Showing posts with label Case Analysis. Show all posts
Showing posts with label Case Analysis. Show all posts

Citation of the case: (1860) 8 HLC 268

The original name of the case: Cox V. Hickman

Sitting judges of the case: Lord Cranworth and Lord Wensleydale

This is an example of one of the key elements of partnership-Mutual Agency. Mutual Agency Evidence cooperation is conclusive proof. In Section 18[1], the "partner is a representative of the company for the company." They operate as agents as well as directors and have the unrestricted ability to bind.

What is the mutual agency in The Partnership Act, 1932?

The mutual agency is the partnership's legal relationship, with each member having authorization rights and the authority to conclude commercial contracts with the partner. This means that every partner in the partnership is the agent in the company and authority for taking business choices committing or binding, as a whole, to an agreement between itself and a third party or organization.

Only partners operating in the usual scope of business activities and transactions have mutual agency. A retail clothing partner with an agency, for example, would not be allowed to contract other partners to buy an investment property since it would not be in the usual company operation.

On the other side, one of the retail partners might buy products from a supplier and demand partnership payment for the products. This transaction is part of the company's usual activity.

Facts of the case

Under the name of B Smith & Son, Benjamin Smith and Josiah Timmis Smith were active as iron and maize tradespeople. They owed the creditors a lot of money and there was a meeting, including Cox and Wheatcroft. More than six-sevenths of the number and value of the debtors performed a deed of arrangement. The trusts have been listed and the rental period is 21 years. The company was to operate under the name "The Stanton Iron Company." The deed also contains a clause preventing the Smiths from prosecuting the current debts. After six weeks after which no trustee was appointed, Cox had never functioned as trustee.

Hickman produced 3 bills of exchange that were accepted but not honored by the firm. The products were supplied for the business.

The trial was initially brought before Lord Jervis, who ruled for the accused. The action was taken before the Exchequer Chamber in which three judges wanted the judgment to be upheld and the remaining three reverted it.

What were the issues?

Whether the merchants who were essentially the creditors of the company are in partnership?

Contentions of the case

The Wheatcroft lawyers argued:

¾    There was no action, as though Hickman had heard that the trustees were Cox and Wheatcroft, that Cox was never a trustee and Wheatcrofte had resigned. The appellants were never brought to justice.

¾    The Smiths owned and owned the partnership never altered.

¾    No individual becomes a partner in a qualifying benefit from trade. There is no collaboration here until the gains are taken.

Cox's lawyer argued that:

The defendant can only be held responsible if:

¾    He has on the bill his name

¾    Allowed another person to place their name on the bill

¾    The power was held by himself

·         He is not responsible for the first and third points. The second point is that until an agency is proven, the defendant cannot be held accountable.

·         The defendant is responsible for demonstrating that the complainant is a partner.

Hickman's lawyer argued that:

¾    A partnership arrangement was concluded to carry out operations for the benefit of creditors

¾    Planed creditors may partake in the company's earnings and become partners in the company

¾    Any partner may bind everyone other by accepting the invoices in the ordinary business process

Test of Partnership[2]

Mode of the existence of a partnership. —The true relationship between the two parties, as evidenced by all relevant facts taken together, should be considered when deciding whether or not a group of individuals is an enterprise, or whether or not a person is or is not a company partner.

Explanation 1.These people do not themselves form partners by sharing profits or gross return on the property by others with a shared or shared interest in that property.

·         Example: Two persons are co-owners of a house in a lawsuit. Every month they rented the house and paid the rent. This does not form a partnership.

Explanation 2. The person who has received a share of the company's profits and a payment contingent on profit or which vary in terms of profits earned by an enterprise does not make him/her a partnership with the companies, and in particular, the person who received that share or payment.

¾    A person who has given money to a partner or company engaged in an enterprise may offer a share in the profit, rather than or in addition to the money he has provided. But owing to such a percentage of revenues, he will not become a partner.

¾    A business servant/agent may get, in addition, or place of the ordinary pay, a share of the company's earnings. But that doesn't make him a company partner.

Example: A is an assistant at a broker's company and receives a percentage of its earnings beyond its wages. Sometimes, on behalf of the company, A also signs certain letters and papers. A is simply an agent of the enterprise, though, and is not only a partner because he has a stake in the profits. (This is comparable to Mc Laren Morrison vs. Verschoyle[3])

¾    The widow or offspring of a dead partner often get an annuity share in his profits. The widow or the descendants of the company are not partners.


¾    A portion of earnings may be provided in return to a shareholder or the former owner of an enterprise who, along with goodwill, sells its stake. However, such a person is not a partner in the firm.

Example:A physician is a physician who sold his practice and his will to B. They sign an arrangement whereby A helps B by referring him to his patients. A will receive a part of earnings, in turn. A and B aren't partners in this regard. This is comparable to Pratt vs. Strick[4]

Section 6[5] makes explicit that 'the genuine relationship between the parties, as all relevant facts demonstrate combined, must be taken into consideration when evaluating whether a group of people is or is not a company, or whether a person is a partner in a company.

