Lakshmirattan Cotton Mills v. Commissioner Of Income-Tax, U.p

LAKSHMIRATIAN COTION MILIS COMMISSIONER OF INCOME-TAX, U.P. September 3, 1968 B (J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.] Income-tax Act (11 of 1922), ss. !0(2)(xv), 66(1), (2) and (4)-T ermination of managinJ? agency-No evidence of services don~ by managing agent-Payment of compensation fvr termination-If permis-sible deduction under s. 10(2) (xv). Questions not raised in application under s. 6Gf 1) and (2)-:-lurisdic-tion of High Court to direct Tribunal to state case on such question under c s. 66(4). The shares in the a·ssessee-company were held in equal moieties by nvo families. Four members of each family, together, formed a partnership firm and by a managing agency agreement the ao;~ss<e appointed the fir!" as· its managing agent. In 1943, one of the fatnll!es was represented m tb.e firm by two women and two minors. The management o~ the asses.see D was carried on by two df the four members of the other farruly who were the partners in the fi'rm. Those two members were also directors of the assessee-company. Disputes arose between the two families and the assessee terminated the managing agency with effect from September 30, 1944. Thereupon the members of the two families asserting that they, as partners of the firm we're interested in the mdD.agiug agency, claimed compensation from the assessee for wrongful ts1niuation of the agency. The dispute between the firm and the assessee was referred to arbitration, E and in pursuance of the award the assessee paid Rs. 18,90,000 to the firm and Rs. 13,300 were disbW:sed as expenses of arbitration. The assessee claimed the payment of Rs. 19,03,300 as a permissible allowance under s. 10(2) (xv) of the Income-ta>. Act, 1922, but the Income-tax Offioer, Appellate Assistant Comm '.ssioner and the Appellate Tribunal disallowed the claim. The assessee thcu filed an application under s. 66(1) for stating a case for the opinion ot tile High Court, but the Tribunal rejected the apolication. The assessee then moved the High Court under s. 66(2) for directing the Tribunal to state a case in respect of two questions. On the direction of the High Court, the Tribunal referred to the High Court the question : Whether there was material on which the Tribunal could haye come to the conclusion that Rs. 19,03,300 were not spent by the assessee wholly and exclusively for the purpose of its business. The assessee, thereafter, filed another appli· cation before the High Court for referring additional questions which were not incorporatqj. in ~he applications under s. 66(1) or (2); and the High Court, in purported exercise of the power under s. 66( 4) directed the Tribunal to submit another statement with respect to the additional questions and the Tribunal complied with the order. At the hearing of the reference, the High Court was of the view that it had no jurisdiction under s. 66( 4) to direct the Tribunal to submit the second st-atement and declined to record format answers on the additional questions. On the original question, the Hip;h Court held that there was material on which the Tribunal could hold that the allowance claimed \ras not spent wholly and exclusively for the purpose of the asS>essee's businesil and confirmed the Tribunal's order. , In appeal ~o this. C"-?ui: •. on !he qu_estions : \I) \V'hcthcr th!! High