Commercial accounting principle requires closing stock credit in management-period accounts, defeating recovery of extraction expenses.

Where a statute requires accounts for a management period to be closed and balanced on the appointed day, and no special accounting method is prescribed, normal commercial practice applies. Stock-in-trade must therefore be brought into the accounts to reflect the true commercial position, even if title has vested in the Central Government. On that basis, the stock of coking coal lying in the mine had to be credited to the owner, and extraction expenses could not be recovered without giving effect to that stock. The appeals failed because the accounts had to be recast on a commercial basis.

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Issues: Whether the stock of coking coal lying in the mine on the appointed day was required to be taken into account while drawing up the accounts for the period during which management remained vested in the Custodian, and whether the amount spent on extraction could be recovered from the owner without giving credit for such stock.

Analysis: The statutory scheme distinguished between two separate liabilities: compensation for extinguishment of title and the amounts payable or recoverable in respect of the period of management. For the management period, the books had to be closed and balanced as on the appointed day and the statement of accounts had to reflect the true commercial position. In the absence of any special accounting method prescribed by the statute, normal commercial practice applied, under which stock-in-trade must be brought into account. The extracted coal was part of the mine when accounts were balanced, and its value could not be ignored merely because title had vested in the Central Government on the appointed day. The prescribed form of accounts also required the stock as on 30 April 1972 to be taken into account.

Conclusion: The stock of coal had to be included in the accounts for the management period, and the owner was entitled to credit for it; the contrary claim for recovery of extraction expenses without such credit was unsustainable.

Final Conclusion: The appeals failed because the accounts had to be recast on a commercial basis by including the closing stock, thereby recognising the owner's entitlement to credit for the coal in stock.

Ratio Decidendi: Where a statute requires accounts to be closed and balanced for a period of management, and no special accounting method is prescribed, the accounts must be prepared according to normal commercial practice, including stock-in-trade in the computation of the true balance.

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