A partnership cannot be established based on proclaimed intentions. It was concluded that simple usage of the word 'partner' in Raghunathan vs. Hormusjee[6]  leads to a partnership when there is no partnership. The actual or true relationship between the so-called partners of the company as a result of all the essential circumstances determines the existence of a partnership.It depends on the parties' purpose, as demonstrated by their agreement or behavior, that creates implicit agreement or both. No one becomes a partner in a mere shared interest. Sharing finance doesn't indicate that two individuals are partners in the same way.

Cox vs. Hickman[7] concluded that the sharing of profits is a vital and not conclusive criterion of all the fundamental elements of a partnership. Mutual agency is the real test for establishing partnerships. If one partner can bind the other partners and the company by its acts and is, in turn, linked with other partners' activities, a partnership may only be stated.

Highlights of Cox v. Hickman

¾    No partner is only sharing the profit. It's only the first test

¾    Work with his real or ostensible authority should have been done personally or on behalf of him.

¾    The partners should be able.

¾   No partner relationship exists in this scenario. (the 'real relationship' term in Section 6 of the Act)


The act provided the creditors with extraordinary authority. The majority of them had the option of continuing trade or not, and of creating norms and regulations for the exercise of trade which are the powers of partners.

However, if they could, the creditors did not do the business, they let the trustees go on with it. They did not become commercial partners by this act of theirs. If they had done business, none of the trustees would have taken the bill of exchange as the directors.

This is just a contract between creditors and Smiths for the repayment of current and future earnings by the creditors. This link between the creditors and debtors is not sufficient for the principle to have a connection with the agency. The Trustees are responsible since they are contract agents, yet the trustees' creditors are not the directors.

The House of Lords Held did not agree and Cox did not take responsibility.

Lord Cranworth argued that profit participation is not a crucial partner test. The real test is whether the partners are 'mutual agencies.'

Lord Cranworth - "A partner's responsibility for his co-partners conduct is indeed a principal's responsibility for his agent's activities. If two or more individuals are involved in an ordinary business, they each have an implicit authority from another person to bind them all through contracts entered into in the course of business. Each trading partner is his co-agent; partner's everyone is consequently accountable for the other's regular commercial contract."


This blog is authored by Aeshita Marwah, a student of the University of Petroleum and Energy Studies.

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[1]The Indian Partnership Act, 1932

[2]Section 6, The Indian Partnership Act, 1932

[3]1901 6 CWN 429

[4]1932 7 Tax Cas. 459

[5]The Indian Partnership Act,1932

[6]52 Bom 342

[7](1860) 8 H.L.C. 268



In these, the Chennai City Municipal Act, 1919 challenges the section 326A to 326J1 in writ petitions. In these sections it cover ups about the definition of Hoardings whether it is for public or private or for any advertisement and not for any sale purpose or for any other purpose. These sections also includes the prohibition for erection of hoardings where it becomes mandatory for License to the one who is the owner of particular hoarding. For License one needs to make an application to the District Collector/ Commissioner. Therefore the District Collector or Commissioner may grant permission for license only after his/her inspection and if not satisfied, permission may get cancelled but not without informing the reason of cancellation or without listening to the appellant point of side. The License shall be renewed from time to time otherwise it may cause penalty to the owner. Any person holding the License for particular hoarding shall pay a Tax calculated at particular rates2. With the authority of granting License by the District Collector/ Commissioner, also has the power of cancelling or suspension of license if that hoarding contains any mis-representation or any fraud material presented on hoardings which can damage someone’s image or creates nuisance to the public or private property. In other case if hoardings found without License the District Collector/ Commissioner passed the order of removal of unauthorized hoardings or in such other cases. There are certain exemptions to certain hoardings also from state government an appeal is made for the refusal or approval of hoardings. One of the sections also mentions the penalty of hoardings with an imprisonment or with fine. There is also prohibition of construction to certain hoardings.


The Judgement for the case title named “NOVVA ADS. V. Deptt. Of Municipal Administration and water supply (2008) 8 SCC 42” was passed on a particular dated 09/04/2008. When the writ Petitions was dismissed in High Court, the case was then carried to the Hon’ble Supreme Court of India, the titled case was therefore ruled upon the Civil Appeal where leave was granted in the ‘Special Leave Petitions’. The Judgement was delivered to the division bench of Madras High court in writ petitions and was challenged in these appeals. The following sections 326A to 326J in writ petitions challenges not only Chennai City Municipal Act, 1919, but also challenges ‘Licensing of hoardings and Levy and Collection of Advertisement Tax, Rules, 2003’.

