9911796707
TMI Blog1966 (6) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... cond partnership, the partners being himself and his son, Govindarajulu. 3. There were applications for registration under section 26A of the Indian Income Tax Act, 1922, in respect of each of the four periods with which we are concerned in this reference. Those applications were refused by the Income Tax Officer, and the appeals preferred by the assessee to the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal were dismissed. The refusal of the applications was founded on the view that the partnership on behalf of which applications were sought were not genuine, in the sense that the assignments of the mining lease by Thiruvengadam Chetty to Venkatarama Chetty once in the year 1954, and again in the year 1955, were not valid assignments, since the previous sanction of the State Government was not obtained in regard thereto under rule 37 of the Mineral Concession Rules. This, in our opinion, is how we should understand what was said, although the Income Tax Appellate Tribunal in some part of its order made a casual reference to the fact that there was a power of attorney executed by Thiruvengadam Chetty in favour of Venkatarama Chetty after the assignment on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, since the application in respect of that period of three months was made beyond the period prescribed, the answer to the first question should be against the assessee and we answer it accordingly. 8. Questions Nos. 2, 3 and 4 cover the same ground although they are worded in somewhat different phraseology. Mr. Rajasekhara Murthy, appearing for the respondent, made the submission that the real question which we should decide is that presented by the second question and that the answer to the third and the fourth questions would depend upon our answer to the second. We think Mr. Rajasekhara Murthy is right in making this submission. 9. Now, the second question, we must observe, is somewhat awkwardly worded. That question asks us to say whether a partnership for continuing mining operations, or an assignment made by a person who holds a lease or on his permission, is prohibited by the Mines and Mineral (Regulation and Development) Act, 1948 (to which we shall refer as the Act ) and the Mineral Concession Rules) to which we shall refer as the Rules .) 10. It is common ground that Thiruvengadam Chetty was granted a mining lease. It is also common ground that there were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that application. But it is enough now to mention that no order was passed by anyone during the relevant period, and it appears that a communication was issued that the matter was under the consideration of the Government. 14. So, the position is that during the period between November 1, 1954, and June 30, 1955, which was period of the first partnership consisting of Venkatarama Chetty and six others, and, during the period commencing on July 1, 1955, when the second partnership was formed, the assignment did not have the support of a sanction under rule 37. Venkatarama Chetty was nevertheless handed over possession of the mine and he worked it, and to overcome technical difficulties such as might emanate from there being no sanction by the State Government, Thiruvengadam Chetty executed two powers of attorney in favour of Venkatarama Chetty. The first was executed on December 11, 1954, and the second on July 25, 1955. 15. In one part of its order, the Tribunal was disposed to think that the execution of the powers of attorney in this way superseded the antecedent assignments made by Thiruvengadam Chetty, although in the statement of the case, the Tribunal made it clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... theless one was formed for working a mine, the lease pertaining to which belonged to Thiruvengadam, but had not been properly transferred to Venkatarama Chetty, that partnership was an illegal partnership and so could not be registered. 19. It is clear that the registration of a partnership cannot be refused under section 26A if there is a genuine partnership and one exists in the eye of the law. The refusal of registration is possible only when there is no genuine partnership or the partnership is illegal. We were not asked by Mr. Rajasekhara Murthy to say that there the partnership which was indeed formed between Venkatarama Chetty and his son was illegal partnership. It was in that sense that he asks us to understand the observation made by the Appellate Tribunal that there was no genuine partnership. 20. As already observed, the illegality of the partnership was sought to be deduced from the fact that it was formed, according to Mr. Rajasekhara Murthy, for working a mine in respect of which the lease had been granted to Thiruvengadam from whom there was no transfer of the lease with the previous sanction of the State Government. We were, therefore, asked to say that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to the provisions of sub-section (1) shall be void. We are not concerned in this case with the grant of any lease, not is it contended by Mr. Rajasekhara Murthy that the grant of the lease to Thiruvengadam was contrary to the provisions of section 4 and the Rules. On the contrary, it is disputed that there was a proper grant of the lease to Thiruvengadam. 25. Rules 26 to 36 are the relevant rules which regulate the grant of a lease. The 26th rule provides that there shall be no grant of a mining a lease to a person who does not hold a certificate of approval. Rule 27 prescribes an application for grant of a mining lease and the particulars to be furnished by the applicant. Rule 28 directs the deposit of a fee along with the application. Rule 28A requires that the lease shall be executed within six months of the order sanctioning the lease. Rule 29 to 36 provide for miscellaneous matters such as the deposit of preliminary expenses, survey of the land leased, the declination of the area of the lease, the security deposit to be made by the applicant and the like. It is after these rules that rule 37 appears and it is the rule which provides for the transfer of a lease by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on mining operations in it at all relevant times. It is seen from the statement of the case that at least two application were presented to the concerned authorities for recognition of the assignment and the second assignment became necessary since the first was not in proper form. Anyhow, on neither of these applications was any order made at any time. The endeavours made by the transferee to secure the sanction sought by him is summed up by the Tribunal in its statement of the case thus : It was learnt subsequently that the application made to Geological Department was not in