JUDGMENT
Murray Coutts Trotter, Kt., C.J.
1. The facts relating to this case are clearly set out in the judgment of the learned Trial Judge and it is unnecessary to repeat them. I considered the whole position as it stood under the Act of 1884 in the case of Clan Line Steamers, Ltd. v. Municipal Council of Cocanada (1917) 34 M.L.J. 145, in which I reviewed all the authorities. That judgment was confirmed on appeal and 1 do not propose to go over the same ground again.
2. The only question I have to consider is whether Section 92 of the new Madras District Municipalities Act of 1920 has altered the law as it stood at the date of the Clan Line case. In my opinion it has not, though I have no doubt that it was intended to do so. Two parts of the section are called in aid by the Municipality. The first is the body of the section itself which uses the phrase “transacting business” instead of the words of the old Act “exercising…any one…of the trades or callings specified in the schedule.” It is quite obvious that if “transacting business” is not to be controlled in some way, it would render liable to the tax any company situate in Madras who made an isolated purchase for the purpose of re-sale or shipment abroad in any one of the Municipalities in the Presidency. No one can suppose that any such construction could reasonably be put upon the words. Stress is also laid upon the explanation to Section 92 which says:
Whenever a company employs a servant or agent to represent it for the purpose of transacting. Business in a municipality, such company shall be deemed to transact business within the Municipality and such servant or agent shall be liable for the tax in respect of the company’s business whether or not he has power to make binding contracts on behalf of the company.
3. In my view that carries the matter no further. I feel myself constrained to construe “transacting business” as meaning no more than the! phrase “carrying on business” which has been denned by a series of decisions of the highest Courts in England and settled for this Court by the decision in Clan Line Steamers, Ltd. v. Municipal Council of Cocanada (1917) 34 M.L.J. 145. The English decisions I have reviewed in my judgment in the last named case. It may be quite true that if the Company does carry on business in the Municipality, the fact that it does so by an agent who has no power to make binding contracts is no longer one of the tests to be applied. The question still remains, “does the Company either itself or by its agent transact, i.e., carry on business in the accepted legal meaning of the term ‘within the Municipality’?” In my opinion it would be no more reasonable so to hold than to hold that a Company who sends a commercial traveller all over India to make purchases for them can be said to carry on business in all the various places at which he calls to fulfil the purpose of his employment.
4. An alternative case was put forward, namely, that even if it could not be said that the Bombay Company carried on the business of purchasing cotton and ground-nuts in Dindigul, they still could be said to be carrying on the business of managing agents of the Tinnevelly Cotton Press Company in Dindigul. On the facts it appears to me absolutely plain that the business they undoubtedly carried on as managing agents of the Tinnevelly Cotton Press Company was entirely carried on in Madras and the fact that the Bombay Company lent certain persons to the Tinnevelly Cotton Press Company to help them in their business of ginning and pressing cotton and decorticating groundnuts does not affect the matter. The salaries of the persons so lent are in every case ultimately paid by the Tinnevelly Cotton Press Company and not by the Bombay Company, though the Bombay Company made themselves responsible for the amount in the first instance. In these circumstances, it appears to me impossible to contend that their business as managing agents is carried on anywhere except in Madras where the whole of the accounts are kept and adjusted, and where the remuneration by way of commission for managing the Tinnevelly Cotton Press Company is paid.
5. The second point in the case raises a question of very considerable interest. The plaintiff Company here sued for a return inter alia of moneys that they had paid under protest more than six months before the action was brought, and it is contended that the recovery of such payments is time-barred by reason of Section 350 of the Act of 1920. The industry of counsel put before us practically every decided case both English and Indian. 1 may clear the ground of two points at once. In the first place it cannot be contended, as was at one time suggested, that payment under protest can affect the position of the person who is being paid. Its value is to safeguard the position of the person who makes the payment and to ensure that it cannot be said that the payment he made was a voluntary one; but it does not raise any obligation on the part of the person who accepts the payment to return it if it turns out ultimately that the money was not due. The question whether there is an obligation to return it has to be determined on grounds altogether independent of whether the payment was made with or without protest.