In the City of Chennai, a committee was setup for identifying or counting the historical or important places for the hoardings. It was pointed out that no license is to be granted or renewed in respect of any hoarding which is not in conformity with provisions Act or the Advertisement Rules Act3.


So as per our case law, the appellant who is the owner of particular hoarding, it was required for the District Collector to make a view for the call of traffic views and for other views too, which needs to be communicated to the District Collector. It was hold on to that if applicant had already constructed a hoarding it was liable to remove that hoarding and then only applicant can apply for the removal of hoarding. The plan of the hoarding needs to be approved by a qualified engineer. It was directed by District Collector to remove and demolish all unauthorized hoardings which were construct after the deadline of date and to which no application was made in between 8 weeks of time to the District Collector. For removal of such hoardings District Collector/ Commissioner are directed to provide necessary work force for removal or demolishing such removals. Alongside State Government was also directed to appoint two officers as a special officers with the powers of District Collector to make inspection of pending applications before collector within a period of 4 weeks from the date of judgement. By the Advertisement Rules, it was directed against the decision of special officer to dispose of within 60 days. Nonetheless the District Collector and the Thasildar were directed to take immediate steps for the recovery or penalties from the hoarding owners.

The Advertisement Rules have submitted that the Articles are violative of 19(1)(a) and 19(1)(b) in the Constitution of India,19504. Along with articles 19(1)(a) and 19(1)(b), Article 14 has also been violate of treating public and private hoardings equally. In Tamil Nadu Acquisition hoarding act, 1985 it was submitted that the hoarding whether it was public or private property it was held to be illegal.In the Chennai City Municipal Act,19195 in it the owner of hoarding needs to apply for license within a period of 30 days. A very well-known case law ‘P.Narayana Bhat v. state of Tamil Nadu and ors. (2001) 4 SCC’ can be referred as an example or helpful for better understanding of the following case.

In the Advertisement Rules, the time period for making application license was fixed in the year 2003. Also in these rules the term ‘Obstruction’ is pointed out to the physical disturbance to the people. ‘K.R.Ramaswamy @traffic v. The Collector on 28 April, 2008’ is also one of the case law which can be taken into consideration for better understanding. According to Rule 66, challenge is made to relate to the width of the road.It is pointed out that the concept of Public Order which is being introduced but it has to be in relatable parameters mention in the Case Law ‘Dr. Ram Manohar Lohia v. State of Bihar and ors.(1966) 1 SCR 709’.For arguments provisions are regulatory and are related to the parameters of Article 19(2)7, but there were restrictions on use of private land for advertisement. On the other hand in the following case title ‘BrijBhushan and anr. v. The State of delhi (AIR) 1950 SC 129 state that restriction can be related to only public interest and not to the public order. Basic difference between Article 19(2) and 19(6) has not been kept in view.

Some of the petitioners have stated that there was a regulatory fixed dated 23.7.1998 register was to be done to identify data as to which hoardings existed prior to the fixed date so applicants can make application before the date gets extended.  Most of the roads are between the 15ft. to 50ft category which is submitted in Rule 6.The question arise in the form that, what is objectionable in the hoarding, to which it said to be its content and that matters. The content is not limited to words, colour, size, extent, form, and placement. In these case there is no guided discretion. On the other hand the respondent has submitted that the appellants and many like them have continued the legislation regulating hoardings in Chennai. Along with it was submitted that the hoarding owners have challenged the regulation on specification on hoardings for the last two decades that Chennai still carries away the dishonourable hoardings in majority which are hazardous and dangerous to the traffic. Instead of getting relief, the failure continues while the court challenged is still continued.

Rule 6 of 20038 puts restrictions on size of hoardings, height, spacing, etc. also the requirement of steel frames. The Commissioner is satisfied under section 326-J that any hoarding visible to the traffic on the road is hazardous to the safe traffic movement, and shall not grant any License under Section 326-C. There are no bans on hoardings as such but only in case of obstructive and destructive hoardings are prohibited by the government. Therefore the appeals and Writ Petitions without merit and needs to dismiss. The content, effect and the purpose clearly show that it is intended. As it has been rightly said by the counsel of the respondents that the Act and the Advertisement rules do not regulate advertisement. There are two things made arranged in Rule 3(b) where one would be relating to NOC by the police and the other power of District Collector whether the hoardings fall under the section 326J was in the same line.


A Delegated legislation can be declared invalid by the court only on two grounds: a) It violates any provision in the constitution (b) It is violative of the enabling act. Basically this provisions relate to the process that rules and regulations conferred by the Government is consulted.


1Chapter XII-A of Chennai City Municipal Act, 1919

2Section 326CC of Chapter XII-A of Chennai City Municipal Act, 1919

3 Rule 3(i) of Advertisement Rules Act, which specifies Magic Remedies, or Alcohol.

4Article 19(1)(a) and 19(1)(b) in Constitution of India,1950, expresses the freedom of speech and expression and to assemble peacefully that too without arms.

