, Sec.16 for land in Secs.24 and 25, (w.e.f. 25th September, 1975) and in [(Note: Subs. by Act 66 of 1980, (w.e.f. 21st August, 1980) [Secs. 24 and 25]] referred to as the “said authority”) to which any dispute of he nature specified in Sec.22 has been referred, the balance-sheet and the profit and loss account of an employer, being a corporation or a company (other than a banking company), duly audited by the Comptroller and Auditor-General of India or by auditors duly qualified to act as auditors of companies under sub-section (1) of Sec.226 of the Companies Act,, 1956 (1 of 1956), are produced before it, then the said authority may presume the statements and the particulars contained in such balance-sheet and profit and loss account to be accurate and it shall not be necessary for the corporation or the company to prove the accuracy of such statements and particulars by the filing of an affidavit or by any other mode:

Provided that where the said authority is satisfied that the statements and particulars contained in the balance-sheet or the profit and loss account of the corporation or the company are not accurate, it may take such steps as it thinks necessary to find out the accuracy of such statements and particulars.

(2) When an application is made to the said authority by any trade union being a party to the dispute or where there is not trade union, by the employees being a party to the dispute, requiring any clarification relating to any item in the balance-sheet or the profit and loss account, it may, after satisfying itself that such clarification is necessary, by order, direct the corporation or, as the case may be, the company, to furnish to the trade union or the employees such clarification within such time as may be specified in the direction and the corporation or, as the case may be, the company shall comply with such direction.

Section 24. Audited accounts of banking companies not to be questioned

(1) Where any dispute of the nature specified in Sec.22 between an employer, being a banking company, and its employees has been referred to the said authority under that section and during the course of proceedings the accounts of the banking company duly audited are produced before it, the said authority shall not permit any trade union or employees to question the correctness of such accounts, but the trade union or the employees may be permitted to obtain from the banking company such information as is necessary for verifying the amount of bounds due under this Act.

(2) Nothing contained in sub-section (1) shall enable the trade union or the employees to obtain any information which the banking company is not compelled to furnish under the provisions of Sec. 34-A of the Banking Regulation Act, 1949 (10 of 1949).

Section 25. Audit of accounts of employers, not being corporations or companies

(1) Where any dispute of the nature specified in Section 22 between an employer, not being a corporation or a company, and his employees has been referred to the said authority under that section and the accounts of such employer audited by any auditor duly qualified to act as auditor of Companies under sub-section (1) of Section 226 of the Companies Act, 1956 (1 of 1956), are produced before the said authority, the provisions of Section 23, shall, so far as may be, apply to the accounts so audited.

(2) When the said authority finds that the accounts of such employer have not been audited by any such auditor and it is of opinion that an audit of the accounts of such employer is necessary for deciding the question referred to it, then it may, by order, direct the employer to get his accounts audited within such time as may be specified in the direction or within such further time as it thinks fit and thereupon the employer shall comply with such direction.

(3) Where an employer fails to get the accounts audited under sub-section (2) the said authority may, without prejudice to the provisions of Sec.28 get the accounts audited by such auditor or auditors as it thinks fit.

(4) When, the accounts are audited under sub-section (2) or sub-section (3) the provisions of Sec.23 shall, so far as may be, apply to the accounts so audited.

(5) The expenses of, and incidental to, any audit under sub-section (3) (including the remuneration of the auditor or auditors) shall be determined by the said authority (which determination shall be final) and paid by the employer and in default of such payment shall be recoverable from the employer in the manner provided in Sec.21

Section 26. Maintenance of register, records, etc.

Every employer shall prepare and maintain such registers, records and other documents in such form and in such manner as may be prescribed.

Section 27. Inspectors

(1) The appropriate Government may, by notification in the official Gazette, appoint such persons as it thinks fit to be Inspectors for the purpose of this Act and may define the limits within which they shall exercise jurisdiction.

(2) Require an employer to furnish such information as he may consider necessary ; (a) At any reasonable time and with such assistance, if any, as he thinks fit, enter any establishment or any premises connected therewith and require any one found in charge thereof to produce before him for examination any accounts, books, registers and other documents relating to the employment of persons or the payment of salary or wage or bonus in the establishment;

(b) Examine with respect to any matter relevant to any of the purposes aforesaid, the employer, his agent or servant or any other person found in charge of establishment or any premises connected therewith or any person whom the Inspector has reasonable cause to believe to be or to have been an employee in the establishment ;

(c) Make copies of, or take extracts from, any book, register or other document maintained in relation to the establishment;

(d) Exercise such other powers as may be prescribed.

(3) Every Inspector shall be deemed to be a public servant within the meaning of the Indian Penal Code (45 of 1860).

(4) An person required to produce any accounts, book, register or other document or to give information by an Inspector under sub-section (1) shall be legally bound to do so.

[(Note: Subs. by Act 66 of 1980 (w.e.f. 21st August, 1980) (5) Nothing contained in this section shall enable an Inspector to require a banking company to furnish or disclose any statement or information or to produce, or give inspection of, any of its books of account or other documents, which a banking company cannot be compelled to furnish, disclose, produce or give inspection of, under the provisions of Sec. 34-A of the Banking Regulation Act, 1949( 10 of 1949)].

Section 28. Penalty – If any person

(a) Contravenes any of the provisions of this Act or any rule made thereunder; or (b) To whom a direction is given or a requisition is made under this Act fails to comply with the direction or requisition.

He shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

Section 29. Offences by companies

(1) If the person committing an offence under this Act is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:

provided that nothing contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be proceeded against and punished accordingly.

Explanation – For the purposes of this section -

(a) “Company” means any body corporate and includes a firm or other association of individuals; and (b) “Director”, in relation to a firm, means a partner in the firm.

Section 30. Cognizance of offences:

(1) No court shall take cognizance of any offence punishable under this Act, save on complaint made by or under the authority of the appropriate Government, [(Note: Ins. by ibid, See.16) or an officer of that Government (not below the rank of a Regional Labour Commissioner in the case of an officer of the Central Government and not below the rank of a labour commissioner the case of an officer of the State Government) specially authority in this behalf by that Government.]

(2) No Court inferior to that of a presidency magistrate or a magistrate of the first class shall try any offence publishable under this Act.

Section 31. Protection of action taken under the Act.

No suit, prosecution or other legal proceeding shall lie against the Government or any officer of the Government for anything which is in good faith done or intended to be done in pursuance of this Act or any rule made thereunder.

Section 31-A. Special provision with respect to payment of bonus linked with production or productivity

Notwithstanding anything contained in this Act, -

(i) Where an agreement or a settlement has been entered into by the employees with their employer before the commencement of the Payment of Bonus (Amendment) Act, 1976 (23 of 1976), or (ii) Where the employees enter into any agreement with their employer after such commencement,

For payment of an annual bonus linked with production or productivity in lieu of bonus based on profits payable under this Act, then, such employees shall be entitled to receive bonus due to them under such agreement or settlement, as the case may be :

[(Note: Ins. by Act 66 of 1980, (w.e.f. 21st August, 1980)) Provided that any such agreement or settlement whereby the employees relinquish their right to receive the minimum bonus under Sec.10 shall be null and void in so far as it purports to deprive them of such right :]

[(Note: Subs. by ibid) Provided further that] such employees shall not be entitled to be paid such bonus in excess of twenty per cent, of the salary or wage earned by them during the relevant accounting year.]

Section 32. Act not to apply to certain classes of employees.

Nothing in this Act shall apply to -

(i) Employees employed by any insurer carrying on general insurance business and the employees employed by the Life Insurance Corporation of India ;

(ii) Seaman as defined in Cl. (42) of Sec.3 of the Merchant Shipping Act, 1958 (44 of 1958) ;

(iii) Employees registered or listed under any scheme made under the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948), and employed by registered or listed employers ;

(iv) Employees employed by an establishment engaged in any industry carried on by or under the authority of any department of the Central Government or a State Government or a local authority ;

(v) Employees employed by -

(a) The Indian Red Cross Society or any other institution of a like nature (including its branches) ;

(b) Universities and other educational institutions;

(c) Institutions (including hospitals, chambers of commerce and society welfare institutions) established not for purposes of profit;

(i) Employees employed through contractors on building operations ;

(ii) (Note: Clause (vii) omitted by Act 66 of 1980, (w.e.f. 21st August, 1980)

(iii) Employees employed by the Reserve Bank of India ;

(iv) Employees employed by -

(a) The Industrial Finance Corporation of India;

(b) By Financial Corporation established under Sec.3, or any Joint Financial Corporation established under Sec. 3-A of the State Financial Corporations Act, 1951 (63 of 1951) ;

(c) The Deposit Insurance Corporation;

(d) [(Note: Subs. by Act 61 of 1981) the National Bank for Agriculture and Rural Development;]

(e) the Unit Trust of India;

(f) the Industrial Development Bank of India;

(Note: Omitted by Act 66 of 1980, (w.e.f. 21st August, 1980))

(g) Any other financial institution [(Note: Ins. by ibid) Other than a banking company], being an establishment in public sector, which the Central Government may, by notification in the official Gazette, specify having regard to -

(i) Its capital structure;

(i) Its objectives and the nature of its activities; (ii) The nature and extent of financial assistance or any concession given to it by the Government; and

(iii) Any other relevant factor;

(i) (Note: Clause (x) omitted by Act 23 of 1976, Sec.20, (w.e.f. 25th September, 1975)

(ii) Employees employed by inland water transport establishments operating on routes passing through any other country.

NOTES

Applicability of the provisions of the Bonus Act to employees the Defence ministry canteen stores department. It was held that canteen stores department is an “establishment” engaged in any industry carried on by or under the authority of any department of the Central Government. (Radhu-k-Kallde of Bombay v. Union of India and other (1986) 1 S.C.J.5).

Section 33. Act to apply of certain pending dispute regarding payment of bonus.

Rep. by the Payment of Bonus (Amendment) Act, 1976 (23 of 1976), Section 21 (w.e.f. 25th September, 1975).

Section 34. Employees and employers not to be precluded from entering into agreements for grant of bonus under a different formula.

Nothing contained in this Act shall be construed to preclude employees employed in any establishment or class of establishments from entering into agreements with their employer for granting them an account of bonus under a formula which is different for that under this Act :

Provided that no such agreement shall have effect unless it is entered into with the previous approval of the appropriate Government:

Provided further that any such agreement whereby the employees relinquish their right to receive the minimum bonus under sub-section (2-A) of Section 10 shall be null and void in so far as it purports to deprive them of such right:

Provided also that such employees shall not be entitled to be paid bonus in excess of -

(a) 8.33 per cent of the salary or wage earned by them during accounting year if the employer has no allocable surplus in the accounting year or the amount of such allocable surplus is only so much that, but for the provisions of sub-section (2-A)of Section 10, it would entitle the employees only to receive an amount of bonus which is less than the aforesaid percentage, or (b) Twenty per cent, of the salary or wage earned by them during the accounting year.

NOTES

Employer and workmen enter into settlement before Conciliation Officer on 9th October, 1972 within the meaning of Sec.34 (3) of Payment of Bonus Act – On a reference before the tribunal workmen claims three month Salary as customer’s bonus or 2% of salary as per the Act – Validity of award directing payment of three months basic wages as on 31st March 1972 instead of 31st March 1970 in term 1 of the Settlement. (Dishergarh Power Supply Co., Ltd. v. The Workmen of Dishergarh Power Supply Co., Ltd., (1986) 3 SCJ 247).

Section 34-A. – Effect of laws and agreements inconsistent with the Act.

Subject to the provisions of Sections 31-A and 34, the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the terms of any award, agreement, settlement or contract of service.

Section 35. Saving

Nothing contained in this Act shall be deemed to affect the provisions of the Coal Mines Provident Fund and Bonus Schemes Act, 1948 (46 of 1948), or of any scheme made there under.

Section 36. Power of exemption

If the appropriate Government, having regard to the financial position and other relevant circumstances of any establishment or class of establishments, is of opinion that it will not be in public interest to apply all or any of the provisions of this Act thereto, it may, by notification in the official Gazette, exempt for such period as may be specified therein and subject to such conditions as it may think fit to impose, such establishment or class of establishments from all or any of the provisions of this Act.

NOTE

The Court has jurisdiction to consider whether the powers under Section 36 has been properly exercised by the Government.

Consideration of the profits for one previous year cannot amount to consideration of “the financial position” of an establishment within the terms of Section 36 of the Bonus Act. (M/s, Fashan Electric Dry Cleaners v. The Government of A.P. (1977) 1 An. A.W.R.27).

Section 37. Power to remove difficulties

Rep. by the Payment of Bonus (Amendment) Act, 1976 (23 of 1976), Section 23 (w.e.f. 25th September, 1975).

Section 38. Power of make rules.

(1) The Central Government may make rules for the purpose of carrying into effect the provision of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for -

(a) The authority for granting permission under the proviso to sub-clause (iii) of Cl. (I) of Sec.2 ;

(b) The preparation of registers, records and other document and the form and manner in which such registers, records and documents may be maintained under Sec.26 ;

(c) The powers which may be exercised by an inspector under Cl. (e) of sub-section (2) of Sec.27 ;

(d) Any other matter which is to be, or may be prescribed.

(3) Every rule made under this section shall be laid as soon as may be after it is made, before each House of Parliament while it is in session for a total period of thirty days, which may be comprised in one session [(Note: Subs. by Act 23 of 1976, (w.e.f. 25th September, 1975) or in two or more successive session], and if before the expiry of the session [(Note: Subs. by Sec.21, ibid, (w.e.f. 25th September, 1975) immediately following the session or the successive sessions aforesaid], both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect as the case may be; so however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

Section 39. Application of certain laws not barred.

Save as otherwise expressly provided, the provisions of this Act shall be in addition to and not in derogation of the industrial Disputes Act, 1947 (14 of 1947) or any corresponding law relating The Orient Tavern investigation and settlement of industrial disputes in force in a State.

Section 40. Repeal and saving

(1) The Payment of Bonus Ordinance, 1965 (3 of 1965) is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance shall be deemed to have been done or taken under this Act as if this Act commenced on the 29th May, 1965.

Schedules

THE FIRST SCHEDULE

 [See Sc.4 (a)]

 Composition of Gross Profits

 Accounting Year Ending ……….

1. Bonus to employees
2. Depreciation
3. Development Rebate Reserve

(If, and to the extent, charged to Profit and Loss Account)

4. Any other reserves.

(If, and to the extent, charged to Profit and Loss Account)

Total of item No.   Rs. 3.Add back  also:

(a) Bonus paid to employees in respect of previous accounting years.

(If, and to the extent, charged to Profit and Loss Account)

(b) The amount debited in respect of gratuity paid or payable to employees in excess of the aggregate of –

1. The amount, if any, paid to, or provided for payment to, an approved gratuity fund ; and
2. The amount actually paid to employees on their retirement or on termination of their employment for any reason.

(c) Donations in excess of the amount admissible for income-tax.

(d) Capital expenditure (other than capital expenditure on scientific research which is allowed to as a deduction under any law for the time being in force relating to direct taxes) and capital losses (other than losses on sale of capital assets on which depreciation has been allowed for income-tax).

(If, and to the extent, charged to Profit and Loss Account)

(e) Any amount certified by the Reserve Bank of India in terms of sub-section (2) of Sec.34-A the Regulation Act, 1949 (10 of 1949)

(f) Losses of, or expenditure relating to any business situated outside India.     Total of Item No.3 Rs.4.Add also income, profits or gains (if any) credited directly to published or disclosed reserves, other than –

(i) Capital receipts and capital profits (including profits on the sale of capital assets on which depreciation has not been allowed for income-tax);

(ii) Profits of and receipts relating to, any business situated outside India ;

(iii) Income of foreign banking companies from investments outside India.   Net total Item No.4 Rs.5.Total of Item Nos. 1,2,3 and 4.   Rs.6.Deduct :

(If, and to the extent, credited to Profit and Loss Account)

(a) Capital receipts and capital profits (other than profits on the sale of assets) on which depreciation has been allowed for income-tax.

(b) Profits of, and receipts relating to any business situated outside India.

(c) Income of foreign banking companies from investments outside India.

(d) Expenditure or losses (if any) debited directly to published or disclosed reserves, other than –

1. Capital expenditure and capital losses (other than losses on sale of capital assets on which depreciation has not been allowed for income-tax);
2. Loses of any business situated outside India.

(e) In the case of foreign banking companies proportionate administrative (overhead) expenses of Head Office allocable to Indian business.

(If, and to the extent, credited to Profit and Loss Account)

(f) Refund of any excess direct tax paid for previous accounting years, relating to bonus, depreciation, or development rebate, if written back.

(If, and to the extent, credited to Profit and Loss Account)

(g) Cash subsidy, if any, given by the Government or by any body corporate established by any law for the time being in force of by any other agency through budgetary grants, whether given directly or through any agency for specified purposes and the proceeds of which are reserved for such purposes.

(If, and to the extent, credited to Profit and Loss Account)   Total of Item No.6 Rs. 7.Gross Profits for purposes of bonus   (Item No.5 minus Item No.6) Rs.

 Explanation – In sub-item (b) of item 3, “approved gratuity fund” has the same meaning assigned to it in Cl. (5) of Sec.2 of the Income-tax Act.

[THE SECOND SCHEDULE]

 [(Note: Subs. by ibid, Sec.19)

 See Sec. 4 (b)]

 Computation of Gross Profits

 Accounting Year ending …………

1. Bonus to employees.
2. Depreciation.
3. Direct taxes, including the provision (if any) for previous accounting years. (If, and to the extent, charged to Profit and Loss Account.)
4. [(Note: Subs. by Act 66 of 1980, Sec.19) Development rebate/Investment allowance/Development allowance reserve.] (If, and to the extent, charged to Profit and Loss Account.)
5. Any other reserves

Total of Item No.2 Rs.3.Add back also:

(If, and to the extent, charged to Profit and Loss Account.)

(a) Bonus paid to employees in respect of previous accounting years.

[(aa) (Note: Ins. by Act 23 of 1976, Sec.26 (w.e.f. (25^th September, 1975)) The amount debited in respect of gratuity paid or payable to employees in excess of the aggregate of –

1. The amount, if any, paid to, or provided for payment to, an approved gratuity fund ; and
2. The amount actually paid to employees on their retirement or on termination of their employment for any reason.]

(b) Donations in excess of the amount admissible for income-tax.

(c) Any annuity due, or commuted value of any annuity paid, under the provisions of Sec. 280-D of the Income-tax Act during the accounting year.

(d) Capital expenditure (other than capital expenditure on scientific research which is allowed as deduction under any law for the time being in force relating to direct taxes) and capital losses (other than losses on sale) of Capital assets on which depreciation has been allowed for income-tax or agricultural income-tax).

(e) Losses of, or expenditure relating to, any business situated outside India.   Total of Item No.34.Add also Income, profits or gains (if any) credited directly to reserves, other than –

1. Capital receipts and capital profits including profits on the sale of capital assets on which depreciation has not been allowed for income-tax or agricultural income-tax ;
2. Profits of, and receipts relating to, any business situated outside India ;
3. Income of foreign concerns from investments outside India.

Net total of Item No.45.Total of Item Nos. 1,2,3 and 4.   6.Deduct :

(a) Capital receipts and capital profits (other than profits on the sale of assets on which depreciation has been allowed for income-tax or agricultural income-tax).

(b) Profits of, and receipts relating to, any business situated outside India.

(c) Income of foreign concerns from investments outside India.

(d) Expenditure or losses (if any) debited directly to reserves, other than –

1. Capital expenditure and capital losses (other than losses on sale of capital assets on which depreciation has not been allowed for income-tax or agricultural income-tax) ;
2. Losses of any business situated outside India.

(e) In the case of foreign concerns proportionate administrative (over head) expenses of Head Office allocable to Indian business.

(In the proportion of Indian Gross Profit (Item No.7) to Total World Gross Profit (as per Consolidated Profit and Loss Account, adjusted as in Item No.2 above only).

(f) Refund of any direct tax paid for previous accounting years and excess provision, if any, of previous accounting years relating to bonus, depreciation, taxation or development rebate or development allowance, if written back.

(Ins. by s 26. (w.e.f. 25^th September, 1975)

(g) [(Note: Subs. by Act 23 of 1976) Cash subsidy, if any, given by the Government or by body corporate established by any law for the time being in force or by any other agency for specified purposes and the proceeds of which are reserved for such purposes.]

Total of Item No.6 Rs. 7. Gross Profits for purposes of bonus (item No.5 minus Item No.6)   Rs.

 [(Ins. by s 26. (w.e.f. 25th September, 1975) Explanation – In sub-item (aa) of Item 3, “approved gratuity fund” has the same meaning assigned to it in Cl. (5) of Sec.2 of the Income-tax Act.

THE THIRD SCHEDULE]

 [See Sec.6 (d)]

Provided that where such employer is a person to whom Chapter XXII-A of the Income-tax Act applies the annuity deposit payable by him under the provisions of that chapter during the accounting year shall also be deducted :

Provided further that where such employer is a firm, an amount equal to 25 per cent, of the gross profits derived by it from the establishment in respect of the accounting year after deducting depreciation in accordance with the provisions of Cl. (a) of Sec.6 by way of remuneration to all the partners taking part in the conduct of business of establishment shall also be deducted, where oral or written, provides for the payment of remuneration to any such partner, and –

1. The total remuneration payable to all such partners is less than the said 25 per cent, the amount payable, subject to a maximum of forty-eight thousand rupees to each such partner ; or
2. The total remuneration payable to all such partners is higher than the said 25 percent. Such percentage, or a sum calculated at the rate of forty-eight thousand rupees to each such partner, which ever is less.

Shall be deducted under this proviso :

Provided also that where such employer is an individual or a Hindu undivided family, –

1. An amount equal to 25 per cent of the gross profits derived by such employer from the establishment in respect of the accounting year after deducting depreciation in accordance with the provisions of Cl. (a) of Sec.6, or
2. Forth-eight thousand rupees whichever is less, by way of remuneration to such employer, shall also be deducted.

6.Any employer failing under Item No.1 or Item No.3 or Item No.4 or Item No.5 and being a licensee within the meaning or the Electricity (Supply) Act, 1948 (54 of (1948).In additional the sums deductible under any of the aforesaid Items, such sums as are required to be appropriated by the licensee in respect of the accounting year to a reserve under the Sixth Schedule to that Act shall also be deducted.

Explanation – The expression “reserves” occurring in column (3) against Item Nos. [(Note: Omitted by Act 23 of 1976, and by Act 43 of 1977, Sec.19 (w.e.f. 3rd July 1977) 1 (iii), 2 (ii), and 3 (ii)] shall not include any amount set apart for the purpose of –

(i) Payment of any direct tax which, according to the balance-sheet, would be payable.

(ii) Meeting any depreciation admissible in accordance with the provisions of Cl. (a) of Sec.6 ;

(iii) Payment of dividends which have been declared but shall include -

(a) Any amount, over and above the amount referred to in Cl. Of payment of any direct tax; and

(b) Any amount set apart for meeting any depreciation in excess of the amount admissible in accordance with the provisions of Cl. (a) of Sec.6].

THE FOURTH SCHEDULE]

 (See Secs. 15 and 16)

 In this Schedule, the total amount of bonus equal to 8.33 per cent of the annual salary or wage payable to all the employees is assumed to be Rs.1,04,167. Accordingly, the maximum bonus to which all the employees are entitled to be paid (twenty per cent of the annual salary or wage of all the employees) would be Rs. 2,50,000.

 Notes: * Maximum

 ** Minimum

 The balance of Rs.1,10,000 set on from Year-2 lapses.

Rules  – Introduction

No. G.S.R. 2367, dated the 21st August, 1975 (Note: Published in the Gazette of India, Pt. II, Sec.3 (I) dated 30th August,1975 p.2580) – In exercise of the powers conferred by Sec.38 of the Payment of Bonus Act,1965 (XXI of 1965), and in super session of the Payment of Bonus Rules, 1965, the Central Government hereby makes the following rules namely

(See Rules 1 to 5)

1. Short title and commencement -

(1) These rules may be called the Payment of Bonus Rules, 1965

(2) These shall come into force at once on the date of their publication in the official Gazette.

2. Definitions – In these rules, -

(a) “Form” means a form appended to these rules; (b) “Act” means the Payment of Bonus Act, 1965(XXI of 1965) ;

(c) “Section” means a section of the Act.

3. Authority for granting permission for change of accounting year -

The prescribed authority for the purposes of the proviso to para. (b) of sub-clause (iii) of Cl. (1) of Sec.2 shall be-

(a) In the case of an establishment in relation to which the Central Government is the appropriate Government under the Act, the Chief Labour Commissioner (Central); (b) In any other case, the Labour Commissioner of the State in which the establishment is situated.

4. Maintenance of registers. -

Every employer shall prepare and maintain the following registers, namely:

(a) A register showing the computation of the allocable surplus referred to in Cl. (4) of Sec.2 in Form A ;

(b) A register showing the set-on and set-off of the allocable surplus, under Sec.15, in Form B ;

(c) A register showing the details of the amount of bonus due to each of the employees, the deductions under Secs.17 and 18 and the amount actually disbursed, in Form C.

5. Annual returns -

Every employer shall send a return in Form D to the Inspector so as to reach the said form to the Inspector within 30 days after the expiry of the time limit specified in Sec. 19 for payment of bonus.

Central Sales Tax Act

November 30, 2014

Section 1. Short title, extent, and commencement.

ACT NO. 74 OF 1956

[21st December, 1956.]

An Act to formulate principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import into or export from India, to provide for the levy, collection and distribution of taxes on sales of goods in the course of inter-State trade or commerce and to declare certain goods to be of special importance in inter-State trade or commerce and specify the restrictions and conditions to which State laws imposing taxes on the sale or purchase of such goods of special importance shall be subject.

(1) This Act may be called the Central Sales Tax Act, 1956.

(2) It extends to the whole of India ¹[***]

(3) It shall come into force on such date² as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different provisions of this Act.

—————

1. The words “except the State of Jammu and Kashmir” omitted by Act 5 of 1958, sec. 2 (w.e.f. 13-3-1958).

2. Came into force on 5-1-1957, all sections except section 15, vide S.R.O. 78, dated 4th January, 1957, published in the Gazette of India, Extra., 1957, Pt. II, Sec. 3, p. 57. Section 15 came into force on 1-10-1958, vide G.S.R. 897, dated 23rd September, 1958, published in the Gazette of India, Extra., 1958, Pt. II, Sec. 3 (i), p. 476.

Section 2. DEFINITIONS.

In this Act, unless the context otherwise requires,—

(a) “appropriate State” means—

(i) in relation to a dealer who has one or more places of business situated in the same State, that State;

(ii) in relation to a dealer who has ¹[***] places of business situated in different States, every such State with respect to the place or places of business situated within its territory;

²[***]

³[(aa) “business” includes—

(i) any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern; and

(ii) any transaction in connection with or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern;

(ab) “crossing the customs frontiers of India” means crossing in the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities.

Explanation.—For the purposes of this clause, “customs station” and “customs authorities” shall have the same meanings as in the Customs Act, 1962 (52 of 1962);]

⁴[(b) “dealer” means any person who carries on (whether regularly or otherwise) the business of buying, selling, supplying or distributing goods, directly or indirectly, for cash or for deferred payment, or for commission remuneration or other valuable consideration, and includes—

(i) a local authority, a body corporate, a company, any co-operative society or other society, club, firm, Hindu undivided family or other association of persons which carries on such business;

(ii) a factor, broker, commission agent, del credere agent, or any other mercantile agent, by whatever name called, and whether of the same description as hereinbefore mentioned or not, who carries on the business of buying, selling, supplying or distributing, goods belonging to any principal whether disclosed or not; and

(iii) an auctioneer who carries on the business of selling or auctioning goods belonging to any principal, whether disclosed or not and whether the offer of the intending purchaser is accepted by him or by the principal or a nominee of the principal.

Explanation 1.—Every person who acts as an agent, in any State, of a dealer residing outside that State and buys, sells, supplies, or distributes, goods in the State or acts on behalf of such dealer as—

(i) a mercantile agent as defined in the Sale of Goods Act, 1930
(3 of 1930), or

(ii) an agent for handling of goods or documents of title relating to goods, or

(iii) an agent for the collection or the payment of the sale price of goods or as a guarantor for such collection or payment,

and every local branch or office in a State of a firm registered outside that State or a company or other body corporate, the principal office or headquarters whereof is outside that State, shall be deemed to be a dealer for the purposes of this Act.

Explanation 2.—A Government which, whether or not in the course of business, buys, sells, supplies or distributes, goods, directly or otherwise, for cash or for deferred payment or for commission, remuneration or other valuable consideration, shall except in relation to any sale, supply or distribution of surplus, un-serviceable or old stores or materials or waste products or obsolete or discarded machinery or parts or accessories thereof, be deemed to be a dealer for the purposes of this Act;]

(c) “declared goods” means goods declared under section 14 to be of special importance in inter-State trade or commerce;

(d) “goods” includes all materials, articles, commodities and all other kinds of movable property, but does not include 5[newspapers] actionable claims, stocks, shares and securities.

⁵[(dd) “place of business” includes—

(i) in any case where a dealer carries on business through an agent by (whatever name called), the place of business of such agent;

(ii) a warehouse, godown or other place where a dealer stores his goods; and

(iii) a place where a dealer keeps his books of account;

(e) “prescribed” means prescribed by rules made under this Act;

(f) “registered dealer” means a dealer who is registered under section 7;

⁶[(g) “sale”, with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes,—

(i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;

(ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;

(iii) a delivery of goods on hire-purchase or any system of payment by instalments;

(iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;

(v) a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;

(vi) a supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration,

but does not include a mortgage or hypothecation of or a charge or pledge on goods;]

(h) “sale price” means the amount payable to a dealer as consideration for the sale of any goods, less any sum allowed as cash discount according to the practice normally prevailing in the trade, but inclusive of any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in cases where such cost is separately charged:

⁷[Provided that in the case of a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, the sale price of such goods shall be determined in the prescribed manner by making such deduction from the total consideration for the works contract as may be prescribed and such price shall be deemed to be the sale price for the purpose of this clause;]

⁸[(i) “sales tax law” means any law for the time being in force in any State or part thereof which provides for the levy of taxes on the sale or purchase of goods generally or on any specified goods expressly mentioned in that behalf and includes value added tax law, and “general sales tax law” means any law for the time being in force in any State or part thereof which provides for the levy of tax on the sale or purchase of goods generally and includes value added tax law;]

(j) “turnover” used in relation to any dealer liable to tax under this Act means the aggregate of the sale prices received and receivable by him in respect of sales of any goods in the course of inter-State trade or commerce made during any prescribed period 9[and determined in accordance with the provisions of this Act and the rules made thereunder];

⁷[(ja) “works contract” means a contract for carrying out any work which includes assembling, construction, building, altering, manufacturing, processing, fabricating, erection, installation, fitting out, improvement, repair or commissioning of any movable or immovable property;]

(k) “year”, in relation to a dealer, means the year applicable in relation to him under the general sales tax law of the appropriate State, and where there is no such year applicable, the financial year

Sale price

The definition of ‘sale price’ is in two parts. The first part says that ‘sale price’ means the amount payable to a dealer as consideration for the sale of any goods. The second part which is an inclusive clause, includes any sum charged for anything done by the dealer in respect of the goods at the time of or before the delivery thereof other than the cost of freight or delivery or the cost of installation in case where such cost is separately charged. Where the cost of freight is part of the price, it would fall within the first part of the definition and to such a case, the exclusion clause in the second part has no application. So it is exigible tax; Hindustan Sugar Mills Ltd. v. State of Rajasthan, (1979) 43 STC 13 (SC).

—————

1. The words “one or more” omitted by Act 31 of 1958, sec. 2 (w.e.f. 1-10-1958).

2. Explanation omitted by Act 31 of 1958, sec. 2 (w.e.f. 1-10-1958).

3. Ins. by Act 103 of 1976, sec. 2 (w.e.f. 7-9-1976).

4. Subs, by Act 103 of 1976, sec. 2, for clause (b) (w.e.f. 7-9-1976).

5. Ins. by Act 31 of 1958, sec. 2 (w.e.f. 1-10-1958).

6. Subs. by Act 20 of 2002, sec. 150, for clause (g) (w.e.f. 11-5-2002).

7. Ins. by Act 18 of 2005, sec. 89 (w.e.f. 13-5-2005).

8. Subs.by Act 18 of 2005, sec. 89, for clause (i) (w.e.f. 13-5-2005). Clause (i), before substitution, stood as under:

‘(i) “sales tax law” means any law for the time being in force in any State or part thereof which provides for the levy of taxes on the sale or purchase of goods generally or on any specified goods expressly mentioned in that behalf, and “general sales tax law” means the law for the time being in force in any State or part thereof which provides for the levy of tax on the sale or purchase of goods generally;’.

9. Subs. by Act 28 of 1969, sec. 2, for “and determined in the prescribed manner” (w.r.e.f. 5-1-1957).

Section 3. WHEN IS A SALE OR PURCHASE OF GOODS SAID TO TAKE PLACE IN THE COURSE OF INTER-STATE TRADE OR COMMERCE.

A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase, -

(a) occasions the movement of goods from one State to another; or

(b) is effected by a transfer of documents of title to the goods during their movement from one State to another.

Explanation 1 : Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause

(b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.

Explanation 2 : Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State.

Section 4. WHEN IS A SALE OR PURCHASE OF GOODS SAID TO TAKE PLACE OUTSIDE A STATE.

(1) Subject to the provisions contained in section 3, when a sale or purchase of goods is determined in accordance with sub-section (2) to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States.

(2) A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State—

(a) in the case of specific or ascertained goods, at the time the contract of sale is made; and

(b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation.

Explanation.—Where there is a single contract of sale or purchase of goods situated at more places than one, the provisions of this sub-section shall apply as if there were separate contracts in respect of the goods at each of such places.

Section 5. WHEN IS A SALE OR PURCHASE OF GOODS SAID TO TAKE PLACE IN THE COURSE OF IMPORT OR EXPORT.

(1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.

(2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.

¹[(3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export.]

²[(4) The provisions of sub-section (3) shall not apply to any sale or purchase of goods unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the exporter to whom the goods are sold in a prescribed form obtained from the prescribed authority.

(5) Notwithstanding anything contained in sub-section (1), if any designated Indian carrier purchases Aviation Turbine Fuel for the purposess of its international flight, such purchase shall be deemed to take place in the course of the export of goods out of the territory of India.

Explanation.—For the purposes of this sub-section, “designated Indian carrier” means any carrier which the Central Government may, by notification in the Official Gazette, specify in this behalf.]

Sale in the course of import

When the bill of lading is endorsed while the consignment is still on the high seas and the sale was in the course of import, as it was effected by transfer of documents to the goods before they had crossed the limits of the customs. The sale was covered by the latter part of section 5 (2) read with section 2 (ab) and as it was in course of import hence not liable to Sales Tax; Minerals and Metals Trading Corporation of India Ltd. v. Sales Tax Officer, (1998) 111 STC 434.

—————

1. Ins. by Act 103 of 1976, sec. 3 (w.r.e.f. 1-4-1976).

2. Ins. by Act 18 of 2005, sec. 90 (w.e.f. 13-5-2005).

Section 6. LIABILITY TO TAX ON INTER-STATE SALES.

¹[(1)] Subject to the other provisions contained in this Act, every dealer shall, with effect from such date² as the Central Government may, by notification in the Official Gazette, appoint, not being earlier than thirty days from the date of such notification, be liable to pay tax under this Act on all sales ³[of goods other than electrical energy] effected by him in the course of inter-State trade or commerce during any year on and from the date so notified:

⁴[Provided that a dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with the provisions of sub-section (3) of section 5 is a sale in the course of export of those goods out of the territory of India.]

⁵[(1A) A dealer shall be liable to pay tax under this Act on a sale of any goods effected by him in the course of inter-State trade or commerce notwithstanding that no tax would have been leviable (whether on the seller or the purchaser) under the sales tax law of the appropriate State if that sale had taken place inside that State.]

⁶[(2) Notwithstanding anything contained in sub-section (1) or sub-section (1A), where a sale of any goods in the course of inter-State trade or commerce has either occasioned the movement of such goods from one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods to a registered dealer, if the goods are of the description referred to in sub-section (3) of section 8, shall be exempt from tax under this Act:

Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit,—

(a) a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority; and

(b) if the subsequent sale is made to a registered dealer, a declaration referred to in sub-section (4) of section 8:

Provided further that it shall not be necessary to furnish the declaration referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if,—

(a) the sale or purchase of such goods is, under the sales tax law of the appropriate State exempt from tax generally or is subject to tax generally at a rate which is lower than three per cent. or such reduced rate as may be notified by the Central Government, by notification in the Official Gazette, under sub-section (1) of section 8 (whether called a tax or fee or by any other name); and

(b) the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in this sub-section.]

⁷[(3) Notwithstanding anything contained in this Act, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-State trade or commerce, to any official, personnel, consular or diplomatic agent of—

(i) any foreign diplomatic mission or consulate in India; or

(ii) the United Nations or any other similar international body,

entitled to privileges under any convention or agreement to which India is a party or under any law for the time being in force, if such official, personnel, consular or diplomatic agent, as the case may be, has purchased such goods for himself or for the purposes of such mission, consulate, United Nations or other body.

(4) The provisions of sub-section (3) shall not apply to the sale of goods made in the course of inter-State trade or commerce unless the dealer selling such goods furnishes to the prescribed authority a certificate in the prescribed manner on the prescribed form duly filled and signed by the official, personnel, consular or diplomatic agent, as the case may be.]

—————

1. Section 6 re-numbered as sub-section (1) of that section by Act 31 of 1958, sec. 3 (w.e.f.1-10-1958).

2. 1st July, 1957, vide S.R.O. 940A, dated 26th March, 1957, published in the Gazette of India, Extra., Pt. II, Sec. 3, p. 1233/1.

3. Ins. by Act 61 of 1972, sec. 2 (w.e.f. 1-4-1973).

4. Ins. by Act 103 of 1976, sec. 4 (w.r.e.f. 1-4-1976).

5. Ins. by Act 28 of 1969, sec. 3 (w.r.e.f. 5-1-1957).

6. Subs. by Act 16 of 2007, sec. 2, for sub-section (2) (w.e.f. 1-4-2007). Earlier sub-section (2) was substituted by Act 61 of 1972, sec. 2 (w.e.f. 1-4-1973) and was amended by Act 25 of 1975, sec. 38 (w.e.f. 1-7-1975). Sub-section (2), before substitution by Act 16 of 2007, stood as under:

“(2) Notwithstanding anything contained in sub-section (1) or sub-section (1A), where a sale of any goods in the course of inter-State trade or commerce has either occasioned the movement of such goods from one State to another or has been effected by a transfer of documents of title to such goods during their movement from one State to another, any subsequent sale during such movement effected by a transfer of documents of title to such goods,—

(a) to the Government, or

(b) to a registered dealer other than the Government, if the goods are of the description referred to in sub-section (3) of section 8,

shall be exempt from tax under this Act:

Provided that no such subsequent sale shall be exempt from tax under this sub-section unless the dealer effecting the sale furnishes to the prescribed authority in the prescribed manner and within the prescribed time or within such further time as that authority may, for sufficient cause, permit,—

(a) a certificate duly filled and signed by the registered dealer from whom the goods were purchased containing the prescribed particulars in a prescribed form obtained from the prescribed authority; and

(b) if the subsequent sale is made—

(i) to a registered dealer, a declaration referred to in clause (a) of sub-section (4) of section 8, or

(ii) to the Government, not being a registered dealer, a certificate referred to in clause (b) of section (4) of section 8:

Provided further that it shall not be necessary to furnish the declaration or the certificate referred to in clause (b) of the preceding proviso in respect of a subsequent sale of goods if,—

(a) the sale or purchase of such goods is, under the sales tax law of the appropriate State exempt from tax generally or is subject to tax generally at a rate which is lower than four per cent. (whether called a tax or fee or by any other name); and

(b) the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in clause (a) or clause (b) of this sub-section.”

7. Subs. by Act 18 of 2005, sec. 91, for sub-section (3) (w.e.f. 13-5-2005). Sub-section (3), before substitution, stood as under:

“(3) Notwithstanding anything contained in this Act, if—

(a) any official or personnel of—

(i) any foreign diplomatic mission or consulate in India; or

(ii) the United Nations or any other similar international body,

entitled to privileges under any convention to which India is a party or under any law for the time being in force; or

(b) any consular or diplomatic agent of any mission, the United Nations or other body referred to in sub-clause (i) or sub-clause (ii) of clause (a),

purchases any goods for himself or for the purposes of such mission, United Nations or other body, then, the Central Government may, by notification in the Official Gazette, exempt, subject to such conditions as may be specified in the notification, the tax payable on the sale of such goods under this Act.”

Section 6A. BURDEN OF PROOF, ETC., IN CASE OF TRANSFER OF GOODS CLAIMED OTHERWISE THAN BY WAY OF SALE.

(1) Where any dealer claims that he is not liable to pay tax under this Act, in respect of any goods, on the ground that the movement of such goods from one State to another was occasioned by reason of transfer of such goods by him to any other place of his business or to his agent or principal, as the case may be, and not by reason of sale, the burden of proving that the movement of those goods was so occasioned shall be on that dealer and for this purpose he may furnish to the assessing authority, within the prescribed time or within such further time as that authority may, for sufficient cause, permit, a declaration, duly filled and signed by the principal officer of the other place of business, or his agent or principal, as the case may be, containing the prescribed particulars in the prescribed form obtained from the prescribed authority, along with the evidence of despatch of such goods ²[and if the dealer fails to furnish such declaration, then, the movement of such goods shall be deemed for all purposes of this Act to have been occasioned as a result of sale].

(2) If the assessing authority is satisfied after making such inquiry as he may deem necessary that the particulars contained in the declaration furnished by a dealer under sub-section (1) are true, he may, at the time of, or at any time before, the assessment of the tax payable by the dealer under this Act, make an order to that effect and thereupon the movement of goods to which the declaration related shall be deemed for the purpose of this Act to have been occasioned otherwise than as a result of sale.

Explanation : In this section, “assessing authority”, in relation to a dealer, means the authority for the time being competent to assess the tax payable by the dealer under this Act.

—————

1. Ins. by Act 61 of 1972, sec. 3 (w.e.f. 1-4-1973).

2. Ins. by Act 20 of 2002, sec. 151 (w.e.f. 11-5-2002).

Section 7. REGISTRATION OF DEALERS.

(1) Every dealer liable to pay tax under this Act shall, within such time as may be prescribed for the purpose, make an application for registration under this Act to such authority in the appropriate State as the Central Government may, by general or special order, specify, and every such application shall contain such particulars as may be prescribed.

¹[(2) Any dealer liable to pay tax under the sales tax law of the appropriate State, or where there is no such law in force in the appropriate State or any part thereof, any dealer having a place of business in that State or part, as the case may be, may, notwithstanding that he is not liable to pay tax under this Act, apply for registration under this Act to the authority referred to in sub-section (1), and every such application shall contain such particulars as may be prescribed.

Explanation.—For the purposes of this sub-section, a dealer shall be deemed to be liable to pay tax under the sales tax law of the appropriate State notwithstanding that under such law a sale or purchase made by him is exempt from tax or a refund or rebate of tax is admissible in respect thereof.]

²[(2A) Where it appears necessary to the authority to whom an application is made under sub-section (1) or sub-section (2) so to do for the proper realisation of the tax payable under this Act or for the proper custody and use of the forms referred to in clause (a) of the first proviso to sub-section (2) of section 6 or sub-section (1) of section 6Aor ³[sub-section (4) of section 8], he may, by an order in writing and for reasons to be recorded therein, impose as a condition for the issue of a certificate of registration a requirement that the dealer shall furnish in the prescribed manner and within such time as may be specified in the order such security as may be so specified, for all or any of the aforesaid purposes.]

(3) If the authority to whom an application under sub-section (1) or sub-section (2) is made is satisfied that the application is in conformity with the provisions of this Act and the rules made thereunder ²[and the condition, if any, imposed under sub-section (2A), has been complied with] he shall register the applicant and grant to him a certificate of registration in the prescribed form which shall specify the class or classes of goods for the purposes of sub-section (1) of section 8.

²[(3A) Where it appears necessary to the authority granting a certificate of registration under this section so to do for the proper realisation of tax payable under this Act or for the proper custody and use of the forms referred to in sub-section (3A), he may, at any time while such certificate is in force, by an order in writing and for reasons to be recorded therein, require the dealer, to whom the certificate has been granted, to furnish within such time as may be specified in the order and in the prescribed manner such security, or, if the dealer has already furnished any security in pursuance of an order under this sub-section or sub-section (2A), such additional security, as may be specified in the order, for all or any of the aforesaid purposes.]

⁴[(3B) No dealer shall be required to furnish any security and sub-section (2A) or any security or additional security under sub-section (3A) unless he has been given an opportunity of being heard.

(3BB) The amount of security which a dealer may be required to furnish under sub-section (2A) or sub-section (3A) or the aggregate of the amount of such security and the amount of additional security which he may be required to furnish under sub-section (3A), by the authority referred to therein shall not exceed—

(a) in the case of a dealer other than a dealer who has made an application, or who has been registered in pursuance of an application, under sub-section (2), a sum equal to the tax payable under this Act, in accordance with the estimate of such authority, on the turnover of such dealer for the year in which such security or, as the case may be, additional security is required to be furnished; and

(b) in the case of a dealer who has made an application, or who has been registered in pursuance of an application, under sub-section (2), a sum equal to the tax leviable under this Act, in accordance with the estimate of such authority on the sales to such dealer in the course of inter-state trade or commerce in the year in which such security or, as the case may be additional security is required to be furnished, had such dealer been not registered under this Act.]

⁵[(3C) Where the security furnished by a dealer under sub-section (2A) or sub-section (3A) is in the form of a surety bond and the surety becomes insolvent or dies, the dealer shall, within thirty days of the occurrence of any of the aforesaid events, inform the authority granting the certificate of registration and shall within ninety days of such occurence furnish a fresh surety bond or furnish in the prescribed manner other security for the amount of the bond.]

⁵[(3D) The authority granting the certificate of registration may by order and for good and sufficient cause forfeit the whole or any part of the security furnished by a dealer,—

(a) for realising any amount of tax or penalty payable by the dealer;

(b) if the dealer is found to have misused any of the forms referred to in sub-section (2A) to have failed to keep them in proper custody:

Provided that no order shall be passed under this sub-section without giving the dealer an opportunity of being heard.]

⁵[(3E) Where by reason of an order under sub-section (3D), the security furnished by any dealer is rendered insufficient, he shall make up the deficiency is such manner and within such time as may be prescribed.]

⁵[(3F) The authority issuing the forms referred to in sub-section (2A) may refuse to issue such forms to a dealer who has failed to comply with an order under that sub-section or sub-section (3A), or with the provisions of sub-section (3C) or sub-section (3E), until the dealer has complied with such order or such provisions, as the case may be.]

⁵[(3G) The authority granting a certificate of registration may, on application by the dealer to whom it has been granted, order the refund of any amount or part thereof deposited by the dealer by way of security under this section, if it is not required for the purposes of this Act.]

⁵[(3H) Any person aggrieved by an order passed under sub-section (2A), sub-section (3A), sub-section (3D) or sub-section (3G) may, within thirty days of the service of the order on him, but after furnishing the security, prefer, in such form and manner as may be prescribed, an appeal against such order to such authority (hereinafter this section referred to as the “appellate authority”) as may be prescribed:

Provided that the appellate authority may, for sufficient cause, permit such person to present the appeal—

(a) after the expiry of the said period of thirty days; or

(b) without furnishing the whole or any part of such security.]

⁶[(3-I) The procedure to be followed in hearing any appeal under sub-section (3H), and the fees payable in respect of such appeals shall be such as may be prescribed.]

⁶[(3J) The order passed by the appellate authority in any appeal under sub-section (3H) shall be final.]

⁷[(4) A certificate of registration granted under this section may—

(a) either on the application of the dealer to whom it has been granted or, where no such application has been made, after due notice to the dealer, be amended by the authority granting it if he is satisfied that by reason of the registered dealer having changed the name, place or nature of his business or the class or classes of goods in which he carries on business or for any other reason the certificate of registration granted to him requires to be amended; or

(b) be cancelled by the authority granting it where he is satisfied, after due notice to the dealer to whom it has been granted, that he has ceased to carry on business 8[or has ceased to exist or has failed without sufficient cause, to comply with an order under sub-section (3A) or with the provisions of sub-section (3C) or sub-section (3E) or has failed to pay any tax or penalty payable under this Act], or in the case of a dealer registered under sub-section (2) has ceased to be liable to pay tax under the sales tax law of the appropriate State or for any other sufficient reason.]

(5) A registered dealer may apply in the prescribed manner not later than
six months before the end of a year to the authority which granted his certificate of registration for the cancellation of such registration, and the authority shall, unless the dealer is liable to pay tax under this Act, cancel the registration accordingly, and where he does so, the cancellation shall take effect from the end of the year.

—————

1. Subs. by Act 31 of 1958, sec. 4, for sub-section (2) (w.e.f. 1-10-1958).

2. Ins. by Act 61 of 1972, sec. 4 (w.e.f. 1-4-1973).

3. Subs. by Act 16 of 2007, sec. 3, for “clause (a) of sub-section (4) of section 8” (w.e.f. 1-4-2007).

4. Subs. by Act 103 of 1976, sec. 5, for sub-section (3B) (w.e.f. 7-9-1976). Earlier sub-section (3B) was inserted by Act 61 of 1972, sec. 4 (w.e.f. 1-4-1973).

5. Ins. by Act 61 of 1972, sec. 4 (w.e.f. 1-4-1973).

6. Ins. by Act 61 of 1972, sec. 4 (w.e.f. 1-4-1973).

7. Subs. by Act 31 of 1958 sec. 4, for sub-section (4) (w.e.f. 1-10-1958).

8. Subs. by Act 61 of 1972, sec. 4, for “or has ceased to exist” (w.e.f. 1-4-1973).

Section 8. RATES OF TAX ON SALES IN THE COURSE OF INTER-STATE TRADE OR COMMERCE.

²[(1) Every dealer, who in the course of inter-State trade or commerce, sells to a registered dealer goods of the description referred to in sub-section (3), shall be liable to pay tax under this Act, which shall be ³[two per cent.] of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, whichever is lower:

Provided that the Central Government may, by notification in the Official Gazette, reduce the rate of tax under this sub-section.]

⁴[(2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1), shall be at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State.

Explanation. —For the purposes of this sub-section, a dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.]

⁵[***]

(3) ⁶[The goods referred to in sub-section (1)]—

⁷[***]

(b) ⁸[***] are goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for re-sale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or ⁹[in the tele-communications network or] in mining or in the generation or distribution of electricity or any other form of power;

(c) are containers or other materials specified in the certificate of registration of the registered dealer purchasing the goods, being containers or materials intended for being used for the packing of goods for sale;

(d) are containers or other materials used for the packing of any goods or classes of goods specified in the certificate of registration referred to in ¹⁰[***] clause (b) or for the packing of any containers or other materials specified in the certificate of registration referred to in clause (c).

¹¹[(4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority:

Provided that the declaration is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit.]

¹²[(5) Notwithstanding anything contained in this section, the State Government may ¹³ [on the fulfilment of the requirements laid down in sub-section (4) by the dealer] if it is satisfied that it is necessary so to do in the public interest, by notification in the Official Gazette and subject to such conditions as may be specified therein direct,—

(a) that no tax under this Act shall be payable by any dealer having his place of business in the State in respect of the sales by him, in the course of inter-State trade or commerce, 13[to a registered dealer ¹⁴[***]] from any such place of business of any such goods or classes of goods as may be specified in the notification, or that the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) ¹⁵[***] as may be mentioned in the notification;

(b) that in respect of all sales of goods or sales of such classes of goods as may be specified in the notification, which are made, in the course of inter-State trade or commerce ¹³[to a registered dealer ¹⁴[ ***]] by any dealer having his place of business in the State or by any class of such dealers as may be specified in the notification to any person or to such class of persons as may be specified in the notification, no tax under this Act shall be payable or the tax on such sales shall be calculated at such lower rates than those specified in sub-section (1) ¹⁵[***] as may be mentioned in the notification.]

¹⁶[(6) Notwithstanding anything contained in this section, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-State trade or commerce to a registered dealer for the purpose of setting up, operation, maintenance, manufacture, trading, production, processing, assembling, repairing, reconditioning, re-engineering, packaging or for use as packing material or packing accessories in a unit located in any special economic zone or for development, operation and maintenance of special economic zone by the developer of the special economic zone, if such registered dealer has been authorised to establish such unit or to develop, operate and maintain such special economic zone by the authority specified by the Central Government in this behalf.]

(7) The goods referred to in sub-section (6) shall be the goods of such class or classes of goods as specified in the certificate of registration of the registered dealer referred to in that sub-section.

(8) The provisions of sub-sections (6) and (7) shall not apply to any sale of goods made in the course of inter-State trade or commerce unless the dealer selling such goods furnishes to the ¹⁷[prescribed authority referred to in sub-selling such goods furnishes to the 17[prescribed authority referred to in sub-section (4) a declaration in the prescribed manner on the prescribed form obtained from the authority specified by the Central Government under sub-section (6)] in sub-section (5), duly filled in and signed by the registered dealer to whom such goods are sold.

Explanation.— For the purposes of sub-section (6), the expression “special economic zone” has the meaning assigned to it in clause (iii) to Explanation 2 to the proviso to section 3 of the Central Excise Act, 1944 (1 of 1944).]

———-

1. The Act has been extended to Goa, Daman and Diu (with modifications) by Reg. 12 of 1962, sec. 3 and Sch., to Kohima and Mokokchung districts of Nagaland (as in force on 5-8-1971) by Act 61 of 1972, sec. 14 (1) (w.e.f. 30-11-1972). The amendments made to the Act by Act 61 of 1972, came into force in the said districts (w.e.f. 1-4-1973) [ vide sec. 14(2), Act 61 of 1972].

2. Subs. by Act 16 of 2007, sec. 4(a), for sub-section (1) (w.e.f. 1-4-2007). Earlier sub-section (1) was substituted by Act 31 of 1958, sec. 5 (w.e.f. 1-10-1958) and was amended by Act 25 of 1975, sec. 38 (w.e.f. 1-7-1975) and by Act 32 of 2003, sec. 162 (w.e.f. 14-5-2003). Sub-section (1), before substitution by Act 16 of 2007, stood as under:

“(1) Every dealer, who in the course of inter-State trade or commerce—

(a) sells to the Government any goods; or

(b) sells to a registered dealer other than the Government goods of the description referred to in sub-section (3),

shall be liable to pay tax under this Act, with effect from such date as may be notified by the Central Government in the Official Gazette for the purpose, which shall be two per cent. of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate State under the sales tax law of that State, or, as the case may be, under any enactment of that State imposing value added tax, whichever is lower:

Provided that the rate of tax payable under this sub-section by a dealer shall continue to be four per cent. of his turnover, until the rate of two per cent. takes effect under this sub-section.”

