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Civil Appeal No. 3582 of 1986.
From the Judgment and Order dated 24.7.1985 of the Delhi High Court in Civil W.P. No. 435 of 1985.
section Rangarajan and Ms. Asha Rani Jain for the Appellant.
V.C. Mahajan, Ms. C.K. Sucharita and C.V. Subba Rao for the Respondents.
32 The Judgment of the Court was delivered by SEN, J.
This appeal by special leave directed against the judgment and order of the High Court of Delhi dated July 24, 1985 raises two questions, namely: (1) Was the Union of India justified in passing an order dated September 17, 1982 in terms of FR 25 declaring the appellant to be unfit to cross the efficiency bar as Assistant Engineer, Central Public Works Department at the stage of Rs.590 in the prerevised scale of pay of Rs.350 590 EB 900 as from October 5, 1966? And (2) Is the appellant entitled to interest on the delayed payment of his pension? This litigation has had a chequered career.
The appellant who was as Assistant Engineer in the Central Public Works Department was placed under suspension pending a departmental enquiry under r.12(2) of the Central Civil Services (Classification, Control & Appeal) Rules, 1965 on September 3, 1959.
He remained on suspension till May 25, 1970 when on repeated representations the Chief Engineer, Central Public Works Department revoked the order of suspension and he was reinstated in service.
During the aforesaid period of suspension, adverse remarks in his confidential reports for the period between April 1, 1957 and August 31, 1957 and between April 1, 1958 and March 31, 1959 were communicated to him on December 16, 1959.
After a period of nearly five years, the departmental proceedings culminated in an order of dismissal from service dated March 12, 1964 but the same on appeal by him, was set aside by the President of India by order dated October 4, 1966 with a direction for the holding of a fresh departmental inquiry under r. 29(1)(c) of the Rules, with a further direction that he shall continue to remain under suspension.
The order of suspension was revoked by the Chief F Engineer on May 8, 1970 but the departmental proceedings were kept alive.
As a result of this, the appellant was reinstated in service on May 25, 1970.
Immediately thereafter, he made representation to the Department to pass an order under FR 54 for payment of full pay and allowances for the period of suspension i.e. the period between September 3, 1959 and May 25, 1970 but the same was rejected on the G ground that departmental inquiry was still pending.
There was little or no progress in the departmental inquiry.
on April 25, 1972 the Chief Engineer passed an order of compulsory retirement of the appellant under FR 56(j).
The appellanrmade representations to various authorities, including the President of India, H against his compulsory retirement but the same was rejected Eventu 33 ally, on July 20, 1972 the appellant filed a petition under article 226 of the Constitution in the High Court challenging the validity of the order of compulsory retirement and prayed for a direction in terms of FR 54 for payment of full pay and allowances for the period of suspension and also for payment of all increments to which he was entitled.
He also prayed for quashing of the departmental proceedings.
A learned Single Judge (Wad, J.) by his judgment and order dated January 5, 1981 held that the order of compulsory retirement of the appellant was bad in law, not being relatable to FR 56(j) inasmuch as the action was not based on an overall assessment of the appellant 's record of service and was in breach of the instructions issued by the Government of India, Ministry of Home Affairs dated June 23, 1969 laying down the procedure to be followed under FR 56(j).
He further held that the action to compulsorily retire the appellant in 1972 under FR 56(j) could not obviously be taken on the basis of adverse remarks for the years 1950 51 when he was an Overseer, nor on the adverse remarks for the years 1957 59 communicated to him on December 16, 1959, after a lapse of 20 years and 13 years respectively.
Further he observed that the adverse remarks of 1957 59 were not serious enough to cut short the career of the appellant as a Government servant, particularly in view of the fact that the general confidential reports for two years immediately preceding his retirement on July 28, 1972 did not reveal anything blameworthy against him.
He accordingly quashed the order of compulsory retirement of the appellant and held that he shall be deemed to have continued in service till March 31, 1978, the date when he attained the normal age of superannuation.
During the course of his judgment, the learned Judge also adversely commented on the failure of the Department to pass an order in terms of FR 54 consequent upon the reinstatement of the appellant on May 25, 1970 within a reasonable time.
He observed that ordinarily he would have left it to the Department to pass an order under FR 54 as to whether the suspension of the appellant for the period from September 3, 1959 to May 25, 1970 was justified or not but due to the inactivity or refusal on the part of the Government to pass an order under FR 54, the Court was left with no other option but to deal with the question.
After referring to the various stages of the departmental proceedings, the learned Judge held that the suspension of the appellant was not justified and the period of suspension must be regarded as spent on duty and therefore the appellant under FR 54(2) was entitled to full pay and allowances and the increments for that period.
He further held that r. 9(2)(b) of the Central Civil Services 34 (Pension) Rules, 1972 was not attracted and accordingly quashed the departmental proceedings.
The operative part of the judgment of the learned Judge reads as follows: "The petition, for the reasons stated above, succeeds.
The order of compulsory retirement dated 25.4.1972 is set aside.
The petitioner would be entitled to continuation in service upto March 31, 1978 (the date when he reached his normal age of superannuation) and consequential benefits.
The continuation of suspension of the petitioner was without any justification.
The petitioner would be entitled to full pay and allowances from 3.9.1959 to 24.5.1970 with increments and other service benefits according to Rules.
The pending departmental proceedings are quashed.
" Aggrieved, the Union of India went up in appeal but a Division Bench by its judgment dated March 24, 1982 declined to interfere.
The appellant had in the meanwhile submitted his bill of arrears and the respondents having failed to comply with the direction of the learned Single Judge, he moved the High Court for contempt.
In response to the notice issued by the High Court, respondent No. 4 Director General of Works entered appearance on September 6, 1982 and tendered a written apology, upon which the High Court dropped the proceedings.
It appears that the Department paid the appellant about Rs.86,000 in compliance with the judgment of the learned Single Judge.
Although there is a healthy trend and the Government of India has set up an independent Ministry Ministry of Personnel, Public Grievances & Pension for settlement of claims in regard to pension, this case is an instance where a civil servant had been subjected to endless harassment for no fault of his own.
While it is true that the charge levelled against the appellant was serious enough to merit the imposition of a major punishment, there was little or no progress for keeping the departmental proceedings pending for over 20 years.
There was persistent effort on behalf of the Department to visit the appellant with civil consequences, first by placing him under suspension under r. 12(2) of the Rules for a period of 11 years and secondly by directing his compulsory retirement when it was realised that the charge levelled could not be substantiated.
Under FR 54 when a Government servant who had been dismissed, removed or suspended is reinstated, the authority competent to order reinstatement has to make a specific order (a) regarding the pay and allowances to be paid 35 to the Government servant for the period of his absence from duty, and (b) directing whether or not the period of suspension shall be treated as a period spent on duty.
Despite repeated representations made by the appellant, the Government failed in its duty to pass an order in terms of FR 54 within a reasonable time.
The Government also failed to comply with the judgment of the learned Single Judge and pay to the appellant the arrears of pay and allowances amounting to about Rs.86,000 till the High Court issued a notice for contempt.
It is regrettable that respondent No. 4 Director General of Works had to enter personal appearance and tender a written apology.
The payment of Rs.86,000 to the appellant was therefore under threat of contempt and does not redound to the credit of the Government.
The miseries of the appellant did not end with this.
The Department apparently never forgave the appellant for having dragged the Government to litigation and compel the personal appearance of the Head of the Department.
It was expected that the Government would act with good grace but just within a fortnight of the termination of the contempt proceedings, the Director General rejected the appellant 's case for crossing of the efficiency bar at the stage of Rs.590 w.e.f. October 5, 1966 as indicated hereinafter.
In the counter affidavit to the contempt proceedings, the Government stated that there were two conditions for an Assistant Engineer to cross the efficiency bar, namely: (1) that he should have passed the departmental examination in Accounts prescribed for Assistant Engineers, and (2) he should have obtained good reports over the last five years.
The increments above the stage of efficiency bar are to be allowed in accordance with the provisions contained in FR 25 and the Government of India 's decisions thereunder.
The appellant 's case for crossing of efficiency bar at the stage of Rs.590 w.e.f. October 5, 1966 was said to have been considered by the Departmental Promotion Committee on the basis of his performance reports.
Evidently, the Departmental Promotion Committee recommended on the basis of such reports that he was not fit to cross the efficiency bar at the stage of Rs.590 from October 5, 1966 or on any subsequent date upto October 5, 1971.
The report of the Departmental Promotion Committee was accepted by the competent authority.
Accordingly, the Director General of Works on September 17, 1982 passed an order to the following effect: "No.32/426/66.EC.III New Delhi, dated 17.9.82 36 OFFICE MEMORANDUM Sub: Crossing of Efficiency Bar by Shri O.P. Gupta, Assistant Engineer (Civil), Retired.
The Executive Engineer, Central Stores Division No. 1, C.P.W.D. New Delhi is informed that the case of crossing of efficiency bar by Shri O.P. Gupta, Assistant Engineer (Retired) at the stage of Rs.590 in the pre revised scale of pay of Rs.350 25 500 30 590 EB 30 800 EB 30 830 35 900 has been considered by the competent authority, who has found him unfit to cross the efficiency bar w.e.f.5.
10.1966 or from any subsequent date upto 5.
10.1971.
" The impugned order is not as innocuous as it looks.
Just as suspension of a government servant pending a departmental inquiry is not by way of punishment, so also the withholding of increments at the efficiency bar pending such inquiry.
But when the High Court quashed the departmental proceedings which were pending for over 20 years with little or no progress as being wholly invalid and unfair, there was no occasion for the Department to have passed an order under FR 24 for withholding increments to the appellant at the stage of Rs.590 w.e.f. October 5, 1966 unless it was with a view to penalise him financially.
As already stated, the authority competent to order reinstatement failed to make an order in terms of FR 54 after the appellant had been reinstated in service on May 25, 1970 within a reasonable time.
Looking to the long lapse of time, the High Court was entitled to go into the question as to whether the appellant upon his reinstatement was entitled to the full pay and allowances to which he would have been entitled had he not been suspended.
Undoubtedly, the High Court gave a direction in terms in FR 54(2) that the appellant would be entitled to his full pay and allowances as also to his increments etc.
but this would be the normal increment prior to the crossing of the efficiency bar for purposes of FR 54(2).
There has to be a specific order in terms of FR 25 before a government servant can be allowed to draw his increments above the efficiency bar.
The Government was justified in withholding increments under FR 25 pending the departmental inquiry but after the High Court had quashed the departmental inquiry, the question whether the appellant could be deprived of his increments under FR 25 was a live issue till the controversy was settled by the Government of India, Ministry of Finance decision dated September 21, 1967.
We shall first reproduce FR 25 and it is in the following terms: 37 "Where an efficiency bar is prescribed in a time scale, the increment next above the bar shall not be given to a Government servant without the specific sanction of the authority empowered to withhold increment under Rule 24 or the relevant disciplinary rules applicable to the Government servant or of any other authority whom the President may,by general or special order, authorise in this behalf.
" The Government of India, Ministry of Finance 's decision dated September 21, 1967 as clarified by Ministry of Home Affairs, Department of Personnel & Administrative Reforms Memorandum dated April 6, 1979, insofar as relevant is reproduced below: "(7) Procedure for consideration of cases (a) When disciplinary proceedings are pending A Government servant against whom proceedings are pending but who is due to cross the efficiency bar prescribed in his time scale of pay, may not be allowed to cross the bar until after the conclusion of the proceedings.
A question was raised as to the date from which a Government servant whose case for crossing the efficiency bar has not been considered on account of the pendency of a disciplinary/vigilance case against him, should be considered for being allowed to cross the efficiency bar, after the enquiry is over.
It has been decided, in consultation with the Ministry of Home Affairs, that if after the conclusion of the proceedings, the Government servant is completely exonerated, he may be allowed to cross the efficiency bar with effect from the due date retrospectively, unless the competent authority decides otherwise.
If however, the Government servant is not completely exonerated, his case for crossing the efficiency bar cannot be considered with retrospective effect from the due date.
Such cases can be considered only with effect from a date following the conclusion of the disciplinary/vigilance case, taking into account the outcome of the disciplinary/vigilance case.
(b) When conduct is under investigation Same procedure as at (a) may be followed after the conclusion of the investigation and where the competent authority on consideration of the results of the investigation, has formed the opinion that a charge sheet may be issued to the Government servant concerned on specific imputations where 38 departmental action is contemplated or that sanction for prosecution may be accorded where prosecution is proposed.
Otherwise, the normal procedure should be followed.
The sealed cover should be opened after conclusion of the proceedings.
If he is fully exonerated, the recommendations in the sealed cover may be considered by the competent authority who may lift the bar retrospectively from the date recommended by the D.P.C.
In that case, the Government servant will be entitled to the arrears of the increment(s).
In case, however, the proceedings do not result in complete exoneration of the Government servant, he cannot be allowed to cross the bar with retrospective effect.
" The relevant provision in r. 2.636 of the C.P.W.D. Manual, Vol. 1, 1956 edn.
at p. 53 is in the following terms: "2.636.
The Government of India have decided (a) that a departmental examination shall be held by the Chief Engineer twice a year and as far as possible in the months of January and July every year, for all Divisional and Sub Divisional Officers in the Central Public Works Department; (f) Divisional and Sub Divisional Officers who fail to pass the departmental examination should not ordinarily be considered either for promotion or for crossing the efficiency bar.
" It is somewhat strange that when the appellant applied to the learned Judge (Wad, J.) for review, he by his order dated February 2, 1983 declined to interfere saying that there was no ground for review inasmuch as the appellant had not been allowed to cross the efficiency G bar under FR 25 for two valid reasons, namely: (1) his failure to pass the departmental examination, and (2) his confidential reports for the preceding five years were not satisfactory.
As to the question of the appellant being afforded an opportunity before an order under FR 54(2) adverse to him was passed by the disciplinary authority, the learned Judge observed that 'the matter was at large when the petition H for contempt was filed ' and further that 'all pros and cons of the matter 39 had been gone into through the affidavits filed by the parties and at the hearing in the Court ' and added: "I do not think that it is necessary to give any further opportunity to the petitioner for this purpose, particularly when he has admitted that he has not passed the examination." The learned Judge failed to appreciate that no prejudicial order under FR 25 could be made without giving the appellant an opportunity of a hearing as it visited him with civil consequences.
The appellant was thus constrained to move another application for review.
This time the learned Judge by his order dated November 30, 1983 dismissed the application observing that no ground for review had been made out and that the earlier order declining to review had been passed after fully hearing the parties and no further relief could be granted.
But he added a rider that if the appellant was not satisfied with the Government decision, his remedy was to file a separate writ petition.
Thereupon, the appellant went up in appeal but a Division Bench by its order dated April 30, 1984 dismissed the same and reiterated that he should file a writ petition.
The appellant accordingly filed a petition under article 226 of the Constitution to enforce his right to increments after the crossing of the efficiency bar under FR 25.
Again, a Division Bench by its order dated October 30, 1984 declined to interfere saying that the appellant should make a representation to the competent authority with the direction that the same should be considered sympathetically.
In accordance therewith, on December 10, 1984 the appellant made a representation to the Director General of Works, Central Public Works Department.
He thereafter addressed several communications to the authorities on the subject.
Eventually, the Deputy Director of Administration by her letter dated April 9, 1985 informed the appellant that his representation had been rejected.
She further intimated the appellant the following order with respect to his crossing of the efficiency bar under FR 25.
"I am further to inform you that your case for crossing the E.B. at the stage of Rs.590 w.e.f. 5.10.1972 in the prerevised scale of Rs.350 25 500 30 590 EB 30 800 EB 30 830 35 900 and also at the stage of Rs.810 in the revised scale of Rs.650 30 740 35 810 EB 35 880 40 1000 EB 40 1200, w.e.f. 5 10.1973 or from any subsequent date upto the date of your superannuation viz. 31.3.1978 has also 40 been considered carefully by the competent authority.
It is regretted that you have not been found fit to cross the E.B. w.e.f. 5.10.1972 at the stage of Rs.590 in the pre revised scale of Rs.350 25 500 30 590 EB 30 800 EB 30 830 35 900, as also at the stage of Rs.810 in the revised scale of Rs.650 30 740 35 810 EB 35 880 40 1000 EB 40 1200, w.e.f. 5.10.1973 or from any subsequent date upto the date of your superannuation viz. 31.3.1978.
" On July 10, 1985 the appellant filed the present petition under article 226 of the Constitution for redressal of his grievance as regards the crossing of the efficiency bar at the stages indicated in the impugned order and also for grant of interest on delayed payment of pension.
A Division Bench (D.K.Kapur and Mahinder Narain, JJ.) by its order dated July 24, 1985 dismissed the writ petition.
It held that the crossing of the efficiency bar depends on satisfaction of the competent authority under FR 25 and also on the passing of the departmental examination under r. 2.636 of the C.P.W.D. Manual, Vol. 1, 1956 edn.
at p. 53.
It further observed that the sanction of the authority competent under FR 25 was not forthcoming and that 'if the authority concerned had chosen not to give the sanction, the Court had no jurisdiction to interfere particularly as the appellant was not actually in office for such a long period of time '.
Curiously enough, the Division Bench also added that it felt, considering the harassment to which the appellant had been subjected during the long years of suspension, it was a fit case in which the authority concerned should have granted the requisite sanction.
We have set out the facts in sufficient detail to show that there is no presumption that the Government always acts in a manner which is just and fair.
There was no occasion whatever to protract the departmental inquiry for a period of 20 years and keeping the appellant under suspension for a period of nearly 11 years unless it was actuated with the mala fide intention of subjecting him to harassment.
The charge framed against the appellant was serious enough to merit his dismissal from service.
Apparently, the departmental authorities were not in a position to substantiate the charge.
But that was no reason for keeping the departmental proceedings alive for a period of 20 years and not to have revoked the order of suspension for over 11 years.
An order of suspension of a government servant does not put an end to his service under the Government.
He continues to be a member of the service in spite of the order of suspension.
The real effect of the order of suspension as explained by this Court in Khem Chand vs Union of 41 India; , is that he continues to be a member of the government service but is not permitted to work and further during the period of suspension he is paid only some allowance generally called subsistence allowance which is normally less than the salary instead of the pay and allowances he would have been entitled to if he had not been suspended.
There is no doubt that an order of suspension unless the departmental inquiry is concluded within a reasonable time, affects a government servant injuriously.
The very expression 'subsistence allowance ' has an undeniable penal significance.
The dictionary meaning of the word 'Subsist ' as given in Shorter Oxford English Dictionary, Vol.
II at p. 2171 is "to remain alive as on food; to continue to exist".
"Subsistence" means means of supporting life, especially a minimum livelihood.
Although suspension is not one of the punishments specified in r. 11 of the rules, an order of suspension is not to be lightly passed against the government servant.
In the case of Board of Trustees of the Port of Bombay vs Dilip Kumar Raghavendranath Nadkarni & Ors., ; the Court held that the expression 'life ' does not merely connote animal existence or a continued drudgery through life.
The expression 'life ' has a much wider meaning.
Suspension in a case like the present where there was no question of inflicting any departmental punishment prima facie tantamounts to imposition of penalty which is manifestly repugnant to the principles of natural justice and fairplay in action.
The conditions of service are within the executive power of the State or its legislative power under the proviso to article 309 of the Constitution, but even so such rules have to be reasonable and fair and not grossly unjust.
It is a clear principle of natural justice that the delinquent officer when placed under suspension is entitled to represent that the departmental proceedings should be concluded with reasonable diligence and within a reasonable period of time.
If such a principle were not to be recognised, it would imply that the Executive is being vested with a totally arbitrary and unfettered power of placing its officers under disability and distress for an indefinite duration.
It is a fundamental rule of law that no decision must be taken which will affect the rights of any person without first giving him an opportunity of putting forward his case.
Both the Privy Council as well as this Court have in a series of cases required strict adherence to the rules of natural justice where a public authority or body has to deal with rights.
There has ever since the judgment of Lord Reid in Ridge vs Baldwin LR ; been considerable fluctuation of judicial opinion in England as to the degree of strictness with which the rules of natural justice should be extended, and there is growing awareness 42 of the problems created by the extended application of principles of natural justice, or the duty to act fairly, which tends to sacrifice the administrative efficiency and despatch, or frustrates the object of the law in question.
Since this Court has held that Lord Reid 's judgment in Ridge vs Baldwin should be of assistance in deciding questions relating to natural justice, there is always 'the duty to act judicially ' whenever the rules of natural justice are applicable.
There is therefore the insistence upon the requirement of a 'fair hearing '.
In the light of these settled principles, we have no doubt whatever that the Government acted in flagrant breach of the rules of natural justice or fairplay in passing the impugned order.
We do not see why the principles enunciated by the Court in M. Gopala Krishna Naidu vs State of Madhya Pradesh, ; should not apply with equal vigour to a case like the present.
There is no reason why the power of the Government to direct the stoppage of increments at the efficiency bar on the ground of unfitness or otherwise after his retirement which prejudicially affects him should not be subject to the same limitations as engrafted by this Court in M. Gopala Krishna Naidu while dealing with the power of the Government in making a prejudicial order under FR 54, namely, the duty to hear the government servant concerned after giving him full opportunity to make out his case.
Under FR 54 when a government servant who had been dismissed, removed or suspended is reinstated, the authority competent to order the reinstatement shall make a specific order (a) regarding the pay and allowances to be paid to the government servant for the period of his absence from duty, and (b) directing whether or not the said period shall be treated as a period spent on duty.
In the present case, the Government failed in its duty to pass an order in terms of FR 54 despite repeated representations made by the appellant in that behalf.
The learned Single Judge was therefore justified in dealing with the question whether or not the period of suspension should be treated as a period spent on duty and to make a direction regarding payment of the full pay and allowances as also to increments to which he would have been entitled to but for the disciplinary proceedings.
In M. Gopala Krishna Naidu 's case the civil servant concerned had been exonerated of the charges framed against him in a departmental inquiry.
The Government however held that the appellant 's suspension in that case and the departmental inquiry instituted against him 'were not wholly unjustified ' and tried to support its action in this Court on the ground that the making of an order under FR 54 was a consequential order.
This Court repelled the contention and held that an order passed under FR 54 is not always a consequential order or a mere 43 continuation of the departmental proceedings against the delinquent civil servant.
Inasmuch as consideration under FR 54 depends on facts and circumstances in their entirety, and since the order may result in pecuniary loss to the government servant, consideration under the rule 'must be held to be an objective rather than a subjective consideration '.
Shelat, J. who delivered the judgment of the Court went on to observe: "The very nature of the function implies the duty to act judicially.
In such a case if an opportunity to show cause against the action proposed is not afforded, as admittedly it was not done in the present case, the order is liable to be struck down as invalid on the ground that it is one in breach of the principles of natural justice.
" There is thus a duty to hear the concerned Government servant under FR 54 before any prejudicial order is made against him.
The same principle was reiterated in B.D. Gupta vs State of Haryana, ; It must follow that when a prejudicial order is made in terms of FR 25 to deprive the government servant like the appellant of his increments above the stage of efficiency bar retrospectively after his retirement, the Government has the duty to hear the concerned government servant before any order is made against him.
There has to be as laid down in M. Gopala Krishna Naidu 's case an objective consideration and assessment of all the relevant facts and circumstances.
We find it difficult to subscribe to the doctrine evolved by the Division Bench that if the competent authority declines to sanction the crossing of the efficiency bar of a government servant under FR 25, the Court has no jurisdiction to grant any relief.
No doubt, there has to be a specific order in terms of FR 25 by the competent authority before the government servant can get the benefit of increments above the stage of efficiency bar.
The stoppage of such increments at the efficiency bar during the pendency of a departmental proceeding is not by way of punishment and therefore the government servant facing a departmental inquiry is not entitled to a hearing.
Ordinarily, therefore, the Court does not come into the picture at that stage.
But in a case like the present where despite the fact that the departmental inquiry against the appellant had been quashed, and it has been held by the High Court that his suspension was wholly without justification.
44 there was no occasion for the competent authority to enforce the bar against him under FR 25, particularly after his retirement, unless it was by way of punishment.
That being so, the order passed by the competent authority under FR 25 prejudicial to the interests of the appellant in such circumstances must be subject to the power of judicial review.
The reasoning of the learned Single Judge that the authority competent was justified in refusing to allow the crossing of the efficiency bar under FR 25 in the case of the appellant on the ground that (1) the appellant did not have good record of service over the last five years preceding his compulsory retirement, and (2) he had not passed the departmental examination in Accounts prescribed for Assistant Engineers, does not bear scrutiny.
In the first place, there was no question of the appellant having an adverse record for five years preceding his compulsory retirement since for three years he was under suspension and, according to the learned Judge himself, for the next two years there was nothing blameworthy against him.
Secondly, the failure to pass a departmental examination under r. 2.636 obviously could not stand in the way of the appellant since he had already been compulsorily retired.
The appellant having compulsorily retired on July 28, 1972 and also having reached his normal age of superannuation on March 31, 1978, his failure to pass the departmental examination under r. 2.636 could not be treated as a ground for denying him the benefit of crossing the efficiency bar under FR 25.
The word 'ordinarily ' in r. 2.636 must be given its plain meaning as 'in normal circumstances '.
It is extremely doubtful whether in a case like the present the Director General of Works, Central Public Works Department, as the competent authority, could at all have taken a decision to enforce the bar under FR 25 against the appellant after his retirement.
That apart, the competent authority acted in flagrant breach of the instructions contained in the Note beneath Government of India, Ministry of Finance Memorandum dated April 23, 1962, as amended from time to time.
It enjoins that the cases of government servants for crossing of the efficiency bar in the time scale of pay should be considered at the appropriate time and in case the decision is to enforce the bar against the government servant, he should be informed of the decision.
This clearly implies that the competent authority must conform to the rules of natural justice.
It would be a denial of justice to remit back the matter to the competent authority to reach a decision afresh under FR 25, in the facts and circumstances of the present case.
45 The public interest in maintaining the efficiency of the services requires that civil servants should not be unfairly dealt with.
The Government must view with concern that a departmental inquiry against the civil servant should have been kept alive for so long as 20 years or more and that he should have been placed under suspension without any lawful justification for as many as 11 years, without any progress being made in the departmental inquiry.
It should also view with concern that a decision should have been taken by the competent authority to enforce the bar under FR 25 against the civil servant long after his retirement with a view to cause him financial loss.
Such a course not only demoralises the services but virtually ruins the career of the delinquent officer as a government servant apart from subjecting him to untold hardship and humiliation.
We hope and trust that the Government in future would ensure that departmental proceedings are concluded with reasonable diligence and not allowed to be protracted unnecessarily.
The Government should also view with concern that there should be an attempt on the part of the competent authority to enforce the bar against a civil servant under FR 25 long after his retirement without affording him an opportunity of a hearing.
It comes of ill grace from the Government to have defeated the just claim of the appellant on technical pleas.
Normally, this Court, as a settled practice, has been making direction for payment of interest at 12% on delayed payment of pension.
There is no reason for us to depart from that practice in the facts of the present case.
The result therefore is that the appeal succeeds and is allowed with costs.
The judgment and order passed by the High Court are set aside and the writ petition is allowed.
The impugned orders passed by the Director General of Works, Central Public Works Department dated September 17, 1982 and April 9, 1985 declining to permit the appellant to cross the efficiency bar at the stage of Rs.590 in the pre revised scale of Rs.350 900 w.e.f. October 5, 1966 as also from October 5, 1972, and also at the stage of Rs.810 in the revised scale of Rs.650 1200 w.e.f. October 5, 1973 or from any subsequent date upto March 31, 1978, the date of his superannuation, are quashed.
We direct the Director General of Works to make an order in terms of FR 25 allowing the appellant to cross the efficiency bar at the stage of Rs.590 w.e.f. October 5, 1966 and at the stage of Rs.810 w.e.f. October 5, 1973 and subsequent dates, according to the decision of the Government of India, Ministry of Finance dated September 21, 1967 46 as later clarified by the Ministry of Home Affairs Memorandum dated April 6, 1979 and to re fix his salary upon that basis and pay the difference, as also re fix his pension accordingly.
The appellant would be entitled to interest at 12% per annum on the difference in salary as well as in pension.
We further direct that the Government of India will make the payment to the appellant within four months from today.
P.S.S. Appeal allowed.
|
Fundamental Rule 54 requires that when a Government servant who had been dismissed, removed or suspended is reinstated, the authority competent to order reinstatement has to make a specific order (a) regarding the pay and allowances to be paid to the Government servant for the period of his absence from duty, and (b) directing whether or not the period of suspension shall be treated as a period spent on duty.
Fundamental Rule 25 lays down that the increment next above the efficiency bar in a time scale shall not be given to a Government servant without the specific sanction of the authority empowered to withhold increment under R.24.
The Government of India, Ministry of Finance 's decision dated September 21, 1967, as clarified by Ministry of Home Affairs, Department of Personnel & Administrative Reforms Memorandum dated April 6, 1979, stated that if after the conclusion of the disciplinary proceedings, the Government servant is completely 28 exonerated, he may be allowed to cross the efficiency bar with effect from the due date retrospectively, unless the competent authority decides otherwise.
Rule 2.636 of the C.P.W.D. Manual, Vol.
I, 1956 edn., laid down that Divisional and Sub Divisional Officers who fail to pass the departmental examination should not ordinarily be considered either for promotion or for crossing the efficiency bar.
The appellant, an Assistant Engineer in the Central Public Works Department was placed under suspension on September 3, 1959 pending a departmental enquiry.
That order was revoked by the Chief Engineer on May 8, 1970, and he was reinstated in service on May 25, 1970 but the departmental proceedings were kept alive.
Immediately thereafter, the appellant made a representation to the department to pass an order under FR. 54 for payment of full pay and allowances for the period of suspension, which was rejected on the ground that the departmental enquiry was still pending.
Thereafter, the appellant was compulsorily retired by an order of the Chief Engineer dated April 25, 1972 under FR.
56(j).
In the writ petition filed by the appellant under Article 226 of the Constitution challenging the validity of the order of compulsory retirement, and seeking directions in terms of FR 54 for payment of full pay and allowances for the period of suspension and also for payment of all increments to which he was entitled, a Single Judge of the High Court found the order of compulsory retirement bad in law, quashed it, and held that the appellant shall be deemed to have continued in service till March 31, 1978, the date when he attained the normal age of superannuation.
It was further held that the suspension of the appellant was not justified, and the period of suspension must be regarded as spent on duty and therefore the appellant under FR 54(2) was entitled to full pay and allowances and the increments for that period, and that r.9(2)(b) of the Central Civil Services (Pension) Rules, 1972 was not attracted, and accordingly quashed the departmental proceedings.
The Division Bench declined to interfere.
Thereafter the Director General of Works on September 17, 1982 passed an order on the recommendation of the departmental promotion board declaring the appellant unfit to cross the efficiency bar at the stage of Rs.590 in the grade Rs.350 900 with effect from October 5, 1966.
In the contempt proceedings taken by the appellant, the government stated that there were two conditions for an Assistant Engineer to 29 cross efficiency bar namely, (i) that he should have passed the departmental examination in Accounts, and (ii) he should have obtained good reports for the preceding five years.
The Single Judge declined to interfere with the governmental order.
The Division Bench dismissed the appeal and reiterated that a writ petition should be filed.
The appellant thereupon filed the present writ petition on July 10, 1985 under Article 226 of the Constitution to enforce his right to increments after crossing of the efficiency bar and also for grant of interest on delayed payment of pension.
The High Court held that the crossing of the efficiency bar depends on the satisfaction of the competent authority under FR 25 and also on the passing of the departmental examination under r. 2.636 of the C.P.W.D. Manual, Vol. 1, 1956 edn.
and that if the authority concerned had chosen not to give the sanction under FR 25, the Court had no jurisdiction to interfere particularly as the appellant was not actually in office for such a long period of time.
In this appeal by special leave, on the questions: (i) was the Union of India justified in passing the oder in terms of FR 25 declaring the appellant unfit to cross the efficiency bar, and (ii) was the appellant entitled to interest on the delayed payment of his pension? Allowing the appeal, ^ HELD: 1.1 The order passed by the competent authority under FR 25, prejudicial to the interest of the appellant must be subject to the power of judicial review.
[44AB] 1.2 The stoppage of increment at the efficiency bar during the pendency of a departmental proceeding is not by way of punishment, and therefore the government servant facing a departmental inquiry is not entitled to a hearing.
The court does not come into the picture at that stage.
But where despite the fact that the departmental inquiry against the government officer had been quashed, and it had been held by the High Court that the suspension was wholly without justification, there was no occasion for the competent authority to enforce the bar against him under FR 25, particularly after his retirement, unless it was by way of punishment.
[43G 44A] 1.3 It is a fundamental rule of law that no decision must be taken which will affect the rights of any person without first giving him an opportunity of putting forward his case.
Strict adherence to this rule is mandatory where a public authority or body has to deal with rights.
30 There is always the duty to act judicially in such cases.
There is, therefore, the insistence upon the requirement of a fair hearing.
There is no reason why the power of the Government under FR 25 should not be subject to the same limitations.
[41G, 42B,C] 1.4 The note beneath Government of India, Ministry of Finance Memorandum dated April 23, 1962, as amended from time to time enjoins that the cases of government servants for crossing of the efficiency bar in the time scale of pay should be considered at the appropriate time and in case the decision is to enforce the bar against the government servant, he should be informed of the decision.
In enforcing the bar under FR 25 against the appellant the competent authority acted in flagrant breach of these instructions.
[44FG] 1.5 There was no question of the appellant having adverse record for five years preceding his compulsory retirement since for three years he was under suspension and for the next two years there was nothing blameworthy against him.
Furthermore, he having compulsorily retired on July 28, 1972 and also having reached his normal age of superannuation on March 31, 1978, his failure to pass the departmental examination under r. 2.636 could not be treated as a ground for denying him the benefit of crossing the efficiency bar under FR 25.
The word 'ordinary ' in r. 2.636 must be given its plain meaning as in normal circumstances.
[44CE] 2.1 Suspension where there is no question of inflicting any departmental punishment prima facie tantamounts to imposition of penalty which is manifestly repugnant to the principles of natural justice and fairplay in action.
The conditions of service are within the executive power of the State or its legislative power under the proviso to article 309 of the Constitution, but even so such rules have to be reasonable and fair and not grossly unjust.
It is a clear principle of natural justice that the delinquent officer when placed under suspension is entitled to represent that the departmental proceedings should be concluded with reasonable diligence and within a reasonable period of time.
If such a principle were not recognised, it would imply that the executive is being vested with a totally arbitrary and unfettered power of placing its officers under disability and distress for an indefinite duration.
[41DF] 2.2 There is no presumption that the Government always acts in a manner which is just and fair.
In the instant ease, there was no occasion whatever to protract the departmental inquiry for a period of 20 years 31 and keeping the appellant under suspension for a period of 11 years unless it was actuated with the mala fide intention of subjecting him to harassment.
[40F] 2.3 The public interest in maintaining the efficiency of the services requires that civil servants should not be unfairly dealt with.
The Government must view with concern that a departmental inquiry against the civil servant should have been kept alive for so long as 20 years or more and that he should have been placed under suspension without any lawful justification for as many as 11 years, without any progress being made in the departmental inquiry.
It should also view with concern that a decision should have been taken by the competent authority to enforce the bar under FR 25 against the civil servant long after his retirement without affording him an opportunity of a hearing with a view to cause him financial loss.
[45AB] 3.
The Court, as a settled practice has been making direction for payment of interest at 12% on delayed payment of pension.
There is no reason for it to depart from that practice in the facts of the present case.
[45E] 4.
The Director General of Works is directed to make an order in terms of FR 25 allowing the appellant to cross the efficiency bar according to the decision of the Government of India, Ministry of Finance dated September 21, 1967 as later clarified by the Ministry of Home Affairs Memorandum dated April 6, 1979 and to re fix his pension accordingly.
The appellant would be entitled to interest at 12% per annum on the difference in salary as well as in pension.
[45G 46A] Ridge vs Baldwin, LR [1964] AC40; M. Gopala Krishna Naidu vs State of Madhya Pradesh, ; ; B.D. Gupta vs State of Haryana, ; ; Khem Chand vs Union of India; , and Board of Trustees of the Port of Bombay v Dilip Kumar Raghavendranath Nadkarni & Ors., , referred to.
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ivil Appeal No. 1430 of 1990.
From the Judgment and Order dated 21.10.1989 of the Central Government Industrial Tribunal, New Delhi in I.D. No. 40 of 1986.
N.B. Shetye and A.M. Khanwilkar for the Appellant.
Ashok H. Desai, R.P. Bhatt.
P.H. Parekh and Mrs. Sumita Sharma for the Respondents.
The Judgment of the Court was delivered by PUNCHHI, J.
This appeal by special leave is directed against the Award of the Central Government Industrial Tribunal, New Delhi, in I.D. No. 40 of 1986 published in the Gazette of India, New Delhi dated 21.10 89.
The appellant is the Mathura Refinery Mazdoor Sangh (here after referred to as 'Union ').
The contesting respondent is the Indian Oil Corporation Ltd., Mathura Refinery Project, Mathura, U.P. (hereafter referred to as the 'Refinery ').
The Union represents about 900 casual labourers working in the Refinery.
These labourers are contract labourers coming under the Contract Labour (Regulation & Abolition) Act, 1971.
The nature of their work has grouped them .Some of the labourers have formed themselves into cooperative societies and those societies have entered into labour contracts with 470 the Refinery.
Other labourers are working under labour contractors who have contracts with the Refinery.
Theirs is not a constant relationship with one contractor and these labourers keep shifting from one contractor to another.
However it is claimed that these casual labourers, have been working in the Refinery for so many years in the past ranging between ten to fifteen years but they are denied wages and other benefits as also other beneficial service conditions enjoyed by workmen who are regular employees of the Refinery.
Claiming that they had a right to be treated at par with regular employees, the Union filed Writ Petition No. 2876 of 1985 under Article 32 of the Constitution of India in this Court which was disposed of on January 16, 1986 by directing the Central Government to refer to the Industrial Tribunal for adjudication the following questions: 1.
Whether, in law, the petitioners and the 48 workmen whose services have been terminated are employees of the Indian Oil Corporation, Mathura Refinery Project, Mathura? 2.
Whether the termination of the services of 48 workmen was justified? and 3.
To what relief are the workmen entitled?" Status quo was ordered to be maintained and the services of the workmen were ordered not to be terminated.
At that time, the services of 48 workmen alone were involved but as is evident the adjudication of the Tribunal would have affected others too.
Pursuant to the order of this Court, the Central Government referred and the Industrial Tribunal decided the above referred questions holding that the workmen were not employees of the Refinery and were rather the employees of the contractors.
With regard to the termination of the services of the workmen and to what relief they were entitled, the Tribunal, after answering the questions against the Union and in favour of the Refinery, suggested the following steps in the interest of Industrial harmony: (i) Though the Union should have pressed their demand for abolition of the contract labour system in the Refinery to the Central Advisory Board constituted under the Act, and even though it had been pursuing its remedies before this Court and the Tribunal, suggestions were made to the Refinery to approach 471 the Advisory Board to make a study with regard to the desirability of continuance of the contract labour system in the Refinery.
(ii) Till the Central Advisory Board makes its recommendations and the action is taken, the management of the Refinery to ensure that the contract labour is paid at least the minimum of the pay scale of its regular employees performing the same or similar duties as the workmen of the contract labour and further that the workmen among the contract labour who have put in 5 years or more of work at the Mathura Refinery shall be continued to be employed in the same work even if there is a change in the contractor and such workmen shall not be terminated except as a punishment inflicted by way of disciplinary action for misconduct, etc., voluntary retirement or retirement on reaching the age of superannuation (which may be taken as the superannuation age for the I.O.C. employees) or on ground of continuous ill health.
(iii) Refinery to give preference to those workmen in its employment by waiving the requirement of age and other qualifications wherever possible and it may also consider the creation of a benevolent fund for the contract labour wherein it may make a lumpsum contribution initially and then make equivalent or even more contribution to match the contribution made by the workmen of the contract labour.
Having suggested these, the Tribunal has clarified that these ameliorative steps, if taken by the Refinery, shall not be taken to mean that the contract labour has become the direct employees of the Refinery.
Learned counsel for the appellant says that though the above suggestions, which have the colour of directions, are in accord with the decision of this Court in 13HEL workers Association, Hardwar and Others etc.
vs Union of India and Others, [ ; yet they fall short of the expectancies of the Union and in particular to the wide sweep of the principles laid down by this Court in Dharwad Distt P.W.D. Literate Daily Wage Employees Association and Others vs State of Karnataka and Others, [ ; and prayed for directions such as those given to the State of Karnataka in the Dharwad 's case (supra).
The argument of the learned counsel has barely to be noted and 472 rejected.
The Tribunal has given to the appellant Union the maximum which could be given in the facts and circumstances of the, case.
In Dharwad 's case (supra), the State of Karnataka had itself come out with a scheme to absorb the casual workers in regular government service in a phased manner and though it did not satisfy all concerned, yet it was given a workable final shape.
This Court observed as follows: "Though the, scheme so finalised is not the ideal one but it is the obligation of the court to individualise justice to suit a given situation in a set of facts that are placed before it.
Under the scheme of the Constitution the purse remains in the hands of the executive.
The legislature of the State controls the Consolidated Fund out of which the expenditure to be incurred, in giving effect to the scheme, will have to be met.
The flow into the Consolidated Fund depends upon the policy of taxation depending perhaps on the capacity of the payer.
Therefore, unduly burdening the State for implementing the constitutional obligation forth with would create problems which the State may not be able to handle.
Therefore, the directions have been made with judicious restraint.
" Those casual workers were under the employment of the State and the State came out with a scheme for phased absorption and a graded financial responsibility.
In the instant case before us, the contract labourers are not, and have also not been found to be, having a direct connection with the Refinery, even though it is a State for the purpose of enforcement of fundamental rights.
The suggestions/directions given by the Tribunal, appear to us to be the only relief which was due to the appellant and its members in the given situation and circumstances.
Therefore, the impugned Award of the Tribunal cannot be improved upon.
Finding no merit in the appeal, we dismiss the same.
No costs.
T.N.A. Appeal dismissed.
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The appellant Union, representing about 900 casual labourers falling under the Contract Labour (Regulation and Abolition) Act, 1971 some of whom formed Co operative societies and entered into contracts with the respondent refinery while others worked for contractors who had contracts with the refinery, filed a writ petition in this court claiming parity in wages and service conditions with the regular workmen of the respondent refinery.
This Court disposed the petition by directing the Central Government to refer to the Industrial Tribunal for adjudication the questions whether the petitioners and some of the workmen whose services were terminated were employees of the refinery; whether their termination was justified and to what relief they were entitled to.
The Government referred and the Tribunal decided the questions against the appellant union by holding that the labourers were employees of the contractors and not of the refinery and their termination was justified.
But the Tribunal gave certain directions by way of relief for consideration by the Advisory Board about the desirability of continuance of the contract system in the refinery, for providing minimum pay of scale of regular employees to the contract labour and giving them preference in the regular employment.
Against the award of the Industrial Tribunal, the Union filed an appeal in this Court praying for directions to the refinery to absorb and regularise the casual labourers in a phased manner.
Dismissing the appeal, this Court, 469 HELD:The contract laboures are not, and have also not been found to be, having a direct connection with the Refinery, even though it is a State for the purpose of enforcement of fundamental rights.
The directions given by the Tribunal was the only relief which was due to the appellant_union and its members.
Hence the Tribunal has given to the appellant union the maximum which could be given in the facts and circumstances of the case.
Therefore, the impugned Award of the Tribunal cannot be improved upon.
[472E F] BHEL Workers Association, Hardwar and Ors.
vs Union of India and Ors.
, ; , referred to.
Dharwad Distt.
P.W.D. Literate Daily Wage Employees Association and Ors.
V. State Of Karnataka and Ors.
, ; , distinguished.
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Writ Petition No. 1555 of 1979 etc.
(Under Article 32 of the Constitution of India).
144 D.N. Dwivedi and Sarwa Mitter for the Petitioners.
Dr. L.M, Singhvi, B.D. Sharma, Shri Narain, Sandeep Narain, Shrid Rizvi and D.K. Singh for the Respondents.
The Judgment of the Court was delivered by R.M. SAHAI, J.
Validity of Rajasthan Agricultural Pro duce Markets Act, 1961 (for brevity the Act) levying market fee on sale and purchase of agricultural produce in market yard or sub marketyard was challenged by dealers for lack of legislative competence, violation of Articles 14, 19, 30 1 and 304 of Constitution, absence of any quid pro quo in the fee paid and service rendered, illegal and arbi trary inclusion of manufactured articles such as Khandsari, Shakkar, Gur and Sugar as agricultural produce in the sched ule etc.
Acts of other States, for instance, Punjab and Haryana and U.P. were also assailed for similar infirmities.
Whether these petitions, which appear to be identical, are reproduc tion of any of those petitions, which were pending in this Court from before is not relevant but various group of petitions of Punjab and Haryana dealers challenging consti tutionality and legality of Act and its provisions including Gut, Khandsari and Shakkar as agricultural produce in the schedule of Punjab Act have been dismissed by different benches presumably because of decisions in Kewal Krishan Puri vs State of Punjab, ; ; Ramesh Chandra vs State of U.P., ; Rathi Khandsari Udyog vs State of U.P., and Sreenivisa General Traders vs State of Andhra Pradesh, AIR 1983 SC 1264.
Despite these decisions spelling out basic principles for determining validity of marketing legislations dealing with agricultural produce the petitioners were not willing to take it lying down probably because none of these deci sions dealt with sugar.
It was urged that inclusion of sugar in the Schedule of the Act was arbitrary., primarily because it being a declared commodity of public importance under Entry 52 of List I of Schedule VII the State legislature was precluded from legislating on it.
Its inclusion in the Schedule was also assailed as it being a Mill or Factory produce it could not be deemed to be agricultural produce which is basically confined to produce of or from soil.
Sugar is one of the items which was included in the Schedule to the Act, statutorily, right from its inception.
Such inclusion is found in 145 Maharashtra, Gujarat, West Bengal, Bihar etc.
Whether it was subsequently deleted or re included or re grouped or it was added later was immaterial as Section 40 of the Act empow ered State Government to amend or include any item in the Schedule of agricultural produce.
Existence of such delegat ed power is usual feature of the statutes.
No illegality or infirmity could be pointed out in it.
Any challenge, there fore, rounded on excessive delegation of legislative power was misconceived.
Inclusion of sugar in the Schedule was urged to be arbitrary as it was not produced out of soil the basic ingredient of agricultural produce.
Fallacy of the submis sion is apparent as it was in complete disregard of defini tion of the word "agricultural produce" in the Act which includes all produce whether agricultural, horticultural, animal husbandry or otherwise as specified in the Schedule.
The legislative power to add or include and define a word even artificially, apart, the definition which is not ex haustive but inclusive neither excludes any item produced in mill or factories nor it confines its width to produce from soil.
If that be the construction then all items of animal husbandry shall stand excluded.
It further overlooks expanse of the expression "or otherwise as specified in the Sched ule.
" Nor switch over from indigenous method of producing anything to scientific or mechanical method changes its character.
Khandsari sugar, which is produced by open pan process and is not different from sugar produced by vacuum pan process except in composition, filterability and conduc tivity as held in Rathi Khandsari Udyog, (supra) was held to be agricultural produce in some decisions.
No distinction was made on method of production, namely, by modern plant and machinery.
To say, therefore, that sugar being produced in mill or factories could not be deemed to be agricultural produce is both against the statutory language and judicial interpretation of similar provisions of the Act in statutes of other States.
Rice or dal produced in mills have been held to be agricultural produce in Ramesh Chandra vs
U.P. State, and State of U.P. vs Ganga Das Mill, Even in Halsbury Law of England, ' Vol.
I the word agricultural produce for purpose of agricultural marketing schemes is understood as, 'including any product of agriculture or horticulture and any article of food or drink wholly or partly manufactured or derived from any such product and fleeces (including all kinds of wool) and the skins of animals '.
In the same volume products covered by the provisions of EEC Treaty as to agriculture (classified according to the Brussels Nomenclature of 1965) are men tioned in paragraph 1845.
Sugar is one of them.
146 Another legalistic challenge regarding inhibition of State to legislate on sugar or of repeated argument of occupied field was more attractive than of any substance.
Reliance on Article 246 of the Constitution was academic only.
As far back as 1956 Constitution Bench of this Court in Choudhary Tika Ram and others vs State of U.P., ; examined the matter in detail and held sugar legis lations to be within the scope of Entry 33 of concurrent list.
It was observed that all 'Acts and the notifications issued thereunder by the Centre in regard to sugar and sugarcane were enacted in exercise of concurrent jurisdic tion '.
Effect of it was described thus, 'The Provincial Legislature as well as the Central Legislature would be competent to enact such pieces of legislation and no ques tion of legislative competence would arise '.
Any further discussion on clash between Entry 52 of List I of VII Sched ule with Entry 28 of List II in the circumstances is unnec essary.
As regards the submission of occupied field suffice it to say that there is no repugnancy m the Central and State legislation.
At least none was made out.
Even if there would have been any the Act having received assent of the President it is fully protected by Article 254(2).
For these reasons these petitions fail and are dismissed with costs.
N.P.V. Petitions dismissed.
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In the Writ Petition flied in this Court, the validity of Rajasthan Agricultural Produce Markets Act, 1961, levying market fee on sale and purchase of agricultural produce was challenged for lack of legislative competence, and arbitrary inclusion of Khandsari, Shakkar, Gur and Sugar as agricul tural produce in the Schedule.
It was contended that inclu sion of sugar was arbitrary inasmuch as it being a declared commodity of public importance under Entry 52 of List I of Schedule VII, the State Legislature was precluded from legislating on it and that being a mill or factory produce, it could not be deemed to be agricultural produce, which was basically confined to produce of or from soil.
Dismissing the Petitions, this Court, HELD: 1.1 Sugar is one of the items which was included in the Schedule to the Rajasthan Agricultural Produce Mar kets Act, 1961, statutorily, right from the inception.
Such inclusion is found in many States.
Whether it was subse quently deleted or re included or regrouped or was added later was immaterial, as Section 40 of the Act empowered State Government to amend or include any item in the Sched ule of agricultural produce.
Existence of such delegated power is 143 usual feature of the statutes.
No illegality or infirmity could be pointed out in it.
Any challenge, therefore, round ed on excessive delegation of legislative power was miscon ceived.
[144H, 145A B] 1.2 The definition of the word "agricultural produce" in the Act includes all produce whether agricultural, horticul tural, animal husbandry or otherwise as specified in the Schedule.
The legislative power to add or include and define a word even artificially, apart, the definition which is not exhaustive but inclusive, neither excludes any item produced in mill or factories nor it confines its width to produce from soil.
Nor switch over from indigenous method of produc ing anything to scientific or mechanical method changes its character.
To say, therefore, that sugar being produced in mill or factories could not be deemed to be agricultural produce is both against the statutory language and judicial interpretation of similar provisions of the Act in statutes of other States.
[145C D, F] Kewal Krishan Puri vs State of Punjab, ; ; Ramesh Chandra vs State of U.P., ; Rathi Khandsari Udyog vs State of U.P., ; Sreenivisa General Traders vs State of Andhra Pradesh, AIR 1983 SC 1264; Ramesh Chandra vs U.P. State and State of U.P. vs Ganga Das Mill, , re ferred to.
Halsbury 's Law of England, Vol.
I and Paragraph 1845, re ferred to. 2.
In view of the settled position of law that sugar legislations are within the scope of Entry 33 of Concurrent List, no further discussion on clash between Entry 52 of List I of Vllth Schedule and Entry 28 of List II is neces sary.
There is no repugnancy in the Central and State legis lation.
Even if there would have been any, the Act having received assent of the President is fully protected by Article 254(2) of the Constitution.
[146B D] Choudhary Tika Ram and Others vs State of U.P., ; , followed.
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ition No. 6607 of 1981.
Kapil Sibal (A.C.) for the Petitioner.
N.C. Talukdar and R.N. Poddar with him for the Respondent.
Miss A. Subhashini for CBI.
Daniel Latiffi and N.K Agarwal with him for the Intervener.
The Judgment of the Court was delivered by PATHAK, J.
The petitioner, Shri Bhagwant Singh, has applied to this Court for relief in the matter of the death of his married daughter, Gurinder Kaur.
113 Shri Bhagwant Singh is a member of the Indian Revenue Service.
His daughter, Gurinder Kaur, was one of three children.
She was an intelligent and talented girl who secured a first division in the Senior Cambridge Examination and had obtained a B. Sc.
(Home Science) Degree from Lady Irwin College.
She was endowed with good looks and a pleasing personality, and her education and deportment attracted notice.
It is apparent that the father was proud of his daughter.
Shri Bhagwant Singh and Shri Kartar Singh Sawhney were colleagues in the office.
They had been friends for over thirty years.
Shri Kartar Singh has a son, Amarjit Singh.
The family lived at J 7/93, Rajouri Garden, New Delhi.
The son ran a motor parts shop at Kashmere Gate, Delhi.
It appears that the two colleagues decided on a marriage between Gurinder Kaur and Amarjit Singh in view of the close association of the two families.
From the very beginning, it seems, Shri Bhagwant Singh was opposed to the evils of the dowry system, and the sentiment was also deeply entrenched in Gurinder Kaur for, it appears, she along with other girls of her college signed a pledge in favour of the "anti dowry movement".
According.
to Shri Bhagwant Singh, there was an express stipulation between the respective parents that no dowry would be demanded in the marriage.
The marriage started off well and the young couple enjoyed a harmonious relationship for the first few months.
But very soon, it is alleged, Gurinder Kaur became conscious of broad hints from her mother in law that gifts in the shape of money and jewellery were expected from her parents.
Shri Bhagwant Singh, on being formed of this, decided to ignore it, firm inn his conviction that any insidious attempt to extract a dowry should not be countenanced.
It is alleged that from this point Gurinder Kaur became the victim of constant ill treatment by her mother in law.
She was carrying a baby, but amidst the oppressive tensions at home she suffered a miscarriage and was admitted to a Nursing Home.
According to Shri Bhagwant Singh, his daughter continued to be ill treated and was often taunted that unless the observed the family tradition of presenting a necklace to her mother in law she would remain without child.
It is said that the pressure on Gurinder Kaur continued unabated, and it was not long before her husband got it conveyed to Shri Bhagwant Singh that he required about 114 Rs. 50,000 for financing his business.
As Shri Bhagwant Singh remained firm in his resolve not to yield to these pressures, it is alleged that the girl continued to be harassed and her parents in law made it plain to her that they regretted the marriage.
The attitude and relations of her husband and his family towards her went from bad to worse, and the regard which ordinarily a bride in the house can expect to receive was replaced by a continuing scorn and contempt and ill will.
It must be recalled that Gurinder Kaur was a girl of good family, of refined character and well educated.
Brought up in a home where the dowry system was regarded as an evil to be opposed, it can be presumed that she rebelled strongly against the attempts at extortion directed against her father.
It is reasonable to assume that the relations between the young husband and wife were vitiated by bitter discord, and that she lived in the home in an atmosphere of open and continuous hostility.
On August 9, 1980, ten months after the marriage, Gurinder Kaur, aged 22 years was found dead of third degree burns from a kerosene fire in the bath room.
According to the family of Kartar Singh, all the members of the family had proceeded to the Gurudwara Bangla Sahib in the early morning, and on their return the girl had prepared breakfast for the eight members of the family.
She and her husband ate breakfast later and, it is said, the husband left for work about 10.
30 A.M.
Within an hour thereafter, the girl was found dead in the bathroom.
The tragedy occasioned universal distress, and on the versions put out by the newspapers agitated letters condemning the dowry system and calling for urgent legislative and social measures for reform poured into the press.
The police authorities, it seems, tend to believe that the case was one of suicide, but Shri Bhagwant Singh is convinced that murder cannot be ruled out.
It is not possible in this case, nor indeed would it be right for us to do so, to enter into the question whether Gurinder Kaur committed suicide or was murdered.
That is a matter which is properly involved in the trial of a criminal charge by a court possessing jurisdiction.
We are concerned here only with an examination of the question whether, after being informed of Gurinder Kaur 's death, the police authorities conducted themselves as law and justice required of them.
A counter affidavit of October, 1981 of Shri P.S. Bhinder, Commissioner of Police, Delhi states that Gurinder Kaur was admitted in the Ram Manohar Lohia Hospital on August 9, 1980 at 12.15 P.M. with "100% burn injury" by her father in law, 115 Shri Kartar Singh Sawhney, and that on receiving information a Sub Inspector of Police visited the hospital and was told by the doctor on duty at 3.
10 P.M. that Gurinder Kaur was unfit to make a statement.
His enquiries led him to believe that Gurinder Kaur had attempted to commit suicide.
He registered the case as F.I.R. No. 507 dated August 9, 1980 under section 309 of the Indian Penal Code and commenced investigation.
IS P.M.
On the same day Gurinder Kaur died.
The police investigation brought to light that Gurinder Kaur was found burning at about 11 A.M.
On August 9, 1980 in the bathroom of the first floor of the house.
The police say that the bath room was found bolted from inside, and it was broken open by a servant, Ramu, with the assistance of Smt.
Satinder Kaur, the elder daughter in law.
After the fire was extinguished, Gurinder Kaur was removed to the hospital.
It is said that a tin can of S litters of Kerosene oil, two match boxes and one looking glass with the words "Do not hold any one responsible Pinky" written on its surface with a soap cake were found.
The Central Forensic Science Laboratory experts summoned for the purpose were of opinion that the writing on the mirror was that of Gurinder Kaur.
It was also said that the door of the bathroom could have been broken open from outside.
When Shri Bhagwant Singh complained about the manner in which the police investigation was proceeding and expressed his suspicions in regard to the circumstances in which his daughter died, the police added section 4 of the Dowry Prohibition Act to the charge on November 29, 1980.
Subsequently, on May 15, 1981 reference to section 306 of the Indian Penal Code was also included.
The police continued their investigation until August 29, 1981, and from the investigation they inferred that it was a case of suicide.
It seems that thereafter the investigation was entrusted by the Minister of State for Home Affairs in the Government of India to the Central Bureau of Investigation, and the file was sent to its Director on September 10, 1981.
For that reason, it is said, no question arose of filing any report under section 173 (2) of the Code of Criminal Procedure.
Shri Bhagwant Singh has vigorously contended that the investigating agency in this case did not carry out its statutory duties in a bonafide manner and deliberately withheld the filing of a police report and resorted to delaying the progress of the investigation in order to ensure that no proceedings were taken against the accused in the case.
He disputes the version of the police that the doctor 116 on duty at the hospital had said that Gurinder Kaur was unfit to make a statement and that it was not possible for the police to obtain her statement before her death.
He has referred to the statement of Shri Kartar Singh Sawhney, the father in law of the girl, made to the police on November 13, 1980, in which he had disclosed that Shri Bhagwant Singh had come to the hospital and he found that his daughter was talking occasionally, and that during the period from 2.30 P.M. to 8.30 P.M. Shri Bhagwant Singh, his wife, his niece, who was a doctor, and his elder brother Balwant Singh, as well as the latter 's wife and two sons, had been talking to the girl.
In his affidavit Shri Bhagwant Singh also alludes to the statement of Smt.
Satinder Kaur recorded by the police on August 9, 1980 where she stated that at the time of the tragedy she rushed upstairs and fainted and that when.
she regained consciousness many people including her father in law, mother in law and brother in law, Raman Deep Singh who lived on the second floor were present.
It is pointed out that if this statement is true, then it is not possible to accept the version put forward by the family of Shri Kartar Singh that the servant, Ramu, with the assistance of Smt.
Satinder Kaur had to break open the door of the bathroom because it was bolted from inside.
It is also pointed out that the servant Ramu and Smt.
Satinder Kaur were alleged to be on the ground floor when the burning took place in the both room on the first floor of the house where the mother in law, Gurbachan Kaur was present.
Gurbachan Kaur, according to her statement, was ironing clothes at that movement on the first floor, a few yards away from the bathroom and would have been the first person to have witnessed the tragedy and yet, it is questioned, there is no reason why she should not have been the first to assist the servant Ramu in breaking open the door if indeed the door had to be broken open.
It is also alleged that the police never attempted to take into possession the cake of soap in the bathroom with which the deceased is supposed to have written on the looking glass, nor did they take possession of the blanket, which according to the statement of Shri Kartar Singh Sawhney, was employed to extinguish the fire.
Several suspicious circumstances have been set forth by Shri Bhagwant Singh in his affidavit, and the opinion of the C.F.S.L. experts has been assailed on the ground that it was delivered on an examination of the mirror after more than a month.
He has also attempted to rebut the assertion of the police that he did not join in the investigation from the outset and that he had originally said that he did not suspect any foul play.
On the contrary, he has dwelt at some length on the 117 continuous attempts made by him to ensure an effective investigation into the cause of his daughter 's death, approaching in this behalf the highest authorities in the land.
When this case came before this Court, an order was made directing the filing of a detailed affidavit by the Commissioner of Police setting forth full particulars of the various steps taken by the police in connection with the investigation.
A further counter affidavit was filed by Shri P. section Bhinder, Commissioner of Police.
It is stated in the counter affidavit that the investigating officer remained busy with the investigation of other cases and with matters concerning the maintenance of law and order.
and that this particular case was with Sub Inspector Amrit Lal, who had 12 cases in hand, from August 9, 1980 to August 11, 1980.
and thereafter was entrusted to Sub Inspector Sri Ram, who had 29 cases in hand, from August 12, 1980, to November 13,1980, and subsequently to Inspector Charan Das, who had only one case in hand, from November 13, 1980 to May 28, 1981.
It is stated that these police officers "could not investigate this case all the time" because besides the other cases in hand, they had also to look after the day to day work of the Police Station.
It is said also that during the period when the case was under investigation with Inspector Charan Das, the file remained under submission to the Crime Bench of Delhi for scrutiny with a view to guide the local police on further investigation.
Finally, the case passed into the hands of Inspector R. P. Kochhar of the Crime Branch, who had four cases in hand, and he dealt with this case from May 28, 1981 to September 9, 1981.
It is pointed out that Inspector Kochhar was at that time entrusted also with the investigation of a number of cases involving a notorious dacoit as well as two sensational murders.
It is reiterated in the counter affidavit that the statement of Gurinder Kaur could not be recorded by the police as the doctor on duty had declared her unfit to make a statement.
It is admitted that the blanket with which the fire was extinguished was not taken into possession by the police, but it is asserted that the soap cake was taken on August 9, 1980.
It is also asserted that on August, 10, 1980 Sub Inspector Amrit Lal brought a team of C.F.S.L. experts to the place of occurrence and a photograph of the mirror was taken.
It is alleged that although every effort was made to record the statement of Shri Bhagwant Singh, he declined to make any statement.
It was only on April 21, 1981 that he did so.
It is conceded that reference to section 306 of the Indian Penal Code was added only on May 15, 1981, the omission 118 to do so earlier being explained as a mistake.
The delay occasioned A in the investigation is ascribed by the Commissioner of Police to the fact that Shri Bhagwant Singh permitted his statement to be recorded only as late as April 21, 1981.
We think it can be fairly stated that the police did not display the promptitude and efficiency which the investigation of the case required.
There is much that calls for comment.
It appears from the entries in the police Case Diary that a Sub Inspector visited the place of occurrence on August 9, 1980 and seized a number of articles.
But it is conceded that he did not take into custody the blanket with which the fire is said to have been put out.
On the next day, experts from the Central Forensic Science Laboratory visited the place and appear to.
have made an examination for chance prints.
They also photographed the mirror.
And yet, it was not until over five weeks later that the police were able to obtain a report from them.
Curiously, although the minor was removed from the scene of occurrence and was examined for chance prints, no "identifiable prints" could be developed.
In cases such as this, it would have been of the essence that on visiting the place of occurrence immediately on information of the incident, the mirror should have been taken into possession by the police and handed over forthwith to the Central Forensic Science Laboratory experts for an urgent report in regard to the existence and identification of the prints.
Delay in such a matter is vital and can often result in the loss of valuable clues.
It is of little consolation that, according to the entry G. D. No. 7 dated September 23, 1980 the Deputy Commissioner of Police wrote a reminder to the Director, Central Forensic Science Laboratory for an urgent examination of the writing.
An important question was whether the bathroom door was latched from inside and had to be forced open, or was in fact latched from outside.
According to the family of Shri Kartar Singh, the door was forced open with the help of the servant Ramu.
The entry C. D. No. 1 dated August 9, 1980 in the Case Diary does not indicate that Ramu 's statement was recorded by the police on that day, although it shows that the statements of other persons were recorded.
There is a suggestion by the learned counsel for the State that Ramu 's statement was also recorded on that very day, but that is not shown by the Case Diary extracts filed before us.
It is only as late as January 25, 1981, according to the entry C. D. No. 13 of that date, that the servant was examined by the Station House officer.
Ramu 119 was a material witness, and yet strangely, as it appears from the entries in the police Case Diary, he was allowed to leave the town and go to his village before he could be fully examined by the police.
There is no evidence that the police expressed any anxiety to put him through a thorough examination immediately or shortly after the date of the occurrence or at least before Shri Kartar Singh 's family allowed Ramu to leave the town for his village.
Much has been made by the police of the reluctance of Shri Bhagwant Singh to make a statement to them.
As a responsible officer of sufficiently senior status in the Government of India it would have been natural to expect that he would have come forward from the very first to have his statement recorded and to cooperate with the police, especially in view of the fact that he would have been particularly anxious to have the truth determined into the death of his own daughter.
It is indeed difficult to believe that he did not cooperate with the police in the investigation or declined to give his statement until April 21, 1981.
But if he did so, it could only be because of want of confidence in the manner in which the police investigation was being conducted.
The most vital evidence would have been the statement of Gurinder Kaur herself, and yet even on that point there is a conflict of testimony on the question whether she was fit to make a statement at 3.10 p.m. when the Sub Inspector approached the doctor for the purpose.
On the other hand, according to the statement made by her father in law, Shri Kartar Singh, himself to the police on November 13, 1980, when her father Shri Bhagwant Singh came to the hospital and entered the room, the girl was talking occasionally, and during the period 2.30.p.m.
to 8.30 p.m. Shri Bhagwant Singh, his wife, his niece who was a. doctor and other members of his family had been talking to the girl.
According to the statement of Dr. Rajinder Pal Kaur, niece of Shri Bhagwant Singh, Gurinder Kaur was in possession of her senses at the time and when Dr. Kaur suggested to one of the police officers, who was present, to record to statement of the girl, he declined to do so.
It is regrettable that there is a conflict on the question whether the girl was fit to make a statement to the police, and we are constrained to point out that the conflict centres on a vital part of the case.
There are other features of the case, including the question of the transfer of a Television set to the family of Shri Kartar Singh as a palliative by the uncle of the unfortunate girl, but.
we find it 120 unnecessary to enter into them.
It is enough to point out that A the investigation by the police does not inspire confidence.
It was, in fact, considered materially inadequate by the Crime Branch itself.
For on May 12, 1981, a memorandum was addressed by the Crime Branch to the Deputy Commissioner of Police, Delhi pointing out that the file showed that statements of material persons had not been recorded.
We may also advert to the fact that although the girl was taken to the hospital in a taxi, the police do not appear to have attached any importance to recording the statement of the taxi driver.
There is also an affidavit of one Shri Jagjit Singh before us from which it appears that he was among the first to reach the house when the incident occurred and that it was he who suggested that the girl, who was lying burnt half inside the bathroom and half outside in the verandah, should be taken forthwith to the hospital, and he states that it was he who wag instrumental in sending for the taxi.
Shri Jagjit Singh was an important witness, and although he was in the neighbourhood, no attempt was made to record his statement expeditiously.
Two inferences follow irresistibly from the material before us.
One is that the investigation by the police following the occurrence was desultory and lackadaisical, and showed want of appreciation of the emergent need to get at the truth of the case.
There is a powerful suggestion made by learned counsel for Shri Bhagwant Singh that the police were anxious not to embarrass Shri Kartar Singh and his family and may indeed, as it were, have looked the other way instead of vigorously pursuing the investigation.
Whatever may be the reason, there is no doubt that the investigation of the case suffered from casualness lack of incisiveness and unreasonable dilatoriness, and this is demonstrated most effectively by the manner in which the case was passed from one police official to another, being entrusted successively to Sub Inspectors and Inspectors each of whom already had his hands full with the investigation of several other cases.
There is the admission that these police officers were preoccupied with numerous other cases in their hands and they were officers who were also required to look after the day to day work of the police station.
It was only when on the repeated and insistent petitions of Shri Bhagwant Singh the case passed into the control of the Crime Branch that the investigation showed some signs of being speeded up.
The other inference which disturbs us is that the entries in the police Case Diary (set forth in the annexure to the counter affidavit 121 on the record) do not appear to have been entered with the scrupulous completeness and efficiency which the law requires of such a A document.
The haphazard maintenance of a document of that status not only does no credit to those responsible for maintaining it but defeats the very purpose for which it is required to be maintained.
We think it to be of the utmost importance that the entries in a police Case Diary should be made with promptness, in sufficient detail, mentioning all significant facts in careful chronological order and with complete objectivity.
We believe it would be appropriate to make a few further observations at this stage.
It is impossible to escape the conclusion that, in a case such as this, the death of a young wife must be attributed either to the commission of a crime or to the fact that, mentally tortured by the suffocating circumstances surrounding her, she committed suicide.
Young women of education, intelligence and character do not set fire to themselves to welcome the embrace of death unless provoked and compelled to that desperate step by the intolerance of their misery.
It is pertinent to note that such cases evidence a deep seated malady in our social order.
The greed for dowry, and indeed the dowry system as an institution, calls for the severest condemnation.
It is evident that legislative measures such as the Dowry Prohibition Act have not met with the success for which they were designed.
Perhaps, legislation in itself cannot succeed in stamping out such an evil, and the solution must ultimately be found in the conscience and will of the social community and in its active expression through legal and constitutional methods.
Besides this, what is important to point out is that where the death in such cases is due to a crime, the perpetrators of the crime not infrequently escape from the nemesis of the law because of inadequate police investigation.
It would be of considerable assistance if an appropriately high priority was given to the expeditious investigation of such cases, if a special magisterial machinery was created for the purpose of the prompt investigation of such incidents, and efficient investigative techniques and procedures were adopted into taking account the peculiar features of such cases.
Among other suggestions, we would recommend that a female police officer of sufficient rank and status in the police force should be associated with the investigation from its very inception.
There are evident advantages in that.
In a case where a wife dies in suspicious circumstances in her husband 's home it is invariably a matter of 122 considerable difficulty to ascertain the precise circumstances in which the incident occurred.
As the incident takes place in the home of the husband, the material witnesses are usually the husband and his parents or other relations of the husband staying with him.
Whether it was cooking at the kitchen stove which was responsible for the accident or, according to the inmates of the house, there was an inexplicable urge to suicide or whether indeed the young wife was the victim of a planned murder are matters closely involving the intimate knowledge of a woman 's daily existence.
If the incident is the result of a crime by the husband or his family, the problem of ascertaining the truth is burdened by the privacy in which the incident occurred.
In circumstances where it is possible to record the dying declaration of the victim, it would, in our opinion, be more conducive to securing the truth if the victim made the declaration in the presence of a female police officer who can be expected to inspire confidence in the victim.
Psychological factors play their part, and their role cannot be ignored.
A young wife can be the subject of varying psychological pressures, and because that is so the nuances of feminine psychology support the need for including a female police officer as part of the investigating force.
While making these observations we may emphasise that we intend no aspersion on the rectitude or efficiency of the male members of the police involved in the investigation of such cases.
Another suggestion which has found favour with us is the need to extend the application of the to other cities besides those where it operates already.
The application of the will make possible an immediate inquiry into the death of the victim, whether it has been caused by accident, homicide, suicide or suddenly by means unknown.
It contains provisions which are entirely salutary for the purpose of such inquiry, and we have little doubt that an inquiry under that enactment would be more meaningful and effective and complete in the kind of case before us.
We are aware that the Code of Criminal Procedure, 1973 contains, in sections 174 and 175, provision for a police inquiry pursuant to an information that a person has committed suicide or has been killed by another or by an animal or by machinery or by an accident or has died under circumstances raising reasonable suspicion that some other person has committed an offence.
In such a case the police officer makes an investigation and submits a report to the District Magistrate or the Sub Divisional Magistrate, and thereafter the 123 District Magistrate of Sub Divisional Magistrate or other Executive Magistrate empowered in that behalf is required to hold an inquest.
The police officer making an investigation is entitled to summon two or more persons for the purpose of the investigation and any other person who appears to be acquainted with the facts of the case to attend and answer truly all questions other than questions the answer to which would have a tendency to incriminate him.
We think that in the category of cases we have in mind the more appropriate and effective procedure would be that contemplated by the , which ensures that the inquiry into the death is held by a person of independent standing and enjoying judicial powers, with a status and jurisdiction commensurate with the necessities of such cases and the assistance of an appropriate machinery.
We have referred to some of the important features of the case.
We have done so not for the purpose of determining whether the girl was murdered or had committed suicide, but solely with the object of drawing attention to the manner in which the investigation of the case was conducted.
Disappointing as it may seem to those who have desired the institution of criminal action on the basis that a crime has been committed, we do not think that on the material before us we can go that far.
The investigation of the case was transferred from the police administration of Delhi to the Central Bureau of Investigation at the instance, we understand, of the petitioner.
We hope and trust that this investigation has been completed.
It not, we would request the Central Bureau of Investigation to complete the investigation within three months from the today and take such action as may be warranted by the result of the investigation.
The petition is disposed of accordingly.
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The petitioner Bhagwant Singh a member of the Indian Revenue Service applied to the Court for intervention and necessary relief in the matter of the death of his married daughter Gurinder Kaur alleging that due to several circumstances he was convinced that his daughter was murdered in the house of her parent 's in law by burning her and that the police investigation was improper and irregular and ineffective.
According to the petitioner: (i) that he and his daughter were opposed to the evils of the dowry system and therefore, with a stipulation that no dowry should be demanded at the time of the marriage he gave his daughter to one Amarjit Singh, son of his colleague Kartar Singh Sawhney and a friend for over thirty years; (ii) that after the marriage his daughter came to be ill treated by her mother in law hinting that gifts and jewellery were expected from her parents and such oppressive tensions at home resulted in the mis carriage of a child, from which time onwards the mother in law taunted her saying that unless she observed the family tradition of presenting a necklace to her mother in law she would remain without a child; (iii) that sometime later, the son in law got it conveyed to Bhagwant Singh that he required Rs. 50,000 for financing his business which was not acceded to; (iv) that on August 9, 1980 i.e. ten months after the marriage his daughter was found dead of third degree burns from a kerosene fire in the bath room and was admitted in the Ram Manohar Lohia Hospital by her father in law at 12.15 P.M.; (v) that the police did not get the statement of his daughter recorded though she was able to speak; (vi) that the police added section 4 of the Dowry Prohibition Act to the charge on November 29, 1980 and only on May 15, 1981 a reference to section 306 IPC was included in the F.I.R.; and (vii) that the police failed to examine material witnesses and recover material objects and proceeded in a leisurely manner.
110 The Court admitted the writ petition and called for full details from the Inspector General of Police about the investigation of the case and the circumstances leading to the non filing of the report under section 173(2) of the Code of Criminal Procedure.
Disposing of the Writ Petition and directing the C.B.I. to complete the investigation within three months, the Court ^ HELD: 1:1 Disappointing as it may seem to those who have desired the institution of criminal action on the basis that a crime has been committed, the material on record does not, however, justify an order to that effect by the Supreme Court.
The investigation of the case now stands transferred to the C.B.I. at the instance of the petitioner.
[123 E F] 1:2.
It is not possible, in this case, nor indeed would it be right for the Court to do so, to enter into the question whether Gurinder Kaur committed suicide or was murdered.
That is a matter which is properly involved in the trial of a criminal charge by a court possessing jurisdiction.
[114 G H] 2:1.
The police did not display the promptitude and efficiency which the investigation of the case required.
There is much that calls for comment.
Though the CD entry made on August 9, 1980 indicates the visit of a sub inspector to the place of occurrence and seizure of several things, the blanket with which the fire is said to have been put out has not been seized.
On the next day when the experts from the Central Forensic Science Laboratory visited the place for getting any chance prints, the mirror was not taken possession of, nor was the report obtained for full five weeks.
In cases such as this, it would have been of the essence that on visiting the place of occurrence immediately on information of the incident, the mirror should have been taken into possession by the police and handed over forthwith to the Central Forensic Science Laboratory experts for an urgent report in regard to the existence and identification of the prints.
Delay in such a matter is vital and can often result in the loss of valuable clues.
Since Ramu the servant was reported to have helped in forcing open the door of the bathroom, he was a material witness for deposing whether the bathroom was latched from inside and had to be forced open or was in fact latched from outside.
It was only as late as January 25,1981, according to entry CD 13 of that date, that Ramu was examined by the Station House Officer.
Strangely he was allowed to leave the town and go to his village before he could be fully examined by the police.
There is no evidence that the police expressed any anxiety to put him through a thorough examination immediately or shortly after the date of the occurrence or at least before Shri Kartar Singh 's family allowed Ramu to leave the town for his village.
The fact that the investigation by the Delhi Police does not inspire confidence is clear from the memorandum dated May 12, 1981 issued by the Crime Branch to the Deputy Commissioner of Police to the effect that the statement of several material witnesses had not been recorded.
[118 B H, 119 A B, 120 B] 2:2 The investigation by the police following the occurrence was desultory and lackadaisical, and showed want of appreciation of the emergent need 111 to get at the truth of the case.
Whatever may be the reason, there is no doubt that the investigation of the case suffered from casualness, lack of incisiveness and unreasonable dilatoriness, and this is demonstrated most effectively by the manner in which the case was passed from one police official to another, being entrusted successively to sub Inspectors and Inspectors each of whom already had his hands full with the investigation of several other cases.
There is the admission that these police officers were not only preoccupied with numerous other cases in their hands but they were officers who were also required to look after the day to day work of the police station.
It was only when on the repeated and insistent petitions of Shri Bhagwant Singh the case passed into the control of the Crime Branch that the investigation showed some signs of speeding up.
Secondly, the haphazard maintenance of a police case diary not only does no credit to those responsible for maintaining it but defeats the very purpose for which it is required to be maintained.
It is of the utmost importance that the entries in a police Case Diary should be made with promptness, in sufficient detail, mentioning all significant facts, in careful chronological order and with complete objectivity.
[120 E H, 121 A.B] 2.3 In a case such as this, the death of a young wife must be attributed either to the commission of a crime or to the fact that.
mentally tortured by the suffocating circumstances surrounding her, she committed suicide.
Young woman of education, intelligence and character do not set fire to themselves unless provoked and compelled to that desperate step by the intolerance of their misery.
Such cases evidence a deep seated malady in our social order.
The greed for dowry, and indeed the dowry system as an institution, calls for the severest condemnation lt is evident that legislative measures such as the Dowry Prohibition Act have not met with the success for which they were designed.
Perhaps, legislation in itself cannot succeed in stamping out such an evil, and the solution must ultimately be found in the conscience and will or the social community and in its active expression through legal and constitution methods.
[121 C E] 3.
The Court suggested the following (i) Where the death in such cases is due to a crime, the perpetrators of the crime not infrequently escape from the nemesis of the law because of inadequate police investigation.
It would be of considerable assistance if an appropriately high priority was given to the expeditious investigation of such cases, if a special magisterial machinery was created for the purpose of the prompt investigation of such incidents, and efficient investigative techniques and procedures were adopted taking into account the peculiar features of such cases; [121 F G] (ii) A female police officer of sufficient rank and status in the police force should be associated with the investigation from its very inception.
There are evident advantages in that.
In a case where a wife dies in suspicious circumstances in her husband 's home its invariably a matter of considerable difficulty to ascertain the precise circumstances in which the incident occurred.
As the incident takes place in the home of the husband the material witnesses are 112 usually the husband and his parents or other relations of the husband staying with him.
Whether it was cooking at the kitchen stove which was responsible for the accident or, according to the inmates of the house, there was an inexplicable urge to suicide or whether indeed the young wife was the victim of a planned murder are matters closely involving the intimate knowledge of a woman 's daily existence.
[121 H, 122 A B] If the incident is the result of a crime by the husband or his family, the problem of ascertaining the truth is burdened by the privacy in which the incident occurred.
In the circumstances where it is possible to record the dying declaration of the victim, it would be more conducive to securing the truth if the victim made the declaration in the presence of a female police officer who can be expected to inspire confidence in the victim.
Psychological factors play their part, and their role cannot be ignored.
A young wife can be the subject of varying psychological pressures, and because that is so the nuances of feminine psychology support the need for including a female police officer as part or the investigating force; and [122 C E] (iii) The need to extend the application of the to other cities besides those where it operates already.
The application of the will make possible an immediate inquiry into the death of the victim, whether it has been caused by accident, homicide, suicide or suddenly by means unknown.
lt contains provisions which are entirely salutary for the purpose of such inquiry, and an inquiry under that enactment would be more meaningful and effective and complete than one under sections 174 and 175 of the Code of Criminal Procedure.
The procedure contemplated by the , ensures that the inquiry into the death is held by a person of independent standing and enjoying judicial powers, with a status and jurisdiction commensurate with the necessities of such cases and the assistance of an appropriate machinery.
[122 F H, 123 B C]
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4620.txt
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Appeal No. 164 of 1962.
Appeal from the judgment and decree dated june 19,1958, of the Andhra Pradesh High Court in Appeal Suit No. 944 of 1953.
K. Bhimasankaram, J. V. Kriahna Sarma and T. Satyanarayana, for the appellant.
A. Ranganadham Chetty, Miss A. Vedavalli, N. Rajeshwara Rao and A. V. Rangam, for respondents 1 (a) and (b).
November 14.
The judgment of the Court was delivered by AYYANGAR, J.
This appeal comes before us on a certificate of fitness granted by the High Court of Andhra Pradesh under article 133(1)(a) of the Constitution.
57 The following facts are necessary to be stated to apperciate the contention , urged before us.
We consider it would be convenient to refer to the parties by their array in the trial Court.
The 2nd defendantfirm Hajee Abdul Kadir Sahib and Lala Batcha Sahib & Co., had been apparently carrying on business in several places including Vizianagaram, Bellary, Madras etc., in skins and hides since 1941 when the partnership was formed between the 3rd and the 4th defendants.
It was common ground that from about 1947 or 1948 the firm had not been doing any businesss in Vizianagaram and by that time it had contracted quite a large volume of debts, the tannery business there proving a loss.
The two partners accordingly entered into a deed of dissolution dated March 31, 1949, in which it is stated that the book debts, stock in trade, immovable properties and other assets including the goodwill of the firm were of the value of Rs. 2,90,000/ , and at the same time that the partnership which was admitted to be suffering losses owed debts to the extent.
of Rs. 2 1/2 lakhs.
It ' was agreed between the partners that the 3rd defendant Abdul Shukoor Saheb should go out of the partnership taking with him one item of property in Vaniyambadi valued at Rs. 20,000/ while the suit tannery which was estimated as of the same value was to become the sole property of the 4th defendant who was described in the deed as "the continuing partner".
Soon after this deed of dissolution the 4th defendant entered into an agreement with the plaintiff for the sale to him of the suit property for a sum of Rs. 19,000/ , and later executed the deed of sale on May 20, 1949.
The plaintiff was, however, advised that it would be safer to have the conveyance in his favour executed by the other partner also and accordingly the 3rd defendant was also an executant of the sale deed.
On the execution of the sale deed the plaintiff entered into possession and he claimed to have thereafter effected improvements to the property.
58 While so, the 1st defendant Arji Papa Rao filed suit O. section 46 of 1950 in the Court of subordinate judge at Visakhapatnam for the recovery of a sum of Rs. 12,950/5/8 against the 2nd defendant firm and its partners defendants 3 & 4 and obtained a decree for the sum claimed with interest and costs on June 19, 1951.
Soon after filing the plaint he obtained an order for attachment before judgment of the suit property and that order was on the passing of the decree made absolute, subject however, to the result of a claim petition which had been filed by the plaintiff for raising the attachment.
The Subordinate judge of Visakhapatnam dismissed the plaintiff 's claim and this has led to the suit O. section 145 of 1951 out of which this appeal arises to set aside that summary order under O. XXI, r. 63, Code of Civil Procedure.
The plaintiff impleaded as parties to the suit besides the attaching decree holder who was made the 1st defendant, the debtor firm and the two partners as defendants 2 to 4 respectively and the son of the 4th defendant who executed the sale deed as his agent under a power of attorney as the 5th defendant.
The plaintiff claimed that he purchased the property bonafide and for its full value, that since its purchase he having entered into possession, 'was in enjoyment thereof in his own right, paying the rates and taxes due thereon and had effected valuable improvements thereto, and that consequently the property was not liable to be attached as belonging to the partnership or any of its partners.
Broadly stated, the defence of the 1st defendant the only contesting defendant, the others either remaining ex parte or supporting the plaintiff, was that the sale in favour of the plaintiff was either a sham and nominal transaction or in fraud of creditors of whom he was one.
The trial court upheld the plaintiff 's claim that the sale was real and was fully 59 supported by consideration.
It also negatived the contention raised by ' the first defendant that the sale was fraudulent as intended to defeat or delay creditors under section 53 (1) of the .
The 1st defendant filed an appeal to the High Court and the learned judges reversed the decision of the trial judge and directed the dismissal of the plaintiff 's suit.
It is the correctness of this decision that is challenged in this appeal.
Learned counsel for the appellant raised four principal points in support of the appeal : (1) that on a proper construction of the written statement the only real and effective defence that was raised was that the sale in favour of the appellant was sham and nominal and that the Courts below were in error in proceeding on the basis that the sale was in the alternative impugned as brought about to defeat or delay creditors within section 53 (1) of the ; (2) that on the facts and circumstances of the case it had not been established that the sale in favour of the appellant was vitiated by fraud against creditors falling within section 53 (1) of the ; (3) that in any event, the plaintiff was a purchaser in good faith and for valuable consideration and was therefore protected even on the basis that the transferor intended, by the alienation, to defraud his creditors; (4) that on a proper construction of section 53 (1) of the , as it now stands, read in the light of the provisions of the Code of Civil Procedure particularly those relating to claim petitions under O. XXI rr.
58 to 63, a transfer which was voidable under section 53 (1) could be avoided only by a representative suit filed on behalf of creditors and not by an individual creditor who may be defeated or delayed, by way of defence to a suit to set aside a summary order under O. XXI, r. 63, Code of Civil Procedure.
We shall deal with each of these points and in that order.
There is no doubt that the written 60 Statement has not been artistically drafted, keeping in view the real distinction between a sham and nominal sale which is not intended to pass title and a sale which is real but which is voidable at the instance of creditors because the transfer is intended in the language of section 53 (1) of the "to defeat and delay creditors".
In paragraph 2 of the Written Statement the 1st defendant stated : , "The said sale deed is sham; nominal and collusive document not intended to pass any title but brought about to screen the suit properties from the creditors of defendants 2 to 5.
No consideration passed under the sale deed and the recitals thereof in the document are fictitious and make believe.
" The paragraph.
however, further went on to add "It is further submitted that even if the sale deed is true, it, is in fraud of creditors including the plaintiff and not binding on them." In paragraphs 3 the allegation was made that the plaintiff was the relative of defendants 2 to 5, that the plaintiff and the vendors were natives of the same place and that the sale deed was clandestinely brought into existence at Madras at a. time when defendants 2 to 5, were hard pressed by the plaintiff and other creditors and unable to pay their debts.
, at V,izianagaram and that in order to put the properties beyond the reach of the creditors, defendants 2 to; 4 seem to, have hit upon the frauds device.
of the alleged We to the plaintiff".
In the light of these averments it, cannot be , said that the defendants did not raise two distinct pleas (1) that the sale was a sham, a pretended Sale without any consideration and not intended to pass any title to the nominal purchaser and in the alternative (2) that even if it were a 61 real transaction supported by consideration and intended to pass title to the plaintiff, still the same was, having Tegard to the circumstances stated, a fraud upon the creditors and therefore voidable at his instance.
Though the pleading in the Written Statement was in this form, the issues struck did not raise the two defenses as distinct pleas but rolled both of them into a single plea raising the question "whether the plaintiff hid title to the suit property and whether the claim order was liable to be set aside.
" Notwithstanding the indefiniteness in the frame of the issues it could not be said that when the parties proceeded to adduce evidence the same was not directed to both the above defences.
As we have necessarily to consider thus evidence in dealing with the submissions made to us regarding the correctness of the dismissal of the plaintiff 's suit by the High Court it is unnecessary to set out the details of the evidence which indicates that the defence based upon section 53 of the was borne in mind.
At the, stage of the arguments before the trial Judge it was the subject of keen contest between the parties.
The learned trial judge first dealt with the question as to whether the sale was real as pleaded by the plaintiff or whether it was without consideration and sham and nominal not intended to pass any little, and recorded a clear finding in favour of the plaintiff After having done so he considered in detail the various circumstances which were relied on by the first defendant in support of the plea that the sale was in fraud of creditors so as to be voidable under.
section 53(1) of the .
He negatived this plea and upheld the plaintiff 's claim to the Property and passed a decree in his favour.
In these circumstances we consider that there is no force in the objection that there has not been a sufficient plea of a defence based upon section 53 of the as to justify or entitle the court to afford relief if satisfied that the same was proved.
62 Before dealing with the second point it is necessary to make a few observations in relation to certain submissions made by learned Counsel for the appellant.
This was in relation to the manner in which the. learned judges of the High Court had approached this question and arrived at a conclusion adverse to his client.
The learned judges had formulated the questions to be considered in the appeal as follows : "The main point that falls to be considered in this appeal is whether the sale deed in favour of the Plaintiffs Exhibit A 2, is a genuine transaction supported by consideration; and, if on this point the finding is in favour of the plaintiff, the further question that falls to be determined is whether the suit sale deed was executed in fraud of creditors and as such not binding on the first defendant and other creditors of defendants, 2 to 5.
If the finding on this issue is that the transaction was in fact in the fraud of creditors, the further question that would arise for consideration is whether the plaintiff could claim to be the transferee in good faith and for consideration so as to claim the benefit of the exemption contained in section 53 of the .
Learned Counsel had no quarrel with the propositions as here set out or the mode of approach, but his complaint was that in dealing with the appeal these were not kept in view.
He urged that they did not consider either initially or even later the question as to whether the sale to the plaintiff was real or was sham and nominal unsupported by consideration and though they stated in one portion of the judgment that they did not propose to consider this question because they were satisfied that the decision on the other points might be sufficient to dispose of the appeal,yet they made passing observation which appeared to throw doubt on the reality of the sale.
63 Again, learned Counsel pointed out that though they had formulated the two questions viz., (1) assuming the sale to be real whether the sale was intended by the transferor to defeat or delay creditors, and (2) assuming the sale was voidable under section 53(1) of the whether the plaintiff was a bona fide purchaser in good faith, as distinct and separate questions, in the discussion which followed they did not keep these two points separate.
Besides, it was urged that there were some statements or assumptions made in the judgment which were entirely not, warranted by the facts.
We cannot say that there is not some force in these submissions.
In view of this, the course which we intimated to the teamed Counsel that we would adopt was that we would ourselves consider the entire evidence on the record and arrive at our own conclusions on such evidence in regard to the two issues: (a) whether the sale was in fraud of creditors, and (b) whether the plaintiff was a bona fide purchaser for value and that if it became necessary to arrive at any finding as regards the reality of the sale, we would remand the appeal to the High Court for the matter being considered since the learned judges had expressly reserved the consideration of that question.
We shall now proceed to consider the facts and circumstances of the case which are relevant to the issue as to whether the sale was to defeat or delay creditors.
There was some argument before us about the burden of proof in such cases but learned Counsel for the appellant submitted that he would assume for the purpose of argument that the onus was upon the plaintiff purchaser and that he would satisfy us that burden had been discharged.
This apart, we consider that the question of onus of proof is merely academic at this stage because the entire evidence is before us and except in a rare case where the considerations are evenly balanced, it would have little significance.
64 The circumstances which are relevant for the consideration of this question are these: The second defendant firm was in financial embarrassment at the time of the sale.
The deed of dissolution dated March 31, 1949 recites that the business carried on by the firm was resulting in losses and that the debts amounted to about 2 1/2 lakhs of rupees.
No doubt, it is there stated that the assets of the firm were by consent of the parties estimated of the value of Rs. 2,90,000/ .
This estimate however included the value of the goodwill, which would not be of any real value in the case of a losing business of this sort and we do not know how much was attributed to this item.
This apart, the assets were said to be made up of book debts, stock in trade, immovable property etc.
There is however, no indication as to the relative value of these several components to judge whether or not the alienation of the suit property would have the effect of delaying, if not defeating the creditors.
It can however be asserted that the picture presented by the deed of dissolution is certainly of a firm whose financial position was far from satisfactory.
There is no evidence on the record whether the partners or either of them had any property of their own besides the assets of the partnership for discharging the debts due to the firm 's creditors.
Though the 4th defendant filed a written Statement supporting the plaintiff, the plaintiff did not choose to examine him as a witness in order to elucidate this matter or otherwise explain the circumstances in which the impugned sale ' was effected.
The next feature to be noticed is that the plaintiff and the 4th defendant were both members of the same community labbais of North Arcot district, a fairly small and well knit community several of whom are engaged in the hides and skins business.
The learned judges of the High Court have referred to the plaintiff and the 4th defendant as natives of ,the same place and as relatives.
Learned Counsel 65 for the Appellant pointed out that whereas the 4th defendant was a native of Vaniyambadi, the plaintiff was, native of Parnambet and the suggestion made that they were relatives had been denied, in the evidence.
Learned Counsel might be right on these matters but we consider that not much turns on them.
Both of them were conducting business in Madras and the plaintiff had also a business in Vizianagaram though it was in bidis and not in hides and skins.
In these circumstances we consider that it matters little whether they were relatives or not.
The significance of the 'plaintiff and his vendors being members of the same community and well known to each other consists in this, that the plaintiff might have been chosen because of his willingness to take the sale without any searching enquiry as to the circumstances necessitating it,and because there would be less publicity in the transaction being put through between them such as for instance inspection of the property or enquiries in the locality as regards value etc.
, which would take place if the sale was to be to a total stranger which would attract the attention of the firm 's creditors.
The next circumstance is as regards the pressure exerted on the 3rd and 4th defendants by the creditors immediately prior to the impugned sale and which, in the normal course of events, would be relevant, as providing that the sale was effected in order to put the property beyond the reach of creditors by converting it into cash.
On April 20, 1948, O. section 162 of 1948 on the file of the District Munsiff 's Court, Vizianagaram was filed for the recovery of Rs. 1,016/ on a promissory note for Rs. 1,000/executed by the firm.
On September 8, 1948, it was reported as adjusted out of court.
Besides this some other suits were filed for the recovery of amounts 'from the partnership but they were defended and were ultimately dismissed.
Then we come to 66 O. section 191 of 1949 in which the plaint was presented on April 4, 1949, for recovery of a sum of Rs. 1,385/and odd which was decreed with interest and costs on November 22, 1949.
The date on which this last mentioned suit was filed is of some significance because of another suit which was filed at about the same time.
One Damayanti presented a plaint on March 9, 1949, against the firm for the recovery of Rs .
3,000/ being the principal and interest due on a promissory note.
The date fixed for the appearance by the defendant was April 4, 1949.
It will be noticed that the deed of dissolution was executed on March 31, 1949.
The defendant did not enter appearance on the day fixed and the Court passed an ex parte decree on April 5, 1949; for the amount claimed.
She filed an application for execution on April 18, 1949, and obtained an order on April 21, 1949, for the attachment of the suit property though the attachment was actually effected on June 8, 1949, because the court was closed for the summer vacation.
Long before these dates the 4th defendant had made up his mind to alienate the suit property and we have a letter from the 4th defendant to the plaintiff as early as February 5, 1949, which evidences negotiations for the sale of the property.
There was apparently some giggling about the price which caused some delay and a few days after the attachment was ordered, on April 27, 1949, a formal agreement of sale was entered into between the plaintiff and the 4th defendant under which he agreed to purchase the property for a sum of Rs. 19,000/and the agreement recited that the purchaser, i. e., the plaintiff had paid a sum of Rs. 10,000/ in advance as earnest money and the sale deed itself was executed on May 20, 1949.
In pursuance of the order dated April 21, 1949, Damayanti attached the suit property as already stated on June 8, 1949 and thereupon the plaintiff filed a claim under O. XXI, r, 59, Code of Civil Procedure, for raising the 67 attachment but this, however, was dismissed on November 16, 1950, and thereafter the amount of the decree was paid up by the judgment debtor just a few days before tile expiry of the one year period of limitation for filing the suit under O. XXI, r. 63, Code of Civil Procedure.
A suggestion was made to the plaintiff while he was examined in the case that it was he who had paid up the decree debt of Damayanti but he denied it and we shall proceed on the basis that debt was discharged by the judgment debtors themselves.
For the purpose of establishing that the firm was hard pressed by its creditors at the time of the negotiations which resulted in the sale impugned in these proceedings and at the time of the sale, it matters little who paid this decree debt.
Next we have the circumstance that though the properties were at Vizianagaram, the document was registered at Madras and the suggestion made to the plaintiff was that this was meant as a measure of secrecy to keep this alienation from the knowledge of the firm 's creditors.
The explanation offered by the plaintiff was that having regard to the distance between the native places of the two parties from Vizianagaram and the proximity of these to Madras and the fact that both the Plaintiff, as well as the executants were at Madras it was found more convenient to have the document presented for registration at Madras instead of incurring the expenses of a journy to Vizianagaram for having it registered there.
The learned trial judge accepted this explanation and held that the registration of the sale deed at Madras was not a suspicious circumstance indicating an intention to keep the transaction secret.
The learned judges of the High Court, however, considered it otherwise and expressed the view that this was done in order to keep the transaction secret.
We are inclined to agree with the learned judges of the High Court 68 in their appreciation of this piece of conduct.
Admittedly, the 4th defendant had his agent at Vizianagaram and similarly the plaintiff himself had his men there to look after ' his, bidi business.
There was no impediment in these circumstances and no expenses of traveling involved if only the 4th defendant had executed a power @ of attorney in favour,of some one at Vizianagaram to present the document for registration and admit its execution.
In fact, it may be mentioned that even the sale deed now impugned was executed not by the 3rd and 4th defendants but by the 4th defendant 's son K. L. Abdulla in whose favour a general power of attorney was executed on April 26, 1949, apparently immediately the agreement for sale was concluded.
It is in the light of this feature that we are not disposed to dismiss as irrelevant the circumstance that the document was registered at Madras.
The next feature of the case to which.
we must direct attention relates to the purpose for which the sale was executed.
As regards this, there is no evidence led to indicate why exactly the 4th defendant desired with some urgency to dispose of the property at that juncture.
The relevant circumstance in the present case is that there was a great deal of pressure from creditors, who not having been paid the amounts due to them as and when they became due, were forced to file suits and those which were decreed were those which were not defended and the firm was mulcted with costs under each of these decrees.
In the circumstances one would expect an explanation as to why the sale was being effected.
Ordinarily in circumstances such as in this case there could only be two alternatives : (1) a sale in order to pay the creditors out of the proceeds obtained; and (2) a sale in ' order to convert immovable property which was capable of being attached and brought to sale for the realisation of the amounts due to the creditors 69 into cash, which could either be secreted or used for the vendor 's own purposes.
If the purpose was as that indicated in the first of the above alternatives the proceeds of the sale would have been earmarked for the payment of particular debts for which pressure Was the greatest.
It is needless to add that if this were the case and if creditors who were not so provided were defeated or delayed it would merely be a case of a fraudulent preference which could be impugned only under the law relating to insolvency and not as a fraud on creditors for which section 53 of the makes provision.
It is, however, common ground that apart from the sale deed not making any provision that the consideration was to be utilised for the discharge of any particular debts, it is not the case of the plaintiff that there was any such stipulation as to the application of the money or that without any stipulation therefor the money was so utilised.
It would therefore not be an unreasonable inference to draw from the circumstances of the tale at the Juncture at which it took place that the Vendor 's object was merely to convert this immovable property into cash, so that it may not be available to the creditors.
Before leaving this point it is necessary to advert to one matter which was suggested by learned Counsel for the appellant.
He submitted that the property sold was only a part of the assets of the partners and that unless there was evidence to show that nothing was left available for the creditors after the impugned sale, its validity could not be impugned under section 53 of the .
We consider that there is no force in ' this submission.
As a matter of fact, there is no evidence as to what other properties the partners had beyond what 'is contained in the deed of dissolution on March 31, 1949.
But that apart, the terms of section 53(1) are satisfied even if the transfer does not " 'defeat" but only "delays" the 70 creditors.
The fact therefore that the entirety of the debtors ' property was not sold cannot by itself negative the applicability of section 53(1) unless there is cogent proof that there is other property left, sufficient in value and of easy availability to render the alienation in question immaterial for tie creditors.
In the present case, as already pointed out, we have no definite, evidence as to the nature and quality of the property left as available to the creditors after the impugned alienation, and though light on this could have been thrown by the 4th defendant being called as a witness, the plaintiff did not choose to take the step, nor indeed did ' he even summon the production of the accounts of the firm which might have disclosed the true state of affairs.
Each of these circumstances might be capable of some explanation consistent with the case that the transfer now impugned was effected in the normal and ordinary course of business by the 4th defendant for some purpose which did not involve an intention to defeat or delay his creditors, but the question we have to consider is their cumulative effect and so viewed the conclusion appears irresistible that the object of the transaction was to put the property out of the reach of the creditors.
The transfer was therefore plainly within the terms of the 1st paragraph of section 53 (1) of the and was voidable at the instance of the 1st defendant who was a decree creditor.
The next question is whether the plaintiff is a bona fide purchaser for value so as to be protected by the second paragraph of section 53 (1) reading : "Nothing in this section impairs the rights of the transferee in good faith and for consideration.
As stated earlier, the learned trial judge held that the Rs. 19,000/ , the sale price was the full value of 71 the property and that the consideration as recited in the document was paid by the purchaser.
This finding has not been set aside by the High Court.
We are, therefore, proceeding on the basis that the Transfer was real and supported by consideration.
The narrow question is whether the plaintiff was a transferee in good faith.
It was submitted on behalf of the appellant that the learned judges of the High Court had directed the dismissal of the plaintiff 's suit even without a definite finding that the plaintiff was a party to the fraud on the part of the transferor to defeat or delay the creditors.
There might be some force in this submission that there is no specific finding to that effect but that does not in any way assist the appellant.
Where fraud on the part of the transferor is established i. e. by the terms of paragraph (i) of section 53(1) being satisfied, the burden of proving that the transferee fell within the exception is upon him and in order to succeed he must establish that he was not a party to the design of the transferor and that he did not share the intention with which the transfer had been effected but that he took the sale honestly believing that the transfer was in the ordinary and normal course of business.
When once the conclusion is reached that the transfer was effected with the intent on the part of the transferor to convert the property into cash so as to defeat or delay his creditors, there cannot be any doubt on the evidence on record that the plaintiff shared that intent.
For this purpose the following circumstances may be pointed out (1) The plaintiff and the vendor belong to the same community, a small, compact and well knit one and they must obviously have known each other having been in trade for several years in several places in common and must therefore have been wellacquainted with the financial and business affairs of each other.
72 (2) This general inference apart, the plaintiff admittedly had with him a copy of the deed of dissolution dated March 31, 1949, which disclosed that the firm 's business had resulted in losses and that it was greatly indebted, the debts amounting to Rs. 2 1/2 lakhs.
(3) If as we have held that registration of the sale deed at Madras was with a view to keep the transaction secret from the creditors, the plaintiff was, as much a party to the secrecy as the transferor.
(4) One matter which would be of considerable relevance and significance in this connections would be the enquiries that the plaintiff made before he took the transfer.
He no doubt led evidence to show that he consulted his lawyers about the title of the vendor; but any attempt at an enquiry of the 4th defendant as to why he was effecting the sale of the only immovable property of the firm which was alloted to him under the deed of dissolution is significantly absent.
In the circumstances, it stands to reason that; the plaintiff must be fixed with notice of the design in pursuance of which the transfer was effected.
If the object of a transferor who is heavily indebted was to convert his immovable property into cash for keeping it away from his creditors and knowing it the transferor helped him to achieve that purpose it has naturally to be held that he shared that intention and was himself a party to the fraud.
In this connection, there is one circumstance which is rather significant.
Even when the plaintiff was fixed with notice that the firm 's business had been running at a loss and had accumulated a very large volume of debts as disclosed by the recitals in the deed of dissolution, which was placed in his hands, the purchaser did not insist that the consideration which he was paying should be utilised for the discharge of at least some 73 of the debts.
We are therefore satisfied that the Plaintiff was not a transferee in good faith and that the transfer itself was a scheme by the transferor with the knowledge and concurrence of the transferee to put the property out of the reach of the creditors The result therefore would be that the plaintiffs suit, was liable, to be dismissed for the reason that the defence plea invoking section 53 (1) of the was made out.
What remains for consideration is a ;point of law that was raised on behalf of the appellant that a transfer which is voidable under section 53 (1) of the can be avoided only by: a suit, filed by a creditor impugning the transfer on behalf of himself and the other creditors and not byway of defence to a suit under O. 21,.
r. 63, Code of Civil Procedure by a claimant whose application has been rejected in summary proceedings under O. 21, rr. 58, to 61, Code of Civil Procedure.
Section 53 (1) of the , as it stands at presented is, as amended by the Transfer of Property (Amendment) Act (Act 20 of 1929).
As part of the argument on this head was based on a comparison of the provisions of the section before and after the same was amended, we shall set out in parallel, columns section 53 (1) as it stood before it was.
amended in 1929 and as it stands as amended section 53(1);as it stood before section 53 (1) as it stands the Amending Act, 1929 after the Amending Act, 1929 "Every transfer of "Every transfer of immov immovable property able property made with made with intent to de,, intent to defeat or delay fraud prior or subsequent the creditors of 1 the 74.
section 53 (1) as it stood before section 53 (1) as it standsafter the Ameding Act, 1929.
transferees thereof for consideration or coowners or other persons having an interest in such property or to defeat or delay the creditors of the transferor, is voidable at the option of any person so defrauded or delayed.
Where the effect of any transfer of immovable property is to defraud, defeat or delay any such person, and such transfer is made gratuitously or for a grossly inadequate con sideration, the transfer may be presumed to have been made with such intent as aforesaid.
Nothing contained in this section shall impair the rights of any transferee in good faith and for consideration." after the Amending Act, 11929.
transferor shall be voidable at the option of any creditor so defeated or delayed.
Nothing in this sub section shall impair the rights of a transferee in good faith and for consideration.
Nothing in this subsection shall affect any law for the time being in force relating to insolvency.
A suit instituted by a creditor (which term includes a decree holder whether he has or has not applied fore execution of his decree) to avoid a transfer on the ground that it has been made with intent to defeat or delay the creditors of the transferor, shall be instituted on behalf of, or for the benefit of, all the creditors.
" Two points were made by the learned Counsel in support of this submission; the first being independent of the amendment effected by the Act of 1929 75 and the other based on the provision as amended.
The former was based on the impact of the nature G. of the proceedings under O. 21, rr.
58 to 61, Code of Civil Procedure, and of the order that would be passed therein and particularly of the questions that would arise in a suit under O. 21, r. 63, Code of Civil Procedure, to set aside summary orders; while the latter was based on the amendment by which a creditor 's suit was required to be in a representative capacity.
It would be seen that so far as the first point was concerned, the amendment made no change and that if the learned Counsel were right the position would have been the same even on the section as it stood before it was amended.
It was conceded that on the section as it stood prior to the amendment, there was a direct decision against this argument, of a Full Bench of five 6 judges of the Madras High Court as early as 1920 (Ramaswami Chettiar vs Mallappa Reddiar (1) which had been consistently followed by every other High Court in India up to this date without any doubt or dissent.
Gleamed Counsel however urged that this Court was not precluded from considering the correctness of this decision notwithstanding its having held the field for over forty years without question, As a legal proposition, Counsel is undoubtedly right, but the question is whether any reasons have been adduced before us to consider that decision was wrong.
We shall be presently setting out the reasoning on which it is contended that an attaching creditor who has succeeded in the summary proceedings under O. XXI, rr. 58 to 61, cannot, in a suit to set aside the summary order under O. XXI, r. 63, raise by way of defence the plea that the sale in favour of the plaintiff the transferee claimant is vitiated by fraud under section 53(1) of the , but (1) Mad.
760 76 before doing so it is necessary to point out that this very argument was urged before the Full Bench referred to and after elaborate consideration, rejected by them, Now the argument as regards the inference to be drawn from the nature of the enquiry in the summary proceedings for investigating.
claims to property which has been attached is briefly as follows:: s 53 of the assumes that there, is a real transfer intended to pass title to the transferee but that the transfer is vitiated by fraud which renders it voidable.
In the summary proceedings under O. XXI, rr. 58 to 61, having regard to the terms of r. 61, the Court is concerned only with the question as to whether the transferee is in possession of the property in his own right and not on behalf of the judgment debtor, when a transfer is real, though it is liable to be impeached as a fraud on creditors, and the tranferee has entered into possession, he would succeed in the summary proceedings, with the result that it is the defeated attaching 'creditor who would have to figure as a plaintiffq If he figures as a plaintiff the suit would have to be in a representative capacity, that is, under O. 1, r. 8, Code of Civil Procedure.
In every case, therefore, when a transfer is real but is liable to be set aside under section 53 (1) on the provisions of O. XXI, rr. 58 to 61, Code of Civil Procedure,the transferee is bound to succeed in the summary proceedings and the attaching decree holder would have to figure as a plaintiff and the suit would be a representative suit.
From this it is said that it follows that in no case can an attaching creditor who defends a suit to set aside a summary order in 'his favour resist it on the plea of fraud under section 53(1).
It would however be seen that, this last step, which is vital for the argument to have force does not follow for the argument does not proceed on any construction of the terms of section 53(1) nor on any legal 77 theory as to the mode or procedure ,by which; the intention to avoid the transaction which the attaching creditor claims is voidable at his instance may be expressed or enforced.
The argument would only establish that if the Court investigating claims under O. XXI.
r. 58 etc., conformed strictly to the terms of those provision is the transferee under a real sale would succeed in those proceedings and, he would be a defendant and need 'not be a plaintiff in suits to set aside the summary order under O. XXI, r. 63.
This line of reasoning does not take into account at least the following possibilities: (1) The claim or objection by the transferee may be rejected, not on :the merits, but because it has been designedly or unnecessarily delayed (vide O. XXI, r. 58, Code of Civil Procedure).
It is certainly not the contention of learned Counsel that when there is a rejection of a transferee 's claim under this provision the order of rejection is any the less final and has not to be set aside by a suit contemplated by O. XXI, r. 63, Code of Civil Procedure, in order to overcome the effect of that finality.