5Section 326 B, Chennai City Municipal Act, 1919

6Rule 6, mention any drugs or magical remedies of the Advertisement Rules Act.

7Articles 19(2) specifies freedom of speech and expression in the interest of public order.

8Rule 6 of 2003 includes Licensing of hoardings.                                                                       


  1. o
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The levying of taxes by the state has always been in question regarding their validity and the enactment of legislation by the state for that purpose. The freedom that is provided under Article 301 of the Constitution sometimes creates a dilemma on whether the taxes come under the purview of the restriction on trade and commerce or not? A similar question arose in the present case in which legislation of Haryana was challenged by a trader of the state.

The court in the case has laid reference to the various cases through which the constitutionality of the act challenged has also been explained and many of the questions in relation to taxes have been answered. The judgment of the case is a lengthy one and the case note provides the keynotes of the judgment and the case as it is important to understand the significance of the case for the purpose of levying taxes by the states.

Brief Facts-

There have been various instances in which the levying of taxes by different states has been challenged. The issue of levying of tax is been continued for a long time. Jindal Stainless Steel is an industry and a product manufacturing unit is established in the state of Haryana. For an industry to work, it becomes important to export and import materials according to needs. The Jindal steel imported raw materials and exported goods for revenue and sale to other states.

In 2000, Haryana Local Development Act was enacted to collect taxes in an entry from other states and also to regulate other taxes on the products being imported and exported. The act focused on the internal development of the state. The maintenance of the industrial sector needed the taxes to be levied so that along with the work, the development also takes place.

The Haryana Local Development Act, 2000 has been challenged by the petitioner in the present and has been stated as unconstitutional. However, many of the states in the country have enacted laws that levy taxes on the entry of goods into the local areas. The article has been mainly pointed out in Article 301 of the Indian Constitution. The article provides for the freedom of trade and commerce and intercourse. The act of 2000 has been challenged previously in various instances. However, the emphasis was laid down on the cases Atibari tea Co. v. State of Assam (AIR 1961 SC 232), Automobile Transport (Rajasthan) Ltd. Etc. v. State of Rajasthan and Ors. (AIR 1962 SC 1406), and it was held by the Division Bench of High Court of Punjab and Haryana that the taxes that are levied under the Act are compensatory and hence do not violate Article 301 of the Constitution.

The levying of taxes on the entry of goods has been stated against the freedom of trade and commerce as per the Constitution and such actions of the government are being said as arbitrary. The collection of taxes by the government has been challenged in many cases earlier too. However, they have been referred to in the contentions of the parties.

Issues Raised-

1. Whether the tax levied by the state on the entry of goods is violative of Article 301 of the Indian Consti9tution?
2. Whether the enactment of the Haryana Local development act, 2000 violative and unconstitutional?
3. Whether the levy of taxes on entry of goods are important to be considered and tested about articles 304 (a) and (b) of the Constitution?
4. Whether the levying of taxes on the goods being entered in the local area for being stored are to be treated the same as the goods being imported for sale?
5. Whether the principle laid down in the case of Atibari and Automobile Transport also applicable in the present scenario?
6. Whether the taxes which are stated as non-discriminatory infringe the right mentioned in Article 301 of the Constitution?
7. Whether levying taxes as per Entry 52 List II of Schedule VII is in contradiction with Article 301 of the Constitution?
8. Whether the internal and external goods be differentiated about Article 304 (a) and Article 304 (b) of the Constitution?

Important provisions-

The case involves various articles of the Constitution and their relation to the levying of taxes. Some of the major and important provisions to be considered while reading the case are-

Article 301 of the Constitution of India- Freedom of Trade and Commerce. It states that trade and commerce must be free across the country and no discriminatory restrictions must be imposed on it.

Article 304 of the Constitution of India- Restrictions on Trade and Commerce notwithstanding anything contained in Articles 301 or 303- It states that the taxes can be levied by the state and the center and it does not infringe the rights contained in Article 301.

Article 265 of the Constitution of India- No tax can be levied by the state except by the authority of law. This signifies the importance of enactment of the legislature for the imposition of taxes.

Article 356 of Constitution of India- Failure of machinery in the state. It states the provisions or the conditions that can arise when a failure of machinery takes place in the state.

Article 302 of the Constitution of India- Power of the Parliament for imposing restrictions on trade. It states that the parliament has the power to impose restrictions on the freedom stated in Article 301.

Article 366(28) of the Constitution of India- States the imposition of taxes irrespective of the kind.

Entry 57 List II of Schedule VII- It states the right of levying taxes by the states on vehicles. This is important for the maintenance of roads and highways of the states.

The contention of the Petitioners-

The petitioners stated that there is a difference between the compensatory and regulatory taxes. The law should be made in such a way that it does not restrict the freedom of trade and commerce as per article 301 of the Constitution. Thus, there stands a difference between regular and compensatory taxes. Compensatory taxes are important to be paid as they are a source for the development of the roads and facilitating the movement of vehicles in and out of the state. However, such taxes cannot be levied by infringing the freedom provided for trade and commerce.