C~oun acted vtnhout 1un'id1cllon, 1n calling for 1he second statement of '?s7; .and (2) ~hether there was material before the Ttihunal h· justify 11 1n 1ls conclu\1on. aaa aa eq 4Wale- HRT TAH, TAT TA (Lakshmirattan Cotton Mills Versus (3 faaeaz,1968) (zaro Ho Alo Me, Ao TWHealAl BAT To Tao Faz) grun era tee (1922 gr 11), wae 10 (2) (xv), 61(1),(2) sit (4)—saeg afrary st gaara sae afawat arc Btme Qari BI RE lea al ai—aagera & faa afaae adea—aa gz10(2)(sv) & aedla weld saga TP.azar 66 (1) ae (2) & ada maga F axa adt sore ae—qt 64(4) F sella CI oa a Aaa a aaa aa F facafrecy a fads 23 % fac seq area a aiftraricar|Qeza oe fraltd-seadt B sit F md medida asa,gas EAH a aeeat a amaFH fawacae aie gd and aefaratttel-aeaett araeq afiay RUE (managingagency agreement)Zi ga wand ca st arat cad aftsal fga fear) 32,1943 % eewet a gaat FF amgea arofahfrea Dakar wae es amas(minor) #22 F| get FoI FR AC ace H IA age, MN aa > aria a,Pratt or sar ae ce a) Aaa azar whfrstfedlweaed & frees a |qa aat Seal H Aare ss ast gar we fraffedl 7 30 fearaz, 1944 anara aireey ot waa ae fear) agaea al geal Facat acts—amet hea Fae gens Pear fe ot S arte} wat F sae fea aca—omftacy 42) se Gas waa F fac Asie a sfase st ata atwae att Pratfidt & dq at are qreaeay & fe flee fear aa ak afafaaa% saawy F fraiRalJ wa FH 18,90,000 sat dea fae ae aeF_ @a % far 13,300 aad afaatea fac ags afrat % cena 2za Dez,1922 sf qe 10(2) (xv) % aaa waa, foe(permissibleallowance) @} t#q 19,03,300 ea2 (18,90,000wat + 13,300 eat) 3B dara ar erat fear fea mazar aifkar, wha werasMIs Me aie ala a ca ast MN aig we fart Taz aya Maia4 we 66(1) FS adla S54 aaa a} a aaa % faq way a ays BA>SUH Maaa niga fear fag afsawy Fae Maer mA at fear azfaaiRal A ae 66(2)& ala asa gaa a ae mar a fe nfraey4g fier fear are f ag Mal agal st aaa Maa BI BAA HEL Tee QaRar ae afteeq Aaa al ogi al afafea ett asa qaqa assfafae fear) sya ag ar f& zara ara) Mag at es alrsuy ag fasag.GUaalfasta atat Me wae: at fe Faia} (wholly 2 and19,03,300exclusively) aak aad244 wea faq @ B gataa | ga% qyqT F facfrail 3 s=q eqaaa % wag Us AMT mA Tee Feat fad sq Halesagait et vit, a ar 66 (1) ar (2) & aehe fee ae maa Fae at faea, Bet TAT BAe fee aA A oar St ag| sea eq Aa 66(4)Faala ain si aaa eed eqaaey sag fra fearae slat aya at aaa ca gar aaa ASake afte 3 caME eT Mages fear||66(4) 4fada adta at gangs ag afaaifiar ana seq adl-ef fe aaa ae afta st ag aaa et gat fe maa sa 8h ae afag fate tah| aes earenaa a afaftes ozal ar cafes sax aftfafeaSta F THT Be (ZA | SBq -AMAMATA Fw azar at aaa ae afafaaifeafrat fe dt amal alse et fea a aftary ae aftaifa ae aaaT aSf fame & faq an fear are ae fake sea F salea es~yfag quan at waeqa: ey add fear Talat | sa ITTahraey% mee a ge az fear|| bs foe| | Se eqea % ga at ogdt & art F fH (1) eat sa TATA HAe% gat Ga Btgig aq A aaa aftarftar & arer sia fear a, ste (2)qa wfaanwy % ang Del aa dag ot fad seer ees femaar arnira41, ALA BT VW,. wifirfatfea—(1) 354 eararea ser 66(2) 3% srt fea ae aaaHagWea TU wee 66(1) ale. % asa ada fe faq aaa ve sr wae saat % sa ofha og at al aa fea fear aga) ag ae atae ae 66(4) SF sefta ales at arger 2 seer sda wage sua.