3. Subs. by S.O. 1277(E), dated 30th May, 2008, for “three per cent.” (w.e.f. 1-6-2008).

4. Subs. by Act 16 of 2007, sec. 4(a), for sub-section (2) (w.e.f. 1-4-2007). Earlier sub-section (2) was substituted by Act 31 of 1958, sec. 5 (w.e.f. 1-10-1958) and was amended by Act 8 of 1963, sec. 2 (w.e.f. 1-4-1963) and by Act 20 of 2002, sec. 152 (w.e.f. 11-5-2002). Earlier sub-section (2), before substitution by Act 16 of 2007, stood as under:

“(2) The tax payable by any dealer on his turnover in so far as the turnover or any part thereof relates to the sale of goods in the course of inter-State trade or commerce not falling within sub-section (1)—

(a) in the case of declared goods, shall be calculated at twice the rate applicable to the sale or purchase of such goods inside the appropriate State;

(b) in the case of goods other than declared goods, shall be calculated at the rate of ten per cent. or at the rate applicable to the sale or purchase of such goods inside the appropriate State, whichever is higher; and

(c) in the case of goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally shall be nil,

and for the purpose of making any such calculation under clause (a) or clause (b), any such dealer shall be deemed to be a dealer liable to pay tax under the sales tax law of the appropriate State, notwithstanding that he, in fact, may not be so liable under that law.

Explanation.— For the purposes of this sub-section, a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods.”

5. Sub-section (2A) omitted by Act 20 of 2002, sec. 152 (w.e.f. 11-5-2002). Earlier sub-section (2A) [along with sub-sections (2), (3) and (4)] was substituted by Act 31 of 1958, sec. 5, for sub-sections (1), (2), (3) and (4) (w.e.f. 1-10-1958).

6. Subs. by Act 16 of 2007, sec. 4(b), for “The goods referred to in clause (b) of sub-section (1)” (w.e.f. 1-4-2007).

7. Clause (a) omitted by Act 8 of 1963, sec. 2 (w.e.f. 1-4-1963).

8. Certain words omitted by Act 8 of 1963, sec. 2 (w.e.f. 1-4-1963).

9. Ins. by Act 20 of 2002, sec. 152 (w.e.f. 11-5-2002).

10. The words “clause (a) or” omitted by Act 8 of 1963, sec. 2 (w.e.f. 1-4-1963).

11. Subs. by Act 16 of 2007, sec. 4(c), for sub-section (4) (w.e.f. 1-4-2007). Earlier sub-section (4) was amended by Act 61 of 1972, sec. 5 (w.e.f. 1-4-1973). Sub-seciton (4), before substitution by Act 16 of 2007, stood as under:

“(4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner—

(a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed authority; or

(b) if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorised officer of the Government:

Provided that the declaration referred to in clause (a) is furnished within the prescribed time or within such further time as that authority may, for sufficient cause, permit.”

12. Subs. by Act 61 of 1972, sec. 5, for sub-section (5) (w.e.f. 1-4-1973).

13. Ins. by Act 20 of 2002, sec. 152 (w.e.f. 11-5-2002).

14. The words “or the Government” omitted by Act 16 of 2007, sec. 4(d) (w.e.f. 1-4-2007).

15. The words “or sub-section (2)” omitted by Act 16 of 2007, sec. 4(d) (w.e.f. 1-4-2007).

16. Subs. by Act 23 of 2004, sec. 118, for sub-section (6) (w.e.f. 10-9-2004). Sub-section (6), before substitution, stood as under:

“(6) Notwithstanding anything contained in this section, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-State trade or commerce to a registered dealer for the purpose of manufacture, production, processing, assembling, repairing, reconditioning, re-engineering, packaging or for use as trading or packing material or packing accessories in an unit located in any special economic zone, if such registered dealer has been authoirsed to establish such unit by the authority specified by the Central Government in this behalf”.

17. Subs. by Act 23 of 2004, sec. 118, for “authority referred to in sub-section (6) a declaration in the prescribed manner on the prescribed form obtained from the authority referred to in sub-section (5)” (w.e.f. 10-9-2004).

Section 8A. DETERMINATION OF TURNOVER.

(1) In determining the turnover of a dealer for the purpose of this Act, the following deductions shall be made from the aggregate of the sale prices, namely : (a) the amount arrived at applying the following formula :

rate of tax × aggregate of sale prices `

_____________________________

100 + rate of tax

PROVIDED that no deduction on the basis of the above formula shall be made if the amount by way of tax collected by a registered dealer, in accordance with the provisions of this Act, has been otherwise deducted from the aggregate of sale prices.

Explanation : Where the turnover of a dealer is taxable at different rates, the aforesaid formula shall be applied separately in respect of each part of the turnover liable to a different rate of tax;

(b) the sale price of all goods returned to the dealer by the purchasers of such goods, -

(i) within a period of three months from the date of delivery of the goods, in the case of goods returned before the 14th day of May, 1966;

(ii) within a period of six months from the date of delivery of the goods in the case of goods returned on or after the 14th day of May, 1966 :

PROVIDED that satisfactory evidence of such return of goods and of refund or adjustment in accounts of the sale price thereof is produced before the authority competent to assess or, as the case may be, reassess the tax payable by the dealer under this Act; and

(c) such other deductions as the Central Government may, having regard to the prevalent market conditions, facility of trade and interests of consumers, prescribe.

(2) Save as otherwise provided in sub-section (1), in determining the turnover of a dealer for the purposes of this Act, no deduction shall be made from the aggregate of the sale prices.

————

1.Ins. by Act 28 of 1969, sec. 5 (w.r.e.f. 5-1-1957).

Section 9. LEVY AND COLLECTION OF TAX AND PENALTIES.

¹[9. Levy and collection of tax and penalties.—(1) The tax payable by any dealer under this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within clause (a) or clause (b) of section 3, shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with the provision of sub-section (2), in the State from which the movement of the goods commenced:

²[Provided that, in the case of a sale of goods during their movement from one State to another, being a sale subsequent to the first sale in respect of the same goods and being also a sale which does not fall within sub-section (2) of section 6, the tax shall be levied and collected—

(a) where such subsequent sale has been effected by a registered dealer, in the State from which the registered dealer obtained or, as the case may be, could have obtained, the form prescribed for the purposes of ³[sub-section (4) of section 8] in connection with the purchase of such goods; and

(b) where such subsequent sale has been effected by an unregistered dealer in the State from which such subsequent sale has been effected.]

(2) Subject to the other provisions of this Act and the rules made thereunder, the authorities for the time being empowered to assess, re-assess, collect and enforce payment of any tax under general sales tax law of the appropriate State shall, on behalf of the Government of India, assess re-assess, collect and enforce payment of tax, including any ⁴[interest or penalty,] payable by a dealer under this Act as if the tax or 4[interest or penalty] payable by such a dealer under this Act is a tax or 4[interest or penalty] payable under the general sales tax law of the State; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State; and the provisions of such law, including provisions relating to returns, provisional assessment, advance payment of tax, registration of the transferee of any business, imposition of the tax liability of a person carrying on business on the transferee of, or successor to, such business, transfer of liability of any firm or Hindu undivided family to pay tax in the event of the dissolution of such firm or partition of such family, recovery of tax from third parties, appeals, reviews, revisions, references, ⁵[refunds, rebates, penalties,] ⁶[charging or payment of interest,] compounding of offences and treatment of documents furnished by a dealer as confidential, shall apply accordingly:

Provided that if in any State or part thereof there is no general sales tax law in force, the Central Government may, be rules made in this behalf make necessary provision for all or any of the matter specified in this sub-section.

⁷[(2A) All the 8[provisions relating to offences, interest and penalties] (including provisions relating to penalties in lieu of prosecution for an offence or in addition to the penalties or punishment for an offence but excluding the provisions relating to matters provided for in section 10 and 10A) of the general sales tax law of each State shall, with necessary modifications, apply in relation to the assessment, re-assessment, collection and the enforcement of payment of any tax required to be collected under this Act in such State or in relation to any process connected with such assessment, re-assessment, collection or enforcement of payment as if the tax under this Act were a tax under such sales tax law.]

⁹[(2B) If the tax payable by any dealer under this Act is not paid in time, the dealer shall be liable to pay interest for delayed payment of such tax and all the provisions for delayed payment of such tax and all the provisions relating to due date for payment of tax, rate of interest for delayed payment of tax, of the general sales tax law of each State, shall apply in relation to due date for payment of tax, rate of interest for delayed payment of tax, and assessment and collection of interest for delayed payment of tax under this Act in such States as if the tax and the interest payable under this Act were a tax and an interest under such sales tax law.]

(3) The proceeds in any financial year of any tax, ¹⁰[including any interest or penalty] levied and collected under this Act in any State (other than a Union Territory) on behalf of the Government of India shall be assigned to the State and shall be retained by it; and the proceeds attributable to Union territories shall form part of the Consolidated Fund of India.]

—————

1. Subs. by Act 28 of 1969, sec. 6, for section 9 (w.r.e.f. 5-1-1957). Earlier section 9 was substituted by Act 31 of 1958, sec. 6 (w.e.f. 1-10-1958).

2. Subs. by Act 103 of 1976, sec. 6, for the proviso (w.e.f. 7-9-1976).

3. Subs. by Act 16 of 2007, sec. 5, for “clause (a) of sub-section (4) of section 8” (w.e.f. 1-4-2007).

4. Subs. by Act 10 of 2000, sec. 119, for “penalty” (w.e.f. 12-5-2000).

5. Subs. by Act 61 of 1972, sec. 6, for “refunds, penalties” (w.e.f. 1-4-1973).

6. Ins. by Act 103 of 1976, sec. 6 (w.e.f. 7-9-1976).

7. Ins. by Act 103 of 1976, sec. 6 (w.e.f. 7-9-1976).

8. Subs. by Act 10 of 2000, sec. 119, for “provisions relating to offences and penalties” (w.e.f. 12-5-2000).

9. Ins. by Act 10 of 2000, sec. 119 (w.e.f. 12-5-2000).

10. Subs. by Act 10 of 2000, sec. 119, for “including any penalty” (w.e.f. 12-5-2000).

Section 9A. COLLECTION OF TAX TO BE ONLY BY REGISTERED DEALERS.

¹9A. COLLECTION OF TAX TO BE ONLY BY REGISTERED DEALERS. No person who is not a registered dealer shall collect in respect of any sale by him of goods in the course of inter-State trade or commerce any amount by way of tax under this Act, and no registered dealer shall make any such collection except in accordance with this Act and the rules made thereunder.

—————

1. Ins. by Act 31 of 1958, sec. 6 (w.e.f. 1-10-1958).

Section 9B. ROUNDING OFF OF TAX, ETC.

¹9B. ROUNDING OFF OF TAX, ETC.

The amount of tax, interest, penalty, fine or any other sum payable, and the amount of refund due, under the provisions of this Act shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of a rupee consisting of paise, then, if such part is fifty paise or more it shall be increased to one rupee and if such part is less than fifty paise, it shall be ignored :

PROVIDED that nothing in this section shall apply for the purpose of collection by a dealer of any amount by way of tax under this Act in respect of any sale by him of goods in the course of inter-State trade or commerce.

———-

1.Ins. by Act 61 of 1972, sec. 7 (w.e.f. 1-4-1973).

Section 10. PENALTIES.

If any person—¹[(a) furnishes a ²[***] declaration under sub-section (2) of section 6 or sub-section (1) of section 6A or sub-section (4) ³[or sub-section (8)] of section 8, which he knows, or has reason to believe, to be false; or

(aa) fails to get himself registered as required by section 7 or fails to comply with an order under sub-section (3A) or with the requirements of sub-section 3(C) or sub-section (3E) of that section;]

(b) being a registered dealer, falsely represents when purchasing any class of goods that goods of such class are covered by his certificate of registration; or

(c) not being a registered dealer, falsely represents when purchasing goods in the course of inter-State trade or commerce that he is a registered dealer; or

(d) after purchasing any goods for any of the purposes specified in ⁴[clause (b) or clause (c) or clause (d)] of sub-section (3) 3[or sub-section (6)] of section 8 fails, without reasonable excuse, to make use of the goods for any such purpose;

(e) has in his possession any form prescribed for the purpose of sub-section (4) 3[or sub-section (8)] of section 8 which has not been obtained by him or by his principal or by his agent in accordance with the provisions of this Act or any rules made thereunder;

⁵[(f) collects any amount by way of tax in contravention of the provisions contained in section 9A,]

he shall be punishable with simple imprisonment which may extend to six months, or with fine or with both; and when the offence is a continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues.

—————

1. Subs. by Act 61 of 1972, sec. 8, for clause (a) (w.e.f. 1-4-1973).

2. The words “certificate or” omitted by Act 16 of 2007, sec. 6 (w.e.f. 1-4-2007).

3. Ins. by Act 20 of 2002, sec. 153 (w.e.f. 11-5-2002).

4. Subs. by Act 61 of 1972, sec. 8, for “clause (b)” (w.e.f. 1-4-1973).

5. Ins. by Act 31 of 1958, sec. 7 (w.e.f. 1-10-1958).

Section 10A. IMPOSITION OF PENALTY IN LIEU OF PROSECUTION.

¹[10A. Imposition of penalty in lieu of prosecution—²[(1)] If any person purchasing goods is guilty of an offence under clause (b) or clause (c) or clause (d) of section 10, the authority who granted to him or, as the case may be, is competent to grant to him a certificate of registration under this Act may, after giving him a reasonable opportunity of being heard, by order in writing, impose upon him by way of penalty a sum not exceeding one and a half times ³[the tax which would have been levied under sub-section (2) of section 8 in respect of the sale to him of the goods, if the sale had been a sale falling within that sub-section]:

Provided that no prosecution for an offence under section 10 shall be instituted in respect of the same facts on which a penalty has been imposed under this section.]

⁴[(2) The penalty imposed upon any dealer under sub-section (1) shall be collected by the Government of India in the manner provided in sub-section (2) of section 9—

(a) in the case of an offence falling under clause (b) or clause (d) of section 10, in the State in which the person purchasing the goods obtained the form prescribed for the purposes of ⁵[sub-section (4) of section 8] in connection with the purchase of such goods;

(b) in the case of an offence falling under clause (c) of section 10, in the State in which the person purchasing the goods should have registered himself if the offence had not been committed.]

—————

1. Ins. by Act 31 of 1958, sec. 8 (w.e.f. 1-10-1958).

2. Section 10A re-numbered as sub-section (1) of that section by Act 28 of 1969, sec. 7 (w.r.e.f. 1-10-1958).

3. Subs. by Act 61 of 1972, sec. 9, for certain words (w.e.f. 1-4-1973).

4. Ins. by Act 28 of 1969, sec. 7 (w.r.e.f. 1-10-1958).

5. Subs. by Act 16 of 2007, sec. 7, for “clause (a) of sub-section (4) of section 8” (w.e.f. 1-4-2007).

Section 11. COGNIZANCE OF OFFENCES.

(1) No court shall take cognizance of any offence punishable under this Act or the rules made there under except with the previous sanction of the government within the local limits of whose jurisdiction the offence has been committed or of such officer of that government as it may, by general or special order, specify in this behalf; and no court inferior to that of a presidency magistrate or a magistrate of the first class shall try any such offence.

(2) All offences punishable under this Act shall be cognizable and bailable.

Section 12. INDEMNITY.

No suit, prosecution or other legal proceeding shall lie against any officer of government for anything which is in good faith done or intended to be done under this Act or the rules made there under.

Section 13. POWER TO MAKE RULES.

(1) The Central Government may, by notification in the Official Gazette, make rules providing for -

(a) the manner in which application for registration may be made under this Act, the particulars to be contained therein, the procedure for the grant of such registration, the circumstances in which registration may be refused and the form in which the certificate of registration may be given;

¹[(aa) the manner of determination of the sale price and the deductions from the total consideration for a works contract under the proviso to clause (h) of section 2;]

²[[³(ab)] the form and the manner for furnishing declaration under sub-section (8) of section 8;]

(b) the period of turnover, the manner in which the turnover in relation to the sale of any goods under this Act shall be determined, and the deductions which may be made ⁴[under clause (c) of sub-section (1) of section 8A] in the process of such determination;

(c) the cases and circumstances in which, and the conditions subject to which, any registration granted under this Act may be cancelled;

⁵[(d) the form in which and the particulars to be contained in any declaration or certificate to be given under this Act ⁶[the State of origin of such form or certificate and the time within which any such certificate or declaration shall be produced or furnished];

(e) the enumeration of goods or class of goods used in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity or any other form of power;

(f) the matters in respect of which provision may be made under the provision to ⁷[sub-section (2)] of section 9;

(g) the fees payable in respect of applications under this Act.]

⁸[(h) the proper functioning of the Authority constituted under section 19;

(i) the salaries and allowances payable to, and the terms and conditions of service of, the Chairman and Members under sub-section (3) of
section 19;

(j) any other matter as may be prescribed.]

⁹[(2) Every rule made by the Central Government under sub-section (1) shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.]

(3) The State Government may make rules, not inconsistent with the provisions of this Act and the rules made under sub-section (1), to carry out the purposes of this Act.

(4) In particular and without prejudice to the powers conferred by sub-section (3), the State Government may make rules for all or any of the following purposes, namely:—

(a) the publication of lists of registered dealers, of the amendments made in such lists from time to time, and the particulars to be contained in such lists;

¹⁰[(aa) the manner in which security may be furnished under sub-section (2A) or sub-section (3A) or sub-section (3C) of section 7 and the manner in which and the time within which any deficiency may be made up under sub-section (3E) of that section;]

(b) the form and manner in which accounts relating to sales in the course of inter-State trade or commerce shall be kept by registered dealers;

(c) the furnishing of any information relating to the stocks of goods of purchases, sales and deliveries of books by, any dealer or any other information relating to his business as may be necessary for the purposes of this Act;

(d) the inspection of any books, accounts or documents required to be kept under this Act, the entry into any premises at all reasonable times for the purposes of searching for any such books, accounts or documents kept or suspected to be kept in such premises and the seizure of such books, accounts or documents;

¹¹[(e) the authority from whom, the conditions subject to which and fees subject to payment of which any form of certificate prescribed under clause (a) of the first proviso to sub-section (2) of section 6 or of declaration prescribed under sub-section (1) of section 6A or sub-section (4) of section 8 may be obtained, the manner in which such forms shall be kept in custody and records relating thereto maintained and the manner in which any such form may be used and any such certificate or declaration may be furnished;

(ee) the form and manner in which, and the authority to whom, an appeal may be preferred under sub-section (3H) of section 7, the procedure to be followed in hearing such appeals and the fees payable in respect of such appeals;]

(f) in the case of an Undivided Hindu Family, association, club, society, firm or company or in the case of a person who carries on business as a guardian or trustee or otherwise on behalf of another person, the furnishing of a declaration stating the name of the person who shall be deemed to be the manager in relation to the business of the dealer in the State and the form in which such declaration may be given;

(g) the time within which, the manner in which and ¹²[the authorities to whom] any change in the ownership of any business or in ¹³[the name, place or nature] of any business carried on by any dealer shall be furnished.

(5) In making any rule under this section ¹⁴[the Central Government or as the case may be, the State Government] may direct that a breach thereof shall be punishable with fine which may extend to five hundred rupees and when the offence is a continuing offence, with a daily fine which may extend to fifty rupees for every day during which the offence continues.

—————

1. Ins. by Act 18 of 2005, sec. 92 (w.e.f. 13-5-2005).

2. Ins. by Act 20 of 2002, sec. 154 (w.e.f. 11-5-2002).

3. Clause (aa) relettered as clause (ab) by Act 18 of 2005, sec. 92 (w.e.f. 13-5-2005).

4. Ins. by Act 61 of 1972, sec. 10 (w.e.f. 1-4-1973).

5. Subs. by Act 31 of 1958, sec. 9, for clause (d) (w.e.f. 1-10-1958).

6. Ins. by Act 61 of 1972, sec. 10 (w.e.f. 1-4-1973).

7. Subs. by Act 28 of 1969, sec. 8, for “sub-section (3)” (w.r.e.f. 5-1-1957).

8. Ins. by Act 41 of 2001, sec. 2 (w.e.f. 17-3-2005).

9. Subs. by Act 61 of 1972, sec. 10, for sub-section (2) (w.e.f. 1-4-1973).

10. Ins. by Act 61 of 1972, sec. 10 (w.e.f. 1-4-1973).

11. Subs. by Act 61 of 1972, sec. 10, for clause (e) (w.e.f. 1-4-1973).

12. Subs. by Act 31 of 1958, sec. 9, for “the authorities to which” (w.e.f. 1-10-1958).

13. Subs. by Act 31 of 1958, sec. 9, for “the nature” (w.e.f. 1-10-1958).

14. Subs. by Act 61 of 1972, sec. 10, for “the State Government” (w.e.f. 1-4-1973).

Section 14. CERTAIN GOODS TO BE OF SPECIAL IMPORTANCE IN INTER-STATE TRADE OR COMMERCE.

It is hereby declared that the following goods are of special importance in inter-State trade or commerce:—

1[(i) cereals, that is to say,—

(i) paddy (Oryza sativa L.);

(ii) rice (Oryza sativa L.);

(iii) wheat (Triticum vulgar, T. compactum, T. sphaerococcum, T. durum, T. aestivum L. T. dicoccum);

(iv) jowar or milo (Sorghum vulgare Pers);

(v) bajra (Pennisetum typhoideum L.);

(vi) maize (Zea mays D.);

(vii) ragi (eleusine coracana Gaertn.);

(viii) kodon (paspalum scrobiulatum L.);

(ix) kutki (Panicum miliare L.);

(x) barley (Hordeum vulgare L.);]

²[³[(ia)] coal, including coke in all its forms, but excluding charcoal:

Provided that during the period commencing on the 23rd day of February, 1967 and ending with the date of commencement of section 11 of the Central Sales Tax (Amendment) Act, 1972 (61 of 1972) this clause shall have effect subject to the modification that the words “but excluding charcoal” shall be omitted;]

(ii) cotton, that is to say all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton waste;

⁴[(iia) cotton fabrics covered under heading Nos. 52.05, 52.06, 52.07, 52.08, 52.09, 52.10, 52.11, 52.12, 58.01, 58.02, 58.03, 58.04, 58.05, ⁵[58.06,] 59.01, 59.03, 59.05, 59.06, and 60.01 of the Schedule to the Central Exercise Tariff Act, 1985 (5 of 1986);]

⁶[(iib) cotton yarn, but not including cotton yarn waste;]

⁷[(iic) crude oil, that is to say, crude petroleum oils and crude oils obtained from bituminous minerals (such as shale, calcareous rock, sand), whatever their composition, whether obtained from normal or condensation oil-deposits or by the destructive distillation of bituminous minerals and whether or not subjected to all or any of the following processes:—

(1) decantation;

(2) de-salting;

(3) dehydration;

(4) stabilisation in order to normalise the vapour pressure;

(5) elimination of very light fractions with a view to returning them to the oil-deposits in order to improve the drainage and maintain the pressure;

(6) the addition of only those hydrocarbons previously recovered by physical methods during the course of the above mentioned processes;

(7) any other minor process (including addition of pour point depressants or flow improvers) which does not change the essential character of the substance;]

⁸[(iid) Aviation Turbine Fuel sold to an aircraft with a maximum take-off mass of less than forty thousand kilograms operated by scheduled airlines.

Explanation.—For the purposes of this clause, “scheduled airlines” means the airlines which have been permitted by the Central Government to operate any Scheduled air transport service;]

(iii) hides and skins, whether in a raw or dressed state;

⁹[(iv) iron and steel, that is to say,—

(i) ¹⁰[pig iron, sponge iron and] cast iron including ¹¹[ingot moulds, bottom plates], iron scrap, cost iron scrap, runner scrap and iron skull scrap;

(ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes);

(iii) skelp bars, tin bars, sheet bars, hoe-bar and sleeper bars;

(iv) steel bars (rounds, rods, squares, flat, octagons and hexagons, plain and ribbed or twisted, in coil form as well as straight lengths;

(v) steel structurals (angles, joists, channels, tees, sheet piling sections, Z-sections or any other rolled sections);

(vi) sheets, hoops, strips and skelp, both black and galvanised, hot and cold rolled plain and corrugated, in all qualities, in straight lengths and in coil form, as rolled and in rivetted condition;

(vii) Plates both plain and chequered in all qualities;

(viii) discs, rings, forgings and steel castings;

(ix) tools, alloy and special steels of any of the above categories;

(x) steel melting scrap in all forms including steel skull, turnings and borings;

(xi) steel tubes, both welded and seamless, of all diameters and lengths including tube fittings;

(xii) tin-plates, both hot dipped and electrolytic and tinfree plates;

(xiii) fish plate bars, bearing plate bars, crossing sleeper bars, fish plates, bearing plates, crossing sleepers and pressed steel sleepers—heavy and light crane rails;

(xiv) wheels, tyres, axles and wheels sets;

(xv) wire rods and wires—rolled, drawn, galvanised, aluminised, tinned or coated such as by copper;

(xvi) defectives, rejects, cuttings, or end pieces of any of the above categories;]

¹²[(v) jute, that is to say, the fibre extracted from plants belonging to the species Corchorrus capsularies and Corchorus olitorius and the fibre known as mesta or bimli extracted from plants of the species Hibiscus cannabinus and Hibiscus sabdariffa—Varaltissima and the fibre known as Sunn or Sunn-hemp extracted from plants of the species Crotalaria juncea whether baled or otherwise;]

¹³[(va) liquified petroleum gas for domestic use;]

¹⁴[(vi) oilseeds, that is to say,—

(i) groundnut or peanut (Arachis hypogaea);

(ii) sesamum or til (Sesamum orientale);

(iii) cotton seed (Gossypium Spp);

(iv) soyabean (Glycine seja);

(v) rapeseed and mustard—

(1) torta (Brassica campestris var toria);

(2) rai (Brassica juncea);

(3) jamba—taramira (Eruca Satiya);

(4) sarson, yellow and brown (Brassica campestris var sarson);

(5) banarasi rai or true mustard (Brassica nigra);

(vi) linseed (Linum usitatissimum);

(vii) castor (Ricinus communis);

(viii) coconut (i.e., Copra excluding tender coconuts) (cocosnucifera);

(ix) sunflower (Helianthus annus);

(x) nigar seed (Guizotia abyssinica);

(xi) neem, vepa (Azadirachta indica);

(xii) mahua, illupai, ippe (Madhuca indica M. Latifolia, Bassia, Latifolia and Madhuca longifolia syn. M. Longifolia);

(xiii) karanja, pongam, honga (Pongamia pinnata syn. P. Glabra);

(xiv) kusum (Schleichera oleosa, syn. S. Trijuga);

(xv) punna, Undi (Calophyllum inophyllum);

(xvi) kokum (Carcinia indica);

(xvii) sal (Shorea rebusta);

(xviii) tung (Aleurites fordii and A. montana);

(xix) red palm (Elaeis guinensis);

(xx) safflower (Carthanus tinctorius);]

¹⁵[(via) pulses, that is to say,—

(i) gram or gulab gram (Cicerarietinum L.);

(ii) tur or arhar (Cajanus cajan);

(iii) moong or green gram (Phaseolus aureus);

(iv) masur or lentil (Lens esculemta Moench, Lens culinarie Medic.);

(v) urad or black gram (Phaseolus mungo);

(vi) moth (Phaseolus aconitifolius Jacq);

(vii) lakh or khesari (Lathyrus sativus L.);]

¹⁶[(vii) man-made fabrics covered under heading Nos. 54.08, 54.09, 54.10, 54.11, 54.12, 55.07, 55.08, 55.09, 55.10, 55.11, 55.12, 58.01, 58.02, 58.03, 58.04, 58.05, 17[58.06,] 59.01, 59.02, 59.03, 59.05, 59.06, and 60.01 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);]

¹⁸[(viii) sugar covered under sub-heading Nos. 1701.20, 1701.31, 1701.39, and 1702.11 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);]

¹⁹[***]

²⁰[(x) woven fabrics of wool covered under heading Nos. 51.06, 51.07, 58.01, 58.02, 58.03 and 58.05 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1985);]

²¹[***]

—————

1. Ins. by Act 103 of 1976, sec. 7 (w.e.f. 7-9-1976).

2. Subs. by Act 61 of 1972, sec. 11, for clause (i) (w.r.e.f. 5-1-1957).

3. Clause (i) re-numbered as clause (ia) by Act 103 of 1976, sec. 7 (w.e.f. 7-9-1976).

4. Subs. by Act 26 of 1988, sec. 85, for item (iia) (w.e.f. 13-5-1988). Earlier item (iia) was inserted by Act 16 of 1957, sec. 3 (w.e.f. 4-6-1957) and was substituted by Act 31 of 1958, sec. 10 (w.e.f. 1-10-1958).

5. Ins. by Act 13 of 1989, sec. 50 (w.e.f. 12-5-1989).

6. Ins. by Act 31 of 1958, sec. 10 (w.e.f. 1-10-1958)

7. Ins. by Act 103 of 1976, sec. 7 (w.e.f. 7-9-1976).

8. Subs. by the Act 22 of 2007, sec. 142, for clause (iid). Earlier clause (iid) was inserted by Act 14 of 2001, sec. 139 (w.e.f. 11-5-2001). Clause (iid), before substitution by the Act 22 of 2007, stood as under:

“(iid) Aviation Turbine Fuel sold to a Turbo-Prop Aircraft.

Explanation.—For the purposes of this clause, “Turbo-Prop Aircraft” means an aircraft deriving thrust, mainly from propeller, which may be driven by either turbine engine or piston engine;”.

9. Subs. by Act 61 of 1972, sec. 11, for clause (iv) (w.e.f. 1-4-1973).

10. Subs. by Act 14 of 2001, sec. 139, for “pig iron and” (w.e.f. 11-5-2001).

11. Subs. by Act 38 of 1978, sec. 3 and Sch. II, for “ingot moulds bottom plates” (w.e.f. 26-11-1978).

12. Subs. by Act 61 of 1972, sec. 11, for clause (v) (w.e.f. 1-4-1973).

13. Ins. by Act 21 of 2006, sec. 71 (w.e.f. 18-4-2006).

14. Subs. by Act 61 of 1972, sec. 11, for clause (vi) (w.e.f. 1-4-1973).

15. Ins. by Act 103 of 1976, sec. 7 (w.e.f. 7-9-1976).

16. Subs. by Act 26 of 1988, sec. 85, for item (vii) (w.e.f. 13-5-1988). Earlier item (vii) was inserted by Act 31 of 1958, sec. 10 (w.e.f. 1-10-1958).

17. Ins. by Act 13 of 1989, sec. 50.

18. Subs. by Act 26 of 1988, sec. 85, for item (viii) (w.e.f. 13-5-1988). Earlier item (viii) was inserted by Act 31 of 1958, sec. 10 (w.e.f. 1-10-1958).

19. Clause (ix) omitted by Act 16 of 2007, sec. 8 (w.e.f. 1-4-2007). Earlier clause (ix) was inserted by Act 31 of 1958, sec. 10 (w.e.f. 1-10-1958) and was substituted by Act 26 of 1988, sec. 85 (w.e.f. 13-5-1988) and was amended by Act 13 of 1989, sec. 50 (w.e.f. 12-5-1989). Clause (ix), before omission by Act 16 of 2007, stood as under:

“(ix) unmanufactured tobacco and tobacco refuse covered under sub-heading No. 2401.00, cigars and cheroots of tobacco covered under heading No. 24.02, cigarettes and cigarillos of tabacco covered under sub-heading Nos. 2403.11, and 2403.21 and other manufactured tobacco covered under sub-heading Nos. 2404.11, 2404.12, 2404.13, 2404.19, 2404.21, 2404.29, 2404.31, 2404.39, 2404.41, 2404.50 and 2404.60 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);”

20. Subs. by Act 26 of 1988, sec. 85, for item (x) (w.e.f. 13-5-1988). Earlier item (x) was inserted by Act 31 of 1958, sec. 10 (w.e.f. 1-10-1958).

21. Item (xi) omitted by Act 19 of 1968, sec. 43 (w.e.f. 11-5-1968).

Section 15. RESTRICTIONS AND CONDITIONS IN REGARD TO TAX ON SALE OR PURCHASE OF DECLARED GOODS WITHIN A STATE.

Every sales tax law of a State shall, insofar as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely :-

(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed ²four per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage;³[***]

(b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce,⁴ and tax has been paid under this Act in respect of the sale of such goods in the course of inter-State trade or commerce, the tax levied under such law ⁵shall be reimbursed to the person making such sale in the course of inter-State trade or commerce in such manner and subject to such conditions as may be provided in any law in force in that State;

⁶(c) where a tax has been levied under that law in respect of the sale or purchase inside the State of any paddy referred to in sub-clause (i) of clause (i) of section 14, the tax leviable on rice procured out of such paddy shall be reduced by the amount of tax levied on such paddy;

⁷[(ca) where a tax on sale or purchase of paddy referred to in sub-clause (i) of clause (i) of section 14 is leviable under the law and the rice procured out of such paddy is exported out of India, then, for the purposes of sub-section (3) of section 5, the paddy and rice shall be treated as a single commodity;]

(d) each of the pulses referred to in clause (via) of section 14, whether whole or separated, and whether with or without husk, shall be treated as a single commodity for the purposes of levy of tax under that law.

—————

1. Subs. by Act 31 of 1958, sec. 11, for section 15 (w.e.f. 1-10-1958).

2. Subs. by Act 25 of 1975, sec. 38, for “three per cent.” (w.e.f. 1-7-1975).

3. Certain words omitted by Act 20 of 2002, sec. 155 (w.e.f. 11-5-2002).

4. Subs. by Act 61 of 1972, sec. 12, for “the tax so levied” (w.e.f. 1-4-1973).

5. Subs. by Act 61 of 1972, sec. 12, for “shall be refunded to such person” (w.e.f. 1-4-1973).

6. Ins. by Act 103 of 1976, sec. 8 (w.e.f. 7-9-1976).

7. Ins. by Act 33 of 1996, sec. 87 (w.e.f. 28-9-1996).

Section 16. DEFINITIONS.

In this Chapter, -

(a) “appropriate authority”, in relation to a company, means the authority competent to assess tax on the company;

(b) “company” and “private company” have the meanings respectively assigned to them by clauses (i) and (iii) of sub-section (1) of section 3 of the Companies Act, 1956 (1 of 1956).

—————

*. Sections 16 ins. by Act 61 of 1972, sec. 13 (w.e.f. 1-4-1973).

Section 17. COMPANY IN LIQUIDATION.

(1) Every person, -

(a) who is the liquidator of any company which is being wound up, whether under the orders of a court or otherwise; or

(b) who has been appointed the receiver of any assets of a company, (hereinafter referred to as the liquidator) shall, within thirty days after he has become such liquidator, give notice of his appointment as such to the appropriate authority.

(2) The appropriate authority shall, after making such inquiry or calling for such information as it may deem fit, notify to the liquidator within three months from the date on which he receives notice of the appointment of the liquidator the amount which, in the opinion of the appropriate authority would be sufficient, to provide for any tax which is then, or is likely thereafter to become, payable by the company.

(3) The liquidator shall not part with any of the assets of the company or the properties in his hands until he has been notified by the appropriate authority under sub-section (2) and on being so notified, shall set aside an amount equal to the amount notified and, until he so sets aside such amount, shall not part with any of the assets of the company or the properties in his hands :

PROVIDED that nothing contained in this sub-section shall debar the liquidator from parting with such assets or properties in compliance with any order of a court or for the purpose of the payment of the tax payable by the company under this Act or for making any payment to secured creditors whose debts are entitled under law to priority of payment over debts due to government on the date of liquidation or for meeting such costs and expenses of the winding up of the company as are in the opinion of the appropriate authority reasonable.

(4) If the liquidator fails to give the notice in accordance with sub- section (1) or fails to set aside the amount as required by, or parts with any of the assets of the company or the properties in his hands in contravention of the provisions of sub-section (3), he shall be personally liable for the payment of the tax which the company would be liable to pay:

PROVIDED that if the amount of any tax payable by the company is notified under sub-section (2), the personal liability of the liquidator under this sub-section shall be to the extent of such amount.

(5) Where there are more liquidator than one, the obligations and liabilities attached to the liquidator under this section shall attach to all the liquidators jointly and severally.

(6) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force.

—————

*. Sections 17 ins. by Act 61 of 1972, sec. 13 (w.e.f. 1-4-1973).

Section 18. LIABILITY OF DIRECTORS OF PRIVATE COMPANY IN LIQUIDATION.

Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), when any private company is wound up after the commencement of this Act, and any tax assessed on the company under this Act for any period, whether before or in the course of or after its liquidation, cannot be recovered, then, every person who was a director of the private company at any time during the period for which the tax is due shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company.

—————

*. Sections 18 ins. by Act 61 of 1972, sec. 13 (w.e.f. 1-4-1973).

Land Acquisition Act

November 30, 2014

Section 1. Short title, extent and commencement

(1) This Act may be called the Land Acquisition Act, 1894.

(2) It extends to the whole of India ¹[except the State of Jammu and Kashmir]

(3) It shall come into force on the 1st day of March 1894.

——————–

1. Subs. by Act No. 68 of 1984, (w.e.f. 24-9-1984).

Section 2. Repeal and saving

[Repealed partly by the Repealing and Amending Act, 1914 (X of 1914) Section 3 and Sch. II and partly by the Repealing Act, 1938 (1 of 1938 Section 2 and Sch.]

Section 3. Definitions

In this Act, unless there is something repugnant in the subject or context, -

(a) The expression “land” includes benefits to arise out of land and things attached to the earth or permanently fastened to anything attached to the earth;

¹[“(aa) The expression “local authority” includes a town planning authority (by whatever name called) set up under any law for the time being in force];

(b) The expression “person interested” includes all persons claiming an interest in compensation to be made because of the acquisition of land under this Act-, and a person shall be deemed interested in land if he is interested in an easement affecting the land;

(c) The expression “Collector” means the Collector of a district, and includes a Deputy Commissioner and any officer specially appointed by the Appropriate Government to perform the functions of a Collector under this Act;

¹[(cc) The expression “corporation owned or controlled by the State” means any body corporate established by or under a Central, Provincial or State Act, and includes a Government company as defined in Section 617 of the Companies Act, 1956 (1 of 1956), a society registered under the Societies Registration Act, 1860 (21 of 1860). or under any corresponding law for the time being in force in a state being a society established or administered by Government and a cooperative society within the meaning of any law relating to co-operative societies for the time being in force in any State, being a co-operative society in which not less than fifty-one per centum of the paid-tip share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments,]”

(d) The expression “Court” means a principal Civil Court of original jurisdiction, unless the Appropriate Government has appointed (as it is hereby empowered to do) a special judicial officer within any specified local limits to perform the functions of the Court under this Act;

(e) The expression “company” means-

(i) A company as defined in Section 3 of the Companies Act, 1956 (1 of 1956), other than a Government company referred to in clause (cc);

(ii) A society registered under the Societies Registration Act, 1860 (21 of 1860), or under any corresponding law for the time being in force in a State, other than a society referred to in clause (cc);

(iii) A co-operative society within the meaning of any law relating to co-operative societies for the time being in force in any State, other than a co-operative society referred to in clause (cc);

(ee) The expression “appropriate Government” means in relation to acquisition of land for the purposes of the Union the Central Government, and, in relation to acquisition of land for any other purposes, the State Government;

²[(f) The expression “public purpose” includes-

(i) The provision of village-sites, or the extension, planned development or improvement of existing village-sites;

(ii) The provision of land for town or rural planning;

(iii) The provision of land for planned development of land from public funds in pursuance of any scheme or policy of Government and subsequent disposal thereof in whole or in part by lease, assignment or outright sale with the object of securing further development as planned;

(iv) The provision of land for a corporation owned or controlled by the State;

(v) The provision of land for residential purposes to the poor or landless or to persons residing in areas affected by natural calamities, or to persons displaced or affected by reason of the implementation of any scheme undertaken by Government, any local authority or a corporation owned or controlled by the State;

(vi) The provision of land for carrying out any educational, housing, health or slum clearance scheme sponsored by Government, or by any authority established by Government for carrying out any such scheme, or, with the prior approval of the appropriate Government, by local authority, or a society registered under the Societies Registration Act, 1860 (21 of 1860), or under any corresponding law for the time being in force in a State, or a co-operative society within the meaning of any law relating to co-operative societies for the time being in force in any State;

(vii) The provision of land for any other scheme of development sponsored by Government or, with the prior approval of the appropriate Government, by a local authority;

(viii) The provision of any premises or building for locating a public office, but does not include acquisition of land for companies]

(g) The following persons shall be deemed persons “entitled to act” as and to the extent hereinafter provided (that is to say)-

Trustees for other persons beneficially interested shall be deemed the persons entitled to act with reference to any such case, and that to the same extent as the persons beneficially interested could have acted if free from disability; a married woman, in cases to which the English law is applicable, shall be deemed the person so entitled to act, and, whether of full age or not, to the same extent as if she were unmarried and of full age; and the guardians of minors and the committees or managers of lunatics or idiots shall be deemed respectively the persons so entitled to act to the same extent as the minors, lunatic or idiots themselves, if free from disability, could have acted:

Provided that-

(i) No person shall be deemed “entitled to act” whose interests in the subject matter shall be shown to the satisfaction of the Collector or Court to be adverse to the interest of the person interested for which he would otherwise be entitled to act;

(ii) In every such case the person interested may appear by a next friend, or, in default of his appearance by a next friend, the Collector or Court, as the case may be, shall appoint a guardian for the case to act on his behalf in the conduct thereof,

(iii) The provisions of 2[Order XXXI of the first schedule to the Code of Civil Procedure, 1908 (5 of 1908)], shall, mutatis mutandis, apply in the case of persons interested appearing before a Collector or Court by a next friend, or by a guardian for the case, in proceedings under this Act; and

(iv) No person “entitled to act” shall be competent to receive the compensation money payable to the person for whom he is entitled to act, unless he would have been competent to alienate the land and receive and give a good discharge for the purchase money on a voluntary sale.

——————–

1. Ins by Act No.68 of l984, sec. 3 (w.e.f. 24-9-1984).

2. Subs. by Act No.68 of 1984, (w.e.f. 24-9-1984).

Section 4. Publication of preliminary notification and powers of officers there upon

(1) Whenever it appears to the appropriate Government that land in any locality is needed or is likely to be needed for any public purpose or for a company a notification to that effect shall be published in the official Gazette ¹[and in two daily newspapers circulating in that locality of which at least one shall be in the regional language] and the Collector shall cause public notice of the substance of such notification to be given at convenient places in the said locality ¹[the last of the dates of such publication and the giving of such public notice, being hereinafter referred to as the date of publication of die notification].

(2) Thereupon it shall be lawful for any officer, either, generally or specially authorised by such government in this behalf, and for his servants and workers, to enter upon, survey, and take levels of any land in such locality;

To dig or bore in the sub-soil;

To do all other acts necessary to ascertain whether the land is adapted for Such Purposes;

To set out the boundaries of the land proposed to be taken and the intended line of the work (if any) proposed to be made thereon;

To mark such levels, boundaries and line by placing marks and cutting trenches and, where otherwise the survey cannot be completed and the levels taken and the boundaries and line marked, to cut down and clear away any part of any standing crop, fence and jungle:

Provided that no person shall enter into any building or upon any enclosed court or garden attached to a dwelling house (unless with the consent of the occupier thereof) without previously giving such occupier at least seven day’s notice in writing of his intention to do so.

——————–

1. Ins by Act No. 68 of 1984 sec.4 (w.e.f. 24-9-1984).

Section 5. Payment for damage

The officer so authorised shall at the time of such entry pay or tender payment for all necessary damage to be done as aforesaid, and in case of dispute as to the sufficiency of the amount so paid or tendered, he shall at once refer the dispute to the decision of the Collector or other Chief Revenue officer of the district and such decision shall be final.

Section 5A. Hearing of objections

(1) Any person interested in any land which has been notified under Section 4, sub-section (1), as being needed or likely to be needed for a public purpose or for a company may, within thirty days form the date of the publication of the notification, object to the acquisition of the land or of any land in the locality, as the case may be.

(2) Every objection under subsection (1) shall be made to the Collector in writing and the Collector shall give the objector, an opportunity of being heard in person or by any person authorised by him in this behalf or by pleader and shall, after hearing all such objections and after making such further inquiry, if any, as he thinks necessary, either make a report in respect of the land which has been notified under Section 4, subsection (1), or make different reports in respect of different parcels of such land, to the appropriate Government containing his recommendations on the objections, together with the record of the proceedings held by him. for the decision of that Government. The decision of the Appropriate Government on the objections shall be final.

(3) For the purposes of this section, a person shall he deemed to be in load who would be entitled to claim an interest in compensation if the land were acquired under this Act.

Section 6. Declaration that land is required for a public purpose

(1) Subject to the provisions of’ Part VII of this Act, when the Appropriate Government is satisfied after considering the report, if any, made under Section 5A, subsection (2), that any particular land is needed for a public purpose, or for a company, a declaration shall be made to that effect under the signature of a Secretary to such Government or of some officer duly authorised to certify its orders and different declarations may be made from time to time in respect of different parcels of any land covered by the same notification under Section 4, sub section (1), irrespective of whether one report or different reports has or have been made (wherever required) under Section 5-A, sub-section (2):

¹[Provided that no declaration in respect of any particular land covered by a notification under Section 4, subsection (1), -

(i) Published after the commencement of the Land Acquisition (Amendment and Validation) Ordinance, 1967 but before the commencement of the Land Acquisition (Amendment) Act, 1984 shall he made after the expiry of three years front the date of the publication of the notification; or

(ii) Published after the commencement of the Land Acquisition (Amendment) Act, 1984, shall be made after the expiry of one year from the date of the publication of the notification:

Provided further that no such declaration shall be made unless the compensation to be awarded for such property is to be paid by a company, or wholly or partly out of public revenues or some fund controlled or managed by a local authority,

²[Explanation 1

In computing any of the periods referred to in the first proviso the period during which any action or proceeding to be taken in pursuance of the notification issued under Section 4, subsection (1), is stayed by an order of a Court shall be excluded.

Explanation 2

Where the compensation to be awarded for such property is to he paid out of the funds of a corporation owned or controlled by the State, such compensation shall be deemed to be compensation paid out of public revenues].

(2) Every declaration shall be published in the Official Gazette, 1[and in two daily newspapers circulating in the locality in which the land is Situate of which at least on, shall be in the regional language, and the Collector shall cause public notice of the substance of such declaration to be given at convenient places in the said locality (the last of the date of such publication and the giving of such public notice, being herein after referred to as the date of publication of the declaration), and such declaration shall state] the district or other territorial division in which the land is situate, the purpose for which it is needed, its approximate area, and where a plan shall have been made of the land, the place where such plan may be inspected.

(3) The said declaration shall be conclusive evidence that the land is needed for a public purpose or for a company, as the case may be; and, after making such declaration the Appropriate Government may acquire the land in a manner hereinafter appearing.

——————–

1. Subs. by Act No. 68 of 1984, sec. 6 (w.e.f. 24-9-1984).

2. Ins by Act No. 68 of 1984, sec. 6 (w.e.f. 24-9-1984).

Section 7. After declaration, Collector to take order for acquisition

Whenever any land shall have been so declared to be needed for a public purpose or for a company, the appropriate Government or some officer authorised by the appropriate Government in this behalf, shall direct the Collector to take order for the acquisition of the land.

Section 8. Land to be marked out, measured and planned

The Collector shall thereupon cause the land (unless it has been already marked out under Section 4), to he marked out. He shall also cause it to be measured, and (if no plan has been made thereof), a plan to be made of the same.

Section 9. Notice to persons interested

(1) The Collector shall then cause public notice to be given at convenient places on or near the land to be taken, stating that the Government intends to take possession of the land, and that claims to compensation for all interests in such land may be made to him.

(2) Such notice shall state the particulars of the land so needed, and shall require all persons interested in the land to appear personally or by agent before the Collector at a time and place therein mentioned (such time not being earlier than fifteen days after the date of publication of the notice), and to state the nature of their respective interests in the land and the amount and particulars of their claims to compensation for such interests, and their objections (if any) to the measurements made under Section 8. The Collector may in any case require such statement to be made in writing and signed by the party or his agent.

(3) The Collector shall also serve notice to the same effect on the occupier (if any) of such land and on all such persons known or believed to be interested therein, or to be entitled to act for persons so interested, as reside or have agents authorised to receive service on their behalf, within the revenue district in which the land is situate.

(4) In case any person so interested resides elsewhere, and has no such agent the notice shall be sent to him by post in A letter addressed to him at his last known residence, address or place of business and ¹[registered under Sections 28 and 29of the Indian Post Office Act, 1898 (6 of 1898)].

——————–

1. Subs. by Act 68 of 1984, sec. 7 (w.e.f. 24-9-1984).

Section 10. Power to require and enforce the making of statements as to names and interests

(1) The Collector may also require any such person to make or deliver to him, at a time and place mentioned (such time not being earlier than fifteen days after the date of the requisition), a statement containing, so far as may be practicable, the name of every other person possessing any interest in the land or any part thereof as co-proprietor, mortgagee, tenant or otherwise, and of the nature of such interest, and of the rents and profits (if any) received or receivable on account thereof for three years next preceding the date of the statement.

(2) Every person required to make or deliver a statement under this section or Section 9 shall be deemed to be legally bound to do so within the meaning of Sections 175 and 176 of the Indian Penal Code.

Enquiry into measurements, value, claims, and award by the Collector.

Section 11. Enquiry and award by Collector

¹[(1)] On the day so fixed, or any other day to which the enquiry has been adjourned, the Collector shall proceed to enquire into the objections (if any) which any person interested has stated pursuant to a notice given under Section 9 to the measurements made under Section 8, and into the value of the land and at the date of the publication of the notification under Section 4, subsection (1), and into the respective interests of the persons claiming the compensation, and shall make an award under his hand of-

(i) The true area of the land;

(ii) The compensation which in his opinion should be allowed for the land; and

(iii) The apportionment of the said compensation among all the persons known or believed to he interested in the land, of whom, or of whose claims, he has information, whether or not they have respectively appeared before him:

²[Provided that no award shall be made by the Collector under this subsection without the previous approval of the appropriate Government or of such officer as the appropriate Government may authorise in this behalf:

Provided further that it shall be competent for the Appropriate Government to direct that the Collector may make such award without such approval in such class of cases as the Appropriate Government may specify in this behalf];

³[(2) Notwithstanding anything contained in sub-section (1), if at any stage of the proceedings, the Collector is satisfied that all the persons interested in the land who appeared before him have agreed in writing on the matters to be included in the award of the Collector in the form prescribed by rules made by the appropriate Government, he may, without making further enquiry, make an award according to the terms of such agreement.

(3) The determination of compensation for any land under sub-section (2) shall not in anyway affect the determination of compensation in respect of other lands in the same locality or elsewhere in accordance with the other provisions of this Act.

(4) Notwithstanding anything contained in the Registration Act, 1908 (16 of 1908) no agreement made under subsection (2) shall be liable to registration under that Act.]

——————–

1. Section 11 re-numbered as sub-section (1) thereof by Act No. 68 of 1984, sec. 8.

2. Ins. by Act No. 68 of 1984, (w.e.f. 24-9-1984).

Section 11A. Period within which an award shall be made

¹[11A. Period within which an award shall be made. (1) The Collector shall make an award under Section 11 within a period of two years from the date of the publication of the declaration and if no award is made within that period, the entire proceedings for the acquisition of the land shall lapse:

Provided that in a case where the said declaration has been published before the commencement of the Land Acquisition (Amendment) Act, 1984, the award shall he made within a period of two years from such commencement.

Explanation

In computing the period of two years referred to in this section the period during which any action or proceeding to be taken in pursuance of the said declaration is stayed by an order of a Court shall be excluded.).

——————–

1. Ins. by Act No. 68 of 1984, sec. 9 (w.e.f. 24-9-1984).

Section 12. Award of Collector when to be final

(1) Such award shall be filed in die Collector’s office and shall, except as hereinafter provided, be final and conclusive evidence, as between the Collector and the persons interested, whether they have respectively appeared before the Collector or riot, of the true area and value of the land, and apportionment of the compensation among the persons interested.

(2) The Collector shall give immediate notice of his award to such of the persons interested as are not present personally or by their representatives when the award is made.

Section 13. Adjournment of enquiry

The Collector may, for any cause he thinks fit, from time to time, adjourn the enquiry to a day to be fixed by him.

¹[13A. Correction of clerical errors, etc.

(1) The Collector may, at any time but not later than six months from the date of the award, or where he has been required under Section 18 to make a reference to the Court, before the making of such reference, by older, correct any clerical or arithmetical mistakes in the award or errors arising therein either on his own motion or on the application of any person interested or a local authority:

Provided that no correction, which is likely to affect prejudicially any person, shall be made unless such person has been given a reasonable opportunity of making a representation in the matter.

(2) The Collector shall give immediate notice of any correction made in the award to all the persons interested,

(3) Where any excess amount is proved to have been paid to any person as a result of the correction made under sub-section (1), the excess amount so paid shall be liable to be refunded and in the case of any default or refusal to pay, the same may he recovered as all arrear of’ land revenue.]

——————–

1. Ins by Act No. 68 of 1984, sec. 10 (w.e.f. 24-9-1984).

Section 14. Power to summon and enforce attendance of witnesses and production of documents

For the purpose of enquiries under this Act the Collector shall have power to summon and enforce the attendance of witnesses, including tree parties interested or any of them, and to compel the production of documents by the same means, and (so far as may be) in the same mariner as is provided in the case of a Civil Court under the ¹[Code of Civil Procedure, 1908 (5 of 1908).]

——————–

1. Subs by Act No. 68 of 1984. sec. 11 (w.e.f. 24-9-1984).

Section 15. Matters to be considered and neglected

In determining the amount of compensation, the Collector shall be guided by the provisions contained in Sections 23 and 24.

Section 15A. Power to call for records, etc

¹[15A. Power to call for records, etc. The appropriate Government may at any time before the award is made by the Collector under Section 11 call for any record to any proceedings (whether by way of enquiry or otherwise) for the purpose of satisfying itself as to the legality or propriety of any finding or order passed or as to the regularity of such proceedings and may pass such order or issue such direction in relation thereto as it may think fit:

Provided that the appropriate Government shall not pass or issue any order or direction prejudicial to any person without affording such person a reasonable opportunity of being heard.]