6. It is clear that actions such as the present are in the nature of English actions for money had and received and we were taken through a long series of authorities as to what the real nature of this action in the English Common Law Courts was, culminating in the judgment of the House of Lords in the well-known case of Sinclair v. Brougham (1914) A.C. 398. The history of the matter will be found in the judgment of Lord Sumner in that case. There, the suggestion was made that it was erroneous to suppose that the cause of action was really in assumpsit which would rest upon an implied or imputed contract to return the money to the person to whom it was proved properly to belong but that Lord Mansfield in Moses v. Macferlan (1760) 2 Burr. 1005 : 97 E.R. 676 had rested it on an equitable doctrine independent of assumpsit which made the return of the money obligatory ex aequo et bono. That doctrine was demolished by Lord Sumner and it may be regarded as definitely established that in the English Common Law Courts, the cause of action is exclusively founded on an assumpsit or its modern equivalent. It would be a barren display of learning to enquire how far it is true to say that an action in assumpsit in its origin really sounded in tort, for the simple reason that I am quite prepared to concede that if an action for money had and received sounds either in tort or implied contract in this country, it would be within the words of Section 350 of Act V of 1920 and that the plaintiff Company would be time-barred; because either form of such an action would obviously be a suit for damages or compensation within the meaning of the section. These words are peculiar to the Indian Statute. They are not found either in Section 21 of the Public Health Act of 1875 or Section 1 of the Public Authorities Protection Act of 1893 whose language is very much more general; and I am quite prepared to think that if the draftsman of the Indian Act had reproduced the words of the English Statute and not added the qualification “for damages or compensation,” which has caused all the trouble, in this case these arrears could not be recovered. But there are the words which I have to deal with and the question which I have to consider is whether the Courts in India are compelled to regard a suit of this nature as confined within the limits of a suit for money had and received as known to the English Common Law. I find the highest authority for taking the contrary view, the authority of a Privy Council case binding on me, namely, John v. Dodwell and Company (1918) A.C. 563. Lord Haldane there points out, referring to Ceylon,
Under principles which have always obtained in Ceylon, law and equity have been administered by the same Courts as aspects of a single system, and it could never have been difficult to treat an action analogous to that for money had and received as maintainable in all cases ‘where the defendant has received money which ex aequo et bona he ought to refund.’ If, as in Ceylon, there is no necessity to find an actual contract or to impute the fiction of a contract, inasmuch as every Court can treat the question as one not merely of contract, but of trust fund where necessary, there is no difficulty in extending the remedy to all the cases covered by the words just quoted.
7. I take that as being equally applicable to the Courts of British India and I take it to mean this–that in Courts such as those in Ceylon and those of British India, an action for money had and received, may be treated, though the English Common Law cannot treat it, as an action founded on an equity binding on the conscience of the recipient of the money which is shown not to be his. If that be right, it follows that the remedy being an equitable one is enforceable because it is binding as ex aequo et bono on the conscience of the defendant and cannot possibly be either a suit for damages or compensation. I do not quite understand His Lordship’s words “trust fund,” but it appears to me reasonably clear that as he is dealing throughout with an action for money had and received, he cannot be supposed to have intended to apply what he said merely to earmarked funds, for such do not arise in the case of actions for money had and received. I consider it broadly as coming to this, that Lord Haldane considers that for Ceylon and therefore for India, where there has never been any divergence between equitable and legal remedies, it is permissible to apply the suggestion of Lord Mansfield, whether it offends against the Common Law of England or not, to such actions when brought in India. In this view, the suit for the recovery of the payments made outside the limitation period of six months is unaffected by the provisions of Section 350 and neither the necessity for the notice nor the limitation of six months contained in that section applies.
