DARPAN CINEMA v. STATE — 1993 DIGILAW 367 (GUJ)

RAVANI, J. ( 1 ) THE petitioners challenge the legality and validity of decision of respondent authorities asking petitioner No. 1 to pay entertainment tax at the rate of Rs. 2 244 per week instead of Rs. 1 48 per week. The petitioners also challenge the legality and validity of orders and notices issued in this behalf by respondents herein. The petitioners also pray that the respondents be restrained from recovering any amount from the petitioners in excess of Rs. 1 48 per week from 3/03/1989 to 31/03/1991 ( 2 ) PETITIONER No. 1-Darpan Cinema is a partnership firm. Petitioner No. 2 is a partner thereof. Petitioners firm was running a cinema in the name of Darpan Cinema. The firm was constituted by partnership deed dated 12/07/1972 By order dated 28/02/1989 the firm obtained permission to pay entertainment tax in lump sum. In the permission so granted amount of Rs. 1 48 was written as the amount of tax to be paid per week. This was a calculation mistake. Therefore by notice dated 13/02/1991 the Mamlatdar Anand informed petitioner No. 1 about the calculation mistake and asked the petitioners to pay the difference of amount of tax calculating the same on the basis of Rs. 2 244 per week instead of Rs. 1 48 per week. Since the difference of amount which arose on account of calculation mistake as pointed out was not paid notice dated 14/02/1992 was issued by the Mamlatdar. By this notice petitioner No. 1 firm was called upon to pay an amount of Rs. 1 33 997 (Rupees one lac thirty-three thousand nine hundred ninety-seven ). The petitioners preferred appeal before the District Magistrate and Entertainment Tax Collector Kheda. In appeal despite several adjournments being granted and several opportunities having been afforded neither the appellants nor their advocate nor any one on behalf of the appellants remained present. Hence the District Magistrate Kheda decided the appeal on merits and dismissed the same by order dated 18/06/1992 Petitioner No. 1-firm preferred revision before the Commissioner of Entertainment Tax. The revision was preferred by petitioner No. 1 and its partner Shri Dattubhai Manibhai Patel who represented firm as partner of the firm. The Commissioner in his order dated 14/12/1992 observed as follows: ( 3 ) THUS the liability was accepted by the firm. Only request for instalment was made. The revision was preferred by petitioner No. 1 and its partner Shri Dattubhai Manibhai Patel who represented firm as partner of the firm. The Commissioner in his order dated 14/12/1992 observed as follows: ( 3 ) THUS the liability was accepted by the firm. Only request for instalment was made. The Commissioner of Entertainment Tax held that the request for instalment be made to the Collector. With these observations the revision application has been rejected by order dated 14/12/1992 Thereafter as the firm approached the Collector Kheda for instalments the Collector determined the amount of instalments as Rs. 30 0 per month and stated that the last instalment of Rs. 13 997 be paid as fifth instalment. Thus total amount of Rs. 1 33 997 was divided into five instalments. Even after the determination of the instalments the amount was not paid. Therefore the Mamlatdar issued notice dated 4/03/1992 ( 4 ) PETITIONER No. 1-firm and petitioner No. 2 - Shri Bhaskerbhai Manibhai Patel one of the partners of the firm have preferred this petition on 4/08/1993 It may be noted that earlier appeal was filed before the Collector and the matter was carried in revision before the Commissioner of Entertainment Tax by the firm itself. The firm was represented by one of the partners namely Shri Dattubhai Manibhai Patel. Said Shri Dattubhai Manibhai Patel partner of the petitioner firm admitted the liability of the firm for and on behalf of the firm. He only pleaded for deferment of the payment of Entertainment Tax and requested for instalments. As indicated hereinabove the instalments have been granted by the Collector Kheda. Now the petition is filed by petitioner No. 1-firm and Shri Bhaskerbhai Manibhai Patel another partner of petitioner No. 1-firm. ( 5 ) IT is contended that Shri Dattubhai Manibhai Patel who is admittedly a partner of the firm had no power and authority to admit liability of Entertainment Tax for and on behalf of petitioner No. 1-firm. In support of this contention reliance is placed on the provisions of Section 19 of the Indian Partnership Act 1932 It is contended that in view of the provisions of Clause (e) of Section 19 a partner cannot admit any liability in a suit or proceeding against the firm. In support of this contention reliance is placed on the provisions of Section 19 of the Indian Partnership Act 1932 It is contended that in view of the provisions of Clause (e) of Section 19 a partner cannot