——————–

1. Ins by Act No. 68 of 1984., sec.12 (w.e.f. 24-9-1984).

Section 16. Power to take possession

When the Collector has made an award under Section 11, he may take possession of the land, which shall thereupon vest absolutely in the Government, free from all encumbrances.

Section 17. Special powers in cases of urgency

(1) In cases of urgency, whenever the Appropriate Government so directs, the Collector, through no such award has been made, may, on the expiration of fifteen days from the publication of the notice mentioned in Section 9, sub-section (1), ¹[take possession of any land needed for a public purpose] Such land shall thereupon vest absolutely in the Government, free from all encumbrances.

(2) Whenever owing to any sudden change in the channel of any navigable river or other unforeseen emergency, it becomes necessary for any Railway administration to acquire the immediate possession of any land for the maintenance of their traffic or for the purpose of making thereon a river-side or ghat station, or of providing convenient connection with or access to any such station, ²[or the appropriate Government considers it necessary to acquire the immediate possession of any land for the purpose of maintaining any structure or system pertaining to irrigation, water supply, drainage, road communication or electricity,] the Collector may, immediately after the publication of the notice mentioned in sub-section (1) and with the previous sanction of the appropriate Government, enter upon and take possession of such land, which shall thereupon vest absolutely in the Government free from all encumbrances.

Provided that the Collector shall not take possession on any building or part of a building under this sub-section without giving to the occupier thereof at least forty-eight hours’ notice of his intention so to do, or such longer notice as may be reasonably sufficient to enable such occupier to remove his movable property from such bundling without unnecessary inconvenience.

(3) In every case under either of the proceeding subsections the Collector shall at the time of taking possession offer to the persons interested, compensation for the standing crops and trees (if any) on such land and for any other damage sustained by them caused by such sudden dispossession and not excepted in Section 24; and, in case such offer is not accepted, the value of such crops and trees and the amount of such other damage, shall be allowed for in awarding compensation for the land under the provisions herein contained,

²[(3A) Before taking possession of any land under subsection (1) or subsection (2), the Collector shall, without prejudice to the provisions of sub-section (3), -

(a) Tender payment of eight per centum of the compensation for such land as estimated by him to the persons interested entitled thereto, and

(b) Pay it to them, unless prevented by some one or more of the contingencies mentioned in Section 31, sub-section (2), and where the Collector is so prevented, the provisions of Section 31, subsection (2), (except the second proviso thereto), shall apply as they apply to the payment of compensation under that section.

(3-B) The amount paid or deposited under sub-section (3A), shall be taken into account for determining the amount of compensation required to he tendered under Section 31, and where the amount so paid or deposited exceeds the compensation awarded by the Collector under Section II, the excess may, unless refunded within three months from the date of the Collector’s award, be recovered as an arrear of land revenue.]

(4) In the cases of any land to which, in the opinion of the appropriate Government, the provisions of subsection (1), or subsection (2) are applicable, the appropriate Government may direct that the provisions of Section 5A shall not apply, and, if it does so direct, a declaration may be made under Section 6 in respect of the land at any time 1[after the date of the publication of the notification] under Section 4 subsection (1)

——————–

1. Subs. by Act No. 68 of 1984, (w.e.f. 24-9-1984).

2. Ins. by Act No.68 of 1984 (w.e.f. 24-9-1984).

Section 18. Reference to Court

(1) Any person interested who has not accepted the award may, by written application to the Collector, require that the matter be referred by the Collector for the determination of the Court, whether his objection be to the measurement of the land, the amount of the compensation, the persons to whom it is payable, or the apportionment of the compensation among the persons interested.

(2) The application shall state the grounds on which objection to the award is taken:

(a) If the person making it was present or represented before the Collector at die time when he made his award, within six weeks from the date of the Collector’s award;

(b) In other cases, within six weeks of the receipt of the notice from the Collector under Section 12, sub-section (2); or within six months from the date of the Collector’s award, whichever period shall first expire.

Section 19. Collector’s statement to the Court

(1) In making the reference, the Collector shall state, for the information of the Court, in writing under his hand-

(a) The situation and extent of the land, with particulars of any trees, buildings or standing crops thereon;

(b) The names of the persons whom he has reasons to think interested in such land;

(c) The amount awarded for damages and paid or tendered under Sections 5 and 17, or either of them, and the amount of compensation awarded under Section 11; ¹[* * *]

²[(cc) The amount paid or deposited under subsection (3A) of Section 17; and]

(d) If the objection be to the amount of the compensation, the grounds on which the amount of compensation was determined.

(2) To the said statement, shall be attached a Schedule giving the particulars of the notices served upon, and of the statements in writing made or delivered by the parties interested, respectively.

——————–

1. The word “and” omitted by Act No. 68 of 1984, (w.e.f. 24-9-1984). Sec. 14

2. Ins. by Act No. 68 of 1984, sec. 14 (w.e.f. 24-9-1984.

Section 20. Service of notice

The Court shall thereupon cause a notice, specifying the day on which the Court will proceed to determine the objection, and directing their appearance before the Court on that day, to be served on the following person, namely, -

(a) The applicant;

(b) All persons interested in the objection, except such (if any) of them as have consented without protest to receive payment of the compensation awarded; and

(c) In the objection is in regard to the area of the land or to the amount of compensation, the Collector.

Section 21. Restriction on scope of proceedings

The scope of the inquiry in every such proceeding shall be restricted to a consideration of the interests of the persons affected by the objection.

Section 22. Proceedings to be in open Court

Every such proceeding shall take place in open court, and all persons entitled to practice in any Civil Court in the State shall he entitled to appear, plead and act (as the case may be) in such proceeding.

Section 23. Matters to be considered in determining compensation

(1) In determining the amount of compensation to be awarded for land acquired under this Act, the Court shall take into consideration-

First, the market value of the land at the date of the publication of the notification under Section 4, sub-section (1);

Secondly, the damage sustained by the person interested, by reason of the taking of any standing crops or trees which may be on the land at the time of the Collector’s taking possession thereof,

Thirdly, the damage (if any), sustained by the person interested, at the time of the Collector’s taking possession of the land, by reason of severing such land from his other land;

Fourthly, the damage (if any), sustained by the person interested, at the time of the Collector’s taking possession of the land, by reason of the acquisition injuriously affecting his other property, movable or immovable, in any other manner, or his earnings;

Fifthly, if, in consequence of the acquisition of the land by the Collector, the person interested is compelled to change his residence or place of business, the reasonable expenses (if any) incidental to such change; and

Sixthly, the damage (if any) bona fide resulting from diminution of the profits of the land between the time of the publication of the declaration under Section 6 and the time of the Collector’s taking possession of the land.

¹[(1A) In addition to the market value of the land above provided, the Court shall in every case award an amount calculated at the rate of twelve per centum per annum of such market-value for the period commencing on and from the date of the publication of the notification under Section 4, sub-section (1), in respect of such land to the date of the award of the Collector or the date of taking possession of the land, whichever is earlier.

Explanation

In computing the period referred to in this sub-section, any period or periods during which the proceedings for the acquisition of the land were help up on account of any stay or injunction by the order of any court shall be excluded.]

(2) In addition to the market value of the land, as above provided, the court shall in every case award a sum of ²[thirty per centum] on such market value, in consideration of the compulsory nature of the acquisition.

——————–

1. Ins by Act No. 68 of 1984, sec. 15 (w.e.f. 24-9-1984), regarding its application to proceedings pending on or after 30. 4.1982.

2. Subs. by Act No. 68 (w.e.f. 24-9-1984).

Section 24. Matters to be neglected in determining compensation

But the court shall not take into consideration-

First, the degree of urgency, which has led to the acquisition;

Secondly, any disinclination of the person interested to part with the land acquired;

Thirdly, any damage sustained by him, which, if caused by a private person, would not tender such person liable to a suit;

Fourthly, any damage which is likely to be caused to the land acquired, after the date of the publication of the declaration under Section 6, by or in consequence of- the use to which it will be put;

Fifthly, any increase to the value of the land acquired likely to accrue from the use to which it will be put when acquired;

Sixthly, any increase to the value of the other land of the person interested likely to accrue from the use to which the land acquired will be put;

Seventhly, any outlay or improvements on, or disposal of, the land acquired, commenced, made or effected without the sanctified of the Collector after the date of the publication of the notification under Section 4, sub-section (1); or]

¹[Eighthly, any increase to the value of the land on account of its being Hart to ally use which is forbidden by land or opposed to public policy.)

——————–

1. Ins. by Act No. 68 of 1984, sec. 16 (w.e.f. 24-9-1984).

Section 25. Amount of compensation awarded by Court not to be lower than the amount awarded by the Collector

¹[25. Amount of compensation awarded by court not to be lower than the amount awarded by the Collector.

The amount of compensation awarded by the court shall not be less than the amount awarded by the Collector under Section 11.]

——————–

1. Sub by Act No. 68 of 1984 sec. 17 (w.e.f. 24-9-1984).

Section 26. Form of awards

(1) Every award under this Part shall be in writing signed by the Judge, and shall specify the amount awarded under clause first of subsection (1) of Section 23, and also the amounts (if any) respectively awarded under each of the other clauses of the same subsection, together with the grounds of awarding each of the said amounts.

(2) Every such award shall be deemed to be a decree and the statement of the grounds of every such award a judgment within the meaning of Section 2, clause (2) and Section 2, clause (9), respectively, of the Code of Civil Procedure, 1908.

Section 27. Costs

(1) Every such award shall also state the amount of costs incurred in the proceedings, under this Part, and by what persons and in what proportions they are to be paid.

(2) When the award of the Collector is not upheld, the costs shall ordinarily be paid by the Collector, unless the Court shall be of opinion that the claim of the applicant was so extravagant or that he was so negligent in putting his case before the Collector that some deduction from his costs should be made or that he should pay a part of the Collector’s costs.

Section 28. Collector may be directed to pay interest on excess compensation

¹[28. Collector may be directed to pay interest on excess compensation. If the sum which, in the opinion of the court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of 1[nine per centum] per annum from the date on which he took possession of the land to the date of payment of such excess into court.

²[Provided that the award of the Court may also direct that where such excess or any part thereof is paid into Court after the date of expiry of a period of’ one year from die date on which possession is taken, interest at the rate of’ fifteen per centum per Minimal, shall be payable from the date of expiry of the said period of one year on the amount of such excess or part thereof which has not been paid into Court before the date of such expiry.

——————–

1. See act 68, sec. 30 (20, regarding its application to certain awards made and orders passed after 30.4.1982.

2. Ins by Act No. 68 of 1984 sec.18 (w.e.f. 24-9-1984).

Section 28A. Re-determination of the amount of compensation on the basis of the award of the Court

¹[28A. Re-determination of the amount of compensation on the basis of the award of the Court. (1) Where in an award under this Part, the Court allows to die applicant any amount of compensation in excess of the amount awarded by the collector under Section 11, the persons interested in all die other land covered by the Sallie notification under Section 4 subsection (1) and who are also aggrieved by the award of the Collector within three months from the date of the application to the Collector require that the amount of compensation payable to deep may be re-determined on the basis of the amount of compensation awarded by the Court:

Provided that in computing the period of three months within which an application to the Collector shall be made under this sub section, the day on which the award was pronounced and the ‘lime requisite for obtaining a copy of the award shall be excluded.

(2) The Collector shall, on receipt of an application under sub section (1), inquiry after giving notice to all the persons interested and giving them a reasonable opportunity of being heard, and make an award determining the amount of compensation payable to the applicants.

(3) Any person who has not accepted the award under subsection (2) may, by written application to the Collector, require that the matter be referred by the Collector for die determination of the Court and the provisions of Sections 18 to 28 shall, so fir as may be, apply to such reference as they apply to reference under Section 18.]

——————–

1. Ins by Act No. 68 of 1984 sec.19 (w.e.f. 24-9-1984).

Section 29. Particulars of apportionment to be specified

Where there are several persons interested, if such persons agree in the apportionment of the compensation, the Particulars of such apportionment shall be specified in the award, and as between such persons the award shall he conclusive evidence of the correctness of the apportionment.

Section 30. Dispute as to apportionment

When the amount of compensation has beer) settled under Section 11, it any dispute arises as to the apportionment of the same or any part thereof, or as to the persons to whom the same or any part thereof, is payable, the Collector may refer such dispute to the decision of the court.

Section 31. Payment of compensation or deposit of same in Court

(1) On making an award under Section 11, the Collector shall tender payment of the compensation awarded by him to the persons interested entitled thereto according to the award, and shall pay it to them unless prevented by some one or more of the contingencies mentioned in the next sub-section.

(2) If they shall not consent to receive it, or if there be no person competent to alienate the land, or if there be any dispute as to the title to receive the compensation or as to the apportionment of it, the Collector shall deposit the amount of the compensation in the court to which a reference under Section 18 would be submitted:

Provided that any person admitted to be interested may receive such payment under protest as to the sufficiency of the amount:

Provided also that no person who has received the amount otherwise than under protest shall be entitled to make any application under Section 18:

Provided also that nothing herein contained shall affect the liability of any person, who may receive the whole or any part of any compensation awarded under this Act, to pay the same to the person lawfully entitled thereto.

(3) Notwithstanding anything in this section, the Collector may, with the sanction of appropriate Government instead of awarding a money compensation in respect of any land, make any arrangement with a person having a limited interest in such land, either by the grant of other lands in exchange, the remission of land revenue on other lands held under the same title, or in such other way as may be equitable having regard to the interest of the parties concerned.

(4) Nothing in the last foregoing sub-section shall be construed to interfere with or limit the power of the Collector to enter into any arrangement with any person interested in the land and competent to contract¹ in respect thereof.

——————–

1. As to who are competent to contract, see section 11 of the Indian Contract Act, 1872 (9 of 1872).

Section 32. Investment of money deposited in respect of lands belonging to persons incompetent to alienate

(1) If any money shall be deposited in Court under sub-section (2) of the last preceding section and it appears that the land in respect whereof the same was awarded belonged to any person who had no power to alienate the same, the Court shall-

(a) Order the money to be invested in the purchase of other lands to be held under the like title and conditions of ownership as the land in respect of which such money shall have been deposited, was held, or

(b) If such purchase cannot be effected forthwith, then in such Government or other approved securities as the Court shall think fit;

And shall direct the payment of the interest or other proceedings arising from such investment to the person or persons who would for the time being have been entitled to the possession of the said land, and such moneys shall remain so deposited and invested until the same be applied, -

(i) In the purchase of such other lands its aforesaid; or

(ii) In payment to any person or persons becoming absolutely entitled thereto.

(2) In all cases of moneys deposited to which this section applies, the Court shall order the costs of the following matters, including therein all reasonable charges and expenses incidental thereto, to be paid by the Collector, namely. -

(a) The costs of such investments as aforesaid;

(b) The costs of the orders for the payment of the interest or other proceeds, of the securities upon which such moneys are for the time being invested, and for the payment out of Court of the principal of such moneys, and of all proceedings relating thereto, except such as may be occasioned by litigation between adverse claimants.

Section 33. Investment of money deposited in other cases

When any money shall have been deposited in Court under this Act for any cause other than that mentioned in the last preceding section, the Court may, on the application of any party interested of claiming an interest in such money, order the same to be invested in such Government or other approved securities as it may think proper, and may direct the interest or other proceeds of any such investment to be accumulated and paid in such manner as it may consider will give the parties interested therein the same benefit therefrom as they might have had from the land in respect whereof such money shall have been deposited or as near thereto as may be.

Section 34. Payment of interest

When the amount of such compensation is not paid or deposited on or before taking possession of the land, the Collector shall pay the amount awarded with interest thereon at the rate of ¹[nine per centum per annum from the time of so taking possession until it shall have been so paid or deposited.

²[Provided that if such compensation or any part thereof is not paid or deposited within a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of expiry of the said period of one year on the amount of compensation or part thereof which has not been paid or deposited before the date of such expiry”.]

——————–

1. See Act No. 68 of 1984, sec. 30 (3)regarding it’s application to certain cases of possession of acquired land before, on or after 30-4-982.

2. Ins by Act No. 68 of 1984, sec. 20 (w.e.f 24-9- 1984).

Section 35. Temporary occupation of waste or arable land, procedure when difference as to compensation exists

(1) Subject to the provisions of Part VII of this Act, whenever it appears to the appropriate Government that the temporary occupation and use of any waste or arable land are needed for any public purpose, or for a company, the appropriate Government may direct the Collector to procure the occupation and use of the same for such terms as it shall think fit, not exceeding three years from commencement of such occupation.

(2) The Collector shall thereupon give notice in writing to the persons interested in such land of the purpose for which the same is needed, and shall, for the occupation and use thereof, for such term as aforesaid, and for the materials (if any) to he taken therefrom, pay to them such compensation, either in a gross sum of money, or by monthly or other periodical payments, as shall be agreed upon in writing between him and such persons respectively.

(3) In case the Collector and the persons interested differ as to the sufficiency of the compensation or apportionment thereof, the Collector shall refer such difference to the decision of the Court.

Section 36. Power to enter and take possession, and compensation on restorations

(1) On payment of such compensation, or on executing such agreement, or on making a reference under section 35, the Collector may enter upon and take possession of the land, and use or permit the use thereof in accordance with the terms of the said notice.

(2) On the expiration of the term, the Collector shall make or tender to the persons interested compensation for the damage (if any) done to the land and not provided for by the agreement, and shall restore the land to the persons interested therein:

Provided that, if the land has become permanently unfit to be used for the purpose for which it was used immediately before the commencement of such term, and if the persons interested shall so require, appropriate Government shall proceed under this Act to acquire the and as if it was needed permanently for a public purpose or for a company.

Section 37. Difference as to condition of land

In case the Collector and persons interested differ as to the condition of the land at the expiration of the term, or as to any matter connected with the said agreement, the Collector shall refer such difference to, the decision of the Court.

Section 38. Section

¹[* * *]

——————–

1. Omitted by Act No. 68 of 1984 sec. 21 (w.e.f. 24-9- 1984).

Section 38A. Industrial concern to be deemed Company for certain pur­poses

An industrial concern, ordinarily employing not less than one hundred workmen owned by an individual or by an association of individuals and not being a company, desiring to acquire land for the erection of dwelling-houses for workmen employed by the concern or for the provision of amenities directly connected therewith shall, so far as concerns the acquisition of such land, be deemed to be a company for the purposes of this Part, and the references to company in ¹[Sections 4, 5A, 6, 7, and 50] shall be interpreted as references also to such concern.

——————-
1. Subs by Act No. 68 of 1984 sec. 22 for “sections 5A, 6,7,17 and 50”.

Section 39. Previous consent of appropriate Government and execution of agreement necessary

The provisions of Sections 6 to 10 (both inclusive) and Sections 18 to 37 (both inclusive) shall not be put in force in order to acquire land for any company, ¹[under this part] unless with the previous consent of the appropriate Government, nor unless the company shall have executed the agreement hereinafter mentioned.

——————–

1. Ins by Act No. 68 of 1984 sec. 23 (w.e.f. 24-9-1984).

Section 40. Previous enquiry

(1) Such consent shall not be given unless the appropriate Government be satisfied, either on the report of the Collector under Section 5A, subsection (2), or by an enquiry held as hereinafter provided, -

(a) That the purpose of the acquisition is to obtain land for the erection of dwelling-houses for workmen employed by the Company or for the provision of amenities directly connected therewith, or

(aa) That such acquisition is needed for the construction of some building or work for a company which is engaged or is taking steps for engaging itself in any industry or work which is for a public purpose, or

(b) That such acquisition is needed for the construction of some work and that such work is likely to prove useful to the public.

(2) Such enquiry shall be held by such officer and at such time and place, as the appropriate Government shall appoint.

(3) Such officer may summon and enforce the attendance of witnesses and compel the production of documents by the same means and, as far as possible, in the same manner as is provided by the ¹[Code of Civil Procedure, 1908] (5 of 1908) in the case of Civil Court.

——————–

1. Subs by Act No. 68 of 1984 sec. 24 (w.e.f. 24-9-1984).

Section 41. Agreement with appropriate Government

If the appropriate Government is satisfied after considering the report, if any, of the Collector under Section 5A, sub-section (2), or on the report of the officer making an inquiry under Section 40 that the proposed acquisition is for any of the purposes referred to in clause (a) or clause (aa) or clause (b) of sub-section (1) of Section 40, it shall require the company to enter into an agreement with the appropriate Government, providing to the satisfaction of the appropriate Government for the following matters, namely,-

(1) The payment to the appropriate Government of the cost of the acquisition;

(2) The transfer, on such payment, of the land to the company;

(3) The term on which the company shall hold the land;

(4) Where the acquisition is for the purpose of erecting dwelling-houses or the provision of amenities connected therewith, the time within which, the conditions on which and the manner in which the dwelling-houses or amenities shall be erected or provided;

(4A) Where the acquisition is for the construction of any building or work for it company which is engaged or is taking steps for engaging itself in any industry or work which is for a public purpose, the time within which and the conditions on which the building or work shall be constructed or executed; and

(5) Where the acquisition is for the construction of any other work the time within which and the conditions on which the work shall be executed and maintained and the terms on which the public shall be entitled to use the work.

Section 42. Publication of agreement

Every such agreement shall, is soon as may be after its execution, be published in the Official Gazette, and thereupon (so far as regards the terms on which the public shall be entitled to use the work) have the same effect its it’ it had formed part of this Act.

Section 43. Sections 39 to 42 not to apply where Government bound by agreement to provide land for Companies

The provisions of Sections 39 to 42, both inclusive, shall not apply and the corresponding sections of the Land Acquisition Act, 1870 (10 of 1870), shall be deemed never to have applied, to the acquisition of land of any Railway or other Company, for the purposes of which, under any agreement with such Company, the Secretary of State for India in Council, the Secretary of State, Central Government or any State Government is or was bound to provide land.

Section 44. How agreement with railway Company may be proved

In the case of the acquisition of land for the purposes of a railway company, the existence or such all agreement as is mentioned in Section 43 may be proved by the production of a printed copy thereof purporting to be printed by order of Government.

Section 44A. Restriction on transfer, etc

No company for which any land is acquired under this Part shall be entitled to transfer the said land or any part thereof by sale, mortgage, gift, lease or otherwise except with the previous sanction of the appropriate Government.

Section 44B. Land not to be acquired under this part except for certain purpose for private companies other than Government companies

Notwithstanding anything contained in the Act, no land shall be acquired under this Part, except for the purpose mentioned in clause (a) of sub-section (1) of Section 40, for a private company, which is not a Government company.

Explanation

”Private company” and “Government Company” shall have the meanings respectively assigned to them in the Companies Act, 1956 (1 of 1956).

Section 45. Service of notices

(1) Service of any notice under this Act shall be made by delivering or tendering a copy thereof signed in the case of a notice under Section 4, by the officer therein mentioned, and in the case of’ any other notice, by an order of the Collector or the Judge.

(2) Whenever it may be practicable, the service of the notice shall be made on the person therein named.

(3) When such person cannot be found, the service may be made on any member of his family residing with him; and if no such adult male member can be found the notice may be served by fixing the copy on the outer door of the house in which the person therein named ordinarily dwells or carries on business or by fixing a copy thereof in some conspicuous place in the office of the officer aforesaid or of the Collector or in the court-house, and also in some conspicuous part of the land to he acquired:

Provided that if the Collector or Judge shall so direct, a notice may be sent by post, in a letter addressed to the person named therein at his last known residence, address or place of business and ¹[registered under Sections 28 and 29 of the Indian Post Office Act, 1898 (6 of 1898)] and service of it may be proved by the production of, the addressee’s receipt.

——————–

1. Sub by Act No. 68 of 1984 sec. 25, for “registered under Part III of the Indian Posssst Ofice Act, 1866.

Section 46. Penalty for/obstructing acquisition of land

Whoever wilfully obstructs any person in doing any of the acts authorised by Section 4 or Section 8 or wilfully fills up, destroys, damages or displaces any trench or mark made under section 4, shall, on conviction before a Magistrate, be liable to imprisonment for any term not exceeding one month, or to fine not exceeding ¹[five hundred rupees], or to both.

——————–

1. Subs by Act No.68 of l984 sec. 26 for “fifty rupees” (w.e.f.24-9-1984).

Section 47. Magistrate to enforce surrender

If the Collector is opposed or impeded in taking possession under this Act of any land, he shall, if it Magistrate, enforce the surrender of the land to himself, and, if not a Magistrate, he shall apply to a Magistrate or (within the towns of Calcutta, Madras and Bombay) to the Commissioner of Police and Such Magistrate or the Commissioner (as the case may be) shall enforce the surrender of the land to the Collector.

Section 48. Completion of acquisition not compulsory, but compensation to be awarded when not completed

(1) Except in the case provided for in Section 36, the Government shall be at liberty to withdraw from the acquisition of any land of which possession has not been taken.

(2) Whenever the Government withdraws from any such acquisition, the Collector shall determine the amount of compensation due for the damage suffered by the owner in consequence of the notice or of any proceedings thereunder, and shall pay such amount to the person interested, together with all costs reasonably incurred by him in the prosecution of the proceedings under this Act relating to the said land.

(3) The provisions of Part III of this Act shall apply, so far as may be, to the determination of the compensation payable under this section.

Section 49. Acquisition of part of house or building

(1) The provisions of this Act shall not be put in force for the purpose of acquiring a part only of any house, manufactory or other building, if the owner desires that the whole of such house, manufactory or building shall be so acquired:

Provided that the owner may, at any time before the Collector has made his award under Section 11, by notice in writing, withdraw or modify, his expressed desire that the whole of such house, manufactory or building shall be so acquired.

Provided also that, if any question shall arise as to whether any land proposed to be taken under this Act does or does not form part of a house, manufactory or building within the meaning of this section, the Collector shall refer the determination of such question to the Court and shall not take possession of such land until, after the question has been determined.

In deciding on such a reference the Court shall have regard to the question whether the land proposed to be taken is reasonably required for the full and unimpaired use of the house, manufactory or building.

(2) If, in the case of any claim under Section 23, sub-section (1), thirdly, by a person interested, on account of the serving of the land to be acquired from his other land, the appropriate Government is of opinion that the claim is unreasonable or excessive, it may at any time before the Collector has made his award, order the acquisition of the whole of the land of which the land first sought to be acquired forms a part.

(3) In the case last here-in-before provided for, no fresh declaration or other proceedings under Sections 6 to 10, both inclusive, shall be necessary but the Collector shall without delay furnish a copy of the order of the appropriate Government to the person interested, and shall thereafter proceed to make his award under section 11.

Section 50. Acquisition of land at cost of a local authority or Company

(1) Where the provisions of this Act are put in force for the purpose of acquiring land at the cost of any fund controlled or managed by a local authority or of any company, the charges of any incidental to such acquisition shall be defrayed from or by such fund or company.

(2) In any proceeding held before a Collector or Court in such cases the local authority or company concerned may appear and adduce evidence for the purpose of determining the amount of compensation:

Provided that no such local authority or Company shall be entitled to demand a reference under Section 18.

Section 51. Exemption from stamp duty and fees

No award or agreement made under this Act shall be chargeable with stamp duty, and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of’ the same.

Section 51A. Acceptance of certified copy as evidence

¹[51A. Acceptance of certified copy as evidence. In any proceeding under this Act, a certified copy of a document registered under the Registration Act, 1908 (16 of 1908), including a copy given under Section 57 of that Act, may he accepted as evidence of the transaction recorded in such document.]

——————–

1. Ins. by Act No. 68 of 1984, sec. 27 (w.e.f. 24-9- 1984).

Section 52. Notice in case of suits for anything done in pursuance of Act

No suit or other proceeding shall be commenced or prosecuted against any person for anything done in pursuance of this Act, without giving to such person a month’s previous notice in writing of the intended proceeding, and of the cause thereof, nor after tender of sufficient amends.

Section 53. Code of Civil Procedure to apply to proceedings before Court

Save in so far as they may be inconsistent with anything contained in this Act, the provision of the ¹[Code of Civil Procedure, 19081 (5 of 1908) shall apply to all proceedings before the Court under this Act.

——————–

1. Subs by Act No. 68 of 1984, sec. 28 (w.e.f. 24-9-1984).

Section 54. Appeals in proceedings before Court

Subject to the provisions of’ the Code of Civil Procedure, 1908, applicable to appeals from original decrees, and notwithstanding, anything to the contrary in any enactment for the time being in force, an appeal shall only lie in any proceedings under this Act to the High Court front the award or from any part of the award of’ the Court and from any decree of’ the High Court passed on such appeal as aforesaid an appeal shall lie to the Supreme Court subject to the provisions contained in Section 110 of the Code of Civil Procedure, 1908, and in Order XLIV thereof.

Section 55. Power to make rules

(1) The appropriate Government shall have power to make rules consistent with the Act for the guidance of officer in all matters connected with its enforcement, and may from time to time alter and add to the rules so made:

Provided that the power to make rules for carrying out the purposes of Part VII of this Act shall be exercisable by the Central Government and such rules may be made for the guidance of the State Governments and the officers of the Central Government and of the State Governments:

Provided further that every such rule made by the Central Government shall be laid as soon as may be after it is made, before each Houses of Parliament while it is in session for a total period of thirty days which may be comprised in one session or two or more successive sessions, and if, 1[before the expiry of the session, in which it is so laid or the successive sessions aforesaid, both house agree in making any modification in the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be, so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.]

¹[Provided also that every such rule made by the State Government shall be laid, as soon as may be after it is made, before the State Legislature.]

(2) The power to make, alter and add to rules under subsection (1) shall be subject to the condition of the rules being made, altered or added to after previous publication.

(3) All such rules, alterations and additions shall be published in the Official Gazette, and shall thereupon have the force of law.

——————–

1. Subs by Act No. 68 of 1984 sec. 29 (w.e.f. 24-9-1984).

Juvenile Justice Act

November 30, 2014

Introduction

The problem of juvenile justice is, no doubt, one of tragic human interest so much so in fact that it is not only confined to this country alone but cuts across national boundaries. Juvenile delinquency laws are characterized by the denature that they prescribe many acts which are regarded as non-criminal if indulged in by elder persons like drinking, smoking, viewing adult films or reading adult literature, etc. The extension of the concept of juvenile delinquency towider limits has drawn adverse criticism on the ground that it is neither necessary nor desirable to use police and courts in private matters which can be well tackled by family themselves.

The first legislation converning children which came in 1850 was the Apprentic Act which provided that children in the age group of 10-18 convicted by courts were intended to be provided with some vocational training which might help their rehabilitation. It was followed by Reformatory Schools Act, 1897. The Indian Jail Committee (1919-1920) brought to the fore the vital need for square trial and treatment of young offenders. Its recommendations prompted the enactment of the Children Act in Madras in 1920. This was followed by Bengal and Bombay Acts in 1922 and 1924 respectively. The three poineer statutes (i.e. Acts concerning Madras, Bengal and Bombay) were extensively amended between 1948 and 1959.

In 1960 at the second United Nations Congress on the Prevention of Crime and Treatment of offenders at London this issue was discussed and some therapeutic recommendations were adopted.

The Central enactment, the Children Act, 1960 was passed to cater to the heads of the Union Territories. To remove same inherent lacuane of the above mentioned Act, the Children (Amendment) Act was passed in 1978. But the need of a uniform legislation regarding juvenile justice for the whole country had been expressed in various fora, including Parliament but it could not be enacted on he ground that the subject matter of such a legislation fell in the State List of the Constitution. To bring the operations of the juvenile justice system in the country in conformity with the UN Standard Minimum Rules for the Administration of Juvenile Justice, Parliament seems to have exercised its power under Article 253 of the Constitution read with Entry 14 of the Union List to make law for the whole of India to fulfill international obligations. On 22nd August, 1986, the Juvenile Justice Bill, 1986 was introduced in the Lok Sabha.

STATEMENT OF OBJECTS AND REASONS

A review of the working of the existing Children Acts would indicate that much greater attention is required to be given to children who may be found in situations of social maladjustment, delinquency or neglect. The justice system as available for adults is not considered suitable for being applied to juvenile. It is also necessary that a uniform juvenile justice system should be available throughout the country which should make adequate provision for dealing with all aspects in the changing social, cultural and economic situation in the country. There is also need for larger involvement of informal systems and community based welfare agencies in the care, protection, treatment, development and rehabilitation of such juveniles.

In this context, the proposed legislation aims at achieving the following objectives:-

(i) To lay down a uniform frame work for juvenile justice in the country so as to ensure that no child under any circumstances is lodged in jail or police lock-up. This is being ensured by establishing Juvenile Welfare Boards and Juvenile Courts;

(ii) To provide for a specialised approach towards the prevention and treatment of juvenile delinquency in its full range in keeping with the development needs of the child found in any situation of social maladjustment;

(iii) To spell out the machinery and infrastructure required for the care, protection, treatment, development and rehabilitation of various categories of children coming within the purview of the juvenile justice system. This is proposed to be achieved by establishing observation homes, juvenile homes for neglected juveniles and special homes for delinquent juveniles;

(iv) To establish norms and standards for the administration of juvenile justice in terms of investigation and prosecution, adjudication and disposition and care, treatment and rehabilitation;

(v) To develop appropriate linkages and coordination between the formal system of juvenile justice and voluntary agencies engaged in the welfare of neglected or society maladjusted children and to specifically define the areas of their responsibilities and roles;

(vi) To constitute special offences in relation to juveniles and provide for punishments therefore;

(vii) To bring the operation of the juvenile justice system in the country in conformity with the United Nations Standard Minimum Rules for the Administration of Juvenile Justice.

As its various provisions come into force in different parts of the country they would replace the corresponding laws on the subject such as Children Act, 1960 and other State enactments on the subject.

The Bill seeks to achieve the above objects.

Act 53 of 1986

The Juvenile Justice Bill, 1986 was passed by both Houses of Parliament. After receiving the assent of the President it came on the Statute Book as the Juvenile Justice Act, 1986 (53 of 1986).

Chapter I –  Preliminary

Section 1. Short title, extent, and commencement

(53 of 1986) (1st December, 1986)

An Act to provide for the care, protection, treatment, development and rehabilitation of neglected or delinquent juveniles and for the adjudication of certain matters relating to and disposition of, delinquent juveniles.

BE it enacted by Parliament in the Thirty-seventh Year of the Republic of India as follows:-

(1) This Act may be called the Juvenile Justice Act, 1986.

(2) It extends to the whole of India except the State of Jammu and Kashmir.

(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act and for different States.

Section 2. Definitions

In this Act, unless the context otherwise requires, – (a) “Begging” means -

(i) Soliciting or receiving alms in a public place or entering into any private premises for the purpose of soliciting or receiving alms, whether under the pretence of singing, dancing, fortune-telling, performing tricks or selling articles or otherwise ;

(ii) Exposing or exhibiting, with the object of obtaining or extorting alms, any sore, wound, injury, deformity or disease, whether of himself or of any other person or of an animal ;

(iii) Allowing oneself to be used as an exhibit for the purpose of soliciting or receiving alms ;

(b) “Board” means a Juvenile Welfare Board constituted under section 4;

(c) “Brothel”, prostitute”, “prostitution” and “public place” shall have the meanings respectively assigned to them in the Suppression of Immoral Traffic in Women and Girls Act, 1956 (104 of 1956) ;

(d) “Competent authority” means, in relation to neglected Juveniles, a Board and, in relation to delinquent Juveniles, a Juvenile Court and where no such Board or Juvenile Court has been constituted, includes any court empowered under sub-section (2) of section 7 to exercise the powers conferred on a Board or Juvenile Court ;

(e) ‘Delinquent juvenile’ means a juvenile who has been found to have committed an offence ;

(f) “Fit person” or “fit institution” means any person or institution (not being a police station or jail) found fit by the competent authority to receive and take care of a juvenile entrusted to his or its care and protection on the terms and conditions specified by the competent authority

(g) ‘Guardian’ in relation to a juvenile, includes any person who, in the opinion of the competent authority, having cognizance of any proceeding in relation to a juvenile, has, for the time being, the actual charge of, or control over, that juvenile ;

(h) ‘Juvenile’ means a boy who has not attained the age of sixteen years or a girl who has not attained the age of eighteen years ;

(i) “Juvenile Court” means a court constituted under section 5;

(j) “Juvenile home” means an institution established or certified by the State Government under section 9 as a Juvenile home ;

(k) “Narcotic drug’ and ‘psychotropic substance’ shall have the meanings respectively assigned to them in the Narcotic Drugs and psychotropic Substances Act, 1985 (61 of 1985) ;

(l) “Neglected juvenile” means a juvenile who –

(i) Is found begging ; or

(ii) Is found without having any home or settled place of abode and without any ostensible means of subsistence and is destitute ; or

(iii) Has a parent or guardian who is unfit or incapacitated to exercise control over the juvenile ; or

(iv) Lives in a brothel or with a prostitute or frequently goes to any place used for the purpose of prostitution, or is found to associate with any prostitute or any other person who leads an immoral, drunken or depraved life ; or

(v) Who is being or is likely to be abused or exploited for immoral or illegal purposes or unconscionable gain ;

(m) “Observation homes” means any institution or place established or recognised by the State Government under section 11 as an observation home ;

(n) “Offence” means an offence punishable under any law for the time being in force ;

(o) “Place of safety” means any place or institution (not being a police station or jail), the person in charge of which is willing temporarily to receive and take care of a juvenile and which, in the opinion of the competent authority may be a place of safety for the juvenile ;

(p) “Prescribed” means prescribed by rules made under this Act;

(q) “Probation officer” means an officer appointed as a probation officer

under this Act or under the Probation of Offenders Act, 1958 (20 of 1958);

(r ) “Special home” means an institution established or certified by the State Government under section 10;

(s) “Supervision”, in relation to a juvenile placed under the care of any parent, guardian or other fit person or fit institution under this Act, means the supervision of that juvenile by a probation officer for the purpose of ensuring that the juvenile is properly looked after and that the conditions imposed by the competent authority are complied with ;

(t) All words and expressions used but not defined in this Act and defined in the Code of Criminal Procedure, 1973 (2 of 1974), shall have the meanings respectively assigned to them in that Code.

Section 3. Continuation of inquiry in respect of juvenile who has ceased to be a juvenile.

Where an inquiry has been initiated against a juvenile and during the course of such inquiry the juvenile ceases to be such, then, notwithstanding anything contained in this Act or in any other law for the time being in force, the inquiry may be continued and orders may be made in respect of such person if such person had continued to be a juvenile.

Chapter II – Competent Authorities and Institutions for Juveniles  

Section 4. Juvenile Welfare Boards

(1) The State Government may, by notification in the Official Gazette, constitute for any area specified in the notification, one or more Juvenile Welfare Boards for exercising the powers and discharging the duties conferred or imposed on such Board in relation to neglected juveniles under this Act.

(2) A Board shall consist of a Chairman and such other members as the State Government thinks fit to appoint, of whom not less than one shall be a woman; and every such member shall be vested with the powers of a Magistrate under the Code of Criminal Procedure, 1973 (2 of 1974).

(3) The Board shall function as a Bench of Magistrates and shall have the powers conferred by the Code of Criminal Procedure, 1973 (2 of 1974), on a Metropolitan Magistrate or, as the case may be, a Judicial Magistrate of the first class.

Section 5. Juvenile Courts

(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), the State Government may, by notification in the Official Gazette, constitute for any area specified in the notification, one or more Juvenile Courts for exercising the powers and discharging the duties conferred or imposed on such court in relation to delinquent juveniles under this Act.

(2) A Juvenile Court shall consist of such number of Metropolitan Magistrates or Judicial Magistrates of the first class, as the case may be, forming a Bench as the State Government thinks fit to appoint, of whom one shall be designated as the Principal Magistrate; and every such Bench shall have the powers conferred by the Code of Criminal Procedure, 1973 (2 of 1974), on a Metropolitan Magistrate or, as the case may be , a Judicial Magistrate of the first class.

(3) Every Juvenile Court shall be assisted by a panel of two honorary social workers possessing such qualifications as may be prescribed, of whom at least one shall be a woman, and such panel shall be appointed by the State Government.

Section 6. Procedure, etc., in relation to Boards and Juvenile Courts

(1) In the event of any difference of opinion among the members of a Board or among the Magistrates of a Juvenile Court, the opinion of the majority shall prevail, but where there is no such majority, the opinion of the Chairman or of the Principal Magistrate, as the case may be, shall prevail.

(2) A Board or Juvenile Court may act notwithstanding the absence of any member of the Board or, as the case may be, any Magistrate of the Juvenile Court, and no order made by the Board or Juvenile Court shall be invalid by reason only of the absence of any member or Magistrate, as the case may be, during any stage of the proceeding.

(3) No person shall be appointed as a member of the Board or as a Magistrate in the Juvenile Court unless he has, in the opinion of the State Government, special knowledge of child psychology and child welfare.

Section 7. Powers of Board and Juvenile Court

(1) Where a Board or a Juvenile Court has been constituted for any area, such Board or Court, shall, notwithstanding anything contained in any other law for the time being in force but save as otherwise expressly provided in this Act have power to deal exclusively with all proceedings under this Act relating to neglected juveniles or delinquent juveniles, as the case may be :

Provided that a Board or a Juvenile Court may, if it is of opinion that it is necessary so to do having regard to the circumstances of the case, transfer any proceedings to any Juvenile Court or Board, as the case may be :

Provided further that where there is any difference of opinion between a Board and a Juvenile Court regarding the transfer of any proceedings under the first proviso, it shall be referred to the Chief Metropolitan Magistrate or, as the case may be, the Chief Judicial Magistrate for decision, and in a case where the District Magistrate is functioning as a Board or a Juvenile Court, such difference of opinion shall be referred to the Court of Session, and the decision of the Chief Metropolitan Magistrate or Chief Judicial Magistrate or, as the case may be, the Court of Session on such reference shall be final.

(2) Where no Board or Juvenile Court has been constituted for any area, the powers conferred on the Board or the Juvenile Court by or under this Act shall be exercised in that area, only by the following, namely :-

(a) The District Magistrate ; or

(b) The Sub-Divisional Magistrate ; or

(c ) Any Metropolitan Magistrate or Judicial Magistrate of the first class, as the case may be.

(3) The powers conferred on the Board or Juvenile Court by or under this Act may also be exercised by the High Court and the Court of Session, when the proceeding comes before them in appeal, revision or otherwise.

Section 8. Procedure to be followed by a Magistrate not empowered under the Act

(1) When any Magistrate not empowered to exercise the powers of a Board or a Juvenile Court under this Act is of opinion that a person brought before him under any of the provisions of this Act (otherwise than for the purpose of giving evidence) is a juvenile, he shall record such opinion and forward the juvenile and the record of the proceeding to the competent authority having jurisdiction over the proceeding.

(2) The competent authority to which the proceeding is forwarded under sub-section (1) shall hold the inquiry as if the juvenile had originally been brought before it.

Section 9. Juvenile homes

(1) The State Government may establish and maintain as many juvenile homes as may be necessary for the reception of neglected juveniles under this Act.

(2) Where the State Government is of opinion that nay institution other than a home established or maintained under sub-section (1) is fit for the reception of the neglected juveniles to be sent there under this Act, it may certify such institution as a juvenile home for the purpose of this Act.

(3) Every juvenile home to which a neglected juvenile is sent under this Act shall not only provide the juvenile with accommodation, maintenance and facilities for education, vocational training and rehabilitation, but also provide him with facilities for the development of his character and abilities and give him necessary training for protecting himself against moral danger or exploitation and shall also perform such other functions as may be prescribed to ensure all round growth and development of his personality.

(4) The State Government may, by rules made under this Act, provide for the management of juvenile homes, including the standards and the nature of services to be maintained by them and the circumstances under which, and the manner in which, the certification of a juvenile home may be granted or withdrawn.

Section 10. Special homes

(1) The State Government may establish and maintain as many special homes as may be necessary for the reception of delinquent juveniles under this Act.

(2) Where the State Government is of opinion that any institution other than a home established or maintained under sub-section (1) is fit for the reception of the delinquent juveniles to be sent there under this Act, it may certify such institution as a special home for the purposes of this Act.

(3) Every special home to which a delinquent juvenile is sent under this Act shall not only provide the juvenile with accommodation, maintenance and facilities for education, vocational training and rehabilitation, but also provide him with facilities for the development of his character and abilities and give him necessary training for his reformation and shall also perform such other functions as may be prescribed to ensure all round growth and development of his personality.

(4) The State Government may, by rules made under this Act, provide for the management of special homes, including the standards and the nature of services to be maintained by them, and the circumstances under which, and the manner in which, the certification of a special home may be granted or withdrawn.

(5) The rules made under sub-section (4) may also provide for the classification and separation of delinquent juveniles on the basis of age and nature of offences committed by them.

Section 11. Observation homes

(1) The State Government may establish and maintain as many observation homes as may be necessary for the temporary reception of juveniles during the pendency of any inquiry regarding them under this Act.

(2) Where the State Government is of opinion that any institution other than a home established or maintained under sub-section (1) is fit for the temporary reception of juveniles during the pendency of any inquiry regarding them under this Act it may recognise such institution as an observation home for the purposes of this Act.

(3) Every observation home to which a juvenile is sent under this Act shall not only provide the juvenile with accommodation, maintenance and facilities for medical examination and treatment but also provide him with facilities for useful occupation.

(4) The State Government may, by rules made under this Act provide for the management of observation homes, including the standards and the nature of services to be maintained by them, and the circumstances under which, and the manner in which, an institution may be recognised as an observation home or the recognition may be withdrawn.

Section 12. After-care organisations

The State Government may, by rules made under this Act, provide – (a) For the establishment or recognition of after-care organisations and the powers that may be exercised by them for effectively carrying out their functions under this Act :

(b) For a scheme of after-care programme to be followed by such after-care organisations for the purpose of taking care of juveniles after they leave juvenile homes or special homes and for the purpose of enabling them to lead an honest, industrious and useful life ;

(c ) For the preparation or submission of a report by the probation officer in respect of each juvenile prior to his discharge from a juvenile home or special home, as the case may be, regarding the necessity and nature of after-care of such juvenile, the period of such after-care, supervision thereof and for the submission of a report by the probation officer on the progress of each such juvenile ;

(d) For the standards and the nature of services to be maintained by such after-care organisations ;

(e) For such other matters as may be necessary for the purpose of effectively carrying out the scheme of after-care programme of juveniles.

Section 13. Production of neglected juveniles before Boards

(1) If any police officer or any other person or organisation authorised by the State Government in this behalf, by general or special order, is of opinion that a person is apparently a neglected juvenile, such police officer or other person or organisation may take charge of that person for bringing him before a Board.

(2) When information is given to an officer-in-charge of a police station about any neglected juvenile found within the limits of such station, he shall enter in a book to be kept for the purpose the substance of such information and take such action thereon as be deems fit and if such officer does not propose to take charge of the juvenile, he shall forward a copy of the entry made to the Board.

(3) Every juvenile taken charge of under sub-section (1) shall be brought before the Board without any loss of time but within a period of twenty-four hours of such charge taken excluding the time necessary for the journey from the place where the juvenile had been taken charge of to the Board.

(4) Every juvenile taken charge of under sub-section (1) shall, unless he is kept with his parent or guardian, be sent to an observation home (but not to a police station or jail) until he can be brought before a Board.

Section 14. Special procedure to be followed when neglected juvenile has parents

(1) If a person, who in the opinion of the police officer or the authorised person or organisation is a neglected juvenile, has a parent or guardian who has the actual charge of, or control over, the juvenile, the police officer or the authorised person or the organisation may, instead of taking charge of the juvenile, make a report to the Board for initiating an inquiry regarding that juvenile.

(2) On receipt of a report under sub-section (1), the Board may call upon the parent or guardian to produce the juvenile before it and to show cause why the juvenile should not be deal with as a neglected juvenile under the provisions of this Act and if it appears to the Board that the juvenile is likely to be removed from its jurisdiction or to be concealed, it may immediately order his removal (if necessary by issuing a search warrant for the immediate production of the juvenile) to an observation home or a place of safety.

Section 15. Inquiry by Board regarding neglected juveniles

(1) When a person alleged to be a neglected juvenile is produced before a Board, it shall examine the police officer or the authorised person or the organisation who brought the juvenile or made the report and record the substance of such examination and hold the inquiry in the prescribed manner and may make such orders in relation to the juvenile as it may deem fit.

(2) Where a Board is satisfied on inquiry that a juvenile is a neglected juvenile and that it is expedient so to deal with him, the Board may make an order directing the juvenile to be sent to a juvenile home for the period until he ceases to be a juvenile :

Provided further that the Board may, if it is satisfied that having regard to the circumstances of the case it is expedient so to do, for reasons to be recorded, reduce the period of stay to such period as it thinks fit.

(3) During the pendency of any inquiry regarding a juvenile, the juvenile shall, unless he is kept with his parent or guardian, be sent to an observation home or a place of safety for such period as may be specified in the order of the Board :

Provided that no juvenile shall be kept with his parent or guardian if, in the opinion of the Board, such parent or guardian is unfit or unable to exercise or does not exercise proper care and control over the juvenile.

Section 16. Power to commit neglected juvenile to suitable custody

(1) If the Board so thinks fit, it may, instead of making an order under sub-section (2) of section 15, for sending the juvenile to a juvenile home, make an order placing the juvenile under the care of a parent, guardian or other fit person, on such parent, guardian or fit person executing a bond with or without surety to be responsible for the good behavior and well-being of the juvenile and for the observance of such conditions as the Board may think fit to impose.

(2) At the time of making an order under sub-section (1) or at any time subsequently, the Board may, in addition, make an order that the juvenile be placed under supervision for any period not exceeding three years in the first instance.

(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), if at any time it appears to the Board, on receiving a report from the probation officer or otherwise, that there has been a breach of any of the conditions imposed by it in respect of the juvenile, it may, after making such inquiry as it deems fit, order the juvenile to be sent to a juvenile home.

Section 17. Uncontrollable juveniles

Where a parent or guardian of a juvenile complaints to the Board that he is not able to exercise proper care and control over the juvenile and the Board is satisfied on inquiry that proceedings under this Act should be initiated regarding the juvenile, it may send the juvenile to an observation home or a place of safety and make such further inquiry as it may deem fit and the provisions of section 15 and section 16 shall, as far as may be, apply to such proceedings.

Chapter IV – Delinquent Juveniles

Section 18. Bail and custody of juveniles

(1) When any person accused of a bailable or non-bailable offence and apparently a juvenile is arrested or detained or appears or is brought before a Juvenile Court, such person shall, notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), or in any other law for the time being in force, be released on bail with or without surety but he shall not be so released if there appear reasonable grounds for believing that the release is likely to bring him into association with any known criminal or expose him to moral danger or that his release would defeat the ends of justice.

(2) When such person having been arrested is not released on bail under sub-section (1) by the officer-in-charge of the police station, such officer shall cause him to be kept in an observation home or a place of safety in the prescribed manner (but not in a police station or jail) until he can be brought before a Juvenile Court.

(3) When such person is not released on bail under sub-section (1) by the Juvenile Court it shall, instead of committing him to prison, make an order sending him to an observation home or a place of safety for such period during the pendency of the inquiry regarding him as may be specified in the order.

Section 19. Information to parent or guardian or probation officer

Where a juvenile is arrested, the officer-in-charge of the police station to which the juvenile is brought shall, as soon as may be after the arrest, inform –

(a) The parent or guardian of the juvenile, if he can be found, of such arrest and direct him to be present at the Juvenile Court before which the juvenile will appear; and

(b) The probation officer of such arrest in order to enable him to obtain information regarding the antecedents and family history of the juvenile and other material circumstances likely to be of assistance of the Juvenile Court for making the inquiry.

Section 20. Inquiry by Juvenile Court regarding delinquent juveniles.

Where a juvenile having been charged with an offence appears or is produced before a Juvenile Court shall hold the inquiry in accordance with the provisions of section 39 and may, subject to the provisions of this Act, make such order in relation to the juvenile as it deems fit.

Section 21. Orders that may be passed regarding delinquent juveniles

(1) Where a Juvenile Court is satisfied on inquiry that a juvenile has committed an offence, then, notwithstanding anything to the contrary contained in any other law for the time being in force, the Juvenile Court may, if it so thinks fit, -

(a) Allow the juvenile to go home after advice or admonition ;

(b) Direct the juvenile to be released on probation of good conduct and placed under the care of any parent, guardian or other fit person, on such parent, guardian or other fit person executing a bond, with or without surety as that court may require, for the good behavior and well-being of the juvenile for any period not exceeding three years ;

(c ) Direct the juvenile to be released on probation of good conduct and placed under the care of any fit institution for the good behavior and well-being of the juvenile for any period not exceeding three years ;

(d) Make an order directing the juvenile to be sent to a special home, -

(i) In the case of a boy over fourteen years of age or of a girl over sixteen years of age, for a period of not less than three years ;

(ii) In the case of any other juvenile, for the period until he ceases to be a juvenile;

Provided that the Juvenile Court may, if it is satisfied that having regard to the nature of the offence and the circumstances of the case it is expedient so to do, for reasons to be recorded, reduce the period of stay to such period as it thinks fit :

Provided further that the Juvenile Court may, for reasons to be recorded, extend the period of such stay, but in no case the period of stay shall extend beyond the time when the juvenile attains the age of eighteen years, in the case of a boy, or twenty years in the case of a girl ;

(e) Order the juvenile to pay a fine if he is over fourteen years of age and earns money.

(2) Where an order under clause (b), clause (c ) or clause (e) of sub-section (1) is made, the Juvenile Court may, if it is of opinion that in the interests of the juvenile and of the public it is expedient so to do, in addition make an order that the delinquent juvenile shall remain under the supervision of a probation officer named in the order during such period, not exceeding three years, as may be specified therein, and may in such supervision order impose such conditions as it deems necessary for the due supervision of the delinquent juvenile :

Provided that if at any time afterwards it appears to the Juvenile Court on receiving a report from the probation officer or otherwise, that the delinquent juvenile has not been of good behavior during the period of supervision or that the fit institution under whose care the juvenile was placed is no longer able or willing to ensure the good behavior and well-being of the juvenile it may after making such inquiry as it deems fit, order the delinquent juvenile to be sent to a special home.

(3) The Juvenile Court making a supervision order under sub-section (2), shall explain to the juvenile and the parent, guardian or other fit person or fit institution, as the case may be, under whose care the juvenile has been placed the terms and conditions of the order and shall forthwith furnish one copy of the supervision order to the juvenile, the parent, guardian or fit institution, as the case may be, the sureties, if any, and the probation officer.

(4) In determining the special home, or any person or institution to whose custody a juvenile is to be committed or entrusted under this Act, the court shall pay due regard to the religious denomination of the juvenile to ensure that religious instruction contrary to the religious persuasion of the juvenile is not imparted to him.