The petitioners referred to various case to validate their contention that the levying of taxes by the government on the incoming foods was violative and was not valid. The case Bolani Iron Ores v. state of Orissa[1] has been stated in which the Supreme court held that as per Entry 57, List II cannot exceed the compensatory nature, also the same must have nexus with the vehicles being used for the transportation. The compensatory taxes must be used only for motor vehicles. However, the tax in the present scenario was being levied on the goods.

The taxes that are stated as non-discriminatory must be levied following the Constitution. Also, the taxes that are being collected on the incoming goods are “fees” being collected in the name of “taxes”. Such collection of fees is against the rights and is restricting the practice of trade and commerce unfairly. It was also stated that the states such as Arunachal Pradesh, Assam, Jharkhand, Kerala, etc. have also struck down the levying of such taxes as they were discriminatory and were held to be violative of Article 304 (a) of the Constitution. The contention of the petitioners was contradicted regarding the precedents by the respondents.

Contentions of the Respondents

The state has placed the contention that the enactment of the Act of 2000 was an integral step to be taken to levy taxes. The reliance has been placed on the case Commissioner of Income Tax, Udaipur, Rajasthan v. McDowell and Co. Ltd. [2] to state the difference and meaning of fees and taxes. The supreme court in the above-stated case held that “fees” “cess” “tax” or “duty” are various kinds of imposts that are collected by the state and it comes within the sovereign power of the state. This revenue is generated for the welfare of the state and. The authority of the collection of taxes is stated under Article 265 of the Indian Constitution and to levy a tax, the presence of legislation for the same is important and necessary as an authority without any legislative power cannot levy taxes. Hence, the enactment of the Act of 2000 by the state of Haryana is valid and the contention raised by the petitioners that the amount being collected is “fees’ and not “tax”, all comes under a similar purview and the sovereign power of the state.

Also, it has been stated for examining the levying of the taxes by the government and questioning the validity of Indian Legislations, sometimes the emphasis is placed on American and Australian decisions. However, in the case of Atibari Tea and Co., the court expressed the view that it is not always correct to pay emphasis on the international judgments to check the validation of the Indian laws as every country functions differently. So, it would not be justifiable to make a comparison out of them every time.

The taxes do not have a limited variety and the Entry 56 of Part II of Schedule VII links to the roads and highways in a manner that the levying of taxes on the goods are associated with the roads and highways that are used for their transportation. The power of the state to collect taxes is valid to the extent that the reason behind is the maintenance and welfare of the state.

Another case that was referred to is Raja Jagannath Baksh Singh v. State of UP and Anr.[3], in this case, the Supreme Court observed that the collection of taxes is paramount for the states. It is correct to state that the collection of taxes comes under the sovereign power of the state. However, the same also stands as a necessity for them to progress and to collect revenue for the development.

Ratio Decidendi

The bench of Justice T.S. Thakur, Justice A. K. Sikri, Justice S.A. Bobde, Justice Shiva Kirti Singh, Justice N.V. Ramana considered the following in consideration with the contentions of the parties,

a. For the question that arose concerning levying of non-discriminatory taxes, it was held that the discriminatory taxes are prohibited by Article 304 (a) and no infringement takes place in the non-discriminatory taxes. Hence, such taxes are not violative of Article 301 of the Constitution.

b. Taxes are a part of the trade and the term used “freedom” and “free” in Article 301 does not include the meaning “free from the levying of taxes”. Taxes help in the generation of revenue for the government and payment of taxes by the corporates does not infringe any kind of freedom.

c. Within the Articles, 265 read with Article 366 (28) of the Constitution, every kind of impost collected by the government is valid and can be termed as a cess, fees, tax, or duty. The only issue that arises is that the rate of taxation cannot exceed the valid limit.

d. For the same cause, the enactment of the legislature for levying taxes by the state is necessary as the collection of taxes by the states must be backed up by legislation and authority.

e. Reliance was placed upon cases such as Keshvananda Bharati v. the State of Kerala[4] and S.R. Bommai v. Union of India[5] to establish the quasi-federal nature of the Indian Constitution. This states that the mind of the Constitution makers has clearly stated the necessity of the actions that are to taken by the center and the state.

f. It was also stated that when Article 301 and 302 are read together, it establishes the fact that valid restrictions can be imposed on the trade by the legislatures and the restrictions which are discriminatory in nature can only be opposed. All the other legislations enacted to establish valid rules and regulations cannot be said to be unconstitutional.

g. The consideration was also given to Synthetics Chemical Ltd. V. State of U.P and Ors. (1990) 1 SCC 109 in which it was stated that both center and state have the sovereign powers to implement new legislation and impose restrictions on that basis.

h. The evolution of the impositions of taxes has been considered to be important and the legislative authorities are to be given importance to coordinate with the government.