admit any liability in a suit or proceeding against the firm. Relevant part of Section 19 is reproduced hereinbelow:19 (1) Subject to the provisions of Section 22 the act of a partner which is done to carry on in the usual way business of the kind carried on by the firm binds the firm. The authority of a partner to bind the firm conferred by this section is called his implied authority. (2) In absence of any usuage or custom or trade to the contrary the implied authority of a partner does not empower him to- (a ). . . . . . . . . . . . . . . . . . . . . . (e) admit any liability in a suit or proceedings against the firm ( 6 ) IT is true that the aforesaid provisions of Section 19 (2) (e) of the Indian Partnership Act 1932 inter alia provides that the implied authority of the partner does not empower him to admit any liability in a suit or proceeding against the firm. However the aforesaid provision is required to be read together with the provision of Sections 18 20 21 and 22 of the Partnership Act. Section 18 provides that subject to the provisions of the Act a partner is the agent of the firm for the purposes of the business of the firm. The section embodies the principle that every partner is incontemplation of law a general and accredited agent of the partnership. Therefore a partner may consequentially bind all the other partners by his act in all matters which are within the scope and object of the partnerships Section 19 has been reproduced hereinabove. It is subject to the provisions of Section 22 of the Act. Section 19 provides for implied authority of a partner and it also provides for limitation on the implied authority of a partner in absence of any usage or custom of trade to the contrary. For considering the scope of power of a partner to bind the firm the question to be decided is what is necessary for the usual conduct of the partnership business. For considering the scope of power of a partner to bind the firm the question to be decided is what is necessary for the usual conduct of the partnership business. For usual conduct of the partnership business a partner has general authority. He is a general agent of the firm for the usual conduct of the partnership business. Therefore the authority of the partner can be decided by determining the nature of the business of the firm and by the practice of the persons engaged in it. What is the nature of the business and what is the practice adopted by the firm? Whether there is any usuage or custom of trade to the contrary ? These are the questions whi ch are required to be examined before considering the contention so raised. Section 20 of the Act provides for extension and restriction of partners implied authority. It inter alia provides that a partner in a firm may by contract between the partners extend or restrict the implied authority of any partner. Section 21 provides for a partners authority in an emergency. This section extends a partners authority in emergency. In emergency a partner has authority to do any such things to save the firm from threatened loss as what would have been done by a person of ordinary competence in his own case in similar circumstances. ( 7 ) AFTER referring to the aforesaid relevant provisions of the Partnership Act one may have a look to the deed of partnership which is produced at Annexure-A to the petition. Clause 7 of the Partnership reads as follows: ( 8 ) EACH of the parties hereto shall: (a) carry on the business of the firm to the greatest common advantage be just and faithful to each other and render true accounts and full information of all things affecting the firm to any of the parties hereto or his legal representatives; (B) attend diligently to his duties in the conduct of the business by this clause the authority of all the partners is extended to do the business of the firm. There is no restriction on the authority of the partner. In the instant case Shri Dattubhai Manibhai Patel a partner of the firm obtained the permission to pay the amount of tax in lump sum for and on behalf of the firm. There is no restriction on the authority of the partner. In the instant case Shri Dattubhai Manibhai Patel a partner of the firm obtained the permission to pay the amount of tax in lump sum for and on behalf of the firm. Shri Dattubhai Manibhai Patel on receipt of the notice issued by the Mamlatdar to the firm and on receipt of the order passed by the Mamlatdar directing payment of the amount of difference of Entertainment Tax carried the matter in appeal before the Collector. Thereafter Shri Dattubhai Manibhai Patel carried the matter in revision before the Commissioner of Entertainment Tax. Before the Commissioner of Entertainment Tax as he was explained the correct position Shri Dattubhai Manibhai Patel conceded that the amount calculated was required to be