Section 22. Orders that may not be passed against delinquent juvenile

(1) Notwithstanding anything to the contrary contained in any other law for the time being in force, no delinquent juvenile shall be sentenced to death or imprisonment, or committed to prison in default of payment of fine or in default of furnishing security :

Provided that where a juvenile who has attained the age of fourteen years has committed an offence and the Juvenile Court is satisfied that the offence committed is of so serious a nature or that his conduct and behavior have been such that it would not be in his interest or in the interest of other juvenile in a special home to send him to such special home and that none of the other measures provided under this Act is suitable or sufficient, the Juvenile Court, may order the delinquent juvenile to be kept in safe custody in such place and manner as it thinks fit and shall report the case for the orders of the State Government.

(2) On receipt of a report from a Juvenile Court under sub-section (1), the State Government may make such arrangement in respect of the juvenile as it deems proper and may order such delinquent juvenile to be detained at such place and on such conditions as it thinks fit:

Provided that the period of detention so ordered shall not exceed the maximum period of imprisonment to which juvenile could have been sentenced for the offence committed.

Section 23. Proceeding under Chapter VIII of the Code of Criminal Procedure not competent against juvenile

Notwithstanding anything to the contrary contained in the Code of Criminal Procedure, 1973 (2 of 1974), no proceeding shall be instituted and no order shall be passed against a juvenile under Chapter VIII of the said Code.

Section 24. No joint trial of juvenile and person not to juvenile

(1) Notwithstanding anything contained in section 223 of the Code of Criminal Procedure, 1973 (2 of 1974), or in any other law for the time being in force, no juvenile shall be charged with or tried for, any offence together with a person who is not a juvenile.

(2) If a juvenile is accused of an offence for which under section 223 of the Code of Criminal Procedure, 1973 (2 of 1974), or any other law for the time being in force, such juvenile and any person who is not a juvenile would, but for the prohibition contained in sub-section (1), have been charged and tried together, the court taking cognizance of that offence shall direct separate trials of the juvenile and the other person.

Section 25. Removal of disqualification attaching to conviction.

Notwithstanding anything contained in any other law, a juvenile who has committed an offence and has been dealt with under the provisions of this Act and shall not suffer disqualification, if any, attaching to a conviction of an offence under such law.

Section 26. Special provision in respect of pending cases

Notwithstanding anything contained in this Act, all proceedings in respect of a juvenile pending in any court in any area on the date on which this Act comes into force in that area, shall be continued in that court as if this Act had not been passed and if the court finds that the juvenile has committed an offence, it shall record such finding and instead of passing any sentence in respect of the juvenile, forward the juvenile to the Juvenile Court which shall pass orders in respect of that juvenile in accordance with the provisions of this Act as if it had been satisfied on inquiry under this Act that the juvenile has committed the offence.

Chapter V – Procedure of competent authorities generally and appeals and revision from orders of such authorities

Section 27. Sittings, etc., of Boards and Juvenile Courts

(1) A Board or a Juvenile Court shall hold its sittings at such place, on such day and in such manner, as may be prescribed.

(2) A Magistrate empowered to exercise the powers of a Board or, as the case may be, a Juvenile Court under sub-section (2) of section 7 shall, while holding any inquiry regarding a juvenile under this Act, as far as practicable, sit in a building or room different from that in which the ordinary sittings of Civil and Criminal Courts are held, or on different days or at times different from those at which the ordinary sittings of such courts are held.

(3) An inquiry regarding a juvenile under this Act shall be held expeditiously and shall ordinarily be completed within a period of three months from the date of its commencement, unless, for special reasons to be recorded in writing, the competent authority otherwise directs.

Section 28. Persons who may be present before competent authority

(1) Save as provided in this Act, no person shall be present at any sitting of a competent authority, except – (a) Any officer of the competent authority, or

(b) The parties to the inquiry before the competent authority, the parent or guardian of the juvenile and other persons directly concerned in the inquiry including police officers and legal practitioners, or

(c) Such other persons as the competent authority may permit to be present.

(2) Notwithstanding anything contained in sub-section (1), if at any stage during an inquiry a competent authority considers it to be expedient in the interest of the juvenile or on grounds of decency or morality that any person including the police officers, legal practitioners, the parent, guardian or the juvenile himself should withdraw, the competent authority may give such direction, and if any person refuses to comply with such direction, the competent authority may have him removed and may, for this purpose, cause to be used such force as may be necessary.

(3) No legal practitioner shall be entitled to appear before a Board in any case or proceeding before it, except with the special permission of that Board.

Section 29. Attendance of parent or guardian of juvenile

Any competent authority before which a juvenile is brought under any of the provisions of this Act may, whenever it so thinks fit, require any parent or guardian having the actual charge of, or control over, the juvenile to be present at any proceeding in respect of the juvenile.

Section 30. Dispensing with attendance of juvenile

If, at any stage during the course of an inquiry, a competent authority is satisfied that the attendance of the juvenile is not essential for the purpose of the inquiry, the competent authority may dispense with his attendance and proceed with the inquiry in the absence of the juvenile.

Section 31. Committal to approved place of juvenile suffering from dangerous disease and his future disposal

(1) When a juvenile who has been brought before a competent authority under this Act is found to be suffering from a disease requiring prolonged medical treatment or physical or mental complaint that will respond to treatment, the competent authority may send the juvenile to any place recognised to be an approved place in accordance with the rules made under this Act for such period as it may think necessary for the required treatment.

(2) Where a juvenile is found to be suffering from leprosy or is of unsound mind, he shall be dealt with under the provisions of the Lepers Act, 1898 (3 of 1898), or the Indian Lunacy Act, 1912 (4 of 1912), as the case may be.

(3) Where a competent authority has taken action under sub-section (1) in the case of juvenile suffering from an infectious or contagious disease, the competent authority before restoring the said juvenile to his partner in marriage, if there has been such, or to the guardian, as the case may be, shall, where it is satisfied that such action will be in the interest of the said juvenile call upon his partner in marriage or the guardian, as the case may be, to satisfy the competent authority by submitting to medical examination that such partner or guardian will not re-infect the juvenile in respect of whom the order has been passed.

Section 32. Presumption and determination of age

(1) Where it appears to a competent authority that a person brought before it under any of the provisions of this Act (otherwise than for the purpose of giving evidence) is a juvenile, the competent authority shall make due inquiry as to the age of that person and for that purpose shall take such evidence as may be necessary and shall record a finding whether the person is a juvenile or not, stating his age as nearly as may be.

(2) No order of a competent authority shall be deemed to have become invalid merely by any subsequent proof that the person in respect of whom the order has been made is not a juvenile, and the age recorded by the competent authority to be the age of the person so brought before it shall, for the purposes of this Act, be deemed to be the true age of that person.

Section 33. Circumstances to be taken into consideration in making orders under the Act

In making any order in respect of a Juvenile under this Act, a competent authority shall take into consideration the following circumstances, namely :-

(a) The age of the juvenile ;

(b) The state of physical and mental health of the juvenile ;

(c) The circumstances in which the juvenile was and is living ;

(d) The reports made by the probation officer ;

(e) The religious persuasion of the juvenile ;

(f) Such other circumstances as may, in the opinion of the competent authority, require to be taken into consideration in the interest of the welfare of the juvenile :

Provided that in the case of a delinquent juvenile, the above circumstances shall be taken into consideration after the Juvenile Court has recorded a finding against the juvenile that he has committed the offence:

Provided further that if no report of the probation officer is received within ten weeks of his being informed under section 19, it shall be open to the Juvenile Court to proceed without it.

Section 34. Sending a juvenile outside jurisdiction

In the case of a neglected or delinquent juvenile whose ordinary place of residence lies outside the jurisdiction of the competent authority before which he is brought, the competent authority may, if satisfied after due inquiry that it is expedient so to do, send the juvenile back to a relative or other person who is fit and willing to receive him at his ordinary place of residence and exercise proper care and control over him, notwithstanding that such place of residence is outside the jurisdiction of the competent authority ; and the competent authority exercising jurisdiction over the place to which the juvenile is sent shall in respect of any matter arising subsequently have the same powers in relation to the juvenile as if the original order had been passed by itself.

Section 35. Reports to be treated as confidential.

The report of the probation officer or any circumstance considered by the competent authority under section 33 shall be treated as confidential :

Provided that the competent authority may, if it so thinks fit, communicate the substance thereof to the juvenile or his parent or guardian and may give such juvenile, parent or guardian an opportunity of producing such evidence as may be relevant to the matter stated in the report.

Section 36. Prohibition of publication of names, etc., of juveniles involved in any proceeding under the Act

(1) No report in any newspaper, magazine or news-sheet of any inquiry regarding a juvenile under this Act shall disclose the name, address or school or any other particulars calculated to lead to the identification of the juvenile nor shall any picture of any such juvenile be published :

Provided that for reasons to be recorded in writing, the authority holding the inquiry may permit such disclosure, if in its opinion such disclosure is in the interest of the juvenile.

(2) Any person contravening the provisions of sub-section (1) shall be punishable with fine which may extend to one thousand rupees.

Section 37. Appeals

(1) Subject to the provisions of this section, any person aggrieved by an order made by a competent authority under this Act may, within thirty days from the date of such order, prefer an appeal to the Court of Session :

Provided that the Court of Session may entertain the appeal after the expiry of the said period of thirty days if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal in time.

(2) No appeal shall lie from –

(a) Any order of acquittal made by the Juvenile Court in respect of a juvenile alleged to have committed an offence ; or

(b) Any order made by a Board in respect of a finding that a person is not a neglected juvenile.

(3) No second appeal shall lie from any order of the Court of Session passed in appeal under this section.

Section 38. Revision

The High Court may, at any time, either of its own motion or on an application received in this behalf, call for the record of any proceeding in which any competent authority or Court of Session has passed an order for the purpose of satisfying itself as to the legality or propriety of any such order and may pass such order in relation thereto as it thinks fit :

Provided that the High Court shall not pass an order under this section prejudicial to any person to any person without giving him a reasonable opportunity of being heard.

Section 39. Procedure in inquiries, appeals and revision proceedings

(1) Save as otherwise expressly provided by this act, a competent authority while holding any inquiry under any of the provisions of this Act, shall follow such procedure as may be prescribed and subject thereto, shall follow, as far as may be, the procedure laid down in the Code of Criminal Procedure, 1973 (2 of 1974), for trials in summons cases.

(2) Save as otherwise expressly provided by or under this Act, the procedure to be followed in hearing appeals or revision proceedings under this Act shall be, as far as practicable, in accordance with the provisions of the Code of Criminal Procedure, 1973 (2 of 1974).

Section 40. Power to amend orders

(1) Without prejudice to the provisions for appeal and revision under this Act, any competent authority may, either on its own motion or on an application received in this behalf, amend any order as to the institution to which a juvenile is to be sent or as to the person under whose care or supervision a juvenile is to be placed under this Act.

(2) Clerical mistakes in orders passed by a competent authority or errors arising therein from any accidental slip or omission may, at any time, be corrected by the competent authority either on its own motion or on an application received in this behalf.

Chapter VI – Special offences in respect  of Juveniles

Section 41. Punishment for cruelty to juvenile

(1) Whoever, having the actual charge of, or control over, a juvenile, assaults, abandons, exposes or willfully neglects the juvenile or causes or procures him to be assaulted, abandoned, exposed or neglected in a manner likely to cause such juvenile unnecessary mental or physical suffering shall be punishable with imprisonment for a term which may extend to six months, or with fine, or with both.

(2) No court shall take cognizance of an offence punishable under sub-section (1) unless the complaint is filed with the previous sanction of the State of the Government or an officer authorised by it in this behalf.

Section 42. Employment of juveniles for begging

(1) Whoever employs or uses any juvenile for the purposes of begging or causes any juvenile to beg shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.

(2) Whoever, having the actual charge of, or control over, a juvenile abets the commission of the offence punishable under sub-section (1) shall be punishable with imprisonment for a term which may extend to one year and shall also be liable to fine.

(3) The offence punishable under this section shall be cognizable.

Section 43. Penalty for giving intoxicating liquor or narcotic drug or psychotropic substance to a juvenile

Whoever gives, or causes to be given, to any juvenile any intoxicating liquor in a public place or any narcotic drug or psychotropic substance except upon the order of a duly qualified medical practitioner or in case of sickness shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.

Section 44. Exploitation of juvenile employees

Whoever ostensibly procures a juvenile for the purpose of any employment and withholds the earnings of the juvenile or uses such earnings for his own purposes shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.

Section 45. Alternative punishments

Where an act or omission constitutes an offence punishable under this Act and also under any other Central or State Act, then, notwithstanding anything contained in any law for the time being in force, the offender found guilty of such offence shall be liable to punishment only under such Act as provides for punishment which is greater in degree.

Chapter VII – Miscellaneous

Section 46. Power of State Government to discharge and transfer juveniles

(1) The State Government may, notwithstanding anything contained in this Act, at any time, order a neglected or delinquent juvenile to be discharged from the juvenile home or special home, either absolutely or on such conditions as it may think fit to impose.

(2) The State Government may, notwithstanding anything contained in this Act, order –

(a) A neglected juvenile to be transferred from one juvenile home to another,

(b) A delinquent juvenile to be transferred from one special home to another or from a special home to a borstal school where such school exists or from a special home to a juvenile home ;

(c ) A neglected juvenile or a delinquent juvenile to be transferred from a juvenile home or a special home to a fit person or a fit institution ;

(d) A juvenile who has been released on licence which has been revoked or forfeited, to be sent to the special home or juvenile home from which he was released or to any other juvenile home or special home or borstal school :

Provided that the total period of the stay of the juvenile home or a special home or a fit institution or under a fit person shall not be increased by such transfer.

(3) The State Government may, notwithstanding anything contained in this Act, at any time, discharge a juvenile from the care of any person under whom he was placed under this Act either absolutely or on such conditions as may think fit to impose.

Section 47. Transfers between juvenile homes, etc., under the Act, and juvenile homes, etc., of like nature in different part of India

(1) The Government of a State may direct any neglected juvenile or delinquent juvenile to be transferred from any juvenile home or special home within the State to any other juvenile home, special home, or institution of a like nature in any other State with the consent of the Government of that State.

(2) The Government of a State may, by general or special order, provide for the reception in a juvenile home or special home within the State of a neglected juvenile or delinquent juvenile detained in a juvenile home or special home or institution of a like nature in any other State where the Government of that State makes an order for such transfer, and upon such transfer the provisions of this Act shall apply to such juvenile as if he had been originally ordered to be sent to such juvenile home or special home under this Act.

Section 48. Transfer of juveniles of unsound mind or suffering from leprosy or addicted to drugs

(1) Where it appears to the State Government that any juvenile kept in a special home or juvenile home or institution in pursuance of this Act is suffering from leprosy or is of unsound mind, or is addicted to any narcotic drug or psychotropic substance, the State Government may order his removal to a leper asylum or mental hospital or treatment center for drug addicts or other place of safe custody for being kept there for such period not exceeding the period for which he is required to be kept in custody under the orders of the competent authority or for such further period as may be certified by the medical officer to be necessary for the proper treatment of the juvenile.

(2) Where it appears to the State Government that the juvenile is cured of leprosy or of unsoundness of mind or drug addiction it may, if the juvenile is still liable to be kept in custody, order the person having charge of the juvenile to send him to the special home or juvenile home or institution from which he was removed or, if the juvenile is no longer liable to be kept in custody order him to be discharged.

Section 49. Placing out on licence

(1) When a juvenile is kept in a juvenile home or special home, the State Government may, if it so thinks fit, release the juvenile from the juvenile home or special home and grant him a written licence for such period and on such conditions as may be specified in the licence permitting him to live with, or under the supervision of, any responsible person named in the licence willing to receive and take charge of him with a view to educate him and train him for some useful trade or calling.

(2) Any licence so granted under sub-section (1) shall be in force for the period specified in the licence or until revoked or forfeited by the breach of any of the conditions on which it was granted.

(3) The State Government may, at any time, by order in writing, revoke any such licence and order the juvenile to return to the juvenile home or special home from which he was released or to any other juvenile home or special home, and shall do so at the desire of the person with whom or under whose supervision the juvenile has been permitted to live in accordance with a licence granted under sub-section (1).

(4) When a licence has been revoked or forfeited and the juvenile refuses or fails to return to the special home or juvenile home to which he was directed so to return, the State Government, if necessary, cause him to be taken charge of and to be taken back to the special home or juvenile home.

(5) The time during which a juvenile is absent from a special home or juvenile home in pursuance of a licence granted under this section shall be deemed to be part of the time for which he is liable to be kept in custody in the special home or juvenile home :

Provided that when a juvenile has failed to return to the special home or juvenile home on the licence being revoked or forfeited, the time which elapses after his failure so to return shall be excluded in computing the time during which he is liable to be kept in custody.

Section 50. Provision in respect of escaped juveniles

Notwithstanding anything to the contrary contained in any other law for the time being in force, any police officer may take charge without warrant of a juvenile who has escaped from a special home or a juvenile home or from the care of a person under whom he was placed under this Act and shall send the juvenile back to the special home or that person, as the case may be; and no proceeding shall be instituted in respect of the juvenile by reason of such escape but the special home, juvenile home or the person may, after giving the information to the competent authority which passed the order in respect of the juvenile, take such steps against the juvenile as may be deemed necessary.

Section 51. Contribution by parents

(1) The competent authority which makes an order for sending a neglected juvenile or a delinquent juvenile to a juvenile home or a special home or placing the juvenile under the care of a fit person or fit institution may make an order requiring the parent or other person liable to maintain the juvenile to contribute to his maintenance, if able to do so, in the prescribed manner.

(2) The competent authority before making any order under sub-section (1) shall inquiry into the circumstances of the parent or other person liable to maintain the juvenile and shall record evidence, if any, in the presence of the parent or such other person, as the case may be.

(3) The person liable to maintain a juvenile shall, for the purposes of sub-section (1), include in the case of illegitimacy, his putative father :

Provided that where the juvenile is illegitimate and an order for his maintenance has been made under section 125 of the Code of Criminal Procedure, 1973 (2 of 1974), the competent authority shall not ordinarily make an order for contribution against the putative father, but may order the whole or any part of the sums accruing due under the said order for maintenance to be paid to such person as may be named by the competent authority and such sum shall be paid by him towards the maintenance of the juvenile.

(4) Any order made under this section may be enforced in the same manner as an order under section 125 of the Code of Criminal Procedure, 1973 (2 of 1974).

Section 52. Fund

(1) The State government may create a Fund under such name as it thinks fit for the welfare and rehabilitation of the juveniles dealt with under this Act.

(2) There shall be credited to the Fund such voluntary donations, contributions or subscriptions as may be made by any individual or organisation.

(3) The fund created under sub-section (1) shall be administered by such officers or authority in such manner and for such purposes as may be prescribed.

Section 53. Advisory Board

(1) The State government may constitute an Advisory Board to advise it on matters relating to the establishment and maintenance of homes, mobilisation of resources, provision of facilities for education, training and rehabilitation of neglected and delinquent juveniles and co-ordination among the various official and non-official agencies concerned.

(2) The Advisory Board shall consist of such number of officers and other persons as the State Government thinks fit and may also include experts and the representatives of voluntary organisations engaged in the relevant areas.

Section 54. Visitors

(1) The State Government may nominate not more than three non-officials to be Visitors for each of the homes established under this Act.

(2) A Visitor nominated for a home under sub-section (1) shall periodically visit such home and make a report to the State Government.

Section 55. Control of custodian over juvenile

Any person in whose custody a juvenile is placed in pursuance of this Act shall, while the order is in force, have the like con4trol over the juvenile as he would have if he were his parent, and shall be responsible for his maintenance, and the juvenile shall continue in his custody for the period stated by the competent authority, notwithstanding that he is claimed by his parent or any other person:

Provided that no juvenile while in such custody shall be carried except with the permission of the competent authority.

Section 56. Delinquent juvenile undergoing sentence of commencement of the Act

In any area in which this Act is brought into force, the State Government may direct that a delinquent juvenile who is undergoing any sentence of imprisonment at the commencement of this Act shall, in lieu of undergoing such sentence, be sent to a special home or be kept in safe custody in such place and manner as the State Government thinks fit for the reminder of the period of the sentence; and the provisions of this Act shall apply to the juvenile as if he had been ordered by a Juvenile Court to be sent to such special home or, as the case may be, ordered to be detained under sub-section (2) of section 22.

Section 57. Appointment of officers

(1) The State Government may appoint as many probation officers, officers for the inspection of special homes, juvenile homes, observation homes or after care organisations and such other officers as it may deem necessary for carrying out the purposes of this Act.

(2) It shall be the duty of the probation officer –

(a) To inquire, in accordance with the direction of a competent authority, into the antecedents and family history of any juvenile accused of an offence, with a view to assist the authority in making the inquiry ;

(b) To visit neglected and delinquent juveniles at such intervals as the probation officer may think fit ;

(c ) To report to the competent authority as to the behavior of any neglected or delinquent juvenile ;

(d) To advice and assist neglected and delinquent juveniles and, if necessary, endeavor to find them suitable employment ;

(e) Where a neglected or delinquent juvenile is placed under the care of any person or institution on certain conditions to see whether such conditions are being complied with ; and

(f) To perform such other duties as may be prescribed.

(3) Any officer empowered in this behalf by the State Government may enter any special home, juvenile home, observation home or after-care organisation and make a complete inspection thereof in all its departments and of all papers, registers and accounts relating thereto and shall submit the report of such inspection to the State Government.

Section 58. Officers appointed under the Act to be public servants

Probation officers and other officers appointed in pursuance of this Act shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code, 1860 (45 of 1860).

Section 59. Procedure in respect of bonds

The provisions of Chapter XXXIII of the Code of Criminal Procedure, 1973 (2 of 1974), shall, as far as may be, apply to bonds taken under this Act.

Section 60. Delegation of powers

The State Government may, by general or special order, direct that any power exercisable by it under this Act shall, in such circumstances and under such conditions, if any, as may be specified in the order, be exercisable also by an officer subordinate to that Government.

Section 61. Protection of action taken in good faith

No suit or other legal proceeding shall lie against the State Government or any probation officer or other officer appointed under this Act in respect of anything which is in good faith done or intended to be done in pursuance of this Act or of any rules or orders made thereunder.

Section 62. Protection of action taken in good faith

The State Government may, by notification in the Official Gazette, make rules to carry out the purposes of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely :-

(a) The places at which, the days on which, the time at which, and the manner in which, a competent authority may hold its sittings :

(b) The procedure to be followed by a competent authority in holding inquiries under this Act, and the mode of dealing with juveniles suffering from dangerous diseases or mental complaints :

(c) The circumstances in which, and the conditions subject to which, an institution may be certified as a special home or a juvenile’s home or recognised as an observation home, and the certification or recognition withdrawn ;

(d) The internal management of special homes juvenile homes and observation homes and the standards and the nature of services to be maintained by them ;

(e) The functions and responsibilities of special homes juvenile homes and observation homes ;

(f) The inspection of special homes, juvenile homes, observation homes and after-care organisations ;

 (g) The establishment, management and functions of after-care organisations ; the circumstances in which, and the conditions subject to which an institution may be recognised as an after-care organisation and such other matters as are referred to in section 12 ;

(h) The qualifications and duties of probation officers ;

(i) The recruitment and training of persons appointed to carry out the purposes of this Act and the terms and conditions of their services ;

(j) The conditions subject to which a girl who is a neglected or delinquent juvenile may be escorted from one place to another, and the manner in which a juvenile may be sent outside the jurisdiction of a competent authority ;

(k) The manner in which contribution for the maintenance of a juvenile may be ordered to be paid by a parent or guardian ;

(l) The officers or authorities by whom, the manner in which and the purpose for which the Fund created under section 52 shall be administered ;

(m) The conditions under which a juvenile may be placed out on licence and the form and conditions of such licence ;

(o) Any other matter which has to be, or may be, prescribed.

(3) Every rule made by a State Government under this Act shall be laid, as soon as may be after it is made, before the legislature of that State.

Section 63. Repeal and savings

If, immediately before the date on which this Act comes into force in any State, there is in force in that State, any law corresponding to this Act, that law shall stand repealed on the said date:

Provided that the repeal shall not affect –

(a) The previous operation of any law so repealed or anything duly done or suffered thereunder ; or

(b) Any right, privilege, obligation or liability acquired, accrued or incurred under any law so repealed ; or

(c ) Any penalty, forfeiture or punishment incurred in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed, as if this Act had not been passed.

Transfer of Property Act

November 30, 2014

Section 1. Short title

This Act may be called the Transfer of Property Act, 1882.

Commencement.—It shall come into force on the first day of July, 1882.

Extent.—¹[It extends² in the first instance to the whole of India except ³[the territories which, immediately before the 1st November, 1956, were comprised in Part B States or in the States of] Bombay, Punjab and Delhi.]

⁴[But this Act or any part thereof may by notification in the Official Gazette be extended to the whole or any part of the ⁵[said territories] by the ⁶[State Government] concerned.]

⁷[And any ⁶[State Government] may ⁸[***] from time to time, by notification in the Official Gazette, exempt, either retrospectively or prospectively, any part of the territories administered by such State Government from all or any of the following provisions, namely:—

Section 54, paragraph 2 and sections 3, 59, 107 and 123.]

⁹[Notwithstanding anything in the foregoing part of this section, section 54, paragraphs 2 and 3, and sections 59, 107 and 123 shall not extend or be extended to any district or tract of country for the time being excluded from the operation of the Indian Registration Act, ¹⁰[1908], (16 of 1908), under the power conferred by the first section of that Act or otherwise.]

————————————-

1. Subs. by the A.O. 1950, for the original third paragraph.

2. The application of this Act was barred in the Naga Hills District, including the Mokokchang Sub-Division, the Dibrugarh Frontier Tract, the North Cachar Hills, the Garo Hills, the Khasea and Jaintia Hills and the Mikir Hills Tract, by notification under sec. 2 of the Assam Frontier Tracts Regulation, 1880 (2 of 1880).

The Act has been declared to be in force in Panth Piploda by the Panth Piploda Laws Regulation, 1929 (1 of 1929), sec. 2, and continued in force, with modifications, in the territory transferred to Delhi Province by the Delhi Laws Act, 1915 (7 of 1915), sec. 3 and Sch. III. It has also been partially extended to Berar by the Berar Laws Act, 1941 (4 of 1941).

The Act has been extended with effect from 1st January, 1893, to the whole of the territories, other than the Scheduled Districts, under the administration of the Govt. of Bombay. Sections 54, 107 and 123 have been extended from 6th May, 1925 to all Municipalities in the Punjab and to all notified areas declared and notified under sec. 241 of the Punjab Municipal Act, 1911 (Pun. Act 3 of 1911), see Punjab Gazette, Extra., 1925, p. 27.

These sections and section 129 have been extended to certain areas in Delhi Province, see Notifications No. 198/38-III, dated 30th May, 1939, Gazette of India, 1939, Pt. I, p. 918, and No. 61/40-Judl., dated 16th November, 1940, Gazette of India, 1940, Pt. I, p. 1639, respectively.

The Act has been extended to Manipur by the Union Territories (Laws) Amendment Act, 1956 (68 of 1956).

It has been rep. as to Government Grants by the Government Grants Act, 1895 (15 of 1895) and rep. or modified to the extent necessary to give effect to the provisions of the Madras City Tenants Protection Act, 1921 (Madras 3 of 1921) in the City of Madras; see sec. 13 of that Act.

It has been amended in Bombay by Bombay Act 14 of 1939, and in Uttar Pradesh by Uttar Pradesh Act 24 of 1954. It has been extended to Pondicherry by Act 26 of 1968, sec. 3, Sch., Part I.

3. Subs. by the Adaptation of Laws (No. 2) Order, 1956, for “Part B States”.

4. Subs. by the A.O. 1937, for the original paragraph.

5. Subs. by the Adaptation of Laws (No. 2) Order, 1956, for “said States”.

6. Subs. by A.O. 1950, for “Provincial Government”.

7. Subs. by Act 3 of 1885, sec. 1, for the original paragraph.

8. The words “with the previous sanction of the Governor General in Council” omitted by Act 38 of 1920, sec. 2 and Sch. I.

9. Added by Act 3 of 1885, sec. 2 (with retrospective effect). Section 54, paras 2 and 3 and sections 59, 107 and 123 extend to every cantonment—see section 287 of the Cantonment Act, 1924(2 of 1924).

10. Subs. by Act 20 of 1929, sec. 2, for “1877”.

Section 2. Repeal of Acts

Saving of certain enactments, incidents, rights, liabilities, etc.—In the territories to which this Act extends for the time being the enactments specified in the Schedule hereto annexed shall be repealed to the extent therein mentioned. But nothing herein contained shall be deemed to affect—

(a) the provisions of any enactment not hereby expressly repealed;

(b) any terms or incidents of any contract or constitution of property which are consistent with the provisions of this Act, and are allowed by the law for the time being in force;

(c) any right or liability arising out of a legal relation constituted before this Act comes into force, or any relief in respect of any such right or liability; or

(d) save as provided by section 57 and Chapter IV of this Act, any transfer by operation of law or by, or in execution of, a decree or order of a Court of competent jurisdiction,

and nothing in the second Chapter of this Act shall be deemed to affect any rule of ¹[***] Muhammadan ²[***] law.

————–

1. Added by Act 3 of 1885, sec. 2 (with retrospective effect). Section 54, paras 2 and 3 and sections 59, 107 and 123 extend to every cantonment—see section 287 of the Cantonment Act, 1924(2 of 1924).

2. Subs. by Act 20 of 1929, sec. 2, for “1877”.

Section 3. Interpretation clause

In this Act, unless there is something repugnant in the subject or context,—

“immoveable property” does not include standing timber, growing crops or grass;

‘‘instrument” means a non-testamentary instrument;

¹[“attested”, in relation to an instrument, means and shall be deemed always to have meant attested by two or more witnesses each of whom has seen the executant sign or affix his mark to the instrument, or has seen some other person sign the instrument in the presence and by the direction of the executant, or has received from the executant a personal acknowledgement of his signature or mark, or of the signature of such other person, and each of whom has signed the instrument in the presence of the executant; but it shall not be necessary that more than one of such witnesses shall have been present at the same time, and no particular form of attestation shall be necessary;]

“registered” means registered in ²[³[any part of the territories] to which this Act extends] under the law⁴ for the time being in force regulating the registration of documents;

“attached to the earth” means—

(a) rooted in the earth, as in the case of trees and shrubs;

(b) imbedded in the earth, as in the case of walls or buildings; or

(c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached;

⁵[“actionable claim” means a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent;]

⁶[“a person is said to have notice” of a fact when he actually knows that fact, or when, but for wilful abstention from an enquiry or search which he ought to have made, or gross negligence, he would have known it.

Explanation I.—Where any transaction relating to immoveable property is required by law to be and has been effected by a registered instrument, any person acquiring such property or any part of, or share or interest in, such property shall be deemed to have notice of such instrument as from the date of registration or, where the property is not all situated in one sub-district, or where the registered instrument has been registered under sub-section (2) of section 30 of the Indian Registration Act, 1908 (16 of 1908), from the earliest date on which any memorandum of such registered instrument has been filed by any Sub-Registrar within whose sub-district any part of the property which is being acquired, or of the property wherein a share or interest is being acquired, is situated:]

Provided that—

(1) the instrument has been registered and its registration completed in the manner prescribed by the Indian Registration Act, 1908 (16 of 1908), and the rules made thereunder,

(2) the instrument or memorandum has been duly entered or filed, as the case may be, in books kept under section 51 of that Act, and

(3) the particulars regarding the transaction to which the instrument relates have been correctly entered in the indexes kept under section 55 of that Act.

Explanation II.—Any person acquiring any immovable property or any share or interest in any such property shall be deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof.

Explanation III.—A person shall be deemed to have had notice of any fact if his agent acquires notice thereof whilst acting on his behalf in the course of business to which that fact is material:

Provided that, if the agent fraudulently conceals the fact, the principal shall not be charged with notice thereof as against any person who was a party to or otherwise cognizant of the fraud.

————————-

1. Ins. by Act 27 of 1926, sec. 2 as amended by Act 10 of 1927, sec. 2 and Sch. I.

2. Subs. by Act 3 of 1951, sec. 3 and sch., for “a Part A State or a Part C State” (w.e.f. 1-4-1951).

3. Subs. by the Adaptation of Laws (No. 2) Order, 1956, for “any State”.

4. See the Indian Registration Act, 1908 (16 of 1908).

5. Ins. by Act 2 of 1900, sec. 2.

6. Subs. by Act 20 of 1929, sec. 4 as amended by Act 5 of 1930, sec. 2 for the original paragraph.

Section 4. Enactments relating to contracts to be taken as part of Contract Act and supplemental to the Registration Act

The Chapters and sections of this Act which relate to contracts shall be taken as part of the Indian Contract Act, 1872

(9 of 1872).

¹[And section 54, paragraphs 2 and 3, and sections 59, 107 and 123 shall be read as supplemental to the Indian Registration Act, ²[1908 (16 of 1908)].]

————————-

1. Added by Act 3 of 1885, sec. 3.

2. Subs. by Act 20 of 1929, sec. 5, for “1877”.

Section 5. “Transfer of property” defined

In the following sections “transfer of property” means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, ¹[or to himself] and one or more other living persons; and “to transfer property” is to perform such act.

¹[In this section “living person” includes a company or association or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals.]

————————-

1. Ins. by Act 20 of 1929, sec. 6.

Section 6. What may be transferred

Property of any kind may be transferred, except as otherwise provided by this Act or by any other law for the time being in force,—

(a) The chance of an heir-apparent succeeding to an estate, the chance of a relation obtaining a legacy on the death of a kinsman, or any other mere possibility of a like nature, cannot be transferred;

(b) A mere right of re-entry for breach of a condition subsequent cannot be transferred to any one except the owner of the property affected thereby;

(c) An easement cannot be transferred apart from the dominant heritage;

(d) All interest in property restricted in its enjoyment to the owner personally cannot be transferred by him;

¹[(dd) A right to future maintenance, in whatsoever manner arising, secured or determined, cannot be transferred;]

(e) A mere right to sue ²[***] cannot be transferred;

(f) A public office cannot be transferred, nor can the salary of a public officer, whether before or after it has become payable;

(g) Stipends allowed to military ³[naval], ⁴[air-force] and civil pensioners of the ⁵[Government] and political pensions cannot be transferred;

(h) No transfer can be made (1) in so far as it is opposed to the nature of the interest affected thereby, or (2) ⁶[for an unlawful object or consideration within the meaning of section 23 of the Indian Contract Act, 1872 (9 of 1872)], or (3) to a person legally disqualified to be transferee;

⁷[(i) Nothing in this section shall be deemed to authorise a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate, under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee.]

————————-

1. Ins. by Act 20 of 1929, sec. 6.

2. The words “for compensation for a fraud or for harm illegally caused” omitted by Act 2 of 1900, sec. 3.

3. Ins. by Act 35 of 1934, sec. 2 and Sch.

4. Ins. by Act 10 of 1927, sec. 2 and Sch. I.

5. The word “Government” successively subs. by the A.O. 1937 and the A.O. 1950 to read as above.

6. Subs. by Act 2 of 1900, sec. 3, for “for an illegal purpose”.

7. Added by Act 3 of 1885, sec. 4.

Section 7. Persons competent to transfer.

Every person competent to contract and entitled to transferable property, or authorised to dispose of transferable property not his own, is competent to transfer such property either wholly or in part, and either absolutely or conditionally, in the circumstances, to the extent and in the manner, allowed and prescribed by any law for the time being in force.

Section 8. Operation of transfer

Unless a different intention is expressed or necessarily implied, a transfer of property passes forthwith to the transferee all the interest which the transferor is then capable of passing in the property and in the legal incidents thereof.

Such incidents include, where the property is land, the easements annexed thereto, the rents and profits thereof accruing after the transfer, and all things attached to the earth; and, where the property is machinery attached to the earth, the moveable parts thereof; and, where the property is a house, the easements annexed thereto, the rent thereof accruing after the transfer, and the locks, keys, bars, doors, windows, and all other things provided for permanent use therewith; and, where the property is a debt or other actionable claim, the securities therefor (except where they are also for other debts or claims not transferred to the transferee), but not arrears of interest accrued before the transfer;and, where the property is money or other property yielding income, the interest or income thereof accruing after the transfer takes effect.

Section 9. Oral transfer

A transfer of property may be made without writing in every case in which a writing is not expressly required by law.

Section 10. Condition restraining alienation

Where property is transferred subject to a condition or limitation absolutely restraining the transferee or any person claiming under him from parting with or disposing of his interest in the property, the condition or limitation is void, except in the case of a lease where the condition is for the benefit of the lessor or those claiming under him: provided that property may be transferred to or for the benefit of a women (not being a Hindu, Muhammadan or Buddhist), so that she shall not have power during her marriage to transfer or charge the same or her beneficial interest therein.

Section 11. Restriction repugnant to interest created

Where, on a transfer of property, an interest therein is created absolutely in favour of any person, but the terms of the transfer direct that such interest shall be applied or enjoyed by him in a particular manner, he shall be entitled to receive and dispose of such interest as if there were no such direction.

¹[Where any such direction has been made in respect of one piece of immoveable property for the purpose of securing the beneficial enjoyment of another piece of such property, nothing in this section shall be deemed to affect any right which the transferor may have to enforce such direction or any remedy which he may have in respect of a breach thereof.]

———————

1. Subs. by Act 20 of 1929, sec. 8, for the original paragraph.

Section 12. Condition making interest determinable on insolvency or attempted alienation

Where property is transferred subject to a condition or limitation making any interest therein, reserved or given to or for the benefit of any person, to cease on his becoming insolvent or endeavouring to transfer or dispose of the same, such condition or limitation is void.

Nothing in this section applies to a condition in a lease for the benefit of the lessor or those claiming under him.

Section 13. Transfer for benefit of unborn person

Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property.

Illustration

A transfers property of which he is the owner to B in trust for A and his intended wife successively for their lives, and, after the death of the survivor, for the eldest son of the intended marriage for life, and after his death for A’s second son. The interest so created for the benefit of the eldest son does not take effect, because it does not extend to the whole of A’s remaining interest in the property.

Section 14. Rule against perpetuity

No transfer of property can operate to create an interest which is to take effect after the life-time of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.

Section 15. Transfer to class some of whom come under sections 13 and 14

If, on a transfer of property, an interest therein is created for the benefit of a class of persons with regard to some of whom such interest fails by reason of any of the rules contained in sections 13 and 14, such interest fails ¹[in regard to those persons only and not in regard to the whole class].

————————-

1. Subs. by Act 20 of 1929, sec. 9, for “as regards the whole class”.

Section 16. Transfer to take effect on failure of prior interest

¹[16. Transfer to take effect on failure of prior interest.—Where, by reason of any of the rules contained in sections 13 and 14, an interest created for the benefit of a person or of a class of persons fails in regard to such person or the whole of such class, any interest created in the same transaction and intended to take effect after or upon failure of such prior interest also fails.

————————-

1. Subs. by Act 20 of 1929, sec. 10, for the original sections 16 to 18.

Section 17. Direction for accumulation

(1) Where the terms of a transfer of property direct that the income arising from the property shall be accumulated either wholly or in part during a period longer than—

(a) the life of the transferor, or

(b) a period of eighteen years from the date of transfer,

such direction shall, save as hereinafter provided, be void to the extent to which the period during which the accumulation is directed exceeds the longer of the aforesaid periods, and at the end of such last-mentioned period the property and the income thereof shall be disposed of as if the period during which the accumulation has been directed to be made had elapsed.

(2) This section shall not affect any direction for accumulation for the purpose of—

(i) the payment of the debts of the transferor or any other person taking any interest under the transferor; or

(ii) the provision of portions for children or remoter issue of the transferor or of any other person taking any interest under the transfer; or

(iii) the preservation or maintenance of the property transferred,

and such direction may be made accordingly.

Section 18. Transfer in perpetuity for benefit of public

The restrictions in sections 14, 16 and 17 shall not apply in the case of a transfer of property for the benefit of the public in the advancement of religion, knowledge, commerce, health, safety or any other object beneficial to mankind.]

Section 19. Vested interest

Where, on a transfer of property, an interest therein is created in favour of a person without specifying the time when it is to take effect, or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the terms of the transfer.

A vested interest is not defeated by the death of the transferee before he obtains possession.

Explanation.—An intention that an interest shall not be vested is not to be inferred merely from a provision whereby the enjoyment thereof is postponed, or whereby a prior interest in the same property is given or reserved to some other person, or whereby income arising from the property is directed to be accumulated until the time of enjoyment arrives, or from a provision that if a particular event shall happen the interest shall pass to another person.

Section 20. When unborn person acquires vested interest on transfer for his benefit

Where, on a transfer of property, an interest therein is created for the benefit of a person not then living, he acquires upon his birth, unless a contrary intention appears from the terms of the transfer, a vested interest, although he may not be entitled to the enjoyment thereof immediately on his birth.

Section 21. Contingent interest

Where, on a transfer of property, an interest therein is created in favour of a person to take effect only on the happening of a specified uncertain event, or if a specified uncertain event shall not happen, such person thereby acquires a contingent interest in the property. Such interest becomes a vested interest, in the former case, on the happening of the event, in the latter, when the happening of the event becomes impossible.

Exception.—Where, under a transfer of property, a person becomes entitled to an interest therein upon attaining a particular age, and the transferor also gives to him absolutely the income to arise from such interest before he reaches that age, or directs the income or so much thereof as may be necessary to be applied for his benefit, such interest is not contingent.

Section 22. Transfer to members of a class who attain a particular age

Where, on a transfer of property, an interest therein is created in favour of such members only of a class as shall attain a particular age, such interest does not vest in any member of the class who has not attained that age.

Section 23. Transfer contingent on happening of specified uncertain event

Where, on a transfer of property, an interest therein is to accrue to a specified person if a specified uncertain event shall happen, and no time is mentioned for the occurrence of that event, the interest fails unless such event happens before, or at the same time as, the intermediate or precedent interest ceases to exist.

Section 24. Transfer to such of certain persons as survive at some period not specified

Where, on a transfer of property, an interest therein is to accrue to such of certain persons as shall be surviving at some period, but the exact period is not specified, the interest shall go to such of them as shall be alive when the intermediate or precedent interest ceases to exist, unless a contrary intention appears from the terms of the transfer.

Illustration

A transfers property to B for life, and after his death to C and D, equally to be divided between them, or to the survivor of them. C dies during the life of B. D survives B. At B’s death the property passes to D.

Section 25. Conditional transfer

An interest created on a transfer of property and dependent upon a condition fails if the fulfilment of the condition is impossible, or is forbidden by law, or is of such a nature that, if permitted, it would defeat the provisions of any law, or is fraudulent, or involves or implies injury to the person or property of another, or the Court regards it as immoral or opposed to public policy.

Illustration

(a) A lets a farm to B on condition that he shall walk a hundred miles in an hour. The lease is void.

(b) A gives Rs. 500 to B on condition that he shall marry A’s daughter C. At the date of the transfer C was dead. The transfer is void.

(c) A transfers Rs. 500 to B on condition that she shall murder C. The transfer is void.

(d) A transfers Rs. 500 to his niece C, if she will desert her husband. The transfer is void.

Section 26. Fulfilment of condition precedent

Where the terms of a transfer of property impose a condition to be fulfilled before a person can take an interest in the property, the condition shall be deemed to have been fulfilled if it has been substantially complied with.

Illustration

(a) A transfers Rs. 5,000 to B on condition that he shall marry with the consent of C, D and E. E dies. B marries with the consent of C and D. B is deemed to have fulfilled the condition.

(b) A transfers Rs. 5,000 to B on condition that he shall marry with the consent of C, D and E. B marries without the consent of C, D and E, but obtains their consent after the marriage. B has not fulfilled the condition.

Section 27. Conditional transfer to one person coupled with transfer to another on failure of prior disposition

Where, on a transfer of property, an interest therein is created in favour of one person, and by the same transaction an ulterior disposition of the same interest is made in favour of another, if the prior disposition under the transfer shall fail, the ulterior disposition shall take effect upon the failure of the prior disposition, although the failure may not have occurred in the manner contemplated by the transferor.

But, where the intention of the parties to the transaction is that the ulterior disposition shall take effect only in the event of the prior disposition failing in a particular manner, the ulterior disposition shall not take effect unless the prior disposition fails in that manner.

Illustration

(a) A transfers Rs. 500 to B on condition that he shall execute a certain lease within three months after A’s death, and, if he should neglect to do so, to C. B dies in A’s life-time. The disposition in favour of C takes effect.

(b) A transfers property to his wife; but, in case she should die in his life-time, transfer to B that which he had transferred to her. A and his wife perish together, under circumstances which make it impossible to prove that she died before him. The disposition in favour of B does not take effect.

Section 28. Ulterior transfer conditional on happening or not happening of specified event

Where, on a transfer of property, an interest therein is created in favour of one person, and by the same transaction an ulterior disposition of the same interest is made in favour of another, if the prior disposition under the transfer shall fail, the ulterior disposition shall take effect upon the failure of the prior disposition, although the failure may not have occurred in the manner contemplated by the transferor.

But, where the intention of the parties to the transaction is that the ulterior disposition shall take effect only in the event of the prior disposition failing in a particular manner, the ulterior disposition shall not take effect unless the prior disposition fails in that manner.

Illustration

(a) A transfers Rs. 500 to B on condition that he shall execute a certain lease within three months after A’s death, and, if he should neglect to do so, to C. B dies in A’s life-time. The disposition in favour of C takes effect.

(b) A transfers property to his wife; but, in case she should die in his life-time, transfer to B that which he had transferred to her. A and his wife perish together, under circumstances which make it impossible to prove that she died before him. The disposition in favour of B does not take effect.

Section 29. Fulfilment of condition subsequent

An ulterior disposition of the kind contemplated by the last preceding section cannot, take effect unless the condition is strictly fulfilled.

Illustration

A transfers Rs. 500 to B, to be paid to him on his attaining his majority or marrying, with a proviso that, if B dies as minor or marries without C’s consent, the Rs. 500 shall go to D. B marries when only 17 years of age, without C’s consent. The transfer to D takes effect.

Section 30. Prior disposition not affected by invalidity of ulterior disposition

If the ulterior disposition is not valid, the prior disposition is not affected by it.

Illustration

A transfers a farm to B for her life, and, if she does not desert her husband to C. B is entitled to the farm during her life as if no condition had been inserted.

Section 31. Condition that transfer shall cease to have effect in case specified uncertain event happens or does not happen

Subject to the provisions of section 12, on a transfer of property an interest therein may be created with the condition superadded that it shall cease to exist in case a specified uncertain event shall happen, or in case a specified uncertain event shall not happen.

Illustration

(a) A transfers a farm to B for his life, with a proviso that, in case B cuts down a certain wood, the transfer shall cease to have any effect. B cuts down the wood. He loses his life-interest in the farm.

(b) A transfers a farm to B, provided that, if B shall not go to England within three years after the date of the transfer, his interest in the farm shall cease. B does not go to England within the term prescribed. His interest in the farm ceases.

Section 32. Such condition must not be invalid

In order that a condition that an interest shall cease to exist may be valid, it is necessary that the event to which it relates be one which could legally constitute the condition of the creation of an interest.

Section 33. Transfer conditional on performance of act, no time being specified for performance

Where, on a transfer of property, an interest therein is created subject to a condition that the person taking it shall perform a certain act, but no time is specified for the performance of the act, the condition is broken when he renders impossible, permanently or for an indefinite period, the performance of the act.

Section 34. Transfer conditional on performance of act, time being specified

Where an act is to be performed by a person either as a condition to be fulfilled before an interest created on a transfer of property is enjoyed by him, or as a condition on the non-fulfilment of which the interest is to pass from him to another person, and a time is specified for the performance of the act, if such performance within the specified time is prevented by the fraud of a person who would be directly benefited by non-fulfilment of the condition, such further time shall as against him be allowed for performing the act as shall be requisite to make up for the delay caused by such fraud. But if no time is specified for the performance of the act, then, if its performance is by the fraud of a person interested in the non-fulfilment of the condition rendered impossible or indefinitely postponed, the condition shall as against him be deemed to have been fulfilled.

Section 35. Election when necessary

Where a person professes to transfer property which he has no right to transfer, and as part of the same transaction confers any benefit on the owner of the property, such owner must elect either to confirm such transfer or to dissent from it; and in the latter case he shall relinquish the benefit so conferred, and the benefit so relinquished shall revert to the transferor or his representative as if it had not been disposed of,

subject nevertheless,

where the transfer is gratuitous, and the transferor has, before the election, died or otherwise become incapable of making a fresh transfer,and in all cases where the transfer is for consideration,to the charge of making good to the disappointed transferee the amount or value of the property attempted to be transferred to him.

Illustrations

The farm of Sultanpur is the property of C and worth Rs. 800. A by an instrument of gift professes to transfer it to B, giving by the same instrument Rs. 1,000 to C. C elects to retain the farm. He forfeits the gift of Rs. 1,000.

In the same case, A dies before the election. His representative must out of the Rs. 1,000 pay Rs. 800 to B.

The rule in the first paragraph of this section applies whether the transferor does or does not believe that which he professes to transfer to be his own.

A person taking no benefit directly under a transaction, but deriving a benefit under it indirectly, need not elect.

A person who in his one capacity takes a benefit under the transaction may in another dissent therefrom.

Exception to the last preceding four rules.—Where a particular benefit is expressed to be conferred on the owner of the property which the transferor professes to transfer, and such benefit is expressed to be in lieu of that property, if such owner claims the property, he must relinquish the particular benefit, but he is not bound to relinquish any other benefit conferred upon him by the same transaction.

Acceptance of the benefit by the person on whom it is conferred constitutes an election by him to confirm the transfer, if he is aware of his duty to elect and of those circumstances which would influence the judgment of a reasonable man in making an election, or if he waives enquiry into the circumstances.

Such knowledge or waiver shall, in the absence of evidence to the contrary, be presumed, if the person on whom the benefit has been conferred has enjoyed it for two years without doing any act to express dissent.

Such knowledge or waiver may be inferred from any act of his which renders it impossible to place the persons interested in the property professed to be transferred in the same condition as if such act had not been done.

Illustration

A transfers to B an estate to which C is entitled, and as part of the same transaction gives C a coal-mine. C takes possession of the mine and exhausts it. He has thereby confirmed the transfer of the estate to B.

If he does not within one year after the date of the transfer signify to the transferor or his representatives his intention to confirm or to dissent from the transfer, the transferor or his representative may, upon the expiration of that period, require him to make his election; and, if he does not comply with such requisition within a reasonable time after he has received it, he shall be deemed to have elected to confirm the transfer.

In case of disability, the election shall be postponed until the disability ceases, or until the election is made by some competent authority.

Section 36. Apportionment of periodical payments on determination of interest of person entitled

In the absence of a contract or local usage to the contrary, all rents annuities, pensions, dividends and other periodical payments in the nature of income shall, upon the transfer of the interest of the person entitled to receive such payments, be deemed, as between the transferor and the transferee, to accrue due from day to day, and to be apportionable accordingly, but to be payable on the days appointed for the payment thereof.

Section 37. Apportionment of benefit of obligation on severance

When, in consequence of a transfer, property is divided and held in several shares, and thereupon the benefit of any obligation relating to the property as a whole passes from one to several owners of the property, the corresponding duty shall, in the absence of a contract, to the contrary amongst the owners, be performed in favour of each of such owners in proportion to the value of his share in the property, provided that the duty can be severed and that the severance does not substantially increase the burden of the obligation; but if the duty cannot be severed, or if the severance would substantially increase the burden of the obligation the duty shall be performed for the benefit of such one of the several owners as they shall jointly designate for that purpose:

Provided that no person on whom the burden of the obligation lies shall be answerable for failure to discharge it in manner provided by this section, unless and until he has had reasonable notice of the severance.

Nothing in this section applies to leases for agricultural purposes unless and until the State Government by notification in the Official Gazette so directs.

Illustration

(a) A sells to B, C and D a house situated in a village and leased to E at an annual rent of Rs. 30 and delivery of one fat sheep, B having provided half the purchase-money and C and D one quarter each. E, having notice of this, must pay Rs. 15 to B, Rs. 7.50 to C, and Rs. 7.50 to D and must deliver the sheep according to the joint direction of B, C and D.

(b) In the same case, each house in the village being bound to provide ten days’ labour each year on a dyke to prevent inundation. E had agreed as a term of his lease to perform this work for A. B, C and D severally require E to perform the ten days’ work due on account of the house of each. E is not bound to do more than ten days’ work in all, according to such directions as B, C and D may join in giving.

38. Transfer by person authorised only under certain circumstances to transfer.—

Where any person, authorised only under circumstances in their nature variable to dispose of immoveable property, transfers such property for consideration, alleging the existence of such circumstances, they shall, as between the transferee on the one part and the transferor and other persons (if any) affected by the transfer on the other part, be deemed to have existed, if the transferee, after using reasonable care to ascertain the existence of such circumstances, has acted in good faith.

Illustration

A, a Hindu widow, whose husband has left collateral heirs, alleging that the property held by her as such is insufficient for her maintenance, agrees, for purposes neither religious nor charitable to sell a field, part of such property, to B. B satisfies himself by reasonable enquiry that the income of the property is insufficient for A’s maintenance, and that the sale of the field is necessary, and acting in good faith, buys the field from A. As between B on the one part and A and the collateral heirs on the other part, a necessity for the sale shall be deemed to have existed.

Section 39. Transfer where third person is entitled to maintenance

Where a third person has a right to receive maintenance, or a provision for advancement or marriage, from the profits of immoveable property, and such property is transferred, ¹[***] the right may be enforced against the transferee, if he has notice ²[thereof] or if the transfer is gratuitous; but not against a transferee for consideration and without notice of the right, nor against such property in his hands.

³[* * *]

———————–

1. The words “with the intention of defeating such right” omitted by Act 20 of 1929, sec. 11.

2. Subs. by Act 20 of 1929, sec. 11, for “of such intention”.

3. The illustration omitted by Act 20 of 1929, sec. 11.

0. Burden of obligation imposing restriction on use of land.—

Where, for the more beneficial enjoyment of his own immoveable property, a third person has, independently of any interest in the immoveable property of another or of any easement thereon, a right to restrain the enjoyment ¹[in a particular manner of the latter property], or

Or of obligation annexed to ownership but not amounting to interest or easement.—Where a third person is entitled to the benefit of an obligation arising out of contract and annexed to the ownership of immoveable property, but not amounting to an interest therein or easement thereon,

such right or obligation may be enforced against a transferee with notice thereof or a gratuitous transferee of the property affected thereby, but not against a transferee for consideration and without notice of the right or obligation, not against such property in his hands.

Illustration

A contracts to sell Sultanpur to B. While the contract is still in force he sells Sultanpur to C, who has notice of the contract. B may enforce the contract against C to the same extent as against A.

