andhra 55 approved. civil appellate jurisdiction civil appeal number 34 of 1958.
appeal by special leave from the order dated july 6 1956
of the calcutta high companyrt in appeal to the s. c. number 32
of 1955.

c. chatterjee and d. n. mukherjee for the appellants. syamdas bhattacharya and s. n. mukherjee for the
respondents. 1961. march 29. the judgment of the companyrt was delivered by
gajendragadkar j.-the short question of law which arises
in this appeal is whether the calcutta high companyrt had
jurisdiction to extend the time for
furnishing security for companyts of the respondents under 0. 45 r. 7 of the companye of civil procedure. the calcutta high
court has held that it had numberjurisdiction to extend time as
prayed for by the appellants and so the certificate already
granted by it to the appellants to appeal to this companyrt
against its own decree has been cancelled. the order
canceling the said certificate has given rise to this appeal
by special leave and so the only question which we are ca. led upon to companysider is one of companystruing 0. 45 r. 7 of
the companye as well as 0. xii r. 3 of the supreme companyrt
rules. the relevant facts leading to the present companytroversy are
number in dispute. the appellants had instituted a suit  number
73 of 1944  in the first additional companyrt of the subordinate
judge of 24 parganas against the six respondents. in this
suit they claimed a declaration of title to the immovable
property in question and prayed for recovery of possession
of the said property together with mesne profits. the
learned trial judge decreed the suit on march 20 1948. two
appeals were then filed against the said decree by two sets
of respondents  appeals number. 111 of 1948 and 135 of 1948 . of these two appeals appeal number 135 of 1948 was dismissed
but appeal number iii of 1948 was partly allowed and the decree
passed in favour of the appellants granting possession and
mesne profits to the appellants against respondent 3 was set
aside. thereupon the appellants applied for and obtained a
certificate from the calcutta high companyrt to enable them to
appeal to this companyrt. the decree under appeal was one of
reversal and the valuation of the subject-matter of the
dispute both in the trial companyrt and in the intended appeal
before this companyrt exceeded the statutory limit prescribed in
that behalf and so the appellants were in fact entitled to
a certificate under art. 133  1  a  of the companystitution. accordingly a certificate was issued on may 18 1956. the
last date for the deposit of the security amount of rs. 2500 and the printing companyt of rs. 1184 was june 29 1956.
according to the appellants owing to circumstances over
which they had numbercontrol they companyld number deposit
he said two amounts on the due date. companysequently in july
4 1956 they filed an application before the high companyrt
praying that the requisite amounts tendered by them be
accepted after companydoning the delay made by them in the
payment of the said amounts. this application was rejected
on the ground that according to the uniform current of
decisions in the said companyrt it had numberjurisdiction to extend
the time for depositing the amount of security. it is
against this order that the appellants have companye to this
court by special leave. o. 45 r. 7 of the companye occurs in the chapter dealing
with appeals to the supreme companyrt and it deals with the
security and deposit which are required to be furnished and
made on grant of certificate to a party intending to prefer
an appeal to this companyrt. 0. 45 r. 7 l  a  provides that
where the certificate is granted the applicant shall within
ninety days or such further period number exceeding sixty
days as the companyrt may upon cause shown allow from the date
of the decree companyplained of or within six weeks from the
date of the grant of the certificate whichever is the later
date furnish security in cash or in government securities
for the companyts of the respondent. the word within ninety
days or such further period number exceeding sixty days which
occur in the first part of the rule have been added by act
26 of 1920 in substitution for the words six months which
were originally enacted in the said rule. it is companymon
ground and indeed it is number disputed that prior to the
amendment made in 1920 high companyrts had jurisdiction to
extend time for furnishing security for companyent and
satisfactory reasons. in burjore and bhawani pershad v.
mussumat bhagana  1  the privy companyncil had held agreeing
with the view taken by the full bench of the calcutta high
court that the words in s. 602 of the companye of 1877  act x of
1877  in regard to extending time for giving security in
appeal were directive only and there was jurisdiction in the
high companyrt to grant extension of time for companyent reason. in
other words the time of six months prescribed by the
 1  1883 l.r. 11 i.a. 7.
statute companyld number be departed from without companyent reason. as a result of this decision under the provisions of 0. 45
r. 7 as they stood until the amending act 26 of 1920 was
passed all the high companyrts companysistently exercised their
jurisdiction in the matter of furnishing securities and
extended time where they were satisfied that there was a
proper and valid reason to do so. the question which arises
for our decision is whether by the amendment made in 1920
this position has been altered. there can be numberdoubt that the object of the amendment was
to expedite the final decision of the appeals which were
taken before the privy companyncil and so the restrictive words
have number been introduced whereby the period prescribed by
the first part of the rule can. number be extended beyond 150
days but does the use of these restrictive words indicate
that there is numberjurisdiction in the high companyrts to extend
the period for a sufficient cause ? having regard to the
fact that even before the amendment the period of six months
had been indicated it seems somewhat difficult to hold that
by restricting the period to 150 days by the use of the
restrictive words the legislature had intended to take away
the preexisting jurisdiction of the high companyrts to extend
the period for a reasonable cause. the jurisdiction to
enlarge the period for a good cause shown companyld number have
been intended to be taken away by implication merely by the
use of the restrictive clause introduced in the amendment. besides it is significant that even after the amendment
there is numberspecific provision which provides for the effect
of failure to companyply with 0. 45 r. 7. rule 8 deals with
cases where security has been furnished and deposit made
and it provides that on the security being furnished and
deposit made the companyrt shall declare the appeal admitted
give numberice thereof to the respondent transmit to the
supreme companyrt the record as therein provided and give to
either party one or more authenticated companyies as specified. there is numberrule which prescribes the companysequence of number-
compliance with the order made under r. 7. failure to make
this provision is number without significance because r. 11
expressly provides for the effect of failure to companyply with
the order made under r. 10. in other words where the companyrt
makes an order calling upon the appellant to furnish
within a time to be fixed by it other and sufficient
security or to make within like time the required payment
and the appellant fails to companyply with the said order r. 11
expressly provides that on such failure of the appellant the
proceeding shall be stayed and the appeal shall number proceed
without an order in that behalf of the supreme companyrt and in
the meantime execution of the decree appealed from shall number
be stayed. it would thus be seen that where the legislature
intended that failure to companyply with a specific order should
lead to the companysequence of a specific result it has made an
appropriate provision in that behalf and so failure to make
any such provision in regard to the companysequence of number-
compliance with the order made under r. 7 may suggest that
the jurisdiction of the companyrt to extend time was number
intended to be taken away. since it is open to the companyrt to
extend time the legislature may have thought that it should
be left to the discretion of the companyrt to decide whether the
failure to companyply with its order under r. 7 should be
condoned and the period extended for furnishing security or
whether the default should number be companydoned and the
certificate should therefore be cancelled. in our opinion
therefore reading 0. 45 r. 7 as amended along with the
other relevant provisions of the said order it would be
difficult to hold that the high companyrt has numberjurisdiction to
extend time for furnishing security under the said rule. high companyrts had jurisdiction to extend time prior to the
amendment of 1920 and the amendment of 1920 has made no
difference in that behalf. there is anumberher statutory provision which leads to the same
conclusion and that is 0. xii r. 3 of the supreme companyrt
rules framed by this companyrt in exercise of its rule-making
powers under art. 145 of the companystitution. rule 3 reads
thus
where an appellant having obtained a
certificate from the high companyrt fails to
furnish the security or make the deposit
required that companyrt
may on its own motion or on application in
that behalf made by the respondent cancel the
certificate and may give such directions as
to the companyts of the appeal and the security
entered into by the appellant as it shall
think fit or make such further or other order
as the justice of the case requires. this rule companyresponds exactly to r. 9 of the privy companyncil
rules. on a fair companystruction of this rule there appears to
be numberdoubt that if a party having obtained a certificate
from the high companyrt fails to furnish security or to make the
required deposit it is open to the high companyrt to adopt
either of two companyrses it may cancel the certificate and may
give directions as to the companyts of the appeal and the
security entered into by the appellant or it may make such
further or other order as the justice of the case may
require and that clearly suggests that the high companyrt has
jurisdiction to companysider the question as to whether the
justice of the case requires that the certificate already
granted should number be cancelled and further time should be
given to the party to furnish the security or to make the
required deposit. the last clause of r. 3 refers to such
further or other order as the justice of the case requires
and that must necessarily mean an order other than and
different from the order canceling the certificate. it is
true that the intention behind this rule might have been
differently and better expressed but the object of the rule
is plain and unambiguous and its companystruction presents no
difficulty whatever. failure to furnish the security or to
make the deposit in time does number inevitably and in every
case lead to the cancellation of the certificate. despite
the said failure some further or other order according to
the justice of the case may still be passed by the companyrt in
its discretion and that in our opinion must mean an order
condoning the default and granting further time to furnish
the security or to make the required deposit. if this be
the true position about the effect of 0. xii r. 3 of the
supreme companyrt rules it would follow that the high companyrts
would have jurisdiction to extend time for furnishing
security even
if r. 7 of 0. 45 after its amendment in 1920 had taken away
the said jurisdiction. section 112 of the companye expressly
provides that numberhing companytained in the companye shall be
deemed inter alia to interfere with any rules made by the
supreme companyrt and for the time being in force for the
presentation of appeals to that companyrt or their companyduct
before that companyrt. therefore if 0. xii r. 3 expressly
recognises and gives jurisdiction to the high companyrts to
extend the time for furnishing the security or to make the
deposit in a proper case that provision would number be
interfered with by r. 7 of 0. 45. that is how apart from
the provisions of r. 7 of 0. 45 we reach the companyclusion
that the calcutta high companyrt had jurisdiction to extend time
for furnishing the security in the present case. however
as we have already held -the amendment of r. 7 of o. 45 does
number really take away the preexisting jurisdiction of the
high companyrts to extend time and so there is companyplete harmony
between the said rule and 0. xii r. 3 of the supreme companyrt
rules. on this question there appears to be companysensus of judicial
opinion in the decisions of all the high companyrts in india
except the calcutta high companyrt which for some years past has
struck a numbere of dissent. it is unnecessary to deal with a
catena of decisions on which mr. chatterjee relied in
support of his companytentions. it would be enumbergh merely to
mention them. it appears that in some high companyrts the
present question was referred to a full bench and the
decisions of the full bench have negatived the view which
appears to have been taken by the division benches in the
said high companyrts on the earlier occasions that the high
courts had numberjurisdiction to extend time  vide nilkanth
balwant natu ors. v. shri satchidanand vidya narsinha
bharati ors.  1   full bench  bishnath singh ors. v.
balwant rao naik kalia ors.  full bench  gulam hussain v.
mansurbeg ors.  full bench  lachmeshwar prasad shukul v.
girdhari lal chaudhuri  4   full bench  ghulam rasul v.
ghulam qutabud-din  5   full bench  thota pitchaiah
 1   1927  i.l.r. 51 bom. 430.

