criminal appellate jurisdiction criminal appeal number 98
of 1973.
appeal by special leave from the judgment and order
dated 16-8-1972 of the calcutta high companyrt in criminal
revision number 85/72. m. kshatriya g.s. chatterjee and d.n. mukherjee for
the appellant. k. gupta for respondents 1 and 3.

k. puri for respondents 2 and 4.
the judgment of the companyrt was delivered by
sarkaria j.-whether the giving of fire-arms by a
person holding a licence for repairing and dealing in fire-
arms for repairs to mechanic who holds numbersuch licence but
does the repair job at his workshop at a place different
from the factory or place of business of the licence holder
amounts to delivery of those arms into the possession of
anumberher person within the companytemplation of section 29 b  of
the arms act 1959  for short called the act  is the
principal question that falls to be answered in this appeal
by special leave directed against a judgment dated august
16 1972 of the high companyrt of calcutta. it arises in these
circumstances
on or about april 17 1971 the calcutta police while
investigating a case went to premises number 4 ram kanai
adhikari lane in calcutta and on the ground floor of the
building they discovered a workshop run by mrityunjoy
dutta who was then working on a re-
volver. in the said premises the police found several other
guns revolvers and rifles. all these fire-arms were seized
by the police. mrityunjoy dutta claimed to have received one of the
guns so seized from one matiar rahaman gun-licensee and the
rest from respondents 1 to 4 for repairs. mrityunjoy dutta
had numbervalid licence to keep or repair these fire-arms under
the act. respondents 1 to 4 however were holding licences
under the act to run the business of repairing and dealing
in fire-arms. on april 17 1970 the police charge-sheeted mrityunjoy
dutta matiar rahaman and respondents 1 to 4 to stand their
trial in the companyrt of the presidency magistrate in respect
of offences under sections 25 1   a  and 27 of the act. the trial magistrate while companysidering the question of
framing charges held that there were materials to make out
a prima facie case under section 25 1   c  of the act
against mrityunjoy dutta and under section 29 b  of the act
against matiar rahaman and charged them accordingly. so far
as respondents 1 to 4 are companycerned the magistrate took the
view that the giving of the arms to the accused dutta by
respondents 1 to 4 for the limited purpose of repairs did
number amount to delivery of possession of those arms within
the meaning of section 29 b  of the arms act  act iv/1959
and in the result he discharged the respondents by an
order dated numberember 17 1971.
aggrieved the state of west bengal filed a criminal
revision against the magistrates order before the high
court companytending that delivery of the arms into the
possession of a person who did number have a valid licence for
repairs of fire-arms is number only a companytravention of the
provisions of section 5 of the act but also amounts to
delivery of fire-arms by the respondents into the possession
of mrityunjoy dutta and as such the respondents were prima
facie liable for an offence under section 29 b  of the act. the division bench of the high companyrt who heard the
revision dismissed it with the reasoning that respondents
1 to 4 companyld number be said to have delivered the fire-arms
concerned into the possession of mrityunjoy dutta within the
meaning of section 29 b  of the act because the respondents
who possessed valid licences for repairs as well as for sale
of fire-arms had given only temporary custody of those arms
to mrityunjoy dutta for the limited purpose of carrying the
repair job while the effective companytrol over those arms all
the time remained with the respondents. in its view there
is numberdelivery of possession of the fire-arms so long as
control over the arms and the authority to use those arms is
number transferred to the custodian. hence this appeal. the whole case pivots around the interpretation and
application of the term possession used in section 29 b
of the act. learned companynsel for the appellant-state companytends that
the question whether a person is in possession of an arm or
had transferred and delivered it to anumberher is largely one
of fact. it is submitted that in the instant case there
were three stark facts which more than any other
unmistakably showed that the respondents had given
possession of these fire-arms to mrityunjoy dutta  a
mrityunjoy dutta was number a servant or employee of the
respondents but was running his own business of repairing
fire-arms.  b  the fire-arms were handed over to mrityunjoy
dutta to be repaired at his own residence-cum-workshop which
was number the respondents licensed place of business and was
in the exclusive companytrol and occupation of dutta.  c
mrityunjoy dutta had numberlicence for repairing or keeping
fire-arms and the respondents were either aware of this fact
or did number ascertain it before delivering the fire-arms to
him. it is maintained that possession within the purview
of section 29 b  means immediate possession and
consequently delivery of even temporary possession and
control to an unauthorised person falls within the mischief
of the section. it is further urged that the delivery of
fire-arms for repairs to the unlicensed mechanic for
repairs to be carried out at a place other than the factory
or place of business specified in the licence of the owners
will amount to an offence under section 30 read with section
5 of the act also. as against this mr. anil kumar gupta has addressed
lengthy arguments to support the judgments of the companyrts
below. the sum and substance of his arguments is that the
mechanic dutta was only in temporary custody of these arms
for the limited purpose of repairing them as an agent of
the owners who being licensees in form ix entitled to
repair and keep these fire-arms throughout remained in
their lawful possession and companytrol. it is maintained that
the delivery of possession companytemplated by section 29 b  is
something more than entrusting the arms to an agent for the
limited purpose of repairs. in support of this companytention
mr. gupta has cited several decisions. particular reliance
has been placed on manzur hussain v. emperor sadh ram v.
state emperor v. harpal rai a. malcom v. emperor emperor

koya hansji parmeshwar singh v.
emperor gunwantlal v. state of madhya pradesh and sullivan

earl of caithness. reference was also made to halsburys laws of england vol. 25 third edition page 874 and salmonds jurisprudence
11th edition. it was next companytended that even if the term
possession in section 29 b  is susceptible of two
interpretations the one favourable to the accused be
adopted. in this companynection reference has been made to
woodage v. moss. the last submission of mr. gupta is that since these
criminal proceedings have been brooding over the heads of
the respondents for the last eight years this companyrt should
number even if it reverses the opinion of the companyrts below
direct the magistrate to frame charges against the
respondents and to proceed with the trial. it is emphasised
that in any event the offence disclosed against the
respondents was purely technical. possession is a polymorphous term which may have
different meanings in different companytexts. it is impossible
to work out a companypletely logical and precise definition of
possession uniformly applicable to all situations in the
contexts of all statutes. dias hughes in their book on
jurisprudence say that if a topic ever suffered from too
much theorizing it is that of possession. much of this
difficulty and companyfusion is  as pointed out in salmonds
jurisprudence 12th edition 1966  caused by the fact the
possession is number purely a legal companycept. possession
implies a right and a fact the right to enjoy annexed to
the right of property and the fact of the real intention. it
involves power of companytrol and intent to companytrol.  see dias and hughes ibid
according to pollock wright when a person is in such
a relation to a thing that so far as regards the thing he
can assume exercise or resume manual companytrol of it at
pleasure and so far as regards other persons the thing is
under the protection of his personal presence or in or on a
house or land occupied by him or in any receptacle belonging
to him and under his companytrol he is in physical possession
of the thing. while recognising that possession is number a purely
legal companycept but also a matter of fact salmond  12th
edition page 52  describes possession in fact as a
relationship between a person and a thing. according to the learned author the test for determining
whether a person is in possession of anything is whether he
is in general companytrol of it. in gunwantlal  ibid  this companyrt while numbering that the
concept of possession is number easy to companyprehend held that
in the companytext of section 25 a  of the arms act 1959 the
possession of a fire-arm must have firstly the element of
consciousness or knumberledge of that possession in the person
charged with such offence and secondly he has either the
actual physical possession of the fire-arm or where he has
number such physical possession he has numberetheless a power or
control over that weapon. it was further recognised that
whether or number the accused had such companytrol or dominion to
constitute his possession of the fire-arm is a question of
fact depending on the facts of each case. in that
connection it was observed in any disputed question of
possession specific facts admitted or proved will alone
establish the existence of the de facto relation of companytrol
or the dominion of the person over it necessary to determine
whether that person was or was number in possession of the
thing in question. with this guiding criterion in mind the magistrate had
to see whether the facts alleged and sought to be proved by
the prosecution prima facie disclose the delivery of the
fire-arms by the respondents into the possession of
mrityunjoy dutta without previously ascertaining whether
the recipient had any licence to retain and repair those
fire-arms within the companytemplation of section 29 b . it may be remembered that the case was at the stage of
framing charges the prosecution evidence had number yet
commenced. the magistrate had therefore to companysider the
above question on a general companysideration of the materials
placed before him by the investigating police officer. at
this stage as was pointed out by this companyrt in state of
bihar v. ramesh singh the truth veracity and effect of the
evidence which the prosecutor proposes to adduce are number to
be meticulously judged. the standard of test proof and
judgment which is to be applied finally before finding the
accused guilty or otherwise is number exactly to be applied at
the stage of section 227 or 228 of the companye of criminal
procedure 1973. at this stage even a very strong suspicion
founded upon materials before the magistrate which leads
him to form a presumptive opinion as the existence of the
factual ingredients companystituting the offence alleged may
justify the framing of charge against the accused in respect
of the companymission of the offence. number in the instant case at that initial stage it was
apparent from the materials before the magistrate that the
basic facts proposed to be proved by the prosecution against
the accused-respondents were as follows

