Judgement Appeal (No. 26 of 1941) from a decree of the High Court (February 8, 1938) which reversed a decree of the First Class Subordinate Judge of Ahmedabad (March 31, 1933). The following facts are taken from the judgment of the Judicial Committee The plaintiff (appellant) was the Ahmedabad Municipality, and the defendant (respondent) was the Secretary of State. The question for decision was whether, in the circumstances mentioned below, the appellant was entitled to recover from the respondent sums of money amounting to Rs.48,156-5-0, together with interest, which were deducted by the Government of Bombay from grants for primary education made by them to the Ahmedabad Municipality, and during its supersession, to the Committee of Management. The facts were not in dispute. On March 9, 1920, the Government of Bombay sanctioned the grant of Rs.4 lakhs to the appellant in connexion with a scheme for the acquisition of building sites for primary schools. Two of the conditions of the grant were (1.) that the building should commence within six months from the date the land was handed over to the Municipality, and (2.)1 that the Municipality should spend at least Rs.4 lakhs on the buildings within five years from that date. No provision was made in the grant as regards interest which might be earned on the amount pending its application due to delay in acquiring land or for any other sufficient reason. The money was paid over to the Municipality on March 30, 1920. On February 6, 1922, the Municipality was superseded by the Government of Bombay, under s. 179, sub-s. 1, of the Bombay District Municipal Act, 1901, for two years; and under sub-s. 3 (b) of the section a Com mittee of Management was appointed to perform its duties during the period. As a consequence of the supersession, all the property of the Municipality vested in His Majesty. (See s. 179, sub-s. 3 (c)). As the sum of Rs.4 lakhs was not immediately spent, the whole, or the unspent balance, was "either invested or placed on deposit in the bank" and earned interest. For the financial year 1921-22, a sum of Rs.24,000 was earned, and for the next year, 1922-23, Rs.18,000—the total interest for the two years being Rs.42,000. As the sum of Rs.4 lakhs was not immediately spent, the whole, or the unspent balance, was "either invested or placed on deposit in the bank" and earned interest. For the financial year 1921-22, a sum of Rs.24,000 was earned, and for the next year, 1922-23, Rs.18,000—the total interest for the two years being Rs.42,000. On January 26, 1923, the Government passed a resolution directing "that the Government grant to the Ahmedabad "Municipality for primary education payable in 1922-23 should "be reduced by Rs.24,000 or by the interest which actually "accrued during 1921-22 on the advance building grant of "Rs.4 lakhs paid by the Government whichever is greater. "Similarly, in future years the interest which actually accrues "in any year, or six per cent, of the unspent balance of that year, whichever is greater, should be deducted from the "Government grant of the following year." In pursuance of the above resolution a sum of Rs.42,000 was deducted by the Government from the educational grant to the Municipality for the year 1922-23. Similarly, sums of Rs.2,000, and Rs.4,156-5-0, representing interest on the un-expired balance of the Rs.4 lakhs for the financial years 1924-25 and 1925-26, were deducted by the Government from a sub sequent grant. The total sum thus deducted amounted to Rs.48,156-5^0. It was that sum together with interest, amounting to Rs.62,856-5-0, that was claimed by the appellant in the suit, which was instituted on December 18, 1928. In the plaint, various contentions were raised. Amongst others, it was pleaded that the amount of Rs.4 lakhs having vested in the Municipality by the grant, the interest accruing on it or the unspent balance belonged to it in the absence of any reservation of the same favour of the Government, and that the recovery of the interest on the building grant was contrary to the terms of the grant and was not warranted by it. Though it was not so specifically stated in the plaint, the substantial plea urged by the appellant was that the Government by deducting from the grants for education amounts equal to the interest on the advance for the building sites was in effect recovering the interest on the amount which they were not entitled to do, as the interest accruing to it belonged to the Municipality and not to the Government. The respondent in his written statement contended that the interest on the grant for the building sites belonged to the Government, and that the suit was barred by limitation. He also stated in paras. 