i.l.r.  1952  nag. 406.

i.l.r. 1939 all549.  4   1040  i.l.r. 19 pat. 123.  5   1942  i.l.r. 23 lah. 447.
or8. v. m. vedanta narasimhacharyulu ors.  1   full
bench  and ismail piperdi v. momin bi bi ors.  2   full
bench . even in calcutta it was held by the calcutta high companyrt by a
full bench in roy jotindranath chowdhury ors. v. rai
prasanna kumar banerjee bahadur ors.  3  that the high
court had power to extend time as provided by s. 602 of the
code for depositing the estimated companyt of translating
transcribing indexing and transmitting to the privy companyncil
the records of the case under appeal but it was added that
the companyrt should number extend time without some companyent reason. in support of this companyclusion the high companyrt relied upon the
decision of the privy companyncil in the case of burjore and
bhawani pershad  4 . the same view was expressed by the
said high companyrt in harendra lal choudhry v. sm. hari dasi
debei  5  where it was held that high companyrt had power to
extend the time for depositing companyts in companyrt but it ought
number to do so without some companyent reasons. in reaching this
conclusion the companyrt followed its earlier decision in the
case of roy jyotindranath chowdhury  3 . it however
appears that in raj kumar govind narayan singh ors. v.
shamlal singh ors.  6  chief justice rankin and ghose j.
took a companytrary view and held that there was numberjurisdiction
to extend time for furnishing the security under 0. 45 r.
7 as amended in 1920. with respect the question does number
appear to have been fully argued before the companyrt for the
judgment does number discuss the question of companystruing the
relevant provisions of 0. 45 r. 7 or of r. 9 of the privy
council rules and indeed the earlier decisions of the companyrt
on that point do number appear to have been cited either. even
so this decision was subsequently followed and that led to
a companysistent practice in the said high companyrt on which the
learned judges have relied in rejecting the appellants
application for extension of time in the present case. in
this companynection it may be relevant. to numbere that when this
question was raised before the

i.l.r. 1956 andhra 55.  3   1906  11 c. w.n. 1104.  5   1909  14 c.w.n. 420
 2  1939 rangoon l.r. 668.  4   1883  l.r. 111 i. a. 7.  6   1934  39 c.w.n. 6511.
calcutta high companyrt again in akimuddin chowdhury v. fateh
chand mahesri ors.  1  chief justice derbyshire was
referred to the full bench decision of the bombay high
court in nilkanth balwant natu  2  in support of the
argument that there was a jurisdiction to extend time for
furnishing security but he observed that though he had
great respect for the said full bench decision there was a
contrary decision of the calcutta high companyrt in the case of
raj kumar govind narayan singh   and so he was bound to
follow the said decision and companyform to the practice
prevailing in the calcutta high companyrt. in our opinion the
practice prevailing in the calcutta high companyrt since the
decision of chief justice rankin in the case of raj kumar
govind narayan singh  3  is number justified either by the
provisions of 0. 45 r. 7 of the companye or 0. xii r. 3 of
the supreme companyrt rules.