(2) The Court making the summary enquiry might come to an erroneous conclusion that the transfer is sham and not real or that the transferee is in possession for the benefit of the judgmentdebtor.
In the suit filed by the transferee to set aside ' this erroneous order, the plaintiff would have to establish his title and even if he succeeds in showing that the sale to him was real and effective, still the question would remain whether, having regard to the circumstances of the transfer, the same is not voidable under section 53(1).
Thus there would be occasions when a defeated transferee whose transfer is real might have to figure as a plaintiff in a suit to set aside a summary order under O. 21, r. 63, Code of Civil Procedure.
(3) The attaching decree holder might raise in the summary proceedings two alternative defenses to a transferee 's claim (a) that the sale was sham and nominal and therefore the possession 78 of the transferee was really on behalf of the judgment debtor, and (b) that even if the sale be real and intended to pastitle it was voidable as a fraud on creditors.
It is, no doubt, true that the second or the alternative defence is not open in the claim proceedings, but if however the same were erroneously entertained and an order passed, rejecting the claim of the transferee, the same would nevertheless be an order which would have to be set aside by a suit by the defeated transferee and he cannot ignore it.
It would thus be seen that the entire argument as regards the impact of the nature of the enquiry under O. 21, r. 59,on the defences which would be open in a suit under O. 21, r. 63, depends on two factors: (1) the summary order being passed on the merits and not because the making of the claim was designedly or unnecessarily delayed, and (2) the summary order being right on the merits and strictly in conformity to the provisions of the Code.
As we have already pointed out, the points urged before us as regards the scope of the enquiry into claim petitions was also the subject of elaborate argument and consideration by the learned judges of the Madras High Court in the Full Bench.
Sadasiva Ayyar, J., classified the cases of transferees who failed in their claim petitions and had to file suits to set aside summary orders under O. 21, r. 63, under three heads : (a) Where the transferee was a mere benamidar; (b) Where he was a fraudulent transferee in possession; and (c) Where he was a fraudulent transferee not in possession.
The learned Judge said : "A creditor decree holder, who is in most cases a stranger, cannot reasonably be expected to know of his own knowledge whether a transfer 79 by his judgment debtor is only fraudulent or is wholly nominal or partly nominal and partly fraudulent, and whether the transferee is in possession and if in possession, whether he is so for him self or for the judgment debtor.
He would therefore ' usually both in the claimpetition and in the suit which afterwards arises out of the order against the claimant, be obliged to raise and be justified in raising alternatively all the pleas open to him, and the Court which decided the claim against the claimant might, in its conclusions on each of the three points, be either right or wrong." He further pertinently pointed out that to hold that a plea based on the transfer being voidable under section 53(1) could not be raised in defence to a suit to set aside a summary order would mean that " 'The creditor decree holder would be in a much worse position for his success in the summary claim proceedings than if he had lost in those proceedings".
Section 53(1) of the rendered the transaction voidable at the instance of the creditors if the transfer was effected with the particular intent specified and the statute does not prescribe any particular method of avoidance.
Referring to this the learned judges observed : "If the creditor knowing of the transfer applies for attachment; the application is sufficient evidence of his intention to avoid it; if he only hears of the transfer when a claim petition is preferred under O. 21, r. 58, and still maintains his right to attach, that again is a sufficient.
exercise of his option to avoid and entitles him to succeed in the subsequent suit under r. 63".
They further pointed out that "the suit under r. 63 is by the unsuccessful party to the claim petition to establish the 80 right which he claims to the property in dis pute.
Whether this suit be instituted by the attaching decree holder or by the transferee claimant it must equally be decided in favour of the former if the transfer is shown to have been fraudulent; because, in consequence of the fraudulent character of the transfer and its avoidance by the judgment creditor, the result ,is that the transfere has not the right which he claims, namely, to hold the property free from attachment in execution by the judgments." The learned judges based their conclusion on this and on several other lines of reasons which we consider unnecessary to set out, but it is sufficient to say that we are enentire agreement with all of them.
There is therefore no substance in the point ;that there is anything in section 53(1) as it originally stood which precluded a defence by an attaching creditor to a suit to set aside a summary order under O. 21, r. 63, that the: sale in favour of the plaintiff is vitiated by fraud of the type specified in the earlier quoted pro vision and the amendment has admittedly made no change in this matter.
It was next urged that the third paragraph of the amended section 53 (1) has, effected a change in the law and that thereafter transfers voidable under 1st paragraph of section 53 (1) could be avoided only in suits filed by a defeated or delved creditor as plaintiff suing on behalf of himself and other creditors.
We consider that there is no substance in this objection either.
We shall first refer to the purpose of the amendment.
In decisions rendered prior to the amendment, there were a large number in which it was held, following certain English cases decided with reference to 13 Eliz., Ch. 5, on which section 53(1) was based, 81 that suits by creditors for avoiding a transfer under section 53 (1) was a representative action.
To that general rule however, an exception was recognised in a number of ' decisions when the suit was to set aside a summary order under O. 21.
r. 63, and was brought by an attaching decree holder against whom an adverse order had been made in the summary proceedings, it being held that such a suit need not be in a representative capacity.
The decisions on this point were however not uniform.
It was merely to have a uniform rule and to avoid these conflicting decisions that the third paragraph was inserted so that after the amendment the rule that a suit by a creditor should be brought in a representative capacity would apply as much to a suit set aside a summary order under O. 21, r. 63, as to other suits.
It was not suggested that there was anything in the terms of the amended section 53 (1) which referred to a defence to a suit and, in fact, learned Counsel did not contend that if a defence under section 53 (1) could be raised by defeated attaching creditor such a defence had to be in a representative capacity, and we consider that learned Counsel was correct in this submission.
From a provision as to how a plaintiff, if he filed a suit, should frame it, we can see no logical process by which it could be held that a defendant cannot impugn the validity of the sale which is voidable at his instance.
We have, therefore, no hesitation in rejecting the legal point urged on behalf of the appellant.
The result is that the appeal fails and is dismissed with costs.
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The appellant purchased the suit property under a sale deed executed by defendant 4 on May 20, 1949.
Defendants 3 and 4 had been doing business in partnership, which, how.
ever, was dissolved on March 31, 1949.
The deed of dissolution showed that the partnership owed debts to the extent of Rs. 2 1/2 lakhs and that the suit property was allotted to defendant 4.
The first respondent to whom money was due from the partnership obtained a decree on june 19, 1951, and had the suit property attached.
The appellant filed a claim petition for raising the attachment but it was dismissed.
He then instituted a suit to set aside the summary order under O. 21, r. 63, of the Code of Civil Procedure.
The first respondent 's defence, inter alia, was that the sale was fraudulent intended to defeat or delay.
creditors and, therefore, was invalid under section 53 (1) of the .
The appellant pleaded that on a proper construction of section 53 (1) of the Act, a transfer which was voidable under the section could be avoided only by a representative suit filed on behalf of creditors and not by an individual creditor by way of defence to a suit to set aside a claim order.
The evidence in the case showed that the appellant was not a transferee in good faith and that the transferor itself was a scheme by the transferor with the knowledge and concurrence of the transferee to put the property out of the reach of the creditors.
Held : (1) that section 53 (1) of the , rendered a transaction voidable at the instance of the creditors if the transfer was effected with the particular intent specified and that the statute did not prescribe any particular method of avoidance.
There was nothing in section 53 (1), as 56 it originally stood before the amendment of the section in 1929, which precluded a defence by an attaching creditor to a suit to set aside a summary order under O. 2 1, r. 63, Code of Civil Procedure, that the sale in favour of the plaintiff was vitiated by fraud ; and the amendment made no change in this matter.
(2) that it was merely to have a uniform rule and to avoid conflicting decisions that the third paragraph was inserted in section 53 (1) so that after the amendment, the rule that a suit by a creditor should be brought in a representative capacity would apply as much to a suit to set aside a summary order under O. 21, r. 63, as to other suits.
(3) that the terms of section 53 (1) were satisfied even if the transfer did not "defeat" but only "delayed" the creditors.
The fact that the entirety of the debtor 's property was not sold could not by itself negative the applicability of the section unless it was proved that there was other property left, sufficient in value and of easy availability to render the alienation in question immaterial for the creditors.
Ramaswami Chettiar vs Mallappa Reddiar, Mad., 760, approved.
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Appeal No. 2458 of 1966.
Appeal by special leave from the judgment and decree dated April 1, 1963 of the Allahabad High Court in Sales tax Reference No. 391 of 1959.
C.B.Agarwala and O.P. Rana, for the appellant.
J.P. Goyal and Sobhag Mal Jain, for the respondent.
711 The Judgment of the Court was delivered by Shah, J.
The Judge [Revisions] Sales Tax, U.P., Lucknow, referred the following question to the High Court of Allahabad for opinion: "Whether the preparation of medicines on prescriptions of the applicant amounted to a manufacture of "medicines and pharmaceutical preparations" within the meaning of notification No. S.T. 3504/X dated 10th May, 1956, and whether the applicant was assessable to tax on the turnover of the medicines so dispensed ?" The High Court held that the respondent was not a manufacturer of medicines and pharmaceutical preparations within the meaning of the notification.
Against the answer recorded by the High Court, the Commissioner of Sales Tax, U.P., has appealed to this Court with special leave.
The respondent is a medical practitioner and in the performance of his professional duties he examines patients, advises them and prescribes medicines which are issued from his dispensary.
The Sales Tax Officer being of the view that the dispensing of medicines, according to the prescriptions issued by the respondent, amounted to manufacture of medicines within the meaning of the notification No. S.T. 3504/X dated May 10, 1956, assessed the respondent to pay tax on a turnover of Rs. 12,943 for the year 1956 57.
The order was confirmed in appeal by the Judge (Appeals) and was further confirmed by the Judge (Revisions) Sales Tax.
The sole question which falls to be deterrained in this appeal is whether by virtue of the notification, the respondent is exempt from liability to pay tax.
Section 3 of the U.P. Sales Tax Act, 1948, makes every dealer liable to pay in each assessment year a tax at a certain rate on the turnover.
Section 3A provides: "Notwithstanding anything contained in section 3 the State Government may . declare that the turnover in respect of any goods . shall not be liable to tax except at such single point in the series of sales by successive dealers as the State Government may specify." On May 10, 1965, the Governor of Uttar Pradesh issued a notification No. S.T. 3504/X that "In exercise of the powers conferred by section 3A of the U.P. Sales Tax Act, 1948, as amended from time to time, and in supersession of all the previous notifica 712 tions on the subject, the Governor of Uttar Pradesh is hereby pleased to declare that with effect from May 8, 1956, the turnover m respect of medicines and pharmaceutical preparations shall not be liable to tax except (a) in the case of medicines and pharmaceutical preparations imported from outside Uttar Pradesh, at the point of sale by the importer.
and (b) in the case of medicines and pharmaceutical preparations manufactured, in Uttar Pradesh, at the point of sale by the manufacturer; And the Governor is further pleased to declare that such turnover shall with effect from the said date be taxed at the rate of . " The respondent is not an importer of medicines and pharmaceutical preparations from outside Uttar Pradesh.
That Is common ground.
The Revenue authorities, however, held that when in his dispensary medicines and pharmaceutical preparations as prescribed by him were mixed, the process of mixing resulted in "manufacture" of medicines, by him as a "manufacturer".
The expression "manufacture" has in ordinary acceptation a wide connotation: it means making of articles, or material commercially different from the basic components, by physical labour or mechanical process; and a manufacturer is a person by whom or under whose direction and control the articles or materials are made.
The notification in the first instance exempts from tax sales of medicines and pharmaceutical preparations.
It then proceeds to withdraw the exemption in respect of two classes of sales of medicines and pharmaceutical preparations, (i) sale by an importer of medicines etc., imported from outside the State and (ii) sale by a manufacturer of medicines etc., manufactured in the State.
The tax levied in respect of the excepted categories is a single point tax: it may be levied when medicines and pharmaceutical preparations manufactured in the State of Uttar Pradesh are sold by the manufacturer.
In our judgment when, as prescribed by a medical practitioner, a mixture of different drugs is prepared by the medical practitioner or by his employees specially for the use of a patient in the treatment of an ailment or discomfort diagnosed by the medical practitioner by his professional skill, and which mixture is normally incapable of being passed from hand to hand as a commercial commodity, the medical practioner supplying the medicines cannot be said to be a manufacturer of the mixture and the mixture cannot be said to be manufactured within the mean 713 ing of the notification.
Exemption granted by the notification ceases to apply under cl.
(a) if the importer of medicines and pharmaceutical preparations manufactured outside the State sells them, and under cl.
(b) if the manufacturer of medicines and pharmaceutical preparations manufactured in Uttar Pradesh sells them.
The scheme therefore is to levy sales tax at one point only, viz., at the point of sale by the importer in respect of medicines imported by him into the State,.
and at the point of sale by the manufacturer of medicines manufactured by him within the State.
If preparation of a mixture of drugs as prescribed by a medical practitioner in his own dispensary is not manufacture of medicines or pharmaceutical preparation, the exception clause of the notification will have no application.
Acceptance of the contention by the Revenue would imply that a medical practitioner supplying to his patients medicines and pharmaceutical preparations separately is not liable to tax: when under his direction they are mixed by his employees for the special use of a patient under his treatment and to achieve a specific purpose, the turnover from the resultant mixture is taxable.
In the absence of clearer phraseology, the Court would not in a taxing provision be willing to give that interpretation.
The appeal therefore fails and is dismissed.
The delay in filing the respondent 's statement of the case is condoned.
There will be no order as to costs in this appeal.
G.C. Appeal dismissed.
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The respondent was a medical practitioner in Uttar Pradesh and maintained a dispensary from which medicines were issued to his patients according to his prescriptions.
According to notification No. S.T. 3504/X, dated May 10, 1956 issued under section 3A of the U.P. Sales Tax Act, 1948, tax in respect of sale of medicines and pharmaceuticals manufactured in the State was payable at single point on the sale effected by the manufacture.
The Sales Tax Officer held that dispensing of medicines was manufacture ' within the meaning of the aforesaid notification and assessed the respondent to sales tax for the year 1956 57 on the turnover of medicines dispensed.
The order was confirmed by the appellate and revisional authorities, but the High Court decided in favour of the respondent.
The State appealed.
HELD: When as prescribed by a medical practitioner, a mixture of different drugs is prepared by the medical practitioner or by his employees specially for the use of a patient in the treatment of an ailment or discomfort diagnosed by the medical practitioner by his professional skill, and which mixture is normally incapable of being passed 'from hand to hand as a commercial commodity, the medical practitioner supplying the medicines cannot be said to be a manufacturer of the mixture and the mixture cannot be said to be manufactured within the meaning of the notification.
[712 G H] In the absence of clearer phraseology the Court would not in a taxing provision be willing to give an interpretation whereby a medical practitioner supplying to his patients medicines and pharmaceutical preparations separately is not liable to tax, but when under his direction they are mixed by his employees for the special use of a patient under his treatment and to achieve a specific purpose, the turnover from the resultant mixture is taxable.
[713 D]
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tions (C) Nos.
331 47 of 1984.
(Under Article 32 of the Constitution of India. ) Rajinder Sachar and K.T. Anantharaman for the Petitioners.
Narayan B. Shetty, G.B. Pai, S.S. Shroff, Mrs. P.S. Shroff, Miss Girja Krishan, S.A. Shroff, Mrs. Pallavi Shroff, O.C. Mathur and A.M. Dittia for the Respondents.
The Judgment of the Court was delivered by 365 DUTT, J.
In these writ petitions, the petitioners are former officers and employees of the Caltex Oil Refining (India) Ltd., which has since been amalgamated with the Hindustan Petroleum Corporation Limited.
The complaint of the petitioners is with regard to the inter se fitment of the officers and employees of the Caltex Oil Refining (India) Ltd. and the other two Companies which have also been amalgamated with Hindustan Petroleum Corporation Ltd., namely, ESSO Standard Refining Company of India Ltd. and Lube India Ltd. In 1974, the Undertakings in India of ESSO Eastern Inc. that is, ESSO Standard Refining Company of India Ltd. (for short 'ESSO ') and Lube India Ltd. (for short 'LIL ') were acquired by the ESSO (Acquisition of Undertakings in India) Act, 1974 and vested in Hindustan Petroleum Corporation Ltd. (for short 'HPCL '), a Government Company.
In 1977, the shares of Caltex Oil Refining (India) Ltd. and Undertakings in India of Caltex (India) Ltd. were acquired by the Caltex (Acquisition of Shares of Caltex Oil Refining (India) Ltd. and the Undertakings in India of Caltex (India) Ltd. Act, 1977 and vested in Caltex Oil Refining (India) Ltd. (for short 'CORIL '), a Government Company.
On May 5, 1978, by the order of the Company Law Board, CORIL was amalgamated with HPCL.
By an order dated June 17, 1978, the Central Government appointed a one man Committee of Mr. B.B. Tandon, IAS (Retd.), for the purpose of examining the problems arising out the the integration of the management staff of CORIL and HPCL.
The said Committee was to make recommendation inter alia on the following: (i) fitment in equivalent Groups; (ii) criteria to be adopted for determination of seniori ty and fixation of inter se seniority; and (iii) placement in appropriate positions.
In September, 1970, the Tandon Committee submitted a report to the Central Government recommending that for equating positions in the two companies and fitting them in equivalent groups, the following two principles should be followed: 1.
The principle of functional similarity 2.
The principle of co equal responsibility.
366 We shall have occasion to refer to the report of the Tandon Committee later in this judgment, for much reliance has been placed by the petitioners on the report.
While the report of the Tandon Committee was under the consideration of the Central Government, HPCL appointed two functional directors for the purpose of formulating a rationalisation scheme.
In this connection, we may refer to a letter dated July 28, 1979 of the Central Government whereby it advised HPCL that the pay scales and perquisites of management and employees in the nationalised oil companies should be ratio nalised and fitted into the pay scales of the Indian Oil Corporation, hereinafter referred to as 'IOC ', a public sector Company.
Further, it was stated in the said letter that the guiding principle to be adopted for the purpose was to find out the equivalence, that is to say, the equality of duty and also the equality of responsibility.
On July 7, 1980, a circular letter was issued by HPCL annexing thereto a rationalisation scheme consisting of two pans.
In the first part, the past service benefits that would be admissible to each employee of CORIL on the basis of existing pay scales and in the second pan, details were given of the rationalised conditions of service, payscales, perquisites and retirement benefits.
In the circular it was stated as follows: "In relation to your fitment or fixation of salary in the proposed rationa lised scales, should you have any grievance you will be at liberty to represent your case to a Grievance Committee, which has been specially constituted for the purpose.
I am directed to request you to signify your acceptance of this offer within 30 days from the date of receipt of this letter by returning the duplicate copy of this letter duly signed by you.
On receipt of your acceptance, consequent letters will be issued.
" In the scheme the pay scales of ESSO, LIL and CORIL sought to be equated with the pay scales of HPCL are as follows: From ESSO To : HPCL HPCL Salary Group Salary Group Salary Scale RS.
E 7, E 8 A 750 40 1150 50 1550 E 6 B 1050 50 1450 60 1750 367 E 5, E 5A C 1450 60 1690 65 1950 E 4 D 1600 65 2120 E 3 E 1850 100 2350 E 2 F 2000 100 2500 O & E 1 & Unclassified G 2250 100 2750 General Manager H 2500 100 3000 From : LIL To : HPCL HPCL Salary Group Salary Group Salary Scale L 7 A 750 40 1150 50 1550 L 6 B 1050 50 1450 60 1750 L 5 C 1450 60 1690 65 1950 L 4 D 1600 65 2120 L 3 E 1850 100 2350 L 2 F 2000 100 2350 L 1 G 2250 100 2750 General Manager H 2500 100 3000 From CORIL To : HPCL HPCL Salary Group Salary Group Salary Scale R 6 A, R 6 B A 759 40 1150 50 1550 R 7 A, R 7 B B 1050 50 1450 60 1750 R 8 C 1450 60 1690 65 1950 R 9 D 1600 65 2 120 R 10 E 1850 100 2350 R R 12 G 2250 100 2750 General Manager H 2500 100 3000 So far as CORIL is concerned, it appears that it has 10 grades, while HPCL has 8 Grades.
For, the purpose of equa tion of these 10 grades of CORIL with 8 Grades of HPCL, some compression has been made in the lower Grades, namely, R6 A and R6 B have been clubbed together and equated with Grade A of HPCL.
Again Grades R7 A and R7 B of CORIL have been clubbed together and equated with Grade B of HPCL.
In ESSO, .the
Grades E 7 and E 8 have been clubbed together and equated with Grade A of HPCL.
In the Salary Group of ESSO, the Grades E 5 and E SA have been shown to be two different Grades, but it is not disputed before us that these two Grades are really one Grade.
368 The complaint of the petitioners is that in the matter of fitment/ integration of the officers of CORIL, that is, the petitioners, and the officers of ESSO/LIL into HPCL/IOC Grades, gross disparities have been made to the prejudice of the officers of CORIL.
It is the case of the petitioners that the officers of CORIL have been fitted by HPCL consist ently in one or two Grades lower in HPCL vis a vis their counterparts in ESSO/LIL, performing similar duties and having similar responsibilities and status.
It is urged on behalf of CORIL that in integrating the officers CORIL with those of ESSO and LIL, HPCL did not make any attempt to equate all the positions held by the officers of CORIL with those held by the officers of ESSO/LIL.
It is submitted that before any fitment can be made into any scale of pay, it is incumbent to make an equation of posts and without such equation the officers of CORIL could not be fitted into the pay scales of HPCL along with the officers of ESSO and LIL.
In support of the contention that HPCL has not made any equation of posts before fitment in HPCL/IOC scales of pay, Mr. Sachar, learned Counsel appearing on behalf of the petitioners, has placed much reliance on the Tandon Commit tee 's Report.
In the said report, the post of General Sales Representative of ESSO has been equated with the post of Retail Development Supervisor of CORIL.
In the scheme pre pared by HPCL, the post of General Sales Representative of ESSO (E 6) and that of Depot Superintendent (E 6) have been placed in the Salary Group B of HPCL, while the post of Retail Development Supervisor (R6 A) and Depot Superintend ent/Relief Depot Superintendent (R6 B) of CORIL have been placed in the Salary Group A of HPCL.
In Tandon Committee 's Report, it has been observed that the functional similari ties and the responsibility carried by both these function aries, namely, Retail Development Supervisor of CORIL and General Sales Representative of ESSO, are alike.
Further, it has been observed that since these two posts are congruent, they can be fitted in the same Group, that is, in Group B of the new HPCL Grade Structure representing IOC scales of pay.
The post of Depot Super intendent A (R7 B) and that of Mar keting Representative (R7 A) of CORIL have been placed in the Salary Group B of HPCL, but similar posts of ESSO being E 5/E 5A have been placed in the Salary Group C of HPCL.
It is thus complained that the scheme, which has been prepared by HPCL, is arbitrary and is not based on a proper equation of posts.
On the other hand, it is the case of HPCL that before the rationalisation scheme was finalised.
HPCL Employees Management 369 Staff Association and CORIL Staff Association submitted their written submissions on December 6, 1977 and July 17, 1977 respectively.
These representations were considered by the Government and after several meetings between the Chief Executives of HPCL and CORIL and the Secretary and other senior officers of the Ministry and Bureau of Public Enter prise, Government formulated the guidelines for rationalisa tion and communicated its decision to both CORIL and HPCL by its letter dated July 28, 1979.
With a view to giving a further opportunity to the employees of erstwhile ESSO and CORIL group of officers, the Chairman of HPCL appointed two Committees to submit their recommendations as to the equiva lence and fitment of existing officers on the basis of IOC 's scales of pay in accordance with the Government guidelines.
HPCL considered the reports submitted by the said two Com mittees and also different methods of fitment and equiva lence of different pay scales of ESSO, LIL and CORIL with the pay scales of IOC and, keeping in view all these factors including the submissions made by the Officers ' Association through their representations, HPCL approved the proposal of rationalisation of pay scales, allowances and perquisites.
Accordingly, an offer letter dated July 7, 1980 together with the terms and conditions of new appointment as per the rationalisation scheme was sent to each of the employees.
The further case of HPCL is that without exception every one of the CORIL Management Employees accepted the fresh terms offered to them by the said letter dated July 7, 1980.
It is, accordingly, contended by Mr. Pai, learned Coun sel appearing on behalf of HPCL, that the impugned rational isation scheme having been finalised after repeated consul tations with the officers of CORIL and their Association and all the officers of CORIL having accepted in writing the said scheme, they are precluded from challenging the same.
Another fact, upon which reliance has been placed on behalf of HPCL, is an order of this Court dated December 17, 1979 passed in Civil Appeal No. 3214 of 1979 whereby HPCL challenged the judgment of the Delhi High Court quashing a circular dated March 8, 1978 issued by the Board of Direc tors of CORIL, on the writ petition filed by the employees of CORIL being Writ Petition No. 426 of 1978.
Two other appeals being Civil Appeal No. 3212 of 1979 and Civil Appeal No. 35 186 of 1979 were also filed by the officers of CORIL and Bharat Petroleum Corporation Ltd. respectively.
The said order is as follows: "The petitioner Corporation will be at liberty to frame a 370 scheme, if it wishes to do so, in accordance with the judg ment of the High Court under appeal.
If the scheme is framed, it will not be implemented for a period of three weeks from the date of its framing and the respondents will be at liberty within the period of 3 weeks to apply to this Court for stay.
This order will be without prejudice to the rights and contentions of the petitioner Corporation in the appeal.
" Admittedly, no application was made to this Court by the officers of CORIL praying for stay of the rationalisation scheme within a period of three weeks.
Relying on the said order of this Court and also on the fact that no application for stay was made to this Court within the period allowed, it is submitted on behalf of HPCL that the petitioners accepted the rationalisation scheme which is also evidenced by their written acceptance.
If they had any objection to the scheme, they would have surely made a representation to this Court in the said Civil Appeal No. 3214 of 1979 which was then pending.
In the writ petition, the petitioners have emphatically denied the allegation of HPCL that discussions were made with individuals and groups of Management Staff of CORIL with regard to the rationalisation scheme.
As to the accept ance of the rationalisation scheme, the case of the peti tioners is that on July 12, 1980 a news item appeared in the Bombay edition of the Times of India to the effect that under the scheme of rationalisation, the services of nearly 950 officers of HPCL would be terminated, and that such officers would simultaneously be reappointed on the basis of public sector salary.
In view of the said news, the peti tioners filed an application in this Court in the said Civil Appeals praying for stay or suspension of the operation of the said offer letter dated July 7, 1980 and for restraining HPCL from terminating the services of the Management Staff of CORIL pending the disposal of the Civil Appeals.
HPCL filed an affidavit in opposition to the said application of the petitioners to the effect that no decision had been taken by HPCL to terminate the services of the officers of CORIL.
Accordingly, this Court disposed of the said applica tion recording that in view of the said affidavit of HPCL, no order was needed to be passed.
Further, the case of the petitioners is that in spite of the said order of this Court, the petitioners still apprehended that HPCL would terminate the services of the petitioners in the event of their refusal to accept the said scheme and, as such, the petitioners under duress were forced to signify their con sent to the said scheme.
371 We have considered the explanation of the petitioner justifying the acceptance of the said offer letter dated July 7, 1988 and the rationalisation scheme sent therewith and also the contention of HPCL in that regard.
In our opinion, the apprehension of the petitioners that in the event of their refusal to accept the scheme, their services will be terminated cannot be rejected on the face of it.
It may be that there was no reasonable basis for such apprehen sion, but the plea that because of such apprehension the petitioners had no other alternative than to accept the scheme, cannot be disbelieved.
At the same time, we do not also put any blame on HPCL for implementing the said scheme which was accepted by the petitioners and other officers of CORIL.
Instead of disposing of these writ petitions on this technical grounds, we may proceed to consider the respective contentions of the parties on merits.
The main grievance of the petitioners appears to be that in the rationalisation scheme a compression has been made at the lower level, namely, Grades R6 A and R6 B have been clubbed together and instead of placing them in the Salary Group B of HPCL, as has been done for the equivalent Grade E 6 of ESSO, they have been placed in the Salary Group A of HPCL.
Similarly, the Grades R7 A and R7 B have been clubbed together and placed in Salary Group B of HPCL, while the equivalent Grade of ESSO has been placed in the Salary Group C of HPCL.
The contention of the petitioners is that the compres sion should have been made at the higher grades, namely, Grades R11 and R12 and the Grade of General Manager.
This is not for this Court to say whether the compression should have been made in the lower grades or in the higher grades.
By such compression, Grades R6 A and R7 A have been upgraded and the persons placed in those Grades have been benefited by such upgradation.
There is much substance in the conten tion made on behalf of HPCL that if compression had been made in the upper grades, there would be much complications and, moreover, such compression in the upper grades was not convenient to be made in view of functional differences.
The Grade of General Manager cannot be clubbed together with a lower grade.
In the circumstances, we are unable to accept the contention of the petitioners that the compression should have been made in the higher grades of CORIL.
The most important question that requires consideration is whether in framing the rationalisation scheme HPCL has really made the equation of posts of CORIL with those of ESSO/LIL.
It is the 372 positive case of the petitioners that no such equation has been made and the fitment of the officers of CORIL and those of ESSO/LIL in the IOC/HPCL scales of pay have been made without the equation of posts, which is a sine qua non for integration of officers coming from different sources.
The petitioners have mainly relied upon the recommendation of the Tandon Committee that General Sales Representative of ESSO has been equated with the post of Retail Development Supervisor of CORIL.
In the scheme prepared by HPCL, the post of General Sales Representative of ESSO and that of Depot Superintendent have been placed in the Salary Group B of HPCL, while the post of Retail Development Supervisor and Depot Superintendent/Relief Depot Superintendent of CORIL have been placed in the Salary Group A of HPCL.
As against this, the contention of HPCL is that the two Committees that were appointed by the Chairman of HPCL considered the different methods of fitment and equivalence of different pay scales of ESSO, LIL and CORIL with the pay scales of IOC.
Except the bare allegation, no material has been produced before us on behalf of HPCL to show that the said Committees had, as a matter of fact, considered the question of equation of posts on the basis of the principle as laid down by the Central Government while referring the matter to the Tandon Committee, namely, functional similari ty and co equal responsibility.
In the affidavits filed on behalf of HPCL, no particulars have been given with regard to the functional equivalence or otherwise of the different grades of these officers of CORIL, ESSO and LIL.
It is also not stated what happened to the consideration by the Govern ment of the Tandon Committee 's report.
There can be no doubt that the Government is not bound to accept the recommenda tion of the Tandon Committee but, at the same time, the equation of posts has to be made on the principle of func tional equivalence and co equal responsibility.
As no mate rials have been produced in that regard on behalf of HPCL, it is difficult for us to hold that the different grades of posts have been compared before placing the officers of these companies in the IOC/HPCL scales of pay.
While it is not within the domain of the Court to make the equation of posts for the purpose of integration, it is surely the concern of the Court to see that before the integration is made and consequent fitment of officers in different grades/scales of pay is effected, there must be an equation of different posts in accordance with the principle stated above.
As there is no evidence or material in support of such equation of posts, it is difficult to accept the ra tionalisation scheme with regard to the placing of the officers of CORIL in different IOC/HPCL grades of pay.
373 The petitioners approached the Grievance Committee, but the Grievance Committee did not consider the objections of the petitioners to the said scheme.
In our opinion, there is much substance in the contention made on behalf of HPCL that it was not the business of the Grievance Committee to con sider the propriety or otherwise of the rationalisation scheme, but if any officer has not been placed in the proper grade, the Grievance Committee may place such officer in the proper grade in accordance with the rationalisation scheme.
Be that as it may, in the view which we take, namely, that there has been no equation of posts, the rationalisa tion scheme cannot be accepted in full.
The prayer of the petitioners in the writ petition is for a declaration that the said scheme is violative of Articles 14 and 16 of the Constitution of India and for a writ, order or direction in the nature of mandamus directing HPCL to remove the discrim ination against the petitioners in regard to the impugned rationalisation scheme.
The question is whether we should set aside the scheme after the lapse of about eight years.
During these eight years, by virtue of implementation of the scheme, many changes have taken place with regard to the positions and ranks of the officers of HPCL including the petitioners and to set aside the whole scheme at this stage would surely affect the service structure of HPCL.
We are also not obliv ious of the order of this Court dated July 20, 1984 record ing the statement made in the affidavit of HPCL that if this Court would ultimately decide the matter in favour of the petitioners, HPCL would accord to them all the benefits which they would be entitled to.
That is an undertaking given by HPCL, but we should also look to the interest of several officers of HPCL who would be affected, if the scheme is set aside.
In the circumstances, without setting aside the scheme, we direct HPCL to appoint a Committee consisting of high officials of HPCL and Central Government, other than those who were in the previous Committees, within one month from date for the purpose of considering the question of equation of posts on the basis of functional similarity, equivalence and co equal responsibility, that is to say, whether on that basis Grades R6 A and R6 B of CORIL, either jointly or separately, can be equated with the Grade E 6 of ESSO and, similarly, Grades R7 A and R7 B of CORIL, either jointly or separately, can be equated with Grade E 5/E 5A of ESSO.
In considering the question of equation of posts, the respond ents shall also take into its consideration the report of the Tandon Committee.
Such consideration shall be 374 made within six months from today.
If such equation is found to be in favour of the petitioners, HPCL shall give effect to the same.
But, in view of the lapse of about eight years for which the petitioners are also to some extent responsi ble, the date or dates from which the consequential benefit will be given effect to and also the quantum of such benefit will be such as may be deemed fit and proper by the respond ents, having regard to the financial involvement and the changes that have taken place.
We make it clear that, in no event, promotions and the existing positions of the officers of HPCL, by virtue of the implementation of the impugned scheme, will be interfered with.
The writ petitions are disposed of as above.
There will be no order as to costs.
P.S.S Petitions allowed.
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ESSO Standard Refining Company of India Ltd. and Lube India Ltd. were acquired by the ESSO (Acquisition of Under takings in India) Act, 1974 and vested in the Hindustan Petroleum Corporation Ltd.
In 1978 Caltex Oil Refining India Ltd., another Government company was amalgamated with HPCL.
Consequent upon this integration of management staff of CORIL and HPCL, dispute arose as to their fitment in equiva lent groups and fixation of inter se seniority.
The Tandon Committee appointed to examine the issues recommended the application of the principles of (1) functional similarity, and (2) co equal responsibility, for equating positions in the two companies.
The HPCL appointed two functional direc tors for framing a rationalisation scheme.
In the said scheme for the purpose of equation of 10 grades of CORIL with 8 grades of HPCL some compression was made in the lower grades, namely, R6 A and R6 B of CORIL were clubbed together and equated with grade A of HPCL.
Again, grade R7 A and R7 B were clubbed together and equated with grade B of HPCL.
The complaint of the petitioners, former officers and employees of CORIL, was that the rationalisation scheme was arbitrary, in that the fitment of officers of CORIL and those of the ESSO/LIL in the HPCL scales of pay had been made without the equation of posts, which was a sine qua non for integration of officers coming from different sources, so much so that they had been consistantly fitted in one or two grades lower in HPCL vis a vis their counterparts in ESSO/LIL performing similar duties and having similar re sponsibilities and status; that in the Tandon Committee report, the post of General Sales Representative of ESSO had been equated with the post of Retail Development Supervisor of CORIL on the principle of functional similarity and co equal responsibility; that since these two posts were con gruent, they should have been fitted in the same group, that is, in Group B of the new HPCL 363 Grade structure, whereas in the said scheme the post of General Sales Representative of ESSO (E 6) and that of Depot Superintendent (E 6) have been placed in the Salary Group B of HPCL, while the post of Retail Development Supervisor (R6 A) and Depot Superintendent/ Relief Depot Superintendent (R6 B) of CORIL have been placed in Salary Group A of HPCL.
It is further averred that the post of Depot Super intend ent A (R7 B) and that of Marketing Representative (RT A) of CORIL have been placed in the Salary Group B of HPCL, but similar posts of ESSO being E 5/E5A have been placed in Salary Group C of HPCL; that the compression should have been made at the higher grades namely, grades R 11 and 12 and the grade of General Manager, and that the petitioners were forced to signify their consent to the said scheme under duress.
They, therefore, prayed for a declaration that the said scheme was violative of Articles 14 and 16 of the Constitution of India.
For the respondents, it was contended that the two committees that were appointed by the Chairman of HPCL considered the different methods of fitment and equivalence of different pay scales of ESSO, LIL and CORIL with the pay scales of IOC, that the reports submitted by these two committees were considered by the HPCL along with the sub missions made by the officers ' association through their representations before approval, that the terms and condi tions of the new appointments as per the rationalisation scheme were circulated to each of the CORIL employees with its letter dated July 7, 1980 and they having accepted in writing the said scheme they were precluded from challenging the same.
Allowing the writ petitions, HELD: 1.
While it is not within the domain of the Court to make the equation of posts for the purpose of integra tion, it is surely the concern of the Court to see that before the integration is made and consequent fitment of officers in different grades/scales of pay is effected, there must be an equation of different posts in accordance with the principle Of functional equivalence and co equal responsibility.
[372G H] In the instant case, no evidence or material has been placed before the Court on behalf of the HPCL in support of such equation of posts.
The rationalisation scheme with regard to the placing of the officers of CORIL in different IOC/HPCL grades of pay, therefore, cannot be accepted in full.
[372H] 364 2.
This is not for the Court to say whether the compres sion should have been made in the lower grades or in the higher grades.
By such compression, grades R6 A and R7 A have been upgraded and the persons placed in those grades have been benefitted.
If compression had been made in the upper grades there would have been much complications in view of the functional differences, for the grade of General Manager cannot be clubbed together with a lower grade.
The contention that the compression should have been made in the higher grades of CORIL cannot, therefore, be accepted.
[371F G] 3.
The apprehension of the petitioners that in the event of their refusal to accept the scheme, their services will be terminated cannot be rejected.
It may be that there was no reasonable basis for such apprehension, but the plea that because of such apprehension the petitioners had no other alternative than to accept the scheme, cannot be disbe lieved.
[371B] 4.
Having regard to the interest of several officers of HPCL who would be affected if the scheme is set aside, and in view of the fact that during the eight years in which the scheme had been in operation many changes had taken place with regard to the positions and ranks of the officers of HPCL including petitioners, HPCL is directed to appoint a committee consisting of high officials of HPCL and Central Government, other than those who were in the previous com mittees, within one month for the purpose of considering the question of equation of posts on the basis of functional similarity, equivalence and co equal responsibility, and to give effect to the same.
Promotions and the existing posi tions of the officers of HPCL by virtue of the implementa tion of the impugned scheme, not to be interfered with.
[373D, F G; 374B]
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5940.txt
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ivil Appeal No. 203 of 1975.
From the Judgment and Order dated 12.12.1974 of the Madhya Pradesh High Court in Second Appeal No. 569 of 1970.
U.R. Lalit, Rameshawar Nath, L.G. Kher and Ravinder Nath for the appellant.
P.P. Rao, Dr. N.M. Ghatate, S.V. Deshpande, Ms. Priya Gupta and Ejaz Maqbool for the Respondents.
The Judgment of the Court was delivered by KASLIWAL, J.
This appeal by special leave is directed against 908 the judgment of the High Court of Madhya Pradesh at Jabalpur dated 12th December, 1974.
This litigation has a long chequered history of more than five decades.
The appellant, the Sagar Mahila Vidyalaya is an educational institution founded by a section of the public of District Sagar (M.P.) by giving donations and is duly registered under the Societies Registration Act (Act XXI of 1860).
On 17th November, 1933 one Govind Rao Harshe had mortgaged some agricultural land and house known as ``Harshewada ' ' to Lakshmi Chand and Duli Chand Modi.
The aforesaid mortgages filed a suit and obtained a preliminary decree for sale on 14th July, 1937.
A final decree for sale for the realisation of Rs. 5001/13/6 was passed on 26th March, 1938.
On 29th March 1938 the decree holders applied for execution of the said decree.
The execution of the aforesaid decree was stayed and in the meantime C.P. and Berar Relief of Indebtedness Act, 1939 came into force.
The judgment debtor Govind Harshe alongwith his minor sons namely, Sadashiv Rao and Ram Chander Rao applied for settlement of the debts on 14th September, 1939 in the Debt Relief Court, Sagar.
the execution of the final decree for sale had been stayed by the executing Court as per the provisions of the Relief of Indebtedness Act.
On 11th September, 1940, the Debt Relief Court reduced the amount and granted instalments.
The creditors filed revision applications against the aforesaid order of Debt Relief Court.
The revision filed by Lakshmi Chand and Duli Chand was registered as Civil Revision No. 119 of 1940 while that of another creditor Pandey Shankernath was registered as Civil Revision No. 27 of 1941.
The Additional District Judge disposed of both the revisions by order dated 29th September, is the copy of the order passed in Civil Revision No. 119 of 1940 and its operative part reads as under: ``For the reasons given in paragraph 8 of the order of C.R. No. 27 of 1941, I hold that a condition can be prescribed by the D. R. Court in default of which the order fixing instalments shall cease to have effect and the whole claim shall become recoverable.
I, therefore, order that the debtors shall keep the mortgaged property intact by paying its land revenue in time every year and shall keep the house in good repairs, as a condition precedent to the continuance of their right to pay the claim by instalments fixed by the D.R. Court.
In default of their paying land revenue of the Malik Makbuza land in time, endangering its sale for its recovery, and in case they deliberately fail to keep the mortgaged 910 house in proper repairs or endanger its existence, this order of instalments shall cease to have effect and the applicant creditor shall become entitled to recover the whole amount.
Parties will bear their own costs of this revision. ' ' On November, 1941 the decree holders Lakshmi Chand and Duli Chand Modi applied for the revival of the execution proceedings on the ground that the judgment debtor had defaulted in carrying out the directions of the revisional court and as such the order passed by the Debt Relief Court granting instalments had ceased to exist and the whole amount had become payable in lumpsum.
the decree holders as such prayed for the sale of the house property in dispute.
the judgment debtor Govind Rao Harshe did not appear before the executing court inspite of service of notice and allowed the execution case to proceed ex parte against him.
On 31st March, 1942 the executing court passed a order holding that the non applicant judgment debtor had committed breach of the condition and as such the decree holders were entitled to recover the amount determined by the Debt Relief Court as due to them at once.
It was further held that the decree holders were entitled to execute the decree for recovery of debt amount.
The judgment debtor Govind Rao Harshe submitted an application on 12th August, 1942 for setting aside the ex parte order dated 31st March, 1942.
This application was dismissed on 13th November, 1942.
Civil Appeal filed against the said order was also dismissed on 6th April, 1943 by the Additional District Judge.
In the meantime, the house mortgaged was put to auction and the highest bid of Rs. 5905 was knocked down in favour of one Gopal Rao Mutatkar on 20th August, 1942.
1/4th of the auction amount Rs. 1500 was deposited on the spot and the balance 3/4th amounting to Rs. 4405 was deposited on 4th September, 1942.
The Judgment debtor Govind Rao Submitted an application under Order XXI Rule 90 C.P.C. for setting aside the sale dated 20th August, 1942.
This application was rejected vide order dated 6th February, 1943.
Miscellaneous Appeal filed against the said order was dismissed by the Second Additional District Judge, Sagar vide order dated 19th December, 1943.
It may be noted at this stage that in the meantime the sale was confirmed vide order dated 10th April, 1943.
Sadashiv Rao and Ram Chander Rao, sons of judgment debtor Govind Rao Harshe who had become adult also moved the executing Court on 28th September, 1943 that they were also necessary parties to the execution case as they were also parties in the proceedings before 911 the Debt Relief Court and as they were not made parties in the execution court, the order passed by the executing court dated 31st March, 1942 was void and without jurisdiction.
This application was rejected on 13th December, 1943.
An appeal filed against this order was dismissed by the Additional District Judge, Sagar by order dated 24th April 1944.
The Miscellaneous second appeal filed against the appeal order was also dismissed by the High Court by order dated 15th December, 1947.
In the meantime on 15th January, 1944 an application was submitted by Mahila Vidyalaya, Sagar (appellant before us) through its Secretary, Shri G.R. Wakhle for granting the sale certificate to the applicant Mahila Vidyalaya.
It was stated in the application that the house in question was auctioned by the Court and was purchased by Gopal Rao Mutatkar on 20th August, 1942 for Mahila Vidyalaya, Sagar for Rs. 5905 and the auction sale was confirmed by the Court on 10th April , 1943.
It was prayed that the sale certificate be granted to the applicant purchaser (Mahila Vidyalaya).
Stamps of Rs. 90 were supplied with the application.
A note was also appended with the application as under: ``That when Gopal Rao son of Madho Rao offered bid in public auction he was a member of the above mentioned institution.
But at present he is not a member.
Therefore, the following applicant who is the Secretary of this institution makes this application. ' ' The executing court on 26th February, 1944 passed an order to the following effect: ``The sale certificate will issue in the name of Mahila Vidyalaya, Sagar through Secretary, G.R. Wakhle ' '.
The sale certificate was then actually issued in favour of Mahila Vidyalaya on 8th April, 1944.
It is further important to note that four sons of the judgment debtor Govind Rao, namely, Sadashiv Rao, Ram Chander Rao, Sarad Chand (minor) and Ashok Kumar (minor) filed a Civil suit in the year 1948 (Civil Suit No. 1 A of 1948) for a declaration that the execution sale was not binding on their interest.
It may be noted that initially this suit was filed against Gopal Rao Mutatkar for Mahila Vidyalaya, Sagar as defendant No. 1(a), Shri G.R. Wakhle, Secretary, Mahila Vidyalaya as defendant No. 1(b), Lakshmi Chand and Duli Chand as defendant Nos. 2 and 3 and Govind Rao Harshe (father of the 912 plaintiffs) as defendant No. 4.
In that suit Gopal Rao Mutatkar and G.R. Wakhle filed their written statements and raised an objection that they were unnecessarily made parties as they had ceased to have any connection with the Mahila Vidyalaya.
exhibit P 22 is the copy of the written statement dated 10th March, 1948 filed by Gopal Rao Mutatkar in which he admitted that the house under dispute was auctioned on 20th August, 1942 and the same was purchased by the Sagar Mahila Vidyalaya, Sagar through him and that defendant No. 1 b (G.R. Wakhle) as Secretary of the said Mahila Vidyalaya had made an application for issue of sale certificate and for possession of the house.
The Sagar Mahila Vidyalaya, Sagar was a registered institution and the suit should have been filed against the institution itself and not in the name of its office bearers.
Shri G.R. Wakhle was the Secretary of the Sagar Mahila Vidyalaya, Sagar in 1942 and 1943.
He was no longer its secretary and the present Secretary of the said institution was Mr. Kamlakar Nagarkar.
It was thus prayed that the defendants 1 a and 1 b had been unnecessarily joined as parties to the suit and should be discharged.
Thereafter, the plaintiffs impleaded Mahila Vidyalaya, Sagar as party.
This suit filed by the aforementioned four sons of the judgment debtor was also dismissed on 27th December, 1949 and costs were imposed not only on the plaintiffs but also on defendant No. 4 i.e. Govind Rao Harshe, the judgment debtor.
The defendant No. 4 was also required to pay Rs. 300 to defendants 1, 2 and 3 as compensatory costs.
No further appeal was preferred against this judgment and decree.
The Sagar Mahila Vidyalaya, Sagar in the capacity of auction purchaser then applied for the delivery of possession.
The possession was delivered to Mahila Vidyalaya on 24th March, 1951.
At the time of delivery of possession some portion of the house was in the occupation of Smt.
Radha bai, widowed sister of the judgment debtor, Govind Rao Harshe and other portions were in the occupation of the tenants.
The Secretary of the Mahila Vidyalaya Agreed to the request of the tenants including Smt.
Radha Bai that they will not be ousted as they were willing to execute rent notes.
Thereafter, Mahila Vidyalaya being in need of more occupation moved the Rent Controller for permission to serve notices on the tenants to vacate the premises.
The permission was granted by the Rent Controller on 10th March, 1953 after service of the notices, all the tenants except Mst.
Radha Bai vacated the premises and handed over possession to Mahila Vidyalaya.
The Mahila Vidyalaya then instituted a suit (Civil Suit No. 100 A of 1954) against Mst.
Radha Bai and also Govind Rao Harshe who had started to live with his family in the portion occupied by Mst.
Radha bai as her 913 licensee.
The Trial Court dismissed the suit for ejectment but passed a decree for arrears of rent against Mst.
Radha Bai alone.
The appeal filed by the Mahila Vidyalaya was allowed by the Additional District Judge by judgment dated 27th October, 1957.
Against this decision, Govind Rao Harshe alone preferred an appeal in the High Court and Mst.
Radha Bai was impleaded as respondent No. 2.
The High Court by its judgment dated 29th April, 1960 dismissed the second appeal filed by Govind Rao Harshe.
The Mahila Vadyalaya then filed an execution application for ejectment of the occupants and the same is still pending as a result of stay order passed in a subsequent suit filed by Govind Rao Harshe, which is now the subject matter of the present appeal before us.
In the above background, we would, now state the facts of suit No. 133 of 1960 filed in the Court of Civil Judge, Class I, Sagar on 26th November, 1960 by Govind Rao Harshe, which has culminated in the present appeal.
Govind Rao Harshe filed the suit against Mahila Vidyalaya for a declaration, possession and permanent injunction.
Plaintiff Govind Rao Harshe died on 14th December, 1967 during the pendency of the suit and all the respondents in the present appeal were substituted in his place as his legal representatives.
The suit was dismissed by the Trial Court on 13th December, 1968.
On an appeal the District Judge, Sagar allowed the appeal and decreed the suit in favour of the present respondents granting the declaration, delivery of possession of the house together with a mandatory injunction directing demolition of some new constructions made by the Mahila Vidyalaya.
Aggrieved against the judgment of the First Appellate Court, the defendant Mahila Vidyalaya filed a second appeal before the High Court.
The High Court by order dated 12th December, 1974 dismissed the appeal.
The defendant Mahila Vidyalaya in the above circumstances have come in appeal by the grant of special leave.
The High Court held that as Gopal Rao Mutatkar was the auction purchaser, no sale certificate could be issued by the executing court in favour of the appellant Mahila Vidyalaya.
It was held that the bid in the auction was made by Gopal Rao for himself and not on behalf of Mahila Vidyalaya.
The deposit of auction money was also made in his own name and the order dated 10th April, 1943 confirming the sale was also made in his name.
The High Court affirmed the finding of the First Appellate Court that Gopal Rao Mutatkar did not purchase the property in the auction acting on behalf of the appellant and the First Appellate Court rightly held that Gopal Rao Mutatkar was the auction purchaser ad the sale was confirmed in 914 his name and the deposited full sale amount in his own name.
The High Court also held that Gopal Rao Mutatkar could only transfer his proprietary right by sale or a gift which he did not do.
In the circumstances, there was no transfer of the proprietary rights in favour of the appellant Vidyalaya and if that was so, no certificate could be issued in favour of the Mahila Vidyalaya.
The act of the executing court was clearly without jurisdiction and the sale certificate being void and inoperative conferred no right or title upon the appellant Mahila Vidyalaya over the suit property.
The High Court further held that suit filed on 26th November, 1960 being within 12 years from 24th March, 1951 was within time.
The plaintiff Govind Rao Harshe was never ousted by Gopal Rao Mutatkar who was the auction purchaser.
He was dispossessed by a person who had no title.
There was, therefore, no question of filing a suit for setting aside the sale.
It was further held that the plaintiff in this case was not required to file a suit for getting the sale set aside when he was pleading that the sale itself was void.
A void sale could be ignored by a true owner and it did not affect his title.
The High Court thus took the view that the suit for possession on the basis of title was governed by Article 144 of the Limitation Act, 1908.
In either case, whether Article 142 or 143 of the Limitation Act, 1908 is applied, the suit is within time.
We have heard learned counsel for the parties and have thoroughly perused the records.
In our view the High Court completely misdirected itself and wrongly ignored the earlier decisions between the parties and we are, therefore, inclined to allow this appeal.
The admitted facts of the case are that the house in question was auctioned in the execution of a decree for sale obtained by the mortgagees Lakshmi Chand and Duli Chand Modi.
Gopal Rao Mutatkar took part in the auction bid and it was knocked down in his favour on 20th August, 1942.
The sale was confirmed by an order of the executing court dated 10th April, 1943.
Govind Rao the judgment debtor submitted an application for setting aside the sale under Order XXI Rule 90 C.P.C. but remained unsuccessful.
The steps taken by his adult sons Sadashiv Rao and Ram Chander Rao for impleading them as parties also proved futile.
It is an admitted position that an application was submitted by the Mahila Vidyalaya through its Secretary as early as 5th January, 1944 for issue of a sale certificate in its name as the house was purchased in the auction for the Vidyalaya by Gopal Rao Mutatkar as a member of the institution.
The Court on 26th February, 1944 ordered that the sale certificate be issued to Mahila Vidyalaya.
The necessary stamps for the sale certificate were supplied 915 by the Mahila Vidyalaya and the sale certificate was actually issued in the name of the Mahila Vidyalaya on 8th April, 1944.
It is important to note that no finger was raised nor any steps were taken by the judgment debtor or his sons objecting the issue of sale certificate in favour of Mahila Vidyalaya.
A suit was brought in the year 1948 by the four sons of the judgment debtor Govind Rao Harshe.
The two adult sons were those who had already remained unsuccessful in challenging the order of the Court dated 31st March, 1942 and two sons Sarat Chand and Ashok Kumar were those who were born in the meantime.
This suit filed in 1948 was for a declaration that the execution sale was not binding on their interests.
It is worthwhile to note that this suit was initially filed against Gopal Rao Mutatkar and G.R. Wakhle but subsequently the plaintiffs impleaded the Mahila Vidyalaya in view of an objection raised by Gopal Rao Mutatkar and G.R. Wakhle that the house in question was actually purchased by Mahila Vidyalaya and the sale certificate was also issued in the name of Mahila Vidyalaya.
This suit was dismissed on 27th December, 1949 and had become final as no appeal was preferred against the dismissal of the suit.
It may be further noted that application for delivery of possession to auction purchaser was filed by Mahila Vidyalaya on 22nd September, 1948 and the symbolic possession was also delivered on 24th March, 1951.
As Mahila Vidyalaya was in need of more building, it moved the Rent Controller for permission to serve notices on the tenants.
The said permission was granted on 10th March, 1953 and all the tenants except Mst.
Radha Bai who was the widowed sister of Govind Rao Harshe, handed over the possession to Mahila Vidyalaya.
The Mahila Vidyalaya thereafter instituted Civil Suit No. 100 A of 1954 against Mst.
Radha Bai and Govind Harshe for ejectment and rent.
The Trial Court dismissed the suit for ejectment but passed a decree for arrears or rent against Mst.
Radha Bai alone.
The appeal filed by the Mahila Vidyalaya was allowed by the Additional District Judge, Sagar on 27th October, 1957 and the prayer for ejectment was also allowed.
Against this decision, Govind Rao Harshe alone preferred a second appeal in the High Court and the same was dismissed by order dated 29th April, 1960.
In this litigation Govind Rao Harshe was held to be a licensee of his sister Mst.
Radha Bai.
The above narration of events which remain undisputed go to show that the house in question was sold in the execution of a final decree for sale and the bid was knocked down in the name of Gopal Rao Mutatkar as back as 20th August, 1942.
The entire sale money was deposited and the sale was confirmed under Order XXI Rule 92 C.P.C. by order dated 10th April, 1943.
It is no doubt correct that the 916 final bid in the sale was knocked down in the name of Gopal Rao Mutatkar and the sale was also confirmed in his name but the sale certificate was admittedly issued in the name of the Mahila Vidyalaya.
In this regard an application was filed on behalf of Mahila Vidyalaya on 5th January, 1944 and the executing court had passed an order on 26th February, 1944 that the sale certificate will issue in the name of Mahila Vidyalaya.
In the application filed by Mahila Vidyalaya it was clearly stated that the house in question was auctioned by the Court and was purchased by Gopal Rao Mutatkar on 20th August, 1942 for Mahila Vidyalaya.
This stand taken by Mahila Vidyalaya was accepted and the executing court passed a specific order on 26th February, 1944 for issue of a sale certificate in the name of Mahila Vidyalaya.
The sale certificate was thereafter, actually issued in the name of Mahila Vidyalaya on 8th April, 1944.
Steps for executing the decree and for obtaining actual possession was also taken by the Mahila Vidyalaya.
Govind Rao Harshe was a party to the execution proceedings and till the filing of the present suit on 26th November, 1960, no objection was raised as regards the sale certificate being wrongly issued in favour of Mahila Vidyalaya.
Not only that in a suit for declaration filed in 1948 by the four sons of Govind Rao Harshe, Gopal Rao Mutatkar in his written statement filed on 10th March, 1948 had taken a clear stand that the house in question was actually purchased by Mahila Vidyalaya and as such he was wrongly impleaded as defendant in the suit.
On such stand taken by Gopal Rao Mutatkar, the plaintiffs had subsequently impleaded Mahila Vidyalaya as the defendant.
In this suit also no objection was raised on behalf of the plaintiffs, who were sons of Govind Rao Harshe, that no sale certificate could have been issued in the name of Mahila Vidyalaya nor any title could have passed to Mahila Vidyalaya and as such there was no question of impleading Mahila Vidyalaya as defendant and the suit for declaration should continue against Gopal Rao Mutatkar.
The High Court in the impugned order considered that as Gopal Rao Mutatkar was the auction purchaser, no sale certificate could be issued by the executing court in favour of the appellant Mahila Vidyalaya.
The High Court in arriving at the aforesaid conclusion also took the view that there was nothing on record to show that till the sale was confirmed it was ever made known that Gopal Rao Mutatkar was purchasing the property for and on behalf of the Mahila Vidyalaya.
The order dated 10th April, 1943 relating to confirmation of sale was also made in the name of Gopal Rao Mutatkar.
The High Court further took the view that Gopal Rao Mutatkar could only 917 transfer his proprietary rights by sale or a gift and the same being not done, there was no transfer of the proprietary rights in favour of the appellant Mahila Vidyalaya.
It was thus held that the Act of the executing court was clearly without jurisdiction and the sale certificate being void and inoperative conferred no right or title on the appellant Mahila Vidyalaya over the suit property.
We do not subscribe to the above view taken by the High Court in the facts and circumstances of the present case.
The sale certificate is issued under Order XXI Rule 94 C.P.C. The sale certificate is granted by specifying the property sold and the name of the person who at the time of sale is declared to be the purchaser.
An application was submitted on 5th January, 1944 on behalf of Mahila Vidyalaya that it was the real purchaser and the bid in the auction was made by Gopal Rao Mutatkar on its behalf as he was a member of the institution.
This application was accepted by the executing court by a specific order dated 26th February, 1944 and it was directed that the sale certificate shall be issued in favour of the applicant Mahila Vidyalaya.
The executing court had jurisdiction to allow or reject such application and it cannot be said that the act of the executing court was clearly without jurisdiction and the sale certificate as well as the entire execution proceedings were void and inoperative.
In case Govind Rao Harshe had any grievance he ought to have challenged the order dated 26th February, 1944 in the proper forum and had no right to challenge the same after 16 years by filing the present suit on 26th November, 1960.
We are not going into the propriety of such order but the same cannot be said to be void on account of being without jurisdiction as held by the High Court.
The High Court while dealing with the question of limitation held that the plaintiff in this case was not required to file a suit for getting the sale set aside when he is pleading that the sale itself is void.
A void sale could be ignored by a true owner and it did not affect his title.
The High Court in our view was totally wrong in holding that it was a case of void sale.
It may be noted that Govind Rao Harshe had already taken steps for getting the sale set aside by moving a petition under Order XXI Rule 90 C.P.C. and his sons had filed a suit for declaration but all those proceedings finally terminated against them.
Even if for arguments sake the objection now raised in the present suit is considered, it is only in respect of the sale certificate being wrongly issued in favour of Mahila Vidyalaya.
So far as the sale in favour of Gopal Rao Mutatkar is concerned, there is no illegality and the sale was rightly confirmed in his favour under Order XXI Rule 92 C.P.C. by order dated 10th April, 1943.
It may be noted that once an order was made under Order XXI Rule 92 confirming the sale, the title of 918 the auction purchaser related back to the date of sale as provided under Section 65 C.P.C. The title in the property thereafter vests in the auction purchaser and not in the judgment debtor.
The issue of sale certificate under Order XXI Rule 94 C.P.C. in favour of the auction purchaser though mandatory but the granting of certificate is a ministerial act and not judicial.
Thus looking into the matter from this angle also it is clear that no right or title remained with Govind Rao Harshe after confirmation of sale in favour of Gopal Rao Mutatkar which related back to the date of sale i.e. 20th August, 1942.
Thus there is no question of holding that it was a case of a void sale which could be ignored by a true owner and it did not affect his title.
Govind Rao Harshe and as such the respondents who are his legal representatives were not entitled to take the stand that they were true owner as the sale itself was void and they were not required to file a suit for getting the sale set aside.
With the risk of repetition it is held that it was not a case of the sale being void and in any case so far as issue of sale certificate in favour of Mahila Vidyalaya is concerned, the same was determined by a judicial order dated 26th February, 1944 and the executing court was competent to pass such order cannot be held to be void on the ground of being without jurisdiction as determined by the High Court and it was necessary to challenge the said order within limitation.
Even if the residuary Article 120 of the Limitation Act, 1908 is applied, it should have been challenged within 6 years and as such the present suit filed on 26th November, 1960 was hopelessly barred by time.
The High Court was clearly in error in taking the view that Govind Rao Harshe was the true owner and the appellant Mahila Vidyalaya was a trespasser.
Even if it may be considered for a moment that sale certificate could not have been issued in favour of the appellant Mahila Vidyalaya still in the facts of this case it cannot be held that Mahila Vidyalaya was a trespasser and G.R. Harshe was the true owner at the time of filing of the present suit.
The sale of the property in question was perfectly valid and as soon as the sale was confirmed in favour of Gopal Rao Mutatkar under Order XXI Rule 92 C.P.C., Govind Rao Harshe had no right or title in the property and Gopal Rao Mutatkar became the owner of the property.
The admitted position which is borne out from the records is that Gopal Rao Mutatkar never claimed any right in the property nor took proceedings for obtaining possession by executing the decree.
On the other hand, he took a clear stand in his written statement filed on 10th March, 1948 that he had bit in the auction on behalf of Mahila Vidyalaya and the sale certificate was rightly issued in favour of the Mahila Vidyalaya.
919 The apart, after the issue of sale certificate in favour of Mahila Vidyalaya it alone was entitled to obtain possession under Order XXI 95 C.P.C.
The appellant Mahila Vidyalaya had filed execution application and possession was given to it on 24th March, 1951.
Not only that Mahila Vidyalaya got an order for serving notice of ejectment on the tenants from the Rent Controller and all the tenants except Mst.
Radha Bai surrendered possession in favour of Mahila Vidyalaya.
Not only that a suit for ejectment filed against Mst.
Radha Bai and Govind Rao Harshe was also decreed in favour of the appellant Mahila Vidyalaya.
In execution of the decree for ejectment Mahila Vidyalaya was trying to obtain possession.
Thus by no stretch of imagination can it be said that Mahila Vidyalaya was a trespasser in the facts and circumstances mentioned above.
Th High Court in our view did not consider the case in a proper perspective and took a wholly erroneous view in holding that the appellant was a trespasser and Govind Rao Harshe could have filed a suit for possession.
The plaintiff Govind Rao Harhse himself had come forward with a plea that the execution proceedings and sale was null and void and unless he was able to succeed in this regard, which he did not in the present case, no decree for possession could at all have been passed in his favour.
Thus, we allow the appeal, set aside the judgment and decree of the High Court dated 12th December, 1974 and dismiss the suit with costs.
Y. Lal Appeal allowed.
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One Govind Rao Harshe mortgaged some agricultural land and a house to Lakshmi Chand and Duli Chand Modi.
The mortgagees filed a suit and obtained a preliminary decree and later a final decree for sale of the property for realisation of Rs. 5001/13/6 on 26.3.1938, and applied for execution of the said decree, which was stayed ' because the mortgagor applied for relief under the C.P. and Berar Relief of Indebtedness Act, 1939, to save the property from being sold at auction.
Consequent upon his failure to comply with the conditions of the order passed in those proceedings, the decree holders alleging default again applied for the revival of the execution proceedings and prayed for sale of the house property in dispute.
The judgment debtor did not appear before the Executing Court and the said Court held that the decree holders were entitled to execute the decree for the recovery of the debt.
Thereupon the judgment debtor submitted an application for setting aside the ex parte order, which was dismissed and an appeal filed against the said order was also dismissed by the District Judge.
In the meantime the house was put to auction and the highest bid of Rs. 6905 was knocked down in favour of one Gopal Rao Mutatkar on 20.8.1942 and the sale was confirmed vide order dt.
10.4.1943.
Applications filed by the judgment debtor and his adult sons seeking to set aside sale were dismissed and the appeals failed even upto the High Court.
In the meantime the appellant, a registered educational institution, through its Secretary, moved an application for granting a sale certificate stating that the house in question was auctioned by the Court and was purchased by Gopal Rao Mutatkar a member of the appellant institution, on 20.8.1942, for Mahila Vidyalaya, which sale was confirmed on 10.4.43.
The appellant prayed that the certificate be granted in its favour.
A stamp requisite for the purpose was also supplied.
The execution court on 26.2.1944, ordered that the sale certificate will issue in the name of Mahila Vidyalaya, Sagar, through Secretary, G.R. Wakhle and 907 accordingly the sale certificate was issued in favour of the appellant on 8.4.1944.
The four sons of the mortgagor filed a suit impleading the auction purchaser, G.R. Wakhle, Secretary, mortgagees and their father mortgagor, as defendants, praying that the execution sale was not binding on their interest.
The auction purchaser and the former Secretary of the appellant institution objected to their being impleaded as parties to the suit, as according to them they had ceased to be the functionaries of the appellant and the suit should have been filed against the appellant itself and not against its office bearers.
Thereafter the plaintiffs impleaded the appellant as party.
This suit by the sons of the mortgagor was dismissed.
The appellant thereupon as auction purchaser applied for the delivery of possession, which was granted.
Some portion of the property was in occupation of the widowed sister, Radhabai, of the original mortgagor and other portions were in the possession of tenants.
The Secretary of the appellant agreed to the request of the tenants that they will not be ousted as they were willing to execute rent notes.
The appellant later required the premises and moved the Rent Controller for permission to serve notices on the tenants to vacate the premises.
All the tenants except Radhabai and the original mortgagor who had also started living with his sister, vacated the premises.
The appellant then instituted a suit against them.
The trial court dismissed the suit for ejectment but passed a decree for arrears of rent.
The appeal filed by the appellant against that order was allowed by the District Judge.
The original mortgagor 's appeal failed before the High Court whereupon the appellant filed a execution application for ejectment of the occupants which is still pending as a result of stay order passed in a subsequent suit filed by Govind Rao Harshe, original mortgagor, against the appellant for a declaration, possession and permanent injunction.
This suit giving rise to the present appeal was dismissed by the Trial Court.
An appeal preferred against that order by the legal representatives of the deceased plaintiff, was allowed by the District Judge granting the declaration, delivery of possession of the house together with a mandatory injunction directing demolition of some new constructions made by the appellant.
The appellant filed a second appeal before the High Court which was dismissed by the impugned special leave.
The High Court held that as Goapl Rao Mutatkar was the auction purchaser, no sale certificate could be issued by the executing court in favour of the appellant, his bid being in his personal capacity and not one for and on behalf of the appellant.
It was also held by High Court that Gopal Rao Mutatkar could transfer his proprietary right by sale or a gift which he did not do.
According to the High Court the act of the executing court was clearly without jurisdic 908 tion and the sale certificate being void and inoperative, conferred no right or title upon the appellant over the suit property.
Allowing the appeal, this Court HELD: Once an order is made under Order XXI rule 92, confirming the sale, the title of the auction purchaser related back to the date of sale as provided under Section 65, C.P.C. The title in the property thereafter vests in the auction purchaser and not in the judgment debtor.
The issue of sale certificate under order XXI, rule 94, C.P.C. in favour of the auction purchaser though mandatory but the granting of certificate is a ministerial act and not judicial.
[917H 918B] The sale of the property in question was perfectly valid and as soon as the sale was confirmed in favour of Gopal Rao Mutatkar under Order XXI Rule 92, C.P.C. Govind Rao Harshe had no right or title in the property and Gopal Rao Mutatkar became the owner of the property.
[918G] The High Court did not consider the case in a proper perspective and took a wholly erroneous view in holding that the appellant was a trespasser and Govind Rao Harshe could have filed a suit for possession.
The plaintiff Govind Rao Harshe himself had come forward with a plea that the execution proceedings and the sale was null and void and unless he was able to succeed in this regard, which he did not in the present case, no decree for possession could at all have been passed in his favour.
[919C D]
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6753.txt
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ew Petition No. 37 of 1959.
Petition for Review of this Court 's judgment and order dated October 29, 1959, in Civil Appeal No. 38 of 1958.
C. K. Daphtary, Solicitor General of India, B. Sen, J. B. Mehta and J. B. Dadachanji, for the petitioner.
N. C. Chatterjee and section section Shukla, for respondents.
J. B. Mehta and J. B. Dadachanji, for interveners Nos. 1 to 13.
J. B. Dadachanji, for interveners Nos.
14 to 19. 1960.
August 3.
The Judgment of the Court was delivered by WANCHOO J.
This is an application for review of the judgment delivered by this Court, to which three of us were party, on October 29, 1959.
The ground on which review is sought is that there are mistakes and/ or errors apparent on the face of the record and therefore the judgment in question should be reviewed.
The petitioner contends further that the judgment under review had dealt with the matter of issue of writs by High Courts under article 226 of the Constitution and this involved a question which could only have been dealt by a bench of not less than five judges and that is why the review application has been placed before a bench of five judges.
Lastly it is contended that this Court should have decided the question of jurisdiction as various.
other parties had agreed to be governed by the decision in this case and that would have saved multiplicity of proceedings.
115 Before we deal with the points urged in support of the petition we should like to state what exactly has been decided by the judgment under review.
The appeal in which the judgment under review was given came up before the Court on special leave granted under article 136 of the Constitution from a decision of the Bombay High Court in a writ petition filed there under article 226 against an order of the Payment of Wages Authority.
The question of jurisdiction of the Payment of Wages Authority was raised before this Court and reliance in that connection was placed on the decision in A. V. D 'Costa vs B. C. Patel and another(1).
It was remarked in the judgment under review that there appeared to be some force in the contention relating to the jurisdiction of the Payment of Wages Authority; but this Court did not go further and decide that question on the view that as there had been no failure of justice this Court would not interfere under its powers under article 136 of the Constitution, particularly as the matter came before it from a decision of the Bombay High Court and not directly from the Authority.
In that connection reference was made to the case of A. M. Allison vs B. L. Sen (2), in which in similar circumstances this Court had refused to decide the question of jurisdiction, because it was satisfied that there had been no failure of justice.
All that therefore the judgment under review decided was that where this Court is of the view that there is no failure of justice it is not bound to interfere under its powers under article 136 of the Constitution.
Reference to Allisons ' Case (2) was made only to show that in almost similar circumstances (except that Allison 's Case came to this Court on a certificate granted under article 133(1) (c) of the Constitution), this Court had refused to decide the question of jurisdiction as there was no failure of justice.
The judgment under review did not deal with the powers of the High Court under article 226 of the Constitution and nowhere laid down anything in conflict with the previous decision of this Court in H. V. Kamath vs Syed Ahmad Ishaque and others(3).
(1) ; (2) ; (3) ; 116 Thus the narrow point decided by the judgment under review was that when dealing with an appeal under article 136 of the Constitution this Court comes to the conclusion %that there is no failure of justice, it is not bound to decide and interfere even when a question of jurisdiction of the original court or tribunal is raised in a case where the matter had been considered by a higher tribunal, which undoubtedly had jurisdiction, and the appeal to this Court is from the decision of the higher tribunal.
This being the decision of this Court in the judgment under review, let us see if there is any reason to review that judgment on the grounds urged in the petition.
Before we consider the main ground in support of the review we should like to observe that the fact that other parties had agreed to be governed by the decision in the judgment under review can be no ground for review.
Are there then such mistakes and/ or errors apparent on the face of record which would justify a review? It is said that in dealing with whether there has been failure of justice in this case, this Court omitted to consider certain provisions of the Bombay Industrial Relations Act, 1946.
Assuming this to be correct, the question still is whether even after a consideration of those provisions the decision of this Court on the question of failure of justice would have been different.
On a further consideration of the reasons given in the judgment under review for holding that there was no failure of justice we feel that the decision on this point would have been still the same even if the provisions referred to had been considered.
In the circumstances we are of opinion that there is no ground for review of the judgment even if it be assumed that certain provisions of the Bombay Industrial Relations Act, 1946, were relevant and had not been considered.
The main plank however of the petitioner is that this Court was bound to consider the question of jurisdiction and the question whether there was failure of justice or not was bound up with the question of jurisdiction and a decision on that question was necessary to arrive at the conclusion that there was no 117 failure of justice.
This contention also must in our opinion be rejected, specially in the context of the narrow point which, as we have already indicated, was decided in the judgment under review.
Besides it is not unknown to law that decisions of original courts and tribunals may be allowed to stand even though there may be some doubt as to the jurisdiction of such courts or tribunals.
There are provisions in the revenue laws where in case of doubt whether the civil court or the revenue court has jurisdiction the decision of the original court is allowed to stand in certain circumstances if there has been no failure of justice : (see, for example, sections 290 and 291 of the U. P. Tenancy Act, 1939).
Therefore when the judgment under review left the question of jurisdiction open on the ground that there was no failure of justice and in consequence this Court refused to exercise its jurisdiction under article 136, it cannot be said that something was done which was unknown to law.
It is necessary to remember that wide as are our powers under article 136, their exercise is discretionary; and if it is conceded, as it was in the course of the arguments, that this Court could have dismissed the appellant 's application for special leave summarily on the ground that the order under appeal had done substantial justice, it is difficult to appreciate the argument that because leave has been granted this Court must always and in every case deal with the merits even though it is satisfied that ends of justice do not justify its interference in a given case.
In the circumstances we are of opinion that this Court was not bound to decide the question of jurisdiction on the facts and circumstances of this case when it had come to the conclusion in dealing with an appeal Under article 136 of the Constitution that there was no failure of justice.
The review application therefore fails and is hereby dismissed with costs.
Review application dismissed.
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Where at the hearing of an appeal filed by special leave from a decision of the High Court in a Writ Petition filed there under article 226 of the Constitution of India against an order of the Payment of Wages Authority, the Court considered that there was some force in the contention relating to the jurisdiction of the Authority concerned but did not decide that question on the view that as there had been no failure of justice the Court would not interfere under its powers under article 136, and the appellant applied for a review of the judgment 15 114 Held, that wide as are the powers of the Supreme Court under article 136 of the Constitution, its powers are discretionary and though special leave had been granted the Court was not bound to decide the question of jurisdiction of the inferior tribunal or court where the decision of the inferior tribunal or court had been taken to a higher tribunal which undoubtedly had jurisdiction and from the decision of which the special leave was granted if on the facts and circumstances of the case it came to the conclusion in dealing with the appeal under that Article that there was no failure of justice.
A. M. Allison vs B. L. Sen, ; , relied on.
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925.txt
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Civil Appeal No. 1224 of 1977.
Appeal by special leave from the judgment and order dated the 3rd September, 1976 of the Gujarat High Court in Special Civil Appln.
No. 1501 of 1974 84 F.S. Nariman, Dr. Y.S. Chitale, K.S. Nanavati, C.R. Gandhi, P.H. Parekh and Miss Vineeta Caprihan for the Appellant.
Soli J. Sorabjee, G.N. Desai and M.N. Shroff for Respondent No. 1 G.N. Desai, Prashant G. Desai and S.C. Patel for Respondent No. 2 S.K. Dholakia and R.C. Bhatia for Intervener Surat Municipality.
The Judgment of the Court was delivered by GUPTA J.
On June 26, 1965 the Surat Municipal Corporation, then called Surat Borough Municipality, declared its intention to make a town planning scheme under section 22 of the Bombay Town Planning Act, 1954 (hereinafter referred as the Act).
This was Town Planning Scheme Surat No. 8 (Umarwada).
On July 4, 1967 a draft scheme was published which included among other lands an area admeasuring 1,37,961 sq.
meters of which appellant as Karta of a Hindu undivided family was the lessee.
On May 10, 1968 Government of Gujarat granted sanction to the draft scheme.
Before the Town Planning Officer the appellant claimed compensation for deprivation of his right in the land at Rs. 50 per sq.
By his order made on November 4, 1971 the Town Planning Officer awarded compensation to the appellant at the rate of Rs. 2.40 p. per sq.
; the total compensation awarded was Rs. 3,31,455.
Not satisfied with the decision of the Town Planning Officer the appellant preferred an appeal.
Section 34 read with section 32(1) of the Act provides an appeal from the decision of the Town Planning Officer on certain specified matters to a Board of Appeal.
Before the Board of Appeal the appellant reduced his claim to Rs. 9.50 p. per sq.
The appellant 's grievance was that the compensation awarded was inadequate and further that the apportionment of compensation between the lessor and the lessee was not proper.
He also questioned the propriety of reserving such a large area of land for the scheme.
The Board of Appeal held that the appeal was not maintainable as the Act did not provide an appeal from a decision of the Town Planning Officer on matters dealt with by him in his order dated November 4, 1971.
The appellant then challenged the order of the Board of Appeal before the Gujarat High Court by filing a writ petition in which certain provisions of the Act were also challenged as unconstitutional and it was claimed 85 that the town planning scheme was consequently invalid.
The Gujarat High Court dismissed the writ petition agreeing with the Board of Appeal that the appeal was incompetent.
The constitutional questions raised in the writ petition could not be decided as Emergency was then in force in the country and rights conferred by Articles 14,19 and 31 of the Constitution on which the appellant 's contentions were based remained suspended at the time.
The High Court also relied on the decision of this Court in State of Gujarat vs Shri Shantilal Mangaldas which had upheld the validity of the Act.
The appeal before us is by special leave.
Mr. Nariman for the appellant submitted that in case we held that the appeal preferred by his client before the Board of Appeal was maintainable he would not press the grounds questioning the constitutional validity of the Act at this stage and the matter should then go back to the Board of Appeal for a decision on the adequacy of the Compensation; if however we found that the Board of Appeal was right in holding that the appeal was not maintainable, he would then urge the grounds challenging the validity of the Act.
The question is whether the order of the Town Planning Officer determining the amount of compensation payable to the appellant falls within any of the appealable clauses of section 32(1).
To be able to answer the question it will be necessary to examine the various clauses of section 32(1) and also certain other provisions of the Act.
The scheme of the Act has been analysed by this Court in State of Gujarat vs Shantilal Mangaldas (supra) and earlier in Maneklal Chhottalal and others vs M.G. Makwana and others; we will not attempt another comprehensive survey of all the provisions of the Act but refer to those of them which have some bearing on the question that falls to be decided.
Mr. Nariman drew our notice to the decision of this Court in State of Karnataka vs Shri Ranganatha Reddy where Untwalia, J, speaking for the court said at page 652 of the report that in Rustom Cavasjee Cooper vs Union of India, this Court apparently seeking to explain Shantilal 's case had "in substance" overruled the decision.
Even if Shantilal 's case was 86 overruled, that was on another point and the analysis of the scheme of the Act made in Shantilal cannot be questioned.
The long title of the Act states that it is an "Act to consolidate and amend the law for the making and execution of town planning schemes".
The Act has been made applicable to the State of Gujarat.
It is an Act providing for compulsory acquisition of land and payment of compensation for the land taken.
Some of the terms and expressions defined in section 2 of the Act are relevant.
Section 2 (2) defines "development Plan" as meaning a plan for the development or redevelopment or improvement of the entire area within the jurisdiction of a local authority prepared under section 3.
Section 3 requires every local authority to carry out a survey of the area within its jurisdiction and prepare and publish a development plan and submit it to the State Government for sanction.
Sub section (4) of section 2 defines local authority as a municipal corporation constituted under the Bombay Provincial Municipal Corporation Act, 1949 or a municipality constituted or deemed to be constituted under the Gujarat Municipalities Act, 1973.
Section 2 (9) defines "reconstituted plot" as a plot which is in any way altered by the making of a town planning scheme.
Chapter III of the Act provides for the making of town planning schemes.
Sub section (2) of section 18 which occurs in this chapter states that a town planning scheme may make provisions for any of the matters specified in clauses (a) to (k) of the sub section.
These matters include laying out of land, reclamation of unhealthy areas, laying out new streets of roads, construction and removal of buildings, bridges and other structures, providing for drainage, lighting and water supply, allotment or reservation of land for roads, open spaces, schools, markets and public purposes of all kinds.
Clause (1) says that apart from the matters specified, the town planning scheme may provide for "such other matter not inconsistent with the objects of this Act as may be prescribed".
Chapter IV which contains section 21 to section 30 bears the heading "Declaration of Intention to Make a Scheme and Making of a Draft Scheme".
Under section 22 a local authority may by resolution declare its intention to make a town planning scheme and is required to publish the scheme in the prescribed manner and despatch a copy thereof to the State Government.
Section 23 (1) provides that following the declaration of intention to make a scheme, the local authority shall make a draft scheme for the area 87 in respect of which the declaration has been made and publish it in the prescribed manner.
Section 25 mentions the particulars that a draft scheme shall contain; they include among other things, the area, ownership and tenure of each original plot; the extent to which it is proposed to alter the boundaries of original plots; and an estimate of the nett cost of the scheme to be borne by the local authority.
Sub section (1) of section 26 says that in the draft scheme the size and shape of every reconstituted plot shall be determined; as far as possible, to render it suitable for building purposes and where the plot is already built upon, to ensure that the building complies with the provisions of the scheme as regards open spaces.
For the purpose of sub section (1) the draft scheme may contain proposals which are enumerated in clauses (a) to (e) of sub section (2) of the section.
We may here refer to clauses (a), (b) and (d): "(a) to form a reconstituted plot by the alteration of the boundaries of an original plot; (b) to form a reconstituted plot by the transfer wholly or partly of the adjoining lands; (c) . . (d) to allot a plot to any owner dispossessed of land in furtherance of the scheme.
(e) . .
Under section 27, within one month from the date of publication of the draft scheme, any person affected by such scheme may communicate in writing to the local authority any objection relating to such scheme which the local authority has to consider.
Section 28 (1) requires the local authority to submit the draft scheme together with the objections to the State Government and at the same time apply for its sanction.
Under sub section (2) the State Government may within six months from the date of the submission of the draft scheme either sanction such scheme with or without modifications and subject to such conditions as it may think fit to impose or refuse to give sanction.
Chapter V which includes section 31 to section 43 provides for the appointment of the Town Planning Officer and constitution of the Board of Appeal.
Within one month from the date on which the sanction of the State Government to the draft scheme is 88 published, the State Government is required under section 31 (1) to appoint a Town Planning Officer.
The duties of the Town Planning Officer are enumerated in section 32 (1).
The provisions of sections 32, 33 and 34 have a direct bearing on the question of appealability of the Town Planning Officer 's decision, but we think it would be more helpful for appreciating the contentions raised on behalf of the appellant if we referred to certain other provisions of the Act before turning to the aforesaid section in Chapter V.
We need only mention here that drawing up the final scheme in accordance with the draft scheme is one of the duties of the Town Planning Officer who is required to forward the final scheme to the State Government for sanction.
In Chapter VI section 53 is the only relevant provision.
Section 53 lays down: "On the day on which the final scheme comes into force: (a) all lands required by the local authority shall, unless it is otherwise determined in such scheme, vest absolutely in the local authority free from all encumbrances; (b) all rights in the original plots which have been reconstituted shall determine and the reconstituted plots shall become subject to the rights settled by the Town Planning Officer".
Chapter VIII deals with "Finance".
It contains, inter alia, provisions specifying the principles on which compensation for the land taken is to be determined.
This chapter includes section 64 to section 78.
Section 64 (1) enumerates in clauses (a) to (f) the sums payable or spent and the expenses incurred by the local authority which are to be included in the costs of a town planning scheme.
Clause (d) mentions the sums payable as compensation for land reserved or designated for any public purpose or purposes of the local authority.
Clause (f) of section 64 (1) reads as follows: "any amount by which the total of the values of the original plots exceeds the total of the values of the plots included in the final scheme, each of such plots being estimated at its market value at the date of the declaration of intention to make a scheme with all the buildings and works thereon at that date and without references to improvements contemplated in the scheme other than improvements due to the alteration of its boundaries.
" 89 Sub section (2) of section 64 provides: "if in any case the total of the values of the plots included in the final scheme exceeds the total of the values of the original plots, each of such plots being estimated in the manner provided in clause (f) of sub section (1), then the amount of such excess shall be deducted in arriving at the costs of the scheme as defined in sub section (1).
" Section 65 explains the meaning of increment for the purposes of the Act as follows: "For the purposes of this Act the increments shall be deemed to be the amount by which at the date of the declaration of intention to make a scheme the market value of a plot included in the final scheme estimated on the assumption that the scheme has been completed would exceed at the same date the market value of the same plot estimated without reference to improvements contemplated in the scheme: Provided that in estimating such values the value of buildings or other works erected or in the course of erection on such plot shall not be taken into consideration.
" Section 66 (1) states that the costs of the scheme shall be met wholly or in part by a contribution to be levied by the local authority on each plot in the final scheme calculated in proportion to the increment which is estimated to accrue in respect of such plot by the Town Planning Officer.
Under sub section (2) of section 66 the "owner of each plot included in the final scheme shall be primarily liable for the payment of the contribution leviable in respect of such plot".
Under section 67 the amount by which the total value of the plots in the final scheme with all the buildings and works thereon allotted to a person falls short of or exceeds the total value of the original plots with all the buildings and works thereon of such person shall be deducted from or added to, as the case may be, the contributions leviable from such person, each of such plots being estimated at its market value at the date of the declaration of intention to make a scheme without reference to improvements contemplated in the scheme other than improvements due to the alteration of its boundaries.
As Shah J., speaking for the Court in State of Gujarat vs Shantilal Mangaldas and others observed: "(Section 67) is intended to make adjustments between the right to compensation for loss of 90 land suffered by the owner, and the liability to make contribution to the finances of the scheme".
Section 69 deals with the compensation payable in respect of any property or right which is injuriously affected by the making of a town planning scheme.
The section says: "The owner of any property or right which is injuriously affected by the making of a town planning scheme shall, if he makes a claim before the Town Planning Officer within the prescribed time, be entitled to obtain compensation in respect thereof from the local authority or from any person benefited or partly from the local authority and partly from such person as the Town Planning Officer may in each case determine.
Provided that the value of such property or right shall be held to be its market value at the date of the declaration of intention to make a scheme or the date of a notification under sub section (1) of section 24 without reference to improvements contemplated in the scheme".
Section 71 deals with the case of an owner of land who is not given a plot in the final scheme and also provides for a case where the amount payable to an owner exceeds the amount due from him.
Section 71 is as follows: "If the owner of an original plot is not provided with a plot in the final scheme or if the contribution to be levied from him under section 66 is less than the total amount to be deducted therefrom under any of the provisions of this Act, the net amount of his loss shall be payable to him by the local authority in cash or in such other way as may be agreed upon by the parties".
The appellant in the present case was not provided with a plot in the final scheme.
Section 87 in Chapter IX empowers the State Government to make rules consistent with the provisions of the Act to provide for all matters not specifically indicated therein.
The effect of the final scheme coming into force has been summarized by Shah J., in Shantilal 's case; we may quote here the following extract from page 349 of the report: "On the coming into force of the scheme all lands which are required by the local authority, unless otherwise 91 determined in the scheme, by the operation of section 53 (a) vest absolutely therein free from all encumbrances.
The result is that there is a complete shuffling up of plots of land, roads, means of communication, and rearrangement thereof.
The original plots are re constituted, their shapes are altered, portions out of plots are separated, lands belonging to two or more owners are combined into a single plot, new roads are laid out, old roads are diverted or closed up, and lands originally belonging to private owners are used for public purposes i.e. for providing open spaces, green belts dairies etc.
In this process the whole or parts of a land of one person, may go to make a reconstituted plot, and the plot so reconstructed may be allotted to another person and the lands needed for public purposes may be earmarked for those purposes.
The re arrangement of titles in the various plots and reservation of lands for public purposes require financial adjustments to be made.
The owner who is deprived of his land has to be compensated, and the owner who obtains a re constituted plot in surroundings which are conducive to better sanitary living conditions has to contribute towards the expenses of the scheme.
This is because on the making of a town planning scheme the value of the plot rises and a part of the benefit which arises out of the unearned rise in prices is directed to be contributed towards financing of the scheme which enables the residents in that area to more amenities, better facilities and healthier living conditions".
Under the Act the compensation payable to an owner for loss of land has to be determined on the basis of the market value of the land at the date on which the declaration of intention to make a scheme was made.
On the question whether the Act specifies a principle of compensation, it is observed in Shantilal 's case at page 357 of the report: "It is true that under the Act the market value of the land at the date of declaration of intention to make a scheme determines the amount to be adjusted, and that is the guiding rule in respect of all lands covered by the scheme.
The High Court was, in our judgment, right in holding that enactment of a rule determining payment or adjustment of price of land of which the owner was deprived by the 92 scheme estimated on the market value on the date of declaration of the intention to make a scheme amounted to specification of a principle of compensation within the meaning of Art, 31 (2).
Specification of principles means laying down general guiding rules applicable to all persons or transactions governed thereby.
Under the Land Acquisition Act compensation is determined on the basis of "market value" of the land on the date of the notification under s.4 (1) of that Act.
That is a specification of principle.
Compensation determined on the basis of market value prevailing on a date anterior to the date of extinction of interest is still determined on a principle specified.
Whether an owner of land is given a reconstituted plot or not, the rule for determining what is to be given as recompense remains the same.
It is a principle applicable to all cases in which by virtue of the operation of the Town Planning Act a person is deprived of his land whether in whole or in part".
We may now turn to sections 32, 33 and 34 occurring in chapter V.
It may be recalled that the appellant 's land was taken for purposes of the scheme but he was not given a reconstituted plot.
Section 32 (1) which enumerates the duties of the Town Planning Officer is set out below: "32 (1) In accordance with the prescribed procedure the Town Planning Officer shall (i) after notice given by him in the prescribed manner, define and demarcate the areas allotted to, or reserved, for a public purpose or purpose of the local authority and the reconstituted plots; (ii) after notice given by him in the prescribed manner, determine, in the case in which a reconstituted plot is to be allotted to persons in ownership in common, the shares of such persons; (iii)fix the difference between the total of values of the original plots and the total of the values of the plots included in the final scheme, in accordance with the provisions contained in clause (f) of sub section (1) of section 64; 93 (iv) determine whether the areas used, allotted or reserved for a public purpose of the local authority are beneficial wholly or partly to the owners or residents within the area of the scheme; (v) estimate the portion of the sums payable as compensation on each plot used, allotted or reserved for a public purpose or purpose of the local authority which is beneficial partly to the owners or residents within the area of the scheme and partly to the general public, which shall be included in the costs of the scheme; (vi) calculate the contribution to be levied on each plot used, allotted or reserved for a public purpose or purpose of the local authority which is beneficial partly to the owners or residents within the area of the scheme and partly to the general public; (vii)determine the amount of exemption, if any, from the payment of the contribution that may be granted in respect of plots exclusively occupied for the religious or charitable purposes; (viii)estimate the increment to accrue in respect of each plot included in the final scheme in accordance with the provisions contained in section 65; (ix) calculate the proportion in which the increment of the plots included in the final scheme shall be liable to contribution to the costs of the scheme in accordance with the provisions contained in section 66; (x) calculate the contribution to be levied on each plot included in the final scheme; (xi) determine the amount to be deducted from, or added to, as the case may be, the contribution leviable from a person in accordance with the provisions contained in section 67; (xii)provide for the total or partial transfer of any right in an original plot to a reconstituted plot or provide for the extinction of any right in an original plot in accordance with the provisions contained in section 68; 94 (xiii)estimate in reference to claims made before him, after the notice given by him in the prescribed manner, the compensation to be paid to the owner of any property or right injuriously affected by the making of a town planning scheme in accordance with the provisions contained in section 69; (xiv)draw in the prescribed form the final scheme in accordance with the draft scheme:" There is a proviso to section 32 (1) which is not relevant for the purpose of this appeal.
Section 33 says: "Except in matters arising out of clauses (v), (vi), (vii), (ix), (x) and (xiii) of sub section (1) of section 32, every decision of the Town Planning Officer shall be final and conclusive and binding on all persons." Section 34 provides an appeal to a Board of Appeal from any decision of the Town Planning Officer under clauses (v), (vi) (viii), (ix), (x) and (xiii).
Thus the decision of the Town Planning Officer is final and conclusive in all matters referred to in the various clauses of section 32 (1) except those mentioned in (v), (vi), (viii), (ix), (x) and (xiii).
It was claimed on behalf of the appellant that the Town Planning Officer 's decision in the appellant 's case was appealable either under clause (viii) or clause (xiii) of section 32 (1).
The Town Planning Officer has a duty under clause (viii) to calculate the increment to accrue in respect of each plot included in the final scheme (which we will refer to hereinafter as the final plot for brevity 's sake) in accordance with the provisions of section 65.
Under section 65 increment means the amount by which at the date of the declaration of the intention to make a scheme, the market value of a final plot calculated on the basis as if the improvements contemplated in the scheme had stood completed on that date exceeds the market value of the same plot when taken into account without the improvements.
The increment is thus the difference in the market value of the same final plot with the improvements and without the improvements on the aforesaid date.
The value of the original plot does not arise for consideration under clause (viii).
Rule 17 of the Bombay Town Planning Rules, 1955 sets out the particulars that a draft scheme shall contain in addition to the particulars specified in 95 section 25 of the Act.
Clause (v) of rule 17 mentions a "redistribution and valuation statement in Form 'B ' showing the estimated amounts to be paid to, or by, each of the owners included in the scheme".
Form B makes it clear that the increment is the difference in value of the same final plot in its developed and undeveloped conditions; Form B keeps the valuation of the original plot distinct from that of the final plot.
The appellant 's case therefore cannot fall under clause (viii).
Does the case fall under clause (xiii)? Under clause (xiii) the Town Planning Officer is required to estimate the compensation to be paid to the owner of any property or right injuriously affected by the making of a town planning scheme in accordance with the provisions of section 69.
Section 69 states that the owner of any property or right which is injuriously affected by the making of a town planning scheme shall be entitled to obtain compensation from the local authority or from any person benefited or partly from the local authority and partly from such person as the Town Planning Officer may in each case determine.
It seems obvious that the property or right which is injuriously affected by the making of a town planning scheme is a property or right other than that acquired for the purposes of the scheme.
The property or right affected remains with the owner who is entitled to compensation for such injurious affection.
When under the Act a plot of land is taken for the purposes of a town planning scheme, it cannot be suggested that land itself is injuriously affected; such a view is unsupportable both as a matter of language and having regard to the scheme of the Act.
On behalf of the appellant it was urged that clause (xiii) would cover the case of the appellant if only we read a few words in that clause and that we should do so to avoid injustice being done to the appellant and the owners of land similarly situated.
That we are afraid is not possible.
We find no compelling reason for restructuring that clause, and taking acquisition of land to mean 'injurious affection ' of the land acquired would be inconsistent with the entire scheme of the Act.
We may refer to clause 'fourthly ' of section 23 (1) of the land Acquisition Act, 1894 which requires the court to take into consideration in determining the amount of compensation to be awarded for land acquired under that Act, the damage sustained by the "person interested" "by reason of the acquisition injuriously affecting his other property".
The expression "person interested" as defined in section 3 of the Land Acquisition Act means all persons claiming an interest in compensation to be made on account of the acquisition of land under that Act.
It is made clear in clause 96 'fourthly ' that the damage is for injurious affection of some property other than the land acquired.
The sense in which the expression 'injurious affection ' is used in section 23 (1) of the Land Acquisition Act is the generally accepted meaning of that expression and we find nothing in the Act concerned in this case that suggests that it should be construed differently.
It was then argued that if neither clause (viii) nor clause (xiii) was applicable, then there was no clause in section 32 (1) of the Act that covers the appellant 's case.
The contention is not correct.
The owner of an original plot who is not provided with a plot in the final scheme gets his right to compensation from section 71 of the Act which says that the net amount of loss shall be payable to him by "the local authority in cash or in such other way as may be agreed upon by the parties".
The principle for determining the compensation is the same whether an owner of land is given a reconstituted plot or not; compensation is payable on the basis of the market value of the plot at the date of declaration of the intention to make a scheme.
In the appellant 's case it would be the value of the original plot and not the final plot.
In determining the difference between the total of the values of the original plots and the total of the values of the plots included in the final scheme, the Town Planning Officer under section 32 (1) (iii) has to find out the market value of each of the original plots at the date of the declaration of intention to make a scheme as provided in section 64 (1) (f).
Thus the Act contains the necessary provisions for estimating the compensation payable to an owner of land who has not been given a reconstituted plot.
We therefore hold that the High Court was right in finding that the decision of the Town Planning Officer determining the amount of compensation in the appellant 's case was not appealable.
In the view we take, Mr. Nariman should be allowed to urge the grounds concerning the constitutional validity of the Act.
This case may now be placed before a Constitution Bench for hearing.
An application has been filed on behalf of the appellant for leave to urge additional grounds; this application may also be considered by the Constitution Bench that will hear this appeal.
P.B.R. Appeal dismissed.
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The Bombay Town Planning Act, 1954 (which was made applicable to the State of Gujarat) provides for the compulsory acquisition of land and payment of compensation for the land so acquired for the development or re development or improvement of the entire area within the jurisdiction of a local authority such as a municipal corporation or a municipality.
The Town Planning Scheme prepared under the Act may make provision for laying out new streets or roads, allotment or reservation of land for roads, open spaces and such other matters not inconsistent with the objects of the Act.
Before proceeding to acquire any land for town planning purposes, a local authority, by resolution, must declare its intention to make a town planning scheme and publish it in the manner prescribed.
The draft scheme may contain proposals such as to form a re constituted plot by the alteration of the boundaries of an original plot, to form a reconstituted plot by the transfer, wholly or partly, of the adjoining land, to allot a plot to any owner dispossessed of a land in furtherance of the scheme.
Any person affected by the scheme may communicate to the local authority concerned any objection relating to such scheme.
The scheme is then forwarded to the State Government for the requisite sanction.
The scheme of the Act envisages the appointment of a Town Planning Officer and constitution of a Board of Appeal.
It is the duty of the Town Planning Officer to draw up a final scheme in accordance with the draft scheme.
When the final scheme comes into force all lands required by the local authority shall vest absolutely in that authority free from all encumbrances and all rights in the original plots which have been reconstituted shall determine and the reconstituted plots shall become subject to the rights settled by the Town Planning Officer.
Section 64 (1) enumerates the sums payable or spent and the expenses incurred by the local authority which are to be included in the costs of a town planning scheme.
Under section 65 increment means the amount by which at the date of the declaration of intention to make a scheme the market value of a final plot calculated on the basis as if the improvement contemplated in the scheme had stood completed on that date.
Provision is made in section 67 to make adjust 82 ment between the rights to compensation for loss of land suffered by the owner and the liability to make contribution to the finance of the scheme.
Compensation payable to any owner for loss of lands has to be determined on the basis of the market value of the land at the date on which the declaration of intention to make a scheme was made.
Section 69 contemplates that the owner of any property or right which is injuriously affected by the making of a town planning scheme shall be entitled to obtain compensation from the local authority or from any person bona fide or partly from such person as the Town Planning Officer may in each case determine.
Section 32 enumerates duties of the Town Planning Officer and section 33 provides that except in matters arising out of clauses (v), (vi), (vii), (ix), (x) and (xiii) of section 32 (1) every decision of the Town Planning Officer shall be final and conclusive and binding on all persons.
An appeal from the decision of the Town Planning Officer under the six clauses mentioned in section 33 lies to the Board of Appeal.
The Surat Municipal Corporation declared its intention to make a town planning scheme under section 22 of the Bombay Town Planning Act, 1954.
The draft scheme published included an area of 1.37 lac square meters of which the appellant was the lessee.
Dissatisfied with the compensation awarded to him by the Town Planning Officer the apportionment of the compensation between the lessor and lessee and the propriety of reserving such a large area of land for the scheme the appellant preferred an appeal under section 34 read with section 32 (1) of the Act to the Board of Appeal.
The Board rejected the appeal as being not maintainable on the ground that the Act did not provide an appeal from a decision of the Town Planning Officer on matters dealt with by him in the impugned order.
Agreeing with the Board of Appeal the High Court dismissed the appellant 's writ petition.
In the appeal to this court it was contended on behalf of the appellant that the Town Planning Officer 's decision was appealable under clause (viii) or clause (xiii) of section 32(1) because he has a duty to calculate the increment to accrue in respect of each plot included in the final scheme in accordance with the provision of section 65.
Dismissing the appeal, ^ HELD: The High Court was right in holding that the decision of the Town Planning Officer determining the amount of compensation in the appellant 's case was not appealable.
[96 F] The decision of the Town Planning Officer is final and conclusive in all matters referred to in the various clauses of section 32 (1) except those mentioned in clauses (v), (vii), (viii), (ix), (x) and (xiii).
[94 E] The increment referred to in section 65 is the difference in the market value of the same final plot with the improvements and without the improvements on 83 the date of the declaration of intention to make a scheme.
The value of the original plot does not arise for consideration under clause (viii).
Form B referred to in clause (v) of rule 17 of the Bombay Town Planning Rules, 1955 makes it clear that the increment is the difference in value of the same final plot in its developed and undeveloped condition.
This form keeps the valuation of the original plot distinct from that of the final plot.
The appellant 's case cannot fall under clause (viii) of section 32.
[94 G 99 B] What is contemplated by section 69 is that the property or right which is injuriously affected by the making of a town planning scheme is a property or right other than that acquired for the purposes of the scheme.
The property or right affected remains with the owner who is entitled to compensation for such injurious affection.
When under the Act a plot of land is taken for the purposes of a town planning scheme it cannot be said that land itself is injuriously affected.
[95 C E] There is no compelling reason for restructuring clause (xiii) suggested by the appellant.
Taking acquisition of land to mean "injurious affection" of the land acquired would be inconsistent with the entire scheme of the Act.
[95 F] In determining the amount of compensation awarded for land acquired under the Land Acquisition Act, that Act requires the Court to take into consideration the damage sustained by the "person interested" by reason of the acquisition injuriously affecting his other property.
" A "person interested" means a person claiming an interest in compensation to be made on account of the acquisition of land under the Land Acquisition Act and the damage is for injurious affection of some property other than the land acquired.
There is nothing in the Act to suggest that the generally accepted meaning of the expressions "injurious affection" used in the Land Acquisition Act should be construed differently in this Act.
[95 G 96 B] The owner of an original plot who is not provided with a plot in the final scheme gets his right to compensation from section 71.
The principle for determining the compensation is the same whether an owner of land is given a reconstituted plot or not.
Compensation is payable on the basis of the market value of the plot at the date of declaration of the intention to make a scheme.
In the appellant 's case it would be the value of the original plot and not the final plot.
In determining the difference under section 32 (1) (iii) the Town Planning Officer has to find out the market value of each of the original plots at the date of the declaration of intention to make a scheme.
The Act contains necessary provisions for estimating the compensation payable to an owner of land who has not been given a reconstituted plot.
[96 C E]
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4425.txt
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N: Criminal Appeal No. 499 of 1976.
Appeal by Special Leave from the Judgment and Order dated 22 7 1975 of the Punjab & Haryana High Court in Criminal Appeal No. 166/75 and Murder Reference No. 10/75.
O.P. Sharma and M. section Dhillon for the Appellant.
R.K. Jain for Respondents Nos. 1 and 3 to 6.
R.K. Kohli and R. C. Kohli for the complainant.
The Judgment of the Court was delivered by SARKARIA, J.
This appeal by the State of Punjab is directed against a judgment, dated July 22, 1975, of the High Court of Punjab and Haryana, whereby the appeal of the respondents (hereinafter referred to as the accused) was accepted and they were acquitted of the double murder charge against them.
The prosecution story narrated by Resham Singh (P.W. 2), who claims to be an eyewitness of the occurrence, runs as follows.
Resham Singh (P.W.2) used to live with his brother in law, Hazara Singh deceased, in a hamlet in the fields outside the habitation of village Cheema.
One Ajit Singh of village Dhual was murdered, and Wassan Singh accused and his party men were tried therefor.
At the trial, Hazara Singh deceased appeared as an eyewitness of that murder.
The trial court convicted Wasson Singh and his companions in that case.
They went in appeal to the High Court.
Pending the appeal the High Court enlarged Wasson Singh accused on bail.
The occurrence now in question in the instant case took place when Wasson Singh was on bail.
The lands of Avtar Singh, Mukhtar Singh and Harbhajan Singh accused (respondents) adjoin the lands of Hazara Singh deceased.
Three or four days prior to the incident in question, the cattle of these accused persons trespassed on the land of Hazara Singh and damaged his cotton crop.
Thereupon, a sharp altercation took place 620 between Hazara Singh and Resham Singh on one side and Harbhajan Singh and Mukhthar Singh on the other.
Gajjan Singh son of Gopal Singh resident of the village interceded and pacified the parties.
Joginder Singh accused respondent is the brother of Mukhtar Singh accused respondent while Harbhajan Singh Respondent is their first cousin.
Mukhtar Singh and Harbhajan Singh accused are alleged to be partyman of Wasson Singh.
On August 4, 1973 at about 3.30 p.m., Resham Singh (P.W.2).
Resham Singh (deceased) son of another Hazara Singh and Hazara Singh deceased were proceeding by the foot path from the Bus Stand Amarkot to their hamlet.
On the way Bachan Singh, brother of Hazara Singh, met them and proceeded along with them.
When they reached near the fields of Jarmaj Singh Sarpanch of Mahmoodpura, all the six accused, namely, Wasson Singh, Baj Singh, Meja Singh, Joginder Singh, Mukhtar Singh and Harbhajan Singh emerged from the sann crop and came to the bank of the watercourse.
Baj Singh was armed with a pistol and the other five accused were armed with rifles.
Wasson Singh, Joginder Singh and Mukhtar Singh fired their rifles at Hazara Singh.
The rifle shots hit Hazara Singh on the left side of his head, and he dropped dead.
Resham Singh (P.W.2), Bachan Singh and Resham Singh deceased started running towards the ploughed fields.
Meja Singh, Harbhajan Singh and Baj Singh chased them.
Meja Singh and Harbhajan Singh encircled Resham Singh deceased and shot him dead with rifle shots.
Baj Singh chased Resham Singh (P.W. 2) and Bachan Singh (P.W. 3) and fired at them with his pistol.
When these two were running away, the other two accused also fired at them.
Resham Singh and Bachan Singh, however, succeeded in escaping unhurt.
Resham Singh (P.W. 2) immediately reached the Bus Stand Amarkot, picked up his motor cycle which was lying there at a shop and drove fast to Police Station Valtoha, where he lodged the First Information Report (exhibit PE) at 4.30 p.m.
Police Sub Inspector Bishambar Lal recorded the report of Resham Singh and sent a copy of the same as a special report to the superior officers, including the Judicial Magistrate, First Class at Patti, who received the copy of the F.I.R. at 6.30 p.m., on the same day.
While running away from the spot Resham Singh (P.W. 2) had left behind his shoe (exhibit P 1) near the scene of murders.
Sub Inspector Bashambar Lal reached the scene of occurrence at 5.30 p.m. and started investigation.
He prepared the inquest reports regarding the deaths of Hazara Singh and Resham Singh deceased persons.
He also took into possession blood stained earth 621 and other relevant articles lying near the two dead bodies.
He found two empty cartridge cases at the scene of Hazara Singh 's murder.
He took them into possession and sealed them into a parcel.
He also seized two pairs of shoes lying at the spot.
After his arrest, Mukhtar Singh accused was interrogated by the Investigating Officer on August 31, 1973.
After making a statement, Mukhtar Singh accused, in the presence of witnesses, led the police to the discovery of the rifle (exhibit P 7) and some live cartridges.
The rifle and the empty cartridges earlier found at the scene of crime were sent to the ballistic expert for examination and opinion.
After examination, the ballistic expert of the Forensic Science Laboratory, Chandigarh, reported (vide exhibit P. 9) that the 303 fired cartridge, marked C, had been fired through the 303 rifle marked `A ' by him.
But no definite opinion could be given regarding the linkage of the fired cartridge marked C, with the 303 rifle marked `A ' due to lack of sufficient individual characteristic marks on C2.
Joginder Singh accused was arrested on August 24, 1973 and Baj Singh accused on December 18, 1973.
The post mortem examination of the dead body of Resham Singh was performed by Dr. Gursharan Kaur on August 5, 1973 at 8 a.m.
The Doctor found five gun shot injuries on his body.
Two of these were wounds of entry, with everted margins on the back of the left chest.
No charring was present on any of these gun shot wounds.
The death in the opinion of the Doctor was due to shock and haemorrhage resulting from gun shot injuries on the chest which were sufficient to cause death in the ordinary course of nature.
On the same day, Dr. Gursharan Kaur conducted the autopsy on the dead body of Hazara Singh and found four fire arm injuries, two of which were wounds of entry and two were wounds of exit.
All these injuries were on the skull.
They involved fracture of the skull and damage to the brain.
These injuries had been caused with firearm and were sufficient to cause death instantaneously, in the ordinary course of nature.
At the trial, the main stay of the prosecution was the testimony of the two eye witnesses, Resham Singh (P.W.2) and Bachan Singh (P.W.3).
Examined under Section 342, Cr.
P.C., Wasson Singh accused admitted that he along with others was tried for the murder of Ajit Singh of village Dhual and Hazara Singh deceased had appeared against him as eye witness of that murder; and that he (Wasson Singh) was convicted by the Court of Session, but had been released on bail 622 pending his appeal in the High Court.
He denied the rest of the prosecution case and stated that he had been falsely implicated by the relations of Ajit Singh deceased on suspicion; and that on the day of occurrence, he was working as a Conductor on a truck at Muzaffarnagar.
The plea of Baj Singh was one of plain denial of the prosecution case.
He stated that his brothers Punjab Singh, Narinder Singh and Bagicha Singh had been prosecuted for the murder of one Puran Singh who was a relation of Bachan Singh (P.W.3); that Punjab Singh and his companions were acquitted in that case.
Baj Singh added that he used to look after the defence of the accused in Puran Singh 's murder case; and that on account of this, he had been falsely implicated.
