Mumbai ITAT erred in applying the ejusdem generisrule in

construing two limbs of Article 13 of the India-UK DTAA

May 18, 2019 [2019] 105 taxmann.com 240 (Article)

[The author is at present a part of the Corporate Direct Taxation

team of a leading Indian multinational engaged in an infrastructure
business. The views expressed in this article are the author's own
and are not necessarily endorsed by his employer.

In this article, the author argues that the Mumbai Bench of the
Appellate Tribunal erred in applying the ejusdem generis rule in
construing the two limbs of paragraph 4(c) of Article 13 of the India-
United Kingdom Double Taxation Avoidance Agreement; the author,
however, goes on to argue that the Tribunal's ruling, viz, that the
consideration received by the taxpayer is not covered by the second
limb of paragraph 4(c) and is therefore chargeable to Indian income-
tax, is correct, although for a different reason.]

In Buro Happold Ltd. v. Dy. CIT [2019] 103 taxmann.com 344

(Mum. - Trib.), the Mumbai Bench of the Income-tax Appellate
Tribunal was called upon to decide an issue involving the
construction of the India-United Kingdom Double Taxation
Avoidance Agreement ["India-UK Tax Treaty"], specifically the
provisions of Article 13(4) of that Treaty dealing with the taxability
of "fees for technical services" ("FTS").

Facts

2. The facts lie in a narrow compass and need not detain us for long.
The taxpayer, viz, Buro Happold Ltd, UK ("BH-UK"), a tax resident
of the UK, was engaged in the business of providing engineering
design and consultancy design services, which involved, inter alia,
the provision of structural and Mechanical, Electrical and Public
Health ("MEP") engineering for various buildings.

3. During the previous year ended on 31st March, 2014, relevant to

the Assessment Year 2014-15, the taxpayer had received from Buro
Happold Engineers India Pvt. Ltd. ("BH-India"), an amount of Rs.
1,09,03,0391, in consideration of having rendered consulting
engineering services to the latter. In its return of income, the
taxpayer claimed the said consideration as not chargeable to Indian

Page 1 of 20
income-tax on the ground that it did not constitute FTS in terms of
Art. 13(4) of the India-UK Tax Treaty since, according to the
taxpayer, the consideration fell outside the ambit of paragraph 4(c)
of Art. 13, having regard to the fact that the services rendered by the
taxpayer did not "make available technical knowledge, experience,
skill, know-how or processes or consist of the development and
transfer of a technical plan or technical design". The taxpayer
further submitted that the consideration received by it, therefore,
constituted Business Income, which, however, was beyond the reach
of Art. 7 of the Treaty, in view of the taxpayer not having any
Permanent Establishment in India.

4. The Assessing Officer ("AO") was, however, not impressed by the

case set up by the taxpayer. He found that the services rendered by
the taxpayer included the supply of designs/drawings and that the
provision of other services were ancillary to such supply. In this
factual backdrop, the AO carried out an analysis of paragraph 4(c) of
Art. 13, and held that –

"
the words "make available" go with technical knowledge,
experience, skill, knowhow, etc., but do not go with "the
development and transfer of a technical plan or a technical
design".
"

In other words, he held that the second limb of paragraph 4(c), viz,
"consist of the development and transfer of a technical plan or
technical design", constituted a condition independent from the first
limb, viz, "make available technical knowledge, experience, skill,
know-how or processes", and that the taxpayer's services fell within
the mischief of the second limb. The AO, therefore, concluded that
the consideration for such services constituted FTS in terms of Art.
13(4) of the Treaty, read with the second limb of paragraph 4(c)
thereof, for which reason such consideration was chargeable to
Indian income-tax.

Taxpayer's Appeal to Commissioner (Appeals)

5. The aggrieved taxpayer's appeal to the Commissioner of Income-

tax (Appeals) was dismissed, with that authority upholding the
characterisation and chargeability of the consideration as FTS, not
only under Art. 13(4) of the Treaty, i e, not only in terms of both
limbs of paragraph 4(c) thereof, but also under Section 9(1)(vii) of
the Indian Income-tax Act, 1961.

Page 2 of 20
Taxpayer's Second Appeal to Appellate Tribunal

6. The taxpayer, thereupon, preferred a second appeal to the

Income-tax Appellate Tribunal.