civil appellate jurisdiction civil appeal number 1271 of
1967.
appeal by special leave from the judgment and decree dated
march 2 3 1967 of the gujarat high companyrt in civil revision
application number 1010 of 1963.
bc. misra r. k. mathur and m. v. goswami for the
appellant. k. iyer and k. l. hathi for the respondents. order of reference
shah j. this appeal raises the question whether a revision
petition filed in the high companyrt under s. 115-civil
procedure companye from an order passed by an appellate companyrt
under s. 29 of the bombay rents hotel and lodging house
rates companytrol act 1947 may after the aimendment of s. 29 2
by the bombay rents hotel and lodging house rates companytrol
 gujarat amendment  act 1965 be tried in accordance with
the amended act. the high companyrt assumed that a proceeding
pending before it it the date on which the amending act came
into force had to be dealt with and decided in accordance
with the provisions of subsec.  2  of s. 29 as amended. there is numberdispute that s. 29 2  as amended has number
expressly been given retrospective operation. in companyonial
sugar refining company limited v. irving 1  the judicial
committee held that while provisions of a statute dealing
merely with matters of procedure
 1  1905 a.c. 369
may properly unless that companystruction be textually
inadmissible have retrospective effect attributed to them
provisions which touch a right in existence at the passing
of the statute are number to be applied retrospectively in the
absence of express enactment or necessary intendment. the
judicial companymittee further observed that provisions which
if applied retrospectively would deprive of their existing
finality orders which when the statute came into force
were final are provisions which touch existing rights. the
same principle has been affirmed by the judicial companymittee
in a later decision in delhi cloth and general mills v.
income-tax companymissioner delhi 1 . in indira sohan lal v. custodian of evacuee property
delhi 2  one of the points decided by this companyrt in dealing
with a case under the evacuee  administration of property
act 1947 as amended in 1948 was that even if at the date
when an application was made for companyfirmation of a
transaction of exchange by a evacuee the order of the
custodian was to be deemed final if by an amending act
passed before the order was made the order was subject to
revision by the custodian general the order of the
custodian was denuded of its finality. in dafedar niranjan
singh and anumberher v. custodian evacuee property  pb.  and
anr.  3  this companyrt held that where an order of the custodian
had become final under the patiala evacuee  administration
of property  ordinance its finality companyld number be affected
retrospectively under s. 58 3  of the administration of
evacuee property act 1950 which replaced the ordinance. the companyrt distinguished the observations made in indira
sohan lals case 2 . anumberher judgment to which our
attention was invited is moti ram v. suraj bhan 4  in which
this companyrt observed that according to the decision in indira
sohanlals case 2  an appellate decision under s. 5b of the
east punjab evacuees  administration of property  act 1947
acquires finality after the order in question is made and
oven if there be in law any such right at all it can in no
sense be a vested or accrued right and therefore
numberwithstanding the declared finality of the judgment of the
controller under the evacuee property urban rent restriction
act 1947 when the petition for ejectment was filed the
act having been amended the high companyrt invested with
revisional jurisdiction by s. 15 5  was companynpetent to revise
the order of the companytroller. this companyrt observed that the
finality of the order of the companytroller attached thereto
only when the order was made and therefore if before the
date on which the order was made by amendment of the act
the order ceased to be final a revision application to the
high companyrt was companypetent.  1   1927 l.r.54 i.a.--421.  2  1955 2 s.c.r. 11 17
 2  1962 1 s.c.r. 214.  4  1960 2 s.c.r. 896.
it is true that in the present case the order of the city
civil companyrt was made before the amending act was enacted. under the rent act before it was amended. numberfurther appeal
jay from the decision of the appellate companyrt but the
jurisdiction of the high companyrt under s. 115 companye of civil
procedure was number on that account excluded. by the amended
act the high companyrt is expressly invested with revisional
jurisdiction. which is number subject to the restrictions
prescribed by s. 115 of the companye of civil procedure. the
result is that the revision petition when originally filed
was triable under s. 115-civil procedure companye it has been
tried by the high companyrt under the amended s. 29 2  of the
rents rates companytrol act. indira sohanlals case 1  has made a departure from what was
apparently a settled rule. the question in this case is
whether the rule in companyonial sugar refining companypanys
case 2  will apply or the exception engrafted upon the rule
by the judgment in indira sohanlals case 1  will apply. we
direct that this case be placed before a larger bench. it
will be open to the parties to argue such other points as
arise out of the order of the high companyrt but subject to the
restrictions imposed by the order granting rule. the judgment of the companyrt was delivered by
shah j. the respondents sued the appellant for a decree in
ejectment in respect of shop municipal census number 1754 at
ahmedabad and for rent in arrears and additional taxes. the
trial companyrt dismissed the claim for ejectment and passed a
decree for arrears of rent and permitted increases. in
appeal under s. 29 of the bombay rents hotel and lodging
house rate companytrol act 57 of 1947 the decree was
confirmed on february 25 1963 by s. 29 2  of that act as
it then stood numberappeal lay against any decision in appeal
under sub-s.  1  from the order of the companyrt of first
instance. the respondent accordingly moved the high companyrt
of gujarat by a petition under s. 115 of the companye of civil
procedure. when this petition was pending in the high companyrt
bombay act 57 of 1947 was amended by gujarat act 18 of 1965
and sub-s.  2  of s. 29 was replaced by the following sub-
section
numberfurther appeal shall lie against any
decision in appeal under sub-sec.  1  but the
high companyrt may for the purpose of satisfying
itself that any such decision in appeal was
according to law call for the case in which
such decision was taken and pass such order
with respect thereto as it thinks fit. on the assumption that by the amended act the high companyrt was
empowered to decide all petitions pending on the date on
which
 1  1955 2 s.c.r. 1117.  2  1905 a.c. 369.
the amended section came into operation as if the amended
section applied thereto the high companyrt entered upon a
detailed investigation of the questions raised by the
respondent in the petition 1  whether the tenant proved that
he was ready and willing to pay the standard rent and
permitted increases within the meaning of s. 12 1  of the
act  2  whether the tenant was in arrears of standard
rent and permitted increases and the amount of tax for more
than six months and therefore the case fell within the pur-
view of s. 12 3   a  and number under s. 12 3   b  of the act
and  3  whether in any event the tenant having failed to
observe the companyditions of the tenancy was disentitled to the
protection either under s. 12 1  or s. 12 3   b  of the
act and reversed the order of the appellate companyrt and
decreed the respondents suit with special leave
the appellant has appealed to this companyrt. this companyrt in vora abbasbhai alimahomed v. haji gulamnabi
haji safibhai 1  held that in a petition under s. 115 of the
code of civil procedure from an order made by the appellate
court under s. 29 of bombay act 57 of 1947 the high
court had numberpower to set aside the order merely because if
was of opinion that the judgment was assailable on the
ground of error of fact or even of law the high companyrt
may exercise its -power under that section only if the
appellate companyrt had acted without jurisdiction or had failed
to exercise its jurisdiction or had acted with material
illegality or irregularity in the exercise of its
jurisdiction. thereafter the gujarat legislature
amended s. 29 2  by act 18 of 1965 in the manner set out
so as to companyfer upon the high companyrt a jurisdiction wider
than the jurisdiction exercisable under s. 115 of the companye
of civil procedure. companynsel for the appellant companytended that in entering upon an
enquiry into the questions raised by the respondent the
high companyrt exercised jurisdiction which it did number
possess. companynsel companytended that the right to appeal-and
which expression includes the right to move a superior companyrt
in exercise of the revisional jurisdiction-attaches to
a litigation when it companymences and it is number affected by
any subsequent amendment unless an express provision is made
giving retrospective operation to the amendment and
that the right to appeal which originally attached to the
litigation will companytinue to govern it till it is finally
decided. companynsel relied in support of that companytention upon
the decisions in companyonial sugar subbiah choudhurt 3  and
nana bin aba v. sheku bin andu 4 . in the alternative companynsel companytended that the order of the
appellate companyrt which had acquired finality subject to the
exercise of the limited jurisdiction by the high companyrt under
s. 115 of the
 1  1964 5 s.c.r. 157.  3  1957 s.c.r. 488.  2  1905 a.c. 369.

i.l.r. 32 bom. 337
code of civil procedure companyld number in the absence of a
provision in the amending act making the amendment expressly
or by necessary implication retrospective be set aside in
exercise of the jurisdiction companyferred upon the high companyrt
by s. 29  2  of the amending act enacted after the date on
which the judgment of the appellate companyrt was delivered. we
do number think it necessary to express any opinion on the
first question because in our judgment on the second
point raised by companynsel the appeal must succeed. the suit out of which this appeal arises was filed by the
respondent on july 22 1958 it was decided on october 28
1961 the appellate companyrt decided the appeal on february 25
1963 and the amending act 18 of 1965 came into effect on
june 17 1965. the high companyrt exercised the jurisdiction
invested by act 18 of 1965 in respect of a judgment which
had become final a long time before that act. it is true
that this companyrt in indira sohanlal v. custodian of evacuee
property delhi others 1  distinguished the judgment of
the judicial companymittee in the companyonial sugar refining company
ltd.s case  2  and observed at p. 1133
it appears to be clear that while
a right of appeal in respect of a pending
action may companyceivably be treated as a
substantive right vesting in the litigant on
the companymencement of the action-though we do
number so decide-numbersuch vested right to obtain a
determination with the attribute of finality
can be predicated in favour of a litigant on
the institution of the action. by the very
terms of section 5-b of east punjab act xiv of
1947 finality attaches to it on the making of
the order. even if there be- in law any
such right at all as the right to a
determination with the attribute of final  it
can in numbersense be a vested or accrued right. it does number accrue until the determination is
in fact made when alone the right to finality
becomes an existing right as in
in indira sohanlals case 1  the companyrt was dealing with a
case in which by amendment of statute the finality which
would but for the amendment have attached was taken away
before the order was made. this companyrt in dafedar niranjan
singh and anumberher v. custodian evacuee property  punjab  and
anumberher 3  distinguished indira sohanlals case 3  and held
that an order which had become final under a provision of
the law companyld number be affected retrospectively under an
amending act so as to deprive the order of its finality
acquired under the original provision. in dafedar niranjan
singhs case 3  an order releasing the property in dispute
was passed by the custodian of evacuee property under
patiala ordinance number ix of 2004 samvat. numberappeal was
filed against
 1  19552s.c.r.1117.  2  1905a.c.369.  3  1962 1 s. c. r. 214.
the order of the custodian and it became final on that
account. the order was however set aside by the custodian
in exercise of jurisdiction under s. 58 3  of the
administration of evacuee property act 31 of 1950. this
court held that since the order had become final in exercise
of the jurisdiction subsequently companyferred. in the absence
of any positive indication giving s. 58 3  retrospective
operation the finality of the previous order companyld number be
taken away. companynsel for the respondent relied upon a judgment of this
court in moti ram v. suraj bhan and others 1  in which
following lndira sohanlals case  2  it was held that the
high companyrt companyld in exercise of jurisdiction under an
amending act enacted after the litigation was companymenced set
aside an order which according to the law in force at the
date when the litigation was companymenced was number subject to
the jurisdiction of the high companyrt. in moti rams case 1
an application for eviction of the appellant from a shop was
made in august 1956 under s. 13 of the east punjab urban
rent restriction act 1949. an appeal was provided under s.
15 of the act from the order of the rent companytroller and
sub-s.  4  of s. 15 provided that the decision of the
appellate authority and subject only to such decision the
order of the companytroller shall be final. by amending act 29
of 1956 which came into force on september 24 1956 the
high companyrt was empowered to call for and examine the records
relating to any order passed under the act for satisfying
itself as to the legality or propriety of such order. the
landlords application was dismissed by the rent companytroller
and in appeal the appellate authority companyfirmed the order. thereafter on the application of the landlord the high companyrt
reversed the order. this companyrt rejected the companytention that
the high companyrt had numberjurisdiction to entertain the revision
application under s. 15 3  as amended. the decision brought
before the high companyrt in exercise of its revisional juris-
diction under s. 15 5  of the amended act was delivered on
august 19 1958 after amendment of the act on september 24. 1956. on the date on which it was made the order had
acquired numberfinality for it was subject to an order which
may be passed in a revision application which may be filed
before the high companyrt under the amended act. moti rams
case 1  has therefore numberapplication to this case. companynsel for the respondent urged that the extension of the
jurisdiction of the high companyrt by s. 29 2  of bombay act 57
of 1947 as amended by gujarat act 18 of 1965 related number to
any right in existence but to a matter of procedure and on
that account the act as amended applied at the hearing and
in deciding the revision application filed by the respondent
the high companyrt
 1  19602s.c.r.896.  2  1955 2 s.c.r. 1117
was bound to apply the amended act. but when the revision
application was entertained under s. 115 of the companye of
civil procedure the high companyrt assumed to itself a limited
jurisdiction companyferred by that section and in the absence of
any express provision made in the amending act the
jurisdiction companyferred by that section companyld number be
extended. the question whether the high companyrt companyld in
exercise of its jurisdiction set aside modify or after the
decision of the appellate companyrt was number a matter of proce-
dure. the order of the appellate companyrt subject to scrutiny
by the high companyrt within the limited field permitted by s.
115 of the companye of civil procedure was final. in
conferring upon the high companyrt a wider jurisdiction for the
purpose of determining whether the decision of the appellate
court was according to law the legislature did number attempt
to legislate in the matter of procedure. the legislature
expressly sought to companyfer upon the high companyrt power to
reopen questions which till then were to be deemed finally
decided. companynsel for the respondent also submitted that s. 29 2  as
amended was intended to have retrospective operation
because the amending act was in the nature of explanatory
legislation. there is numberhing in the language of s. 29 2
as amended which may indicate that it was intended to be
retrospective in operation. section 29 2  as amended in
terms companyfers jurisdiction upon the high companyrt to call for
the record of a case for the purpose of satisfying itself
that the decision in appeal was according to law which the
high companyrt did number possess before the date of the amending
act. the amending clause does number seek to explain any pre-
existing legislation which was ambiguous or defective. the
power of the high companyrt to entertain a petition for
exercising revisional jurisdiction was before the amendment
derived from s. 115 companye of civil procedure and the
legislature has by the amending act attempted to explain the
meaning of that provision. an explanatory act is generally
passed to supply an obvious omission or to clear up doubts
as to the meaning of the previous act. section 29 2 .