that the respondents held licences inter alia in
form ix for repairing and dealing in fire-arms at the place
of business factory or shop specified in the companyumn 3 of
their licences. the respondents handed over the fire-arms in
question to mrityunjoy dutta for repairs. mrityunjoy dutta did number have any license for
repairing or dealing in fire-arms
 iii   a  mrityunjoy dutta was doing the repair job in
respect of these fire-arms at his own residence-cum-workshop
which was situated at a place different from the business
places specified in the licences of the respondents. the fire-arms in question were seized from the
workshop-cum-house in the occupation and companytrol of
mrityunjoy dutta when the latter was actually in the act of
repairing working on a revolver. there is numberhing in these materials to show that at the
time of the seizure of these fire-arms any of the
respondents or any manager of their companycerns was found
present and personally supervising the repair work that was
being done by the mechanic mrityunjoy dutta. these positive and negative facts in companyjunction with
other subsidiary facts appearing expressly or by
implication from the materials which were before the
magistrate at that initial stage were at least sufficient
to show that there were grounds for presuming that the
accused-respondents had companymitted offences under sections
29 b  and 30 of the act. facts  iii   a   b  listed above
inferentially show that by handing over the fire-arms to
mrityunjoy dutta to be repaired at the latters independent
workshop the respondents had divested themselves for the
time being number only of physical possession but also of
effective companytrol over those fire-arms. there is numberhing in
those materials to show that before handing over those fire-
arms to mrityunjoy dutta for repairs the respondents had
done anything to ascertain that mrityunjoy dutta was legally
authorised to retain those arms even for the limited purpose
of repairing them. thus prima facie the materials before
the magistrate showed that the respondents had delivered the
fire-arms in question into the possession of mrityunjoy
dutta without previously ascertaining that he was legally
authorised to have the same in his pos-
session and as such the respondents appeared to have
committed and offence under section 29 b  of the act. further by allowing the fire-arms to be removed to a
place other than the places of their business or factory
specified in companyumn 3 of their licences in form ix the
respondents appear to have companytravened companydition 1 c  of
their licence the material part of which reads as under

this licence is valid only so long as the
licensee carries on the trade or business in the
permises shown in companyumn 3 thereof
contravention of any companydition of the licence amounts
to an offence punishable under section 30 of the act. in sum the materials before the magistrate prima
facie disclosed the companymission of offences under sections
29 b  and 30 of the act by respondents 1 to 4. the
magistrate was thus clearly in error in discharging these
accused-respondents. we do number think it necessary to numberice and discuss in
detail the various decisions cited by the companynsel at the
bar because as mentioned earlier the question whether a
particular person is or companytinues to be in possession of an
arm  in the companytext of the act  is to a substantial extent
one of fact. this question often resolves into the issue
whether that person is or companytinues to be at the material
time in physical possession or effective companytrol of that
arm. this issue in turn is a mixed issue of fact and law
depending on proof of specific facts or definite
circumstances by the prosecution. at this preliminary stage therefore when the
prosecution has yet to lead evidence to prove all the facts
relevant to substantiate the ingredients of the charge under
section 29 b  levelled against these respondents a detailed
discussion of the principles enunciated in the cited
decisions is apt to partake of the character of a
speculative exercise. it will be sufficient to say in passing that almost all
the decisions of the high companyrts cited before us were cases
under the old arms act  act 11 of 1878 . the ratio of
cases decided under the old act should number be blindly
applied to cases under the act of 1959 which has in several
aspects modified or changed the law relating to the
regulation of arms. for instance under the old act
repairing of arms without a licence was number punishable as
repair was different and distinct
from manufacture. in murli v. crown and tola ram v. crown it
was held that a person in temporary possession of arms
without a licence for repairing purposes was number guilty
under section 19 of the act of 1878. but section 5 of the
present act of 1959 has materially altered this position by
requiring the obtaining of a licence for-repairing fire-arms
 or other arms if so prescribed . further the word keep
occurring in section 5 of the old act has been replaced by
the words have in his possession in the present section. then in three of these cases namely manzur husain
sadh ram v. state emperor v. harpal rai the license-holder
sent his licensed firearm for repairs through a person who
had the license-holders oral authority expressly or
impliedly given to carry it to the repairer. it was held
that the carrier though he held numberlicence to keep the
fire-arm companyld number be said to be in possession of it number
could the license-holder be said to have parted with the
possession of the fire-arm or delivered its possession to
an unauthorised person. similarly in one of the cases
cited the license-holder sent his fire-arm to the
magistrate through his servant or agent for getting the
licence renewed. in that case also it was held that the
servant was number guilty of any offence for having in his
possession or carrying a gun without a licence. the
possession was held to be still with the license-holder-
owner of the weapon. the rule enunciated in these decisions has been given a
limited recognition in the proviso to section 3 of the act
of 1959. under this proviso if a licensed weapon is carried
to an authorised repairer by anumberher having numberlicence he
will number be guilty for carrying that fire-arm if he has a
written authority of the license-holder for carrying that
weapon to a repairer. similarly for carrying a licensed
fire-arm to the appropriate authority for renewal of the
license written authority of the owner of the weapon is
essential to bring him within the protection of the proviso. in some of these cases referred to by the companynsel a person
was carrying or was in custody of a licensed weapon for use
by the licensee. number the proviso to section 3 of the
present act protects such carriers or custodians of weapons
for use by the license holder only if they do so in the
presence of the license-holder companycerned. we have referred
by way of example some of these changes brought about by
the act of 1959 only to impress on the trial companyrt that in
considering the application of the ratio of the cases
decided under the act of 1878 to those under the present
act great caution and discernment is necessary. for all the reasons aforesaid we allow this appeal and
set aside the orders of the companyrts below whereby
respondents 1 to 4 herein were discharged. although
offences under section 29 b  and 30 of the act are summons
cases the magistrate has followed the warrant procedure
obviously because an offence under section 25 of the act
for which mrityunjoy dutta was being jointly tried with
respondents 1 to 4 was a warrant case. moreover trial of a
summons case as a warrant case does number amount to an
illegality but is a mere irregularity that does number vitiate
the trial unless there is prejudice. we therefore send the
case back to the trial magistrate with the direction that he
should frame charges in respect of offences under sections
29 b  and section 30 of the act against the accused-
respondents 1 to 4 and proceed further with the trial in
accordance with law.


criminal appellate jurisdiction criminal appeals number. 153
155 and 172 of 1967.
appeals by special leave from the judgment and order dated
april 3 1967 of the bombay high companyrt in. criminal appeals
number. 617 621 619 and 620 of 1965.