10 and 11 as follows Para. 10. "The "amounts in suit were deductions from the government grant "to the primary education and not recoveries in the ordinary "sense of the term." Para 11. ". . . . There was no legal "obligation on the part of Government to bear any portion "of the costs of elementary education incurred by the Municipality. The grants are in the nature of bounties and the "Municipality has no legal right to enforce their payment. "Consequently the reduction of the grants by any amount "was a matter entirely within the discretion of the defendant "and furnishes no cause of action to the plaintiff." As the issues framed in the case did not cover the point raised in the above two paragraphs, the respondent submitted to the court that the following additional issue should be framed, namely "Whether the Municipality has any legal right to enforce payment of any grants for elementary education and whether any " such reduction furnishes any cause of action to the plaintiff." The First Class Subordinate Judge, by his order dated February 7, 1933, rejected the respondents application on the ground that the issue asked for did not arise on the pleadings and that it changed the nature of the case. The First Class Subordinate Judge held that the grant of Rs.4 lakhs vested in the Municipality, that it carried with it the interest that might accrue on it, and that the Government had no right, since the Municipality was the owner of the interest, to make deductions from the primary education grant payable every year, on account of such interest. The First Class Subordinate Judge held that the grant of Rs.4 lakhs vested in the Municipality, that it carried with it the interest that might accrue on it, and that the Government had no right, since the Municipality was the owner of the interest, to make deductions from the primary education grant payable every year, on account of such interest. He also held that the question whether or no Government had the right to reduce the recurring amount of the primary education grant payable every year did not really arise in the case, as according to him "the parties have all along proceeded on the basis that the Government "claimed the interest on the grant in suit and the way they "recovered it was by deducting so much money from the "recurring grant payable for primary education." On the question of limitation, the Subordinate Judge held that the suit was not barred having regard to s. 10 of the Indian Limitation Act. On appeal to the High Court, Beaumont C.J. (with whom Wassoodew J. agreed) set aside the decision of the Subordinate Judge and dismissed the appellants suit. The learned judge agreed with the Subordinate Judge that the interest on the Rs.4 lakhs or the unspent balance belonged to the Municipality ; but he held that the appellant had no cause of action to maintain the suit. He pointed out that "out of the interest nothing 1 at all has been paid to Government. The interest was received "by the Municipality and it has always been retained by the "Municipality." In the course of his judgment he also observed that "if Government choose to make no grant at all, "they are at liberty to do so ; and if they choose to make a " grant, less a particular sum to which they consider they have a "moral claim but to which they have no legal claim, that "cannot confer any right of action upon the recipient of the "balance of the grant; and that is really the plaintiffs case." 1942. Nov. 26. Sir Thomas Strangman K.C., Charles Bagram and 17 Sen Gupta for the appellant. J. M. Tucker K.C. and W. W. K. Page for the respondent. Dec. 15. Nov. 26. Sir Thomas Strangman K.C., Charles Bagram and 17 Sen Gupta for the appellant. J. M. Tucker K.C. and W. W. K. Page for the respondent. Dec. 15. The judgment of their Lordships was delivered by SIR MADHAVAN NAIR, who stated the facts set out above, and continued Their Lordships find themselves in agreement with the view of the Chief Justice as expressed above. It is clear that the First Class Subordinate Judge failed to appreciate the true nature of the case. This may possibly be due to the fact that the respondent contended that the interest on the Rs.4 lakhs belonged to the Government. However that may be, the position before the Board has been made clear by the admissions made by counsel. Sir Thomas Strangman stated candidly that he cannot contend that the primary education grant annually made by the Government was not a bounty; while Mr. Tucker has with equal candour conceded that the Government cannot legally claim the interest on the Rs.4 lakhs or the unspent amount. In their Lordships view, the legal position has been stated correctly by the learned counsel. If the position is that the annual primary education grant made by the Government is only a bounty, then it must follow that the Government can make deductions from the amount of whatever sums they like. This is the basis of their resolution dated January 26, 1923. The fact that the amounts of interest which had accrued during any period, or would accrue in the future, on the Rs.4 lakhs or the unspent balance formed measures of the deductions to be made from the annual payments for primary education does not by any means show that it was the interest on the grant that the Government were seeking to deduct. The amounts of interest are but measures of the deductions and nothing more. The interest is there for the Municipality to collect, and as the learned Chief Justice has well pointed out, the interest was received by the Municipality and it has always retained it. The First Class Subordinate Judge should have framed the new issue asked for by the respondent and considered the question whether the appellant had any cause of action to maintain the suit. The First Class Subordinate Judge should have framed the new issue asked for by the respondent and considered the question whether the appellant had any cause of action to maintain the suit. Their Lordships hold, agreeing with the High Court, that the appellant has no cause of action; the question whether the suit is barred by limitation does not therefore arise for decision. The result is that the appeal fails, and their Lordships will humbly advise His Majesty that it should be dismissed with costs.