He further stated that at the time of occurrence, he was residing in U.P. Meja Singh accused, also, denied the prosecution case.
He stated that one Balkar Singh of Village Wan had been murdered.
He (Meja Singh) used to look after the defence of Jarnail Singh (his wife 's brother, who was being tried for the murder of Balkar Singh; that on account of this, the relation of the said Balkar Singh had, in connivance with the complainant party, falsely implicated him in the instant case.
The remaining accused, also, denied the circumstances appearing in evidence against them.
The learned Additional Sessions Judge, Amritsar, who tried the case against these six accused persons, found that Wasson Singh had a strong motive to murder Hazara Singh deceased, because the latter had appeared as an eye witness against Wasson Singh in Ajit Singh 's murder case.
The trial Judge further accepted the prosecution evidence in regard to the fact that a few days before this occurrence in question, there was a: quarrel between Hazara Singh deceased and Resham Singh (P.W. 2) on one side and Mukhtar Singh, and Harbhajan Singh accused on the other, when the cattle of the accused had trespassed on the land of the deceased and damaged his cotton crop; and that on account of this ill will, Joginder Singh, Mukhtar Singh and Harbhajan Singh accused had a sufficient motive to join hands with Wasson Singh accused to murder Hazara Singh deceased.
The trial Judge further found that the prosecution had failed to establish the exact nature of the motive which might have actuated Meja Singh and Baj Singh to murder Resham Singh deceased.
The trial Judge further held that the F.I.R. which had been lodged by Resham Singh with great promptitude at Police Station Valtoha, which was about three miles from the place of occurrence, furnished valuable corroboration of the evidence of Resham Singh (P.W. 2).
623 He accepted the evidence of Resham Singh and Bachan Singh.
He further found that Sub Inspector Bishambar Lal had tried to favour Joginder Singh accused by fabricating a note in his zimini at some subsequent stage.
This note is to the effect, that Joginder Singh was, in fact, present irrigating his nearby fields and he joined the police investigation on the very day of occurrence and had remained with the police till the investigation by the Deputy Superintendent of Police.
The trial Judge disbelieved the plea of alibi set up by Meja Singh accused.
In the absence of independent evidence, the trial Judge was unable to hold from the bare testimony of Bishamber Lal, Sub Inspector, that the rifle (exhibit P 7) had been recovered from Mukhtar Singh accused.
He, however, criticised the conduct of Sub Inspector Bishamber Lal in not sending the empty cartridges found at the spot to the ballistic expert of the Forensic Laboratory, Chandigarh, with due promptitude.
In the result, the trial Judge held that Wasson Singh, Joginder Singh and Mukhtar Singh accused had fired their rifles at Hazara Singh deceased, and had caused his death.
He therefore, convicted these three accused for the substantive offence under Section 302, Penal Code.
He further held that the common object of the unlawful assembly constituted by the six accused was to murder Hazara Singh deceased.
He therefore, further convicted all the six accused under Section 302 read with Section 149, Penal Code, for the murder of Hazara Singh.
The trial Judge found that the murder of Resham Singh did not appear to have been caused in prosecution of the common object of the said unlawful assembly.
He therefore, convicted Baj Singh, Meja Singh and Harbhajan Singh accused only under Section 302 read with Section 34, Penal Code, for the murder of Resham Singh deceased and sentenced each of them to imprisonment for life and a fine of Rs. 200/ .
In respect of the murder of Hazara Singh, Wasson Singh was sentenced to death, while each of the other five accused were sentenced to imprisonment for life and a fine.
The trial Judge referred the case to the High Court for confirmation of the death sentence of Wasson Singh.
All the accused, also appealed against their conviction and sentences.
The High Court allowed the appeal, declined the reference and rejected the evidence of the eye witnesses, Resham Singh (P.W. 2) and Bachan Singh (P.W. 3), for these reasons: (i) Both these witnesses are closely related to the deceased Hazara Singh, who was the principal target of the accused.
(ii) (a) Excepting in the case of Wasson Singh who had undoubtedly a grudge against Hazara Singh deceased, it has not been 624 satisfactory established by the prosecution that the other five accused had any motive to commit the murders in question.
(b) Gajjan Singh, who is said to have interceded and pacified both the parties at the time of the alleged quarrel over cattle trespass, three or four days prior to the occurrence, between Mukhtar Singh and Harbhajan Singh on one hand and Hazara Singh deceased and Resham Singh (P.W. 2) on the other, has not been examined by the prosecution.
(c) There was no mention about this earlier incident in the statement of Bachan Singh (P.W. 3) before the police during investigation.
(iii) Both Resham Singh and Bachan Singh, P.Ws.
had earlier been involved in cases of serious crime, and Bachan Singh was admittedly registered as a bad character with the Police.
On account of their antecedents, Resham Singh and Bachan Singh do not appear to be reliable people.
(iv) The prosecution story is highly unnatural.
The presence of these two eye witnesses along with the deceased persons was unlikely.
Had these witnesses been with Hazara Singh deceased, they would have been the target of attack after Hazara Singh was killed and not Resham Singh deceased against whom the accused had no grudge.
(v) Hazara Singh deceased, Bachan Singh and Resham Singh, P.Ws.
, all admittedly reside in the hamlet of Hazara Singh deceased, and if they had to go to Amarkot for making purchases, they would have in all probability gone together.
Bachan Singh 's version, that he had gone to Amarkot to make enquiries regarding the availability of diesel and on his return journey in the way, met and joined the company of his brother Hazara Singh deceased, and his companions, was not believable, because there was no need for Bachan Singh to have gone to Amarkot for the purchase of diesel as he could have asked Hazara Singh to make the necessary enquiries.
(vi) There is a material inconsistency in the testimony of the two eye witnesses as to when Hazara Singh deceased and Resham Singh (P.W. 2) had left their behak (hamlet).
From the statement of Resham Singh (P.W. 2), it appears that from their behak they had gone to Amarkot that very day for purchasing cloth and on the return journey they met Bachan Singh.
As against this, the story told by Bachan Singh is that a day earlier Hazara Singh deceased and Resham Singh, P.W. had left their behak for some unknown destination and that a day later they had met him at the adda, after their departure from the behak the previous day.
This version completely belies the version of Resham Singh (P.W. 2) that they had left their behak 625 in order to make purchases of cloth and other articles.
(vii) Another odd feature brought out from the evidence of Resham Singh (P.W. 2) is the presence of motor cycle at Amarkot on that day.
It is surprising that he could afford to maintain a motorcycle from the meagre income that he would have got from his 5 or 6 acres of land.
His explanation as to why he left the motor cycle at Amarkot, is also not convincing.
(viii) The investigation of the case conducted by the Sub Inspector Bishamber Lal (P.W. 13) does not inspire confidence.
(a) The evidence relating to the recovery of empty cartridges (vide exhibit P.G.) and pair of shoes from the spot near the dead body of Hazara Singh, was not reliable, because P.W. 13 did not mention about the presence of these articles in the inquest report (exhibit PDZ).
(b) Though the empty (crime) cartridges recovered from the spot were sent to the ballistic expert earlier, they were returned to the Police Station on the plea that the test cartridges had not been sent along with those empties.
"Even if it was so, there was no need of sending the crime cartridges to the Police Station, as the test cartridges could be sent for through a separate letter.
In this situation, the suggestion that the crime cartridge had been later on fired through rifle (exhibit P7) when it was recovered cannot be considered improbable".
(ix) "On arrival at the scene of the incident, P.W. 13 found Joginder Singh accused at a distance of about 100 yards irrigating his field.
According to Bishamber Lal, he interrogated Joginder Singh there and then, but did not arrest him.
If Joginder Singh accused had been found near the scene of the crime within a short time, engaged in his normal activities, his participation in the crime would be highly improbable".
Learned counsel for the appellant vehemently contends that the reasoning of the High Court is manifestly unsound, if not wholly perverse.
Great emphasis has been laid on the fact that the First Information Report, in this case was lodged by Resham Singh (PW 2) with utmost promptitude, and even its copy had reached the Magistrate at about 6 or 6 30 p.m. at Patti, on the same day.
In the First Information Report, proceeds the argument, all the material facts including the names of the accused and of the witnesses have been mentioned It is submitted that since this F.I.R. was made without delay in circumstances in which the informant had no time to concoct a false story, it furnished valuable corroboration of the evidence of Resham Singh (P.W. 2), and made his evidence safe enough to be 626 accepted.
It is further maintained that in the first place, the prosecution had established that Mukhtar Singh, Harbhajan Singh and Joginder Singh had also a motive to join hands with Wasson Singh to murder Hazara Singh deceased, and that even if it was held that such motive on the part of the companions of Wasson Singh accused had not been substantiated as the High Court has held then P.Ws. 2 and 3 had also no motive or animus to falsely implicate them.
Counsel have criticised the failure of the High Court to discuss the value and effect of the F.I.R. lodged by P.W. 2.
It is emphasised that the circumstance that the F.I.R. was made without delay was a circumstance of paramount importance in evaluating Resham Singh 's evidence in particular and the prosecution evidence in general.
It is argued that the omission on the part of the High Court to deal with and discuss the F.I.R. has caused serious aberration in its approach and vitiated its appreciation of the evidence of the eye witnesses.
On the other hand, Shri R. K. Jain, learned counsel for the respondents, has submitted that since the reasons given by the High Court in support of the acquittal of the accused cannot be called perverse, this Court should not, in keeping with its practice, disturb the acquittal even if it feels inclined to hold that the view of the evidence taken by the trial court is also reasonable.
Shri Jain has further tried to support the reasoning of the High Court.
We have carefully considered the contentions canvassed on both sides.
We are also not unmindful of the fact that we are dealing with an appeal against an order of acquittal in a double murder case.
Even so, we find that the reasons given by the High Court for holding that Resham Singh (P.W. 2) was not an eye witness of these murders, are utterly unsustainable.
The mere fact that Resham Singh (P.W. 2) had succeeded in escaping unhurt, or that there are discrepancies in the statements of Resham Singh (P.W. 2) and Bachan Singh (P.W. 3), as to whether they had gone to Amarkot with Hazara Singh deceased on the very day of occurrence or a day earlier, was no ground for jumping to the conclusion that P.W. 2 was not in the company of the deceased or nearabout the scene of occurrence when Hazara Singh and Resham Singh were shot dead.
The occurrence took place on August 4, 1973, While Resham Singh (P.W. 2) and Bachan Singh (P.W. 3) were examined at the trial on December 27, 1974, that is to say, 17 months after the incident.
Such discrepancies in regard to collateral or subsidiary facts or matters of detail occur even in the statements of truthful witnesses, particularly when they are examined to depose to events which happened long before their examination.
Such discrepancies are 627 hardly a ground to reject the evidence of the witnesses when there is general agreement and consistency in regard to the substratum of the prosecution case.
As rightly observed by the trial court, Resham Singh (P.W.2) was never cross examined by the defence regarding his whereabouts and that of Hazara Singh deceased on the previous night.
The mere fact that P.W. 2 did not make any purchases at Amarkot could hardly be a reason to hold that his being in the company of Hazara Singh deceased at the material time, was improbable.
It is common ground that there was no love lost between Wassan Singh appellant and Hazara Singh deceased.
Wassan Singh, though convicted by the trial court for the murder of Ajit Singh, was released on bail by the High Court pending his appeal.
P.W. 3 is the brother and P.W. 2 a relation of the deceased.
All these three were living together in the same hamlet in the fields.
It is in the evidence of these witnesses that the other accused are partymen of Wasson Singh.
It is further in evidence that sometime before the occurrence both Hazara Singh and Resham Singh,(P.W. 2) were arrested and handcuffed by Darshan Singh, Police Sub Inspector on the allegation that they were indulging in smuggling and would be liquidated.
Both of them however, escaped and appeared with handcuffs on before the Deputy Home Minister and complained against the Police Sub Inspector.
Both were prosecuted for smuggling betel leaves across the border.
It was therefore, not improbable that this trio consisting of Hazara Singh deceased, P.W. 2 and P.W. 3 was, as usual, moving about or carrying on their activities together.
Moreover, the deceased Hazara Singh must have known that Wasson Singh accused who was inimically disposed towards him, was at large on bail.
This was an added reason for this troika to move about for their security, if not for anything else, in the company of each other.
Nor could P.W. Bachan Singh 's presence at the scene of crime be discounted and his evidence discarded merely on the score that there was no necessity for him to go to Amarkot for enquiring about the availability of diesel.
There is one towering circumstance which goes a long way to lend assurance to the claim of P.W. 2 that he was an eye witness of the occurrence.
It is that the F.I.R. (exhibit P.E.) was lodged by him at Police Station Valtoha, so promptly that he had practically no time to spin out a false story.
628 The learned trial Judge has accepted, and rightly so, the sworn testimony of Resham Singh (P.W. 2) and Sub Inspector Bishamber Lal (P.W. 13), who was then Station House Officer, Valtoha, to the effect, that the F.I.R. (exhibit P.E.), was recorded in the Police Station at 4.30 p.m. Police Station Valtoha is three miles from Bus Stand Amarkot.
According to Resham Singh, the occurrence took place at about 3.30 p.m. On seeing the occurrence and after eluding the pursuit, Resham Singh, as he says, ran to Adda Amarkot through the fields covering a distance of about one kilometre.
According to P.W. 2, his motor cycle was lying at a shop in Amarkot.
He picked up his motor cycle from there and drove to the Police Station, Valtoha and without loss of time lodged the first information, there.
The endorsement on exhibit PE, bears out that the copy of the First Information was in the hands of Shri K. K. Garg, Judicial Magistrate, First Class, Patti, at 6.30 p.m.
This circumstance assures the truth of the prosecution evidence on the point that the First Information Report was made by Resham Singh (P.W. 2) at the Police Station at 4.30 p.m., that is within two hours of the occurrence without undue delay.
The learned Judges of the High Court have not at all dealt with the F.I.R. or the promptitude with which it was made.
They doubted Resham Singh 's version that from Amarkot he went on his own motor cycle to Valtoha Police Station.
The argument employed by the High Court is that Resham Singh owned only four or five killas of land, and could not acquire and maintain a motor cycle from the income of his petty holding.
However, this was not the defence case.
In cross examination, the defence themselves, brought out and tried to establish that he was earning by smuggling betel or other things to Pakistan.
Thus, according to the own showing of the defence, P.W. 2 had a source of income other than his agricultural income.
It was, therefore, nothing improbable if Resham Singh owned a motor cycle.
Sub Inspector Bishamber Lal (P.W. 13) was not questioned in cross examination as to whether or not Resham Singh had come to the Police Station on a motor cycle.
He (P.W. 13) was however, questioned as to what transport he had used for going from the Police Station to the scene of murders.
The witness replied that he went on a motor cycle upto Amarkot and from there went on foot to the scene of occurrence.
Resham Singh stated that since it had recently rained, the kacha path from Amarkot to their hamlet in village Ban, had became muddy and unsafe for riding a motor cycle because of the high risk of skidding.
That was why, the witness had left the motor cycle at Adda Amarkot with a shopkeeper.
629 It may be noted that the occurrence took place on August 4, 1973 when the rainy season would be in full swing.
This explanation of Resham Singh (P.W. 2) regarding the kacha path from Amarkot to the scene of occurrence, being non motorable on the day of occurrence, receives inferential support from the fact appearing in the evidence of Bishamber Lal (P.W. 13), that he had to cover the distance from Adda Amarkot to the place of occurrence, on foot.
Thus, the reason employed by the High Court for disbelieving the version of Resham Singh (P.W. 2) regarding his owning and going on a motor cycle from Amarkot to Police Station Valtoha was manifestly unsound.
It was argued before the trial court on behalf of the accused that the occurrence might have taken place at about 2 p.m. when Resham Singh (P.W. 2) was about 400 or 500 yards away in his hamlet, and that on hearing the report of gun fire he was attracted to the scene of crime, and he having seen the dead bodies lying there, went home, took his motor cycle and then drove to the Police Station Valtoha and brought Sub Inspector Bishamber Lal to the scene of occurrence and the Sub Inspector prepared the F.I.R. at the spot after deliberation with Resham Singh and others.
This contention was rightly rejected by the trial court.
As observed earlier, since it had rained a day prior to the occurrence, the kacha path from Amarkot to the scene of occurrence and to the hamlet of the deceased must have been muddy and slippery.
Therefore, the very suggestion that from village Ban to Amarkot and thereafter to Valtoha, Resham Singh went on his motor cycle, was improbable.
Moreover, from the conduct of the Investigating Officer, Bishamber Lal, it appears that he was not favourably disposed towards the deceased and the informant.
Indeed, a suggestion was put to Bishamber Lal (P.W. 13) by the Public Prosecutor, that he has been unfair in the investigation of the case and tried to favour Joginder Singh and Meja Singh accused.
The learned trial Judge found that the investigation conducted by Sub Inspector Bishamber Lal was biased in favour of Joginder Singh and Meja Singh accused persons, and that the Sub Inspector fraudently interpolated a note in his zimini to help Joginder Singh accused.
The High Court has, also, found that this note in the zimini was a fraudulent insertion.
This being the case, Sub Inspector Bishamber Lal would be least disposed to join hands with Resham Singh informant in preparing the First Information Report, after deliberation with him (P.W.2) at the spot.
630 Dr. Gursharan Kaur (P.W. 1) who performed the post mortem examination of the dead bodies of Resham Singh and Hazara Singh on August 4, 1973 between 8 a.m. and 9 a.m. respectively, opined that the time which elapsed between these deaths and their post mortem examination was about 18 hours.
Thus, according to the Doctor 's opinion, also, the deaths took place at about 2 or 3 p.m. on August 4, 1973.
The opinion of the medical witness thus corroborated the version of Resham Singh (P.W. 2) in as much as the latter has testified that the murders took place at about 3.30 p.m.
This means, that the statement of Resham Singh (P.W. 2) in the First Information Report was made without undue delay, and, as such, furnished very valuable corroboration of his testimony at the trial, in all material particular.
If the presence of Resham Singh (P.W. 2) and Dalip Bachan Singh (P.W. 3) at the time and place of murders was probable the further question would be, how far their evidence could be safely accepted against each of the accused persons ? It is true that both these witnesses are related to the deceased, and, as such, are interested witnesses.
Their antecedents, also, are of a questionable nature.
But their antecedents or mere interestedness was not a valid ground to reject their evidence.
Persons with such antecedents are not necessarily untruthful witness.
Nor mere relationship with the deceased was a good ground for discarding their testimony, when, as we have already held, their presence at the scene of occurrence was probable.
All that was necessary was to scrutinise their evidence with more than ordinary care and circumspection with reference to the part or role assigned to each or the accused.
An effort should have been made to sift the grain from the chaff; to accept what appeared to be true and to reject the rest.
The High Court did not adopt this methodology in appreciating their evidence.
Instead, it took a short cut to disposal, and rejected their evidence whole sale against all the accused, for reasons which, as already discussed, are manifestly untenable.
Keeping the principle enunciated above, we have scrutinised the entire material on record with particular focus on the evidence of P.W.2 and P.W.3, against each of the accused.
Excepting the immaterial discrepancies considered earlier, the evidence of P.W. 2 and P.W. 3 was consistent, and their presence as already mentioned, at the time and place of murders was probable.
Even so, as a matter of abundant caution, it will be safe to act on their interested evidence 631 to the extent to which some assurance is coming forth from surrounding circumstances or other evidence.
The story narrated by the eye witnesses, Resham Singh and Bachan Singh is that Wasson Singh, Mukhtar Singh and Joginder Singh first fired a volley of rifle shots at Hazara Singh deceased as a result of which he dropped dead at the spot.
The evidence of the Doctor who performed the autopsy on the dead body of Hazara Singh is to the effect that there were two bullet wounds of entry on the left side of the head.
These wounds were located at a distance of 2 1/2 cms.
from each other.
There were two corresponding wounds of exit.
There was no blackening or charring around these wounds of entry.
This indicates that these injuries were caused by bullets fired almost simultaneously from two separate rifles from a distance beyond 6 feet.
This means at least the rifles fired by two of the three aforesaid accused did find their mark, causing instantaneous death of the deceased.
Now, both the courts below have concurrently found that Wasson Singh had a strong motive to murder Hazara Singh deceased.
This circumstance, by itself, is sufficient to lend the necessary assurance to the evidence of Resham Singh (P.W. 2) and Bachan Singh (P.W. 3) and make it a safe basis for convicting Wasson Singh accused for the murder of Hazara Singh.
The trial court had accepted the evidence of Resham Singh (P.W.2) in regard to the quarrel over cattle trespass that took place 3 or 4 days prior to these murders between Mukhtar Singh and Harbhajan Singh accused on one side, and Hazara Singh deceased and P.W. 2 on the other.
This story finds particular mention in the F.I.R. (exhibit PE) which was lodged by P.W. 2 without undue delay.
The High Court has rejected this story about this previous quarrel on the three fold ground, namely: (a) Gajjan Singh who interceded and pacified the parties has not been examined, (b) No evidence of the extent of damage done to the crop or of any complaint made to village Panchayat has been produced, (c) Bachan Singh (P.W.3), did not mention about this earlier incident in his police statement.
In our opinion, none of these was a valid ground for rejecting the evidence of Resham Singh (P.W.2) in regard to this incident.
Resham Singh 's consistent testimony on this point corroborated by the F.I.R. (exhibit PE) was sufficient to establish this fact beyond doubt.
Thus, it was proved by the prosecution that Mukhtar Singh accused had also a motive to join Wasson Singh accused in killing Hazara Singh.
The circumstance that Mukhtar Singh had also a motive to participate in the murder of Hazar Singh deceased lends assurance to the 632 testimony of Resham Singh (P.W.2) and Bachan Singh (P.W.3), and strengthens the inference of guilt against the said accused, also.
It is in the evidence of Sub Inspector Bishamber Lal (P.W.13) that Mukhtar Singh was arrested on August 18, 1973 and on August 31, 1973 Mukhtar Singh accused, whilst under Police custody, made a disclosure statement in the presence of Ajit Singh and Sardul Singh Constables, that he had kept concealed a 303 rifle with 5 cartridges wrapped in a piece on cloth in a bundle of reeds lying inside the courtyard of his house at village Thathiwala and he could get the same discovered.
P. W. 13 recorded that statement (exhibit P 1).
Thereafter, the accused was taken to village Thathiwala where he led the Sub Inspector in the presence of Sardul Singh and Ajit Singh Constables, to that bundle and got discovered the rifle (exhibit P7) and the cartridges (exhibit P8 to 12) therefrom.
The Sub Inspector prepared the sketch of the rifle and the memo (exhibit PM) which was attested by the aforesaid Constables.
The rifle and the cartridges were sealed into parcels and were thereafter sent through Constable Ajit Singh, with seals intact, to the Police Station where they were received by the Moharrir Head Constable Natha Singh (P.W. 10).
P.W. 13 has also, stated that he had on August 4, 1973 on inspecting the scene of murders, found two empty cartridges (exhibit
P3 and exhibit P4) from near the dead body of Hazara Singh.
The witness took them into possession and sealed them into a parcel in the presence of Anokh Singh and Gajjan Singh witnesses, and prepared the memo (exhibit PG).
The parcel containing the empties was later deposited by the Sub Inspector, with seals in tact, in the Malkhana of the Police Station.
The evidence of Sub Inspector Bishamber Lal, with regard to the seizure of the empty (crime) cartridges from the scene of occurrence on August 4, was supported by Anokh Singh (P.W.4) who is an attesting witness of the memo, Ex.PG.
The witness is a resident of village Cheema.
In cross examination, he revealed that these two fired cartridges were lying at a distance of 1.5 karams (8 or 9 feet) from the dead body of Hazara Singh.
Nothing was brought out in cross examination to show that the witness was in any way interested in the prosecution or was related to the deceased or had any animus against the accused.
Thus, it has been clearly proved that two fired cartridges were picked up from the scene of crime and sealed into parcels which were later deposited with seals intact in the Police Station.
In the memo (exhibit PG), it is mentioned that these fired cartridges were of 303 bore rifle.
633 Ajit Singh Moharrir Head Constable (P.W.11) swore in his affidavit that on August 4, 1973, he received the sealed parcel of 2 empty cartridges from Sub Inspector Bishamber Lal.
The seals on the parcel remained intact so long as the parcel remained in his custody.
Then, there are the affidavits of Avtar Singh Constable (P.W. 9) and Natha Singh Moharir Head Constable showing that on September 24, 1973, the sealed parcels containing the rifle (exhibit P7) and the five live cartridges were sent through P.W. 9 to the Forensic Science Laboratory Chandigarh, who delivered the same in the said Laboratory with seals intact.
The evidence of P.W. 13 regarding the discovery of the rifle (exhibit P7) from Mukhtar Singh accused was fully corroborated by Constable Sardul Singh (P.W. 12).
His cross examination reveals that Mukhtar Singh was interrogated in the Police Station at 4 5 A.M. when he made the statement (exhibit PL), leading to the discovery of the rifle (exhibit P7).
Sub Inspector Bishamber Lal (P.W. 13) has stated that the sealed parcel containing the empty cartridges, that had been found at the scene of crime, was sent to the Forensic Science Laboratory Chandigarh at a date earlier than the one on which the parcel containing the rifle (exhibit P7) and the five live cartridges was sent to the said Laboratory, but it was returned with the objection that it should have been sent along with the test cartridges.
Consequently, this parcel containing the empties was again sent to the Forensic Laboratory along with the sealed parcel containing the rifle (exhibit P7) and the live cartridges recovered from Mukhtar Singh accused.
In the Report (exhibit PQ) of the Ballistic Expert (L. A. Kumar) which was tendered in evidence and admitted without objection, it is opined that the empty (crime) cartridge, marked C1, had been fired through the rifle (exhibit P7).
In cross examination, the defence suggested to P.W. 13, that he had purposely recalled the parcel containing the empty cartridges from the Forensic Science Laboratory for creating evidence against the accused and he did so by firing one cartridge through the rifle (exhibit P7).
The oblique suggestion was that the cartridge, marked C1 which in the opinion of the Ballistic Expert had been fired through the rifle (exhibit P7) was substituted for the original empty cartridge that had been found at the scene of murder.
The Sub Inspector emphatically denied the suggestion.
It was further suggested to P.W. 13 that the rifle (exhibit P7) had, in fact, been handed over to the Police by the relations of the deceased after procuring it from some source.
This was also stoutly denied by P.W. 13.
634 The learned trial Judge discarded this evidence relating to the discovery of the rifle (exhibit P7) at the instance of the accused, Mukhtar Singh, for the reason that Sub Inspector Bishamber Lal, for no good reason, had failed to join respectables of the locality to witness the discovery of the rifle, and that he (P.W. 13) "has tried to be a defence witness rather than the investigating officer".
The trial Judge accepted Anokh Singh 's statement regarding the recovery of the two fired cartridges from the scene of Hazara Singh 's murder on August 4, but he adversely commented on the conduct of Bishamber Lal in delaying the despatch of those crime cartridges to the Forensic Science Laboratory Chandigarh till after the recovery of the rifle.
He observed: "In all probability, Sub Inspector Bishamber Lal wanted to help the accused by creating suspicion with respect to the identity of the firing impressions" (on the empties).
For this reason, according to the trial Judge, the ballistic evidence "will not be corroborative evidence for the prosecution.
" We agree with the trial Court that the investigating officer did not deliberately join with him respectables of the locality to attest the statements (exhibit PL) made by Mukhtar Singh, and to witness the sub sequent discovery of the rifle (exhibit P7) at the instance of Mukhtar Singh.
There was substance in the observation of the trial Judge that the investigation was biased in favour of the accused.
If that was so, the failure of Bishamber Lal (P.W. 13) to join with him respectables of the locality was, by itself, no ground for ruling out the evidence of the discovery of the rifle, altogether.
The partiality of Bishamber Lal towards the defence, rather assures the genuineness of the discovery He was least disposed to 'collaborate ' or 'cooperate ' with the relations of the deceased to procure this rifle (exhibit P7) from some other source and then foist it on Mukhtar Singh.
For the same reason, it is not possible to hold that he recalled the sealed parcel containing the fired (crime) cartridges from the Laboratory at Chandigarh, for substituting a cartridge fired through the rifle (exhibit P7) or for fabricating evidence in support of the prosecution.
Moreover, the parcel containing the two empties must have been returned by the Director of the Forensic Laboratory on his own initiative and not at the instance of the Sub Inspector (P.W. 13).
The omission on the part of this investigating officer to join with him some independent persons or respectables of the locality to witness the recovery devalues that evidence but does not render it inadmissible.
Although a suggestion of "planting" the rifle, and fabricating the evidence of the empty cartridge (C1) was put to Sub Inspector Bishamber Lal in cross examination, no such allegation was 635 made, nor any such plea was set up by Mukhtar Singh accused when the evidence relating to the recovery of the two empties from the spot, the discovery of the rifle (exhibit P7) at his instance and the opinion (exhibit PQ) of the Ballistic Expert was put to this accused in his examination under Section 342, Cr.
P.C. The circumstance of the recovery of the rifle (exhibit P7) and the opinion of the Ballistic Expert that the empty cartridge (marked C1) (found on August 4, at the scene of murder) had been fired through the rifle (exhibit P7), though feeble it might be was relevant and furnished a further pointer to the participation of Mukhtar Singh in the commission of Hazara Singh 's murder by rifle fire.
In sum, sufficient assurance of the testimony of P.W. 2 and P.W. 3, was available from the circumstantial evidence discussed above, regarding the participation of Wasson Singh and Mukhtar Singh accused in the murder of Hazara Singh.
The evidence of the eyewitnesses therefore, could safely be acted upon for convicting Wasson Singh and Mukhtar Singh accused respondents for the murder of Hazara Singh.
But such assurance of the evidence of these eyewitnesses was not available against the remaining accused regarding either of the murders in question.
Joginder Singh accused admittedly was not present when the quarrel over cattle trespass took place between Hazara Singh deceased and P.W. 2 on one side, and Mukhtar Singh and Harbhajan Singh accused on the other.
It has neither been alleged nor proved that Joginder Singh had any motive of his own to murder Hazara Singh deceased.
Although, the investigation betrays a tilt in favour of the accused, and P.W. 13 made a fraudulent insertion in the zimini to help Joginder Singh accused, it cannot be said that the version of P.W. 13 to the effect that when he went to the scene of murders at 5.30 P.M., he found Joginder Singh irrigating his nearby fields at a distance of about 100 yards therefrom and he (P.W. 13) interrogated him there and then, but did not think it necessary to arrest him, is necessarily false.
The absence of motive, and the presence of Joginder Singh near the scene of crime shortly after the murders, engaged in normal agricultural activities does cast a doubt about his participation in the commission of these murders.
P.W. 2 and P.W. 3 have stated that they started running away from the spot, immediately after Hazara Singh was shot dead.
The surrounding circumstances, natural probabilities and the normal course of human conduct also suggest the same inference, that 636 immediately on seeing Hazara Singh being shot down, these witnesses who were following Hazara Singh, ran fast for their lives.
Had they tarried for a while at the scene of Hazara Singh 's murder, it would have been too late for them to escape unhurt.
In such a situation, when they were being pursued by persons armed with fire arms, they could, if at all they turned and looked behind have only a fleeting glimpse in the distance of the assailants of Resham Singh deceased.
That is why, Resham (P.W. 2) is not consistent in his statements as to which of the accused had fired at him when he was running away for his life.
Moreover, it has not been established that any of the six accused had any motive, whatever, to murder Resham Singh deceased.
For the foregoing reasons, we partly allow this appeal by the State, set aside the acquittal of Wassan Singh and Mukhtar Singh accused (respondents) and convict them under Section 302 read with Section 34, Penal Code for the murder of Hazara Singh deceased and sentence each of them to imprisonment for life.
We would, however, accord the benefit of doubt to the rest of the accused (respondents) and maintain their acquittal on all the counts.
Wasson Singh and Mukhtar Singh shall surrender to their bail bonds to serve out the sentences inflicted on them.
N.V.K. Appeal partly allowed.
|
The prosecution case against the six accused (Respondents) was that prior to the incident in question, there was an altercation between the two deceased on one side and the six accused on the other over trespass of cattle of the accused persons on the land of the deceased, which damaged his cotton crop.
On the day of the incident when P.W. 2, P.W. 3 and the two deceased were going by a foot path, the six accused suddenly emerged out of a field and fired.
The two deceased fell dead, while P.W. 2 and 3 ran and escaped unhurt.
P.W. 2 reached the bus stand, picked up his motor cycle parked at a shop and drove to the nearest police station to lodge the F.I.R.
The Additional Sessions Judge found that one of the accused had a strong motive to murder one of the deceased because of an old feud and that on account of this ill will, some of the accused had a strong motive in joining hands with the others to murder the deceased, but that no motive could be established for murdering the second deceased.
He also found that the fact that the F.I.R. was lodged by P.W. 2 with the utmost promptitude furnished valuable corroboration of his evidence and also disbelieved the evidence of the police Sub Inspector (P.W. 13).
In the result he convicted all the six accused under section 302 read with section 149 I.P.C. for murder of one of the deceased and sentenced them to imprisonment.
In the case of first accused however, he was sentenced to death for the murder of one of the deceased.
All the accused appealed against their conviction and sentence to the High Court which allowed the appeal and rejected the reference.
It rejected the evidence of the eye witnesses, P.W. 2 and P.W. 3 on the ground that these witnesses were closely related to the first deceased who was the principal target of the accused and that it had not been satisfactory established by the prosecution that the other five accused had any motive to commit the murders in question.
It found that the prosecution story was highly unnatural and that the presence of the two eye witnesses alongwith the deceased persons was un 616 likely.
It further held there was material inconsistency in their testimony, as to when the first deceased and P.W. 2 had left the hamlet, and that the investigation of the case conducted by the Sub Inspector (P.W. 13) did not inspire confidence.
In the appeal by the State to this Court it was contended on behalf of the State that the reasoning of the High Court was manifestly unsound, if not wholly perverse.
The fact that the F.I.R. was lodged by P.W. 2 with utmost promptitude and all the material facts including the names of the accused and of the witnesses having been mentioned therein, indicated that there was no time to concoct a false story.
On behalf of the respondents it was submitted that the acquittal could not be disturbed, as the reasons given by the High Court could not be called perverse.
^ HELD : 1(i) The acquittal of respondent Nos. 1 and 2 are set aside and they are convicted under section 302 read with section 34 Indian Penal Code for the murder of the first deceased and sentenced to imprisonment for life.
The benefit of doubt to the rest of the accused (respondents) and their acquittal on all the counts maintained.
[636 C D] (ii) Sufficient assurance of the testimony of P.W. 2 and P.W. 3 was avail able from the circumstantial evidence regarding the participation of respondents Wasson Singh and Mukhtar Singh in the murder of deceased Hazara Singh.
The evidence of the eye witnesses therefore, could safely be acted upon for convicting these respondents for the said murder.
[635 C D] 2.
The reasons given by the High Court for holding that P.W. 2 was not an eye witness of these two murders are utterly unsustainable.
The reason that P.W. 2 had succeeded in escaping unhurt, or that there are discrepancies in the statements of P.W. 2 and P.W. 3 as to whether they had gone with the deceased on the very day of occurrence or a day earlier was no ground for the conclusion that P.W. 2 was not in the company of the deceased or near about the scene of occurrence when the two deceased were shot dead.
[626 F G] 3.
Discrepancies in regard to collateral or subsidiary facts or matters of detail occur even in the statements of truthful witnesses, particularly when they are examined to depose to events which happened long before their examination.
Such discrepancies are hardly a ground to reject the evidence of the witnesses when there is general agreement and consistency in regard to the substratum of the prosecution case.
[626H 627A] In the instant case the occurrence took place on August 4, 1973, while P.W. 2 and P.W. 3 were examined at the trial on December 27, 1974 i.e. seventeen months after the incident.
The trial court has rightly observed that P.W. 2 was never cross examined by the defence regarding his whereabouts and those of the deceased on the previous night.
The mere fact that P.W. 2 did not make any purchase at Amarkot could hardly be a reason to hold that his being in the company of the deceased at the material time was improbable.
[626G, 627B] 4.
P.W. 3 is the brother and P.W. 2 relation of the deceased.
All three were living together in the same hamlet in the fields.
It is in the evidence of 617 these witnesses that the other accused are partymen of respondent No. 1.
It is further in evidence that sometime before the occurrence both the deceased and P.W. 2 were arrested and handcuffed by a police Sub Inspector on the allegation that they were indulging in smuggling and would be liquidated.
It was, therefore, not improbable that this trio consisting of first deceased, P.W. 2 and P.W. 3 were as usual moving about or carrying on their activities together.
Moreover the deceased must have known that Respondent No. 1 who was inimically disposed towards him was at large on bail.
This was an added reason for this troika to move about for their security, if not for anything else, in the company of each other.
[627C F] 5.
(i) The High Court has not all dealt with the First Information Report or the promptitude with which it was made.
[628D] (ii) The towering circumstance which lends assurance to the claim of P.W. 2 that he was an eye witness of the occurrence is that the First Information Report was lodged by him at the Police Station so promptly that he had practically no time to spin out a false story.
The reason employed by the High Court for disbelieving the version of P.W. 2 regarding his owning and going on a motor cycle to the Police Station was manifestly unsound.
The Sub Inspector P.W. 13 was not questioned in cross examination as to whether or not P.W. 2 had come to the Police Station on a motor cycle.
He was, however, questioned as to what transport he had used for going from the Police Station to the scene of murders.
The witness replied that he went on a motor cycle upto Amarkot and from there went on foot to the scene of occurrence.
This explanation of P.W. 2 regarding the kacha path from Amarkot to the scene of occurrence, being non motorable on the day of occurrence, receives inferential support from the fact appearing in the evidence of P.W. 13 that he had to cover the distance from Adda Amarkot to the place of occurrence, on foot.
[627H, 629E, 628G 629A] 6.
The conduct of the Investigation Officer (P.W. 13) indicates that he was not favourably disposed to the deceased and P.W. 2.
A suggestion was also put to P.W. 13 by the Public Prosecutor that he had been unfair in the investigation of the case and tried to favour the 3rd and 4th respondent.
The High Court found that the note in the zimini was a fraudulent insertion.
This being the case, Sub Inspector (P.W. 13) would be least disposed to join hands with P.W. 2 informant in preparing the First Information Report, after deliberation with P.W. 2 at the spot.
[629F H] 7.
The opinion of the medical witness P.W. 1 corroborates the version of P.W. 2 in as much as the latter has testified that the murders took place at about 3.30 p.m.
This means that the statement of P.W. 2 in the F.I.R. was made without undue delay, and, as such, furnished very valuable corroboration of his testimony at the trial in all material particulars.
[630B C] 8.
(i) Both P.W. 2 and P.W. 3 are related to the deceased, and as such are interested witnesses.
Their antecedents, also, are of a questionable nature.
But their antecedents or mere interestedness was not a valid ground to reject their evidence.
All that was necessary for the Court was to scrutinise their evidence with more than ordinary care and circumspection with reference to the part or role assigned to each of the accused.
An effort should have been made to sift the grain from the chaff; to accept what appeared to be true and to reject the 618 rest.
The High Court did not adopt this methodology in appreciating their evidence.
Instead it took a shortcut to disposal and rejected their evidence whole sale against all the accused for reasons which are manifestly untenable.
[630E G] (ii) Excepting for immaterial discrepancies the evidence of P.W. 2 and P.W. 3 was consistent and their presence at the time and place of murders was probable.
Even so, as a matter of abundant caution it will be safe to act on their interested evidence to the extent to which some assurance is coming forth from surrounding circumstances or other evidence.
[630H 631A] 9.
The prosecution has proved that the respondent No. 2 had also a motive to participate in the murder of the second deceased.
This lends assurance to the testimony of P.W. 2 and P.W. 3 and strengthens the inference of guilt against the said accused also.
P.W. 2 's consistent testimony corroborated by the F.I.R. was sufficient to establish this fact beyond doubt.
[631H 632A] 10.
It had been clearly proved that two fired cartridges were picked up from the scene of crime and sealed into parcels which were later deposited with seals intact in the Police Station.
On the memo it is mentioned that these fired cartridges were of 303 bore rifle.
[632H] 11.
There was substance in the observation of the trial Judge that the investigation was biased in favour of the accused.
If that was so, the failure of P.W. 13 to join with him respectables of the locality was by itself no ground for ruling out the evidence of the discovery of the rifle, altogether.
The partiality of P.W. 13 towards the defence, rather assures the genuineness of the discovery.
He was least disposed to 'collaborate ' or cooperate with the relations of the deceased to procure this rifle from some other source and then foist it on respondent Mukhtar Singh.
The omission on the part of this Investigating Officer to join with him some independent persons or respectables of the locality to witness the recovery devalues that evidence but does not render it inadmissible.
[634D F, H] 12.
The circumstance of the recovery of the rifle (exhibit P. 7) and the opinion of the Ballistic Expert that the empty cartridge (C1) had been fired through the rifle though feeble it might be was relevant and furnished a further pointer to the participation of Mukhtar Singh in the commission of Hazara Singh 's murder by rifle fire.
[635B] 13.
Although the investigation betrays a tilt in favour of the accused, and P.W. 13 made a fraudulent insertion in the zamini to help Joginder Singh accused, it cannot be said that the version of P.W. 13, that when he went to the scene of murders at 5.30 p.m. he found Joginder Singh irrigating his nearby fields at a distance of about 100 yards therefrom and he interrogated him there and then but did not think it necessary to arrest him is necessarily false.
The absence of motive and the presence of Joginder Singh near the scene of crime shortly after the murders, engaged in normal agricultural activities does cast a doubt about his participation in the commission of these murders.
[635 F G] 14.
P.W. 2 and P.W. 3 have stated that they started running away from the spot, immediately after deceased Hazara Singh was shot dead.
The surrounding circumstances, natural probabilities and the normal course of human conduct 619 also suggest the same inference, that immediately on seeing Hazara Singh being shot down, these witnesses who were following him ran fast for their lives.
Had they tarried for a while at the scene of the murder, it would have been too late for them to escape unhurt.
In such a situation, when they were being pursued by persons armed with fire arms, they could if at all they turned and looked behind have only a fleeting glimpse in the distance of the assailants of Resham Singh deceased.
That is why P.W.2 is not consistent in his statements as to which of the accused had fired at him when he was running away for his life.
Moreover it has not been established that any of the six accused had any motive, whatever to murder Resham Singh deceased.
[635H 636C]
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4344.txt
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No. 47 of 1966.
Petition.under article 32 of the Constitution of India for the enforcemont of fundamental rights.
The petitioner appeared in person.
210 Niren De, Additional Solicitor General, N. section Bindra, R. H. Dhebar and B.R.G.K. Achar, for the respondent.
R. V. section Matti, for the intervener.
The Judgment of the Court was delivered by Sarkar, CJ.
The petitioner, Puran Lal Lakhanpal, was arrested and detained under cl.
(b) of sub r.
(1) of Rule 301 of the Defence of India Rules.
1962 by an order passed on December 10, 1965 and directed to be detained in Central Jail, Tehar, New Delhi.
The order stated that: "WHEREAS the Central Government is satisfied that with a view to preventing Shri P.L. Lakhanpal.
son of late Shri Diwan Chand Sharma. . from acting in a manner prejudicial to the Defence of India and Civil Defence, public safety and the maintenance of public order, it is necessary that he should be detained; NOW, THEREFORE. . . the Central Government hereby directs that the said Shri P. L. Lakhanpal be detained.
" He has moved this Court under article 32 of the Constitution by a petition presented on December 24, 1965 for a writ of habeas corpus directing his release.
He challenges the legality of the detention order on various grounds which we now proceed to consider.
The first ground is that r. 30(1)(b) is ultra vires section 3(2)(15)(1) of the Defence of India Act under which the Rules were made.
Sub s.(1) of section 3 contains the general power to make rules for certain purposes.
Sub section (2) states that the rules made may provide for and many empower any authority to make orders providing for all or any of the following matters, namely: "(15) notwithstanding anything in any other law for the time being in force. . . . (i) the apprehension and detention in custody of any person whom the authority empowered. . suspects, on grounds appearing to that authority to be reasonable . . . . acting, being about to act or being likely to act in a manner prejudicial to the defence of India and civil defence, the security of the State, the public safety or interest,the maintenance of public order. . or with respect to whom that authority is satisfied that his apprehension and detention are necessary for the purpose of preventing him from acting in any such prejudicial manner." 211 Rule 30(1)(b) is in these terms: "The Central Government. . . if it is satisfied with respect to any particular person that with a view to preventing him from acting in any manner prejudicial to the defence of India and civil defence, the public safety, the maintenance of public order. . . may make an order (b) directing that he be detained.
" It will be noticed that the rule does not say that the satisfaction mentioned in it shall be on grounds appearing to the authority concerned to be reasonable.
It is said that by omitting these words the rule has gone outside the section which mentions them, and is, therefore, ultra vires.
This contention is untenable.
It overlooks the fact that the latter part of the section states that the rules made under it may also provide for the apprehension and detention of a person "with respect to whom that authority is satisfied that his apprehension and detention are necessary" for certain purposes; this part does not contain any requirement as to satisfaction on reasonable grounds.
This part of the section is independent of the earlier part under which the apprehension and detention can be directed only when the authority suspects on certain grounds appearing to it to be reasonable that a person is about to act in a certain manner.
It is of some significance to point out that the second part of the section is preceded by the word 'or '.
That puts it beyond doubt that the rules made under it may provide for detention in two alternative cases, for the first of which only it is necessary that the authority should entertain a suspicion on grounds appearing to it to be reasonable.
That requirement is absent in the case of a rule made under the second part of the section.
Rule 30(1)(b) cannot be said to be ultra vires the section for the reason that it does not state that the satisfaction of the authority making the order of detention has to be on grounds appearing to it to be reasonable.
The rule requires only that the detaining authority must be satisfied that the detention is necessary for the purposes mentioned and that is what the latter part of the section under which it was made also says.
The rule has clearly been made in terms of the section authorising it.
It was next said that the Proclamation of Emergency made by the President under article 352 of the Constitution which prevented the Act from being illegal, was not in terms of the article as it did not state that the President was satisfied that a grave emergency existed.
It is true that the Proclamation did not do that.
It stated: " In exercise of the powers conferred by clause (1) of article 352 of the Constitution, I Sarvapalli Radhakrishnan, President of India, by this Proclamation declare that a grave emergency exists whereby the security of India is threatened by external aggression.
" 212 We, however, find nothing in the Article which requires the Proclamation to state the satisfaction of the President about the emergency.
Article 352(1) reads, "If the President is satisfied that a grave emergency exists whereby the security of India or of any part of the territory thereof is threatened, whether by war or external aggression or internal disturbance, he may, by Proclamation, make a declaration to that effect.
" The Article requires only a declaration of emergency threatening the security of India by one of the causes mentioned.
The words "to that effect" can have no other meaning.
The power to make the declaration can no doubt be exercised only when the President is satisfied about the emergency, but we do not see that the Article requires the condition precedent for the exercise of the power, that is, the President 's satisfaction, to be stated in the declaration.
The declaration shows that the President must have satisfied himself about the existence of the emergency for in these matters the rule that official acts are presumed to have been properly performed applies and there is nothing proved by the petitioner to displace that presumption.
We were referred to certain other provisions, viz., article 311(2)(c) of the Constitution and r. 30(1)(b) of the Rules and it was contended that these provisions require the satisfaction to be stated.
It is unnecessary to decide whether they so require.
Even if they did, the requirement of the statement of the President 's satisfaction in the present case has to be decided on the terms of article 352 alone.
We have said that this Article does not contain any such requirement.
It is of interest to point out here that the petitioner stated in his petition that he extended his full support to the Government on the Proclamation of Emergency.
Obviously he could not have done so if he had any doubt about the legality of the Proclamation.
Then it was said that the Proclamation should have stated the direction from which the external aggression which it mentioned was apprehended.
We find nothing in the Article to require the Proclamation to state this.
The Proclamation was issued on October 26, 1962 when, it is well known, India 's integrity was threatened by China.
It was also stated that the continuance of Emergency which was declared over three years ago is a fraud on the Constitution.
We were told that the President in his address to the Parliament in February this year did not state that the Emergency continued to exist.
The President 's address has not been produced, and we do not know what it contained.
However that may be, article 352 itself by cl.
(2) provides that a Proclamation issued under cl.
(1) may be revoked by a subsequent Proclamation and shall cease to operate at the expiration of two months unless before the expiration of that period it has been approved by resolutions of both Houses of Parliament.
This clause also states that the Proclamation shall be laid before each House of Parliament.
It has not 213 been stated that the Houses of Parliament did not approve of the Proclamation within the period of two months.
It would appear, therefore, that the only way a Proclamation ceases to have effect is by one of the events mentioned in this clause.
None of them has happened.
Nothing contained in an address by the President to the Houses of Parliament can operate to terminate the Proclamation.
In this connection it was also said that 'external aggression ' means armed aggression and as for some time past there was no armed, aggression against the territory of India, the continuance of the Proclamation was unjustified.
This contention must also fail, on the ground which we have just mentioned.
Another challenge to the legality of the detention was that the petitioner had not been allowed to make any representation against his detention.
Our attention was drawn in this connection to section 3(2) (15)(iv) of the Act and r. 30 A of the Rules and also to r. 23, of the Defence of India (Delhi Detenues) Rules, 1964.
The two first mentioned provisions do not, in our opinion, give a right to make a representation.
Their effect is to provide a review of the detention order by the authorities and in the manner mentioned.
The last one states that a detenue will be allowed to interview a legal practitioner for the purpose of drafting his representation against his detention.
It has not been stated in the petition that the petitioner was pre vented from making any representation or denied the opportunity to consult a legal practitioner.
All hat is said is that he had not been furnished particulars of his writing s and materials on which the satisfaction of the Central Government mentioned in the order was based and that had prevented him from making a representation to the Government against his detention.
This contention seems to us unwarranted.
There is nothing to show that the detention order had been based on petitioner 's writings, nor has our attention been drawn to any provision which requires the detaining authority to supply the materials on which they had formed their satisfaction about the necessity of the detention.
Then it was said that the order of detention violated section 44 of the Act and section 3(2)(4)(b), (6), (7)(a)(b)(c) and (d) and rr. 41, 42, 44, 45 and 46 of the Rules.
The substance of the contention is that the petitioner was the editor of and ran a newspaper and that action against him could only be taken under the sections and rules earlier mentioned and not under r. 30(1)(b).
This contention seems to us to be entirely groundless.
The provisions referred to no doubt deal with newspapers and the manner of controlling them but they in no way lead to the conclusion that a newspaper editor may not, if the occasion arises, be detained under r. 30(1)(b).
The fact that newspapers and men connected with them may be dealt with in a certain manner does not prevent detention of such persons under r. 30(1)(b).
It was also said that r. 30(1)(b) requires that the part of India which is to be prejudicially affected by the acts of the detenue has to be mentioned in the order.
This is an idle contention.
The 214 rule no doubt says that the detention may be ordered to prevent a person from acting in a manner prejudicial to the maintenance of peaceful conditions in any part of India, but it also says that the detention can be ordered for preventing a person from acting in a manner prejudicial to the defence of India, civil defence and public safety and maintenance of public order with regard to which there is no requirement provided that they should be confined to any part of India or that part should be mentioned in the order of detention.
The order in this case was made on these grounds.
The petition furnishes no material for saying that the terms of section 44 have been violated.
There is nothing to show that the detention interfered with the petitioner 's avocation in life in a manner not justified by that section.
The last ground taken was that the detention order was mala fide because the Home Minister had not sworn an affidavit to say that he was satisfied about the necessity for the detention.
There is a bald allegation in the petition that the detaining authority had not applied its mind to the matter before making the order of detention.
This part of the petition was verified as true to the petitioner 's knowledge.
This verification was plainly false and, therefore, the allegation in the petition required no answer.
However, that may be, a Deputy Secretary to the Home Ministry of the Government of India has sworn an affidavit stating as true to his knowledge that the materials in connection with the activities of the petitioner were placed before the Union Home Minister and, on a consideration of those materials, the Minister was satisfied that the detention order was necessary.
The result is that this petition fails and it is accordingly dismissed.
Petition dismissed.
|
The petitioner, the editor of a newspaper, was detained under r. 30(1)(b) of the Defence of India Rules, 1962.
He filed a petition under article 32 of the Constitution for a writ of habeas corpus challenging the legality of the detention order on various grounds.
Dismissing the petition, HELD:Rule 30 (1) (b) cannot be said to be ultra vires of section 3 (2) (15)(i) of the Defence of India Act for the reason that it does not state that the satisfaction of the authority making the order of detention has to be on grounds appearing to it to be reasonable.
The rule requires only that the detaining authority must be satisfied that the detention is necessary for the purposes mentioned and that is what the latter part of the section under which it was made also says.
This part does not contain any requirement as to satisfaction on reasonable grounds.
The rule has clearly been made in terms of the section authorising it.
[211 F] Article 352 of the Constitution does not require the proclamation to state the satisfaction of the President about the Emergency.
The Article requires only a declaration of emergency threatening the security of India by one of the causes mentioned.
The words "to that effect" can have no other meaning.
A proclamation ceases to have effect only by one of the events mentioned in cl. 2 of article 352 of the Constitution.[212 C] Section 3(2)(15)(iv) of the Defence of India Act and r. 30 A of the Defence of India Rules, does not give a right to make a representation.
Their effect is to provide a review of the detention order by the authorities and in the manner mentioned.
Rule 23 of the Defence of India (Delhi Detenus) Rules, 1964, states that a detente will be allowed to interview a legal practitioner for the Purpose of drafting his representation against his detention.
[213 C D].
The fact that newspapers and men connected with them may be dealt with under other provisions of the Art and Rules does not prevent detention of such persons under r. 30(1)(b) of the Defence of India Rules.
[213 H] The order need not mention the part of India which was to be Prejudicially affected by the acts of the detenue.
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2108.txt
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vil Appeal No. 4289 of F 1991 etc.
From the Judgment and Order dated 25.8.1989 of the Punjab & Haryana High Court in Civil Writ Petition No. 2635 of 1989.
Soli J. Sorabjee, Krishnamurthy lyer, Bishamber Lal Khanna, H.K. Puri, Ms. Geetanjali Mohan, Ms. A.K. Verma, P.R. Ramasesh, MahabirSingh, R. Mohan and Ayyam Perumal for the appearing parties.
The Judgment of the Court was delivered by V. RAMASWAMI, J.
Leave granted in all Special Leave Peti tions.
526 In this batch of civil appeals, writ petition and trans ferred case, a common question of law arises as to whether the industries which manufacture sugar from sugar cane are covered by Entry 15 of Schedule I to the (Central Act 36 of 1977) (hereinafter called the 'Cess Act ').
Originally the Water (Prevention and Control of Pollu tion Act), 1974 (hereinafter called the Act) was enacted by the Parliament under Article 252 of the Constitution with a view to control the pollution of rivers and streams which has assumed considerable importance and urgency in recent years as a result of increasing industrialisation and urban isation.
The Act is intended to ensure that the domestic and industrial affluence are not allowed to be discharged into water coarses without adequate treatment.
This Act is now in force in almost all States and in all Union Territories.
The Act provides for the constitution of a Central Board by the Central Government and State Boards by the State Governments concerned for the prevention and control of water pollution.
There are also certain provisions relating to constitution of joint boards the details of which need not detain us.
The Act sets out in detail the functions and powers of these Boards.
Chapter VI of the Act requires the Central Govern ment and the State Governments to provide funds to the Central Board and the State Boards respectively for imple menting the provisions of the Act.
The Cess Act 36 of 1977 provides for levy of cess on water consumed by persons carrying on certain industries and by the local authorities with a view to augment the resources of the Central Board and the State Boards constituted for the prevention and control of water pollution.
Section 3 of the Cess Act which may be termed as the charging section states that "there shall be levied and collected a cess for the purposes of the and utilisation thereunder".
The cess is payable by every person carrying on any specified industry and every local authority and is calculated on the basis of water consumed by such person or local authority as the case may be for any of the purposes specified in column I of Schedule II to the Act, at such rate not exceeding the rates specified in the corre sponding Entry in column II thereof as the Central Govern ment may by notification in the Official Gazette from time to time, specify.
"Specified industry" is defined in the Act as meaning any industry specified in Schedule I.
There are 15 entries in Schedule I and they read as follows: SCHEDULE I (See Section 2(c)) 1.
Ferrous metallurgical industry.
527 2.
Non ferrous metallurgical industry.
Mining industry.
Ore processing industry.
Petroleum industry.
Petro chemical industry.
Chemical industry.
Ceramic industry.
Cement industry.
Textile industry.
Paper industry.
Fertilizer industry.
Coal (including coke) industry.
Power (thermal and diesel) generating industry. ' 15.
Processing of animal or vegetable products industry.
The concerned assessing authorities have in all the cases under consideration issued notices demanding water cess from the sugar manufacturers on the ground that this industry falls under item 15 "processing of animal or vege table products industry".
The Punjab and Haryana High Court and the Allahabad High Court have taken the view that the sugar manufacturing industries would come within Entry 15 as "processing vegetable products industry".
On the other hand the Andhra Pradesh High Court and Patna High Court have taken the view that sugar manufacturing industries would not come within Entry 15 of the ist Schedule.
A writ petition which was filed in the High Court of Karnataka, Bangalore, by one of the sugar mills in Karnataka raising similar question has been withdrawn to this Court in transfer peti tion No. 276 of 1984 to be dealt with along with other appeals raising identical question.
Similarly another writ petition has been withdrawn from the Allahabad High Court in Transfer Petition No. 277 of 1984 to be dealt with along with this group of cases.
The object of the Act is to control the water pollution and to ensure 528 that industrial affluents are not allowed to be discharged into the water coarses without adequate treatment.
The Cess Act is not an enactment to regulate and control pollution but a fiscal measure to raise revenue for augmenting the resources of the Pollution Control Boards.
The levy and collection of cess provided under the Cess Act is on water consumed by persons carrying on the industries specified in the Schedule.
The Cess is levied on the person carrying on the specified industry.
The question is whether industries manufacturing sugar is covered by Entry 15 that is "process ing of vegetable product industry".
From the botanic point of view 'vegetable ' may include any plant but in common parlance it is understood as refer ring to edible plants or parts of edible plants.
The word 'vegetable ' has been defined in many ways.
In the World Book it is defined as follows: "In the usual sense, the word vegetable is applied to those plants whose leaves, stalks, roots or tubers are used for food, such as lettuce, asparagus, cabbage, beet and turnip.
It also includes several plants whose fruits are the edible portions, as peas, beans, melons and tomatoes.
" In the Concise Oxford Dictionary, 3rd Ed. p. 1365, it is defined as: "Plant, esp.
herbaceous plant, used for culi nary purposes or for feeding cattle, e.g. cabbage, potato, turnip bean.
" Again in Webster 's International Dictionary, vegetable is defined as: "A plant used or cultivated for food for man or domestic animals, as the cabbage, turnip, potato, bean, dandelion, etc., also the edible part of such a plant, as prepared for market or the table.
Vegetables and fruits are some times loosely distinguished by the used need of cooking the former or the use of man, while the latter may be eaten raw; but the distinc tion often fails, as in the case of quinces, barberries, and other fruits, and lettuce, celery, and other vegetable.
Tomatoes if cooked are vegetables, if eaten raw are fruit.
" In the Encyclopaedie Britannica, vol.
23, 'vegetable ' is defined as: "A general term used as an adjective in refer ring to any kind of plant life or plant product, viz. 'vegetable matter '.
More common ly and specifically, in common language, the word is used 529 as a noun in referring to those generally herbaceous plants or any parts of such plants as are eaten by man.
The edible ' portions of many plants considered aS vegetables are in a botanical sense, fruits.
The common distinc tion between fruits and vegetables is often indefinite and confusing, since it is based generally on how the plant or plant part is used rather than on what it This Court in State of West Bengal & Ors.
vs Washi Ahmed etc.
; , with reference to the meaning of the word 'vegetable ' in Item (6) of Schedule I to the Bengal Finance (Sales Tax) Act, 1941 held: "That the word 'vegetable ' in Item (6) of Schedule I to the Act must be construed as understood in common parlance and it must be given its popular sense meaning 'that sense which people conversant with the subject matter with which the statute is dealing would attribute to it ' and so construed, it denotes those classes of vegetables which are grown in a kitchen garden or in a farm and are used for the table.
" The interpretation of one of the entries in Schedule I to the Cess Act came up for consideration in Member Secre tary, Andhra Pradesh State Board for Prevention and Control of Water Pollution vs Andhra Pradesh Rayons Ltd. and others; , The question for consideration was whether manufacturing of rayon grade pulp a base material for manu facturing of synthetics or manmade fabrics is an industry as mentioned in Schedule I to the Cess Act.
It was held: .lm13 "Whether a particular industry is an industry as covered in Schedule I of the Act, it has to be judged normally by what that industry produces mainly.
Every industry carries out multifarious activities to reach its goal through various multifarious methods.
Whether a particular industry falls within the realm of taxation, must be judged by the predominant purpose and process and not by any ancillary or incidental process carried on by a particular industry in running its business." This Court also observed: "It has to be borne in mind that this Act with which we are concerned is an Act imposing li ability for cess.
The Act is fiscal in nature.
The Act must, therefore, be strictly construed in order to find out whether a liability is fas tened on a particular 530 industry.
The subject is not to be taxed without clear words for that purpose, and also that every Act of Parliament must be read according to its natural construction of words.
See the observations In Re. Nicklethwait, 1985 (11) exhibit 452, 456.
Also see the observations in Tenant vs Smith ; and Lord Halsbury 's observa tions at page 154.
See also the observations of Lord Simonds in St. Aubyn vs A.G. 1951 (2) All.
ER, 473, 485.
Justice Rowlatt of England said a long time ago, that in a taxing Act one has to look merely at what is clearly said.
There is no room for any intendment.
There is no equity about a tax.
There is no presumption as to tax.
Nothing is to be read in, nothing is to be implied.
One has to look fairly at the language used.
See the observations in Cape Brandy Syndi cate vs IRC, , 71.
This Court has also reiterated the same view in Gursahai Saigal vs CIT, , CIT vs Mr. P. Firm, Muar, ; Controller of Estate duty vs Kantilal Trikamlal; , The question as to what is covered must be found out from the language according to its natural meaning fairly and squarely read.
See the obser vations in IRC vs Duke of Westminster, ([1963] AC 1, 24) and of this Court in A.V. Fernandez vs State of Kerala ; Justice Krishna Iyer of this Court in Martand Dairy & Fawn vs Union of India ; has observed that taxing consideration may stem from adminis trative experience and other factors of life and not artistic visualisation or neat logic and so the literal, though pedestrain, interpretation must prevail." This Court considered the question as to whether sugar cane is green vegetable with reference to an exemption given under Sales Tax Enactment in the decision in M/s. Motipur Zamindary Co. (P) Ltd. vs The State of Bihar [1962] Supp. 1 SCR 498.
This Court quoted with the approval a passage from the judgment of the Nagput High Court in Madhya Pradesh Pan Merchants Association vs State of Madhya Pradesh (1956 (7) S.T.C. 99) wherein it was held "the word vegetable in taxing statutes is to be understood as in common parlance that is denoting class of vegetables which are grown in a kitchen garden or in a farm and are used for the table".
It was further held that sugarcane is normally considered to be a grass specie and it would not fail within the definition of words green vegetable.
The use of the word processing is also significant.
Processing of 531 vegetable products industry are normally understood in the sense they relate processing of vegetables which even after processing retain its character as vegetable.
Processing: Section 3(1), Marine Product Export Develop ment Authority Act, 1972 defines processing in relation to marine products, as including the preservation of such products as canning, freezing, drying, salting, smoking, peeling or filleting or any other method of processing which the authority made by notification in the Gazette of India, specified in this behalf.
Section 2(g) of the Agricultural and Processed Food Products Export Development Authority Act, 1985 defines processing in relation to scheduled products as including the process of preservation of such products such as canning, freezing, drying, salting, smok ing, peeling or rilleting and any other methods of process ing which the authority made by notification in the official Gazette specified in this behalf.
Thus processing as gener ally understood in marine, agricultural and food products industries is an action, operation or method of treatment applying it to something.
It is refining, development, preparation or converting of material especially that in a raw state into marketable form.
It would be interesting to note that this Act contains a Schedule of the agricultural or processed food products" which are to be governed by the Act which reads as follows: THE SCHEDULE (See Section 2(i)) 1.
Fruits, vegetables and their products.
Meat and meat products.
Poultry and poultry products.
Dairy products.
Confectionary, biscuits and bakery products.
Honey, jaggery and sugar products.
Cocoa and its products, chocolates of all kinds.
Alcoholic and non alcoholic beverages.
Cereal products.
532 10.
Cashewnuts, groundnuts, peanuts and wal nuts.
Pickles, chutneys and papads.
Guar Gum. 13.
Floriculture and floriculture products.
Herbal and medicinal plants.
In CST v.A.R.Alladin, AIR 1964 Guj. 27 the expression "who processes any goods" in the Bombay Sales Tax was held to refer to the subjecting of any goods to a treatment or process.
In Addl.
CIT vs Farrukhabad Cold Storage, held that processing of goods means that the goods must be adopted for a particular use.
The variety of acts performed in respect of goods or their subjection to a process need not be such as may lead to the production of any new article.
The act of subjecting ' goods to a particu lar temperature for a long period of time as in cold storage amounts to processing of goods.
On the other hand manufac ture is a transformation of an article which is commercially different from the one which is converted.
The essence of manufacture is the change of one object to another for the purpose of making it marketable.
In Union of India vs Delhi Cloth and General Mills, AIR 1963 SC 79 this Court pointed out: "The word 'manufacture ' used as a verb is generally understood to mean as bringing into existence a new substance and does not mean 'merely ' to produce some change in a sub stance, however minor in consequence, the change may be." In the same decision the following passage from the Permanent Edition of Words and Phrases from an American Judgment was quoted with approval: "Manufacture implies a change but every change is not manufacture, and yet every change of an article is the result of treatment, labour and manipulation.
But something more is necessary and there must be transformation, a new and different article must emerges having a dis tinctive name, character or use.
" The essential point thus is that in manufacture some thing is brought into existence which is different from that originally existed in the sense that the thing produced is by itself a commercially different commodity 533 whereas in the case of processing it is not necessary to produce a commer cially different article.
Processing essentially effectuates a change in form, contour, physical appearance or chemical combination or otherwise by artificial or natural means and in its more complicated form involves progressive action in performing, producing or making something.
Vide Com Products Refining 60.
vs Federal Trade Commission, CCA.
7, In the decisions under appeal, the Allahabad High Court held that sugar mills will come within the meaning of 'pro cessing vegetable products industry ' in Entry 15 on the ground that the word 'vegetable ' has been used in opposition to the expression 'animal ' and that it could not be given the meaning of vegetables which are kept on the dining tables for dinner purposes, and it has a wider amplitude.
It was further of the view that in interpreting the word 'veg etable ' one has to keep in mind the object for which the Cess Act was made.
The learned Judges then stated that sugar industry is one of the main source of causing water pollu tion and since the object of the Pollution Act and the Cess Act were intended to control water pollution and since the entries are to be given a wider meaning sugar industry would be covered by the Act.
The Punjab & Haryana High Court also took a similar line of reasoning and said that 'vegetable products ' essentially mean what belongs to the plant kingdom as opposed to the animal kingdom.
In another words the word 'vegetable ' has been used in contra distinction to the word 'animal '.
Though the learned Judges were not prepared.to hold that sugar cane is vegetable, the word 'product ' gives a definite colour, meaning thereby all that belongs to the world of plants would come within the entry.
We are unable to appredate the reasonings of the learned judges.
Pollution Act may be a regulating Act but Cess Act is a fiscal enactment, as is held by this Court in Member Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution vs Andhra Pradesh Rayons Ltd. and Others (supra) and Rajasthan State Electricity Board vs The Cess Appellate Committee & Anr., JT There fore we have to look merely at what is clearly said.
There is no room for any intendment and there is no room for bringing within the provision of the Act anything by impli cation.
Unless we give the botanical meaning to the word 'vegetable ' it is not possible to conclude sugar cane as vegetable.
The Patna High Court in Civil Writ Jurisdiction Case Nos.
4413 of 1981 and 2346 of 1983 M/s Champaran Sugar Co. Ltd. vs State of Bihar & 534 Ors.
held that sugar manufacturing industry would not fall under Entry 15 Of Schedule I.
The Andhra Pradesh High Court also seems to be as the same view and it had dismissed a Writ Petition without a speaking order.
Construction of words and the meaning to be given for such words shall normally depend on the nature, scope and purpose of the statute in which it is occurring and to the fitness of the matter to the statute.
The meaning given to the same word occurring in a. social security measure or a regulating enactment may not be apposite or appropriate when the same word is interpreted with reference to a taxing statute.
The Cess Act is a fiscal enactment.
In the context in which the word 'vegetable ' is used in Entry 15 'vegetable product ' means product of or made of or out of vegetable. 'Vegetables ' as understood in common parlance are not products of manufacture unless we say that agriculture is an industry for certain purposes and vegetables are products of that industry.
In order to bring an industry within any of the entires in Schedule I it has to be seen what is the end product produced by that industry.
Sugar cane is not a vegetable though it may be an agricultural product.
If the botanic meaning of vegetable as referring to any and every kind of plant life is to be given then some of the indus tries listed in Schedule I like Paper Industry and Textile Industry and even chemical industry which are covered by other entries could also be brought within Entry 15.
The word vegetable in the context does not attract the botanic meaning.
The sugar manufacturing industry do not, therefore, come within Entry 15 of Schedule I of the Cess Act.
In Civil Appeal (arising out of Special Leave Petition No. 814 of 1990) the appellant is Haryana Distillery who purchases molasses which is a by product of the .manufacture of sugar and manufactures alcohol.
Manufacture of alchohol was held by the High Court to come within Entry 15 of Sched ule I as processing agricultural prOduct industry.
We have held already that the industry manufacturing sugar itself is not an industry within the meaning of Entry 15 and a fortio ri the manufacture of alcohol from molasses could not be considered to be an industry within Entry 15 of Schedule I.
In the result we allow Civil Appeals (arising out of SLP Nos.
15828 of 1989, 7496 of 1989, 778, 814, 830, 1286, 1433 of 1990 and SLP No . . . of 1991 entitled Upper Doab Sugar Mills Ltd & Anr.
vs Union of India & Ors.
Writ Petition No. 77 of 1990, and Transfer CaSe (C) Nos.
6 of 1986 & 91 of 1989 and dismiss Civil Appeals (arising out of SLP Nos.
9558 62 of 1988) and the Rule Nisi is made abso lute.
N.P.V. Appeals disposed of.
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Section 3 of the Water (Prevention of Pollution and Control) Cess Act, 1977 provided that water cess was payable by every person carrying on any specified industry and every local authority, for the purposes of the .
"Specified industry" was defined in the Act meaning any industry specified in Schedule 1.
There were 15 items under Schedule I, including "processing of animal or vegetable products industry", under Entry 15.
The question for consideration in the batch of appeals, writ petitions and transferred cases arising out of the notices issued by the concerned assessing authorities de manding water cess from the sugar manufacturers was whether sugar manufacturing industry fell under Entry 15 of Schedule I of the .
Disposing of the appeals, writ petitions and transferred cases, this Court, HELD: 1.
In the context in which the word 'vegetable ' is used in Entry 15, Schedule I of the , 'vegetable product ' means product of or made of or out of 524 vegetable. 'Vegetables ' as understood in common parlance are not products of manufacture unless it is said that agricul ture is an industry for certain purposes and vegetables are products of that industry.
In order to bring an industry within any of the entries in Schedule 1 it has to be seen what is the end product produced by that industry.
Sugarcane is not a vegetable though it may be an agricultural product.
If the botanic meaning of vegetable as referring to any and every kind of plant life is to be given then some of the industries listed in Schedule I like Paper Industry and Textile Industry and even Chemical Industry which are cov ered by other entries could also be brought within Entry 15.
The word 'vegetable ' in the context does not attract the botanic meaning.
The sugar manufacturing industry does not, therefore, come within Entry 15 of Schedule I of the Cess Act.
Consequently, the manufacture of alcohol from molasses, which is a by product of manufacture of sugar, could not be considered to be an industry within Entry 15 of Schedule I. [534 C E, F] 2.1 The word 'vegetable ' has been defined in many ways.
From the botanic point of view 'vegetable ' may include any plant but in common parlance it is understood as referred to edible plants or parts of edible plants.
Unless the botani cal meaning is given to the word 'vegetable ' it is not possible to conclude sugarcane as vegetable.
[528 C] 2.2 Pollution Act may be a regulating Act, but Cess Act is a fiscal enactment.
Therefore, the Court has to look merely at what is clearly said.
There is no room for any intendment and no room for bringing within the provision of the Cess Act anything by implication.
[533 E,F] State of West Bengal & Ors.
vs Washi Ahmed Etc.
; ; Member Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution vs
Andhra Pradesh Rayons Ltd. and others; , , M/s Motipur Zamind ary Co. (P) Ltd. vs The State of Bihar, [1962] Suppl.
1 SCR 498 and Rajasthan State Electricity Board vs The Cess Appel late Committee & Anr., JT , referred to.
World Book, Concise Oxford Dictionary, 3rd Ed.
p. 1365, Webster 's International Dictionary and Encyclopaedia Brit tannica, Vol. 23, referred to.
2.3 Construction of words and the meaning to be given for such words shall normally depend on the nature, scope and purpose of the statute in which it is occurring and to the fitness of the matter to the 525 statute.
The meaning given to the same word occurring in a social security measure or a regulating enactment may not be apposite or.
appropriate when the same word is interpreted with reference to a taxing state.
The Cess Act is a fiscal enactment.
[534 B] 3.1.
Processing of vegetable products industry is nor mally understood in the sense that it relates to processing of vegetables, which even after processing retain its char acter as vegetable.
[530 H,531A] 3.2 Processing as generally understood in marine, agri cultural and food products industries is an action, opera tion or method of treatment applying it to something.
It is refining, development, preparation or converting of material especially that in a raw state into marketable form.
In manufacture something is brought into existence, which is different from that originally existed in the sense that the thing produced is by itself a commercially different commod ity, whereas in the case of processing it is not necessary to produce a commercially different article.
[531 C,D] 3.3 Processing essentially effectuates a change in form, cantour, physical appearance or chemical combination or otherwise by artificial or natural means and in its more complicated form involves progressive action in performing, producing or making something.
[533 A,B] CST v.
A.R.Aladin, AIR 1964 Guj. 27.
CIT vs Farruk habad Cold Storage, ; Union of India vs Delhi Cloth and General Mills, AIR 1963 SC 79 and Corn Products Refining Co. vs Federal Trade Commission, CCA.7. , referred to.
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Appeal No. 144 of 1977.
Appeal by Special leave from the Judgment and order dated the 2nd January, 1976 of the Karnataka High Court in Writ Appeal No. 430 of 1974.
509 V.N. Satyanarayana, K. Rajendra Chowdhary and Veena Devi (Mrs.) Khanna for the Appellant.
S.S. JavaIi, B.P. Singh and A. K. Srivastava for Re spondent.
The Judgment of the Court was delivered by KAILASAM, J.
This appeal is by the Karnataka Electrici ty Board by its Secretary by Special leave granted by this Court against the judgment of the Karnataka High Court allowing the writ petition filed by the respondent and issuing a writ of mandamus to the appellant to consider the case of the respondent for promotion as an Accounts Superin tendent as on 30th December, 1966, and to promote him to that post with effect from that date.
The respondent was serving as an Accountant, Grade II, in the Electricity Department of the former .State of Hyd erabad.
On the reorganisation of the States in pursuance of the , he was allotted to the new State of Mysore (now Karnataka) with effect from 1st November, 1956.
The post which he held came to be equated with that of I Division Clerk in the former State of Mysore.
On 1st October, 1957, the Mysore State Electricity Board now Karnataka State Electricity Board was constituted under the Indian Electricity (Supply.) Act.
An option was given to the respondent to continue in the Government service or to opt to the Board.
On 1st October, 1957, the respondent opted to the Service under the Board and ceased to be an employee of the Government with effect from that date.
In the year 1960 the Board framed Recruitment and Promo tions Regulations in the exercise of its powers conferred on it under section 79(c) of the Act.
The Regulations were subsequently amended on 16th December, 1966.
The amended Rules prescribed that the posts of Accounts Superintendents were to be filled by promotion of I Division Clerks on the basis of seniority cum merit on their having passed Part I and II of the S.A.S. examination.
On 30th December, 1966, some persons junior to the respondent were promoted on their having passed the S.A.S. examination while promotion was denied to the respondent as he had not passed the examination.
The respondent made several representations one such representation being on 24th December, 1970.
On 21st November, 1972, the respond ent 's representations were rejected.
The respondent there after filed a writ petition before the High Court on 13th February, 1973.
The learned Single Judge who heard the petition dismissed it and the respondent preferred an appeal to a Bench of the Karnataka High Court.
On behalf of the appellant, Karnataka Electricity Board, it was contended before the court that the writ petition ought to be dis missed on the ground of inordinate delay and laches on the part of the respondent and also on the ground that in view of the later Resolution of the Board dated 5th January, 1970, it was no longer open to the respondent to rely on the Resolution dated 19th May, 1969.
The Bench of the Karnataka High Court held that the writ petition cannot 6 502SCI/77 510 be thrown out on the ground of delay.
On a consideration of the two Resolutions of the Board, namely that of 19th May, 1969 and 5th January, 1970, it found that the respondent as an allottee was exempted from complying with the require ments of passing the examination and therefore allowed the writ petition.
We do not see any ground for not accepting the view of the High Court that in the circumstances of the case the relief to the respondent should not be denied on the ground of delay and laches.
The only ground therefore on which the order of the High Court was challenged by the appellant is that the court was in error in construing the relevant provisions of the Regulations and the Resolutions and holding that the re spondent is exempted from passing the S.A.S. examination before qualifying for the promotion.
Before referring to the two Resolutions the relevant provisions of the law and Regulations made thereunder may be referred to.
The Elec tricity (Supply) Act, 1948, by section 79 empowers the Board to make Regulations not inconsistent with the Act and the rules made thereunder to provide for all or any of the matters referred to in clauses (a) to (k) of the section, Sub clause (c) empowers the Board to make Regulations re garding the duties of officers and servants of the Board and their salaries, allowances and other conditions of service.
By virtue of the powers conferred on the Board it framed Mysore State Electricity Board Recruitment and Promotion of Employees of .the
Board Regulation, 1960.
The method of recruitment prescribed for promotion to Accounts Superin tendents is prescribed in Chapter V of Annexure 2.
The method of recruitment is by promotion from the cadre of I Grade Clerks on the basis of seniority cum merit, The minimum qualification prescribed is that the candidate ought to have passed S.A.S. examination Part I and Part II.
This provision which was enacted in 1960 continued to be in force during the relevant time.
If this Regulation is applicable, the respondent 's plea has to be rejected as it is incumbent on him to pass the S.A.S. examination.
The Resolution of the Board relied on by the respondent is 19th May, 1969 and the material paragraph runs as follows : "It is hereby directed that the candi dates appointed to Government/Board Service for the first time after the date of States Re organisation i.e., 1st November 1956 (as they are not allottees) should pass the De partmental Examinations and Kannada Language Tests for purposes of earning increments and for promotion.
" The Resolution requires the passing of the examination and Kannada language test for the purpose of earning incre ments and for promotion for candidates appointed after/st November, 1956.
But as it is not made applicable to the allottees, it is contended that the allottees are by impli cation exempted from passing the Departmental Examination I and Kannada language test.
This contention cannot be ac cepted for the Resolution is silent regarding the allottees and is not made applicable to them.
It is not possible to infer from the Resolution that the 511 allottees are exempted from passing the Departmental Exami nation and the Kannada language test.
the Resolution was ' passed by the Board in pursuance of certain proceedings of the Government referred to in the Resolution itself.
Paragraph 2 of the Resolution reads thus: "Approval is accorded for the adoption of the Government Order Nos.
(1) GAD 123 SSH 65 dated 21 11 1966 (2) GAD dated 3 8 1957 and (3) GAD dated 20 7 1968.
" The three Government orders referred to in the Resolution relate to the requirement of passing of the Departmental Examination and Kannada language test as a consequence of the judgment of the High Court of Mysore and the Supreme Court.
The ' orders specifically states that unless.
in the Recruitment Rules relating to the service concerned Depart mental Examination had been incorporated and prescribed and unless it is clearly specified for what purpose the tests are prescribed viz., whether for increments or promotions, the passing of Departmental tests cannot be legally insist ed upon for grant of increments or for according promotion to higher posts.
The three Government orders make it clear that the relaxation of the rule relating to passing of the Departmental Examinations and Kannada language test is only as regards services where the rules do not specifically require the passing of the examinations and the language test.
These G.O.s do not apply in the present case as the Regulations framed by the Board under section 79(c) specifi cally prescribe the passing of the S.A.S. test.
We are unable to construe the Resolution dated 19th May, 1969 as exempting the allottees from passing the test.
In any event the plea of the respondent will have to fail on the ground that the Regulations framed under section 79(c) of the Board requiting the passing of the examination was not relaxed by amending the Regulations.
The passing of the Resolution by the Board cannot have the effect of modifying a Regulation which was passed by the Board in the exercise of the powers conferred by the statute.
Apart from this circumstance by a subsequent Resolution the Board itself considered the ques tion in all its aspects and resolved that passing of the S.A.S. examination for promotion to the cadre of Accounts Superintendents as before be insisted.
Whatever might have been the purport of the Resolution dated 19th May, 1969, the Board by a subsequent Resolution had resolved on insisting on the passing of the examination.
The High Court found that the later Resolution did not affect the earlier Resolu tion on the ground that the subsequent Resolution did not make any reference to the earlier Resolution and that there is no reference to the allottees at all.
Relying on the words "the passing of the S.A.S. Examination for promotion to the cadre of Accounts Superintendents as before be in sisted" the court found that it would .mean that where the passing of the S.A.S. Examination was insisted prior to that Resolution in the same shall continue to be insisted in future also, and if passing of the S.A.S. Examination was not insisted prior to that Resolution in the case of allot tees for promotion to the cadre of Accounts Superintendents.
The Resolution dated 5th January, 1970, cannot be understood as altering the position existing "as before".
This reasoning is 512 erroneous for, as pointed out by us the earlier Resolution was not intended to cover the case of allottees and merely because the allottees were excluded from the operation of the Resolution the inference that the allottees were exempt ed from the passing 'of the ' examination is not justified.
Further before the Resolution there is nothing to indicate that the allottees were not required to pass the examina tion.
The conclusion of the High Court cannot be upheld as the binding nature of the Regulations passed by the Board under section 79(c) has not been taken due note of.
This is the view taken by the Single Judge of the High Court.
In the result we allow the appeal, set aside the judg ment of the lower appellate court and restore that of the Single judge.
There will be no order as to costs.
P.H.P. Appeal allowed.
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The respondent was serving as an Accountant in 'the Electricity Department of the former State of Hyderabad.
On the reorganisation of the States in pursuance of the , he was allotted to the new State of Mysore with effect from 1st November, 1956.
Option was given to the respondent to continue in the Government serv ice or to opt to the BOard.
On 1st October, 1957, the re spondent opted to the service under the Board and ceased to be an employee of the Government with effect from that date.
In 1960, the Board framed Recruitment and Promotion Regula tion in exercise of its powers conferred under section 79(c) of the Indian Electricity Supply Act, 1948.
The regulations were subsequently amended on 16.12.1966.
The amended The regulations prescribed that the posts of Accounts Super intendents were to be filled on the basis of seniority cum merit on their having passed SAS examination.
In December, 1966, some persons junior to the respondent were promoted on their having passed the SAS examination, while promotion was denied to the respondent as he had not passed the examina tion.
After the respondent 's representations were rejected he filed a Writ Petition.
The Single Judge dismissed the Petition.
The Division Bench refused to throw out the Writ Petition on the ground of delay.
It found on consideration of the two resolution of the Board one dated 19.5.1969 and another dated 5.1.1970 that the respondent being an allottee was exempted from complying with the requirements of passing the examination.
Allowing the appeal.
HELD: (1) The Division Bench rightly refused to deny relief to the respondent on the ground of delay and laches.
[510 B] (2) Section 79 of the Act empowers the Board to make regulations not inconsistent with the Act and rules made thereunder to provide for all or any of the matters referred to hi cls.
(a) to (k) of the section.
Sub section
(c) empowers the Board to make regulations regarding the duties of offi cers and servants of the Board and their salaries, allow ances and other conditions of service.
By virtue of the said powers the Board framed Mysore State Electricity Board Recruitment and Promotion of Employees of the Board Regula tions, 1960.
The minimum qualification prescribed is pass ing of SAS examination.
The resolution.
of the Board dated 19.5.1969 merely provides that the candidates appointed to the Government Board services for the first time after 1st November, 1956, must pass the department examination for purposes of earning increments and promotion.
The said resolution does not deal with cases of allottees.
It is silent about allottees and, therefore, it is not possible to infer from that resolution that the allottees were exempted from passing the departmental examination.
In any case, the passing of the resolution cannot have the effect of relax ing statutory regulations.
Apart from that by the subse quent resolution of 1970, the Board made it absolutely clear that the SAS examination had to be passed.
[510 C D, G H, 511 E F]
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Civil Appeal No. 705 of 1962.
Appeal by special leave from the Award dated September 19, 1961 of the Fourth Industrial Tribunal, West Bengal in Case No. VIII 42 of 1961.
H. N. Sanyal, Solicitor General of India and P. E. Chatterjee, for the appellant.
D.L. Sen and Janardhan Sharma, for the respondents.
May 2.
The judgment of the Court was delivered by GAJENDRAGADKAR J.
This appeal arises out of an industrial dispute between the appellant, Khardah Co. Ltd., and the respondents, its workmen.
The dispute was in regard to the, dismissal of the appellant 's employee, Samiran jadav.
The respondents alleged that the said dismissal was unjustified, whereas, according to the appellant, the said employee had been properly and validly dismissed.
The dispute which was referred to the 4th Industrial Tribunal, West Bengal, for its adjudication was whether the said dismissal was justified, and to what relief, if any, was the workman entitled? The Tribunal has held that the dismissal was unjustified and so, it has directed the appellant to reinstate the said employee to his old post within a month from the date of the publication of the award.
It has also ordered that the period starting from the date of the dismissal till the date of reinstatement should be treated as leave without pay and as such, should be counted towards the length of service.
It is against this award that the appellant has come to this Court by special leave.
509 The respondent 's case was that jadav had been dismissed by the appellant mala fide with the motive of victimising him for his trade union activities.
jadav was the Organising Secretary of the Union and since he supported the Union 's demands very strongly, the appellant wanted to get rid of him.
It appears that jadav had been working as a weaver for some years past.
He was confirmed in service with effect from April 12, 1954.
On September 19, 1960, he went on a week 's leave.
When he returned on September 26, 1960, he was asked to work on machine producing twill, though, normally, he was assigned work on a plain machine.
jadav was not accustomed to work on the complicated machine which produces twill and so, he requested the management that he should be asked to do his usual work on a plain machine.
This request was, however, turned down Being unaccustomed to work on the machine producing twill, jadav met with an accident on September 27, 1960, and was grantedmedical leave for a week ending on Saturday, October 1, 1960.
On October, 3 1960, when he resumed duty, he again requested the management that he should be permitted to work on the plain machine, but when his request was turned down, he told the management that he would work on the twill machine in the second shift which starts from I P.M.
On that day, another employee Mahboob who was ailing and had been on leave, asked for further leave which was refused and he fell unconscious while he was going to operate his machine.
As a result, 700 weavers of the appellant stopped work and the weaving section could not resume work at 1 P. M.
The management then declared a lock out on October 5, 1960 which continued until October 29, 1960.
On October 3, 1960, the management served a charge sheet on jadav in which it was alleged that jadav had wilfully disobeyed the lawful 510 and reasonable order of his superior and had acted in a manner subversive of discipline.
The case against him was that he had moved from one place to another in the weaving Department and incited workers of the said department to go on strike.
The management alleged that by his conduct, jadav had committed misconduct under Rule 14(c) (i) and (viii) of the Standing Orders.
jadav was called upon to offer his explanation within 24 hours after receipt of the charge sheet.
After jadav gave his explanation, an enquiry was held.
At the initial stages of the enquiry, jadav appeared, but, later, he did not take part in the proceedings.
The appellant contends that jadav deliberately refrained from taking part in the proceedings, whereas according.
to the respondents, the enquiry was conducted unfairly, and so, it became impossible for jadav to participate in it.
This enquiry was conducted by the Manager himself After the enquiry was over, the Manager decided that jadav was guilty of the charge, and so, dismissed him on November 21, 1960.
The respondents ' case was that the dismissal was purely vindictive and was not justified at all.
On the other hand, the appellant 's case was that jadav had been working in the weaving department both on plain looms and on looms that produce twill.
When he returned to duty on October 3, 1960, the departmental Overseer, Mr. jha asked Jadav to go to his loom; but he refused to obey his orders.
The appellant further alleged that jadav moved inside the weaving department and incited the workers to stop work.
The appellant also pleaded that a proper enquiry had been held against jadav and it was as a result of the said enquiry that he was dismissed for misconduct under Rule 14 (c)(i) & (viii) of the Company 's Standing Orders.
Regarding the incident of Mahboob, the appellant alleged that 511 Mahboob was absent on October 3, 1960 and, therefore, no question of his working on any machine arose on that day.
In other words, the appellant 's contention was that the Union 's version that the strike was spontaneous because Mahboob fainted, was untrue and the strike was in substance, the result of the instigation of jadav.
Before the Tribunal, some oral evidence was led by the parties and reliance was placed by the appellant on the proceedings of the enquiry itself.
The Tribunal held that the management had deliberately suppressed the fact that Mahboob had gone to the mill on October 3, and prayed for extension of leave which was refused, and so, the Tribunal came to the conclusion that the strike could not have been instigated by jadav.
The Tribunal further commented on the fact that after the enquiry was held, no finding was recorded by the Manager who held the enquiry, and it appeared to the Tribunal that the conclusions on which the management presumably acted in dismissing jadav were of such a character that "no person acting fairly and honestly could have reached them".
The Tribunal also held that jadav was not used to work on a twill loom, and so, his request that he should be allowed to work on a plain loom was not unjustified.
Its conclusion, therefore, was that a grave charge had been unjustly framed against jadav and that showed want of good faith and Vindictiveness.
On these findings, the Tribunal answered the question in favour of the respondents and directed reinstatement of jadav.
On behalf of the appellant, the learned Solicitor General has strenuously urged before us that the appellant has held a proper domestic enquiry and has dismissed jadav because the management thought that the enquiry disclosed the fact that the charges framed against jadav had been established.
He contends that it is firmly established by decisions of this Court 512 that an Industrial Tribunal will not interfere with the action of the management in dismissing its employee after holding an enquiry into his alleged misconduct unless it is shown that the management has not acted in good faith; or that the dismissal amounts to victimisation or unfair labour practice, or where the management has been guilty of a basic error, or violation of a principle of natural justice, or when on the materials, the finding is completely baseless or perverse, vide Indian Iron & Steel Company Ltd. vs Their Workmen.
There is no doubt that this Court has consistently refrained from interfering with the conclusions reached.
by the enquiry officer who Conducts domestic enquiries against industrial employees unless one of the four tests laid down in the case of the Indian Iron & Steel Co. Ltd. (1) is satisfied, because we have generally accepted the view that if the enquiry is fairly held and leads to the conclusion that the charge framed against the employee is proved, the Industrial 'Tribunal should not sit in appeal over the finding recorded at the said enquiry and should not interfere with the management 's right to dismiss a workman who is found guilty of misconduct.
It would be noticed that the essential basis on which this view is founded is that the enquiry conducted by the management before a domestic tribunal must be a fair and just enquiry and in bringing home to the workman the charge framed against him, principles of natural justice must be observed.
Normally, evidence on which the charges are sought to be proved must be led at such an enquiry in the presence of the workman himself.
It is true that in the case of departmental enquires held against public servants, this Court has observed in the State of Mysore vs section section Makapur (2) that if the deposition of a witness has been recorded by the enquiry officer in the absence of the public servant and a copy thereof is given to him, and an opportunity is given to him (1) (1958) 1 I L. J. 260.
(2) ; 513 to cross examine the witness after he affirms in a general way the truth of his statement already recorded, that would conform to the requirements of natural justice; but as has been emphasised by this Court in M/s Kesoram Cotton Mills Ltd. vs Gangadhar (1), these observations must be applied with caution to enquiries held by domestic Tribunals against the industrial employees.
In such enquiries, it is desirable that all witnesses on whose testimony the management relies in support of its charge against the workman should be examined in his presence.
Recording evidence in the presence of the workman concerned serves a very important purpose.
The witness knows that he is giving evidence against a particular individual who is present before him, and therefore, he is cautious in making his statement.
Besides, when evidence is recorded in the presence of the accused person, there is no room for persuading the witness to make convenient statements, and it is always easier for an accused person to cross examine the witness if his evidence is recorded in his presence.
Therefore, we would discourage the idea of recording statements of witnesses exparte and then producing the witnesses before the employee concerned for cross examination after serving him with such previously recorded statements even though the witnesses concerned make a general statement on the latter occasion that their statements already recorded correctly represent what they stated.
In our opinion, unless there are compelling reasons to do so, the normal procedure should be followed and all evidence should be recorded in the presence of the workman who stands charged with the commission of acts constituting misconduct.
In this connection, it is necessary to point out that unlike domestic enquiries against public servants to which article 311 of the Constitution applies, in industrial enquiries, the question of the bona fldes or mala fides off the employer is often at issue. 'If it (1) [1964] Vol. 2 section C. R. 809.
514 is shown that the employer was actuated by a desire to victimise a workman for his trade union activities, that itself may, in some cases, introduce an infirmity in the order ' of dismissal passed against such a workman.
The question of motive is hardly relevant inenquiries held against public servants, vide UnionTerritory of Tripura vs Gopal Chandra Dutta Choudhuri (1).
That is another reason why domestic enquiries in industrial matters should be held with scrupulous regard for the requirements of natural justice.
Care must always be taken to see that these enquiries are not reduced to an empty formality.
Take the present case where, after the enquiry was held, the Manager who held the enquiry has not recorded any findings, and so, we do not know what reasons weighed in his mind and how he appreciated the evidence led before him.
The learned Solicitor General contends that there was hardly any need to record any findings or to make a formal report in the present case, because the Manager who held the enquiry was himself competent to dismiss the employee.
We are not impressed by this argument.
The whole object of holding an enquiry is to.
enable the enquiry officer to decide upon the merits of the dispute before him, and so, it would be idle to contend that once evidence is recorded, all that the employer is expected to do is to pass an order of dismissal which impliedly indicates that the employer accepted the view that the charges framed against the employee had been proved.
One of the tests which the Industrial Tribunal is entitled to apply in dealing with industrial disputes of this character is whether the conclusion of the enquiry officer was perverse or whether there was any basic error in the approach adopted by him.
Now, such an enquiry would be impossible in the present case because we do not know how the enquiry officer approached the question and what conclusions he C. R. 266.
515 reached before he decided to dismiss jadav.
In our opinion, therefore, the failure of the Manager to record any findings after holding the enquiry constitutes a serious infirmity in the enquiry itself.
The learned Solicitor General suggested that we might consider the evidence ourselves and decide whether the dismissal of jadav is justified or not.
We are not prepared to adopt such a course.
If industrial adjudication attaches importance to domestic enquiries and the conclusions reached at the end of such enquiries, that necessarily postulates that the enquiry would be followed by a statement containing the conclusions of the enquiry officer.
It may be that the enquiry officer need not write a very long or elaborate report ; but since his findings are likely to lead to the dismissal of the employee, it is his duty to record clearly and precisely his conclusions and to indicate briefly his reasons for reaching the said conclusions.
Unless such a course is adopted, it would be difficult for the Industrial Tribunal to decide whether the approach adopted by the enquiry officer was basically erroneous or whether his conclusions were perverse.
Indeed, if the argument urged before us by the learned Solicitor General is accepted, it is likely to impair substantially the value of such domestic enquiries.
As we have already observed, we must insist on a proper enquiry being held, and that means that nothing should happen in the enquiry either when it is held or after it is concluded and before the order of dismissal is passed, which would expose the enquiry to the criticism that it was undertaken as an empty for mality.
Therefore, we are satisfied that the Industrial Tribunal was right in not attaching any importance to the enquiry held by the Manager in dealing with the merits of the dispute itself on the evidence adduced before it.
It is well settled that if the enquiry is held to be unfair, the employer can lead evidence before the Tribunal and justify his action, but in such a case) the question as to whether the dismissal of The employee is justified or not would be open before the Tribunal and the Tribunal will consider the merits ,if the dispute and come to its own conclusion without having any regard for the view taken by the management in dismissing the employee.
If the enquiry is good and the conduct of the management is not mala fide or vindictive, then, of course, the Tribunal would not try to examine the merits of the findings as though it was sitting in appeal over the conclusions of the enquiry officer.
In the present case, the Tribunal has come to the conclusion that the dismissal of jadav was not effected in good faith and has been actuated by a desire to victimise him for his trade union activities.
That is a conclusion of fact which cannot be said to be perverse, and so, it is not open to the,appellant to challenge its correctness of the merits before us.
There is one point to which we ought to refer before we part with this appeal.
It appears that the main dispute between the parties was whether the strike on October 3, 1960, was spontaneous, or had been instigated by jadav.
The respondents contended that the treatment given by the management to Mahboob caused this strike and 700 weavers struck work spontaneously, whereas the appellant urged that Mahboob was not present on the said date, and so, the story that his request for leave was not acceded to and he had to work is altogether false and the strike had really been instigated by jadav.
On this point, the Tribunal has made a categorical finding against the appellant and in doing so, it has relied upon the minutes of the Emergency Works Committee meeting held on October 3, 1960, at 3 P.M. with the Manager himself in the chair.
These minutes show that when an enquiry was made as to why the strike had commenced, it was definitely reported to the Committee that Mahboob who had 517 gone on leave, had extended his leave and after the expiry of the extended leave, he reported or October 3, and pleaded that he was still unwell and should be given still further leave, but "nobody paid any heed to his prayer", and so, presumably he had to resume duty.
The minutes further show that the Labour Officer informed the members of the Com mittee that Mahboob had produced a certificate of fitness on September, 22, 1960 and after discussion, it was unanimously decided to refer his case to the Mill 's Medical Officer on whose recommendation the leave should be considered.
These minutes, therefore, clearly prove that Mahboob had gone to the Mill on October 3, had asked for further leave, and his request for further leave was not granted.
We ought to add that these minutes have been signed by the joint Secretary on the employer 's side and the joint Secretary on the employees ' side, and their correctness cannot be impeached.
It is in the light of these statements that the plea made by the appellant before the Tribunal had to be considered by it.
The plea specifically made was that Mabboob was absent on October 3, and, therefore, there was no question of his working on any machine.
This plea would seem to suggest that Mahboob was absent from the Mill and that undoubtedly is not true.
The learned Solicitor General invited us to consider this plea in the light of the statement made by one of the witnesses in the domestic enquiry.
This statement was that Mahboob and the witness had gone to the Labour Officer for extension of leave to Mahboob and the Labour Officer had granted leave.
This statement would show that leave had been granted to Mahboob in the morning of October 3, but as 'we have already seen, the Labour Officer himself told the members of the Works Committee at 3 P.M. on the same day that leave had not been granted to Mahboob because he had produced 518 a certificate of fitness dated September 22, and the Works Committee had resolved that Mahboob 's case should be referred to the Mill 's Medical Officer on whose recommendation action should be taken.
Thus, there can be not doubt that even if the plea made by the appellant is liberally construed and is read in the light of the statement made by one of the witnesses at the domestic enquiry, the Industrial Tribunal was right in holding that the stand taken by the appellant was wholly untrue and that Mahboob had not been given leave on October 3.
That being so, if the Industrial Tribunal took the view that the refusal of the management to give leave to Mahboob exasperated the workmen, we cannot hold that its conclusion is erroneous or that its propriety can be successfully challenged before us.
The incident in regard to Mahboob forms the main background of the strike and the anxiety of the appellant was to show that Mahboob was not present on that date.
Therefore, once the Industrial Tribunal came to the conclusion that the version given by the appellant was untrue, it naturally changed the complexion of the whole of the charge sheet framed by the appellant against jadav.
That is why the Industrial Tribunal came to the conclusion that the conduct of the appellant in dismissing jadav showed lack of good faith and appeared to have been in spired by the desire to victimise jadav for his trade union activities.
The learned Solicitor General commented on the fact that the Tribunal had allowed the respondents to call for the register of trade unions after the arguments had been heard before it.
It appears that both the parties appeared before the Tribunal on January 19, 1961, when arguments were heard and the award was reserved.
The Union then filed an application praying that the trade union record may be called for, and the Tribunal ordered that the record be called for.
The grievance made by the 419 learned Solicitor General is that it is improper to have allowed additional evidence to be called for after the arguments had been heard.
We do not think there is any force in this argument, because the only purpose for which the record was called for by the Union was to show that jadav was the Organising Secretary of the Union.
Since that fact was presumably disputed by the appellant in arguing the case before the Tribunal, the Union urged that the record kept by the Registrar of Trade Unions would show that the appellant 's plea was not well founded.
If, in such circumstances, the Tribunal sent for the record to satisfy itself 'that the record showed that jadav was the Organising Secretary of the Union, we do not think any serious grievance can be made by the appellant about the conduct of the Tribunal.
It is perfectly true that in dealing with industrial matters, the Tribunal cannot allow evidence to be led by one party in the absence of the other, and should not accept the request of either party to admit evidence after the case has been fully argued unless both the parties agree.
In the present case, however, what the Tribunal has done, is merely to send for authenticated record to see whether jadav was the Organising Secretary of the Union or not.
The result is, the appeal fails and is dismissed with costs.
Appeal dismissed.
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The appellant dismissed one of its workmen on a domestic enquiry held by its Manager who did not record any findings, took some of the evidence in the absence of the workman and found him guilty of misconduct under Rule 14 (c) (i) and (viii) of the Standing Orders.
The Industrial Tribunal held that the dismissal was unjustified and directed the appellant to reinstate the employee.
The respondent Union 's case was that the dismissed workman, who was the Organising Secretary of the union, was dismissed by the appellant mala fide with the purpose of victimising him for his trade union activities.
The dispute centered round the question whether the strike which the dismissed workman was charged as having instigated was really instigated by him or was the spontaneous result of the treatment meted out by the appellant to another workman who was sick and fainted on the day the strike started.
The case of the appellant was that this latter workman was not present on that day at all.
This was belied by the record and the Industrial Tribunal without attaching any importance to the domestic enquiry held by the Manager dealt with the merits of the dispute itself and found in favour of the respondent, holding that the management was unjustified in dismissing the workman on the report of the Manager which was neither fair nor honest.
On behalf of the appellant reliance was placed on the decision of this Court in Indian Iron & Steel Co. Ltd. vs Their Workmen and it was contended that the Industrial Tribunal was in error in interfering with the decision of the management.
Held the Industrial Tribunal was right in discarding the domestic enquiry.
Although this Court has consistently 507 refrained from interfering with the conclusions of domestic enquiries in industrial matters unless one of the four tests laid down in Indian Iron & Steel Co. Ltd. vs Their Workmen was satisfied, the essential basis on which this view is founded is that the domestic enquiry must be conducted fairly and properly in conformity with the principles of natural justice.
The evidence on which the charges are sought to be proved against the workman must normally be led in his presence.
The procedure of recording statements of witnesses ex parte and thereafter producing the witnesses for cross examination, unless there are compelling reasons to do so, must be discouraged.
Departmental enquiries under article 311 of the Consti tution where the question of motive is hardly relevant do not stand on the same footing as those in industrial enquiries where the question of bona fides or mala fides of the employee is often in issue.
Indian Iron & Steel Co. vs Their Workmen, , explained.
State of Mysore vs section section Makapur, ; ; M/s. Ke.8oram Cotton Mills Ltd. vs Gangadhar, [1961] Vol. 2 S.C.R. 809, and Union Territory of Tripura vs Gopal Chander Dutta Choudhri, [1963] Supp.
I S.C.R. 266, referred to.
The failure of the Manager to record any findings after holding the enquiry was a serious infirmity in the enquiry and it is not for this Court to go into the evidence to decide whether the dismissal was justified.
It is the duty of the enquiry officer in an industrial enquiry to record clearly and precisely his conclusions and to indicate briefly the reasons therefor so that the Industrial Tribunal can judge whether they arc basically erroneous or perverse.
Although the Industrial Tribunal should not as a normal procedure allow evidence to be led by one party in absence of the other or admit evidence after the case has been fully argued unless both the parties agree, the mere calling for the authenticated record to see whether the workman was the Organising Secretary could not amount to a breach of the rule.
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1624.txt
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Appeal No. 32 of 1965.
Appeal by special leave from the judgment and order dated May 13, 1963 of the Calcutta High Court in Award Case No. 119 of 1963.
Sachin Chowdhury, M. G. Poddar and D. N. Mukherjee, for the appellant.
Sardar Bahadur, for the respondent.
The appellants applied to the High Court of Judicature at Calcutta on its original side under section 33 of the Indian Arbitration Act 10 of 1940 for an order, inter alia, declaring that "there exists a valid arbitration agreement contained in contract No. 750 dated September 16, 1960 between the petitioners" and the respondents.
The appellants claimed that they entered into a contract with the respondents on September 16, 1960, for the purchase of 6,00,000 bags of B Twill at the rate of Rs. 132.50 nP per 100 bags, "on their own account" in Transferable Specific Delivery Form prescribed under the byelaws of the Association.
and on terms and conditions set out therein The respondents denied the existence of the contract and also its validity.
The High Court dismissed the application holding that M/J(N)6SCI 13 610 the contract was invalid in that it did not comply with the requirements of section 15 sub section
(4) of the Forward Contracts (Regulation) Act, 1952.
By special leave, the appellants have appealed to this Court.
The relevant recitals in the notes, which, it was claimed, constituted the contract between the parties may first be set out: "7A, Clive Row, Calcutta 1 Sunder Lal & Son.
Contract No. 750 Messrs. Bharat Handicrafts (Private) Ltd. Dear Sirs, We have, subject to the terms and conditions hereinafter referred to, this day sold to Messers.
, Sunderlal & Son by Your order, and on your account: Yours faithfully, Sunderlal & Sons. "Calcutta, 16th September, 1960 Messrs. Sunderlal & Son No. 750 Dear Sirs, We have, subject to the terms and conditions hereinafter referred to this day bought from Bharat Handicrafts (Private) Ltd., by your order, and on your account: Yours faithfully, Sunderlal & Son.
Validity of the contract was challenged by the respondents on, two grounds (1) that the appellants were not at the relevant time members of the Association; and (2) that the requirements of section (4) of the Forward Contracts (Regulation) Act were not complies with and the contract was on that account invalid.
The High Court decided both the grounds in favour of the respondents.
The appellants averred in their petition that they were at all" material times members of the Association.
Baburam Saraf principal officer of the.
Company in his affidavit in reply merely states 611 that he did not admit that averment.
The learned Judge observed that he was "unable to hold that the appellants had proved that the appellants were members of the Association at the time of the formation of the contract".
It is unfortunate that the attention of the learned Judge was not invited to the admission made by the respondents in paragraph 6 of the plaint filed by them in the City Civil Court, Calcutta, for a declaration that there was in fact no contract between them and the appellants bearing No. 750 dated September 16, 1960, in which the respondents had averred that they had discovered that the appellants "at all material times were the members of the said East India Jute & Hessian Exchange Ltd".
In view of this evidence, counsel for the respondents did not seek to support the decision of the High Court on the first ground, and nothing more need be said in that behalf.
In dealing with the second ground, it is necessary to summarise the relevant provisions of the Forward Contracts (Regulation) Act, 1952.
The Act was enacted to provide for the regulation of certain matters relating to forward contracts, the prohibition of options III goods and for matters connected therewith.
By Ch.
II the Central Government is given authority to establish and constitute a Forward Markets Commission with certain functions and powers.
By Ch.
Ill provision is made for granting recognition to associations, withdrawal of recognition and other incidental matters.
By section 11 sub section
(1) any recognised association may, subject to the previous approval of the Central Government, make bye laws for the regulation and control of forward contracts.
By sub section
(2), it is provided that such bye laws may provide inter alia for the terms, conditions and incidents of contracts, including the prescription of margin requirements, if any, and conditions relating thereto, and the forms of contracts in writing.
Sub sections (1), (2) and (4) of section 15 in force it the date of the contract were these: "(1) The Central Government may by notification in the Official Gazette, declare this section to apply to such goods or class of goods and in such areas as may be specified in the notification, and thereupon, subject to the provisions contained in section 18, every forward contract for the sale or purchase of any goods specified in the notification which is entered into in the area specified therein otherwise than between members of a recognised association or through or with any such member shall be illegal.
(2) Any forward contract in goods entered into in pursuance of sub section (1) which is in contravention of any of the bye laws specified in this behalf under clause (a) of sub section (3) of section 11 shall be void (i) as respects the rights of any member of the recognised association who has entered into such contract in contravention of any such bye law, and also 612 (ii) as respects the rights of any other person who has knowingly participated in the transaction entailing such contravention.
(3) (4) No member of a recognised association shall, in respect of any goods specified in the notification under sub section (1), enter into any contract on his account with any person other than a member of the recognised association, unless he has secured the consent or authority of such person and discloses in the note, memorandum or agreement of sale or purchase that he has bought or sold the goods, as the case may be, on his own account: Provided that where the member has secured the consent or authority of such person otherwise than in writing he shall secure a written confirmation by such person of such consent or authority within three days from the date of such contract: Provided further Section 20 prescribed, penalties for breach of the provisions of the Act.
The relevant section at the date of the contract insofar as it relates to the penalty for infringement of section 15(4) read as follows: (2) any person who enters into any forward contract in contravention of the provisions contained in subsection (4) 'of section 15 shall on conviction be punishable with fine.
" It is common ground that the Central Government has issued a notification declaring section 15(1) of the Act as applicable to forward contracts in jute and jute goods.
The appellants entered into the contract with the respondents who are not members of the association for buying jute bags on their own account.
Sub section (4) of section 15 imposes a prohibition against the entry into a contract on his own account by a member of the association with any person who is not a member of that association, unless the member has secured the consent of such other person and discloses in the note, memorandum or agreement of $ale or purchase that he has bought or sold the goods, as the case may be, on his own account.
The prohibition is removed only if two conditions exist (i) that the note must disclose that the purchase or sale is on the account of the member of the recognised association; and (ii) consent or authority of the other person has been secured independently of the disclosure in the note.
Where the consent or authority of the other person is secured but not in writing, the member has to secure a written confirmation 'of such consent or authority within three days from the date of such contract.