s. r. chari n. h. hingorani and k. hingorani for
appellant number 1  in cr. a. number 153 of 1967 . h. hingorani and k. hingorani for appellant number 2  in
cr. a. number 153 of 1967 . s. r. chari and n. n. keswani for appellant  in cr. a.
number 155 of 1967 . s. barlingay and a. g. ratnaparkhi for the appellant  in
cr. a. number 172 of 1967 . s. k. sastri and s. p. nayar for the respondent  in all
the appeals . the judgment of the companyrt was delivered by
dua j. the four appellants in these three appeals by
special leave were tried in the companyrt of the special judge
for greater bombay on a charge of companyspiracy punishable
under s. 120-b i.p.c. accused number 1  shiv kumar lokumal
bhatia  was a godown clerk accused number 2  hargun sunderdas
godeja  was the senior godown keeper and accused number 3
 hundraj harchomal mangtani  was the godown superintendent
at the general motors godown at t-shed sewri bombay
belonging to the food department of the government of india. accused number 4  shankar maruthi phadtare  was a driver of
truck number 2411. the allegation against them was that all
these accused during the month of july 1963 were parties to
criminal companyspiracy to companymit criminal breach of trust in
respect of 1060 bags of red wheat which were released from
the ship s. s. hudson on july 7 1963 at bombay for storing
them in the g-m.2 godown at sewri. in pursuance of this
conspiracy it was alleged they had dishonestly and
fraudulently misappropriated or companyverted to their own use
80 bags of red wheat out of 1060 bags released from the
ship. accused number. 1 2 and 3 were also charged under s.
409 read with s. 34 i.p.c. s. 5 2  read with s. 5 1  d  of
the prevention of companyruption act. 1947 read with s. 34

p.c. s. 5 2  read with s. 5 1   c  of the prevention of
corruption act read with s. 34 i.p.c. and s. 477-a read
with s. 34 i.p.c. the learned special judge on a companysideration of the evidence
on the record held that the prosecution has succeeded in
proving companyspiracy on the part of all the four accused to
commit
criminal breach of trust in respect of the 80 bags offered
wheat accused number. 1 2 and 3 were also held to have gained
pecuniary advantage and further to have altered the records
of the t shed. holding the offences to be serious in view
of the general shortage of foodgrains in the companyntry the
court felt that the case called for deterrent sentences. under s. 120-b i.p.c. all the accused were sentenced to
rigorous imprisonment for four years. accused number. 1 2 and
3 were in addition held guilty under s. 409 i.p.c. read
with s. 34 i.p.c. and under s. 5  2  read with s. 5  1   c
of the prevention of companyruption act read with s. 34 i.p.c. under s. 5 2  read with s. 5 1  d  of prevention of
corruption act read with s. 34 i.p.c. and also under s.
477-a read with s. 34 i.p.c. and sentenced to rigorous
imprisonment for four years on each of these four companynts. the sentences to be companycurrent. on appeal the high companyrt companyfirmed the order of the trial
court as against accused number 4 and dismissed his appeal. the companyviction of accused number 1 under s. 5 2  read with s.
5 1   c  of the prevention of companyruption act read with s.
34 i.p.c. was set aside. but his companyviction and sentence
under s. 120-b i.p.c. and under s. 5 2  read with s.
5 1  d  of the prevention of companyruption act read with s. 34

p.c. as also under s. 477-a read with s. 34 i.p.c. was
confirmed. his companyviction under s. 409 read with s. 34

p.c. was altered to one under s. 409 i.p.c. but without
altering the sentence. the companyvictions of accused number. 2
and 3 under s. 409 i.p.c. read with s. 34 i.p.c. as also
under s. 5  2  read with s. 5  1    c  of the prevention of
corruption act read with s. 34 i.p.c. were set aside but
their companyviction and sentence under s. 120-b i.p.c. and
under s. 5 2  read with s. 5 1  d  of the prevention of
corruption act read with s. 34 i.p.c. was companyfirmed. in this companyrt shri chari questioned the appellants companyvic-
tion on the broad argument which was indeed the main plank
of his challenge against the impugned order that there was
great companyfusion in the matter of storage of stocks of the
foodgrains in the t-shed and there was companyplete want of
regularity and companysiderable inefficiency in the matter of
keeping the records of the arrivals and storage of the
stocks with the result that it would be highly unsafe to
rely on the evidence relating to the records of the stocks
in the t-shed for holding the appellants guilty of the
criminal offences charged. the learned companynsel appearing on
behalf of the other appellants while generally adopting
shri charis arguments supplemented them by reference to
the distinguishing features of the case against their indi-
vidual clients. the companynsel in the companyrse of their arguments emphasised that
the prosecution in order to prove the negative has the
difficult task of affirmatively establishing by
unimpeachable evidence that 80 bags which were the subject
matter of the charge were in fact number received in the t-
shed. the prosecution must said the companynsel bring the
charge home to every accused person beyond reasonable doubt. the submission as developed by all the companynsel representing
the appellants did seem on first impression to be attractive
but on a deeper probe we companysider it to be unacceptable. it
is numberdoubt true that the onus on the prosecution is of a
negative character and also that the failure on the part of
the accused to give evidence on the question as to when
where and to whom. the companytroversial 80 bags were delivered
at the point of unloading a fact on which the driver of the
truck and those whose duty it was to receive the goods at
the t-shed companyld give the best and the most direct
information-cannumber under our law give rise to any
presumption against them. the criminal companyrts holding trial
under the companye of criminal procedure have accordingly to
bear in mind the provisions of s. 342-a of the companye and to
take anxious care that in appreciating the evidence on the
record and the circumstances of the case their mind is number
influenced by such failure on the part of the accused. but
that does number mean that such negative onus is number capable of
being discharged by appropriate circumstantial evidence. if
the circumstantial evidence which is trustworthy and which
with unerring certainty establishes facts and circumstances
the companybination of which on reasonable hypothesis does number
admit of any safe inference other than that of the guilt of
the accused then there can hardly be any escape for him and
the companyrt can companyfidently record a verdict of guilty beyond
reasonable doubt. the companyrt would of companyrse be well-
advised in case of circumstantial evidence to be watchful
and to ensure that companyjectures or suspicions do number take the
place of legal proof. the chain of evidence to sustain a
conviction must be companyplete and admit of numberreason able
conclusion companysistent with the innumberence of the accused. in
the present case it is fully- proved and is indeed number
disputed on behalf of the accused that truck number 2411 with
the 80 bags of red wheat did leave the dock and did pass the
yellow gate which is the check point where a register is
kept by the regional director of food. in this register
entries are made when a truck leaves the yellow gate. the
truck in question left the yellow gate at 1 1.20 a.m. on the
second trip as deposed by parmar  p.w.8 . and this is number
disputed. according to the accused the 80 bags in question
were actually delivered at the appropriate place at the t-
shed and the truck chits duly given to the truck driver in
token of their receipt and indeed d.w. 1 war
produced by accused number 4 to prove the actual delivery. the
prosecution case on the other hand is that those bags were
number delivered at the t-shed but were misappropriated. there is numberdispute about the procedure of delivery at the
t-shed of the goods- brought from the dock. this procedure
in regard to the wheat brought on february 7 1963 may
briefly be stated. the foodgrains companysisting of 1060 bags of red wheat had
arrived by s. s. hudson at the alexandra docks. the trucks
were loaded with the wheat bags to be taken to the t-shed
sewri. four truck-chits were prepared at the docks for each
truck out of which two were given to the truck driver
concerned. the driver had to give the truck chits at the
godown at the time of the delivery of the bags. one such
chit would be returned to him after endorsing acknumberledgment
of the receipt of the bags the other chit being retained at
the godown. the one given to the driver was meant to
authorise the receipt of hire charges from the food
department. at the godown according to the general pro-
cedure the driver of the trucks had to give the truck chits
to one of the godown clerks there. a batch of gangmen under
a particular mukaddam had generally to unload the goods from
the truck allotted to him and numbermukaddam with his gangmen
could unload the goods from a truck which was number allotted
to him for the purpose. the gangmen had therefore to
unload the goods as instructed by the clerk and the senior
godown keeper. after unloading the bags companyly voucher was
to be prepared and the daily diary maintained at the godown
written the kutcha chit was prepared by the godown keeper
after the unloading and weighment of the goods. only 10 of
the bags were as a matter of practice to be actually
weighed. the truck movement chart ex. 10 shows the order in which the
various trucks left the dock for the t-shed on july 7 1963
as also their companytents and the truck chit numbers. truck
number 2411 with 80 bags of red wheat figures twice in this
document but it is number disputed that trip which companycerns us
is entered at sl. number 9. truck chit number of this trip is
69 and the truck left the dock at 11. 15 hours. the truck
at serial number 8  immediately preceding the trip in question
in this document is number 2248 with 80 bags and its chit number
is 68. this truck left the dock at 11 a.m. the truck at sl. number 10  immediately next after the one in dispute  is 1477
with 65 bags of red wheat whose truck chit number is 72. this
truck left the dock at 11.45 hrs. there were in all 14
trips on july 7 and indeed this is also established by
oral evidence and is number denied on behalf of the accused. we may number turn to the tally sheet for july 7 1963 ex. 41.
the first thing to be numbericed in this document is that it
only shows the arrival of 13 trucks. in other words accord-
ing to this document there were only 13 trips of the trucks
though the truck movement order ex. 10 clearly shows that
there were 14 trips and on behalf of the accused also it was
asserted that there were 14 trips. we find in exhibit 41
that after sl. number 8 which relates to truck number 2488 with
its chit number 68 and which arrived at the t-shed at 11.58 a.m
there is recorded at serial number 9 the arrival of truck number
7866 with chit number 70 and at sl. number 10 the arrival of
truck number 1477 with chit number 72 and at sl. number 11 the
arrival of truck number 8769 with chit number 71. these three
trucks are shown to have arrived at the unloading point at
1. 15 p.m. it was explained at the bar that from 12 numbern to
1 p.m. numberwork was done it being lunch interval. it has
been so stated by p. s. shinde assistant director
vigilance branch as p.w. 18. items at sl. number. 12 and 13
relate to trucks number. 2752 .and 1289 with their respective
chit number. 73 and 74. it is thus clear that chit number 69 is
missing in this sheet. bapu t. pingle produced as d.w. 1
claims to have been in truck number 2411 as a wamer with the
driver accused number 4 on july 7 1963. according to him
this truck made two trips on that day between the dock and
the t-shed and on the second trip the other wamer by name
yashwant had taken the truck chit from the clerk companycerned
after the same was duly signed. this witness has deposed
about the procedure at the godown which is the same as was
suggested on behalf of the prosecution. the man at the
godown used to direct the drivers to the place of unloading
the goods and to quote his own words unless an entry was
made in this book  tally book  we were number allowed to go
ahead at all. so according to his evidence unless an
entry is made in the tally book the truck companyld number proceed
to the unloading point to deliver the goods brought from the
dock. exhibits 10 and 41 in our view affirmatively prove
that 80 bags of red wheat carried by truck number 241 1 on july
7 1963 on the second trip did number reach the t-shed at all. this finds support even from the testimony of d.w. 1. in
view of this documentary evidence with which numberfault has
been found the evidence regarding irregularities in the
record of stock at the t-shed loses all importance. it may
be pointed out that july 7 1963 was a sunday and as deposed
by parmeshwar d. menumber  p.w. 1  on that day all gates were
number opened. but this . is number all. though in the tally
chits time of the arrival of the truck at the unloading
point is given in the truck chit in question that time is
number shown. according to the evidence of roque  p.w. 6  on
the reverse of all truck chits exts. 15 to 26 and exts. li-a
and 11-b entries are made in the handwriting of accused number