[st][ Ata]ga % fae 3a ang feat a aKa 2 Sa qa BT VE BATA wel BY AAT fe arr 66(1) ar (2) ® seta fee maa st wea gaa wala? fe aaaRU Se aa aA ST MAE aT aad! eager wT WatQt gat Gua St aiafae val Pea st aaa fees aia a fates alfear at | af seq earaaa A a 66(4) F gala weet af sr sat 2amyal az, St ar 66(1) she (2) & aedla fer ae wer yorker adt facae a, wats saa st ata azar afralaa at| ry wait aaa faeafafate aaa saat sqm, (1960)1 Was alo ARs 249; 37 BIko eto Bo11 (Wao eto); we Blastsige Ta fafa: dia alata arady falate, 42 ge do ARe589, 609; SI maaTy fear Tar fide st gaat & ana asa enaaa sr waite syal BI TAC eAB game Bea safes wt salle ale arr 66(1)% adia wader A wilea fae wat 8 oeat sel ToT ST aH A A sea AAT BIA fea 4 BART§ falge aga at sat B4-8 gene Bt aRAT 2 MAT WAR TA Byxqgal sat, 68 ako Ae mo 750 (quo de); HT aaaey far wat | 2. (6) ae alfaa set sr wit fH ae cay fasted& area a facGuat WL Raa: sanaFRAT va at, faalfedl-weaal ae AT| MeTA TIAA4 narq aftery suz & mela fiers a ait % faq dea are (i) fratfedterat & daria H fae Bar seat, We (ii) saa wfaat B waa faaifedtat Gar etat!fied Dar NE aga adi 2 (Had ag gar aa f% gat aftreatRm fafafee aa altar a| saa afiaey wut F A ak gat % aaaa 3ae car waare fe afisal a wfaoa ara eet ar mfr es Badaval werat aaah sa at & fc wt a area ate atlfiajfedlat caer ata:adt gt FF aagea Ba aatER VaalSTtIMtlaecaer afiary % Waa a yaAMT agar at at ate gat Hera Hazell (feast ale wmaaa) a BEgia wat & al ar frail & aaa ar sara ata TT ay aaa at caFave & wa F adi afes faaitd weal & Stentstweal efaaa 3Car Ht TSF | ae Hftacy FB ang ME fayzadla aera adi at at afeseq% fac ca fase oe agaar anafaa at f& ca A saa aftaBeeHPratfiat at and Gar adt a al | afe aaa H saea afaeal A HE Bar aemat at ae oiftafie falfel-seat% dsadafac al ak Far3% fawaa: SLIT AAT aT Bhat wT | fees fa safestFe seat at daada feara are TitaeR BAF saTg cay fafa F Car uae aq ag 2 A aT aeilaa sea fava gay Baar Hae, cet eer (sato qe] 655 + 102) (xv) & ala sata caa ae saa afew 3B waza}fam gave afteat st da ofaee Paatfidl 8 ora H qaqa we saeSag e4y qel FEIBRAT | (a) aa HE tar wea te fea aa At a ag BAMAfac Hsnate Oh fear mar 2 f& at eral % ale fare sr sofas aaa. fea ate 2mga) H aaa a asa 2) afew a MIA GAG sega aga B wrayz qxag faves fasrar fe ae faare 2 geet & safes faeSs ate gadfreee & areare ae AE slag maa a a ogi ar Tae aKa 2 aeeae aie SRT A ME Tar asd A Me afar sr wae aaal ais mazasar al etome ga mat ae ofaat de a ahMayasar aal al | (at) ag aatia aat at ak of fe faleaaah s aq F agaa) ga: aaa dal great Fa aos Hera 4 falfed-aeaadl F say} fagY — fauffeddfalax ah 8 fragt gare aed & fee % fae Raw waa adl a sea asa Bt ar) east wa: at ge at fee aa a) A AME aRTAaaT frelazat ff ta) Farc aaa) a sara aay SI Waae HT faa Rar!nat a} fad fe ofaet % dara at mMazaeat Zz at | ga ay 8 afar % ang Oat gala ara alae of) fas mez ge ae moar fased fate ata ari wheaRy A waea Bana aieqae faayzfear atc ae aél ser sr ana fe saat eas Fae erat sk aaaat arate 2 fafsa silat afsaifiar: 1966 at wo 2139 aay fafaANE | 1961 % do 586 Ta waar face 4 gaemeseq aA} ade 27 gad, 1965 am faa Me mee F Hee HAT esa AazRl ay ANT|| aaaat Ft sz &aaa ato dhe ag st Fe Mo maggayi amt aaa do 84, Mko Tao Aart wefo gto gat ear ot fata safes So Mo ate 9 feat sqaifagtea sie—| aad wea faga A, (fad zak wt ‘azcal’ Fer war 2) 1945-46ay &faq at favey a. safeF gag Zag Qzz, 1922 9 656 [1969] 1 saofioqo at 102) 102) at 102) 102)(xv) % mala 18,90,000 a3 % aa (allowance) a-grat featKe se J18,90.000 aed feria dea va FFgaeq afiaza 3S qaaera & ofa} eH dea fae @ We oftar FTAY F aaa FH qeaeay Fafa} st aaa 13,300 ead a7 aq sanafeat at) mast simat § gaard Bl ase we fear| ale aessiz maat ae ate a xa mee ayy ae fear| geey Zaz daz,1922 #} ayer 66(2) % mela fase fem aA Te REEIAIE Seq rqIAIAT A aEafufratfia fear fa tel ae aaa) saaer ad} a} faah sine qt ahaeygatsa le So aaa ae afafaetta ae agar a fe ag RAF IRgalaal % fae quae ae waeae: oa al fHay maT aT |, Section: CONCLUSION HELD : (I) In an application under s. 66(2). the High C.ourl cannot cft<lcr rhat a case he stated on auestion<; which \\.