7. Before the Tribunal, the submissions of the taxpayer's Authorised

Representative were to the following effect. The taxpayer was
rendering consultancy services and supply of designs and drawings
was only incidental to the rendering of those services. Further, such
consultancy services were project-based and the services for one
project could not be used for any subsequent project. For treating
the consideration received by the taxpayer as FTS in terms of Art. 13
(4), the taxpayer must make available technical knowledge,
experience, skill etc. The words constituting the second limb of
paragraph 4(c) of Art. 13, viz,"consist of the development and
transfer of technical plan or technical design", could not be read
disjunctively but had to be read along with the first limb. Therefore,
unless the development and transfer of any technical plan or
technical design made available the technical knowledge,
experience, skill, knowhow or processes to the service recipient, the
consideration received could not be treated as FTS. Since in the
instant case, the technical plans or designs provided by the taxpayer
were project-specific, there was no scope for the service recipient to
use such plans or designs subsequently in any other project.
Consequently, the technical knowledge, skill etc embedded in the
technical plans or designs not having been made available to BH-
India, the consideration received therefor by the taxpayer could not
be treated as FTS.

8. The Departmental Representative's submissions can be summed

up as follows :

(i) Since the taxpayer itself was not executing the project, it
had provided technical/engineering consultancy advice as
well as technical designs to parties in India, thereby
enabling them to further apply and re-apply such
technology in India; therefore, the consideration received
by the taxpayer was for making available technical
knowledge and experience.
(ii) A reading of the agreement between the taxpayer and BH-
India made it clear that "the key deliverable of the
assessee is development and transfer of technical
designs/drawings".
(iii) BH-India was responsible to the Indian client for
everything and the taxpayer was only a sub-contractor of
BH-India. It was impossible for BH-India to implement
the project without the knowhow and experience of the
taxpayer. The employees of the taxpayer worked closely

Page 3 of 20
 with the employees of BH-India and supported/advised
them as well as provided assistance to them on various
technical and engineering matters. Therefore, technical
knowledge, experience etc were made available to BH-
India. Further, the technical services provided by the
taxpayer were capable of being used in future. Also, BH-
India was not barred under the agreement from using
such knowhow or knowledge in future.
(iv) In sum, the consideration received by the taxpayer was in
the nature of FTS under Art. 13(4)(c) of the India-UK Tax
Treaty.

Tribunal's Ruling

9. The Tribunal's findings as regards the facts were that the work of
the taxpayer was basically to provide to BH-India, consultancy
services relating to a twin city project awarded to BH-India by the
Pune Municipality and other building projects in Mumbai and, in
that context, to provide technical designs/drawings/plans. Put
differently, the Tribunal found that the taxpayer's core function was
the provision of consultancy services, which incidentally required
the provision of designs, drawings, plans etc. The Tribunal further
found that "it is a fact on record that technical
designs/drawings/plans supplied by the assessee under contract are
project specific".

10. In the light of the foregoing, the Tribunal proceeded to

formulate the following two questions as representing the issues
arising for its consideration, viz :

"

(i) Whether development and transfer of a technical plan or

technical design simplicitor without making available
technical knowledge, experience, skill, knowhow or
processes, etc., would be in the nature of fees for technical
services; and
(ii) In the event, it is held that development and transfer of a
technical plan or a technical design also requires making
available technical knowledge, experience, skill, knowhow
or processes, etc., whether in the present case such
condition is satisfied.

"

11. Having posed to itself the above questions, the Tribunal2

rejected, almost summarily, the AO's determination that the second
limb of Art. 13(4)(c) of the Treaty had to be read independently (of
the first limb). For doing so, the Tribunal purported to apply the rule
of ejusdem generis, by holding that the second limb would take

Page 4 of 20
colour from the first limb. The Tribunal thus answered Question (i)
in the negative, i e, in favour of the taxpayer and against the
Revenue.