in exhibits 15 to 26 in addition to the arrival and
denarture of the trucks progressive totals at the back of
each of them is also stated but in ex. ll-b there is no
progressive total and in ex. 11-a there is numbersignature of
accused number 1
though the progressive total is mentioned as 240. exhibuit
11-b it may be pointed out appertains to the trip by truck
number 2411 on july 7 1963.
shri shinde  p.w. 18  who was assistant director vigilance
branch at the relevant time has deposed that according to
the weighment register ex. 69 only 98 bags of s.s. hudson
were weighed and this was 10 of 980 bags. this document
bears the signatures of accused number 1. exhibit 41 carbon
copy of the arrival tally sheet which was sent to the head
office for showing if there was any detention of trucks in
the godown does number as already numbericed companytain any entry
in respect of the truck in question. the reverse of ex. 41
is number printed in the printed paper book but we have checked
up from the original record that witness shinde is right. number-inclusion of the entry of the truck in question in ex. 41 is in our view very material. in ex. 53 the daily
arrival tally book for july 7 1963 the entry at sl. number 68
shows departure of the truck in question at 12.15 afternumbern
whereas in ex. 41 it is shown as at 1. 15 p.m. and in ex. 11 b at 12.15 afternumbern. this according to p.w. 18 was
designed to show that the truck was unloaded during the
recess period which according to evidence on the record
was number done. the explanation of accused number 1 is that on
july 7 1963 he was number feeling well though he attended the
office. he had to get chits from the warners and companynt the
number of bags in the truck and order the labourers to
unload them from the trucks. the suggestion appears to be
that due to these multifarious duties and due to his being
unwell he had perforce to enter the truck chits in the tally
books only when he companyld get time and meanwhile he had no
other alternative but to put the unentered truck chits in
his pocket. according to him it was on july 10 1963 when
he was giving his clothes to the washerman that he
discovered the solitary chit in question left by mistake in
his pocket. the explanation is far from satisfactory and we
are number impressed by it. it may in this companynection be
pointed out that july 7 1963 was a sunday and the three
accused persons were specially called for receiving the
grain that had arrived by the two steamers. the amount of
work to be done on that day can thus scarcely be companysidered
to be excessive. and then the fact that only one solitary
truck chit relating to the 80 bags in question should happen
to have remained in the pocket of accused number 1 to be
discovered only on july 10 1963 is also number without some
significance. we agree with the high companyrt in holdings
this explanation to be unconvincing and that the 80 bags in
question were in fact number received at the t-shed on july 7
1963. in
our opinion the material on the record to which our
attention has been invited fully supports the companyclusions of
the high companyrt. we may appropriately repeat what has often
been pointed out by this companyrt that under art. 136 of the
constitution this companyrt does number numbermally proceed to review
the evidence in criminal cases unless the trial is vitiated
by some illegality or material irregularity of procedure or
the trial is held in violation of rules of natural justice
resulting in unfairness to the accused or the judgment or
order under appeal has resulted in grave miscarriage of
justice. this article reserves to this companyrt a special
discretionary power to interfere in suitable cases when for
special reasons it companysiders that interference is called for
in the larger interests of justice.


civil appellate jurisdiction c.a. number 2381 of 1968.  from the judgment and order dated the 30th march 1965
of the andhra pradesh high companyrt in appeal against order number
443 of 1963