613 The "bought" and "sold" notes which are set out earlier are in the form prescribed in the Appendix to the Bye laws of the association.
At the foot of the prescribed form of the note there is a slip in which normally the confirmation of the other party to the contract would be obtained,.
The confirmation slip was it appears detached from the "sold" note, but it was not produced before the High Court by the appellants.
Counsel for the appellants says that the respondents did give a slip confirming the contract in the " sold" note, but it was unfortunately not tendered in evidence in the High Court, and he applies for leave to tender in evidence that confirmation slip in this Court.
The confirmation slip sought to be produced in this Court purports to bear the confirmation by a person who has signed it as 'M.L. Bahati '.
This document was admittedly in the possession of the appellants and could have been produced by them in the High Court.
No rational explanation is fur nished for not producing the document before the High Court.
Again the document does not prove itself: to make out the case that the respondents had consented in writing to the terms of the contract, evidence that the signature "M. L. Bahati" was subscribed by the person bearing that name and that he was authorised to confirm the note on behalf of the respondents would be necessary.
The " sold" note is addressed to the appellants: it purports to be made out in the name of the respondents, and is signed by the appellants as "Member Licensed Broker of the Association" " It is claimed that the appellants subscribed their signature to the sold" note under the authority of the respondents.
The authority of the appellants from the respondents to enter into the transaction does not appear from the terms of.
, the "sold" note.
But it is urged on behalf of the appellants that the bye laws framed by the association prescribe that this form of the note shall be adopted even in transactions in which a broker is entering into a contract on his own account, and if the contract is not in the form prescribed under the bye laws the contract would be void.
We need not dilate upon that question, for we ' are only concerned to point out that there is no evidence on the record that the appellants had secured the written consent or authority of the respondents to the contract.
Where the Appellate Court requires any document to be produced or witnesses to be examined to enable it to pronounce judgment, or for any other substantial cause, the Court may allow such document to be produced or witnesses to be examined.
We do not, require additional evidence to be produced in this case to enable us to pronounce judgment, nor do we think that any substantial cause is made out which would justify an order allowing additional evidence to be led at this stage.
The document relied upon was admittedly in the possession of the appellants, but they did not rely upon it before the High Court.
It was said at the Bar that the importance of the document was not realized by those in charge of the case.
We do not think that the plea would bring the case within the expression "other substantial cause" in 0.
41 r. 27 of the Code of Civil Procedure.
We therefore decline to allow this additional evidence to be brought on the record 614 There is accordingly no writing evidencing the consent or authority A to the appellants entering into a contract on their own account with the respondents in respect of jute goods, and it is 'not the case of the appellants that they had secured written confirmation of such consent or authority by the respondents within three days from the date of the contract.
Counsel for the appellants, however, contends that sub section
(4) of section 15 does not invalidate a contract merely because there is no writing evidencing or confirming the consent or authority of the non member, even if the member has entered into a contract in respect of goods purchased or sold on his own account.
Counsel says that the prohibition imposed by the Parliament against the entry into such a contract does not make it void: only by entering into the contract the appellants are rendered guilty of an offence under section 20 sub section
(2) of the Act.
In support of that contention, counsel says, that since in sections 15(1), 15(2), 17(2) and 19 the Parliament has expressly enacted that in certain eventualities forward contracts shall be illegal or void, but in section 15(4) no such consequence is indicated, a contract even in breach of the prohibition is enforceable, though it may expose the appellants to a criminal prosecution.
Reliance is placed in support of that plea upon Shri Bajrang Jute Mills Ltd. vs Lalchand Dugar(1), in which the Calcutta High Court observed in dealing with the validity of a contract entered into by a member of a recognised association on his own account with a non member in respect of specified goods: ". . .
We think that the first proviso to section 15(4) is directory in the sense that the securing of the written confirmation of the contract is no more than a condition subsequent as to which the responsible members may be blamable or punishable if be does not secure it, but his failure to do so does not invalidate the contract.
We think that on a true construction of section 15(4) the failure of the member to obtain the written confirmation of the oral consent or authority to enter into the forward contract on his own account does not render the contract either illegal or void." In our judgment that view cannot be accepted as correct.
The Legislature has by the Act imposed diverse restrictions upon the liberty of contract in respect of forward transactions in commodities specified in a notification under section 15(1).
By the first sub section of section 15 it is provided that contracts in respect of the specified goods or classes of goods in certain areas not between persons who are members of a recognized association or through or with any such member shall be illegal.
The effect of the sub section is that a forward contract for the sale or purchase of specified goods may be entered into (1) 615 only between members of a recognized association or with a member or through any member of such an association: otherwise the contract will be invalid.
The Act then proceeds to enact in sub section
(2) that a forward contract in goods entered into in pursuance of sub section
(1) shall still be void if it is made in contravention of the bye laws in that behalf under cl.
(a) of sub section
(3) of section 11.
By sub section
(4) the Parliament has then imposed a prohibition upon every member of a recognized association against entry into a contract on his own account with a non member in respect of specified goods: the prohibition is lifted when in the memorandum, agreement of sale or purchase or in the bought and sold notes it is expressly disclosed that the contract is by the member on his own account and that he has secured the consent or authority of the other person who is a party to the contract, and if such consent or authority be not in writing, the member has obtained a written confirmation by such person of such consent or authority within three days from the date of the contract.
It is therefore contemplated that for an enforceable 'contract to arise there shall be a writing evidencing or confirming the consent or authority of such person.
The prohibition imposed by cl.
(4) is not imposed in the interest of revenue; the clause is apparently conceived in the larger interest of the public to protect them against the malpractices indulged in by members of re cognized associations in respect of transactions in which their duties as agents conflict with their personal interest.
The Parliament has clearly made a writing evidencing or confirming the consent or authority of a non member as a condition of the contract, if the member has entered into a contract on his own account.
So long as there is no writing as is contemplated by section 15(4) or the proviso thereto, there is no enforceable contract: it is the consent or authority in writing or confirmation of such consent or authority which brings into existence an enforceable contract.
Any other view.
would attribute to the Parliament an intention to impose a prohibition which would be rendered for all practical purposes futile.
Under section 20 sub section
(2) of the Act a penalty is imposed on any person who enters into a forward contract in contravention of the provisions contained in sub section
(4) of section 5.
The penal clause is not clearly expressed.
A reasonable reading of that clause is that a person who enters into a contract without disclosing that he contracts on his own account is liable to be punished.
It could obviously not have been intended by the Parliament to punish a person for failing to secure the consent or authority of the other party to the contract an act which depends solely upon the volition of that other person.
The apparent obscurity in the penal provision cannot however be utilized to restrict the prohibition contained in section 15(4).
What is penalised under section 20(2) is entry into a forward contract by a member on his own account without disclosing to the non member contracting party that the contract is on the member 's own account.
We therefore bold that 616 the High Court was right in holding that the contract did not comply with the requirements of sub section
(4) of section 15 and was on that account invalid.
The appeal therefore fails and is dismissed with costs.
V.P.S. Appeal dismissed.
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Under section 15(1) of the Forward Contracts (Regulation) Act 1952, forward contracts for the sale or purchase of specified goods may be entered into only between members of a recognised association or with a member or through any member of such association otherwise, the contract will be invalid.
By sub section
(4), Parliament imposed a prohibition upon every member of a recognised association against entry into a contract on his own account.
with a non member, in respect of the specified goods: the prohibition is lifted when in the memorandum, agreement of sale or purchase, or in the bought and sold notes it is expressly disclosed that the contract is by the member on his own account and that he has secured the consent or authority of the other person who is a party to the contract, and.
if such consent or authority be not in writing, the member has obtained a written confirmation by such person of such consent or authority within three days from the date of the contract.
A notification was issued by the Central Government declaring section 15(1) to be applicable to forward contracts in jute goods, and the appellants, who were members of an Association recognised by the Act, entered into a contract with the respondents who were not members of any such association for buying jute bags on their own account.
The appellants applied to the High Court.
under section 33 of the , for an order declaring that there existed a valid arbitration agreement contained in the relevant bought and sold notes.
No evidence was tendered in the High Court to show that the appellants had secured the written consent or authority of the respondents, to the contract, and it was not their case that they had secured any written confirmation of an oral consent or authority by the respondents.
within three days of the date of the contract.
The High Court held that the requirements of section 15(4) were not complied with.
and that the contract was therefore invalid.
In appeal to this Court.
the appellants contended (1) that section 15(4) was complied with, because, the respondents did confirm the contract in the slip provided for such confirmation at the foot of the sold note, that the slip was detached from the sold note but was not tendered in evidence in the High Court as its importance was not realised, and that this Court should receive the document in evidence: and (2) that even if there was a breach of the prohibition in section 15 (4) the contract was enforceable, and the breach would merely expose the appellants to a criminal prosecution under section 20(2).
HELD: (1) The additional evidence could not be allowed to be brought on record.
[613H] 609 The document was in the possession of the appellants and no rational explanation Was furnished for not producing it before the High Court.
Further, the document did not prove itself and did not establish that the respondents had consented in writing to the terms of the contract.
This Court as the appellate court, did not require the additional evidence to enable it to pronounce judgment, nor was any substantial cause made out which would justify an order allowing additional evidence to be led in this Court, within the meaning of O. XLI, r. 27 of the Civil Procedure Code.
[613C D, G H] (2) The prohibition imposed by section 15(4) is not imposed in the interest of revenue: the clause is conceived in the larger interest of the public to protect them against the malpractices indulged in by members of recognised associations in respect of transactions in which their duties as agents conflict with their persona interest.
parliament has made a writing, evidencing or confirming the consent or authority of a non member, as a condition of the contract, if the member has entered into a contract on his own account.
So long as there is no such writing, as is contemplated by section 15(4) or its proviso there is no enforceable contract.
[615D F] The penal clause in section 20(2) cannot be utilised to restrict the prohibition contained in section 15(4).
What is penalized under section 20(2) Is entry into a forward contract by a member on his own account without disclosing to the non member contracting party that the contract is on the member 's own account; and not, for failing to secure the consent or authority of the other party to the contract.
[615G H] Shri Bajrang Jute Mills Ltd. vs Lalchand Dugar, , overruled.
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2289.txt
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(Civil) No. 511 of 1988.
WITH Writ Petition (Civil) No. 975 of 1988.
391 (Under Article 32 of the Constitution of India).
K.V. Sreekumar, (N.P.) for the Petitioners.
V.C. Mahajan, A.K. Panda, Ms. C.K. Sucharita, and Ms. A. Subhashini for the Respondents.
The Court delivered the following Order: One of the matters which arises for consideration in this Writ Petition is as to how the provisions of the inter state Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979, and particularly of sec tion 20 thereof can be enforced.
In the affidavit filed by the Union of India in the Ministry of labour it has been stated that in view of the scheme contained in section 20(3) of the Act that officer of the Originating State can make enquiries within the Recepient State provided the Recepient State agrees to such Officers of the Originating State operating within that State, the law has not become workable in a proper way.
This is a beneficial legislation for satis fying the provisions of the Constitution and the obligation in international agreements to which India is a party.
We do not think there can be any valid justification for not permitting the officers of the Originating State to hold appropriate enquiries in the Recepient State in regard to persons of the Originating State working as migrant labour in the Recepient State.
We do not think that there is any necessity to hear the other States before making an order for enforcing section 20(3) and to give effect to the legis lative intention contained therein.
Mr. Panda appearing for the State of Orissa has agreed that Orissa State has no objection to officers of any origi nating State holding necessary enquiries within Orissa when it is a Recepient State.
We would, therefore, make a direc tion that to implement the provisions of the Act of 1979 referred to above every State and Union Territory in India would be obliged to permit Officers of originating States of migrant labour for holding appropriate inquiries within the limits of the Recepient States for enforcement of the stat ute and no Recepient State shall place any embargo or hin drance in such process.
Copy of this order shall be sent to the Chief Secretary of every State and Union Territory for compliance.
We are cognizant of the fact that this order has been made with 392 out hearing the States other than Orissa and the Union Territories.
In the event of any State or Union Territory is of the opinion that the direction should be modified, liber ty is given to apply for modification of the order but until it is modified it shall remain in force.
The Writ Petitions are disposed of with this order.
No costs.
T.N.A. Petitions disposed of.
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In these petitions on the question: as to how the provi sions of the Inter State Migrant Workmen (Regulation of Employment and Condition of Service) Act, 1979 can be en forced.
Disposing the Writ Petitions, this Court, HELD: 1.
Inter State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979 is a benefi cial legislation for satisfying the provisions of the Con stitution and the obligation in international agreements to which India is a party.
There is no valid justification for not permitting the officers of the Originating State to hold appropriate enquiries in the Recepient State in regard to persons of the Originating State Working as migrant labour in the Recepient State.
[391D E] 2.
To implement the provisions of the Act every State and Union Territory in India would be obliged to permit officers of originating States of migrant labour for holding appropriate inquiries within the limits of the Recepient States for enforcement of the statute and no Recepient State shall place any embargo or hindrance in such process.
[391G]
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6499.txt
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vil Appeal No. 2089 of 1985.
(with C.A. Nos.
99 100 of 1986 & 3340 46 of 1984).
From the Judgment and Order dated 24.11.1983 of the Excise & Gold (Control) Appellate Tribunal in Appeal No. ED (SB) 1255/83 D. 1227 Hemant Sharma, C.V. Subba Rao and K. Swamy for the Appellant.
R.N. Banerjee and K.J. John for the Respondents.
The Judgment of the Court was delivered by RANGANATH MISRA, J.
Each of these appeals under Section 35 L (b) of the Central Excise and Salt Act, 1944 is direct ed against the decision of the Customs, Excise and Gold (Control) Appellate Tribunal.
The short question arising in each of them is as to whether P.V.C. Conveyor Belting manu factured by the different respondents in these appeals comes within the purview of Item 22(3) or would be governed by the residuary entry 68 for purposes of excise duty under the Central Excise Tariff.
According to the respondents the appropriate Item is 68 while according to the Revenue Item 22 squarely covers the commodity.
The Tribunal has accepted the stand of manufacturers.
That is how all these appeals have been carried by the Collector of Central Excise.
The Assistant Collector who initiated the proceeding in the show cause notice reproduced the Departmental Chemical Examiner 's Certificate.
Therein it was stated: "The sample is in the form of cut piece of black coloured Belting of width 10 c.ms.
and thickness 9 m.m.
It is composed of synthetic resin of P.V.C. type, reinforced with textile fabric containing 42.3% by weight of cotton and rest viscose (man made filament yarns of cellulosic origin).
Percentage of textile fabric = 43.3.
Percentage of P.V.C. Compound = 56.7%".
This position has not been disputed at any stage nor even before us.
The Tribunal has recorded a finding that P.V.C. compounding was done simultaneously with the weaving of the fabric from yarn which clearly indicated that the process of manufacture was conversion from yarn to fabric as also the application of the P.V.C. Compound carried on at the same point of time.
Learned counsel for the appellants who ini tially attempted to challenge this fact was ultimately obliged to accept the situation as a finding of fact.
In fact before the Tribunal the departmental representative had relied upon this position as would appear from the judgment of the Tribunal.
1228 It is not disputed that if the commodity would not be covered by item 22, residuary Item 68 of the Schedule would be applicable.
Item 22 provides thus: "MAN MADE FABRICS "Man made fabrics" means all varieties of fabrics manufactured either wholly or partly from man made fibres or yarn and includes embroidery in the piece, in strips or in mo tifs, fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials and fabrics covered partially or fully with tex tile flocks or with preparation containing textile flocks, in each of which man made (i) cellulosic fibre or yarn, or (ii) non cellu losic fibre or yaru, predominates in weight: Explanation I: "Base fabrics" means fabrics failing under sub item (1) of this Item which are subjected to the process of embroidery or which arc imprignated ' coated or laminated with preparations of cellulose derivatives or of other plastic materials or which are cov ered partially or fully with textile flocks or with preparations containing textile flocks.
Explanation II: . . . . . . .
Explanation III: Explanation II under Item No. 19 shall, so far as may be, apply in relation to this Item as it applies in relation to that item.
" It is accepted that yarn is woven into fabric.
Item 19 deals with cotton fabrics while Item 22 deals with man made fabrics.
On the footing recorded by the Tribunal, it is claimed that there was no preexisting base fabric and the manufacturing process simultaneously brought into existence the commodity by weaving yarn into fabric and application of P.V.C. Compound.
In view of the higher percentage of P.V.C. Compound in commodity, it becomes difficult to treat the ultimate goods as man made fabrics for holding that it is covered by Item 22.
Upon this analysis it follows that the Tribunal came to the correct conclusion when it held that the goods were not covered by Item 22 and, therefore, the residuary item 68 applied.
All these appeals are without any merit and are dismissed.
Each of the respondents should be entitled to its costs.
N.P.V. Appeals dismissed.
|
The respondents, manufacturers of P.V.C. Conveyor Belt ing, contended before the Customs, Excise and Gold (Control) Tribunal that for purposes of excise duty under the Central Excise Tariff this item fell under Item 68.
The Revenue submitted that the commodity was governed by Item 22.
The Tribunal recorded a finding of fact that P.V.C. compounding was done simultaneously with the weaving of the fabric from yarn and held that this item should be governed by the residuary Entry 68 for the purposes of excise duty.
Dismissing the appeals by the Revenue, the Court, HELD: It is accepted that yarn is woven into fabric.
Item 19 deals with cotton fabrics while Item 22 deals with man made fabrics.
The Tribunal recorded a finding that P.V.C. compounding was done simultaneously with the weaving of the fabric from yarn, which clearly indicated that the process of manufacture was conversion from yarn to fabric as also the application of the P.V.C. Compound carried on at the same point.
[1228F; 1227FG] In view of the higher percentage of P.V.C. Compound in the commodity, it becomes difficult to treat the ultimate goods as manmade fabrics for holding that it is covered by Item 22.
Upon this analysis, the Tribunal was correct in holding that the goods were not covered by Item 22 and, therefore, the residuary Item 68 applied.
[ 1228G ]
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5348.txt
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67 of 1953.
Petition under article 32 of the Constitution of India for a writ in the nature of habeas corpus.
Veda Vyas (V. N. Sethi and section K. Kapur, with him) for the petitioner.
M. C. Setalvad, Attorney General for India (G. N. Joshi, with him) for the respondents.
709 1953.
April 16.
The Judgment of the Court was delivered by PATANJALI SASTRI C.J.
This is a petition under article 32 of the Constitution for the issue of a writ in the nature of habeas corpus directing the release of the petitioner Dr. Ram Krishan Bhardwaj who is a medical practitioner in Delhi and is now said to be under unlawful detention.
The petitioner was arrested on the 10th March, 1953, under an order of the District Magistrate of Delhi made under section 3 of the Preventive Detention Act as amended.
The grounds of detention were communicated to the petitioner on the 15th March, 1953.
The first paragraph of that communi cation states that " the Jan Sangh, the Hindu Mahasabha and the Ram Rajya Parishad have started an unlawful campaign in sympathy with the Praja Parishad movement of Kashmir for defiance of the law, involving violence and threat to the maintenance of public order " as evidenced by the sub paragraphs which follow.
The incidents referred to in sub paragraphs (a) to (1) are said to have ranged from the 4th to the 10th March, 1953, the date on which the petitioner was arrested, but they do not directly implicate the petitioner.
They merely give particulars of the alleged unlawful activities of the three political organizations referred to above.
Subparagraph (m) is important, as, on it is founded the first contention of Mr. Veda Vyas, the learned counsel for the petitioner.
It runs as follows: "(m) On the evening of 11th March, 1953, there was very heavy brick batting indulged in by or at the instance of Jan Sangh and Mahasabha workers in Sabzimandi when the police dispersed a Jan Sangh and Hindu Mahasabha procession and several persons including policemen, journalists and other non officials were injured.
An assault was made on Miss Mridula Sarabhai and Sri Dan Dayal one of her associates received a stab injury.
" 710 It will be noticed that the incidents related in the sub paragraph are alleged to have taken place on the 11th March, the day after the petitioner was arrested and detained.
Mr. Veda Vyas relies upon it as showing that the District Magistrate did not apply his mind to the alleged necessity for the detention of the petitioner as, if he had done so, he could not possibly have referred to what happened on the 11th March as a ground of justification for what he did on the 10th The so called grounds on which the detention is said to have been based must, it was suggested, have been prepared by some clerk or subordinate in the District Magistrate 's office and mechanically signed by him.
The learned Attorney General explained that the incidents of the 11th March were referred to not as a ground for the arrest and detention of the petitioner, but merely as evidencing the unlawful activities of the movement organized by the Jan Sangh and the other political bodies of which the petitioner was an active member.
The explanation is hardly convincing and we cannot but regard this lapse in chronology as a mark of carelessness.
Notwithstanding repeated admonition by this Court that due care and attention must be bestowed upon matters involving the liberty of the individual, it is distressing to find that such matters are dealt with in a careless and casual manner.
In view, however, of the statements in the affidavit filed by the District Magistrate before us that he carefully perused and considered the reports.
and materials placed before him by responsible Intelligence Officers and that he was fully satisfied that the petitioner was assisting the movement and agitation started by the Jan Sangh, etc.
, we are not prepared to hold that the District Magistrate failed to apply his mind to the relevant considerations before he made the detention order as suggested for the petitioner.
The second contention raised by Mr. Veda Vyas is more formidable.
As already stated, the first paragraph of the statement.
of grounds, while it sets out the unlawful activities of the, three political bodies, 711 does not directly implicate the 'petitioner in any of them.
The second paragraph shows how the petitioner was concerned in those activities.
It begins by stating " The following facts show that you are personally helping and actively participating in the above mentioned movement which has resulted in violence and threat to maintenance of public order".
Then follow four sub paragraphs (a) to (d) which refer to private meetings of the Working Committee of the Jan Sangh in January and February, 1953, where, it is alleged, it was decided to launch and intensify the campaign and the petitioner made inflammatory speeches.
Sub paragraph (e) on which this contention is based runs thus : "(e) You have been organising the movement by enrolling volunteers among the refugees in your capacity as President of the Refugee Association of the Bara Hindu Rao," a local are& in Delhi.
It is argued by Mr. Veda Vyas that this ground is extremely vague and gives no particulars to enable the petitioner to make an adequate representation against the order of detention and thus infringes the constitutional safeguard provided in article 22 (5).
Learned counsel relies on the decision in Atma Ram Vaidya 's case(1) where this Court held by a majority that the person detained is entitled, in addition to the right to have the grounds of his detention communicated to him, to a further right to have particulars " as full and adequate as the circumstances permit " furnished to him so as to enable him to make a representation against the order of detention.
It was further held that the sufficiency of the particulars conveyed in the " second communication " is a justiciable issue, the test being whether it is sufficient to enable the detained person to make a representation " which, on being considered, may give relief to the detained person".
On this interpretation of article 22 (6) two questions arise for consideration : first, whether the ground mentioned in subparagraph (e) is so vague (i) 712 as to render it difficult, if not impossible, for the peti tioner to make an adequate representation to the appropriate authorities, and second, if it is vague, whether on vague ground among others, which are clear and definite, would infringe the constitutional safeguard provided in article 22(5).
On the first question, the Attorney General argued that the grounds must be read as a whole and so read, the ground mentioned in sub paragraph (e) could reasonably be taken to mean, that the petitioner was organizing the movement by enrolling volunteers from the 4th to 10th March in the area known as Bara Hindu Rao.
This interpretation is plausible, but the petitioner, who is a layman not experienced in the interpretation of documents, can hardly be expected without legal aid, which is denied to him, to interpret the ground in the sense explained by the AttorneyGeneral.
Surely, it is up to the detaining authority to make his meaning clear beyond doubt, without leaving the person detained to his own resource for interpreting the grounds.
We must, therefore, hold that the the ground mentioned in sub paragraph (e) of paragraph 2 is vague in the sense explained above.
On the second question, there is no considered pronouncement by this Court, though in some cases it would appear to have been assumed, in the absence of any argument, that one or two vague grounds could not affect the validity of the detention where there are other sufficiently clear and definite grounds to support the detention.
Mr. Veda Vyas now argues that even though the petitioner might succeed in rebutting the other grounds to the satisfaction of the Advisory Board, his representation might fail to carry conviction so far as the ground mentioned in sub paragraph (e) was concerned in the absence of particulars which he could rebut and the Advisory Board might, therefore, recommend the continuance of his detention.
The argument is not without force, as the possibility suggested cannot altogether be ruled out.
The Attorney General drew attention to the recent amendment of section 10 of the Preventive Detention 713 Act as a result of which the petitioner would be entitled to be heard in person before the Advisory Board if he so desires and, it was said that he would thus have the opportunity of getting the necessary particulars through the Board who could call upon the appropriate Government to furnish particulars if the Board thought that the demand for them was in the circumstances just and reasonable.
The petitioner would thus suffer no hardship or prejudice by reason of sufficient particulars not having been already furnished to him.
The question however is not whether the petitioner will in fact be prejudicially affected in the matter of securing his release by his representation, but whether his constitutional safeguard has been infringed.
Preventive detention is a serious invasion of personal liberty and such meagre safeguards as the Constitution has provided against the improper exercise of the power must be jealously watched and enforced by the Court.
In this case, the petitioner has the right, under article 22(5), as interpreted by this Court by a majority, to be furnished with particulars of the grounds of his detention "sufficient to enable him to make a representation which on being considered may give relief to him.
" We are of opinion that this constitutional requirement must be satisfied with respect to each of the grounds communicated to the person detained, subject of course to a claim of privilege under clause (6) of article 22.
That not having been done in regard to the ground mentioned in sub paragraph (e) of paragraph 2 of the statement of grounds, the petitioner 's detention cannot be held to be in accordance with the procedure established by law within the meaning of article 21.
The petitioner is therefore entitled to be released and we accordingly direct him to be set at liberty forthwith.
Petition allowed.
Agent for the petitioner : Ganpat Rai.
Agent for the respondent : G. H. Rajadhyaksha.
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Under article 21 (5) as interpreted by an earlier decision of this court a person detained under the Preventive Detention Act is entitled, in addition to the right to have the ground of his detention communicated to him, to a further right to have particulars as full and adequate as the circumstances permit furnished to him as to enable him to make a representation against the order of detention and the sufficiency of particulars conveyed in the second communication is a justiciable issue, the test being whether they are sufficient to enable the detained person to make a representation which on being considered may give him relief.
The constitutional requirement that the grounds must not be vague must be satisfied with respect to each of the grounds communicated to the person detained subject to the claim of privilege under el.
(6) of article 22 of the Constitution.
Where one of the grounds mentioned was "you have been organising the movement (Praja Parishad Movement) by enrolling volunteers among the refugees in your capacity as President of the Refugee Association of Bara Hindu Rao": Held, that this ground was vague and even though the other grounds were not vague the detention was not in accordance with the procedure established by law and was therefore illegal.
Dictum: Preventive detention is a serious invasion of personal liberty and such meagre safeguards as the Constitution has provided against the improper exercise of the power must be jealously watched and enforced by the Court.
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163.txt
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Appeal No. 900 of 1976.
Appeal by Special Leave from the Judgment and Order dated 8 3 1976 of the Gujarat High Court in Spl.
Civil Appln.
No. 263 of 1976.
P.H. Parekh and (Miss) Manju jetley for the Appellant.
S.C. Agarwal, V.J. Francis and A.P. Gupta for the Respond ents.
933 The Judgment of the Court was delivered by GOSWAMI, J.
This appeal by special leave at the in stance of the Bhavnagar Municipality is directed against the order of the Gujarat High Court dismissing in limine its writ application challenging the award of the Industrial Tribunal, Gujarat, made under section 33A of the Industrial Disputes Act (briefly the Act).
There was an industrial dispute pending between the Bhavnagar Municipality (briefly the appellant) and its workmen before the Industrial Tribunal 'in Reference No. 37 of 1974 referred to it under section 10(1) (d) of the Act on March 5, 1974.
The said industrial dispute related to several demands including the demand for permanent status of the daily rated workers of the Water Works Section of the Municipality who had completed 90 days ' service.
While the aforesaid industrial dispute was pending before the Tribu nal, the appellant, on September 30, 1974, passed orders retrenching 22 daily rated workmen (briefly the respondents) attached to the Water Works Section of the Municipality.
It is not disputed that the appellant had complied with sec tion 25F of the Act and due retrenchment compensation had been paid to those workers.
On June 20, 1975, the respond ents filed a complaint to the Tribunal under section 33A of the Act for contravention of section 33 of the Act by the appellant.
Neither party adduced any oral evidence before the Tribunal but relied only upon documents produced before it.
On October 30, 1975, the Tribunal made its award holding that the appellant contravened section 33(1)(a) of the Act and, therefore, directed reinstatement of the respondents.
The appellant preferred a writ application before the High Court which was dismissed in limine, as stated above.
Hence this appeal by special leave.
Two questions arise for decision in this appeal.
First, whether the appellant contravened section 33 (1)(e) of the Act by ordering retrenchment of the respondents who, along with other workers, were directly involved in the industrial dispute pending before the Tribunal.
Second, whether contra vention of section 33 will automatically lead to an order of reinstatement of the respondents, as has been held by the, Tribunal.
It is common ground that the appellant did not obtain prior permission of the Tribunal before retrenching the respondents.
It is well settled that a complaint under section 33A is maintainable only if the employer contravenes section 33 of the Act.
It is submitted by Mr. Agarwal, on behalf of the respondents, that the object of section 33 should be borne in mind in considering the question about alteration of conditions of service under section 33(1)(a) of the Act.
He submits that since the respondents were directly in volved in the dispute and the question of their permanent status from a casual or temporary status formed the subject matter of the dispute, the reference.
has been made nuga tory by the action of the appellant in retrenching them. 'Mr. Parekh, on the other hand, submits that retrenchment of the respondents does not ' involve alteration of conditions of service and hence there is no contravention of section 33 of the Act.
934 There is no complaint by Mr. Agarwal that there is any noncompliance by the appellant with section 28F of the .Act.
Mr. Agarwal further rightly concedes that he cannot bring his case under section 33(1) (b) or under section 33(2)(b) since it is not a case of discharge or dismissal for miscon duct.
His entire submission is based on section 33(1)(a) of the Act.
Section 33 of the Act so far as material for us may be set out: "33(1) During the pendency of any . proceeding before a . Tribunal . in respect of an industrial dispute, no employer shall (a) in regard to any matter connected with the dispute, alter, to the prejudice of the workmen concerned in such dispute, the condi tions of service applicable to them immediate ly before the commencement of such proceeding; X X X save with the express permission in writing of the authority before which the proceeding is pending".
There is a clear prohibition in section 33(1)(a) against altering conditions of service by the employer under the circumstances specified except with the written permission of the Tribunal or other authority therein de scribed.
In order to attract section 33(1)(a), the following features must be present: (1) There is a proceeding in respect of an industrial dispute pending before the Tribunal.
(2) Conditions of service of the workmen applicable immedi ately before the commencement of the Tribunal proceeding are altered.
(3) The alteration of the conditions of service is in regard to a matter connected with the pending industrial dispute.
(4) The workmen whose conditions of service are altered are concerned in the pending industrial dispute.
(5) The alteration of the conditions of service is to the prejudice of the workmen.
The first feature is admittedly present in this case since action has been taken by the appellant in retrenching the respondents during the pendency of the proceeding before the Tribunal.
The point that requires consideration is whether the other features are also present in the instant case.
Before we proceed further we should direct our attention to the subject matter of the industrial dispute pending before the Tribunal.
It is sufficient to take note of the principal item of the dispute, namely, the demand of the respondents for conversion of the temporary status of their employment into permanent.
To recapitulate briefly the appellant employed daily rated workers to do the work of boring and hand pumps in its Water Works Section.
These workers have been in employment for over a year.
They claimed permanency in their employment on their putting in more than 90 days ' service.
They also demanded two pairs of uniform every year, cycle allowance at the rate of Rs. 10/ per month, Provident Fund benefit and National Holidays and other holidays allowed to the other workers.
While this particular dispute was pending before the Tribunal, the appellant decided to entrust the work, which had till then been performed by these workers in the Water Works Section, to a contractor.
On the employment of the contractor by the Municipality for the self same work, the services of the respondents became unnecessary and the appellant passed the orders of retrenchment.
It is, therefore, clear that by retrenchment of the respondents even the temporary employ ment of the workers ceased while their dispute before the Tribunal was pending in order to improve that temporary and insecure status.
Retrenchment may not, ordinarily, under all circum stances, amount to alteration of the conditions of service.
For instance, when a wage dispute is pending before a Tribu nal and on account of the abolition of a particular depart ment the workers therein have to be retrenched by the em ployer, such a retrenchment cannot amount to alteration of the conditions of service.
In this particular case, howev er, the subject matter: being directly connected with the conversion of the temporary employment into permanent, tampering with the status quo ante of these workers is a clear alteration of the conditions of their service.
They were entitled during the pendency of the proceeding before the Tribunal to continue as temporary employees hoping for a better dispensation in the pending adjudication.
And if the appellant wanted to effect a change of their system in getting the work done through a contractor instead of by these temporary workers, it was incumbent upon the appellant to obtain prior permission of the Tribunal to change the conditions of their employment leading to retrenchment of their services.
The alteration of the method of work culmi nating in termination of the services by way of retrenchment in this ease has a direct impact on the adjudication pro ceeding.
The alteration effected in the temporary employ ment of the respondents which was their condition of service immediately before the commencement of the proceeding before the Tribunal, is in regard to a matter connected with the pending industrial dispute.
The character of the temporary employment of the re spondents being a direct issue before the Tribunal, that condition of employment, however insecure, must subsist during the pendency of the dispute before the Tribunal and cannot be altered to their prejudice by putting an end to that temporary condition.
This could have been done only with the express permission of the Tribunal.
It goes with out saying that the 936 respondents were directly concerned in the pending industri al dispute.
No one also deny that snapping of the temporary employment of the respondents is not to their prejudice.
All the five features adverted to above are present in the instant case.
To permit rupture in employment, in this case, without the prior sanction of the Tribunal will be to set at naught the avowed object of section 33 which is principally directed to preserve the status quo under speci fied circumstances in the, interest of industrial peace during the adjudication.
We are, therefore, clearly of opinion that the appellant has contravened the provisions of section 33(1)(a) of the Act and the complaint under section 33A, at the instance of the respondents, is maintainable.
The submission of Mr. Parekh to the contrary cannot be accepted.
That, however, does not conclude the matter.
The Tribu nal was clearly in error in not adjudicating the complaint on the merits.
It is well settled that in a complaint under section 32A, event if the employer is found to have contra vened the provisions of section 33, the Tribunal has to pronounce upon the merits of the dispute between the par ties. ' The order passed in an application under section 33A is an award similar to one passed in a reference under section 10 of the Act.
The award passed has to be submitted to the Government and the same has to be published under section 17 of the Act.
For the purposes of the Act the complaint under section 33A takes, as it were, the form of a reference of an industrial dispute by the appropriate au thority and the same has to be disposed of in a like manner.
The Tribunal has committed an error of jurisdiction in declining to adjudicate the matter and to make its award on the merits as required under the law.
The High Court was, therefore, not right in dismissing the writ application of the appellant in limine.
We should also.
observe that, in the absence of adjudication on the merits by the Tribunal, the High Court was not right in holding that the retrench ment by the appellant was "a gross act of victimisation".
In the result the order of the High Court is set aside.
It follows that the award of the Tribunal ordering rein statement of the respondents fails and is set aside.
We should also add that the.
observations of the Tribunal with regard to the question of prosecution of the appellant under sections 31 and 32 of the Act were not at all perti nent in an enquiry under section 33A and ought not to have been made.
The writ application in the High Court stands allowed to the extent indicated.
The appeal is allowed as directed in this order.
The complaint under section 33A stands restored to the file of the Tribunal for disposal on the merits in accordance with law and in the light of this judgment.
The appellant, however, shall pay the costs of the respondents as ordered at the time of granting of the Special Leave.
M.R. Appeal allowed.
|
An industrial dispute between the appellant and its workmen including the respondents, was pending before the Industrial Tribunal.
The dispute, inter alia, related to the demand for permanent status of the respondents who were rated workers of the water works section of the Munici pality.
Meanwhile, without obtaining the Tribunal 's prior permission, the appellant retrenched the respondents.
On a complaint by the respondents section 33 A of the Industrial Disputes Act, the Tribunal made an award holding that the appellant had contravened section 33(1)(a) of the Act, and di rected reinstatement of the respondents.
The complaint was not adjudicated on merits.
The appellant filed a writ petition which was dismissed in limine by the High Court.
Allowing the appeal, but agreeing that the appellant had contravened section 33 ( I ) (a) and that the respondents ' com plaint section 3 3 ( 1 ) (a) was maintainable, the Court re stored the respondents ' complaint for disposal on merits by the Tribunal.
HELD: (1) The character of the temporary employment of the respondents being a direct issue before the Tribunal, that condition must subsist and cannot be altered to their prejudice by putting an end to that temporary condition.
This could be done only with the express permission of the Tribunal.
[933 G H] The Court further observed: To permit rupture in employment, in this case, without the prior sanction of the Tribunal will be to.
set at naught the avowed object of section 33 which is principally direct ed to preserve the status quo under specified circumstances in the interest of industrial peace during the adjudication.
[936 A B] (2) In a complaint under section 33 A, even if the employer is found to have Contravened the provisions of section 33, the Tribunal has to pronounce upon the merits of the dispute between the parties.
For the purposes of the Act, the complaint under section 33A takes the form of a reference of an industrial dispute by the appropriate authority and the same has to be disposed of in a like manner.
[936 C D] (3) The Tribunal has committed an error of jurisdiction in ordering reinstatement of the respondents and declining to adjudicate the matter and to make its award on the merits as required under the law.
[936 D]
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3747.txt
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Civil Appeal No. 150 of 1963.
Appeal by special leave from the judgment and decree dated January 9, 1962 of the Calcutta High Court in Appeal from Original Decree No. 48 of 1961.
N.C. Chatterlee, R.K. Garg, S.C. Agarwal, M.K. Rarnatnurthi and D.P. Singh, for the appellant.
M.C. Setalvad and B.P. Maheshwari, for the respondent.
October 10, 1963.
The Judgment of the Court was delivered by RAGHUBAR DAYAL J.
Raj Kishore Tewari, appellant in this appeal by special leave, was occupying certain premises as sub tenant of Susil Chandra Banerjee, under a registered lease dated April 10, 1954.
His tenancy commenced from April 1, 1954.
The rent fixed was Rs. 220 per mensem.
Subsequent 123 ly it was reduced to Rs. 205 by an agreement dated June 9, 1954.
The tenancy was monthly.
Susil Chandra Banerjee was the tenant of Govindaram Bhansali from September 15, 1943, at a monthly rental of Rs. 153 plus certain other charges.
On June 16, 1955, the landlord obtained a decree of ejectment against Susil Chandra Banerjee.
In view of sub section
(2) of section 13 of the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950 (Act XVII of 1950), hereinafter called the Act, the appellant became the tenant of the landlord after the determination of the tenancy of Susil Chandra Banerjee.
On March 19, 1957, the land lord respondent gave a notice to the appellant asking him to deliver possession of the premises on the expiry of the last day of April 1957, on the ground that he, being the statutory tenant, had not paid rents to him since June 16, 1955, and, as such, was not entitled to any protection under the West Bengal Premises Tenancy Act, 1956 (Act XII of 1956).
Subsequently, on June 10, 1957, the respondent instituted the suit for ejectment of the appellant from the premises.
The suit was resisted by the appellant on various grounds.
His defence was however struck off due to certain default.
Ultimately, the suit was decreed on December 15, 1959.
An appeal to the High Court was unsuccessful.
The High Court refused to give leave to appeal to this Court.
Thereafter, the appellant obtained special leave from this Court and filed the appeal.
The only point urged for the appellant is that the notice of ejectment dated March 19, 1957, was invalid in view of the fact that under the law the notice must be to require the appellant to deliver possession on the expiry of the month of tenancy, that the tenancy was from the 16th of a month as the decree for ejectment against the tenant of the first degree was passed on June 16, 1955, and that this notice required the delivery of possession on the expiry of the last day of April.
We may say that this point was not raised in the written statement.
It was however allowed to be raised in the appellate Court but was repelled.
124 The only point to determine in this appeal is the date from which the tenancy of the appellant vis a vis the respondent commenced.
The relevant portion of sub s.(2) of section 13 of the Act is: "(2) Where any premises or any part thereof have been or has been sub let by 'a tenant of the first degree ' or by a tenant inferior to a tenant of the first degree ', as defined in explanation to sub section (1), and the sub lease is binding on the landlord of such last mentioned tenant, if the tenancy of such tenant in either case is lawfully determined otherwise than by virtue of a decree in a suit obtained by the landlord by reason of any of the grounds specified in clause (h) of the proviso to sub section (1) of section 12, the sub lessee shall be deemed to be a tenant in respect of such premises or part, as the case may be, holding directly under the landlord of the tenant whose tenancy has been determined, on terms and conditions on which the sub lessee would have held under the tenant if the tenancy of the latter had not been so determined.
" There is nothing in these provisions which should persuade us to hold, as urged for the appellant, that the sub tenant becomes a tenant of the landlord from the date on which the tenancy of the tenant against whom a decree for ejectment is passed is determined.
The provisions only lay down that the sub tenant would become the tenant of the landlord if the tenancy in chief is determined lawfully.
On the other hand, this sub section lays down that the subtenant would be tenant on the terms and conditions on which the sub lessee would have held under the tenant if the tenancy of the tenant had not been determined.
This means that the terms and conditions of the tenancy between the erstwhile sub tenant and the landlord continue to be the same which were the terms and conditions of the sub tenancy.
Such terms and conditions of the tenancy in the case of the appellant were that he was to be a monthly tenant on the payment of a certain rent and that his tenancy was to 125 commence from the first day of April 1954.
It is clear therefore that his tenancy was by the calendar month.
It commenced on the first day of the month and expired on the last day of the month.
This period of monthly tenancy was in no way affected by the provisions of sub section
(2) of section 13 whose effect was simply this that the sub tenant instead of being sub tenant of the tenant who had been ejected, got a direct connection with the landlord and became his tenant in chief or, as the Act describes, tenant in the first degree.
The statutory provision just brought about a change in the landlord of the sub tenant.
The proprietor landlord took the place of the tenantin chief from whom the sub tenant had secured the tenancy.
We are therefore of opinion that the High Court was right in rejecting the contention of the appellant with respect to the invalidity of the notice for ejectment dated March 19, 1957.
The result is that the appeal fails and is dismissed with costs.
Appeal dismissed.
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The appellant was a sub tenant of S on a monthly basis commencing from April 1, 1954.
S was the tenant of the Respondent from September 15, 1943 on a monthly rental.
On June 16, 1955, the respondent obtained a decree of ejectment against section In view of sub s(2) of section 13 of the West Bengal Premises Rent Control (Temporary Provisions) Act, 1950, the appellant became the tenant of the respondent after the determination of the tenancy of section The respondant gave a notice to the appellant asking him to deliver possession of the premises on the expiry of the last day of April 122 1957, since he being a statutory tenant had not paid rent since June 16, 1955.
The respondant instituted a suit for ejectment, which was decreed, and an appeal to the High Court by the appellant was unsuccessful.
On appeal by special leave, it was contended that the notice was invalid for under the law the notice must be to require the appellant to deliver possession on the expiry of the month of tenancy, that the tenancy was from the 16th of a month as the decree for ejectment against S was passed on June 16, 1955 and that this notice required the delivery of possession on the expiry of the last day of April.
Held: The contention was untenable and rightly rejected by the High Court.
The provisions of Sub section
(2) of section 13 of the West Bengal Rent Control (Temporary Provisions) Act, 1950 only lay down that the sub tenant would become the tenant of the landlord if the tenancy in chief is determined, on the same terms and conditions on which the sub lessee would have held under the tenant if the tenancy of the tenant had not been determined.
This means that the terms and conditions of the tenancy between the erstwhile sub tenant and the landlord continue to be the same which were the terms and conditions of the sub tenancy.
The period of monthly tenancy commencing from the first of the month and expiring on the last day of the month, was in no way affected by the provisions of Sub section
(2) of section (13) whose effect was simply that the sub tenant instead of being sub tenant of the tenant who had been ejected, got a direct connection with the landlord and became his tenant in chief.
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1677.txt
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Appeal No. 757 of 1963.
Appeal by special leave from the judgment and decree dated November 29, 1960 of the Andhra Pradesh High Court in Appeal No. 261 of 1956.
M. C Chagla, R. Thiagarajan and T. Satyanarayana, for the appellant.
Suryanarayanamurthy and K. Jayaram for respondents Nos. 1, 4 to 6, 9 to 11, 13, 17, 25, 26, 29, 39, 42, 45, 47, 55 to 57, 59, 63 and 64.
The Judgment of the, Court was delivered by Bachawat, J.
This dispute relates to the succession to the immoveable properties of late Bhaskara Rao, a Brahmin karnam, 302 who died on November 29, 1903 without issue, but leaving a widow.
The suit was instituted on April 15, 1953 by the appellant claiming to be the nearest heir of Bhaskara Rao for recovery of possession of the properties.
The case of the contesting defendants is that Bhaskara Rao executed a will on November 29, 1903 authorising his widow Seshamma to adopt a son, that pursuant to such authority she 'adopted Rajeswarara, in or about May 1904 that Rajeswararao died in 1950 and that the first defendant is his adopted son.
The courts below concurrently found in favour of the defendants on all the points.
They held that (1) Bhaskara Rao duly executed the will dated November 29, 1903; (2) his widow Seshamma in fact adopted Rajeswararao in or about May 1904 and the requisite ceremonies of adoption were performed.
These findings of fact are no longer challenged.
The trial court held that 'at the time of adoption Seshamma was about 14, years of age.
The High Court held that having regard to the lapse of time there was a strong presumption that Seshamma had attained the usual age of discretion at the time of the adoption, that the presumption had not been rebutted and that the adoption was valid.
Mr. M. C. Chagla argued that in May 1904 Seshamma had not attained the age of discretion and was not competent to make the adoption.
He relied on the following passage in Mulla 's Principles of Hindu Law, 13th ed.
article 465, page 491 : "A minor widow may adopt in the same circum stances as an adult widow, provided she has attained the age of discretion and is able to form an independent judgment in selecting the boy to be adopted.
According to Bengal writers the age of discretion is reached at the beginning of the sixteenth year; according to Benaras writers, at the end of the sixteenth year.
The former view was taken in a recent Madras case.
" Now there is no clear evidence on the question of Seshamma 's age in May 1904.
The plaint said that she was then 10 years of age.
One of the written statements said that she was about 15 years old.
Exhibit A 2 an extract from the register of deaths suggests that she was then aged about 14 years.
In exhibit A 7 dated March 25, dated May 2, dated April 25, , dated November 1, 191 dated November 15, 1911, Exs.
A 11 and A 12 dated November 17, 1911,she was described as a minor.
But exhibit B 138 dated August 9, 1910 described her 'as a major.
The evidence of DW 2 suggests that she was about 15 years old at the time of adoption.
The evidence of DW 3 fixes her age at about 17 years in or about 1903.
Evidence was adduced to show that she married in 1898 303 when she was 11 or 12 years old.
The appellant made no attempt to produce the certified copy of the register of births which would have shown her exact age.
The adoption was made in May 1904.
It was challenged in 1953 after a lapse of about 50 years.
The, long delay in filing the suit is not satisfactorily explained.
A declaratory suit challenging the adoption could have been filed soon after the adoption.
Rajeswara Rao died in 1950, Seshamma died on October 2, 1952.
During his life time Rajeswararao was re cognised by every member of the family as the adopted son of Bhaskara Rao.
He was registered as kamam and acted as such, till his death.
Under exhibit B 12 dated November 19, 1937 the plaintiff 's mother Kamappa purchased a property from Rajeswara Rao wherein he was described as the adopted son of Bhaskara Rao.
Having regard to the long lapse of time and the recognition of Rajeswararao as the adopted son of Bhaskara Rao, the strongest presumption arises in favour of the validity of the adoption.
The law on this point is correctly stated in Mulla 's Hindu Law, 13th ed., article 512, page 519: "But when there is a lapse of 55 years between the adoption and its being questioned, every allowance for the absence of evidence to prove such fact must be favourably entertained.
It stands to reason that after a very long term of years, and a variety of transactions of open life and conduct upon the footing that the adoption was a valid act, the burden must rest heavily upon him who challenges its validity," See also Venkataseetarama Chandra Row vs Kanchu Marthi Raju(1).
The presumption in this case is very heavy considering that all the parties to the adoption and all those who could have given evidence in favour of its validity have passed away.
The appellant has not rebutted this presumption and has not shown that Sashamma did not attain the age of discretion in May 1904 and was not competent to make the adoption.
The courts below rightly found in favour of the factum and validity of the adoption.
There is no merit in this appeal.
The appeal is dismissed with costs.
V.P.S. Appeal dismissed,.
(1) A.I.R 1925 P.C. 201, 202.
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One B, a Brahmin Karnam, executed a will in 1903 authorising his 'widow to adopt.
After his death, the widow adopted R in 1904.
The first respondent was R 's adopted son.
R died in 1950, and his adoptive mother died in 1952.
During his lifetime, R was recognised by every member of the family as the adopted son of B, and he was registered as the Karnam and he acted as the Karnam till his death.
In 1953, the appellant, claiming to be the nearest heir of B filed a suit for recovery of possession of B 's property contending that R 's adoption was invalid, because, the adoptive mother had not attained the age of discretion at the .time of the adoption and was therefore not competent to make the adop tion.
The suit was dismissed.
In appeal to this Court, HELD : Where there is a lapse of several years between the adoption and its being questioned, the burden rests heavily upon him who challenges it, and every allowance for the absence of evidence to prove it must be favourably entertained.
[303 D E] In the present case, having regard to the long lapse of time, the recognition of R as, the adopted son of B, and the fact that those who could have given evidence in favour of the adoption had passed away, a strong presumption in favour of the validity of adoption should be drawn.
The appellant made no attempt to produce the certified copy of the register of births which would have shown, the exact age of the mother and thus failed to rebut the presumption.
[303 C D; F] Venkataseetarama Chandra Row vs Kanchu Marthi Raju A.I.R. applied.
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2614.txt
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minal Appeals No. 76 82 of 1965.
Appeals from the judgment and order dated September 9, 1963 of the Punjab High Court, Circuit Bench at Delhi in Criminal Writs Nos.
3 D, 4 D, 5 D, 6 D, 7 D, 10 D and 12 D of 1962.
B. R. L. Iyengar and R. N, Sachthey, for the appellants (in all the appeals).
G. section Bawa and Harbans Singh, for the respondents (in Cr.
76, 81 of, 1965).
206 The Judgment of the Court was delivered by Hegde, J.
These are companion appeals.
They were brought to this Court on the strength of the certificates issued, by the High Court of Punjab.
The only question that falls for decision in these appeals is whether s.18 of the Suppression of Immoral Traffic in Women and Girls Act, 1956 (hereinafter referred to as the Act) is ultra vires article 14 of the Constitution.
The attack on the validity of that section on the basis of Art 19(d), (e) and (f) was not pressed at the time of the hearing.
Hence there is no need to examine the said plea.
The first appellant in these appeals, Shri A. C. Aggarwal.
Sub Divisional Magistrate, Delhi, issued notices to the respondents in these appeals except that in criminal appeal No. 82 of 1965 to show cause why the premises occupied by them should not be attached under .
(1) of the Act.
Those notices were issued on the basis of police reports that those premises were being used as brothers.
In reply amongst other pleas those respondents challenged the validity of s.18.
They moved the learned magistrate to refer the question as to the validity of section 18 to the High Court under s.432 of the Criminal Procedure Code of 1898.
As the learned magistrate rejected .that prayer, they moved the High Court under article 226 of the Constitution in criminal writs 'Nos. 3D to 7D and 10D of 1962, challenging the vires of s.18. Respondent in criminal appeal No. 82 of 1962 claims to be the tenant in flat No. 54 on the first floor of Japan Building, which premises had been attached in the proceedings against one Mst.
Ambar under section 18(1).
His case was that be 'had permitted the said Mst.
Ambar to use those premise 's temporarily but she lad vacated the same and therefor he was entitled to their possession as according to him he was unaware of the fact that Mst.
Ambar was using the premises in question for an improper purpose.
But the learned magistrate rejected his application holding that(a) there was no satisfactory proof of the 'fact that lie was a tenant in those promises and (b) he was aware of the unlawful use to which the premises in question were being put.
Aggrieved 'by that decision, 'he moved the High 'Court of Punjab in Ur.
Writ No,. 12 0/62 to quash :the order of the learned Magistrate on the around that section 18 was ultra vires of Article 14.
The aforementioned writ petitions were heard by Mahajan and Shamsher Bahadur, JJ.
and by a common order dated September 9, 1963, they Allowed those petition and quashed the notices issued to the respondents in criminal appeals Nos.
76 to 81 of 1965 .
They also quashed the order refusing to raise the attachment in respect of flat No. 154 of which Siri Chand the respondent in Criminal appeal No. 82 / 65 claimed to be the tenant.
The learned Judges held that "whenever action is taken under s.18 independently of s.7, 'it would offend Art.14 of the Constitution and to that extent section 18 would be ultra vires of the Constitution.
" 207 In the course of their order dated 23rd July, 1963, the learned Judges observed: "The requirements for taking action under Section 18 or under Section 7 of the Act are identical.
The Act leaves the choice of the action under one or the other provision to the executive in the case of persons similarly situate and thus can lead to discrimination without there being any rational basis for the same.
The consequences of an action in one case are of an extremely penal nature whereas in the other case, that is, under Section 18, of comparatively inconsequential nature.
The discrimination can come about where in the case of a number of prostitutes, who carry on their profession within two hundred yards of a public place, as defined in Section 7, the authorities may take action against some of ' them under Section 18 and against the others under Section 7.
The fact that this can happen is not controverted by the learned cou nsel for the Delhi State.
We also find.
no rationable behind this type of discrimination.
The, scheme of the Act also does not provide any key for such, sort of discrimination between persons of the same class.
and similarly situate".
The inhibition of article 14 that the State shall not deny to any person equality before the law or the equal protection of the laws.
was resigned to protect all persons against discrimination by the State amongst equals and to prevent any person or class of persons from being singled out as a special subject for discrimination and hostile treatment.
If law deals equally with all of a certain well defined class, it is not obnoxious and it is not open to the charge of denial of equal protection on the ground that it has no application to other persons, for the class for whom the law has been made is different from other persons and, therefore, there is no discrimination against equals.
Every classification is in some degree likely to produce some inequality but mere production of inequality is not all by itself enough.
The inequality pruduced in order to encounter the challenge of the of the Constitution must be the result of some arbitrary step taken by the State.
Reasonable classification is permitted but suchclassification must be based upon some real and substantial distinction bearing a reasonable and just relation to the thing in respect of which such classification is made.
The presumption is always in favour of the constitutionality of an enactment, since it must be assumed that the legislature understands and correctly appreciates the needs of its own people, and its laws are directed to problems made manifest by experience and its discriminations are based on adequate grounds.
The contention advanced on behalf of the respondents and accepted by the High Court, is that section 18 discriminates against the , 208 person who is proceeded against under that section, without first being prosecuted under s.3 or s.7 as the case be, though the information laid against him discloses an offence either under s.3 or s.7.
Section 18 covers two classes of cases, namely, persons who have been prosecuted and found guilty of an offence either under s.3 or s.7 as well, as persons not dealt with under those provisions.
In the case of the former, they have the benefit of regular trial, they can crossexamine the prosecution witnesses, adduce defence evidence and also go up in appeal if convicted.
In those, cases the result of the proceedings under s.18 largely though not entirely depends on the result of the connected prosecution.
But in the case of the latter, i.e., those who are only proceeded against under s.18 they have only a right of 'hearing '.
It is further urged on their behalf that under s.3 or s.7 action is taken before a court, whereas the proceeding under section 1 8 is taken before a magistrate.
In the latter case the Act does not lay down the scope of the hearing provided for.
It was lastly urged that the facts to be proved both in prosecutions under ss.3 and 7 and in proceedings under s.18 are identical; hence, there is no justification for adopting two widely different procedures.
In support of their contention that the difference in the two procedures prescribed amounts to a discrimination under article 14, reliance was placed on the decision of this Court in the State of West Bengal vs Anwar Ali Sarkar(1).
We shall now proceed to examine the correctness of these contentions.
The Act was enacted in pursuance of an international convention signed at New York on the 9th day of May, 1950.
It provides for the suppression of immoral traffic in women and girls.
The sections that are material for our present purpose are 3, 7 and 18.
Section 3 provides for punishment for keeping a brothel or allowing premises to be used as a brothel.
Section 3(1) provides for the conviction and punishment of a person who keeps or manages ,or acts or assists in the keeping or management of, a brothel.
Sub s.(2) of that section provides for the conviction and punishment of a person who being (a) tenant lessee or occupier or person incharge of any premises, uses or knowingly allows any other person to use, such premises or any part thereof as a brothel,(b) the owner lessor or landlord of any premises or the agent of such owner,lessor or landlord, lets the premises or any part thereof with the knowledge that the same or any part thereof is intended to be used as a brothel or is wilfully a party to the use of such premises or any part thereof, as a brothel.
"Brothel" is defined in s.2(a) as including a house, room, or place or any portion of any house, room or place, which is used for the purpose of prostitution for the gain of another person or for the mutual gain of two or more prostitutes.
"Prostitute" is defined in s.2(e) as meaning a female who offers her body for promiscuous sexual intercourse for hire whether in money or in kind.
(1) ; 209 Section 7 provides for the Punishment of prostitution in or in the vicinity of public places.
That section reads: "(1) Any woman or girl who carries on prostitution, and the person with whom such prostitution is carried on, 'in any premises which are within a distance of two hundred yards of any place of public religious worship, educational institution, hostel, hospital, nursing home or such other public place of any kind as may be notified in this behalf by the Commissioner of Police or District Magistrate in the manner prescribed, shall be punishable with imprisonment for a term which may extend to three months.
(2) Any person who (a) being the keeper of any public place knowingly permits prostitutes for purposes of their trade to resort to or remain in such place; or (b) being the tenant, lessee, occupier or person in charge of any premises referred to in sub section (1) knowingly permits the same or any part thereof to be.
used for prostitution; or (c) being the owner, lessor or landlord of any premises referred to in sub section (1), or the agent of such owner, lessor or landlord, lets the same or any part thereof with the knowledge that the same or any part thereof may be used for prostitution, or is wilfully a party to such use, shall be punishable on first conviction with imprisonment for a term which may extend to three months, or with fine which may extend to two hundred rupees, or with both, and in the event of a second or subsequent conviction with imprisonment for a term which may extend to six months and also with fine which may extend to two hundred rupees.".
Public place is defined in section 2(h) as meaning any place intended for use by or accessible to the public and includes and public conveyance.
Now we may refer to section 18.
It reads: " (1) A Magistrate, may, on receipt of information from the police or otherwise, that any house, room, place or any portion thereof within a distance of two hundred yards of any public place referred to in sub section (1) of section 7, is being run or used as a brothel by any person, or is being used by prostitutes for carrying on their trade, issue notice on the owner, lessor 210 or landlord of such house, room, place or por tion or the agent of the owner, lessor or landlord or on the tenant, lessee, occupier of, or any other person in charge of such house, room, place, or portion, to show cause within seven days of the receipt of the notice why the same should not be attached for improper user thereof; and if, after hearing the person concerned, the Magistrate is satisfied that the house, room, place, or portion is being, used as a brothel or for carrying on prostitution, then the Magistrate may pass orders (a) directing eviction of the occupier within seven days of the passing of the order from the house, room, place, or portion; (b) directing that before letting it out during the period of one year immediately after the passing of the order, the owner, lessor or landlord or the agent of the owner, lessor or landlord shall obtain the previous approval of the Magistrate: Provided that, if the Magistrate finds that the owner, lessor or landlord as well as the agent of the owner, lessor or landlord, was innocent of the improper user of the house, room, place or portion, he may cause the same to be restored to the owner, lessor or landlord, or the agent of the owner, lessor or landlord, with a direction that the house, room, place or portion shall not be leased out, or otherwise given possession of, to or for the benefit of the person who was allowing the improper user therein.
(2) A Court convicting a person of any offence under section 3 or section 7 may pass orders under sub section (1), without further notice to such person to show cause as required in that sub section.
(3) Orders passed by the Magistrate or court under sub section (1) or sub section (2) shall not be subject to appeal and shall not be stayed or set aside by the order of any court, civil or criminal, and the said orders shall cease to have validity after the expiry of one year: Provided that where a conviction under section 3 or section 7 is set aside on appeal on the ground that such house, room, place or any portion thereof is not being run or used as a brothel or is not being used by prostitutes for carrying on their trade, any order passed by the trial court under sub section (1) shall also be set aside.
211 (4) Notwithstanding anything contained in any other law for the time being in force, when a Magistrate passes an order under sub section (1), or a court passes an order under sub section (2), any lease or agreement under which the house, room, place or portion is occupied at the time shall become void and inoperative.
(5) When an owner, lessor or landlord, or the agent of such owner, lessor or landlord fails to comply with a direction given under clause (b) of sub section (1) he shall be punishable with fine which may extend to five hundred rupees or when he fails to comply with a direction under the proviso to that sub section, he shall be deemed to have committed an offence under clause (b) of sub section (2) of section 3 or clause (c) of sub section (2) of section 7, as the case may be, and, punished accordingly." Sections 3 and 7 provide for the punishment of persons guilty of the offences mentioned therein.
Any contravention of the provisions mentioned therein amounts to a cognizable offence in view of section 14, whereas a proceeding under s.18 is in no sense a prosecution.
It is a preventive measure.
It is intended to minimise the chance of a brothel being run or prostitution being carried on in premises near about public places.
Naturally, in the case of prosecutions, a regular trial with a right of appeal is provided for.
The enquiry contemplated by s.18 is summary in character.
The attachment contemplated by that section can enure only for a period of one year.
Under these circumstances evidently the Legislature thought that a regular trial and an appeal against the order of the magistrate is not called for.
In these cases it is unnecessary for us to spell out the scope of the expression "hearing" found in s.18.
It is necessary to remember that ss.3 and 7 deal with persons guilty of offences whereas s.18 deals with the premises mentioned therein.
It is not correct to say that the set of facts to be proved in prosecutions under ss.3 or 7 and in proceedings under s.18 are identical.
In the former the prosecution to succeed has to establish either the intention or knowledge referred to therein but in the latter they are not necessary ingredients.
Section 18 provides for two classes of cases namely, (1) those coming either under section 3 or 7 as well as under section 18 and (2) those coming only under section 18.
They are two distinct classes of cases a classification which has reasonable relationship with the object sought to be achieved and therefore falls outside the rule laid down by this Court in Anwar Ali Sarkar 's(1) case.
(1) (N)1SCI 15(a) 212 From the copies of the reports made in these cases to the magistrate by the police made available to us at the hearing of these appeals it is clear that they disclose offences under s.3 against the respondents.
Therefore, the question is whether the magistrate can choose to ignore the cognizable offence complained of and merely have recourse to s.18 and thus deprive the parties proceeded against of the benefit of a regular trial as well as the right of appeal in the event of their conviction.
Bearing in mind the purpose of these provisions as well as the scheme of the Act and on a harmonious construction of the various provisions in the Act, we are of the opinion that in cases like those before us the magistrate who is also a court as provided in s.22 must at the first instance proceed against the persons complained against under the penal provisions in ss.3 or 7 as the case may be, and only after the disposal of those cases take action under s.18 if there is occasion for it.
Under s.190(1)(b) of the Code of Criminal Procedure, the magistrate is bound to take cognizance of any cognizable offence brought to his notice.
The words "may.
take cogni zance" in the context means "must take, cognizance".
He has no discretion in the matter, otherwise that section will be violative of article 14.
But as laid down in Delhi Administration vs Ram Singh(1) only an officer mentioned in s.13 can validly investigate an offence under the Act.
Hence if the cases before us had been investigated by such an officer, there is no difficulty for the magistrate to take cognizance of those cases.
Otherwise it is open to him to direct fresh investigations by competent police officers before deciding whether the facts placed before him disclose any cognizable offence.
In the result, we hold, for the reasons mentioned above, that the proceedings taken by the learned magistrate against the respondents are not in accordance with law as he has proceeded against them under s.18 without first taking action under s.3.
For that reason we uphold the conclusions reached by the learned Judges of the Punjab High Court but on grounds other than those relied on by them.
But this conclusion of ours does not debar the learned magistrate from taking fresh proceedings against the respondents in accordance with law as explained by us earlier.
In the result, these appeals fail and are dismissed.
Appeals dismissed.
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Section 18 of the Suppression of Immoral Traffic in Women and Girls Act, 1956, provides for two classes of cases namely, (1) those coming under sections 3 or 7 as well as under section 18, and (2) those coming only under section 18.
Sections 3 and 7 provide for the punishment of persons guilty of the offences mentioned therein after a regular trial, with a right of appeal.
Section 18 is a preventive measure, dealing with premises, and is intended to minimise the chance of a brothel being run near a public place, and provides for a summary enquiry.
[211 D E; G H].
In the present case, on the strength of reports submitted by the police to him, the Sub Divisional Magistrate passed orders under section 18 (1) with respect to certain premises in the occupation of the respondents.
They challenged the validity of the section, and the High Court held that the section violated article 14 of the Constitution.
In appeal to this Court, Held,: Section 18 provides for two distinct classes of cases and the classification being reasonable is not violative of article 14 of the Constitution.
But the proceedings taken by the Magistrate not being in accordance with law should be set aside.
The reports disclosed a cognizable offence under section 3 of the Act and in such a case, the Magistrate cannot ignore the cognizable offence and merely have recourse to section 18, thus depriving parties of the benefit of a trial and appeal.
The, Magistrate should have taken action under section 190 (1) (b) of the Criminal Procedure Code after investigation by such police officer as is mentioned in section 13 of the Act, and it was only after the disposal of the cases against the parties that action could be taken under section 18 if there was occasion for it.
[212 A D].
State of West Bengal vs Anwar AU Sarkar.
; and Delhi Administration vs Ram.
Singh.
[1962] 2 S.C.R. 694, referred to.
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2243.txt
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ivil Appeal No. 3054 of 1988.
From the Judgment and Order dated 16.3.1988 of the Rajasthan High Court in S.B. Civil Miscellaneous Appeal No. 240/1987.
K. Parasaran, Attorney General, B.L. Saruparia and Badridas Sharma for the Appellant.
Soli J. Sorabjee, Paras Kulad, Rohinton F. Nariman and Rathin Das for the Respondent.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
Leave granted.
Appeal is disposed of by the judgment herein.
This appeal challenges the order of the High Court of Rajasthan, dated 16th March, 1988.
The respondent 's tender for construction of complete masonry dam (Civil Engineering Works) Mahi Bajaj Sagar Project, Banswara, was accepted by the appellant for a sum of Rs.5,90,30,791 vide letter dated 29.4.1974 and a provisional agreement was entered into between the parties on 23.5.1975.
The construction was commenced by the respondent company but it did not complete the same and, it is alleged, left the work unfinished in the year 1979, which was of the value of Rs. 1,79,80,054.
The letter of acceptance was dated 23.5.1975.
It is stated that the respondent did not start the work in spite of written notices and, ultimately, by a letter dated 24th December, l979 of the Executive Engineer (Dam Division), Banswara, the respondent was informed that as it had committed breach of the conditions of the contract, the same had been terminated and that the State Govt.
would complete the work under the clauses and conditions of the contract.
The work had to be completed departmentally at the cost and risk of the respondent company.
After some litigation between the parties when the Civil Revision was pending in the High Court of Rajasthan at Jodhpur, a compromise between PG NO 444 the parties was arrived at on the 13th April, 1982.
It was agreed that the dispute would be settled through arbitration.
By an agreement dated 13th June, 1982 the parties named their arbitrators.
The arbitrators entered upon the reference on 19th June, 1982.
On 5th May, 1982, the respondent company presented its claims under 40 heads claiming a total sum of Rs. 1,90,53,059.28.
This amount was later on revised to Rs. 1,82,20,261.02.
The State filed a counter claim for a sum of Rs. 1,70,63,026.37 which was revised to Rs. 1,25,706,17.
It is stated that the arbitration proceedings were conducted for 52 days during which the number of sittings was 25.
Various issues were framed.
Minutes of the proceedings were recorded.
The arbitrators gave the award on 8.12.1982.
It is stated that the award did not contain any reason as to why and how they had arrived at the figure of Rs. 75,41,755 in favour of the respondent company.
The award, however, mentioned that the State of Rajasthan committed breach of contract and was also guilty of wrongful revocation of the agreement and the actions taken under Clauses 2 and 3 of the conditions of the Contract, were wrongful and unjustified.
However.
no reasons were indicated as to how the arbitrators arrived at those findings.
The respondent filed an application in the Court of the learned District Judge for making the award Rule of the Court.
The appellant, however, filed an objection on the grounds inter alia that no reasons had been given by the arbitrators for the award and the amount of interest awarded was unjustified.
It was further averred that the award being ambiguous, showed non application of mind and the question as regards the plant machinery of the respondent company lying at the dam site, were beyond the scope of the arbitrator.
The learned District Judge by his judgment and order dated 11th August, 1987 allowed the objection and set aside the award on the ground of ambiguity and non application of mind.
The award also suffered from the vice of non statement of reasons, according to the learned District Judge.
According to him, the award was not in accordance with law.
He further held that the plant & machinery lying at the dam site was beyond the reference made to the arbitrators.
He was of the opinion that the interest amount was ambiguous and thus liable to be set aside.
THere was an appeal to the High Court.
The High Court allowed the appeal and passed a decree for Rs. 75,41,755 being the amount of all claims and directed that the State should pay interest @ 5% p.a.
on the said amount for the period from 1.8.1983 to 8.12.1985, being the period during which the arbitration proceedings were PG NO 445 pending.
This decision of the High Court is under challenge in this appeal.
It was contended before us that the question whether on the ground of absence of reasons, the award is bad per se, is pending consideration by a Constitution Bench of this Court in C.A. No. 3137 39/85, 3145/85 Jaipur Development Authority vs Firm Chhokhamal Contractor etc.
It was, hence, urged that this should await adjudication on this point by the Constitution Bench.
We are unable to accept this contention.
In our opinion pendency of this question should not postpone all decisions by this Court.
One of the cardinal principles of the administration of justice is to ensure quick disposal of disputes in accordance with law, justice and equity.
In the instant case the proceedings have long procrasticated.
Indeed, the learned Judge of the High Court, after narrating the incidents from 1975 to 1985, concluded his judgment in March 1988 by observing that that was the end of the journey.
He was wrong.
That was only the end of a chapter in the journey and the appellant wants to begin another chapter in the journey on the plea that the award is not a reasoned one.
The bargaining between the parties was entered into in 1974 75 and the award was made on 8th December, 1985 i.e. a decade after the beginning of the transaction.
The law as it stands today is clear that unless there is an error of law apparent on the face of the award, the award cannot be challenged merely on the ground of absence of reasons.
This is settled law by a long series of decisions.
Interests of justice and administration of justice would not be served by keeping at bay final adjudication of the controversy in this case on the plea that the question whether an unreasoned award is bad or not, is pending adjudication by a larger Bench.
There have been a large number of sittings before the arbitrators.
Parties have been heard.
There was no misconduct in the proceedings.
There has been no violation of the principles of natural justice.
In such a situation it would be inappropriate to postpone the decision pending adjudication of this question by a larger Bench of this Court.
We do not know how long it would take to decide that question, and whether ultimately this court would decide that unreasoned awards per se are bad or whether the decision would have prospective application only in view of the long settled position of law on this aspect in this country or not.
Justice, between the parties in a particular case, should not be in suspended animation.
Law as it stands today, as observed in Jivarajbhai Ujamshi Sheth & Ors.
vs Chintamanrao Balaji & Ors., ; is that award made by an arbitrator is conclusive as a judgment between the parties and the Court is entitled to set aside an award only if the arbitrator has misconducted himself in PG NO 446 the proceedings or when the award has been made after the issue of an order by the Court superseding the arbitration or if the arbitration proceedings have become invalid under Sec.
35 of the or where an award has been improperly procured or is otherwise invalid under Sec.
30 of the Act.
An award may be set aside by the Court on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator had committed some mistake in arriving at some conclusion.
In that decision Shah, J. and Sarkar, J. as the learned Chief Justices then were, were of the view that it was not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusions.
They held the award not severable.
Hidayatullah, J. as the learned Chief Justice then was, observed that if the parties set limits to action by the arbitrator, then the arbitrator had to follow the limits set for him and the Court can find his auxiliary jurisdiction.
Instant case before us is also not a severable award.
In Firm Madanlal Roshanlal Mahajan vs Hukumchand Mills Ltd., Indore ; Bachawat, J. speaking for the Court observed that an arbitrator could give a lump sum award.
He was not bound to give a separate award for each claim.
His award on both fact and law is final.
There is no appeal from his verdict.
The Court cannot review his award and correct any mistake in his adjudication, unless an objection to the legality of the award is apparent on the face of it.
In the present case the arbitrator gave no reasons for the award.
There is no legal proposition which is the basis of the award, far less any legal proposition which is erroneous.
Also there is no allegation of any misconduct in the proceedings.
It is an error of law apparent on the face of it and not mistake of fact which could be the ground for challenging the award.
See in this connection the observations in Union of India vs Bungo Steel Furniture P. Ltd.; , Also see the observations of this Court in Allen Berry & Co. (P) Ltd. vs Union of India, New Delhi, [l971] 3 SCR 282.
Hence, the High Court was right in the instant case.
There is, however, one infirmity in the award as sanctioned by the High Court, that is to say, the grant of interest pendente lite.
The arbitrators have observed as follows : "By adjustment of interest held to be due to the Respondents with that held to be due to the Claimants on their items of claims which were not in the nature of claim PG NO 447 for damages for breach, we hold that the Respondents do pay Rs. 17,92,957 (Rupees seventeen lacs ninetytwo thousand nine hundred fiftyseven only) as interest, to the Claimants upto the date of the AWARD.
Claimants further do pay to the Respondents Rs. Nill.
" This was awarding interest pendente lite.
This is in violation of the principles enunciated by this Court in Executive Engineer (Irrigation), Balimela & Ors.
vs Abhaduta Jena & Ors., [1988] 1 SCC 418.
Our attention was drawn by Shri Soli J. Sorabjee, counsel for the respondent, to the decision of this Court in Food Corpn.
of India vs M/s. Surendra, Devendra & Mohendra Transport Co., where at pages 555 556 of the report, the Court referred to certain decisions cited by Chinnappa Reddy, J. in Executive Engineer (Irrigation), (supra) in which he had expressed the view that those were cases in which the references to arbitration were made by the Court or in Court proceedings of the disputes in the suit.
In that context it was held in those cases that the arbitrator had power to grant interest.
It was contended before us that this was a similar case.
There was a Court proceeding in this case regarding the appointment of the arbitrator and, as such, on the same analogy it should be treated that the arbitrator had power to grant interest.
We are unable to accept this.
What Mr justice O. Chinnappa Reddy meant to say by the latter judgment in Executive Engineer (Irrigation), case referred to in Food Corporation of India, (supra) was where the disputes regarding the merit of the case were pending in the Court and such disputes instead of being decided by the Court adjudication had been referred to an arbitrator by the Court, in such cases the arbitrators deciding in the place of the Court, would have the same powers to grant interest pendente lite as the Courts have under Section 34 of the Civil Procedure Code.
Instant case is not such a proceeding.
In that view of the matter this part of the award, which was affirmed by the High Court of granting of interest, must be deleted.
We do so accordingly.
Shri K. Parasaran, learned Attorney General, assures us that the amount awarded as modified, would be paid within 8 weeks from today.
The appeal is thus disposed of without any order as to costs.
R.S.S. Appeal disposed of.
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A dispute over the completion of construction work under a contract led to the litigation between the appellant and the respondent company.
However, during the pendency of the proceedings in the High Court, the parties agreed to settle the dispute through arbitration.
The Arbitrators gave their award in favour of the respondent company on the ground that the appellant had committed breach of contract and was also guilty of wrongful revocation of the agreement.
The award did not contain any reason as to why and how the Arbitrators had arrived at the sum awarded.
The appellant filed objection to the respondent 's application for making the award Rule of the Court on the ground inter alia that (i) no reasons had been given for the award, (ii) the award being ambiguous showed non application of mind, and (iii) the amount of interest awarded was unjustified.
The learned District Judge allowed the objection and set aside the award on the ground of ambiguity and non statement of reasons.
The High Court, however, allowed the respondent 's appeal and also directed payment of interest for the period during which the arbitration proceedings were pending.
Before this Court it was urged that, because the question whether on the ground of absence of reasons the award is bad per se is pending consideration by a Constitution Bench of this Court, the present case should await adjudication on this point by the Constitution Bench.
Disposing of the appeal, it was, HELD: (1) One of the cardinal principles of the administration of justice is to ensure quick disposal of PG NO 441 PG NO 442 disputes in accordance with law, justice and equity.
Justice between the parties in a particular case should not be in suspended animation.
[445B C, G] (2) Interests of justice and administration of justice would not be served by keeping at bay final adjudication of the controversy in this case on the plea that the question whether an unreasoned award is bad or not, is pending adjudication by a larger Bench.
[445E F] (3) It is not known whether the decision of this Court would have prospective application only in view of the long settled position of law on this aspect in this country or not.
[445G] (4) The law as it stands today is clear that unless there is an error of law apparent on the face of the award, the award cannot be challenged merely on the ground of absence of reasons.
This is settled law by a long series of decisions.
[445E] (5) An award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator had committed some mistake in arriving at some conclusion.
[446B] (6) It is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusions.
[446C] Jivarajbhai Ujamshi Sheth vs Chintamanrao Balaji & Ors., ; , referred to.
(7) It is an error of law apparent on the face of it and not a mistake of fact which could be the ground for challenging the award.
[446F] Union of India vs Bungo Steel Furniture P. Ltd., ; and Allen Berry & Co. P. Ltd. vs Union of India, ; , referred to.
In the present case the arbitrator gave no reasons for the award.
There is no legal proposition which is the basis of the award, far less any legal proposition which is erroneous.
And there is no allegation of any misconduct in the proceedings.
[446E F] (9) The award of interest pendente lite in this case was in violation of the principles enunciated by this Court.
[447B] PG NO 443 Executive Engineer (Irrigation) Balimela vs Abhaduta Jena, [1988] 1 SCC 418, followed.
Food Corporation of India vs M/s. Surendra Devendra & Mohendra Transport Co., [1988] 1 SCC 57, explained.
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Special Leave Petition (Civil) No.9887 of1987.
From the Judgment and order dated 20.8.
1987 of the Bombay High Court in L.P.A. No. 77 of 1987.
K.K. Venugopal, A.K. Sen, M.K. Nesari, P.H. Parekh and R.K. Dhillon for the petitioners.
F.S. Nariman, U.J.Maskeja, B.S. Basaniaum, J. Peres, A.K. Verma and D.N. MiShra for the Respondents.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
This petition is for leave to appeal against the judgment and order of the Division Bench of the 485 Bombay High Court dismissing Letters Patent Appeal from the order of the learned Single Judge.
The 1st respondents being the trustees for the Port of Bombay are the owners of plot of land bearing Plot No. 62 admeasuring 576 sq.
yards Lying and situate in Pooria Street, Elphinstone Estate, Bombay 3.
In or about 1945 the trustees of the Port of Bombay granted lease of the said plot of land to one Mustafa Husein for the purpose of erecting a godown for carrying on commercial activities at a monthly rent of Rs. 925 which later on was increased to Rs.1,465.
In or about 1946 Mustafa Husein being the lessee of the 1st Respondent erected a permanent godown of brick, mortar and cement.
The said Mustafa Husein in 1958 granted lease of the said godown to the petitioners; the area of the godown is about 3,000 sq.
It is alleged that petitioners have since been carrying on their business in the said godown The Trustees of the Port of Bombay filed suit against the heirs of Mustafa Husein for eviction from the lease granted to Mustafa Husein for termination of the tenancy.
The ground for eviction was termination of tenancy.
The Trustees of the Port of Bombay in July, 1977 obtained a decree on admission against the heirs of Mustafa Husein in the said suit.
In or about May, 1985 warrant of possession in execution of decree dated 20th of July, 1977 was sought to be executed against the petitioners.
The petitioners obstructed the execution of the decree.
Thereupon in or about June, 1985, the Trustees of the Port of Bombay took out a Chamber Summons in the High Court of Bombay for removal of obstruction under order 21 Rules 97 to 101 of the Code of Civil Procedure.
Petitioners contended that they were lessees under the said Mustafa Husein and as such they were entitled to the protection of the Bombay Rent, Hotel and Lodging Houses Rates (Control) Act, 1947, hereinafter called the Bombay Rent Act, as the Bombay Rent Act applied to the building erected by a lessee from the local authority and as such the petitioners right of possession was protected under the provisions of the Bombay Rent Act.
The Trial Court allowed the Chamber Summons and rejected the petitioner 's contentions.
He observed that it was not necessary to record evidence in this case.
The petitioners being aggrieved preferred a first appeal.
The learned single judge of the High Court dismissed the first appeal holding that the petitioners were not entitled to the benefit of the Bombay Rent Act and negatived the contentions arising out of the Easement Act and also arising out of the alleged acquiescence of the Trustees of the Port of Bombay.
The petitioners preferred Letters Patent Appeal which was also dismissed by the Division Bench of the Bombay High Court.
The High Court observed that if the contentions of the petitioners were accepted then the provisions of Section 4(1)(a) of the Bombay Rent Act would become nugatory.
Being aggrieved 486 therefrom the petitioners seek leave to appeal to this Court under A Article 136 of the Constitution.
The question, is, whether the petitioners are entitled to protection under section 4(1)(a) of the Bombay Rent Act.
The answer will depend upon the question whether there was any building lease granted to the original tenant Mustafa Husein.
There was none, at least no such evidence was adduced before the learned Trial Judge or before the Division Bench of the High Court.
When the matter came before this Court for admission by our order dated 17th of September, 1987 as the question involved was whether there was any agreement or lease with the lessor that they will have to construct building on the land demised to them, but as no such lease had been produced so far, time was granted for production of such evidence.
Pursuant to the same today we have been shown two letters, one dated 16th of April, 1951 written by the Architect of the lessor forwarding the plants in triplicate to the Bombay Port Trust for approval, and the other letter dated 14th of June, 1951 written by the Manager, Land and Bunders to the architect of the lessor on the following subject: "Elphinstone State Reconstruction of a Shed on Monthly Tenancy Plot at Poona Street.
" The petitioners were informed that the plan was approved subject to the compliance of the Municipal Regulations.
This question arose in the Bombay High Court in Ram Bhagwandas vs Municipal Corporation of the City of Bombay, There interpreting the Bombay Rent Act and section 4(1) and 4(a) thereof Chief Justice Chagla speaking for the Division Bench held that the proper interpretation to put upon section 4(4)(a) was that "under an agreement, lease or grant" must qualify both "building erected" and "land held".
In other words, the building must be erected by the lessee pursuant to the agreement, lease or grant given to the person who held the land under that agreement, lease or grant.
Therefore, where a building was erected by the lessee not pursuant to any agreement with the lessor or not under any agreement with the lessor then the case did not fall under section 4( l)(a).
What section 4(1) does is to give immunity to the local authority in respect of the land which it has let out to the lessee and that immu 487 nity cannot be taken away merely because the lessee on his own volition and without being under any obligation under any agreement choses to put up structures on that land.
Section 4 deals with exemptions and sub section (1) provides as follows: "This Act shall not apply to any premises belonging to the Government or a local authority or apply as against the Government to any tenancy or other like relationship created by a grant from the Government in respect of premises taken on lease or requisitioned by the Government: but it shall apply in respect of premises let to the Government or a local authority".
Therefore, if we have premises which belong to Government or a local authority, then the Act would not apply.
The land here belongs to the local authority but the structures were put on by the lessees of the Port not under any building lease, and such protection can not be claimed in respect of these premises.
Sub section (4)(a) of section 4 is also relevant.
It was held "The expression 'premises belonging to the Government or local authority ' in sub section (1) shall, notwithstanding anything contained in the said sub section or in any judgment decree or order of a Court not include a building erected on any land held by any person from the Government or a local authority under an agreement, lease or other grant, although having regard to the provisions of such agreement, lease or grant the building so erected may belong or continue to belong to the Government or the local authority, as the case may be".
Chief Justice Chagla considered the historical background under which Section 4(a) was enacted by the Bombay Act of 1953.
This decision was approved by this Court in Kanji Manji vs The Trustees of the Port of Bombay [1962] Suppl.
3 S.C.R. 461.
Sub section (4)(a) and (b) read as follows: "(4)(a).
The expression "premises belonging to the Government or a local authority" in sub section (1) shall, notwithstanding anything contained in the said sub section or in any judgment, decree or order of a Court, not include a building erected on any land held by any person from the Government or a local authority under an agreement, lease or other grant, although having regard to the provisions of 488 such agreement, lease or grant the building so erected may belong or continue to belong to the Government or the local authority, as the case may be; and (b) notwithstanding anything contained in section 15, such person shall be entitled to create a tenancy in respect of such building or a part thereof." This Court observed at page 471 of the report that this was introduced by amendment and the purpose of the amendment was as follows: "The amendment achieved two different things.
It enabled the lessee of the particular kind of building described in cl.(a) to create sub tenancies in spite of the ban against sub tenancies contained in section 15.
It also excluded from the operation of sub section (1) the buildings specified in cl.
(a) of the sub section.
The amendment said nothing about the relationship of the Government or the local authority, on the one hand, and the lessee, on the other, in respect of the land.
The word "premises" in sub section (1) could mean the land or the buildings or both.
Sub section (4)(a) dealt only with the buildings, and did not deal with the land, because it used the word "buildings" and not the more general word "premises".
The import of sub section
(4)(a) of section 4 was thus limited to buildings, and did not extent to land.
The sub section, however, was drafted somewhat in artistically, and the obscurity of the language presents some difficulty.
The Trial Judge followed a decision of the Bombay High Court reported in Ram Bhagwandas vs Bombay Corporation In that case, one Khudabaksh Irani had taken lease of certain plots some 30 years back, and constructed some structures upon the open plot, and rented them out as tenements.
In 1947, Irani sold them to one Tyaballi.
In 1951, the Municipal Corporation filed a suit to eject Tyaballi from the plots, and by a consent decree, Tyaballi agreed to deliver up vacant and peaceful possession of the plots clear of all structures.
Tyaballi failed to remove the structures, and the Municipal Corporation sought to execute the decree.
The tenants thereupon filed a suit under 0.21, r. 103 of the Civil Procedure Code against Municipal Corporation, but the h suit was dismissed.
In the appeal which was filed in the 489 High Court, it was conceded that the Municipal Corporation was the owners of the plots in question, but protection was claimed on the basis of sub section
(4)(a) of section 4 of the Rent Control Act.
Chagla, C.J. in dealing with the history of the amending Act, pointed out that the legislature was seeking to protect by that sub section tenants who occupied buildings put upon land belonging to a local authority, if the buildings occupied by them were constructed under an agreement under which the lessee was under an obligation to construct buildings.
He pointed out that the protection of sub section
(4)(a) was to buildings and not to land, and that the phrase "under an agreement, lease or other grant" modified not only "held by any person from Government or local authority" but also "erected on any land".
therefore, held that the words "erected on any land held by any person form a local authority" were descriptive of the building and did not emphasise the point of time when the building was erected.
By that phrase, what was emphasised was "that the nature of the building must be such as to satisfy the test that it was erected on land held by a person from a local authority and the test must be applied at the time when the protection is sought." In that case, it was contended before this Court, as it was contended in the Bombay High Court, that so long as a building was erected under an agreement with Government or a local authority, the benefit of sub section
(4)(a) of section 4 would be available, no matter how many hands the property might have changed.
This Court accepted the interpretation of the High Court in the aforesaid decision.
In our opinion, in the instant case, in view of the fact that the original lease was only a monthly tenancy and not a building lease, the High Court was right in dismissing the objections on behalf of the petitioners.
We find no reason, therefore, to interfere with the order of the High Court.
The special leave petition therefore, fails and is accordingly dismissed without any order as to costs.
Since, the petitioners have been in possession of the premises for some time, in the interest of justice it is desirable, in our opinion, that the petitioners should have time to vacate the premises in question.
In the premises, we allow the petitioners to continue to remain in the premises upto 15th of September, 1988 provided they file the usual undertaking in this Court within four weeks.
N.P.V. Petition dismissed.
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In 1945 the first respondent Trustees of Port of Bombay, granted lease of plot owned by them for the purpose of erecting a godown for carrying on commercial activities at a monthly rent of Rs. 925.
In 1946 the lessee erected a permanent godown.
In 1958, he granted lease of the said godown to the petitioners.
The first respondent filed a suit against the heirs of the original lessee for eviction on the ground of termination of tenancy, and obtained a decree.
When warrant of possession was sought to be executed, the petitioners obstructed the execution of the decree.
The first respondent thereupon took out a Chamber Summons for removal of obstruction under order 21 Rule 97 101 C.P.C.
The petitioners contended that as they were lessees under the original lessee they were entitled to protection of the Bombay Rent, Hotel and Lodging Houses Rates (Control) Act, 1947 the Bombay Rent Act which applied to the building erected by a lessee from the local authority.
The trial court rejected the petitioners ' objection and allowed the Chamber Summons.
The appeal of the petitioners was dismissed by the Single Judge of the High Court holding that they were not entitled to the benefit of the Bombay Rent Act.
The contentions arising out of the Easement Act and alleged acquiescence of the first respondent were negatived.
The Letters Patent Appeal was also dismissed by the Division Bench.
On the question whether the petitioners were entitled to protection under section 4(1)(a) of the Bombay Rent Act.
484 dismissing the Special Leave Petition, ^ HELD: Where a building was erected by the lessee not pursuant to or not under any agreement with the lessor then the case did not fall under section 4(1)(a) of the Bombay Rent, Hotel and Lodging Houses Rates (Control) Act, 1947.
[486G] Section 4(1) gives immunity to the local authority in respect of the land which it has let out to the lessee and that immunity cannot be taken away merely because the lessor on his own volition and without being in obligation under any agreement choses to put up structures on that land.
Therefore, if the premises belonged to the Government or a local authority then the Act would not apply.
[486H; 487A, D] In the instant case, The lands belong to the local authority but the structures were put on by the lessees of the first respondent not under any building lease, and such protection cannot be claimed in respect of these premises.
In view of the fact that the original lease was only a monthly tenancy and not a building lease, the High Court was right in dismissing the objections on behalf of the petitioners.
Since the petitioners have been in possession of the premises for some time, the petitioners are allowed to continue to remain in the premises upto 15th September, 1988.
[489F, H] Kanji Manji vs The Trustees of the Port of Bombay, [1962] Suppl.
3 S.C.R. 461 applied.
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5491.txt
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Criminal Appeal No. 60 of 1963.
Appeal by special leave from the judgment and order dated August 24, 1962 of the Allahabad High Court in Government Appeal No. 1379 of 1962.
B.C. Misra and O.P. Rana, for the appellant.
1. P. Goyal, for the respondent.
The Judgment of the Court was delivered by Sikri, J.
This appeal by special leave is directed against the judgment of the Allahabad High Court dismissing the appeal of the State against the judgment of the Sessions Judge allowing the appeal of the respondent and acquitting him.
The respondent obtained permits under the Iron and Steel (Control) Order, 1956 hereinafter referred to as the Control Order for about 28 tons of iron, including 6 tons of rods, 151/2 tons of joints and 2 tons of G.C. Sheets.
He is alleged to have purchased these articles on the basis of the above permits between July 1957 and March 1958.
The permits were obtained on three applications made by the respondent.
Only two applications are in the printed record.
The first application is dated May 23, 1957, and is addressed to the Provincial Iron and Steel Controller, Kanpur, through the District Magistrate, Deoria.
In this application the respondent stated that he was a political sufferer and he was constructing a public temple for which he required five tons of M.S. Round and eight tons of Girder.
He further stated that the requirements were nor available at Deoria and as such the application should be considered and forwarded to the Controller for consideration and orders.
It appears that this application was forwarded, duly recommended, by the District Supply Officer.
Deoria, and ultimately a permit was given to him by the Controller.
He made another application dated September 7, 1957.
In this application he again stated that he was a political sufferer and he was constructing a public temple and dharamshala for which he required certain quantities of iron.
He further stated that the requirements were not available at Deoria and as such the application should be forwarded to the Controller.
This application was also recommended and forwarded and ultimately a permit was given to him.
On January 2, 1958, the accused made another application (exhibit Ka 9 not available in the printed record) and a permit was given to him by the District Supply Officer himself.
We may mention that the original permits are not printed in the record, and, therefore, we have not been able to see for ourselves as to what are the exact conditions contained in the permits.
It is the case of the prosecution that the respondent after obtaining the materials sanctioned to him under the permits did not construct any temple or dharamshala building at Barhaj Bazar or at any other place.
We may mention that Barhaj Bazar is the place where he lives and the applications which are in the record also mention this address.
163 Before the Magistrate who tried the case the respondent was put the following question: "It is alleged that the iron obtained under the permits mentioned in questions 2, 3 and 4 was not utilised for the purpose for which it was taken.
What have you to say in this respect?" The respondent 's reply was: "No. Whatever iron 1 got, I used it in the temple situate in mauza Tinbari, P.S. Madhubam district Azamgarh, which is my place of residence as well.
" Before the Magistrate the accused had admitted to have purchased about 17 tons of iron.
The Magistrate held it proved that the accused had atleast purchased one ton more from one Mishri Lal, P.W. 7.
Thus, he came to the conclusion that the accused had purchased at least 18 tons of iron.
He further held that on the evidence it was clear that only 3/4 ton of rods had been utilised in the building constructed at Tinhari, but as the building had been constructed between 1943 52, no portion of the iron obtained by the accused had been utilised for the purpose for which it was procured.
He further held that the accused had disposed of the iron wrongfully at Kanpur and did not even bring the same to Barhaj Bazar or Tinhar.
Accordingly he held that the respondent had contravened the provisions of cl. 7 of the Control Order.
The respondent filed an appeal before the Sessions Judge.
The Sessions Judge held that barring a very small quantity of iron, the remaining quantity that was received by the respondent had not been utilised in the temple or dharmashala at Tinhari.
Differing from the Magistrate, he held that it was not proved by any evidence that the respondent had actually sold the excess quantity at Kanpur.
He then observed that "in the absence of any such evidence the possibility of the appellant retaining the iron at some other place is not completely excluded.
" Then construing d. 7 of the Control Order, he observed that "in the aforesaid section there is no mention that the iron purchased should be utilised at any particular place or within a particular period.
The condition in the various permits granted to the appellant was simply this that he should utilise the iron in creecting a temple or dharamshala in the town of Barhai.
It may be noted that the main purpose was the construction of a temple and dharamshala; the place where it was to be constructed does not appear to have much significance.
Further no time limit is given during which the entire quantity of iron should be utilised.
" Accordingly he held that there had been no contravention of cl. 7 of the Control Order.
The State appealed to the High Court.
Srivastava, J. dismissed the appeal holding that there had been no contravention of cl. 7 of the Control Order.
According to him, two essentials are necessary before there can be contravention of el. 7. "In the 164 first place the iron and steel should be 'used '; secondly it should be used otherwise than in accordance with the conditions contained or incorporated in the document which was the authority for the acquisition." He held that the first condition had not been fulfilled because it had not been proved that the respondent had used the iron which he had obtained on the basis of the permit.
It appears that the findings of the learned Sessions Judge, as well as the Magistrate, that he had not used or utilised the remaining portions of the iron and steel at all were not questioned before him.
According to him, if the remaining quantity of iron was still unutilised or unused, then the respondent could not be said to have done anything contrary to cl. 7.
He further held that the second condition had also not been fulfilled because the permit itself contained only one condition printed on its back.
This condition was "that the materials required against the permit will be used only for the purpose for which it was asked for and has been given." According to him, it is not permissible to refer to the application made for the permit because the only document that can be looked at is the permit.
He was, however, prepared to concede that "it is also open to the officer to mention in the permit that it is being granted for the purpose mentioned in the application.
That may be a short cut for avoiding the trouble of entering in the permit the details of the purpose.
In that case it may be permissible to refer to the application.
" In spite of this concession, he concluded that "when even that is not done in fact no condition is mentioned in the permit at all about the manner in which the iron or steel is to be utilised it cannot be said that a condition of the permit has been broken because the assurance given in the application has not been carried out." Mr. B.C. Misra, learned counsel for the appellant.
has urged before us that on the facts found by the learned Sessions Judge.
cl. 7 of the Control Order has been contravened.
He says that the word "use" in el. 7 includes "kept for eventual use for another purpose." He says that if one stores iron and steel.
one uses it and the word "use" does not imply consumption only.
Relying on Maxwell on Interpretation of Statutes, Eleventh Edition, p. 266.
he says that we should give a wide construction to the word ' "use" in cl. 7.
Clause 5 and the relevant portion of cl. 7 of the Control Order are as follows: "5. Disposals.
No person, who acquires iron or steel under clause 4.
or no producer shall dispose of or agree to dispose of or export or agree to export from any place to which this Order extends any iron or steel, except in accordance with the conditions contained or incorporated in a special or general written order of the Controller.
165 7.
Use of Iron and Steel to conform to conditions governing acquisition.
A person acquiring iron or steel in accordance with the provisions of el. 4 shall not use the iron or steel otherwise than in accordance with any conditions contained or incorporated in the document which was the authority for the acquisition . " We are unable to accede to the above contentions.
There is no provision in the Control Order requiring that iron or steel acquired under the Control Order should be utilised within a specified time.
If it had been the intention to include keeping or storing within the word 'use ' there would have been some provision regarding the period during which it would be permissible to keep or store the iron, for it is common knowledge that building operations take some considerable time and are sometimes held up for shortage of material or other reasons.
Further the word 'use ' must take its colour from the context in which it is used.
In cl. 7 the expression "use. in accordance with the conditions contained" suggests something done positively, e.g. utilisation or disposal.
Mere 'non use ', in our opinion, is not included in the word 'use '.
The passage relied on by the learned counsel in Maxwell is as follows: "Wide Sense given to words: The rule of strict construction, however, whenever invoked, comes attended with qualifications and other rules no less important, and it is by the light which each contributes that the meaning must be determined.
Among them is the rule that the sense of the words is to be adopted which best harmonises with the context and promotes in the fullest manner the policy and object of the legislature.
The paramount object, in construing penal as well as other statutes, is to ascertain the legislative intent, and the rule of strict construction is not violated by permitting the words to have their full meaning, or the more extensive of two meanings, when best effectuating the intention.
They are, indeed, frequently taken in the widest sense, sometimes even in a sense more wide than etymological belongs or is popularly attached to them, in order to carry out effectually the legislative intent, or, to use Sir Edward Coke 's words, to suppress the mischief and advance the remedy.
" But this passage does not warrant the giving of a meaning to a word apart from the context in which it is used.
There is no doubt that the legislative intent of the Control Order is that this essential commodity should be utilised in accordance with the conditions contained in the permit, but no clause in this Control Order evinces a legislative intent that a mere non user is also prohibited and made punishable.
166 The learned counsel referred to London County Council vs Wood(1), but we do not derive any assistance from that case.
The head note brings out the point decided in that case as follows: "The Highways and Locomotives Act, 1878, provides by section 32 that "A country authority may. make. by laws for granting annual licences to locomotives used within their country.
" And by a by law made by the London County Council under that section it was provided that "No locomotive shall be used on any highway within the county of London until an annual licence for the use of the same shall have been obtained from the council by the owner thereof": Held, that a steam roller which was not at the time being employed in road making, but was merely passing through the county to a destination outside was being "used within the country" within the meaning of the section and the by law." In the context, the word "used" was, with respect, properly construed.
Collins, J., held that "the object of the Act was evidently to protect the highways, and the effect of a steam roller upon the highways may be just the same whether it be engaged in mending the roads or not".
In conclusion we hold that it has not been established that the respondent had used the iron acquired by him in contravention of cl. 7 of the Control Order.
The learned council further urges that the High Court erred in holding that the application cannot be referred to for the purpose of construing the conditions appearing in the permit, the condition being that "the materials acquired against a permit will be used only for the purpose for which it was asked for and has been given." He says that the expression "the purpose for which it was asked for" refers back to the application, and the expression "has been given" refers back to the Order.
There is some force in what he urges.
We are unable to sustain the finding of the High Court that it is not permissible to refer to the application and the order to find out the purpose for which the iron was obtained.
But even if we look at the applications, which are in the printed record, the purpose mentioned is only construction of a temple, in the application dated May 23, 1957, and temple and dharamshala in the application dated September 7, 1957.
These applications do not disclose that the respondent wanted to construct the temple and dharamshala at any particular place.
It is urged that the sentence which occurs in both the applications, namely that the requirements are not available at Deoria, shows that the purpose for which the iron and steel was required was for construction (1)[1897] 2 QB 482.
167 of a temple and dharamshala in the district of Deoria.
This argument is sought to be reinforced by asserting that a District Magistrate was not empowered to recommend applications for iron required for works to be constructed outside the District, and therefore it must be held that the purpose was construction of a temple and dharamshala in the district of Deoria.
However, no orders showing the jurisdiction of the District Magistrate in respect of this matter has been shown to us, and we are unable to conclude from the applications that the purpose was construction of a temple and dharamshala in the district of Deoria alone.
Accordingly we hold that the respondent has not contravened cl. 7 of the Control Order.
The appeal accordingly fails and is dismissed Appeal dismissed.
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The respondent obtained permits under the Iron and Steel (Control) Order, 1956 on the representation that he wanted to purchase iron goods for the purpose of building a temple and a dharamshala.
The permits were obtained from the authorities of District Deoria in U.P.
At the back of the permit a condition was printed tematerials required against the permit will be used only that "h.q for the purpose for which it was asked for and has been given".
The respondent was tried for the contravention of cl. ? of the aforesaid order on the allegation that he had not used the goods purchased under the permits for the purpose for which ,they were issued.
The trial Magistrate found him guilty.
In appeal, however, the Sessions Judge acquitted him on the ground that the possibility of his retaining the iron at some other place was not entirely excluded.
The High Court in appeal by the State confirmed the acquittal holding that it had not been proved that the respondent had "used" the iron which he had obtained on the basis of the permit.
The High court further held that it was not possible to look into the application in order to see for what purpose the applicant took the permit and no condition actually printed at the back of the permit had been broken.
By special leave the State appealed to the Supreme Court, On behalf of the appellant it was urged: (1) the word "use" in cl. 7 of the order includes "kept for eventual use for another purpose." (2) The High Court erred in holding that the application cannot be referred to for the purpose of construing the conditions appearing in the permit.
HELD: The respondent could not be held guilty of a contravention of cl. 7 of the order.
(i) No doubt the legislative intent of the Iron & Steel (Control) Order is that this essential commodity should be utilised in accordance with the conditions contained in the permit, but no clause in the Control Order in question evinces a legislative intent that a mere non user is also prohibited and made punishable.
[165 H] The word 'use ' must take its colour from the context in which is used.
In cl. ? the expression "use. in accordance with the conditions contained" suggests something done positively e.g. utilisation or disposal.
Mere "non use" is not included in the word "use".
165 D] (ii) The High Court was wrong in holding that it is not permissible to look at the application to determine the purpose for which permit is obtained.
However in the present case the applications did not disclose that the respondent wanted to build a temple or dharamshala at any particular place.
From the mere fact that the applications were made to the authorities in Deoria District, or the fact that in the applications it was mentioned that the goods were not available in Deoria District, it did not necessarily follow that the goods were intended to be used in that District.
[166 H] 162
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1933.txt
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Criminal Appeals Nos. 48 and 80 of 1960.
Appeals by special leave from the judgment and orders dated December 11, 1959 and March 2, 1960 of the Bombay High Court Rajkot (Now Gujarat High Court) In criminal Revision Application No. 100 of 1959.
855 N.N. Keswani, for the appellants (in both the appeals).
D.R. Prom and R.N. Sachthey, for the respondent (in both the appeals).
The Judgment of the Court was delivered by Wanchoo, J.
The two appeals by special leave arise out of the same criminal trial before a magistrate at Porbunder and will be dealt with together.
The three appellants along with one more person, namely, Keshavlal Nagjibhai were prosecuted under section 167 (81) of the , No. 8 of 1878, (hereinafter referred to as the Act).
The prosecution case briefly was that Vallabhdas Liladhar, who is now dead, came in contact with an Arab from whom he purchased smuggled gold weighing a little more than 84 tolas on December 1, 1956.
Before this, Vallabhdas Liladhar had borrowed Rs. 3,600/ from the other two appellants and Keshavlal about November 28, 1956, in order to make the purchase.
After making the purchase, Vallabhdas Liladhar came to Porbunder to the house of the other two appellants and Keshavlal and informed them of the purchase and wanted their help in the disposal of the gold.
The other two appellants namely, Narandas Nagjibhai and Vallabhdas Nagjibhai are brothers.
Keshavlal was also the brother of these two appellants.
The prosecution case further was that Narandas Nagjibhai asked Vallabhdas Nagjibhai to take the gold to Bantwa and sell it at the rate of Rs. 103/ or so per tola.
Vallabhdas Nagjibhai was also instructed that in case he could not sell the gold at that rate he should contact Vallabhdas Liladhar and Narandas Nagjibhai at Bantwa bus stand from where they were to go to Junagadh to dispose of the gold if no suitable buyer could be found in Bantwa.
Consequently Vallabhdas Nagjibhai proceeded to Bantwa by bus on December 2, 1956 in the afternoon.
In the meantime information was received by Mehta who was Inspector of Customs about the smuggling of this gold.
He consequently followed the bus in which Vallabhdas Nagjibhai was travelling and intercepted him at Kutiyana bus stand at about 3 p.m.
The Deputy Superintendent of Customs was also with Inspector Mehta and Vallabhdas Nagjibhai was taken down from the bus at Kutiyana.
On search in the presence of witnesses, five bars of gold weighing about 84 tolas were recovered from his possession.
All these five bars bore marks of foreign origin and were taken in possession by the customs authorities after preparing a recovery list.
Further investigation was made in the matter and eventually on October 7, 1957, the Collector of Central Excise Baroda confiscated the gold bars under section 167 (8) of the Act read with section 23 of the Foreign Exchange Regulation Act, 1947 and also imposed a penalty of Rs. 1,000/ each on the three appellants and a penalty of Rs. 500/ on Keshavlal.
Thereafter a complaint was filed by the Assistant Collector of Customs under section 167(81) of the Act before the magistrate at Porbunder on June 27.
856 The case of Vallabhdas Liladhar was that he had not purchased the gold from any Arab but had brought it with him from Karachi in the year 1946.
Vallabhdas Nagjibhai admitted the recovery of gold from him but said that it belonged to Vallabhdas Liladhar and he was carrying it at the request of the latter and that he did not know that it was smuggled gold.
Narandas Nagjibhai also, admitted that Vallabhdas Liladhar had come to their house with the gold but added that it was not smuggled gold and that Vallabhdas Liladhar had told him that it belonged to him and was for sale.
Keshavlal, the fourth person, who has been acquitted, said that he did not know anything about the matter and had no connection with it.
It may be added that the three appellants had made statements before the customs authorities and those statements were also put in evidence in support of the prosecution case.
In those statements, they practically admitted the prosecution case that the gold was smuggled gold and they were trying to dispose it of.
The magistrate convicted all the four persons under section 167 (81) of the Act and sentenced them to rigorous imprisonment for six months and a fine of Rs. 500/ He relied on the statements made by the appellants and Keshavlal before the customs authorities and also on the evidence produced before him, which was mainly about the recovery of gold.
All the four convicted persons appealed to the Sessions Judge.
The appeal was heard by the Additional Sessions Judge, Porbunder who acquitted Keshavlal.
The appeal of the other three (namely, the three appellants now before us) was dismissed and their convictions and sentences Were upheld.
The three appellants then went in revision to the High Court.
The High Court rejected the revisions of Vallabhdas Liladhar and Vallabhdas Nagjibhai summarily.
The revision application of Narandas Nagjibhai was admitted but was eventually dismissed.
The three appellants then applied for leave to appeal to this Court which was refused.
They then prayed for special leave from this Court, which was granted, and that is how the matter has come up before us.
Vallabhdas Liladhar, one of the appellants in Cr.
A 48 of 1960, is dead.
So far therefore as he is concerned, his appeal abates.
It only remains to consider the appeal of Vallabhdas Nagjibhai (Cr.A.48) and Narandas Nagjibhai (Cr.A.80).
Before however we consider the points raised before us on behalf of the appellants we may refer to the circumstances which have been found established by all the courts and on the basis of which the conviction of the appellants has been upheld.
These circumstances are (1) Though the price of gold at the relevant time was over Rs. 105/ per tola, the appellant were intending to sell these gold bars at a lower price of about Rs. 103/ per tola.
857 (2) The two appellants were working as goldsmiths at Porbunder and there was no reason why the gold had to be sent elsewhere for disposal.
As Porbunder is a fairly large town, there was no reason why the gold could not be sold in the market at Porbunder.
(3) The two appellants displayed undue haste in the disposal of gold.
(4) The surreptitious manner in which the gold bars were kept by Vallabhdas Nagjibhai as shown at the time of recovery shows that the appellants knew that they were dealing with smuggled gold.
(5) The amount of Rs. 3,600/ was advanced to Vallabhdas Liladhar but the entries in the account book of the appellants were made in the name of the brother of Vallabhdas Liladhar who is the brother in law of the two appellants.
(6) The markings on the gold made it quite clear that it was of foreign origin and the two appellants could not be unaware of this, particularly as they work as goldsmiths.
In addition to the above circumstances, all the courts relied on the statements made by the two appellants before the customs authorities and the presumption under section 178 A of the Act was raised and on that basis convicted the appellants, though the High Court held that even without the presumption under section 178 A the evidence was sufficient to convict the appellants.
Learned counsel for the appellants has very properly not challenged the concurrent findings of fact by all the courts.
He has raised four points for our consideration, which are these (1) The statements made to the customs authorities were inadmissible in evidence as they were not properly proved.
(2) The statement made before the Collector of Customs were inadmissible in evidence under sections 24 and 25 of the Indian Evidence Act.
(3) As the gold had already been confiscated and penalty had been imposed under section 167(8) of the Act, there could be no further trial in a criminal court in view of section 186 of the Act.
(4) The ingredients of section 167(81) are not satisfied in this case.
858 Re.
So far as the first point is concerned, the only argument is that the lawyer who signed the statements made before the customs authorities was not produced to prove them, and therefore the statements cannot be held to have been properly proved.
It is however clear that the statements were not only signed by the lawyer of the appellants but also by the appellants.
In their statements in court, the appellants admitted that they had signed the statements, though they said.
that they did not know what the statements contained and they signed it on being asked by their lawyer.