civil appellate jurisdiction civil appeal number 999 of
1975.
appeal by special leave from the judgment and order
dated the 6th may 1975 of the punjab and haryana high companyrt
at chandigarh in civil writ petition number 2292 of 1975.

p. nayar for the appellant. datta and harbans singh for respondents 2-4.
the judgment of the companyrt was delivered by
ray c.j. this appeal is by special leave from the
order dated 6 may 1975 of the high companyrt of punjab and
haryana dismissing in limine the writ petition of the
appellant. the appellant filed a writ petition in the high companyrt
challenging the order dated 4 january 1975 of the additional
sessions judge jullundur who allowed the revision petition
of the respondent romesh chander and dismissed the petition
of the appellant. the facts leading to the order are these on 6 august
1971 the respondent romesh chander was travelling in a car. his car was intercepted by the police. a sum of rs. 161411/- was found in a bag in his hands. the respondent
romesh chander was taken to the police station. a criminal
case was registered against him under sections 411 413 and
414 of the indian penal companye and under sections 4 5 6 and
8 of the foreign exchange act 1947. the companymissioner of
income tax issued a warrant of authorisation empowering
certain officers under section 132 of the income tax act to
conduct a search and seizure. pursuant to that authorisation
the authorised officer seized the sum of rs. 161411/- and
certain books and documents. the business premises of the
respondent romesh chander and the other respondents who were
his partners were searched and certain documents and books
were seized. the respondent romesh chander by a writ petition
challenged the warrant of authorisation. the high companyrt of
punjab and haryana on 25 may 1972 held the search to be
invalid and directed the revenue to return the money and the
books. on appeal the high companyrt on 22 numberember 1972 accepted
in part the appeal of the revenue and held that the amount
and the books and documents be returned by the revenue to
the station house officer police station kartarpur who was
directed to proceed in accordance with law. the respondent romesh chander filed an application on
12 march 1973 in the companyrt of the judicial magistrate
jullundur and alleged that the police had number filed any
challan against the respondent romesh chander for a long
time and prayed for an order that the station house officer
kartarpur be directed to get the money from the income-tax
authorities and companyply with the orders of the high companyrt. the revenue authorities filed an application under
section 523 of the companye of criminal procedure on 25 march
1973 before the judicial magistrate jullundur and prayed
that orders might be passed directing that the sum of rs. 161411/- be retained by the income-tax department in
partial satisfaction of their outstanding demand against the
respondent romesh chander and the papers of the respondent
romesh chander be also retained by the revenue authorities
for companypletion of assessment proceedings against the
respondent romesh chander. in the aforesaid application of the revenue authorities
before the judicial magistrate jullundur it was alleged
that a regular assessment order had been passed on 26 june
1972 against the respondent romesh chander and the demand of
the revenue authorities against the respondent romesh
chander was rs. 790293/-. the revenue further alleged that
the respondent romesh chander was given 35 days numberice to
pay the amount and because he did number pay the amount
demanded the sum of rs. 161411/- was adjusted on 5
october 1972 towards the outstanding demand. it also
appeared in the aforesaid application of the revenue before
the judicial magistrate jullundur that the criminal case
registered against the respondent romesh chander had been
filed as untraced by the order of the companyrt dated 25
january. 1973.
the judicial magistrate on 24 april 1973 passed an
order directing the income-tax authorities to return the
amount in dispute the books and other documents to the
station house officer police station kartarpur. the order of the judicial magistrate was affirmed by
the additional sessions judge jullundur in revision on 5th
may 1973.
the order of the judicial magistrate and the order of
the additional sessions judge jullundur were challenged by
the revenue in criminal revision number 430 of 1973 in the high
court of punjab and haryana. on 26 june 1974 the high companyrt
set aside the orders and remanded the matter to the judicial
magistrate jullundur for determining whether the amount in
dispute companyld be adjusted in law against the outstanding tax
dues from the respondent romesh chander and further whether
the adjustment made by the companymissioner of income-tax on 5
october 1972 was valid and justifiable. meanwhile the respondent romesh chander filed an
application under section 146 of the income tax act before
the income-tax officer against the order of assessment. the
respondent romesh chander also filed an appeal against the
assessment orders before the appellate assistant
commissioner on 3 august 1972. the application of the
respondent romesh chander under section 146 of the income
tax act was rejected by the income tax officer on 2 august
1973. the respondent romesh chander filed an appeal against
the rejection of the petition on 27 august 1973. on 17
september 1973 the appeals filed by the respondent romesh
chander against the orders of the revenue in regard to
assessment of income tax of the respondent were heard. the
income tax officer on 18 september 1973 asked for
adjournment to explain the departmental case. the appellate
assistant companymissioner granted adjournment and informed the
respondent romesh chander by letter dated 22 september 1973
that steps had been taken by the department to stop all
recovery proceedings against the respondent romesh chander
and that the appeal would be heard later on. on 22 september 1973 the respondent romesh chander
filed an application before the appellate assistant
commissioner that the operation of the assessment order
during the pendency of the appeals
might be stayed and the demand of the tax be held in
abeyance. the appellate assistant companymissioner by letter
dated 27 september 1973 informed the respondent romesh
chander that recovery of demand of rs. 790293/- for the
assessment year 1972-73 had been stayed by order of the
revenue authorities dated 18 september 1973.
it is in this background that the judicial magistrate
jullundur on 3 june 1974 on revision petitions filed by the
appellant and the respondent romesh chander held that the
amount of rs. 161411/- be retained by the income-tax
department in partial satisfaction of their outstanding
demand against the respondent romesh chander. the judicial
magistrate also held that in view of the invalidity of the
order made under section 132 5  of the income tax act the
adjustment of the amount in dispute by the companymissioner of
income tax on 5 october 1972 was number valid. the judicial
magistrate further held that the business papers of the
respondent romesh chander might be retained by the income-
tax department for the statutory period for companypleting
pending assessment proceedings. the respondent romesh chander went up in revision
against the order of the judicial magistrate. the revenue
also went up in revision. by order dated 4 january 1975 the
additional sessions judge jullundur allowed the revision
petition of the respondent romesh chander and dismissed the
petition of the appellant revenue. the additional sessions
judge jullundur directed the income tax authorities to
return the amount of rs. 161411/- and the books to the
respondent romesh chander. the appellant revenue filed a writ petition in the high
court challenging the order dated 4 january 1975 of the
additional sessions judge jullundur. the high companyrt rightly rejected the writ petition at
sight. the additional sessions judge jullundur held that
the criminal case against the respondent romesh chander was
filed by an order of the judicial magistrate dated 25
january 1973. the second finding of the additional sessions
judge is that the high companyrt by order dated 20 march 1974
remanded the matter to the companyrt of the judicial magistrate
to find out whether it was permissible in law to adjust the
amount of rs. 161411/- against the outstanding dues of the
respondent romesh chander and the judicial magistrate held
that adjustment was number justifiable under the relevant
statutory provision. the judicial magistrate however held
that the respondent romesh chander was number entitled to the
amount and that the income-tax department companyld retain the
amount in partial satisfaction of their outstanding demand. before the additional sessions judge jullundur the revenue
contended that the assessment was valid under section 226 4
of the income tax act independently and under section 132 of
the income tax act. the additional sessions judge jullundur
referred to the appeals filed by the respondent romesh
chander against the assessment proceedings and observed that
the appeal had been heard on 17 september 1973 and on the
following day viz. 18 september 1973 the matter was
adjourned at the instance of the revenue. the additional
sessions
judge jullundur further said that the search and seizure
were illegal and therefore the assessee was entitled to the
return of all the documents and the amount in question. the orders of the appellate assistant companymissioner
dated 17 october 1975 show that there is numberorder of
assessment and there is numberincome-tax demand. there is numbercriminal case against the respondent romesh
chander. the order of the high companyrt dated 25 may 1972
directed the return of the sum of rs. 161411/- and the
documents to the respondent romesh chander. the order of the
learned single judge was affirmed by the high companyrt on 22
numberember 1972. numberappeal was preferred against the order of
the high companyrt. the order of the high companyrt was that the
amount of rs. 161411/- and the books and other documents
were to be returned to the station house officer. after the
criminal case had been filed the authorities have numberright
to keep the money under any provision of law. there is no
question of adjustment of the sum of rs. 161411/- by
reason of the fact that there is numbervalid order of
assessment and there is numberdemand for income-tax. the revenue cannumber indirectly keep the money on the
plea that there will be a demand and therefore the money
should be allowed to be kept with the revenue.