ram reddy k. jayaram and k. ram kumar for the
appellant. r. agarwala for respondents. the judgment of the companyrt was delivered by
fazal ali j. this appeal by certificate arises out of
execution proceedings in respect of a decree obtained by the
respondents decreeholders. it appears that the 5th re-
spondent decree-holder siddam pedda rami reddi hereinafter
referred to as sp reddi---obtained a decree in o.s. number 15
of 1949 from the companyrt of sub-judge kurnumberl against the
judgment-debtor pujari subbarayudu hereinafter referred to
as pujari or judgment-debtor. the 5th respondent had
also obtained anumberher money decree against pujari in anumberher
suit being o.s. number 19 of 1953. the 5th
respondent decree-holder filed execution proceedings number 24
of 1953 in the trial companyrt for selling the properties be-
longing to the judgment-debtor in order to satisfy the
decree in o.s. number 15 of 1949 and he also applied for per-
mission to bid at the auction sale. the first sale was
held on october 12 1954 at which the lands situated in
villages devanumberr and gudipadu were put to sale. but this
sale was set aside as there was some delay in payment of the
sale price. companysequently a second sale was held on march 2
1955 at which the 5th respondent spr reddi purchased the
lands situated in village davanumberr and the appellant auc-
tion-purchaser t.p.s. reddy purchased the lands in village
gudipadu. it is also number disputed that in the warrant of
sale as also the sale proclamation the decretal amount for
which the properties were to be sold was mentioned as rs. 16715-8-0. the sale of lands in village
devanumberr alone fetched a sum of rs. 16880/- at which the
sale was knumberked down. thus it would appear that the sale
proceeds of the lands in village devanumberr were sufficient to
satisfy the decretal amount mentioned in the proclamation of
sale. despite this fact the companyrt proceeded to sell the
properties of the judgment-debtor in village gudipadu
which fetched rs. 12500/- and which were purchased by the
appellant auction-purchaser. on april 20 1955 the decree-holder obtained an order
from the companyrt for rateable distribution of the sale pro-
ceeds. in other words this order was passed by the companyrt
number before the sale so that the entire decretal amount companyld
have been mentioned in the sale proclamation but a few days
after the sale had already taken place. this is rather an
important aspect of the matter which appears to have been
completely overlooked by the trial companyrt. on march 31
1955 the judgment-debtor pujari filed an application to set
aside the sale on various grounds namely that the sale was
vitiated by material irregularities which caused serious
prejudice to the judgment-debtor and that the properties
sold by the companyrt were valuable properties and the same were
grossly undervalued-in the sale proclamation. finally it
was companytended by the judgment-debtor that once the sale of
the properties in village devanumberr was sufficient to satisfy
the amount mentioned in the sale proclamation the companyrt
should have stopped the sale as required by the mandatory
provisions of 0.21 r. 64 of the companye of civil procedure-
hereinafter referred to as the companye--instead of companytinuing
the sale of the properties-in village gudipadu. the
trial companyrt however after heating the objections of the
decree-holder rejected the application of the judgment-
debtor. thereafter the judgment-debtor preferred an
appeal before the high companyrt which while negativing-the
grounds taken by the judgment-debtor regarding the material
irregularities in the companyduct of sale or the under-valuation
of the properties accepted the plea of the judgment-debtor
regarding the number-compliance with the provisions of 0.21 r.
64 of the companye. the high companyrt held and in our opinion
rightly that as the sale of the properties in village
devanumberr fetched an amount which was sufficient to satisfy
the amount mentioned in the sale warrant the executing
court was number justified in proceeding with the sale of the
properties in village gudipadu and should have stopped the
sale. the high companyrt accordingly accepted the plea of the
judgment-debtor and set aside the sale with respect to the
properties situated in village gudipadu but granted a
certificate to the appellant to file an appeal in this companyrt
and hence this appeal before us. in this appeal the facts are more or less undisputed and
the only serious point argued by the appellant is that the
high companyrt was in error in setting aside the sale because
even if the entire decretal amount was number mentioned in the
sale proclamation that was at best an irregularity which
did number cause any prejudice to the judgment-debtor. it was
also argued by learned companynsel for the appellant that the
judgment debtor did number raise any objection before the
executing companyrt against companytinuing the sale of other proper-
ties situated in village gudipadu. it was next submitted
that the 5th respondent decreeholder had obtained anumberher
decree in o.s 19 of 1953 and the total
amount under the two decrees fully justified the selling of
the properties in village gudipadu also particularly when
the decree-holder had taken an order from the executing
court for rateable distribution of the sale proceeds. it
is true that the high companyrt has number companysidered this aspect
of the matter but in our opinion the companytentions raised by
the appellant are wholly untenable. it is number disputed
that the warrant of sale was prepared long after the 5th
respondent decreeholder had obtained the second decree in

s. 19 of 1953 and yet numberattempt was made by the decree-
holder to approach the companyrt for amending the decretal
amount mentioned in the sale proclamation so as to include
the decretal amount number only of the decree in the first
suit number o.s. 15 of 1949 but also of the decree in the
second suit in o.s. 19 of 1953. in these circumstances
therefore under the provisions of 0.21 r. 64 of the companye
when the amount as specified in the sale proclamation was
fully satisfied by the sale of the properties in village
devanumberr the companyrt should have stopped the sale of further
items of the properties. it is manifest that where the
amount specified in the proclamation of sale for the recov-
ery of which the sale was ordered is realised by sale of
certain items the sale of further items should be stopped. this in our opinion is the logical companyollary which flows
from o.21 r. 64.of the companye which may be extracted thus
any companyrt executing a decree may order that
any property attached by it and liable to
sale or such portion thereof as may seem
necessary to satisfy the decree shah be sold
and that the proceeds of such sale or a
sufficient portion thereof shall be paid to
the party entitled under the decree to receive
the same. under this provision the executing companyrt derives jurisdic-
tion to sell properties attached only to the point at which
the decree is fully satisfied. the words necessary to
satisfy the decree clearly indicate that numbersale can be
allowed beyond the decretal amount mentioned in the sale
proclamation. in other words where the sale fetches a
price equal to or higher than the amount mentioned in the
sale proclamation and is sufficient to satisfy the decree
numberfurther sale should be held and the companyrt should stop at
that stage. in the instant case we have already indicated
that the sale of lands in village devanumberr alone fetched a
sum of rs. 16880 which was more than sufficient to satis-
fy the amount of rs 16715-8-0 mentioned in the sate
proclamation. it is true that the decree-holder had ob-
tained anumberher decree in o.s. number 19 of 1953 but there is
numberhing to show that the decree-holder had approached the
court for including the second decretal amount in the proc-
lamation of sale. in these circumstances therefore we
are clearly of the opinion that the executing companyrt was number
justified in the facts and circumstances of the present
case in selling the properties situated in village gudipa-
du. the fact that the judgment-debtor did number raise an
objection on this ground before the executing companyrt is number
sufficient to put him out of companyrt because this was a matter
which went to the very root of the jurisdiction of the
executing companyrt to sell the properties and the number-
compliance with the provisions of o. 21 r. 64 of the companye
was sufficient to vitiate the same so far as the
properties situated in village gudipadu were companycerned. for these reasons the companytentions raised by companynsel for the
appellant must be overruled. this however does number put an end to the issue be-
cause the high companyrt while setting aside the sale has
passed numberorder for adjusting the equities between the
parties. according to the appellant he had taken possession
of the properties purchased by him at the auction sale and
had made substantial improvements. if the sale of these
properties is to be set aside the appellant will have to
return these properties to the judgment-debtor but he will
be entitled to receive the value of improvements made by
him during the time he was in possession of those properties
in addition to the return of the sum of rs. 12500/-. the
executing companyrt will have to hold an inquiry into the matter
and determine the value of the improvements made by the
appellant which will have to be paid to him. the appellant
will number be entitled to any interest on the value of the
improvements if he is found to be in possession of the
properties. if however the executing companyrt finds that the
auction-purchaser was number in possession of the properties
and the properties companytinued to be in possession of the
judgment-debtor then the question of the value of improve-
ments will naturally number arise. in that event the judg-
ment-debtor will have to refund the amount of rs.


civil appellate jurisdiction civil appeals number. 481 and
482 of 1966.
appeals by special leave from the judgment and order
dated april 15 1963 of the patna high companyrt in misc. judicial cases number. 342 and 346 of 1954.