8. I may add that a tax, the amount of which is fixed solely by the paid-up capital of the Company, without reference to the amount of business done in the area of proposed assessment is one whose incidence the Courts should watch with a jealous eye. The Municipalities are to get this tax without incurring any (expense of enquiry into, or consequent on, the assessment of the amount of business actually done. The tax no doubt is not heavy and perhaps it suits both sides to avoid the trouble of going into the actual volume of business done in the particular Municipality. But the principle is a dangerous one, and it is not difficult to imagine cases where it would inflict great injustice on the Company to be taxed.
9. The appeal will be dismissed with costs.
Madhavan Nair, J.
10. The plaintiff, the Bombay Company, Limited, is a company incorporated under the Indian Companies Act and carries on business in Madras and elsewhere. The defendant, the Municipal Council of Dindigul, is a Corporation constituted under the District Municipalities Act of 1920 and has its office at Dindigul. The defendant Municipality purporting to act under Section 22 and Rule 16, Schedule IV of the District-Municipalities Act assessed the plaintiff Company to Company’s tax for the half-years ending 30th Sept. 1922, 31st March 1923, 30th September, 1923, 31st March, 1924, 30th September, 1924 and 31st March, 1925 in the sum of Rs. 250 in respect of each half-year. Under this section, tax is leviable if the Company has transacted business for profit within the Municipality for a specified period. The plaintiff Company paid this tax under protest and filed the suit to recover the sums so paid which amount to Rs. 1,500. The contention of the plaintiff Company is that it did not transact business in the Municipality and therefore the tax is not leviable; the defendant, on the other hand, contends that the tax is leviable as the Company transacted business in Dindigul and also that the suit is barred under Section 350, Clause (2) of the District Municipalities Act. The learned Judge (Beasley, J.) who heard the case overruled the contentions of the defendant and gave a decree to the plaintiff Company. This appeal is against his judgment and decree.
11. Two questions for consideration in this appeal are : (1) Whether the defendant is entitled to levy the tax on the plaintiff Company under Section 92 of the District Municipalities Act? and (2) Is the suit barred by limitation?
12. The relevant portion of Section 92 of the District Municipalities Act is as follows:
…every company transacting business within the Municipality for profit or as a benefit society shall… pay a half-yearly tax on its paid-up capital on the scale shown in Schedule IV, if, and as soon as it has transacted business in the Municipality for a period laid down in Section 95.
13. According to this section, if the plaintiff Company transacted business in the Municipality for the specific period, the tax is leviable by the defendant. The question whether the plaintiff Company transacted business within the Municipality for profit is ultimately a question of fact depending on the evidence in each case. The question in what circumstances a Company or person may be said to carry on or exercise a trade in any locality has been considered in England in various cases mainly under the Income-tax Acts : the principles laid down in these cases will be very helpful in examining the evidence in this case. These decisions are so well known that I propose to refer only to a few of them; and further, most of these cases have been very exhaustively, if I may say so with respect, considered in a judgment of this Court in Clan Line Steamers, Ltd. v. Municipal Council of Cocanada (1917) 34 M.L.J. 145. In Grainger and Son v. Gough (1896) A.C. 325 it was held by the House of Lords that a foreign merchant, who canvasses through agents in the United Kingdom for orders for the sale of his merchandise to customers in the United Kingdom, does not exercise a trade in the United Kingdom within the meaning of the Income-tax Acts, so long as all contracts for the sale and all deliveries of the merchandise to customers are made in a foreign country. In that case a wine merchant whose place of business was in France employed Grainger and Son who had an extensive business of their own as wine merchants, as agents for the sale of his wine in the United Kingdom. They sought orders in the name of the foreign merchant and transmitted them to him in France where he exercised his discretion as to executing these orders. It was sought to assess Grainger and Son to income-tax on the ground that they were exercising a trade in the United Kingdom. The following extract from the judgment of Lord Herschell explains the basis of the judgment:
Taking the findings together, I think it clear that no contracts to sell wine were ever made by the appellants on behalf of Roederer. All that they did was to transmit to him the orders received, and until he had agreed to comply or complied with them there was no contract . An order given to a merchant for the supply of goods does not of itself create any obligation. Until something is done by the person receiving the order which amounts to an acceptance, there is no contract. It is clear that the appellants in receiving an order did not accept or purport to accept it on Roederer’s behalf so as to constitute a contract, and that they had no authority so to do.
