Name Pradumn Bisht

Roll No. 1629

Semester V
Subject IOS

Ans 1.

FACTS : Section 154 of Companies Act,1935 provide for machinery for transfer of a company.

Mr.Groot working for Peaky Blinders & Co.---- Peaky Blinders and CO. in accordance with
Section 154 transfer their company to Harvey Weinsten and Co. --- Mr.Groot had no knowledge
of this transfer ---Mr. Groot absent for 3 days --- Harvey Weinstein Co bring an action against
him under Employers and workmen Act,1875 --- Mr.Groot contends he is not an employee and
not any contract of service with Harvey Weinstein and Co hence no action against him ----
Harvey Weinstein and CO argue contract of service is property under Sec.154 hence a valid
action against Mr.Groot and hence he is liable

ISSUE:

1. Is contract of service a property under Section 154 of Companies act, 1935?

2. Is Mr.Groot liable under Employers and workmen Act, 1875 for wilful abstention?

ANALYSIS AND RULE OF INTERPRETATION:

RULE OF INTERPRETATION: Golden Rule of Interpretation

Golden Rule of interpretation need to be used in the present case because if we proceed with the
literal rule of interpretation and give effect to Section 154 of Companies Act, 1935 in the present
case it would lead to absurdity and under no circumstance this absurdity which has arisen with
respect to transfer of contract of service would have been the intention of the legislature. Here in
the present factual matrix we need to give effect to the spirit of law rather than the grammatical
or mechanical meaning .

In a fact similar to this case, the court in matter of Nokes v. Dancaster had also applied the
Golden Rule of Interpretation. Applying the spirit of law and the fact that the legislature would
only legislate for purpose of bringing an effective result , the contract of service of Mr. Groot
cannot be said to be validly transferred from Peaky Blinders and Co. to Harvey Weinstein and
Co. because the transfer won’t take place as it doesn’t include Mr. Groot’s consent consent as a
person is entitled to choose his employer and an employer can’t force anyone to work for him;. If
in the present case we don’t apply the golden rule of interpretation, the narrow interpretation of
Section 154 would fail to achieve the purpose of legislation, which would have never been the
intention of the legislature and it would also trample on an individual’s indefeasible right of
consent and choice.

Hence applying golden rule of Interpretation and arguments stated above, there is no transfer of
contract of service under Section 154 of the Companies Act,1935 and Harvey Weinstein and
Co’s action against Mr.Groot under Employers and Workmen Act, 1875 would fail and will not
be liable.

Ans 2

FACTS: Section 16(3) of the Income Tax Act, 1922 provides in computing the total income of
an individual (which is taxed) for the purpose of assessment, there shall be included so much of
the income of a wife or a minor child of such individual as arises indirectly or directly.

ISSUE: The issue is whether the word ‘ any individual’ included males and females both, or
whether it was restricted to males and doesn’t include females?

Analysis and Rule of Interpretation

Rule of Interpretation – MISCHIEF RULE

When determining whether ‘an individual’ includes a female also the background and preceding
conditions need to be kept in mind which prompted the legislature to introduce section 16(3).
The main underlying intention of the legislature was to make sure than no evasion of tax takes
place as there was a widespread and mala fide practice of husbands entering into nominal
partnerships with their wives and minor childs for the benefit of the partnership of which they
were the members.
The facts of the case are similar to the case of Sodra Devi v. CIT, there also the court applied
the mischief rule of interpretation.

The legislature had introduced an ambiguous term “any individual” .Hence the need and
applying the mischief rule to the present facts at hand it is quite clear that the rationale of
legislature behind introducing 16(3) was to include the income derived by the wife and minor
children of the husband along with that of the husband’s income so that no taxes can be evaded
and income tax is calculated and paid accurately.

Now keeping in mind the law before introducing the provision 16(3), the mischief and defect for
which the law did not provide, what remedy the legislature has brought to cure the mischief and
the rationale behind the same it is quite easily ascertainable that the term “ any individual”
should be used to refer to males only.