·ere not inclu<.!i.!<l ia the application under s. 66(1). Po"·er under s. 66(-1l. n1;1y he cxcr~ised lo call for a supplementary statement only when the t:ourt is :,Jlisl~-:d that the !itatcmcnt in 1he cac;e referred under s. 66( 1) or (2) is not '.:1.,;ffic:cnt to enable it to determine the question raised by that stalcmrnr. The power cannot he exercised for calling for anoth\.T ~1:1:..:1n~nt on "-!Uestion~ not referred hy lh·;! ·rribunal. Therefore, the t1(ocedurc rollov;c~ by the l·ligh Court. in exercise of the power under s. 66( 4), ~3iiin2 for ::n addi-tional statement of case on questions which \Vere not 111cor?orat-:d in the applications umkr s. 66(1) and (2) was irregular. (963 G-H; 964 D. Il-965 A I New f<./wngir Vakil Mil/; Ltd. v. C.l.T. (1960] I S.C.R. 249; 37 1.T.R. 11 (S.C.) and c:.1.r. V, Scindia SU!l/11l /\i(lvi;:~tlvfl Co., ·+2 1.·r.R. 589, 609 <S.C.,l followed. l'hc 1-Jigh Court, at the hearing: of the reference. wa.; jusdli'!d in refu~;­ing to ans.,..'Cr the addit!onal qucs~ions. since, !t may decline to ;1nswc-r a question referred pu·rsuant to the direction of the Hil!.h C..ourt if the qucs-tion could not have hecn r:iised because it 'A':t" not inco'rporalcd in the application under s. 66( I). J965 Il-CJ CJ.T. v. Smr. A111m1ya Dr•vi, 68 I.TR. 750 (S.C). followed. (2) (a) The burden of proof 101y upon the ao;scs....;ee to prove that the expenditure \Vas incurred \i.·holly and exclusivelv for its t1us1nes":>. In the present case, the remuneration payable under the manJgi.:H? .l!!Ct~cy agret:-E n1cnt was for a t\VO-fold consideration (i) tor the service rendered in promoting the a-;sc'iscc:- and (ii) for rendering scrvict!s to the .1s:-.esse~ as n1anaging agent. But thcr-.: \Vas no evidence th.'.lt anr spccdic functions \\·ere entrusted to 1hc m:inaging agent. A 'recital in tlie n1anaginf ag~ney agreement authorising the ;lgcnt to do certain actc; woulJ not b-~ :1 .suhs-titute for cvicJcncc th~1t those ;1cl-. \\'ere done. ·fhc 1n;lnacen1cnt of the asses.sec 'A'as in fact carried on hy (\l,'O membcr'i of one o.f the farnilics, hoth hcforc :ind after the termination of the m:in,1~ing agcr.cy; anJ the F mcmh-~rs of the olhcr famih· I \\·omen and niinors) had 110 r.;:!lcclivc voice in the managc1ncnt. Even :.he t.,..·o men1hcrs \;:110 \\'Crc 1;1,1na(dn.g lhc affairs of 1hC ;L'>\Csscc "''ere doing so not as oartncr:; of !hi.! llrn1 hut in their eapacitv as directors of the asscssec·company l'hcrc \\[1]<lS no reliable evidence bcfOrc the ·rribun:il. ;ind the Trihun;1l was justified in reaching the conclusion thaL the firm did not render any scrv;cc to tile a'>~.t.:~:>~c :~s its n1anaging agent. Jf no service w;1s in fact ren~crcd by the n1:1naging a<!c.nt the remuneration mu5t he regarded :i.s cxcl11s1vely pavahle for the service G rendered in pron1oting Iii·: ~1sr,cssce. But expcn~1;~uf'e in..:urn.:d for rcmu-·Jlcratin_g per~ons .,..