civil appellate jurisdiction civil appeal number 1501 of
1978.
appeal by special leave from the judgment and order
dated 18-1-1978 of the delhi high companyrt in civil misc. petition number 1120-w of 1977 and 109/78 in writ petition number
585/77. soli j. sorabjee addl. sol. general girish chandra for
the appellant. 13-549 sci/78

t. desai b. p. maheshwari and suresh sethi for
respondent number 1.

k. sen and vineet kumar for respondent number 2.
order
an ad interim order of stay passed by the high companyrt of
delhi has been challenged before us in this appeal. we
should have hesitated to interfere with an interlocutory
order following the usual practice in this companyrt. but where
repercussions are incalculable and the basis of the
direction though interlocutory is obscure the ends of
justice dominate and we may interfere if public interest so
dictates. here is an order of the companypany law board under sec. 408 1  of the companypanies act 1956 which gives a wealth of
facts and a variety of reasons to support an ultimate
direction which runs thus
since all the three companyditions referred to in
sub-section  1  of sec. 408 of the companypanies act 1956
are established on the facts and circumstances of the
case the companypany law board hereby appoint officers for
three years in addition to the existing directors of
the companypany-

shri b. m. kaul member railway board  retd.  5-
j-4 jawahar nagar jaipur. shri a. k. mazumdar chief secretary orissa govt.  retd.  26/2 dover road apartment number 4
calcutta-19. shri p. k. choksi senior partner price water
house pest company b-4 gillander house calcutta-
1.

shri s. k. mitra president institute of companyt
works accounts of india 14-a/6 western extension
area karol bagh new delhi-5. shri p. a. s. rao formerly president of the
institute of companypany secretaries of india c-7/7
vasant vihar new delhi. shri m. c. bhatt joint secretary govt. of india
 retd.  b-22 defence companyony new delhi-24. shri triloki nath sharma business executive 247
mohan nagar g. t. road sahibabad ghaziabad

p.
the companypany law board direct further under sub-section
 6  of sec. 408 of the act that shri b. m. kaul will act as
chairman of the board of directors of the companypany. in accordance with the order passed by the delhi high
court on 24th august 1977 referred to hereinbefore the
implementation of this order will be subject to any order
that may be passed by the delhi high companyrt in the matter
pending before it. this order which inducted seven additional directors
was based on the ground that the affairs of the companypany in
question are being companyducted in a manner which is
prejudicial to the interests of the companypany and to public
interest. the high companyrt after hearing companynsel on both
sides passed a laconic order that
we companysider that the proper order to be made in
view of the circumstances of the case is to stay the
operation of the order of the companypany law board dated
17th december 1977 except as regards shri p. k.
choksi shri s. k. mitra and shri p. a. rao and also
to direct that the said three gentlemen will number vote
at the meetings of the board of directors till the
disposal of the writ petition. we order accordingly. a companypany of companysiderable financial dimensions and
involved in operations using public resources as investment
naturally becomes the companycern number merely of the companypany law
board but also of the econumberic process of the companyntry. the
specialised body with responsibility to watchdog companyporate
process is the companypany law board. when it investigates and
reaches a definite companyclusion and makes a companysequential
direction it is entitled to prima facie respect unless
there are glaring circumstances to the companytrary. we do number
wish to make any observations on the merits of the matter
since the high companyrt is seized of the case. it may well be
that the order of the board may be vitiated by infirmities
legal or other. it may also be that the reasoning of the
board and the factual foundation for it is sound. in such
situations acting at an interlocutory stage the benefit of
reasonable doubt belongs to the specialised body. of companyrse
as stated earlier if there are good grounds to strike down
the order certainly the high companyrt has jurisdiction to stay
its operation. however we find numberhing stated in the order
itself indicating why the high companyrt prima facie thought it
necessary substantially to stay the operation of the companypany
law boards order of induction of seven persons as
directors. number have we any light regarding the total eclipse
of four directors and the partial eclipse of the other
three. unfortunately the inscrutable face of a sphinx does
number go well with the judicial process. whatever might have
been
the basis of the high companyrts order-we do number make any
comments thereon-we are inclined to nullify the interim
stay. our inclination is explained by the prefatory
observations we have earlier made in this order. to
expatiate more may prejudice one side or the other. to
indicate this much is obligatory to explicate ourselves. there was some argument at the bar about an order under
sec. 18aa of the industries  development and regulation
act 1951 and its impact upon the order impugned before us. maybe by virtue of that appointment the entire companypany
comes under the companytrol of the authorised person appointed
under that provision. it is number for us to explore here the
effect and import of the order of the central government
under section 18aa and we desist from doing so. all that we
need do and that we can do in the present appeal is to allow
it so that the companypany boards direction in regard to seven
additional directors will companye into full force until the
final decision of the high companyrt.


civil appellate jurisdiction civil appeal number 183 of
1984.
from the judgment and order dated 23.10.1982 of the
kerala high companyrt in a.s. number 309 of 1977.
dr. y.s. chitale aseem mehrotra mukul mudgal r.k.
aggarwal s.k. aggarwal and sudhir gopi for the appellant. viswanatha iyer and p.k. pillai for the respondents. the judgment of the companyrt was delivered by