————————-

1. Subs. by Act 20 of 1929, sec. 12, for “of the latter property or to compel its enjoyment in a particular manner”.

Section 41. Transfer by ostensible owner

Where, with the consent, express or implied, of the persons interested in immoveable property, a person is the ostensible owner of such property and transfers the same for consideration, the transfer shall not be voidable on the ground that the transferor was not authorised to make it: provided that the transferee, after taking reasonable care to ascertain that the transferor had power to make the transfer, has acted in good faith.

Section 42. Transfer by person having authority to revoke former transfer

Where a person transfers any immoveable property, reserving power to revoke the transfer, and subsequently transfers the property for consideration to another transferee, such transfer operates in favour of such transferee (subject to any condition attached to the exercise of the power) as a revocation of the former transfer to the extent of the power.

Illustration

A lets a house to B, and reserves power to revoke the lease if, in the opinion of a specified surveyor, B should make a use of it detrimental to its value. Afterwards A, thinking that such a use has been made, lets the house to C. This operates as a revocation of B’s lease subject to the opinion of the surveyor as to B’s use of the house having been detrimental to its value.

Section 43. Transfer by unauthorised person who subsequently acquires interest in property transferred

Where a person ¹[fraudulently or] erroneously represents that he is authorised to transfer certain immoveable property and professes to transfer such property for consideration, such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists.

Nothing in this section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.

Illustration

A, a Hindu who has separated from his father B, sells to C three fields, X, Y and Z, representing that A is authorised to transfer the same. Of these fields Z does not belong to A, it having been retained by B on the partition; but on B’s dying A as heir obtains Z. C, not having rescinded the contract of sale, may require A to deliver Z to him.

————————-

1. Ins. by Act 20 of 1929, sec. 13.

Section 44. Transfer by one co-owner

Where one of two or more co-owners of immoveable property legally competent in that behalf transfers his share of such property or any interest therein, the transferee acquires as to such share or interest, and so far as is necessary to give, effect to the transfer, the transferor’s right to joint possession or other common or part enjoyment of the property, and to enforce a partition of the same, but subject to the conditions and liabilities affecting at the date of the transfer, the share or interest so transferred.

Where the transferee of a share of a dwelling-house belonging to an undivided family is not a member of the family, nothing in this section shall be deemed to entitle him to joint possession or other common or part enjoyment of the house.

Section 45. Joint transfer for consideration

Where immoveable property is transferred for consideration to two or more persons and such consideration is paid out of a fund belonging to them in common, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property identical, as nearly as may be, with the interests to which they were respectively entitled in the fund; and, where such consideration is paid out of separate funds belonging to them respectively, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property in proportion to the shares of the consideration which they respectively advanced.

In the absence of evidence as to the interests in the fund to which they were respectively entitled, or as to the shares which they respectively advanced, such persons shall be presumed to be equally interested in the property.

Section 46. Transfer for consideration by persons having distinct interests

Where immoveable property is transferred for consideration by persons having distinct interests therein, the transferors are, in the absence of a contract to the contrary, entitled to share in the consideration equally, where their interests in the property were of equal value, and, where such interests were of unequal value, proportionately to the value of their respective interests.

Illustration

(a) A, owing a moiety, and B and C, each a quarter share, of mauza Sultanpur, exchange an eighth share of that mauza for a quarter share of mauza. There being no agreement to the contrary, A is entitled to an eighth share in Lalpura, and B and C each to a sixteenth share in the mauza.

(b) A, being entitled to a life-interest in mauza Atrali and B and C to the reversion, sell the mauza for Rs. 1,000. A’s life-interest is ascertained to be worth Rs. 600, the reversion Rs. 400. A is entitled to receive Rs. 600 out of the purchase-money. B and C to receive Rs. 400.

Section 47. Transfer by co-owners of share in common property

Where several co-owners of immoveable property transfer a share therein without specifying that the transfer is to take effect on any particular share or shares of the transferors, the transfer, as among such transferors, takes effect on such shares equally where the shares were equal, and, where they were unequal, proportionately to the extent of such shares.

Illustration

A, the owner of an eight-anna share, and B and C, each the owner of a four-anna share, in mauza Sultanpur, transfer a two-anna share in the mauza to D, without specifying from which of their several shares the transfer is made. To give effect to the transfer one-anna share is taken from the share of A, and half-an-anna share from each of the shares of B and C.

Section 48. Priority of rights created by transfer

Where a person purports to create by transfer at different times rights in or over the same immoveable property, and such rights cannot all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created.

Section 49. Transferee’s right under policy

Where immoveable property is transferred for consideration, and such property or any part thereof is at the date of the transfer insured against loss or damage by fire, the transferee, in case of such loss or damage, may, in the absence of a contract to the contrary, require any money which the transferor actually receives under the policy, or so much thereof as may be necessary, to be applied in reinstating the property.

Section 50. Rent bona fide paid to holder under defective title

No person shall be chargeable with any rents or profits of any immoveable property, which he has in good faith paid or delivered to any person of whom he in good faith held such property, notwithstanding it may afterwards appear that the person to whom such payment or delivery was made had no right to receive such rents or profits.

Illustration

A lets a field to B at a rent of Rs. 50, and then transfers the field to C. B, having no notice of the transfer, in good faith pays the rent to A. B is not chargeable with the rent so paid.

51. Improvements made by bona fide holders under defective titles.—

When the transferee of immoveable property makes any improvement on the property, believing in good faith that he is absolutely entitled thereto, and he subsequently evicted therefrom by any person having a better title, the transferee has a right to require the person causing the eviction either to have the value of the improvement estimated and paid or secured to the transferee, or to sell interest in the property to the transferee at the then market value thereof, irrespective of the value of such improvement.

The amount to be paid or secured in respect of such improvement shall be the estimated value thereof at the time of the eviction.

When, under the circumstances aforesaid, the transferee has planted or sown on the property crops which are growing when he is evicted therefrom, he is entitled to such crops and to free ingress and egress to gather and carry them.

Section 52. Transfer of property pending suit relating thereto

During the ¹[pendency] in any Court having authority ²[ ³[within the limits of India excluding the State of Jammu and Kashmir] or established beyond such limits] by ⁴[the Central Government] ⁵[* * *] of ⁶[any] suit or proceedings which is not collusive and in which any right to immoveable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.

⁷[Explanation.—For the purposes of this section, the pendency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the institution of the proceeding in a Court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has been obtained, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force.]

————————

1. Subs. by Act 20 of 1929, sec. 14, for “active prosecution”.

2. Subs. by the A.O. 1950, for “in the Provinces or established beyond the limits of the Provinces”.

3. Subs. by Act 3 of 1951, sec. 3 and Sch., for “within the limits of Part A States and Part C States” (w.e.f. 1-4-1951).

4. Subs. by the A.O.1937, for “the Governor General in Council”.

5. The words “or the Crown Representative” rep. by the A.O. 1948.

6. Subs. by Act 20 of 1929, sec. 14, for “a contentious”.

7. Ins. by Act 20 of 1929, sec. 14.

Section 53. Fraudulent transfer

¹[53. Fraudulent transfer.—(1) Every transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed.

Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration.

Nothing in this sub-section shall affect any law for the time being in force relating to insolvency.

A suit instituted by a creditor (which term includes a decree-holder whether he has or has not applied for execution of his decree) to avoid a transfer on the ground that it has been made with intent to defeat or delay the creditors of the transferor shall be instituted on behalf of, or for the benefit of, all the creditors.

(2) Every transfer of immoveable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee.

For the purposes of this sub-section, no transfer made without consideration shall be deemed to have been made with intent to defraud by reason only that a subsequent transfer for consideration was made.]

————————

1. Subs. by Act 20 of 1929, sec. 15, for the original section.

Section 53A. Part performance

¹[53A. Part performance.—Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty,

and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract,

then, notwithstanding that ²[***] where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:

Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.]

1. Ins. by Act 20 of 1929, sec. 16.

2. The words “the contract, though required to be registered, has not been registered, or,” omitted by Act 48 of 2001, sec. 10 (w.e.f. 24-9-2001).

Section 54. “Sale” defined

‘‘Sale” is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.

Sale how made.—3Such transfer, in the case of tangible immoveable property of the value of one hundred rupees and upwards, or in the case of a reversion or other intangible thing, can be made only by a registered instrument.

¹In the case of tangible immoveable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.

Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.

Contract for sale.—A contract for the sale of immoveable property is a contract that a sale of such property shall take place on terms settled between the parties.

It does not, of itself, create any interest in or charge on such property.

————————

1. As to limitation to the territorial operation of paragraphs 2 and 3 of section 54, see section 1, supra. These paragraphs extend to every cantonment see section 287 of the CantonmentsAct, 1924 (2 of 1924).

Section 55. Rights and liabilities of buyer and seller

In the absence of a contract to the contrary, the buyer and the seller of immoveable property respectively are subject to the liabilities, and have the rights, mentioned in ,the rules next following, or such of them as are applicable to the property sold:—

(1) The seller is bound—

(a) to disclose to the buyer any material defect in the property 1[or in the seller’s title thereto] of which the seller is, and the buyer is not, aware, and which the buyer could not with ordinary care discover;

(b) to produce to the buyer on his request for examination all documents of title relating to the property which are in the seller’s possession or power;

(c) to answer to the best of his information all relevant questions put to him by the buyer in respect to the property or the title thereto;

(d) on payment or tender of the amount due in respect of the price, to execute a proper conveyance of the property when the buyer tenders it to him for execution at a proper time and place;

(e) between the date of the contract of sale and the delivery of the property, to take as much care of the property and all documents of title relating thereto which are in his possession as an owner of ordinary prudence would take of such property and documents;

(f) to give, on being so required, the buyer, or such person as he directs, such possession of the property as its nature admits;

(g) to pay all public charges and rent accrued due in respect of the property up to the date of the sale, the interest on all encumbrances on such property due on such date, and, except where the property is sold subject to encumbrances, to discharge all encumbrances on the property then existing.

(2) The seller shall be deemed to contract with the buyer that the interest which the seller professes to transfer to the buyer subsists and that he has power to transfer the same:

Provided that, where the sale is made by a person in a fiduciary character, he shall be deemed to contract with the buyer that the seller has done no act whereby the property is encumbered or whereby he is hindered from transferring it.

The benefit of the contract mentioned in this rule shall be annexed to, and shall go with, the interest of the transferee as such, and may be enforced by every person in whom that interest is for the whole or any part thereof from time to time vested.

(3) Where the whole of the purchase-money has been paid to the seller, he is also bound to deliver to the buyer all documents of title relating to the property which are in the seller’s possession or power :

Provided that, (a) where the seller retains any part of the property comprised in such documents, he is entitled to retain them all, and, (b) where the whole of such property is sold to different buyers, the buye of the lot of greatest value is entitled to such documents. But in case (a) the seller, and in case (b) the buyer, of the lot of greatest value, is bound, upon every reasonable request by the buyer, or by any of the other buyers, as the case may be, and at the cost of the person making the request, to produce the said documents and furnish such true copies thereof or extracts therefrom as he may require; and in the meantime, the seller, or the buyer of the lot of greatest value, as the case may be, shall keep the said documents safe, uncancelled and undefaced, unless prevented from so doing by fire or other inevitable accident.

(4) The seller is entitled—

(a) to the rents and profits of the property till the ownership thereof passes to the buyer;

(b) where the ownership of the property has passed to the buyer before payment of the whole of the purchase-money, to a charge upon the property in the hands of the buyer, 1[any transferee without consideration or any transferee with notice of the non-payment], for the amount of the purchase-money, or any part thereof remaining unpaid, and for interest on such amount or part ¹[from the date on which possession has been delivered].

(5) The buyer is bound—

(a) to disclose to the seller any fact as to the nature or extent of the seller’s interest in the property of which the buyer is aware, but of which he has reason to believe that the seller is not aware, and which materially increases the value of such interest;

(b) to pay or tender, at the time and place of completing the sale, the purchase-money to the seller or such person as he directs: provided that, where the property is sold free from encumbrances, the buyer may retain out of the purchase-money the amount of any encumbrances on the property existing at the date of the sale, and shall pay the amount so retained to the persons entitled thereto;

(c) where the ownership of the property has passed to the buyer, to bear any loss arising from the destruction, injury or decrease in value of the property not caused by the seller;

(d) where the ownership of the property has passed to the buyer, as between himself and the seller, to pay all public charges and rent which may become payable in respect of the property, the principal moneys due on any encumbrances subject to which the property is sold, and the interest thereon afterwards accruing due.

(6) The buyer is entitled—

(a) where the ownership of the property has passed to him, to the benefit of any improvement in, or increase in value of, the property, and to the rents and profits thereof;

(b) unless he has improperly declined to accept delivery of the property, to a charge on the property, as against the seller and all persons claiming under him, ²[* * *] to the extent of the seller’s interest in the property, for the amount of any purchase-money properly paid by the buyer in anticipation of the delivery and for interest on such amount; and, when he properly declines to accept the delivery, also for the earnest (if any) and for the costs (if any) awarded to him of a suit to compel specific performance of the contract or to obtain a decree for its rescission.

An omission to make such disclosures as are mentioned in this section, paragraph (1), clause (a), and paragraph (5), clause (a), is fraudulent.

————————

1. Ins. by Act 20 of 1929, sec. 17.

2. The words “with notice of the payment” omitted by Act 20 of 1929, sec. 17.

Section 56. Marshalling by subsequent purchaser

¹[56. Marshalling by subsequent purchaser.—If the owner of two or more properties mortgages them to one person and then sells one or more of the properties to another person, the buyer is, in the absence of a contract to the contrary, entitled to have the mortgaged-debt satisfied out of the property or properties not sold to him, so far as the same will extend, but not so as to prejudice the rights of the mortgagee or persons claiming under him or of any other person who has for consideration acquired an interest in any of the properties.]

———————-

1. Subs. by Act 20 of 1929, sec. 18, for the original section.

Section 57. Provision by Court for encumbrances and sale freed therefrom

(a) Where immoveable property subject to any encumbrances, whether immediately payable or not, is sold by the court or in execution of a decree, or out of court, the court may, if it thinks fit, on the application of any party to the sale, direct or allow payment into Court,—

(1) in case of an annual or monthly sum charged on the property, or of a capital sum charged on a determinable interest in the property—of such amount as, when invested in securities of the Central Government, the Court considers will be sufficient, by means of the interest thereof, to keep down or otherwise provide for that charge, and

(2) in any other case of a capital sum charged on the property—of the amount sufficient to meet the encumbrance and any interest due thereon.

But in either case there shall also be paid into court such additional amount as the Court considers will be sufficient to meet the contingency of further costs, expenses and interest, and any other contingency, except depreciation of investment, not exceeding one-tenth part of the original amount to be paid in, unless the Court for special reasons (which it shall record) thinks fit to require a large additional amount.

(b) Thereupon the Court may, if it thinks fit, and after notice to the encumbrance, unless the Court, for reasons to be recorded in writing, thinks fit to dispense with such notice, declare the property to be freed from the encumbrance, and make any order for conveyance, or vesting order, proper for giving effect to the sale, and give directions for the retention and investment of the money in Court.

(c) After notice served on the persons interested in or entitled to the money or fund in Court, the Court may direct payment or transfer thereof to the persons entitled to receive or give a discharge for the same, and generally may give directions respecting the application or distribution of the capital or income thereof.

(d) An appeal shall lie from any declaration, order or direction under this section as if the same were a decree.

(e) In this section “Court” means (1) a High Court in the exercise of its ordinary or extraordinary original civil jurisdiction, (2) the Court of a District Judge within the local limits of whose jurisdiction the property or any part thereof is situate, (3) any other Court which the State Government may, from time to time, by notification in the Official Gazette, declare to be competent to exercise the jurisdiction conferred by this section.

Section 58. “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money” and “mortgage-deed” defined

(a) A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.

The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed.

(b) Simple mortgage.—Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied, so far as may be necessary, in payment of the mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee.

(c) Mortgage by conditional sale.—Where, the mortgagor ostensibly sells the mortgaged property—

on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or

on condition that on such payment being made the sale shall become void, or

on condition that on such payment being made the buyer shall transfer the property to the seller,

the transaction is called mortgage by conditional sale and the mortgagee a mortgagee by conditional sale:

¹[Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale.]

(d) Usufructuary mortgage.—Where the mortgagor delivers possession ¹[or expressly or by implication binds himself to deliver possession] of the mortgaged property to the mortgagee, and authorises him to retain such possession until payment of the mortgage-money, and to receive the rents and profits accruing from the property ²[or any part of such rents and profits and to appropriate the same] in lieu of interest, or in payment of the mortgage-money, or partly in lieu of interest ³[or] partly in payment of the mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee an usufructuary mortgagee.

(e) English mortgage.—Where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English mortgage.

⁴[(f) Mortgage by deposit of title-deeds.—Where a person in any of the following towns, namely, the towns of Calcutta, Madras, ⁵[and Bombay], ⁶[* * *] and in any other town⁷ which the ⁸[State Government concerned] may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immoveable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds.

(g) Anomalous mortgage.—A mortgage which is not a simple mortgage, a mortgage by conditional sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds within the meaning of this section is called an anomalous mortgage.]

————————

1. Ins. by Act 20 of 1929, sec. 19.

2. Subs. by Act 20 of 1929, sec. 19, for “and to appropriate them”.

3. Subs. by Act 20 of 1929, sec. 19, for “and”.

4. Added by Act 20 of 1929, sec. 19.

5. Subs. by the A.O. 1948, for “Bombay and Karachi”. The word “and” had been ins. by the A.O. 1937.

6. The words “Rangoon, Moulmein, Bassein and Akyab” omitted by the A.O. 1937.

7. For notifications relating to the towns of—Ahmedabad, see Gazette of India, 1935, Pt. I, p. 936, Bandra, Kurla and Ghathkoper Kirol, see Gazette of India, 1924, Pt.I, p.1064, Cawnpore, Allahabad and Lucknow, see Gazette of India, 1938, Pt. I, p. 158. Coimbatore, Madura, Cocanada and Cochin, see Gazette of India, 1935, Pt. I, p. 526.

8. The words “Governor General in Council”, successively amended by the A.O. 1937 and the A.O. 1950 to read as above.

Section 59. Mortgage when to be by assurance

Where the principal money secured is one hundred rupees or upwards, a mortgage other than a mortgage by deposit of title deeds can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses.

Where the principal money secured is less than one hundred rupees, a mortgage may be effected either by a registered instrument signed and attested as aforesaid or (except in the case of a simple mortgage) by delivery of the property.

¹[***]

———————-

1. The third paragraph was omitted by Act 20 of 1929, sec. 20.

Section 59A. References to mortgagors and mortgagees to include persons deriving title from them

¹[59A. References to mortgagors and mortgagees to include persons deriving title from them.—Unless otherwise expressly provided, references in this Chapter to mortgagors and mortgagees shall be deemed to include references to persons deriving title from them respectively.]

————————

1. Ins. by Act 20 of 1929, sec. 21.

————————

1. As to limitation to the territorial operation of section 59, see section 1, supra, section 59, extends to every cantonment—see section 287 of the Cantonments Act, 1924 (2 of 1924).

2. Ins. by Act 20 of 1929, sec. 20.

3. Subs. by Act 6 of 1904, sec. 3, for “an instrument”.

4. The third paragraph omitted by Act 20 of 1929, sec. 20

Section 60. Right of mortgagor to redeem

At any time after the principal money has become ¹[due], the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage-money, to require the mortgagee (a) to deliver ²[to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee], (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and (c) at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished:

Provided that the right conferred by this section has not been extinguished by act of the parties or by ³[decree] of a Court.

The right conferred by this section is called a right to redeem and a suit to enforce it is called a suit for redemption.

Nothing in this section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed, the mortgagee shall be entitled to reasonable notice before payment or tender of such money.

———————-

1. Subs. by Act 20 of 1929, sec. 22, for “payable”.

2. Subs. by Act 20 of 1929, sec. 22, for “the mortgage-deed, if any to the mortgagor”.

3. Subs. by Act 20 of 1929, sec. 22, for “order”.

4. Ins. by Act 20 of 1929, sec. 22.

Section 60A. Obligation to transfer to third party instead of re-transference to mortgagor

¹[60A. Obligation to transfer to third party instead of re-transference to mortgagor.—(1) Where a mortgagor is entitled to redemption, then, on the fulfilment of any conditions on the fulfilment of which he would be entitled to require a re-transfer, he may require the mortgagee, instead of re-transferring the property, to assign the mortgage-debt and transfer the mortgaged property to such third person as the mortgagor may direct; and the mortgagee shall be bound to assign and transfer accordingly.

(2) The rights conferred by this section belong to and may be enforced by the mortgagor or by any encumbrancer notwithstanding an intermediate encumbrance; but the requisition of any encumbrance shall prevail over a requisition of the mortgagor and, as between encumbrancers, the requisition of a prior encumbrancer shall prevail over that of a subsequent encumbrancer.

(3) The provisions of this section do not apply in the case of a mortgagee who is or has been in possession.

———————-

1. Sections 60A and 60B ins. by Act 20 of 1929, sec. 23.

Section 60B. Right to inspection and production of documents

A mortgagor, as long as his right of redemption subsists, shall be entitled at all reasonable times, at his request and at his own cost, and on payment of the mortgagee’s costs and expenses in this behalf, to inspect and make copies or abstracts of, or extracts from, documents of title relating to the mortgaged property which are in the custody or power of the mortgagee.]

Section 61. Right to redeem separately or simultaneously

¹[61. Right to redeem separately or simultaneously.—A mortgagor who has executed two or more mortgages in favour of the same mortgagee shall, in the absence of a contract to the contrary, when the principal money of any two or more of the mortgages has become due, be entitled to redeem any one such mortgage separately, or any two or more of such mortgages together.]

———————-

1. Subs. by Act 20 of 1929, sec. 24, for the original section.

Section 62. Right of usufructuary mortgagor to recover possession

In the case of a usufructuary mortgage, the mortgagor has a right to recover possession of the property ¹[together with the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee],—

(a) where the mortgagee is authorized to pay himself the mortgage-money from the rents and profits of the property,—when such money is paid;

(b) where the mortgagee is authorised to pay himself from such rents and profits²[or any part thereof a part only of the mortgage-money],—when the term (if any) prescribed for the payment of the mortgage-money has expired and the mortgagor pays or tenders to the mortgagee ³[the mortgage-money or the balance thereof] or deposits it in Court as hereinafter provided.

———————-

1. Ins. by Act 20 of 1929, sec. 25.

2. Subs. by Act 20 of 1929, sec. 25, for “the interest of the principal money”.

3. Subs. by Act 20 of 1929, sec. 25, for “the principal money”.

Section 63. Accession to mortgaged property

Where mortgaged property in possession of the mortgagee has, during the continuance of the mortgage, received any accession, the mortgagor, upon redemption shall, in the absence of a contract to the contrary, be entitled as against the mortgagee to such accession.

Accession acquired in virtue of transferred ownership.—Where such accession has been acquired at the expense of the mortgagee, and is capable of separate possession or enjoyment without detriment to the principal property, the mortgagor desiring to take the accession must pay to the mortgagee the expense of acquiring it. If such separate possession or enjoyment is not possible, the accession must be delivered with the property; the mortgagor being liable, in the case of an acquisition necessary to preserve the property from destruction, forfeiture or sale, or made with his assent, to pay the proper cost thereof, as an addition to the principal money, ¹[with interest at the same rate as is payable on the principal, or, where no such rate is fixed, at the rate of nine per cent per annum].

In the case last mentioned the profits, if any, arising from the accession shall be credited to the mortgagor.

Where the mortgage is usufructuary and the accession has been acquired at the expense of the mortgagee, the profits, if any, arising from the accession shall, in the absence of a contract to the contrary, be set off against interest, if any, payable on the money so expended.

———————-

1. Subs. by Act 20 of 1929, sec. 26, for “at the same rate of interest”.

Section 63A. Improvements to mortgaged property

¹[63A. Improvements to mortgaged property.—(1) Where mortgaged property in possession of the mortgagee has, during the continuance of the mortgage, been improved, the mortgagor, upon redemption, shall, in the absence of a contract to the contrary, be entitled to the improvement; and the mortgagor shall not, save only in cases provided for in sub-section (2), be liable to pay the cost thereof.

(2) Where any such improvement was effected at the cost of the mortgagee and was necessary to preserve the property from destruction or deterioration or was necessary to prevent the security from becoming insufficient, or was made in compliance with the lawful order of any public servant or public authority, the mortgagor shall, in the absence of a contract to the contrary, be liable to pay the proper cost thereof as an addition to the principal money with interest at the same rate as is payable on the principal, or, where no such rate is fixed, at the rate of nine per cent per annum, and the profits, if any, accruing by reason of the improvement shall be credited to the mortgagor.]

———————-

1. Ins. by Act 20 of 1929, sec. 27.

Section 64. Renewal of mortgaged lease

Where the mortgaged property is a lease ¹[***], and the mortgagee obtains a renewal of the lease, the mortgagor, upon redemption, shall, in the absence of a contract by him to the contrary, have the benefit of the new lease.

———————-

1. The words “for a term of years” omitted by Act 20 of 1929, sec. 28.

Section 65. Implied contracts by mortgagor

In the absence of a contract to the contrary, the mortgagor shall be deemed to contract with the mortgagee,—

(a) that the interest which the mortgagor professes to transfer to the mortgagee subsists, and that the mortgagor has power to transfer the same;

(b) that the mortgagor will defend, or, if the mortgagee be in possession of the mortgaged property, enable him to defend, the mortgagor’s title thereto;

(c) that the mortgagor will, so long as the mortgagee is not in possession of the mortgaged property, pay all public charges accruing due in respect of the property;

(d) and, where the mortgaged property is a lease ¹[***], that the rent payable under the lease, the conditions contained therein, and the contracts binding on the lessee have been paid, performed and observed down to the commencement of the mortgage; and that the mortgagor will, so long as the security exists and the mortgagee is not in possession of the mortgaged property, pay the rent reserved by the lease, or, if the lease be renewed, the renewed lease, perform the conditions contained therein and observe the contracts binding on the lessee, and indemnify the mortgagee against all the claims sustained by reason of the non-payment of the said rent or the non-performance or non-observance of the said conditions and contracts;

(e) and, where the mortgage is a second or subsequent encumbrance on the property, that the mortgagor will pay the interest from time to time accruing due on each prior encumbrance as and when it becomes due, and will at the proper time discharge the principal money due on such prior incumbrance.

²[***]

The benefit of the contracts mentioned in this section shall be annexed to and shall go with the interest of the mortgagee as such, and may be enforced by every person in whom that interest is for the whole or any part thereof from time to time vested.

———————-

1. The words “for a term of years” omitted by Act 20 of 1929, sec. 29.

2. Certain words omitted by Act 20 of 1929, sec. 29.

Section 65A. Mortgagor’s power to lease

¹[65A. Mortgagor’s power to lease.—(1) Subject to the provisions of sub-section (2), a mortgagor, while lawfully in possession of the mortgaged property, shall have power to make leases thereof which shall be binding on the mortgagee.

(2) (a) Every such lease shall be such as would be made in the ordinary course of management of the property concerned, and in accordance with any local law, custom or usage,

(b) Every such lease shall reserve the best rent that can reasonably be obtained, and no premium shall be paid or promised and no rent shall be payable in advance,

(c) No such lease shall contain a covenant for renewal,

(d) Every such lease shall take effect from a date not later than six months from the date on which it is made,

(e) In the case of a lease of buildings, whether leased with or without the land on which they stand, the duration of the lease shall in no case exceed three years, and the lease shall contain a covenant for payment of the rent and a condition of re-entry on the rent not being paid with a time therein specified.

(3) The provisions of sub-section (1) apply only if and as far as a contrary intention is not expressed in the mortgage-deed; and the provisions of sub-section (2) may be varied or extended by the mortgage-deed and, as so varied and extended, shall, as far as may be, operate in like manner and with all like incidents, effects and consequences, as if such variations or extensions were contained in that sub-section.]

———————-

1. Ins. by Act 20 of 1929, sec. 30.

Section 66. Waste by mortgagor in possession

A mortgagor in possession of the mortgaged property is not liable to the mortgagee for allowing the property to deteriorate; but he must not commit any act which is destructive or permanently injurious thereto, if the security is insufficient or will be rendered insufficient by such act.

Explanation.—A security is insufficient within the meaning of this section unless the value of the mortgaged property exceeds by one-third, or, if consisting of buildings, exceeds by one-half, the amount for the time being due on the mortgage.

Section 67. Right to fore-closure or sale

In the absence of a contract to the contrary, the mortgagee has, at any time after the mortgage-money has become ¹[due] to him, and before a decree has been made for the redemption of the mortgaged property, or the mortgage-money has been paid or deposited as hereinafter provided, a right to obtain from the Court ²[a decree] that the mortgagor shall be absolutely debarred of his right to redeem the property, or ²[a decree] that the property be sold.

A suit to obtain ²[a decree] that a mortgagor shall be absolutely debarred of his right to redeem the mortgaged property is called a suit for foreclosure.

Nothing in this section shall be deemed—

³[(a) to authorise any mortgagee other than a mortgagee by conditional sale or a mortgagee under an anomalous mortgage by the terms of which he is entitled to foreclose, to institute a suit for foreclosure, or an usufructuary mortgagee as such or a mortgagee by conditional sale as such to institute a suit for sale; or]

(b) to authorise a mortgagor who holds the mortgagee’s rights as his trustee or legal representative, and who may sue for a sale of the property, to institute a suit for foreclosure; or

(c) to authorise the mortgagee of a railway, canal, or other work in the maintenance of which the public are interested, to institute a suit for foreclosure or sale; or

(d) to authorise a person interested in part only of the mortgage-money to institute a suit relating only to a corresponding part of the mortgaged property, unless the mortgagees have, with the consent of the mortgagor, severed their interests under the mortgage.

———————-

1. Subs. by Act 20 of 1929, sec. 31, for “payable”.

2. Subs. by Act 20 of 1929, sec. 31, for “an order”.

3. Subs. by Act 20 of 1929, sec. 31, for the original clause.

Section 67A. Mortgagee when bound to bring one suit on several mortgages

¹[67A. Mortgagee when bound to bring one suit on several mortgages.—A mortgagee who holds two or more mortgages executed by the same mortgagor in respect of each of which he has a right to obtain the same kind of decree under section 67, and who sues to obtain such decree on any one of the mortgages, shall, in the absence of a contract to the contrary, be bound to sue on all the mortgages in respect of which the mortgage-money has become due.]

———————-

1. Ins. by Act 20 of 1929, sec. 32.

Section 68. Right to sue for mortgage-money

¹[68. Right to sue for mortgage-money.—(1) The mortgagee has a right to sue for the mortgage-money in the following cases and no others, namely:—

(a) where the mortgagor binds himself to repay the same;

(b) where, by any cause other than the wrongful act or default of the mortgagor or mortgagee, the mortgaged property is wholly or partially destroyed or the security is rendered insufficient within the meaning of section 66, and the mortgagee has given the mortgagor a reasonable opportunity of providing further security enough to render the whole security sufficient, and the mortgagor has failed to do so;

(c) where the mortgagee is deprived of the whole or part of his security by or in consequence of the wrongful act or default of the mortgagor;

(d) where, the mortgagee being entitled to possession of the mortgaged property, the mortgagor fails to deliver the same to him, or to secure the possession thereof to him without disturbance by the mortgagor or any person claiming under a title superior to that of the mortgagor :

Provided that, in the case referred to in clause (a), a transferee from the mortgagor or from his legal representative shall not be liable to be sued for the mortgage-money.

(2) Where a suit is brought under clause (a) or clause (b) of sub-section (1), the Court may, at its discretion, stay the suit and all proceedings therein, notwithstanding any contract to the contrary, until the mortgagee has exhausted all his available remedies against the mortgaged property or what remains of it, unless the mortgagee abandons his security and, if necessary, re-transfers the mortgaged property.]

———————-

1. Subs. by Act 20 of 1929, sec. 33, for the original section.

Section 69. Power of sale when valid

69. Power of sale when valid.—¹[(1)] ²[³[***] A mortgagee, or any person acting on his behalf, shall, subject to the provisions of this section have power to sell or concur in selling the mortgaged property or any part thereof, in default of payment of the mortgage-money, without the intervention of the court, in the following cases and in no others, namely:—]

(a) where the mortgage is an English mortgage, and neither the mortgagor nor the mortgagee is a Hindu, Muhammadan or Buddhist 4[or a member of any other race, sect, tribe or class from time to time specified in this behalf by ⁵[the State Government], in the Official Gazette];

(b) where ⁶[a power of sale without the intervention of the court is expressly conferred on the mortgagee by the mortgage-deed and] the mortgagee is ⁷[the Government];

(c) where ⁶[a power of sale without the intervention of the court is expressly conferred on the mortgagee by the mortgage-deed and] the mortgaged property or any part thereof ⁸[was, on the date of the execution of the mortgage-deed], situate within the towns of Calcutta, Madras, Bombay, ⁹[***] ¹⁰[or in any other town11 or area which the State Government may, by notification in the Official Gazette, specify in this behalf.]

¹²[(2)] ¹³[***] No such power shall be exercised unless and until—

¹⁴[(a)] notice in writing requiring payment of the principal money has been served on the mortgagor, or on one of several mortgagors, and default has been made in payment of the principal money, or of part thereof, for three months after such service; or

¹⁵[(b)] some interest under the mortgage amounting at least to five hundred rupees is in arrear and unpaid for three months after becoming due.

¹⁶[(3)] When a sale has been made in professed exercise of such a power, the title of the purchaser shall not be impeachable on the ground that no case had arisen to authorise the sale, or that due notice was not given, or that the power was otherwise improperly or irregularly exercised; but any person damnified by an unauthorised or improper or irregular exercise or the power shall have his remedy in damages against the person exercising the power.

¹⁷[(4)] The money which is received by the mortgagee, arising from the sale, after discharge of prior encumbrances, if any, to which the sale is not made subject, or after payment into Court under section 57 of a sum to meet any prior encumbrance, shall, in the absence of a contract to the contrary, be held by him in trust to be applied by him, first, in payment of all costs, charges and expenses properly incurred by him as incident to the sale or any attempted sale; and, secondly, in discharge of the mortgage-money and costs and other money, if any, due under the mortgage; and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorised to give receipts for the proceeds of the sale thereof.

¹⁸[(5) Nothing in this section or in section 69A applies to powers conferred before the first day of July, 1882.]

¹⁹[***]

———————-

1. Section 69 re-numbered as sub-section (1) of that section, by Act 20 of 1929, sec. 34.

2. Subs. by Act 20 of 1929, sec. 34, for certain words.

3. The words and figures “Notwithstanding anything contained in the Trustees’ and Mortgagees’ Powers Act, 1866″ omitted by Act 48 of 1952, sec. 3 and Sch. II.

4. Ins. by Act 3 of 1885, sec. 5.

5. The words “the L.G., with the previous sanction of the G.G. in C” successively amended by the A.O. 1937 and the A.O. 1950 to read as above.

6. Ins. by Act 20 of 1929, sec. 34.

7. The words “the Secretary of State for India in Council” successively amended by the A.O. 1937 and the A.O. 1950 to read as above.

8. Subs. by Act 20 of 1929, sec. 34, for “is”.

9. The word “Karachi” omitted by the A.O. 1948.

10. The words “or Rangoon” have been successively amended by Acts 6 of 1904, 11 of 1915, 20 of 1929, the A.O. 1937 and the A.O. 1950 to read as above.

11. For notifications relating to the towns of— Ahmedabad, see Gazette of India 1935, Pt. I, p. 936. Bandra, Kurla and Ghatkoper-Kirol, see Gazette of India, 1924, Pt. I, p. 1964. Cawnpore, Allahabad and Lucknow, see Gazette of India, 1933, Pt. I, p. 158. Coimbatore, Mudura, Cocanada and Cochin, see Gazette of India, 1935, Pt. I, p. 526. Delhi (Contonment), see Gazette of India, 1963, Pt. II, Section 3, Sub-section (1), p. 1020.

12. Second paragraph re-numbered as sub-section (2) by Act 20 of 1929, sec. 34.

13. The word “But” omitted by Act 20 of 1929, sec. 34.

14. Clause (1) was lettered (a) by Act 20 of 1929, sec. 34.

15. Clause (2) was lettered (b) by Act 20 of 1929, sec. 34.

16. Third paragraph numbered as sub-section (3) by Act 20 of 1929, sec. 34.

17. Fourth paragraph numbered as sub-section (4) by Act 20 of 1929, sec. 34.

18. Subs. by Act 20 of 1929, sec. 34, for the original fifth paragraph.

19. Original last paragraph omitted by Act 20 of 1929, sec. 34.

Section 69A. Appointment of receiver

¹[69A. Appointment of receiver.—(1) A mortgagee having the right to exercise a power of sale under section 69 shall, subject to the provisions of sub-section (2), be entitled to appoint, by writing signed by him or on his behalf, a receiver of the income of the mortgaged property or any part thereof.

(2) Any person who has been named in the mortgage-deed and is willing and able to act as receiver may be appointed by the mortgagee.

If no person has been so named, or if all persons named are unable or unwilling

to act, or are dead, the mortgagee may appoint any person to whose appointment the mortgagor agrees; failing such agreement, the mortgagee shall be entitled to apply to the Court for the appointment of a receiver, and any person appointed by the Court shall be deemed to have been duly appointed by the mortgagee.

A receiver may at any time be removed by writing signed by or on behalf of the mortgagee and the mortgagor, or by the court on application made by either party and on due cause shown.

A vacancy in the office of receiver may be filled in accordance with the provisions of this sub-section.

(3) A receiver appointed under the powers conferred by this section shall be deemed to be the agent of the mortgagor; and the mortgagor shall be solely responsible for the receiver’s act or defaults, unless the mortgage-deed otherwise provides or unless such acts or defaults are due to the improper intervention of the mortgagee.

(4) The receiver shall have power to demand and recover all the income of which he is appointed receiver, by suit, execution or otherwise, in the name either of the mortgagor or of the mortgagee to the full extent of the interest which the mortgagor could dispose of, and to give valid receipts accordingly for the same, and to exercise any powers which may have been delegated to him by the mortgagee, in accordance with the provisions of this section.

(5) A person paying money to the receiver shall not be concerned to inquire if the appointment of the receiver was valid or not.

(6) The receiver shall be entitled to retain out of any money received by him, for his remuneration, and in satisfaction of all costs, charges and expenses incurred by him as receiver, a commission at such rate not exceeding five per cent, on the gross amount of all money received as is specified in his appointment, and, if no rate is so specified, then at the rate of five per cent. on that gross amount, or at such other rate as the court thinks fit to allow, on application made by him for that purpose.

(7) The receiver shall, if so directed in writing by the mortgagee, insure to the extent, if any, to which the mortgagee might have insured, and keep insured against loss or damage by fire, out of the money received by him, the mortgaged property or any part thereof being of an insurable nature.

(8) Subject to the provisions of this Act as to the application of insurance money, the receiver shall apply all money received by him as follows, namely:—

(i) in discharge of all rents, taxes, land revenue, rates and outgoings whatever affecting the mortgaged property;

(ii) in keeping down all annual sums or other payments, and the interest on all principal sums, having priority to the mortgage in right whereof he is receiver;

(iii) in payment of his commission, and of the premiums on fire, life or other insurances, if any, properly payable under the mortgage-deed or under this Act, and the cost of executing necessary or proper repairs directed in writing by the mortgagee;

(iv) in payment of the interest falling due under the mortgage;

(v) in or towards discharge of the principal money, if so directed in writing by the mortgagee,

and shall pay the residue, of any, of the money received by him to the person who, but for the possession of the receiver, would have been entitled to receive the income of which he is appointed receiver, or who is otherwise entitled to the mortgaged property.

(9) The provisions of sub-section (1) apply only if and as far as a contrary intention is not expressed in the mortgage-deed; and the provisions of sub-sections (3) to (8) inclusive may be varied or extended by the mortgage-deed; and, as so varied or extended, shall, as far as may be, operate in like manner and with all the like incidents, effects and consequences, as if such variations or extensions were contained in the said sub-sections.

(10) Application may be made, without the institution of a suit, to the court for its opinion, advice or direction on any present question respecting the management or administration of the mortgaged property, other than questions of difficulty or importance not proper in the opinion of the court for summary disposal. A copy of such application shall be served upon, and the hearing thereof may be attended by, such of the persons interested in the application as the Court may think fit.

The costs of every application under this sub-section shall be in the discretion of the Court.

(11) In this section, “the Court” means the Court which would have jurisdiction in a suit to enforce the mortgage.]

———————-

1. Ins. by Act 20 of 1929, sec. 35.

Section 70. Accession to mortgaged property

If, after the date of a mortgage, any accession is made to the mortgaged property, the mortgagee, in the absence of a contract to the contrary, shall, for the purposes of the security, be entitled to such accession.

Illustrations

(a) A mortgages to B a certain field bordering on a river. The field is increased by alluvion. For the purposes of his security, B is entitled to the increase.

(b) A mortgages a certain plot of building land to B and afterwards erects a house on the plot. For the purposes of his security, B is entitled to the house as well as the plot.

Section 71. Renewal of mortgaged lease

When the mortgaged property is a lease ¹[***] and the mortgagor obtains a renewal of the lease, the mortgagee, in the absence of a contract to the contrary, shall, for the purposes of the security, be entitled to the new lease.

———————-

1. The words “for a term of years” omitted by Act 20 of 1929, sec. 36.

Section 72. Right of mortgagee in possession

¹[A mortgagee] may spend such money as is necessary—

²[***]

(b) for ³[the preservation of the mortgaged property] from destruction, forfeiture or sale;

(c) for supporting the mortgagor’s title to the property;

(d) for making his own title thereto good against the mortgagor; and

(e) when the mortgaged property is a renewable lease-hold, for the renewal of the lease, and may, in the absence of a contract to the contrary, add such money to the principal money, at the rate of interest payable on the principal, and, where no such rate is fixed, at the rate of nine per cent. per annum:

⁴[Provided that the expenditure of money by the mortgagee under clause (b) or clause (c) shall not be deemed to be necessary unless the mortgagor has been called upon and has failed to take proper and timely steps to preserve the property or to support the title.]

Where the property is by its nature insurable, the mortgagee may also, in the absence of a contract to the contrary, insure and keep insured against loss or damage by fire the whole or any part of such property, and the premiums paid for any such insurance shall be ⁵[added to the principal money with interest at the same rate as is payable on the principal money or, where no such rate is fixed, at the rate of nine per cent. per annum]. But the amount of such insurance shall not exceed the amount specified in this behalf in the mortgage-deed or (if no such amount is therein specified) two-thirds of the amount that would be required in case of total destruction to reinstate the property insured.

Nothing in this section shall be deemed to authorise the mortgagee to insure when an insurance of the property is kept up by or on behalf of the mortgagor to the amount in which the mortgagee is hereby authorised to insure.

———————-

1. Subs. by Act 20 of 1929, sec. 37, for “When, during the continuance of the mortgage, the mortgagee takes possession of the mortgaged property, he”.

2. Clause (a) omitted by Act 20 of 1929, sec. 37.

3. Subs. by Act 20 of 1929, sec. 37, for “its preservation”.

4. Ins. by Act 20 of 1929, sec. 37.

5. Subs. by Act 20 of 1929, sec. 37, for certain original words.

Section 73. Right to proceeds of revenue sale or compensation on acquisition

¹[73. Right to proceeds of revenue sale or compensation on acquisition.—(1) Where the mortgaged property or any part thereof or any interest therein is sold owing to failure to pay arrears of revenue or other charges of a public nature or rent due in respect of such property, and such failure did not arise from any default of the mortgagee, the mortgagee shall be entitled to claim payment of the mortgage-money, in whole or in part, out of any surplus of the sale-proceeds remaining after payment of the arrears and of all charges and deductions directed by law.

(2) Where the mortgaged property or any part thereof or any interest therein is acquired under the Land Acquisition Act, 1894 (1 of 1894); or any other enactment for the time being in force providing for the compulsory acquisition of immoveable property, the mortgagee shall be entitled to claim payment of the mortgage-money, in whole or in part, out of the amount due to the mortgagor as compensation.

(3) Such claims shall prevail against all other claims except those of prior encumbrancers, and may be enforced notwithstanding that the principal money on the mortgage has not become due.]

———————-

1. Subs. by Act 20 of 1929, sec. 38, for the original section.

Section 74. Right of subsequent mortgagee to pay off prior mortgagee

[Rep. by the Transfer of Property (Amendment) Act, 1929 (20 of 1929), sec. 39.]

Section 75. Rights of mesne mortgagee against prior and subsequent mortgagees

[Rep. by the Transfer of Property (Amendment) Act, 1929 (20 of 1929), sec. 39.]

Section 76. Liabilities of mortgagee in possession

When, during the continuance of the mortgage, the mortgagee takes possession of the mortgaged property,—

(a) he must manage the property as a person of ordinary prudence would manage it if it were his own;

(b) he must use his best endeavours to collect the rents and profits thereof;

(c) he must, in the absence of a contract to the contrary, out of the income of the property, pay the Government revenue, all other charges of a public nature ¹[and all rent] accruing due in respect thereof during such possession, and any arrears of rent in default of payment of which the property may be summarily sold;

(d) he must in the absence of a contract to the contrary, make such necessary repairs of the property as he can pay for out of the rents and profits thereof after deducting from such rents and profits the payments mentioned in clause (c) and the interest on the principal money;

(e) he must not commit any act which is destructive or permanently injurious to the property;

(f) where he has insured the whole or any part of the property against loss or damage by fire, he must, in case of such loss or damage, apply any money which he actually receives under the policy or so much thereof as may be necessary, in reinstating the property, or, if the mortgagor so directs, in reduction or discharge of the mortgage-money;

(g) he must keep clear, full and accurate accounts of all sums received and spent by him as mortgagee, and, at any time during the continuance of the mortgage, give the mortgagor, at his request and cost, true copies of such accounts and of the vouchers by which they are supported;

(h) his receipts from the mortgaged property, or, where such property is personally occupied by him, a fair occupation-rent in respect thereof, shall, after deducting the expenses 1[properly incurred for the management of the property and the collection of rents and profits and the other expenses] mentioned in clauses (c) and (d), and interest thereon, be debited against him in reduction of the amount (if any) from time to time due to him on account of interest ²[***] and, so far as such receipts exceed any interest due, in reduction or discharge of the mortgage-money; the surplus, if any, shall be paid to the mortgagor;

(i) when the mortgagor tenders, or deposits in the manner hereinafter provided, the amount for the time being due on the mortgage, the mortgagee must, notwithstanding the provisions in the other clauses of this section, account for his ³[***] receipts from the mortgaged property from the date of the tender or from the earliest time when he could take such amount out of court, as the case may be 1[and shall not be entitled to deduct any amount therefrom on account of any expenses incurred after such date or time in connection with the mortgaged property].

Loss occasioned by his default.—If the mortgagee fails to perform any of the duties imposed upon him by this section, he may, when accounts are taken in pursuance of a decree made under this Chapter, be debited with the loss, if any, occasioned by such failure.

———————-

1. Ins. by Act 20 of 1929, sec. 40.

2. The words “on the mortgage-money” omitted by Act 20 of 1929, sec. 40.

3. The word “gross” omitted by Act 20 of 1929, sec. 40.

Section 77. Receipts in lieu of interest

Nothing in section 76, clauses (b), (d), (g) and (h), applies to cases where there is a contract between the mortgagee and the mortgagor that the receipts from the mortgaged property shall, so long as the mortgagee is in possession of the property, be taken in lieu of interest on the principal money, or in lieu of such interest and defined portions of the principal.

Section 78. Postponement of prior mortgagee

Where, through the fraud, misrepresentation or gross neglect of prior mortgagee, another person has been induced to advance money on the security of the mortgaged property, the prior mortgagee shall be postponed to the subsequent mortgagee.

Section 79. Mortgage to secure uncertain amount when maximum is expressed

If a mortgage made to secure future advances, the performance of an engagement or the balance of a running account, expresses the maximum to be secured thereby, a subsequent mortgage of the same property shall, if made with notice of the prior mortgage, be postponed to the prior mortgage in respect of all advances or debits not exceeding the maximum, though made or allowed with notice of the subsequent mortgage.

Illustration

A mortgages Sultanpur to his bankers, B & Co., to secure the balance of his account with them to the extent of Rs.10,000. A then mortgages Sultanpur to C, to secure Rs.10,000, C having notice of the mortgage to B & Co., and C gives notice to B & Co. of the second mortgage. At the date of the second mortgage, the balance due to B & Co. does not exceed Rs. 5,000. B & Co. subsequently advance to A sums making the balance of the account against him exceed the sum of Rs.10,000. B & Co. are entitled, to the extent of Rs.10,000, to priority over C.

Section 80. Tacking abolished

[Rep. by the Transfer of Property (Amendment) Act, 1929 (20 of 1929), sec. 41.]

Section 81. Marshalling, securities

¹[81. Marshalling, securities.—If the owner of two or more properties mortgages them to one person and then mortgages one or more of the properties to another person, the subsequent mortgagee is, in the absence of a contract to the contrary, entitled to have the prior mortgage-debt satisfied out of the property or properties not mortgaged to him, so far as the same will extend, but not so as to prejudice the rights of the prior mortgagee or of any other person who has for consideration acquired an interest in any of the properties.]

———————-

1. Subs. by Act 20 of 1929, sec. 42, for the original section.

Section 82. Contribution to mortgage-debt

¹[Where property subject to a mortgage belongs to two or more persons having distinct and separate rights of ownership therein, the different shares in or parts of such property owned by such persons are, in the absence of a contract to the contrary, liable to contribute rateably to the debt secured by the mortgage, and, for the purpose of determining the rate at which each such share or part shall contribute, the value thereof shall be deemed to be its value at the date of the mortgage after deduction of the amount of any other mortgage or charge to which it may have been subject on that date.]

Where, of two properties belonging to the same owner, one is mortgaged to secure one debt and then both are mortgaged to secure another debt, and the former debt is paid out of the former property, each property is, in the absence of a contract to the contrary, liable to contribute rateably to the latter debt after deducting the amount of the former debt from the value of the property out of which it has been paid.

Nothing in this section applies to a property liable under section 81 to the claim of the ²[subsequent] mortgagee.

———————-

1. Subs. by Act 20 of 1929, sec. 43, for the original paragraph.

2. Subs. by Act 20 of 1929, sec. 43, for “second”.

83. Power to deposit in Court money due on mortgage.—

At any time after the principal money ¹[payable in respect of any mortgage has become due] and before a suit for redemption of the mortgaged property is barred, the mortgagor, or any other person entitled to institute such suit, may deposit, in any court in which he might have instituted such suit, to the account of the mortgagee, the amount remaining due on the mortgage.

Right to money deposited by mortgagor.—The court shall thereupon cause written notice of the deposit to be served on the mortgagee, and the mortgagee may, on presenting a petition (verified in manner prescribed by law² for the verification of plaints) stating the amount then due on the mortgage, and his willingness to accept the money so deposited in full discharge of such amount, and on depositing in the same Court the mortgage-deed ³[and all documents in his possession or power relating to the mortgaged property], apply for and receive the money, and the mortgage-deed, ⁴[and all such other documents] so deposited shall be delivered to the mortgagor or such other person as aforesaid.

⁵[Where the mortgagee is in possession of the mortgaged property, the court shall, before paying to him the amount so deposited, direct him to deliver possession thereof to the mortgagor and at the cost of the mortgagor either to re-transfer the mortgaged property to the mortgagor or to such third person as the mortgagor may direct or to execute and (where the mortgage has been effected by a registered instrument) have registered an acknowledgement in writing that any right in derogation of the mortgagor’s interest transferred to the mortgagee has been extinguished.]

———————-

1. Subs. by Act 20 of 1929, sec. 44, for “has become payable”.

2. See the Code of Civil Procedure, 1908 (5 of 1908), Sch. I, Order VI, rule 15.

3. Subs. by Act 20 of 1929, sec. 44, for “if then in his possession or power”.

4. Ins. by Act 20 of 1929, sec. 44. 5. Ins. by Act 20 of 1929, sec. 44.

Section 84. Cessation of interest

When the mortgagor or such other person as aforesaid has tendered or deposited in Court under section 83 the amount remaining due on the mortgage, interest on the principal money shall cease from the date of the tender or ¹[in the case of a deposit, where no previous tender of such amount has been made] as soon as the mortgagor or such other person as aforesaid has done all that has to be done by him to enable the mortgagee to take such amount out of Court, ²[and the notice required by section 83 has been served on the mortgagee:

Provided that, where the mortgagor has deposited such amount without having made a previous tender thereof and has subsequently withdrawn the same or any part thereof, interest on the principal money shall be payable from the date of such withdrawal.]

Nothing in this section or in section 83 shall be deemed to deprive the mortgagee of his right to interest when there exists a contract that he shall be entitled to reasonable notice before payment or tender of the mortgage-money ³[and such notice has not been given before the making of the tender or deposit, as the case may be].

———————-

1. Ins. by Act 20 of 1929, sec. 45.

2. Subs. by Act 20 of 1929, sec. 45, for “as the case may be”.

3. Added by Act 20 of 1929, sec. 45.

Section 85. Parties to suits for foreclosure, sale and redemption

[Rep. by the Code of Civil Procedure, 1908 (5 of 1908), sec. 156 and Sch. V.]

Section 86.—[Rep. by the Code of Civil Procedure, 1908 (5 of 1908), sec. 156 and Sch. V.]

Section 87.—[Rep. by the Code of Civil Procedure, 1908 (5 of 1908), sec. 156 and Sch. V.]

Section 88.—[Rep. by the Code of Civil Procedure, 1908 (5 of 1908), sec. 156 and Sch. V.]

Section 89.—[Rep. by the Code of Civil Procedure, 1908 (5 of 1908), sec. 156 and Sch. V.]

Section 90.—[Rep. by the Code of Civil Procedure, 1908 (5 of 1908), sec. 156 and Sch. V.]

Section 91. Persons who may sue for redemption.

¹[91. Persons who may sue for redemption.—Besides the mortgagor, any of the following persons may redeem, or institute a suit for redemption of, the mortgaged property, namely:—

(a) any person (other than the mortgagee of the interest sought to be redeemed) who has any interest in, or charge upon, the property mortgaged or in or upon the right to redeem the same;

(b) any surety for the payment of the mortgage-debt or any part thereof; or

(c) any creditor of the mortgagor who has in a suit for the administration of his estate obtained a decree for sale of the mortgaged property.]

———————-

1. Subs. by Act 20 of 1929, sec. 46, for the original section.

Section 92. Subrogation

¹[92. Subrogation.—Any of the persons referred to in section 91 (other than the mortgagor) and any co-mortgagor shall, on redeeming property subject to the mortgage, have, so far as regards redemption, foreclosure or sale of such property, the same rights as the mortgagee whose mortgage he redeems may have against the mortgagor or any other mortgagee.