12. In view of its answer to Question (i)3 the Tribunal proceeded to

answer Question (ii) on that footing. After reproducing the
established rationes decidendi of several judicial precedents on the
contours of the "make available" condition, the Tribunal held that
since, in the instant case, it had been found that the technical
designs/plans supplied by the taxpayer were project-specific (and,
therefore, could not be used by BH-India in any other project in
future), it could not be said that BH-India was at liberty to use in its
own right, the technical knowledge, experience, skill, knowhow or
processes embedded in such designs/plans. The Tribunal took
support from Gera Developments (P.) Ltd. v. Dy. CIT [2016] 160
ITD 439 (Pune)4, in which, dealing with Art. 12(4)(b) of the India-
US Tax Treaty5, the Pune Bench of the Tribunal had held that the
"mere passing of project specific architectural drawings & designs
with measurements does not amount to 'making available' technical
knowledge, know-how or process"6. The Tribunal, therefore, upheld
the claim of the taxpayer that it had not made available any technical
knowledge, experience etc. The Tribunal thus answered Question (ii)
also in the negative, i.e., in favour of the taxpayer and against the
Revenue.

13. In view of its aforesaid determinations, the Tribunal allowed the

taxpayer's appeal.

Tribunal's Answer to Question (i) Erroneous;

Consequently, Its Answer to Question (ii) Also Erroneous

14. It is submitted, with respect, that the Tribunal fell into error in
answering both, Question (i) and Question (ii), as is sought to be
established hereafter.

15. At the outset, it is submitted that the Tribunal erred in finding

favour with the following submission of the taxpayer's counsel, viz :

"
….. Drawing our attention to Article-13(4)(c) of India-UK tax
treaty, the learned Authorised Representative submitted, for
treating the amount received by the assessee as fees for
technical services, the assessee must make available technical
knowledge, experience, skill, etc. He submitted, the words
"consists (sic) of the development and transfer of technical plan

Page 5 of 20
 or technical design" in the second limb of Article-13(4)(c)
cannot be read disjunctively but has (sic) to be read along with
the first limb. Therefore, unless the development and transfer of
a technical plan makes available the technical knowledge,
experience, skill, knowhow or processes to the service recipient,
the amount received cannot be treated as fees for technical
services. …..
"
(Paragraph 8 of the Tribunal's Order)
(emphases supplied)

It is submitted that the said submission of the taxpayer's Authorised

Representative is preposterous, since no amount of stretching of the
norms of syntax will achieve the result suggested by him. It is
further submitted that had the intention of the Treaty parties been
to have the "make available" requirement applicable to both limbs of
paragraph 4(c) of Art. 13 of the India-UK Tax Treaty, they would
have drafted that provision differently7, e g, as follows :

"
(c) make available technical knowledge, experience, skill, know-
how or processes, or consist of the development and transfer of
a technical plan or technical design which enable the person
acquiring the plan or design to apply the technology contained
therein.
"

Erroneous Application of the ejusdem generis rule

16. As pointed out above, in answering Question (i), the Tribunal

has purported to apply the rule of ejusdem generis, by holding that
the second limb of paragraph 4(c) of Art. 13 of the India-UK Tax
Treaty would take colour from the first limb. It, therefore, becomes
important to understand the ejusdem generis8 rule.

17. While several iterations of the rule can be found strewn across
the law reports, the conditions for its applicability can conveniently
be gathered from CIT v. McDowell & Co Ltd. [2009] 314 ITR
167/180 Taxman 514 (SC), wherein Dr Arijit Pasayat, J, wrote on
behalf of the Court :

"
11. The principle of statutory interpretation is well known and
well settled that when particular words pertaining to a class,
category or genus are followed by general words, the general
words are construed as limited to things of the same kind as

Page 6 of 20
 those specified. This rule is known as the rule of ejusdem
generis. It applies when :

(1) the statute contains an enumeration of specific words;

(2) the subjects of enumeration constitute a class or category;
(3) that class or category is not exhausted by the enumeration;
(4) the general terms follow the enumeration; and
(5) there is no indication of a different legislative intent.

"

18. At this juncture, it would be useful to read paragraph 4(c) of Art.

13 of the India-UK Tax Treaty, shorn off verbiage :

"
ARTICLE 13 – Royalties and fees for technical services
1. to 3. ** ** **

4. For the purposes of paragraph 2 of this Article and subject to

paragraph 5 of this Article, the term "fees for technical services"
means payments of any kind of9 any person in consideration for
the rendering of any technical or consultancy services
(including the provision of services of technical or other
personnel) which :
(a) to (b). ** ** **

(c) make available technical knowledge, experience, skill, know-

how or processes, or consist of the development and transfer of
a technical plan or technical design.
5. to 9. ** ** **

19. Before proceeding to consider the existence of the five

conditions for applicability of the rule laid down in McDowell
(supra), it would be instructive to consider whether the bare rule as
enunciated in that case10 at all applies to the facts of the instant case.