paid and he prayed for instalments. Thereafter application for instalments was submitted before the Collector by Shri Dattubhai Manibhai Patel for and on behalf of the firm as a partner of the firm. This conduct of Shri Dattubhai Manibhai Patel as a partner of the firm for and on behalf of the firm clearly indicates the manner and method of carrying on the business of the firm. This was part of the business of the firm. Clause 7 of the Partnership Deed also authorise each and every partner to carry on the business of the firm to the greatest common advantage of the firm. Had Shri Dattubhai Manibhai Patel not the authority to do all the aforesaid acts for and on behalf of the firm petitioner No. 2 i. e. Bhaskerbhai Manibhai Patel (brother of Shri Dattubhai Manibhai Patel) or any other partner would have certainly raised objection as regards the admission of liability by Shri Dattubhai Manibhai Patel for and on behalf of the firm. ( 9 ) IT may be noted that non-payment of the amount of tax may lead to serious consequences. The licence itself may be cancelled and the business of running cinema also may have to be closed. In such a situation even the provisions of Section 21 of the Partnership Act which provides for authority of partner in case of emergency would be attracted. The licence itself may be cancelled and the business of running cinema also may have to be closed. In such a situation even the provisions of Section 21 of the Partnership Act which provides for authority of partner in case of emergency would be attracted. Thus looking to the provisions of Section 20 of the Act which provides for extension and restriction of authority of a partner by specific contract and also the provisions of Section 21 which provides for authority of a partner in case of emergency obvious inference is that Shri Dattubhai Manibhai Patel had authority to admit liability for and on behalf of the firm. It may be noted that Shri Dattubhai Manibhai Patel acted for the conduct of the business of the firm. It is not the case of the petitioners that what was done by Shri Dattubhai Manibhai Patel was not part of the business of the firm. It is also not shown by the petitioners that the action of Shri Dattubhai Manibhai Patel was not covered by Clause 7 of the partnership deed which has been reproduced hereinabove. It is also not shown by the petitioners that it was not the usuage and custom of the trade in which the petitioners are engaged that one of the partners of the firm may bind the firm even in dealings with the statutory authority from whom permission for payment of lump sum tax was required to be obtained. Thus considering the question from all relevant aspects it is difficult to accept the contention raised by the learned Counsel for the petitioners that Shri Dattubhai Manibhai Patel had no authority to make concession and accept the liability for and on behalf of the firm. ( 10 ) IT may noted that petitioner No. 2 therein is the brother of Shri Dattubhai Manibhai Patel who had received the notice issued by the Mamlatdar. He had also received the order issued by the Mamlatdar and had carried the matter in appeal and further in revision. From the inter se relationship of the partners and the practice of conducting the business of the partnership firm and also from all the relevant aspects indicated hereinabove it is difficult to believe that Shri Dattubhai Manibhai Patel had no authority to give concession and request for instalments. From the inter se relationship of the partners and the practice of conducting the business of the partnership firm and also from all the relevant aspects indicated hereinabove it is difficult to believe that Shri Dattubhai Manibhai Patel had no authority to give concession and request for instalments. In facts of the case the provision of Section 19 (2) (e) of the Indian Partnership Act 1932 are not attracted. ( 11 ) THESE are proceedings under Articles 226/z27 of the Constitution of India. By the very nature of the proceedings High Court is required to exercise its extraordinary powers under Articles 226 of the Constitution of India. In this case it is evident that the first round of litigation is carried on by one of the partners of the firm. Now another round of litigation is sought to be initiated for and on behalf of the firm by another partner i. e. Shri Bhaskerbhai Manibhai Patel. It may be noted that Shri Dattubhai Manibhai Patel completed the first round of litigation upto the revision stage before the Commissioner of Entertainment Tax. If such challenge is permitted to be made in a petition under Articles 226/227 of the Constitution of India it would amount to perpetuating fraud and misrepresentation. One partner carries the matter before the superior authorities completes one round of litigation. Then another partner comes