·ho- had t>rornotcd ~1 companv i" not in L:"' a revc~uc cxpendilurc admis\ihle under s. I0(2)(xv). Therefore. compensation r.avablc to the n1anaging a!.!Cllt for tcrn1in<1tion c:I !he m.1n<:gir~ "·!!COL')' could not he s.aicl to he expenditure incu'rrc<l \vhollv .and c:xdu~:;v~h· i:1 the interest of the hnsincs<o of 'the ;:sses<>ee. r965 I), f-G: 966 r-G: 967 B-J): %8 lHlJ { h) ·rherc \~·as no evidence ;ind not even an ::ittcmpt v.·~is rnade lo c'<olain hn"- the affairs o; .thl' cn~l~pany \i.·ouhl. have !1~:.=n 11rcjudiccd 1~1 fhc clisrn1tcs hct\vccn the t\vo fan11hes. The Tribunal found: on .t~e C\r-d~n1.:c llCforc ii. that lhc di-;putcs \\'Crc personal 1-0 the i\\[1]0 fa:nihes and L. C. MILLS V. C. I. T. (Shah,/.) ag fata faa aval B sare ot fear aay ai ses FR Pea F saatsagas& (ae Hraal 1934 % fanfea Rak| A seat % azeal araad ma feed Axa stadB sig dyadgael geal et ca sfaaratcfs & ‘featear ste gar’ 3 aH sz asa d| feniaa ak gaa ate3 gue, 1934 7a faa % sla fear Fara F Tag agaeITAL aula @ vient (partnership) s147q atl xa RT A RIIAaT Fafaal, asifadl ate afnaatat ® era ufaa a | ga aca} a ale2 ng, 1935 Te wes Tee fede Farava st gaat gaea afheaign fear saaaa ath ms area a an fanfare gaawheSe gal 3 STFA HBA F Gag k waget B aca feeds Fareaaa a ata fates arated feewat 2) nae aPaRRY BT BT GTS2 farafataa ea F ar— “gad a mea fee ag SUT a,eae ya wales 2 ya wales 2 wales 2 2 caseyse ead A GAR anaa y Bac at it sak ofane Faw, at it sak ofane Faw, it sak ofane Faw, sak ofane Faw, ofane Faw, Faw, FOGH Att sas azet B ary Gans faq gas arr frafafea semAl BT FE 2— eae ya wales 2 ya wales 2 wales 2 2 casey Bac at it sak ofane Faw, at it sak ofane Faw, it sak ofane Faw, sak ofane Faw, ofane Faw, Faw, FO (s) fe ae ta 29 ant at warafa & feo ate ayaa sa anaanfaqarasfe a ama et & a aaas fe ag asasfieat & wa Ho paa oe 8 aadF ateerfial & Ma-sharg agaa aeSz1 at St oa, Heat A feat sa} TEM| (@) ae ca waa arr afatafaa he aA ac ead ats + at aoe & fama wea a A ofaga ale ate at arat & famagmat (sale proceeds) a g& Sfaga sal soedt8 grr HT|ea ah aafhaljaa, Yar a ai ge aa Ak ga sc BI ME WAaa, fet erat a fama fear at, aiaF) cae wear sea | Ga ata art (gross profits) a za gfaga salga wt grad) faraa Bsa TAL A a al saat a satal al sree] ale rah sa RAqIY(depreciation) at daqar salt 9B ga MY ora a srIegaa fafaa ar ofan dfeaat 8 ga 2 we rad oifas we F faaqTal aga aalea We ag faa aa sara, {AR seat2 seal rergat ar afimatal ate aaa arr faga sage F aex arr sgfaatat ertTa aT ae a faq NE ATM ITT Sfag fear gt, aed aifer vel far areaa (1) ag ca} agfaa salar ae BF saaifiaee A aangwaa % faa, Far fe ca erat & afeaal B oa A asa SRA TAA% faq ale aah, al catat| (a) afk arqat aA fra F afeadl we aglad aie AIA HEAT gy faa Rat at ae fama erat & afisatat a cas saz aftaae at & serdia ain, faas saae ca sue ANT BTS BTABN aaa & Masel A far nar 2 1”|| eut & awe 3 A ag sae fear aa at fH seal F ear Dat gl ear @ saa afteat agave targca afieal & ea F maa fate ot atsfaa oarwTA AA a WAR esa at A aad B aaa aSatya TH aR suas waaust ail) fsadae Faria au3 (4) att (S) Badia ta al ad aa, wa, aelad ake ee ma eetaar fe ana aaa oz sega) & feet A oat & fae sagas a ate saat famagt he ara) & feel F gare at afalafea we ga ge at vial A aa ga~‘‘aa At eagle fea eT| ate (s) a gay afisat sa ae aftaBoa BU A SE grad F daq se wa=set gra a) ag all ca ata wTYa auaea fear aan arale aa ar Pager adi far araT A Ta & fae aeSa aim fe ag eral & afasat Beaaad frafe oe Wane oma siafaa sq daa, aT ANT Vea BAT BAT IW acm Taal Z| filer Ferra Bl Maa BAT AAA TW FVal TAL | HH CAA AMTat & sit gq wea acer Tamifes get fea cad feat ae gatequae auraz sfatafier § ANE sear ael Ter) ada 15 Head, 1943 at ferlaraSaiqaa 2 are ar we aa fae ontza fear Pas wala faenfan %ar afaafa & —(1) sfiad) waagar 2a, (2) efadt qenad eal, (3) fraara(savaaa),(4) waaga (sateaaa) | do(3) ate ge(4)ara ahahaha ara AMI feafrat & ameaaa ga So aca B are sfafahe A—(1) Maal wae, .