14. In another part of the same judgment appears the statement:
If all that the merchant does in any particular country is to solicit orders, I do not think he can reasonably be said to exercise or carry on his trade in that country. What is done there is only ancillary to the exercise of his trade in the country where he buys or makes, stores, and sells his goods.
15. Erichsen v. Last (1881) 8 Q.B.D. 414 is another case where similar principles have been enunciated. In Lovell and Christmas, Ltd. v. Commissioner, of Taxes (1908) A.C. 46 the following observation appears in the judgment of the Privy Council:
One rule is easily deducible from the decided cases. The trade or business in question in such cases ordinarily consists in making certain classes of contracts and in carrying those contracts into operation with a view to profit; and the rule seems to be that where such contracts, forming as they do the essence of the business or trade, arc habitually made, there a trade or business is carried on within the meaning of the Income-tax Acts, so as to render the profits liable to income-tax.
16. See also San Panlo (Brazilian) Railway Company v. Carter (1896) A.C 31. All the well-known cases on this point have been discussed, as I have already pointed out, under two heads, the tax cases and the jurisdiction cases in Clan Line Steamers, Ltd. v. Municipal Council of Cocanada (1917) 37 M.L.J. 145, which is a decision on the District Municipalities Act of 1884. It was held in that case that the shipping company which was sought to be assessed at Cocanada was not exercising any trade in Cocanada so as to be liable to be taxed because the freight-earning contracts entered into by the Company were not entered into at the port of Cocanada.
17. According to these decisions, provided they are applicable to the circumstances of the case before us, what we have to find out mainly from the ‘evidence is as to where the contracts relating to the business of this company are habitually made. If the contracts are made elsewhere, then the company cannot be taxed for transacting business in Dindigul. But it is argued by Mr. Krishnaswami Aiyar for the appellant that these tests should not be applied in judging the evidence in this case because they were decided under the English Income-tax Acts and they were concerned with the interpretation of the words “exercising a trade for profit” or “carrying on a trade” and not with the meaning of the term “transacting business” which are the words used in the District Municipalities Act. He also relies on the explanation to Section 92 of the Act to show that these decisions are no longer applicable in considering cases arising under the section. In support of his first argument he has referred us to the decision in Smith v. Anderson (1880) 15 Ch. D. 247 and a few other cases to show that the word “business” has a more extensive signification than “trade” and that, if there is evidence to show that some kind of business was done in Dindigul such as buying raw cotton, etc., though the contracts with regard to such purchase are made in Madras, then the Company must be considered to be transacting business in Dindigul and not in Madras. It is difficult to accept this distinction. What we have to see under the Act is whether the company transacts business for profit in Dindigul. The place where the business is transacted is the place where the tax is leviable. Whether the words are “carrying on business” or “exercising a trade” or “transacting business” I think all must be considered to be used in the same sense and therefore the principles deducible from the decisions are equally applicable to the present case. The second argument that these principles are inapplicable because of explanation to Section 92 of the District Municipalities Act presents some difficulty. It is obvious that the intention of the legislature in enacting the explanation was to nullify the effect of the decision in Clan Line Steamers, Limited v. Municipal Council of Cocanada (1917) 34 M.L.J. 145 and also generally to exclude the operation of the English cases referred to. But I think the language employed has not succeeded in fully carrying out that intention. According to the explanation, if a company employs a servant for transacting business within the Municipality, such company shall he deemed to transact business within the municipality, and such servant shall be liable for the tax in respect of the company’s business, whether or not he has power to make binding contracts. Even so, it is the company that is sought to be made liable for the tax and in order to make it liable for the tax, the agent or servant should be employed for the purpose of transacting business within the municipality for profit and so we are thrown back again to the consideration of the , question, what is meant by “transacting business.” The mere employment of the agent to do some work for the company within the municipality will not, I think, make the company liable to pay the tax so long as the effective management of the business, its administration and control are vested elsewhere; otherwise the mere soliciting of an order by an agent in any particular case will make the company of which he is the representative liable for the company’s tax in that case, and this will clearly be against the accepted notions of the commercial community here and elsewhere. In my view the section and its explanation should not be interpreted to lead to this result.