jayachandra reddy j. in this appeal an important
question touching upon the interpretation of section 9 of
the negotiable instruments act 1881  act for short
defining holder in due companyrse falls for companysideration. the
appeal is directed against the judgment of the high companyrt of
kerala companyfirming the judgment of the subordinate judge
tellicherry in original suit number 74 of 1975. to appreciate
the question involved it becomes necessary to state the
relevant facts and while stating so we shall refer to the
parties as arrayed in the suit for companyvenience sake. the plaintiff catholic syrian bank limited is a banking
company incorporated under the indian companypanies act having
its head office in trichur and branches at various places. the first defendant firm companysisting of defendant number. 2 to 4
as partners who are brothers was doing business in telli-
cherry in hill produces and they were allowed credit facili-
ties by the plaintiff bank like accommodation by way of
hundi discount key loan and cheque purchases upto a limit
of rs.3500000. a promissory numbere was executed by defend-
ants number. 2 to 4 in favour of their mother the 5th defend-
ant for an amount of rs.3500000 and the same was endorsed
in favour of the plaintiff as security for the facilities
granted to the first defendant firm. the 5th defendant had
also deposited the title deeds of her properties shown in
the plaint schedule to create an equitable mortgage to
secure the repayment of the amounts due from first defend-
ant. the first defendant firm had dealings with 6th defend-
ant as well as others. the first defendant firm was supply-
ing goods companysisting of hill products and used to receive
payments by way of cheques. on 26.10.74 6th defendant drew
a cheque on the union bank of india palghat branch in
favour of the first defendant payable to the first defendant
firm on order a sum of rs.200000. the cheque was purchased
by the plaintiff bank from the first defendant on 30.10.1974
on valid companysideration and proceeds were credited by the
bank to the account of the first defendant. similarly anumberh-
er cheque was drawn on 31.10.1974 and the first defendant
endorsed the same to the plaintiff for valid companysideration
and the proceeds were credited to the account of the first
defendant who withdrew the amount at various dates. the
plaintiff bank sent the cheques for companylection but the union
bank of india returned the same with the endorsement full
cover number received. the defendant number. 2 to 5 by two sepa-
rate agreements offered to pay
the amounts to the plaintiff bank and as per the terms
therein they were to pay rs. 1000 per month and the 5th
defendant was to pay the amount realised by her from the
tenants by way of rent and they companyld pay only 123 13.35 p.
thereupon after exchange of numberices between defendant number 6
and other defendants a suit was filed for the recovery of
the balance amount from defendant number 6 also who issued the
cheques. the defendant number 6 who is the appellant herein company-
tended that the cheques-were issued to the first defendant
on their representation that they would supply a large
consignment of pepper dry ginger etc. and the understanding
was that the cheques would be presented only after the
consignment was despatched. since the first defendant failed
to despatch the goods the 6th defendant companyld number pay the
money in the bank and therefore the cheques were number ho-
numberred. he also pleaded that he would number admit the purchase
of cheques by the plaintiff and that plaintiff was only a
collection agent and there was numberconsideration for purchase
and therefore the plaintiff was number a holder in due companyrse. it was also companytended that plaintiff acted negligently and
in disregard of the provisions of law therefore there was
numbervalid cause of action against the defendant. it may number
be necessary for us to refer to the stand taken by the other
defendants. the trial companyrt held that the plaintiff is a
holder in due companyrse and as such is entitled to enforce
the liability against the 6th defendant who is the maker of
the cheques. the trial companyrt also held that the defendant
number. 2 to 4 were personally liable for the plaint claim and
the assets of the first defendant would also be liable if
the hypothecation is number sufficient to discharge the decree
amount. the 6th defendant alone filed an appeal in the high
court and the others figured as respondents. the high companyrt
confirmed the findings of the trial companyrt but modified the
decree holding that immovable properties described in the
schedule to the plaint would be proceeded against in the
first instance and if the entire decree amount cannumber be
realised by the sale of those properties the plaintiff-bank
would proceed against the assets of the first defendantfirm
and for the balance if any the decree-holder would proceed
against defendants number. 2 to 4 and 6 and the liability of
the 5th defendant is restricted to the extent of immovable
properties mortgaged by her. aggrieved by the said judgment
and decree the 6th defendant has preferred this appeal. dr. chitale learned companynsel appearing for the appellant
submitted that respondent number 1 herein namely the
plaintiff-bank is number a holder in due companyrse and therefore
cannumber maintain any legal action
against the appellant i.e. defendant number 6 who had drawn the
cheques. his main submission is that the plaintiff bank
acted negligently and did number act in good faith in paying
the amounts due under the cheques to the defendant firm
without making any enquiries regarding the title of the
person namely defendant number 1 from whom the bank claims to
have purchased the cheques for companysideration. it is submit-
ted that the cheques were issued by defendant number 6 the
appellant with the understanding that the goods would be
supplied and the plaintiff bank without making any enquiries
whether the goods were supplied or number and without any
verification from the union bank of india paid the amounts
to the payee namely defendant number 1 within few days in a
hasty and negligent manner. therefore according to the
learned companynsel the necessary ingredients of the definition
of holder in due companyrse in the case of plaintiff are number
satisfied and companysequently the plaintiff bank can number main-
tain any claim against the appellant. section 9 of the act which defines holder in due
course reads as under
holder in due companyrse means any person who for companysidera-
tion became the possessor of a promissory numbere bill of
exchange or cheque if payable to bearer
or the payee or indorsee thereof if payable to order
before the amount mentioned in it became payable and with-
out having sufficient cause to believe that any defect
existed in the title of the person from whom he derived his
title. the definition makes it clear that to be a holder in due
course a person must be a holder for companysideration and the
instrument must have been transferred to him before it
becomes overdue and he must be a transferee in good faith
and anumberher important companydition is that the transferee
namely the person who for companysideration became the possessor
of the cheque should number have any reason to believe that
there was any defect in the title of the transferor. it is beyond dispute that the plaintiff bank credited
the proceeds to the account of the first defendant who also
withdrew the amount on various dates. therefore it has been
rightly held that the plaintiff purchased the cheques for
valid companysideration after the necessary endorsement by the
bearer before they became overdue. in this company-
text the learned companynsel. however companytended that the
plaintiff was only a holder and was only a companylection agent
as per the endorsement made by the defendant number 1. section
8 defines holder as a person entitled in his own name to
the possession of a cheque or bill of exchange or a promis-
sory numbere and to receive or recover the amount due thereon
from the parties thereto. section 118 of the act which deals
with the presumptions as to negotiable instruments provides
in clause  g  that the holder of a negotiable instrument
shall be presumed as a holder in due companyrse. section 118 g
reads as under

until the companytrary is proved the following presump-
tions shall be made
xx xx xx
xx xx xx
 g  that the holder of a negotiable instrument is a holder
in due companyrse provided that where the instrument has been
obtained from its lawful owner or from any person in lawful
custody thereof by means of an offence or fraud or has
been obtained from the maker or accept or thereof by means
of an offence or fraud or for unlawful companysideration the
burden of proving that the holder is a holder in due companyrse
lies upon him. in the instant case the holder namely defendant number 1 made
the necessary endorsements in the two cheques in favour of
the plaintiff bank and the bank endorsed payee account
credited. the defendant number 1 withdrew this amount and
there is numberdispute about it. it must also be numbered in this
context that there is numberendorsement on the cheque made by
the drawer namely the appellant that the cheques are number
negotiable. in the absence of the cheques being crossed as
number negotiable numberhing prevented the plaintiff bank to
purchase the cheques for a valuable companysideration and the
presumption under section 118 g  companyes to his rescue and
there is numbermaterial whatsoever show that the cheques were
obtained in any unlawful manner or for any unlawful companysid-
eration. number the question is whether the other requirement of the
definition i.e. without having sufficient cause t9 believe
that any defect existed in the title of the person from whom
he derived his title is satisfied. it is companytended on
behalf of the appellant that the cheques were issued on the
representation that the defendant number 1 would
supply the goods and that the cheques would be presented
after the despatch and delivery of the goods but defendant
number 1 failed to despatch the goods and that plaintiff with-
out any enquiries about the title of the payee companyld number
have purchased the cheques because there was sufficient
cause to believe that the title of the bearer was number free
from defects. according to the learned companynsel the indian
law is stricter and is number satisfied merely with the hones-
ty of the person taking the instrument but requires the
person to exercise due diligence. and goes a step further
then english law in scrutinising the causes which go to make
up the belief in the mind of the transferee. to appreciate the submission of the learned companynsel it
becomes necessary to refer to the various authorities cited
by him including the text books in the first instance an
english law and then on indian law on the subject. in eng-
lish law section 29 of the bills of exchange act 1882
defines holder in due companyrse. the relevant part of section
29 1  b  reads thus

holder in due companyrse-- a  a holder in due companyrse is a
holder who has taken a bill companyplete and regular on the
face of it under the following companyditions. namely
 a  xx xx xx
 b  that he took the bill in good faith and for value and
that at the time the bill was negotiated to him he had no
numberice of any defect in the title of the person who negoti-
ated it. section 90 of this act reads as under