This part of the statements of the appellants has not been believed by the courts below and in our opinion rightly.
As the statements bore the signature of the appellants which are admitted, they must be held to be proved by this admission and it was not further necessary to examine the lawyer who signed the statements along with the appellants.
The contention on this head must there fore fail.
As to the second point, we are of opinion that section 25 of the Indian Evidence Act has no application on the facts of the present case which are on all fours with the facts in The State of Punjab vs Barkat Ram(1).
In similar circumstances it was held by this Court in that case that customs officers are not police officers and statements made to them were not inadmissible under section 25.
Section 24 would however apply, for customs authorities must be taken to be persons in authority and statements would be inadmissible in a criminal trial if it is proved that they were caused by inducement, threat or promise.
But the finding of all the courts is that the statements were not made on account of any inducement threat or promise as required by section 24 of the Indian Evidence Act.
In the face of this finding, therefore, it cannot be said that the statements are inadmissible under section 24 of the Indian Evidence Act.
Next the appellants rely on section 186 of the Act.
which reads as follows: "The award of any confiscation, penalty or increased rate of duty under this Act by an officer of Customs shall not prevent the infliction of any punishment to which the person affected thereby is liable under any other law.
" It is urged that when section 186 lays down that the award of any confiscation, penalty or increased rate of duty under the shall not prevent the infliction of any punishment to which the person affected thereby is liable under any other law, it necessarily forbids by implication infliction of any punishment to which (1) ; 859 the person affected thereby is liable under the itself.
In this connection our attention is drawn to certain observations in Leo Roy Frey vs The Superintendent District Jail(1).
It is true that in that case this Court referred to section 186 of the Act; but that case was not directly concerned with the question whether a prosecution under section 167(81) of the Act is permissible after the award of confiscation, penalty or increased rate of duty under section 167(8) of the Act in view of section 186.
Clause (81) in section 167 was introduced by the Amending Act No. 21 of 1955.
Before that there were 80 clauses in the section, and the scheme of those clauses was that a person could either be dealt with by the award of confiscation, penalty or increased rate of duty, or by a prosecution before a magistrate.
It was in those circumstances that section 186 provided that the award of confiscation, penalty or increased rate of duty would not bar infliction of any other punishment under any other law.
The intention of the legislature by this provision in section 186 was clearly to allow a prosecution under any other law even though there might be award of confiscation, penalty or increased rate of duty under the Act.
Section 186 was thus meant for permitting prosecutions in addition to action under the Act in the shape of confiscation, penalty or increased rate of duty; it was never intended to act as a bar to any prosecution that might be permissible after the award of confiscation, penalty or increased rate of duty.
It was merely an enabling section and not a barring section and seems to have been put in the Act ex abundanti cautela.
When however, cl.
(81) was introduced in section 167, it became possible in some cases where goods had been confiscated; and penalty inflicted under the Act by the customs authorities to prosecute persons also under cl.
(81) of the Act.
That however would not change the nature of the provision contained in section 186 which was an enabling provision and not a barring provision.
If the intention was to bar prosecutions in consequence of the award confiscation, penalty or increased rate of duty, the words of section 186 would have been very different.
We cannot therefore read in section 186 a bar by implication to a prosecution under the Act simply because section 186 enables prosecution under any other law.
In this view of the matter, section 186 is no bar to the prosecution for an offence under the Act in connection with a matter in which the award of confiscation, penalty or increased rate of duty has been made.
Next it is contended that the ingredients of cl.
(81) of section 167 are not satisfied inasmuch as it is not proved that the intention of the appellants was to defraud the government of any duty payable on the gold which was the subject matter of the charge in this case or to evade any prohibition or restriction for the time (1) ; , 827. 860 being in force.
It is true that before cl.
(81) can apply it has to be proved inter alia that the person charged thereunder with possession of any dutiable or prohibited or restricted goods or concerned in carrying, removing, depositing, keeping or concealing such goods, has the intention of defrauding the government of any duty payable thereon or of evading any prohibition or restriction thereon for the time being in force.
So it is said that the prosecution has failed to prove by positive evidence that the intention was to defraud the government of the duty payable on the gold in this case or to evade the prohibition or restriction on the import thereon for the time being in force.
We have not been able to understand this argument at all.
Once it is proved that the gold is smuggled gold, it follows that it was brought into the country without payment of duty or in violation of the prohibition or restriction in force.
and whosoever brought it and whosoever dealt with it thereafter knowing it to be smuggled in the manner provided in the section must be held to have the intention of evading the payment of duty or violating the prohibition or restriction.
There is no force in this contention also.
Lastly it is urged that the substantive sentence of imprisonment in the case of the two appellants before us may be reduced to the period already undergone, particularly, as the appellants, have been on bail since March 1960 and it would not be in the interest of justice to send them back to jail for a short period after four years when about half the sentence has already been served out.
We however see no reason to interfere with the sentence in cases of this nature.
The appeals therefore fail and are hereby dismissed.
Appeal dismissed.
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Smuggled gold recovered from the appellants was confiscated and a penalty imposed on them.
Thereafter the appellants were tried and convicted under section 167(81) of the Sea ' Customs Act.
In their statements made to the customs authorities, the appellants had practically admitted the prosecution case and these statements were put in evidence.
An appeal to the Sessions Judge and a revision to the High Court were dismissed.
In appeal to this Court: HELD: (i).Since the statements made to the customs authorities bore the signature of the appellants which were admitted, they must be taken to be proved by such admission and no further evidence was necessary.
[858C] (ii) Customs officers are not in the circumstances arising in this case police officers and statements mad.e to them were not inadmissible under section 25 of the Evidence Act.
Section 24 would apply, as customs authorities are persons in authority; and such statements would be inadmissible if vitiated by inducement, threat or promise.
[858E F] State of Punjab vs Barkat Ram, ; , followed.
(iii) Section 186 of the , which is merely an enabling section, is no bar to a prosecution for an offence under the Act in connection with a matter in which the award of confiscation, penalty or increased rate of duty has been made.
[859F, G] Leo Ray Frey vs Superintendent of District Jail ; , referred to.
(iv) Once the gold recovered is proved to be smuggled whosoever is found to have brought it and dealt with it, thereafter, knowing it to be smuggled must be held to have had the intention of evading duty or violating the prohibition or restriction.
[860C D]
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1713.txt
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tition Nos.
15863 15906 of 1984.
(Under Article 32 of the Constitution of India) D.N. Goburdhan, D. Goburdhan, Ms. Gita Luthra and Ms. Pinky Anand for the Petitioners.
G. Ramaswamy, Additional Solicitor General, Kuldeep Singh, Additional Solicitor General, C. Ramesh and Mrs. Sushma Suri for the Respondents.
G The Judgment of the Court was delivered by RANGANATH MISRA, J.
The petitioner in each of these applications under Article 32 of the Constitution is a workman engaged on terms of casual labour for periods varying between 10 140 and 16 years in the Construction Department of the Signal Unit in the Northern Railway.
All the writ petitions having disposed of by a common judgment as questions of law and fact involved therein are similar.
The petitioners alleged that notwithstanding the fact that each of them has put in continuous service for quite a long period, the Railway Administration, respondent herein, has not treated them as temporary servants and has applied discriminatory rates of wages.
They have asked for a direction to treat the petitioners at par with maintenance workers and to declare that they are entitled to equal pay for equal work and have asked for their absorption in the regular cadre in the permanent category as per the circulars issued by the respondents.
A number of documents and circulars issued by the Administration have been produced in support of their claim.
The Senior Signal & Telecom Engineer (Power Signalling) has filed a counter affidavit on behalf of the respondents challenging the claim of the petitioners.
According to the respondents five out of the forty four petitioners in this group of writ petitions had undergone medical examination and were granted temporary status as Khallasis.
One of them has been directed to be absorbed against a permanent vacancy in the open line; five others have refused to go to the open line for permanent absorption.
He further averred that though prior to the issue of the Railway Board 's directions on January 1, 1984, project casual labourers were not entitled to all the privileges like House Rent Allowance, City Compensatory Allowance, Casual Leave, increment etc., they are now entitled to all the privileges as applicable to open line temporary railway servants after attaining temporary status.
In Paragraph 23 of the counter affidavit, it has been specifically pleaded that as per the extant rules, temporary status will first be given in the cadre of Khallasi and then promotion to skilled category after conducting the trade test is admissible.
A further detailed counter affidavit has again been filed by another Senior Signal & Telecom Engineer, wherein along with the affidavit particulars of service of each of the petitioners has been provided.
Petitioners have filed a Rejoinder.
At the hearing of the applications, counsel for the petitioners as also the learned Additionaly Solicitor General were given full opportunity of placing their arguments and documents.
In addition, they have also furnished written submissions.
141 It is stated on behalf of the Administration that out of fortyfour petitioners sixteen have now been empanelled and of them five have been given temporary appointments; eleven are said to have refused to join and seventeen are still continuing with temporary status.
Learned Additional Solicitor General states that petitioners are project employees and do not belong to the open line.
According to him employees in the open line acquire temporary status on completion of 120 days of service as against 180 days which was the previous requirement.
That status is acquired on completion of 360 days by casual labour in Project Works as provided in the scheme formulated under orders of this Court, though such status were acquirable by project casual labourers on completion of 180 days of continuous employment previously.
Learned counsel for the respondents has placed reliance on the definition of 'Project ' which means: "a project should be taken as construction of new lines, major projects, restoration of dismantled lines and major important open line works, line doubling, widening of tunnels etc.
which are completed within a definite time limit".
Admittedly the petitioners have put in more than 360 days of service.
Though counsel for the petitioners had pointed out that the Administration was requiring continuous service for purpose of eligibility, learned Additional Solicitor General on instructions obtained from the Railway officers present in Court during arguments has clarified that continuity is not insisted upon and though there is break in such continuity the previous service is also taken into account.
Learned Additional Solicitor General has made a categorical statement before us that once temporary status is acquired, casual employees of both categories stand at par.
Keeping the prevailing practice in the Railways in view, it is difficult for us to obliterate the distinction between the two categories of employees till temporary status is acquired.
With the acquisition of temporary status the casual labourers are entitled to: (1) Termination of service and period of notice (subject to the provisions of the ).
(2) Scales of pay.
(3) Compensatory and local allowances.
142 (4) Medical attendance (5) Leave rules.
(6) Provident Fund and terminal gratuity.
(7) Allotment of railway accommodation and recovery of rent.
(8) Railway passes.
(9) Advances.
(10) Any other benefit specifically authorised by the Ministry of Railways.
It is not disputed that the benefit of Discipline and Appeal Rules is also applicable to casual labour with temporary status.
It is also conceded that on eventual absorption in regular employment half the service rendered with temporary status is counted as qualifying service for pensionary benefits.
In the Signal and Telecom Construction organisation under which the petitioners are working, according to the Railway Administration further privileges of being regularised in permanent service is affirded by giving them access to their regularisation against permanent vacancies which mostly occur in open line.
For such purpose, casual labour in open line as well as willing project casual labour are combined for the purpose of screening and forming of panel on the basis of seniority depending upon the days of work put in.
In view of the submission, learned counsel for the respondents has pleaded that the allegation of discrimination does not exist.
Disputes arising out of termination of employment and inter se seniority came before this Court in the Writ Petition No. 147 of 1983 (Inderpal Yadav & Ors vs Union of India.
This Court changed the existing prevalent practice for reckoning seniority and directed that seniority of project casual labourers should be combined and prepared departmentwise and categorywise and in terms of the directions of this Court, steps have been taken.
It has been further contended that by the time these writ petitions were filed, the Railway, Board 's order of 1st of June, 1984, had not been given but with those directions now holding the field, the ambit of grievances has been very much reduced.
Learned Additional Solicitor General has gone 143 to the extent of even saying that nothing survives in the writ petitions.
What exactly are the benefits admissible to temporary railway servants have, however, been seriously debated.
Paragraph 2511 of the Indian Railway Establishment Manual provides: (a) "Casual labour treated as temporary are entitled to all the rights and privileges admissible to temporary railway servants as laid down in Chapter XXIII of the Indian Railway Establishment Manual.
The rights and privileges admissible to such labour also include the benefits of the Discipline and Appeal Rules.
Their service, prior to the date of completion of six months ' continuous service will not, however, court for any purposes like reckoning of retirement benefits, seniority etc.
Such casual labourers will, also, be allowed to carry forward the leave at their credit to the new post on absorption in regulation service.
(b) Such casual labour who acquire temporary status, will not, however, be brought on to the permanent establishment unless they are selected through regular Selection Boards for Class IV staff.
They will have a prior claim over others to permanent recruitment and they will be considered for regular employment without having to go through employment exchanges.
Such of them who join as casual labourers before attaining the age of 25 years may be allowed relaxation of the maximum age limit prescribed for Class IV posts to the extent of their total service which may be either continuous or in broken periods.
(c) It is not necessary to create temporary posts to accommodate casual labourers who acquire temporary status for the conferment of attendant benefits like regular scales of pay, increments etc.
Service prior to the absorption against a regular temporary/permanent post after requisite selection will, however not constitute as qualifying service for pensionary benefits.
" 144 It is the stand of the learned Additional Solicitor General that no pensionary benefits are admissible even to temporary railway servants and, therefore, that retiral advantage is not available to casual labour acquiring temporary status.
We have been shown the different provisions in the Railway Establishment Manual as also the different orders and directions issued by the Administration.
We agree with the learned Additional Solicitor General that retiral benefit of pension is not admissible to either category of employees.
As already stated, sixteen out of the forty four petitioners have already been empanelled and eleven seem to have joined, while seventeen are continuing on temporary status.
We expect the Railway Administration to take prompt steps to screen such of the petitioners who have not yet been tested for the purpose of regularising their service.
Learned Additional Solicitor General specifically accepted the position that the petitioners should be entitled to the same pay as is 1) admissible to others either in the project or in the open line.
That would take away inequality which is main grievance of the petitioners.
The respondents shall have a direction to consider the claims of each of the petitioners promptly and make appropriate orders for their regularisation.
For over ten years, litigations of this type have been coming to the Court.
About three years back, this Court directed a scheme for absorption in Yadav 's case which has been framed and is operative.
Casual labour seems to be the requirement of the Railway Administration and cannot be avoided.
The Railway Establishment Manual has made provisions for their protection but implementation is not P effective.
Several instructions issued by the Railway Board and the Northern Railway Headquarters were placed before us to show that the Administration is anxious to take appropriate steps to remove the difficulties faced by the casual labour but there is perhaps slackness in enforcing them.
We hope and trust that such an unfortunate situation will not arise again and in the event any such allegation coming to the Court, obviously the Administration will have to be blamed.
The writ petitions are disposed of with the directions indicated above without any order for costs.
N.P.V. Petitions disposed of.
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% The petitioners, who were engaged on terms of casual labour for periods varying between 10 and 16 years in the Construction Department of the Signal Unit in the Northern Railway, filed writ petitions in this Court alleging that though they had put in continuous service for quite a long period, the Railway Administration the respondent, had not treated them as temporary servants and had applied discriminatory rates of wages, and prayed for a direction to treat them at par with maintenance workers, and to declare that they were entitled to equal pay for equal work and absorption in the regular cadre in The permanent category as per the circulars issued by the respondents.
The respondents in their counter affidavits contested the claim of the petitioners contending that out of the forty four petitioners, sixteen bad been empanelled, five of whom had been given temporary appointments, eleven had refused to join and seventeen had been given temporary status, and that by the Railway Board 's directions on January 1, 1984, project casual labourers were now entitled to all privileges that were applicable to open line temporary railway servants, that temporary status will first be given in the cadre of Khallasis and then promotion to skilled category, after conducting trade test, and that the employees in the open line acquired temporary status on completion of 120 days of service whereas such status was acquired by the casual labour in project work on completion of 360 days as formulated under orders of this Court.
Disposing of the writ petitions, ^ HELD: Casual labour seems to be the requirement of the Railway 139 administration and cannot be avoided.
The Railway Establishment A Manual has made provisions for their protection, but implementation is not effected.
Several instructions were issued by the Railway Board and the Northern Railway Headquarters to remove the difficulties faced by the casual labour but there is slackness in enforcing them.
This Court hopes and trusts that such an unfortunate situation will not arise again and in the event of any such allegation coming to the Court, the Administration will have to be blamed.
[144F G] No doubt, the petitioners have put in more than 360 days of service.
But keeping the prevailing practice, distinction between the casual labour employed in the open line, and in the project line cannot be obliterated.
[141D F] The Railway Administration should take prompt steps to screen such of the petitioners who have not yet been tested for the purpose of regularising their services.
[144C] The respondents are directed to consider the claims of the petitioners promptly and make appropriate orders for their regularisation.
[144D E] The petitioners are entitled to the same pay as is admissible to others, either in the project or in the open line.
Retiral benefit of pension is not admissible.[144D,B]
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5557.txt
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No. 118 of 1968.
Petition under article 32 of the Constitution of India for enforcement of the fundamental rights.
B. Datta, for the petitioner.
C.K. Daphtary, Attorney General, B.D. Sharma and R.H. Dhebar, for respondents Nos. 1 to 5.
The Judgment of the Court was delivered by Ramaswami, J.
In this case the petitioner has obtained a rule from tiffs Court asking the respondents to show cause why a writ in the nature of certiorari should not be issued under Art 32 of the Constitution for calling up and quashing the proceedings before the General Court Martial No. JAG 26/66 67/AA of 1965 from the Judge Advocate General (Army branch), Army Headquarters whereby the petitioner was found guilty of charges under section 304 and section 149 of the Indian Penal Code and sentenced to a period of 6 years rigorous imprisonment and cashiering.
Cause has been shown by the Attorney General on behalf of the Union of India and other respondents to whom notice of the rule was ordered to be given.
The petitioner was commissioned in the Indian Army in February, 1964 and was posted as Second Lt.
(E.C. 55461) and was attached to 397 Engineering Construction Equipment Company in December, 1964.
In August, 1965 the petitioner was posted as a Quarter Master and was transferred to Madras along with the Company.
It appears that Wednesday, September 1, 1965 was to be celebrated as the Raising Day of the Unit when Games and Sports, entertainment and Bara Khana (evening dinner) were to be arranged.
In this celebration, all officers and other ranks of the Unit had to take some part and a number of other Army officers were to be received and entertained on behalf of the Unit.
At the variety entertainment Punjabis and Garhwalis took part and each party was given free one bottle of rum.
But it is alleged that the Purbias were not given an opportunity to put up their show and were not given free a bottle of rum.
They were consequently aggrieved for this reason.
The variety entertainment concluded at about 1900 hours at the end of which rum was issued to the jawans.
The bara khana was to commence at 2000 hours.
As there was a delay in the assembly of the men at the dining hall, Maj.
Agarwal sent the petitioner to the lines to find out the cause for the delay and to get the men quickly.
The petitioner went to the lines and it is alleged that the accused used filthy language while addressing the men.
Some of the Purbias including the deceased Spr.
Bishwanath Singh protested 180 against the use of such language.
Though the petitioner expressed regret, the men were not satisfied.
A few of the Sikh jawans, including some of the accused, sided with the petitioner and there was a heated argument between the two groups on their way to the dining hall.
The bara khana was served in two sittings.
The petitioner did not join the first sitting but joined the second sitting which consisted of about 30 to 40 men.
The quarrel which started between the two groups earlier was continued in the dining hall.
The lights went off for a few minutes and when the lights came on, it was observed that a scuffle was going on in the middle of the hall between the petitioner and other Sikh jawans and the deceased.
As the scuffle progressed, the deceased was surrounded by petitioner No. 1 and the other accused persons and the group moved towards the service counter.
The lights went off for a second time.
In the darkness tables, benches and plates were hurled about.
Most of the men ran out of the dining hall.
It is alleged that accused No. 6 was seen stabbing with a knife Spr.
Bishwanath Singh and the latter slumped to the ground.
Accused No. 3 hit him with a soot rake.
When the lights came on after a few minutes, the petitioner and the other accused were found standing near the place where Spr.
Bishwanath Singh had fallen.
Consequently, Maj. Agarwal arrived at the scene and took Spr.
Bishwanath Singh to.
the MI room where he was found dead by Maj.
Koley, the Medical Officer.
It appears that on September 2, 1965 at about 0400 hours the matter was reported to the Civil Police by Second Lt. F.D.A. Jesudian.
A case under section 302, Indian Penal Code was registered as crime No. 726/1965 at Pallavaran Police Station, Madras.
Sri Bashyam, Inspector of Police reached the place of occurrence at 0430 hours on the same date.
He inspected the dining hall and seized certain exhibits produced by Maj. Agarwal.
He also held inquest on the deadbody of Spr.
Bishwanath Singh and sent the dead body for postmortem examination to.
the mortuary, Madras General Hospital through Police Constable No. 1407, Ratnam.
He sent the exhibits seized to the State Forensic Science Laboratory, Madras for chemical examination.
At 1330 hours on the same date Sri Bashyam stopped further investigations as Lt. Col. Bajpai wanted the case to be handled by the Military authorities.
On September 2, 1965, a Court of Enquiry_ under the provisions of Ch.
of the Army Rules was ordered by the Commander, Mysore and Kerala Sub Area.
After the Court of Inquiry had concluded the proceedings, a Court Martial was constituted by an order, dated August 11, 1966 by Major General.
S.J. Sathe, General Officer Commanding, Madras, Mysore and Kerala area to try the petitioner and other accused persons.
The Court Martial assembled on August 18, 1966 and conducted its proceedings on several subsequent dates.
In support of the case of the prosecu 181 tion 30 witnesses were examined.
At the Court Martial, the defended by an Advocate of the Madras High Court, petitioner was Sri Natarajan and he was also as by assisted a friend of the accused Major T.B. Narayanan.
At the trial the Counsel for the petitioner cross examined the witnesses for the prosecution and after the prosecution evidence was concluded, the petitioner said that he did not intend to call any defence witnesses.
The petitioner, how ever, submitted a written statement.
He was also put various questions by the Court Martial to which he replied.
After the Counsel for the defence was heard and after the Judge Advocate summed up the case, the Court Martial came to the finding that the petitioner was guilty of culpable homicide not amounting to murder and that he was a member of an unlawful assembly and the petitioner was sentenced to cashiering and 6 years rigorous imprisonment.
Against the decision of the Court Martial the petitioner field a petition under section 164 of the Army Act but the petition was dismissed by the confirming authority and the finding and sentence by the Court Martial was confirmed so far as the petitioner was concerned.
The petitioner thereafter filed an appeal under section 165 of the Army Act to the Central Government but the appeal was dismissed.
The first question to be considered in this case is whether the Court Martial had jurisdiction to try and convict the petitioner of the offences under sections 304 and 149, Indian Penal Code.
It was contended by Mr. Dutta on behalf of the petitioner that the Court Martial had no jurisdiction having regard to the mandatory provisions contained in section 125 of the Army Act and having also regard to the fact that Maj.
Agarwal had, in the first instance, decided to hand over the matter for investigations to the Civil Police.
In order to test whether this argument is valid it is necessary to scrutinize the provisions of the Army Act in some detail.
Section 2 of the (Act 46 of 1950), hereinafter called the ' ', describes the different categories of army personnel who are subject to the .
Section 3 (ii) defines a "civil offence" to mean "an offence which is triable by a criminal court"; section 3(vii) defines a "court martial" to mean "a court" to mean "a court of ordinary criminal justice in any part of India other that the state of Jammu and Kashmir" ; section 3(xvii) defines "offence" to mean "any act or omission punishable under this act and includes a civil offence"; and section 3 (xxv) declares that "all words and expressions used but not defined in this Act and defined in the Indian Penal Code shall be deemed to have the meanings assigned to them in that code.
" chapter is "Offences".
As we have already noticed, the word "offence" is defined to mean not only any act or omission punishable under the , but also a 182 civil offence.
Sections 34 to 68 define the offences against the Act triable by court martial and also indicate the punishments for the said offences.
Section 69 states as follows: "69.
Subject to the provisions of sect.ion 70, any person subject to this Act who at any place in or beyond India commits any civil offence shall be deemed to be guilty of an offence against this Act and, if charged therewith under this section, shall be liable to be tried by a court martial and, on conviction, be punishable as follows, that is to say, (a) if the offence is one which would be punishable under any law in force in India with death or with transportation, he shall be liable to suffer any punishment, other than whipping, assigned for the offence, by the aforesaid law and such less punishment as is in this Act mentioned; and (b) in any other case, he shall be liable to suffer any punishment, other than whipping, assigned for the offence by the law in force in India, or imprisonment for a term which may extend to seven years, or such less punishment as is in this Act mentioned.
" Section 70 provides: "A person subject to this Act who commits an offence of murder against a person not subject to military, naval or air force law, or of culpable homicide not amounting to murder against such a person or of rape in relation to such a person, shall not be deemed to be guilty of an offence against this Act and shall not be tried by a court martial, unless he commits any of the said offences (a) while on active service, or (b) at any place outside India, or (c) at a frontier post specified by the Central Government by notification in this behalf.
Explanation.
In this section and in section 69, "India" does not include the State of Jammu and Kashmir.
" Shortly stated , under this Chapter there are three categories of offences, namely, (1 ) offences committed by a person subject to the Act triable by a court martial in respect whereof specific punishments have been assigned; (2) civil offences committed by the said person at any place in or beyond India, but deemed to 183 be offences committed under the Act and, if charged under section 69 of the Act, triable by a court martial; and (3) offences of murder and culpable homicide not amounting to murder or rape committed by a person subject to the Act against a person not subject to the military law.
Subject to a few exceptions, they are not triable by court martial, but are triable only by ordinary criminal courts.
The legal position therefore is that when an offence is for the first time created by the , such as those created by sections 34, 35, 36, 37 etc., it would be exclusively triable by a court martial; but where a civil offence is also an offence under the Act or deemed to be an offence under the Act, both an ordinary criminal court as well as a court martial would have jurisdiction to try the person committing the offence.
Such a situation is visualized and provision is made for resolving the conflict under sections 125 and 126 of the which state: "125.
When a criminal court and a court martial have each jurisdiction in respect of an offence, it shall be in the discretion of the officer commanding the army, army corps, division or independent brigade in which the accused person is serving or such other officer as may be prescribed to decide before which court the proceedings shall be instituted, and, if that officer decides that they should be instituted before a court martial, to direct that the accused person shall be detained in military custody.
(1 ) When a criminal court having jurisdiction is of opinion that proceedings shall be instituted before itself in respect of any alleged offence, it may, by written notice, require the officer referred to in section 125 at his option, either to deliver over the offender to the nearest magistrate to be proceeded against according to law, or to postpone proceedings pending a reference to the Central Government.
(2) In every such case the said officer shall either deliver over the offender in compliance with the requisition or shall forthwith refer the question as to the court before which the proceedings are to be instituted for the determination of the Central Government, whose order upon such reference shall be final.
" Section 125 presupposes that in respect of an offence both a criminal court as well as a court martial have each concurrent jurisdiction.
Such a situation can arise in a case of an act or omission punishable both under the aS well as under any law in force in India.
It may also arise in the case of an offence deemed to be an offence under the .
Under the scheme of the two sections, in the first instance, it is left to the 184 discretion of the officer mentioned in section 125 to decide before which court the proceedings shall be instituted, and, if the officer decides that they should be instituted before a court martial, the accused person is to be detained in military custody; but if a criminal court is of opinion that the said offence shall be tried before itself, it may issue the requisite notice under section 126 either to deliver over the offender to the nearest magistrate or to postpone the proceedings pending a reference to the Central Government.
On receipt of the said requisition, the officer may either deliver .over the offender to the said court or refer the question of proper court for the determination of the Central Government whose order shall be final.
These two sections of the provide a satisfactory machinery to resolve the conflict of jurisdiction, having regard to the exigencies of the situation in any particular case.
In the present case, we are unable to accept the contention of the petitioner that merely because Maj. Agarwal had directed that the First Information Report should be lodged with the Civil Police through Second Lt. Jesudian, it means that the competent authority under section 125 of the had exercised its discretion and decided that the proceedings should be instituted before the criminal court.
The reason is that Maj. Agarwal was not the competent authority under section 125 of the to exercise the choice under that section.
The competent authority was the General Officer Commanding, Madras, Mysore and Kerala Area and that authority had decided on September 2, 1965 that the matter should be tried by a Court Martial and not by the Criminal Court.
On the same date, the General Officer Commanding, Madras, Mysore & Kerala Area had ordered the constitution of the Court Martial under Ch.
VI of the Army Rules to investigate into the case of the petitioner and the other accused persons.
There was admittedly No. direction by the Commander of that area to hand over the proceedings to the Criminal Court.
It is true that Maj.
Agarwal had directed a report to be lodged with the Civil Police at 4.00 a.m. on September 2, 1965.
It is also true that Sri Bashyam, Inspector of Police had inspected the place of occurrence, seized certain exhibits and held inquest of the deadbody of Spr.
Bishwanath Singh.
Sri Bashyam has admitted that he stopped investigations on the same date as directed by the military authorities.
Merely because Sri Bashyam conducted the inquest of the dead body of Spr.
Bishwanath Singh or because he seized certain exhibits and sent them to the State Forensic Science Laboratory, Madras for chemical examination, it cannot be reasonably argued that there was a decision of the competent military authority under section 125 of the for handing over the inquiry to the Criminal Court.
On the other hand, the action of the General Officer Commanding in constituting the Court of 185 Inquiry on September 2, 1965 indicates that there was a decision taken under section 125 of the that the proceedings should be instituted before the Court Martial.
The second branch of the argument of the petitioner is based upon section 549 of the Criminal Procedure Code which states: "(1) The Central Government may make rules consistent with this Code and the , the Naval Discipline Act and the Indian Navy (Discipline) Act, 1934, and the Air Force Act and any similar law for the time being in force as to the cases in which persons subject to military, naval or air force law, shall be tried by a Court to which this Code applies, or by Court martial, and when any person is brought before a Magistrate and charged with an offence for which he is liable, to be tried either by a Court to which this code applies or by a Court martial, such Magistrate shall have regard to such rules, and shall in proper cases deliver him, together with a statement of the offence of which he is accused, to the commanding officer of the regiment, corps, ship or detachment, to which he belongs, or to the commanding officer of the nearest military, naval or air force station, as the case may be, for the purpose of being tried by Court martial.
The Central Government has made rules in exercise of powers conferred on it under this section.
The Rules were published at p. 690 in section 3 of Part H of the Gazette of India, dated April 26, 1962, under Ministry of Home Affairs, S.R.O. 709, dated April 17, 1962.
Rules 3, 4, 5 and 8 are to the following effect: "3.
Where a person subject to military, naval or Air Force law is brought before a Magistrate and charged with an offence for which he is liable to be tried by a court martial, such Magistrate shall not proceed to try such person or to issue orders for his case to be referred to a Bench, or to inquire with a view to his commitment for trial by the Court of Sessions or the High Court for 'any offence friable by such Court, unless (a) he is of opinion, for reasons to be recorded, that he should so proceed without being moved thereto by competent military, naval or Air Force authority, or (b) he is moved thereto by such authority.
Before proceeding under clause (a) of rule 3 the Magistrate shall give written notice to the Com Sup C1/69 13 186 manding Officer of the accused and until the expiry of a period of seven days from the date of the service of such notice he shall not (a) convict or acquit the accused under sections 243, 245, 247 or 248 of the Code of Criminal Procedure, 1898 (V of 1898), or hear him in his defence under section 244 of the said Code; or (b) frame in writing a charge against the accused under section 254 of the said Code; or (c) make an order committing the accused for trial by the High Court or the Court of Sessions under section 213 of the said Code." "5.
Where within the period of seven days mentioned in rule 4, or at any time thereafter before the Magistrate has done any act or issued any order referred to in that rule, the Commanding Officer of the accused or competent military, naval or Air Force authority, as the case may be, gives notice to the Magistrate that in the opinion of such authority, the accused should be tried by a court martial, the Magistrate shall stay proceedings and if the accused is in his power or under his control, shall deliver him, with the statement prescribed in sub section (1) of section 549 of the said Code to the authority specified in the said sub section." "8.
Notwithstanding anything in the foregoing rules, where it comes to the notice of a Magistrate that a person subject to military, naval or Air Force law has committed an offence, proceedings in respect of which ought to be instituted before him and that the presence of such person cannot be procured unless through military, naval or Air Force authorities, the Magistrate may by a written notice require the Commanding Officer of such person either to deliver such person to a Magistrate to be named in the said notice for being proceeded against according to law, or to stay the proceedings against such person before the court martial, if since instituted, and to make a reference to the Central Government for determination as to the Court before which proceedings should be instituted.
" It was argued on behalf of the petitioner that there was no notice given by the Commanding Officer to the Magistrate under Rule 5 that the petitioner should be tried by a Court Martial and hence the criminal court alone had jurisdiction under Rule 3 to conduct proceedings against the petitioner for the offences charged.
In our opinion, the argument on behalf of the petitioner 187 is mis conceived.
The rules framed by the Central Government under section 549 of the Criminal Procedure Code apply to a case where the proceedings against the petitioner have already been instituted in an ordinary criminal court having jurisdiction to try the matter and not at a stage where such proceedings have not been instituted.
it is clear from the affidavits filed in the present case that the petitioner was not brought before the Magistrate and charged with the offences for which he was liable to be tried by the Court Martial within the meaning of Rule 3 and so the situation contemplated by Rule 5 has not arisen and the requirements of that rule are therefore not attracted.
It was pointed out by Mr. Dutta that after the First Information Report was lodged at Pallavaran police station a copy thereof should have been sent to the Magistrate.
But that does not mean that the petitioner "was brought before the Magistrate and charged with the offences" within the meaning of Rule 3.
It is manifest that Rule 3 ,only applies to a case where the police had completed investigation and the accused is brought before the Magistrate after submission of a charge sheet.
The provisions of this rule cannot be invoked in a case where the police had merely started investigation against a person subject to.
military, naval or air force law.
With regard to the holding of the inquest of the dead body of Spr.
Bishwanath Singh it was pointed out by the Attorney General that Regulation 527 of the Defence Services Regulations has itself provided that in cases of unnatural death that is death due to suicide, violence or under suspicious circumstances information should be given under section 174, Criminal Procedure Code to the Civil authorities, and the conduct of Maj. Agarwal in sending information to the Civil Police was merely in accordance with the provisions of this particular regulation.
For these reasons we hold that Counsel for the petitioner is unable to make good his argument on this aspect of the case.
We proceed to consider the next argument presented on behalf of the petitioner, namely, that even if the Military Court Martial had jurisdiction, it could not give a finding of guilt against the petitioner with regard to culpable homicide not amounting to murder unless the charge was .altered and amended in accordance with sub rule 2 of Rule 50 of the Army Rules, 1954.
It was also contended on behalf of the petitioner that the procedure contemplated by Rule 121(4) of the Army Rules was not followed by the Court Martial and the finding of the Court Martial must therefore be held to be defective.
In our opinion, there is no warrant or justification for this argument since rules 50(2) and 121 (4) have no application to the present case.
Rules 50 and 121 provide as follows: "50.
Amendment of charge. ( 1 ) At any time during the trial, if it appears to the court that there is 188 any mistake in the name or description of the accused in the charge sheet, the court may amend the chargesheet so as to correct that mistake.
(2) If, on the trial of any charge, it appears to the court at any time before it has begun to examine the witnesses, that in the interests of justice any addition to, commission from, or alteration in, the charge is required, it may report its opinion to the convening authority, and may adjourn, and the convening authority may either direct the new trial to be commenced, or amend the charge, and order the trial to proceed with such amended charge after due notice to the accused." "121.
Form and record of finding. (1) The finding on every charge upon which the accused is arraigned shall be recorded, and except as mentioned in these rules, such finding shall be recorded simply as a finding of "Guilty" or of "Not guilty".
(2) When the court is of opinion as regards any charge that the facts proved do not disclose the offence charged or any offence of which he might under the Act legally be found guilty on the charge as laid, the court shall acquit the accused of that charge.
(3) When the court is of opinion as regards any charge that the facts found to be proved in evidence differ materially from the facts alleged in the statement of particulars in the charge, but are nevertheless sufficient to prove the offence stated in the charge, and that the difference is not so material as to have prejudiced the accused in his defence, it may, instead of a finding of "Not guilty" record a special finding.
(4) The special finding may find the accused guilty on a charge subject to the statement of exceptions or variations specified therein.
(5) The court shall not find the accused guilty on more than one of two or more charges laid down in the alternative, even if conviction upon one charge necessarily connotes guilt upon the alternative charge or charges.
" In the present ease there was no necessity for amending the charge by the Court Martial under Rule 50(2) because that subrule only relates to an alteration of charge before the examination of witnesses.
The Court Martial has also not contravened the provisions of Rule 121 (4) because that sub rule is not attracted to the present ease.
On the contrary, the finding of the Court 189 Martial is justified in view of the language of section 139(6) of the which states : "139.
(6) A person .charged before a court martial with an offence punishable under section 69 may be found guilty of any other offence of which he might have been found guilty if the provisions of the Code of Criminal Procedure., 1898, were applicable.
" We accordingly reject the argument of learned Counsel for the petitioner on this part of the case.
Finally it was contended on behalf of the petitioner that the order of the Chief of the Army Staff confirming the proceedings of the Court Martial under section 164 of the was illegal since no reason has been given in support of the order by the Chief of the Army Staff.
It was also pointed out that the Central Government has also not given any reasons while dismissing the appeal of the petitioner under section 165 of the and that the order of the Central Government must therefore be held to be illegal and ultra vires and quashed by the. grant of a writ in the nature of certiorari.
In this context it is necessary to reproduce sections 164 and 165 of the which are to the following effect: "164.
(1) Any person subject to this Act who considers himself aggrieved by any order passed by any court martial may present a petition to the officer or authority empowered to confirm any finding or sentence of such court martial, and the confirming authority may take such steps as may be considered necessary to satisfy itself as to the correctness, legality or propriety of the order passed or as to the regularity of any proceeding to which the order relates.
(2) Any person subject to this Act who considers himself aggrieved by a finding or sentence of any court martial which has been confirmed, may present a petition to the Central Government, the Chief of the Army Staff or any prescribed officer superior in command to the one who confirmed such finding or sentence, and the Central Government, the Chief of the Army Staff or other officer, as the case may be, may pass such order thereon as it or he thinks fit." "165.
The Central Government, the Chief of the Army Staff or any prescribed officer may annul the proceedings of any court martial on the ground that they are illegal or unjust.
" In contrast to these sections, section 162 of the expressly provides that the Chief of the Army Staff "for reasons based on 190 the merits of the case" set aside the proceedings or reduce the sentence to any other sentence which the court might have passed.
Section 162 reads as follows: "The proceedings of every summary court martial shall without delay be forwarded to the officer commanding the division or brigade within which the trial was held, or to the prescribed officer; and such officer, or the Chief of the Army Staff, or any officer empowered in this behalf by the Chief of the Army Staff, may, for reasons based on the merits of the case, but not any merely technical grounds, set aside the proceedings or reduce the sentence to any other sentence which the court might have passed.
" It is necessary in this context to refer to Rules 61 and 62 of the Army Rules which prescribe the standard form of recording the opinion of the Court Martial on each charge and of announcement of that finding.
These rules omit all mention of the evidence or the reasoning by which the finding is reached by the Court Martial.
Rules 61 and 62 are to the following effect: 61.
Consideration of finding. (1) The court shall deliberate on its finding in closed court in the presence of the judge advocates.
(2) The opinion of each member of the court as to the finding shall be given by word of mouth on each charge separately.
Form, record and announcement of finding. (1) The finding on every charge upon which the accused is arraigned shall be recorded and, except as provided in these rules, shall be recorded simply as a finding of 'Guilty ' or of 'Not guilty '.
(10) The finding on each charge shall be announced forthwith in open court as subject to confirmation.
" In the present case it is manifest that there is no express obligation imposed by section 164 or by section 165 of the on the confirming authority or upon the Central Government to give reasons in support of its decision to confirm the proceedings of the Court Martial.
Mr. Dutta has been unable to point out any other section of the Act or any of the rule made therein from which necessary implication can be drawn that such a duty is cast upon the Central Government or upon the confirming authority.
Apart from any requirement imposed by the statute or statutory rule either expressly or by necessary implication, we are unable to accept the contention of Mr. Dutta that there is 191 any general principle or any rule of natural justice that a statutory tribunal should always and in every case give reasons in support of its decision.
In English law there is no general rule apart from the statutory requirement that the statutory tribunal should give reasons for its decision in every case.
In Rex vs Northumberland Compensation Appeal Tribunal(1) it was decided for.the first time by the Court of Appeal that if there was a "speaking order" a writ of certiorari could be granted to quash the decision of an inferior court or a statutory tribunal on the ground of error on the face of record.
In that case, Denning, L.J. pointed out that the record must at least contain the document which initiates the proceedings; the pleadings, if any; and the adjudication, but not the evidence, nor the reasons, unless the tribunal chooses to incorporate them in its decision.
It was observed that if the tribunal did state its reasons and those reasons were wrong in law, a writ of certiorari might be granted by the High Court for quashing the decision.
In that case the statutory tribunal under the National Health Service Act, 1946 had fortunately given a reasoned decision; in other words, made a 'speaking order ' and the High Court could hold that there was an error of law on the face of the record and a writ of certiorari may be granted for quashing it.
But the decision in this case led to an anomalous result, for it meant that the opportunity for certiorari depended on whether or not the statutory tribunal chose to give reasons for its decision; in other words, to make a 'speaking order '.
Not all tribunals, by any means, were prepared to do so, and a superior court had no power to compel them to give reasons except when the statute required it.
This incongruity was remedied by the Tribunals and Inquiries Act, 1958 (section 12), [6 & 7 Elizabeth 2 c. 66], which provides that on request a subordinate authority must supply to .a party genuinely interested the reasons for its decision.
Section 12 of the Act states that when a tribunal mentioned in the First Schedule of the Act gives a decision it must give a written or oral statement of the reasons for the decision, if requested to do so on or before the giving or notification of the decision.
The statement may be refused or the specification of reasons restricted on grounds of national security, and the tribunal may refuse to give the statement to a person not principally concerned with the decision if it thinks that to give it would be against the interests of any person primarily concerned.
Tribunals may also be exempted by the Lord Chancellor from the duty to give reasons but the Council on Tribunals must be consulted on any proposal to do so.
As already stated, there is no express obligation imposed in the present case either by section 164 or by section 165 of the Indian on the confirming (1) ; 192 authority or on the Central Government to give reasons for its decision.
We have also not been shown any other section of the Army.
Act or any other statutory rule from which the necessary implication can be drawn that such a duty is cast upon the Central Government or upon the confirming authority.
We, therefore, reject the argument of the petitioner that the order of the Chief of the Army Staff, dated May 26, 1967 confirming the finding of the Court Martial under section 164 of the or the order of the Central Government dismissing the appeal under section 165 of the are in any way defective in law.
For the reasons expressed we hold that the petitioner has made out no case for the grant of a writ under article 32 of the Constitution.
The application accordingly fails and is dismissed.
R.K.P.S. Petition dismissed.
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The petitioner, a Second Lieutenant in the army, was involved in a quarrel between two groups of soldiers on September 1, 1965 which led to an altercation and the stabbing and death of a soldier.
On September 2, 1965, the matter was reported to the Civil Police at the local police station.
The Inspector o.f Police inspected the place: of occurrence on the same day, seized certain exhibits produced by an Army Officer, held an inquest on the dead body of the deceased soldier and sent it for postmortem examination through a police constable.
Later on the same day, he stopped further investigation as the Army Officer incharge wanted the case to be handled by the Military authorities.
On September 2, 1965, a Court of Inquiry under the provisions of Ch.
VI of the Army Rules was ordered by the Commander for the area.
After the Court of Inquiry had concluded its proceedings, a Court Martial was constituted by an order dated August 11.
1966, by the General Officer Commanding for the area to try the petitioner and other accused persons.
The Court Martial came to the finding that the petitioner was guilty of culpable homicide not amounting to murder, and that he was a member of an unlawful assembly; it sentenced him to cashiering and six years rigorous imprisonment.
The petitioner filed a petition under section 164 of the Army Act, but this was dismissed by the confirming authority and the finding and sentence of the Court Material was confirmed.
The petitioner 's appeal under section 165 of the Army Act to the Central Government was also dismissed.
In the present petition under Article 32 of the Constitution, the petitioner sought a writ of certiorari to quash the proceedings of the Court MartiaL It was contended on his behalf (i) that the Court Martial had no jurisdiction to try and convict him of offences under sections 304 'and 149 I.P.C. having regard to the mandatory provisions of section 125 of the Army Act and having also regard to the fact that the Army Officer incharge had in the first instance decided to hand over the.
matter for investigation to the Civil Police; (ii) that no notice was given by the Commanding Officer to the Magistrate under Rule 5 of the Rules framed by the Central Government under section 549 of the Criminal Procedure Code, that the petitioner should be tried by a Court Martial; the Criminal Court alone 178 therefore had jurisdiction under Rule 3 to try the petitioner for the offence charged; (iii) that even if the Court Martial had jurisdiction, it could not give a finding of guilt against the petitioner with regard to culpable homicide not amounting to murder unless the charge was altered and amended in accordance with sub rule 2 of Rule 50 of the Army Rules, 1954; the procedure contemplated by Rule 121(4) 'of the Army Rules was not followed by the Court Martial and its finding must therefore be held to be defective; and (iv) that the orders of the Chief of the Army Staff confirming the proceedings of the Court Martial under section 164 of the Army Act and of the Central Government dismissing the petitioners appeal under section 165 were illegal since no reasons had been given in support of the decisions contained in them.
HELD: Dismissing the petition: (i) Merely because the First Information Report was lodged with the civil police on September 2 and the Inspector of Police inspected the place of occurrence, seized certain exhibits and held an inquest on the body of the deceased, it could not reasonably be said that there was a decision of the competent military authority under section 125 of the Army Act to hand over the inquiry to the criminal court.
On the other hand the action of the General Officer Commanding the area, who was the competent authority under section 125 constituting the Court of Inquiry on September 2, 1965 indicates that there was a decision taken under section 125 that the proceedings should be instituted before the Court Martial.
[184 H] (ii) Rule 3 of the Rules framed by the Central Government under section 549 Criminal P.C. only applies to a case where the police has completed the investigation and the accused is brought before the Magistrate after submission of a charage sheet.
The provisions of Rule 3 cannot be invoked in the present case where the police had merely started investigation against a person subject to military law.
The situation contemplated by Rule 5 had not arisen and the requirements of that rule were not attracted.
Furthermore, Regulation 527 of the Defence Services Regulations itself provides that in cases of unnatural death, information should be given under section 174 Criminal Procedure Code to the civil authorities.
The action of the Army Officer in sending information to the civil police was merely in accordance with the provisions of this particular Regulation.
[187 D] (iii) There Was no necessity for amending the charge by the Court Martial under Rule 50(2) because that sub rule only relates to an alteration of charge before the examination of witnesses.
The Court Martial had also not contravened the provisions of Rule 121(4) because that sub rule was not attracted in the present case.
On the contrary, the finding of the Court Martial was justified in view of the language of section 139(6) of the Army Act.
[188 H] (iv) There is no express obligation imposed by section 164 or by section 165 of the Army Act on the confirming authority or upon the Central Government to give reasons in support of its decision to confirm the proceedings of the Court Martial.
No other Section of the Act or any Rule had been shown from which a necessary implication could be drawn that such a duty is cast upon the Central Government or upon the confirming authority.
Furthermore, there was no force in the contention that there is any general principle or any rule of natural justice that a statutory tribunal should always and in every case give reasons in support of its decision.
[190 H; 192 A B] 179 Rex.
vs Northumberland Compensation Appeal Tribunal, ; , considered.
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2476.txt
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Appeal No. 782 of 1991.
From the Judgment and Order dated 10.7.1990 of the Bombay 484 High Court in Appeal No. 423 of 1987.
Ashok H. Desai, Vinay Tulzapurkar, Raghu Kothare and Rajiv Dutta for the Appeallant.
Soli J. Sorabjee, D.R. Poddar, Ms. Purnima, Atul Sharma, A.V.Palli, E.C.Agrawala and V.B.Joshi for the Respondents.
The Judgments of the Court was delivered by OJHA, J. Special leave granted.
This appeal by special leave has been preferred against the judgment dated 10th July, 1990 of the Bombay High Court in Appeal No. 423 of 1987.
Respondent No. I is a private limited company whereas Respondents 2 to 4 are its Directors.
Respondent No. 1, for setting up a factory, sought financial assistance from the appellant and the appellant sanctioned a loan of Rupees thirty lakhs.
In order to secure the loan Respondent No. 1 executed a deed of mortgage of certain properties on 29th June, 1979 and Respondents 2 to 4 on the same date by executing a deed of guarantee stood surety for repayment of the said loan.
It was a case of personal guarantee only as no property was given in security.
For the sake of brevity the appellant, Respondent No. I and Respondents 2 to 4 shall hereinafter be referred to as the Corporation, the Company and the sureties respectively.
The amount of loan was to be advanced in phases and after the Corporation had advanced a part of the total sanctioned loan, the Company did not want to avail of the balance of the amount as it seems to have lost interest in setting up the factory for reasons with which we are not concerned.
The Corporation consequently called upon the Company to repay the amount already advanced together with interest and on its failure to do so took possession under Section 29 of the (for short the Act) over the industrial concern, a term defined under Section 2(c) of the Act and took steps to realise its outstanding dues by transfer of property in the manner provided therein.
However, notwithstanding advertisement for sale thereof having been made on several occasions the Corporation could not get an offer of more than about Rupees five lakhs.
Having failed to recover the amount due to it in the manner stated above, the Corporation proceeded to recover the same from the sureties whose liability was coextensive and for this purpose it filed a petition in the High Court under Sections 31 and 32 of the Act arraying 485 the Company as Respondent No. I and the sureties as Resondents 2 to 4, with the prayer that "the respondents be jointly and severally ordered and decreed to pay the petitioners the sum of Rs 15,87,391.20 as per particulars hereto annexed and marked exhibit H. with further interest at the rates of 14 1/2% per annum till payment and may further "be ordered to pay to the petitioners costs of the petition".
Thus, according to the relief claimed in the petition the liability of the respondents with regard to the amount payable to the Corporation on the date of making of the petition was for a sum which was more than Rupees fifty thousand which, as will be presently shown, represents maximum amount over which the Bombay City Civil Court has pecuniary jurisdiction.
The respondents contested the petition and raised three pleas in defence: (1) A petition under Sections 31 and 32 of the Act could be filed only in the Bombay City Civil Court and the High Court had no jurisdiction to entertain it, (2) the relief claimed in the petition could not be granted under Sections 31 and 32 of the Act inasmuch as these sections did not contemplate passing of a money decree not only against the principal debtor but also against the sureties; and (3) the provisions in the Act relating to enforcement of the liability of a surety were ultra vires Article 14 of the Constitution.
The learned Single Judge of the High Court before whom the petition came up for hearing did not, in view of his finding on the first two pleas, entertain any argument on the last plea nor has the said plea been raised before us and as such the same does not need to be gone into.
As regards the second plea it was conceded before the learned Single Judge on behalf of the Corporation by its learned counsel that no such money decree could be passed against the Company as was claimed in the petition.
It was, however, asserted that such a decree could be passed as against the sureties.
In this view of the matter the petition was treated and decided as being confined against the sureties only.
In regard to the plea of jurisdiction the learned Single Judge took the view that since an appeal was pending before a Division Bench of the High Court against the judgment of a Single Judge in Misc Petition No. 357 of 1985, Maharashtra State Financial Corporation vs Hindtex Engineers Pvt. Ltd., decided on 3rd December, 1986 (since reported in , in which it had been held that such a petition was maintainable in the High Court, he would proceed to decide the petition on merits on the assumption that he had jurisdiction to entertain it.
On merits, he took the view that no money decree could be passed in a petition under Sections 31 and 32 of the Act 486 even against the sureties and since in the instant case sureties had admittedly not given any security except their personal guarantee the said surety could be enforced only in the ordinary course and not under the special machinery provided under the Act.
The petition was accordingly dismissed.
Aggrieved by the judgment of the learned Single Judge the Corporation preferred an appeal before a Division Bench which has been dismissed by the judgment under appeal.
The Division Bench not only upheld the finding of the Single Judge on merits but also over ruled the decision reported in and held that the High Court had no jurisdiction to entertain a petition under Sections 31 and 32 of the Act.
Shri Ashok Desai, Senior Advocate appearing for the Appellant Corporation has assailed the findings of the High Court in the judgment under appeal both on merits and on the plea about jurisdiction.
Shri Soli J. Sorabjee, Senior Advocate appearing for the respondents has in reply asserted that the findings of the High Court on both the pleas were unassailable.
An application for intervention being I.A. No. 3 of 1990 has been made on behalf of Nav Bharat Udyog, a partnernship firm having its office at Mehta Building, 2nd Floor, 47, Nagindas Marg, Bombay, confined to the plea with regard to jurisdiction and it has been urged by learned counsel for the intervenor also, in line with the submission made by learned counsel for the respondents, that it is only the Bombay City Civil Court and not the High Court which has jurisdiction to entertain a petition under sections 31 and 32 of the Act.
For the sake of facility in considering the respective submissions made by learned counsel for the parties we find it useful to refer to the statutory provisions relevant in this behalf.
Section 2 of the Bombay City Civil Court Act, 1948 contains definitions and inter alia provides: "2.
In this Act unless there is anything repugnant in the subject or context, (1) "City Court" means the Court established under Section 3; (2) "High Court" means the High Court of Judicature at Bombay" 487 Section 3 in its turn provides: "3.
The State Government may by notification in the Official Gazette, establish for the Greater Bombay a court, to be called the Bombay city Civil Court.
Notwithstanding anything contained in any law, such court shall have jurisdiction to receive, try and dispose of all suits and other proceedings of a civil nature not exceeding fifty thousand rupees in value, and arising within the Greater Bombay, except suits or proceedings which are cognizable (a) by the High Court as a Court of Admiralty or Vice Admiralty or as a Colonial Court of Admiralty, or as a Court having testamentary, intestate or matrimonial jurisdiction, or (b) by the High Court for the relief of insolvent debtors, or (c) by the High Court under any special law other than the Letters Patent; or (d) by the Small Cause Court: Provided that the State Government may, from time to time, after consultation with the High Court, by a like notification extend the jurisdiction of the City Court to any suits or proceedings which are cognizable by the High Court as a court having testamentary or intestate jurisdiction or for the relief of insolvent debtor.
" The other Section which is relevant is Section 12 which reads: "12.
Notwithstanding anything contained in any law, the High Court shall not have jurisdiction to try suits and proceedings cognizable by the City Court; Provided that the High Court may, for any special reason, and at any stage remove for trial by itself any suit or proceeding from the City Court.
" As regards Sections 31 and 32 of the , since the submissions made by learned counsel for the 488 parties referred to most of the provisions contained therein these two Sections may be quoted in their entirety.
They read: "31.
(1) Where an industrial concern, in breach of any agreement makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation or where the Financial Corporation requires an industrial concern to make immediate repayment of any loan or advance under section 30 and the industrial concern fails to make such repayment, then, without prejudice to the provisions of section 29 of this Act and of section 69 of the any officer of the Financial Corporation, generally or specifically authorised by the Board in this behalf, may apply to the district judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs, namely: (a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as security for the loan or advance; or (aa) for enforcing the liability of any surety; or (b) for transferring the management of the industrial concern to the Financial Corporation; or (c) for an ad interim injunction restraining the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board, where such removal is apprehended.
(2) An application under sub section (1) shall state the nature and extent of the liability of the industrial concern to the Financial Corporation, the ground on which it is made and such other particulars as may be prescribed.
(1) When the application is for the reliefs mentioned in clauses (a) and (c) of sub section (1) of section 31, the 489 district judge shall pass an ad interim order attaching the security, or so much of the property of the industrial concern as would on being sold realise in his estimate an amount equivalent in value to the outstanding liability of the industrial concern to the Financial Corporation, together with the costs of the proceedings taken under section 31, with or without an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment.
(IA) When the application is for the relief mentioned in clause (aa) of sub section (1) of section 31, the district judge shall issue a notice calling upon the surety to show cause on a date to be specified in the notice why his liability should not be enforced.
(2) When the application is for the relief mentioned in clause (b) of sub section (1) of section 31, the district judge shall grant an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment and issue a notice calling upon the industrial concern to show cause, on a date to be specified in the notice, why the management of the industrial concern should not be transferred to the Financial Corporation.
(3) Before passing any order under sub section I) or sub section (2) or issuing a notice under sub section (IA), the district judge may, if he thinks fit, examine the officer making the application.
(4) At the same time as he passes an order under sub section (1), the district judge shall issue to the industrial concern or to the owner of the security attached a notice accompanied by copies of the order, the application and the evidence, if any, recorded by him calling upon it or him to show cause on a date to be specified in the notice why the ad interim order of attachment should not be made absolute or the injunction confirmed.
(4A) If no cause is shown on or before the date specified in the notice under sub section (IA), the district judge shall forthwith order the enforcement of the liability of the surety.
490 (5) If no cause is shown on or before the date specified in the notice under sub sections (2) and (4), the district judge shall forthwith make the ad interim order absolute and direct the sale of the attached property or transfer the management of the industrial concern to the Financial Corporation or confirm the injunction.
(6) If cause is shown, the district judge shall proceed to investigate the claim of the Financial Corporation in accordance with the provisions contained in the Code of Civil Procedure, 1908, in so far as such provisions may be applied thereto.
(7) After making an investigation under sub section (6), the district judge may (a) confirm the order of attachment and direct the sale of the attached property; (b) vary the order of attachment so as to release a portion of the property from attachment and direct the sale of the remainder of the attached property; (c) release the property from attachment; (d) confirm or dissolve the injunction; (da) direct the enforcement of the liability of the surety or reject the claim made in this behalf, or (e) transfer the management of the industrial concern to the Financial Corporation or reject the claim made in this behalf; Provided that when making an order under clause (c) or making an order rejecting the claim to enforce the liability of the surety under clause (da) or making an order rejecting the claim to transfer the management of the industrial concern to the Financial Corporation under clause (e), the district judge may make such further orders as he thinks necessary to protect the interests of the Financial Corporation and may apportion the costs of the proceedings in such manner as he thinks fit: 491 Provided further that unless the Financial Corporation intimates to the district judge that it will not appeal against any order releasing any property from attachment or rejecting the claim to enforce the liability of the surety or rejecting the claim to transfer the industrial concern to the Financial Corporation, such order shall not be given effect to, until the expiry of the period fixed under sub section (9) within which an appeal may be preferred or, if an appeal is preferred, unless the High Court otherwise directs until the appeal is disposed of.
(8) An order of attachment or sale of property under this section shall be carried into effect as far as practicable in the manner provided in the Code of Civil Procedure, 1908 for the attachment or sale of property in execution of a decree as if the Financial Corporation were the decree holder.
(8A) An order under this section transferring the management of an industrial concern to the Financial Corporation shall be carried into effect, as far as may be practicable, in the manner provided in the Code of Civil Procedure, 1908, for the possession of immovable property or the delivery of immovable property in execution of a decree, as if the Financial Corporation were the decree holder.
(9) Any party aggrieved by an order under sub section (4A), sub section (5) or sub section (7) may, within thirty days from, the date of the order, appeal to the High Court, and upon such appeal the High Court may, after hearing the parties, pass such orders thereon as it thinks proper.
(10) Where proceedings for liquidation in respect of an industrial concern have commenced before an application is made under sub section (1) of section 31, nothing in this section shall be construed as giving to the Financial Corporation any preference over the other creditors of the industrial concern not conferred on it by any other law.
(11) The functions of a district judge under this section shall be exercisable 492 (a) in a presidency town, where there is a City Civil Court having jurisdiction, by a judge of that court and in the absence of such court, by the High Court; and b) elsewhere, also by an additional district judge or by any judge of the principal court of civil jurisdiction.
(12) For the removal of doubts it is hereby declared that any court competent to grant an ad interim injunction under this section shall also have the power to appoint a Receiver and to exercise all the court powers incidental thereto.
At this place it may be pointed out that with regard to the enforcement of the liability of a surety it was held by a Full Bench of the Allahabad High Court in Munnalal Gupta vs Uttar Pradesh Financial Corporation and Another, A.I.R. 1975 Allahabad 416 that from the scheme of the Act it is clear that the speedy remedy contained in Section 31 is available not against the surety but against the borrower only.
In arriving at this conclusion reference was made inter alia to the reliefs (a), (b) and (c) contained in sub section (1) of Section 31 and to sub section (4) of Section 32 of the Act as it then stood.
It was pointed out that this sub section (4) contemplated a notice to the borrower industrial concern after an interim order had been passed to show cause why the ad interim injunction should not be made absolute but did not contemplate a notice to the surety and that it would be unthinkable that the Legislature intended that the property of the surety may be attached and put to sale without even a notice to him.
It appears that in order to meet the difficulty in enforcing the liability of a surety as pointed out in the case of Munnalal Gupta (supra) Parliament found it necessary to make specific provisions in this behalf and passed the State Financial Corporations (Amendment) Act, 1985 (hereinafter referred to as Act 43 of 1985).
Among other amendments made by Act 43 of 1985 were the following: (i) In sub section (1) of Section 31 clause (aa) was inserted.
(ii) In Section 32 a new sub section (lA) and in sub section (3) thereof the words "or issuing a notice under sub section (lA)" were inserted.
493 (iii) Sub section (4) of Section 32 was substituted with an inclusion of sub section (4A).
(iv) The word "or" occurring at the end of clause (d) of sub section (7) was omitted and a new clause (da) was inserted.
(v) In the first proviso after sub section (7) the words "or making an order rejecting the claim to enforce the liability of the surety under clause (da) or making an order rejecting the claim to transfer the management of the industrial concern to the Financial Corporation under clause (e)" and in the second provis1on the words "or rejecting the claim to enforce the liability of the surety or rejecting the claim to transfer the industrial concern to the Financial Corporation" were inserted and in sub section (9) the words "under sub section (4A), sub section (5)" were substituted for "under sub section (5)" By the same Act 43 of 1985 a new Section 32G was inserted which reads: "32G.
Where any amount is due to the Financial Corporation in respect of any accommodation granted by it to any industrial concern, the Financial Corporation or any person authorised by it in writing in this behalf, may, without prejudice to any other mode of recovery, make an application to the State Government for the recovery of the amount due to it, and if the State Government or such authority, as that Government may specify in this behalf, is satisfied, after following such procedure as may be prescribed, that any amount is so due, it may issue a certificate for that amount to the Collector, and the Collector shall proceed to recover that amount in the same manner as an arrear of land revenue.
" Having extracted the relevant statutory provisions we now take up the question of jurisdiction.
Sub section (1) of Section 31 of the Act contemplates making of the petition thereunder "to the district judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business".
A petition so made is to be decided in the manner provided by Section 32 of the Act, subsection (11) whereof inter alia provides that the functions of a district judge under the said Section shall be exercisable, in a Presidency town, where there is a City Civil Court having jurisdiction, by a judge 494 of the court and in the absence of such court, by the High Court.
It has been urged by learned counsel for the appellant that in a case to which the provisions contained in sub section (1) of Section 32 of the Act and of the Bombay City Civil Court apply, if the extent of the liability sought to be enforced against a surety is upto Rupees fifty thousand a petition under Section 31 read with Section 32 of the Act would lie before the Bombay City Civil Court and if the liability is more than the said amount it would lie before the High Court.
This, according to him is apparent from the use of the words "having jurisdiction" in sub section (11) of Section 32 of the Act and the extent of the pecuniary jurisdiction of the Bombay City Civil Court as contained in Section 3 of the Bombay City Civil Court Act.
According to him since in the instant case the liability sought to be enforced against the sureties was for a sum of more than Rupees fifty thousand the petition made by the appellant was maintainable in the High Court alone and not in the Bombay City Civil Court.
On the other hand, it has been urged on behalf of the respondents and the intervenor by their learned counsel that word "jurisdiction" used in sub section (1) of Section 31 and sub section (11) of Section 32 of the Act connotes territorial jurisdiction alone and that the concept of pecuniary jurisdiction is beyond the scope of Sections 31 and 32 in view of the decision of this Court in Gujarat State Financial Corporation vs Natson Manufacturing Co. Pvt. Ltd. and Ors., relied on in M/s. Everest Industrial Corporation and Ors.
vs Gujarat State Financial Corporation, [ ; and Maganlal vs M/s. Jaiswal Industries, Neemach and Ors., [ ; which lays down that an application under Section 31(1) of the Act is neither a plaint as contemplated by Article I of Schedule I nor an application in the nature of a plaint as contemplated by Article 7 of the Court Fees Act, 1870, that the special procedure contained in Section 3 1(1) was not even something akin to a suit of a mortgagee to recover mortgage money by sale of mortgaged property, that even if the Corporation applicant so chooses it cannot pray for a preliminary decree for accounts or final decree for payment of money nor can it seek any personal liability, that the Corporation cannot pray for a decree of its outstanding dues, that the reliefs contemplated by Section 31(1) on being granted do not result in a money decree or decree for recovery of outstanding loans or advance, that a substantive relief in an application under Section 31(1) is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree and that such relief cannot be valued in terms of the monetary gain or prevention of monetary loss.
495 Having given our anxious consideration to the question we are inclined to agree with the submission made by learned counsel for the appellant.
The three decisions of this Court referred to above and relied on by learned counsel for the respondents were not cases relating to the enforcement of a liability of a surety made possible by the amendments by Act 43 of 1985.
In our opinion, what has been laid down therein does not in any way militate against ascertaining in monetary terms value or the extent of the liability of a surety, which is sought to be enforced and there is intrinsic evidence in Sections 31 and 32 themselves to support this view.
Sub section (2) of Section 31 makes it obligatory to state the "extent of the liability (1) of Section 32 refers to "an amount equivalent in value to the outstanding liability".
Sub section (lA) of Section 32 contemplates notice to the surety to show cause "why his liability" should not be enforced.
Sub section (6) of Section 32 contemplates investigation and determination of "the claim" of the Financial Corporation which is to be recovered.
If the application under Section 3 1(1) is made before the district judge, there is no difficulty because he has unlimited pecuniary jurisdiction.
The difficulty arises, as in the instant case, when such application is to be made either before the city Civil Court or the High Court as contemplated by sub section (11) of Section 32.
In our opinion, the extent of the liability stated in the application as contemplated by sub section (2) of Section 31 of the Act would represent the value of the claim of the Corporation and if such value is upto Rupees fifty thousand the application would lie in the City Civil Court and if it is more than that amount it would lie in the High Court.
This interpretation would give meaning and relevance to the words "having jurisdiction" used in sub section (11) of Section 32.
A different interpretation would render superfluous or otiose not only the words "having jurisdiction" but also the words"and in the absence of such court, by the High Court" occurring in the said sub section (11) inasmuch as in a Presidency town, in terms of territorial jurisdiction, the jurisdiction of the City Civil Court and of the High Court is co terminus.
That it is so is clear from Section 3 of the Bombay city Civil Court Act and the definition of the term "Presidency town" contained in Section 3(44) of the according to which "Presidency town" shall mean the local limits for the time being of the ordinary original civil jurisdiction of the High Court of Judicature at Calcutta, Madras or Bombay, as the case may be.
It is a settled rule of interpretation of statutes that if the language and words used are plain and unambiguous, full effect must be given to them as they stand and in the garb of finding out the intention of the 496 Legislature no words should be added thereto or subtracted there from.
Likewise, it is again a settled rule of interpretation that statutory provisions should be construed in a manner which subserves the purpose of the enactment and does not defeat it and that no part thereof is rendered surplus or otiose.
The aforesaid interpretation of sub section (II) of Section 32 of the Act is not only in conformity with the rule of interpretation referred to above, it also does not militate in any way with the concept of an application under Section 31(1) of the Act, not being a plaint in a suit for recovery of money.
Reliance in this behalf has been placed by learned counsel for the intervenor on a decision of the Delhi High Court in Parkash Playing Cards Manufacturing Company vs Delhi Financial Corporation, In our opinion, however, the said decision is of little assistance in resolving the plea of jurisdiction raised in the instant case, namely, whether in a Presidency town an application under Section 31(1) of the Act is to be made before a City Civil Court or High Court.
In the case of Parkash Cards Manufacturing Company (supra), the provision which came up for consideration in the forefront was Section 5 of the and the question of jurisdiction was largely considered on that basis.
Sub section (11) of Section 32 with pointed reference to the jurisdiction exercisable by a City Civil Court in a Presidency town and the High Court did not fall for consideration in that case.
The case which throws some light on the point is a decision of the Calcutta Court Court in West Bengal Financial Corporation vs Gluco Series Private Limited, where it was held: "Section 32 sub section (1 1) does not say that the City Civil Court will have exclusive jurisdiction but states "in the Presidency Town where there is City Civil Court having jurisdiction, by a Judge of that Court and in the absence of such Court by the High Court.
" The words "in the absence of such Court" mean in the absence of such Court having jurisdiction in the matter.
The City Civil Court has no jurisdiction to entertain and try suits and proceedings of Civil nature exceeding Rs.50,000 in value.
Here the value of the claims in the proceedings exceeds much more than Rs.50,000 and, therefore, under Section 32, sub section (11) this proceeding has been duly instituted in the High Court.
497 In the instant case the extent of the liability of the surety being more than Rupees fifty thousand, the application could only have been filed and was rightly filed in the High Court and the finding in the judgment under appeal to the contrary for holding that the High Court had no jurisdiction to entertain the application cannot be sustained.
Now we come to the second plea raised on behalf of the respondents, namely, that the relief claimed in the petition could not be granted under Sections 31 and 32 of the Act inasmuch as these sections did not contemplate passing of a money decree not only against the principal debtor but also against the sureties.
In so far as the special machinery provided under Sections 31 and 32 of the Act being applied to a surety who has given some property in security, it has been pointed out by learned counsel for the appellant that even before the amendment introduced in these sections by Act 43 of 1985 a Division Bench of the Kerala High Court had, in Thressiamma Varghese vs K. section F. Corporation, AIR 1986 Kerala 222, taken the view that the provisions contained in these sections would be applicable.
According to teamed counsel, in any view of the matter, after the amendment of these sections by Act 43 of 1985 introducing specific provisions for enforcement of the liability of a surety, the matter is now beyond doubt that the procedure contained in these sections shall be applicable for the enforcement of the liability of such surety who has given some property in security.
According to him even in the judgment under appeal the High Court has accepted this proposition and has expressed its reservation with regard to enforcement of the liability of a surety who has not given any property in security and has given only a personal guarantee.
Reference in this connection has been made to the following observations in the judgment under appeal: "Even if the Corporation s now entitled to obtain relief also against any property which might have been given a security by the surety, the further question would remain whether the Corporation is entitled under Section 31(l)(aa) to obtain any relief personally against such a surety.
" Indeed, the submission even before us which was made by learned counsel for the appellant has been that the only effect of the 1985 amendment is that it enables proceedings to be taken for the realisation of the security given by the surety in respect of his own 498 liability whereas such proceedings could not be taken before the amendment.
He, however, asserted that the Act even after the amendment does not enable a monetary decree to be passed against the surety any more than a decree can be passed against the principal debtor.
According to him, in this view of the matter, in the instant case, the liability of the sureties could not be enforced under Sections 31 and 32 of the Act in as much as they had given only personal guarantee and had not given any property in security.
In the background of the rules of interpretation of statutes adverted to earlier and the specific provisions with regard to enforcement of the liability of a surety introduced in Sections 31 and 32 of the Act by Act 43 of 1985 we find it difficult to agree with the submission made by learned counsel for the respondents.
It is true, as has been indicated above, that this Court has in the case of Gujarat State Financial Corporation (supra) taken the view that Sections 31 and 32 of the Act do not contemplate the passing of a money decree and the principle laid down in that case has been relied on in two later decisions referred to above.
The said principle would, in our opinion, not come in the way of enforcing the liability under Sections 31 and 32 of the Act even against the surety who has given only a personal guarantee.
As indicated earlier those were not cases dealing with the question of enforcement of the liability of such a surety and naturally, therefore, the provisions in this behalf specifically introduced in Sections 31 and 32 of the Act by Act 43 of 1985 were not considered in those cases.
However, in this connection what is of significance is that clause (aa) inserted in sub section (1) of Section 31 of the Act by Act 43 of 1985 uses the words "any surety".
On its plain grammatical meaning there can be no doubt that the term "any surety" will include not only a surety who has given some security but also one who has given only a personal guarantee.
If the submission made by learned counsel for the respondents is accepted the words "who has given property by way of security" will have to be added after the words "any surety".
Such a course not only militates against the normal rule of interpretation but also tends to defeat the very purpose of the amendment introduced by Act 43 of 1985 enabling the Financial Corporation to make an application under Section 31(1) of the Act "for enforcing the liability of any surety", inasmuch as it would have the effect of restricting or qualifying the amplitude of the term "any surety" which the Legislature has in its wisdom thought it fit to use in its widest sense.
The procedure, in our opinion, for enforcing the liability of a surety who has given only a personal guarantee would, after the amendment introduced by Act 43 of 1985, be that an application under Section 31(1) shall lie for enforc 499 ing the liability of such surety as contemplated by clause (aa) of the said section.
On such an application being made notice shall be issued to the surety as contemplated by sub section (1A) of Section 32.
This may, in view of sub section (3), be done after examining the officer making the application.
If no cause is shown in pursuance of the notice served on him by the surety sub section (4A) of Section 32 contemplates passing of an order forthwith for the enforcement of the liability of surety.
If, on the other hand, cause is shown the claim of the Financial Corporation shall be determined as contemplated by sub section (6) of Section 32 and thereafter a direction as contemplated by clause (da) of sub section (7) shall be issued for the enforcement of the liability of the surety or rejecting the claim made in this behalf.
In the case of Maganlal (supra) which related to the relief contemplated by clause (a) of Section 31(1) of the Act it was pointed out that the purpose of enacting Sections 31 and 32 of the Act was apparently to provide for a speedy remedy for recovery of the dues of the Financial Corporation and that these sections had the effect of cutting across and dispensing with the provisions of the Code of Civil Procedure, 1908 (hereinafter referred to as the Code) from the stage of filing a suit to the stage of obtaining a decree in execution whereof such properties as are referred to in clause (a) of sub section (1) of Section 31 could be sold.
In our opinion, on the same principle, even in a case where the relief claimed in the application under Section 31(1) of the Act is for enforcing the liability of a surety who has given only a personal guarantee, sub section (4A) of Section 32 where no cause is shown and clause (da) of sub section (7) where cause is shown contemplate cutting across and dispensing with the provisions of the Code from the stage of filing a suit to the stage of obtaining a decree against the surety, the passing of an order which can straightaway be executed as if it were a decree against the surety which may be passed in the event of a suit being filed.
As seen above, sub section (2) of Section 31 enjoins upon the Financial Corporation to state the "extent of the liability of the industrial concern" in the application to be made under sub section (1) thereof.
Since the liability of the surety is co extensive the same shall, in the absence of anything contrary in the surety bond, be the liability of the surety also.
In a case where there is any provision confining the liability of the surety, the extent of the liability to be shown in the application shall be such as is in conformity with the surety bond.
When no cause is shown by the surety on being served with the show cause notice the order which will be passed under sub section (4A) of Section 32 would be for the enforcement against the surety of that liability which is stated in the application.
Where, however, cause has been shown by the surety the extent of his liability shall be determined 500 as contemplated in sub section (6) of Section 32 and it is the liability so determined which shall be enforced under clause (da) of sub section (7) of Section 32.
It does not require any elucidation that the extent of the liability referred to above will necessarily have to be in the very nature of things in terms of monetary value even though it may not be possible to call it a decree stricto sensu defined in Section 2(2) of the Code for recovery of money.
Here, Section 46B of the Act may be usefully extracted: "46B.
The provision of this Act and of any rule or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of association of industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern.
On its plain language, in the absence of anything inconsistent in the Act, the provisions of the Code shall obviously be applicable for the enforcement of the liability of the surety directed to be enforced as aforesaid in the same manner as a decree is enforced in a suit instituted in this behalf.
It is true, as has been emphasised by learned counsel for the respondents, that there is no provision corresponding to sub section (8) of Section 32 for the enforcement of the liability of a surety who has given only personal guarantee but, in our opinion, keeping in view the amendments introduced by Act 43 of 1985, it is not very significant.
To us it appears that in view of Section 46B of the Act and for the reasons to be stated shortly even if Section 46B was not there, in the absence of any provision to the contrary in the Act, that order also, which was passed in a case where relief contemplated by clause (a) of Section 31(1) of the Act was claimed, could have been enforced in the manner provided in the Code.
The purpose of yet inserting sub section (8) in Section 32 seems to be that it was not intended to apply the provisions of execution of a decree for attachment or sale of property as contained in the Code in its entirety and to achieve this purpose the words "as far as practicable" were used in that sub section.
To us it appears that in the absence of any provision such as sub section (8) of Section 32 applying the manner provided in the Code for the execution of a decree against a surety only "as far as practicable" the entire provision contained in this behalf in the Code 501 shall be applicable.
this would be so in view of the use of the expression "any other law for the time being applicable to an industrial concern".
That the Code is applicable to an industrial concern also is not in dispute and cannot be doubted.
We may now state our reasons for holding that even if Section 46B of the Act was not there the provisions of the Code for the execution of a decree against a surety who had given only personal guarantee would, in the absence of any provision to the contrary in the Act, be applicable.
In view of the decision of this Court in The Central Taikies Ltd. Kanpur vs Dwarka Prasad, ; , where it was held that a persona designata is a person selected as an individual in his private capacity, and not in his capacity as filling a particular character or office, since the term used in Section 31(1) of the Act is "district judge" it cannot be doubted that the district judge is not a persona designata but a court of ordinary civil jurisdiction while exercising jurisdiction under Sections 31 and 32 of the Act.
In National Sewing Thread Co. Ltd. vs James Chadwick & Bros. Ltd., ; while repelling the objection that an appeal under the Letters Patent against the judgment of a Single Judge passed in an appeal against the decision of the Registrar under Section 76(1) of the was not maintainable it was held at pages 1033 34 of the Report: "Obviously after the appeal had reached the High Court it has to be determined according to the rules of practice and procedure of that Court and in accordance with the provisions of the charter under which that court is constituted and which confers on it power in respect to the method and manner of exercising that jurisdiction.
The rule is well settled that when a statute directs that an appeal shall lie to a Court already established, then that appeal must be regulated by the practice and procedure of that Court.
This rule was very succinctly stated by Viscount Haldane L.C. in National Telephone Co. Ltd. vs Postmaster General, in these terms: "When a question is stated to referred to an established Court without more, it, in my opinion, imports that the ordinary incidents of the procedure of that Court are to attach, and also that any general right of appeal from its decision likewise attaches.
" 502 The same view was expressed by their Lordships of the Privy Council in R.M.A.R.A. Adaikappa Chettiar vs Ra.
Chandrasekhara Thevar, wherein it was said: "Where a legal right is in dispute and the ordinary Courts of the country are seized of such dispute the Courts are governed by the ordinary rules of procedure applicable thereto and an appeal lies if authorised by such rules, notwithstanding that the legal right claimed arises under a special statute which does not, in terms confer a right of appeal." Again in Secretary of State for India vs Chellikani Rama Rao, when dealing with the case under the Madras Forest Act their Lordships observed as follows: "It was contended on behalf of the appellant that all further proceedings in Courts in India or by way of appeal were incompetent, these being excluded by the terms of the statute just quoted.
In their Lordships ' opinion this objection is not well founded.
Their view is that when proceedings of this character reach the District Court, that Court is appealed to as one of the ordinary Courts of the country, with regard to whose procedure, orders, and decrees the ordinary rules of the Civil Procedure Code apply." Though the facts of the cases laying down the above rule were not exactly similar to the facts of the present case, the principle enunciated therein is one of general application and has an apposite application to the facts and circumstances of the present case.
Section 76 of the confers a right of appeal to the High Court and says nothing more about it.
That being so, the High Court being seized as such of the appellate jurisdiction conferred by section 76 it has to exercise that jurisdiction in the same manner as it exercises its other appellate jurisdiction and when such jurisdiction is exercised by a single Judge, his judgment becomes subject to appeal under clause 15 of the Letters Patent there being nothing to the contrary in the .
And it is in view of this decision that we are of the opinion that the provisions of the Code would have, even in the absence of Section 503 46B of the Act, been attracted in the matter of enforcing the liability of a surety.
In view of the foregoing discussion, the finding of the High Court even on this point cannot be sustained.
Since, however, the High Court has not made a determination of the liability of the sureties as contemplated by sub section (6) of Section 32 of the Act, the matter has to be sent back to it for doing so and thereafter to pass an order as contemplated by clause (da) of sub section (7) of Section 32 of the Act and to proceed to enforce the liability so determined an against the sureties.
In the result, this appeal succeeds and is allowed with costs and the judgment of the Division Bench and also of the Single Judge of the High Court are set aside.
The High Court shall now decide the application made by the appellant in accordance with law and in the light of the observations made above.
S.C. AGRAWAL, J. Special leave granted.
In this appeal two questions arise for consideration: 1) whether a petition under sections 31 and 32 of the (hereinafter referred to as 'the Act ') can be filed only in the Bombay Civil City Court and the Bombay High Court, on its original side, has no jurisdiction to entertain it? and 2) whether in such a petition, a decree/order can be passed directing payment of money by respondents nos.
2 to 4 who stood surety for repayment of the loan advanced by the appellant, Financial Corporation to respondent No. 1? The Division Bench of the Bombay High Court has answered both these questions against the appellant.
My learned brother Ojha, J. has disagreed with this view of the Bombay High Court on both the questions.
He has held that as the extent of the liability of the surety is more than Rupees fifty thousand the application could only have been filed and was rightly filed in the High Court which had the jurisdiction to entertain it.
He has also held that in view of the amendments introduced in the Act by the Amending Act 43 of 1985, an order for payment of money can be passed against the surety who has given only a personal guarantee.
While I am fully in agreement with the decision of my learned brother on the first question with regard to the jurisdiction of the Bombay High Court to entertain the petition filed by the appellant, I have not been able to persuade myself to agree with the view taken by him on the second question.
Section 31 of the Act has been described in the marginal note as special provisions for enforcement of claims by the Financial Corpora 504 tion.
It deals with a situation where an industrial concern, in breach of any agreement, makes any default in repayment of any loan or advance or any instalment thereof or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation or where the Financial Corporation requires an industrial concern to make immediate repayment of any loan or advance under section 30 of the Act and the industrial concern fails to make such repayment.
It enables an officer of the Financial Corporation, generally or specially authorised by the Board in this behalf, to apply to the District Judge within the limits of whose jurisdiction the Industrial concern carries on the whole or a substantial part of its business for one or more of the following reliefs: (a) for an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation as security for the loan or advance; or (aa) for enforcing the liability of any surety; or (b) for transferring the management of the industrial concern to the Financial Corporation; or (c) for an ad interim injunction restraining the industrial concern from transferring or removing its machinery or plant or equipment from the premises of the industrial concern without the permission of the Board, where such removal is apprehended.
Clause (aa) was inserted in sub section (1) of section 31 by section 19 of Act 43 of 1985.
Section 32 of the Act prescribes the procedure to be followed by the District Judge in respect of applications under section 31 of the Act.
Prior to the amendments introduced in it by Act 43 of 1985, the said section read as under: "32.
Procedure of district judge in respect of applications under Section 31.
(1) When the application is for the reliefs mentioned in clauses (a) and (c) of sub section (1) of section 31, the district judge shall pass an ad interim order attaching the security, or so much of the property of the industrial concern as would on being sold realise in his estimate an amount equivalent in value to the outstanding 505 liability of the industrial concern to the Financial Corporation, together with the costs of the poceedings taken under section 31, with or without an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment.
(2) When the application is for the relief mentioned in clause (b) of sub section (1) of section 31, the district judge shall grant an ad interim injunction restraining the industrial concern from transferring or removing its machinery, plant or equipment and issue a notice calling upon the industrial concern to show cause, on a date to be specified in the notice, why the management of the industrial concern should not be transferred to the Financial Corporation.
(3) Before passing any order under sub section (1) or sub section (2) the district judge may, if he thinks fit, examine the officer making the application.
(4) At the same time as he passes an order under sub section (1), the district judge shall issue to the industrial concern a notice accompanied by copies of the order, the application and the evidence, if any, recorded by him calling upon it to show cause on a date to be specified in the notice why the ad interim order of attachment should not be made absolute or the injunction confirmed.
(5) If no cause is shown on or before the date specified in the notice under sub sections (2) and (4), the district judge shall forthwith make the ad interim order absolute and direct the sale of the attached property or transfer the management of the industrial concern to the Financial Corporation or confirm the injunction.
(6) If cause is shown, the district judge shall proceed to investigate the claim of the Financial Corporation in accordance with the provisions contained in the Code of Civil procedure, 1908, in so far as such provisions may be applied thereto.
(7) After making an investigation under sub section (6), the district judge may 506 (a) confirm the order of attachment and direct the sale of the attached property: (b) Vary the order of attachment so as to release a portion of the property from attachment and direct the sale of the remainder of the attached property; (c) release the property from attachment; (d) confirm or dissolve the injunction; or (e) transfer the management of the industrial concern to the Financial Corporation or reject the claim made in this behalf: Provided that when making an order under clause (c) the district judge may make such further orders as he thinks necessary to protect the interests of the Financial Corporation and may apportion the costs of the proceedings in such manner as he thinks fit: Provided further that unless the Financial Corporation intimates to the district judge that it will not appeal against any order releasing any property from attachment, such order shall not be given effect to, untill the expiry of the period fixed under sub section (9) within which an appeal may be preferred or, if an appeal is preferred, unless the High Court otherwise directs until the appeal is disposed of.
(8) An order of attachment or sale of property under this section shall be carried into effect as far as practicable in the manner provided in the Code of Civil Procedure, 1908 for the attachment or sale of property in execution of a decree, as if the Financial Corporation were the decree holder.
(8A) An order under this section transferring the management of an industrial concern to the Financial Corporation shall be carried into effect, as far as may be practicable, in the manner provided in the Code of Civil Procedure, 1908, for the possession of immovable property of the delivery of movable property in execution of a decree, as if the Financial Corporation were the decree holder.
507 (9) Any party aggrieved by an order under sub section (5) or sub section (7) may, within thirty days from the date of the order, appeal to the High Court, and upon such appeal the High Court may, after hearing the parties, pass such orders thereon as it thinks proper.
(10) Where proceedings for liquidation in respect of an industrial concern have commenced before an application is made under sub section (1) of section 31, nothing in this section shall be construed as giving to the Financial Corporation any preference over the other creditors of the industrial concern not conferred on it by any other law.
(11) The functions of a district judge under this section shall be exercisable (a) in a presidency town, where there is a city civil court having jurisdiction, by a judge of that court and in the absence of such court, by the High Court; and (b) elsewhere, also by an additional district judge or by any judge of the principal court of civil jurisdiction.
(12) For the removal of doubts it is hereby declared that any court competent to grant an ad interim injunction under this section shall also have the power to appoint a Receiver and to exercise all the other powers incidental thereto.
" By Act 43 of 1985, the following amendments have been introduced in section 32 of the Act: (1) Sub section (1A) which reads as under was inserted: "(1A) When the application is for the relief mentioned in clause (aa) of sub section (1) of section 31, the district judge shall issue a notice calling upon the surety to show cause on a date to be specified in the notice why his liability should not be enforced." (2) In sub section (3), the words, or issuing a notice under sub section (1A) "were inserted after the words" "or sub section (2)".
508 (3) Subsection (4) was substituted by sub sections (4) and (4A), which read as under: "(4) At the same time as he passes an order under subsection (1), the district judge shall issue to the industrial concern or to the owner of the security attached a notice accompanied by copies of the order, the application and the evidence, if any, recorded by him calling upon it or him to show cause on a date to be specified in the notice why the ad interim order of attachment should not be made absolute or the injunction confirmed.
(4A) If no cause is shown on or before the date specified in the notice under sub section (1A), the district judge shall forthwith order the enforcement of the liability of the surety.
(4) In sub section (7), clause (da) was inserted which provides as under: "(da) direct the enforcement of the liability of the surety or reject the claim made in this behalf; or" (5) In the first proviso to sub section (7), the words "or making an order rejecting the claim to enforce the liability of the surety under clause (da) or making an order rejecting the claim to transfer the management of the industrial concern to the Financial Corporation under clause (e)" were inserted after the words "order under clause (c)".
(6) In the second proviso to sub section (7), the following words were inserted after words "any property from attachment": or rejecting the claim to enforce the liability of the surety or rejecting the claim to transfer the industrial concern to the Financial Corporation." (7) In sub section (9), for the words "sub section (5)", the words "under sub section (4A), sub section (5)" were substituted.
In order to find an answer to the second question, it is necessary to construe the words "for enforcing the liability of any surety" which were introduced by way of clause (aa) in sub section (1) of section 31 509 by the Act 43 of 1985, and also find mention in sub sections (IA), (4A) and (7) of section 32.
The learned counsel for the appellant has urged that the said words are wide in their amplitude and would cover a case where the surety has given a personal guarantee only and his liability is purely monetary.
The learned counsel for the sureties, viz., respondents Nos. 2, 3 and 4, has, on the other hand, submitted that the said words must be construed in a more limited sense to cover only those cases where surety has given security of property to guarantee the repayment of loan and in such an event the remedy provided by sections 31 and 32 of the Act can be invoked against the surety and that the said provisions do not enable passing of an order for payment of a monetary sum against the surety who has given personal guarantee only.
In order to deal with these rival contentions, it would be of relevance to take note of the state of law existing on the date of the enactment of Act 43 of 1985 whereby amendments were introduced in sections 31 and 32 of the Act.
The provisions contained in sections 31 and 32 of the Act came up for consideration before this Court in Gujarat State Financial Corporation vs M/s Natson Manufacturing Co. (P) Ltd. & Ors., ; That case related to payment of court fee on an application submitted under section 31(1) of the Act and the question for consideration was whether such an application should be treated on par with a suit by a mortgagee to enforce the mortgage debt by sale of the mortgaged property which is being treated as a money suit failing within the purview of Article 1 of Schedule I to the Bombay Court Fees Act, 1959 or it should bear a fixed court fee under the residuary Article 1(c) to Schedule II of the said Act.
This Court disagreeing withthe view of the Gujarat High Court, held that an application under section 31(1) of the Act would be covered by the residuary Article 1(c) of Schedule II to the said Act and it should bear a fixed court fee.
In this context, this Court has examined the nature of the proceedings contemplated by section 31(1) of the Act.
After referring to the provisions of the Act, this Court has held that "it would be inappropriate to say that an application under section 31(1) is something akin to a suit by a mortgagee to recover mortgage money by sale of mortgaged property" and that "in an application under section 31(1), the Corporation does not and cannot pray for a decree for its outstanding dues" and that none of the three reliefs mentioned in sub section (1) of section 31, if granted, "results in a money decree or decree for recovery of outstanding loans or advance" (pages 378 379).
After referring to the provisions contained in sub section (6) of section 32, which provides for investigation of the claim of the Financial Corporation in 510 accordance with the provisions contained in the code of Civil Procedure, 1908, this Court has laid down: "The claim of the Corporation is not the monetary claim to be investigated though it may become necessary to specify the figure for the purpose of determining how much of the security should be sold.
But the investigation of the claim does not involve all the contentions that can be raised in a suit.
The claim of the Corporation is that there is a breach of agreement or default in making repayment of loan or advance or instalment thereof and, therefore, the mortgaged property should be sold.
It is not a money claim.
The contest can be that the jurisdictional fact which enables the Corporation to seek the relief of sale of property is not available to it or no case is made out for transfer of management of the industrial concern.
" (p.381) This Court has further emphasised that sub section (7) of section 32 "prescribes what reliefs can be given after investigation under subsection (6) is made, and it clearly gives a clue to the nature of contest under sub section (6)" and further that sub section (8) of section 32 . 'only prescribes the mode and method of executing the order of attachment or sale of property as provided in the Code of Civil Procedure".
According to this Court, "the provision contained in sub section (6) does not expand the contest in the application under section 31(1) as to render the application to be a suit between a mortgagee and the mortgagor for sale of mortgaged property" (p.381).
This Court has held that "the substantive relief in an application under section 31(1) is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree" (p.382).
In Everest Industrial Corporation & Ors.
vs Gujarat State Financial Corporation, this Court was examining the question whether the rate of interest on the amount payable under an order passed under section 32 of the Act from the date said order is governed by section 34 of the Code of Civil Procedure, 1908 or whether it is payable at the contractual rate.
This Court held that section 34 CPC was not applicable to these proceedings.
After referring to the earlier decision in Gujarat State Financial Corporation vs M/s Natson Manufacturing Co. (P) Ltd. & Ors. case (supra), this Court has reiterated that the proceedings instituted under section 31(1) of the Act is something akin to an application for attachment of property in execution of a decree at a stage posterior 511 to the passing of the decree and, therefore, no question of passing any order under section 34 CPC would arise since section 34 CPC would be applicable only at the stage of the passing of the decree and not to a stage posterior to the passing of the decree.
In Maganlal etc.
vs Jaiswal Industries Neemach & Ors., , after referring to the decisions mentioned above, this Court has observed: "In view of these two decisions, the law seems to be settled that an application under section 31(1) of the Act cannot be put on par to a suit for enforcement of a mortgage nor the order passed thereon under section 32 of the Act be put on par as if it was an order in a suit between a mortgagee and the mortgagor for sale of mortgaged property.
On the other hand the substantive relief in an application section 31(1) is something akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree." (p.710) The question whether the provisions of sections 31 and 32 of the Act could be invoked against the property of the surety came up for consideration before a full bench of the Allahabad High Court in Munnalal Gupta vs Uttar Pradesh Financial Corporation & Anr., AIR 1975 ALL 416.
In that case, the surety had mortgaged his house by way of collateral security for the loan granted to the borrower industrial concern and the Financial Corporation had moved an application under section 31 of the Act for sale of the property of the surety which had been mortgaged as well as the property of the principal debtor which had been mortgaged and the question was whether an order for sale of the property of the surety could be passed on an application under section 31( 1) of the Act.
It was held that the relief which can be granted by a District Judge under section 32 of the Act must be confined against the borrower industrial concern and its property and that the District Judge can pass an ad interim order attaching the security or so much of the property of the industrial concern as would be sufficient in his opinion to satisfy the outstanding liability.
It was laid down that the order of attachment is restricted to the property of industrial concern given to the Corporation by way of surety and he is not empowered to attach the property of a person other than an industrial concern.
According to the said decision, a surety, who is not a partner or otherwise interested in the industrial concern, cannot be proceeded against under section 31 so that his property, even if mortgaged with the Corporation, cannot be attached 512 by the District Judge.
In this context, the teamed Judges pointed out the sub section (4) of section 32 contemplates a notice to the borrower industrial concern after an interim order has been passed to show cause why the ad interim injunction should not be made absolute and the said provision does not contemplate a notice to the surety and that it would be unthinkable that the legislature intended that the property of the surety may be attached and put to sale without even a notice to him.
The amendments introduced in sections 31 and 32 by Act 43 of 1985 seek to remove the lacunae in those provisions as pointed out in the aforesaid judgment of the Allahabad High Court and with that end in view clause (aa) has been inserted in sub section (1) of section 31 whereby a Financial Corporation can move an application under section 31(1) for enforcing the liability of any surety and amendments have been made in section 32 to prescribe the procedure for grant of the said relief on such application.
Express provision has been made in sub section (1A) of section 32 for issuing a notice to the surety requiring him to show cause why his liability should not be enforced.
It is argued on behalf of the appellant that the words "for enforcing the liability of any surety" are wide in their amplitude to cover the monetary liability of a surety who has given personal guarantee only and has not given his property as security for repayment of the loan by the borrower industrial concern, though it is not disputed that in so far as the borrower industrial concern is concerned, the amendments introduced in sections 31 and 32 by Act 43 of 1985 do not alter the existing law and no order in the nature of a money decree can be passed against him in these proceedings.
It is, however, urged that in so far as the surety is concerned the position is different and in view of the amendments introduced in sections 31 and 32, an order in the nature of a money decree can be passed against the surety who has given personal guarantee only and has not given security of his property for repayment of the loan.
This argument implies that as a result of the amendments introduced in sections 31 and 32 by Act 43 of 1985 while the nature of the proceedings as against the borrower industrial concern remains unchanged and the said proceedings continue to be proceedings akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree, the nature of these poceedings has been changed in so far as the surety is concerned and they have become proceedings in which an order in the nature of a money decree can be passed.
In other words, in a case where the borrower industrial concern has obtained a loan from the Financial Corporation without furnishing the security of property on the basis of 513 a personal guarantee given by the surety, the Financial Corporation will have to proceed against the borrower industrial concern by instituting a regular suit for recovery of the dues whereas it can proceed against the surety under sections 31 and 32 of the Act.
It means that as compared to the principal debtor the Financial Corporation vis a vis the surety has been placed on a more advantageous Position.
It may, however, be mentioned that under the common law, which finds re enactment in section 128 of the , the liability of the surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract.
It means that the liability must be proved against the surety in the same way as against the principal debtor.
Thus under the general law the surety stands on the same footing as the principal debtor.
These submissions raise the question: can the legislature be attributed the intention to alter the existing law so as to bring about a change in the nature of proceedings under sections 31 and 32 of the Act and also to alter the general law relating to the enforcement of the liability of the surety? I find it difficult to answer this question in the affirmative.
In the matter of interpretation of statutes, a principle which is well recognised in England is: "it is thought to be in the highest degree improbable that Parliament would depart from the general system of law without expressing its intention with irresistible clearness, and to give any such effect to general words merely because this would be their widest, usual, natural or literal meaning would be to place on them a construction other than that which Parliament must be supposed to have intended." (See: Mexwell on The Interpretation of Statutes, 12th Edition, p. 116).
In Minet vs Leman, [1955] (20) Eeav.
Sir John Romilly, M.R. stated as a principle of construction, which could not be disputed, that "the general words of the Act are not to be so construed as to alter the previous policy of the law, unless no sense or meaning can be applied to those words consistently with the intention of preserving the existing policy untouched".
In this context, it would be of relevance to take note of the decision of this court in M.K.Ranganathan & Anr.
vs Government of Madras & Ors.
, ; In that case this Court was required to construe the words "or any sale held without leave of the Court of any of the properties of the Company" which were added in section 232 (1) of the Indian Companies Act, 1913 by Act 22 of 1936.
the said amendment was introduced with a view to get over the decision of the Allahabad High Court in Kayastha Training and Banking Corporation Ltd vs Sat Narain Singh, All. 433.
The question was whether the words which had been added refer only to sales held through the intervention of the 514 court or whether they included the sales effected by the secured creditors outside the winding up and without the intervention of the court.
This Court held that the said words referred only to sales held through the intervention of the Court and that the amendments whereby these words were introduced were not intended to bring within the sweep of the general words "sales effected by the secured creditors outside the winding up".
In order to arrive at this conclusion, this Court placed reliance on the principle of interpretation referred to above and it was observed: "If the construction sought to be put upon the words "or any sale held without leave of the Court of any of the properties" by the Appellants were accepted it would effect a fundamental alteration in the law as it stood before the amendment was inserted in section 232 by Act XXII of 1936.
Whereas before the amendment the secured creditor stood outside the winding up and could if the mortgage deed so provided, realise his security without the intervention of the Court by effecting a sale either by private treaty or by public auction, no such sale could be effected by him after the amendment and that was certainly a fundamental alteration in the law which could not be effected unless one found words used which pointed unmistakably to that conclusion or unless such intention was expressed with irresistible clearness.
Having regard to the circumstances under which the amendment was inserted in section 232 by Act XXII of 1936 and also having regard to the context we are not prepared to hold that the Legislature in inserting that amendment intended to effect a fundamental alteration in law with irresistible clearness.
Such a great and sudden change of policy could not be attributed to the Legislature and it would be legitimate therefore to adopt the narrower interpretation of those words of the amendment rather than an interpretation which would have the contrary effect." (p. 388) In my opinion, regard must be had of this principle of interpretation while construing the expression "for enforcing the liability of any surety" which has been inserted by way of clause (aa) in sub section (1) of section 31 by Act 43 of 1985.
Considering the amendments introduced in sections 31 and 32 of the Act by Act 43 of 1985 and having regard to the principle of interpretation referred to above I do not find any provision in the said amendments which may indicate that 515 Parliament has evinced an intention to effect a fundamental alteration in the law with irresistible clearness.
In this context, it would be of relevance to note that while introducing the said amendments Parliament has chosen not to make any alteration in relation to the following matters: (1) In the marginal note, section 31 is described as `special provisions for enforcement of claims by Financial Corporation '.
No alteration has been made therein by Act 43 of 1985 and section 31 continues to be a special provision for enforcement of claims by Financial Corporation.
(2) Parliament has not expressly indicated that an order for payment of money only may be passed against the surety.
(3) Although in sub sections (8) and (8A) of section 32, express provision has been made prescribing the procedure for carrying into effect an order of attachment and sale of property and an order transferring the management of an industrial concern to the Financial Corporation passed under sub section (7) of section 32, no specific provision was made prescribing the procedure for carrying into effect of an order passed under clause (da) of sub section (7) of section 32 directing the enforcement of the liability of the surety.
It cannot be comprehended that while making a provision which would enable passing of an order in the nature of a money decree against a surety on an application under section 31 of the Act, Parliament would have refrained from making a corresponding provision prescribing the procedure for carrying into effect of such an order.
Having regard to the features referred to above, it appears to be more in consonance with the scheme of the Act and the object underlying sections 31 and 32 that by introducing the amendments in sections 31 and 32 of the Act, Parliament intended to place the surety on the same footing as the principal debtor in the matter of enforcement of the claims of the Financial Corporation so as to enable the Financial Corporation to obtain relief against the properties of the principal debtor as well as the surety.
If considered in this perspective, the expression "enforcing the liability of any surety" in clause (aa) of section 31(1) would mean enforcing the liability of a surety in the same manner as the liability of principal debtor is enforced, i.e., by attachment and sale of property keeping in view that the proceedings under sections 31 and 32 of the Act are akin to an application for attachment of property in execution of a decree at a stage posterior to the passing 516 of the decree.
This construction would obviate the need for a procedure for carrying into effect of the order passed under clause (da) of sub section (7) of section 32 of the Act because such an order would be an order for attachment and sale of the property of the surety and it can be carried into effect in accordance with sub section (8) of section 32 which prescribes the procedure for carrying into effect an order for attachment and sale of property.
This construction will also preserve the special nature of the proceedings under section 31 and would not result in bringing about a fundamental alteration in the law laid down by this Court with regard to the nature of these proceedings as well as the general law whereunder a surety is to be treated on par with the principal debtor.
For the reasons aforesaid, I am in agreement with the view of the Division Bench of the High Court on this question and I am unable to concur with the decision of my learned brother Ojha, J. I would, therefore, uphold the decision of the Division Bench of the High Court that the petition whereby the appellant had sought the relief of a money decree for payment of Rs. 15,87,391.20 paise against respondents 2 to 4 was not maintainable and the said relief could not be granted to the appellant in proceedings under section 31 of the Act.
As a result, the petition filed by the appellant must be dismissed and for the same reason this appeal also must fail.
R. N. J. Appeal allowed.
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Respondent No. 1 a Private Limited Company, was sanctioned a loan of Rs.30 lakh by the Appellant Corporation for the setting up of a factory.
To secure this loan a mortgage deed of certain properties was executed by the Company and Respondents 2 to 4 as its directors had executed a personal Surety Bond without any security for its repayment.
After obtaining a part of the sanctioned loan, which was to be given in phases, the Company became disinterested in availing of the balance amount.
Consequently the Corporation demanded back the amount ahead taken together with interest and on the company 's failure to do so, it took over the Industrial Concern under section 29 of the Act and initiated steps to realise its dues by putting the property to sale.
Having failed to recover the amount as no adequate offer was forthcoming despite repeated advertisements, it filed a petition before the Bombay High Court under sections 31 and 32 of the Act both against the Company as well as its directors sureties praying for a decree in the sum of Rs. 15,87,391.20 to be passed against them jointly and severally.
The respondents contested the petition contending (a) that a petition under sections 31 and 32 of the Act could be filed only before the City Civil Court and the High Court had no jurisdiction to entertain it, (b) that no money decree can be passed under sections 31 and 32 of the Act, and (c) that the provision in the Act relating to enforcement of the 481 liablity of surety were ultra vires of Article 149 of the Constitution.
The learned single judge relying on an earlier decision of the Bombay High Court reported in 1987 Mah.
L.J 243 held that the High Court had to entertain the petition but on merits took the view that no money decree could be passed under sections 31 and 32 even against the sureties and since in the instant case the sureties had not given any security except their personal guarantee, the same could be enforced only in the ordinary course and not under the special machinery provided under the Act.
In view of his findings on the first two pleas no arguments were entertained on the last plea and accordingly the petition was dismissed.
The Division Bench while dismissing the appeal not only upheld the finding of the single Judge on merits but also overruled the decision reported in and held that the High Court had no jurisdiction to entertain a petition under sections 31 and 32 of the Act.
The Corporation came up in appeal before this court by special leave against this decision of the High Court of Bombay.
The impugned judgement was assailed by the Appellant Corporation both on merites and on the plea of juridiction.
The respondents in reply asserted that the findings of the High Court on both pleas were unassailable.
Allowing the appeal, by a majority decision, HELD: A.
By the Full Court (i)The extent of the liability stated in the application as contemplated by sub section (2) of section 31 of the Act would represent the value of the claim of the Corporation and if since value is upto Rupees Fifty Thousand, the application would lie in the City City Court and if it is more than that amount it would lie in the High Court.
This interpretation would give meaning and relevance to the words "having jurisdiction" used in sub section (11) of section 32.
A different interpretation would render superfluous or otiose not only the words "having jurisdiction" but also the words and in the absence such court, by the High Court, occurring in the said sub section (11) inasmuch as in a Presidency town, in terms of territorial jurisdiction, the jurisdiction of the City Civil Court and of the High Court is co terminus [495D F] (ii) In the instant case the extent of liability of the surety being more than Rupees fifty thousand, the application could only have been filed and was rightly filed in the High Court and the finding in the 482 judgment under appeal to the contrary for holding that the High Court had no jurisdiction to entertain the application cannot be sustained.
[497A] B. Per N.
D. Ojha, J. for himself and Ranganathan, J. (iii) There can be no doubt that the term, "any surety" used in clause (aa) in sub section (1) of section 31 of the Act, will include not only a surety who has given some security but also one who has given only a personal guarantee.
In our opinion, in a case where the relief claimed in the application under section 31(1) of the Act is for enforcing the liability of a surety who has given only a personal guarantee, sub section 4(A) of section 32 where no cause is shown and clause (da) of sub section (7) where cause is shown, contemplate cutting across and dispensing with the provisions of the Code of Civil Procedure from the stage of filing a suit to the stage of obtaining a decree against the surety, the passing of an order which can straightaway be executed as if it were a decree against the surety which may be passed in the event of suit being filed.
[498F, 499E] (iv) In the absence of any provision such as sub section (8) of section 32 of the Act applying the manner provided in the Code for the execution of a decree against a surety only "as far as practicable" the entire provision contained in this behalf in the Code shall be applicable.
This would be so in view of the use of the expression "any other law for the time being applicable to an industrial concern" used in section 46B of the Act.
That the Code is applicable to an industrial concern also is not in dispute and cannot be doubted.
[50OH 501A] (v) Even in the absence of section 46B of the Act the provisions of the Code would have been attracted in the matter of enforcing the liability of a surety in view of the decision of this Court in National Sewing Thread Co. Ltd. vs James Chadwick & Bros. Ltd., ; inasmuch as the District Judge while exercising jurisdiction under sections 31 and 32 of the Act is not a persona designate but a court of ordinary civil jurisdiction.
[501B D] (Per section C. Agrawal, J. Dissenting.) It cannot be comprehended that while making provision which would enable passing of an order in the nature of a money decree against a surety on an application under section 31 of the Act, Parliament would have refrained from making a corresponding provision prescribing the procedure for carrying into effect such an order.
It 483 appears to be more in consonance with the scheme of the Act and the object underlying sections 31 and 32 that by introducing the amendments in sections 31 and 32 of the Act the Parliament intended to place the surety on the same footing as the principal debtor so as to enable the Financial Corporation to obtain relief against the properties of the principal debtor as well as the surety [515E G] If considered in this perspective, the expression "enforcing the liability of any surety" in clause (aa) of section 31(1) would mean enforcing the liability of a surety in the same manner as the liability of principal debtor is enforced, by attachment and sale of property keeping in view that the proceedings under sections 31 and 32 of the Act are akin to an application for attachment of property in execution of a decree at a stage posterior to the passing of the decree.
The relief of a money decree sought against the sureties respondents 2 to 4 was not maintainable and the said relief could not be granted to the appellant in proceedings under section 31 of the Act.
As a result, the petition filed by the appellant must be dismissed and for the same reason this appeal must fail.
[515G 516A, 516D E] Munnalal Gupta vs Uttar Pradesh Financial Corporation & Anr.
,A.I.R. 1975 Allahabad 416; Thressiamma Varghese vs K. section F. Corporation, A.I.R. 1986 Kerala 222; Maharashtra State Financial Corporation vs Hindtex Engineers Pvt. Ltd., ; Kayastha Training & Banking Corporation Ltd vs Sat Narain Singh, All. 433; M. K. Ranganathan & Anr.
vs Government of Madras & Ors.
,[1955] 2 S.C.R. 374; The Central Talkies Ltd., Kanpur vs Dwarka Prasad, ; , referred to.
Maganlal V. MIS.
Jaiswal Industries, Neemach & Ors., ; ; M/s. Everest Industrial Corporation & Ors.
vs Gujarat State Financial Corporation, [1987] 3S.C.C. 597; Parkash Playing Cards Manufacturing Co. vs Delhi Financial Corporation, ; Gujarat State Financial Corporation V. Natson Manufacturing Co. Pvt. Ltd. & Ors., , distinguished.
West Bengal Financial Corporation vs Gluco Series Pvt. Ltd.
,A.I.R. , approved.
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6677.txt
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Civil Appeal Nos.
2242 2247 of 1972.
Appeals by special leave from the Judgment and Order dated 1 12 1971 of the Kerala High Court in Income Tax Ref.
No. 29/70, 30/70, 71, 92, 97 and 98/69.
P. A. Francis, G. A. Shah and Miss A. Subhashini for the Appellant.
section T. Desai, Mrs. section Vaidyalingam, J. B. Dadachanji, Mrs. A. K. Verma and Monjel Kumar for the Respondents.
The following Judgments were delivered: UNTWALIA, J.