The right conferred by this section is called the right of subrogation, and a person acquiring the same is said to be subrogated to the rights of the mortgagee whose mortgage he redeems.

A person who has advanced to a mortgagor money with which the mortgage has been redeemed shall be subrogated to the rights of the mortgagee whose mortgage has been redeemed, if the mortgagor has by a registered instrument agreed that such persons shall be so subrogated.

Nothing in this section shall be deemed to confer a right of subrogation on any person unless the mortgage in respect of which the right is claimed has been redeemed in full.]

———————-

1. Ins. by Act 20 of 1929, sec. 47. Original sections 92 were repealed by Act 5 of 1908, sec. 156 and Sch.V.

Section 93. Prohibition of tacking

¹[93. Prohibition of tacking.—No mortgagee paying off a prior mortgage,whether with or without notice of an intermediate mortgage, shall thereby acquire any priority in respect of his original security; and, except in the case provided for by section 79, no mortgagee making a subsequent advance to the mortgagor, whether with or without notice of an intermediate mortgage, shall thereby acquire any priority in respect of his security for such subsequent advance.]

———————-

1. Ins. by Act 20 of 1929, sec. 47. Original sections 93 were repealed by Act 5 of 1908, sec. 156 and Sch.V.

Section 94. Rights of mesne mortgagee

¹[94. Rights of mesne mortgagee.—Where a property is mortgaged for successive debts to successive mortgagees, a mesne mortgagee has the same rights against mortgagees posterior to himself as he has against the mortgagor.]

———————-

1. Ins. by Act 20 of 1929, sec. 47. Original sections 94 were repealed by Act 5 of 1908, sec. 156 and Sch.V.

Section 95. Right of redeeming co-mortgagor to expenses

¹[95. Right of redeeming co-mortgagor to expenses.—Where one of several mortgagors redeems the mortgaged property, he shall, in enforcing his right of subrogation under section 92 against his co-mortgagors, be entitled to add to the mortgage money recoverable from them such proportion of the expenses properly incurred in such redemption as is attributable to their share in the property.]

———————-

1. Subs. by Act 20 of 1929, sec. 48, for the original section 95. Original section 96 was repealed by Act 5 of 1908, sec. 156 and Sch.V.

Section 96. Mortgage by deposit of title-deeds

¹[96. Mortgage by deposit of title-deeds.—The provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to a mortgage by deposit of title-deeds.]

———————-

1. Subs. by Act 20 of 1929, sec. 48, for the original section 95. Original section 96 was repealed by Act 5 of 1908, sec. 156 and Sch.V.

Section 97. Application of proceeds

¹[97. Application of proceeds.—[Rep. by the Code of Civil Procedure, 1908 (5 of 1908), sec. 156 and Sch. V.]

———————-

1. For the repealed provisions as re-enacted, see the Code of Civil Procedure, 1908 (5 of 1908), Sch. I, Order XXXIV, rules 12 and 13.

Section 98. Rights and liabilities of parties to anomalous mortgages

98. Rights and liabilities of parties to anomalous mortgages.—In the case of ¹[an anomalous mortgage] the rights and liabilities of the parties shall be determined by their contract as evidenced in the mortgage-deed, and, so far as such contract does not extend, by local usage.

———————-

1. Subs. by Act 20 of 1929, sec. 49, for “a mortgage, not being a simple mortgage, a mortgage by conditional sale, an usufructuary mortgage or an English mortgage or a combination of the first and third, or the second and third, of such forms”.

Section 99. Attachment of mortgaged property

¹[99. Attachment of mortgaged property.—[Rep. by the Code of Civil Procedure, 1908 (5 of 1908), sec.156 and Sch. V.]

———————-

1. For the repealed provisions as re-enacted, see the Code of Civil Procedure, 1908 (5 of 1908), Sch. I, Order XXXIV, rule 14.

Section 100. Charges

Where immoveable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained ¹[which apply to a simple mortgage shall, so far as may be, apply to such charge].

Nothing in this section applies to the charge of a trustee on the trust-property for expenses properly incurred in the execution of his trust, ²[and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge].

———————-

1. Subs. by Act 20 of 1929, sec. 50, for “as to a mortgagor shall, so far as may be, apply to the owner of such property, and the provisions of sections 81 and 82 shall, so far as may be, apply to the person having such charge”.

2. Added by Act 20 of 1929, sec. 50.

Section 101. No merger in case of subsequent encumbrance

¹[101. No merger in case of subsequent encumbrance.—Any mortgagee of, or person having a charge upon, immoveable property, or any transferee from such mortgagee or charge-holder, may purchase or otherwise acquire the rights in the property of the mortgagor or owner, as the case may be, without thereby causing the mortgage or charge to be merged as between himself and any subsequent mortgagee of, or person having a subsequent charge upon, the same property; and no such subsequent mortgagee or charge-holder shall be entitled to foreclose or sell such property without redeeming the prior mortgage or charge, or otherwise than subject thereto.]

———————-

1. Subs. by Act 20 of 1929, sec. 51, for the original section.

Section 102. Service or tender on or to agent

Where the person on or to whom any notice or tender is to be served or made under this Chapter does not reside in the district in which the mortgaged property or some part thereof is situate, service or tender on or to an agent holding a general power-of-attorney from such person or otherwise duly authorised to accept such service or tender shall be deemed sufficient.

¹[Where no person or agent on whom such notice should be served can be found or is known] to the person required to serve the notice, the latter person may apply to any court in which a suit might be brought for redemption of the mortgaged property, and such court shall direct in what manner such notice shall be served, and any notice served in compliance with such direction shall be deemed sufficient:

²[Provided that, in the case of a notice required by section 83, in the case of a deposit, the application shall be made to the court in which the deposit has been made.]

³[Where no person or agent to whom such tender should be made can be found or is known] to the person desiring to make the tender, the latter person may deposit ⁴[in any Court in which a suit might be brought for redemption of the mortgaged property] the amount sought to be tendered, and such deposit shall have the effect of a tender of such amount.

———————-

1. Subs. by Act 20 of 1929, sec. 52, for “Where the person or agent on whom such notice should be served cannot be found in the said district, or is unknown”.

2. Ins. by Act 20 of 1929, sec. 52.

3. Subs. by Act 20 of 1929, sec. 52, for “Where the person or agent to whom such tender should be made cannot be found within the said district or is unknown”.

4. Subs. by Act 20 of 1929, sec. 52, for “in such Court as last aforesaid”.

Section 103. Notice, etc., to or by person incompetent to contract

Where, under the provisions of this Chapter, a notice is to be served on or by, or a tender or deposit made or accepted or taken out of court by, any person incompetent to contract, such notice may be served ¹[on or by] or tender or deposit made, accepted or taken, by the legal curator of the property of such person; but where there is no such curator, and it is requisite or desirable in the interest of such person that a notice should be served or a tender or deposit made under the provisions of this Chapter, application may be made to any court in which a suit might be brought for the redemption of the mortgage to appoint a guardian ad litem for the purpose of serving or receiving service of such notice, or making or accepting such tender, or making or taking out of court such deposit, and for the performance of all consequential acts which could or ought to be done by such person if he were competent to contract²; and the provisions of ³[order XXXII in the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908)] shall, so far as may be, apply to such application and to parties thereto and to the guardian appointed thereunder.

———————-

1. Ins. by Act 20 of 1929, sec. 53.

2. As to persons competent to contract, see sections 11 and 12 of the Indian Contract Act, 1872 (9 of 1872).

3. Subs. by Act 20 of 1929, sec. 53, for “Chapter XXXI of the Code of Civil Procedure”.

Section 104. Power to make rules

The High Court may, from time to time, make rules consistent with this Act for carrying out, in itself and in the Courts of Civil Judicature subject to its superintendence, the provisions contained in this Chapter.

Section 105. Lease defined

A lease of immoveable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

Lessor, lessee, premium and rent defined.—The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.

Section 106. Duration of certain leases in absence of written contract or local usage

¹[106. Duration of certain leases in absence of written contract or local usage.—(1) In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months’ notice; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days’ notice.

(2) Notwithstanding anything contained in any other law for the time being in force, the period mentioned in sub-section (1) shall commence from the date of receipt of notice.

(3) A notice under sub-section (1) shall not be deemed to be invalid merely because the period mentioned therein falls short of the period specified under that sub-section, where a suit or proceeding is filed after the expiry of the period mentioned in that sub-section.

(4) Every notice under sub-section (1) must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property.]

———————-

1. Subs. by Act 3 of 2003, sec. 2, for section 106 (w.e.f. 31-12-2002).

Section 106, before substitution, stood as under: “106. Duration of certain leases in absence of written contract or local usage.—

In the absence of a contract or local law or usage to the contrary, a lease of immoveable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months’ notice expiring with the end of a year of the tenancy; and a lease of immoveable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days’ notice expiring with the end of a month of the tenancy.

Every notice under this section must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property”.

Section 107. Leases how made

¹107. Leases how made.—A lease of immoveable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument.

²[All other leases of immoveable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.

³[Where a lease of immoveable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee:]

Provided that the State Government may⁴[***] from time to time, by notification in the Official Gazette, direct that leases of immoveable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.]

———————

1. As to limitation to the territorial operation of section 107, see section 1, supra, section 107 extends to every cantonment—see section 287 of the Cantonments Act, 1924 (2 of 1924).

2. Subs. by Act 6 of 1904, sec. 5, for the original paragraph.

3. Ins. by Act 20 of 1929, sec. 55.

4. The words “with the previous sanction of the Governor General in Council” omitted by the A.O. 1937.

Section 108. Rights and liabilities of lessor and lessee

In the absence of a contract or local usage to the contrary, the lessor and the lessee of immoveable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased:—

(A) Rights and Liabilities of the Lessor

(a) The lessor is bound to disclose to the lessee any material defect in the property, with reference to its intended use, of which the former is and the latter is not aware, and which the latter could not with ordinary care discover;

(b) the lessor is bound on the lessee’s request to put him in possession of the property;

(c) the lessor shall be deemed to contract with the lessee that, if the latter pays the rent reserved by the lease and performs the contracts binding on the lessee, he may hold the property during the time limited by the lease without interruption.

The benefit of such contract shall be annexed to and go with the lessee’s interest as such, and may be enforced by every person in whom that interest is for the whole or any part thereof from time to time vested.

(B) Rights and Liabilities of the Lessee

(d) If during the continuance of the lease any accession is made to the property, such accession (subject to the law relating to alluvion for the time being in force) shall be deemed to be comprised in the lease;

(e) if by fire, tempest or flood, or violence of an army or of a mob, or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void:

Provided that, if the injury be occasioned by the wrongful act or default of the lessee, he shall not be entitled to avail himself of the benefit of this provision;

(f) if the lessor neglects to make, within a reasonable time after notice, any repairs which he is bound to make to the property, the lessee may make the same himself, and deduct the expense of such repairs with interest from the rent, or otherwise recover it from the lessor;

(g) if the lessor neglects to make any payment which he is bound to make, and which, if not made by him, is recoverable from the lessee or against the property, the lessee may make such payment himself, and deduct it with interest from the rent, or otherwise recover it from the lessor;

(h) the lessee may ¹[even after the determination of the lease] remove, at any time ²[whilst he is in possession of the property leased but not afterwards] all things which he has attached to the earth; provided he leaves the property in the state in which he received it;

(i) when a lease of uncertain duration determines by any means except the fault of the lessee, he or his legal representative is entitled to all the crops planted or sown by the lessee and growing upon the property when the lease determines, and to free ingress and egress to gather and carry them;

(j) the lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease;

Nothing in this clause shall be deemed to authorise a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee;

(k) the lessee is bound to disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take, of which the lessee is, and the lessor is not, aware, and which materially increases the value of such interest;

(l) the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf;

(m) the lessee is bound to keep, and on the termination of the lease to restore, the property in as good condition as it was in at the time when he was put in possession, subject only to the changes caused by reasonable wear and tear or irresistible force, and to allow the lessor and his agents, at all reasonable times during the term, to enter upon the property and inspect the condition thereof and give or leave notice of any defect in such condition; and, when such defect has been caused by any act or default on the part of the lessee, his servants or agents, he is bound to make it good within three months after such notice has been given or left;

(n) if the lessee becomes aware of any proceeding to recover the property or any part thereof, or of any encroachment made upon, or any interference with, the lessor’s rights concerning such property, he is bound to give, with reasonable diligence, notice thereof to the lessor;

(o) the lessee may use the property and its products (if any) as a person of ordinary prudence would use them if they were his own; but he must not use, or permit another to use, the property for a purpose other than that for which it was leased, or fell ³[or sell] timber, pull down or damage buildings ³[belonging to the lessor, or] work mines or quarries not open when the lease was granted, or commit any other act which is destructive or permanently injurious thereto;

(p) he must not, without the lessor’s consent, erect on the property any permanent structure, except for agricultural purposes;

(q) on the determination of the lease, the lessee is bound to put the lessor into possession of the property.

———————-

1. Ins. by Act 20 of 1929, sec. 56.

2. Subs. by Act 20 of 1929, sec. 56, for “during the continuance of the lease”.

3. Ins. by Act 20 of 1929, sec. 56.

Section 109. Rights of lessor’s transferee

If the lessor transfers the property leased, or any part thereof, or any part of his interest therein, the transferee, in the absence of a contract to the contrary, shall possess all the rights, and, if the lessee so elects, be subject to all the liabilities of the lessor as to the property or part transferred so long as he is the owner of it; but the lessor shall not, by reason only of such transfer cease to be subject to any of the liabilities imposed upon him by the lease, unless the lessee elects to treat the transferee as the person liable to him:

Provided that the transferee is not entitled to arrears of rent due before the transfer, and that, if the lessee, not having reason to believe that such transfer has been made, pays rent to the lessor, the lessee shall not be liable to pay such rent over again to the transferee.

The lessor, the transferee and the lessee may determine what proportion of the premium or rent reserved by the lease is payable in respect of the part so transferred, and, in case they disagree, such determination may be made by any Court having jurisdiction to entertain a suit for the possession of the property leased.

Section 110. Exclusion of day on which term commences

Where the time limited by a lease of immoveable property is expressed as commencing from a particular day, in computing that time such day shall be excluded. Where no day of commencement is named, the time so limited begins from the making of the lease.

Duration of lease for a year.—Where the time so limited is a year or a number of years, in the absence of an express agreement to the contrary, the lease shall last during the whole anniversary of the day from which such time commences.

Option to determine lease.—Where the time so limited is expressed to be terminable before its expiration, and the lease omits to mention at whose option it is so terminable, the lessee, and not the lessor, shall have such option.

Section 111. Determination of lease

A lease of immoveable property determines—

(a) by efflux of the time limited thereby;

(b) where such time is limited conditionally on the happening of some

event—by the happening of such event;

(c) where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to, the happening of any event—by the happening of such event;

(d) in case the interests of the lessee and the lessor in the whole of the property become vested at the same time in one person in the same right;

(e) by express surrender; that is to say, in case the lessee yields up his interest under the lease to the lessor, by mutual agreement between them;

(f) by implied surrender;

(g) by forfeiture; that is to say, (1) in case the lessee breaks an express condition which provides that, on breach thereof, the lessor may re-enter ¹[* * *]; or (2) in case the lessee renounces his character as such by setting up a title in a third person or by claiming title in himself; ²[or (3) the lessee is adjudicated an insolvent and the lease provides that the lessor may re-enter on the happening of such event]; and in³[any of these cases] the lessor or his transferee⁴[gives notice in writing to the lessee of] his intention to determine the lease;

(h) on the expiration of a notice to determine the lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other.

Illustration to clause (f)

A lessee accepts from his lessor a new lease of the property leased, to take effect during the continuance of the existing lease. This is an implied surrender of the former lease, and such lease determines thereupon.

———————-

1. The words “or the lease shall become void” omitted by Act 20 of 1929, sec. 57.

2. Ins. by Act 20 of 1929, sec. 57.

3. Subs. by Act 20 of 1929, sec. 57, for “either case”.

4. Subs. by Act 20 of 1929, sec. 57, for “does some act showing”.

Section 112. Waiver of forfeiture

A forfeiture under section 111, clause (g) is waived by acceptance of rent which has become due since the forfeiture, or by distress for such rent, or by any other act on the part of the lessor showing an intention to treat the lease as subsisting:

Provided that the lessor is aware that the forfeiture has been incurred:

Provided also that, where rent is accepted after the institution of a suit to eject the lessee on the ground of forfeiture, such acceptance is not a waiver.

Section 113. Waiver of notice to quit

A notice given under section 111, clause (h), is waived, with the express or implied consent of the person to whom it is given, by any act on the part of the person giving it showing an intention to treat the lease as subsisting.

Illustrations

(a) A, the lessor, gives B, the lessee, notice to quit the property leased. The notice expires. B tenders and A accepts, rent which has become due in respect of the property since the expiration of the notice. The notice is waived.

(b) A, the lessor, gives B, the lessee; notice to quit the property leased. The notice expires, and B remains in possession. A gives to B as lessee a second notice to quit. The first notice is waived.

Section 114. Relief against forfeiture for non-payment of rent

Where a lease of immoveable property has determined by forfeiture for non-payment of rent, and the lessor sues to eject the lessee, if, at the hearing of the suit, the lessee pays or tenders to the lessor the rent in arrear, together with interest thereon and his full costs of the suit, or gives such security as the Court thinks sufficient for making such payment within fifteen days, the Court may, in lieu of making a decree for ejectment, pass an order relieving the lessee against the forfeiture; and thereupon the lessee shall hold the property leased as if the forfeiture had not occurred.

Section 114A. Relief against forfeiture in certain other cases

¹[114A. Relief against forfeiture in certain other cases.—Where a lease of immoveable property has determined by forfeiture for a breach of an express condition which provides that on breach thereof the lessor may re-enter, no suit for ejectment shall lie unless and until the lessor has served on the lessee a notice in writing—

(a) specifying the particular breach complained of; and

(b) if the breach is capable of remedy, requiring the lessee to remedy the breach, and the lessee fails, within a reasonable time from the date of the service of the notice, to remedy the breach, if it is capable of remedy.

Nothing in this section shall apply to an express condition against the assigning, under-letting, parting with the possession, or disposing, of the property leased, or to an express condition relating to forfeiture in case of non-payment of rent.]

———————-

1. Ins. by Act 20 of 1929, sec. 58.

Section 115. Effect of surrender and forfeiture on under-leases

The surrender, express or implied, of a lease of immoveable property does not prejudice an under-lease of the property or any part thereof previously granted by the lessee, on terms and conditions substantially the same (except as regards the amount of rent) as those of the original lease; but, unless the surrender is made for the purpose of obtaining a new lease, the rent payable by, and the contracts binding on, the under-lessee shall be respectively payable to and enforceable by the lessor.

The forfeiture of such a lease annuls all such under-leases, except where such forfeiture has been procured by the lessor in fraud of the under-lessees, or relief against the forfeiture is granted under section 114.

Section 116. Effect of holding over

If a lessee or under-lessee of property remains in possession thereof after the determination of the lease granted to the lessee, and the lessor or his legal representative accepts rent from the lessee or under-lessee, or otherwise assents to his continuing in possession, the lease is, in the absence of an agreement to the contrary, renewed from year to year, or from month to month, according to the purpose for which the property is leased, as specified in section 106.

Illustrations

(a) A lets a house to B for five years. B underlets the house to C at a monthly rent of Rs. 100. The five years expire, but C continues in possession of the house and pays the rent to A. C’s lease is renewed from month to month.

(b) A lets a farm to B for the life of C. C dies, but B continues in possession with A’s assent. B’s lease is renewed from year to year

Section 117. Exemption of leases for agricultural purposes

None of the provisions of this Chapter apply to leases for agricultural purposes, except in so far as the State Government ¹[***] may by notification published in the Official Gazette declare all or any of such provisions to be so applicable ²[in the case of all or any of such leases], together with, or subject to, those of the local law, if any, for the time being in force.

Such notification shall not take effect until the expiry of six months from the date of its publication.

———————-

1. The words “with the previous sanction of the Governor General in Council” omitted by Act 38 of 1920, sec. 2 and Sch. I. 2. Ins. by Act 6 of 1904, sec. 6.

Section 118. “Exchange” defined

When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an “exchange”.

A transfer of property in completion of an exchange can be made only in manner provided for the transfer of such property by sale.

Section 119. Right of party deprived of thing received in exchange

¹[119. Right of party deprived of thing received in exchange.—If any party to an exchange or any person claiming through or under such party is by reason of any defect in the title of the other party deprived of the thing or any part of the thing received by him in exchange, then, unless a contrary intention appears from the terms of the exchange, such other party is liable to him or any person claiming through or under him for loss caused thereby, or at the option of the person so deprived, for the return of the thing transferred, if still in the possession of such other party or his legal representative or a transferee from him without consideration.]

———————-

1. Subs. by Act 20 of 1929, sec. 59, for the original section.

Section 120. Rights and liabilities of parties

Save as otherwise provided in this Chapter, each party has the rights and is subject to the liabilities of a seller as to that which he gives, and has the rights and is subject to the liabilities of a buyer as to that which he takes.

Section 121. Exchange of money

On an exchange of money, each party thereby warrants the genuineness of the money given by him.

Section 122. “Gift” defined

“Gift” is the transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.

Acceptance when to be made.—Such acceptance must be made during the lifetime of the donor and while he is still capable of giving.

If the donee dies before acceptance, the gift is void.

Section 123. Transfer how effected

¹123. Transfer how effected.—For the purpose of making a gift of immoveable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses.

For the purpose of making a gift of moveable property, the transfer may be effected either by a registered instrument signed as aforesaid or by delivery.

Such delivery may be made in the same way as goods sold may be delivered.

———————-

1. As to limitation to the territorial operation of section 123, see section 1, supra, section 123 extends to every cantonment—see section 287 of the Cantonments Act, 1924 (2 of 1924).

Section 124. Gift of existing and future property

A gift comprising both existing and future property is void as to the latter.

Section 125. Gift to several of whom one does not accept

A gift of a thing to two or more donees, of whom one does not accept it, is void as to the interest which he would have taken had he accepted

Section 126. When gift may be suspended or revoked

The donor and donee may agree that on the happening of any specified event which does not depend on the will of the donor a gift shall be suspended or revoked; but a gift which the parties agree shall be revocable wholly or in part, at the mere will of the donor, is void wholly or in part, as the case may be.

A gift may also be revoked in any of the cases (save want or failure of consideration) in which, if it were a contract, it might be rescinded.

Save as aforesaid, a gift cannot be revoked.

Nothing contained in this section shall be deemed to affect the rights of transferees for consideration without notice.

Illustrations

(a) A gives a field to B, reserving to himself, with B’s assent, the right to take back the field in case B and his descendants die before A. B dies without descendants in A’s lifetime. A may take back the field.

(b) A gives a lakh of rupees to B, reserving to himself, with B’s assent, the right to take back at pleasure Rs. 10,000 out of the lakh. The gift holds goods as to Rs. 90,000, but is void as to Rs. 10,000, which continue to belong to A.

Section 127. Onerous gifts

Where a gift is in the form of a single transfer to the same person of several things of which one is, and the others are not burdened by an obligation, the donee can take nothing by the gift unless he accepts it fully.

Where a gift is in the form of two or more separate and independent transfers to the same person of several things, the doneee is at liberty to accept one of them and refuse the others, although the former may be beneficial and the latter onerous.

Onerous gift to disqualified person.—A donee not competent to contract and accepting property burdened by any obligation is not bound by his acceptance. But if, after becoming competent to contract and being aware of the obligation, he retains the property given, he becomes so bound.

Illustrations

(a) A shares in X, prosperous joint stock company, and also shares in Y, a joint stock company in difficulties. Heavy calls are expected in respect of the shares in Y. A gives B all his shares in joint stock companies. B refuses to accept the shares in Y. He cannot take the shares in X.

(b) A, having a lease for a term of years of a house at a rent which he and his representatives are bound to pay during the term, and which is more than the house can be let for, gives to B the lease, and also, as a separate and independent transaction, a sum of money. B refuses to accept the lease. He does not by this refusal forfeit the money.

Section 128. Universal donee

Subject to the provisions of section 127, where a gift consists of the donor’s whole property, the donee is personally liable for all the debts due by ¹[and liabilities of] the donor at the time of the gift to the extent of the property comprised therein.

———————-

1. Ins. by Act 20 of 1929, sec. 60.

Section 129. Saving of donations mortis causa and Muhammadan Law

129. Saving of donations mortis causa and Muhammadan Law.—Nothing in this Chapter relates to gifts of moveable property made in contemplation of death, or shall be deemed to affect any rule of Muhammadan law ¹[***].

———————-

1. The words and figures “or, save as provided by section 123, any rule of Hindu or Buddhist law” omitted by Act 20 of 1929, sec. 61.

Section 130. Transfer of actionable claim

(1) The transfer of an actionable claim ¹[whether with or without consideration] shall be effected only by the execution of an instrument in writing signed by the transferor or his duly authorised agent, ²[***] shall be complete and effectual upon the execution of such instruments, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice of the transfer as is hereinafter provided be given or not:

Provided that every dealing with the debt or other actionable claim by the debtor or other person from or against whom the transferor would, but for such instrument of transfer as aforesaid, have been entitled to recover or enforce such debt or other actionable claim, shall (save where the debtor or other person is a party to the transfer or has received express notice thereof as hereinafter provided) be valid as against such transfer.

(2) The transferee of an actionable claim may, upon the execution of such instrument of transfer as aforesaid, sue or institute proceedings for the same in his own name without obtaining the transferor’s consent to such suit or proceeding and without making him a party thereto.

Exception.—Nothing in this section applies to the transfer of a marine or fire policy of insurance ³[or affects the provisions of section 38 of the Insurance Act, 1938 (4 of 1938)].

Illustrations

(i) A owes money to B, who transfers the debt to C. B then demands the debt from A, who, not having received notice of the transfer, as prescribed in section 131, pays B. The payment is valid, and C cannot sue A for the debt.

(ii) A effects a policy on his own life with an Insurance Company and assigns it to a Bank for securing the payment of an existing or future debt. If A dies, the Bank is entitled to receive the amount of the policy and to sue on it without the concurrence of A’s executor, subject to the proviso in sub-section (1) of section 130 and to provisions of section 132.

———————-

1. Ins. by Act 20 of 1929, sec. 62.

2. The words and figures “and notwithstanding anything contained in section 123” ins. by Act 38 of 1925, sec. 2 and omitted by Act 20 of 1929, sec. 62.

3. Added by Act 4 of 1938, sec. 121 (w.e.f. 1-7-1939).

Section 130A. Transfer of policy of marine insurance

¹[130A. Transfer of policy of marine insurance.—[Rep. by the Marine Insurance Act, 1963 (11 of 1963), sec. 92 (w.e.f. 1-8-1963)].]

———————-

1. Ins. by Act 6 of 1944, sec. 2.

Section 131. Notice to be in writing, signed

Every notice of transfer of an actionable claim shall be in writing, signed by the transferor or his agent duly authorised in this behalf, or, in case the transferor refuses to sign, by the transferee or his agent, and shall state the name and address of the transferee.

Section 132. Liability of transferee of actionable claim

The transferee of an actionable claim shall take it subject to all the liabilities and equities and to which the transferor was subject in respect thereof at the date of the transfer.

Illustrations

(i) A transfers to C a debt due to him by B, A being then indebted to B. C sues B for the debt due by B to A. In such suit B is entitled to set off the debt due by A to him; although C was unaware of it at the date of such transfer.

(ii) A executed a bond in favour of B under circumstances entitling the former to have it delivered up and cancelled. B assigns the bond to C for value and without notice of such circumstances. C cannot enforce the bond against A.

Section 133. Warranty of solvency of debtor.

Where the transferor of a debt warrants the solvency of the debtor, the warranty, in the absence of a contract to the contrary, applies only to his solvency at the time of the transfer, and is limited, where the transfer is made for consideration, to the amount or value of such consideration.

Section 134. Mortgaged debt

Where a debt is transferred for the purpose of securing an existing or future debt, the debt so transferred, if received by the transferor or recovered by the transferee, is applicable, first, in payment of the costs of such recovery; secondly, in or towards satisfaction of the amount for the time being secured by the transfer; and the residue, if any, belongs to the transferor or other person entitled to receive the same.

Section 135. Assignment of rights under policy of insurance against fire

¹[135. Assignment of rights under policy of insurance against fire.—Every assignee by endorsement or other writing, of a policy of insurance against fire, in whom the property in the subject insured shall be absolutely vested at the date of the assignment, shall have transferred and vested in him all rights of suit as if the contract contained in the policy has been made with himself.]

———————-

1. Subs. by Act 6 of 1944, sec. 3, for the original section.

135A. Assignment of rights under policy of marine insurance.—

¹[135A. Assignment of rights under policy of marine insurance.—[Rep. by the Marine Insurance Act, 1963 (11 of 1963), sec.92, (w.e.f. 1-8-1963)].]

———————-

1. Section 135A ins. by Act 6 of 1944, sec. 4.

Section 136. Incapacity of officers connected with Courts of Justice

No judge, legal practitioner or officer connected with any Court of Justice shall buy or traffic in, or stipulate for, or agree to receive any share of, or interest in, any actionable claim, and no Court of Justice shall enforce, at his instance, or at the instance of any person claiming by or through him, any actionable claim so dealt with by him as aforesaid.

Section 137. Saving of negotiable instruments, etc.

Nothing in the foregoing sections of this Chapter applies to stocks, shares or debentures, or to instruments which are for the time being, by law or custom, negotiable, or to any mercantile document of title to goods.

Explanation.—The expression “mercantile document of title to goods” includes a bill of lading, dock-warrant, warehouse-keeper’s certificate, railway receipt, warrant or order for the delivery of goods, and any other document used in the ordinary course of business as proof of the possession or control of goods, or authorising or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented.

THE SCHEDULE

(A) STATUTES

(B) ACT OF THE GOVERNOR GENERAL IN COUNCIL

(C)  REGULATIONS

Indian Contract Act

November 30, 2014

Preliminary

1. Short title

This Act may be called the Indian Contract Act, 1872.

Extent, Commencement. -It extends to the whole of India ¹[except the State of Jammu and Kashmir]; and it shall come into force on the first day of September 1872.

Saving.- ²[* * *] Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract, not inconsistent with the provisions of this Act.

1. Subs. by Act 3 of 1951, sec. 3 and Sch., for “except Part B States”.

2. The words “The enactments mentioned in the Schedule hereto are repealed to the extent specified in the third column thereof, but” rep. by Act 10 of 1914, sec. 3 and Sch. 11.

2. Interpretation

In this Act the following words and expressions are used in the following senses, unless contrary intention appears from the context:

(a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal;

(b) When a person to whom the proposal is made, signifies his assent thereto, the proposal is said to be accepted. A proposal, when a accepted, becomes a promise;

(c) The person making the proposal is called the “promisor”, and the person accepting the proposal is called “promisee”,

(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;

(e) Every promise and every set of promises, forming the consideration for each other, is an agreement;

(f) Promises which form the consideration or part of the consideration for each other, are called reciprocal promises;

(g) An agreement not enforceable by law is said to be void;

(h) An agreement enforceable by law is a contract;

(i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract;

(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

At the desire of the promisor

Suit would lie for the recovery of a promised subscription where on the faith of the promisee, the promiser entered into a contract with a contractor; Kedarnath Bhattacharji v. Gorie Mohomed, (1886) ILR 14 Cal 64.

Consideration and motive

A promise founded on motive of generosity, prudence and natural duty is a promise without consideration; Abdul Aziz v. Masum Ali, (1914) ALJR 36 All 268.

Contract

A contract comes into existence only when all the terms and conditions have been finalised. If the facts of a particular case show that execution of a written contract was a condition precedent for coming into force of the contract between the parties, then it cannot be said that any concluded contract in absence of a written contract being executed has come into force between the parties; J.K. Industries Ltd. v. Mohan Investments and Properties Pvt. Ltd., AIR 1992 Del 305.

Proposal: Offer and statement of intention

The proposal when accepted gives rise to an agreement. It is at this stage that the agreement is reduced into writing and a formal document is executed on which parties affix their signature or thumb impression so as to be bound by the terms of the agreement set out in that document. Such an agreement has to be lawful; Tarsem Singh v. Sukhmider Singh, AIR 1998 SC 1400.

Valid consideration

The consideration should be something which not only the parties regard but the law can also regard as having some value. It must be real and not illusory, whether adequate or not; Chidambara v. P.S. Renga, AIR 1965 SC 193: (1966) 1 SCR 168.

When Strangers may not sue – the general rule

A person not a party to a contract can sue on it; Venkata Chinnaya Rau Garu v. Venkataramaya Garu, 1881 ILR 4 Mad 137.

Creating legal relations

If there being no agreement, there was no breach of contract committed by the respondent and also that since there was no breach of contract, the petitioner cannot retain or forfeit the earnest money deposited by the respondent by way of penalty; State of Tripura v. Bhowmik & Co., AIR 2004 Gau 21.

Chapter I – Of the Communication, Acceptance and Revocation of Proposals

3. Communication, acceptance and revocation of proposals.

The communication of proposals, the acceptance of proposals, and the revocation of proposals and acceptance, respectively, are deemed to be made by any act or omission of the party proposing, accepting or revoking, by which he intends to communicated such proposal, acceptance or revocation, or which has the effect of communicating it.

Communication of acceptance

An offer is accepted when the acceptance is communicated. The communication must be made to the offeror and a communication of acceptance made to a third person creates no contract; Felthouse v. Bindely, (1862) 6 LT 157.

Exposure of goods: offer or not

The Exposure of goods by a shopkeeper does not amount to an offer to sell. On picking the goods, it is an offer by the customer to buy, and sale is not effected until the buyer’s offer price is accepted by the shopkeeper; Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd., (1952) 2 QB 795.

Offer to the whole world

Though an offer may be made to the whole world, a contract can arise only by acceptance of the offer. Hence knowledge of the terms of the offer is essential for acceptance. Thus where a person sent his servant in search of his missing boy and subsequently offered a reward to any one who would find the boy, the servant, on finding the boy, could not claim the reward, as his search for the boy could not be regarded as a consideration for the promise of reward; Lalman Shukul v. Gauri Dat, (1913) 11 AQLJ 489.

Unaccepted offer creates no right or obligation

A mere making of an offer does not form part of the cause of action for damages for breach of contract which has resulted from the acceptance of the offer. Ordinarily it is the acceptance of the offer and intimation of that acceptance which results in a contract; Bhagwan Das Goverdhan Das Kedia v. Girdhari Lal & Co., AIR 1966 SC 543.

4. Communication when complete

The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.

The communication of an acceptance is complete,—

as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the acceptor;

as against the acceptor, when it comes to the knowledge of the proposer.

The communication of a revocation is complete,—

as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge.

Illustrations

(a) A proposes, by letter, to sell a house to B at a certain price.

The communication of the proposal is complete when B receives the letter.

(b) B accepts A’s proposal by a letter sent by post.

The communication of the acceptance is complete,

as against A when the letter is posted;

as against B, when the letter is received by A.

(c) A revokes his proposal by telegram.

The revocation is complete as against A when the telegram is despatched.

It is complete as against B when B receives it.

B revokes his acceptance by telegram. B’s revocation is complete as against B when the telegram is despatched, and as against A when it reaches him.

Communication of proposal and acceptance

The advertisement of the Corporation for tenders was an ‘invitation to make an offer’. The tenders when submitted to the Corporation were ‘offers’ or ‘proposals’ in terms of section 4 of the Act and the ‘communication’ of ‘proposal’ or ‘offers’ was complete when received by the Corporation. In terms of section 4 of the Act, the ‘acceptance’ was not complete as it was never made, and never put into transmission. The revocation within the meaning of section 4 was complete as it was received and within the knowledge of the Corporation. The offers on tenders were revoked before it was accepted. The contract never saw the light of the day; Shyam Biri Works Pvt. Ltd. v. U.P. Forest Corporation, AIR 1990 All 205.

Where an offer is made by a method of instantaneous communication like telex, the contract is only complete when the acceptance is received by the offerer, and the contract is made at the place where the acceptance is received; Entores Ltd. v. Miles Far East Corporation, (1955) 2 All ER 493: (1955) 2 QB 327: (1955) 3 WLR 48.

Contract by correspondence: Antecedents and subsequent negotiations

The communication of acceptance of the highest bid is necessary for completed contract; Haridwar Singh v. Begum Sumbrui, AIR 1972 SC 1942.

Dispensing with notice of acceptance

A notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so: there can be no doubt that where a person in an offer made by him to another person expressly or impliedly, intimates a particular mode of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such offer is made to follow the indicated mode of acceptance; and if the person making the offer expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification; Carlill v. Carbolic Smoke Ball Co., (1893) 1 QBD 256.

5. Revocation of Proposals and acceptance

A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but no afterwards.

Illustrations

A proposes, by a letter sent by post, to sell his house to B.

B accepts the proposal by a letter sent by post.

A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.

B may revoke his acceptance at any time before or at the moment when the letter communicating it reaches A, but not afterwards.

Revocation

Where an offer gives the offerer an option to accept within a fixed period, it may be withdrawn even before the expiry of that period unless there is some consideration for keeping it open; Airfred Schonlank v. Muthurayna Chetty, (1892) 2 Mad LJ 57.

6. Revocation how made

A proposal is revoked -

(1) by the communication of notice of revocation by the proposer to the other party;

(2) by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;

(3) by the failure of the acceptor to fulfil a condition precedent to acceptance; or

(4) by the death or insanity of the proposer, if the fact of the death or insanity comes to the knowledge of theacceptor before acceptance.

7. Acceptance must be absolute

In order to convert a proposal into a promise the acceptance must -

(1) be absolute and unqualified.

(2) be expressed in some usual and reasonable manner, unless the proposal prescribes the manner in which it is to be accepted. If the proposal prescribes a manner in which it is to be accepted; and the acceptance is not made in such manner, the proposer may, within a reasonable time after the acceptance is communicated to him, insist that his proposal shall be accepted in the prescribed manner, and not otherwise; but; if he fails to do so, he accepts the acceptance.

Acceptance must be unqualified and without condition

The cardinal principle in the light of section 7 of the Act is that the offer and acceptance of an offer must be absolute without giving any room of doubt. It is well settled that the offer and acceptance must be based or founded on three components—Certainty, commitment and communication. If any one of three components is lacking either in the offer or in the acceptance there cannot be a valid contract; Kilburn Engineering Ltd. v. Oil and Natural Gas Corporation Ltd., AIR 2000 Bom 405.

When the acceptor puts in a new condition while accepting, the contract already signed by the proposer is not complete until the proposer accepted the condition; Haridwar Singh v. Begum Sumbrui, AIR 1972 SC 1942.

An acceptance with a variation is no acceptance; it is simply a counter proposal which must be accepted by the original promisor before a contract is made; Haji Mohd. Haji Jiva v. E. Spinner, (1900) 24 Bom 510.

No second acceptance

The rule of law is that a mere offer to sell property, which can be withdrawn at any time, and which is made dependant on the acceptance of the person to whom it is made, is a mere nudum pactum. The person to whom, the offer has been made, cannot, by acceptance make a binding contract after he knows that the person who has made the offer has sold the property to someone else; Dickinson v. Dodds, 1876 Ch. D. 463.

8. Acceptance by performing conditions, or receiving consideration

Performance of the conditions of proposal, for the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.

Performance by act: Interference of acceptance

The defendant company advertised that they would pay pound 1,000 to any person who used their carbolic smoke ball for a certain time any yet contracted influenza. The plaintiff purchased the medicine, used it for the stated time but contracted the disease. It was held that the contract was accepted by being acted upon, that the defendant had not stipulated for any communication of acceptance and therefore the plaintiff was entitled to recover the amount; Carlill v. Carbolic Smoke Ball Co., (1893) 1 QBD 256.

9. Promise, express and implied

In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express. In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.

Implied terms

A contract can be implied and it is very clear from section 9 of the Contract Act, but it is a fundamental principle of law that the court should not make a contract for the parties. A contract implied in fact requires meeting of minds. The court should refuse to read an implied term into a contract which is silent on the point or did not clearly indicate the nature of the term. However, when the stipulations are clear and in contemplation of the parties or which necessarily arise out of the contract between the parties, they will be implied; State of Maharashtra v. Saifuddin Mujjaffarali Saifi, AIR 1994 Bom 48.

Chapter II – Of contracts, violable, contracts and void agreements

10. What agreements are contracts

All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

Nothing herein contained shall affect any law in force in ¹India, and not hereby expressly repealed, by which any contract is required to be made in writing ²or in the presence of witnesses, or any law relating to the registration of documents.

Breach of statutory provision

Railway invited tenders for the supply of jaggery to the railway grain shops. The respondent submitted his tender for the supply of 14,000 imperial maunds of cane jaggery during the month of February and March and the tender was accepted by the letter. So far, the offer of a supply of a definite quantity of jaggery during a specified period at a certain rate and the acceptance of the offer would constitute an agreement, but would fall short of amounting to a legal contract inasmuch as the date of delivery of the jaggery was not specified. Once the order is placed for such supply on such dates, that order amounts to a binding contract making it incumbent on the respondent to supply jaggery in accordance with the terms of the order and also making it incumbent on the Dy. General Manager to accept the jaggery delivered in pursuance of that order; Union of India v. Maddala Thathaiah, (1964) 3 SCR 774.

What agreements are Contract

If entering into a contract containing prescribed terms and conditions is a must under the statute then that contract becomes a statutory contract. If contract incorporates certain terms and conditions in it, which are statutory then the said contract to that extent is statutory; Thermal Power Ltd. v. State of Madhya Pradesh, AIR 2000 SC 1005.

In order to constitute a contract, both the parties must consent to the agreement; Steel Authority of India Ltd. v. Salem Stainless Steel Suppliers, AIR 1994 SC 1415.

A person who by reason of infancy is incompetent to contract cannot make a contract within the meaning of the Act. The question whether a contract is void or voidable presupposes the existence of a contract within the meaning of the Act, and cannot arise in the case of an infant; Mohoribibi v. Dharmodas Ghose, (1903) 30 IA 114.

What agreements are not Contract

Agreement subject to ratification by others who are not parties to it is not a conclusive contract; M.V. Shankar Bhat v. Claude Pinto (Deceased) by LRs, (2003) 4 SCC 86.

——————————-

1. Subs. by Act 3 of 1951, sec. 3 and Sch., for “Part A States and Part C States”. Earlier the words “Part A States and Part C States” were substituted by the A.O. 1950, for the words “the Provinces”.

2. See e.g., sec. 25, the Copyright Act, 1957 (14 of 1957), section 19, the Carriers Act, 1865 (3 of 1865) sections 6 and 7; the Companies Act, 1956 (1 of 1956) sections 12, 30, 46 and 109.

11. Who are competent to contract

Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is sound mind and is not disqualified from contracting by any law to which he is subject.

Minor’s contract of service

A contract of marriage, entered into by a father for the benefit of his minor child is not void for want of consideration, unlike a contract of service by a minor which is a contract of service entered into by a father on behalf of the minor which is not enforceable as it is void for want of consideration; Raj Rani v. Prem Adib, AIR 1949 Bom 215.

Minor’s contract void

Where a mortgage was made by a minor and the money lender who had advanced money to the minor on the security of the mortgage sued the minor on the strength of the contract. It is held, having regard to sections 2, 10 and 11 of the Contract Act, that the Act makes it essential that the contracting parties should be competent to contract and that a minor’s contract is void; Mohoribibee v. Dharmodas Ghose, (1903) ILR 30 Cal 539 (PC).

———————————

1. See the Indian Majority Act, 1875 (9 of 1875).

12. What is a sound mind for the purposes of contracting

A person is said to be of sound mind for the propose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgement as to its effect upon his interest.A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind. A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.

Illustrations

(a)   A patient in a lunatic asylum, who is, at intervals, of sound mind, may contract during those intervals.

(b)   A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts.

13. “Consent” defined -

Two or more person are said to consent when they agree upon the same thing in the same sense.

14. “Free consent” defined -

Consent is said to be free when it is not caused by -

(1) coercion, as defined in section 15, or

(2) undue influence, as defined in section 16, or

(3) fraud, as defined in section 17, or

(4) misrepresentation, as defined in section 18, or

(5) mistake, subject to the provisions of section 20,21, and 22.

Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation, or mistake.

15. “Coercion” defined

“Coercion” is the committing, or threating to commit, any act forbidden by the Indian Penal Code (45 of 1860) or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.

Illustrations

A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Indian Penal Code (45 of 1860).

A afterwards sues B for breach of contract at Calcutta.

A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the Indian Penal Code (45 of 1860) was not in force at the time when or place where the act was done.

An act forbidden by the Penal Code

The threat of suicide amounts to coercion within section 15; Chikam Amiraju v. Chickam Seshamma, (1912) 16 IC 344.

16. “Undue influence” defined

¹[16.‘Undue influence’ defined.—(1) A contract is said to be induced by “under influence” where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.

(2) In particular and without prejudice to the generally of the foregoing principle, a person is deemed to be in a position to dominate the will of another -

(a) where he hold a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or

(b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.

(3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall be upon the person in a position to dominate the will of the other.

Nothing in the sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872)

Illustrations

(a) A having advanced money to his son, B, during his minority, upon B’s coming of age obtains, by misuse of parental influence, a bond from B for a greater amount than the sum due in respect of the advance. A employs undue influence.

(b) A, a man enfeebled by disease or age, is induced, by B’s influence over him as his medical attendant, to agree to pay B an unreasonable sum for his professional services, B employes undue influence.

(c) A, being in debt to B, the money-lender of his village, contracts a fresh loan on terms which appear to be unconscionable. It lies on B to prove that the contract was not induced by undue influence.

(d) A applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms. This is a transaction in the ordinary course of business, and the contract is not induced by undue influence.]

Unconsiderable transaction

The circumstance that a grandfather made a gift of a portion of his properties to his only grandson a few years before his death is not on the face of it an unconscionable transaction; Subhas Chandra Das Mushib v. Ganga Prasad Das Mushib, AIR 1967 SC 878.

Undue influence

Merely because the parties were nearly related to each other no presumption of undue influence can arise; Subhas Chandra Das Mushib v. Ganga Prasad Das Mushib, AIR 1967 SC 878.

Undue influence and fraud

(i) Undue influence is said to be a subtle species of fraud whereby mastery is obtained over the mind of the victim, by insidious approaches and seductive artifices; Mahboob Khan v. Hakim Abdul Rahim, AIR 1964 Raj 250.

(ii) Where pardanashin and illiterate woman acting under full confidence of the defendant who projected a false impression of the contents of a documents, put this thumb impression on such documents, their comment is a vitiated one; Kharbuja Kuer v. Jangbahadur Rai, AIR 1963 SC 1203.

What to prove—Burden of proof

If the transaction appears to be unconscionable then the burden of proving that the contract was not induced by undue influence is to lie upon the person who was in a position to dominate the will of the other; Shrimati v. Sudhakar R. Bhatkar, Air 1998 Bom 122.

———————————

1. Subs. by Act 6 of 1899, sec. 2, for section 16.

17. “fraud defined “

“Fraud” means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agents,¹ with intent to deceive another party thereto his agent, or to induce him to enter into the contract;

(1) the suggestion as a fact, of that which is not true, by one who does not believe it to be true;

(2) the active concealment of a fact by one having knowledge or belief of the fact;

(3) a promise made without any intention of performing it;

(4) any other act fitted to deceive;

(5) any such act or omission as the law specially declares to be fraudulent.

Explanation.—Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak², or unless his silence, is, in itself, equivalent to speech.

Illustrations

(a) A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horse’s unsoundness. This is not fraud in A.

(b) B is A’s daughter and has just come of age. Here the relation between the parties would make it A’s duty to tell B if the horse is unsound.

(c) B says to A—‘‘If you do not deny it, I shall assume that the horse is sound”. A says nothing. Here, A’s silence is equivalent to speech.

(d) A and B, being traders, enter upon a contract. A has private information of a change in prices which would affect B’s willingness to proceed with the contract. A is not bound to inform B.

Cases where there is duty to speak

It is the duty of the assured to put the insurer in possession of all material facts affecting the risk covered; Mithoo Lal Nayak v. L.I.C. of India, AIR 1962 SC 814.

Pleading and proof of fraud

The transaction designed to defeat the plaintiff creditors was fraudulent. Fraud was fully carried into effect in letter and spirit. In as much as the plaintiff himself was the preparator of fraud, he should not be granted any discretionary relief. Once it is found that the parties are in pari delicto the court will not assist the party who enters into illegal transaction and makes that transaction the basis of his claim; Sultan Ahmad v. Rashid Ahmad, AIR 1990 All 47.

——————————-

1. Cf. section 238, infra.

2. See section 143, infra.

18. “Misrepresentation” defined

“Misrepresentation” means and includes -

(1) the positive assertion, in a manner not warranted by the information of the person making it, of that whichis not true, though he believes it to be true;

(2) any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or anyone claiming under him; by misleading another to his prejudice, or to the prejudice of any one claiming under him;

(3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is subject of the agreement.

A statement is said to be warranted by the information of the person making it when he receives the information from a trustworthy source. It should not be a mere hearsay; Mohanlal v. Sri Gungaji Cotton Mills Co., (1900) 4 CWN 369.

19. Voidability of agreements without free consent

When consent to an agreement is caused by coercion, ¹fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to contract, whose consent was caused by fraud or mispresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put on the position in which he would have been if the representations made had been true.

Exception : If such consent was caused by misrepreentation or by silence, fraudulent within the meaning of section 17, the contract, neverthless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.

Explanation : A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable.

Illustrations

(a) A, intending to deceive B, falsely represents that five hundred maunds of indigo are made annually at A’s factory, and thereby induces B to buy the factory. The contract is voidable at the option of B.

(b) A, by a misrepresentation, leads B erroneously to believe that five hundred maunds of indigo are made annually at A’s factory. B examines the accounts of the factory, which show that only four hundred maunds of indigo have been made. After this B buys the factory. The contract is not voidable on account of A’s misrepresentation.

(c) A fraudulently informs B that A’s estate is free from incumbrance. B thereupon buys the estate. The estate is subject to a mortgage. B may either avoid the contract, or may insist on its being carried out and mortgage-debt redeemed.

(d) B, having discovered a vein of ore on the estate of A, adopts means to conceal, and does conceal the existence of the ore from A. Through A’s ignorance B is enabled to buy the estate at an under-value. The contract is voidable at the option of A.

(e) A is entitled to succeed to an estate at the death of B; B dies: C, having received intelligence of B’s death, prevents the intelligence reaching A, and thus induces A to sell him his interest in the estate. The sale is voidable at the option of A.

Scope

The defendant represented himself to be a partner of the firm by his conduct and through documents and got a loan of Rs. 60,000 from the plaintiff bank. The plaintiff bank gave loan to all the defendants believing them to be partners of the defendant. It was held that the defendant had represented himself to be a partner and therefore liable with other defendants; Oriental Bank of Commerce v. S.R. Kishore & Co., AIR 1992 Del 174.

——————————-

1. The words “undue influence” rep. by Act 6 of 1899, sec. 3.

19-A. Power to set aside contract induced by undue influence -

When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.

Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the Court may seem just.

Illustrations

(a) A’s son has forged B’s name to a promissory note. B under threat of prosecuting A’s son, obtains a bond from A for the amount of the forged note. If B sues on this bond, the Court may set the bond aside.

(b) A, a money-lender, advances Rs. 100 to B, an agriculturist, and, by undue influence, induces B to execute a bond for Rs. 200 with interest at 6 per cent. per month. The Court may set the bond aside, ordering B to repay the Rs. 100 with such interest as may seem just.]

——————————-

1. Ins. by Act 6 of 1899, sec. 3.

20. Agreement void where both parties are under mistake as to matter of fact

Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement the agreement is void.

Explanation.—An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement, is not to be deemed a mistake as to a matter of fact.

Illustrations

(a) A agrees to sell to B a specific cargo of goods supposed to be on its way from England to Bombay. It turns out that, before the day of the bargain the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of these facts. The agreement is void.

(b) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.

(c) A, being entitled to an estate for the life of B, agrees to sell it to C, B was dead at the time of agreement, but both parties were ignorant of the fact. The agreement is void.

Mistake

There can be a mistake of identity only when a person bearing a particular identity exists within the knowledge of the plaintiff and the plaintiff intends to deal with him only; King’s Nortan Metal Co. v. Edridge, Merrett & Co., (1897) 14 TLR 98 (CA).

21. Effect of mistake as to law

A contract is not voidable because it was caused by a mistake as to any law in force in ¹India; but mistake as to a law not in force in India has the same effect as a mistake of fact.

²[***]

Illustration

A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of Limitation; the contract is not voidable.

³[***]

—————————–

1. The original words “British India” have successively been amended by the A.O. 1948 and the A.O. 1950 to read as above.

2. Paragraph 2 omitted by the A.O. 1950. Earlier paragraph 2 was inserted by the A.O. 1937.

3. The second Illustration rep. by Act 24 of 1917, sec. 3 and Sch. II

22. Contract caused by mistake of one party as to matter of fact

A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.

23. What consideration and objects are lawful, and what not

The consideration or object of an agreement is lawful, unless -It is forbidden by law; oris of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; ofinvolves or implies, injury to the person or property of another; orthe Court regards it as immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.

Illustrations

(a) A agrees to sell his house to B for 10,000 rupees. Here, B’s promise to pay the sum of 10,000 rupees is the consideration for A’s promise to sell the house and A’s promise to sell the house is the consideration for B’s promise to pay the 10,000 rupees. These are lawful considerations.

(b) A promises to pay B 1,000 rupees at the end of six months, if C, who owes that sum to B, fails to pay it. B promises to grant time to C accordingly. Here, the promise of each party is the consideration for the promise of the other party, and they are lawful considerations.

(c) A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is wrecked on a certain voyage. Here, A’s promise is the consideration for B’s payment, and B’s payment is the consideration for A’s promise, and these are lawful considerations.

(d) A promises to maintain B’s child, and B promises to pay A 1,000 rupees yearly for the purpose. Here, the promise of each party is the consideration for the promise of the other party. They are lawful considerations.

(e) A, B and C enter into an agreement for the division among them of gains acquired or to be acquired, by them by fraud. The agreement is void, as its object is unlawful.

(f) A promises to obtain for B an employment in the public service and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful.

(g) A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a lease of land belonging to his principal. The agreement between A and B is void, as it implies a fraud by concealment, by A, on his principal.

(h) A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful.

(i) A’s estate is sold for arrears of revenue under the provisions of an Act of the Legislature, by which the defaulter is prohibited from purchasing the estate. B, upon an understanding with A, becomes the purchaser, and agrees to convey the estate to A upon receiving from him the price which B has paid. The agreement is void, as it renders the transaction, in effect, a purchase by the defaulter and would so defeat the object of the law.