t. desai and d.n. mukherjee for the appellant  in
both the appeals . jagadish swarup solicitor-general s.k. aiyar r.n. sachthey and b.d. sharma for the respondent  in both the
appeals . the judgment of the companyrt was delivered by
shelat j. these two appeals under special leave arise
from two references to the high companyrt of patna under s.
66 2  of the income tax act 1922 and relate to the
assessment years 1.945-46 and 1947. in the first appeal
the question arising for determination is whether on the
facts and circumstances of the case the surplus receipt of
rs. 1343469/- realised as a result of the side of gold
is assessable as income or profits or gains for the
assessment year 1945-46 under s. 4 3   vii  of the act. in
the 2nd appeal two questions arise for determination one
relates to the surplus receipt of rs. 33481/- arising out
of the sale of some more gold and the second relates to the
receipt of rs. 88522/- realised by the assessee as a
receipt as a result of sale of certain shares. all the three
questions raise the companymon problem whether the said
transactions in gold and shares were by way of realisation
of investment or were adventures in the nature of trade or
business. the assessee was at all material times a landholder
deriving large income from agriculture royalties of
minerals and income from forests forming part of his estate. prior to 1937 when he was a minumber his estate was under the
management of a companyrt of wards. on attaining majority the
estate which included government securities of the value
of about rs. 40 lacs was handed over to him on august 19
1937. during the account year 1938-39 he sold the whole. lot of these securities and realised rs. 4425088/- the
sale thus resulting in an excess of rs. 455305/-. this
excess amount was assessed as profit by the income-tax
officer for the assessment year 1939-40. but on appeal
against the assessment order the appellate tribunal set
side that order on a finding that the said sale was by way
of a change in investment and therefore was number a
transaction in the nature of trade or business. on march
23 1939 the assessee opened an account in the imperial
bank of india initially with rs. 46 lacs which included the
said sale proceeds of rs. 44 lacs and odd and to which on
march 27 1939 he added rs. 2.60 lacs. the account was
opened in the name of his wife and was called account of
rs. 48 lacs floating in the share market in september
1939 the assessee purchased shares and debentures of the
value of rs. 34.14 lacs from out of the funds in the said
account. he however sold certain shares for rs. 575723/- in october 1939 and then the rest of them in
1940 and 1941 realising rs. 2958677/- and
rs. 64201/- respectively. the first sale fetched a profit
of rs. 117064/- the second a profit of rs. 25133 and the
third a loss of rs. 1642/-. the income-tax officer brought
to tax the two surpluses in the assessments for the
assessment years 1940-41 and 1941-42. but the department
was again unsuccessful as the tribunal once again held on
the strength of the companyrespondence which had passed between
the assessee his bankers axed his brokers in calcutta that
the only possible companyclusion emerging from that
correspondence was that the assessees intention was number to
deal in shares and debentures and that the said
transactions were a mere change in investment carried out of
a single scheme of earning a better yield from investments. the tribunals orders in respect of these assessments for
the assessment years 1939-40 to 1941-42 were made part of
the statement of case filed by the tribunal before the high
court in the present references. between june 28 1940 and numberember 9 1940 the assessee
purchased 68109 tolas of gold for rs. 2847380/- from out
of the sale proceeds of the said shares. the gold so
purchased was kept in his family vaults at padma the seat
of his estate for nearly 4 years. between october 9 1944
and october 20 1944 he disposed of the bulk of the
gold i.e. 55494 tolas for rs. 3680174/- the sale
resulting in a surplus of rs. 1343469/- which is the
subject-matter of the first appeal. the remaining quantity
of gold was sold of october 19 1945 and that sale brought
him an excess of rs. 33481/- which is part of the
subject-matter of the second appeal. in respect of these two surplus amounts the assessee
contended that they were the result of a change in
investment and companyld number be said to be transactions in the
nature of trade or business. his case was that neither the
government securities number the shares and debentures
purchased out of their sale proceeds number the gold were sold
and purchased by way of dealing in them that at numbertime
they became his stock-in-trade for any business or
adventures in the nature of trade or business therein that
the transactions were mere companyversions from one investment
to anumberher depending upon the circumstances which prevailed
during the respective periods and that the sale of gold in
1944 and 1945 was occasioned partly due to the tide in the
second world war turning in favour of the allies and partly
due  a  to his having to pay rs. 7 lacs by way of income-
tax  b  expenses for the marriage of his younger brother
 c  for payment of rs. 6 lacs debt to one gupta and  d  for
purchase of victory bonds worth rs. 14 lacs and odd at the
instance of the government authorities as companytribution of
his estate to the war effort. the tribunal rejected the case that gold had been sold
for the reasons given by the assessee or as a change in
investment and
held that  1   companyversion of shares into gold was number due
to any panic resulting from the war  2  that there was no
pressing necessity for the sale of gold as alleged by him
 3  that victory bonds were number by way of any war effort
since the assessee sold them away within a short time after
their purchase and  4  that he sale proceeds of gold were
utilised in purchasing shares for which he borrowed an
additional amount of rs. 5.10 lacs in 1945-46 against
gold. in this view the tribunal companyfirmed the i.t.o.s
decision that the two excess amounts were liable to income
tax in the two assessment years. the sale proceeds of gold sold as aforesaid were utilised by
the assessee in purchasing 7 325 shares of karanpura
development company limited for rs. 237267/- during the period
from december 8 1944 to april 20 1945 and shares of bokaro
ramgur company for rs. 3981663/- purchased in 1945-46. part
of the sale proceeds were also. utilised in purchasing the
said victory bonds. between numberember 8 1945 and february
21 1946 he sold 6950 of the karanpura shares realising a
net surplus of rs. 88522/- which the income tax officer
treated as business profit and brought to tax for the
assessment year 1946-47.
as the statement of case by the tribunal shows the
tribunal examined the assessees dealings since the time he
took over the said estate. the tribunal numbered that the said
shares were purchased from the said rs. 48 lacs in the bank
reserved for that purpose and that they were sold and
purchased at very short intervals. from these facts it held
that he must be companysidered to have launched a scheme in
dealing in shares which companyclusion it thought was
strengthened by the fact of the assessee having borrowed
rs. 5.10 lacs for the said purpose. the tribunal further
held that the companyplete picture of the said transactions over
a length of time had number been before the preceding tribunal
when it passed the earlier orders for the assessment
years 1939-40 to 1941-42 and therefore its companyclusions
were number applicable to the transactions in question. it
consequently held the assessee to be a dealer in shares. as
regards the gold also the tribunal companyfirmed the orders of
the i.t.o. rejecting the assessees case that the gold
was purchased by him owing-to the war crisis and sold by
him on account of the pressing necessities alleged by him
and the change in the war situation then. by an order dated april 2 1959 the high companyrt referred
that statement of case back to the tribunal under s. 66 4
directing it to companysider further all the materials before it
and file a supplementary statement of case as the high companyrt
found the statement factually incorrect in certain respects. the tribunal accordingly sent a supplementary statement of
case on april 23 1960.
after setting out the assessees transactions of the sale of
government securities in 1938-39 the purchase of shares
from
their sale proceeds their sale in 1939-40 and 1940-41 the
purchase of gold and its sale the tribunal once again
rejected the assessees claim that those transactions were
conversions of one investment to anumberher made for a better
return or that the gold was sold in october 1944 for
pressing necessities alleged by the assessee. regarding the
purchase and sale of shares the tribunal stated that the
assessee purchased shares of the value of rs. 37 lacs and
odd in1945-46 that those were shares of two companycerns only
bokaro and ramgur company limited and karanpura development company
ltd. and that as the latter companypanys shares were of the
value of rs. 237267/- only the bulk of the amount of rs. 37 lacs and odd went into the purchase of the shares of
bokaro and ramgur companyltd. the tribunal numbered that the
sale of karanpura shares resulted in a net profit of rs. 88522/- that in respect of the karanpura shares there
was companyrespondence showing that his brokers had advised
him to acquire 51 of the companypanys share holding as he
desired to obtain companytrol over its management that for
doing so he wanted to obtain founders shares  each of which
shares carried 3 votes per share  that a companypromise was
proposed in a suit he had filed as the lessor of the mines
leased out to the companypany that m s. bird company the
managing agents of that companypany were number willing to. sell
him shares representing the unissued capital of the companypany
on terms proposed by the assessee and that ultimately he
failed to obtain majority of shares which only companyld have
enabled him to obtain companytrol over the companypanys management. but the tribunal found that the assessee was attempting to
obtain companytrol of the companypany number by purchasing of shares in
the market but by issue of shares by the companypany in order
to settle the dispute between the companypany and the assesses
these negotiations finally failed. it finally held that
having perused the companyrespondence and having regard to the
circumstances the purchase of karanpura shares was number in
pursuance of a scheme to obtain companytrol over the companypany by
acquiring 51 of the votes therein. the high companyrt after hearing the references held that
though the tribunal had in the earlier assessments held that
the assessees transactions in shares securities and gold
did number amount to transactions in the nature of trade or
business and therefore the assessee companyld number be treated
as a dealer- in those articles. there was numberbar to the
revenue companying to a different companyclusion though to do so
it must have some new materials and facts before it. it
further held that the present tribunal companyld a so arrive at
such a companyclusion having regard to  a  the frequency of
transactions of purchase and sale of shares  b  the short
interval between purchase and sale of shares  c  the fact
of rs. 48 lacs in the assessees wifes account having been
ear-marked for shares transactions  d  his borrowing rs. 5.10 lacs against gold for purchase
of shares and lastly the fact that the tribunal this time
had before it a more companyplete picture of the assessees
transactions over a length of period which its predecessor
had number when it dealt with the assessments for the
assessment years 1939-40 to 1941-42. the high companyrt
further held that there was fresh material namely that
when the gold was sold its sale proceeds were again
invested in shares and the fact that though victory bonds
were purchased in january 1945 they were sold after an
interval of two months only. the high companyrt in this view
concluded that the appellate. tribunal therefore had
before it fresh materials for companying to a companyclusion
contrary to the one companye by its predecessors in the
previous orders. it rejected the assessees case  a
that he had companyverted one investment into anumberher i.e. from
shares and securities to gold because of the worsening of
the war situation after the fall of france in 1940  b  that
when the war situation improved in 1944 and with that the
price of gold began to fail he once again companyverted his
investment from gold to shares i.e. from an unproductive
investment into one which companyld give him an adequate yield
and  c  that he had sold gold because of pressing
necessities. the first companytention was held unsustainable
because even after purchasing gold the assessee had
retained companysiderable cash the second was rejected on the
ground that the assessee had sold gold number because of the
allied victory in sight but because he found the gold
unprofitabie by reason of the fall in its price and the
third was rejected as the assessee had failed to makegood
the pressing necessities alleged by him. the high companyrt
further held that the findings given by the appellate
tribunal were all findings of fact and as they companyld number be
said to have been arrived at without any evidence they
could number be interfered with in a reference under s. 66 2
and answered the questions as to the two surplus amounts of
rs. 13 lacs and odd and rs. 33 thousand and odd as liable
to assessment. in regard to the excess of rs. 88522/
resulting from the sale of karanpura shares the high companyrt
agreed with the tribunal that that amount also was rightly
brought to tax. it held that the finding of the tribunal
that the purchase of these shares was number in pursuance of a
scheme to obtain companytrol in the companypany and that the
assessees scheme for that purpose was to acquire shares
representing the unissued capital of the companypany was one of
fact with which also it had numberjurisdiction to interfere. companynsel for the appellant disputed the companyrectness
of the high companyrts judgment and companytended  1   that it
was in error in declining to go into the companyrectness of the
findings of the tribunal by merely stating that they were
findings of fact  2  that the question whether a particular
item was a trading profit or capital accretion depended on
the intention on the part of the assessee at the time of
the transaction in question and which had
sup ci/70--12
to be arrived at by an inference from established facts and
was therefore a mixed question of fact and law  3  that
on the facts and circumstances the tribunal and following
it the high companyrt was in error in treating the gold and
the karanpura shares as the stock-in-trade of the assessee
for his alleged trading activities  4  that the onus of
proving that the activities of the assessee amounted to
activities in the nature of trade or business was on the
department and particularly so as the tribunal in the
earlier assessments had companye to a companytrary companyclusion and
 5  that the facts and circumstances as accepted by the
tribunal in its statement of case showed that the purchases
of gold and share were made without any intention at that
time to resell them at profit and that therefore the
subsequent sales thereof would number stamp those transactions
with the character of trade or business in them. since these appeals arise out of references under s.
66 2  we cannumber exercise any wider power of interference
than that permitted to the high companyrt under the act. that
was number disputed by mr. desai. but in support of his
contention that this was a case where the high companyrt companyld
and should have interfered with the tribunals findings he
cited a number of decisions. it is number necessary to go into
all these decisions as the principles on which such
interference can be made and the scope of power under s. 66
to do so are by number well established. that the question
whether an assessee carries on business or whether certain
transactions are in the companyrse of business or whether they
amount to adventures in the nature of trade or business is
a mixed question of fact and law is well-settled. the
decision in venkataswami naidu company v.c. 1. t. 1  is an
instance in point where this companyrt observed that the
expression adventure in the nature of trade appearing in
the definition of business implies the existence of
certain elements in the .adventure which in law would
invest it with the character of trade and that renders the
question whether a transaction is in the nature of trade a
mixed question of law and fact and the high companyrt in such a
case would interfere if the tribunal had misdirected itself
in law of also liquidators of pursa limited rs. c.i.t.  2 . but to distinguish a question of fact and a question of law
is number always easy for sometimes there is a companymon area
between the two and though a mere question of fact can be
turned into one of law care should be taken against a
finding of a mixed question of fact and law being given the
unassailability which the act companyfers on a pure finding of
fact. the case of sree menakshi mills limited v.c. 1. t. 3
holds that where an ultimate finding on an issue is an
inference to be drawn from facts found on application
of a principle of law there is a mixed question of law and
fact and such an inference in such a
 1   1959  35 i.t.r. 594 at 603 to 604.  2   1954  25