The views expressed by the Hon’ble judges led to the conclusion that the state has the power to implement legislatures and such legislatures can exercise their powers to levy taxes. The sovereign power of the state and the center can be exercised for the benefit of the traders as well as the state. The taxes levied on the manufacturers or the traders must not be discriminatory in nature.

However, if compliance has to be placed with the Constitution so that the taxes do not contradict the Constitution. The test known as the twin test must be passed by the taxes before being imposed by the state. This test is embodied in Article 304 (a) so that the nature of the test in terms of goods can be checked. The test comprises of the following conditions-

i. Irrespective of the usage of the goods in the state, the similar goods that are produced locally must have a similar tax. This means that the taxes cannot differ on similar kinds of goods based on other factors, the place of production of such similar goods must also be taken into consideration.

j. The taxes imposed by the state must not discriminate between the two varieties of goods. This means that if tax is being levied on the goods, no scope of discrimination must arise and the taxes must be decided upon the varieties of goods.

The view has been placed on the taxes and their non-discriminatory nature by the bench to hold the validity of the sovereign nature of the states.


The economy of the country is managed by both the public and the public sector. In this judgment, it has been stated that the levying of taxes is valid and this is significant to note that the taxes are an important part of the trade. To keep a balance between the states and the trading, the collection by the government is necessary to generate revenue that is in turn used by the traders.

The objective of the compensatory tax is valid and the economic sector also pays importance to it. for the development of the roads through which the goods are transferred comes under the duty of the state. Such duties need revenue that is collected as taxes. It is not necessary to collect imposts in name of taxes. Fees, cess, or duty are also one of a kind.

The judgment has clarified the doubt concerning the term “freedom” used in Article 301 of the Constitution. It is significant to note that freedom of trade and commerce does not include the freedom of taxes and it is a duty to respect the legislation enacted by the state and is for the welfare of the traders as well.

The validity of the Act of 2000 was also challenged several times previously in various cases. However, in the present case, its necessity has also been clarified. The other significant feature is the evolvement of the twin test through which chances of fraud have become negligible. The trader will also not face problems and will be assured that the taxes which are being collected by them are valid and legal.

Case Comment (Observation)

As per the conditions stated and the points clarified in the case, states are empowered to collect taxes that are not derogatory. States are not being arbitrary will collecting taxes as the same come under their power. People need to pay taxes as the generation of revenue by the government is also necessary for the development of the state.

Also, it is just necessary to note that no discrimination takes place and the taxes that are levied are not much higher. The difference in the rates of taxes must not be much higher because this will create a discrepancy amongst the states. Such discrepancy may lead to the development of the trade hub in only certain areas of the country. The tax that is levied must be considered and must be equal in rates.

The most important point to be considered is that the act that has been challenged is known as Haryana Local Development Act, 2000. The enactment of the act states the term “
development” and the scheme of the levying of taxes are stated in it. This clearly means that the emphasis is being laid on the development of the state through the act and the taxation is legal and valid for the development.

Several such acts can be enacted by the states to propose various schemes for the imposition of taxes on the goods as well as vehicles that are being used for the transportation of the goods. This judgment has paved a pay for the development, levying of imposts in various forms (that too with the implementation of twin test on the taxes) and clarification of various dilemmas in relation to freedom and restrictions on trade and commerce across the country.

[1] Bolani Iron Ores v. state of Orissa 1975 AIR 17
[2] Commissioner of Income Tax, Udaipur, Rajasthan v. McDowell and Co. Ltd (2009) 10 SCC 755
[3] Raja Jagannath Baksh Singh v. State of UP and Anr AIR 1962 SC 1563
[4] Keshvananda Bharati v. the State of Kerala AIR 1973 SC 1461
[5] S.R. Bommai v. union of India 1994 AIR 1918
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Author: Ashutosh Chhipa


The below case is a detailed analysis of whether or not the word rent includes just the rent of the land or building or the amenities attached with it also the accessories attached to it. ''building', means a residential or non-residential roofed structure and includes:
(i) any lead (including any garden), garages and outhouses, appurtenant to such building;
(ii) any furniture supplied by the landlord for use in such building;
(iii) any fittings and fixtures affixed to such building for the more beneficial enjoyment thereof.'
Keywords: Rent, Building, Land, Amenities, Fittings, and Fixtures.