Very condition precedent for applicability of ejusdem generis

rule, viz, that general words follow particular words, absent in
paragraph 4(c);

Ejusdem generis rule hence inapplicable to interpretation of

paragraph 4(c)

20. Thus, even the most cursory perusal of paragraph 4(c) of Art. 13
of the India-UK Tax Treaty will establish it that, in point of plain
English, while the words "make available" in paragraph 4(c) can

Page 7 of 20
certainly be considered as constituting "particular words"11, no
general words whatsoever follow such "particular words". In other
words, the very condition precedent for applicability of the ejusdem
generis rule, viz, that general words follow particular words, is
absent in paragraph 4(c). Given this factual position, it is submitted,
with respect, that the Tribunal fell into clear error in holding in
effect that the second limb of paragraph 4(c) contains general words
which, by applying the ejusdem generis rule, must take their colour
from the expression "make available" appearing in the first limb. It
is, therefore, further submitted that the ejusdem generis rule, in
terms, has no application to the interpretation of paragraph 4(c).

In absence of a genus in the first limb of paragraph 4(c), there is no

scope for application of ejusdem generis rule

21. Further, while the words "make available" in paragraph 4(c) can
certainly be considered as constituting "particular words", such
words cannot be said to be "pertaining to a class, category or
genus"12; this is for the reason that the words "make available"
represent merely a single species13 of a genus, other possible species
of such genus being "provide" and "furnish". Accordingly, in the
absence of a genus in the first limb, there is no scope for application
of the ejusdem generis rule, as held by the Privy Council in the
following case :

United Towns Electric Co Ltd. v. His Majesty's Attorney General

(Newfoundland) [1939] UKPC 5

The appellant was incorporated under a 1902 Act of Newfoundland14

titled "United Towns' Electrical Company Act", Section 30 of which
ran as follows:

"
30. The company shall be liable for water rates on all lands and
buildings owned by it in the aforesaid towns, but otherwise the
company shall be exempt from taxation.

The Supreme Court of Newfoundland construed the expression

"taxation" appearing in Section 30, ejusdem generis with the
expression "water rates", consequent to which it held that "taxation"
"was limited to further taxation of a local character similar to the
water rates specially named". It, therefore, held that the exemption
was not applicable to an income-tax, which therefore was properly

Page 8 of 20
charged on the profits of the appellant. The Privy Council, however,
reversed the Supreme Court in the following words :

"
Their Lordships regret that they are unable to agree with the
reasoning of the Supreme Court. In their opinion, there is no
room for the application of the principle of ejusdem generis in
the absence of any mention of a genus15, since the mention of a
single species, e.g. water rates, does not constitute a genus …..
"
Each of two limbs of paragraph 4(c) constitutes a separate
category or genus by itself, rendering ejusdem generis rule
inapplicable

22. However, even assuming that the second limb contains general
words, the ejusdem generis rule is not applicable in interpreting
paragraph 4(c), for yet another reason. Thus, a close examination of
the terms of paragraph 4 of Art. 13 would reveal that it is constituted
of a sentence, which sentence consists of several clauses. Paragraph
4(c), in turn, consists, not of one but of two clauses, or of two limbs
(referred to above). That the said two limbs constitute two clauses
and not a single clause would be evident from the fact that each limb
contains a verb – the first limb containing the verb and adverb
"make available" and the second limb containing the verb and
preposition "consist of". It would further be evident from a reading
of paragraph 4(c) in its entirety that, viewed purely from the point of
plain English, –

(i) each of the two limbs lays down a separate and distinct
condition in respect of the services referred to therein
("TechCons Services", hereinafter) and
(ii) both conditions are disjunctive and not cumulative, since
the expression employed to separate the two limbs is "or"
and not "and".