before the High Court and states that the former one had not authority to make certain concession on behalf of the firm. such plea cannot be permitted to be raised in a petition under Articles 226/227 of the Constitution of India. It needs to be noted that even if it is assumed that the plea based on the provisions of Section 19 (2) (e) of the Act is available to the petitioner firm then also it is required to be proved by evidence. Sufficient proof has not been placed on the record of the petition to show that Shri Dattubhai Manibhai Patel had no authority to bind the firm. On the contrary as indicated hereinabove from clause 7 of the partnership deed it is evident that all the partners had full authority to carry on business of the firm. Moreover the circumstances elaborately discussed hereinabove indicate that the authority of no partner has been restricted. On the contrary as indicated hereinabove from clause 7 of the partnership deed it is evident that all the partners had full authority to carry on business of the firm. Moreover the circumstances elaborately discussed hereinabove indicate that the authority of no partner has been restricted. In above view of the matter the contention raised that Shri Dattubhai Manibhai Patel had no authority to make concession before the revisional authority has no merits and the same is hereby rejected. ( 12 ) IT was contended that the directions to make payment of difference of amount. of Entertainment Tax issued by the respondent-authorities are in contravention of the principles of natural justice. It is submitted that the petitioners have not been afforded an opportunity of being heard before determining the amount of difference in tax. The contention is based on misconception. There is no redetermination of the amount of tax. Whatever has been done is mere correction in the calculation of the amount payable on weekly basis. Errors and omissions are always required to be corrected. Correction of such errors and omission cannot be said to be in the nature of redetermination of the amount of tax payable and therefore cant be labelled an order adverse to a party. Therefore the contention that there was redetermination of the amount of tax and the petitioners were required to be heard has no merits. ( 13 ) IT may be noted that the error in calculation has been accepted by one of the partners of the firm. Initially when the order was passed an error crept in mentioning the amount of lump sum tax payable on weekly basis. It is not even contended that the figure of Rs. 1 48 per week mentioned earlier was correct one. Thus if an erroneous figure is mentioned in the order it would never amount to promissory estoppel against the respondents. If there be any promissory estoppel it is against the petitioners. The petitioner No. 1 represented by its partner Shri Dattubhai Manibhai Patel admitted the calculation mistake; admitted the liability to pay the amount; and requested for instalments. As per the request instalments have been granted. Now it is not open to petitioner No. 1-firm to dispute the liability. In the instant case neither principles of natural justice nor the principles of promissory estoppel are attracted. As per the request instalments have been granted. Now it is not open to petitioner No. 1-firm to dispute the liability. In the instant case neither principles of natural justice nor the principles of promissory estoppel are attracted. Before the revisional authority the liability is accepted by Shri Dattubhai Manibhai Patel a partner of the firm. Therefore also the principles of natural justice would not be attracted. ( 14 ) IT is contended that initially when notice was issued by the Mamlatdar petitioner No. 1-firm was not heard. Therefore the initial order is a nullity inasmuch as it is in contravention. of the principles of natural justice. It is submitted that the order passed in appeal and the revision would only amount to confirmation or modification of nullity. Therefore the order passed in revision also would be a nullity. In support of this contention reliance is placed on Division Bench judgment of this Court authorities completes one round of in the case of Hamtukhbhai Dhanjibhai Zaveri v. R. Parthasarathy reported in 12 GLR 128 It was a case under Section 258 of the Bombay Provincial Municipal Corporation Act 1949 The Division Bench of this High Court held that even if proceedings under Section 258 of BPMC Act is considered as an administrative proceedings the duty to act in consonance with the principles of natural justice will yet be present. This is so because an authority exercising an administrative power is as much required to act justly and fairly and not arbitrarily and capriciously. It is further held that the vice that attaches to an order passed in contravention of rules of natural