These six appeals by special leave preferred by the Commissioner of Income tax from the judgments of the Kerala High Court are all inter connected and arise out of different proceedings in relation to one assessment year only.
They have, therefore, been heard together and are being disposed of by this judgment.
The assessee respondent is a Hindu undivided family owning large agricultural lands in the State of Kerala.
In 1905 the family purchased in court auction some lands covering an area of about 200 acres.
There were two irrigational channels in the land drawing water from a river.
According to the Sanad, there were about 772 trees of various kinds like Karimpana, coconut trees, jack trees, tamarind trees, Maruthu etc.
There were other trees of spontaneous growth but they were not in one block.
They were interspersed among the paddy fields as the land aforesaid was meant for paddy 542 cultivation.
By an agreement dated November 28, 1960 the assessee sold to one Velappa Rowther trees from about 60 acres of land forming part of the 200 acres aforesaid.
Since the original term stipulated in connection with the payment of money by Rowther could not be adhered to by him, further agreements were entered into deferring and spreading the payments over some years.
The assessee under the impression that the money which it received from Rowther on account of sale of trees was not chargeable to income tax under the Indian Income Tax Act did not file any voluntary return.
On February 28, 1963 the Income Tax Officer, Palghat wrote to the Karanavan of the assessee family pointing out that he had information that the assessee had leased certain private forests to Velappa Rowther for cutting timber; and that the assessee had received Rs. 75,000/ during the relevant year.
The corresponding assessment year would be 1961 62.
The assessee was asked to explain why no voluntary return had been filed.
In reply to the letter of the Income Tax Officer the assessee wrote a letter dated the 3rd April, 1963 stating therein that there was no lease but an out and out sale of the entire standing timber trees except certain specified varieties and that the sale was affected with a view to extend wet or dry cultivation in its fields in the area; the receipt therefrom were of a capital nature or in any event it was an agricultural income.
The assessee, however, concluded its letter by stating that he had no deliberate intention of avoiding to file any return.
If the Income Tax Officer so desired, he was ready to comply with his direction.
Thereafter the Income Tax Officer served a notice on the assessee under section 148 of the Income Tax Act, 1961, hereinafter called the Act.
In response to the same the assessee filed a return on 25.3.1966 showing a total net income of Rs. 626.63 paise for the previous year ending on 31.3.1961.
The Income Tax Officer held that out of the total number of trees numbering 772 four varieties were not sold and roughly speaking the number of trees sold and allowed to be cut as per the agreement came to 367.
The trees were of spontaneous growth and the whole of the amount of Rs. 1,75,000/ , although the whole of it was not paid during the accounting year, represented the assessee 's income which had accrued as per the terms of the agreement in that very year.
He accordingly assessed the whole of the amount to income tax.
The Appellate Assistant Commissioner allowed the appeal of the assessee in part and held that only a sum of Rs 75,000/ , the amount actually received during the accounting year, was assessable to income tax in the assessment year 1961 62.
The assessee as well as 543 the department both preferred appeals before the Income Tax Appellate Tribunal from the order of the Appellate Assistant Commissioner.
The Tribunal by its order dated the 16th November, 1968 dismissed both the appeals.
At the instance of the assessee the Tribunal stated a case which was numbered as Reference No. 30 of 1970 and referred the following question of law to the High Court for its opinion: "Whether, on the facts and in the circumstances of the case, the receipts from the sale of trees of spontaneous growth were assessable to tax and if so, whether assessable under 'Other Sources '?" The High Court by its judgment, since reported in Ambat Echukutty Menon vs Commissioner of Income Tax, Ernakulam(1) has answered the question in the negative, in favour of the assessee and against the department.
Civil Appeal No. 2247 arises out of Reference No. 30 of 1970.
At the instance of the Revenue also the Tribunal made a Reference being Reference No. 29/1970 and the question of law referred to the High Court is in the following terms: "Whether on the facts and in the circumstances of the case, the whole of the sum of Rs. 1,75,000/ was not assessable to tax in the previous year ending on 31.3.1961 relevant for the assessment year 1961 62." Since the High Court in the main Reference opined that the receipt from the sale of the trees were of a capital nature this Reference was also answered in favour of the assessee.
Civil Appeal No. 2242 arises out of Reference No. 29 of 1970.
The Income Tax Officer initiated penalty proceedings against the assessee, one under section 271 (1) (a) of the Act and the other under section 273 (b), the former being for the alleged failure of the assessee to furnish the return for the period in question and the latter for its alleged failure to furnish an estimate of the advance tax payable.
In relation to the penalty proceeding under section 271(1)(a) of the Act, two References were made to the High Court, one at the instance of the Revenue and the other at the assessee 's instance and two 544 References were similarly made in relation to the penalty proceeding under section 273(b).
As a consequence of the main judgment of the High Court in Reference No. 30 of 1970 all these four References also had to be disposed of in favour of the assessee.
Civil Appeals 2243 to Civil Appeals 2246 have been preferred by the department in these penalty proceedings.
Since, in our view, for the reasons to be stated hereinafter the judgment of the High Court in the main Reference giving rise to Civil Appeal 2247 is correct and the said appeal has to fail on that account, it is plain that the other five appeals fail as a corollary to the same and have got to be dismissed as such.
I now proceed to discuss and decide the relevant question of law in the main appeal.
Before I notice and advert to some special facts of this case it would be better to have a resume of some decisions of the High Courts and this Court taking one view or the other in relation to the sale of trees, some cases holding that it is a capital receipt and some cases concluding in different situations and on different facts that it is a revenue receipt.
In Commissioner of Income tax, Madras vs T. Manavedan Tirumalpad(1) a Full Bench of the Madras High Court held that the receipts from the sale of timber trees by the owner of unassessed forest lands in Malabar were chargeable to income tax.
Such trees were treated as usufruct from the land like paddy from land and minerals from mines.
Similarly the Oudh Chief Court expressed the view in Maharaja of Kapurthala vs Commissioner of Income Tax, C.P. & U.P.(2) that the net receipts from the sale of forest trees are income liable to income tax even though the forest would be gradually exhausted by fellings.
This was a case of forest trees of spontaneous growth growing on land which was assessed to land revenue.
The Patna case viz. Raja Bahadur Kamakshya Narain Singh vs Commissioner of Income Tax, Bihar and Orissa(3) was also a case of the receipts from the sale of forest trees.
In Fringford Estates Ltd., Calicut vs Commissioner of Income Tax, Madras(4) the sale of timber comprised in the trees from the forest was on a business line and the profits derived from the same were held to be assessable to income tax on the principle that profits derived from capital which is consumed or exhausted in the process of realization are nonetheless the taxable income.
545 The other cases taking the view that money received by sale of trees is a capital receipt are of the nature where trees have not been treated as usufruct of the land.
They were treated as part of the capital assets and the receipts from the sale of such trees retained the same character.
In Commissioner of Income Tax, Bombay South vs N. T. Patwardhan(1) the Bombay High Court was dealing with a case of the sale once for all of the trees with roots even though they were of the spontaneous growth.
The receipts from such sales were held to be capital in nature.
The Kerala High Court in State of Kerala vs Karimtharuvi Tea Estate Ltd.(2) was concerned with the sale of firewood of gravelia trees grown and maintained in tea gardens for the purpose of affording shade to tea plants.
Even sale proceeds of forest trees failed for the purpose of coffee plantation in the land were held to be capital receipts by the Mysore High Court in the case of Commissioner of Income Tax, Mysore vs H. B. Van Ingen(3) and the Madras High Court in the case of Commissioner of Income Tax, Madras vs M. section P. Nadar Sons(4).
Similarly sale of dead and wind fallen trees and trees planted for shades were held to be bringing receipts of capital nature vide Flixir Plantations Ltd. vs Commissioner of Income Tax(5) and Consolidated Coffee Estates (1943) Ltd. vs Commissioner of Agricultural Income Tax, Mysore(6).
In Commissioner of Income Tax, Kerala vs Venugopala Varma Raja(7) the Kerala High Court was concerned with the trees of spontaneous growth.
Obviously the income was not agricultural income.
The owner of a forest had derived income from a lease of the forest which came within the ambit of the Madras Preservation of Private Forests Act, 1949.
The lease was for "clear felling" which had a definite and specific meaning under Rule 7 framed under the said Act.
It did not permit a removal of the trees along with their roots.
The felling of the trees had to be done in such a way as to permit the regeneration and future growth of the trees concerned.
"In other words, what is contemplated by the clear felling method is not the sterilisation of an asset but the removal of a growth above a particular height, leaving intact the roots and the stamps in such a manner as to ensure regeneration, future growth, further felling and a subsequent income" (page 803).
On that account it was held that it was a revenue receipt and 546 not a capital one.
The case came up to this Court and the view of the High Court was eventually upheld.
The decision of this Court is reported in V. Venugopala Varma Rajah vs Commissioner of Income Tax, Kerala(1).
A supplementary statement of the case was called for by this Court but ultimately the decision turned round the true import of the expression "clear felling".
Some of the earlier decisions of the various High Courts noticed by me above were referred and it was thought that there was some conflict between them, yet finally without resolving the conflict, the view expressed at page 466 by this Court with reference to the facts of the case was in these terms: "It is not necessary for the purpose of this case to enter upon a detailed analysis of the principle underlying the decisions and to resolve the conflict.
On the finding in the present case it is clear that the tress were not removed with roots.
The stumps of the trees were allowed to remain in the land so that the trees may regenerate.
If a person sells merely leaves or fruit of the trees or even branches of the trees it would be difficult [subject to the special exemption under section 4(3) (viii) of the Income tax Act, 1922] to hold that the realization is not of the nature of income.
Where the trunks are cut so that the stumps remain intact and capable of regeneration, receipts from sale of the trunks would be in the nature of income.
It is true that the tree is a part of the land.
But by selling a part of the trunk, the assessee does not necessarily realise a part of his capital.
We need not consider whether in case there is a sale of the trees with the roots so that there is no possibility of regeneration, it may be said that the realisation is in the nature of capital.
That question does not arise in the present case.
" The question, however, of sale of trees with roots arose before this Court shortly after in A. K. T. K. M. Vishnudatta Antharjanam vs Commissioner of Agricultural Income Tax, Trivandrum(2).
Shah J., as he then was, who had delivered the judgment in Venugopala 's case (supra) was a party in this case also, the judgment of which was delivered by Grover J.
The test laid down by the Privy Council in The Commissioner of Income tax, Bengal vs Messrs Shaw Wallace and Company(3) was applied and it was said at page 61: "According to that test, income connotes a periodical monetary return coming in with some sort of regularity or 547 expected regularity from definite sources.
The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return excluding anything in the nature of a mere windfall.
Once the teak trees were removed together with their roots and there was no prospect of regeneration or of any production of a return therefrom, it could well be said that the source ceased to be one which could produce any income.
" I am aware that the test laid down by Sir George Lowndes in Shaw Wallace case has been whittled down to a very large extent by subsequent pronouncements of the Privy Council e.g. in Gopal Saran Narain Singh vs C.I.T.(1) and Kamakshya Narain Singh vs C.I.T.,(2) yet in the matter of sale of trees when this Court applied the same test in Vishnudatta 's case it was for the purpose of laying stress on the object of the felling of the trees.
The return may be one and only one.
But if the object of felling the trees leaving the roots and stumps intact is for regeneration of income, then whether income is regenerated or not is immaterial.
But in a case where the trees are sold by uprooting the roots no body can say that there could be any object of regeneration of income from the trees growing again as there was no question of a second growth at all.
Similarly, ordinarily and generally, when the trees are sold and allowed to be felled by leaving the roots and stumps intact then in case of trees of spontaneous growth there is a likelihood of fresh sprouting and further growth of trees on the left out roots and stumps.
The presumption in such cases generally would be that the owner did it with the object of regenerating the income.
But there may be case, although few and far between, like the one with which we are concerned here where the roots and stumps were not allowed to be uprooted and cut by the licensee or the lessee yet the object was not the regeneration of the trees but a protection of the land eventually to be used for the purpose of cultivation.
In this background of the law, I now proceed to refer to the special facts of this case.
Clauses 12 and 13 of the agreement dated 28.11.1960 entered into between the assessee and Velappa Rowther are as follows: "(12) The trees in the reared forest have to but cut neatly and the relative stumps should not be either pulled out or cut out.
548 (13) No. 3 should not enter on the lands from where trees are cut or on the sprouts coming up from there.
After the cuttings sprouts are not to be cut.
" No. 3 referred in clause (13) is the said Rowther.
On the face of the agreement, therefore, the transaction was not a sale of trees with roots and stumps.
Rather there was a prohibition that after the cutting, sprouts were not to be cut.
The agreement, however, did not indicate as to what was the object of the assessee in incorporating clauses (12) and (13) in the agreement.
Was it the regeneration of the trees for earning more income or was it something else ? The subsequent conduct of the assessee as appeared from the facts placed before the Income tax authorities without anything more will indicate that the object of the assessee was to protect the land falling vacant after the cutting of the trees from being damaged by the licensee by at random cutting of the stumps and uprooting of the roots.
The trees sold were spread in an area of 60 acres of land only.
Even in that area the trees were not in any thick or continuous forest.
They were interspersed by paddy fields.
In its very first communication to the Income Tax Officer sent on 3 4 1963 the assessee perhaps was made aware of the decision of the Kerala High Court in Commissioner of Income Tax, Kerala vs Venugopala Varma Raja (1) which was a case of private forest governed by the Madras Act.
The assessee, therefore, claimed that there were no private forests in Cochin area of Kerala where the land was situated.
The assessee asserted that in substance and in effect the sale was of the entire standing timber i.e. totality of the trees and "the sale was effected with a view to extend wet or dry cultivation to that area as well since the standing trees were a hindrance for such extensions.
" In this very letter the assessee also asserted "This is the very first time that our Thavazhi has sold the trees.
The trees, the subject matter of the sale contract, were there at the time of the purchase of the agricultural lands by our Thavazhi in 1080 M.E.
The trees were old trees.
No tree had been sold after our Thavazhi became the owner of the agricultural lands.
A large extent of agricultural lands was purchased and these trees formed part and parcel of such holdings.
None of us know when the trees began to grow.
After purchase of the lands we had developed the same and in the process we sold the trees with the object mentioned above.
The present sale has been the only sale and it will be the last one also since our idea is to extend cultivation to this area as well.
" The Tribunal in its appellate order noticed the argument of the assessee that its sole occupation was agriculture and the attraction in 549 the purchase of the land in the year 1905 was two irrigational channels contained therein.
It also noticed the other facts stated in the letter aforesaid of the assessee and finally concluded on the basis of clauses (12) and (13) of the agreement "It is clear from these that the assessee was reserving to itself the results of the future growth and a source of income.
" The case was squarely covered, in its opinion, by the decision of the Kerala High Court in Venugopala 's case.
It further observed that the assessee was claiming exemption and it was upto him to furnish all the information as to what trees would not regenerate, what kind of trees were sold etc.
The assessee had failed to furnish these details.
Yet it would be noticed that without rejecting the assessee 's stand that the transaction in question was the first and the last sale of trees by the assessee and without finding that the object of the assessee was not to convert the land for cultivation but to earn income by regeneration of trees, it upheld the view of the departmental authorities that the receipt was a revenue receipt assessable to income tax.
It should be noted that the assessment made was not for default of the assessee to produce any relevant material but a regular assessment on consideration of such materials as were produced by it.
It was not asked to produce any other evidence or material to substantiate the stand taken by it.
Nor was the stand rejected.
In such a situation it was not a question of assessee 's claiming any exemption and failing to get it for its alleged failure to furnish any more details.
But it was a case where in order to net the receipt as a revenue receipt it was for the department to reject the assessee 's stand and to hold that the object of the assessee in not allowing the licensee to cut the stumps and uproot the roots was a regeneration of the income.
The High Court has also noticed the fact as found mentioned in the order of the Tribunal that by the time the assessment was completed by the Income Tax Officer an area of 10 acres had been converted into cultivable land.
In our opinion, therefore, the High Court rightly distinguished the decision in Venugopala 's case (supra) and applied the ratio of that of Vishnudatta 's case (supra).
As I have observed above the facts of this case were on a line which on the surface was blurred and indistinct, yet, on a careful examination of the matter I find that the dividing line, though thin, nonetheless, is distinct enough to make this case fit for application of the ratio of the decision of this Court in Vishnudatta 's case.
I accordingly uphold the view of the High Court.
In the result all the six appeals are dismissed but on the special facts and circumstances of this case we make no order as to costs in any of them.
PATHAK, J. I agree with my learned brother that the appeals should be dismissed.
And I shall set out my reasons.
550 The case is one where trees of spontaneous growth were sold on condition that the purchaser would cut and remove the trunks without disturbing the stumps and roots embedded in the soil.
Where trees are so felled and removed, and the stumps and roots are allowed to remain in the land with a view to regeneration of the trees, the intention of the owner would be to indulge in a profit making activity, and the case would fall within V. Venugopala Varma Rajah vs Commissioner of Income Tax, Kerala(1).
The receipts from sale of the trunks would be revenue receipts.
But in the present case there was no intention to reserve the stumps and roots for the purpose of allowing regeneration of the trees.
The intention and subsequent conduct of the assessee establishes that the stipulation against removal of the stumps and roots was intended to protect the surface of the land from indiscriminate injury because the land was to be applied to cultivation.
Intention is a material factor in such cases, and each case has to be decided on its particular facts.
Without evidence of the intention or object behind such a stipulation, the mere fact that the trees were sold without stumps and roots cannot lead to the necessary inference that a profit making activity was involved.
Where the evidence shows that the land had been acquired for the purpose of cultivation, and that the prohibition on the purchaser against removing the stumps and roots was intended to prevent undue interference with the soil, and the assessee did not intend to permit regeneration of the trees, and that the had in fact later put the land to cultivation, the payments received on sale of the trunks cannot be regarded as taxable income.
And yet the case is distinguishable from the facts in A.K.T.K.M. Vishnudatta Antharjanam vs Commissioner of Agricultural Income Tax, Trivandrum.(1) That was a case where the trees were sold with their roots, and it was held by this Court that by removal of the roots the source from which the fresh growth of trees could take place had also been removed and, therefore, the sale of such trees effected the capital structure, and could not give rise to a revenue receipt.
In my opinion, the present case does not fall either within V. Venugopala Varma Rajah (supra) or A.K.T.K.M. Vishnudatta Antharjanam (supra).
It is a case where although the stump and roots remained after the trees were felled and removed by the purchaser, the regeneration of the trees was not to be allowed and, therefore, a profit making activity could not be spelled out.
The appeals are dismissed, but there is no order as to costs.
N.V.K. Appeals dismissed.
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On a vast area of agricultural land owned by the assessee there were about 772 trees some of which were of spontaneous growth.
Clauses 12 and 13 of the agreement by which the assessee sold some trees provided that the trees should be cut without pulling the stumps.
The Income Tax Officer, held that the trees were of spontaneous growth and assessed the whole of the income from the sale of trees to income tax.
The Appellate Assistant Commissioner allowed the assessee 's appeal in part holding that only the amount actually received during the accounting year, was assessable to income tax.
Appeals preferred by the assessee as well as the department to the Income Tax Appellate Tribunal were dismissed but references were made to the High Court on the question whether the receipts from the sale of trees of spontaneous growth were assessable to tax and if so, whether assessable under the head 'other sources '.
The High Court held that the receipts from the sale of the trees were of a capital nature, and decided the references in favour of the assessee and against the department.
Dismissing the appeals the Court, ^ HELD: (per Untwalia, J.) (1) The High Court rightly distinguished the decision in V. Venugopala Varma Rajah vs Commissioner of Income tax, Kerala, and applied the ratio of that in A. K. T. K. M. Vishnudatta Antharjanam vs Commissioner of Agricultural Income Tax, Trivandrum, [549F] (2) In Venugopala Varma Rajah vs Commissioner of Income Tax, Kerala, , this Court held that if a person sells merely leaves or fruit of the trees or even branches of the trees it would be difficult to hold that the realization is not of the nature of income.
Where the trunks are cut so that the stumps remain intact and capable of regeneration, receipts from sale of the trunks would be in the nature on income.
By selling a part of the trunk, the assessee does not necessarily realise a part of his capital.
[546A, D E] 540 (3) In A. K. T. K. M. Vishnudatta Antharjanam vs Commissioner of Agricultural Income Tax, Trivandrum, , a case of sale of trees with roots, this Court applied the test laid down by the Privy Council in the Commissioner of Income Tax, Bengal vs M/s. Shaw, Wallace and Co., and held that, "the source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return excluding anything in the nature of a mere windfall.
Once the teak trees were removed together with their roots and there was no prospect of regeneration or of any production of a return therefrom, it could well be said that the source ceased to be one which could produce any income." Although the test laid down by the Privy Council has been whittled down by subsequent pronouncements, yet in the matter of sale of trees when this Court applied the same test in Vishnudatta 's case it was for the purpose of laying stress on the object of the felling of trees.
[546G, 547A C] (4) If the object of felling the trees leaving the roots and stumps intact is for regeneration of income, then whether income is regenerated or not is immaterial.
But in a case, where the trees are sold by uprooting the roots nobody can say that there could be any object of regeneration of income from the trees growing again as there was no question of a second growth at all.
Similarly when the trees are sold and allowed to be felled by leaving the roots and stumps intact then in case of trees of spontaneous growth there is a likelihood of fresh sprouting and further growth of trees on the left out roots and stumps.
The presumption in such cases would be that the owner did it with the object of regenerating the income.
There can be cases like the instant one, where the roots and stumps were not allowed to be uprooted and cut by the licensee or the lessee, yet the object was not the regeneration of the trees, but a protection of the land eventually to be used for the purpose of cultivation.
[547D F] In the instant case, the agreement dated 28 11 1960 indicates that the transaction was not a sale of trees with roots and stumps, for clauses 12 and 13 of the agreement impose a prohibition that after the cutting, sprouts were not to be cut.
The object of the assessee was to protect the land falling vacant after the cutting of the trees from being damaged by the licensee by at random cutting of the stumps and uprooting of the roots.
[547G, 548B C] (5) In order to net the receipt as a revenue receipt it is for the department to reject the assessee 's stand and to hold that the object of the assessee in not allowing the licensee to cut the stumps and uproot the roots was a regeneration of the income.
By the time the assessment was completed by the Income Tax Officer an area of ten acres had been converted into cultivable land.
[549 E F] (per Pathak, J. concurring) 1.
The instant case does not fall either within V. Venugopala Varma Rajah vs Commissioner of Income Tax, Kerala, or A. K. T. K. M. Vishnudatta Antharjanam vs Commissioner of Agricultural Income Tax, Trivandrum, It is a case where although the stumps and roots remained after the trees were felled and removed by the purchaser, the regeneration of the trees was not to be allowed and, therefore, a profit making activity could not be spelled out.
[550G] 2.
Where trees are felled and removed, the stumps and roots are allowed to remain on the land with a view to regeneration of the trees, the intention of the 541 owner would be to indulge in a profit making activity.
The receipt from the sale of the trunks would be revenue receipts.
[550B] 3.
There was no intention in this case to reserve the stumps and roots for the purpose of allowing regeneration of the trees, and the intention and subsequent conduct of the assessee established that the stipulation against removal of the stumps and roots was intended to protect the surface of the land from indiscriminate injury because the land was to be applied to cultivation.
Intention is a material factor in such cases, and each case has to be decided on its particular facts.
Without evidence of the intention or object behind such a stipulation the mere fact that the trees were sold without stumps and roots cannot lead to the necessary inference that a profit making activity was involved.
[550C D] 4.
Where the evidence shows that the land has been acquired for the purpose of cultivation, and that the prohibition on the purchaser against removing the stumps and roots was intended to prevent undue interference with the soil, and the assessee did not intend to permit regeneration of the trees, and that he had in fact later put the land to cultivation, the payments received on sale of the trunks cannot be regarded as taxable income.
[550E]
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4074.txt
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iminal Appeal No. 12 of 1957.
Appeal from the judgment and order dated September 5, 1956, of the Calcutta High Court in Government Appeal No. 7 of 1954, arising out of the judgment and order dated April 3, 1954, of the Court of 1st Class Magistrate at Alipore.
Ishwar Lal C. Dalal and 1.
N. Shroff, for the appellant.
H. J. Umrigar, and R. H. Dhebar, for the respondent.
May 7.
This is an appeal on a certificate granted by the Calcutta High Court.
Two points have been urged before the Bench of the High Court which granted the certificate.
The first was that the search conducted by the Customs officials which had resulted in the detection of the currency notes on the person of the appellant had not been a legal search and consequently no proceedings could be based on the purported detection made.
This point was rejected by the Bench.
The second point urged on behalf of the appellant was that on September 16, 1952, when the 95 Magistrate issued the warrant of arrest against the appellant he could not have done so without having previously taken cognizance of the offence.
Since, however, the authorization required under section 23(3) of the Foreign Exchange Regulation Act (VII of 1947) was not obtained till January 27, 1953, the cognizance taken by the Magistrate on September 16, 1952, was without jurisdiction.
If the initiation of the proceedings was without jurisdiction, the conviction could not stand.
The High Court thought that the contention of the appellant raised a question of law and granted the requisite certificate for appeal to this Court.
The prosecution case was that on September 7, 1952, the appellant went to Dum Dum Aerodrome with a view to boarding a plane for Hong Kong.
The plane was due to leave the airport at 8 30 a.m.
The appellant had to go through the customs formalities before he could board the plane.
On an enquiry by the Customs Officers as to whether he had any other articles besides what he had declared in the declara tion form, the appellant answered in the negative.
His baggage was then examined but no objectionable article was detected therein.
The Customs Officers, however, noticed a pouch of somewhat unusual size which aroused their suspicion.
Thereafter, the appellant was subjected to personal search.
When they were about to search his person he let drop his trousers.
The appellant was requested to lift up the trousers and wear them again which he did.
On the search of the trousers a sum of Rs. 25,000 in Indian currency notes was discovered in two secret pockets.
They were concealed from below the surface and opened from the inside.
On September 11, 1952, the Reserve Bank of India authorized Inspector section B. Mitra of the Special Police Establishment, Calcutta, to make a representation to the Additional District Magistrate, 24 Parganas (hereinafter referred to as the Additional District Magistrate) for permission to proceed against the appellant as required under section 19(3) of the Foreign Exchange Regulation Act, 1947.
Mitra thereupon applied to the Additional District, Magistrate on September 16, 1952, for a search warrant 96 to be issued which was allowed.
Mitra on the same date also applied to the same Magistrate that a warrant of arrest might be issued against the appellant.
This was also allowed and a warrant of arrest was issued by the Additional District Magistrate and appellant was thereafter arrested and released on bail with a direction to appear before the Additional District Magistrate on September 19.
On September 19, he was released on bail by the Additional District Magistrate in the sum of Rs. 50,000 with 10 sureties of Rs. 5,000 each.
On November 19, the appellant asked for exemption from attending the court on the succes sive dates fixed for the case but the application was refused.
On January 27, 1953, the Reserve Bank of India authorized Mitra to file a complaint against the appellant.
On February 2,1953, a complaint was filed against the appellant charging him with an offence under section 8(2) of the Foreign Exchange Regulation Act read with section 19 of the Sea Customs Act and notification No. FERA 105/55 RB, dated February 27, 1951.
Thereafter, the appellant was tried by another Magistrate, Mr. Sinha, who acquitted him under section 258 of the Code of Criminal Procedure.
The currency notes which had been seized by the Customs Officials were directed to be relassed.
Against the appellant 's acquittal the State of West Bengal preferred an appeal to the High Court.
The High Court allowed the appeal and convicted the appellant of the offence with which he had been charged.
He was sentenced to pay a fine of Rs. 1,000, in default to suffer rigorous imprisonment for three months.
The order of the Magistrate directing the release of the currency notes was set aside.
The main submission made on behalf of the appellant before us has been that the Additional District Magistrate having taken cognizance of the offence on September 16, 1952, and as the provisions of section 23(3) of the Foreign Exchange Regulation Act had not been complied with, the entire proceedings before him and the Magistrate who tried the case were without jurisdiction.
The subsequent authorization by the Reserve Bank on January 27, 1953, and the filing of 97 the complaint on February 2,1953 could not make legal proceedings which had already commenced without jurisdiction.
It was also urged that the facts found did not attract the provisions of section 19 of the Sea Customs Act (8 of 1878) as it could not be said that at the moment the appellant was searched by the Customs Officials, he was taking out of India across any customs frontier as defined by the Central Government the currency notes in question.
It was also urged that explanation offered by the appellant was accepted by the trying Magistrate and the High Court ought not to have set aside the acquittal of the appellant, there being no good ground why his explanation should not have been accepted.
The version of the appellant as to how the sum of Rs. 25,000 in currency notes was with him was that he was not searched at all at the Customs barrier.
had taken out the currency notes in question from his trouser pocket and handed over the same to the Customs Officers stating the circumstances under which he was carrying the same on his person and asked for a receipt.
The Customs Officers instead of giving him a receipt falsely charged him with smuggling the currency notes out of India without any permit.
According to the appellant, he had applied to the Reserve Bank of India at Calcutta for a permit and had sent an application for that purpose to one Joshi in Calcutta.
He failed to receive the permit upto the last moment.
His intention was to hand over the money to the Customs Officers for safe custody.
In other words, the appellant 's version, in substance, was that as he had failed to get the permit upto the last moment he voluntarily handed over the currency notes in question to the Customs Officers at the customs barrier for safe keeping.
He had at no time any intention to carry out of India the said currency notes without a permit.
This version of the appellant was accepted by the trying Magistrate who acquitted him.
The High Court, however, did not accept his version.
It was urged that the appeal is before us on a certificate and as the High Court had come to a different 13 98 finding on a question of fact to what the trying Magistrate had found, it was open to the appellant to urge that he was entitled to question the findings of the High Court.
It is true that the High Court has taken a different view to that taken by the trying Magistrate and has rejected the appellant 's case that he had voluntarily handed over the currency notes in question to the Customs Officers in the circumstances mentioned by him and that he had no intention to take that money out of India without a permit.
Nonetheless, the finding of the High Court is on a question of fact.
We can see no particular reason in this case to go be.
hind the findings of fact arrived at by the High Court.
The High Court gave very good reasons for accepting the evidence of the prosecution witnesses as to the circumstances in which the currency notes in question were recovered from the appellant when his person was searched.
An important circumstance which might have supported the appellant 's case, namely whether he had applied to the Reserve Bank of India for a permit to take out of India currency notes to the extent of Rs. 25,000 was considered by the High Court.
It found, on the evidence of the Superintendent of the Reserve Bank, that the Reserve Bank received no application from the appellant before September 7, 1952, nor had the Reserve Bank granted the permission to the appellant to take any currency notes out of India.
It was on September 16, that the Reserve Bank had received an application of the appellant forwarded by one G.C. Joshi by his letter dated September 15, 1952.
The application of the appellant bore the date September 2, 1952.
The High Court thought that there were grounds for suspecting that this application was antedated.
The High Court came to the conclusion that there was no evidence to show that any such application was written or submitted on September 2, 1952.
It does seem extraordinary that if the appellant had sent the application to Joshi on September 2, 1952, that Joshi should not have sent on that application to the Reserve Bank till September 15, 1952.
It is to be remembered that the incident had already taken place on September 7, 1952, and in that 99 connection on September 15 and 16, 1952, Inspector Mitra of the Special Police Establishment, Calcutta had applied for a search warrant and a warrant of arrest respectively against the appellant.
On arrest, under the terms of that warrant he was released on bail by the police with a direction to appear before the court on September 19.
The appellant had therefore ample opportunity to concoct an application for a permit after September 7, and to antedate it getting Joshi on September 15, 1952, to forward the same to the Reserve Bank.
It is inconceivable that a person who was leaving for Hong Kong and wished to carry such a large sum of money as Rs. 25,000 in currency notes would have applied on September 2, when he was actually to fly on September 7, 1952.
Further it would not be unreasonable to suppose that the appellant would have so timed his arrival at Calcutta as would have enabled him to make the necessary enquiries from Joshi or the Reserve Bank whether the permit asked for had, been granted.
It is impossible to believe that he had arrived at Calcutta and had gone direct to the Dum Dum Aero drome without making any enquiry from Joshi at least whether the permit asked for had been granted.
Normally one would expect the appellant to reach Calcutta in sufficient time to make the necessary enquiries and in the absence of a permit having been granted to have left the currency notes for safe custody with Joshi or some other trusted person.
It is an entirely unacceptable story which the appellant put forward that he waited upto the last moment at the aerodrome for the necessary permit and not having got it requested the Customs Officers to keep the currency notes for safe custody.
It is significant that the appellant did not examine Joshi as a witness in support of his case.
It is not unlikely that if he had done so some inconvenient results would have followed in consequence of close questioning of Joshi regarding the entire transaction.
We have, therefore, no reason to think that the High Court had erred in suspecting that the application to the Reserve Bank was antedated.
On this finding it is apparent that the very foundation of the defence of the appellant is false.
That the appellant did not hand 100 over the currency notes of Rs. 25,000, at the customs barrier but was searched when the customs formalities were gone through is not only deposed to by a number of 'Witnesses holding responsible positions but is deposed to by P.W. 4, Panna Lal Dey, Money Exchanger of Dum Dum Airport.
Panna Lal Dey 's evidence was accepted by the High Court and after having examined his evidence we are satisfied that there is no reason to distrust his testimony.
Reference has been made to some of the evidence on a question of fact in order to ' satisfy ourselves whether the finding of the High Court was correct.
We are satisfied that the finding of the High Court is the only view which could reasonably be taken in a case like this.
It is true that the appellant had not taken the currency notes in question out of India across any customs frontier as defined by the Central Government.
He had, however, clearly attempted to take the same out of India.
In such a case no question of his crossing the customs frontier arises.
That an attempt to take out the currency notes in question is an offence punishable under the Sea Customs Act is clear from the provisions of section 167, Item 8.
The Foreign Exchange Regulation (Amendment) Act 1952 (VIII of 1952), came into force in February 1952.
By this Act section 23B was introduced into the Foreign Exchange Regulation Act.
Section 23B makes punishable an attempt to contravene the provisions of the Foreign Exchange Regulation Act or any rule, direction or order made thereunder.
Furthermore, this point was not taken before the Bench which granted the certificate of fitness for appeal to this Court.
Be that as it may, the facts found clearly established that the appellant attempted to take out of India the currency notes in question.
He had entered the customs enclosure and had signed the declaration form.
He had been questioned as to whether he had any other article than those mentioned in the declaration form which he wished to declare and he had answered in the negative.
On his personal search he dropped his trousers on the ground.
He was asked to pick up his trousers and wear them again.
On search of the trousers Rs. 25,000, 101 in currency notes were found concealed in the inner pockets.
The appellant had his ticket to proceed to Hong Kong by a plane which was due to leave Dum Dum Airport at 8 30 a.m. and the customs formalities were done in connection with that flight.
If the appellant had successfully cleared himself from the customs formalities all that was left for him to do was to board the plane which would take him out of India.
These circumstances establish beyond all reasonable doubt that the act of the appellant had gone beyond the stage of preparation and was clearly an attempt to carry the sum of Rs. 25,000, in currency notes out of India without a permit from the Reserve Bank.
We cannot accept the argument made on his behalf that the act of the appellant, on the facts found, amounted merely to preparation and not an attempt.
The main submission on behalf of the appellant was directed towards establishing that the entire proceedings before the Additional District Magistrate and the trying Magistrate were without jurisdiction as cognizance of the offence had been taken on September 16, 1952, in contravention of the provisions of section 23(3) of the Foreign Exchange Regulation Act, there being on that date no complaint in writing made by an officer authorised in that behalf by the Central Government or the Reserve Bank of India by a general or a special order.
It is, therefore, necessary to see, in the circumstances of the present case, on what date cognizance of the offence was taken.
In order to ascertain this certain provisions of the Foreign Exchange Regulation Act and the Code of Criminal Procedure will require con sideration.
Under section 19(3) of the Foreign Exchange Regulation Act a District Magistrate or Magistrate of the first class may, on a representation in writing made by a person authorized in this behalf by the Central Government or the Reserve Bank and having reasons to believe that there had been contravention of any of the revisions of that Act, issue a search warrant.
Inspector Mitra was so authorized by the Reserve Bank on September 11, 1952, and in pursuance of that authorization applied to the Additional District Magistrate for the issue of a search warrant.
Under 102 this section the search warrant is issued for the purposes of conducting investigation under that Act.
On September 16, Mitra applied for a warrant of arrest against the appellant.
This application was obviously made under the Criminal Procedure Code, The offence which the appellant is alleged to have committed was a non cognizable offence.
Under section 155(2) of the Code of Criminal Procedure, no police officer shall investigate a non cognizable offence without the order of a Magistrate of the first or second class having power to try such a case or commit the same for trial, or of a Presidency Magistrate.
Inspector Mitra 's application definitely states that he in asking for permission to investigate a non cognizable offence under section 155, Cr.
The order of the Additional District Magistrate directing the issue of a search warrant and the word " permitted " contained therein we consider, in the context of the application, to mean that he granted the sanction for investigation as asked for.
Under section 155(3) of the Code a police officer being permitted to investigate a non cognizable offence may exercise the same powers in respect of the investigation as an officer incharge of a police station may exercise in a cognizable case, except that he has not the power to arrest without a warrant.
It was necessary therefore for Inspector Mitra to obtain from the Additional District Magistrate a warrant of arrest.
It is clear, therefore, that upto September 16, 1952, the Additional District Magistrate had not taken cognizance of any offence.
On September 19, 1952, the appellant appeared before the Additional District Magistrate who recorded the following order: " He is to give bail of Rs. 50,000 with ten sureties of Rs. 5,000 each.
Seen Police report.
Time allowed till 19th November, 1952, for completing investigation.
" On November 19, 1952, on perusal of the police report the Magistrate allowed further time for investigation until January 2, 1953, and on that date time was further extended to February 2, 1953.
in the meantime, on January 27, 1953, Inspector Mitra had been authorized under section 23(3)(b) of the Foreign Exchange Regulation Act to file a complaint.
Accordingly, a 103 complaint was filed on February 2,1953.
The Additional District Magistrate thereon recorded the following order: " Seen the complaint filed to day against the accused Narayandas Bhagwandas Madhavdas under section 8(2) of the Foreign Exchange Regulation Act read with Section 23B thereof read with Section 19 of the Sea Customs Act and Notification No. F.E.R.A. 105/51 dated the 27th February, 1951, as amended, issued by the Reserve Bank of India under Section 8(2) of the Foreign Exchange Regulation Act.
Seen the letter of authority.
To Sri M. N. Sinha, S.D.M. (Sadar), Magistrate 1st class (spl.
empowered) for favour of disposal according to law.
Accused to appear before him.
" Accordingly, on the same date Mr. Sinha then recorded the following order: " Accused present.
Petition filed for reduction of bail.
Considering all facts, bail granted for Rs. 25,000 with 5 sureties.
To 26th March, 1952 and 27th March, 1952 for evidence.
" It is clear from these orders that on September 19, 1952, the Additional District Magistrate had not taken cognizance of the offence because he had allowed the police time till November 19, 1952, for completing the investigation.
By his subsequent orders time for investigation was further extended until February 2, 1953.
On that date the complaint was filed and the order of the Additional District Magistrate clearly indicated that he took cognizance of the offence and sent the case for trial to Mr. Sinha.
It would also appear from the order of Mr. Sinha that if the Ad ditional District Magistrate did not take cognizance, he certainly did because he considered whether the bail should be reduced and fixed the 26th and 27th of March, for evidence.
It was, however, argued that when Mitra applied for a search warrant on September, 16, 1952, the Additional District Magistrate had recorded an order thereon, " Permitted.
Issue search warrant.
" It was on this date that the Additional District Magistrate took cognizance of the offence.
We cannot agree with this submission because the petition of Inspector Mitra clearly states that " As this is non cognizable offence, I pray that you will kindly permit 104 me to investigate the case under section 155 Cr. P. C." That is to say, that the Additional District Magistrate was not being asked to take cognizance of the offence.
He was merely requested to grant permission to the police officer to investigate a non cognizable offence.
The petition requesting the Additional District Magistrate to issue a warrant of arrest and his order directing the issue of such a warrant cannot also be regarded as orders which indicate that the Additional District Magistrate thereby took cognizance of the offence.
It was clearly stated in the petition that for the purposes of investigation his presence was necessary.
The step taken by Inspector Mitra was merely a step in the investigation of the case.
He had not himself the power to make an arrest having regard to the provisions of section 155(3) of the Code of Criminal Procedure.
In order to facilitate his investigation it was necessary for him to arrest the appellant and that he could not do without a warrant of arrest from the Additional District Magistrate.
As already stated, the order of the Additional District Magistrate of September 19, 1952, makes it quite clear that he was still regarding the matter as one under investigation.
It could not be said with any good reason that the Additional District Magistrate had either on September 16, or at any subsequent date upto February 2, 1953, applied his mind to the case with a view to issuing a process against the appellant.
The appellant had appeared before the Magistrate on February 2, 1953, and the, question of issuing summons to him did not arise.
The Additional District Magistrate, however, must be regarded as having taken cognizance on this date because he sent the case to Mr. Sinha for trial.
There was no legal bar to the Additional District Magistrate taking cognizance of the offence on February 2, 1953, as on that date Inspector Mitra 's complaint was one which he was authorized to make by the Reserve Bank under section 23(3)(b) of the Foreign Exchange Regulation Act.
It is thus clear to us, that on a proper reading of the various orders made by the Additional District Magistrate no cognizance of the offence was taken until February 2, 1953.
The argument that he took cogniz ance of the offence on September 16, 1952, is without 105 foundation.
The orders passed by the Additional District Magistrate on September 16, 1952, September 19, 1952, November 19, 1952, and January 2, 1953, were orders passed while the investigation by the police into a non cognizable offence was in progress.
If at the end of the investigation no complaint had been filed against the appellant the police could have under the provisions of section 169 of the Code released him on his executing a bond with or without sureties to appear if and when so required before the Additional District Magistrate empowered to take cognizance of the offence on a police report and to try the accused or commit him for trial.
The Magistrate would not be required to pass any further orders in the matter.
If, on the other hand, after completing the investigation a complaint was filed, as in this case, it would be the duty of the Additional District Magistrate then to enquire whether the complaint had been filed with the requisite authority of the Reserve Bank as required by section 23(3)(b) of the Foreign Exchange Regulation Act.
It is only at this stage that the Additional District Magistrate would be called upon to make up his mind whether he would take cognizance of the offence.
If the complaint Was filed with the authority of the Reserve Bank, as aforesaid, there would be no legal bar to the Magistrate taking cognizance.
On the other hand, if there was no proper authorization to file the complaint as required by section 23 the Magistrate concerned would be prohibited from taking cognizance.
In the present case, as the requisite authority had been granted by the Reserve Bank on January 27, 1953, to file a complaint, the complaint filed on February 2, was one which complied with the provisions of section 23 of the Foreign Exchange Regulation Act and the Additional District Magistrate could take cognizance of the offence which, indeed, he did on that date.
The following observation by Das Gupta, J., in the case of Superintendent and Remembrancer of Legal Affairs, West Bengal vs Abani Kumar Banerji (1) was approved by this Court in the case of R. R. Chari vs The State of Uttar Pradesh (2) : (1) A.I.R. (1950) Cal 437.
14 (2) ; 106 "What is taking cognizance has not been defined in the Criminal Procedure Code and I have no desire to attempt to define it.
It seems to me clear however that before it can be said that any magistrate has taken cognizance of any offence under section 190(1)(a) Criminal Procedure Code, he must not only have applied his mind to the contents of the petition but must have done so for the purpose of proceeding in a particular way as indicated in the subsequent provi sions of this Chapter proceeding under section 200 and thereafter sending it for inquiry and report under section 202.
When the magistrate applies his mind not for the purpose of proceeding under the subsequent sections of this Chapter, but for taking action of some other kind, e.g., ordering investigation under section ' 156(3), or issuing a search warrant for the purpose of the investigation, he cannot be said to have taken cognizance of the offence.
" It is, however, argued that in Chari 's case this Court was dealing with a matter which came under the Prevention of Corruption Act.
It seems to us, however, that makes no difference.
It is the principle which was enunciated by Das Gupta, J., which was approved.
As to when cognizance is taken of an offence will depend upon the facts and circumstances of each case and it is impossible to attempt to define what is meant by taking cognizance.
Issuing of a search warrant for the purpose of an investigation or of a warrant of arrest for that purpose cannot by themselves be regarded as acts by which cognizance was taken of an offence.
Obviously, it is only when a Magistrate applies his mind for the purpose of proceeding under section 200 and subsequent sections of Chapter XVI of the Code of Criminal Procedure or under section 204 of Chapter XVII of the Code that it can be positively stated that he had applied his mind and therefore had taken cognizance.
In our opinion, the proceedings before the Additional District Magistrate and the trying Magistrate were with jurisdiction and the trial of the appellant was legal.
The appeal is accordingly dismissed.
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On September 7, 1952, the appellant went to Dum Dum Aerodrome to board a plane for Hong Kong.
On his search by the customs authorities a sum of RS.
25,000 was recovered from him which he had not declared in his declaration form and for which he had no permit from the Reserve Bank of India for taking out of India.
On September II, 1952, the Reserve Bank authorised Inspector Mitra to move the Additional District Magistrate, 24 Parganas under section 19(3) Of the Foreign Exchange Regulation Act, for permission to proceed against the appellant.
On September 16, 1952, Mitra applied to the Magistrate for a search warrant and for a warrant of arrest and both warrants were issued.
The appellant was arrested and released on bail with a direction to appear before the Magistrate on September 19 On September 19, the Magistrate granted bail to the appellant but refused him exemption from personal attendance before the Court and granted time till November 19, 1952, for completing the investigation.
This time was extended upto January 2, 1953 and then upto February 2, 1953.
In the meantime on January 27, 1953, Mitra was authorised under section 23(3)(b)) Of the Act to file a complaint against the appellant.
The complaint was filed on February 2, 1953, before the Additional District Magistrate who transferred the case to a Magistrate I Class for trial.
On the same day the Magistrate I Class recorded the presence of the appellant, allowed his application for reduction of security and fixed March 26, and 27, 1953, for evidence.
Upon conclusion of the trial the Magistrate acquitted the appellant but on appeal the Calcutta High Court convicted him.
The appellant contended that the entire trial was without jurisdiction as the Magistrate had taken cognizance of the offence on September 16, 1952, without there being a complaint in writing by a person authorised as required by section 23(3) of the Act.
Held, that cognizance of the offence was taken by the Additional District Magistrate on February 2, 1953, after the complaint had been filed and the trial was valid.
As to when cognizance is taken of an offence will depend upon the facts and circumstances of each case.
Mere issuing of a search warrant or warrant of arrest for the purposes of investigation did not, by 94 themselves, amount to taking of cognizance.
Cognizance was taken when a Magistrate applied his mind for the purpose of proceeding under section 200 and subsequent sections of Ch.
XVI of the Code of Criminal Procedure or under section 204 Of Ch.
XVII of the Code.
In the present case cognizance was taken when on February 2, 1053, the Additional District Magistrate applied his mind to the case with a view to issuing a process and sent the case for trial to another magistrate.
Superintendent and Remembrancer of Legal Affairs, West Bengal vs Abani Kumar Banerji, and R. R. Chari vs The State of Uttar Pradesh, ; , applied.
The facts found clearly established that the appellant attempted to take out of India the currency notes in question, and such attempt was also an offence.
The High Court had rightly rejected his explanation that he had applied to the Reserve Bank for a permit to take the currency notes out of India and that as the permit had not been received he had handed over the notes to the customs authorities for safe custody.
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754.txt
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Appeal No. 193 of 1952.
Appeal by Special Leave from the Judgment dated the 21st December, 1951, of the High Court of Judicature of Travancore Cochin arising out of the Judgment and Decree dated the 18th January, 1943, of the Court of District Judge, Kottayam.
N. P. Engineer (P. N. Bhagwati, M. Abraham and M. section K. Sastri, with him) for the appellants.
M.C. Setalvad, Attorney General for India, C. K. Daphtary, Solicitor General for India, and K. P. Abraham (T. R. Balakrishna Aiyar and M. R. Krishna Pillai, with them) for respondent No. 2. 1954.
May 21.
The Judgment of the Court was delivered by DAS J.
(After stating the circumstances which gave rise to the present litigation, and the facts of the case, a brief summary of which is given above, His Lordship proceeded as follows).
It will be convenient at this stage to discuss and deal with a preliminary point raised by the learned Attorney General appearing for the plaintiffs respondents.
In order to appreciate and deal with the point so raised it will be necessary to take note of the changed conditions that bad been brought about in the 524 matter of the judicial administration in the State by the recent political changes culminating in the adoption of the new Constitution of India.
It will be recalled that the present review application was made on the 22nd August, 1946, and a notice to show cause was issued on the 4th December, 1947.
The preliminary question as to the maintainability of the review application was decided on the 29th June, 1949.
During all this period Regulation IV of 1099 was in force in the State of Travancore.
Section 1 1, omitting the explanations which are not material for our present purpose, and section 12 of that Regulation provided as follows: " 11.
(1) A Full Bench shall hear and decide all appeals from the decrees of the District Courts in suits in which the amount or value of the subject matter is not less than five thousand rupees and the amount or value of the matter in appeal is not less than that sum.
The judgment of the Full Bench or the judgment of the majority, if there be difference of opinion, together with the records of the case, shall be submitted to us in order that the judgment may be confirmed by Our Sign Manual.
(2)Notwithstanding anything in the provisions of the Civil Procedure Code, the date of the decree shall be the date on which the judgment is declared in open Court after being confirmed by Our Sign Manual.
Explanation I. . . . (a) . . . . . (b) . . . . . . (e) . . . . . .
Explanation II 12.In cases decided under section 11 of this Regulation a Full Bench of the High Court may admit a review of judgment subject to the provisions of the Code of Civil Procedure.
If, on review, a fresh judgment be passed, the provisions of section 11 shall, as far as may be, apply.
" It will be seen that under section 12 if a fresh judgment be passed then the provisions of section 11 shall, as far as possible, apply, that is to say, the judgment 525 shall have to be submitted to the Maharaja for confirmation by his Sign Manual and the judgment so confirmed shall have to be declared in open Court after such confirmation.
This was the position until the end of June, 1949.
In the meantime on the 29th May, 1949, came the Covenant of merger between the Rulers of Travancore and Cochin with the concurrence and guarantee of the then Governor General of India for the formation as from the 1st July, 1949, of the United State of Travancore and Cochin with a common Executive, Legislature and Judiciary.
Article III provided that as from the appointed day (i.e., 1st July, 1949) all rights, authority and jurisdiction belonging to the Ruler of either of the covenanting States which appertained or were incidental to the Government of that State would vest in the United State.
Article IV enjoined that there should be a Rajpramukh of the United State, the then Ruler of Travancore being the first Rajpramukh during his lifetime.
Broadly speaking, articles VI and XI vested the executive and legislative authority of the United State in the Rajpramukh subject to the conditions and for the period therein specified.
Article XXI preserved the power of the Rulers to suspend, remit or commute death sentences.
In exercise of the powers conferred on him by article XI of the Covenant the Rajpramukh on the.
1st July, 1949, promulgated Ordinance No. I of 1124.
Clause 3 of that Ordinance continued in force for that portion of the territories of the United State which formerly formed the territory of the State of Travancore all existing laws until altered, amended or repealed.
Similar provision was made in clause 4 for the continuance of Cochin laws for that part of the United State which formerly formed the State of Cochin.
On the 7th July, 1949, however, came Ordinance No. II of 1124.
Clause 4 of this Ordinance repealed the Travancore High Court Act (Regulation IV of 1099).
The relevant part of clause 8 which is important for the purpose of the present discussion was in the terms following: "8.
All proceedings commenced prior to the coming into force of this Ordinance in either of the 526 High Courts of Travancore and Cochin, hereinafter in this Ordinance referred to as the existing High Courts, shall be continued and depend in the High Court as if they had commenced in the High Court after such date. . " The jurisdiction and powers of the High Court were defined thus: "18.
Subject to the provisions of this Ordinance, the High Court shall have and exercise all the jurisdiction and powers vested in it by this and any other Ordinance and under any law which may hereafter come into force and any power or jurisdiction vested in the existing High Courts by any Act or Proclamation in force in the States of Travancore and Cochin immediately prior to the coming into force of this Ordinance.
Clause 25 leaving out the two Explanations which are not material for our present purpose and clause 26 ran as follows: "25.
A Full Bench shall hear and decide all appeals from the decrees of the District Courts or the Court of a Subordinate Judge or of a Single Judge of the High Court in Suits in which the amount or value of the subject matter is not less than five thousand rupees and the amount or value of the matter in appeal is not less than that sum.
Explanation I. . . . . .
Explanation 11. . . . . . 26.
In cases decided under section 25 of this Ordinance, a Full Bench of the High Court may admit a review of judgment subject to the provisions of the Travancore and Cochin Codes of Civil Procedure.
" Clauses 18, 25 and 26 have been substantially reproduced in sections 18(1), 25 and 26 of the United State of Travancore and Cochin High Court Act 1125 (Act No. V of 1125) which repealed, amongst other things, Regulation IV of 1099 and Ordinance 11 of 1124.
Then came the Constitution of India in 1950 which created a union of several States grouped in Parts A, B and C by the First Schedule.
The United State of Travancore Cochin became one of the Part B States.
527 Under article 214 the High Court of the United State of Travancore and Cochin became the High Court of the Part B State of Travancore Cochin and article 225 continued the jurisdiction of and the laws administered in the then existing High Court.
The contention of the learned Attorney General is that in view of the changes referred to above which had the effect of setting up a common High Court for the United State of Travancore and Cochin with jurisdiction and power defined therein, the review application has become infructuous, for, even if it be allowed, there will be no authority which will have jurisdiction and power to pronounce an effective judgment after rehearing the appeal.
It is pointed out that a review may be admitted under section 26 of the United State of Travancore and Cochin High Court Act, 1125, only in cases decided under section 25 of the Act.
This case was not decided by a Full Bench under section 25 of the Act and, therefore no review is maintainable under section 26.
Further, if it be held that the appeal having been filed under section 11 of the Travancore High Court Regulation (IV of 1099), the application for review must be dealt with under section 12 of that Regulation then, says the Attorney General, if after the review is admitted a fresh judgment has to be passed after rehearing the appeal the provisions of section 11 would have to be complied with, namely, the fresh judgment will, under section 11, have to be submitted to the Maharaja to be confirmed by his Sign Manual and the decree will have to be dated as of the date on which the judgment will be declared in open Court after such confirmation.
It is pointed out that the Maharaja of Travancore no longer possesses the power to consider and to confirm or reject judicial decisions and it is submitted that such being the position in law the review application had become infructuous and should have been dismissed by the Full Bench in limine.
In our opinion, this contention is not well founded.
The application for review was properly made to the Travancore High Court and the Travancore High Court had to decide whether to admit or to reject the application.
The judgment to be pronounced on 528 the application for review did not require, under any provision of law to which our attention has been drawn, to be confirmed by the Maharaja or any other authority.
It was a proceeding properly instituted and was pending on the 1st July, 1949, and consequently under section 8 of Ordinance No. II of 1124 had to be continued in the High Court of the United State as if it had commenced in the said High Court after the coming into force of the said Ordinance.
In this case, the application for review was rejected by the High Court.
If, however, the High Court had admitted the review then such admission would have had the effect of reviving the original appeal which was properly filed in the Travancore High Court under section 11 of the Travancore High Court Regulation (IV of 1099).
That appeal, so revived, having been commenced prior to the coming into force of Ordinance No. II of 1124 would, under section 8 of that Ordinance, have had to be continued in the High Court of the United State as if it had commenced in that High Court after such date.
The position will be the same if on this appeal this Court now admits the review, for, upon such admission the appeal filed in the Travancore High Court will be revived and then, having been 'commenced in the Travancore High Court and continued in the High Court of the United State by virtue of section 8 of Ordinance No. II of 1124 the appeal so revived will, under section 8 of the Act of 11.25, have to be continued in that High Court as if it had commenced in that High Court after the coming into force of that Act.
In other words, the old appeal, if restored by this Court on this appeal, will, by the combined operation of section 8 of Ordinance 11 of 1124 and section 8 of the Act of 1125, be an appeal pending in the High Court of the United State.
Under our present Constitution Travancore Cochin has become a Part B State and under article 214 the High Court of the United State of Travancore Cochin has become the High Court of the Part B State of Travancore Cochin and shall have the jurisdiction to exercise all the jurisdiction of and administer the law administered by the High Court of the United State, Such appeal must, accordingly, be 529 disposed of under section 25 of the last mentioned Act.
That section does not require any confirmation of the judgment passed on the rehearing of the appeal by the Maharaja or Rajpramukh or any other authority.
Assuming, however, that the appeal, if restored, will have to be governed by section 12 of the Travancore High Court Regulation (IV of 1099) even then the provisions of section 11 would have to be applied "as far as may be" and it may well be suggested that the portion of section 11 which requires the confirmation by the Maharaja will, in the events that have happened, be inapplicable.
In our opinion, therefore, the preliminary objection cannot prevail and must be rejected.
Before going into the merits of the case it is as well to bear in mind the scope of the application for review which has given rise to the present appeal.
It is needless to emphasise that the scope of an application for review is much more restricted than that of an appeal.
Under the provisions in the Travancore Code of Civil Procedure which is similar in terms to Order XLVII, rule I of our Code of Civil Procedure, 1908, the Court of review has only a limited jurisdiction circumscribed by the definitive limits fixed by the language used therein.
It may allow a review on three specified, grounds, namely (i) discovery of new and important matter or evidence which, after the exercise of due diligence, was not within the applicant 's knowledge or could not be produced by him at the time when the decree was.
passed, (ii) mistake or error apparent on the face of the record and (iii) for any other sufficient reason.
It has been held by the Judicial Committee that the words "any other sufficient reason" must mean "a reason sufficient on grounds, at least analogous to those specified in the rule.
" See Chhajju Ram vs Neki(1).
This conclusion was reiterated by the Judicial Committee in Bisheshwar Pratap Sahi vs Parath Nath(2) and was adopted by our Federal Court in Hari Shankar Pal vs Anath Nath Mitter(3).
Learned counsel appearing in support of this appeal recognises the aforesaid (1) L.R. 49 I.A. 144.
(2) L.R, 61 I.A. 378.
(3) (1949] F.C.R. 36 pp.
47 48, 68 530 limitations and submits that his case comes within the ground of "mistake or error apparent on the face of the record" or some ground analogous thereto.
As already observed, out of the 99 objections taken in the grounds of review to the judgment of the majority of the High Court only 15 objections were urged before the High Court on the hearing of the application for review.
Although most of those points have been referred to by learned counsel for the appellants, he mainly stressed three of them before us.
We now proceed to examine these objections.
The first objection relates to the validity of the election of the first plaintiff as the Malankara Metropolitan and as such the ex officio trustee and the elections of plaintiffs 2 and 3 as his co trustees at the Karingasserai meeting.
This meeting is pleaded in paragraphs 13 and 14 of the plaint,.
In paragraph 18 of the plaint the plaintiffs refer to the meeting said to have been held at the M. D. Seminary in December, 1934, on which the defendants rely, the plaintiffs ' contention being that that meeting was not convened by competent persons nor after due notice to all the churches according to custom.
In paragraph 20 of their written statement the defendants deny the factum or the validity of the Karingasserai meeting relied upon by the plaintiffs.
They contend that that meeting was not convened by competent persons nor was invitation sent to the large majority of the churches.
In paragraph 29 the defendants repudiate the allegations pleaded in paragraph 18 of the plaint and maintain that their meeting was convened properly and upon notice to all the churches in Malankara.
In paragraphs 16 and 18 of their replication the plaintiffs reiterate the allegations in the plaint.
Issue 1(b) raises the question of validity of the Karingasserai meeting of August, 1935, and issue 6(a) raises the question of the validity of the M. D. Seminary meeting of December, 1934.
As the suit is for possession of the church properties the plaintiffs, in order to succeed, must establish their title as trustees and this they can only do by adducing sufficient evidence to discharge the onus that is on them under issue 1(b) irrespective 531 of whether the defendants have proved the validity of their meeting, for it is well established that the plaintiff in ejectment must succeed on the strength of his own title.
It will be noticed that the defendants ' objection to the Karingasserai meeting was two fold, (i) that the meeting had not been convened by competent persons and (ii) that notice had not been given to all the churches.
The District Judge in paragraph 164 of the judgment held, for reasons stated by him, that that meeting had not been convened by competent persons and in paragraph 165 he found that notice of the said meeting had not been given to all the churches.
It having been conceded by the plaintiffs ' advocate at the time of the final argument before the District Judge that there is no evidence on the plaintiffs ' side to prove that all the churches in existence prior to 1086 had been issued notices, the position was taken up that in the view of the plaintiffs ' party the defendants and their partisans by adopting the new constitution exhibit AM had become aliens to the Church and as such were not entitled to be invited to that meeting.
Their argument was that Karingasserai meeting was only a meeting of the representatives of those churches which stood by the Patriarch Abdulla 11 and the succeeding Patriarchs and as the defendants and their partisans had become aliens to the Church no notice to them was necessary.
This argument clearly amounted to an admission that no notice was sent to the churches on the defendants ' side.
The District Judge having held, contrary to the submission of the plaintiffs, that the defendants and their partisans had not gone out of the Church it followed, according to him, that they were entitled to notice and as it was not proved that notices were sent to them but on the contrary as it was contended that no notice was necessary to be sent to them the District Judge felt it to be quite clear that the said meeting was not duly convened.
In this view of the matter, it was not necessary for the learned District Judge to go further into the matter and enquire whether notices had been given to churches which had not adopted the new constitution exhibit AM.
Coming to the judgment of the High Court it appears that the majority of the Judges dealt with the question 532 of the validity of the meeting in a superficial and summary manner.
Nokes J. said: "The lower Court held that the meeting was not duly convened, mainly because notice was not given to the defendants ' party (judgment paragraphs 166,167).
The want of notice was not disputed, but was justified in accordance with the Patriarchal monition (Exhibit Z).
In view of the conclusion stated above, that the adoption of the new constitution was clear evidence of the defendants ' repudiation of the Patriarchs ' church, and of the fact that the adoption took place in 1934 about 8 months earlier than the meeting at Karingasserai, the want of notice was justifiable apart from the monition.
The lower Court 's conclusion that the meeting formed only a minority of the church is thus erroneous as is the conclusion (judgment, paragraphs 164, 167) that the meeting was not convened by competent persons." Mr. Justice Sathyanesan simply observed: "The only defect pointed out was that no invitation of the meeting was given to the churches under the control of 1st defendant.
The short answer to this is that having already become members of a new Church, they were not entitled to any invitation and were rightly ignored.
" It thus appears that the question as to the competency of the persons who convened the Karingasserai meeting was disposed of by Nokes J. in one single sentence at the end of the paragraph quoted above.
The learned Judge does not appear to have seriously applied his mind at all to the question of the competency of the conveners of that meeting.
Sathyanesan J. did Dot deal with the question and thought, quite wrongly, that the only question raised by the defendants was as to whether notice was given to the churches under the control of the defendants.
It is pointed out by the learned Attorney General that the judgment of Sathyanesan J. was only a supplementary judgment, for he prefaced his judgment with the observation that he entirely agreed with the findings of Nokes J.
This argument might have had some force 533 if Nokes J. had dealt with the point.
The position, therefore, is that neither of the Judges applied his mind to the question of the competency of the persons who had convened the Karingasserai meeting.
As to service of the notice on all churches, Nokes J. in the passage quoted above held that the defendants had gone out of the Church by reason of their adoption of the new constitution exhibit AM.
and that consequently no notice was due to them.
Sathyanesan J. also in the passage quoted above took the view that the defendants having become members of a new church the defendants were not entitled to any invitation to the Karingasserai meeting.
The learned Judges having reversed the finding of the District Judge and held that the defendants had gone out of the Church by adopting the new constitution exhibit AM.
it became incumbent on them to enquire whether all churches not on the plaintiff 's side had adopted exhibit AM.
and if not whether such of them who had not adopted exhibit AM. had been summoned to the meeting.
It may be noted in this context that the learned Judges of the High Court in their judgment seem to indicate that the churches which adopted 'exhibit AM.
did so by participation at the M. D. Seminary meeting.
Reference has been made in the arguments to the various figures set out in the judgment of the District Judge as to the number of Churches which according to the evidence had attended the meeting.
It is not clear how many out of 310 churches claimed by the defendants to have been completely on their side according to exhibit 272 had attended the M. D. Seminary meeting and formally adopted the new constitution the exhibit AM.
If adoption of the exhibit AM.
is the test for determining whether notice 'is due or not, then it becomes important to consider whether all the churches which were not with the plaintiffs but who had not adopted exhibit AM. had been served.
Apart from the question of the service of the notice there was also the question as to the competency of the persons who had convened the Karingasserai meeting where the plaintiffs are said to have been elected.
While Mar Geeverghese Dionysius was alive he, as President 534 of the Malankara Association, used to convene the meetings of the Association.
Who, after his death, was competent to issue notice of meeting? There ,appear to be no rules on the subject.
In this situation, says the learned Attorney General, if all the members of the Association attended the meeting the defect of want of proper notice does not matter.
But did all members attend, even if the defendants ' party who had adopted exhibit AM be left out ? It does not appear that either of the two majority Judges of the High Court adverted to either of these aspects of the matter, namely, service of notice to all churches and competency of the persons who issued the notice of the Karingasseri meeting and in any case did not come to a definite finding on that question.
The majority judgments, therefore, are defective on the face of them in that they did not effectively deal with and determine an important issue in the case on which depends the title of the plaintiffs and the maintainability of the suit.
This, in our opinion, is certainly an error apparent on the face of the. record.
The next point urged by learned counsel appearing for the appellants is that the majority decision proceeds on a misconception as to a concession said to have been made by the defendants ' advocate.
It will be recalled that issues Nos.
14 and 15 quoted above raise the question of the defendants having gone out of the Church, for having committed acts of heresy or having voluntarily given up their allegiance to the ancient Jacobite Syrian Church and establishing a new church and framing a constitution for the same.
Likewise, issues Nos. 19 and 20 raise the question as to whether the plaintiffs and their partisans formed themselves into a new church and separated from the old Church by reason of the several acts and claims therein referred to Here again the suit being one in ejectment it is more important for the plaintiffs to establish their own title by getting issues 19 and 20 decided in their favour than to destroy the defendants ' title by getting issues 14 and 15 decided against the defendants, for a mere destruction of the defendants ' title, in the absence of establishments of their own title 535 carries the plaintiffs nowhere.
It is to be remembered that this is a suit by the plaintiffs as the validly constituted trustees and not a suit under the section analogous to section 92, Civil Procedure Code, for removal of defendants from trusteeship or for the framing of a scheme.
In Paragraph 132 of his judgment the learned District judge found that the acts and claims imputed to the defendants did not amount to heresy and did not make the defendants or their partisans heretics or aliens to the faith and that such acts and conduct ' mentioned in issue 15, even if proved, would not amount to heresy and would not amount to a voluntary giving up of their allegiance to or secession from the ancient Jacobite Church.
On the other hand, in paragraph 133 the District Judge held that the plaintiffs and their adherents by taking up the position which they adopted in 1085 and which they had persistently maintained till then had unlawfully and unjustifiably created a split in the Malankara Church and might in a sense be said to have pursued a course of conduct amounting to persistent schism.
He held that, nevertheless, the plaintiffs and their parti sans had not become aliens to the Church or created or formed themselves into a separate church as they had not been found guilty and punished with the removal from the Church or excommunication from the Church by a proper ecclesiastical authority.
It will be noticed that the learned District Judge found the facts imputed to the defendants not proved but the facts imputed to the plaintiffs to have been proved.
He made no difference between acts of heresy and merely voluntary separation from the Church but treated them on the same footing.
It will be recalled that in the interpleader suit of 1913 the District Judge had held that by accepting Abdul Messiah as their ecclesiastical head or by denying the authority of Abdulla II, Mar Geeverghese Dionysius and his co trustees had not become aliens to the faith.
Finally, in the judgment on rehearing of the appeal reported in from which passages have been quoted above the acts imputed to the defendants in that case which are similar to those imputed 'to the 536 defendants in the present case, with the exception of the adoption of exhibit AM, were held not to amount to a voluntary separation from church by the establishment of a new church and that the Free Church case (1) had no application to the facts of that case.
Likewise, in the present case the District Judge dealt with issues 15, 16, 19 and 20 together, which covered issues on 30th heresy and voluntary separation.
Presumably in view of the decision of the Court of Appeal in the previous suit the learned District Judge in this case did not make any distinction between acts of heresy and voluntary separation from the Church and held that there was "no case of ipso facto heresy or ipso facto loss of membership of the Church or ipso facto loss of status as Priest and prelates for ecclesiastical offences unless the offenders were tried and punished by a competent authority.
" Indeed, the evidence of P.W. 17, the Pope 's delegate, is claimed as supporting this view.
It is in the light of this situation that the question as to the misconception of the concession has to be considered.
Sathyanesan J. in paragraph 4 of his judgment, referred to the concession said to have been made by the learned advocate for the defendants in the following terms: ". . .
However the learned advocate for the respondents clarified the situation by very fairly con.
ceding that plaintiffs had not left the church and that they were as good members of the original Jacobite Syrian Church as anybody else.
Another clarification has been made by the learned advocate for the appellants that the plaintiffs, whatever might have happened in the past, do not hold that the Patriarch can at all interfere in the internal administration of the Malankara trust properties.
Plaintiffs seem to have made their position clear even at the time of pleadings.
According to them, 'The Patriarch as the ecclesiastical head of the Malankara Church could exercise that authority by awarding such spiritual punishment as he thinks fit in cases of mismanagement or misappropriation of church properties ' Vide pleading No. 124(1).
The concession made by the learned advocate for the (I)L.R. 537 defendants has obviated the necessity of a lengthy discussion of several matters.
So it is worth pausing a while and understanding the importance, and the implications of the concessions.
It tends to mean (i) that the Patriarch is not an alien to the Church, i.e., the Patriarch and his predecessors in question are the true and lawful head of the original Jacobite Syrian Church, that (ii) that the plaintiffs and their partisans, holding (a) the Patriarch has only a spiritual supervision of the administration of the trust properties by the trustees, (b) the Patriarch alone can consecrate Morone, (c) that Exhibit BP is the true Canon of the Jacobite Church, and (d) that the Catholicate was not properly established, cannot, on these grounds, be considered to have become aliens to the original church.
So the question is more properly whether the defendants have seceded from the original church and formed a new church.
In the nature of the suit, the plaintiffs can succeed only if they make out, (A) that the defendants are using the trust properties belonging to Malankara Jacobite Church for the maintenance, support and benefit of another and a different body, namely Malankara Orthodox Syrian Church, and (B) that the plaintiffs are the duly elected trustees." Likewise, Nokes J. at pp.
355 356 referred.
to the concession as follows: ". .
In this court the defendants ' advocate did not seek to disturb the finding that the plaintiffs had not become aliens to the church.
Indeed, as previously stated, he based his case on the ground that both parties were still within the church.
This abandonment of his clients ' contention in the lower court was no doubt due to the fact that the written statement involved an admission of the plaintiff ' 69 538 case; for the plaintiffs in effect said, 'we are the trustees of the Patriarch 's church, ' while the defendants said, 'we are the trustees of a church to which the Patriarch is an alien. ' Nor was any attempt made here on behalf of the defendants to challenge the finding that the trust had not become altered; for any contention to the contrary provided no defence and was a further admission of the plaintiffs ' case.
But the existence of this allegation on the pleadings serves to emphasise the defendants ' attitude to the trust.
" Further down the learned Judge said ".
The learned Judge held against the general allegation of separation (judgment, paragraph 133), but in favour of the special allegation as to the plaintiffs ' view on temporalities (paragraph 108).
He also recorded findings as to the limited scope of the Patriarch 's powers in temporal affairs (paragraphs 58, 60), which seem to be based on the erroneous view inter alia that persons who are subject to two systems of law are amenable for different aspects of the same offence only to punishment under one system (see paragraph 57).
The general finding was challenged in the memorandum of objection (grounds 10 and 11), but not in the argument for the defendants here, which, as previously stated, proceeded on the basis that both sides were still members of the church.
" On a plain reading of the two judgments it appears that the majority Judges took the view that even if, as held by the District Judge, the plaintiffs had been guilty of acts and conduct imputed to them it was not necessary for them to enquire whether those acts were mere heresy or also amounted to a setting up of a new church or whether the Canon law requiring the verdict of an ecclesiastical authority applied to both or only to acts of heresy.
This attitude they adopted simply because of what they understood was the concession made by the defendants ' advocate, namely, that the plaintiffs had not gone out of the church.
They, how.
ever, felt bound, notwithstanding the contention of the defendants that they were also, for similar reasons.
539 within the church, to consider whether the defendants had voluntarily gone out of the church by setting up a new church as evidenced by their aforesaid acts.
Learned counsel for the appellants contends, and we think there is a good deal of force in such contention, that the majority Judges do not appear to have examined the question or considered whether voluntarily going out of the church was a concept separate and distinct from acts of heresy and if so whether the acts and conduct imputed to the plaintiffs apart from being acts of heresy from an ecclesiastical point of view, amounted also to voluntarily going out of the ' church by establishing a new church.
Nor do they appear to have considered whether the Canon law requiring verdict of an ecclesiastical authority was required in both cases.
There can be no doubt,therefore, on the face of the judgment, that the decision of the learned Judges in this behalf proceeds on what they considered was a concession made by the defend ants ' advocate that the plaintiffs had not gone out of the church.
Learned counsel for the defendants appellants contends that this was a misapprehension and he relies on the affidavit of Sri E. J. Philipose, advocate, with which were produced two letters written to him by the senior advocate.
In the first letter it is stated as follows: "I argued at length of the misconduct of the plaintiffs in going against the basic conditions of the Royal Courts ' judgment and said that while the conduct of each party is open to examination neither could be said to have left the church.
Their acts may be set aside in both cases but they cannot be said to have left the church.
The Judges cannot accept it in one case as a concession and in the other case as my submission.
Deciding one part of it as a concession not requiring the decision of Court is unjust to my lengthy argument on the misconduct of the plaintiffs; in regard to their diversion of property from the trust " In the second letter we find the following passages: "Throughout my argument was that the plaintiffs had steadily and consistently ' set at naught the 540 fundamental principles of the charity as settled in the judgments of the Royal Court and the Cochin Court.
As between the charge and counter charge of violation of the foundation rules, I expressed it as my view that while their views may be corrected by the Court neither party should be treated as having become aliens to the church by reason merely of erroneous views.
That is what is explained in paragraph 17 of the grounds.
My opinion so expressed is not to be treated as a concession of the one case and a submission as to the other.
If my view of the law was not acceptable the learned Judges must decide and not treat one part of a connected statement as a concession not requiring to be considered by the Court.
" In the review petition ground No. 17 is as follows "Their Lordships ' observation that the defendants ' Advocate based his case on the ground that both parties were still within the Church and that the defendants ' Advocate conceded that the plaintiffs have not left the church and that they were as good members of the original Jacobite Syrian Church as anybody else is inaccurate and incomplete, and misleading.
The Advocate devoted a great part of the argument to showing that the plaintiffs have departed from the constitution as settled by the Royal Court Judgment.
The plaintiffs stated that the defendants have left the Church.
In reply the argument was that there is no such thing as ipso facto secession merely because of differences of views on the powers of the Patriarch or about the Canon to be followed.
It was in that sense and in that sense only that the argument was advanced that in law it must be taken that both parties were within the Church.
The Judges were not justified in taking it out of its setting and using part of it as an admission in support of the plaintiffs and rejecting the other portion as a mere argument not sustainable in law so far as the defendants are concerned.
If it should be treated as an admission at all it must have been accepted or rejected as a whole.
It must not have been torn piecemeal and part used and part rejected. 541 The reasons as signed for concluding that the defendants have gone out of the Church apply even more strongly to the plaintiffs and the Judges should have dismissed the suit in limine.
Their Lordships failed to note that the basic constitution of the Church had been laid down by the Royal Court Judgment and the plaintiffs by disowning and repudiating it had really seceded from it.
If the view of the court was that departure from the rules of the foundation put the parties out of the Church it should apply alike to both the parties and the statement that neither party had gone out of the Church cannot be used to sustain the plaintiffs ' right and at the same time rejected as untenable to support the precisely similar rights of the defendants.
Their Lordships failed to note that the defendants ' Advocate strongly urged that it was necessary to have the charges framed, enquiry held and due and proper grounds made out before a person can be put out of the Church and there was not even a whisper of it as, having been complied with in this case.
Their Lordships also failed to note that there can be no such thing as an entire body of persons against whom nothing was alleged or proved being held to have gone out of the Church.
Their Lordships failed to note that the so called admission did not in any way affect the defendants ' case that the Patriarch and the plaintiffs and their partisans have voluntarily left the Church and had thereby ceased to be members thereof.
" Learned: Attorney General strongly objects to any reference being made to the facts contained in the affidavit of E.J. Philipose or the letters produced along with it and he refers us to the decision of this Court in Sha Mulchand & Co. Ltd. vs Jawahar Mills Ltd.(1), and the cases therein referred to and to the case of Reg.
vs Pestanji Dinsha and Another(1).
It will, however, be noticed that what was deprecated in that case was the fact that no affidavit had been filed before the trial Court for the rectification of what, in the appeal Court, (1) ; at P. 366.
(2) 542 was alleged to have been wrongly recorded by the trial Judge.
The Privy Council in Madhu Sudin Chowdri V. Musammat Chandrabati Chowdhrain(1) also suggested that the proper procedure was to move.
the Court in whose judgment the error is alleged to have crept in.
In this case, as already stated, an affidavit was filed before the appeal Court itself while the Chief Justice and Nokes J. were still in office.
Further, if, as laid down in the judgment of this Court to which reference has been made, the proper procedure is to apply to the Court whose judgment is said to be founded on a misconception as to the concession made by the learned Advocate appearing before it, by what procedure, unless it be by way of review, could that Court be moved? Indeed, the Madras case referred to in the judgment of this Court freely indicates that the application should be by way of review.
Patanjali Sastri J. (as he then was) sitting singly in the Madras High Court definitely took the view in Rekhanti Chinna Govinda Chettiyar vs section Varadappa Chettiar(2) that a misconception by the Court of a concession made by the Advocate or of the attitude taken up by the party appears to be a ground analogous to the grounds set forth in the first part of the review section and affords a good and cogent ground for review.
The learned AttorneyGeneral contends that this affidavit and the letters accompanying it cannot be said to be part of ',the record" within the I meaning of Order 47, rule 1.
We see no reason to construe the word " record " in the very restricted sense as was done by Denning L.J. in Rex vs Northumberland Compensation Appeal Tribunal Ex Parte Shaw(1) which was a case of certiorari and include within that term only the document which initiates the proceedings, the pleadings and the adjudication and exclude the evidence and other parts of the record.
Further, when the error complained of is that the Court assumed that a concession had been made when none had in fact been made or that the Court misconceived the terms of the concession or the scope and extent of it, it will not generally appear on the (1) (2) A.I.R. 194o mad, 17.
(3) at PP 351 352.
543 record but will have to be brought before the Court by way of an affidavit as suggested by the Privy Council as well as by this Court and this can only be done by way of review.
The cases to which reference has been made indicate that the misconception of the Court must be regarded as sufficient reason analogous to an error on the face of the record.
In our opinion it is permissible to rely on the affidavit as an additional ground for review of the judgment.
Turning to the affidavit and the letters and the ground No. 17 of review it is quite obvious that the defendants had not given up their contention, upheld by the District Judge, that the plaintiffs had been guilty of the acts and conduct imputed to them.
What the.
learned Advocate for the defendants did was to accept the Canon law as interpreted by the District Judge, namely that nobody goes out of the church without the verdict of an ecclesiastical authority, whether the acts complained of amount to acts of heresy or to the establishment of a new church so as to make the persons who are guilty of such conduct aliens to the faith.
If the majority Judges took the view that such was not the Canon law and that the same acts and conduct may have an ecclesiastical aspect in the sense that they amount to hers punishable as such and may also amount to a voluntary separation from the church which is not an ecclesiastical offence and does not require the verdict of any ecclesiastical authority to place the guilty person out of the church then it was clearly incumbent upon the majority Judges to consider whether the acts and conduct of which the plaintiffs had been found guilty had actually been committed by them and whether such acts and conduct also had the dual aspect, namely, amounted to an ecclesiastical offence requiring excommunication and also to a voluntary separation which not being an ecclesiastical, offence did not require an ecclesiastical verdict to place a guilty person out of the pale of the Church.
This, on the face of the judgment the learned Judges failed to do.
Learned Attorney General has submitted that the allegations against the plaintiffs, are five in number, namely 544 (1) The Patriarch has Temporal powers over the properties of the Malankara Church; (2) The Patriarch has got the power acting by himself to excommunicate and ordain a Bishop; (3) Only the Patriarch may consecrate Morone (4) The Canon of the Church is exhibit XVIII in O.S. No. 94 of 1088; and (5) The Catholicate has not been validly instituted in the Malankara Church; and suggests that these charges have been gone into directly or indirectly by the majority Judges and that, therefore, no prejudice ' has been caused.
He, however, cannot dispute that the Judges have failed to consider and come to any definite finding on some of them.
We do not consider that the contention of the learned Attorney General is entirely well founded.
Issue20(1) contains several charges against the plaintiffs and even if charges (a) and (b) have been referred to in the majority judgment, the charges (c), (d) and (e) have certainly not.
been dealt with.
As to the temporal power of the Patriarch the District Judge held in paragraph 58 of his judgment that the Patriarch had no temporal authority or jurisdiction or control over the Malankara Jacobite Syrian Church and its temporalities and that the, power of general supervision over spiritual Government conceded to the Patriarch in exhibit DY did not carry with it by necessary implication the right to interfere in the administration of the temporalities and properties of the Church.
The decision to the contrary in 41 T.L.R.
I cannot be regarded as having any bearing after that judgment was set aside subject only to three points as here in before mentioned.
It does not appear that the majority Judges considered whether the plaintiffs imputed full temporal powers to the Patriarch or the limited one as conceded to him in exhibit DY and if they did impute to him full temporal powers whether they had departed from a fundamental tenet of the Church.
They do not also appear to have considered whether, if the plaintiffs originally pledged themselves to the tenet of full temporal power of the Patriarch and thereby departed from a fundamental article and such *departure involved their having 545 become aliens, any subsequent change in their attitude by limiting it as in exhibit DY would make a difference.
Further, as to the power of consecrating Metropolitans Nokes J. found that a validly appointed Catholicos had the power, under both versions of the Canon, to consecrate Metropolitans without a Synod and that by so claiming the defendants had not become aliens to the faith.
The learned Judge, however, did not consider the implication of this finding so far as the plaintiffs were concerned.
This finding may lead to the implication that the claim that the Patriarch alone has got the power of ordination and the Catholicos has not that power cannot but be regarded as a departure from the Canon.
Issue 20(1)(a)(1) which relates to the consecration of Morone has been found in favour of the defendants.
If the defendants have not gone out of the Church by making the claim that Morone may be consecrated by the Catholicos or the Metropolitan in Malankara then the learned Judge should have considered whether a denial of such right by the plaintiffs constituted a departure by them from the canonical law.
This the learned Judge failed to do.
Issue 20(1) (a) (iii) related to the establishment of the Catholicate.
In "pleading" No. 124 the plaintiffs maintained that a Catholicate had not been established at all.
The District Judge held that Abdul Messiah by his Kalpana exhibit 80 revived the Jacobite Catholicate.
The respondents ' ground of appeal No. 17 assumed that a Catholicate had been established.
Nokes J. held that Abdul Messiah was a Patriarch, that a Patriarch had the power by himself and without the Synod to establish a Catholicate and that a Catholicate had been established by him although the old Catholicate of the East had not been revived.
Sathyanesan J., however, held that the establishment of the Catholicate in Malankara was dubious, surreptitious and uncanonical and that no Catholicate had been established.
The two judgments appear to be somewhat at variance in this respect.
In any case, Nokes J. has not considered whether the stand taken by the plaintiffs that no Catholicate had been establisbed at all amounts to a departure by them from the injunctions of the Canon law, On a fair reading of 70 546 the majority judgments it appears to us that the majority Judges have been misled by a misconception as to the nature and scope of the concession alleged to have been made "by the defendants ' advocate.
If the acts imputed to the defendants amounted to a voluntary separation, the learned Judges should have considered whether the acts imputed to the plaintiffs likewise amounted to a voluntary separation.
If the defendants had not gone out of the Church by asserting that a Catholicate had been established, that the Catholicos can ordain Metropolitans and consecrate Morone then they should have considered whether by denying these assertions the plaintiffs had not gone out of the Church.
This they failed to do.
They could not properly decline to go into the question of fact on account of the admission of the defendants ' advocate that the plaintiffs remained in the Church.
Such admission at beat was an admission as to the canon law and the decision that the defendants had voluntarily gone out of the Church even in the absence of an ecclesiastical verdict necessarily implies that the conce ssion made by the defendants ' advocate requiring an ecclesiastical verdict as a condition precedent to voluntary separation also was obviously wrong and an erroneous concession of law made by the defendants ' advocate could not be relied upon for saving the plaintiffs. 'The fact, therefore, that cross objection No. 11 filed in the High Court by the defendants does not appear to have been pressed makes no difference.
In our opinion, for reasons stated above, this head of objection raised by the learned advocate for the appellants before us is well founded and the judgments of the majority Judges are vitiated by an error of a kind which is sufficient reason within the meaning of the Code of Civil Procedure for allowing the review.
The last point taken up by the learned advocate for the appellants is that although certain matters had been agreed to be left out in connection with issue No. 11 (a), the learned Judges took an adverse view against the defendants on matters which had been so left out by agreement.
Issue No. 1 1 relates to the powers of the Patriarch.
Clauses (b) to (1) relate to specific powers of the Patriarch.
Clause (a) of that 547 issue is vague and is expressed in very general terms.
Paragraph 60 of the District Judges judgment is as follows: "60.
It was stated by the advocates on both sides that it is unnecessary for the purpose of this suit to determine or decide in a general and comprehensive manner or define exhaustively all the powers that the Patriarch may have over or in respect of the Malankara Church as the supreme spiritual or ecclesiastical head of the whole Jacobite Church including Malankara and I also think it is not within the province or competency of this court to attempt to do it.
Whether he is the supreme spiritual head or whether be is the supreme ecclesiastical head, his powers as the Patriarch in respect of the matters specified under clauses (b) to (h) of issue II.
(which have formed the subject matter of dispute in this case) have been considered and defined under these various headings under this issue II and it has also been stated how far they have been determined or upheld by law courts, custom, practice and precedent so far as Malankara is concerned and these findings, it is conceded on both sides, will suffice.
" It will be noticed that after this agreement issue No. 11 related only to certain specific powers of the Patriarch.
The findings on these issues by themselves do not lead to any result.
They were, as it were, only introductory issues and were material for other issues, e. g. issues 14, 15, 19 and 20.
In other words, the general issue II (a) being given up, the other issues mentioned above were automatically limited to the specific acts relating to the specific powers of the Patriarch.
The majority Judges have, however, certainly gone into three matters which were then agreed to have been left out, e. g., (a) obligation to obey the Patriarch whether canonically installed.
or not, (b) extent of the right of the Patriarch by himself to decide matters of faith and (c) whether the Patriarch has the right to approve of a Catholicos in the sense that such approval was necessary.
These matters are not averred in pleadings and no specific issues have been raised and in the circumstances, should not have been gone into.
The suggestion is that these points are covered by other issues.
It is said that the learned Judges held that the new constitution exhibit AM amounted to a 548 repudiation of the authority of the Patriarch on the following grounds: (1) Installation of Catholicos ignoring the Patriarch; (2) Absence of a provision for the approval by the Patriarch or Malankara Metropolitan; (3) Ordination of Metropolitan and the issuing of Staticons by the Catholicos, and (4) the right to collect Ressissa.
These points are said to be covered by issues II (b), (c), (g) and (h), and also by issues 10(b), 14, 15 and 16.
Assuming it is so, it is clear that the learned Judges also founded themselves on the three points here in before mentioned which do not appear to fall within any of the issues in the case except issue II (a) which was given up.
To decide against a party on matters which do not come within the issues on which the parties went to trial clearly amounts to an error apparent on the face of the record.
It is futile to speculate as to the effect these matters had on the minds of the Judges in comparison with the effect of the other points.
The above discussion, in our opinion,, is quite sufficient for the purpose of disposing of this appeal and it is not necessary to go into the several other minor points raised before us.
In our opinion the appellants have made out a valid ground for allowing their application for review.
We accordingly allow this appeal, set aside the judgment of the High Court and admit the review.
As the different points involved in this appeal are intimately interconnected we direct the entire appeal to be reheard on all points unless both parties accept any of the findings of the High Court.
The costs must follow the event and we order that the appellants must get the costs of this appeal before us and of the application for review before the High Court.
We need hardly add that the observations that we have made in this judgment are only for the purpose of this application for review and should not be taken or read as observations on the merits 'of the appeal now restored and to be reheard by the High Court.
Appeal allowed.
|
The provisions of the Travancore Code of Civil Procedure are similar in terms to Order 47, rule 1, of the Code of Civil Procedure 1908 and an application for review is circumscribed by the definitive limits fixed by the language used therein.
The words "any other sufficient reason" mean a reason sufficient on grounds at least analogous to those specified in the rule.
It is well settled that in an ejectment suit the plaintiff must succeed on the strength of his own title and not on the weakness of the defendant 's case.
It is an error apparent on the face of the record if the judgment does not deal effectively and determine an important issue in the case on which depends the title of the plaintiff and the maintainability of the suit.
To decide against a party on matters,which do not come with in the issues on which parties went to trial clearly amounts to an error apparent on the face of the record.
Where the error complained of is that the Court assumed that a concession had been made when in fact none had been made or that the Court misconceived the terms of the concession or the scope and extent of it or the attitude taken, up by the party and has been misled by a misconception of such alleged concession, such error must be regarded as a sufficient reason analogous to an error on the face of the record within the meaning of Order 47, rule I of the Code of Civil Procedure.
Such error will not generally appear on the record and will have to be brought before the Court by means of an affidavit.
A suit filed in 1938 in the Court of the District Judge at Kottayam (Travancore) was dismissed, The plaintiff 's appeal 521 against the decree was allowed by a Full Bench of the High Court of Travancore.
A review application filed by the defendants against the judgment on the ground that it contained several mistakes or errors apparent on the face of the record was dismissed by the High Court.
The High Court declined to grant a certificate under article 133.
The defendants were granted special leave to appeal by the Supreme Court.
Consequent upon political changes in India culminating in the adoption of the new Constitution of India, there were changes in the judicial administration in the State of Travancore.
Up to the end of June, 1949, the Travancore High Court Act (Regulation IV of 1099) was in force in the State of Travancore.
Section 11 of the Regulation provided that the judgments of a Full Bench from the decrees of District Courts involving certain amount or value of subject matter in suits as well as in appeals shall be submitted to the Maharaja for confirmation by his Sign Manual.
Section 12 of the Regulation applied as far as may be the provisions of section 11 to the judgments after review.
In May, 1949, came the Covenant of Merger between the rulers of Travancore and Cochin which, inter alia, provided for a Rajpramukh.
In July, 1949, came Ordinance II of 1124 repealing Regulation IV of 1099.
Clause 25 of the Ordinance provided that a Full Bench shall hear and decide the appeals, inter alia, from the decrees of the District Courts etc.
involving certain amount or value of subject matter.
Clause 26 related to a review of the judgment by a Full Bench.
The provisions relating to the jurisdiction and powers of High Court were substantially reproduced in a later Act (V of 11 25) and were Continued by articles 214 and 225 of the Constitution of India.
The advocate for the respondents contended in the Supreme Court that the review application, in view of the changes referred to above, had become infructuous and should have been dismissed in limine, because even if the review application were allowed there would be no authority with jurisdiction and power to pronounce an effective judgment after hearing the appeal.
Again, this case was not decided by a Full Bench under section 25 of the Act, and therefore Do review was maintainable under section 26.
And even if the appeal be considered to have been filed under section 1 1 of Regulation IV of 1099, the application for review must be dealt with under section 12 of the Regulation and a fresh judgment after the review would have to be submitted under section 11 to the Maharaja for confirmation by his Sign Manual; and the present Maharaja of Travancore did not possess the power to consider and to confirm or reject the same.
Hold, (repelling the contention) that in view of the change of the laws if the appeal were revived after the admission of review, it must be disposed of under section 25 of Act V of 1125 and that section did not require any confirmation of the judgment passed on the rehearing of the appeal by the Maharaja or Rajpramukh or Any other authority.
Assuming that the appeal, if restored, 67 522 would be governed by section 12 of Regulation IV of 1099, even then section 11 would have to be applied only "as far as may be" and the portion of the section 11 requiring confirmation by the Maharaja, would be inapplicable in view of the events that had happened.
Chhajju Ram vs Neki (49 I.A. 144), Bisheshwar Pratap Sahi vs Parath Nath (61 I. A. 3 78), Hari Shankar Pal vs Anath Nath Mitter ([1949] F.C.R. 36), Sha Mulchand & Co. Ltd. vs Tawahar Mills Ltd. ([1953] S.C.R. 351)), Beg vs Pestan ji Dingha and Another , Madhu Sudan Chowdhri vs Musammat Chandrabati Chowdhraizi ( ), Bekhanti Chinna Govinda Chettiyar vs section Varadappa Chettiyar , and Rex vs Northumberland Compensation Appeal Tribunal, Ex Parte Shaw ( ) referred to.
The facts leading up to the appeal, as summarized from the Judgment, are as follows.
There were two rival sections of the Malankara Jacobite Syrian Christian community in Malabar, who came to be represented by the appellants and respondents respectively.
Certain disputes had arisen between the two sections ; and each claimed the right to possess and administer the Church properties to the exclusion of the other.
In 1938, a suit was filed in the District Court of Kottayam by the first and second respondents against the first and second appellants.
The plaintiff s contended that the defendants had committed acts of heresy and became ipso facto alien to the Malankara Jacobite Syrian Church.
They were, therefore, " 'disqualified and unfit to be the trustees of or to hold any other position in, or enjoy any benefit from, the Jacobite Syrian Church" (para 26 of the plaint).
The District Judge, who heard the suit, held, by his judgment delivered on the 18th January, 1943, amongst other things, that the acts and conduct imputed to the defendants did not amount to heresy or schism, or to voluntary separation from the Church, and that in any event, according to Canon Law, there could be no ipso facto going out of the Church in the absence of a decision of an ecclesiastical authority properly arrived at.
The conclusion arrived at by the District Judge was that the plaintiffs were not entitled to maintain the suit, which was, therefore, dismissed.
Being aggrieved by the trial Court 's dismissal of the suit, the plaintiffs appealed to the High Court of Travancore.
The appeal was heard by a Full Bench of the High Court, consisting of three Judges, one of whom expressed a dissenting view.
On the 8th of August, 1946, the High Court held, by a majority that the defendants had repudiated the fundamental principles and tenets of the Malankara Jacobite Syrian Church and had established a new Church and had thereby voluntarily separated from, and ceased to be members of, the Malankara Jacobite Syrian Church.
The majority hold that the plaintiffs and been validly elected as trustees and as such were entitled to possession of the Church 523 properties.
The appeal *as accordingly allowed and a decree was passed for possession and other reliefs in favour of the plaintiffs.
On the 22nd August, 1946, the defendants filed a petition for review of the High Court 's judgment on the ground that it contained several mistakes or errors apparent on the face of the record and that in any event there were sufficient reasons for the rehearing of the appeal.
The application for review was ultimately dealt with by the High Court on merits on the 21st of December, 1951.
The Court hearing the review rejected all the points urged in favour of review and dismissed the application, holding that there was no error apparent on the face of the record and that there were not sufficient reasons for the rehearing of the appeal.
The High Court declined to grant leave to appeal to the Supreme Court under article 133 of the Constitution; whereupon the defendants applied for, and on the 14th April, 1952, obtained, special leave of the Supreme Court to prefer an appeal against the High Court 's decision.
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259.txt
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Appeal No.232 of 1960.
Appeal from the Judgment and Order dated October 6, 1958, of the Bombay High Court in Income Tax Reference No. 10 of 1958.
R. J. Kolah, Dwaraka Das, section N. Andley, Rameshwar Nath, J. B. Dadachanji and P. L. Vohra for the Appellants.
Hardyal Hardy and D. Gupta for the Respondent.
November 29.
The Judgment of J. L. Kapur and J. C. Shah, JJ., was delivered by Kapur, J. M. Hidayatullah, J., delivered a separate Judgment.
KAPUR, J. This is an appeal pursuant to a certificate of the High Court of Bombay against the judgment and order of that Court in Income tax Reference No. 10 of 1958, answering the question referred to it against the assesses whose legal representatives are 744 the appellants before, us, the respondent being the Commissioner of Income tax.
The facts which have given rise to the appeal are that the late Mr. Annantrai P. Pattani, hereinafter called the assessee was, by Hazur Order dated December 10, 1937, appointed the Chief Dewan of Bhavnagar State.
On January 15, 1948, the Maharaja of Bhavnagar introduced responsible Government in his State and appointed the assessee as the Chairman of the Bhavnagar Durbar Bank but he received no salary for that post.
On the same date by another Hazur Order the Maharaja granted a monthly pension of Rs. 2,000 to the assessee.
The order was in the following terms: "He looked after us well in our childhood and rendered valuable services sincerely and with single minded loyalty to us and our State during extremely difficult period of the last war and thereafter, which has enhanced the prestige and prosperity of the State and given the State and the people a place of pride in India.
In appreciation of this, it is (hereby) decided to grant him a monthly pension of Rs. 2,000 two thousand which is the monthly salary he is drawing at present.
Date 22 1 1948.
" On May 31, 1950, the Maharaja directed Messrs. Premchand Roychand & Sons, Bombay, with whom he had an account "to pay by cheque to Mr. A.P. Pattani Rs. 5 lacs out of the amount lying to the credit of my account with you." This sum was paid to the assessee on June 12, 1950.
It is stated that the accountant of the Maharaja asked for instructions as to how that amount of Rs. 5 lacs was to be adjusted in the accounts and on December 27, 1950, the Maharaja made the following order: "In consideration of Shri Annantrai P. Pattani the Ex Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five Lacs) are given to him as gift.
Therefore, it is ordered that the said amount should be debited to our Personal Expense Account." On March 1, 1948, Bhavnagar State was merged in the United States of Saurashtra and the Maharaja ceased to be the ruler of the said State as from that 745 date.
The assessability of this sum of Rs. 5 lacs was raised in the course of the assessment proceedings for the assessment year 1951 52 and at the request of the ' assessee which is stated to be oral the Maharaja wrote on March 10, 1953, the following: "I confirm that in June 1950, 1 gave you a sum of rupees five lacs (Rs. 5,00,000) which wag a gift as a token of my affection and regard for you and your family.
This amount was paid to you by Premchand Roychand & Sons according to my letter of 31st May, 1950, from moneys in my account with them.
" On these facts the Income tax Officer held that Rs. 5,00,000 received on June 12, 1950, was liable to income tax under section 7(1) read with explanation (2) of that section as it stood before the amendment by the Finance Act, 1955.
The assessee took an appeal to the Appellate Assistant Commissioner which was dismissed.
Against that order an appeal was taken to the Income tax Appellate Tribunal but the Tribunal also dismissed the appeal.
The Tribunal held that looking to the circumstances they would attach more importance to the "contemporaneous document, i.e., the order of the 27th December, 1950"; which clearly mentioned why the sum of Rs. 5,00,000 was paid to the assessee.
The Tribunal was not inclined to "believe in the contents of that letter and would leave the matter at that.
" The reference is to the letter of the Maharaja dated March 10, 1953.
The Tribunal further held that there was no distinction between the Maha raja and the State and "assuming for a moment that this view of ours is not found to be correct, still it is clear from the Huzur Order No. 13 dated 22 1 1948 (vide para 2 above) that the assessee rendered services not only to the State, if it is distinct from.
the Maharaja but to the Maharaja as well; for that Huzur Order clearly refers to assessee rendering "valuable services sincerely and conscientiously to us and our State".
We would, therefore, hold that the amount of Rs. 5 lacs is a taxable receipt falling under Section 7(1) read with Explanation 2.
" At the instance of the assessee the following question of law was referred to the High Court: 746 "Whether the sum of Rs. 5 lacs has been properly ,brought to tax in the hands of the assessee for the assessment year 1951 52?" and a further question as to the applicability of section 4(3) (vii) of the Income tax Act was not referred on the ground that it did not arise out of the order of the Tribunal.
The High Court, on the findings given by the Tribunal came to the conclusion that section 7(1) explanation (2) of the Income tax Act applied.
It held that it was not possible to regard the receipt of this sum of money by the assessee as a windfall nor as a personal gift of the nature of a testimonial; that the gift was not made in appreciation of the personality or character of the assessee nor was it symbolical of its appreciation of his personal qualities; that the consideration for the gift was in terms stated to be past services and therefore it could not be treated as a mere gift by an employer to an employee when the Court did not know what motivated the making of that gift.
On the facts of the case the High Court reached the conclusion, though with some reluctance, that the case fell within the ambit of section 7(1), Explanation (2).
The High Court also held that this sum could not be exempted from tax on the ground that it was merely a casual or nonrecurring receipt because once connection with the employment was established there was no question of considering the recurring or the casual nature of the receipt.
During the pendency of the proceedings in the High Court the assessee died and his heirs and legal representatives were brought on the record and hence they are the appellants.
It was argued on behalf of the appellants that the facts showed that the sum paid cannot fall within section 7(1), Explanation (2), of the Income tax Act.
By Hazur Order dated January 22, 1948, the Maharaja had compensated the assessee for valuable services rendered and single minded loyalty to the Maharaja and to his State during the difficult period of the war and thereafter, which had added to the prestige and prosperity of the State and in appreciation of that the 747 Maharaja had granted to the assessee a monthly pension of Rs. 2,000, which was paid to the assessee even after the merger and of the establishment of the.
United States of Saurashtra from out of the public revenue.
At the time when Rs. 5,00,000 were paid, the State of Bhavnagar as such had ceased to exist.
The Maharaja was no longer a Ruling Chief but was the Governor of the State of Madras.
The order by which Messrs. Premchand Roychand & Sons, Bombay, were directed to pay the sum of Rs. 5,00,000 out of the account of the Maharaja does not mention any reason for payment.
When as is alleged an accountant of the Maharaja asked as to how that amount of Rs. 5,00,000 was to be adjusted in the accounts, the Maharaja wrote on December 27, 1950, what is described as an order and directed that the sum should be debited to his Personal Expense Account.
It also stated, why it is not clear, that that sum was to be given to the assessee in consideration of the assessee 's loyal and meritorious services as a gift.
When asked later to clarify the reasons for making this gift the Maharaja made it clear that the gift was as a token of affection and regard for the assessee and his family and that the amount was paid by Messrs. Premchand Roychand & Sons from out of the private monies of the Maharaja with that firm.
The Income tax Appellate Tribunal took into account the two documents the first of which has been described as an order of December 27, 1950, which was treated as a "contemporaneous document" and the other the letter of March 10, 1953, which was about two years later.
The Tribunal did not accept the correctness of what was stated in the letter but attached a great deal of importance to the document of December 27, 1950, which the Tribunal thought was a con temporaneous document.
It appears to us that the Tribunal was in error in treating the document of December 27, 1950, as a contemporaneous document and because of this erroneous approach the finding that it has given cannot be treated as a finding of fact which should bind the court in its decision.
It is obvious that the reason why the 748 Tribunal attached all this importance to the document of December 27, 1950, was that it was contemporaneous.
It would be difficult to accept that a document written six months after the fact of payment could be termed as contemporaneous document particularly when the object of that document was only to instruct an accountant as to how he should make a particular entry.
The letter which was written by the Maharaja on March 10, 1953, was rejected because of the circumstances of the case one of which was the contemporaneous document.
It does not appear to us that the Tribunal gave sufficient or any consideration to the fact that the Maharaja had already passed an order of a liberal and almost generous grant of a pension of Rs. 2,000 per mensem which was in lieu of the services rendered by the assessee both to the State as well as to the Maharaja and his family and that pension was ordered before the merger of the State and when the employment of the assessee as the Dewan terminated.
According to what was stated in the letter of the Maharaja dated March 10, 1953, the sum of Rs. 5,00,000 was given as a gift in token of Maharaja 's affection and regard for the assessee and the assessee 's family.
There is no reason shown why the Maharaja should have aided and abetted the assessee in escaping income tax.
The only reason stated by the Tribunal is based on a wrong assumption as.
to the nature of the document of December 27, 1950.
The payment of Rs. 5,00,000 was sought to be brought within the purview of section 7(1) of the Act read with explanation (2).
This section at the relevant time provided: section 7(1) "The tax shall be payable by an assessee under the head "Salaries" in respect of any salary or wages, any annuity, pension or gratuity and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are due to him from; whether paid or not or are paid by or on behalf of. . . any private employer. . . . .
Explanation 2: A payment due to or received by 749 an assessee from an employer or former employer or from a provident or other fund, is to the extent to, which it does not consist of contributions by the ', assessee or interest on such contributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services;. . . .
Counsel for the appellants contended that the payment did not fall within this section because it was a gift made on account of personal qualifications and was a testimonial unconnected with any service rendered.
The submission was that the assessee had already been compensated for his services to the Maharaja personally and the State and this sum of Rs. 5 lacs was a gift in token of affection and regard and not as a payment in consideration of the services already rendered to the State or the Maharaja or both.
It will not be inappropriate to mention that in the document dated December 27, 1950, it is stated that Rs. 5,00,000 was paid to the assessee as ex Dewan of Bhavnagar State in consideration of his having rendered loyal and meritorious services to Bhavnagar State.
There is no mention in the document of December, 1950, of any services rendered to the Maharaja and it does not seem to have been considered by the Tribunal as to why the Maharaja should make out of his personal account the gift of such a large amount for something which was not done for the Maharaja specifically, particularly when the services to the State and to the Maharaja and his family had already been well compensated.
This lends support to the submission of the appellants that the amount was paid merely as a gift in token of Maharaja 's affection and regard for the assessee.
Mr. Kolah for the appellants relied on several cases in support of his contention that the amount was not liable to tax under section 7.
In Beynon vs Thorpe (1) the assessee resigned his position as a Managing Director of the Company; did no work for the company; did (1) 95 750 not attend any Board meetings and received no remuneration as a Director of the Company.
It was, however, a custom of the company to give to its retiring employees voluntary pension or allowance and the company voted a pension of pound 5,000 a year to the assessee but this resolution was rescinded and by another resolution pound 5,000 was voted to the assessee" not as or because he is a Director but as a personal gift".
The assessee was assessed under Schedule 'E ' in respect of both the pension and the final payment but these assessments were discharged on appeal by the Special Commissioners who decided that the allowances were gifts of personal nature only.
It was hold that the payments were not income assessable to income tax in the hands of the assessee.
Rowlatt, J., said at p. 14: "Now the question is whether this ceases to be a mere gift because what has led to it is a past employment, an employment which has ceased.
It has been.
made abundantly clear by the Court in Scotland in Duncan 's case(1) that this sort of sums received by a person cannot possibly be put as receipts from his office or in respect of his office or employment, and they said in terms of that kind in a case like this that these emoluments cannot be taxed under Schedule 'E ', and I am bound to say I think that goes a very long way to conclude this case.
But it is said that nevertheless they are in respect of the employment.
Well, it seems to me that is a complete fallacy.
It is nothing but a gift moved by the remembrance of past services already efficiently remunerated as services in them.
selves; it is merely a gift moved by that sort of gratitude or that sort of moral obligation if you please: it is merely a gift of that kind.
In this ease it happens to be very large; in many cases it is very small, but in all the cases it seems to me, whether it is large gift like this or whether it is a small gift to a humble servant they are exactly on the same footing as gifts which are made to a child or gifts which are made to any other person whom the giver thinks he ought to supply with funds for one reason or another; and as the (1) 751 Lord President in Scotland points out it is only a matter of history that the feeling between the parties which has generated the gift arises out of an employment." Mr. Kolah also relied on Reed vs Seymour (1).
In that case a committee of a Cricket Club granted a benefit match to a professional cricketer in their service.
Out of the profits of the benefit match the beneficiary, who was the assessee purchased a farm and assessment was made on him under Schedule 'E ' in respect of the proceeds of the benefit match but this was discharged by the General Commissioner on appeal.
This sum was held to be in the nature of a personal gift and not assessable *to income tax.
Viscount Cave in his speech posed the question which Rowlatt, J., put, i.e., "is it in the end a personal gift or is it remuneration"; if the latter it is subject to tax, if the former it is not.
In that case the test applied by Viscount Cave was that the terms of the assessee 's employment did not en title him to a benefit; the purpose for which the amount was paid was to express gratitude of the employers and of the cricket loving public for what he had done and in their appreciation of his personal qualities.
It was also stated that if the benefit had taken place after Seymour 's retirement no one would have sought to tax the proceeds as his income and the circumstance that it was given before but in contemplation of, retirement does not alter its quality and the whole sum was a testimonial and not a perquisite and therefore it was not a remuneration for services but a personal gift.
Counsel also relied on Moorehouse vs Dooland (2).
In that case a cricket professional was employed under a contract in which it was provided that collections shall be made for any meritorious performance by him in accordance with the rules for the time being of the employing Cricket League Club.
The assessee played twenty matches and on eleven occasions collections were made on his behalf under the rules of the Club and a total sum of pound 48 15s.
was collected.
This was sought to be taxed as fees, wages perquisites or profits (1) [1927] XI T.C. 625.
(2) 752 arising from his employment.
It was held that (1) the test of liability to tax on voluntary payments from the standpoint of the person who receives it was that it accrued to him by virtue of his office or employment, i.e., byway of remuneration of his services; (2) that if the assessee 's contract of employment entitled him to receive voluntary payments and (3) that the payment was of a periodic and recurring character.
On the other hand if a voluntary payment was made in circumstances which showed that it was given by way of a present or a testimonial on grounds personal to the recipient, the proper conclusion was that the payment was not profit accruing to the recipient by virtue of his office or employment but a gift to him as an individual paid and received by reason of his personal needs or by reason of his personal qualities.
Applying these principles the proceeds were by the terms of the contract of employment received by way of remuneration and were liable to tax.
In that case the payment was treated as being subject to tax because it was substantially in respect of services and accrued to the assessee by reason of his office.
It is quite clear that had the gift been as a testimonial or a contribution for specific performance peculiarly due to the personal qualities of the recipient, it would have been treated as a mere present.
The next case relied upon was David Mitchell vs Commissioner of Income tax (1) where the test laid was whether the payment was made in appreciation of .the personality and character of the assessee or in appreciation of the professional services rendered by him in order to give him an extra profit over and above the share of profit he might get from the firm for the services rendered.