1. On 1st April 1968- the premise in question was let out to Standard Pharmaceutical Ltd. 24, Park Street, Calcutta.
2. 1st April, 1983- After the lapse of years, rent was increased from Rs. 2,000/- to Rs. 2,500/- and after five years the rent was further increased to Rs. 3,000/- w.e.f. 1st April 1988.
3. On 5th January 1991- The original plaintiff (respondent) landlord by notice after the amended Rent Control Act came into force on 1st December, 1988 gave notice and increased the rent by 10%. Consequently, the rent became Rs. 3.300/- per month up to 31st July 1991.
4. Thereafter, the original respondent (appellant) failed to pay the rent. The respondent filed a petition for eviction before the Rent Controller. The proceedings before the Rent Controller continued. On 14th February 1994, the defendant in terms of Section 6A read with Section 8 of the D.R.C. Act gave the notice to increase the rent further by 10% from Rs. 3,300/- per month to Rs. 3,630/- per month and filed the suit.
5. The appellant disputed the jurisdiction of the Civil Court under Section 50 of the Delhi Rent Control Act and submitted that there was no cause of action, also denied that the rent was ever increased from Rs. 2,000/- to Rs. 3,300/-.
6. Para 1 of Reply of Written Statement
The rent was fixed at Rs. 2,000/- and currently service charges Rs. 1,300/- are being paid in addition to the rent of Rs. 2,000/-. Even if the rent is increased in terms of the provisions of the Delhi Rent Act then the increase will be effective on Rs. 2,000/- (rent part and not on service charges). It is further relevant to mention that in the eviction petition pending before the ARC the appellant herein have not demanded any increase under the provisions of the Delhi Rent Control Act which has been sought to be invoked in the present plaint. The plaintiffs (respondents) herein are regularly receiving rent at the rate of Rs. 2,000/- + Rs. 1,300/- per month as service charges.

Issues Raised

1st Issue- Whether or not there is Condensation of delay?
2nd Issue- Whether or not rent includes the service charge and other attached items?

Petitioner’s Contention

A. The notice which purported to increase the rent by 10% dated 14th February 1994 was received but his contention is that if the rent was only Rs. 2,000/- then, at the most, the rent could be deemed to have raised to Rs. 2,200/- and even then the Civil Court would have no jurisdiction for the matter would still not fall within the jurisdiction Rent Controller for the purpose of eviction, for the application of Rent Control Act would not be excluded as Section 3 provides that it excludes only those premises whose monthly rent exceeds Rs. 3,500/- in terms of Section 3(c) of Delhi Rent Control Act and consequently. The Appellate Court should have condoned the delay of 55 days in filing the appeal for four reasons,
1. the company was based at Calcutta;
2. the delay was explained by the Counsel by filing his own affidavit and
3. there was some confusion between 60 and 90 days for filing the appeal and
4. the Court should have allowed the parties to contest the matter on substantive grounds instead of refusing to hear on the ground of technicality of limitation.

Respondent’s Contention

The delay has not been properly explained and as such, the learned Appellate Court was justified in refusing to entertain this application for condensation of delay and dismissing the appeal. Learned Counsel for the respondent relies upon Banwari Lal v. U.O.I.:[1]in support of his contention that the mistake of Counsel could not be treated to be bona-fide and delay must be explained day by day.

The respondent referred to Pushpa Sen Gupta v. Susma Ghose[2] in the case judgment Karnani (supra) in para 3 Although the expression 'rent' has not been defined, there are indications in the present Act to suggest that the word 'rent' includes not only what is strictly understood as rent, but also payment in respect of amenities or services provided by the landlord under the terms of the tenancy. The Act deals with the fixation and revision of fair rent and Sec 8(3), takes into account furniture if supplied or fittings affixed in the tenement for the use of the tenant, indicating that an agreement between the landlord and the tenant in respect of the other amenities comes within the scope of the Act. 
Similarly, the provisions of Section 34 refer to the maintenance of any essential supply or service including the supply of electricity, and Section 35 deals with emergency measures to be taken in respect of matters including additional services. These provisions give a clear indication that the Act contemplates that a tenancy that carries with it certain amenities to be provided or services to be maintained by the landlord is within the purview of the Act. If the Act is not so interpreted, an assured landlord may successfully circumvent the provisions of the Act by imposing on the tenant onerous conditions with reference to supply of amenities as binding terms of the tenancy.

In the case of Sewa International Fashions v. Smt. Suman Kathpalia and Ors[3] the learned single judge after referring to State v. Babu Rajendra Prasad; Banwarilal Sharma v. Ram Swaroop; Inder Vijay Singh v. NDMC; Karnani Properties Ltd. v. Miss Augustine; Pushpa Sen Gupta v. Susma Ghose; P.L. Kureel Talib Mankab, Vidhan Parishad v. Beni Prasad; Pranab Ganguly v. Shambhazar Land and Estate Pvt. Ltd made following observation,

The petitioner/defendant contested the suit on various grounds including the ground that the suit is barred under the provisions of Section 50 of the Delhi Rent Control Act contending, inter alia, that the rent paid to the respondents/plaintiffs was inclusive of all taxes rates and the charges but, exclusive of maintenance charges and, therefore, the rent of the premises should be computed as Rs. 3,146/- per month which was payable by the petitioner to the respondents and that so computed the Civil Courts shall have no jurisdiction to entertain the said suit in view of the provisions of the Delhi Rent Control Act. In the right of the aforesaid pleadings of the parties, a preliminary issue was framed by the ADJ as to whether the suit is barred by the provisions of Section 50 of the Delhi Rent Control Act. ADJ awarded the suit is not barred under the provisions of Section 50 of the Delhi Rent Control Act.