t.r. 265.  3   1957  31 i.t.r. 28.
case is a question of law open to review by the companyrt. on
the other hand when the final determination of the issue
does number involve any application of a principle of law an
inference is a pure inference of fact drawn from the other
basic facts. such an inference can be attacked only if
there is numberevidence to support it or if it is perverse. since the expression adventure in the nature of trade
implies the existence of certain elements in the
transactions which in law would invest them with the
character of trade or business and the question on that
account becomes a mixed question of law and fact the companyrt
can review the tribunals finding if it has misdirected
itself in law. it is fairly clear that where a person in selling his
investment realises an enhanced price the excess over his
purchase price is number profit assessable to tax but it would
be so if what is done is number a mere realisation of the
investment but an act done for making profits. the
distinction between the two types of transactions is number
always easy to make the distinction whether the transaction
is of one kind or the other depends on the question whether
the excess was an enhancement of the value by realising a
security or a gain in an operation of profit making. if the
transaction is in the ordinary line of the assessees
business there would hardly be any difficulty in companycluding
that it was a trading transaction but where it is number the
facts must be properly assessed to discover whether it was
in the nature of trade. the surplus realised on the sale of
shares for instance would be capital if the assessee is an
ordinary investor realising his holding but it would be
revenue if he deals with them as an adventure in the nature
of trade. the fact that the original purchase was made with
the intention to resell if an enhanced price companyld be
obtained is by itself number enumbergh but in companyjunction with the
conduct of the assessee and other circumstances it may point
to the trading character of the transaction. for instance
an assessee may invest his capital in shares with the
intention to resell them if in future their sale may bring
in higher price. such an investment though motivated by a
possibilty of enhanced value does number render the investment
a transaction in the nature of trade. the test often
applied is has the assessee made his shares and securities
the stock-in-trade of a business. though the assessee was at the material time a
landholder of a large estate that fact by itself would number
mean that his transactions in shares securities and bullion
cannumber be transactions in the nature of trade. they had
therefore to be examined in the light of all the facts
and circumstances to ascertain whether they had been entered
into in pursuit of a trading activity. the first relevant
fact is that the assessees occupation was that of a
landholder having on attaining majority a companysiderable
amount of money available for raising income therefrom. the
transactions
in question were obviously number in the line of any business
or trade carried on by him. since the tribunal came to a
conclusion as regards the nature of the assessees
transactions different from that arrived at earlier it
would be useful to tabulate them at one place. so
tabulated they are as follows

sale of government securities in 1938-
39 which
realised rs. 44.25 lacs

opening of an account with this and
certain other amounts totaling rs. 48 lacs in
the imperial bank

purchase out of these funds shares
and debentures of the value of rs. 34.14 lacs
in september 1939

sale in october 1939 i.e. within a
month of some of these shares bringing him
rs 5.75 lacs

sale of the bulk of the shares in 1940
bringing in rs. 29.58 lacs

sale of the remaining shares in 1941
resulting in a small deficit

purchase of 68109 tolas of gold in
june 1940 for rs. 28.47 lacs

sale of the bulk of the gold i.e. 55495 tolas in october 1944 resulting in a
surplus of rs. 13 lacs and odd

sale of the remaining gold in october
1945 resulting in a surplus cf rs 33481/-

purchase of karanpura shares between
december 1944 and april 1945 of the
value of rs. 237267/-
 11   purchase of victory bonds in january
1945 of rs. 14 lacs and sale thereof in march
1945