Counsel for the respondent argued that the gift made by the Maharaja was not in respect of personal qualities of the recipient but was relatable to his office although made by an ex employer and was therefore taxable; that the gift was voluntary is clear but it is not quite clear how the amount can be said to be relatable to the office held by the recipient.
Even (1) 753 according to the case of the respondent the amount was paid about two years after the assessee had ceased to be an employee of the Maharaja or the State and immediately on his ceasing to be the Dewan of Bhavnagar State, the Maharaja had granted him a pension from out of the public funds for his services to the State as Dewan and for services rendered to the Maharaja and his family a handsome and a generous monthly pension of Rs. 2,000 per mensem.
Apart from the fact that the Tribunal relied upon a document which was not contemporaneous, it seems to have overlooked the fact that there was a gap of two years before the amount of Rs. 5,00,000 was paid by the Maharaja out of his personal funds.
Counsel for the respondent relied upon a judgment of this Court in P. Krishna Xenon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore (1).
In that case the assessee was a teacher who taught his disciples Vedanta philosophy without any motive or intention of making any profit.
One of the disciples made gifts of money to him on several occasions and it was contended by the assessee that he was not liable to tax on the amounts received from his disciple as he was not carrying on any vocation.
But it was held that in teaching Vedanta philosophy the assessee was carrying on a vocation and that the payments made by the disciple were received by the recipient from his vocation.
It was also held that if the voluntary payments had been made for reasons purely personal to the donee and not connected with his office or vocation, they would not be taxable but if they were made because of the office they would be taxable.
The question was not what the donor thought he was doing but why the donee received it.
The first thing to notice about that case is that those gifts were not made by the disciple as a gift to mark his esteem and affection for his preceptor but as was stated by the disciple in his affidavit he had paid those amounts because he had obtained the benefit of the teachings by the preceptor on Vedanta.
It was found in that case and the disciple admitted (1) [1959] Supp. 1 S.C.R. 133. 754 that he had received benefit from the teaching of his preceptor and that the gifts that he had made, even though as a mark of esteem and affection, were the result of teaching imparted by the preceptor and because the amounts were paid to the preceptor as preceptor and the imparting of the teaching was the causa causans of the making of the gift,; it was not merely causa sine qua non.
The payments were repeated and came with some regularity as the disciple visited the preceptor for receiving instructions.
It was in these circumstances that this court held the payments to the preceptor as payments because of the imparting of the teaching and therefore they were income arising from the vocation of the recipient as a teacher of Vedanta philosophy.
In our opinion the sum of Rs. 5,00,000 was not paid to the assessee in token of appreciation for the services rendered as a Dewan of Bhavnagar State but as a personal gift for the personal qualities of the assessee and as a token of personal esteem.
The appeal is therefore allowed and the order of the High Court set aside and the reference is answered against the Commissioner of Income tax.
The appellants will have their costs throughout.
HIDAYATULLAH, J. I have had the advantage of reading the judgment just delivered by my brother, Kapur, J.
I regret very much my inability to agree that the appeal should be allowed and the order of the High Court set aside.
In my opinion, the High Court had correctly answered the question referred to it.
The facts of the case have been stated in detail in the judgment of my learned brother, and I need not repeat them but refer only to some of them briefly.
On June 12, 1950, a sum of Rs. 5 lakhs was given by the Maharaja of Bhavnagar to the predecessor of the appellants, who was an ex Dewan of the State.
This was paid by Messrs. Premchand Roychand & Sons, Bombay, with whom the Maharaja had an account.
There is no contemporaneous record to show why this payment was made; but it appears that when the accountant of the Maharaja enquired how the amount 755 was to be entered in the books of account, the Maharaja issued an order on December 27, 1950, to the following effect: "In consideration of Shri Annantrai P. Pattani the Ex Diwan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 (Rupees Five lacs) are given to him as gift.
Therefore, it is ordered that the said amount should be debited to our Personal Expense Account." After the assessment proceedings had commenced in this case, the original assessee produced a letter written by the Maharaja on March 10, 1953, as follows: "I confirm that in June, 1950, I gave you a sum of rupees five lacs (Rs. 5,00,000) which was a gift as a token of my affection and regard for you and your family.
This amount was paid to you by Premchand Roychand & Sons according to my letter of 31st May, 1950, from moneys in my account with them.
" The question in this case was whether section 7(1) of the Income tax Act read with Explanation 2 to that section as it stood prior to the amendment in 1955, applied to this payment.
That section, so far as it is material, is as follows: "7(1).
The tax shall be payable by an assessee under the head 'Salaries ' in respect of any salary or wages, any annuity, pension or gratuity and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are allowed to him by or are due to him, whether paid or not, from, or are paid by or on behalf of any private employer;. . . . .
Explanation 2.
A payment due to or received by an assessee from an employer or former employer or from a provident or other fund, is to the extent to which it does not consist of contributions by the assessee or interest on such contributions a profit received in lieu of salary for the purpose of this subsection, unless the payment is made solely as compensation for loss of employment and not by way of remuneration for past services;. . .".
To determine whether the second Explanation applies 756 to the facts in this case, it has to be found if this pay ment was received by the assessee from a former employer by way of remuneration for past services.
The Tribunal did not accept the letter of the Maharaja, and observed as follows: "In support of the latter view Mr. Tricumdas strongly relied upon the letter dated 10 3 1953 addressed by the Maharaja to the assessee, vide para 2 above.
We have already indicated the circumstances in which that letter came to be written and would merely observe that we find it difficult to bring ourselves to believe in (sic) the contents of that letter and would leave the matter at that.
" This, in my opinion, is a finding upon the evidentiary .value of the letter of the Maharaja, and though the order of the Tribunal is worded mellifluously, the Tribunal 's decision is quite clearly that it was not per suaded to accept it.
Indeed, of the two documents, greater worth has to be attached to one which was issued before the controversy started and was written not to the assessee but to the Maharaja 's accountant who enquired how the account was to be adjusted.
The use of the word 'contemporaneous ' to describe the order to the accountant meant no more than this that it was earlier in time and very soon after the amount was given.
The Tribunal did not rely on any extra neous evidence in reaching its conclusion, but on something which had proceeded from the Maharaja himself.
The motive of the Maharaja may be irrelevant, because what has to be seen is not why the payment was made but for what the assessee had received it.
The Maharaja no doubt had been generous in fixing the pension at Rs. 2,000 per month.
But the payment of such a large sum was not just bounty but to reward the past services, which judged from the scale of the pension had not adequately been paid for in the past.
In this connection, the words of the Maharaja himself (and what better evidence can there be?) were that the amount was paid "in consideration of Shri Annantrai P. Pattani the Ex Dewan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 are given to him as gift".
757 The word gift ' does not alter the nature of the payment.
The Maharaja indeed made a gift, as he had stated over again; but this order quite clearly disclosees that it was by way of remuneration for past services.
The case, therefore, falls within the ruling of the a Supreme Court reported in P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore (1), and is indistinguishable from it.
In the earlier case of this Court, the person who gave the money did not even mention any past services; but this Court found that because the recipient had taught him Vedanta philosophy, the payment was really in the nature of remuneration for past services.
The facts in P. Krishna Menon 's case (1) were that the assessee was teaching his disciples Vedanta philosophy without any motive or intention of making a profit out of such activity.
One J. H. Levy who used to go to Travancore from England at intervals attended his teachings.
Levy had an account with Lloyd 's Bank at Bombay, and on December 31, 1944, Levy transferred the entire amount of Rs. 2,41,103 11 3 to the credit of an account which Levy got the assessee to open in his ' own name.
Levy made further remittances and by August 19, 1951, had paid about Rs. 4,50,000.
It was held by this Court that the assessee was carrying on a vocation.
In deciding the question whether the amounts were assessable to tax, this Court observed as follows: ". it seems to us that the present case is too plain to require any authority.
The only point is, whether the moneys were received by the appellant by virtue of his vocation.
Mr. Sastri contended that the facts showed that the payments were purely personal gifts.
He drew our attention to the affidavit of Levy where it is stated 'all sums of money paid into his account by me have been gifts to mark my esteem and affection for him and for no other reason '.
But Levy also there said, 'I have had the benefit of his teachings on Vedanta '.
It is important to remember however that the point is not what the donor (1) [1959] Supp.
1 S.C.R. 133.
96 758 thought he was doing but why the donee received it".
Sarkar, J., then referred to the dictum of Collins, M. R., in Herbert vs Mc Quade (1), which may be quoted here: "Now that judgment, whether or not the particular facts justified it, is certainly an affirmation of a principle of law that a payment may be liable to income tax although it is voluntary on the part of the persons who made it, and that the test is whether, from the standpoint of the person who receives it, it accrues to him in virtue of his office; if it does, it does not matter whether it was voluntary or whether it was compulsory on the part of the persons who paid it.
That seems to me to be the test; and if we once get to this that the money has come to or accrued to, a person by virtue of his office it seems to me that the liability to income tax is not negatived merely by reason of the fact that there was no legal obligation on the part of the persons who contributed the money to pay it." The learned Judge also referred to the observations of Rowlatt, J., in Reed vs Seymour (2) and of Viscount Cave, L. C., in Seymour vs Reed (3), and observed that the real question was, is the payment in the nature of a personal gift or is it a remuneration?, and quoted as the reply the words of the Lord Chancellor "If the latter, it is subject to the tax; if the former, it is not." Sarkar, J., also referred to the observations of Lord Ashbourne in Blakiston vs Cooper (4), which were: "It was suggested that the offerings were made as personal gifts to the Vicar as marks of esteem and respect.
Such reasons no doubt played their part in obtaining and increasing the amount of the offerings, but I cannot doubt that they were given to the vicar as vicar and that they formed part of the profits accruing by reason of his office.", and concluded as follows: "We have no doubt in this case that the imparting (1) (3) (2) (4) [1909] A.C. 104.
759 of the teaching was the causa causans of the making of the gift; it was not merely a causa sine qua non.
The payments were repeated and came with the same regularity as Levy 's visits to the appellant for receiving instructions in Vedanta.
We do not feel impressed by Mr. Sastri 's contention that the first payment of Rs. 2,41,103 11 3 was too large a sum to be paid as consideration.
In any case, we are not concerned in this case with that payment.
We are concerned with payments which are of much smaller amounts and as to which it has not been said that they were too large to be a consideration for the teaching.
And one must not forget that these are cases of voluntary payments and the question of the appraisement of the value of the teaching received in terms of money is not very material.
If the first payment was too big to have been paid for the teaching received, it was too big to have been given purely by way of gift.
" In my opinion, the case of this Court concludes the matter, and the Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally.
I thus agree with the High Court in the answer which it gave, in agreement on facts with the Tribunal, and the reasons for which the answer was given.
I would, therefore, dismiss the appeal with costs.
BY COURT: In view of the majority judgment of the Court, the appeal is allowed with costs throughout.
Appeal allowed.
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A who was the Dewan of the State of Bhavnagar before responsible government was introduced in the State, was granted a monthly pension of Rs. 2,000 by the Maharaja of the State by an order dated January 15, 1948.
On March 1, 1948 the State of Bhavnagar was merged in the United States of Saurashtra and the Maharajah ceased to be the Ruler of the State.
Subsequently on May 31, 1950, the Maharaja directed his banker in Bombay to pay A a sum of Rs. 5 lakhs out of the amount lying to his credit and when he was asked for instructions as to how that sum was to be entered in the books of account he passed an order on December 27, 1950, to the effect that in consideration of A having rendered loyal and meritorious services the said sum was given to him as a gift and that the amount should be debited to his personal expense account.
The liability of the above sum for income tax was raised during the course of the assessment proceedings of A for the year 1951 52, and the assessee produced a letter dated March 10, 1953, written by the Maharajah at the request of the former, as follows: "I confirm that in June 1950, I gave you a sum of Rs. 5 lakhs which was a gift as a token of my affection and regard for you and your family. .
The Income tax Officer held that the amount was liable to income tax under section 7(1), read with explanation (2), of the Indian Income tax Act, 1922.
The Appellate Tribunal took into account the two documents dated December 27, 1950, and March 10, 1953, written by the Maharajah and considered that the first which clearly mentioned why the said sum was paid to the assessee, was more reliable for the reason that it was contemporaneous, than the second which was written more than 2 years later and the correctness of which they were not inclined to accept.
The Tribunal agreed with the Income tax Officer that the amount was a taxable receipt.
Held, (per Kapur and Shah, JJ.; Hidayatullah, J., dissenting), that on the facts of the case the sum of Rs. 5 lakhs was given to the assessee not as a payment in consideration of the services already rendered by him as the Dewan of the State, but merely as a gift in token of the Maharajah 's affection and regard for the assessee, and, therefore, was not liable to be assessed to tax 743 under section 7(1), explanation (2), of the Indian Income tax Act,1922.
The Tribunal was in error in treating the document dated December 27, 1950, 'as a contemporaneous document while as a matter of fact it was written six months after the fact of payment, and because of this erroneous approach as a result of which the second letter had been rejected, the finding given by the Tribunal could not be treated as binding on the Court.
P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore, [1959] Supp. 1 S.C.R. 133, distinguished.
Per Hidayatullah, J.
The use of the word "contemporaneous" to describe the order to the banker meant no more than this that it was earlier in time and very soon after the amount was given.
The word "gift" did not alter the nature of pay ment; the Maharaja indeed made a gift, as he had stated over again, but the order disclosed that it was by way of remuneration for past services.
The Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally.
The decision in P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore, [1959] Supp. 11 S.C.R. 133, was applicable and concluded the present case.
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1033.txt
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Appeal No. 243 of 1971.
Appeal by special leave from the judgment and order dated September 3, 1970 of the Madhya Pradesh High Court in Miscellaneous Petition No. 256 of 1970.
797 C. K. Daphtary, L. M. Singhvi, section K. Mehta, K. L. Mehta and K. R. Nagaraja, for the appellant.
B. Sen and I. N. Shroff, for respondents Nos. 1, 3 and 4.
section section Khanduja, section K. Dhingra and Promod Swaroop for res pondent No. 2.
It may at the outset be mentioned that the appointment of the Vice Chancollor of the Saugar University is made by the Chancellor of that University under section 13 of the University of Saugar Act, 1946 (hereinafter referred to as "the Act") from 1 panel of not less than three persons recommended by the Committee constituted under sub section (2) of that section.
The Committee to be constituted under sub section (2) was to consist of three persons, two of whom shall be elected by the Executive Council by single transferable vote from amongst persons not connected with the University or a College and the third shall be.
nominated 'by the 'Chancellor who was, also empowered to appoint one of them as Chairman of the Committee.
It is unnecessary to refer to other provisions of this section because these are not relevant for the purpose of this appeal.
It appears that under the above provisions a Committee to submit a panel of names for the appointment of a Vice Chancellor for the University was duly constituted consisting of two persons elected by the executive Committee of the University, namely, G. K. Shinde, Retired Chief Justice and Justice T. P. Naik of the Madhya Pradesh High Court while the third member Shri C. B. Agarwal Retired Judge of the, Allahabad High Court was nominated by tfie Chancellor, Rajmata Vijaya Raje Scindia who also appointed G. K. Shinde as the Chairman of the Committee.
The Chairman thereafter appears to have carried on a correspondence to fix, a convenient place and time for the meeting, which was ultimately fixed at Indore on the 4th of April 1970.
Justice Naik was, however, unable to attend the meeting and in, his absence the other two persons, Shri Shinde panel of and Shri Agrawal met; as a Committee and submitteds names from which the Chancellor appointed the appellant on 7th April 1970 as a vice Chancellor with effect from 22nd June 1970 for, a period of five years.
The appellant at the time of the appointment, it seems, was acting as Vice Chancellor.
1061SupCI/72 798 On the 9th of April 1970, the Governor of Madhya Pradesh, Shri K. C., Reddy promulgated Ordinance No. I of 1970 by section 2 of which sub section (1) of section II was substituted by a new sub section (1) where under the Governor of Madhya Pradesh was made an ex officio Chancellor of that University.
By section 3, it was provided that as from the date of the coming into force of that Ordinance, the Chancellor in office immediately, before the date aforesaid shall cease to hold office of the Chancellor and the Governor of Madhya Pradesh shall assume the said office.
By virtue of this Ordinance Rajmata Vijaya Raje Scindia ceased to be.
the Chancellor.
On the 23rd April 1970, the Governor again passed another Ordinance by section 2 of which, he substituted section 43 of the Act by a new section 43.
By section 3 a new section 43A was also added.
Section 4 made the amendments made by sections 2 and 3 to operate retrospectively as from the commencement of the original Act.
The amended sections 43 and 43A are as follows "43.
If any question arises whether any person hi,,, been duly appointed, elected, nominated or coopted as, or is entitled to be, a member of any authority or other body of the University or any officer of the University, the matter shall be referred to the Chancellor whose decision thereon shall be final.
43A. The Chancellor may, either on his own motion or on the application of any party interested, review any order passed by himself or his predecessor in office if he is of the opinion that it is not in accordance with the provisions of this Act, the statutes, the Ordinance or the Regulations or is otherwise improper and pass such orders in reference thereto as he may think fit." After the above Ordinances were promulgated, the Secretary to the Governor of Madhya Pradesh wrote on the 20th May 1970 to the appellant as follows : "The question has come up before the Chancellor whether the meeting of the committee constituted by his predecessor under section 1 3 (2) (9 the Act held on 4th April 1970 at Indore at which only two members out of the three were present was legal, and whether the recommendations made by the committee at that meeting were legally valid.
The Chancellor has been advised that the meeting held on the 4th April with only two men present and.
the decisions taken at the meeting .were not legal.
As, a consequence, the orders issued by the University office dated 14th April would have to be rescinded.
799 Before the Chancellor takes action in accordance with legal advice, he has desired that you should be asked if you have anything to state why such action should not be taken.
I am desired to request you to send your reply as early as possible, and at the latest within a week".
To this letter the appellant sent a reply on the 9th June 1970 after having earlier obitained an extension of time.
In that reply he tried to make out a case that the recommendation of the Committee of two members out of three was perfectly valid and in support of it he cited various authorities and also a precedent of the same Governor who as the Chancellor of Indore University seems to have maintained the selection made 'by his predecessor in similar circumstances.
The Governor did not, however, accept the appellant 's plea but passed the following impugned orders on the 15th June 1970 : "WHEREAS, on applications made in that behalf, the Chancellor is of the opinion that order dated the 7th April 1970, passed by his predecessor in office appointing Shri Ishwar Chandra as Vice Chancellor of the University of Saugar with effect from the 22nd June 1970, for a period of five years is not in accordance with provisions of section 13 of the University of Saugar Act, 1946 (XVI of 1946) (hereinafter referred to as the said Act); NOW, THEREFORE, in exercise of the powers conferred by section 43A of the said Act, 1, the Chancellor of the University of Saugar, hereby (i) cancel the aforementioned order dated the 7th April 1970 appointing Shri Ishwar Chandra as ViceChancellor; and (ii) direct that the committee be constituted for submission of panel in accordance with the provisions of section 13 of the said Act".
On the 1st July 1970, a Writ Petition was filed in the High Court of Madhya Pradesh and it appears that on the 3rd July 1970 the Court directed the appellant to produce the correspondence between the Chairman, and the members of the Selection Committee in respect of the meeting to be held to recommend the names for the appointment of a Vice Chancellor.
The appellant, if seems, produced the correspondence with an affidavit on the 25th July 1970 stating that he had obtained the correspondence from the Chairman of the Committee.
the former Chief,Justice Shinde.
On the ' 3rd of September 1970 'rule nisi was refused.
800 On the 19th September 1970 die application for leave to appeal to the Supreme, Court was also rejected.
In the latter order two facts had 'been stated which have been challenged as incorrect.
The first one was that the Chairman had at first fixed Bhopal as the venue of the meeting and secondly.that as the working Vice Chancellor of the University, the petitioner had access to all the documents relating to the meeting and his detailed reply given to the Chancellor was grounded on some of them.
Though there is some justification in these contentions what has to be seen is whether the order rejecting the Writ Petition was justified, and if so, now that the order of the Chancellor has been impugned, i.e that order valid.
It is clear from the Governor 's impugned order that the appellant 's appointment was held to be invalid because only two members of the Committee were present at the meeting.
The High Court while holding that in the absence of any provision in the relevant enactment or the rules or regulations made thereunder, a majority of members of a selection committee like the one in the case before them would constitute the quorum, however presumed that the question for consideration of the Chancellor was not merely one relating to the existence of the quorum requisite for a valid meeting but something different.
On that assumption it examined the correspondence which ensued between the Chairman and Justice T. P. Naik to ascertain whether in fact a valid meeting had been called.
According to the learned Judges, Justice Naik had written to the Chairman to say that he, the Chairman, was determined to hold the meeting presumably in his absence, and, therefore, the High Court thought that if the Chancellor, acting under section 43A of the Act formed the opinion that the meeting held on that date was not legal, it cannot be said that there was no prima facie material for the formation of that opinion, reached by him after giving to the, petitioner an oppor tunity to state why the action proposed should not be taken.
The assumption in this order rejecting the Writ Petition is not warranted, firstly, because the correspondence does not show that there was any deliberate attempt made by the Chairman to exclude one of the members in this case, Justice T. P. Naik, and secondly, that the Chancellor had because of this exclusion, declared the meeting held on the 4th April 1970 as not being valid.
We have already pointed out that the Chancellor was merely concerned with the legality of the recommendation made by two out of three members and not that,any attempt was made by the ' Chairman, to, exclude one of the members, Neither the showcase notice, nor the reply given by the appellant to that notice, nor even: the order of the Chancellor indicates any such ground as that assumed by the High Court to form the basis of the,Chancellor 's order.
The correspondence shows that the Chairman 801 had written a letter on the 12th February 1970 in which , he inquired of Justice Naik whether the 7th and 8th March 1970 would suit him to meet at Bhopal to consider the names for the panel.
Later on the 20th February 1970, he wrote another letter saying that the other member was abroad, and therefore, the meeting which was proposed to be held on the 7th or 8th cannot be held and that he would let him know when a new date was fixed.
In fact, Justice Naik replied on the 27th February 1970 acknow ledging these letters and asking him to let him know the date of the meeting as and when fixed.
On the 8th March 1970 Mr. Shinde again wrote to Justice Naik fixing the meeting on the 12th March 1970 at 10.30 a.m. at Indore and also suggested that if necessary they may meet the next day, the 22nd March 1970.
On the 16th March 1970 Shinde sent a telegram to Justice Naik asking him to wire if 4th April was suitable at Indore.
On the 18th March 1970, he again sent a telegram to him saying : "Doctors Forbid travel stop wire whether 4th & 11th April suitable for Indore".
Justice Naik sent two telegrams, one on the 21st March 1970 saying that 4th is suitable at Saugar or Bhopal and another on the 27th March 1970 stating that both 4th and lath suitable at Saugar or Bhopal.
He also wrote two letters on the 26th and 27th to Shinde.
Shinde had earlier written on the, 24th March 1970 to Justice Naik in which he said as follows "The contents of your telegram, were conveyed to me on the phone today.
It appears that 4th and 11th.
April both are suitable to you at Saugar and Bhopal.
As I told you before, I am recovering from the attack of virus fever and am, therefore, not, ' strong enough to undertake a car journey of 120 miles to, Bhopal.
There is no @ convenient plan ,to come: to Bbopal either.
If I come by plane I shall have to stay over the night at the Circuit House and as I am still on diet, the Circuit House food will not suit me.
As you can come up to Bhopal you can easily come to Indore either by Car or 'by Plane.
The plane leaves Bhopal at about 9.00 a.m. and reaches Indore at about 9.30 am.
After attending the meeting you can leave by plane which leaves for Bhopal at about 2.00 p.m. As far as Lunch is concerned, if you let me know if you are vegetarian or non vegetarian, I can arrange to give you lunch at my place.
If it is impossible for You to come to Indore I would request you to send me your suggestions regarding suitable names for the post of Vice Chancellor of the Saugar University by the 3rd of April.
I would, however, request you to make it colonyient to attend the meeting at Indofe.
I have already sent you a tele gram to the effect that the meeting is fixed on the 4th 802 of April at Indore in the Meeting Room of the University of Indore at 10.30 a.m." Hoping to hear from you by the return of post and with kind regards".
Before this letter reached to the telegram received by him, Justice Naik wrote a letter to Shinde as follows : "I am in receipt of your telegram intimating to me that you have fixed the meeting to consider panel of names for Saugar University on the 4th of April 1970, at 10.30 a.m. at Indore in the Indore University.
I regret my inability to be present at Indore on the date and time specified, though I may be able to attend the meeting if 'the venue is changed to Bhopal.
It is very surprising that you should have fixed the meeting on the 4th of April at Indore, even though I had informed you by a telegram on the 17th of March 1970, that it would not be possible for me to attend it there on that date.
Anyway, knowing full well that it would not be pos sible for me to be present at Indore at 10.30 a.m. on April 4, 1970, you seem determined to hold the meeting there presumably in my absence.
I can only regret your decision.
If you are still interested in having my presence for the meeting, you may fix it either on the 4th or the, 11th April 1970 at Saugar or Bhopal, though Bhopal would be more convenient to me personality.
I hope you have recovered from the effects of your illness by now".
This letter shows that though Justice Naik knew about the illness of Shinde, he somehow seems to have assumed, and if we may say so, without justification that Shinde was determined to hold it there, presumably in his absence.
On the 27th March 1970, the next day, he however, after the receipt of the letter of the 24th instant from Side did not take up the attitude that the meeting was being held presumably to keep him away from attending it.
Justice Naik, however, tried to explain his difficulty.
He said : "I am in receipt of your letter dated 24th March 1970.
1 am sorry to note that you have not yet recovered from the effects of your illness.
I do hope you shall soon get well.
803 As for my coming to Indore, I had considered the possibility of my going there by.
air from Bhopal but I am informed that the journey is very bumpy these days due to weather conditions and I do get terribly sick if the journey is bumpy.
I had, therefore, to give up the idea of going by air, and as I cannot spare more than a day for the meeting, I had intimated to you that it would not be possible for me to come to Indore for the meeting scheduled for the 4th of April 1970 at 10.30 a.m. in Indore University.
As for your kindly suggestion that I may by a letter suggest names to you for your consideration, I am of opinion that it would not only not be fair to the persons whose names I may suggest but also not be in keeping with the letter and spirit of the Saugar University Act.
With kind regards".
This letter clearly negatives the assumption in the High Court 's order that Shinde was trying to keep out Justice Naik from the meeting.
On the other hand, Shinde in that letter had requested Justice Naik to suggest names of persons to be considered which prima facie negatives any intention on his part to keep Justice Naik away from the meeting.
There is also nothing in the materials on the record to show that the correspondence cited above was persued by the Chancellor either at the time when the show cause notice was given to the appellant or at the time of making the impugned Order.
It cannot, therefore, be assumed that the Governor was influenced by the above correspondence.
It is rather unfortunate that the appellant 's Writ Petition was dismissed in limited and without a proper appreciation of all the relevant facts.
There is little doubt that the impugned Order made by the Chancellor was based entirely on the legality of the meeting where only two out of three members were present when the name of the appellant was recommended.
The High Court delivered into the correspondence to sustain the order of the Chancellor on grounds other than those relied upon by him in that order for dismissing the Writ Petition in limine, which in our view, was not justified.
It is also not denied that the meeting held by two of the three members on the 4th April 1970 was legal because sufficient notice was given to all the three members.
If for one reason or the other one of them could not attend, that does not make the meeting of others illegal.
In such circumstances, where there is no rule or regulation or any other provision for fixing the quorum, the presence of the majority of the members would constitute it a valid meeting and matters considered there at cannot be held to be invalid.
804 This proposition is well recognised and is also so stated in Halsbury 's Laws of England, Third Edition (Vol.
IX, page 48, Para 95).
It is, therefore, unnecessary to refer to any decisions on the subject.
In the view we have taken, the appeal is allowed with costs against respondent 3, the order of the Chancellor revoking the appointment of the appellant is set aside and the appellant is declared to have been validly appointed as Vice Chancellor Of the Saugar University as from the 22nd June 1970.
G.C. Appeal allowed.
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From a panel of names recommended by a Selection Committee constituted under section 13(2) of the University of Saugar Act, 1946 the then Chancellor of the University appointed the appellant as Vice Chancellor.
Under Ordinance No. 1 of 1970 the Governor of Madhya Pradesh became, the Chancellor of the University.
Exercising his powers of review under section 43A of the Act the Governor, as Chancellor, after notice to the appellant, set aside his appointment as Vice Chancellor on 'the ground that only two out of the three members of the Selection Committee were present when his name was included in the panel.
The appellant filed a writ petition in the.
High Court.
The High Court called for the correspondence between the Chairman of the Committee and the member who was absent at the meeting.
On the basis of a letter written by the absent member to the Chairman, the High Court can to the conclusion that the member had been deliberately kept out of the meeting and held that the Chancellor was justified in the opinion formed by him under section 43 (A).
Allowing the appeal, this Court, HELD : (i) The High Court sustained the order of the Chancellor on grounds other than those relied upon by him in that order, for dismissing the writ petition in limine].
The order made by the Chancellor was based entirely an the legality of the meeting where only two of the three members were present.
Then was nothing to show that the corres pondence was persued by the Chancellor.
Further, the correspondence did not support the assumption in the High Court 's order that the Chairman was trying to keep out any member from the meeting.
[803 D G] (ii) If for one reason or the other one of the members of the Committee, after due notice, could not attend, it did not make the meeting of the others illegal.
in such circumstances where there was no rule or regulation or any other provision for fixing quorum in the presence of the majority of the members would constitute a valid meeting and matters considered thereat could not be held to be invalid.
[803 H]
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3070.txt
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N: Petition for Special Leave to Appeal (Criminal) No. 1923 of 1984.
From the Judgment and Order dated the 19th June, 1984 of the Madras High Court in Crl.
Petition No. 8164/83, 8168, 8166 & 8170/83.
C.S. Vaidyanathan for the Petitioner.
The Order of the Court was delivered by VENKATARAMIAH, J.
The petitioner is the proprietor of M/s. Ratnam Food Stuff Co., Tuticorin.
He is an assessee under the Income tax Act, 1961 (hereinafter called 'the Act ').
For the assessment year 1977 78, he filed his return under the Act on January 20, 1978 disclosing an income of Rs. 13,380/ alongwith the profit and loss account, trial balance, income tax adjustment statement and a copy of the capital account.
The return was accepted.
On August 20 and 21, 1981, a search was conducted at the residence of the petitioner under section 132 of the Act which resulted in the seizure of several documents and account books which revealed the suppression of purchase of chicory seeds, the existence of several bank accounts, fixed deposits, investments in the names of his wife and daughters and several bank accounts not disclose in the statements filed alongwith the return.
The trading and profit and loss account for the assessment year 1977 78 filed alongwith the return showed that he had purchased chicory seeds of the value of Rs. 65,797/ as against Rs. 2,15,729/ as per the seized accounts.
There were several other wrong statements in the accounts.
On the basis of the allegation that the petitioner had deliberately filed a false return and had kept false accounts with the intention of using them as genuine evidence in the assessment proceedings, a complaint was filed against him in the Court of the Additional Chief Judicial Magistrate (Economic Offences), Madurai for taking action against him for offence punishable under section 276C and section 277 of the Act and under sections 193 and 196 of the Indian Penal Code.
Similarly three other complaints were filed against the petitioner for the same offences said to have been committed by him in respect of three succeeding assessment years 1978 79, 1979 80 and 539 1980 81 before the same Magistrate.
The petitioner thereupon filed four petitions under section 482 of the Code of Criminal Procedure before the High Court of Madras requesting it to quash the said proceedings contending that the launching of the prosecution in each of the four cases was a premature one on the ground that the reassessment proceedings started against him under the Act had not been completed.
All the four petitions were dismissed by the High Court by four separate orders dated June 19, 1984.
The petitioner has filed this petition before this Court under Article 136 of the Constitution for leave to appeal against the above said four orders of the High Court.
The only point which arises for consideration in this case is whether prosecutions for offences punishable under section 276C and section 277 of the Act and under section 193 and 196 of the Indian Penal Code instituted by the Department while the reassessment proceedings under the Act are pending are liable to be quashed on the ground that they were not maintainable.
The material parts of section 276C and 277 of the Act read as follows: "276C. Wilful attempt to evade tax etc. (1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or interest chargeable or impossible under this Act, he shall, without prejudice to any penalty that may be impossible on him under any other provision of this Act, be punishable, (i) in a case where the amount sought to be evaded exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.
If a person willfully attempts in any manner whatsoever to evade the payment of any tax, penalty or interest under this Act, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to three 540 years and shall in the discretion of the court, also be liable to fine.
Explanation. . . . . . . . "277.
False statement in verification etc.
If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable, (i) in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less then six months but which may extend to seven years and with fine.
(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.
" The relevant parts of sections 193 and 196 of the Indian Penal Code read thus: "193.
Punishment for false evidence.
Whoever intentionally gives false evidence in any stage of a judicial proceeding, or fabricates false evidence for the purpose of being used in any stage of a judicial proceeding, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine; and whoever intentionally gives or fabricates false evidence in any other case, shall be punished with imprisonment of either description for a term which extend to three years, and shall also be liable to fine.
Explanation. . . . . . . . "196.
Using evidence known to be false.
Whoever corruptly uses or attempts to use as true or genuine evidence any evidence which he knows to be false or fabricated, shall be punished in the same manner as if he gave or fabricated false evidence. ' At the outset it has to be stated that there is no provision in law which provides that a prosecution for the offences in question cannot 541 be launched until reassessment proceedings initiated against the assessee are completed.
Section 279 of the Act provides that a person shall not be proceeded against for an offence punishable under section 276C or section 277 of the Act except at the instance of the Commissioner.
It further provides that a person shall not be proceeded against for an offence punishable under those provisions in relation to the assessment for an assessment year in respect of which penalty is imposed or imposable on him under clause (iii) of sub section (1) of section 271 has been reduced or waived by an order under section 273A.
The Commissioner has the power either before or after the institution of proceedings to compound any such offence.
In this case it is not claimed that the Commissioner has not initiated the proceedings for instituting the complaints.
No other legal bar for the institution of the proceedings is urged except stating that in the event of the petitioner being exonerated in the reassessment proceedings, the prosecutions may have to be dropped.
It is true that as observed by this Court in Uttam Chand & Ors.
vs Income tax officer, Central Circle, Amritsar(1) the prosecution once initiated may be quashed in the light of a finding favourable to the assessee recorded by an authority under the Act subsequently in respect of the relevant assessment proceedings but that decision is no authority for the proposition that no proceedings can be initiated at all under section 276C and section 277 as long as some proceeding under the Act in which there is a chance of success of the assessee is pending.
A mere expectation of success in some proceeding in appeal or reference under the Act cannot come in the way of the institution of the criminal proceedings under section 276C and section 277 of the Act.
In the criminal case all the ingredients of the offence in question have to be established in order to secure the conviction of the accused.
The criminal court no doubt has to give due regard to the result of any proceeding under the Act having a bearing on the question in issue and in an appropriate case it may drop the proceedings in the light of an order passed under the Act.
It does not, however, mean that the result of a proceeding under the Act would be binding on the criminal court.
The criminal court has to judge the case independently on the evidence placed before it.
Otherwise there is a danger of a contention being advanced that whenever the assessee or any other person liable under the Act has failed to convince the authorities in the proceedings under the Act that he has not deliberately made any false statement or that he has not fabricated any material evidence, the conviction of such person should invariably 542 follow in the criminal court.
The High Court of Punjab and Haryana has correctly applied the rule regarding the maintainability of prosecution in such circumstances in M/s. Telu Ram Raungi Ram & Anr.
vs Income tax officer A Ward Hoshiarpur & Anr(1).
We do not however, agree with the view expressed by the High Court of Calcutta in Jyoti Prakash Mitter vs Haramohan Chowdhury.(2) In that case on a complaint made against the assessee for an offence punishable under section 277 of the Act, the Chief Metropolitan Magistrate issued process.
Thereupon the assessee questioned the validity of the initiation of the criminal proceedings before the High Court of Calcutta on the ground that until the penalty proceedings initiated in respect of the same period under section 271(1)(c) of the Act were finally disposed of, no complaint could be filed.
The contention of the assessee was that the prosecution was opposed to the principles of natural justice as he would be deprived of the benefit of a finding which was likely to be recorded in his favour in the penalty proceedings.
It was urged on behalf of the Department that the penalty proceedings under section 271(1)(c) had no direct bearing on the maintainability of a prosecution launched under Chapter XXII of the Act.
The High Court took the view which according to us is an erroneous one that the provisions of section 279(1A) of the Act established the necessity for the completion of the penalty proceedings before the institution of the prosecution and therefore as long as the penalty proceedings were pending the criminal proceedings could not be instituted.
Section 279(1A) of the Act merely states that a person shall not be proceeded against for an offence under section 276C or section 277 in relation to the assessment for an assessment year in respect of which the penalty imposed or imposable on him under clause (iii) of sub section (1) of section 271 has been reduced or waived by an order under section 273A. Section 273A(1)(ii) provides that notwithstanding anything contained in the Act, the Commissioner may, in his discretion, whether on his own motion or otherwise, reduce or waive the penalty if the conditions mentioned therein are satisfied.
The power conferred on the Commissioner under section 273A is an overriding power which he may exercise at his discretion.
It is only where the Commissioner reduces or waives the penalty imposed or imposable under section 271(1)(iii) of the Act in exercise of his discretion under section 273A, section 279(1A) comes into operation and acts as a statutory bar for proceeding with the prosecution under section 276C or section 277.
It does not, however, provide that merely because there is a possibility of the Commissioner 543 passing an order under section 273A, the prosecution shall not be instituted.
The reason given by the High Court of Calcutta, therefore, does not appeal to us.
It may be that in an appropriate case the criminal Court may adjourn or postpone the hearing of a criminal case in exercise of its discretionary power under section 309 of the Code of Criminal Procedure if the disposal of any proceeding under the Act which has a bearing on the proceedings before it is imminent so that it may take also into consideration the order to be passed therein.
Even here the discretion should be exercised judicially and in such a way as not to frustrate the object of the criminal proceedings.
There is no rigid rule which makes it necessary for a criminal court to adjourn or postpone the hearing of a case before it indefinitely or for an unduly long period only because some proceeding which may have some bearing on it is pending elsewhere.
But this, however, has no relevance to the question of maintainability of the prosecution.
The prosecution in those circumstances cannot be quashed on the ground that it is a premature one.
On a careful consideration of the relevant provisions of the Act, we are of the view that the pendency of the reassessment proceedings cannot act as a bar to the institution of the criminal prosecution for offences punishable under section 276C or section 277 of the Act.
The institution of the criminal proceedings cannot in the circumstances also amount to an abuse of the process of the court.
The High Court was, therefore, right in refusing to quash the prosecution proceedings in the four cases instituted against the petitioner under section 482 of the Code of Criminal Procedure.
The Special Leave Petition is, therefore, dismissed.
H.S.K. Petition dismissed.
|
The petitioner, an assessee under the Income Tax Act, 1961, filed income tax returns which were accepted.
Later a search of the petitioner 's residence revealed that the petitioner had suppressed certain business transactions and had kept false accounts.
On the basis of the allegation that the petitioner had deliberately filed false returns and had kept false accounts with the intention of using them as genuine evidence under the assessment proceedings, complaints were filed against him in the trial court for taking action against him for offences punishable under sections 276C and 277 of the Income Tax Act and under sections 193 and 196 of the Indian Penal Code.
The petitioner moved the High Court under section 482 of the Code of Criminal Procedure for quashing the proceedings contending that the launching of the prosecution was a premature one on the ground that the reassessment proceedings started against him under the Income Tax Act had not been completed.
The High Court dismissed the petitions.
The petitioner filed this petition for special leave to appeal.
The petitioner did not urge any legal bar for the institution of the proceedings except stating that in the event of the petitioner being exonerated in the reassessment proceedings, the prosecutions may have to be dropped.
Dismissing the petition for special leave, 537 ^ HELD: The pendency of the reassessment proceedings cannot act as a bar to the institution of the criminal prosecution for offences punishable under section 276C or section 277 of the Act.
The institution of the criminal proceedings cannot in the circumstances also amount to an abuse of the process of the court.
[543 E] There is no provision in law which provides that a prosecution for the offences in question cannot be launched until reassessment proceedings initiated against the assessee are completed.
[540 H] A mere expectation of success in some proceeding in appeal or reference under the Act cannot come in the way of the institution of the criminal proceedings under section 276C and section 277 of the Act.
In the criminal case all the ingredients of the offence in question have to be established in order to secure the conviction of the accused.
The criminal court no doubt has to give due regard to the result of any proceeding under the Act having a bearing on the question in issue and in an appropriate case it may drop the proceedings in the light of an order passed under the Act.
It does not, however, mean that the result of a proceeding under the Act would be binding on the criminal court.
The criminal court has to judge the case independently on the evidence placed before it.
Otherwise there is a danger of a contention being advanced that whenever the assessee or any other person liable under the Act has failed to convince the authorities in the proceedings under the Act that he has not deliberately made any false statement or that he has not fabricated any material evidence, the conviction of such person should invariably follow in the criminal court.[541 E H] Uttam Chand & Ors.
vs Income tax Officer Central Circle, Amritsar, (1982)133 I.T.R. 909, referred to.
M/s. Telu Ram Raungi Ram & Anr.
vs Income tax Officer, 'A ' Ward.
Hoshiar Pur & Anr., (1984)145 I.T.R. 111, upheld.
The view of the Calcutta High Court in Jyoti Prakash Mitter vs Haramohan Chowdhury that the provisions of section 279(1A) of the Income Tax Act established the necessity for the completion of the penalty proceedings before the institution of the prosecution and therefore as long as the penalty proceedings were pending the criminal proceedings could not be instituted was erroneous.
Section 279(1A) does not provide that merely because there is a possibility of the Commissioner passing an order under section 273A, the prosecution shall not be instituted.
[542 D; H; 543 A] Jyoti Prakash Mitter vs Haramohan Chowdhury, overruled.
It may be that in an appropriate case the criminal Court may adjourn or postpone the hearing of a criminal case in exercise of its discretionary power under section 309 of the Code of Criminal Procedure if the disposal of any proceeding under the Act which has a bearing on the proceedings before it is imminent so that it may take also into consideration the order to be passed therein.
Even here the discretion should be exercised judicially and in such a way as not to frustrate the object of the criminal proceedings.
There is no rigid rule which makes it necessary for a criminal court to adjourn or postpone the 538 hearing of a case before it indefinitely or for an unduly long period only because some proceeding which may have some bearing on it is pending elsewhere.
But this, however, has no relevance to the question of maintainability of the prosecution.
The prosecution in those circumstances cannot be quashed on the ground that it is a premature one.
[543 B D]
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ivil Appeal No. 943 Of 1986.
From the Judgment and Order dated 4th July, 1985 of the Appellate Tribunal in Appeal No. 244 of 1985 D. L.M. Singhvi and K.K. Bhaduri for the appellant.
A Subba Rao and Ms. section Relan for the Respondent.
The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
This appeal is directed against a judgment of the Customs, Excise and Gold Control Appellate Tribunal in regard to the manner and sequence in which certain notifications under Rule 8 Sub rule (1) of the Central Excise Rules granting exemptions from duty have to be worked out.
By a notification dated August 1974 the Central Government, in exercise of its powers under subrule(1) of Rule 8 of the Central Excise Rules exempted.
"Tyres for motor vehicles failing under sub item(1) of Item No. 16 of the First Schedule to the Central Excise and Salt Act, 1944(1 of 1944) from so much of the duty of excise leviable thereon as is in excess of fifty five per cent Ad valorem".
200 Thereafter on June 16, 1977 another notification was issued in the following terms: "In exercise of the powers conferred by sub rule (1) of Rule 8 of the Central Excise Rules, 1944 the Central Government hereby exempts all excisable goods (hereinafter referred to as the "said goods") on which the duty of excise is leviable and in the manufac ture of which any goods falling under Item No. 68 of the First Schedule to the Central Excise and Salt Act, 1944 (1 of 1944) (hereinafter referred to as the inputs) have been used, from so much of the duty of excise leviable thereon as is equivalent to the duty of excise already paid on the inputs.
Notification No. 205/77 dated 28.9.77, subject to the condi tions that the manufacturer furnishes to the proper Officer a statement showing the quanti ty of the inputs used in the manufacture of every unit of the said goods.
Provided that where the duty of excise levi able on the said goods is less than the amount of duty of excise paid on the inputs the extent of exemption shall be restricted to the duty of excise on the said goods." A Further notification was issued on July 14, 1978 and this was in the following terms: "In exercise of the powers conferred by sub rule(1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts tyres and tubes excluding flaps failing under Item No. 16(1) and 18(3) of the First Schedule to the (1 of 1944) (hereinafter referred to as the specified goods) from so much of the duty of excise leviable thereon (read with any rele vant notification issued under the said sub rule(1) of rule 8 and in force for the time being) as is in excess of (a) eighty seven and a half per cent, of such duty, if produced in any factory which com menced production of the specified goods for the first time earlier than the 1st day of April 1976: and (b) Seventy five per cent of such duty, if produced in any factory which commenced pro duction of the specified 201 goods for the first time on or after the 1st day of April, 1976, subject to the conditions that: There is no controversy regarding evaluation According to the assessee as well as the department effect has first to be given to the notification dated August 1, 1974 and the duty calculated in terms of that notification.
There is also no controversy at this stage.
The controversy begining thereafter.
According to the dapartment, thereafter, effect has to be given first to the notification dated June 16, 1977 and then to the notification dated July 14, 1978 where as according to the assessee effect has to be given, in the first instance, to the notification dated July 14, 1978 and then to the notification dated 16, 1977.
The Department 's contention was accepted by the Tribunal.
In this appeal, Dr. L.M. Singhvi, learned counsel for the appellant argued that on principle the effective duty has to be first determina tion by applying the notification dated July 14, 1978 first and the duty paid on the inputs should be set off under the notification dated June 16, 1977 against the duty determined as payable after applying the notification dated July 14, 1978.
In support of his argument, the learned counsel relied upon a recent judgment of this court in Assistant Collector of Central Excise v, Madras Rubber Factory limited, Civil Appeal No. 3195 of 1979 etc.
We are afraid that in the face of the language of the notifications, it is not possible to agree with the submission of Dr. Singhvi.
We have already extracted the notification dated June 16, 1977 and July 14, 1978.
The notification dated July 14, 1978, it is to be noticed, has super added the words "read with any relevant notification issued under the said sub rule(1) of Rule 8 and in force for the time being." These super added words show conclusively that the notification dealing with exemption to the extent of the duty paid on the inputs, which was already in force, had to be given effect before giving effect to the notification dated July 14, 1978.
This was the submission of Shri A. Subba Rao, learned counsel for the department and it is difficult to see any escape from it.
The case upon which reliance was placed by Dr. Singhvi does not appear to have any relevance to the question at issue.
There, the court was concerned with the determination of the assessable value and not with the present question relating to the order of priority in which the notifications granting 202 exemption from duty had to be applied.
There, what the court decided was that Excise Duty cannot be computed without proper determination of the assessable value namely assessa ble value exclusive of permissible deductions.
That princi ple cannot come in aid of the question involved in this appeal.
The learned counsel also argued that to give effect first to the notification dealing with exemption to the extent of the duty paid on inputs and thereafter to the notification dated July 14, 1978 would mean that the asses see would not be getting full credit for the entire duty paid on the inputs but only to a percentage of it and that there would, therefore, be double taxation atleast to that extent.
There is no general principle that there can be no 'double taxation ' in the levy of Excise Duty.
The court may lean in favour of a construction which will avoid double taxation but in the present case there does not appear to be any lean question of construction at all.
On the language of the notification dated July 14, 1978 only one result can follow.
That is the view taken by the Tribunal in the order under appeal.
We agree with that view of the matter.
The appeal is dismissed with costs.
P.S.S. Appeal dismissed.
|
By a notification dated August 1, 1974 the Central Government in exercise of its powers under sub rule(1) of Rule 8 of the Central Excise Rules, exempted automobile tyres from excise duty leviable thereon as was in excess of fifty five per cent ad valorem.
Another notification issued on June 16, 1977 exempted all excisable goods from duty to the extent of the duty already paid on the inputs.
A further notification dated July 14, 1978 exempted tyres and tubes from so much of the duty leviable thereon (read with any relevant notification issued under the said subrule(1) of Rule 8 in force for the time being) as was in excess of eightyseven and a half per cent of such duty if produced in any factory which commenced production for the first time earlier than the 1st day of April 1976, and seventy five per cent of such duty if produced in any factory which commenced production for the first time on or after the 1st day of April, 1976.
A dispute arosse in respect of the latter two notifica tion as to which of them was first to be given effect to.
The Tribunal accepted the Department 's contention that effect had to be given in the first instance to the notifi cation dated June 16, 1977, and then to the notification dated July 14, 1978.
In this appeal, it was contended for the appellant that to give effect to the second notification and thereafter to the third notification would mean that the assessee would not be getting full credit for the entire duty paid on the inputs but only a percentage of it and that there would, therefore, be double taxation at least to that extent.
Dismissing the appeal, the Court, 199 HELD: 1.
The Tribunal was right in taking the view that effect had to be given first to the notification dated June 16, 1977 and then to the notification dated July 14, 1978.
The words "read with any relevant notification issued under the said sub rule (1) of Rule 8 in force for the time being" super added by the latter notification show conclusively that the earlier notification dealing with exemption to the extent of the duty paid on the inputs which was already in force had first to be given effect to.
[201E G] Assistant Collector of Central Excise vs Madras Rubber Factory Limited, Civil Appeal No. 3195 of 1979, distin guished.
There is no general principle that there can be no 'double taxation ' in the levy of excise duty.
The Court may lean in favour of a construction which will avoid double taxation, but in the instant case there does not appear to be any lean question of construction at all.
[202B C]
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Civil Appeal No. 774 of 1966.
Appeal by special leave from the judgment and decree dated August 31, 1965 of the Punjab High Court in Letters Patent Appeal No. 91 of 1961.
Harbans Singh, for the appellant.
804 Bishan Narain and S.K. Mehta, for the respondent.
The Judgment of the Court was delivered by Grover, J.
This is an appeal by special leave from a judgment of a division bench.
of the Punjab High Court decreeing the suit filed by the respondent for possession of certain land by preemption.
The facts may be shortly stated: Santa Singh was the owner of some land in village Samadh Bhai, tehsil Moga.
He died leaving a widow Smt.
Sobhi.
He also left a daughter Smt.
Jai Kaur from his other wife.
On February 3, 1958 Smt.
Sobhi sold 73 kanals 14 marlas of land to the appellants, the sale consideration mentioned in the sale deed being Rs. 8,000/ .
Jai Kaur filed a suit for possession by pre emption of the land which had been sold by Smt.
Sobhi.
According to her a consideration of Rs. 4,000/ only had been paid by the vendee.
The trial court decreed the suit in May 1959 granting a decree for possession on payment of Rs. 6,500/ together with costs.
The second Additional Judge to whom an appeal was taken dismissed it.
In the High Court the learned Single Judge took the view that Smt.
Jai Kaur not being the daughter of the vendor Smt.
Sobhi had no right of pre emption under section 15(2) of the Punjab Pre emption Act, 1913 'as amended by the Punjab Pre emption Amendment Act, 1960.
The suit was dismissed.
Jai Kaur filed an appeal under clause 10 of the Letters Patent of the High Court.
Relying on an amendment made by the Punjab Pre emption Amendment Act 1964 in the first paragraph of clause (b) of sub section
(2) of section 15 of the Punjab Pre emption Act, hereinafter called the Act, the Division Bench reversed the judgment of the Single Judge and decreed the plaintiff 's suit.
The relevant provisions of the statute may now be noticed together with the amendments made in 1960 and 1964.
Section 15 of the Act was substituted by section 4 of the Amendment Act, 1960.
According to the substituted section the right of pre emption in respect of agricultural land and village immovable property shall vest thus : (1) (2) Notwithstanding anything contained in sub section (1) (a) where the sale is by a female of land or property to which she h,as succeeded through her father or brother or the sale in respect of such land or property is by the scan or daughter of 805 such female, after inheritance, the fight of preemption shall vest, (i) if the sale is 'by such female, in her brother or brother 's son; (ii) if the sale is by the son or daughter of such female, in the mother 's brother or the mother 's brother 's sons of the vendor or vendors;" By the Amendment Act 1964 in the first paragraph of section 15(2) (b) between the words "such" and "female" the words "husband of the" were inserted.
The result was that after the amendment the portion of clause (b) relevant for our purpose was to read as follows: "FIRST, in the son or daughter of such husband of the female.
" Now if the Amendment Act of 1964 could be regarded as having retrospective operation so as to affect pending proceedings there can be no dispute that the judgment of the division bench was light and must be affirmed.
The contention which has been raised on behalf of the appellants is that.
there is no indication in the Amendment Act of 1964 that it was to have retrospective operation and therefore the 'amendment made by it should be deemed to be only prospective.
It may be mentioned that by section 6 of the Amendment Act of 1960 a new section 31 was inserted in the Act.
That section provided, "no court shall pass a decree in a suit for pre emption whether instituted be,fore or after the commencement of the Punjab Pre emption Amendment Act of 1960 which is inconsistent with the provisions of the said Act." in Ram Sarup vs Munshi & Ors.(1) this Court held that the language used in section 31 was comprehensive enough so as to require an appellate court to give effect to the substantive provisions of the Amending Act whether the appeal before it was one against a decree granting pre emption or one refusing that relief.
Although section 31 was inserted in the Act for all times the phraseology employed therein does not show that its language was meant to cover those amendments which would be made subsequent to the Amendment Act of 1960.
The word "said" can have reference in the context only to the enactment of 1960 and to no other.
it would not be legitimate for the courts to give an extended effect to a provision used and words employed warranted such a course being followed.
That does not appear to be the case here.
It appears to us that the Amendment Act of 1964 was merely of a clarificatory or declaratory nature.
Even in the absence of the words which were inserted by the Amendment Act of 1964 in section 15(2)(b) the only possible interpretation and meaning of (1) ; 806 the words "in the son or daughter of such female" could have reference to and cover the sort or daughter of the husband of the female.
The entire scheme of sub section
(2) of section 15 is that the right of pre emption has been confined to the issues of the last male holder from whom the property which has been sold came by inheritance.
Looking at clause (a) of sub section
(2) where the properly which has been sold has come to the female from her ,father or brother by succession the right of pre emption has been given to.
her brother or brother 's son.
As has been observed in Mota Singh vs Prem Parkash Kaur & Ors.(1), the predominant idea seems to be that the property must not go outside the line of the last male holder and the right has been given to his male linea descendants.
Where the sale is by the son or the daughter of such female the right is given to the mother 's brother or their sons.
The principle which has been kept in view is that the person on whom the right of pre emption is conferred must be a male lineal descendant of the last male holder of the property sold.
This is so with regard to clause (a) of sub section
Coming to clause (b) where the sale is by a female of land or property to which she has succeeded through her husband or through her son in case the son has inherited the same from his father the right of pre emption is to vest firstly in the son or daughter of such female and secondly in the husband 's brother or husband 's brother 's son of such female.
Now if the son or daughter of the female who has sold the property could refer to her son or daughter from a husband other than the one from whom the property devolved on her, it would be contrary to the scheme and purpose of sub section
(2) which essentially is to vest the right of pre emption in the lineal descendants of the last male holder.
Similarly it is unthinkable that a husband 's brother or husband 's brother 's son should have reference to a husband to whom the property never belonged.
In other words it could never be intended that if a female has had a previous husband who has either died or with whom the marriage has been dissolved and the female has remarried and succeeded to the property of her second husband the brother or the brother 's son of her previous husband should be able to claim the right of pre emption when they had nothing whatsoever to do with the property sought to be preempted.
It would follow that under clause (b) the right of preemption would vest firstly in the son or daughter of the husband of the female meaning thereby either her own off spring ,from the husband whom she has succeeded or the son or daughter of that husband even from another wife.
If the above discussion is kept in view there is no difficulty in attributing a retroactive intention to the legislature when the Amendment Act of 1964 was enacted.
It is well settled that if a (1) I.E.R. [1961] Punj.
807 statute is curative or merely declares the previous law retroactive operation would be more rightly ascribed to it than the legislation which may prejudicially affect past rights and transactions.
We are in entire agreement with the following view expressed in a recent full bench decision of the Punjab High Court in Moti Ram vs Bakhwant Singh & Ors.
(1) in which a similar point came up ,for consideration: "A close analysis of paragraphs (First) and (Secondly) of clause (b) of sub section (2) of section 15 before the amendment introduced by Punjab Act 13 of 1964 would demonstrate that a son of the husband of a female vendor though not born from her womb would be entitled to preempt, particularly when the husband 's brother and even the son of the husband 's brother of that female are accorded the right of preemption.
To reiterate, the right of preemption is accorded manifestly on the principle of consanguinity, the property of the female vendor 'being that of her husband, and there is no reason why the step son should be excluded and the nephew of the husband included.
From this alone it must be inferred that the Legislature had intended to include a step son and consequently retrospective operation had to be given to the amending Act as such a construction appears to be in consonance 'and harmony with the purpose of the Act".
The result, therefore, is that the respondent was entitled to.
exercise, her right of preemption under paragraph First of cl.
(b) of sub section
(2) of section 15 even before the amendment made in 1964.
At any rate whatever doubts existed they were removed by the Amendment Act of 1964 which must be given retrospective operation.
The appeal consequently fails and it is dismissed with coats.
R.K.P.S. Appeal dismissed (1) I.L.R.[19681] Punjab 104, 120.
|
S, the owner of some land in a village in Punjab, died leaving a widow and the respondent, his daughter by another wife.
The widow sold a part of the land in February 1958 to the appellants, whereupon the respondent filed a suit for possession by pre emption of the land sold.
The trial court decreed the suit and a first appeal was dismissed.
A single bench of the High Court allowed the second appeal on the view that the respondent not being the widow 's daughter, had no right of pre emption under section 15(2) of the Punjab Pre emption Act, 1913, as amended by the Punjab Pre emption Amendment Act, 1960.
However, a division bench in a Letters Patent appeal, relying on an amendment made by the PUnjab Preemption Amendment Act, 1964 in section 15(2)(b), reversed the judgment of the single bench and decreed the suit.
It was contended in appeal to this Court that there is no indication in the Amendment Act of 1964 that it is to have retrospective operation and the amendment made by it should be deemed to be only prospective.
HELD: The Amendment Act of 1964 was merely of a clarificatory or declaratory nature.
Even in the absence of words which were inserted by the Amendment Act of 1964 under section 15(2)(b) the only possible interpretation and meaning of the words "in the son or daughter of such female" could have reference to and cover the son or daughter of the husband of the 'female.
The entire scheme of section 15(2) is that the right of pre emption has been confined to the issues of the last male holder from whom the property which has been sold came by inheritance.
[805 H] Under section 15(2)(b) the right of pre emption would vest firstly in the son or daughter of the husband of the female meaning thereby either her own off springs from the husband whom she had succeeded or the son or daughter of that husband even from another wife.
[806 G] In the present case the respondent was entitled to exercise her right of pre emption under paragraph First of clause (b) of section 15(2) even before the Amendment of 1964.
Whatever doubts existed they were removed by that Act which must be given retrospective operation.
[807 E F] Ram Sarup vs Munshi & Ors, ; and Mota Singh vs Prem Parkash Kaur & Ors., I.L.R. [1961] Punj.
614, 627; referred to.
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Appeal No. 361 of 1958.
Appeal by special leave from the judgment and order dated December 11, 1957, of the Mysore High Court in Civil Revision No. 702 of 1956, against the judgment and order dated August 10, 1956, of the Court of the Second Extra Assistant Judge, Belgaum, in Misc.
Appeal No. 36 of 1955, arising out of the order dated September 1, 1955, of the 1st Joint Civil Judge, Junior Division, Belgaum, in Regular Civil Suit No. 197 of 1955.
M. M. Gharekhan and I. N. Shroff, for the appellant.
D. D. Chawla and G. Gopalakrishnan, for the respondent.
B. Sen and T. M. Sen, for the intervener (Attorney General of India).
February 13.
The Judgment of the Court was delivered by SARKAR, J.
This is an appeal from the judgment passed by the High Court at Bangalore on a petition in revision.
The question is whether a certain suit should be stayed under section 34 of the . 214 The appellant carries on business as a supplier of electrical energy in Belgaum.
It obtained a licence from the Government under section 3 of the , authorising it to supply the energy in that area.
The respondent, who is the plaintiff in the suit, obtained supply of electricity from the appellant.
The respondent felt that he was being overcharged by the appellant for the electricity so supplied.
He thereupon filed a suit in the Court of the Civil Judge, Belgaum, on or about the 8th of June, 1955, claiming a refund of the amount paid in excess of what he thought was the legitimate charge.
The appellant then applied under section 34 of the for a stay of the suit on the ground that the matter was referable to arbitration under the provisions of the .
The application was dismissed by the Civil Judge and his decision was confirmed by the Extra Assistant Sessions Judge on appeal and lastly, by the High Court in revision.
The appellant has now come to this Court.
The appellant contends that this matter is referable to arbitration under the provision contained in cl.
XVI of the Sixth Schedule of the Act of 1948.
A few of the provisions of these Acts will now have to be referred to.
Under the Act of 1910 the business of supplying electrical energy can be carried on only with the sanction of the Government.
Section 3 of that Act makes provision for the grant of a licence for supplying electrical energy.
The appellant obtained a licence in 1932.
A form of the licence is set out in the rules framed under the Act of 1910 and that form prescribes the maximum limit which a licensee is entitled to charge a consumer for the electrical energy supplied.
The Act of 1948 made a somewhat different provision with regard to these charges.
It provided by section 57 as follows: "section 57.
(1) The provisions of the Sixth Schedule and the Table appended to the Seventh Schedule shall be deemed to be incorporated in the licence of every licensee, not being a local authority, from the date of the commencement of the licensee 's next succeeding 215 year of account, and from such date the licensee shall comply therewith accordingly and any provisions of, such licence or of the , or ' any other law, agreement or instrument applicable to the licensee shall, in relation to the licensee, be void and of no effect in so far as they are inconsistent with the provisions of this section and the said schedule and Table.
(2). . . . . . . . . .
This section had therefore the effect of incorporating in the licence the terms of these two Schedules and provided that they would prevail over the terms of any previously granted licence or the provisions of the Act of 1910, or any other law, agreement or instrument inconsistent with these Schedules.
The Sixth Schedule made new provisions about the charges that a licensee was entitled to realise for the current supplied.
Clause XVI of that Schedule contains a provision for arbitration and it is on that that the appellant relies.
That clause is in these terms: Any dispute or difference as to the interpretation or any matter arising out of the provisions of this Schedule shall be referred to the arbitration of the Authority.
" The appellant contends that the dispute covered by the respondent 's suit is one of the kind mentioned in this clause and therefore must be referred to arbitration under its terms.
We will assume that the dispute is of the kind mentioned in cl.
XVI of the Sixth Schedule.
We are however unable to see that it is a dispute which is referable to arbitration under that clause.
It is not the appellant 's case that el.
XVI is a clause in any contract between it and the respondent.
That being so, the only other way in which it is possible for the appellant to contend that the respondent is bound to refer the dispute to arbitration under this clause is by showing that it is a statutory provision for arbitration.
No doubt if it were so, then in view of the provisions of section 46 of the the 'appellant would be entitled to apply for a stay of the suit under section 34 of that Act.
We are however wholly unable to agree that cl.
XVI is such a statutory provision.
The only 216 statutory provision that we find on the subject is that contained in section 57 and its effect is that the terms of cl.
XVI and the other clauses in the Sixth Schedule are to be deemed incorporated in a licence granted by the Government under section 3 of the Act of 1910 and the licensee is to comply with the terms of that Schedule.
Therefore all that we get is that the licence which is granted by the Government to a supplier of electricity, like the appellant, is to contain a clause that certain disputes would be referred to arbitration.
The licence is an 'engagement between the Government and the licensee, binding the parties to it to its provisions.
It is unnecessary to decide whether this engagement is contractual or statutory, for, in either case it is between the two of them only.
An arbitration clause in an instrument like this can only be in respect of disputes between the parties to it.
Such an arbitration clause does not contemplate a dispute between a party to the instrument and one who is not such a party.
We are unable to read section 57 as making cl.
XVI in the Sixth Schedule a statutory provision by which certain disputes between any and every person have to be referred to arbitration.
It was said on behalf of the appellant that the licence is a statutory document ' That, in our view, is a loose way of putting the thing.
By that the utmost that can be meant is that it is issued under the terms of a statutory provision and must comply with the provisions thereof.
But that cannot convert it into a statutory provision for reference to arbitration of disputes irrespective of the parties between whom the disputes may exist.
In our view, therefore, cl.
XVI of the Sixth Schedule of the Act of 1948 contains no provision for arbitration, statutory or otherwise, for reference of the dispute of the nature we have before us, between a licensed supplier of electricity and a consumer of it from him.
In the result, this appeal fails and is dismissed with costs.
Appeal dismissed.
|
The arbitration clause incorporated by section 57(1) of the , in a licence granted by the Government for the supply of electrical energy to the consumers is not available for adjudicating upon a dispute between the licensee and the consumer, for the licence is an engagement between the licensee and the Government and the arbitration clause in it refers only to disputes between them.
Section 57(1) does not make the arbitration clause a statutory provision by virtue of which disputes between any and every person may be referred to arbitration.
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Criminal Appeal No. 387 of 1990.
From the Judgment and Order dated 12.1.1984 of the Gujarat High Court at Ahmedabad in Misc.
Application No. 48 of 1982.
S.H. Sheth and S.C. Patel for the Appellant.
B. Datta, Sunil Dogra and P.H. Parekh for the Respondents.
The Judgment of the Court was delivered by FATHIMA BEEVI, J.
Leave granted.
The appellant is aggrieved by the judgment of the High Court holding that sanction of the State Government as required under Section 197, Cr.
P.C., is not necessary for taking cognizance of the offences against the appellant on the basis of the complaint filed by the respondent.
The appellant is an employee of the Municipal Corporation, Ahmedabad.
While holding the post of Laboratory Officer, the State Government by a Notification dated 21.12.1966.under Section 8 of the Food Adulteration Act, 1954 appointed the appellant as a Public Analyst for the local area comprised within the limits of the Corporation.
The complaint was filed by the respondent before the Magistrate for the of fences punishable under Sections 465,468 and 201, I.P.C., alleged to have been committed by the appellant while exer cising the functions as Public Analyst.
513 The appellant moved the High Court under Section 482, Cr.
P.C., for quashing the criminal proceedings on the ground that, he being a public servant removable from office only by the State Government the Magistrate could not take cogni zance of the offence alleged to have been committed while discharging the duties as Public Analyst without the requi site sanction under Section 197, Cr.
The High Court rejected this contention and dismissed the petition.
Under Section 197(1), Cr.
P.C., when a public servant not removable from his office save by or with the sanction of the Government, is accused of any offence alleged to have been committed by him while acting or purporting to act in the discharge of his official duty, no Court shall take cognizance of such offence except with the previous sanction of the Government.
The section extends immunity from irre sponsible, frivolous and vexatious prosecution.
The privi lege of immunity from prosecution without sanction extends only when the accused is a public servant of the kind men tioned therein.
He must be a public servant as defined in Section 21 of the Indian Penal Code and not removable from his office save by or with the sanction of the State Govern ment or the Central Government as the case may be.
The offence must also be one committed by the accused while acting or purporting to act in the discharge of his official duty.
Section 21, I .P.C., reads as under: 21.
"Public servant" The words "public servant" denote a person falling under any of the descriptions hereinafter following, namely: Twelfth .
Every person (a) in the service or pay of the Government or remu nerated by less or commission for the performance of any public duty by the Government; (b) in the service or pay of a local authority, a corporation established by Or under a Central, Provincial or State Act or a Government company as defined in Section 6 17 of the ( 1 of 1956).
Section 197, Cr.
P.C., clearly intends to draw a line between public servants and to provide that only in the case of the higher ranks 514 should the sanction of the government to their prosecution be necessary.
While a public servant holding an office of the kind mentioned in the Section is as such public servant appointed to another office, his official acts in connection with the latter office will also relate to the former of fice.
The words "removable from office" occurring in Section 197 signify removal from the office he is holding.
The authority mentioned in the section is the authority under which the officer is serving and competent to terminate his services.
If the accused is under the service and pay of the local authority, the appointment to an office for exercising functions under a particular statute will not alter his status as an employee of the local authority.
The appellant herein is admittedly the Laboratory Offi cer in the service and pay of the Municipal Corporation of Ahmedabad.
The appointment as Public Analyst by the Govern ment does not confer on him the status of a public servant or an officer under the service and pay of the Government.
He is not remunerated by any fee by the Government.
The appellant was not the employee of the State Government and was not employed in connection with the affairs of the State.
He was not holding any public office in connection with the affairs of the State.
The State Government had merely entrusted him with the functions of a Public Analyst which could be granted and taken by an administrative act.
It was on account of his being employed by the Municipal Corporation that he was appointed as a Public Analyst by the Government.
He is not appointed as Public Analyst in the cadre against any post.
The Prevention of Food Adulteration Act also does not contain any deeming provision to treat the Public Analyst as a public servant.
The appellant is holding an office from which he is removable by the Local Authority and not by the Government.
The cancellation of the appointment as Public Analyst would not amount to removal from office.
Section 197, Cr.
P.C., in this context contemplates the removal of the appellant from the office of the Laboratory Officer and not his transfer or removal from the office of the Public Analyst.
The removal of the appellant from the office of Public Analyst would not affect his office as a Laboratory Officer under the Local Authority and would not amount to removal from office.
The appellant is not therefore a public servant removable only by the State Government.
The High Court was right in its view.
We accordingly dismiss the appeal.
Y. Lal Appeal dismissed.
|
The appellant, an employee of the Municipal Corporation Ahmedabad was holding the post of Laboratory Officer and while he was so holding the post, he by a Notification dated 21.12.1966, issued by the State Government, was appointed as a Public Analyst for the local area within the municipal limits of the Corporation.
The respondent filed a complaint before the Magistrate for offences punishable under Sections 465, 468 and 20 1.
I.P.C. alleged to have been committed by the appellant while exercising his functions as a Public Analyst.
The appellant moved the High Court under Section 482, for quashing the criminal proceedings sought to be initiated against him by the said complaint.
His principle contention was that he being a public servant removable from office only by the State Government, the magistrate could not take cognizance of the alleged offences and that previ ous sanction of the State Government as contemplated under section 197, Cr.
P.C. was necessary.
The High Court rejected the contention of the appellant and dismissed the petition.
He has filed this appeal after obtaining special leave from the Court.
Dismissing the appeal, this Court, HELD: The privilege or immunity from prosecution without sanction extends only when the accused is a public servant of the kind mentioned in Section 197, Cr.
He must be a public servant as defined in Section 21 of the Indian Penal Code and not removable from his office save by or with the sanction of the State Government or the Central Government as the case may be.
The offence must also be one committed by the accused while acting or purporting to act in the discharge of his official duty.
Section 197, Cr.
P.C. clearly intends to draw a line between public servants and to pro vide that only in the case of the higher ranks should the sanction of the Government to their prosecution be neces sary.
[513C D, H] 512 The words "removable from office" occurring in Section 197 signify removal from the office one is holding.
[514B] In the instant case, the appellant was not holding any public office in connection with the affairs of the State.
The State Government had merely entrusted him with the functions of a Public Analyst which could be granted and taken by an administrative Act.
It was on account of his being employed by the Municipal Corporation that he was appointed as a Public Analyst in the cadre against any post.
The Prevention of Food Adulteration Act also does not con tain any deeming provision to treat the Public Analyst as a public servant.
[514D E] The appellant is not therefore a public servant remova ble only by the State Government.
[514G]
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6497.txt
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Appeals Nos. 1008 and 1009 of 1965.
Appeals by special leave from the orders dated April 1, 1965 of the Central Government Labour Court, Jullundur, in cases Nos. 409 of 1963 respectively.
C. K. Daphtary, Attorney General, section V. Gupte, Solicitor General, Niren De, Addl.
Solicitor General, K. B. Mehta, V. Sagar, H. L. Anand and B. C. Das Gupta, for the appellants.
M. K. Ramamurthi, for the respondents.
The Judgment of the Court was delivered by Wanchoo, J.
These two appeals by special leave raise a common question as to the interpretation of paragraph 5.356 of the National Industrial Tribunal (Bank Disputes) Award of June 1962 (popularly known as the Desai award) and will be dealt with together.
It is unnecessary to set out the facts of the two appeals at this stage.
It is sufficient to say that the respondents made applications under section 33 C(2) of the Industrial Disputes Act, No. 14 of 1947, praying for determination and computation of the benefit to which they were entitled under the Desai award as they were not satisfied with the fixation of their pay by the appellant bank under para 5.356.
The Desai award dealt with the method of adjustment in the scales of pay fixed by it from para 5.329 onwards.
It divided the employees of the banks with which it was concerned in two groups.
The first group consisted of workmen who were drawing basic pay on January 1, 1962 according to scales of pay provided by the ALL India Industrial Tribunal (Bank Disputes) Award, 1953 (popularly known as the Sastry award) as modified by the Labour Appellate Tribunal Decision (Bank Disputes).
The second group 900 consisted of workmen who on January 1, 1962 were employed in banks which were not governed by the provisions of the Sastry award as modified and were not thus drawing basic pay on the footing of scales of pay provided by that award.
In the first case the Desai award provided that the workmen would be fitted in the new scales of pay from January 1, 1962 on stage to stage adjustment basis, i.e., workmen who were drawing basic pay at a particular stage in the time scale of the Sastry award as modified would draw basic pay at the same stage in the new scale applicable to them under the Desai award.
Examples of how this would be done were given in para.
5.348 of the Desai award.
As to the second group, the Desai award provided that these employees would first be fitted in the appropriate scales provided in the Sastry award as modified as on January 1, 1962 and thereafter they would be fitted in the new scales of pay provided by the Desai award as laid down in para.
5.348.
Paragraph 5.356 then went on to provide how these workmen would be fitted in the Sastry award.
Here again the workmen were divided into two groups, namely, those who entered service before January 1, 1959 and those who entered service on or after January 1, 1959.
In the present appeals we are concerned with workmen who entered service before January 1, 1959, and the fitment of these workmen was dealt with in para.
5.356 of the Desai award, and it is this paragraph which calls for interpretation in the present appeals.
We may at this stage mention that a similar question of fit ment was considered by the Sastry award in para.
292 and certain provisions were made thereunder.
This paragraph was considered by the Labour Appellate Tribunal in appeal from the Sastry award and certain modifications were made thereunder by paras 164 and 166 of the Labour Appellate Tribunal decision in appeal.
Paragraph 292 as modified by the Labour Appellate Tribunal decision came up for interpretation before this Court in State Bank of India vs Prakash Chand Mehra.
(1) As the words of para 292 of the Sastry award as modified by the Labour Appellate Decision are almost the same as the words of para.
5.356 of the Desai award, we may set out the two paragraphs in parallel columns for comparison: Sastry award as modified by the Labour Appellate decision For workmen who enterd service of the bank before 31st January, 1950 1.
The workman 's basic pay as on 31st January 1960 shall not be reduced in any case.
(1) Desai award For workmen who entered service of the bank before 1st January 1959 (i) The workman 's basic pay as on January 1, 1959 shall not be reduced in any case.
Subject to rule (1) the adjusted basic pay in the new scale shall not exceed what point to point adjustment would give him or the maximum in the new scale.
3.In the matter of adjustment all efficiency bars, whether in the previously existing or in the scales fixed by us should be ignored.
4.Subject to rules (1) to (3) a workman 's basic pay in the new scales shall be fixed in the following manner (a) A workman shall first be fitted into the scale of pay fixed by our award (herein called the new scale) by placing him at the stage in the new scale equal to, or next above his basic pay as on 31st January 1950 in the pre Sen scale then in force (herein called the existing scale).
(b) To the basic pay into which he is fitted under cl.
(a) the annual increments in the new scale as from that stage onwards should be added at the rate of one increment for every completed three years of service in the same cadre as on 31st January 1950, up to a limit of 12 years ' service; hereafter one increment for every four years of service up to another 8 years service, and after that one increment for every five years of service.
(c) Such increments shall not however exceed four in number.
[NOTE : Omitted by the Labour Appellate Tribunal in view of change in cl.
(b).] 4 A.
After adjustments are made in accordance with clauses (a), (b) and (c) supra two further increments in the new scale will be added thereto for service for the two years 1951 and 1952.
In addition the workman will be entitled to draw his normal increment for 1953on 1st April 1963.
Thereafter each succeeding year 's annual increment shall take effect as and from 1st April of that year.
901 (ii) Subject to rule (i), the adjusted basic pay in the scale provided in the Sastry award as modified shall not exceed what point to point adjustment would give him or the maximum in the scale provided by the Sastry award as modified.
(iii) In the matter of adjustment, all efficiency bars, whether in the previously existing scales or in the scales provided by the Sastry award as modified should be ignored.
(iv)Subject to rules (i) to (iii) a workman 's basic pay in the scale provided by the Sastry award as modified shall be fixed in the following manner (a)A workman shall first be fitted into the scale of pay of Sastry award as modified by placing him at the stage in the Sastry award scale as modified equal to, or next above his basic pay as on 1st January, 1959 in the scale then in force in the bank concerned (hereinafter called the Bank 's scale).
(b)To the basic pay into which he is fitted under clause (a) annual increment or increment& in scale provided by the Sastry award as modified as from that stage onwards should be added at the rate of one increment for every completed three years of his service in the same cadre as on 1st January 1959.
(c) Such increments shall not however exceed four in number.
(d) After adjustments are made in, accordance with clauses (a),(b) and (c) supra, two further annual increments.
in the scale provided by the Sastry award as modified will be added thereto for service for the two years of 1960 and 1961.
902 We are not concerned with clauses (5) and (6) of para 292 of the Sastry award or with clauses (v) and (vi) of para 5.356 of the Desai award for purposes of the dispute between the parties and have not therefore set them out.
It will be seen from the above comparison of the provisions in the two awards that the substantial provisions of the Desai award are exactly the same as the provisions of the Sastry award as modified except (i) for changes necessitated by the fact that the Desai award was being given in 1962 and (ii) the provision in the Sastry award corresponding to sub cl.
(d) of cl.
(iv) of para 5.356 of the Desai award was separated by the Labour Appellate Tribunal Decision from cl.
(4) and made clause (4 A).
"We have already referred to the fact that para.
292 of the Sastry award as modified came up for consideration before this Court in the case of Prakash Chand Mehra( ') and this Court interpreted clauses (1) to (4 A) of the Sastry Award as modified thus :"We have therefore first to fix the basic pay in accordance with rule 4(a), and then allow annual increments in accordance with rule 4 (b).
But this is subject to rules 1 and 2 above.
We are unable to accept the contention raised on behalf of the respondent that the words "subject to" have not the effect of making what would otherwise follow from the application of rules 4(a) and 4(b) subject to "both the lim its" laid down in rule 2.
Giving as we must natural meaning to the words used in rules 2 and 4, we are of opinion that in no case can the basic pay be fixed at a higher figure than what the point to point adjustment would give to the workman or the maximum in the new scale.
" The dispute between the bank and the workmen in the present ,case was this.
The bank claimed that under cl.
(ii) of the Desai award, the adjusted basic pay in the new scale was not to exceed what point to point adjustment would give an employee on January 1, 1962.
The bank further claimed that this being the maximum permissible under cl.
(ii) and cl.
(iv) being subject to cl.
(ii) the method of fitment provided in cl.
(iv) could not give to an employee more than the maximum arrived at under cl.
Thus the bank 's case was that once the maximum arrived at by point to point adjustment as on January 1, 1962, was reached under cl.
(ii), no further increments even under sub cl.
(1) 903 (d) of cl.
(iv) could be allowed.
The, workmen on the other hand claimed that they were entitled to what was provided by sub cls.
(a), (b) and (c) of cl.
(iv) and the two increments under sub cl.
(d) and that it did not matter whether what was thus arrived at exceeded the maximum provided under cl.
The labour court has partially accepted the workmen 's contention and fixed the pay of the two workmen concerned accordingly.
The bank contests the correctness of this view.
We are of opinion that neither the stand taken by the bank nor the stand taken by the workmen is correct, and that the relevant clauses in para.
5.356 of the Desai award must be interpreted in the same manner as the relevant provisions in the Sastry award as modified were interpreted in Prakash Chand Mehra 's case(1).
In this connection it is brought to our notice that in para.
5.356 of the Desai award it was stated that the award was giving directions similar to those provided under the Sastry award as modified subject to certain changes which were considered necessary having regard to the lapse of time after coming into force of the provisions of the Sastry award as modified.
It is urged on behalf of the appellant that the Desai award made certain changes and therefore need not be interpreted in the same way as was done in Prakash Chand Mehra 's case(1).
We see no force in this submission.
It is true that the Desai award said that certain changes were being made; but these changes were considered necessary having regard to the lapse of time.
However, the main intention of the Desai award was also to give directions similar to those provided in the Sastry award as modified.
It is true that there are some verbal changes in the Desai award; but these verbal changes are only due to lapse of time and do not affect the substance of what was provided by the Sastry award as modified.
We do not agree with the case of the appellant bank that in cl.
(ii) the adjusted basic pay is to be as on January 1, 1962.
We are of opinion that the adjusted basic pay in cl.
(ii) has to be taken as on January 1, 1959.
This follows from the fact that the workman 's basic pay as on January 1, 1959 cannot be reduced and therefore when cl.
(ii) speaks of adjusted basic pay it must refer to the same date as in cl.
Further cl.
(iv) which provides for actual calculations starts with the words "subject to rules (i) to (iii)" and therefore the actual calculations made under cl.
(iv) must be subject to clauses (i) and (ii).
This means in (1) L8Sup.
CI/66 11 904 effect that the actual fixation.
under sub cls.
(a), (b) and (c) of cl.
(iv) will be subject to cl.
(i) and cl.
Under sub cl.
(a) of cl.
(iv) a workman will be placed in the Sastry award as modified by placing him at the stage in the Sastry award scale equal to or next above his basic pay as on January 1, 1959, in the scale then in force in the bank concerned.
But in view of cl.
(i) this cannot be less than the actual basic pay of the workman as on January 1, 1959.
Where under cl.
(i) the actual basic pay as on January 1, 1959, is more than what point to point adjustment will give under cl.
(ii), it cannot be reduced for cl.
(ii) is subject to cl.
After this has been done the workman would be entitled to increments as provided in sub cl.
(b) read with sub cl.
(c) of cl.
(iv), but this will be subject to cls.
(i) and (ii) and the adjusted basic pay arrived at by giving the increments under sub cls.
(b) and (c) cannot exceed the adjusted basic pay as arrived at by point to point adjustment in the Sastry award as modified or the maximum of that scale or the actual basic pay as on 1st January 1959, as the case may be.
Thus sub cl.
(a) is subject to cl.
(i) and the basic pay to be fixed on January 1, 1959, has to be fixed by reading sub cls.
(a) of cl.
(iv) and cl.
(i) together.
Then increments under sub cl.
(b) read with sub cl.
(c) of cl.
(iv) have to be added, but this is again subject to the provisions of cls.
(i) and (ii).
After this has been worked out, then comes sub cl.
(d) of cl.
(iv), and the main dispute in the present case is about this subclause.
The appellant bank 's contention is that two further annual increments allowed under sub cl.
(d) cannot be permitted in view of cl.
(ii) as interpreted by the appellant.
But as we, have held that in cl.
(ii) the adjusted basic pay has to be fixed as on January 1, 1959, sub cl.
(d) of cl.
(iv) will take effect and give two annual increments for 1960 and 1961 which are beyond the date which we have accepted as the right date for purposes of cl.
It is however urged on behalf of the appellant that sub cl.
(d) is also subject to cls.
(i) to (iii) and therefore these increments if they go beyond what cl.
(ii) provides cannot be given.
This argument has arisen because the Desai award did not separate sub cl.
(d) as was done by the Labour Appellate Tribunal in its modification of the Sastry award.
But as stated by the Labour Appellate Tribunal when dealing with the Sastry award, it was inherent in the Sastry award that increments for 1951 and 1952 should be provided after the basic pay was worked out as on January 31, 1950.
The same applies to the Desai award.
Once it is held and that we hold that basic pay under cl.
(ii) has to be worked out as on January 1, 1959, the two increments provided by sub cl.
(d) of cl.
(iv) which are beyond that date must 905 be given over and above what has been worked out under sub cls.
(a), (b) and (c) of el.
(iv) of the Desai award.
The fact that by oversight sub cl.
(d) of el.
(iv) was not made a separate clause would make no difference for sub cl.
(d) provides for a period after the date up to which el.
(ii) works.
Therefore, two increments under sub cl.
(d) have to be given after adjustments have been made under sub cls.
(a), (b) and (c) of el.
(iv) in accordance with what we have interpreted these sub clauses as well as cls.
(i) and (ii) to mean.
In effect the two increments provided in sub el.
(d) must always be given.
But it may happen that increments provided in sub cl.
(b) read with sub cl.
(c) may in some cases be not available where the actual pay as on January 1, 1959 which will not be reduced under el.
(i) happened to coincide with or was more than the adjusted basic pay under el.
This interpretation is in accord with what was decided by this Court in Prakash Chand Mehra 's case(1), and that decision in our opinion would govern the interpretation of para.
5.356 of the Desai award also, which as we have indicated, is in substance the same as para.
292 of the Sastry award as modified by the Labour Appellate decision.
We now turn to the actual fixation of pay in each case.
We shall first take the case of Ram Parkash (i.e. C.A. 1008).
I le joined service on April 11, 1949.
His basic pay as on January 1,1959 was Rs. 106.
His place of posting was Phagwara in area ITT.
Point to point adjustment as on January 1, 1959, would give him Rs. 106 in the Sastry award scale as modified.
This is equal to his actual salary as on January 1, 1959.
Therefore under sub cl.
(a) of el.
(iv) his salary has to be fixed as on January 1, 1959 at Rs. 106.
He would not be entitled to any increments under sub cls.
(b) and (c), because his actual salary coincided with the adjusted basic pay in the Sastry award scale as modified as on January 1, 1959.
He would however be entitled to two increments under sub cl.
(d) for the years 1960 and 1961 and his salary therefore as on January 1, 1962 under the Sastry award would come to Rs. 119.
As Rs. 119 is the eleventh stage in the Sastry scale, Ram Parkash would be entitled to the eleventh stage in the Desai scale, which would be Rs. 170.
The bank actually fixed him at Rs. 176 on its own interpretation of the award.
In the circumstances, Ram Parkash was not entitled to any relief from the labour court.
Tek Chand Sharma respondent in C.A. 1009 was appointed on November 15, 1950.
His salary as on January 1, 1959 was Rs. 100 and his place of posting was Nakodar in area IV of the (1) 906 Sastry award.
His salary according to point to point adjustment would come to Rs. 85.
But under cl.
(i) his salary cannot be fixed below Rs. 100, which he was actually getting.
Under subcl.
(a) of cl.
(iv) his salary will be fixed at Rs. 100.
He would not be entitled to any increments under sub cls.
(b) and (c) of cl.
(iv) because he was getting more than what would be his adjusted basic pay under cl.
Therefore, for purposes of sub cl.
(a) of cl.
(iv) he would be fixed at Rs. 100 as on January 1, 1959, and would be entitled to increments under sub cl.
(d) which will bring his salary to Rs. 112 as on January 1, 1962.
This is the thirteenth stage in the Sastry scale.
Nakodar is now in area III in the Desai award.
The thirteenth stage in the Desai award scale is Rs. 182 for that area.
So his salary as on January 1, 1962 would be fixed at Rs. 182.
In addition he is entitled to two increments on account of being a graduate and one increment on account of his having passed the Indian Institute of Bankers ' examination.
His actual salary in the Desai scale on January 1, 1962 will be Rs. 182 plus Rs. 33, i.e., Rs. 215.
The bank fitted him on Rs. 193.
The award of the labour court therefore in the case of Tek Chand Sharma is correct.
We therefore allow C.A. 1008 and set aside the order of the labour court and dismiss the application of Ram Parkash.
We make no order as to costs in the circumstances.
C.A. 1009 is hereby dismissed.
We make no order as to costs in the circumstances.
C.A. 1008 allowed.
C.A. 1009 dismissed.
|
The respondent employees made applications under section 33C(2) of the Industrial Disputes Act for determination and computation of the benefit to which they were entitled under the National Industrial Tribunal (Bank Disputes) Award (Desai Award) as they were not satisfied with the fixation of their pay by the appellant bank under para 5.356 of the Desai Award.
The Bank claimed that under clause (ii) of para 5.356 of the Desai Award, the adjusted basic pay in,the new scale was not to exceed what point to point adjustment would give an employee on January 1, 1962 and that this being the maximum permissible under cl.
(ii), cl.
(iv) could not give an employee more than the maximum arrived at under cl. (ii).
The employees on the other hand claimed that they were entitled to what was provided by sub cls.
(a), (b) and (c) of cl.
(iv) and the two increments under sub cl.
(d) and that it did not matter whether what was thus arrived at exceeded the maximum provided under cl.
The Labour Court partially accepted the employees ' contention and fixed their pay accordingly.
In appeal.
HELD:The decision of this Court in Prakash Chand Mehra 's case would govern the interpretation of para 5.356 of the Desai Award also, which is in substance the same as para 292 of the Sastry Award as modified by the Labour Appellate decision.
The adjusted basic pay in cl.
(ii) has to be taken as on January 1, 1959.
This follows from the fact that the workman basic pay as on January 1, 1959 cannot be reduced and therefore when cl.
(ii) speaks of adjusted basic pay it must refer to the same date as in cl.
Further cl (iv) which provides for actual calculations starts with words "subject to rules (i) to (iii)" and therefore the actual calculations made under cl.
(iv) must be subject to cls.
(i) and (ii).
This means in effect that the actual fixation under sub cls.
(a), (b) and (c) of cl.
(iv) will be subject to cl.
(i) and cl.
Under sub cl.
(a) of cl.
(iv) a workman will be placed in the Sastry Award as modified by placing him at the stage in the Sastry Award scale equal to or next above his basic pay as on January 1, 1959 in the scale then in force in the bank concerned.
But in view of cl.
(i) this cannot be less than the actual basic pay of the workman as on January 1, 1959.
Where under cl.
(i) the actual basic pay as on January 1, 1959 is more than what point to point adjustment will give under cl.
(ii), it cannot be reduced for cl.
(ii) is subject to cl.
After this has been done the workman would be entitled to increments as provided in sub cl.
(b) read with sub cl.
(c) of cl.
(iv), but this will be subject to cl.
(i) and (ii) and the adjusted basic pay arrived at by giving the increments under sub cls.
(b) and (c) cannot exceed the adjusted basic pay as arrived at by point to point adjustment in the Sastry Award as modified or the maximum of that scale or the 899 actual basic pay as on 1st January 1959, as the case may be.
Thus sub cl.
(a) is subject to cl.
(i) and the basic pay to be fixed on January 1, 1959 hag to be fixed by reading sub cl.
(a) of cl.
(iv) and cl.
(i) together.
Then increments under sub cl.
(b) read with sub cl.
(c) of cl.
(iv) have to be added, but this is again subject to the provisions of cls.
(i) and (ii).
[903 E; 903 G 904 E] Once it is held that basic pay under cl.
(ii) has to be worked out as on January 1, 1959 the two increments provided by sub cl.
(d) of cl.
(iv) which are beyond that date must be given over and above what has been worked out under sub cls.
(a), (b) and (c) of cl.
(iv) of the Desai Award.
The fact that by oversight sub cl.
(d) of cl.
(iv) was not made a separate clause would make no difference for sub cl.
(d) provides for a period after the date up to which cl.
(i) works.
[904 H 905 B] State Bank of India Prakash Chand Mehra, [1961] 11 L.L.J. 383, relied on.
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2052.txt
|
Appeals Nos.
256 267 of 1966.
Appeals by special leave from the Award dated April 6, 1964 of the Central Government Labour Court, Dhanbad in Ap plications L.C. Nos.
237 / 245, 228 / 247, 238 / 250, 230 / 252, 239 / 254, 229/255 of 1962.
H.R. Gokhale and D. N. Gupta, for the appellant (in all the appeals).
Janardan Sharma, for the respondents (in all the appeals).
The Judgment of the Court was delivered by Shelat, J.
These appeals by the special leave arise out of applications filed by workmen of the appellant company claiming bonus under the Scheme framed by the Central Government under the, Coal Mines Provident Fund and Bonus Schemes Act, 46 of 1948 and railway fares and leave wages under the award of the Industrial Tribunal (Colliery Disputes) which came into effect as from February 22, 1954.
The Central Government Labour Court at Dhanbad allowed their claim under section 33C (2) of the .
Mr. Gokhale for the appellant company challenged the correctness of the Labour Court 's decision and raised the following contentions : (1) that the Labour Court had no jurisdiction to try these applications under section 33C (2): (a)because section 33C(2) contemplates recovery of money payable under an award, settlement or under the provisions of Chapter VA of the only 142 and not under any other statute or scheme framed there under; (b)that under section 33C(2) the benefit capable of being computed in terms of money is a non monetary benefit and not a claim for money itself; and (c)that the proceedings under section 33C(2) being in the nature of execution proceedings substantial questions between an employer and his employee cannot be adjudicated by the Labour Court under this section; (2)that in any case these applications were barred by limitation prescribed by the said bonus Scheme and/or due to laches on the part of the respondents , (3)that under the said Scheme the respondents are not entitled to bonus as they were employed as domestic servants and were during the relevant period performing domestic and personal work; and (4)that the direction to pay bonus for the period prior to the dates on which these respondents were employed was in valid.
The contention as to jurisdiction of the Labour Court depends on the true construction of section 33C(2) as it stood in 1962 when these applications were filed and before its amendment by Act 36 of 1964.
Section 33C(2) has so far been the subject matter of decision by this Court in three cases, viz., Punjab National Bank Ltd. vs Kharbanda(1), Central Bank of India vs Rajagopalan(2) and Bombay Gas Co. Ltd. vs Gopal Bhiva(3).
The following propositions on the question as to the scope of section 33C(2) are deducible from these three decisions: (1)The legislative history indicates that the legislature, after providing broadly for the investigation and settlement of disputes on the basis of collective bargaining, recognised the need of individual workmen of a speedy remedy to enforce their existing, individual rights and therefore inserted section 33A in 1950 and section 33C in 1956.
These two sections illustrate cases in which individual workmen can enforce their rights without having to take recourse to section 10(1) and without having to depend on their union to espouse their case.
(2)In view of this history two considerations are relevant while construing the scope of section 33C.
Where industrial disputes arise between workmen acting collec tively and their employers such disputes must be adjudicated upon in the manner prescribed by the Act, as for (1) [1962] Supp. 2 S.C.R. 977.
(2) ; (3) ; 143 instance under section 10(1).
But having regard to the legislative policy to provide a speedy remedy to Individual ' workmen for enforcing their existing rights, it would not be reasonable to exclude their existing rights sought to be implemented by individual workmen.
Therefore though in determining the scope of section 33C care should be taken not to exclude cases which legitimately fall within its purview, cases which fall, for instance under section 10(1), cannot be brought under section 33C; (3)Section 33C which is in terms similar to those in section 20 ofthe Industrial Disputes (Appellate Tribunal) Act,, 1950 is a provision in the nature of an executing provision; (4)Section 33C(1) applies to cases where money is due to a workman under an award or settlement or under Chapter VA of the Act already calculated and ascertained and therefore there is no dispute about its computation.
But sub section 2 applies both to non monetary as well as monetary benefits.
In the case of monetary benefit it applies where such benefit though due is not calculated and there is a dispute about its calculation; (5)Section 33C(2) takes within its purview cases of workmen who claim that the benefit to which they are entitled should be computed in terms of money even though the right to the benefit on which their claim is based is disputed by their employers.
It is open to the Labour Court to interpret the award or settlement on which the workmen 's right rests.
(6) The fact that the words of limitation used in section 20(2) of the Industrial Disputes (Appellate Tribunal Act.
1950 are omitted in section 33C(2) shows that the scope, of section 33C(2) is wider than that of section 33C(1).
Therefore, whereas sub section 1 is confined to claims arising under an award or settlement or Chapter VA.
claims which can be entertained under sub section are not so confined to those under an award, settlement or Chapter VA.
(7)Though the court did not indicate which cases other than those under subsection would fall under sub section 2.
it pointed out illustrative cases which would not fall under sub section 2, viz., cases which Would ap propriately be adjudicated under section 10(1) or claims which have already been the subject matter of settlement to which sections 18 and 19 would apply.
(8)Since proceedings under section 33C(2) are analogous to execution proceeding and the Labour Court called upon to compute in terms of money the benefit claimed by a workman is in such cases in the position of an executing court.
the Labour Court like the executing court 144 in execution proceedings governed by the Code of Civil Procedure, is competent under section 33C(2) to interpret the award or settlement where the benefit is claimed under such award or settlement and it would be open to it to consider the plea of nullity where the award is made without jurisdiction.
It is clear that the right to the benefit which is sought to be computed must be an existing one, that is to say, already adjudicated upon or provided for and must arise in the course of and in relation to the relationship between an industrial workman and his employer.
Since the scope of sub sec.
2 is wider than that of subsec.
1 and the sub section is not confined to cases arising under an award, settlement or under the, provisions of Chapter VA.
there is no reason to hold that a benefit provided by a statute or a Scheme made thereunder, without there being anything contrary tinder such statute or section 33C(2), cannot fall within sub section 2.
Consequently, the benefit provided in the bonus scheme made under the Coal Mines Provident Fund and Bonus Schemes Act, 1948 which remains to be computed must fall under sub section 2 and the Labour Court therefore had jurisdiction to entertain and try such a claim, it being a claim in respect of an existing right arising from the relationship of an industrial workman and his employer.
The contention that the Labour Court had no jurisdiction because the claim arose under the said scheme or because the benefit was monetary or because it involved any substantial question between the Company and the workmen must, in view of the said decisions, fail.
These applications were made in 1962 though they related to claims for the years commencing from 1948 and onwards.
The contention therefore was that part of these claims, at any rate, must be held to be barred either by limitation or by reason of laches on the part of the workmen.
The answer to this contention is clearly provided in the case of Bombay Gas Co.(1) where a distinction was drawn between considerations which would prevail in an industrial adjudication and those which must prevail in a case filed under a statutory provision such as section 33C(2).
This court pointed out there that whereas an industrial dispute is entertained on grounds of social justice and therefore a Tribunal would in such a case take into consideration factors such as delay or laches, such considerations are irrelevant to claims made under a statutory provision unless such provision lays down any period of limitation.
The Court held that there is no justification in inductina period of limitation provided in the Limitation Act into the provisions of section 33C(2) which do not lay down any limitation and that such a provision can only be made by legislature if it thought fit and not by the court on an analogy or any other such consideration.
It is a matter of some significance that though the legislature (1)[1964] 3 S.C.R. 709. 145 amended section 33C by Act 36 of 1964 and introduced limitation in the section, it did so by means of a proviso only in respect of claims made under sub sec.
1 but did not provide any limitation for claims under sub section 2.
In view of this fact and the decision in Bombay Gas Company 's case(1) Mr. Gokhale conceded that he could not press the contention that the present claims were barred by limitation or laches.
Some reliance however was sought to be placed on cl. 3 of section 9A of the Bonus Scheme.
Section 9(A) contemplates that the employer has first to tender the bonus payable to the workman under the Scheme.
If the bonus, in spite of the tender, remains unclaimed for six months after such tender, he is required to have it credited in the Reserve Account established under the Scheme.
The section then provides by cl. 2 that the bonus amount shall be paid in the seventh month from the end of the quarter to which it relates by depositing it in such government treasury as may be prescribed and the original chalan of such deposit shall be sent within the time set out therein to the Coal Mines Provident Fund Commissioner.
Clause (3) then provides that a workman who desires payment of arrears of bonus payable to him shall apply to the said Commissioner within three years from the last date of the quarter to which the bonus relates.
The period of three years of limitation thus applies to applications for payment by the Commissioner from the deposit made in the treasury and has no application to claims under section 33C(2) which as aforesaid makes no provision for limitation The contention that the respondents workmen, though admittedly the employees of the appellant company, were not entitled to bonus under the Scheme as they were doing domestic and personal work, viz., of supplying water at the residence of certain junior officers of the Company throughout the relevant period, is also not tenable.
The relevant portion of section 1 of the Bonus Scheme relied on by the Company reads as follows: "1.
Class of employees eligible to qualify for bonus Except as hereinafter provided, every employee in a coal mine to which this Scheme applies shall be eligible to qualify for bonus.
Exceptions An employee in a coal mine shall not be entitled to a bonus under the Scheme for the period during which (a). . . . . (b)he is employed as a mali, sweeper or domestic servant on domestic or personal work. . " (1) ; my(N)ISCI 12 146 Under this section every employee of the Company except as therein provided is eligible for bonus.
The exception provides that a person though an employee in a colliery is not entitled to bonus inter alia for the period during which he is employed as a mali, sweeper or domestic servant on domestic and personal work.
Two conditions are therefore necessary to render an employee ineligible for bonus : (1) that he is employed as a mali, a sweeper or a domestic servant and (2) that he performs during the relevant period domestic or personal work.
To render an employee ineligible for bonus under this exception both the capacity and the nature of work are relevant factors.
It follows that even though an employee is employed as a mali, a sweeper or a domestic servant if he does non domestic or non personal work he will be entitled to bonus and would lose his right to it only during that period that he does domestic or personal work.
In Bhowra Collicry vs Its Workmen(1) this Court construed this very exception and held that if the concerned workmen were employed and worked as garden mazdoors and malis to look after the gardens attached to the bungalows occupied by the Colliery officers they would not be eligible for the bonus notwithstanding the fact that the bungalows were owned by the Colliery, the workmen were Colliery 's employees and worked under the Company 's orders and were liable to be transferred from one job to another.
Thus the employment of a person as a mali, sweeper or a domestic servant and discharge by him of domestic or personal work as distinguished from non domestic and non personal work, i.e., work relating to the colliery, are necessary conditions before the exception can apply.
In view of the admitted position that the respondents work men were employees of the Company the burden of proof that they fell within the exception is clearly on the Company.
In its written statement the Company no doubt averred that these workmen were employed as domestic servants and carried out domestic and personal duties and were therefore not eligible for the bonus.
But it is clear from the evidence of the two witnesses examined by the Company that the Company failed to establish either that the respondents were employed as domestic servants or that they were exclusively en aged on domestic or personal, work.
On the other hand, from the evidence of Sibu, one of the respondent workmen, it appears that the respondents were employed in the colliery, that they were not assigned the exclusive duty of supplying water, at the residence of the junior officers but that they supplied water at certain pit heads.
On this evidence the Labour Court has given a finding that they were engaged in supplying water at certain points in the colliery.
In these circumstances the Labour Court was justified in coming to the conclusion that the exception did not apply.
(1) 147 The last contention which remains to be considered was that the Labour Court was not right in awarding the claim of the workmen in full, both as regards bonus and railway fares and leave wages.
According to the Company, none of these workmen was in its employment in 1948, that they were appointed at different dates and that they would at best be entitled to bonus for the period during which they were so employed.
This contention has, however, no force in view of the Company not having disputed the quantum of relief claimed by the workmen both as regards bonus as also the railway fares and leave wages.
The appeals are dismissed with costs.
Appeal dismissed.
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The respondents workmen filed applications in 1962 claiming bonus under the Scheme framed by the Central Government under the Coal Mines Provident Fund and Bonus Schemes Act, 1948 and railway fares and leave wages from 1948 onwards.
The Labour Court, Dhanbad allowed their claims under section 33C(2) of the , which, in appeals to this Court, the appellant Company challenged, contending, that (1) the Labour Court had no jurisdiction to try these applications under section 33C(2); (ii) the applications were barred by Limitation prescribed by the bonus Scheme and/or due to laches.
and (iii) under the said Scheme the workmen were not entitled to bonus as they were employed as domestic servants.
HELD:The appeals must fail.
(i)The right to the benefit which is sought to be computed must be an existing one, that is to say, already adjudicated upon or provided for and must arise in the course of and in relation to the relationship ' between an industrial workman and his employer.
Since the scope of sub see.
2 of section 33C is wider than that of sub s 1, and the sub section is not confined to cases arising under an award settlement or under the provisions of Chapter VA there is no reason to hold that a benefit provided by statute or a Scheme made thereunder, without there being anything contrary under such statute or section 33C(2), cannot fall within sub section 2.
Consequently.
the benefit provided in the bonus scheme made under the Coal Mines Provident Fund and Bonus Schemes Act, 1948 which remained to be computed must fall under sub section 2 and the Labour Court therefore had jurisdiction to entertain and try such a claim, it being a claim in respect of an existing right arising from the relationship of an industrial workman and his employer.
[144B D].
Punjab National Bank Ldt.
vs Kharbanda [1962] Supp.
2 S.C.R. 977 Central Bank of India vs Rajagopalan [1964] 3 S.C.R. 140, and Bombay Gas Co., Ltd. vs Gopal Bhiva [1964] 3 S.C.R. 709 relied on, (ii)There is no justification for inducting a period of limitation provided in the Limitation Act into the provisions of section 33C(2) which do not lay down any limitation.
It is a matter of some significance that though the legislature amended section 33C by Act 36 of 1964 and introduced limitation in that Section, it did so by means of a proviso only in respect of claims made under sub sec.
1 but did not provide any such limitation for claims under sub sec.
[14 4H 145B].
Bombay Gas Co. Ltd. vs Gopal Bhiva ; relied on.
141 The period of three years of limitation provided for by clause (3) of section 9A of ;the Bonus Scheme applies to applications for payment by the Coal Mines Provident Fund Commissioner from the deposit made in the Government treasury and has no application to claims under section 33C(2) which makes no provision for limitation.
[145D E].
(iii)Two conditions are necessary to render an employee ineligible for Bonus under section 1 of the Bonus Scheme: (1) that he is employed as a mali, a sweeper or a domestic servant, and (2) that he performs during the relevant period domestic or personal work.
To render an employee ineligible for bonus under this exception both the capacity and the nature of work are relevant factors.
It follows that even though an employee is employed as a mali, a sweeper or a domestic servant if he does non domestic or non personal work he will be entitled to bonus and would lose his right to A only during that period that he does domestic or personal work.
[146B C].
Bhowra Colliery vs Its Workmen, , relied on.
On the evidence, the respondents were employed in the colliery, they were not assigned the exclusive duty of supplying water at the residence of the junior officers but they supplied water at certain pit heads.
So the exception did not apply.
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2235.txt
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ition (Crl.) No. 1414 of 1979.
Under Article 32 of the Constitution.
Ram Jethamalani and Harjinder Singh for the Petitioner.
U. R. Lalit, E. C. Agarwala and M. N. Shroff for the Respondent.
The Judgment of the Court was delivered by KAILASAM, J.
The petitioner is brother of Virendra Ambalal Siroya who was detained by an order of detention dated 31 8 1979 issued by Additional Secretary to the Government of India under section 3(1) of the .
The detenu was served with the grounds of detention on 5 9 1979.
The counsel for the detenu made an application on 17 9 1979 for supply of documents, and statements recorded and relied on in the grounds of detention.
Before the documents were supplied, an incomplete representation was made by the detenu on 22 9 1979.
The documents were supplied on 25 9 1979, 27 9 1979 and 3 10 1979.
The detenu again made a second representation on 5 10 1979 and requested that the order of detention may be revoked by the Central Government.
Mr. A. K. Sen, the learned counsel for the petitioner, submitted that the representation requesting the Central Government to order the revocation under section 11 of the Act was not forwarded by the detaining authority to the Central Government and as such the detention is illegal.
In the memorandum of grounds in his writ petition at paragraph XIV the detenu submitted that he made representation to the Central Government and that the Central Government had not considered the representation at all.
In paragraph XV the detenu contended that the second representation was an application for revocation under section 11 of the Act wherein he specifically requested that the Central Government should revoke the order.
The said representation was not considered by the Central Government.
It was submitted that non consideration of the representation by the Central Government vitiated the detention order.
In reply the detaining authority stated in paragraph 15 as follows: "It is submitted that the consideration of representation of the detenu by the detaining authority is perfectly valid and legal and in accordance with the law.
It is, however, denied that merely because it was not considered by the Central Government, the detention order is vitiated in any way." 1080 It is clear from the statement that the representation was not forwarded to the Central Government.
The plea on behalf of the detaining authority is that merely because the representation was not considered by the Central Government, the detention order would not be vitiated.
The representation of the detenu dated 5 10 1979 is marked as Annexure 'E '.
It states that it is a further representation in the matter of his detention.
After setting out the various grounds, the relief asked for in paragraph 5 runs as follows: "The petitioner prays that: (a) That the order of detention be revoked by the Central Government.
(b) This further representation be placed before COFEPOSA Advisory Board alongwith the earlier representation.
(c) That the Advisory Board be pleased to report to the Central Government to revoke the impugned order of detention.
" The request of the detenu is clear: He prayed for the revocation of the order of detention by the Central Government.
It is not the case of the detaining authority that he did not understand the representation as being intended for the Central Government.
On the other hand, his plea is that the mere fact that the Central Government has not considered the representation would not vitiate the order of detention.
The detaining authority is the Additional Secretary, Government of India, Ministry of Finance and it is not disputed that a communication to that Central Government can be properly addressed by sending it to the Additional Secretary, Government of India, Ministry of Finance.
It is admitted that the representation was properly addressed to the Central Government.
The Central Government is empowered to revoke the order of detention at any stage.
It was submitted that the order of revocation by the Central Government can only be passed after the order of detention in confirmed by the detaining authority and the Advisory Board.
The power conferred on the Central Government by section 11 is wide enough to enable the Central Government to revoke the detention order at any stage for the words used are a detention order may at any time be revoked or modified.
The power of the Central Government to revoke the order of detention implies that the detenu can make a representation for exercise of that power.
Any petition for revocation of an order of detention should be dealt with reasonable expedition.
In this case it is the main ground urged 1081 on behalf of the detenu that the petition of the 5th of October, 1979 was not forwarded to the Central Government and consequently no order has been passed on that petition up to date.
In the course of arguments, Mr. A. K. Sen on behalf of the detenu submitted that even the earlier representation was addressed to the Central Government which was also not forwarded.
We do not think that we should entertain this plea as it was not pleaded in the memorandum of grounds that the first representation was to the Central Government but made for the first time in the Court before us.
In any event, it is clear that a representation properly addressed by the detenu to the Central Government was not forwarded to the Central Government and as such no action had been taken up to date.