Opinio Juris

Answer to 1st issue- The Appellate Court allowed the application C.R. No. 68/2001 citing judgment passed by SC in State of Haryana v. Chandra Mani[4] , whereby the SC condoned the delay of nearly 18 years and the desirability to allow the parties to contest on merits.

Answer to 2nd issue- Rent is not defined under DRC Act, whereby SC referred Karnani Properties Ltd v. Augustin[5] where the apex court took the view that if the word ‘rent’ not defined under the act, it must be taken to have been used in its ordinary meaning, where it indicates ‘rent’ is comprehensive enough to include all payments agreed by the tenant to be paid to his landlord for the use and occupation not only of the building and its accessories but also furnishings, electric installations and other amenities agreed between the parties to be provided by and at the cost of the landlord. In our case rent is within the purview of the Act and Rent Controller and other authorities have the same power to control.

In Radha Kishan Sao v. Gopal Modi and Ors[6], in a different context, a similar question was raised where the tenant has to pay the furniture rent in addition to rent but the tenant admittedly deposited the rent excluding the furniture rent as per direction u/d Sec 11(1)(d) u/d Bihar Buildings Lease Rent and Eviction Control Act. SC took view that since Rs. 50/- was determined by RC as fair rent any subsequent agreement for payment of rent at improved rate would not inure to the benefit of the landlord to bring the nonpayment of furniture rent within the jurisdiction of Section 11(1)(d) of the Act to entitle the landlord to a decree for eviction. The Supreme Court observed that it was the default in payment of the rent, that rent fixed by the Rent Controller, which would furnish a ground for eviction under Section 11(1)(d) of the Act. The default of the furniture rent agreed by the defendant subsequent to the lease cannot be brought within the mischief of Section 11(1)(d) to entitle the landlord to a decree for eviction. On the findings of the First Appellate Court, the furniture rent remained divorced from the rent of the building under the original demise. It was also observed by the SC that even if the furniture was returned, the lease for the building in that case would not be affected.
From the above-derived jurisprudence, the court overrules the 1st contention raised by the appellant.

Obitor dicta/ observation of the court

The Appellate Court held that the service for notice under Section 6A read with Section 8 is not being disputed, its impact is required to be seen. If the rate of rent was Rs. 3,300/- p.m. w/r. 1st April 1991, three years expired on 31st March, 1994, the rent could legally be increased w/r 1st April 1994. Since there is no dispute of the receipt of the notice, it has to be held that the rate of rent w/r 1st April 1994 was raised to Rs. 3,630/-. The learned Senior Counsel may have some justification in his submissions that this is not an admitted fact that rent stood increased by service of notice, for there was no such admission in the written statement. However, the court felt that this submission cannot be accepted for even while deciding an application under Order 12 Rule 6 on the basis of a legal proposition, if any irrefutable conclusion based on point of law is arrived at, the Court could and should decide rather must decide, the question and hair-splitting argument should not be accepted. The Court dismissed the appeal and upheld the order passed by the Trial Court allowing the application u/d Order 12 Rule 6.

Ratio Decidendi

It is not possible to accept the proposition that the service charges would not be included in term 'rent'. However, the respondent was justified in submitting that in that case both the things were mentioned in the lease deed itself, while it is not so in the present case for in the lease deed only rent of Rs. 2,000/- was mentioned. Accordingly, for considering the scope of Section 50 of the DRC Act, the charges payable by the petitioner to the respondent as maintenance charges would also fall in the ambit of the expression 'rent'. Thus, in view of the foregoing case-law, it is clear that this Court would start with the assumption that the service charges of Rs. 1,300/- p.m. also form part of the term 'rent' and thus the rate of rent up to 31st March 1994 was Rs. 3,300/- p.m.


Rent includes not only what is originally described as rent in an agreement between a landlord under the agreement between him and the tenant. The payment made towards the maintenance charges of the premises rented out and also for providing amenities to the tenant would also come within the expression 'rent' as rent doesn’t exclude all payments agreed to be paid by the tenant to his landlord for the use and occupation not only of the building but also of furnishing, electric installations, and other amenities.

[1] AIR 1973 Delhi 24
[2] [1990]2SCR564
[3] AIR2000Delhi69
[4] 2002(143)ELT249(SC)
[5] 1957 Supreme Court Reports 20, and in para 28
[6] [1977]2SCR984
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Author: Kaushal P. Modi, GLS Law College Ahmedabad