18. As regards the evidence, there can be no doubt in this case that all the business contracts are concluded at Madras and that the whole business of the company is effectively controlled from there. On the evidence in the case I agree with the conclusion of Beasley, J., that no tax should have been levied on the plaintiff Company by the municipality as it was not transacting any business within the municipality during the period in question. It therefore follows that the sum which the plaintiff seeks to recover from the defendant was collected by the municipality wrongfully under the provisions of the District Municipalities Act.
19. The next question for consideration is whether the plaintiff’s suit is barred by limitation under Section 350, Clauses (1) and (2) of the District Municipalities Act. If the section applies, the suit for the refund of the tax paid for the first five instalments will clearly be barred, and it will be maintainable only with respect to the last instalment. According to Section 350, Clause (1)
No suit for damages or compensation shall be instituted against the municipal council in respect of any act done in pursuance or execution or intended execution of this Act or any rule regulation or order made under it or in respect of any alleged neglect or default in the execution of this Act, etc.
unless some formalities are complied with and Clause (2) of that Act states:
Every such suit shall he commenced within six months after the date on which the cause of action arose….
20. It is argued on behalf of the plaintiff Company that the present suit is not one for damages or compensation as mentioned in Clause (1) of Section 350 and therefore is not barred under Clause (2) of that section. The defendant argues contra.
21. The question is whether the present suit is one for damages or compensation within the meaning of Section 350, Clause (1) of the Act. 1 may state at once that I have not found the question an easy one to decide and that no decisions directly bearing on the question have been brought to our notice. The section is evidently modelled upon the provisions of Section 1 of the Public Authorities Protection Act, 1893, i.e., 56 and 57 Vic. c. 61, but there is one striking difference between the wording of the provisions of the two enactments. In speaking of the proceedings against persons with reference to acts done in execution of satutory or other public duty, Section 1 of the English Act refers to “any action, prosecution or other proceeding” and Clause (a) states that : “such action shall not lie or be instituted unless it is commenced within six months next after the act, etc.” whereas in speaking of such proceedings Section 350, Clause (1) uses the expression “suit for damages or compensation.” While the English Act gives exemption for all action, prosecution or other proceeding unless commenced within six months next after the act complained against, the Indian enactment confines its operation to “suits for damages or compensation.” With the words of the English enactment “any action, prosecution or proceeding” before it, why the Indian Legislature in enacting the District Municipalities Act chose to use the expression “suits for damages or compensation” in Section 350, Clause (1) of the Act, it is not easy to conjecture. It may be, as contended for by the appellants, that the legislature thought that all actions of the kind that we are dealing with, namely, those brought against public authorities for acts done in execution of their authority might be brought under the description “suits for damages or compensation”; in which case there can be no difference between the English Law and the Indian Law; or it may be, as contended for by the respondent, that the Indian Legislature confined the operation of the section to what are strictly called “suits for damages or compensation” thus deliberately excluding from its scope other kind of suits which do not strictly come within that description. In this connection, it is interesting to note that in speaking of actions which may be brought against the Municipal Council, etc., for, acts done in pursuance of or in execution of the Act, Section 261 (1) of the old Act (that is Act IV of 1884) states that “no action shall be brought etc.,” thus bringing within its scope all descriptions of actions as under the English Law.