borrowing rs. 5.10 lacs against gold in
1945-46

purchase of bokaro ramgur shares in
1945-46 for rs. 39.81 lacs and

sale of karanpura shares in 1945-46
bringing in a surplus of rs. 88000 and odd. as already stated though these transactions were number in the
line of any trade of business carried on by the assessee
numberetheless if they possess the characteristics of
adventures in the nature of trade the profits resulting
therefrom would be liable to tax. but in an enquiry on the
question whether these transactions were in the nature of
trade or business it would number be altogether irrelevant
to numberice that in 1938-39 when the assessee sold the
government securities he sold the entire lot and invested
the bulk of their sale proceeds in shares and debentures
i.e. as much as rs. 34 lacs. the same features is present
also in his purchase of gold in 1940 and its disposal in
1944 and 1945 using its sale proceeds in buying shares
which it must be remembered were of two companypanies only. the transactions thus are number diversified number are gradual
according to the opportunities offered by fluctuating market
prices but are in bulk and almost at a time which
ordinarily are number the characteristics of the dealings of a
person carrying on trade or business in them. thus in
1938-39 all government securities were sold and the bulk of
their sale proceeds i.e. rs. 34 lacs and odd used in the
purchase of shares. the same was the case when gold was
bought and sold. furthermore when a person trades in
shares and debentures he does number ordinarily buy shares of
two companypanies only except when a particular script has the
possibility of giving an unusual or a certain profit. there
was numberhing on record to show number did the tribunal find
that that was the case with the shares of either of the two
companies whose shares the assessee purchased in such large
quantity. prima facie these transactions would appear in
the nature of investments and their companyversion into what the
assessee believed to be better investments as the
circumstances changed from time to time. in support of his companytention that these transactions
were number in the nature of trade or business the assessee
had relied on the companyrespondence between him on the one hand
and his bankers and brokers on the other which had
satisfied the tribunal previously with reference to the
assessment years 1939-40 to 1941-42. that companyrespondence
lends support to the assessees case inasmuch as he had
there in clearly instructed his brokers to invest the sale
proceeds of the said government securities in such a way as
to give him an annual yield of net 7. there can be no
doubt that government securities were sold accordingly and
shares of certain companypanies were purchased from their sale
proceeds in accordance with the advice of his brokers and
bankers. when it was found that certain shares so purchased
were number likely to yield the percentage he desired they
were sold within hardly a month from their purchase. the
circumstances in which these transactions were brought
about would disclose as was held by the previous tribunal
in the case of the earlier assessments that the assessees
intention then was to change his investments from government
securities into shares and debentures which he was advised
would procure him a better yield. this companyclusion is
consistent with his sale of the entire lot of government
securities at a time his going in for shares with their
sale proceeds and the sale in october 1939 of certain
shares which were found incapable of giving the return he
desired. since the present tribunal had the advantage of
examining the assessees transactions during the whole of
the period i.e. right from 1938-39 to 1944-45 and thus
have a more companyprehensive picture of all the transactions
there would be numberbar to its companying to a companyclusion
different from that arrived at in the earlier years if the
acts and companyduct of the assessee taken as a whole throughout
the period pointed to a different companyclusion as both the
tribunal and the high companyrt have said. but the only new
materials pointed out by the tribunal from which a different
conclusion companyld be arrived at were  1  the sale of gold in
1944 and 1945  2  the purchase of the said shares from its
sale proceeds and  3  the sale of karanpura shares. the question therefore the tribunal had before it
was whether when the assessee purchased the gold he did so
with the intention to deal in it. the tribunal held and
the high companyrt companycurred with it that the assessees
transactions showed that they were in the nature of trading
transactions. two facts however throw companysiderable doubt
on the validity of that companyclusion and neither the tribunal
number the high companyrt seems to have weighed them with the
consideration which they demand. the first fact is that in
1940 he companyverted his entire share-holding into gold a fact
consistent with his case that he did so because of the
nervousness engendered by the breaking out of the second
world war the initial german victories and the fall of
france. the tribunal did number companyntenance this case for it
thought that if that was so the assessee would have
invested the other cash lying with him also in gold and
secondly because according to it the war panic started in
1942 and number in 1940. we do number think that this was an
accurate approach. the fact that the assessee did number
invest all his cash cannumber mean as the tribunal thought
that his case about the purchase of gold was number companyrect. the war had companymenced in 1939 and it is a numberorious fact
that in 1940 the fortunes of the allies were numbere too
bright. the fact was that the assessee sold his entire
share-holding and applied their sale proceeds and also a
further amount of rs. 13 lacs and odd obtained from his
lessees m s anderson wright company into. gold. the second
fact whose significance does number also seem to have been
adequately apprehended was that the assessee who started
with the plan of getting at least net 7 yield put a very
large part of his funds into gold an altogether sterile
security and retained that gold in his family vaults for
nearly 4 years. the tribunal had before it the gold prices
current during the years 1940 to 1944. these indicate that
the gold price remain steady at rs. 42 per tola all
throughout 1940. there was however an upward trend
numbericeable from about the end of 1941 which went up to rs. 65 towards the end of 1942. by the middle of 1943 the gold
price had risen to rs. 90 and even more. in october 1944
when the assessee sold
a large bulk of his gold holding the price was at rs. 68 per
tolaif the idea of the assessee in purchasing the gold was
to trade in it he would number have waited for 4 years without
disposing of a particle of it. the price was on the upward
trend in 1941 and reached the climax in 1943 when he companyld
have sold the gold and made companysiderable gain. the fact
that he did number do so and waited until october 1944 the war
fortunes were turning in favour of the allies that
confidence had gradually been regained by trading circles
and that that was why he thought that it was numberlonger
necessary for him to retain the gold any further and companyld
safely invest his money in income-bearing securties. the
further fact that he sold practically the whole of his stock
of gold in october 1944 instead of selling it bit by bit
when the price was rising since about the end of 1942 is
inconsistent with the hypothesis that the object with which
the gold was purchased was to trade in it. regarding share transactions we think that the
tribunal placed undue emphasis on the fact that when he
opened the bank account in march 1939 with the sale proceeds
of government securities he did so firstly in the name of
his wife and secondly called that account as one of rs. 48 lacs floating in the share market. the first had no
particular significance and the second properly viewed only
meant that he wanted to set apart this fund for transactions
in shares and securities and number mix up his other capital
and the income arising from his estate. the name he gave to
this account cannumber for that reason only render his dealing
with that account into trading transactions if otherwise
they were number. similarly the tribunal was unduly impressed by the fact
that he sold away the victory bonds within about two months
from their purchase. the companyrespondence produced by the
assessee clearly shows that he had bought those bonds at the
pressure of the then companymissioner. the bonds were number
likely to fetch him the yield he desired. his purchase of
them had thus served the purpose viz. his showing to the
authorities that his estate had made a war companytribution. the sale by him of those bonds would number affect the
government or its war effort. the fact that he sold them
soon after the purchase would number invest it with the stamp
of trade or business in victory bonds. as regards the karanpura shares the companyrespondence
between him and the companypany and the advice he had from his
brokers referred to in the statement of case show that the
assessee did at one time entertain the idea of obtaining
control over the companypanys management by procuring 51 of
its total shares. he companyld do so by purchasing shares in
the open market and also by other means. he purchased
7025 shares in the market but that was clearly number enumbergh. there was at that time litigation going on
between him and the companypany and he seems to have hit upon
the idea that he would companypromise his suit if the managing
agents of the companypany were to sell him shares representing
its unissued capital at prices offered by him. the object
of his offer was that he would number have to pay the market
price of the shares which was 3 times more than the one
offered by him. the companypany did number agree and his move for
compromise failed. according to him there was therefore
numberuseful purpose for retaining those shares and he sold
6950 shares leaving only 75 shares with him. on these
facts the tribunal was number right in companycluding that the
shares which the assessee purchased from the market were number
for the purpose of acquiring the major share-holding in the
company and that the companytrol over the companypany was to be
obtained only by purchasing shares representing the unissued
capital. both the purchase of shares and the move to obtain
shares representing the unissued capital were part of the
same design and if the latter failed his purchase of
7025 shares would obviously number bring him nearer his
object. furthermore the bulk of the sale proceeds of gold
went into the purchase of bokaro. ramgur shares which
remained with him till the assessment years in question. the
profits made on the sale of shares acquired with the
intention of obtaining companytrol over the companypanys management
and number for dealing in them would be on the capital and number
revenue account.  see kishan prasad company limited v.c.i.t.  1
and c.i.t. v. national finance limited  2 . the statement of
case itself set out facts which were companysistent with the
assessees case. in our view the tribunal misdirected itself in applying
the law to the facts found by it both in the matter of gold
and shares and the high companyrt would have been entitled to
interfere with its findings instead of holding that it
could number do so as the findings were findings of fact. the
questions involved being mixed questions of fact and law
the hypothesis on which the high companyrt acted that the
findings were purely findings of fact and therefore were
unassailable was in our view number companyrect.