Therefore, if either condition is satisfied, the provisions of paragraph

4(c) become applicable. It would thus be manifest that each of the
two limbs constitutes a separate category or genus by itself.
Accordingly, as held by the Supreme Court in State of Bombay v. Ali
Gulshan AIR 1955 SC 810, if the preceding words and the general
words in question constitute descriptions of two categories or
genera, or the general words in question in themselves constitute a
description of a distinct category, the rule will have no application16.

Issue of whether "make available" condition qualifies also second

limb of paragraph 4(c), no longer res integra

Page 9 of 20
23. Finally, the issue of whether the "make available" condition
qualifies also the second limb of paragraph 4(c) of Art. 13 of the
India-UK Tax Treaty, is no longer res integra. In DIT v. SNC
Lavalin International Inc [2011] 11 taxmann.com 23/199 Taxman
247 (Mag.)/332 ITR 314, the Delhi High Court has, while construing
paragraph 4(b) of Art. 12 of the India-Canada Tax Treaty17, repelled
a similar argument put forth by the Revenue. Although the Revenue
was not in that case inviting the Court to apply the ejusdem generis
rule, its submissions – and the Court's ruling – were to the following
effect :

Counsel for the Revenue submitted that paragraph (b) was not to be
segregated in the manner indicated by the Court, i e, by considering
each of its two limbs as separate conditions. His submission was that
the opening words of paragraph 4(b), i.e., "make available" qualified
the rest of the services which were stipulated therein. His
submission, thus, was that, unless the development and transfer of a
technical plan or technical design was made available (to the
transferee), the taxpayer would not be covered under paragraph (4)
of article 12. His further argument was that the two designs provided
by the taxpayer to the National Highways Authority of India
("NHAI") were for specific projects, viz, projects for the widening of
National Highways NH-2 and NH-5, and could not be made
available for any other project or purpose. The Court expressed its
inability to accept these contentions, having regard to the language
of paragraph 4(b). According to the Court, the Counsel wanted the
Court "to design (sic) clause (b) in the following manner (i) make
available technical knowledge, experience, skill, know-how, or
processes or consisting of development; and (ii) transfer of a
technical plan or technical design"; thus, the Counsel in effected
wanted "disjunction of the sentence with the word "and" whereas
according to us, after understanding it properly, it is inferred "or"
where the sentence would be disjuncted." The Court felt that, to read
clause (b) in the manner Counsel wanted it to, the words "consist of
(the) development" would have no meaning and would lead to
ambiguity. The Court was of opinion that its interpretation was
supported by the example given in the India-US Tax Treaty,
paragraph 4 of Art. 12 of which was identically worded with
paragraph 4(b) of Art. 12 of the India-Canada Tax Treaty being
considered by it. It referred to the second example relating to
paragraph 4(b) of Article 12 set-out in the India-US Tax Treaty,
which, inter alia, stated the difference in the two services which are
stipulated in paragraph (4)(b) in the following terms :

Page 10 of 20
 "either the development and transfer of technical plans or
technical designs, or making technology available as described
in paragraph (4)(b)"

According to the Court, the Tribunal below had correctly relied upon
the above example, in concluding that the two limbs of paragraph 4
(b) of the India-Canada Tax Treaty were to be read disjunctively.
The Court, therefore, upheld the taxpayer's claim to the effect that
the fees received by it for providing technical drawings and reports
to the NHAI were covered by the second limb of paragraph 4(b) and
hence chargeable to tax at the rate of 15% specified in the India-
Canada Tax Treaty, instead of it being covered under Section 9(1)
(vii) of the Income-tax Act, 1961 and hence chargeable at the 20%
rate laid down in Section 115-A of that Act. In effect, therefore, the
Court rejected the Revenue's submission that the "make available"
condition qualified also the second limb of paragraph 4(b) of the
India-Canada Tax Treaty.

Conclusion

23. To sum up, it would be manifest from the foregoing that the two
limbs of paragraph 4(c) of Art. 13 of the India-UK Tax Treaty
constitute separate and distinct disjunctive conditions for
determining whether or not the consideration paid for rendering any
TechCons Services constitutes FTS in terms of Art. 13 and that,
therefore, the "make available" requirement of the first limb cannot
be read into the second limb. It would further be manifest that the
development and transfer of a technical plan or technical design
simpliciter, without making available technical knowledge,
experience, skill, knowhow or processes, would constitute TechCons
Services within the meaning of the second limb of paragraph 4(c) of
Art. 13; consequently, the consideration paid therefor would be in
the nature of FTS. It is therefore submitted that the Tribunal's
answer in the negative to Question (i) is erroneous.