22. Decisions of the English Courts under the Public Authorities Protection Act and Section 264 of the Public Health Act which it repealed, Waterhouse v. Keen (1825) 4 B. & C. 200 : 107 E.R. 1033, Selmes v. Judge (1871) 6 Q.B. 724, Midland Railway Co. v. Withington Local Board (1883) 11 Q.B.D. 788, Cree v. St. Pancras Vestry (1899) 1 Q.B. 693, Lyles v. Southend-on-Sea Corporation (1905) 2 K.B. I and Bradford Corporation v. Myres (1916) 1 A.C. 242 were referred to, for showing that actions of the kind we are dealing with in this case are either actions in tort or in contract and therefore should be considered as “suits for damages or compensation.” (See also paragraph 700 of Halsbury’s Laws of England, Vol. 23, page 346). In view of the express language used in the Indian enactment, I do not think a discussion of the question whether an action of this kind would come within the description of the old form of action known to English Law as an action in assumpsit or whether the claim is one in tort will yield much profitable result. It is conceded and it is clear from the English cases referred to above that actions for the recovery of money wrongfully collected by local authorities are actions for money had and received and that, in understanding the nature of such actions, we have to look more to their substance than to their form. Lord Mansfield in the well-known case of Moses v. Macferlan (1760) 2 Burr. 1005 : 97 E.R. 676 stated that the action for money had and received is founded on the equity of the plaintiff’s case and that the action is an equitable one to recover back the money which ought not in justice to be kept by the defendant. The learned Judge pointed out that the action is maintainable for money which ex aequo et bono the defendants are to refund. The money that has been wrongfully collected by the defendant from the plaintiff is to be regarded as a trust fund which the defendant is in equity bound to refund to the plaintiff. This is in substance the essence of the action for money had and received, though it is not clear as to what extent Lord Mansfield intended to import the equitable principles within the dominion of the common law action. See Viscount Haldane’s comment in John v. Dodwell and Company (1918) A.C. 563 on Lord Sumner’s view in Sinclair v. Brougham (1914) A.C. 398 However that may be, the Privy Council has, in John v. Dodwell and Company (1918) A.C. 563,a case from Ceylon, pointed out that where law and equity are administered as parts of a single system, actions for money had and received may be considered as equitable actions; and if so, it must follow that it is not correct to describe them as suits for damages or compensation. There can be no doubt that what has been said with reference to Courts in Ceylon will apply equally to Courts in India as well, inasmuch as in these Courts also, law and equity are administered as parts of a single system. The remarks of Viscount Haldane in John v. Dodwell and Company (1918) A.C. 563 relevant to the present question are as follows:
For under principles which have always obtained in Ceylon, law and equity have been administered by the same Courts as aspects of a single system, and it could never have been difficult to treat an action analogous to that for money had and received as maintainable in all cases ‘where the defendant has received money which ex aequo et bono he ought to refund.’ If, as in Ceylon, there is no necessity to find an actual contract or to impute the fiction of a contract, inasmuch as every Court can treat the question as one not merely of contract, but of trust fund where necessary, there is no difficulty in extending the remedy to all the cases covered by the words just quoted.
23. In view of these observations it must be held that the plaintiff’s suit for Recovery of the money wrongfully collected by the defendant cannot be described as a suit for damages or compensation being essentially an equitable action for money had and received, and that therefore the bar of limitation prescribed by Section 350, Clause (2) of the District Municipalities Act does not apply and the suit is not barred by limitation as regards the refund of any one of the plaint instalments.
24. I would also add that having regard to the meaning of the words “damages and compensation” and also the relief claimed in the plaint, viz., a refund of the amount of the tax overpaid, it is hardly correct to call the plaintiff’s suit one for damages or compensation. ‘
25. In the result, the appeal is dismissed with costs.