+» gyo fac Fo 12-27.| (2) stadt Satarg, (38) war ua waa gear, ate (4) aa TA ae MartHAs FA aA His Als BA sl a aftafaa ea HR dza fear | za ureterion ndfade & areal & ada ae sue gar aar fe aq & ca antlerwlat UA at Acar TAF fies wreare weg F ewerz gia| ion nd A did not and could not prejudicially affect the business of the assessee or put any hindrance in its normal day to day working? and that the~e was no necessity for t'erminating the agency and fdr paying wmpensatlon on that ground. [965 G-H; 968 A-Bl ( c) It was not suggested that the affairs of the u::>Sessee were n1is .. managed. Hence, even if one of the families threatened to apply for the appointment of a receiver for the management of the assessee com-B pany no receiver would have been appointed for the management of the assessee. Therefore, it was unlikely that :such a futile threat was taken into account for determining the managing agency, necessitating the pay-ment of compensation. [967 G-H] There was thus ample material on which the conclusion of the Tribunal was based, The Tribunal considered all the relevant evidence and its finding could not be said to be based on mere surmise~ and conjectures. c [968 H] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2139 of 1966. Appeal by special leave from the judgment and order dated July 27, 1965 of the Allahabad lligh Court in Income-tax Reference No. 586 of 1961. D S. T. Desai and J. P. Goyal, for the appellant. B. Sen, R. N. Sachthey and B. D. Sharma, for the respondent. The Judgment of the Court was delivered by Shah, J. In proceedings for assessment of tax for the year E 1945-46 the Lakshmirattan Cotton Mills--hereinafter called 'the Company'--claimed allowance under s. l0(2)(xv) of the Income-tax Act, 1922, of Rs. 18,90,000 paid by it as compen-sation for termination of the managing agency of the finn Behari-lal Kailashpat and Rs. 13,300 incurred as expenditure in respect of arbitration proceedings in connection with the determination F of compensation. The Income-tax Officer disallowed the claim. The order was confirmed by the Appellate Assistant Commissioner and by the Income-tax Appellate Tribunal. - The lligh Court of Allahabad in a reference under s. 66(2) of the Income-tax Act, 1922, held that ther.~ was material on which the Tribunal could hold that the allowance claimed was not spent wholly and ex-clusively for the p!irpose of the company's business. G The facts which give rise to the reference require to be stated in some detail. The Company was incorporated in 1934. The shares of the Company were held in equal moieties by members of two families, who may for the sake of convenience be referred to as "Singhanias" and "Guptas". Under a deed dated August 3. H 1934, Singhanias and Guptas formed a partnership to carry on, in the name of Beharilal Kailashpat, several businesses including ~e business of Secretaries, .Treasurers and Agents of the Company. By agreement dated May 2, 1935, the Company appointed 954 The