24. In view of the Tribunal's answer to Question (i) being erroneous

(as submitted above), it follows that the Tribunal's reply to Question
(ii) is also erroneous. The reason for this is not far to seek : Question
(ii) arises only if the development and transfer of any technical plan
or technical design are subject to the "make available" condition.
Since, as submitted above, the "make available" requirement of the
first limb cannot be read into the second limb, the answer to
Question (ii) must be that it does not arise for consideration. It is
therefore further submitted that the Tribunal's answer in the
negative to Question (i) is also erroneous.

Tailpiece

Page 11 of 20
 – Despite Erroneous Application of Ejusdem Generis Rule,
Tribunal's Decision that Consideration Received by Taxpayer
Not Chargeable is Correct

25. Finally, it is submitted that despite the Tribunal having

erroneously applied the ejusdem generis rule, its ruling in the
instant case18 is correct, albeit for a different reason. In this
connection, a relook at the second limb of paragraph 4(c) would be
instructive :

"
….. the term "fees for technical services" means payments of any
kind of (to) any person in consideration for the rendering of any
technical or consultancy services ….. which ….. consist of the
development and transfer of a technical plan or technical
design.
"
(emphases supplied)

26. The bare terms of the second limb of paragraph 4(c) would
make it manifest that what is covered by that limb, having regard to
the employment therein of the expression "consist of", is
consideration for the development and transfer of a technical plan or
technical design and not consideration for any other act or deed; in
other words, the consideration should be for the development and
transfer of any technical plan or technical design simpliciter – no
more and no less19. To put it differently, if consideration is paid for
any activity or deed other than the development and transfer of any
technical plan or technical design, then such consideration would
not be caught in the mischief of the second limb. Also, if
consideration is paid predominantly for an activity or deed other
than the development and transfer of any technical plan or technical
design and only incidentally for such development and transfer,
such consideration would also not be roped in by the second limb20.

27. In the instant case, the Tribunal has specifically recorded the
following finding of fact, viz :

16. ….. Further, on perusal of the sample copies of the

agreement filed in the paper book, it is seen that the work of the
assessee is basically to provide consultancy services relating to
the projects and in that context to provide technical
designs/drawings/plans .….

Page 12 of 20
Thus, the Tribunal has found that the function of the taxpayer was
primarily ("basically") to provide consultancy services relating to the
projects, and only incidentally ("in that context") to provide
technical designs/drawings/plans. Consequently, the consideration
paid to the taxpayer being only incidentally for the development and
transfer of technical designs, drawings and plans, such
consideration is not covered by the second limb of paragraph 4(c) of
the India-UK Tax Treaty, for which reason it is not chargeable to
Indian income-tax.

■■

Page 13 of 20
"

1. to 3. ** ** **

4. The term "fees for technical services" as used in this Article

means payments of any kind to any person in consideration for
services of a managerial, technical or consultancy nature
(including the provision of such services through technical or
other personnel) if such services :
(a) ** ** **

(b) make available technical knowledge, experience, skill, know-

how or processes, which enables the person acquiring the
services to apply the technology contained therein; or
(c) consist of the development and transfer of a technical plan
or technical design, but excludes any service that does not
enable the person acquiring the service to apply the technology
contained therein.
5. to 9.** ** **

(emphasis supplied)
It will be noted from the above extract that –

(i) by splitting into paragraphs 4(b) and 4(c), the two limbs
which usually appear as part of one clause in other
Treaties, the India-Singapore Tax Treaty makes explicit
what was always implicit, viz, that the two limbs constitute
separate and distinct conditions for determining the
nature of the "services" specified in the main portion of
paragraph 4 and
(ii) the "make available" condition has specifically been
incorporated in the second limb set out in paragraph 4(c)
[as the emphasised portion of that paragraph in the
above extract cogently establishes], which goes to
impeach the attachment, in Buro Happold (supra), of that
condition to the second limb of paragraph 4(c) of Art. 13 of
the India-UK Tax Treaty without such condition having
expressly been so attached.