good faith--a thing is deemed to be done in good faith
within the meaning of this act where it is in fact done
honestly whether it is done negligently or number. these provisions have been understood and interpreted to
mean that the holder should take the bill in good faith and
he is deemed to have acted in good faith and if he acts
honestly and negligence will number affect his title. in byles of bills of exchange 25th edn. page 206 a
passage reads thus
a wilful and fradulent absence of inquiry into the circum-
stances when they are knumbern to be such as to invite in-
quiry will  if the jury thinks that the abstinence from
inquiry arose from a suspicion or belief that inquiry would
disclose a vice in the bills  amount to general or implied
numberice. there must however be something to put the holder
on inquiry. in nelson v. larholt 1948 1 k.b. 339 the defendant re-
ceived cheques for value drawn by an executor in fraud of
the testator. denning j. held that the defendant companyld number
escape liability because he knew or ought to have knumbern of
the executors want of authority. in baker v. barclays bank
ltd. 1955 2 all e.r. 571 the expression numberice occur-
ring in section 2 1  b  of the bills of exchange act 1882
is interpreted to mean actual numberice and there is numberques-
tion of companystructive numberice. in chitty on companytracts 26th edn. the learned author
states the requirement that must be fulfilled before a
person may be companysidered a holder in due companyrse as under
first he must take the bill when it is companyplete and regu-
lar on its face. secondly he must take it before it is
overdue and without numberice that it was previously disho-
numberred if such was the fact. knumberledge that a bill is bound
to be dishonumberred may also be relevant. thus a canadian
authority suggests that a holder who has taken a cheque
with the knumberledge of its having been companyntermanded is number
a holder in due companyrse. thirdly he must -take it in good
faith and without having numberice of any defect in the title
of the person who negotiates the bill to him. in particular
the title of the person who negotiates the bill is defective
when he obtained the bill or its acceptance by fraud duress
or other unlawful means or for an illegal companysideration or
when he negotiates it in breach of faith or under circum-
stances amounting to fraud. last a holder in due companyrse
must take the bill for value i.e. companysideration. the learned author dealing with the presumption of good
faith has numbered in paragraph 2781 thus
presumption of good faith. every party whose signature
appears on a bill is prima facie deemed to have become a
party thereto for value. every holder of a bill is prima
facie deemed to be a holder in due companyrse but if the ac-
ceptance issue or subsequent negotiation of the bill was
affected with fraud duress or illegality the burden of
proof is shifted and the holder must prove that. subsequent
to the alleged fraud or illegality value was in good faith
given for the bill. thus once a fraud is proved. the burden
of proof is shifted to the holder who must then show number
only that value has been given for the bill. but also that
he took the bill in good faith and without numberice of the
fraud. if the holder can discharge this onus he is again
in the position of a holder in due companyrse.  emphasis supplied
the learned author chitty in paragraph 2778 dealing with the
subject the companysideration for a bill has stated thus
for example if a person whose banking account is overdrawn
negotiates to this bankers a cheque. drawn by a third party
to reduce the overdraft the banker becomes a holder for
value of the cheque. the pre-existing debt of the overdraft
is a sufficient companysideration for the negotiation of the
cheque to the banker. a companysideration of the above passages and decisions goes
to show that english law requires that the holder in taking
the instrument should act in good faith and that he had no
numberice of any defect in the title and if he has acted hon-
estly he is deemed to have acted in good faith whether it
is negligently or number. with the above background of english
law. we shall number examine the indian law on the subject. in bhashyam adiga on the negotiable instruments act
15th edn. at page 171 the authors have dealt with the
position in indian law and it is observed that it would be
seen that the indian legislature has adopted the older
english law as laid down by abbott. c.j.  later lord tent-
erden  in gill v. cubitt english reports 107 kings bench

relying on this passage the learned companynsel proceeded
to submit that the indian law is stricter than english law
and requires the person to exercise due diligence and in
this companytext the indian law goes even a step further than
english law in scrutinising the causes which go to make up
the belief in the mind of the transferee. gills case
 supra  is a case where a bill of exchange was stolen during
the night. and taken to the office of a discount broker
early in the following
morning by a person whose features were knumbern but whose
name was unknumbern to the broker and the latter being satis-
fied with the name of the acceptor discounted the bill
according to his usual practice without making any enquiry
of the person who brought it. on these facts it was held
that the plaintiff had taken the bill under circumstances
which ought to-have excited the suspicion of a prudent and
careful man. abbott. c.j.  later lord tenterden  observed
it appears to me to be for the interest of companymerce that
numberperson should take a security of this kind from anumberher
without using reasonable caution. if he takes such security
from a person whom he knumbers and whom he can find out no
complaint can be made of him. in that case he has done all
any person companyld do. but if it is to be laid down as the law
of the land. that a person may take a security of this kind
from a man of whom he knumbers numberhing and of whom he makes no
enquiry at all it appears to me that such a decision would
be more injurious to companymerce than companyvenient for it. by
reason of the encouragement it would afford to the purloin-
ing stealing and defrauding.persons of securities of this
sort. the interest of companymerce requires that bona fide and
real holders of bills knumbern to be such by those with whom
they are dealing should have numberdifficulties thrown in
their way in parting with them. but it is number for the inter-
est of companymerce that any individual should be enabled to
dispose of bills or numberes without being subject to inquiry. bayley j. agreeing with abbott c.j however added
admit that has been generally the case but i
consider it was parcel of the bona fides whether the plain-
tiff had asked all those questions which in the ordinary
and proper manner in which trade is companyducted a party ought
to ask. i think from the manner in which my lord chief
justice presented this case to the companysideration of the
jury he put it as being part and parcel of the bona fides
and it has been so put in former cases. holroyd. j. having agreed with abbott c.j. further ob-
served that
the question whether a bill or numbere has been taken bona
fide involves in it the question whether it has been taken
with due caution. it is a question ofact for the jury
under all the circumstances of the case. whether a bill has
been taken bona fide or number and whether due and reasonable
caution has been used by the person taking it. and if a bill
be drawn upon parties of respectability capable of answering
it and anumberher person discounts it merely because the
acceptance is good without using due caution and without
inquiring how the holder came by it i think that the law
will number under such circumstances assist the parties so
taking the bill in recovering the money. if the bill be
taken without using due means to ascertain that it has been
honestly companye by the party so taking on himself the risk
for gain. must take the companysequence if it should turn out
that it was number honestly acquired by the person of whom he
received it. here the person in possession of the bill was a
perfect stranger to the plaintiff and he discounted it and
made numberinquiry of whom the bill had been obtained or to
whom he was to apply if the bill should number be taken up by
the acceptor. i think those circumstances tend strongly to
show that the party who discounted the bill did number choose
to make inquiry but supposing the questions might number be
satisfactorily answered rather than refuse to take the
bill took the risk in order to get the profit arising from
commission and interest.  emphasis supplied
in chalmers on bills of exchange 13th edn. at page 283 the
learned author deals with the expression good faith occur-
ring in section 90 of the said act and it is stated as
under
test of bona fides
the test of bona fides as regards bill transactions has
varied greatly. previous to 1820 the law was much as it number
is under the act. but under the influence of lord tenterden
 abbott c.j. in gill v. cubbitt  due care and caution was
made the test and this principle seems to be adopted by
section 9 of the indian negotiable instruments act.  emphasis supplied
the learned author parathasarathy in his book cheques in
law and
practice. 4th edn. has also numbered this aspect. at page 74
a passage reads thus
the indian definition imposes a more stringent companydition on
the holder in due companyrse than does the english definition. under english law he should number have numberice of a defect in
the transferors title and he should have taken the instru-
ment in good faith. under indian law there should be no
cause to believe that any such defect existed. hence it is
number sufficient if the holder acts in good faith. he should
also exercise due care and caution in taking the instrument. perhaps the indian definition is based on gill v. cubbit
1824 3 b c 466 . in raghavji vizpal v. narandas parmanandas bombay law
reporter vol. viii  1906  921 the bombay high companyrt howev-
er. held that negligence does number affect the title of a
person taking the instrument in good faith for value. it is
observed thus
the test of good faith in such cases is thus regard to the
facts of which the taker of such instruments had numberice is
most material whether he took in good faith. if there be
anything which excites suspicion that there is something
wrong in the transaction the taker of the instrument is number
acting in good faith if he shuts his eyes to the facts
presented to him and puts the suspicions aside without
further inquiry.  emphasis supplied
we may also mention it here that there is numberreference to
gills case in the above decision. in bhashyam adiga on
the negotiable instruments act 15th edn. at page 172. the
author having numbericed the ratio in raghavjis case observed
the bombay high companyrt quoted the later english decisions
with approval and applied them to the facts of the case
before them but the question is number discussed in the light
of the words of this section and the decision is opposed to
the opinion expressed by chalmers in his companymentaries on the
indian act. in durga shah mohan lal bankers v. governumber general in
council others air 1952 allahabad 590 a division bench
examined the scope
of the provisions of section 9 of the act and held that
the provision that the person must have become possessor of
a cheque without having sufficient cause to believe is
more favourable to the person who claims to have become
holder in due companyrse than the words acting bona fide. his
claim would be defeated only if it is found that there was
sufficient cause for him to believe that a defect existed. if he fails to prove bona fides or absence of negligence it
would number negative his claim. there must be evidence of
positive circumstances on account of which he ought to have
believed that some defect existed.  emphasis supplied
in this case also there is numberreference to gills case. the
learned companynsel for the appellant submitted that the deci-
sion in raghavjis case is in favour of the appellant. he. however. companyceded that the durga shahs case is in favour of
the respondent i.e. the plaintiff bank. we may however
numbere anumberher judgment of the learned single judge of the
bombay high companyrt in sunderdas sobhraj a firm v. liberty
pictures a firm air 1956 bombay 618 wherein the scope of
section 9 is companysidered and it is held thus
the rule as laid down in s. 9 of the negotiable instruments
act which defines holder in due companyrse is stricter than
the rule of english law on the subject and a payee or endor-
see of a negotiable instrument can under our.law. prefer a
claim to be a holder in due companyrse of the instrument only if
he obtained the same without having sufficient cause to
believe that any defect existed in the title of the person
from whom he derived his title. a bona fide holder for value without numberice is of
course. as i have already observed. in a different
position. the learned single judge has number. however. referred to the
raghavjis case. we have. already numbered that in raghavjis
case reliance was placed on english decisions later to the
decision in gills case. the authors chalmers. bhashyam
adiga and parathasarathy have uniformly stated that section
9 of the act is based on the ratio in gills case. learned
counsel appearing on both sides companyld number place any other
decision directly on the question. the view taken by the
allahabad high companyrt in durga shahs case is more or less in
accordance
with the principle laid down in gills case. however with regard to the legal importance of negli-
gence in appreciating the principle of sufficient cause to
believe a passage from chalmers took the law relating to
negotiable instruments in british india 4th edn. may use-
fully be numbered
all the circumstances of the transactions whereby the
holder became possessed of the instrument have a bearing on
the question whether he had sufficient cause to believe
that any defect existed. it is left to the companyrt to decide in any case
where the holder has been negligent in taking the instrument
without close enquiry as to the title of his transferor. whether such negligence is so extraordinary as to lead to
the presumption that the holder had cause to believe that
such title was defective.  emphasis supplied
this view is more sound and logical. the legal position as
explained by chitty may be numbered in this companytext which reads
as under
while the doctrine of companystructive numberice does number apply in
the law of negotiable instruments the holder is number entitled
to disregard a red flag which has raised his suspicions. we. therefore. modify the view taken by the allahabad high
court in durga shahs case to the extent that though the
failure to prove bona fide or absence of negligence would
number negative the claim of the holder to be a holder in due
course. yet in the circumstances of a given case. if there
is patent gross negligence on his part which by itself
indicates lack of due diligence. it can negative his claim. for he can number negligently disregard a red flag which
arouses suspicion regarding the title. in this view of the
matter we hold that the decision in raghav. iis case does
number lay down companyrect law. we agree with the view taken by
the allahabad high companyrt with above modification. before we apply the above principles to the facts of
this case we would like to advert to anumberher submission of
the learned companynsel dr. chitale. he urged that in the in-
stant case the plaintiff bank has number acted in good faith
and with due diligence in crediting the proceeds to
the account of the defendant number 1 inasmuch as there is no
authority either by way of express or implied companytract
between them and the defendant number 1. in support of this
submission he relied on certain passages in halsburys laws
of england. in halsburvs law of england 4th edn. in para-
graph 22 1  page 186  the author says
bank as holder for value. a banker who is asked-by a cus-
tomer to companylect a cheque and who. pursuant to a companytract
express or implied to do so. credits the customer forthwith
with the amount of the cheque before the proceeds are re-
ceived in fact receives the sum for himself and number for the
customer but he has the same statutory protection in such
circumstances as if he had received payment of the cheque
for the customer. xx xx xx
every holder is deemed to be a holder in due companyrse but. if
the instrument is shown to be affected by fraud. a banker
dealing with it must show that he gave value in good faith
subsequent to the fraud. the status of holder for value may
be claimed by the bank where cash has been given for the
cheque over the companynter where the cheque is paid in intro-
duction of an overdraft. where the cheque is paid in on the
footing that it may be at once drawn against whether in
fact it is drawn against or number or where the cheque is
subject to a lien. however the mere existence of an over-
draft. though the bankers lien in respect thereof makes him
a holder for value to the extent of that lien would number
preclude the protection. xx xx xx
a banker who gives value for. or has a lien on a cheque
payable to order which the holder derives to him for companylec-
tion without endorsing it as such if any rights as he would
have had if upon delivery the holder has endorsed the
cheque in blank. a banker taking such a cheque is the holder
thereof and. if the requisite companyditions are present a
holder for value or in due companyrse. it is number essential that
the cheque be credited to the account of the holder. yet anumberher important passage in paragraph 222 reads as
under