fi!Jil then con- Beharilal Kailashpat as its managing agents. The fi!Jil then con-sisted of eight partners--four belonging to the family of Singhanias and the other four belonging to the family of Guptas. Under the Articles of Association of the Company two ex-officio directors were to be nominated by Beharilal Kailashpat. Clause 2 of the managing agency agreement read as follows : "In consideration of the agreement hereinbefore contained on the part of the firm and in further consider-ation of the firm having promoted the Company, the Company hereby promise and agree with the Finn and its Members for the time being .- (a) That the Firm shall be the Agents of the Com-pany for a period of ninety-nine years and there-after until they shall resign or until they aro thereafter removed from their office as Agents of the Company by a majority of three-fourths of the shareholders of the Company. ion nd 1943 } faarhar ste gare dasafather grarth } gar aaraa, Peat 3 feaae 4, fare seve at ag) 8 faare see wear fee st earaefawaa (adjudication) % fag fafeg fa ae| ae ater fag 318 aaad,1944 at saat afafaea oaifea Pear| Aer (arbitrator) } ga afe-faa & ala faarlaar at Hy sax waeqa: (exclusively) aaa sx fearANE TT HAT Tat A aratea ae fear| sfifhaa FH azqat & gacq afyayat aaa ag fate fearmar arfis feafaar ay strata aan ah a ateSAR Kl STA stat Bt $2,000 aah aft ser ay axa gar ste fear are,ge fe aatia Me Baa at wie Age Ne 2 eraqa? &,az fe faahiarnq 25 aad, 1944 3 sag afrwey at ureded} a fig mar sraaT atae Ph MA UA WA gat WI ATH ae Fs ar se sag AfarBAT St Tea WA FH faa eet ai, ze FH faardena Faraga Br ara eetfear staat, ae fs fader teresa % areefa-Rar 18 aaad, 1944ae Aart Pear aaa We ag fe afraiy este APART (excess profits taxand income tax) $ afaeat a saad BAF qeaT Vat Foal Fa Aaas AT gt eT THA aaa He F fair afaafaa w areal 1 ae afafaaaa nagar 4 faafrar aeudga sala garaa Paar mle saa afvneaGt sr area acer exh Hear UAaeq car aa)31 ara, 1944 a arqat& stgearfeat A sae afeaey GAR daza A a asdlfeat a al saasamen at far |.|dar sala alar 2 fe faerfrar ay spe Fear fe ater fia az afefaaa@ aeae aal ar Ale seal wage & false araray A oH ae waar (1944 ago 31 are aa) ate faetdara Raraga Fo wad feat F otaata ast aay ateay wea Haat at aaa wads wr arar feat | faifaar ate gar % ata os IA-Sua GAT Mt APA Sas SAT Brat aat swat wragas aa 2| 19 fearaz,1944 at area & siqearfiat ar aa afeaga gar ar ale faadera UATat ad at, faust asa ada 27 gaat, 1944 aa antad ataadagata, aad) arcaea afasat fage Pear aar| fearar & ge aa a BIEPear Pstsare aftary } saa fea wed Fo ake gar a ae sata Peararg aeear fae ant fer ag alas & aeha faafaay agar sara afracqA fea ante a nar ate faaiqar & aaeat a feat B are Peardena Feeaa La + HATTA Hea AT TATA START HAR, SAT ABT (Ate etre] 659 Ba eer at Hartera uaawq var aard| eat ® sgarht.a19 farsa, 1944 at fac ae mat afiga § um deeq at aftaFear ar fs sara srfiteat at oaega Paar are al garq HAD Fr BIT30 faaraz, 1944 @ aan az fear ate | agqea faaiaar gerq ar ofafafaa aa aa aaeqi a gaa afaaeyRange edger F fae acca a ofaar ar ear fear! gear gaa a ahafiat sr arar Pear ate acaat & ex star a at ast a| atact alteRadler% fag fafge sataca Pee aq % ta} 1 of Fo faarg qHo atta Agta 19azar, 1944 aera Par) Bare SEA grr aan TAT FTfigs aafac ofiaa fear mar)(1) aaa afzeeg at qtaera aitfeta setaaa aeyar gad aftefaa saradt faardere casey FTFHS afssal ® azeer aan aaa at ar