Page 14 of 20
[Source : Concise Oxford ENGLISH Dictionary (Indian Edition)
(Eleventh Edition, Revised)]

Sun Fire Office v. Hart (Windward Islands) [1889] UKPC 5

On 12th May, 1885, Alice Creagh Hart and five others had
effected a policy of insurance with the Sun Fire Office, on forty
acres of sugar canes, uncut, situate at Barbados. Clause 3 of the
general conditions of the policy was that, if, after the risk had
been undertaken by the Society (The Sun Fire Office), risk to the
insured property, or to any insured building, or to any place or
building in which the insured property was contained, or to the
insured property due to its removal from the original place or
building in which it was contained, was increased without the
Society's assent or sanction in each case, the relevant insurance
ceased to attach. A further condition was that, "(i)f by reason of

Page 15 of 20
such change, or from any other cause whatever" (emphasis
supplied), the Society or its agents desired to terminate the
insurance effected by the said policy, it would be lawful for the
Society to do so by notice to the insured and subject to a refund
to the insured of a rateable proportion of the premium paid.
Eight fires took place during the months of June to September,
resulting in twenty-three acres of canes being burnt. In the
meanwhile, in August, an anonymous letter was received by one
of the insured, threatening continued incendiarism, which letter
was brought to the notice of the Society's agent. On 8th October,
1865, the Society's agent gave written notice in due form to the
insured that, in consequence of the aforesaid occurrences, the
Society terminated the policy from that date, in accordance with
Clause 3 of the general conditions; simultaneously, the agent
refunded to the insured, the rateable proportion of the premium
received. The insured refused to accept the refund and also
refused to give up the policy. The amount of losses sustained
before 8th October were made good by the Society to the
insured. Two fires occurred after that date, one in December
and the other in January. The insured sued the Society for
recovery of the loss caused by the said two fires. In defence, the
Society relied solely on the effect of its notice of 8th October as
determining the policy before either of the two losses sued for
was incurred. The Trial Court held in favour of the Insured-
Plaintiffs, with the judge ruling that the words "any other cause
whatever" in the third general condition meant "any change of
the same genus" as the changes previously specified and that
the facts in evidence did not amount to such changes in respect
of the subject matter of the suit; in effect, therefore, the Trial
Court held that the Society's termination of its policy was not
lawful. The Court of Appeal affirmed the decision of the Trial
Court. Upon the matter being carried to the Privy Council, that
body reversed the courts below, holding, in the following terms,
that the ejusdem generis rule could not be applied:
"
….. It is a well known canon of construction, that, where a
particular enumeration is followed by such words as "or other",
the latter expression ought, if not enlarged by the context, to be
limited to matters ejusdem generis with those specially
enumerated. The canon is attended with no difficulty, except in
its application. Whether it applies at all, and if so, what effect
should be given to it, must in every case depend upon the
precise terms, subject matter, and context of the clause under
construction. In the present case there appears to their
Lordships to be no room for its application. The theory upon
which the ruling of the presiding Judge, and its affirmance by
the majority of the Court of Appeal, proceeds, appears to be
this, that the words "by reason of such change" are equivalent to
an enumeration of certain particular changes or causes specified
in the preceding condition; and that the following words "or
from any other cause whatever" must be confined to causes
ejusdem generis with these. The antecedent context does not

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contain a mere specification of particulars, but the description
of a complete genus, if not of two genera. The first of these is
any and every act done to the insured property whereby the risk
of fire is increased. Taking that as a particular, none of the
learned Judges has suggested what circumstances would
constitute alia similia.
Their Lordships are accordingly of opinion that the condition
must be read in the literal and natural sense of the language
which the contracting parties have chosen to employ, and that it
includes any and every cause which could reasonably induce an
insurer to desire the termination of the policy.

(emphases supplied)

In Gulshan Ali (supra), the Court, dealing with the following

question arising before it in an appeal from the Bombay High
Court viz, –
"
Was the Government of Bombay entitled, under clause (a) of
sub-section (4) of section 6 of the Bombay Land Requisition
Act, 1948 (Bombay Act XXXIII of 1948), to requisition, as for a
public purpose, certain premises for "housing a member of the
staff of a foreign consulate" ?
"

** ** **

Clause (a) of sub-section (4) of section 6, omitting portions

unnecessary for our present purposes, runs in these terms: "The
State Government may, by order in writing, requisition the
premises for the purpose of a State or any other public purpose,
and may use or deal with the premises for any such purpose in
such manner as may appear to it to be expedient".
** ** **

The requisition or acquisition must be for a public purpose and

there must be compensation. This article applies with equal
force to Union legislation and State legislation.
Items 33 and 36 of List I & List II of the Seventh Schedule to the
Constitution empower respectively Parliament and the State
Legislatures to enact laws with respect to them.