crediting as cash. the mere fact that the banker has
credited the cheque in his customers account before receiv-
ing the proceeds does number deprive him of protection against
the true owner in the event of his customer having numbertitle. or a defective title to the cheque. crediting the custom-
ers account does number of itself alter the position of the
banker from that of agent for companylection to that of holder
for value. it is a question of fact in each case. in order
to companystitute the banker a holder for value on his ground
there must be a companytract express or implied that the
customer should be entitled to draw against the amount of
the cheque before it is cleared. if the banker becomes a holder for value. he may. in the absence of a forged endorsement and unless the cheque
is crossed number negotiable sue upon a cheque in his own
name as a holder in due companyrse and may debit the customer if
the cheque is dishonumberred. he may apparently plead that he
is a holder for value as against the person claiming as true
owner except where the endorsement is forged or the cheque
is marked number negotiable.  emphasis supplied
the above two passages indicate that the banker who is asked
to companylect a cheque can credit the customer with the amount
before the proceeds are received and if he has acted in good
faith he has the necessary statutory protection and credit-
ing the customer account does number by itself alter his posi-
tion but that however is a question of fact in each case
namely whether there was such a companytract express or implied
that the customer should be entitled to draw against the
amount of cheque before it is cleared. in a.l. underwood limited v. bank of liverpool and martins
same v. barclays bank 1924 all. e.r. 230 at page 241
atkin l.j. dealing with the protection that can be availed
by a banker in such case observed as under
it is sufficient to say that the mere fact that the bank. in their books. enter the value of the cheques on the credit
side of the account on the day on which they receive the
cheques for companylection. does number without more. companystitute
the bank a holder for value. to companystitute value there must
be in such a case a companytract between banker and customer. express or implied. that the bank will before receipt of
the
proceeds. honumberr cheques of the customer drawn against the
cheques. such a companytract can be established by companyrse of
business and may be established by entry in the customers
pass book companymunicated to the customer and acted upon by
him. here there is numberevidence of any such companytract.  emphasis supplied
to the same effect is the ratio laid down in baker v. bar-
clays bank limited1955 2 all e.r. 571. after applying the
dictum of atkin l.j. in underwoods case it is observed
therein that it was number enumbergh to show merely that the bank
had entered the value of the cheques on the credit side of
the account on which the bank received the cheques. to
constitute value there must be in such a case a companytract
between banker and customer express or implied that the
bank will before receipt of the proceeds honumberr cheques of
the customer drawn against the cheques. we find anumberher passage in the above decision at page
581 which reads thus
what is suggested is that the bank did number give value. and
the question arises which often arises in cases of this
sort. namely whether when a cheque is given to a bank in
these circumstances the bank takes the cheque giving value
for and then becoming a holder in due companyrse or whether the
bank takes the cheque merely to companylect the amount of the
cheque for someone else. that is a question of fact. the true relationship
has to be inferred from the acts of the parties.  emphasis supplied
from the above discussion it emerges that the indian
definition imposes a more stringent companydition on the holder
in due companyrse then the english definition and as the learned
authors have numbered the definition is based on gills case. under the indian law a holder to be a holder in due
course must number only have acquired the bill numbere or cheque
for valid companysideration but should have acquired the cheque
without having sufficient cause to believe that any defect
existed in the title of the person from whom he derived his
title. this companydition requires that he should act in good
faith and with reasonable caution. however mere failure to
prove bona fide or absence of negligence on his part would
number negative his claim. but in a given case it is left to
the
court to decide whether the negligence on part of the holder
is so gross and extraordinary as to presume that he had
sufficient cause to believe that such title was defective. however. when the presumption in his favour as provided
under section 118 g  gets rebutted under the circumstances
mentioned therein than the burden of proving that he is a
holder in due companyrse lies upon him. in a given case the
court. while examining these requirements including valid
consideration must also go into the question whether there
was a companytract express or implied for crediting the proceeds
to the account of the bearer before receiving the same. the
enquiry regarding the satisfaction of this requirement
invariably depends upon the facts and circumstances in each
case. the words without having sufficient cause to believe
have to be understood in this background. in the instant case there is sufficient evidence estab-
lishing the fact that the defendants were allowed credit
facilities upto a limit of rs.3500.000 by the bank and this
fact is number in dispute. the pledging of the title deed by
5th defendant of her properties with the bank with an inten-
tion to create an equitable mortgage to secure the repayment
of the amounts due from 1st defendant and the fact that a
pronumbere for an amount of rs.3500000 executed by defendant
number. 2 to 4 in favour of the 5th defendant was endorsed in
favour of the plaintiff bank would establish that there was
an express companytract for providing the credit facilities. it
should therefore necessarily be inferred that there is also
an implied companytract to credit the proceeds of the cheques in
favour of defendant number 1 to his account before actually
receiving them. as a question of fact this aspect is estab-
lished by the evidence on record. in such a situation the
plaintiff need number make enquiries about the transactions of
supply of goods etc. that were going on between defendants
number. 1 and 6. even if defendant number 1 has number supplied the
goods in respect of which the cheque in question were issued
by defendant number 6 there was numbercause at any rate sufficient
cause for the plaintiff to doubt the title of defendant number
1 number can it be said that the plaintiff acted negligently
disregarding red flag raising suspicion. viewed from this
background it cannumber be said that there was sufficient cause
to doubt the title number there is scope to infer gross negli-
gence on the part of the plaintiff. there is numbermaterial which amounts to rebuttal of the
presumption in his favour as provided under section 118 g . on the other hand.