at? ae (2) ale agRita a at Yagd caer aftsal Peat gece fac, afe is gt, exerTl ga cak fe ot Fo ume gat fide ae fae wa SHC sear faeani eae sffiaa st ws wares ata are, fe sige gar feea dt ogart at aenfa 8 fear ar, soafta ex Rar mart ga gee sarattaafofiua % ada ag sqara fear mar ar P#—. aie‘am GH & after (goodwill) Hale se nara aftiaey 3 qey Hf % fae fra ga ara aratardtart at araa se cao AIxo aocho agit fafhts 2 ow saq faery gut ar qaaart atfeara saeq afieatsit@ am olga & fac after er atar fear 2 faadaH sas ae ara of aaa Aege a se WaIs szyafare ar Areas far fe Peo a ae ae wut Pear nar sheafafawa fear nay fe 88 meant sex & saa wfehata ufada antatt at dea at great ate sab are afvaa st atest ihesa afta ar atatat cada wea adat aaaauld aduta aman, faa a wa amait A ae af & arinat ofaaey aS saga ae caged qdaaa& fac ofaSTH BT F BTA as are aad daw at | sags daa sa TA ataifeaat, after ate éfaarat ¥ ae at aaa Raa AI AA artarct% art cat ale nit a, a2 3 feat at at, gd af site sata(satisfaction and discharge) & fax fac sd} zal aao atodle QHo araal fafk2e % ara fear nar saeq oafaacy auc giaQa ae aqakaa aiza fava fafi@sBee aw gare afarRata & ofsax S fee Pee ae eat a gd afe ale geaitaa% fac at 2 |”| ne,, _oO 860 ( b) The Firm shall receive from the Company a D commission at the rate of two per cent on the sale price of all the cotton, yarn and cotton cloth manufactured and sold by the Company and a commission of one per cent on the sale proceeds of all materials, yams and fabrics manufactured from wool, jute, silk and other fabrics, and sold by the Company, and a com-E mission of ten per cent on the gross profits after deducting all expenses but before deduct-ing depreciation, made by the Company from its ginning or pressing operations independently of the usual adat commission, exchange and interest payable to their branch firms or agents and adatias appointed by them outside Cawn-pore for purchasing or selling any goods or com-modities for or on account of the Company. ( c) The Company shall defray the expenses of maintaining a suitable office and such staff as the Firm may deem proper to transact the busi-G ness of the Firm as Agents of the Company. (d) In case the Company shall sell their Mill premises and machinery and the business thereof. the same shall be sold subject to the rights and claims of the Finn of the Agents of the Company as provided by this Agreement R and the Memorandum and Articles of Associa-• tion of the Company." A By cl. 3 of the agreement it was provided that in the event of the, Company being wound up the managing agents Beharilal Kail~­pat shall be entitled to receive compensation for loss of appomt-ment as agents a sum equal to the amount earned by the firm during five years preceding the winding up of the Company. Beharilal Kailashpat were under els. 3 (f) and (g) to purchase all cotton, wool, machinery and stores that may from tim" to B time be required for the use of the Company Mills and to sell the same and also to sell all loose or baled yarn, and cloth produced or manufactured at the Company's Mills. By cl. (h) the managing agents were to exercise all the powers given to them by the Articles of Association of the Company. It was also provided that if the firm be not dissolved it shall be lawfnl for the firm to change its c constitution, name or style from time to time, without thereby in any way affecting their app