justice cannot be cured ex post facto by affording to the person affected thereby an opportunity to represent his case after the order is passed. It is further held that fatal defect in the proceeding may be cured only if the authority passing the order realising that it had acted hastily and arbitrarily annuls its decision proceeds to reconsider the whole matter afresh after affording to the person affected a reasonable opportunity to represent his case and arrives at a fresh decision. Reliance is also placed on the decision of the Supreme Court in the case of Kiran Singh v. Chaman Paswan reported in AIR 1954 SC 340 . In that case the Supreme Court observed that decree passed without jurisdiction is nullity. Reliance is also placed on the decision of the Supreme Court in the case of Kiran Singh v. Chaman Paswan reported in AIR 1954 SC 340 . In that case the Supreme Court observed that decree passed without jurisdiction is nullity. The aforesaid decisions are not applicable to the facts and circumstances of the case. In the aforesaid decisions the aggrieved parties did not make concession and accept liability before the superior forum. The principle laid down is that if the superior forum has afforded an opportunity of being heard and thereafter confirmed the decision rendered by the original authority it would not cure the initial defect. Such is not the case here. First of all even at the initial stage since mere calculation mistake was required to be corrected there did not arise any question of redetermination of the amount of liability of tax. Therefore there was no need to issue notice and afford an opportunity of being heard. Even if it is assumed that an opportunity of being heard was required to be granted then also the aforesaid decision would not apply to the facts and circumstances of this case. In the instant case the liability has been accepted by the petitioner No. 1-firm before the superior forum. Thereafter the petitioner-firm acted upon the same. It applied to the Collector and got the amount of instalments fixed. Whether one accepts the liability before the original authority or before the superior authority it makes no difference. Once the liability is accepted the question of affording further opportunity and deciding the matter on merits does not arise. In view of this factual position as it obtains in this case the aforesaid decisions are of no help to the petitioners. ( 15 ) IT was submitted that the respondents are estopped from raising the demand. In the instant case there is no promissory estoppel whatsoever. As indicated hereinabove in the original order dated 28/02/1989 a mistake in calculation of the amount of tax payable on weekly basis crept in. This mistake was found little later and it has been corrected. It is not the case of the petitioners that in the original order there was no mistake. In fact on behalf of petitioner No. 1 Shri Dattubhai Manibhai Patel partner of the firm has carried the matter in revision. This mistake was found little later and it has been corrected. It is not the case of the petitioners that in the original order there was no mistake. In fact on behalf of petitioner No. 1 Shri Dattubhai Manibhai Patel partner of the firm has carried the matter in revision. At the revision stage he was explained the position of law and factual position. Thus even in the proceedings out of which this petition arises the firm has conceded that there was a mistake. Therefore it is now not open to the petitioners to come before this Court and say that there is promissory estoppel against the Government. If there is any estoppel it is against the petitioners themselves. In view of this position the reliance placed by the learned Counsel the petitioners on the decision of this High Court in the case of Sabarkantha Jilla Ru Utpadakoni Mills v. General Manager District Industrial Centre reported in 32 (2) GLR 852 is of no help to the petitioner in the present case. In the aforesaid decision learned Single Judge of this Court was concerned with the scheme for economic subsidy for expansion of units in backward areas. The co-operative society which was found eligible for cash subsidy for expansion was denied a part of such subsidy later on on the ground that it was not economically viable. In such circumstances the doctrine of promissory estoppel was invoked and applied. This decision has no applicability to the facts and circumstances of this case. ( 16 ) NO other contention is raised. There is no substance in the petition. No case for exercise of powers under Articles 226/227 of the Constitution of India is made out. On the contrary it appears that in order to avoid payment of Entertainment Tax an attempt is made to invoke the extraordinary jurisdiction of this Court. For the aforesaid reason the petition is rejected. .