(j) A, who is B’s mukhtar, promises to exercise his influence, as such, with B in favour of C, and C promises to pay 1,000 rupees to A. The agreement is void, becuase it is immoral.

(k) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Indian Penal Code (45 of 1860).

Applicability

The notification permitting refund of sales tax was contrary to the statute. The tax paid is not an amount spent by the appellant but realised on sale by it. The constitutional requirements of levy of tax being for the welfare of the society and not for a specific individual the agreement or promise made by the Government was in contravention of public purpose thus violative of public policy and void under section 23 of the Contract Act; Amrit Bansapati Co Ltd. v. State of Punjab, AIR 1992 SC 1076.

Illegal and void agreements

The distinction between illegal and void contracts is very thin but it is there. The law may either forbid an agreement to be made, or it may merely say that if it is made the courts will not enforce it. In the former case, it is illegal in the latter only void; Nutan Kumar v. IInd Additional District Judge, Banda, AIR 1994 All 298.

Object of agreement is valid thereof

The exemption clause containing that the carrier shall be under no liability for any damages to passengers, is valid and it legally excludes all liability for negligence and such clause cannot be held bad under section 23 of Act; Indian Airlines v. Madhuri Chowdhuri, AIR 1965 Cal 252.

Scope

If an agreement is merely collateral to another or constitutes an aid facilitating the carrying out of the object of the other agreement which though void, is not prohibited by law it may be enforced as a collateral agreement. Where a person entering into an illegal contract promises expressly or by implication that the contract is blameless such a promise amount to collateral agreement upon which the other party if in fact innocent of turpitude may sue for damages; Rajat Kumar Rath v. Government of India, AIR 2000 Ori 32.

The appellation ‘void’ in relation to a juristic act, means without legal force, effect or consequence, not binding, invalid, null, worthless, cipher, useless and ineffectual etc.; Nutan Kumar v. IInd Additional District Judge, Banda, AIR 1994 All 298.

An agreement offending a statute or public policy or forbidden by law is not merely void but it is invalid from nativity. It cannot become valid even if the parties thereto agree to it; Nutan Kumar v. IInd Additional District Judge, Banda, AIR 1994 All 298.

While the term ‘object’ unlike the term ‘consideration’ has not been defined in section 2 of the Act, but has been held to mean as ‘purpose’ or ‘design’ of the contract. If the object is opposed to public policy or tends to defeat any provision of law, it becomes unlawful and thereby it is void under section 23 of the Act; Nutan Kumar v. IInd Additional District Judge, Banda, AIR 1994 All 298.

The term ‘law’ in section 23 of the Act must be understood in the sense of the term explained in the Article 13(3) of the Constitution; Nutan Kumar v. IInd Additional District Judge, Banda, AIR 1994 All 298.

——————————

1. See sections 26, 27, 28 and 30, infra.

24. Agreements void, if consideration are objects unlawful in part

If any part of a single consideration for one or more objects, or any one or any part of any one of several consideration of a single object, is unlawful, the agreement is void.

Illustration

A promises to superintend, on behalf of B, a legal manufacturer of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of 10,000 rupees a year. The agreement is void, the object of A’s promise, and the consideration for B’s promise, being in part unlawful.

General Rule

Non-compoundable offences, which are a matter of public concern, cannot be subject matter of private bargains and administration of criminal justice should not be allowed to pass from the hands of judges to private individuals. Where the offence is of public nature, no agreement can be valid that is founded on the consideration of stifling of a prosecution for it. The payment of 470 million US dollars by the Union Carbide Corporation to Union of India was held not to be stifling of prosecution and the payment not unlawful; Union Carbide Corporation v. Union of India, AIR 1992 SC 248.

25. Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law

An agreement made without consideration is void, unless -

(1) it is expressed in writing and registered under the law for the time being in force for the registration of ¹documents, and is made on account of natural love and affection between parties standing in a near relation to each other; or unless.

(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless.

(3) it is a promise, made in writing and signed by the person to be charged therewith or by his agent generally or specially authorised in that behalf, to pay wholly or in part debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract.

Explanation 1 : Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.

Explanation 2 : An agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given.

Illustrations

(a) A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement.

(b) A, for natural love and affection, promises to give his son, B, Rs. 1,000. A puts his promise to B into writing and registers it. This is a contract.

(c) A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract.

(d) A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract.

(e) A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract.

(f) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A’s consent to the agreement was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.

(g) A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A denies that his consent to the agreement was freely given.

The inadequacy of the consideration is a fact which the Court should take into account in considering whether or not A’s consent was freely given.

Natural love and affection as a consideration

In order to rely upon clause (1) of section 25, the existence of the factum of natural love and affection between parties standing in a near relation to each other is a condition precedent; Rajlukhy Dabee v. Bhootnath Mookherjee, (1900) 4 CWN 488.

Voluntary services

If the services are rendered voluntarily, without the desire of the promisor or otherwise than at his request and the promisor undertakes to recompense the person who has rendered his services for it. In such cases, the promise does not need a consideration to support it, and the case falls under section 25 of the Act; Sindha Shri Ganpatsingji v. Abraham alias Vazir Mahomed Akuji, (1895) 20 Bom 755.

—————————–

1. Subs. by Act 12 of 1891, sec. 2 and Sch. II, Pt. I, for “assurances”.

26. Agreement in restraint of marriage, void

Every agreement in restraint of the marriage of any person, other than a minor, is void.

Agreement in restraint of marriage

An agreement between two co-widows that if any of them remarried, she should forfeit her right to her share in the deceased husband’s property is not in restraint of marriage; A. Suryanarayan Murthi v. P. Krishna Murthy, AIR 1957 Ori 125.

27. Agreement in restraint of trade, void

Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.

Exception 1 : Saving of agreement not to carry on business of which good will is sold – One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the court reasonable, regard being had to the nature of the business.

Agreement in restraint of trade

The words “restrained from exercising a lawful profession, trade or business”, do not mean an absolute restriction, and are intended to apply to a partial restriction, a restriction limited to same particular place; Mahbub Chander v. Raj Coomar, (1874) XIV Bengal Law Reports 76.

——————————

1.Exceptions 2 and 3 rep. by Act 9 of 1932, sec. 73 and Sch. II.

28. Agreements in restrain of legal proceedings, void

¹[***]Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to the extent.

Exception 1 : Saving of contract to refer to arbitration dispute that may arise.This section shall not render illegal contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subject shall be referred to arbitration, and that only and amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.

²[***]

Exception 2: Saving of contract to refer question that have already arisen – Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to reference to arbitration. ³

Agreement restricting law of limitation

The clause in the agreement that the appellant would not have any right under the bond after the expiry of six months from the date of termination of the contract has been held not to be contrary to section 28 of the Act nor it imposed any restriction to file a suit within six months; Food Corporation of India v. New India Assurance Co. Ltd., AIR 1994 SC 1896.

Jurisdiction of the proper court

It has been held that it is not open to the parties by agreement to confer jurisdiction on any court which it did not otherwise possess under section 20 of Code of Civil Procedure; Patel Roadways v. Prasad Trading Company, AIR 1992 SC 1514.

——————————-

1. Subs. by Act 1 of 1997, sec. 2, for certain words (w.e.f. 8-1-1997).

2. The second clause of Exception 1 rep. by Act 1 of 1877, sec. 2 and Sch.

3. Cf. the Arbitration Act, 1940 (10 of 1940) and the Companies Act, 1956 (1 of 1956), section 389.

29. Agreements void for uncertainty

Agreements, the meaning of which is not certain, or capable of being made certain, are void.

Illustrations

(a) A agrees to sell B “a hundred tons of oil”. There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.

(b) A agrees to sell B one hundred tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void.

(c) A, who is a dealer in coconut-oil only, agrees to sell to B “one hundred tons of oil”. The nature of A’s trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of coconut-oil.

(d) A agrees to sell B “all the grain in my granary at Ramnagar”. There is no uncertainty here to make the agreement void.

(e) A agrees to sell to B “one thousand maunds of rice at a price to be fixed by C”. As the price is capable of being made certain, there is no uncertainty here to make the agreement void.

(f) A agrees to sell to B “my white horse for rupees five hundred or rupees one thousand”. There is nothing to show which of the two prices was to be given. The agreement is void.

30. Agreements by way of wager, void

Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which may wager is made. Exception on favour of certain prizes for horse-racing: This section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be rewarded to the winner or winners of any horse-race.

Section 294A of the Indian Penal Code not affected : Nothing in this section shall be deemed to legalize any transaction connected with horse-racing, to which the provisions of section 294A of the(45 of 1860) apply.

Scope

To treat an agreement by way of wager as void is that the law discourages people to enter into games of chance and make earning by trying their luck instead of spending their time, energy and labour for more fruitful and useful work for themselves, their family and the society; Subhash Kumar Manwani v. State of Madhya Pradesh, AIR 2000 MP 109.

Wagering Contract

A chit-fund does not come within the scope of wager; Narayana Ayyangar v. K.V. Ambalam, (1927) ILR 50 Mad 696 (FB).

Chapter III – Of contingent contracts

31. “Contingent contract” defined

A “contingent contract” is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.

Illustration

A contracts to pay to B Rs.10,000 if B’s house is burnt. This is a contingent contract.

32. Enforcement of Contracts contingent on an event happening

Contingent contracts to do or not to do anything in an uncertain future event happens, cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void.

Illustrations

(a) A makes a contract with B to buy B’s horse if A survives C. This contract cannot be enforced by law unless and until C dies in A’s lifetime.

(b) A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse has been offered, refuses to buy him. The contract cannot be enforced by law unless and until C refuses to buy the horse.

(c) A contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void.

Applicability

The essential idea upon which doctrine of frustration is based is that of impossibility of performance of contract; Satyabrata Ghose v. Mugneeram Bangur, AIR 1954 SC 44.

33. Enforcement of contract contingent on an event not happening

Contingent contracts to do or not to do anything if an uncertain future event does not happen, can be enforced when the happening of that event becomes impossible, and not before.

Illustration

A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks.

34. When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person

If the future event on which a contract is contingent is the way in which a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that the should so act within any definite time, or otherwise than under further contingencies.

Illustration

A agrees to pay B a sum of money if B marries C, C marries D. The marriage of B to C must now be considered impossible, although it is possible that D may die and that C may afterwards marry B.

35. When contracts become void, which are contingent on happening of specified event within fixed time

Contingent contracts to do or not to do anything, if a specified uncertain event happens within a fixed time, become void, if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed, such event becomes impossible.

When contracts may be enforced, which are contingent on specified event not happening within fixed time : Contingent contract tutu or not to do anything, if a specified uncertain event does not happen within a fixed time, may be enforced by law when the time fixed has expired and such event has not happened, or before the time fixed has expired, if it become certain that such event will not happen.

Illustrations

(a) A promises to pay B a sum of money if a certain ship returns within a year. The contract may be enforced if the ship returns within the year; and becomes void if the ship is burnt within the year.

(b) A promises to pay B a sum of money if a certain ship does not return within a year. The contract may be enforced if the ship does not return within the year, or is burnt within the year.

36. Agreements contingent on impossible event void

Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether the impossibility of the event is known or not to the parties to agreement at the time when it is made.

Illustrations

(a) A agrees to pay B 1,000 rupees if two straight lines should enclose a space. The agreement is void.

(b) A agrees to pay B 1,000 rupees if B will marry A’s daughter C. C was dead at the time of the agreement. The agreement is void.

Chapter IV – Of the performance of contracts which must be performed

37. Obligations of parties to contract

The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance in dispensed with or excused under the provision of this Act, or of any other law.

Promises bind the representative of the promisor in case of the death of such promisors before performance, unless a contrary intention appears from the contract.

Illustrations

(a) A promises to deliver goods to B on a certain day on payment of Rs.1,000. A dies before that day. A’s representatives are bound to deliver the goods to B, and B is bound to pay the Rs. 1,000 to A’s representatives.

(b) A promises to paint a picture for B by a certain day, at a certain price. A dies before the day. The contract cannot be enforced either by A’s representatives or by B

Assignment of Contract

A person cannot be subject to the obligation of a contract to which he is not a party and the logical consequence is that a stranger cannot acquire rights under a contract; Harnam Singh v. Purbi Devi, AIR 2000 HP 108.

Scope

If the agreement makes express provision for enhancement of rate of interest, held, bank need not put borrower on notice before charging higher rate on the basis of the agreement; Syndicate Bank v. R. Veeranna, (2003) 2 SCC 15.

It is well settled principle of law that an arbitration clause is assignable, if the main contract is assignable. An arbitration agreement will find not only the actual parties to it, but also an assignee of the contract containing it; R. K. Associates v. V. Channappa, AIR 1993 Kant 248.

38. Effect of refusal to accept offer of performance

Where a promisor has made an offer of performance to the promisee, and the offer has not been accepted, the promisor is not responsible for non-performance, nor does he thereby lose his rights under the contract.

Every such offer must fulfil the following conditions -

(1) it must be unconditional;

(2) it must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is been made is able and willing there and then to do the whole of what he is bound by his promise to do;

(3) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver. An offer to one of several joint promisees has the same legal consequences as an offer to all of them.

Illustration

A contracts to deliver to B at his warehouse, on the 1st March, 1873, 100 bales of cotton of a particular quality. In order to make an offer of performance with the effect stated in this section. A must bring the cotton to B’s warehouse, on the appointed day, under such circumstances that B may have a reasonable opportunity of satisfying himself that the thing offered is cotton of the quality contracted for, and that there are 100 bales.

Tender must be strict

Where the instructions have been issued to Bidders asking them to state against each work item unit rate in Indian Currency and in U.S. Dollar or Japanese Yen. Then the quoating of the unit rate 50 per cent. in Indian Rupee and 50 per cent. in U.S. Dollar will not be treated as clerical or Mechinical error and cannot be allowed to be corrected; West Bengal Electricity Board v. Patel Engg. Co. Ltd., AIR 2001 SC 683.

39. Effect of refusal of party to perform promise wholly

When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract,unless he has signified, by words or conduct, his acquiescence in its continuance

Illustrations

(a) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during next two months, and B engages to pay her 100 rupees for each night’s performance. On the sixth night A wilfully absents herself from the theatre. B is at liberty to put an end to the contract.

(b) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during next two months, and B engages to pay her at the rate of 100 rupees for each night. On the sixth night A wilfully absents herself. With the assent of B, A sings on the seventh night. B has signified his acquiescence in the continuance of the contract, and cannot now put an end to it, but is entitled to compensation for the damage sustained by him through A’s failure to sing on the sixth night.

40. Person by whom promises is to be performed

If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contain in it should be performed by the promisor himself, such promise must be performed by the promisor.

In other cases, the promisor or his representative may employ a competent person to perform it.

Illustrations

(a) A promises to pay B a sum of money. A may perform this promise, either by personally paying the money to B or by causing it to be paid to B by another; and, if A dies before the time appointed for payment, his representatives must perform the promise, or employ some proper person to do so.

(b) A promises to paint a picture for B. A must perform this promise personally.

41. Effect of accepting performance from this person

When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor.

42. Devolution of joint liabilities

When two or more person have made a joint promise, then, unless a contrary intention appears by the contract, all such persons, during their joint lives, and, after the death of any of them, his representative jointly with the survivor or survivors, and, after the death of the last survivor the representatives of all jointly, must fulfil the promise.

43. Any one of joint promisors may be compelled to perform

When two or more persons make a joint promise, the promise may, in the absence of express agreements to the contrary, compel any ¹one or more of such joint promisors to perform the whole promise.

Each promisor may compel contribution : Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.

Sharing of loss by default in contribution : If any one of two or more joint promisors make default in such contribution, the remaining joint promisors mus bear the loss arising from such default in equal shares.

Explanation : Nothing in this section shall prevent a surety from recovering, from his principal, payments made by the surety on behalf of the principal, or entitle the principal to recover anything from the surety on account of payments made by the principal.

Illustrations

(a) A, B and C jointly promise to pay D 3,000 rupees. D may compel either A or B or C to pay him 3,000 rupees.

(b) A, B and C jointly promise to pay D the sum of 3,000 rupees. C is compelled to pay the whole. A is insolvent, but his assets are sufficient to pay one-half of his debts. C is entitled to receive 500 rupees from A’s estate, and 1,250 rupees from B.

(c) A, B and C are under a joint promise to pay D 3,000 rupees. C is unable to pay anything, and A is compelled to pay the whole. A is entitled to receive 1,500 rupees from B.

(d) A, B and C are under a joint promise to pay D 3,000 rupees. A and B being only sureties for C. C fails to pay. A and B are compelled to pay the whole sum. They are entitled to recover it from C.

———————————–

1. Subs. by Act 12 of 1891, sec. 2 and Sch. II Pt. I, for “one”.

44. Effect of release of one joint promisor

Where two or more persons have made a joint promise, a release of one of such joint promisors by the promisee does not discharge the other joint promisor,neither does it free the joint promisor so released from responsibility to the other joint promisor or joint promisors.¹

—————————

1. See section 138. infra.

45. Devolution of joint rights

When a person has made a promise to two or more persons jointly, then unless contrary intention appears from the contract, the right to claim performance rests, as between him and them, with them during their joint lives, and, after the death of any one of them, with the representative of such deceased person jointly with the survivor or survivors, and, after the death of the last survivor, with the representatives of all jointly.¹

Illustration

A, in consideration of 5,000 rupees lent to him by B and C, promises B and C jointly to repay them that sum with interest on a day specified. B dies. The right to claim performance rests with B’s representative jointly with C during C’s life, and after the death of C, with the representatives of B and C jointly.

———————————–

1. For an exception to section 45 in case of Government securities, see the Public Debt Act, 1944 (18 of 1944), section 8.

46. Time for performance of promise, where no application is to be made and no time is specified

Where, by the contract, a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time.

Explanation : The question “what is a reasonable time” is, in each particular case, a question of fact.

47. Time and place for performance of promise, where time is specified and no application to be made

When a promise is to be performed on a certain day, and the promisor has undertaken to perform it without the application by the promisee, the promisor may perform it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed.

Illustration

A promises to deliver goods at B’s warehouse on the first January. On the day A brings the goods to B’s warehouse, but after the usual hour closing it, and they are not received. A has not performed his promise.

48. Application for performance on certain day to be at proper time and place

When a promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promisee, it is the duty of the promisee to apply for the performance at a proper place within the usual hours of business.

Explanation : The question “what is proper time and place” is, in each particular case, a question of fact.

49. Place for the performance of promise, where no application to be made and no place fixed for performance

When a promise is to be performed without application by the promisee, and not place is fixed for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise, and to perform it at such a place.

Illustration

A undertakes to deliver a thousand maunds of jute to B on a fixed day. A must apply to B to appoint a reasonable place for the purpose of receiving it, and must deliver it to him at such place.

50. Performance in manner or at time prescribed or sanctioned by promise

The performance of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions

Illustrations

(a) B owes A 2,000 rupees. A desires B to pay the amount to A’s account with C, a banker. B, who also banks with C, orders the amount to be transferred from his account to A’s credit, and this is done by C. Afterwards, and before A knows of the transfer, C fails. There has been a good payment by B.

(b) A and B are mutually indebted. A and B settle an account by setting off one item against another, and B pays A the balance found to be due from him upon such settlement. This amounts to a payment by A and B, respectively, of the sums which they owed to each other.

(c) A owes B 2,000 rupees. B accepts some of A’s goods in reduction of the debt. The delivery of the goods operates as a part payment.

(d) A desires B, who owes him Rs.100, to send him a note for Rs.100 by post. The debt is discharged as soon as B puts into the post a letter containing the note duly addressed to A.

Manner and time of performance

If any agreement states that a particular act relating to the furtherance of a contract is to be done in a particular manner, it should be done in that manner and it is not open to the parties to chalk out his own manner of performing his part of contract; Bishamber Nath Agarwal v. Kishan Chand, AIR 1990 All 70.

51. Promisor not bound to perform, unless reciprocal promisee ready and willing to perform

When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.

Illustrations

(a) A and B contract that A shall deliver goods to B to be paid for by B on delivery. A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery.

B need not pay for the goods, unless A is ready and willing to deliver them on payment.

(b) A and B contract that A shall deliver goods to B at a price to be paid by instalments, the first instalment to be paid on delivery.

A need not deliver, unless B is ready and willing to pay the first instalment on delivery.

B need not pay the first instalment, unless A is ready and willing to deliver the goods on payment of the first instalment.

52. Order of performance of reciprocal promises

Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order, and where the orders is not expressly fixed by the contract, they shall be performed in that order which the nature of transaction requires.

Illustrations

(a) A and B contract that A shall build a house for B at a fixed price. A’s promise to build the house must be performed before B’s promise to pay for it.

(b) A and B contract that A shall make over his stock-in-trade to B at a fixed price, and B promise to give security for the payment of the money. A’s promise need not be performed until the security is given, for the nature of transaction requires that A should have security before he delivers up his stock.

53. Liability of party preventing event on which contract is to take effect

When a contract contains reciprocal promises and one party to the contract prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented; and he is entitled to compensation ¹from the other party for any loss which he may sustain in consequence of the non-performance of the contract.

Illustration

A and B contract that B shall execute certain work for A for a thousand rupees. B is ready and willing to execute the work accordingly, but A prevents him from doing so. The contract is voidable at the option of B; and, if he elects to rescind it, he is entitled to recover from A compensation for any loss which he has incurred by its non-performance.

——————————–

 1.See section 73, infra.

54. Effect of default as to the promise which should be performed, in contract consisting or reciprocal promises

When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract.

Illustrations

(a) A hires B’s ship to take in and convey, from Calcutta to the Mauritius, a cargo to be provided by A, B receiving a certain freight for its conveyance. A does not provide any cargo for the ship. A cannot claim the performance of B’s promise, and must take compensation to B for the loss which B sustains by the non-performance of the contract.

(b) A contracts with B to execute certain builder’s work for a fixed price, B supplying the scaffolding and timber necessary for the work. B refuses to furnish any scaffolding or timber, and the work cannot be executed. A need not execute the work, and B is bound to make compensation to A for any loss caused to him by the non-performance of the contract.

(c) A contracts with B to deliver to him, at a specified price, certain merchandise on board a ship which cannot arrive for a month, and B engages to pay for the merchandise within a week from the date of the contract. B does not pay within the week. A’s promise to deliver need not be performed, and B must make compensation.

(d) A promises B to sell him one hundred bales of merchandise, to be delivered next day, and B promises A to pay for them within a month. A does not deliver according to his promise. B’s promise to pay need not be performed, and A must make compensation.

55. Effect of failure to perform a fixed time, in contract in which time is essential

When a party to a contract promises to do a certain thing at or before a specified time, or certain thins at or before a specified time and fails to do such thing at or before a specified time, and fails to do such thing at or before a specified time, the contract or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of essence of the contract.

Effect of such failure when time is not essential: If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.

Effect of acceptance of performance at time other than agreed upon: If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than agree, the promisee cannot claim compensation of any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of acceptance, he give notice to the promisor of his intention to do so.¹

Time – whether essence of Contract

The parties, may make time of the essence either expressly in terms which unmistakably provide that they intended to do so. Alternately, making of time as the essence of a contract may be inferred from the nature of the contract, the property or the surrounding circumstances; Swarnam Ramchandran v. Aravacode Chakungal Jayapalan, AIR 2000 Bom 410.

When the contract itself provides for extension of time, the same cannot be termed to be the essence of the contract and default, however, in such a case it does not make the contract voidable; Arosan Enterprises Ltd. v. Union of India, AIR 1999 SC 3804.

The deferred clause indicated that time was not the essence of the contract. But in the present case the defendants had kept quite for an unreasonably long time so the defendants cannot rely on this clause but the plaintiffs can seek the relief of possession prayed for; Y.A. Kader v. Muthulakshmi Ammal, AIR 1992 Mad 208.

In a contract for the sale of land or immovable property, it would normally be presumed that time was not of the essence of the contract; Gomathinayagam Pillai v. Palaniswami Nadar, AIR 1967 SC 868: (1967) 1 SCR 227.

——————————

1. Cf. sections 62 and 63, infra.

56. Agreement to do impossible act

An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful: A contract to do an act which, after the contract is made, becomes impossible or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.¹

Compensation for loss through non-performance of act known to be impossible or unlawful: Where one person has promised to be something which he knew or, with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, such promisor must make compensation to such promise for any loss which such promisee sustains through the non-performance of the promise.

Illustrations

(a) A agrees with B to discover treasure by magic. The agreement is void.

(b) A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract becomes void.

(c) A contracts to marry B, being already married to C, and being forbidden by the law to which he is subject to practise polygamy. A must make compensation to B for the loss caused to her by the non-performance of his promise.

(d) A contracts to take in cargo for B at a foreign port. A’s Government afterwards declares war against the country in which the port is situated. The contract becomes void when war is declared.

(e) A contracts to act at a theatre for six months in consideration of a sum paid in advance by B. On several occasions A is too ill to act. The contract to act on those occasions becomes void.

Contracting party must not be in default

In contracts in which the performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility arising from the perishing of the person or thing shall excuse performance; Taylor v. Caldwel, 122 ER 30.

It is not permissible for the courts to travel outside the provisions of the section and import the principles of English law de hors the statutory provisions; Satyabrata Ghose v. Mugneeram Bangur & Co., AIR 1954 SC 44.

Impossibility may be in law or in fact

The doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of section 56; Satyabrata Ghose v. Mugneeram Bangur, AIR 1954 SC 44.

Scope and applicability

Section 56 lays a positive rule relating to frustration and does not leave the matter of frustration to the court to be determined. There can be no agreement on altered circumstances and it has also been held that if a consideration of the terms of the contract in the light of the circumstances when it was made shows that the parties never agreed to be bound in a fundamentally different situation which unexpectedly arises the contract ceases to bind at that point, not because the court in its discretion considers it just but on true construction it does not apply in that situation; Shyam Biri Works Pvt. Ltd. v. U.P. Forest Corporation, AIR 1990 SC 205.

——————————

1. See section 65, infra.

57. Reciprocal promise to do things legal, and also other things illegal

Where persons reciprocally promise, firstly to do certain things which are legal, and, secondly under specified circumstances, to do certain other things which are illegal, the first set of promise is a contract, but the second is a void agreement.

Illustration

A and B agree that A shall sell B a house for 10,000 rupees, but that, if B uses it as a gambling house, he shall pay A 50,000 rupees for it.

The first set of reciprocal promises, namely, to sell the house and to pay 10,000 rupees for it, is a contract.

The second set is for an unlawful object, namely, that B may use the house as a gambling house, and is a void agreement.

58. Alternative promise, one branch being illegal

In the case of an alternative promise, one branch of which is legal and other other illegal, the legal branch alone can be enforced.

Illustration

A and B agree that A shall pay B 1,000 rupees, for which B shall afterwards deliver to A either rice or smuggled opium.

This is a valid contract to deliver rice, and a void agreement as to the opium.

59. Application of payment where debt to be discharged is indicated

Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying, that the payment is to be applied to the discharge of some particular debt, the payment if accepted, must be applied accordingly.

Illustrations

(a) A owes B, among other debts, 1,000 rupees upon a promissory note, which falls due on the first June. He owes B no other debt of that amount. On the first June, A pays to B 1,000 rupees. The payment is to be applied to the discharge of the promissory note.

(b) A owes to B, among other debts, the sum of 567 rupees. B writes to A and demands payment of this sum. A sends to B 567 rupees. This payment is to be applied to the discharge of the debt of which B had demanded payment.

Scope of applicability

To several distinct debts payable by a person and not to the various heads of one debt. The principal and interest due on a single debt or decree passed on such debt carrying subsequent interest cannot be held to several distinct debts. Accepting such an argument would amount to doing violence to the language employed in the section and the purpose sought to be achieved by it. Besides it would also be contradictory in terms; Industrial Credit and Development Syndicate now called I.C.D.S. Ltd. v. Smithaben H. Patel, AIR 1999 SC 1036.

The principle applies to several distinct debts and not to a single debt payable by instalments; Munno Bibi v. Commissioner of Income-tax, AIR 1952 All 514.

60. Application of payment where debt to be discharged is not indicated

Where the debtor has ommitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitations of suits.

61. Application of payment where neither party appropriates

Where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionally.

62. Effect of novation, rescission, and alteration of contract-

If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.

Illustrations

 (a) A owes money to B under a contract. It is agreed between A, B and C, that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted.

(b) A owes B 10,000 rupees. A enters into an agreement with B, and gives B a mortgage of his (A’s), estate for 5,000 rupees in place of the debt of 10,000 rupees. This is a new contract and extinguishes the old.

(c) A owes B 1,000 rupees under a contract, B owes C 1,000 rupees, B orders A to credit C with 1,000 rupees in his books, but C does not assent to the agreement. B still owes C 1,000 rupees, and no new contract has been entered into.

Alteration of Contracts

Person entering into agreement under section 8(1)(a) of Requisition and Acquisition of Immovable Property Act cannot later claim a legal right to obtain a court order directing reopening of the agreement, just because a subsequent award granted higher compensation for land similar to his own; Dayal Singh v. Union of India, (2003) 2 SCC 593.

If the parties to a Contract agree

The plaintiff Bank had agreed that the defendants could pay the amount of Rs.10,00,000 which would be convenient to both the parties subsequent to the filing of the suit. The parties have entered into a second agreement to supersede the liability and the entitlement formulated through the transaction and that under the circumstances the said subsequent agreement squarely comes within the ambit of section 62 of the Act; Central Bank of India v. V. G. Naidu & Sons (Leather) Pvt. Ltd., AIR 1992 Mad 139.

Material alteration

A material alteration is one which varies the rights, liabilities or legal position of the parties as ascertained by the deed from its original state, or otherwise varies the effect of the instrument as originally expressed or reduces to certainty some provisions which were originally unascertained and as such void, or which may otherwise prejudice the party bound by the deed as originally executed. The effect of making such an alteration without the consent of the party bound is exactly the same as that of cancelling the deed. The last line in the schedule of property regarding delivery of possession was held to be inserted not on the date of execution of agreement but subequent to it and have material alteration; Janab M. H. M. Yakoob v. M. Krishnan, AIR 1992 Mad 80.

Where an existing mortgage was replaced by a new agreement of mortgage, the new agreement being not enforceable for want of registration, the parties were still bound by the original mortgage; Shanker Lal Damodhar v. Ambalal Ajaipal, AIR 1946 Nag 260.

63. Promise may dispense with or remit performance of promise

Every promise may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, ¹or may accept instead of it any satisfaction which he thinks fit.

Illustrations

(a) A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise.

(b) A owes B 5,000 rupees. A pays to B, and B accepts, in satisfaction of the whole debt, 2,000 rupees paid at the time and place at which the 5,000 rupees were payable. The whole debt is discharged.

(c) A owes B 5,000 rupees. C pays to B 1,000 rupees, and B accepts them, in satisfaction of his claim on A. This payment is a discharge of the whole claim.²

(d) A owes B, under a contract, a sum of money, the amount of which has not been ascertained. A, without ascertaining the amount, gives to B, and B, in satisfaction thereof, accepts, the sum of 2,000 rupees. This is a discharge of the whole debt, whatever may be its amount.

(e) A owes B 2,000 rupees, and is also indebted to another creditors. A makes an arrangement with his creditors, including B, to pay them a ³[composition] of eight annas in the rupee upon their respective demands. Payment to B of 1,000 rupees is a discharge of B’s demand.

Becomes void – discovered to be void

Section 65 starts from the basis of there being an agreement or contract between competent parties and has no application to a case in which there never was, and never could have been any contract, e.g. where one of the parties was a minor; Mohori Bibee v. Dharmodas Ghose, (1903) ILR 30 Cal 539 (PC).

Necessity for consideration

The plaintiff bank accepted the sum of Rs. 10,00,000 from the defendants towards the full discharge of the suit claim according to second agreement. It was held that having received the said compromise amount, it is not open for the plaintiff to claim the overdue interest to the extent of Rs. 69,571.20 for which there has been no agreement and that under the circumstances the claim, if any made by the plaintiff has been directly hit by section 63 of Contract Act; Central Bank of India v. V. G. Naidu & Sons (Leather) Pvt. Ltd., AIR 1992 Mad 139.

Waiver

A waiver is nothing unless it amounts to a release. It signifies nothing more than an intention not to insist upon the right; Jagad Bandhu Chatterjee v. Nilima Rani, (1969) 3 SCC 455: (1970) 2 SCR 925: (1971) 1 SCJ 38.

——————————

1. But See section 135, infra.

2. See section 41, supra.

3. Subs. by Act 12 of 1891, sec. 2 and Sch. II, Pt. I, for “compensation”.

64. Consequence of rescission of voidable contract

When a person at whose option a contract is voidable rescinds it, the other party thereto need to perform any promise therein contained in which he is the promisor. The party rescinding a voidable contract shall, if he have received any benefit thereunder from another party to such contract restore such benefit, so far as may be, to the person from whom it was received.¹

—————————

1.See section 75, infra.

65. Obligation of person who has received advantage under void agreement, or contract that becomes void -

When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore, it, or to make compensation for it, to the person from whom he received it.

Illustrations

 (a) A pays B 1,000 rupees, in consideration of B’s promising to marry C, A’s daughter. C is dead at the time of the promise. The agreement is void, but B must repay A the 1,000 rupees.

 (b) A contracts with B to deliver to him 250 maunds of rice before the first of May. A delivers 130 maunds only before that day, and none after. B retains the 130 maunds after the first of May. He is bound to pay A for them.

 (c) A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her a hundred rupees for each night’s performance. On the sixth night, A wilfully absents herself from the theatre, and B, in consequence, rescinds the contract. B must pay A for the five nights on which she had sung.

 (d) A contracts to sing for B at a concert for 1,000 rupees, which are paid in advance. A is too ill to sing. A is not bound to make compensation to B for the loss of the profits which B would have made if A had been able to sing, but must refund to B the 1,000 rupees paid in advance.

Frustrated Contracts

Where under a contract of Insurance the insured gave a cheque to the insurer for payment of first premium amount, but the cheque was dishonoured by the drawee-bank due to inadequacy of the funds in the account of the drawer, the insurer is not liable in such a situation to honour the claim of the insured. Even if the insurer has disbursed the amount covered by the policy to the insured before the cheque was returned dishonoured insurer is entitled to get the money back; National Insurance Company Ltd. v. Seema Malhotra, AIR 2001 SC 1197.

66. Mode of communicating or revoking rescission of voidable contract

The rescission of a voidable contract may be communicated or revoked in the same manner, and subject to some rules, as apply to the communication or revocation of the proposal. proposal.¹

—————————–

1.see sections 3 and 5, supra.

67. Effect of neglect or promise to afford promisor reasonable facilities for performance

If any promisee neglects or refuses to afford the promisee reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal as to non-performance caused thereby.

Illustration

A contracts with B to repair B’s house.

B neglects or refuses to point out to A the places in which his house requires repair.

A is excused for the non-performance of the contract, if it is caused by such neglect or refusal.

Chapter V – Of certain relations resembling those created by contract

68. Claim for necessaries supplied to person incapable of contracting, or on his account

If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.

Illustrations

(a) A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B’s property.

 (b) A suplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B’s property.

—————————–

1.   The property of a Government ward in Madhya Pradesh is not liable under this section; see the C.P. Court of Wards Act, 1899 (C.P. Act 24 of 1899), section 31(I).

69. Reimbursement of person paying money due by another, in payment of which he is interested

A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other.

Illustration

B holds land in Bengal, on a lease granted by A, the zamindar. The revenue payable by A to the Government being in arrear, his land is advertised for sale by the Government. Under the revenue law, the consequence of such sale will be the annulment of B’s lease. B to prevent the sale and the consequent annulment of his own lease, pays the Government the sum due from A. A is bound to make good to B the amount so paid.

Contribution and reimbursement

Where a person is jointly liable with other to pay, a payment by him of the other’s share would not give him a right of recovery under this section; Jagpatiraju v. Sadnusannama, AIR 1916 Mad 980.

70. Obligation of person enjoying benefit of non-gratuitous act

Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such another person enjoys the benefit thereof, the letter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.

71. Responsibility of finder of goods

A person who finds goods belonging to another, and takes them into his custody, is subject to the same responsibility as a bailee.¹

———————–

1.See sections 151 and 152,infra.

72. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion

A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.

Illustrations

 (a) A and B jointly owe 100 rupees to C, A alone pays the amount to C, and B, not knowing this fact, pays 100 rupees over again to C. C is bound to repay the amount to B.

 (b) A railway company refuses to deliver up certain goods to the consignee except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegal and excessive.

Ingredients of unjust enrichment

Under this Section the principle of unjust enrichment cannot be extended to give a right to the State to recover or realise vend fee after the concerned statute for realisation or recovery of vend fee has been struck down; M/s. Somaiya Organics (India) Ltd. V. State of Uttar Pradesh, AIR 2001 SC 1725.

Chapter VI – Of the consequences of breach of contract

73. Compensation of loss or damage caused by breach of contract

When a contract has been broken, the party who suffers by such breach is entitled to receive, form the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss of damage sustained by reason of the breach.

Compensation for failure to discharge obligation resembling those created by contract : When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.

Explanation : In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by non-performance of the contract must be taken into account.

Illustrations

(a) A contracts to sell and deliver 50 maunds of saltpetre to B, at a certain price to be paid on delivery. A breaks his promise. B is entitled to receive from A, by way of compensation, the sum, if any, by which the contract price falls short of the price for which B might have obtained 50 maunds of saltpetre of like quality at the time when the saltpetre ought to have been delivered.

 (b) A hires B’s ship to go to Bombay, and there takes on board, on the first of January, a cargo, which A is to provide, and to bring it to Calcutta, the freight to be paid when earned. B’s ship does not go to Bombay, but A has opportunities of procuring suitable conveyance for the cargo upon terms as advantageous as those on which he had chartered the ship. A avails himself of those opportunities, but is put to trouble and expense in doing so. A is entitled to receive compensation from B in respect of such trouble and expense.

 (c) A contracts to buy of B, at a stated price, 50 maunds of rice, no time being fixed for delivery. A afterwards informs B that he will not accept the rice if tendered to him. B is entitled to receive from A, by way of compensation, the amount, if any, by which the contract price exceeds that which B can obtain for the rice at the time when A informs B that he will not accept it.

 (d) A contracts to buy B’s ship for 60,000 rupees, but breaks his promise. A must pay to B, by way of compensation, the excess, if any, of the contract price over the price which B can obtain for the ship at the time of the breach of promise.

 (e) A, the owner of a boat, contracts with B to take a cargo of jute to Mirzapur, for sale at that place, starting on a specified day. The boat, owing to some avoidable cause, does not start at the time appointed, whereby the arrival of the cargo at Mirzapur is delayed beyond the time when it would have arrived if the boat had sailed according to the contract. After that date, and before the arrival of the cargo, the price of jute falls. The measure of the compensation payable to B by A is the difference between the price which B could have obtained for the cargo at Mirzapur at the time when it would have arrived if forwarded in due course, and its market price at the time when it actually arrived.

 (f) A contracts to repair B’s house in a certain manner, and receives payment in advance. A repairs the house, but not according to contract. B is entitled to recover from A the cost of making the repairs conform to the contract.

 (g) A contracts to let his ship to B for a year, from the first of January, for a certain price. Freights rise, and, on the first of January, the hire obtainable for the ship is higher than the contract price. A breaks his promise. He must pay to B, by way of compensation, a sum equal to the difference between the contract price and the price for which B could hire a similar ship for a year on and from the first of January.

 (h) A contracts to supply B with a certain quantity of iron at a fixed price, being a higher price than that for which A could procure and deliver the iron. B wrongfully refuses to receive the iron. B must pay to A, by way of compensation, the difference between the contract price of the iron and the sum for which A could have obtained and delivered it.

 (i) A delivers to B, a common carrier, a machine, to be conveyed, without delay, to A’s mill, informing B that his mill is stopped for want of machine. B unreasonably delays the delivery of the machine, and A, in consequence, loses a profitable contract with the Government. A is entitled to receive from B, by way of compensation, the average amount of profit which would have been made by the working of the mill during the time that delivery of it was delayed, but not the loss sustained through the loss of the Government contract.

 (j) A, having contracted with B to supply B with 1,000 tons of iron at 100 rupees a ton, to be delivered at a stated time, contracts with C for the purchase of 1,000 tons of iron at 80 rupees a ton, telling C that he does so for the purpose of performing his contract with B. C fails to perform his contract with A, who cannot procure other iron, and B, in consequence, rescinds the contract. C must pay to A 20,000 rupees, being the profit which A would have made by the performance of his contract with B.

 (k) A contracts with B to make and deliver to B, by a fixed day, for a specified price, a certain piece of machinery. A does not deliver the piece of machinery, at the time specified, and, in consequence of this, B is obliged to procure another at a higher price than that which he was to have paid to A, and is prevented from performing a contract which B had made with a third person at the time of his contract with A (but which had not been communicated to A), and is compelled to make compensation for breach of that contract. A must pay to B, by way of compensation, the difference between the contract price of the price of machinery and the sum paid by B for another, but not the sum paid by B to the third person by way of compensation.

 (l) A, a builder, contracts to erect and finish a house by the first of January, in order that B may give possession of it at that time to C, to whom B has contracted to let it. A is informed of the contract between B and C. A builds the house so badly that, before the first of January, it falls down and has to be re-built by B, who, in consequence, loses the rent which he was to have received from C, and is obliged to make compensations to C for the breach of his contract. A must make compensation to B for the cost of rebuilding of the house, for the rent lost, and for the compensation made to C.

(m) A sells certain merchandise to B, warranting it to be of a particular quality, and B, in reliance upon this warranty, sells it to C with a similar warranty. The goods prove to be not according to the warranty, and B becomes liable to pay C a sum of money by way of compensation. B is entitled to be reimbursed this sum by A.

 (n) A contracts to pay a sum of money to B on a day specified. A does not pay the money on that day. B, in consequence of not receiving the money on that day, is unable to pay his debts, and is totally ruined. A is not liable to make good to B anything except the principal sum he contracted to pay, together with interest upto the day of payment.

 (o) A contracts to deliver 50 maunds of saltpetre to B on the first of January, at a certain price, B, afterwards, before the first of January, contracts to sell the saltpetre to C at a price higher than the market price of the first of January. A breaks his promise. In estimating the compensation payable by A to B, the market price of the first of January, and not the profit which would have arisen to B from the sale to C, is to be taken into account.

 (p) A contracts to sell and deliver 500 bales of cotton to B on a fixed day. A knows nothing of B’s mode of conducting his business. A breaks his promise, and B, having no cotton, is obliged to close his mill. A is not responsible to B for the loss caused to B by closing of the mill.

 (q) A contracts to sell and deliver to B, on the first of January, certain cloth which B intends to manufacture into caps of a particular kind, for which there is no demand, except at that season. The cloth is not delivered till after the appointed time, and too late to be used that year in making caps. B is entitled to receive from A, by way of compensation, the difference between the contract price of the cloth and its market price at the time of delivery, but not the profits which he expected to obtain by making caps, nor the expenses which he has been put to in making preparation for the manufacture.

 (r) A, a ship owner, contracts with B to convey him from Calcutta to Sydney in A’s ship, sailing on the first of January, and B pays to A, by way of deposit, one-half of his passage-money. The ship does not sail on the first of January, and B, after being, in consequence, detained in Calcutta for some time, and thereby put to some expense, proceeds to Sydney in another vessel, and, in consequence, arriving too late in Sydney, loses a sum of money. A is liable to repay to B his deposit, with interest, and the expense to which he is put by his detention in Calcutta, and the excess, if any, of the passage-money paid for the second ship over that agreed upon for the first, but not the sum of money which B lost by arriving in Sydney too late.

Award of damages

When a contract is broken, the party who suffers by such breach is entitled to receive compensation for any loss or damage caused to him from the party who has broken the contract; K. Narayana Kurup v. Sankaranarayanan, AIR 2000 Ker 296.

Breach of Contract of carriage

A corporation had placed the order on telephone. The entire transaction was oral and no attempt was made to produce any witness of the alleged buyer to support the contention that the market value of the goods was at the rate of Rs. 3,000 per metric ton. The material on record does not show that the price of goods has risen to Rs. 3,000. Therefore the damages as a result of non-delivery of the alleged goods, have not been proved by the plaintiff and he is not entitled to any damages; Thakral and Sons v. Indian Petro Chemicals Corporation Ltd., AIR 1994 Del 226.

Damages for breach of contract

When there is a breach of contract, party to the contract cannot determine as to who has committed breach. Damages could be recovered from the person who has committed breach only after the same is determined. The conditions of contract would be considered as liquidated damages and could be recovered and no power has been conferred on the other contracting party to determine the damages; P.V. Paily v. State of Kerala, AIR 2000 Ker 268.

The party in breach must make compensation in respect of the direct consequences flowing from the breach and not in respect of loss or damage indirectly or remotely caused; Pannalal Jankidas v. Mohanlal, AIR 1951 SC 145: (1950) SCR 979.

Damages for breach of contract of service

A contract of service entered into by father on behalf of minor is void being without consideration; Raj Rani v. Prem Adib, AIR 1949 Bom 215.

Damages when become due

A seller who commits breach will be liable to compensate according to the prices at the place of sale and not at destination; Murlidhar Chiranji Lal v. Harish Chandra Dwarkadas, AIR 1962 SC 366: (1962) 1 SCR 653.

Limitation

The principle of awarding damages for a reasonable period or reasonable period of notice comes into play only when the contract of employment is not for a fixed period; S.S. Shetty v. Bharat Nidhi Ltd., AIR 1958 SC 12: (1958) SCR 442.

Measure of damages – Breach of contract for sale of goods

Damages are to be awarded as compensation for any loss or damage arising naturally in the usual course of things from the breach of contract; Karsandas H. Thacker v. Saran Engg. Co. Ltd., AIR 1965 SC 1981.

Natural and probable result of breach: Special damage

In cases of breach of contract the damages should be such as may fairly and reasonably be considered as arising naturally or the damages may be such as may reasonably be supposed to have been in contemplation of both parties at the time they made the contract as the probable result of the breach of it. The damages, however cannot include compensation for any remote and indirect loss or damages sustained by reason of the breach; Hadley v. Bexendale, 9 Ex 742.

Taking advantage of benefit resulting from breach of contract

Where a vendee is in default and the vendor subsequently sells at a price higher than the market price on the date of delivery, the fact that by reason of the loss of the contract which the vendee had failed to perform, the vendor obtained the benefit of another contract which was of value to him did not entitle the vendee to the benefit of the later contract; Jamal v. Moola Dawood Sons & Co., (1916) AC 175.

74. Compensation of breach of contract where penalty stipulated for

¹[When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for.

Explanation.— A stipulation for increased interest from the date of default may be a stipulation by way of penalty.]

Exception.— When any person enters into any bail-bond, recognizance or other instrument of the same nature or, under the provisions of any law, or under the orders of the ²[Central Government] or of any ³[State Government], gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein.

Explanation.— A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested.

Illustrations

 (a) A contracts with B to pay B Rs. 1,000 if he fails to pay B Rs. 500 on a given day. A fails to pay B Rs. 500 on that day. B is entitled to recover from A such compensation, not exceeding Rs. 1,000, as the Court considers reasonable.

 (b) A contracts with B that, if A practises as a surgeon within Calcutta , he will pay B Rs. 5,000. A practises as a surgeon in Calcutta . B is entitled to such compensation; not exceeding Rs. 5,000 as the court considers reasonable.

 (c) A gives a recognizance binding him in a penalty of Rs. 500 to appear in Court on a certain day. He forfeits his recognizance. He is liable to pay the whole penalty.

⁴[(d) A gives B a bond for the repayment of Rs. 1,000 with interest at 12 per cent. at the end of six months, with a stipulation that, in case of default, interest shall be payable at the rate of 75 per cent. from the date of default. This is a stipulation by way of penalty, and B is only entitled to recover from A such compensation as the Court considers reasonable.

 (e) A, who owes money to B, a money-lender, undertakes to repay him by delivering to him 10 maunds of grain on a certain date, and stipulates that, in the event of his not delivering the stipulated amount by the stipulated date, he shall be liable to deliver 20 maunds. This is a stipulation by way of penalty, and B is only entitled to reasonable consideration in case of breach.

 (f) A undertakes to repay B a loan of Rs. 1,000 by five equal monthly instalments, with a stipulation that, in default, of payment of any instalment, the whole shall become due. This stipulation is not by way of penalty, and the contract may be enforced according to its terms.

 (g) A borrows Rs. 100 from B and gives him a bond for Rs. 200 payable by five yearly instalments of Rs. 40, with a stipulation that, in default of payment of any instalment, the whole shall become due. This is a stipulation by way of penalty.]

Courts power to grant damages fined

Where the right to recover liquidated damages under section 74 is found to exit no question of ascertaining damages really arises; Chunilal Mehta & Sons Ltd. v. Century Spinning & Mfg. Co. Ltd., AIR 1962 SC 1314.

Penalty and liquidated damages

A clause in a contract can be described as penal if the party who has to pay a certain amount of money fails to pay the amount within the time stipulated. In such a situation the other party will be at liberty to recover the entire sum with interest and costs. Such a clause would be penal in character. But if half payment is made within the time stipulated, the other party waves his right to the balance amount; Prithvichand Ramchand Sablok v. S.Y. Shinde, AIR 1993 SC 1934.

———

1. Subs. by Act 6 of 1899, sec. 4, for the first paragraph.

2. Subs. by the A.O. 1937, for “Government of India ”.

3. Subs. by the A.O. 1950, for “Provincial Government”.

4. Ins. by Act 6 of 1899, sec. 4(2).

75. Party rightfully rescinding contract, entitled to compensation

A person who rightfully rescinds a contract is entitled to consideration for any damage which he has sustained through the no fulfillment of the contract.

Illustration

A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her 100 rupees for each night’s performance. On the sixth night, A wilfully absents herself from the theatre, and B, in consequence, rescinds the contracts. B is entitled to claim compensation for the damage which he has sustained through the non-fulfilment of the contract.

Chapter VII – Sale of Goods

Section 76 to 123 -

Repealed

Chapter VIII – Of indemnity and guarantee

124. “Contract of indemnity” defined

A contract by which one party promises to save the other from loss caused to him by the contract of the promisor himself, or by the conduct of any other person, is called a “contract of indemnity”.

Illustration

A contracts to indemnify B against the consequences of any proceedings which C may take against B in respect of a certain sum of 200 rupees. This is a contract of indemnity.

Idemnity and guarantee

Acknowledgement of debt by principal debtor binds the guarantor in all respects as if he had given express consent; United Commercial Bank v. B. M. Mahadev Babu, AIR 1992 Kant 294.

125. Right of indemnity-holder when sued -

The promisee in a contract of indemnity, acting within the scope of his authority, is entitled to recover from the promisor-

 (1) all damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies;

 (2) all costs which he may be compelled to pay in any such suit, if in bringing of defending it, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any contract of indemnity, or if the promisor authorised him to bring or defend the suit;

 (3) all sums which he may have paid under the terms of any compromise of any such suit, if the compromise was not contract to the orders of the promisor, and was one which it would have been prudent for the promise to make in the absence of any contract of indemnity, or if the promisor authorised him to compromise the suit.

126. “Contract of guarantee”, “surety”, “principal debtor” and “creditor” -

A “contract of guarantee” is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the “surety”, the person in respect of whose default the guarantee is given is called the “principal debtor”, and the person to whom the guarantee is given is called the “creditor”. A guarantee may be either oral or written.

Bank guarantee

Once it becomes apparent that there was no chance to fulfil the conditions in the bank guarantee, invocation of the bank guarantee would not be premature or unjustified; Daewoo Motors India Ltd. v. Union of India, (2003) 4 SCC 690.

It is well settled that bank guarantee is an autonomous contract. It is in common parlance that the issuance of guarantee is what a guarantor creates to discharge liability when the principal debtor fails in his duty and guarantee is in the nature of collateral agreement to answer for the debt; Syndicate Bank v. Vijay Kumar, AIR 1992 SC 1066.

127. Consideration for guarantee

Anything done, or any promise made, for the benefit of the principal debtor, may be a sufficient consideration to the surety for giving the guarantee.

Illustrations

 (a) B requests A to sell and deliver to him goods on credit. A agrees to do so, provided C will guarantee the payment of the price of the goods. C promises to guarantee the payment in consideration of A’s promise to deliver the goods. This is a sufficient consideration for C’s promise.

 (b) A sells and delivers goods to B. C afterwards requests A to forbear to sue B for the debt for a year, and promises that, if he does so, C will pay for them in default of payment by B. A agrees to forbear as requested. This is a sufficient consideration for C’s promise.

 (c) A sells and delivers goods to B. C afterwards, without consideration, agrees to pay for them in default of B. The agreement is void.

128. Surety’s liability

The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract.

Illustration

A guarantees to B the payment of a bill of exchange by C, the acceptor. The bill is dishonoured by C. A is liable, not only for the amount of the bill, but also for any interest and charges which may have become due on it.

General

Contract of guarantee does not provide any contra-note pertaining to the liability of the surety so as to create an exception within the meaning of section 128; Industrial Finance Corporation of India Ltd. v. Cannonore Spinning & Weaving Mills Ltd., (2002) 5 SCC 54.

Limitation

It is a settled law that the creditor would be entitled to adjust from the payment of a sum by a debtor towards the time barred debt from the guarantor’s account. The appellant did not act in violation of any law when he cut the amount from the fixed deposit of the respondent i.e. the surety when the principal debtor failed to pay; Punjab National Bank v. Surendra Prasad Sinha, AIR 1992 SC 1815.

Scope

The clauses of the guarantees executed by the appellant in favour of PICUP clearly show that the liability of the guarantors was to remain unaffected by the failure of PICUP to enforce its mortgage and hypothecation against the assets of the company. There is nothing in the contracts which can in any way be construed as contrary to the joint and several liability created under section 128; Kailash Nath Agarwal v. Pradeshiya Industrial & Investment Corporation of U.P. Ltd., (2003) 4 SCC 305.

The surety has given a continuing guarantee, limited in amount, to secure the floating balance which may from time to time be due from the principal debtor to the creditor, the guarantee is prima facie to be construed as being of part only of the debt. A continuing guarantee may even be for the fixed period. It is well settled that the guarantor cannot be made liable beyond the terms of the agreements; Aditya Naryan Chouresia v. Bank of India, AIR 2000 Pat 222.

Surety may be liable though the principals Contract is void

The Liability of the sureties is co-extensive with that of the principal debtor. Consequently creditor can proceed against the principal debtor or against the sureties, unless it is otherwise provided in the contract. The same should also be the principle with regard to the rights and liabilities between co-sureties as well. A co-surety cannot insist that the creditor should proceed either against the principal debtor or against other sureties before proceeding against him; Kerala State Financial Enterprises Ltd. v. C.J. Thampi, AIR 2000 Ker 36.

129. Continuing guarantee

A guarantee which extends to a series of transaction, is called, a “continuing guarantee”.