proper form and had not been in strict compliance lessee executed another assignment deed in favour of Raja Venkatarama Chetty and the lessee state that he no longer had any rights or claim in respect of the leases in question and that he had transferred all the rights from that date onwards in respect of the leases in question. On the same day, i.e., on February 11, 1955, an application was made in the required for, after depositing the required fee for the same, to the Director of Geology to transfer the right title and interest of the lessee in the contract of leases in question in favour of Raja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of the Government'. Thereafter, further correspondence took place in this matter and interviews had with the Chief Minister and other Ministers and, thereafter, with the Director of Geology. In the course of an interview by the lessee with the Director of Geology, the latter asked the original lessee to write to him he had reaffirmed the assignments in question in favour of Raja Venkatarama Chetty. Accordingly, the original lessee wrote to the Director of Mines and Geology in Mysore, Bangalore, on March 9, 1960, informing the department through a letter of.... consent reaffirming his original assignment application requesting transferring mineral concessions standing in his name in favour of Raja Venkatarama Chetty. In spite of it and although the matter was agitated subsequently, the State Government has not chosen to send a formal communication to Raja Venkatarama Chetty or the original assignee rejecting the assignment application. 29. It will, therefore, be seen that from February 11, 1955, till March 9, 1960, the matter was under some king of a triangular correspondence between the lessee, the transferee and the concerned authorities and, at one stage, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the provisions of the Rules. It is in the nature of an enabling provision which authorises a transfer by the lessee to a person who has a certificate of approval, and directs that such transfer could be made with the previous sanction of the Government subject to the other conditions with which we are not concerned. There is a distinction between a statutory provision which contains an express prohibition against the performance of a certain act and one which enables its performance subject to prescribed conditions. While in the former case, there will be no difficulty in coming to the conclusion if nothing else could be said about it that the absolute prohibition against the performance of the act is what is forbidden by law, the same could not be said if the matter falls within the second category. Now the 37th rule does not, in express terms, forbid a transfer but authorities a transfer with the previous sanction of the Government and subject to other conditions. 34. Considerable argument was expended before us over the question whether a rule of that nature was an imperative rule or whether it is merely directory and it was maintained that if it was merely a directory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here there is such disobedience - and we not consider it necessary to express any final opinion on that matter - what the State Government can do is to impose a penalty upon the lessee who made such transfer. Our attention was not invited under which it would be possible for the State Government to refuse to recognise a transfer which was made in disobedience to rule 37. 37. It that be the true position emerging from the relevant statutory provisions which we have discussed, it may be a little difficult for us to accede to the contention that rule 37 is imperative and not merely directory. But it is, however, not necessary of us to proceed to express any very definite view on this aspect of the matter since, in our opinion, our answer to the questions before us can be founded on another ground. 38. In our opinion the real question on which we should focus our attention is, whether as contended by Mr. Rajasekhara Murthy, the partnership agreement is forbidden by rule 37 or whether it is of such a nature that, if permitted, it would defeat its provisions. It is at once clear that since that rule does not contain any terms forbidding any agreement, it would not be possible to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what contracts it prohibits; but you are not concerned at all with the intent of the parties; if the parties enter into a prohibited contract, that contract is unenforceable. 40. It was pointed out by this court in Neminath Appayya v. Jamboorao that the effect of the pronouncement in the above case and that in Waugh v. Morris yields the third principle that while the purpose of a contract, though not illegal at the inception, cannot be performed except by violation of the law, the contract is void. 41. We can accede to the argument advanced before us by Sri Rajasekhara Murthy only if we can say that the contract is void for any one of these three reasons. Since the contract is not a prohibited contract in the sense that neither rule 37 nor any other rule prohibits it, the argument cannot be sustained that the contract of partnership is forbidden by law and is, therefore, void under section 23 of the Contract Act. On the contrary, the 37th rule on which Mr. Rajasekhara Murthy depends, enables the transfer of a lease and so enables the formation of a partnership for working a mine in respect of which a mining lease had been granted through a transfer which could be secured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproval under rules 6 and 7. Even on the supposition that the assignment should have been preceded by the sanction of the Government required by the 37th rule, it was possible for the partnership or for Raja Venkatarama Chetty, as the case may be to obtain another assignment from Thiruvengadam with the previous sanction of the Government. It was open to the partners to desist from working the mine until there was a transfer which was preceded by the sanction of the Government and to desist from carrying on the mining operation until there was a proper transfer. 43. The possibility of the partnership securing a proper transfer under the 37th rule clearly excludes the supposition that the working of the mine or the performance of the partnership contract was not possible except in disobedience to the law, and that, in our opinion, is what concludes the matter. 44. The fact the Venkatarama Chetty and his partners did proceed to operate the mines before obtaining the previous sanction of the State Government is not, in our opinion, material. The contract of partnership, when it was made, did not suffer from the vice of illegality and was, therefore, not an illegal contract. The f ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