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The reasoning by which the learned appellate Judges of the
Bombay High Court reached their conclusion is shortly this.
There can be no public purpose, which is not a purpose of the
Union or a purpose of the State. There are only these two
categories to consider under the statute, as the words "any other
purpose" in the particular context should be read ejusdem
generis with "the purpose of the State". The provision of
accommodation for a member of the foreign consulate staff is a
"purpose of the Union" and not a "purpose of the State".
We are unable to uphold this view as regards both the
standpoints. Item 33 in the Union Legislative List (List I) refers
to "acquisition or requisitioning of property for the purposes of
the Union". Item 36 in the State List (List II) relates to
"acquisition or requisitioning of property, except for the
purposes of the Union, subject to the provisions of entry 42 of
List III". Item 42 of the Concurrent Legislative List (List III)
speaks of "the purpose of the Union or of a State or for any
other public purpose". Reading the three items together, it is
fairly obvious that the categories of "purpose" contemplated are
three in number, namely, Union purpose, State purpose, and
any other public purpose. Though every state purpose or Union
purpose must be a public purpose, it is easy to think of cases
where the purpose of the acquisition or requisition is neither
the one nor the other but a public purpose. Acquisition of sites
for the building of hospitals or educational institutions by
private benefactors will be a 'public purpose', though it will not
strictly be a State or Union purpose.
When we speak of a State purpose or a Union purpose, we think
of duties and obligations cast on the State or the Union to do
particular things for the benefit of the public or a section of the
public. Cases where the State acquires or requisitions property
to facilitate the coming into existence of utilitarian institutions,
or schemes having public welfare at heart, will fall within the
third category abovementioned.
With great respect, we are constrained to say that the ejusdem
generis rule of construction, which found favour in the court
below for reaching the result that the words "any other public
purpose" 'are restricted to a public purpose which is also a
purpose of the State', has scarcely any application. Apart from
the fact that the rule must be confined within narrow limits, and
general or comprehensive words should receive their full and
natural meaning unless they are clearly restrictive in their
intendment, it is requisite that there must be a distinct genus,
which must comprise more than one species, before the rule can
be applied. If the words "any other public purpose" in the
statute in question have been used only to mean a State
purpose, they would become mere surplusage; Courts should
lean against such a construction as far as possible.
Even if it is conceded that the law contemplates only two
purposes, namely, State purpose and Union purpose, it is
difficult to see how finding accommodation for the staff of a

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foreign consulate is a Union purpose and not a State purpose.
Item I 1 in the Union list specifies "diplomatic, consular and
trade representation" as one of the subjects within the
legislative competence of Parliament, and under article 73 of
the Constitution, the executive power of the Union shall extend
to all such matters. It can hardly be said that securing a room
for a member of the staff of a foreign consulate amounts to
providing for consular representation, and that therefore it is a
purpose of the Union for which the State cannot legislate. It was
conceded by Mr. Rajinder Narain, Counsel for the Respondent,
that there is no duty cast upon the Union to provide
accommodation for the consulate staff, and this must be so,
when we remember that the routine duties of a Consul in
modern times are to protect the interests and promote the
commercial affairs of the State which he represents, and that his
powers, privileges and immunities are not analogous to those of
an ambassador. The trade and commerce of the State which
appoints him with the State in which he is located are his
primary concern. The State of Bombay is primarily interested in
its own trade and commerce and in the efficient discharge of his
duties by the foreign consul functioning within the State. We
are inclined to regard the purpose for which the requisition was
made in this case more as a State purpose than as a Union
purpose.
In any event, as already pointed out, "other public purpose" is a
distinct category for which the State of Bombay can legislate, as
the acquisition or requisitioning of property except for the
purposes of the Union, is within its competence under item 36
of the State List.

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