Illustrations

(a) A, in consideration that B will employ C in collecting the rents of B’s zamindari, promises B to be responsible, to the amount of 5,000 rupees, for the due collection and payment by C of those rents. This is a continuing guarantee.

 (b) A guarantees payment to B, a tea-dealer, to the amount of £ 100, for any tea he may from time to time supply to C. B supplies C with tea of above the value of £ 100, and C pays B for it. Afterwards, B supplies C with tea of the value of £ 200. C fails to pay. The guarantee given by A was a continuing guarantee, and he is accordingly liable to B to the extent of £ 100.

 (c) A guarantees payment to B of the price of five sacks of flour to be delivered by B to C and to be paid for in a month. B delivers five sacks to C. C pays for them. Afterwards B delivers four sacks to C, which C does not pay for. The guarantee given by A was not a continuing guarantee, and accordingly he is not liable for the price of the four sacks.

130. Revocation of continuing guarantee

A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor.

Illustrations

 (a) A, in consideration of B’s discounting, at, A’s request, bills of exchange for C, guarantees to B, for twelve months, the due payment of all such bills to the extent of 5,000 rupees. B discounts bills for C to the extent of 2,000 rupees. Afterwards, at the end of three months, A revokes the guarantee. This revocation discharges A from all liability to B for any subsequent discount. But A is liable to B for the 2,000 rupees, on default of C.

 (b) A guarantees to B, to the extent of 10,000 rupees, that C shall pay all the bills that B shall draw upon him. B draws upon C, C accepts the bill. A gives notice of revocation. C dishonours the bill at maturity. A is liable upon his guarantee.

131. Revocation of continuing guarantee by surety’ death -

The death of the surety operates, in the absence of any contract to the contrary, as a revocation of ma continuing guarantee, so far as regards future transactions.

132. Liability of two persons, primarily liable, not affected by arrangement between them that one shall be surety on other’s default -

Where two persons contract with third person to undertake a certain liability, and also contract with each other that one of them shall be liable only on the default of the other, the third person not being a party to such contract the liability of each of such two persons to the third person under the first contract is not affected by the existence of the second contract,although such third person may have been aware of its existence.

Illustration

A and B make a joint and several promissory note to C. A makes it, in fact, as surety for B, and C knows this at the time when the note is made. The fact that A, to the knowledge of C, made the note as surety for B, is no answer to a suit by C against A upon the note.

133. Discharge of surety by variance in terms of contract-

Any variance made without the surety’s consent, in the terms of the contract between the principal ¹[debtor] and the creditor, discharges the surety as to transactions subsequent to the variance.

Illustrations

 (a) A becomes surety to C for B’s conduct as manager in C’s bank. Afterwards, B and C contract, without A’s consent, that B’s salary shall be raised, and that he shall become liable for one-fourth of the losses on overdrafts. B allows a customer to over-draw, and the bank loses a sum of money.

A is discharged from his suretyship by the variance made without his consent, and is not liable to make good this loss.

 (b) A guarantees C against the misconduct of B in an office to which B is appointed by C, and of which the duties are defined by an Act of the Legislature. By a subsequent Act, the nature of the office is materially altered. Afterwards, B misconducts himself. A is discharged by the change from future liability under his guarantee, though the misconduct of B is in respect of a duty not affected by the later Act.

 (c) C agrees to appoint B as his clerk to sell goods at a yearly salary, upon A’s becoming surety to C for B’s duly accounting for moneys received by him as such clerk. Afterwards, without A’s knowledge or consent, C and B agree that B should be paid by a commission on the goods sold by him and not by a fixed salary. A is not liable for subsequent misconduct of B.

 (d) A gives to C a continuing guarantee to the extent of 3,000 rupees for any oil supplied by C to B on credit. Afterwards B becomes embarrassed, and, without the knowledge of A, B and C contract that C shall continue to supply B with oil for ready money, and that the payments shall be applied to the then, existing debts between B and C. A is not liable on his guarantee for any goods supplied after this new arrangement.

 (e) C contracts to lend B 5,000 rupees on the 1st March. A guarantees repayment. C pays the 5,000 rupees to B on the 1st January, A is discharged from his liability, as the contract has been varied, inasmuch as C might sue B for the money before the first of March.

—————————–

1.Ins. by Act 24 of 1917, sec. 2 and Sch. I.

134. Discharge of surety by release or discharge of principal debtor -

The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor.

Illustrations

 (a) A gives a guarantee to C for goods to be supplied by C to B. C supplies goods to B, and afterwards B becomes embarrassed and contracts with his creditors (including C) to assign to them his property in consideration of their releasing him from their demands. Here B is released from his debt by the contract with C, and A is discharged from his suretyship.

 (b) A contracts with B to grow a crop of indigo on A’s land and to deliver it to B at a fixed rate, and C guarantees A’s performance of this contract. B diverts a stream of water which is necessary for irrigation of A’s land, and thereby prevents him from raising the indigo. C is no longer liable on his guarantee.

 (c) A contracts with B for a fixed price to build a house for B within a stipulated time. B supplying the necessary timber. C guarantees A’s performance of the contract. B omits to supply the timber. C is discharged from his suretyship.

135. Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor

A contract between the creditor and the principal debtor, by which the creditor make a composition with, or promises to give time, or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract.

136. Surety not discharged when agreement made with third person to give time to principal debtor

Where a contract to give time to the principal debtor is made by the creditor with a third person, and not with the principal debtor, the surety is not discharged.

Illustration

C, the holder of an overdue bill of exchange drawn by A as surety for B, and accepted by B, contracts with M to give to B. A is not discharged.

137. Creditor’s forbearance to sue does not discharge surety

Mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him, dies not, in the absence of any provision in the guarantee to the contrary, discharge the surety.

Illustration

B owes to C a debt guaranteed by A. The debt becomes payable. C does not sue B for a year after the debt has become payable. A is not discharged from his suretyship.

138. Release of one co-surety does not discharge other -

Where there are co-sureties, a release by the creditor of one of them does not discharge the others neither does set free the surety so released from his responsibility to the other sureties.¹

———————

1.See section 44,supra.

139. Discharge of surety by creditor’s act or omission impairing surety’s eventual remedy -

If the creditor does any act which is inconsistent with the right of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.

Illustrations

 (a) B contracts to build a ship for C for a given sum, to be paid by instalments as the work reaches certain stages. A becomes surety to C for B’s due performance of the contract. C, without the knowledge of A, prepays to B the last two instalments. A is discharged by this prepayment.

(b) C lends money to B on the security of a joint and several promissory note made in C’s favour by B, and by A as surety for B, together with a bill of sale of B’s furniture, which gives power to C to sell the furniture, and apply the proceeds in discharge of the note. Subsequently, C sells the furniture, but, owing to his misconduct and wilful negligence, only a small price is realized. A is discharged from liability on the note.

 (c) A puts M as apprentice to B, and gives a guarantee to B for M’s fidelity. B promises on his part that he will at least once a month, see M make up the cash. B omits to see this done as promised, and M embezzles. A is not liable to B on his guarantee.

 (a) B contracts to build a ship for C for a given sum, to be paid by instalments as the work reaches certain stages. A becomes surety to C for B’s due performance of the contract. C, without the knowledge of A, prepays to B the last two instalments. A is discharged by this prepayment.

(b) C lends money to B on the security of a joint and several promissory note made in C’s favour by B, and by A as surety for B, together with a bill of sale of B’s furniture, which gives power to C to sell the furniture, and apply the proceeds in discharge of the note. Subsequently, C sells the furniture, but, owing to his misconduct and wilful negligence, only a small price is realized. A is discharged from liability on the note.

 (c) A puts M as apprentice to B, and gives a guarantee to B for M’s fidelity. B promises on his part that he will at least once a month, see M make up the cash. B omits to see this done as promised, and M embezzles. A is not liable to B on his guarantee.

140. Rights of surety on payment or performance -

Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.

A guarantor will get invested with all the rights which the creditor had only “upon payment or performance of all that he is liable for”. A guarantor is liable for any payment or performance of any obligation only to the extent the principal debtor has defaulted; C.K. Aboobacker v. K.P. Ayishu, AIR 2000 Ker 29 (NOC).

141. Surety’s right to benefit of creditor’s securities -

A surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship entered into, whether the surety knows of the existence of such security or not; and if the creditor loses, or without the consent of the existence of such security or not; and if the creditor loses, or without the consent of the surety, parts with such security, the surety, the surety is discharged to the extent of the value of the security.

Illustrations

 (a) C, advances to B, his tenant, 2,000 rupees on the guarantee of A. C has also a further security for the 2,000 rupees by a mortgage of B’s furniture. C, cancels the mortgage. B becomes insolvent and C sues A on his guarantee. A is discharged from liability to the amount of the value of the furniture.

 (b) C, a creditor, whose advance to B is secured by a decree, receives also a guarantee for that advance from A. C afterwards takes B’s goods in execution under the decree, and then, without the knowledge of A, withdraws the execution. A is discharged.

 (c) A, as surety for B, makes a bond jointly with B to C, to secure a loan from C to B. Afterwards, C obtains from B a further security for the same debt. Subsequently, C gives up the further security. A is not discharged.

Meaning of security

Creditor cannot be said to have lost or parted with a security, without consent of the surety, unless there has been some voluntary act by him; Industrial Finance Corporation of India Ltd. v. Cannanore Spinning & Weaving Mills Ltd., (2002) 5 SCC 54.

142. Guarantee obtained by misrepresentation, invalid

Any guarantee which has been obtained by means of misrepresentation made by the creditor, or with his knowledge and assent, concerning a material part of the transaction, is invalid.

143. Guarantee obtained by concealment, invalid

Any guarantee which the creditor has obtained by means of keeping silence as to meterial circumstances, is invalid.

Illustrations

 (a) A engages B as clerk to collect money for him. B fails to account for some of his receipts, and A in consequence calls upon him to furnish security for his duly accounting. C gives his guarantee for B’s duly accounting. A does not acquaint C with B’s previous conduct. B afterwards makes default. The guarantee is invalid.

 (b) A guarantees to C payment for iron to be supplied by him to B to the amount of 2,000 tons. B and C have privately agreed that B should pay five rupees per ton beyond the market price, such excess to be applied in liquidation of an old debt. This agreement is concealed from A. A is not liable as a surety.

144. Guarantee on contract that creditor shall not act on it until co-surety joins -

Where a person gives a guarantee upon a contract that the creditor shall not act upon it until another person has jointed in it as co-surety, the guarantee is not valid that other person does not join.

145. Implied promise to indemnify surety -

In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety, and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but no sums which he has paid wrongfully.

Illustrations

 (a) B is indebted to C, and A is surety for the debt. C demands payment from A, and on his refusal sues him for the amount. A defends the suit, having reasonable grounds for doing so, but he is compelled to pay the amount of debt with costs. He can recover from B the amount paid by him for costs, as well as the principal debt.

 (b) C lends B a sum of money, and A, at the request of B, accepts a bill of exchange drawn by B upon A to secure the amount. C, the holder of the bill, demands payment of it from A, and, on A’s refusal to pay, sues him upon the bill. A, not having reasonable grounds for so doing, defends the suit, and has to pay the amount of the bill and costs. He can recover from B the amount of the bill, but not the sum paid for costs, as there was no real ground for defending the action.

 (c) A guarantees to C, to the extent of 2,000 rupees, payment for rice to be supplied by C to B. C supplies to B rice to a less amount than 2,000 rupees, but obtains from A payment of the sum of 2,000 rupees in respect of the rice supplied. A cannot recover from B more than the price of the rice actually supplied.

Surety’s right

There is an implied promise by the principal debtor to indemnify the surety and on its basis the latter is entitled to recover from the former whatever sum the latter had rightfully paid under the contract of guarantee; C.K. Aboobacker v. K.P. Ayishu, AIR 2000 Ker 29 (NOC).

146. Co-sureties liable to contribute equally -

Where two or more persons are co-sureties for the same debt or duty, either jointly or severally, and whether under the same or different contract, and whether with or without the knowledge of each other the co-sureties, in the absence of any contract to the contrary, are liable, as between themselves, to pay each an equal share of the whole debt, or of that part of it which remains unpaid by the principal debtor.¹

Illustrations

 (a) A, B and C are sureties to D for the sum of 3,000 rupees lent to E. E makes default in payment. A, B and C are liable, as between themselves, to pay 1,000 rupees each.

 (b) A, B and C are sureties to D for the sum of 1,000 rupees lent to E, and there is a contract between A, B and C that A is to be responsible to the extent of one-quarter, B to the extent of one-quarter, and C to the extent of one-half. E makes default in payment. As between the sureties, A is liable to pay 250 rupees, B 250 rupees, and C 500 rupees.

————————

1. See section 43, supra.

147. Liability of co-sureties bound in different sums -

Co-sureties who are bound in different sums are liable to pay equally as far as the limits of their respective obligations permit.

Illustrations

(a) A, B and C, as sureties for D, enter into three several bonds, each in a different penalty, namely, A in the penalty of 10,000 rupees, B in that of 20,000 rupees, C in that of 40,000 rupees, conditioned for D’s duly accounting to E. D makes default to the extent of 30,000 rupees. A, B and C are liable to pay 10,000 rupees.

 (b) A, B and C, as sureties for D, enter into three several bonds, each in a different penalty, namely, A in the penalty of 10,000 rupees, B in that of 20,000 rupees, C in that of 40,000 rupees, conditioned for D’s duly accounting to E. D makes default to the extent of 40,000 rupees. A is liable to pay 10,000 rupees, and B and C 15,000 rupees each.

 (c) A, B and C, as sureties for D, enter into three several bonds, each in a different penalty, namely, A in the penalty of 10,000 rupees, B in that of 20,000 rupees, C in that of 40,000 rupees, conditioned for D’s duly accounting to E. D makes default to the extent of 70,000 rupees. A, B and C have to pay the full penalty of his bond.

Chapter IX – Of bailment

148. ‘Bailment’, ‘bailor’ and ‘bailee’ defined.—

A ‘bailment’ is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the ‘bailor’. The person to whom they are delivered is called the ‘bailee’.

Explanation.—If a person is already in possession of the goods of other contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment.

Bailment – general

One of the requirements of bailment is delivery of goods to the bailee. Delivery of possession to the bailee is sine qua non of bailment. In order to constitute a bailment change of possession is necessary; Kavita Trehan v. Balsara Hygiene Products Ltd., AIR 1992 Del 103.

149. Delivery to bailee how made -

The delivery to be bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorised to hold them on his behalf.

150. Bailor’s duty to disclose faults in goods bailed -

The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor is aware, and which materially interfere with the use of them, or expose the bailee to extraordinary risk; and if he does not make such disclosure, he is responsible for damage arising to the bailee directly from such faults.

Illustrations

 (a) A lends a horse, which he knows to be vicious, to B. He does not disclose the fact that the horse is vicious. The horse runs away. B is thrown and injured. A is responsible to B for damage sustained.

 (b) A hires a carriage of B. The carriage is unsafe, though B is not aware of it, and A is injured. B is responsible to A for the injury.

151. Care to be taken by bailee -

¹151. Care to be taken by bailee.—In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quantity and value as the goods bailed.²

Care required

In all cases of bailment the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would under similar circumstances; Kavita Trehan v. Balsara Hygiene Products Ltd., AIR 1992 Del 103.

Railway company as bailee

Under section 73 of The Railways Act, the responsibility of railway administration as a carrier and also as a bailee commences from the moment the goods are entrusted to the railway administration for transit to be carried by railway and continues until the goods are unloaded at the destination point. When the responsibility under section 73 of the Railways Act terminates, the responsibility of the railway administration under section 77 of The Railway Act commences; Union of India v. Sattur Nataraja Traders, AIR 1992 Kant 301.

—————————–

1. The responsibility of the Trustees of the Port of Madras constituted under the Madras Port Trust Act, 1905 (Madras Act 2 of 1905), in regard to goods has been declared to be that of a bailee under these sections, without the qualifying words “in the absence of any special contract” in section 152, see section 40(1) of that Act.

2. As to railway contracts see the Indian Railways Act, 1890 (9 of 1890), section 72. [Ed. The Indian Railways Act, 1890 (9 of 1890) has been repealed by the Railways Act, 1989 (24 of 1989), sec. 200.] As to the liability of common carriers, see the Carriers Act, 1865 (3 of 1865), section 8.

152. Bailee when not liable for loss, etc, of thing bailed -

¹152. Bailee when not liable for loss, etc., of thing bailed. The bailee, in the absence of any special contract, is not responsible for the loss, destruction or deterioration of the thing bailed, if he has taken the amount of care of it described in section 151.

——————————

1. The responsibility of the Trustees of the Port of Madras constituted under the Madras Port Trust Act, 1905 (Madras Act 2 of 1905), in regard to goods has been declared to be that of a bailee under these sections, without the qualifying words “in the absence of any special contract” in section 152, see section 40(1) of that Act

153. Termination of bailment by bailee’s act inconsistent with conditions -

A contract of bailment is voidable at the option of the bailor, if the bailee does any act with regard to the foods bailed, inconsistent with the conditions of the bailment.

Illustration

A lets to B, for hire, a horse for his own riding. B drives the horse in his carriage. This is, at the option of A, a termination of the bailment.

154. Liability of bailee making unauthorised use of goods bailed -

If the bailee makes any use of the goods bailed which is not according to the conditions of the bailment, he is liable to make compensation to the bailor for any damage arising to the goods from or during such use of them.

Illustrations

(a) A lends a horse to B for his own riding only. B allows C, a member of his family, to ride the horse. C rides with care, but the horse accidentally falls and is injured. B is liable to make compensation to A for the injury done to the horse.

 (b) A hires a horse in Calcutta from B expressly to march to Banaras. A rides with due care, but marches to Cuttack instead. The horse accidentally falls and is injured. A is liable to make compensation to B for the injury to the horse.

155. Effect of mixture with bailor’s consent, of his goods with bailee’s -

If the bailee, with the consent of the bailor, mixes the goods of the bailor with his own goods, the bailor and the bailee shall have an interest, in proportion to their respective shares, in the mixture thus produced.

156. Effect of mixture, without bailor’s consent, when the goods can be separated -

If the bailee, without the consent of the bailor, mixes the goods of the bailor with his own goods and the goods can be separated or divided, the property in the goods remains in the parties respectively; but the bailee is bound to be bear the expense of separation or division, and any damage arising from the mixture.

Illustration

A bails 100 bales of cotton marked with a particular mark to B. B, without A’s consent, mixes the 100 bales with other bales of his own, bearing a different mark; A is entitled to have his 100 bales returned, and B is bound to bear all the expense incurred in the separation of the bales, and any other incidental damage.

157. Effect of mixture, without bailor’s consent, when the goods cannot be separated -

If the bailee, without the consent of the bailor, mixes the foods of the bailor with his own goods in such a manner that it is impossible to separate the goods bailed from the other goods, and deliver them back, the bailor is entitled to be compensated by the bailee for the loss of the goods.

Illustration

A bails a barrel of Cape flour worth Rs. 45 to B. B, without A’s consent, mixes the flour with country flour of his own, worth only Rs. 25 a barrel. B must compensate A for the loss of his flour.

158. Repayment, by bailor, of necessary expenses -

Where, by the conditions of the bailment, the goods are to be kept or to be carried, or to have work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the bailors shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment.

159. Restoration of goods lent gratuitously

The lender of a thing for use may at any time require its return, if the loan was gratuitous, even through he lent it for a specified time or purpose. But if, on the faith of such loan made for a specified time or purpose, the borrower has acted in such a manner that the return of the thing lent before the time agreed upon would cause him losses exceeding the benefit actually derived by him from the loan, the lender must, if he compels the return. indemnify the borrower for the amount in which the loss so occasioned exceeds the benefits so derived.

160. Return of goods bailed, on expiration of time or a accomplishment of purpose -

It is the duty of the bailee to return, or deliver according to the bailor’s directions, the goods bailed, without demand, as soon as the time for which they were bailed has expired, or the purpose for which they were bailed has been accomplished.

161. Bailee’s responsibility when goods are not duly returned -

¹161. Bailee’s responsibility when goods are not duly returned.—If by the fault of the bailee, the goods are not returned, delivered or tendered at the proper time, he is responsible to the bailor for any loss, destruction or deterioration of the goods from that time.

——————————

1. Section 161 has been declared to apply to the responsibility of the Trustees of the Port of Madras as to goods in their possession see the Madras Port Trust Act, 1905 (Madras Act 2 of 1905).

2. As to Railway contracts, see the Indian Railways Act, 1890 (9 of 1890), section 72 [Ed. The Indian Railways Act, 1890 (9 of 1980) has been repealed by the Railways Act, 1989 (24 of 1989), sec. 200.]

162. Termination of gratuitous bailment by death -

A gratuitous bailment is terminated by the death either of the bailor or of the bailee.

163. Bailer entitled to increase or profit from goods bailed -

In the absence of any contract to the contrary, the bailee is bound to deliver to the bailer, or according to his directions, any increase or profit which may have accrued from the goods bailed.

Illustration

A leaves a cow in the custody of B to be taken care of. The cow has a calf. B is bound to deliver the calf as well as the cow to A.

164. Bailor’s responsibility to bailee -

The bailor is responsible to the bailee for any loss which the bailee may sustain the reason that the bailor was not entitled to make the bailment, or to receive back the goods, or to give directions, respecting them.

165. Bailment by several joint owners -

If several joint owners of goods bail them, the bailee may deliver them back to, or according to the directions of, one joint owner without the consent of all in the absence of any agreement to the contrary.

166. Bailee not responsible on redelivery to bailor without title -

If the bailor has no title to the goods, and the bailee, in good faith, delivers them back to, or according to the directions of the bailor, the bailee is not responsible to the owner in respect of such delivery.¹

——————————–

1. See the Indian Evidence Act, 1872 (1 of 1872), section 117.

167. Right of third person claiming goods bailed -

If a person, other than the bailor, claims goods bailed he may apply to the court to stop delivery of the goods to the bailor, and to decide the title to the goods.

168. Right to finder of goods may sue for specified reward offered -

The finder of goods has no right to use the owner for compensation for trouble and expense, voluntary incurred by him to preserve the goods and to find out the owner; but he may retain the goods again the owner until he receive such compensation; and where the owner has offered a specific required for the return of goods lost, the finder may sue for such reward, and may retain the goods until he received it.

169. When finder of thing commonly on sale may sell it -

When thing which is commonly the subject of sale is lost, if the owner cannot with reasonable diligence be found, or if he refuses upon demand, to pay the lawful charges of the finder, the finder may sell it -

 (1) when the thing is in danger of perishing or of losing the greater part of its value, or

 (2) when the lawful charges of the finder, in respect of the thing found, amount to two-thirds of its value.

170. Bailee’s particular lien -

Where the bailee has, in accordance with the purpose of the bailment, rendered any service involving the exercise of labour or skill in respect of the goods bailed he has in the absence of a contract to the contrary, a right to retain such goods until he receives due remuneration for the services he has rendered in respect of them.

Illustrations

(a) A delivers a rough diamond to B, a jeweller, to be cut and polished, which is accordingly done. B is entitled to retain the stone till he is paid for the services he has rendered.

 (b) A gives cloth to B, a tailor, to make into a coat. B promises A to deliver the coat as soon as it is finished, and to give a three months credit for the price. B is not entitled to retain the coat until he is paid.

171. General lien of bankers, factors, wharfinger, attorneys and policy brokers -

Bankers, factor, wharfingers, attorneys of a High Court and policy brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other person have a right retain, as a security for which balance, goods, bailed to them, unless is an express contract to that effect.¹

Banker’s lien

In mercantile system the Bank has a general lien over all forms of securities or negotiable instruments deposited by or on behalf of the customers in the ordinary course of banking business. The Bank has the liberty to adjust from the proceeds of the two FDR’s towards the dues to the Bank and if there is any balance left that would belong to the depositor; Syndicate Bank v. Vijay Kumar, AIR 1992 SC 1066.

General and particular lien

Section 171 of the Act is clear and categoric that unless a contract to the contrary is established by the plaintiffs, the bank’s right of lien will have to be accepted; Smt. K.S. Nagalambika v. Corporation Bank, AIR 2000 Kant 201.

Workman’s lien for remuneration

The proposition that the bailee, who exercises a lien, is not entitled to charge rent for storage of goods can never apply to a case where the lien is exercised for non-payment of rent or storage charges; Om Shankar Biyani v. Board of Trustees, Port of Calcutta, (2002) 3 SCC 168.

—————————–

1. As to lien of an agent, see section 221, infra. As to lien of a Railway Administration, see the Indian Railways Act, 1890 (9 of 1890), section 55. [Ed. The Indian Railways Act, 1890 (9 of 1890) has been repealed by the Railways Act, 1989 (24 of 1989) See. 200. Now see the Railways Act 1989 (24 of 1989, section 83.]

172. “Pledge”, “Pawnor”, and “Pawnee” defined -

The bailment of goods as security for payment of a debt or performance of a promise is called “pledge”. The bailor is in this case called “pawnor”. The bailee is called “pawnee”.

173. Pawnee’s right of retainer -

The pawnee may retain the goods pledged, not only for payment of the debt or the performance of the promise, but for the interests of the debt, and all necessary expenses incurred by him in respect to the possession or for the preservation of the goods pledged.

174. Pawnee not to retain for debt or promise other than for which goods pledged – presumption in case of subsequent advances -

The pawnee shall not, in the absence of a contract to that effect, retain the goods pledged for any debt or promise of other than the debtor promise for which they are pledged; but such contract, in the absence of anything to the contrary, shall be presumed in regard to subsequent advances made by the pawnee.

175. Pawnee’s right as to extraordinary expenses incurred -

The pawnee is entitled to receive from the pawnor extraordinary expenses incurred by him for the preservation of the goods pledged.

176. Pawnee’s right where pawnor makes default -

If the pawnor makes default in payment of the debt, or performance, at the stipulated time, or the promise, in respect of which the goods were pledged, the pawnee may bring as suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale.

If the proceeds of such sale are less than the amount due in respect of the debt or promise, the pawnor is still liable to pay the balance. If the proceeds of the sale are greater that the amount so due, the pawnee shall pay over the surplus to the pawnor.

Scope

It is the discretion of the pawnee to sell the goods in case the pawnor makes default but if the pawnee does not exercise that discretion no blame can be put on the pawenee and pawnee has the right to bring a suit for recovery of the debt and retain the goods pledged as collateral security; State Bank of India v. Smt. Neela Ashok Naik, AIR 2000 Bom 151.

177. Defaulting pawnor’s right to redeem -

If a time is stipulated for the payment of the debt, or performance of the promise, for which the pledged is made, and the pawnor makes default in payment of the debt or performance of the promise at the stipulated time, he may redeem the goods pledged at any subsequent time before the actual sale of them;¹ but he must, on that case, pay, in addition, any expenses which have arisen from his default.

——————————–

  1.   For limitation, see the Limitation Act, 1963 (36 of 1963), Schedule 1.

178. Pledge by mercantile agent -

¹[178. Pledge by mercantile agent.—Where a mercantile agent is, with the consent of the owner, in possession of goods or the documents of title to goods, any pledge made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the pawnee acts in good faith and has not at the time of the pledge notice that the pawnor has not authority to pledge.

Explanation : In this section, the expression “mercantile agent” and “documents of title” shall have the meanings assigned to them in the Indian Sale of Goods Act, 1930 (3 of 1930).

———————————

1.  Sections 178 subs. by Act 4 of 1930, sec. 2, for original section 178.

178A. Pledge by person in possession under voidable contract -

¹[178A. Pledge by person in possession under voidable contract.—When the pawnor has obtained possession of the other goods pledged by him under a contract voidable under section 19 of section 19A, but the contract has not been rescinded at the time of the pledge, the pawnee acquired a goods title to the goods, provided he acts in good faith and without notice of the pawnor’s defect of title.

———————————-

 1.  Sections 178A subs. by Act 4 of 1930, sec. 2, for original section 178.

179. Pledge where pawnor has only a limited interest -

Where person pledges goods in which he has only a limited interest, the pledge is valid to the extent of that interest.

180. Suit by bailor or bailee against wrong-doer -

If a third person wrongfully deprives the bailee of the use of possession of goods bailed, or does them any injury, the bailee is entitled to use such remedies as the owner might have used in the like case if no bailment has been made; and either the bailor or the bailee may bring a suit against a third person for such deprivation or injury.

181. Appointment of relief or compensation obtained by such suit –

Whatever is obtained by way of relief of compensation in any such suit shall, as between the bailor and the bailee, be dealt with according to their respective interests.

Chapter X – Agency, Appointment and Authority of Agents

182. “Agent” and “principal” defined -

An “agent” is a person employed to do any act for another, or to represent another in dealing with third persons. The person for whom such act is done, or who is so represented, is called the “principal”.

Principle of agency

D.e.s.u. is not an insurance agent within the meanings of life Insurance Corporation Act, 1956 and the Life Insurance Corporation of India (Agents) Regulations, 1972 but D.E.S.U. is certainly an agent as defined in section 182 of the Act. When there is no insurance agent as defined in the Regulations and the Insurance Act, general principles of the law of agency as contained in the Contract Act are to be applied; D.E.S.U. v. Basanti Devi, AIR 2000 SC 43.

183. Who may employ agent -

Any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent.

Scope

Since the defendant is weak, mentally infirm and cannot comprehend for herself, the power of attorney which authorised to act as agent of the defendant had been exhausted because of the defendant’s incapacity; Mahendra Pratap Singh v. Padam Kumari Devi, AIR 1993 All 182.

184. Who may be an agent -

As between the principal and third persons, any person may become an agent, but no person who is not of the age of majority and sound mind can become an agent, so as to be responsible to the principal according to the provisions in that behalf herein contained.

185. Consideration not necessary.—-

No consideration is necessary to create an agency.

186. Agent’s authority may be expressed or implied.—

The authority of an agent may be expressed or implied.¹

—————————

1. See, however, the Registration Act, 1908 (16 of 1908), section 33; See also the Code of Civil Procedure, 1908 (5 of 1908), Schedule I, Order III, rule 4.

187. Definitions of express and implied -

An authority is said to be express when it is given by words spoken or written. An authority is said to be implied when it is to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case.

Illustration

A owns a shop in Serampor, living himself in Calcutta, and visiting the shop occasionally. The shop is managed by B, and he is in the habit of ordering goods from C in the name of A for the purposes of the shop, and of paying for them out of A’s funds with A’s knowledge. B has an implied authority from A to order goods from C in the name of A for the purposes of the shop.

188. Extent of agent’s authority –

An agent, having an authority to do an act, has authority do every lawful thing which is necessary in order to do so such act.An agent having an authority to carry on a business, has authority to do every lawful thing necessary for the purpose, or usually done in the course, of conducting such business.

Illustrations

 (a) A is employed by B, residing in London, to recover at Bombay a debt due to B. A may adopt any legal process necessary for the purpose of recovering the debt, and may give a valid discharge for the same.

 (b) A constitutes B his agent to carry on his business of a ship-builder. B may purchase timber and other materials, and hire workmen, for the purpose of carrying on the business.

189. Agent’s authority in an emergency -

An agent has authority, in an emergency, to do all such acts for the purpose of protecting his principal from loss and would be done by a person or ordinary prudence, in his own case, under similar circumstances.

Illustrations

 (a) An agent for sale may have goods repaired if it be necessary.

 (b) A consigns provisions to B at Calcutta, with directions to send them immediately to C, at Cuttack. B may sell the provisions at Calcutta, if they will not bear the journey to Cuttack without spoiling.

190. When agent cannot delegate -

An agent cannot lawful employ another to perform acts which he has expressly or impliedly undertaken to perform personally, unless by the ordinary custom of trade a sub-agent may, or, from the nature or agency, a sub-agent must, be employed.

191. “Sub-agent” defined -

A “sub-agent” is a person employed by, and acting undue the control of, the original agent in the business of the agency.

192. Representation of principal by sub-agent properly appointed -

Where a sub-agent is properly appointed, the principal is, so far as regards third persons, represented by the sub-agent, and is bound by and responsible for his acts, as if he were an agent originally appointed by the principal.

Agent’s responsibility for sub-agent: The agent is responsible to the principal for the acts of the sub-agent.Sub-agent’s responsibility:

The sub-agent is responsible for his acts to the agent, but not to the principal, except in cases of fraud, or wilful wrong.

193. Agent’s responsibility for sub-agent appointed without -

authorityWhere an agent, without having authority to do so, has appointed a person to act as a sub-agent stands towards such person in the relation of a principal to an agent, and is responsible for his act both to the principal and to third person; the principal is not represented, by or responsible for the acts of the person so employed, nor is that person responsible to the principal.

194. Relation between principal and person duly appointed by agent to act in business of agency -

When an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, such person is not a sub-agent, but an agent of the principal for such part of the business of the agency as is entrusted to him.

Illustrations

(a) A directs B, his solicitor, to sell his estate by auction, and to employ an auctioneer for the purpose. B names C, an auctioneer, to conduct the sale. C is not a sub-agent, but is A’s agent for the conduct of the sale.

 (b) A authorizes B, a merchant in Calcutta, to recover the moneys due to A from C & Co. B instructs D, a solicitor, to take legal proceedings against C & Co. for the recovery of the money. D is not a sub-agent, but is solicitor for A.

195. Agent’s duty in naming such person -

In selecting such agent for his principal, an agent is bound to exercise the same amount of discretion as a man or ordinary prudence would exercise in his own case; and, if he does this, he is not responsible to the principal for the acts of negligence of the agent so selected.

Illustrations

(a) A instructs B, a merchant, to buy a ship for him. B employs a ship-surveyor of good reputation to choose a ship for A. The surveyor makes the choice negligently and the ship turns out to be unseaworthy and is lost. B is not, but the surveyor is, responsible to A.

 (b) A consigns goods to B, a merchant, for sale. B, in due course, employs an auctioneer in good credit to sell the goods of A, and allows the auctioneer to receive the proceeds of the sale. The auctioneer afterwards becomes insolvent without having accounted for the proceeds. B is not responsible to A for the proceeds.

196. Right of person as to acts done forhim without his authority, effect of ratification -

Where acts are done by one person on behalf of another, but without his knowledge or authority, he may elect to ratify or to disown such acts. If he ratifies them, the same effects will follow as if they had been performed by his authority.

197. Ratification may be expressed or implied -

Ratification may be expressed or may be implied in the conduct of the person on whose behalf the acts are done.

Illustrations

 (a) A, without authority, buys goods for B. Afterwards B sells them to C on his own account; B’s conduct implies a ratification of the purchase made for him by A.

 (b) A, without B’s authority, lends B’s money to C. Afterwards B accepts interest on the money from C. B’s conduct implies a ratification of the loan.

198. Knowledge requisite for valid ratification -

No valid ratification can be made by a person whose knowledge of the facts of the case is materially defective.

199. Effect of ratifying unauthorized act forming part of a transaction -

A person ratifying any unauthorized act done on his behalf ratifies the whole of the transaction of which such act formed a part.

200. Ratification of unauthorized act cannot injure third person -

An act done by one person on behalf of another, without such other person’s authority, which, if done with authority, would have the effect of subjecting a third person to damages, or of terminating any right or interest of a third person, cannot, by ratification, be made to have such effect.

Illustrations

(a) A, not being authorized thereto by B, demands, on behalf of B, the delivery of a chattel, the property of B, from C who is in possession of it. This demand cannot be ratified by B, so as to make C liable for damages for his refusal to deliver.

 (b) A holds a lease from B, terminable on three months’ notice. C, an unauthorized person, gives notice of termination to A. The notice cannot be ratified by B, so as to be binding on A.

201. Termination of Agency -

An agency is terminated by the principal revoking his authority, or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated an insolvent under the provisions of any Act for the time being in force for the relief of insolvent debtors.

202. Termination of Agency, where agent has an interest in subject-matter -

Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.

Illustrations

 (a) A gives authority to B to sell A’s land, and to pay himself, out of the proceeds, the debts due to him from A. A cannot revoke this authority, nor can it be terminated by his insanity or death.

 (b) A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and desires B to sell the cotton, and to repay himself out of the price the amount of his own advances. A cannot revoke this authority, nor is it terminated by his insanity or death.

Agent may enforce Contracts if personally enterested

A power of attorney executed in favour of an agent recording or recognizing an interest of the Agent/Attorney in the property which is the subject-matter of the Agency, cannot be revoked or terminated, even if the instrument does not state specifically that it is irrevocable, as then it would be a power coupled with an interest but a power of attorney simplicitor which merely authorised an agent to do certain acts in the name of or on behalf of the executant at any time in spite of the instrument that power of attorney be revoked or cancelled by the executant at any time in spite of the instrument stating that the Power of Attorney is irrevocable; Corporation Bank, Bangalore v. Lalitha H. Holla, AIR 1994 Kant 133.

203. When principal may revoke agent’s authority -

The principal may, save as is otherwise provided by the last preceding section, revoke the authority given to his agent at any time before the authority has been exercised so as to bind the principal.

204. Revocation where authority has been partly exercised -

The principal cannot revoke the authority given to his agent after the authority has been partly exercised, so far as regards such acts and obligations as arise from acts already done in the agency.

Illustrations

(a) A authorizes B to buy 1,000 bales of cotton on account of A and to pay for it out of A’s moneys remaining in B’s hands. B buys 1,000 bales of cotton in his own name, so as to make himself personally liable for the price. A cannot revoke B’s authroty so far as regards payment for the cotton.

(b) A authorizes B to buy 1,000 bales of cotton on account of A, and to pay for it out of A’s money remaining in B’s hands. B buys 1,000 bales of cotton in A’s name, and so as not to render himself personally liable for the price. A can revoke B’s authority to pay for the cotton.

205. Compensation for revocation by principal, or renunciation by agent -

Where there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agent, or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause.

206. Notice of revocation or renunciation -

Reasonable notice must be given of such revocation or renunciation; otherwise the damage thereby resulting to the principal or the agent, as the case may be, must be made good to the one by the other.

207. Revocation and Renunciation may be expressed or implied -

Revocation and renunciation may be expressed or may be implied in the conduct of the principal or agent respectively.

Illustration

A empowers B to let A’s house. Afterwards A lets it himself. This is an implied revocation of B’s authority.

208. When termination of agent’s authority takes effect as to agent, and as to third persons -

The termination of the authority of an agent does not, so far as regards the agent, take effect before it becomes known to him, or, so far as regards third persons, before it becomes known to them.

Illustrations

(a) A directs B to sell goods for him, and agrees to give B five per cent. commission on the price fetched by the goods. A afterwards by letter, revokes B’s authority. B after the letter is sent, but before he receives it, sells the goods for 100 rupees. The sale is binding on A, and B is entitled to five rupees as his commission.

 (b) A, at Madras, by letter directs B to sell for him some cotton lying in a warehouse in Bombay, and afterwards, by letter revokes his authority to sell, and directs B to send the cotton to Madras. B after receiving the second letter, enters into a contract with C, who knows of the first letter, but not of the second for the sale to him of the cotton. C pays B the money, with which B absconds. C’s payment is good as against A.

 (c) A directs B, his agent, to pay certain money to C. A dies, and D takes out probate to his will. B, after A’s death, but before hearing of it, pays the money to C. The payment is good as against D, the executor.

209. Agent’s duty on termination o agency by principal’s death or insanity -

When an agency is terminated by the principal dying or becoming of unsound mind, the agent is bound to take, on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him.

210. Termination of Sub-agent’s authority -

The termination of the authority of an agent causes the termination (subject to the rules herein contained regarding the termination of an agent’s authority) of the authority of all sub-agents appointed by him.

211. Agent’s duty in conducting principal’s business -

An agent is bound to conduct the business of his principal according to the directions given by the principal, or, in the absence of any such directions, according to the custom which prevails in doing business of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and, if any profit accrues, he must account for it.

Illustrations

 (a) A, an agent engaged in carrying on for B a business, in which it is the custom to invest from time to time, at interest, the moneys which may be in hand, on its to make such investments. A must make good to B the interest usually obtained by such investments.

 (b) B, a broker in whose business it is not the custom to sell on credit, sells goods of A on credit to C, whose credit at the time was very high. C, before payment, becomes insolvent. B must make good the loss to A.

212. Skill and Diligence required from agent -

An agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business, unless the principal has notice of his want of skill. The agent is always bound to act with reasonable diligence, and to use such skill as he possesses; and to make compensation to his principal in respect of the direct consequences of his own neglect, want of skill or misconduct, but not in respect of loss or damage which are indirectly or remotely caused by such neglect, want of skill or misconduct.

Illustrations

 (a) A, a merchant in Calcutta, has an agent, B, in London, to whom a sum of money is paid on A’s account, with orders to remit. B retains the money for a considerable time. A, in consequence of not receiving the money, becomes insolvent. B is liable for the money and interest, from the day on which it ought to have been paid, according to the usual rate, and for any further direct loss—as, e.g., by variation of rate of exchange—but not further.

(b) A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper and usual enquiries as to the solvency of B. B at the time of such sale is insolvent. A must make compensation to his principal in respect of any loss thereby sustained.

(c) A, an insurance-broker employed by B to effect an insurance on a ship, omits to see that the usual clauses are inserted in the policy. The ship is afterwards lost. In consequence of the omission of the clauses nothing can be recovered from the underwriters. A is bound to make good the loss to B.

(d) A, a merchant in England, directs B, his agent at Bombay, who accepts the agency, to send him 100 bales of cotton by a certain ship. B, having it in his power to send the cotton, omits to do so. The ship arrives safely in Engalnd. Soon after her arrival the price of cotton rises. B is bound to make good to A the profit which he might have made by the 100 bales of cotton at the time of ship arrived, but not any profit he might have made by the subsequent rise.

General

The defendant/respondent had grossly misconducted himself firstly when he communicated to the appellant that the goods had been purchased at the rate of Rs. 36 per pound when they had not been and further stating that these goods would be despatched as soon as the transporters strike was over. The defendant later on informed the appellant that the goods could not be purchased as their delivery was dependant on yet another party. The defendant had misinformed his principal and his misconduct squarely comes within section 212 of Contract Act; and the defendant must bear the brunt to pay the damages; Jayabharathi Corporation v. SV P.N. SN Rajasekara Nadar, AIR 1992 SC 596.

213. Agent’s accounts -

An agent is bound to render proper accounts to his principal on demand.

214. Agent’s duty of communicate with principal -

It is the duty of an agent, in cases of difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instructions.

215. Right to principal when agent deals, on his own account, in business of agency without principal’s consent -

If an agent deals on his own account in the business of the agency, without first obtaining the consent of his principal and acquainting him with all material circumstances which have come to his own knowledge on the subject, the principal may repudiate the transaction, if the case shows either that any material fact has been dishonestly concealed from him by the agent, or that the dealings of the agent have been disadvantageous to him.

Illustrations

(a) A directs B to sell A’s estate. B buys the estate for himself in the name of C. A, on discovering that B has bought the estate for himself, may repudiate the sale, if he can show that B has dishonestly concealed any material fact, or that the sale has been disadvantageous to him.

 (b) A directs B to sell A’s estate. B, on looking over the estate before selling it, finds a mine on the estate which is unknown to A. B informs A that he wishes to buy the estate for himself, but conceals the discovery of the mine. A allows B to buy, in ignorance of the existence of the mine. A, on discovering that B knew of the mine at the time he bought the estate, may either repudiate or adopt the sale at his option.

216. Principal’s right to benefit gained by agent dealing on his own account in business of agency -

If an agent, without the knowledge of his principal, deals in the business 6f the agency on his own account instead of on account of his principal, the principal is entitled to claim from the agent any benefit which may have resulted to him from the transaction.

Illustration

A directs B, his agent, to buy a certain house for him. B tells A it cannot be bought, and buys the house for himself. A may, on discovering that B has bought the house, compel him to sell it to A at the price he gave for it.

217. Agent’s right of retainer out of sums received on principal’s account -

An agent may retain, out of any sums received on account of the principal in the business of the agency, all moneys due to himself in respect of advances made or expenses properly incurred by him in conducting such business, and also such remuneration as may be payable to him for acting as agent.

218 . Agent’s duty to pay sums received for principal -

Subject to such deductions, the agent is bound to pay to his principal all sums received on his account.

219. When agent’s remuneration becomes due -

In the absence of any special contract, payment for the performance of any act is not due to the agent until the completion of such act; but an agent may detain moneys received by him on account of goods sold, although the whole of the goods consigned to him for sale may not have been sold, or although the sale may not be actually complete.

220. Agent not entitled to remuneration for business misconducted

An agent who is guilty of misconduct in the business of the agency is not entitled to any remuneration in respect of that part of the business which he has misconducted.

Illustrations

(a) A employs B to recover 1,00,000 rupees from C, and to lay it out on good security, B recovers the 1,00,000 rupees and lays out 90,000 rupees on good security, but lays out 10,000 rupees on security which he ought to have known to be bad, whereby A loses 2,000 rupees. B is entitled to remuneration for recovering the 1,00,000 rupees and for investing the 90,000 rupees. He is not entitled to any remuneration for investing the 10,000 rupees, and he must make good the 2,000 rupees to B.

 (b) A employs B to recover 1,000 rupees from C. Through B’s misconduct the money is not recovered. B is entitled to no remuneration for his services, and must make good the loss.

221. Agent’s lien on principal property

In the absence of any contract to the contrary, an agent is entitled to retain goods, papers, and other property, whether movable or immovable, of the principal received by him, until the amount due to himself for commission, disbursements and services in respect of the same has been paid or accounted for to him.

General

The lien of an agent extends only to the retention of the property till his dues are paid. At common law a legal lien merely confers on the holder of the articles in respect of which it was claimed, a passive right to detain the articles until the debt is paid. Such a lien cannot be enforced by sale of the goods; Kavita Trehan v. Balsara Hygiene Products Ltd., AIR 1992 Del 103.

222. Agent to be indemnified against consequences of lawful acts

The employer of an agent is bound to indemnify him against the consequences of all lawful acts done by such agent in exercise of the authority conferred upon him.

Illustrations

 (a) B, at Singapure, under instructions from A of Calcutta, contracts with C to deliver certain goods to him. A does not send the goods to B, and C sues B for breach of contract. B informs A of the suit, and A authorises him to defend the suit. B defends the suit, and is compelled to pay damages and costs, and incurs expenses. A is liable to B for such damages, costs and expenses.

 (b) B, a broker at Calcutta, by the orders of A, a merchant there, contracts with C for the purchase of 10 casks of oil for A. Afterwards A refuses to receive the oil, and C sues B. B informs A, who repudiates the contract altogether. B defends, but unsuccessfully, and has to pay damages and costs and incurs expenses. A is liable to B for such damages, costs and expenses.

223. Agent to be indemnified against consequences of acts done in good faith

Where one person employs another to do an act, and the agent does the act in good faith, the employer is liable to indemnify the agent against the consequences of that act, though it causes an injury to the rights of third persons

Illustrations

(a) A, a decree-holder and entitled to execution of B’s goods requires the officer of the Court to seize certain goods, representing them to be the goods of B. The officer seizes the goods, and is sued by C, the true owner of the goods. A is liable to indemnify the officer for the sum which he is compelled to pay to C, in consequence of obeying A’s directions.

 (b) B, at the request of A, sells goods in the possession of A, but which A had no right to dispose of. B does not know this, and hands over the proceeds of the sale to A. Afterwards C, the true owner of the goods, sues B and recovers the value of the goods and costs. A is liable to indemnify B for what he has been compelled to pay to C, and for B’s own expenses.

224. Non-Liability of employer of agent to do a Criminal Act -

Where one person employs another to do an act which is criminal, the employer is not liable to the agent, either upon an express or an implied promise, to indemnify him against the consequences of that act.

Illustrations

(a) A employs B to beat C, and agrees to indemnify him against all consequences of the act. B thereupon beats C, and has to pay damages to C for so doing. A is not liable to indemnify B for those damages.

(b) B, the proprietor of a newspaper, publishes, at A’s request, a libel upon C in the paper, and A agrees to indemnify B against the consequences of the publication, and all costs and damages of any action in respect thereof. B is sued by C and has to pay damages, and also incurs expenses. A is not liable to B upon the indemnity.

———————————-

 1.See section 24, supra.

225. Compensation to agent for injury caused by principal’s neglect

The principal must make compensation to his agent in respect of injury ¹caused to such agent by the principal’s neglect or want of skill.

Illustration

A employs B as a bricklayer in building a house, and puts up the scaffolding himself. The scaffolding is unskilfully put up, and B is in consequence hurt. A must make compensation to B.

—————————————

1.Cf.the Indian Fatal Accidents Act, 1855 (13 of 1855).

226. Enforcement and Consequences of agent’s contracts -

Contracts entered into through an agent, and obligations arising from acts done by an agent, may be enforced in the same manner, and will have the same legal consequences, as if the contracts had been entered into and the acts done by the principal in person.

Illustrations

(a) A buys goods from B, knowing that he is an agent for their sale, but not knowing who is the principal. B’s principal is the person entitled to claim from A the price of the goods, and A cannot, in a suit by the principal, set-off against that claim a debt due to himself from B.

 (b) A, being B’s agent, with authority to receive money on his behalf, receives from C a sum of money due to B. C is discharged of his obligation to pay the sum in question to B.

227. Principal how far bound, when agent exceeds authority

When an agent does more than he is authorised to do, and when the part of what he does, which is within his authority, can be separated from the part which is beyond his authority, so much only of what he does as is within his authority is binding as between him and his principal.

Illustration

A, being owner of a ship and cargo, authorizes B to procure an insurance for 4,000 rupees on the ship. B procures a policy for 4,000 rupees on the ship, and another for the like sum on the cargo. A is bound to pay the premium for the policy on the ship, but not the premium for the policy on the cargo.

228. Principal not bound when excess of agent’s authority is not separable

Where an agent does more than he is authorised to do, and what he does beyond the scope of his authority cannot be separated from what is within it, the principal is not bound to recognise the transaction.

Illustration

A, authorizes B to buy 500 sheep for him. B buys 500 sheep and 200 lambs for one sum of 6,000 rupees. A may repudiate the whole transaction.

229. Consequences of notice given to agent

Any notice given to or information obtained by the agent, provided it be given or obtained in the course of the business transacted by him for the principal, shall, as between the principal and third parties, have the same legal consequence as if it had been given to or obtained by the principal.

Illustrations

(a) A is employed by B to buy from C certain goods, of which C is the apparent owner, and buys them accordingly. In the course of the treaty for the sale, A learns that the goods really belonged to D, but B is ignorant of that fact. B is not entitled to set-off a debt owing to him from C against the price of the goods.

 (b) A is employed by B to buy from C goods of which C is the apparent owner. A was, before he was so employed, a servant of C, and then learnt that the goods really belonged to D, but B is ignorant of that fact. In spite of the knowledge of his agent, B may set-off against the price of the goods a debt owing to him from C.

230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal

In the absence of any contract to that effect, an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them.

PRESUMPTION OF CONTRACT TO THE CONTRARY. 

Such a contract shall be presumed to exist in the following cases :-

 (1) where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad;

 (2) where the agent does not disclose the name of his principal; and

 (3) where the principal, though disclosed, cannot be sued.

When agent can be sued

Before the agent can be sued it must be pleaded and shown that the principal is undisclosed and the contract, the breach of which is sued on was entered into by the agent as having contracted personally. Where the contract is entered into by agent contracting on behalf of a foreign principal who is named and disclosed, the agent can not be sued personally nor made personally liable; Midland Overseas v. “CMBT Tana”, AIR 1999 Bom 401.

231. Rights of Parties to a contract made by agent not disclosed

If an agent makes a contract with a person who neither knows, nor has reason to suspect, that he is an agent, his principal may require the performance of the contract; but the other contracting party has, as against the principal, the same rights as he would have had as against the agent if the agent had been the principal. If the principal discloses himself before the contract is completed, the other contracting party may refuse to fulfil the contract, if he can show that, if he had known who was the principal in the contract, or if he had known that the agent was not a principal, he would not have entered into the contract.

232. Performance of contract with agent supposed to be principal

Where one man makes a contract with another, neither knowing nor having reasonable ground to suspect that the other is an agent, the principal, if he requires the performance of the contract, can only obtain such performance subject to the rights and obligations subsisting between the agent and the other party to the contract.

Illustration

A, who owes 500 rupees to B, sells 1,000 rupees worth of rice to B. A is acting as agent for C in the transaction, but B has no knowledge nor reasonable ground of suspicion that such is the case. C cannot compel B to take the rice without allowing him to set-off A’s debt.

233. Right of person dealing with agent personally liable

In cases where the agent is personally liable, a person dealing with him may hold either him or his principal, or both of them, liable.

Illustrations

A enters into a contract with B to sell him 100 bales of cotton, and afterwards discovers that B was acting as agent for C. A may sue either B or C, or both, for the price of the cotton.

234. Consequence of Inducing agent or principal to act on belief that principal or agent will be held exclusively liable

When a person who has made a contract with an agent induces the agent to act upon the belief that’ the Principal only will be held liable, or induces the principal to act upon the belief that the agent only will be held liable, he cannot afterwards hold liable the agent or principal respectively.

235. Liability of pretended agent

A person untruly representing himself to be the authorised agent of another, and thereby inducing a third person to deal with him as such agent, is liable, if his alleged employer does not ratify his acts, to make compensation to the other in respect of any loss or damage which he has incurred by so dealing.

236. Person falsely contracting as agent not entitled to performance

A person with whom a contract has been entered into in the character of agent, is not entitled to require the performance of it if he was in reality acting, not as agent, but on his own account.

237. Liability of principal inducing belief that agent’s unauthorized acts were authorized

When an agent has, without authority, done acts or incurred obligations to third persons on behalf of his principal, the principal is bound by such acts or obligations, if he has by his words or conduct induced such third persons to believe that such act and obligations were within the scope of the agent’s authority.

Illustrations

 (a) A consigns goods to B for sale, and gives him instructions not to sell under a fixed price. C, being ignorant of B’s instructions, enters into a contract with B to buy the goods at a price lower than the reserved price. A is bound by the contract.

 (b) A entrusts B with negotiable instruments endorsed in blank. B sells them to C in violation of private orders from A. The sale is good.

238. Effect, on agreement, of misrepresentation or fraud by agent

Misrepresentations made, or frauds committed, by agents acting in the course of their business for their principals, have the same effect on agreements made by such agents as if such misrepresentations or frauds had been made or committed, by the principals; but misrepresentations made, or frauds, committed, by agents, in matters which do not fall within their authority, do not affect their principals.

Illustrations

(a) A, being B’s agent for the sale of goods, induces C to buy them by a misrepresentation, which he was not authorized by B to make. The contract is voidable, as between B and C, at the option of C.

 (b) A, the captain of B’s ship, signs bills of lading without having received on board the goods mentioned therein. The bills of lading are void as between B and the pretended consignor.

Chapter XI – Of Partnership

239-266 of Partnership