It may be permissible for the Central Government to take reasonable time for disposing any revocation petition.
But it would not be justified in ignoring the representation for revocation of the detention as a statutory duty is cast upon the Central Government.
It is necessary that the Government should apply its mind and either revoke the order of detention or dismiss the petition, declining to order for revocation.
The question that arises for consideration is, as to what will be the consequence if a properly addressed petition is not forwarded to the Central Government and as such left unattended for a period of nearly four months.
We feel that in such circumstances the detention cannot be justified as being according to the procedure.
In the circumstances we do not feel that we will be justified in sending the representation to the Central Government for disposal at this stage.
Taking all the facts and circumstances of the case, we feel that the continued detention of the detenu cannot be held to be according to procedure.
His release has already been ordered.
P.B.R. Petition allowed.
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The petitioner 's brother was detained by an order of detention dated 31st August, 1979 under section 3(1) of the and the grounds of detention were served on him on 5th September, 1979.
An application was made on 17th September, 1979 for supply of documents and statements recorded and relied on in the grounds of detention.
On 22nd September, 1979 he made an incomplete representation.
The documents were supplied on 25th September, 27th September and 3rd October, 1979.
The detenu made a second representation on 5th October, 1979 requesting that the order of detention be revoked by the Central Government but no action was taken on them till the date of hearing.
In the writ petition it was alleged that the first representation as well as the second representation requesting for the revocation of the order under section 11 of the Act were not considered by the Central Government and that non consideration of the representation vitiated the detention order.
The detaining authority on the other hand contended that the mere fact that the representation was not considered by the Central Government did not vitiate the order of detention.
Allowing the petition, ^ HELD: The continued detention of the detenu cannot be held to be according to procedure.
[1081F] If a properly addressed petition is left unattended for a long period of time the detention order cannot be justified as being according to procedure.
[1081 E] The power conferred on the Central Government by section 11 of the Act is wide enough to enable that Government to revoke the detention order at any stage for the words used are a detention order may at any time be revoked or modified.
Any petition for revocation of an order of detention should be dealt with with reasonable expedition.
It may be permissible for the Central Government to take reasonable time for disposing of a petition for revocation of an order of detention but it would not be justified in ignoring the representation because a statutory duty is cast upon the Central Government.
It is necessary that the Government should apply its mind and either revoke the order of detention or dismiss the petition.
[1080G H] In the instant case the representation which was properly addressed by the detenu to the Central Government was not forwarded to that Government and 1079 as such no action had been taken till the date of hearing.
There is no justification in sending the representation to the Central Government at this very late stage.
[1081C&E]
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4177.txt
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ivil Appeal No. 2378 of 1977.
804 From the Judgment dated 3.2.1977 of the Gujarat High Court in Special Civil Application No. 551 of 1972.
B. Datta, L.B. Kolekar, Ms. Chetna Anand and P.H. Parekh (NP) for the Appellant.
S.K. Kholakia, R.B. Haribhakti and P.C. Kapoor (NP) for the Respondents.
The Judgment of the Court was delivered by K. RAMASWAMY, J.
The facts relevant to the controversy are as under: The appellant had taken on lease, about 55 years ago, an extent of 2 acres, 6 gunthas of agricultural lands situated in Akote village from Vishwas Rao.
The Bombay Tenancy and Agricultural Lands Act 67 of 1948 for short `the Act ' applies to the lease.
By operation of section 32(1) the appellant became a deemed purchaser from tillers ' day i.e., April 1, 1957.
Section 32 G provides the procedure to determine purchase price.
Since the landlord was insane, the right to purchase was statutorily deferred under section 32 F till date of its cessation or one year after death.
Under section 88(1)(b) of the Act certain areas abutting Baroda Municipality were notified as being reserved for non agricultural or industrial purpose with effect from May 2, 1958.
By another notification published in the Gujarat State Gazette dated July 2, 1964, certain lands including those situated in Akote and of the appellant 's lease hold lands were reserved for industrial purpose.
Consequently Ss. 1 to 87 of the Act do not apply to the exempted area.
While the landlord was continuing under disability, his son Vasant Rao sold the land to the respondent under registered sale deed dated August 19, 1964.
By another notification under Section 88(1)(b) published in the Gazette dated October 29, 1964, the Government restricted the operation of the exemption to the area originally notified on May , 1958 i.e., Ss. 1 to 87 do not apply to the lands in question.
This notification was rescinded by further notification published in the Gazette dated August 23, 1976.
The Bombay Tenancy and Agricultural Lands(Gujarat) Amendment Act 36 of 1965, section 18(1) and 18(2) thereof introduced two provisos to section 88(1)(b) of the Act which was published in the Gazette on December 29, 1965 which are relevant for purpose of the case.
Section 88(1)(b) with amendments reads thus: "(1) Save as otherwise provided in sub section (2) 805 nothing in the following provisions of this Act shall apply (a) to lands belonging to, or held on lease form the Government; (aa) to lands held or leased by a local authority; (b) to any area which the State Government may, from time to time, by notification in th official Gazette, specify as being reserved for non agricultural or industrial development; Provided that if after a notification in respect of any area specified in the notification is issued under this clause, whether before or after the commencement of the Bombay Tenancy and Agricultural Lands (Gujarat Amendment) Act, 1965, the limits of the area so specified are enlarged on account of the addition of any other area thereto, then merely by reason of such addition, the reservation as made by the notification so issued shall not apply and shall be deemed never to have applied to the area so added, notwithstanding anything to the contrary contained in any judgment, or order of any court, Tribunal or any other authority.
Provided further that if any land in the area so added has been transferred or acquired after the issue of notification referred to in the first proviso but before the 9th day of October, 1964, such transfer or acquisition of land shall have effect as if it were made in an area to which this clause applies".
Vishwash Rao died in September 1965.
The appellant became entitled to purchase the land on and from August 19, 1966.
He filed an application before Mamlatdar to fix the price.
He fixed on enquiry at Rs.4,925.65 paise which was paid by the appellant.
In the enquiry, the respondent contended that he purchased the property from Vasantrao, son of the landlord.
By operation of second proviso to section 88(1)(b) the lands stood exempted from operation of Ss. 1 to 87 of the Act.
So the Mamlatdar had no jurisdiction to decide the 806 price of the land.
The appellant raised the contention that Vasantrao has no right to sell during the life time of the father, the Karta of the Hindu Joint Family.
The sale is invalid and does not bind him.
He acquired statutory right of deemed purchaser and its exemption under section 88(1)(b) does not divest his statutory right.
The Mamlatdar accepted the appellant 's contention and allowed the petition.
On appeal to the Collector and revision to the Revenue Tribunal the decision was reversed.
The Division Bench of the High Court by order dated February 3, 1977 dismissed the writ petition.
The appellant had leave of this Court by article 136.
Thus this appeal.
From these admitted facts the question emerges whether the operation of the second proviso to section 88(1)(b) has retrospective effect depriving the appellant of the statutory right of `deemed purchaser '.
section 88 of the Act empowers the government to exempt certain other lands from the purview of Ss. 1 to 87 of the Act.
The State Government exercised their power from time to time under section 88(1)(b) and issued notification and published in the official Gazette specifying certain areas as being reserved for non agricultural or industrial development i.e., urban development.
Consequently the first proviso gets attracted which say that notwithstanding any judgment or order of any court, tribunal or any other authority under the Act to the contrary, once the notification was issued either before or after commencement of the Amendment Act reserving the area so added for non agricultural or industrial development i.e. expansion for urbanisation, to the extent of the area covered under the first proviso, the provisions of Ss. 1 to 87 were not applied and shall be deemed never to have been applied.
The second proviso which is material for the purpose of the case further postulates that: "Provided further that if any land in the are so added has been transferred or acquired after the issue of the notification referred to in the first proviso but before the 29th day of October, 1964, such transfer or acquisition of the land shall have effect as if it was made to an area to which this clause applies".
(emphasis supplied) What is the effect of the second proviso to the facts is the question? Mr. Dutta, the learned counsel for the appellant contended that the first proviso has the effect of excluding Ss. 1 to 87 of the Act only to those areas which were initially reserved for non agricultural or industrial development and has no application to the land added to it by a 807 subsequent notification though it would become part thereof.
Any alienation in violation of the Act would not attract the operation of the second proviso.
The Act is an agrarian reform which created a vested right in the tenant as a deemed purchaser with effect from Tillers ' day which cannot be divested retrospectively.
The proviso should be construed to inhere in the tenant the vested rights created under the Act.
The Withdrawal of the notification dated Oct. 29, 1964 renders the right of the appellant uneffected.
It is a cardinal rule of interpretation that a proviso to a particular provision of a statute only embraces the filed, which is covered by the main provision.
It carves out an exception to the main provision to which it has been enacted by the proviso and to no other.
The proper function of a proviso is to except and deal with a case which would otherwise fall within the general language of the main enactment, and its effect is to confine to that case.
Where the language of the main enactment is explicit and unambiguous, the proviso can have no repercussion on the interpretation of the main enactment, so as to exclude from it, by implication what clearly falls within its express terms.
The scope of the proviso, therefore, it to carve out an exception to the main enactment and it excludes something which otherwise would have been within the rule.
It has to operate in the same field and it the language of the main enactment is clear, the proviso cannot be torn apart from the main enactment nor can it be used to nullify by implication what the enactment clearly says nor set at naught the real object of the main enactment, unless the words of the proviso are such that it is its necessary effect.
The effect of the notification issued under section 88(1)(b) was the subject of consideration in several decisions of this Court.
In Sukharam @ Bapusaheb Narayan Sanas & Anr.
vs Manikchand Motichand Shah and Anr., [196] SCR 59 Sinha, CJ., held that the provisions of section 88 are entirely prospective and apply to such lands as are described in clauses (a) to (d) of section 88(1) from which the Act came into operation, namely, December 28, 1948 and are not a confiscatory in nature so as to take away from the tenant the status of a protected tenant already accrued to him.
In Mohanlal Chunilal Kothari vs Tribhovan Haribhai Tamboli, ; a Constitution Bench speaking through Sinha, CJ. held that Clauses (a) to (c) of section 88(1) applies to things as they were on the date of the commencement of the Act of 1948 whereas clause (d) authorised the State Govt.
to specify certain areas as being reserved for urban non agricultural or industrial development, by notification in the official Gazette, from 808 time to time.
It was specifically provided in clauses (a) to (c) that the Act, from its inception, did not certain areas then identified, whereas clause (d) has reference to the future.
The State Govt, could take out of the operation of the Act such areas as in its opinion should be reserved for urban non agricultural or industrial development.
Clause (d) would come into operation only upon such a notification being issued by the State Govt.
In Sukhram 's case, this Court never intended to lay down that the provisions of clause (d) are only prospective and have no retrospective operation.
Unlike clauses (a) to (c) which are clearly prospective, clause (d) has retrospective operation in the sense that it would apply to land which would be covered by the notification to be issued by the government from time to time so as to take that land out of the operation of the Act of 1948, granting the protection.
(emphasis supplied) So far as clauses (a) to (c) are concerned, the Act of 1948 would not apply at all to lands covered by them, but that would not take away the rights covered by the Act of 1939 which was repealed by the Act of 1948.
Therefore, it was held that by operation of section 89(2) the rights acquired under the Act of 1939 would be available to the tenant.
When a doubt was expressed of the correctness of the above views on reference, another Constitution Bench in Sidram Narsappa Kamble vs Sholapur Borough Municipality & Anr., ; , held at p. 65 thus: "New there is no doubt that section 88 when it lays down inter alia that nothing in the foregoing provisions of the 1948 Act shall apply to lands held on lease from a local authority, it is an express provision which takes out such leases from the purview of sections 1 to 87 of the 1948 Act.
One of the provisions therefore which must be treated as non existent where lands given on lease by a local authority is in section 31. .but the effect of the express provision contained in section 88(1)(a) clearly is that section 31 must be treated as non existent so far as lands held on lease from a local authority are concerned and in effect therefore section 88(1)(a) must be held to say that there will be no protection under the 1948 Act for protected tenants under the 1939 Act so far as lands held on lease from a local authority are concerned . . 809 the appellant cannot claim the benefit of section 31; nor can it be said that his interest as protected tenant is saved by section 89(2)(b).
This in our opinion is a plain effect of the provisions contained in section 31, section 88 and section 89(2)(b) of the 1948 Act".
In Parvati & Ors.
vs Fatehsinhrao Pratapsinhrao Gaekwad, ; the facts were that the Government issued a notification on May 21, 1958 under section 88(1)(b) of the 1948 Act reserving the land within the municipal limits of the city of Baroda for non agricultural and industrial development.
The appellant 's husband had taken possession of certain lands situated in the city of Baroda on lease from the respondent trustee.
The respondent laid the suit against the appellant for recovery of arrears of rent.
The defence was that the suit was not maintainable.
Dealing with the effect of the notification issued under section 88(1)(b), this Court held that the notification had retrospective operation and subject to certain exceptions provided in sub section (2) of section 88 all rights, title, obligations etc.
Accrued or acquired under the said Act ceased to exist.
Therefore, section 89(2)(b) was inapplicable to protect such right, title or interest, acquired under the Act except as provided in s 89A owing to express provision made in section 88 of the Act.
Accordingly it was held that the Civil Court was legally competent to determine the reasonable rent payable by the tenant.
In Navinchandra Ramanlal vs Kalidas Bhudarbai & Anr., ; this court was to consider a case that the notification under section 88(1)(b) was issued on May 30, 1959 by which date the tenant acquired the statutory right of a deemed purchaser with effect from April 1, 1957.
This Court held that the tenant cannot be divested of his deemed purchase by a subsequent notification issued thereunder.
It would be seen that the effect of the second proviso was not considered therein.
The above interpretation would equally apply to the interpretation of the notification issued under the proviso to section 88(1)(b) adding to the area reserved for non agricultural or industrial development.
Its effect is that notwithstanding any judgment or order of any court or Tribunal or any other authority, the provisions of Ss. 1 to 87 shall not apply and shall be deemed never to have applied to such added area as well.
If any land in the newly added area has been transferred or acquired between the date of the notification issued under first proviso and October 9, 1964, such transfer or acquisition of land shall have the effect as if it was made in an area to which the main part of the proviso and section 88(1)(b) would apply.
The necessary consequence would be that the provisions of sections 1 to 87 shall not apply and shall be 810 deemed never to have applied to such added area.
It is implicit that such transfer or acquisition made, to bring within the net of second proviso, must be valid and bona fide one and not colourable, fraudulent, fictitious or nominal.
The Legislature appears to relieve hardship to the bona fide purchasers.
The title acquired by such transfer is not effected by the provisions of the Act.
The Legislature advisedly used the words `acquired or transferred '.
The respondent 's own case is that Vishwesh Rao, Karta of the Hindu Joint Family was under disability due to lunacy.
The tenant acquired statutory right as deemed purchaser under section 32.
The Act, by necessary implication, divests the landlord of his right to alienate the land held by the tenant.
The statutory right topurchase the land under section 32 as deemed purchaser was postponed by operation of section 32 F of the Act till the cessation of the disability or one year after the death of the landlord.
In such situation can the son during the life time of the father, has right to sell the same property to the respondents, and whether such a sale made on August 19, 1964 to the respondents was valid and binds the appellant.
In Raghavachariar 's Hindu Law Principles and Precedents, Eighth Ed., 1987 in section 275 at p. 39 stated thus: "So long as the joint family remains undivided, the senior member of the family is entitled to manage the family properties, and the father, and in his absence, the next senior most male member of the family, as its manager provided he is not incapacitated from acting as such by illness or other sufficient cause.
The father 's right to be the manager of the family is a survival of the patria potastas and he is in all cases, naturally, and in the case of minor sons necessarily the manager of the joint family property.
In the absence of the father, or if he resigns, the management of the family property devolves upon the eldest male member of the family provided he is not wanting in the necessary capacity to manage it".
Regarding the management of the Joint Family Property or business or other interests in a Hindu Joint Family, the Karta of the Hindu Joint Family is a prima inter pares.
The managership of the Joint Family Property goes to a person by birth and is regulated by seniority and the Karta or the Manager occupies a position superior to that of the other members.
A junior member cannot, therefore, deal with the joint family property as Manager so long as the Karta is available except where the Karta relinquishes his right expressly or by necessary impli 811 cation or in the absence of the Manager in exceptional and extra ordinary circumstances such as distress or calamity effecting the whole family and for supporting the family or in the absence of the father whose whereabouts were not known or who was away in remote place due to compelling circumstances and that is return within the reasonable time was unlikely or not anticipated.
No such circumstances are available here to attract the facts of the case.
Vasantrao, the vendor, son of the Karta of the Hindu Joint Family per se has no right to sell the property in question as Manager so long as the father was alive.
When father was under disability due to lunancy, an order from the Court under Indian Lunancy Act IV of 1912 was to be obtained to manager the joint family property.
No proceedings were taken under sections 39, 43 and 45 of the Indian Lunacy Act to have the inquisition made by a competent District Court to declare him as insane and to have him appointed as Manager of the Joint Family.
In P.K. Gobindan Nair & Ors.
vs P. Narayanan Nair & Ors., [1912] 23 M.L.J. 706=17 Indian Cases 473 a division Bench of the Madras High Court held that a guardian cannot be appointed as Manager under the Guardian and Wards Act on an adjudication of Karnavan of an undivided Malabar Tarwad as a lunacy.
In A. Ramacharlu vs Archakan Ananthacharlu & Anr., A.I.R. 1955 A.P. 261 a division Bench consisting of Subba Rao, C.J. and Satyanarayana Raju, J. (as they were) considered the question of appointment of a son as the Manager of the Mitakshara family whose father was alleged to be a lunatic.
Subba Rao, C.J. speaking for the Bench, held that in view of the finding that the Karta, though was mentally not sound, but was capable to manage the property, the application for appointment of a son as manager of the joint family property was not be ordered.
Since Vasantrao did not obtain any order from the competent court under the Lunacy Act to have him appointed as Manager of the joint family to alienate the property, the sale is per se illegal.
The sale, therefore, appears to be to defeat the statutory right of the appellant.
The rigour of the second proviso to section 88(1)(b) is thus inapplicable.
Thereby the right and interest as a deemed purchaser acquired by the appellant has not been effected by a subsequent notification issued under section 88(1)(b).
The High Court, therefore, committed manifest error in holding that the appellant is not entitled to the relief.
The appeal is accordingly allowed and the orders of the High court, The Tribunal and District Collector are set aside and that of the Mamlatdar is confirmed, but in the circumstances parties are directed to bear their own costs.
Y.Lal.
Appeal Allowed.
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The appellant took on lease some agricultural lands from one Viswas Rao and by operation of Section 32(1) of the Bombay Tenancy and Agricultural Lands Act 67 of 1948, which was applicable to the lease, he became a deemed purchaser from tillers ' day i.e. 1.4.1957.
Since the landlord was insane, the right to purchase was statutorily deferred under section 32 F till date of its cessation or one year after death.
Pursuant to the notification issued under Section 88(1)(b) of the Act, certain lands including those of the appellant 's lease hold lands were reserved for industrial purpose; thereby making sections 1 to 87 of the Act inapplicable to the exempted area.
During the subsistence of disability of the landlord, his son Vasant Rao sold the land to the respondent under registered sale deed.
Vishwas Rao died in September 1965.
The appellant became entitled to purchase the land on and from August 19, 1966.
He therefore filed an application before Mamlatdar to fix the price.
He fixed on enquiry at Rs.4,95/65 P. which was paid by the appellant.
In the enquiry, the respondent contended that he purchased the property from Vasantrao, son of the landlord and by operation of the second proviso to Section 88(1)(b), the lands stood exempted from the operation of Section 1 to 87 of the Act.
So the Mamlatdar had no jurisdiction to decide the price of the land.
The appellant 's contention was that Vasantrao had no right to sell the lands during the life time of his father, the Karta of the Hindu Joint Family.
The sale was invalid and did not bind him.
He had acquired statutory right of `deemed purchaser ' and its exemption under section 88(1)(b) did not divest his statutory right.
The Mamlatdar accepted the appellant 's contention and allowed the petition.
On appeal to the Collector and revision to the Revenue Tribunal, the decision of Mamlatdar was reversed.
The Division Bench of the High Court dismissed the writ petition.
Hence this appeal by the appellant, after obtaining special leave.
On the question: whether the operation of the second proviso to Section 88(1)(b) of the tenancy Act, 1948 has retrospective effect depriving the appellant of the statutory right? 803 Allowing the appeal, this Court HELD: Section 88 of the Act empowers the government to exempt certain other lands from the purview of Sections 1 to 87 of the Act.
The State Governments exercised their power from time to time under Section 88(1)(b) and issued notification and punished in the official Gazette specifying certain areas as being reserved for non agricultural or industrial development i.e., urban development.
[806C D] It any land in the newly added area has been transferred or acquired between the date of the notification issued under first proviso and October 9, 1964, such transfer or acquisition of land shall have the effect as if it was made in an area to which the main part of the proviso and Section 88(1)(b) would apply.
The necessary consequence would be that the provisions of Sections 1 to 87 shall not apply and shall be deemed never to have applied to such added area.
It is implicit that such transfer or acquisition made, to bring within the net of second proviso, must be valid and bona fide one and not colourable, fraudulent, fictitious or nominal.
[809G 810B] In the instant case, since Vasantrao did not obtain any order from the competent court under the Lunacy Act to have him appointed as Manager of the joint family to alienate the property, the sale is per se illegal, The sale, therefore, appears to be to defeat the statutory right of the appellant.
The rigour of the second proviso to Section 88(1)(b) is thus inapplicable.
Thereby the right and interest as deemed purchaser acquired by the appellant has not been affected by subsequent notification issued under section 88(1)(b).
[811F G] Sukharam @ Bapusaheb Narayan Sanas & Anr.
vs Manikchand Motichand Shah & Anr., [196] 2 S.C.R. 59; Mohanlal Chunilal Kothari vs Tribhovan Haribhai Tamboli, ; ; Sidram Narsappa Kamble vs Sholapur Borough Municipality & Anr., ; ; Parvati & Ors vs Fatehsinhrao Pratapsinghrao Gaekwad, ; ; Navinchandra Ramanlal vs Kalidas Bhudarbai & Anr., ; ; P.K. Gobindan Nair & Ors.
vs P. Narayanan Nair & Ors., Indian Cases 743; and A. Ramacharlu vs Archakan Ananthacharlu & Anr., A.I.R. 1955 A.P. 261, referred to.
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6742.txt
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Appeal No. 168 of 1963.
Appeal by special Leave from the judgment and decree dated May 1, 1962, of the Gujarat High Court in Appeal from Order No. 46 of 1962.
I.M. Nanavati, 1.
B. Dadachanji 0.
C. Mathur and Ravinder Narain, for the appellant.
S.T. Desai, M. M. Shah and I. N. Shroff, for the res pondents.
September 5, 1963.
A. K. Sarkar, J. delivered a dissenting opinion.
The judgment of M. Hidayatullah and J. C. Shah, jj. was delivered by Shah, J. SARKAR J.
In my opinion this appeal should succeed.
The respondent landlords demised certain premises to 895 Maneklal Mafatlal for a term of five years from March 5, 1950.
The tenant continued in possession after the expiry of the term under the protection from eviction given by the Bombay Rents and Lodging House Rates (Control) Act, 1947 which came into force on February 2, 1948.
On April 27, 1956, the landlords filed a suit against him for eviction for non payment of rent and obtaineda decree on June 22, 1960.
While this suit was pending the tenant sub let a part of the demised premises to the appellant.
In execution of the decree the landlords got possession of a small part of the premises which was in the actual occupation of the tenant.
As to the rest, the sub tenants in possession including the appellant resisted eviction.
The appellant in fact filed a suit against the landlords claiming that under section 14 of the Act it had upon the determination of the interest of the tenant in the premises by the decree against him become their direct tenant of the portion sub let to it and asking for a permanent injunction restraining the landlords from evicting it.
In that suit the appellant made an application for an interim injunction but the application was rejected by the trial Court and an appeal therefrom, by the appellate Court.
The appellant then moved the High Court of Gujarat in revision and the High Court confirmed the orders of the Courts below holding that after the expiry of the term the tenant had no power of sub letting and the appellant, therefore, was not a sub tenant and it was not entitled to any injunction.
The correctness of this judgment of the High Court is challenged in this appeal.
The protection under which the tenant in this case stayed on after the expiry of his lease was given by sub section
(1) of section 12 of the Act which provides that a landlord shall not be entitled to the recovery of possession of any premises so long as the tenant pays rent and observes and performs the conditions of the tenancy as provided in the section.
The tenant contemplated in sub section
(1) of section 12 is plainly a tenant whose had come to an end.
The Act at various places uses the word "tenant" as including such a person and also defines the word "tenant" in section 5(11) (b) as including "any person remaining, after the determination of the lease, in possession, with or without the assent of the landlord, of the premises leased to such person .
" ' 896 Such a person has been called a statutory tenant and I shall also use that description for economy of expression.
The landlords contend that though by virtue of section 12(1) of the Act the tenant could not be evicted after the expiry of his lease, yet he had then lost all interest in the demised premises and could not, therefore, sub let the same.
How it may be that under the general law of landlord and tenant, a tenant has no right to sub let after the expiry of the lease but we have here a statute which has altered that law in many ways.
The power of tenant to sub let cannot therefore be decided by reference to the general law of landlord and tenant but the Act must be examined to see how it affects that power.
In my opinion such a power in a statutory tenant is contemplated by the Act and in particular by cl.
(e) of sub section
(1) of section 13.
That section lays down the circumstances in which a landlord notwithstanding the bar in section 12(1), can get a decree in ejectment against the tenant and the part of it to which I wish to refer is in these terms : section 13.
(1) "Notwithstanding anything contained in this Act but subject to the provisions of section 15, a landlord shall be entitled to recover possession of any premises if the Court is satisfied . . . . . . . . . . . . . . . (e)that the tenant has, since the coming into operation of this Act, unlawfully sub let the whole or part of the premises or assigned or transferred in any other manner his interest therein;" This clause plainly contemplates a tenant sub letting and this is not in dispute.
But it is said that the tenant here referred to is one whose lease has not expired whom I will for short call a contractual tenant as to whose power to sub let there is no question.
The reason given in support of this view is that a statutory tenant having no interest in the premises cannot certainly assign or transfer his interest in the demised premises and, therefore, the word "tenant" in cl.
(e) of section 13(1) must in relation to assignment and transfer by a tenant be understood as a contractual tenant.
That being so, and as it is unlikely that the word had been used in different meanings in the 897 same clause, it must mean only a contractual tenant in relation to sub letting also.
I am unable to accept this contention.
The word "tenant" has been given various meanings by the definition clause in the Act.
All those meanings must be given to that word wherever it occurs in the Act unless the context otherwise requires.
If a statutory tenant cannot transfer or assign his interest as to which I express no opinion cl.
(e) of section 13(1) cannot, of course, be contemplating him as doing so.
That, however, would not show that definition of "tenant" as a statutory tenant would not be available for deciding what kind of tenants were contemplated by cl.
(e) when it said that a tenant unlawfully sub letting would be liable to eviction.
In all other ,clauses in section 13(1) the word "tenant" clearly includes both a statutory and a contractual tenant and, therefore, the section contemplates the word "tenant" being used in ,more than one sense.
The fact that the clause talks of ,a contractual tenant alone assigning does not provide a context preventing the word "tenant" when it talks of the tenant sub letting, as being understood in the sense of a statutory tenant.
Another contention advanced draws its force from the word "sub let".
It proceeds on the basis that the word " sub let" can only mean transfer of an estate.
It is said that cl.
(e) by using the word "sub let" indicated that it did not contemplate a statutory tenant as he could not sub let for he had no interest in the demised premises.
No authority has been brought to our attention in support of the contention that letting or sub letting necessarily means transfer of estate or property and I do not think that it is well founded.
Decisions of Courts in England to which I will later refer, have held that a statutory tenant who has no estate or property in the demised premises, can sub let.
When the clause talks of a statutory tenant sub letting, it may not be contemplating transfer ,of property.
The Act undoubtedly creates rights in the tenant in respect of the property.
He can maintain an ,action for trespass against any one including the landlord, illegally depriving him of the possession of property.
He ,has at least this interest in the property that he can require possession of, it to be delivered to him.
It is not as if his 898 right is one only of a personal action in damages.
The sub letting contemplated in cl.
(e) of section 13(1) may be of ' this statutory right in the property.
It would be no answer to this to say that the right impersonal, for the right would not be personal in the strict sense if it can be sublet.
In Baker vs Turner(1) Lord Porter approved of the observation of Scrutton L. J. in Keeves vs Dean(2) about a statutory tenant that "Parliament has certainly called him a tenant, and he appears to me to have something more than a personal right against his landlord".
Then it was said that under the clause unlawful subletting as also unlawful assignment and transfer were grounds for eviction and if the clause implied a power in the statutory tenant to lawfully sub let it also must equally imply in him a power to, lawfully assign or transfer his interest in the tenancy.
It was contended that since it was impossible for a statutory tenant to assign or transfer any interest in the premises as he had none, it would follow that he could not lawfully sub let either.
In the first place, I do not think that the word "unlawfully" in the clause applies to "assigned or transferred"; I think as the clause stands it applies only to sub letting.
The Act furthermore nowhere states what is an unlawful assignment or transfer of a tenant 's interest.
It would undoubtedly have done so if it contemplated unlawful assignment or transfer.
It is significant that it specifically talks of lawful and unlawful sub letting in sections 14 and 15.
Nor can it be said that the unlawful assignment or transfer contemplated by cl.
(e) is one which is against the terms of the contract of tenancy, for it would be unnecessary to provide that an unlawful assignment or transfer by a contractual tenant, that is, an assignment or transfer which is contrary to the terms of the contract of tenancy, would justify an order for possession as in such a case the protection against eviction under section 12(1) would have been lost by non observance of a condition of the tenancy.
Therefore, it seems to me that the present contention of the landlords wholly lacks foundation.
But assume I am wrong; that cl.
(e) contemplates unlawful assignment or transfer of a tenant 's interest in the 1 , 416. 2 , 644. 899 demised premises.
A statute can well authorise a statutory tenant to assign or transfer his interest in the demised premises.
Indeed section 17 of the English Rent Act of 1957 provides for the transfer of a statutory tenancy.
It cannot be said that assignments or transfers of statutory tenancies are inconceivable.
It has to be remembered that there is no authority for the proposition that a statutory tenant has no interest in the demised premises and this is at the basis of the theory, which I think is misconceived, that a statutory tenant cannot transfer his tenancy.
It is true that he has no estate or property in the demised premises, but that is a different matter.
He has none the less an interest, a right in the premises occupied by him, which he may be empowered to transfer.
Lastly, I am unable to agree that because a statutory tenant cannot transfer, assuming that to be so, that would show that the word "tenant" in cl.
(e) must be understood as referring to a contractual tenant only.
I think the word must have the meanings given in the definition including the meaning of a statutory tenant unless the context otherwise indicates.
No such indication can be said to be present merely because the word in one part of the clause refers to a contractual tenant only.
In Roe vs Russel, (1) the Court of appeal in England held that section 4(1)(h) of the Rent and Mortgage Interest (Restrictions) Act, 1923 which provided that no order for ejectment of a tenant from a dwelling house shall be made unless "(h) the tenant without the consent of the landlord has. . assigned or sub let the whole of the dwelling house or sub let part of the dwelling house, the remainder being already sub let", indicated that a statutory tenant had the power to sub let a part of the premises.
In this case it had been held that the statutory tenant had no estate or property as a tenant at all but had a purely personal right to possess, but that did not create any difficulty in the way of the Court holding that he had power to sub let.
All subsequent cases in England have accepted that Roe vs Russel(1) has laid down the law correctly.
I entirely agree with that view.
In Campbell vs Lill,(2), which is an earlier case and which took the same view as Roe vs, Russel,(1) the argument that section 1 (2) 900 4(1)(h) of the English Act of 1923 dealt only with con tractual tenants was expressly rejected on the ground that the word meant both contractual and statutory tenants throughout the section and it would be contrary to all canons of interpretation to give it a restricted meaning only in cl.
I wish also to observe that the English provision made an assignment by a tenant a ground for eviction but none the less the word "tenant" was mentioned as referring to a statutory tenant.
It was not said that since the tenant contemplated was one who could assign, it must have been that a contractual tenant only was contemplated.
These arguments, it will be remembered, were also advanced in this case.
Now the similarity between section 13(1)(e) of the Bombay Act and section 4(1)(h) of the English Act is obvious.
If the English provision implied that a statutory tenant could sub let part of the premises, there would be no reason for saying that section 13(1) (e) of the Bombay Act did not imply a power in a statutory tenant to sub let lawfully for what was penalised was only an unlawful subletting.
There is, therefore, some support for the view that I have taken.
The learned judge in the High Court did not question the correctness of the decision in Roe vs Russel(1) but sought to distinguish it from the present case on grounds which I have earlier discussed.
I find that case indistinguishable for the purpose of interpreting section 13(1)(e) of the Bombay Act.
Indeed if cl.
(e) of section 13(1) did not contemplate subletting by a statutory tenant as the landlords contend, the result would be most anomalous.
Therefore, in my view, the Act provides a context which indicates that the word " tenant" in that clause had been used as including a statutory tenant.
Suppose a statutory tenant does actually sublet and he and his sub tenant are content to carry out their bargain, as happened in the present case, then the landlord would not be able to take advantage of section 13 (1) (e) and evict the tenant if the contention of the landlords in this case is correct, for, ex hypothesi, the sub letting by the tenant was ineffective and, therefore, as good as not made at all.
The result would be that a contractual ten,ant sub letting would forfeit the protection under section 12(1) 1[1928] 2 K. B. 117. 901 while a statutory tenant in fact doing so would still be entitled to the protection of the Act.
This would put a statutory tenant in a better position than the contractual tenant.
An interpretation of the Act which leads to such a result would be most unnatural and it is one that I am unable to accept.
It is not contended that such an anomalous result was intended but it is said that even if the word "tenant" in cl.
(e) of section 13(1) is understood as referring to a con tractual tenant only, there is no anomaly, for the statutory tenant would by sub letting render himself liable to eviction under other provisions of the Act though not under section 13(1)(e).
It was contended that a statutory tenant is entitled to protection only so long as he remains in possession and by sub letting the statutory tenant would be forfeiting his right to protection under section 12(1) of the Act.
Therefore it was said that a statutory tenant sub letting would not be in a better position than a contractual tenant doing so.
I am unable to accede to the proposition that a statutory tenant sub letting a part of the premises has so parted with the possession thereof as to forfeit his claim to protection under section 12(1).
It has to be remembered that in the present case the tenant had not parted with the entirety of the premises bar sub letting.
In Roe vs Russel(1) it was said at p. 134, "when an individual is placed, as the statutory tenant undoubtedly was, in the position of having an exclusive personal possession of his premises, he is necessarily in a position in which he can place a third person in actual possession of a part of the premises, while retaining possession of the remainder, and that totally irrespective of whether his own right to exclusive undisturbed possession is purely personal or amounts to something of the nature of an estate or interest in the premises.
In Campbell vs Lill(2) it was said, "The policy of the statute is to give protection only to persons in occupation within the meaning of the statute and it aimed at persons who had parted with possession and such parting is deemed to have taken place if the tenant assigns or sub lets the whole of the premises or sub lets part of them, the remainder being already sub let.
In the present case (1) 2 902 the tenant sub let a portion only and remained in pos session of the remainder.
In these circumstances, I think the tenant is protected.
" Both these cases show that under the English Act, a statutory tenant cannot be said to have parted with pos session by sub letting part of the demised premises.
It would appear that under the Bombay Act there is even less reason for saying that a statutory tenant sub letting a part of the demised premises has gone out of possession of them, for I find nothing in that Act which justifies the view that in order to be entitled to protection the statutory tenant must himself be in possession of the entire premises.
On the other hand, the English Increase of Rent and Mortgage Interest (Restrictions) Act, 1920 by sub section
(1) of section 15 provided that "a tenant who by virtue of the provisions of this Act retains possession of any dwelling house. . shall, so long as he retains possession, observe and be entitled to the benefit of all the terms and conditions of the original contract of tenancy".
Notwithstanding this the view in England has been that parting with possession of a portion of the demised premises by way of sub letting does not deprive a tenant his protection under the Act.
I do not find any such express provision in our Act regarding a statutory tenant 's possession of the premises.
If the Act contemplated a statutory tenant sub letting and that is the basis on which I am examining the effect of sub letting under section 12(1) it cannot by providing that by doing so, he would be so far out of possession as to cease to be entitled to the protection of the Act.
Such an interpretation of the Act would result in one part of the Act contradicting another and would be wholly unacceptable.
I find no justification in any case for the view that subletting by a statutory tenant of a part of the demised premises results in a parting with possession of the premises or that such parting deprives him of the protection of the Act.
I think that section 13(1)(e) clearly indicates that a statutory tenant has the power to sub let.
I now set out section 14 of the Act on which the claim of the appellant is based.
"Where the interest of a tenant of any premises is determined for any reason, any sub tenant 903 to whom the premises or any part thereof have been lawfully sub let before the commencement of the Bombay Rents, Hotel and Lodging House Rates Control (Amendment) Ordinance, 1959 shall, subject to the provisions of this Act, be deemed to become the tenant of the landlord on the same terms and conditions as he would have held from the tenant if the tenancy had continued.
" It is not in dispute that the sub letting took place before the date mentioned in this section.
It was contended that the word "interest" in the section showed that it contemplated only sub letting by a contractual tenant.
I am unable to agree for reasons earlier set out.
As I have already said, a statutory tenant has an interest in the premises and when the section talks of the interest of a tenant being determined, it obviously means in the case of a statutory tenant, determined by a decree or by such a tenant giving up the protection of the Act.
In this case the interest of the tenant was determined by the decree that was passed against him.
I may here state that the Ordinance mentioned in the section came into force on May 21, 1959.
I, therefore, find that the appellant became a subtenant before the date mentioned in section 14 and the interest of the tenant who sub let to it had been determined.
The appellant has however still to prove that "the premises had been lawfully sub let to it.
The only provision in the Act which declares a sub letting to be unlawful is section 15.
That section is in these terms : S.15.
(1) Notwithstanding, anything contained in any law, but subject to any contract to the contrary, it shall not be lawful after the coming into operation of this Act for any tenant to sub let the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein : Provided that the State Government may, by notification in the Official Gazette, permit in any area the transfer of interest in premises held under such leases or class of leases and to such extent as may be specified in the notification.
(2)Notwithstanding anything contained in any judgment, decree or order of a Court or any contract, 904 the bar against sub letting, assignment or transfer of premises contained in subsection (1) or in any contract shall, in respect of such sub lessees, assignees or transferees as have entered into possession despite the bar before the commencement of the Bombay Rents, Hotel and Lodging House Rates Control (Amend ment) Ordinance, 1959 and as continue in possession at such commencement, have no effect and be deemed never to have had any effect.
It is said that the section is confined only to contractual tenancies.
The argument is that sub section
(1) makes subletting by contractual tenants after the date mentioned unlawful excepting where the contract otherwise provides and that sub section
(2) saves from this illegality certain varieties of sub lettings by the tenants.
It is however not in dispute that if the section applies to sub lettings by statutory tenants, then the present sub letting to the appellant would be saved by sub section
It is said that the words "but subject to any contract to the contrary" in sub section
(1) of section 15 show that that section was intended to refer to sub lettings by contractual tenants only.
It seems to me that even if those words are applicable only when a contractual tenant sub lets, as to which I have some doubts, that would not lead to the conclusion that the tenant there referred to is only a con tractual tenant.
Those words would only be applicable where a covenant permitting sub letting is contained in the lease.
Take a case of a contractual tenant where the lease contains no covenant permitting him to sub let.
In such a case those words would have no application even though the tenant is a contractual tenant.
Therefore where there is no contract about granting of sub leases, the section may still be applicable and in such a case there would be no reason to support the view that it is concerned with a contractual tenant only.
The section would have to be interpreted in such a case without reference to the words in question.
It would then surely apply to a statutory tenant who, as I have said, can sub let.
It cannot therefore be said that section 15 deals only with a contractual tenant.
But what happens if section 15 does not apply to a statutory tenant? It was said that that would then show that 905 a statutory tenant cannot at all sub let.
If apart from section 15, the proper reading of the Act is, as I have earlier said, that a statutory tenant has the power to sub let, I do not see that this section would provide a ground sufficiently strong to outweigh all the considerations which have led me to that view.
The only result then, if section 15 applies to a contractual tenant alone, would be that a sub letting by a tenant would not have been made unlawful by the section.
If that is so, then also the appellant 's claim under section 14 would become unchallengable.
Whatever view is taken of section 15, it is impossible to say that the section makes the sub letting to the appellant in the present case unlawful.
It is unnecessary to go into any question of the Act contemplating a sub letting which was unlawful for rea sons other than those mentioned in it, for it has not been contended that the sub letting in the present case was for any such reason unlawful.
The result is that the sub let ting to the appellant must be held to have been lawful.
One other matter remains to be dealt with.
It was said, and this is not in dispute, that the sub letting to the appellant took place after the landlords had filed their suit against the tenant which resulted in a decree for ejectment to which I have earlier referred.
It was con tended that the appellant was, therefore, bound by the decree in view of section 52 of the Transfer of Property Act.
On behalf of the appellant it was said that that section was amended so far as Bombay was concerned by Bombay Act 14 of 1939 and the amended section required certain notice to be given before the sub letting could be affected by the principle of lis pendens stated in the section.
I do not think it necessary to deal with this contention for in my view, even section 52 as it stands in the Transfer of Property Act without any amendment does not affect the sub letting in this case.
The first thing that I wish to point out is that, that section does not make any transfer of property illegal.
Therefore, the section does not justify the view that the subletting to the, appellant, assuming it was a transfer of property, as to which doubts may legitimately arise, was.
in any way unlawful or invalid.
If any authority is needed for this proposition, reference may be made to Veyin 58 2 S C India/64 906 dramuthu Pillai vs Maya Nandan.(1) All that section 52 does is to provide that pending a litigation concerning property, the property cannot be transferred so as to affect the rights of any party thereto under the decree that may be passed in the suit.
The only effect then of the section is that the rights of the decree holder under the decree are not to be affected by the transfer.
Now the rights of a landlord who gets a decree for possession of property against his tenant are those men tionEd in 0. 21, r. 35 of the Code, namely, to obtain de livery of it "if necessary, by removing any person bound by the decree who refuses to vacate the property".
It is true that a sub tenant under the general law of landlord and tenant is a person bound by the decree obtained by the landlord against the tenant for possession, though he was not made a party to the suit.
The reason for this is that the sub tenant 's right to remain in possession came to an end with the determination of the tenancy of the tenant : see Yusuf vs lyotish Chandra Banerji(2).
Where however a statute like the Act in the present case gives the sub tenant a right to continue in possession even after the determination of the tenancy of the superior tenant, he would not be a person bound by the decree for his tenancy has not come to an end with the tenancy of the superior tenant.
A sub tenant to whom the premises were lawfully sub let, would under section 14 of the Act be such a person.
That being so, a decree obtained by a landlord against his tenant does not give him a right to evict a sub tenant who is entitled to the benefit of section 14.
Section 52 could not be resorted to by the landlords in the present case to evict the appellant.
I would for these reasons allow the appeal.
SHAH, J. A lease of the ground and the first floors of a building named 'Anand Bhavan ' in the town of Ahmedabad was granted by the trustees of the trust named "Anandji Kalyanji Pedhi" to one Maneklal, for five years commencing from March 5, 1950 at a monthly rental of Rs. 2,000/. A suit instituted by the trustees in the Court of Small Causes (which is the Court competent under (1) Mad. 696.
(2) Cal.
907 s.28 of the Bombay Rents, Hotel and Lodging House Rates Control Act 57 of 1947 hereinafter called 'the Act ' to entertain the suit) against Maneklal after the expiration of the period of the lease for a decree in ejectment and for arrears of rent was decreed on June 22, 1960.
In execution of the decree the trustees obtained possession of the first floor but were obstructed as to the rest by a private limited company called "Anand Nivas Private Ltd.
" and two others who claimed to be sub Iessees from Maneklal and thereby to have acquired rights of tenancy of the ground floor upon the determination of the tenancy of Maneklal.
Anand Nivas Private Ltd which will hereinafter be called 'the Company ' filed Suit No. 2814 in the Court of Small Causes at Ahmedabad for a declaration that it was not bound to deliver possession of the premises in its occupation in execution of the decree in the suit filed by the trustees against Maneklal and for an induction restraining the trustees from enforcing the decree.
The Company 's application for an injuction restraining the trustees from obtaining possession in enforcement of the decree obtained by them against the tenant was dismissed by the Court of First Instance.
In appeal against that order the District Judge, Ahmedabad refused an interim injuction restraining the trustees from executing the decree pending the hearing and disposal of the appeal.
The High Court of Gujarat was then moved against that order by a petition invoking its revisional jurisdiction.
At the hearing, die petition was, by order of the Court, converted into an appeal from order refusing to grant an injuction.
The High Court dismissed the appeal holding that a "statutory tenant" remaining in possession after determination of his contractual tenancy was in law not competent to sublet the premises in whole or in part and a person claiming to be a sub tenant from a statutory tenant could not effectively plead the protection of section 14 of the Act as amended by Ordinance III of 1959 or Bombay Act 49 of 1959.
With special leave, the Company has appealed to this Court.
The Company sets up its claim to protect its possession on the, plea that it had acquired die , rights of a 908 tenant by virtue of section 14 of the Act.
This plea is supported on two grounds : (i)that the contract of tenancy in favour of the tenant expressly authorised him to sublet, and the tenant having lawfully sublet the premises the Company acquired on the determination of the interest of the tenant the rights of a tenant under the landlord; and (ii)in any event, on the determination of the statutory tenancy of the tenant by virtue of Ordinance III of 1959 issued by the Goveronr of Bombay, retrospectively amending section 15 of the Act the Company acquired the rights of a tenant under the landlord.
In the view of the High Court clause (i) of the lease restricted "the ordinary rights of the tenant to sublet under section 108(j) of the Transfer of Property Act", and cannot be interpreted as conferring any right on the tenant to sub let, because it "postulates the existence of a right to sublet, and provides for restrictions on the exercise of such right".
Whether the covenant in the lease authorised or recognised the power of subletting in the tenant before the period of the lease expired, need not be decided in this appeal.
It is common ground that after the expiration of the period of the lease, no extension of or fresh lease was granted to the tenant, and he could set up only such rights as the Act granted or recognised.
Sub section (1) of section 12 of the Act provides "A landlord shall not be entitled to the recovery of possession of any premises so long as the tenant pays, or is ready and willing to pay, the amount of the standard rent and permitted increases, if any, and observes and performs the other conditions of the tenancy, in so far as they are consistent with the provisions of this Act.
" For the protection of tenants the clause imposes a pro hibition against the landlord against recovery of possession of the premises demised to a tenant so long as he pays or is ready and willing to pay the standard rent and permitted increases and also observes and performs the other conditions of the tenancy consistent with the provisions of the Act.
A person remaining in occupation of the premises let to him after the determination of or ex 909 piry of the period of the tenancy is commonly though in law not accurately, called a "statutory tenant.
Such a person is not a tenant at all: he has no estate or interest in the premises occupied by him.
He has merely the protection of the statute in that he cannot be turned out so long as he pays the standard rent and permitted increases, if any, and performs the other conditions of the tenancy.
His right to remain in possession after the determination of the contractual tenancy is personal: it is not capable of being transferred or assigned, and devolves on Ms death only in the manner provided by the statute.
The right of a lessee from a landlord on the other hand is an estate or interest in the premises and in the absence of a contract to the contrary is transferable and the premises may be sublet by him.
But with the determination of the lease, unless the tenant acquires the right of a tenant holding over, by acceptance of rent or by assent to his continuing in possession by the landlord, the terms and conditions of the lease are extinguished, and the rights of such a person remaining in possession are governed by the statute alone.
Section 12(1) of the Act merely recognises his right to remain in possession so long as he pays or is ready and willing to pay the standard rent and permitted increases and performs the other conditions of the tenancy, but not the right to enforce the terms and conditions of the original tenancy after it is determined.
On a matter of interpretation of section 12(1) the decisions of the King 's Bench Division of the High Court in England, viz. Roe vs Russel(1) and Lewis vs Reeves(2), on which reliance was placed by the appellant are of little assistance.
Those cases were decided on the interpretation of the relevant provisions of the Increase of Rent and Mortgage Interest (Restriction) Act, 1920 (10 & 11, Geo.
5 Ch. 17), and particularly of section 15(1).
In Roe vs Russel(1) the question whether a statutory tenant of a dwelling house holding upon terms which do not prohibit subletting, may sublet part of the dwelling house, fell to be determined, and the Court held that a right to sublet a part of the premises provided the remainder was not already sublet could be claimed by a (1) (2) 910 statutory tenant relying upon the "terms and conditions" of the original contract of tenancy.
A similar view was also taken in Lewis vs Reeves(1).
In that case the widow of a statutory tenant remaining in possession, sublet a part of the premises in her occupation.
It was held that on the death of the widow the sub tenant became the direct tenant of the landlord, because subletting of a part of the premises by the widow of a statutory tenant who acquired all the rights under section 12(1)(g) of the Rent Act (10 & 11 Geo.
5 Ch.17) was lawful.
But these cases were decided on the interpretation of section 15(1) of the Act of 1920, which insofar as it is relevant, provided : "A tenant who by virtue of the provisions of this Act retains possession of any dwelling house to which this Act applies shall, so long as he retains possession, observe and be entitled to the benefit of all the terms and conditions of the original contract of tenancy, so far as the same are consistent with the provisions of this Act, and * * * " The terms of section 15(1) of the Increase of Rent and Mortgage Interest (Restriction) Act, 1920, differ materially from sub section
(1) of section 12 of Bombay Act 57 of 1947.
Whereas a tenant who retains possession, and is protected by virtue of the provisions of the English Rent Act is entitled, so long ashe retains possession, to the benefit of all the terms andconditions of the original contract of tenancy so far asthey are consistent with the provisions of the Act, the Bombay Act merely grants conditional protection to a statutory tenant and does not invest him with the right to enforce the benefit of any of the terms and conditions of the original tenancy.
This difference in the phraseology of the two enactments is vital to the matter under discussion, and we are unable to hold assuming that the tenant was entitled to sublet the premises under the terms of the Iease that he could, relying upon section 12(1), exercise the right to sublet granted under the lease after he became a statutory tenant.
The first ground on which the claim was founded by the Company must therefore fail.
(1) 911 The second ground on which the Company claimed to be a lawful tenant of the trustees cannot also be sustained.
In the High Court it was common ground between the parties that the tenant continued to remain in possession after March 5, 1955 of the premises leased to him not because of any renewal or grant of a fresh tenancy, but in virtue of the protection afforded to him by, the Act as a 'statutory tenant '.
As a statutory tenant he had no estate or interest capable of being assigned or transferred, and his statutory right to occupy could not in law be sublet, because a lawful subletting postulates a right: to enjoy the property and a right to transfer the same to another.
There can be no subletting when there is no right in the premises especially when the statutory tenancy ceases when the tenant parts with possession.
The decision of the Calcutta High Court in Krishna Prosad Bose vs Sm.
Sarajubala Dassi(1) on which reliance was placed by the Company in support of its plea that a statutory tenant is entitled to sublet the premises in his occupation does riot assist the argument.
The West Bengal Premises Rent Control (Temporary Provisions) Act, 1950, recognises the right of a statutory tenant to sublet.
Section 12(1) of the West Bengal Act provides that notwithstanding anything to the contrary in any other Act or law, no order or decree for the recovery of possession of any premises shall be made by any court in favour of the landlord against a tenant, including a tenant whose lease has expired.
By the proviso it is enacted that nothing in the sub section shall apply to any suit for a decree for such recovery of possession against a tenant who has sublet the whole or a major portion of the premises for more than seven consecutive months provided that if a tenant who has sublet the major portion of the premises agrees to possess as a tenant the portion of the premises not sublet on payment of rent fixed by the Court, the Court shall pass a decree for ejectment from only a portion of the premises sublet and fix proportionately fair rent for the portion kept in possession of such tenant.
By sub section
(2) of section 13 it is provided, in so far as it is material, that where any premises or any part thereof have been or has been sublet by a tenant of the first degree, if the tenancy of such tenant (1) A.I.R. 1961 Cal.
912 is lawfully determined otherwise than by virtue of a decree in a suit obtained by the landlord by reason of any of the ground specified in clause (h) of the proviso to sub section (1) of section 12, the sub lessee shall be deemed to be a tenant in respect of such premises or part, as the case may be, holding directly under the landlord for the tenant whose tenancy has been determined.
In Krishna prosad Bose 's case(1) Sinha, J., set out certain principles governing the position of a statutory tenant of which the seventh set out below is material : "Although a statutory tenant has no estate, and although his right is a personal right, he can sublet, provided the right of subletting can be spelt out from the Rent Act in operation, either from its express terms or by necessary implication.
The sub tenant will get only such rights as are conferred by the statute" and observed that the right of the statutory tenant to sublet was clearly recognized by section 13(2), and the right of a sub tenant to become a direct tenant under the owner in certain circumstances was expressly provided for.
We are not concerned in this case to decide whether the provisions of the Act were correctly interpreted by the Court: 'it may be sufficient to observe in this case that the Court in Krishna Prosad 's case (1) held that the right of a statutory tenant to sublet was recognised by the statute which afforded him protection.
But it was urged that by Ordinance III of 1959 a right to sublet premises in the occupation of a statutory tenant was invested retrospectively since the commencement of the parent Act.
It is common ground that the tenant purported to sublet a part of the premises in his occupation after the trustees instituted a suit in ejectment against him, and before Ordinance III of 1959 was promulgated.
The Company has claimed the right of a subtenant on the second ground relying upon the Ordinance, ,and it would be necessary to consider the material statutory provisions as amended by the Ordinance.
Section 5(11) as amended defines a "tenant" as meaning : (1) A.I.R. 1961 Cal.
913 "any person by whom or on whose account rent is payable for any premises and includes (a) such sub tenants and other persons as have derived title under a tenant before the commencement of the Bombay Rents Hotel and Lodging House Rates Control (Amendment) Ordinance, 1959; (a ) any person to whom interest in premises has been transferred under the proviso to sub section (1) of section 15; (b) any person remaining, after the determination of the lease, in possession, with or without the assent of the landlord, of the premises leased to such person or Ms predecessor who has derived title before the commencement of the Bombay Rents, Hotel Lodging House Rates Control (Amendment) Ordinance, 1959; (c) any member of the tenant 's family residing with him at the time of his death as may be decided in default of agreement by the Court.
" The expression "tenant" in the different clauses is defined to mean a contractual tenant or a statutory tenant or both.
In the principal definition the expression "tenant" means only a person who is a contractual tenant because rent is payable by a contractual tenant and not by a statutory tenant.
By cl.
(a) sub tenants and other persons who have derived title under a tenant before the commencement of the Ordinance III of 1959 would be regarded as tenants.
These would be sublessees, transferees or assignees of contractual tenants.
Similarly by cl.
(a) persons to whom interest in premises has been transferred in virtue of a notification issued by the State Government permitting in any area the transfer of interest in premises held under such leases or class of leases and to such extent as may be specified in the notification, would be transferees of contractual tenants.
Clause (b) contemplates a tenant holding over and a statutory tenant alike; it takes in a person remaining in occupation with or without the assent of the landlord, when the premises were let to him or to Ms predecessor before the commencement of the Ordinance.
Clause (c) includes in the definition the members of the family of a tenant statutory or contractual residing with him at the time of his death, as may 914 be decided in default by agreement by the Court.
Having regard to the plurality of its meaning, the sense in which the expression is used in different sections, and even clauses, must be ascertained from the context of the scheme of the Act; the language of the provision and the object intended to be served thereby.
In sub section
(1) of section 12 which imposes a prohibition against a landlord recovering possession of premises, the expression "tenant" must of necessity mean a statutory tenant and not a contractual tenant, for unless the contractual tenancy is determined, the landlord has no right to recover possession.
Section 13(1)(e), in so far as it is material, provides that : "Notwithstanding anything contained in this Act, but subject to the provisions of section 15, a landlord shall be entitled to recover possession of any premises if the Court is satisfied (e) that the tenant has, since the coming into operation of this Act, unlawfully sublet the whole or part of the premises or assigned or transferred in any other manner his interest therein;" In this clause the expression "tenant" apparently means a contractual tenant, for it authorises a landlord to recover possession of premises if the tenant has unlawfully assign ed, transferred his interest in the premises or has unlaw fully sublet the premises.
A statutory tenant has no inte rest in the premises occupied by him, and he has no estate to assign or transfer.
To read the clause as meaning that an assignment or transfer of any premises which attracts liability to eviction would be only in respect of a con tractual tenancy whereas subletting which invites that penalty may be in respect of tenancies contractual and statutory alike, would be to attribute to the Legislature an intention to impute two different meanings to the expression " tenant" in cl.
(e) of section 13(1).
By cl.
(e) the Legislature has recognised the right of a landlord to re cover possession if the tenant has without being so autho rised by contract, sublet in whole or in part the premises, or assigned or transferred in any other manner his interest therein.
The adverb "unlawfully" qualifies all the three verbs sublet, assigned and transferred.
That is clear from 915 the terms of section 15(1) which prohibits "subject to any con tract to the contrary" subletting of premises or assignment or transfer of interest therein.
Section 15(1) provides : "Notwithstanding anything contained in any law, but subject to any contract to the contrary, it shall not be lawful after the coming into operation of this Act for any tenant to sub let the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein : Provided that the State Government may, by notification in the Official Gazette, permit in any area the transfer of interest in premises held under such leases or class of leases and to such extent as may be specified in the notification." By cl.
(1) of section 15 all transfers and assignments of interest in the premises, and subletting of premises, by tenants are, subject to any contract to the contrary, made unlawful.
The clause however saves contracts to the contrary and to be effective can operate only in favour of contractual tenants.
A statutory tenant having no interest in the property, it was plainly unnecessary to prohibit transfer of what was ineffective.
Nor can there be letting of the premises by a statutory tenant, for letting postulates a transfer of the right to enjoy property made for a certain time, express or implied, in consideration of price paid or promised and a statutory tenant has merely a personal right to resist eviction.
Section 15(1) therefore applies only to contractual tenants.
The proviso to the clause also furnishes an indication to that effect for the exemption which the Provincial Government may grant can only be in respect of leases or a class of lease.
Sub section(2) is in terms an exception to sub s.(1).
It provides that : "Notwithstanding anything contained in any judgment, decree or order of a Court or any contract.
the bar against subletting, assignment or transfer of premises contained in subsection (1) or in any contract shall, in respect of such sub lessees , assignees or transferees as have entered into possession despite the bar before the commencement of the Bombay Rents, Hotel and Lodging House Rates Control (Amendment) Ordi nance, 1959 and as continue in possession at such 916 commencement, have no effect and be deemed never to have had any effect.
" The exception clause could manifestly not apply to statutory tenancies when the principal clause applied only to contractual tenancies.
The effect of the clause is to vali date assignments, transfers and sub tenancies granted by contractual tenants, despite the prohibition contained in sub section
(1) or even in the contract of tenancy, and this validation is effective, notwithstanding any judgment, decree or order of a Court.
The sub section is plainly retrospective, and protects sub tenants of contractual tenants and removes the bar against sub letting by sub section
(1) as well as by contract, provided that the transferee is in possession at the commencement of the Ordinance.
The argument that by restricting the operation of section 13(1)(e) to contractual tenants subletting by statutory tenants would be protected, is without force, Sections 12 and 13(1) have to be read together.
Clause (e) of section 13(1) entitles a landlord to obtain possession, where a contractual tenant has during the subsistence of the tenancy sublet the premises or assigned or transferred his interest therein.
Where a statutory tenant has purported to sublet the premises, or has purported to assign or transfer his interest therein, and in pursuance of such a transaction parted with possession, he would forthwith forfeit the protection which the statute accords to him by section 12(1).
In the light of this legal position the claim of the Company founded on section 14 may be considered.
The section enacts : "Where the interest of a tenant of any premises is determined for any reason, any sub tenant to whom the premises or any part thereof have been lawfully sublet before the commencement of the Bombay Rents, Hotel and Lodging House Rates Control (Amendment) Ordinance, 1959, shall, subject to the provisions of this Act, be deemed to become the tenant of the landlord on the same terms and conditions as he would have held from the tenant if the tenancy had continued.
" There is abundant indication in the section that it applies to contractual tenancies alone.
In the first instance it speaks of the interest of the tenant and determination of 917 that interest.
It then invests a sub tenant to whom the premises have been lawfully sublet before the date of the Ordinance with the rights of a tenant of the landlord on the same terms and conditions as he would have held from the tenant if the tenancy had continued.
The subletting to be lawful must be permitted by contract, or validated by sub section
(2) of section 15.
The object of section 14 is to protect sub tenants.
By that section forfeiture of the rights of the tenant in any of the contingencies set out in section 13 does not in all cases destroy the protection to the sub tenants.
The protection which a sub tenant is entitled to claim against his own landlord (that is the head tenant) becomes on determination of the head tenancy available to him against the head landlord, but the condition on which such a claim may be sustained is that there is a lawful subletting.
A statutory tenant is, as we have already observed, a person who on determination of his contractual right, is permitted to remain in occupation so long as he observes and performs the conditions of the tenancy and pays the standard rent and permitted increases.
His personal right of occupation is incapable of being transferred or assigned, and he having no interest in the property there is no estate on which subletting may operate.
If it be assumed that a statutory tenant has the right of subletting, some very surprising consequences may ensue.
A statutory tenant by parting with possession of the premises would forfeit all rights in the premises occupied by him, but he would still, if section 14 is construed as suggested by the Company, be able to create an interest in the person inducted in the premises not derivatively but independently, for the statutory tenant had no interest in the premises and the protection granted by the statute is by the very act of transfer of possession extinguished.
Again even though the sub tenant of a statutory tenant may not be protected, because the bar against such subletting is not effectively removed by section 15(2), he would still be entitled to claim the rights of a tenant under section 14 on determination of the tenancy of the head tenant.
Having regard to these considerations there can be little doubt that a sublessee from a statutory tenant under the Act acquires no right of a tenant in the premises occupied by him.
918 Even under the Increase of Rent and Mortgage Interest (Restriction) Act, 1920, protection was accorded to the sub tenant of a part of the premises occupied by a statutory tenant : when the statutory tenant parted with possession of the entirety of the premises occupied by him either by one subletting or more or by subletting of part and surrendered of the rest of the premises, the persons claiming a right of occupation derivatively from the statutory tenant had no protection : Solomon vs Orwell(1).
In that case a statutory tenant of a dwelling house bad sublet a part of the house, vacated the premises in her occupation by removing herself therefrom.
The landlord then filed a suit against the sub tenant who had remained in possession of a part sublet to her.
The subtenant submitted that after the surrender of the statutory tenancy, she was entitled to the same rights against the landlord as the statutory tenant had and therefore her tenancy could not be terminated by merely giving a notice to quit.
This contention was rejected by the Court holding that "a statutory tenant had no interest capable of existing in law as an estate, but merely a statutory right of occupation which could not be the subject of surrender at common law, and, therefore, when the tenant vacated the premises the sub tenant 's right of occupation automatically came to an end.
" We therefore hold that before the date of the institution of the suit, Manekal as a statutory tenant had no right to sublet the premises and the Company acquired no right of a tenant on the determination of the tenant 's right by virtue of section 14 of the Act.
One more argument remains to be considered.
It was urged on the assumption that a statutory tenant has an interest in the property occupied by him, and that by purporting to sublet he transferred that interest that the doctrine of 'ut lite pendente nihil innovetur ' enunciated in section 52 of the Transfer of Property Act did not operate against the Company and the Company was not bound by the decree obtained against the tenant.
Reliance in support of that plea was placed upon the Transfer of Property Act and the Indian Registration (Bombay Amendment) Act, XIV of 1939.
By this Act the rule of 'Lis Pendens ' applies only when a notice of the pendency 919 of the suit in which any right to immoveable property is directly and specifically in question, is registered under section 18 of the Registration Act.
The Act is some what clum sily worded : it applies not to proceedings in Court but to notices in respect of suits or proceedings.
But the reason for the method of drafting adopted is not far to seek.
Condition of registration of notice relating to the suit is only to apply where the suit is in respect of property situate in the area to which the Act is extended.
A suit relating to immoveable property may, in certain cir cumstances, lie in a Court other than the Court within the territorial jurisdiction whereof it is situate (e.g. under cl. 12 of the Letters Patent and section 17 Code of Civil Proce dure) and it appears that the Legislature intended to make the Act applicable only to transfers of title to immoveables only in areas where the litigants were sufficiently sophisticated to understand the importance of registration.
As Bombay Act XIV of 1939, it intended to apply to the situs of immoveable property and not the Court proceeding, application of the rule of 'Lis Pendens ' is, in respect of proceedings relating to immoveable properties situate in certain areas, made conditional upon the registration of the notice of the pendency of the suit.
But this Act did not apply to the suit filed by the trustees.
The Act by section 2 applies only to notices in res pect of suits or proceedings which relate to immoveable property situate wholly or partly in Greater Bombay.
By the proviso to section 2 it may be extended by the Provincial Government by notification to notices relating to immoveable properties situate wholly or partly in such other areas as may be specified.
The suit was filed by the trustees in the Court of Small Causes at Ahmedabad and our attention has not been invited to any notification issued by the appropriate Provincial Government extending the Act to notices relating to immovable properties in areas outside Greater Bombay.
Whereas the rule of 'Lis Pendens ' under the Transfer of Property Act aplies to all suits and proceedings which are not collusive in which the right to immoveable property is directly and specifically in question, by virtue of the amended Act the rule applies in proceedings relating to immoveable property in the areas notified, only if a notice of suit is registered, and from the date of regis 920 tration.
The section in terms applies only to notices in respect of suits or proceedings which relate to immoveable property in the Greater Bombay Area it does not apply to any suits in which property in Greater Bombay is not the subject matter in dispute.
The Transfer of Property (Bombay Provision for Uniformity and Amendment) Act, 57 of 1959, does not also assist the Company.
By that Act, amongst other things, uniformity in the provisions of the Transfer of Property Act as amended in its application to the State of Bombay as it existed after the enactment of the , was sought to be achieved.
Section 3 of the Act enacted that the provisions of Bombay Act XIV of 1939 which amended the Transfer of Property Act in its application to the pre reorganized State of Bombay, were extended to and shall apply to that part of the State to which they did not apply immediately before the commencement of that Act.
Enactment of this Act was necessitated because of section 119 of the States Reorganization Act, 1956, which continued, notwithstanding the formation of the new States, the territorial extent of the laws previously in operation.
It was found expedient to secure uniformity of the laws in the State, and therefore it was enacted by the State Legislature that one of the condi tions of the applicability of the rule of 'Lis Pendens ' was that notice of a suit or proceeding in which any right to immoveable property within the area notified under section 2 of Act XIV of 1939, is directly and specifically in question, is registered under section 18 of the Registration Act.
The decree in the suit filed by the trustees against Maneklal was therefore enforceable against the Company.
The appeal fails and is dismissed with costs.
ORDER BY COURT The appeal is dismissed with costs.
On the Appellant 's undertaking to vacate and deliver possession of the property within one month from today, execution of the decree obtained by the Respondent in Suit No. 707 of 1956 against Maneklal Mafatlal, is stayed for one month.
September 5, 1963.
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The respondents granted to one Maneklat for five years a lease of the ground and the first floor of a building named Anand Bhawan in the town of Ahmedabad.
After the expiration of the period of the lease, a suit was instituted by the respondents against Maneklal for a decree in ejectment and the realisation of arrears of rent.
The suit was decreed.
However, Maneklal sublet a part of the premises in his occupation to the appellant after the institution of the suit against him but before the promulgation of the Bombay Rents, Hotel and Lodging House Rates Control (Amendment) Ordinance, 1959.
In execution of the decree, the respondents obtained possession of the first floor but were obstructed as to the rest by the appellant and two others who claimed to be sub lessees from Maneklal and thereby to have acquired rights of tenancy of the ground floor upon determination of the tenancy of Maneklal.
The appellant filed a suit for a declaration that it was not bound to deliver possession of the premises in its occupation in execution of the decree passed against Maneklal and for an injunction restraining the respondents form enforcing the decree.
The trial Court refused to grant the interim injunction against the respondents.
The lower appellate court also refused to issue the interim injunction.
The High Court dismissed the appeal of the appellant on the ground that a statutory tenant re 893 maining in possession after determination of its contractual tenancy was in law not competent to sublet the premises in whole or in part and a person claiming to be a sub tenant from a statutory tenant could not effectively plead the protection of section 14 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 as amended by the Ordinance of 1959.
The appellant came to this Court by Special Leave.
Held (per Hidayatullah and Shah, JJ.
Sarkar, J. dissenting) (i) Maneklal was a statutory tenant and as such had no right to sublet the premises and the appellant acquired no right of a tenant on the determination of the right of Maneklal by virtue of section 14 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 as amended in 1959.
(ii)The appellant was bound by the decree obtained by the respondents against Maneklal and it could not take advantage of the Transfer of Property Act and the Indian Registration (Bombay Amendment) Act, 1939.
By section 15(1), all transfers and assignments of interests in the premises and sub letting of premises by tenants are, subject to any contract to the contrary, made unlawful.
This provision applies only to contractual tenants and not to statutory tenants who have no interest in the property.
A statutory tenant cannot sublet the premises because subletting involves a transfer of the right to enjoy property for a certain period in consideration of price paid or promised and a statutory tenant has merely a personal right to resist eviction.
Section 15(2) is in the nature of an exception to section 15(1).
It applies to contractual tenancies.
It protects subtenants of contractual tenants and removes the bar against subletting imposed by section 15(1) as well as by contract, provided the transferee is in possession of the premises at the commencement of the Ordinance.
A statutory tenant is a person who remains in occupation of the premises let to him after the determination of or the expiration of the period of the tenancy.
He has no estate or interest in the premises occupied by him.
He merely enjoys the protection of the law in that he cannot be turned out so long as he pays the standard rent and permitted increases, if any, and performs the other conditions of the tenancy.
His right to remain in possession after the determination of the contractual tenancy is personal.
It is not capable of being transferred or assigned and devolves on his death only in the manner provided in the Act.
On the other hand, the right of a contractual tenant is an estate or interest in the premises and in the absence of a contract to the contrary, is transferable and the premises may be sub let by him.
Roe vs Russel, , Lewis vs Reeves, , Krishna Prasad Bose vs Sm.
Sarajubala Dassi, A.I.R. 1961 cal.
505 and Solomon vs Orwell, [1954] 1 All E. R. 874, referred to.
894 Per Sarkar, J. (1) The word 'tenant ' in section 13(1)(c) of the Bombay, Rents, Hotel and Lodging House Rates Conrtol Act, 1947 includes not only contractual tenants but also statutory tenants and a statutory tenant has the power to sublet.
There is no justification for the view that sub letting by a statutory tenant of a part of the demised premises results in a parting with possession of the premises or that such parting deprives him of the protection of the Act.
Section 13(1)(e) of the Bombay Act implies that a statutory tenant can sublet a part of the premises lawfully.
Section 15 of the Bombay Act deals not only with contractual tenants but also with statutory tenants.
The result is that the sub letting by Maneklal of the premises must be held to have been lawful.
(ii)The appellant was not bound by the decree obtained by the respondent against Maneklal.
It is true that a sub tenant under the general law of landlord and tenant is bound by the decree obtained by the landlord against the tenant for possession, though he was not made a party to the suit, but where a statue like the Bombay Act gives sub tenant a right to continue in possession even after determination of the tenancy of the statutory tenant, the sub tenant is not bound by the decree and his tenancy does not come to an end with the tenancy of the superior tenant.
A decree obtained by a landlord against his tenant does not give him a right to evict a subtenant like the appellant who is entitled to the benefits of section 14 of the Act.
Section 52 of the Transfer of Property Act cannot be resorted to by the respondents in the present case to evict the appellant.
Baker vs Turner, , Keeves vs Dean, , Roe vs Russel, , Campbell vs Lill, , Vevindramuthu Pillai vs Maya Nandan, (1920) 1.
L.R.43 Mad. 696 and Yusuf vs joytish Chandra Banerji, (1932) 1.
L. R. Cal.
739, referred to.
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1653.txt
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N: Civil Appeal No. 135 of 1991.
From the Judgment and order dated 16.6.1989 of the Madras High Court Crl.
M.P. No. 2717 of 1988.
T.S. Krishnamoorthy Iyer, K. Rajeswara, N.D.B. Raju and K.R. Chaudhary for the Appellant.
K.K. Lahiri, R.K. Jain (NP), Sreekant, N. Terdal, Mrs. Sushma Suri and A Subba Rao for the Respondent.
The Judgment of the Court was delivered by 745 K.N.SAIKIA, J.
Special leave granted.
The appellant Captain Subhash Kumar was the Master of the Merchant ship M.V. Eamaco owned by Eamaco Shipping Co. (P) Ltd. Singapore, hereinafter called `the ship '.
On 12.8.86 the ship went into distress due to the vessel 's hold Nos. 2 & 3 taking in water, the pumping operations being insufficient and though initially the appellant sent radio message for help he failed to launch the life boats and life crafts and to abandon the ship to enable M.V. Shoun World to pick them up and due to the failure of motor life boats and life crafts, when the ship sank, only 11 out of 28 persons were rescued resulting in loss of life to the remaining persons.
At about 18.25 Hrs.
that day Madras Radio, which was the communication centre between the land and seafaring ships, informed the office of the Principal Officer, Mercantile Marine Department, Madras, District Madras, hereinafter called as `Principal Officer ', that an urgent message had been received by the said Radio from the appellant and from that communication it was clear that the ship under the command of the appellant was posted at position 11 degrees 08 minutes North, 83 degrees 41 minutes East on 12th at 11.30 Greenwich meantime.
The said message further indicated that the vessel 's hold Nos. 2 & 3 were taking in water and the pumping out operation was not sufficient and it called the assistance from all ships in the vicinity.
At 20.28 Hrs.
the Madras Radio again contacted the Principle officer and said that the Radio had received SOS message (distress message) and he took necessary steps.
The Principal Officer filed a complaint in court of 14th Metropolitan Magistrate, Egmore, Madras 8 against the appellant for initiation of an inquiry proceeding under section 363 of the (Central Act No.4 of 1958), hereinafter called `the Act, complaining about the negligence of the appellant while he was the Master of the ship as aforesaid; and that at that time he was residing at Laxmi Niwas, 41, Marshal Road, Egmore, Madras 8 and further stating that the shipping casualty had occurred due to sheer negligence and gross incompetence on the part of the appellant in commanding the ship and the crew; and that the very fact that the life boats and life floats were not used and not even lowered so as to make use of that indicated that the appellant had not even thought about that which a Captain of the ship should have done, resulting in loss of the ship, the cargo and valuable lives of the sailors who had at no time doubted about the competency of the Master or revolted against him.
The complaint accordingly said that the Magistrate 's Court by the provisions of section 363 had got powers to make inquiry into the charges of 746 incompetence or of misconduct of the appellant therein.
It also said that the inquiry be commenced in accordance with the provisions of the Act so as to cancel the certificates of competency of the Master, namely, the appellant, which had been granted by the Central Government; and that cancellation might be recommended under the Act after holding the aforesaid inquiry.
The complaint also said that the appellant rendered himself liable to be proceeded against under the provisions of part XII of the Act which envisaged various modes of investigation and inquiry; and under section 363 the court had powers to make an inquiry into the charges of incompetency or misconduct of the appellant.
On 25.3.1988, the appellant received a notice stating that the inquiry proceedings were instituted against him before the 14th Metropolitan Magistrate under section 363 of the Act.
The appellant thereupon filed Cr.
M.P. No.2717 of 1988 in the High Court under section 482 of the Cr.
P.C. stating that the proceedings were by an abuse of process of the court and the Court had no jurisdiction to proceed with the complaint against the appellant when there was no negligence on his part.
It was also stated that the fact that the appellant was a holder of a Master certificate issued by the Director General of Shipping, Calcutta would not attract the provisions of the Act inasmuch as the ship was a foreign ship and the Master certificate had been issued by a foreign country and the casualty had occurred in the high seas nearly 232 nautical miles away from India and being in open sea the ship was subject to the jurisdiction and also to the protection of the State under whose maritime flag it sailed.
The appellant was, it was further stated, to be in command of the ship by virtue of the certificate issued by the Panamanian Government, the flag of the ship was of Panama and, therefore, the provisions of the Act would not at all apply, much less its section 363.
In other words the proceedings were allegedly intended to harass the appellant without jurisdiction and it amounted to an abuse of process of court.
The learned Single Judge who heard the petition rejected the contention that in view of the language of section 2 of the Act it would not be applicable and that it would not be a shipping casualty as defined in section 358 of the Act, and held that the Act was applicable in the instant case and the action of the petitioner amounted to sheer negligence and called for investigation and inquiry under the Act.
Hence this appeal.
Mr. T. Krishnamurthy Iyer, the learned cousel for the appel 747 lant, submits, inter alia, that the negligence complained of having occurred in respect of foreign ship flying foreign flag at a place 232 nautical miles away from India, and as such, outside the territorial waters of India the Act would not be applicable; and that even if it was applicable it would not amount to a shipping casualty as envisaged in part XII of the Act; and lastly that even assuming that chapter XII applied, the complaint could not have been filed by the Principal Officer in the court of the 14th Metropolitan Magistrate, Egmore, Madras 8 under section 363 of the Act.
Mr. K. Lahiri, the learned counsel for the respondents submits that the shipping casualty having occurred within the territorial waters of India which extended up to 200 nautical miles, the Act would be applicable and the complaint was rightly filed under section 363 of the Act; and that the High Court under section 482 of the Code of Criminal Procedure rightly refused to quash the proceedings.
Three questions, therefore, are to be decided in this appeal.
First, whether the Act would at all be applicable in the facts and circumstances of the case; secondly, if the Act was applicable whether part XII of the Act would apply; and thirdly, if both the Act and part XII were applicable whether the complaint made by the Principal Officer under section 363 of the Act would be maintainable.
Taking the first question first, the Act is one to foster the development and ensure the efficient maintenance of India Mercantile Marine in the manner best suited to serve the national interest and for that purpose to establish a National Shipping Board and Shipping National Fund to provide for registration of India ship and the law relating to Merchant shipping.
Section 2 of the Act deals with its application and says; "(1) Unless otherwise expressly provided, the provisions of this Act which apply to (a) any vessel which is registered in India; or (b) any vessel which is required by this Act to be so registered; or (c) any other vessel which is owned wholly by persons to each of whom any of the descriptions specified in clause (a) or in clause (b) or in clause (c), as the case may be, of 748 section 21 applies, shall so apply wherever the vessel may be.
(2) Unless otherwise expressly provided, the provisions of this Act which apply to vessels other than those referred to in sub section (1) shall so apply only while any such vessel is within India, including the territorial waters thereof." In the instant case the ship was not registered in India and was not required by this Act to be so registered.
Clause (c) refers so clauses (a), (b) and (c) of section 21 which defines Indian ships, and says: "For the purposes of this Act, a ship shall not be deemed to be an Indian ship unless owned wholly by persons to each to whom any of the following descriptions applies: (a) a citizen of India; or (b) a company which satisfies the following requirements, namely: (i) the principal place of business of the company is in India; (ii) at least seventy five per cent of the share capital of the company is held by citizens of India: Provided that the Central Government may, by notification in the official Gazette, alter such minimum percentage, and where the minimum percentage is so altered, the altered percentage shall, as from the date of the notification, be deemed to be substituted for the percentage specified in this sub clause; (iii) not less than three fourths of the total number of directors of the company are citizens of India; (iv) the chairmen of the board of directions and the managing director, if any, of the company are citizens of India; (v) the managing agents, if any, of the company are citizens of India or in any case where a company is the managing agent, the company satisfies the requirements specified in sub cls.
(i), (ii), (iii) and (iv).
or 749 (c) a co operative society which satisfies the following requirements, namely: (i) the co operative society is registered or deemed to be registered under the , or any other law relating to co operative societies for the time being in force in any State, (ii) every individual who is a member of the co operative society and where any other co operative society is a member thereof, every individual who is a member of such other co operative society, is a citizen of India.
" The ship was not a ship owned wholly by persons each of whom was a citizen of India or by a company satisfying the descriptions under clause (b) or (c).
Sub section (2) of section 2 makes the provisions of the Act applicable to vessels other than those referred to in sub section (1) only while any such vessel is within India, including the territorial waters thereof.
The ship a Panamanian ship registered in Panama would come within the purview of the Act only it is within India including the territorial waters.
This leads us to the question as to the extent of territorial waters of India.
The Territorial Waters, Continental shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (Act No. 80 of 1976) is an Act to provide for certain matters relating to the territorial waters continental shelf, exclusive economic zone, and other maritime zones of India.
Section 2 of the Act defines "limit" in relation to the territorial waters, the continental shelf, the exclusive economic zone or any other maritime zones of India to mean the limit of such waters shelf or zone with reference to the mainland of India as well as the individual or composite group or groups of islands constituting part of the territory of India.
Section 3 deals with sovereignty over, and limits of, territorial waters and says: "(1) The sovereignty of India extends and has always extended to the territorial waters of India (hereinafter referred to as the territorial waters) and to the seabed and subsoil underlying, and the air space over such waters.
(2) The limit of the territorial waters is the line every point of which is at a distance of twelve nautical miles from the nearest point of the appropriate baseline.
750 (3) Notwithstanding anything contained in sub section (2), the Central Government may whenever it considers necessary so to do having regard to International Law and State practice, alter, by notification in the Official Gazette, the limit of the territorial waters.
(4) No notification shall be issued under sub section (3) unless resolutions approving the issue of such notification are passed by both Houses of Parliament." Thus sub section (2) clearly provides that the limit of the territorial waters is a line every point of which is at a distance of 12 nautical miles from the nearest point of the appropriate baseline.
Under Article 297 of the Constitution of India things of value within territorial waters or continental shelf and resources of the exclusive economic zone to vest in the Union.
It says: "(1) All lands, minerals and other things of value underlying the ocean within the territorial waters, or the continental shelf, or the exclusive economic zone, of India shall vest in the Union and be held for the purposes of the Union.
(2) All other resources of the exclusive economic zone of India shall also vest in the Union and be held for the purposes of the Union.
(3) The limits of the territorial waters, the continental shelf, the exclusive economic zone, and other maritime zone, of India shall be such as may be specified, from time to time, by or under any law made by Parliament.
" Sub section (3), thus, empowers the Central Government if it considers necessary so to do having regard to the International Law and State practice, alter, by notification in the Official Gazette, the limit of territorial waters.
Under sub section (4) no such notification shall be issued unless resolutions approving the issue of such notification are passed by both Houses of Parliament.
A proclamation was made by the President of India published on September 30, 1967 in the Gazette of India Extraordinary, Part III, section 2 Notification of the Government of India in the Ministry of External Affairs No. FL/III (1) 67.
By a Notification of the Government of India dated 15th 751 January, 1977 the exclusive economic zone of India has been extended upto a distance of 200 nautical miles into the sea from shore and other maritime zones, 1976 under the 40th Constitution Amendment Act, 1976.
The concepts of territorial waters, continental shelf and exclusive economic zone are different concepts and the proclamation of exclusive economic zone to the limit of 200 nautical miles into the sea from the shore baseline would in no way extend the limit of territorial waters which extends to 12 nautical miles measured from the appropriate baseline.
The submission that territorial waters extends to the limit of 200 nautical miles by virtue of the notification extending exclusive economic zone to 200 nautical miles has, therefore, to be rejected.
Admittedly the ship (M.V.Eamaco) at the time of the casualty was at a place beyond the territorial waters of India and even the exclusive economic zone of India.
If this be the position, the ship would not be covered by the provisions of section 2 of the Act and consequently the provisions of the Act would not apply to the instant casualty.
Taking the second question it is obvious that the Act itself having not been applicable Chapter XII being a part of the Act will also not be applicable.
This Chapter deals with investigations and inquiries and contain sections 357 to 389.
Section 357 defines "coasts" to include the coasts of creeks and tidal rivers.
Section 358 deals with shipping casualties and report thereof and says: "(1) For the purpose of investigations and inquiries under this Part, a shipping casualty shall be deemed to occur when (a) on or near the coasts of India, any ship is lost, abandoned, stranded or materially damaged; (b) on or near the coasts of India, any ship causes loss of material damage to any other ship; (c) any loss of life ensues by reason of any casualty happening to or on board any ship on or near the coasts of India; (d) in any place, any such loss, abandonment, stranding, material damage or casualty as above mentioned occurs to or on board any India ship and any competent witness thereof is found in India; 752 (e) any Indian ship is lost or is supposed to have been lost and any evidence is obtainable in India as to the circumstances under which she proceeded to sea or was last heard of.
(2) In the cases mentioned in clauses (a), (b) and (c) of sub section (1), the master, pilot, harbour master or other person in charge of the ship, or (where two ships are concerned) in charge of each ship at the time of the shipping casualty, and in the cases mentioned in clause (d) of sub section (1), where the master of the ship concerned or (except in the case of a loss) where the ship concerned proceeds to any place in India from the place where the shipping casualty has occurred, the master of the ship, shall, on arriving in India, give immediate notice of the shipping casualty to the officer appointed in this behalf by the Central Government.
" Clause (d) envisages shipping casualty in any place but occurring to or on board any Indian ship whether the Master of the ship concerned (except in the case of a loss) where the ship concerned proceeds to any place in India from the place where the shipping casualty of the ship has occurred, the Master of the ship.
Thus this provision will not cover the ship.
The conclusion, therefore, is inescapable that the casualty in the instant case would not be a shipping casualty envisaged in section 358.
Subsequent sections, namely, 359, 360, 361 and 362, relate to shipping casualties as envisaged in section 358.
The impugned complaint was ex facie made under section 363 of the Act which deals with power of Central Government to direct inquiry into the charges of incompetency or misconduct, it says: "(1) If the Central Government has reason to believe that there are grounds for charging any master, mate or engineer with incompetency or misconduct, otherwise than in the course of a formal investigation into shipping casualty, the Central Government.
(a) if the master, mate or engineer holds a certificate under this Act, in any case; 753 (b) if the master, mate or engineer holds a certificate under the law of any country outside India, in any case where the incompetency or misconduct has occurred on board an Indian ship; may transmit a statement of the case of any court having jurisdiction under section 361 which is at or nearest to the place where it may be convenient for the parties and witnesses to attend, and may direct that court to make an inquiry into that charge.
(2) Before commencing the inquiry, the court shall cause the master, mate or engineer so charged to be furnished with a copy of the statement transmitted by the Central Government.
" From the above provisions it appears that section 359 envisages the officers referred to in sub section (2) of section 358.
Receiving the information that a shipping casualty has occurred and reporting in writing the information to the Central Government and his proceeding to make a preliminary inquiry into the casualty and sending a report thereof to the Central Government or such other authority as may be appointed by it in that behalf.
Under section 360 the officer, whether he has made a preliminary inquiry or not, may, and, where the Central Government so directs, shall make an application to the court empowered under section 361 requesting it to make a formal investigation into any shipping casualty and the court shall thereupon make such investigation.
Thus the officer himself may or when directed by the Central Government shall make an application to the court requesting it to make a formal investigation into any shipping casualty.
Section 361 empowers the court to make a formal investigation under Part XII.
A Judicial Magistrate of the first class specially empowered in this behalf by the Central Government and a Metropolitan Magistrate shall have jurisdiction to make formal investigation into any shipping casualty under Part XII.
What has to be noted in this section is that the court on an application of the officer makes a formal investigation into shipping casualties and not a preliminary inquiry which could have been done by the officer referred to in sub section (2) of section 358, and under section 359 send a report to the Central Government.
Section 360 also envisages making of application to court by the officer whether he had made preliminary inquiry or not, requesting it to make formal investigation into any shipping casualty.
Thus under section 361 what is being envisaged is a formal investigation into a shipping 754 casualty and not a preliminary inquiry.
Section 362 deals with only formal investigation and says that while making such investigation into a shipping casualty the court may inquire, into any charge of incompetency or misconduct arising, in the course of the investigation, against any master, mate or engineer, as well as into any charge of a wrongful act or default on his part causing the shipping casualty.
Under sub section (2) a statement of the case has to be furnished to the Master, mate or Engineer.
Section 362 does not envisage inquiring into any charge of incompetency or misconduct otherwise than in the course of the formal investigation into a shipping casualty, Section 363 (1) envisages the Central Government, when it has reason to believe that there are grounds for charging any master, mate or engineer with incompetency or misconduct, otherwise than in the course of a formal investigation into shipping casualty, (b) if he holds a certificate under the law or any country outside India, in any case where the incompetency or misconduct has occurred on board an Indian ship, and the transmitting of the statement of the case to any court having jurisdiction under section 361 where it may be convenient for the parties and witnesses to attend, and the Central Government may direct that court to make an inquiry into that charge.
Under clause (a) the Central Government may exercise the power if the Master, mate or Engineer holds a certificate under the Act, in any case.
Thus under this section the Central Government must have reason to believe that there are grounds for charging any master etc.
with incompetency or misconduct, otherwise than in the course of a formal investigation into shipping casualty, in case of a master of a foreign ship who holds a certificate under the Act "in any case".
It also envisages the transmitting the statement of the case to any court having a jurisdiction under section 361.
The question is what would be the meaning of the words "in any case".
Would it mean any case of shipping casualty, or it would mean any case irrespective of shipping casualty.
In other words, under the above provisions if the appellant was the master of the ship and the casualty was outside the territorial waters of India and the ship involved was a foreign ship would the expression "in any case" cover the instanct case? If the preceding sections of Part XII dealt with only Shipping casualty, will it be permissible to interpret the words "in any case" irrespective of shipping casualty and anywhere outside the territorial waters of India and whoever is the owner of the Vessel? Will not the ejusdem generis rule apply? Again when the Act itself is not applicable to a case, can these words be given a meaning beyond the applicability of the Act? Verba secundum materiam subjectam intelligi nemo est qui nesciat.
There is no one who does not know that words are to be understood according to their subject matter.
The subject matter of 755 Part XII is investigations and inquiries into shipping casualty.
Would 'in any case" then mean in any case of shipping casualty? We have read the other relevant provisions of the Act.
Nemo aliquam partem recti intelligere potest, antequam totum interum atque itrerum parlegerit.
No one can properly understand any part of a statute till he had read through the whole again and again.
We find that Part VI of the Act deals with certificates of officers, namely, Masters, mates and Engineers, Section 76(1) provides: "Every foreign going Indian ship, every home trade Indian ship of two hundred tons gross or more when going to sea from any port or place in India and every ship carrying passengers between ports or places in India shall be provided with officers duly certificated under this Act according to the following scale, namely: (a) in every case, with a duly certificated master; (b) if the ship is a foreign going ship or a home trade passenger ship of one hundred and fifty tons gross or more, with at least one officer besides the master holding a certificate not lower than that of first mate in the case of a foreign going ship and of mate in the case of a home trade passenger ship; (c) if the ship is a home trade ship, not being a passenger ship, of four hundred and fifty tons gross or more, with at least one officer besides the master holding a certificate not lower than that of mate.
(d) if the ship is a foreign going ship and carries more than one mate, then with the second mate duly certificated.
" Section 79 deals with examination for, and grant of, certificate.
Section 82 provides that a note of all orders made for canceling, suspending, altering or otherwise affecting any certificate of competency, in pursuance of the powers contained in this Act, shall be entered on the copy of the certificate kept under section 81.
Section 87 empowers the Central Government to make rules, inter alia, to (f) prescribe the circumstances or cases if which certificates of competency may be canceled or suspended.
Section 363 of the Act does not refer to Part VI and the rules for 756 suspension or cancellation of certificates.
This would be consistent with the view that section 363 confines itself to cases of misconduct or incompetency associated with a shipping casualty.
Assuming that it covers a case of a foreign ship on high seas, it would only be to make an inquiry into that charge and not into the shipping casualty itself.
The question then arises, as has been submitted by Mr. Krishnamurthy Iyer, when the entire Act is not applicable to there instant casualty would it be consistent with the extent of applicability of the Act to pick up three words, namely, "in any case" and apply it to the prejudice of the appellant.
Mr Lahiri submits that the certificate of competency issued under the Act by the appropriate authorities under part VI are valuable certificates and if the holder of such a certificate of competency issued under the provisions of Part VI is alleged to have committed misconduct or acts of incompetency there is no reason why an inquiry into that misconduct or incompetency cannot be ordered by the Central Government to a court competent to exercise jurisdiction under section 361 of the Act.
Section 363 does not envisage the court acting on a statement transmitted by the Central Government to conduct a formal investigation into the shipping casualty but only the courts ' making an inquiry into the charge of incompetency or misconduct.
Section 364 provides giving of opportunity to the person to make defence.
Section 365 empowers the court to regulate its proceedings.
Section 369 provides that the court shall, in the case of all investigations or inquiries under this Part, transmit to the Central Government a full report or its conclusions which it has arrived at together with the evidence.
Under sub section (2) of that section where the investigation or inquiry affects master or an officer of a ship other than an Indian ship who holds a certificate under the law of any country outside India, the Central Government may tansmit a copy of the report together with the evidence to the proper authority in that country.
Section 370 deals with power of court as to certificates granted by Central Government.
A certificate can be canceled or suspended under clause (a) by a court holding formal investigation and under clause (v) by a court holding inquiry under this part into the conduct of the master, mate or engineer if the court finds that he is incompetent or has been guilty of any gross act of drunkenness, tyranny or other misconduct or in a case of collision has failed to render such assistance or gave such information as is required by section 348.
Under sub section (3), where the court 757 cancels or suspends a certificate, the court shall forward it to the Central Government together with the report which it is required by this Part to transmit to it.
Thus, this section deals with power of the court while holding a formal investigation into a shipping casualty under clause (a) and while holding an inquiry into the conduct of the master, mate or engineer i.e. otherwise than while holding a formal investigation into shipping casualty.
If the expression "In any case" is interpreted to cover a foreign ship by a foreign master but holding an Indian certificate having a shipping casualty outside the territorial water sections 363 and 370b) may be applicable.
If on the other hand the words "in any case" is not allowed to be interpreted to include such a master of such a ship and in such a casualty it may not be covered.
The question then is whether the instant complaint can be construed as a statement of the Central Government as envisaged in section 363.
One of the requisites of section 363 is that the Central Government must have reason to believe that there are grounds for charging any master etc.
with incompetency or misconduct; and such reason to believe must have been arrived at otherwise than in the course of a formal investigation into the shipping casualty and it is the Central Government who why transmit the statement of a case to a court having jurisdiction under section 361.
We have to examine whether the complaint is ex facie under section 363.
It nowhere mentions that the Central Government had such reason to believe.
It nowhere mentions that it was a transmission of the statement of a case to the court by the Central Government.
It also nowhere mentions that reason to believe had been found otherwise than in the course of a formal investigation into the shipping casualty.
On the other hand in para 2 it says that the complainant is the Principal Officer who is competent person appointed under the Act to complain about the negligence of the accused.
There is no doubt that he is not empowered under section 363.
In para 6 the complaint says that the court under section 363 has got powers to make an inquiry into the charges of incompetency or misconduct of the accused and para 8 mentions: "The inquiry so as to cancel the certificate of the competency of the master namely the accused which has been granted by the Central Government may be recommended under this Act after holding the above said inquiry and thus render justice." Therefore, prima facie the complaint does not disclose the ingredients required under section 363.
We enquired of the respondents as to whether there have been earlier instances of such an inquiry having ever been made; and the 758 answer is in the negative.
We feel that had such interpretation been given earlier the Act being an old one of 1958, some instances ought to have been available.
However, the instant appeal is from an order of the High Court refusing to quash the complaint and the proceedings.
Quashing of the complaint could have been done, if taken on its face value it failed to disclose any ingredient of the offence.
The High Court found as fact that the appellant had two certificates issued under section 78 of the Act from the Director General of Shipping, Calcutta and Bombay respectively.
The High Court correctly observed that section 363 enables the Central Government to transmit a case to the court which has jurisdiction under section 361 to make an inquiry against master, mate or engineer into the charges for incompetency or misconduct otherwise than in the course of formal investigation into shipping casualties but the High Court failed to notice that the complainant himself had no power under section 363.
High Court has not considered the extent of applicability of the Act and whether all ingredients required under section 363 were satisfied in the impugned complaint.
We accordingly set aside the Judgment of the High Court, quash the complaint and the proceedings before the 14th Metropolitan Magistrate, Egmore, Madras 8, but make it clear the it shall still be open for the Central Government to act under section 363 of the Act according to law if it so decides.
Appeal allowed.
R.S.S. Appeal allowed.
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The appellant was the Master of the Merchant ship, M.V. Eamaco, when it sank in the high seas nearly 232 nautical miles away from India.
The appellant was holder of a Master 's certificate issued by the Director General of Shipping, Calcutta.
The ship was owned by a Singapore company and was flying Panamian flag.
The first respondent filed a complaint in the Court of 14th Metropolitan Magistrate, Egmore, Madras against the appellant for initiation of enquiry proceedings under section 363 of the Merchant Shiping Act, 1958 complaining about the negligence of the appellant while he was the Master of the ship and further stating that the shipping casualty had occurred due to sheer negligence and gross in competence of the Master when he failed to launch the life boats and life crafts which resulted in loss of the ship, the cargo and valuable lives of sailors.
The appellant filed a Criminal Miscellaneous Petition in the High Court under section 482 of the Cr.
P.C. stating that the proceedings were by an abuse of process of the court and the Court had no jurisdiction to proceed with the complaint against the appellant when there was no negligence on his part.
The High Court rejected the petition and held that the Shipping Act was applicable to the instant case and the action of the petitioner amounted to sheer negligence and called for investigation and inquiry under the Act.
The appellant has appealed to this Court.
In this court it was inter alia contended on behalf of the appellant that (i) the negligence complained of having occurred in respect of a foreign ship, flying foreign flag, at a place 232 natuical miles away from India, and as such, outside the territorial waters of India, the Act was 743 not applicable; (ii) even if the Act was applicable it would not amount to a shipping casualty as envisaged in part XII of the Act; and (iii) even assuming that Chapter XII applied the complaint could not have been filed by the appellant in the court of the 14th Metropolitan Magistrate, Egmore under Section 363 of the Act.
On behalf of the respondent it was contended that the shipping casualty having occurred within the territorial waters of India which extended up to 200 nautical miles, the Act would be applicable.
It was further submitted that the certificate of competentence issued under the provisions of Part VI of the Act was a valuable certificate and if the holder of such a certificate of competency was alleged to have committed misconduct or acts of incompetency there was no reason why an inquiry into that misconduct or incompetency could not be orderd by the Central Government to a court competent to exercise jurisdiction under section 361 of the Act.
Allowing the appeal, setting aside the judgment of the High Court, and quashing the complaint and the proceedings against the appellants, this Court.
HELD: (1) The ship was not a ship owned wholly by persons each of whom was a citizen of India or by a company satisfying the description under clause (b) or (c) of sub section (2) of Section 2 of the Act.
The ship being a Panamanian ship registered in Panama would come within the purview of the Act only while it was within India including its territorial waters.
[749C D] (2) By a notification of the Government of India dated 15th January, 1977 the exclusive economic zone of India had been extended upto a distance of 200 nautical miles into the sea from the shore and other maritime zones, under the 40th Constitution Amendement Act, 1976.
[750H 751A] (3) The concepts of territorial waters, continental shelf and exclusive economic zone are different concepts and the proclamation of exclusive economic zone to the limit of 200 nautical miles into the sea from the shore baseline would in no way extend the limit of territorial waters which extends to 12 nautical miles measured from the appropriate baseline.
[751B] (4) Admittedly the ship at the time of the casualty was at a place beyond the territorial waters of India and even the exclusive economic zone of India.
If this be the position, the ship would not be covered by the provisions of section 2 of the Act and consequently the provisions of 744 the Act would not apply to the instant casualty.
[751C] (5) The Act itself having not been applicable, Chapter XII being a part of the Act will also not be applicable.
[751D] (6) What is envisaged under section 361 is a formal investigation into a shiping casualty and not a preliminary inquiry.
Similarly section 262 does not envisage inquiring into any charge of incompetency or misconduct otherwise than in the course of the formal investigation into a shipping casualty.
[753H 754B] (7) Prima facie, the complaint does not disclose the ingredients required under section 363 of the Act.
It nowhere mentions that it was a transmission of the statement of a case to the court by the Central Government; it also nowhere mentions that the reason to believe had been founded otherwise than in the course of a formal investigation into the shipping casualty.
On the other hand in para 2 it says that the complainant is the Principal Officer who is competent person appointed under the Act to complain about the negligence of the accused.
There is however no doubt that he is not so empowered under section 363.
[757G,E F] (8) The High Court correctly observed that section 363 enabled the Central Government to transmit a case to the court which had jurisdiction under section 361 to make an inquiry against master, mate or engineer into the charges for incompetency or misconduct otherwise than in the course of formal investigation into shipping casualties, but the High Court failed to notice that the complainant himself had no power under section 363.
[758C D]
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6680.txt
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Civil Appeal No. 3436 of 1979.
From the Judgment and order dated the 19th April, 1978 of the Madras High Court in Writ Appeal No. 224178.
M.K. Ramamurthi, and C.S. Vaidyanathan for the Appellant.
Dr. Y.S. Chitale and A.V. Rangam for the Respondents.
The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
An order of pre mature retirement following close upon the heels of promotion and appointment to a coveted Selection post is bound to perplex any right thinking man and make him wonder whether the right hand knows what the left hand has done.
If in the month of May a Government servant is found to possess 'such high merit and ability, which naturally includes integrity, as to entitle him not merely to be promoted to a selection post but to be appointed to a very responsible and much desired post in that cadre, what could have happened between May and September to merit his being weeded out altogether from service in September under the rule which enables the Government to retire a Government servant in the public interest after he has attained the age of SO years or after he has completed 25 years of qualifying service.
One would expect that some grave and grim situation had developed in the interregnum to warrant the pursuit of such a drastic course.
But surprisingly, we found nothing what.
soever had happened in this case during that period.
Let us look at the totality of the facts.
77 The appellant appears to have had quite a noteworthy career.
A Starting at the lowest rung as a Lower Division Clerk in 1953, he was promoted as an Assistant Commercial Tax officer in 1954, next as a Deputy Commercial Tax officer in 1957, then as a Joint Commercial Tax officer in 1962, thereafter as a Commercial Tax officer in 1966, later as an Assistant Commissioner of Commercial Taxes in 1972 and finally as Deputy Commissioner of Commercial Taxes on 7 S 1975.
On promotion as Deputy Commissioner of Commercial Taxes he was posted as Member of the Sales Tax Appellate Tribunal in the same cadre.
On September 28,1975, he was retired under Fundamental Rule 56(d).
His Service Book shows that he had an excellent record of service.
He had earned several encomiums, commendations and appreciations.
The several promotions gained by him react his good record of service.
But there was one dark spot.
In 1969 when he was working as Commercial Tax officer it was noted in his Confidential file by the Deputy Commissioner of Commercial Taxes as follows: "This Commercial Tax officer is a very intelligent and capable officer who kept the entire district under his control in perfect discipline.
Unfortunately, his reputation is not at all good.
There were complaints that he used to threaten dealers and take money.
The entire matter is under investigation by the Vigilance and Anti Corruption Department".
There was an enquiry by the Directorate of Vigilance and Anti Corruption.
Charges were framed against the appellant by the Board of Revenue.
The explanation of the appellant was obtained.
The Full Board of Revenue then reported that the charges should be dropped.
The Government accepted the report of the Full Board and dropped the charges making the following order on 29 11 1974: "As the preliminary enquiry disclosed a prima facie case of corruption, a detailed enquiry was taken up by the Directorate of Vigilance and Anti Corruption.
Out of eleven allegations levelled against Thiru D. Ramaswami, seven allegations were not substantiated, in the enquiry made by the Directorate of Vigilance and Anti Corruption.
The Government, examined the report of the Directorate 78 and considered that there was a prima facie case in respect of certain allegations and this was sufficient to proceed against Thiru D. Ramaswami.
The Board of Revenue (CT) was therefore requested to frame charges straightaway as for a major penalty against Thiru D. Ramaswami on the basis of allegations levelled against him.
The Board accordingly framed charges against him in respect of allegations substantiated, obtained his explanation and sent its report thereon.
The Full Board considered that all the charges framed against Thiru D. Ramaswami in consequence of the detailed enquiry conducted by the Vigilance Department cannot be pursued and proved.
The Full Board has therefore expressed the view that the said charges may be dropped.
The Government accept the views of the Full Board and direct that all the charges framed against Thiru D. Ramaswami be dropped".
The effect of the order of November 29, 1974 of the Government was to grant absolution to the appellant from the repercussions of, the note of the Deputy Commissioner of Commercial Taxes, made in 1969.
If there was any ambiguity about the effect of the Government order, it was cleared by the circumstance that, within a few months, on May 7, 1975, he was promoted as Deputy Commissioner of Commercial Taxes and posted as Member, Sales Tax Appellate Tribunal, a prestigious post.
It has to be mentioned here that the post of a Deputy Commissioner of Commercial Taxes is a Selection post.
Under Rule 36(b) (i) of the Tamil Nadu Genera! Rules for the State and Subordinate Services: "Promotions in a service or class to a selection category or to a selection grade shall be made on grounds of merit and ability, seniority being considered only where merit and ability are approximately equal".
Under Rule 2(b) of the Tamil Nadu Special Rules for Commercial Taxes Service: "All promotions shall be made on grounds of merit and ability, seniority being considered only where merit and ability are approximately equal".
So, what do we have ? There was an adverse entry in the confidential file of the appellant in 1969.
The basis of the entry 79 was knocked out by the order dated November 29, 1974 of the A Government, and the effect of the entry was blotted out by the promotion of the appellant as Deputy Commissioner.
After his promotion as Deputy Commissioner there was no entry in the service Book to his discredit or hinting even remotely that he had outlived his utility as a Govt.
servant.
If there was some entry, not wholly favourable to the appellant after his promotion, one might hark back to similar or like entries in the past, read them all in conjunction and conclude that the time had arrived for the Government servant to quit Government service.
But, with nothing of the sort, it is indeed odd to retire a Government servant a few months after promoting him to a Selection post.
In the present case, we made a vain search in Service record of the appellant to find something adverse to the appellant apart from the 1969 entry.
All that we could find was some stray mildly deprecating entries such as the one in 1964 which said: "He is sincere and hardworking.
He 'manages his office very well.
He exercises adequate control over subordinates.
He maintains a cordial relationship with public.
Because of his stiff attitude some of the assessees complain about him stating that he is rude in his behaviour This perhaps is due to his unbending attitude.
With a little more tact he will be an asset to the Department".
one curious feature of the case is that while the 1969 entry noted that an enquiry was pending with the Vigilance and Anti Corruption Department in regard to the allegations against.
the appellant, the ultimate result of the enquiry which was that the charges should be dropped was nowhere noted in the personal file of the appellant.
One wonders whether the failure to note the result of the enquiry in the personal file led to the impugned order ! In the face of the promotion of the appellant just a few months earlier and nothing even mildly suggestive of ineptitude or inefficiency thereafter, it is impossible to sustain the order of the Government retiring the appellant from service.
The learned Counsel for the State of Tamil Nadu argued that the Government was entitled to take into consideration the entire history of the appellant including that part of it which was prior to his promotion, 80 We do not say that the previous history of a Government servant should be completely ignored, once he is promoted.
Sometimes, past events may help to assess present conduct.
But when there is nothing in the present conduct casting any doubt on the wisdom of the promotion, we see no justification for needless digging into the past.
The learned Counsel for the appellant relied on the decisions in Swami Saran Saksena vs State of U.P, (1) Baldev Raj Chadha vs Union of India & Ors (2) State of Punjab vs Dewan Chuni Lal, (3) while the learned counsel for respondent relied on the decision in Union of India etc.
vs M.E. Reddy & Anr.
(4) All the decisions have a been considered by us in reaching our conclusion.
The appeal is allowed.
G. O. Ms. No. 1112 dated September 19, 1975, Commercial Taxes Religious Endowments Department, Government of Tamil Nadu is quashed.
The appellant will be reinstated in service and paid the arrears of salary due to him under the rules.
He is entitled to his costs.
P.B.R. Appeal allowed.
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HELD: In the face of the appellant 's promotion a few months before his compulsory retirement under F. R. 56 (d) and nothing even mildly suggestive of ineptitude or inefficiency after his promotion, it is impossible to sustain the order of the Government retiring him from service.
[79 G] When the Government exonerated him of the charges levelled against him, the basis of the adverse entry in his confidential file was knocked out.
By reason of the promotion of the selection post of Deputy Commissioner and posting as a Member of the Sales Tax Appellate Tribunal, the effect of the entry was further blotted out.
Since then, there was no adverse entry in his service record to discredit him or hinting even remotely that he had outlived his utility as a Government servant.
Had there been another adverse entry after his promotion it would have been possible to read them all in conjunction and say that it was time for him to quit Government service.
But that was not so.
It was therefore odd that he was retired a few months after his promotion.
[79 A C] 76 All this is not to say that previous history of a Government servant should be completely ignored once he is promoted.
Sometimes past events might help to assess the present conduct, but when there was nothing in the present conduct casting any doubt on the wisdom of the promotion there was no justification for needless digging into the past.
[80 A B] Swami Saran Saksena vs State of U.P., [1980] I SCR 923; Baldev Raj Chadha vs Union of India & Ors., [1981] I SCR 430; State of Punjab vs Dewan Chuni Lal, ; ; and Union of India etc.
vs M. E. Reddy & Anr., ; ; referred to.
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tition (Civil) No. 1426 of 1987.
(Under Article 32 of the Constitution of India).
Ms. Abha Jain for the Petitioner.
M.P. Jha for the Respondent.
The Judgment of the Court was delivered by PATHAK, C.J.
This writ petition arises upon a letter received from the Yuva Adhivakta Kalyan Samiti, Sasaram, District Rohtas (Bihar).
Among other things, it is alleged in the letter that the female inmates of the "Care Home", Patna (Bihar) are compelled to live in 757 inhuman conditions in an old dilapidated building, that they are ill treated, provided food which is both insufficient and of poor quality, and that no medical attention is afforded to them.
On 18 November, 1987 this Court issued notice to the Superintendent of the Home, the District Magistrate, Patna and the State of Bihar and simultaneously ordered the learned District Judge, Patna to visit the Home and submit a report on the conditions actually prevailing there in the context of the allegations contained in the letter.
The learned District Judge has submitted his report.
He states that the "Care Home" is managed by the Welfare Department of the State Government under the administrative control of the Deputy Director, Welfare, Patna, that although there is provision for a full time Superintendent no full time Superintendent has been appointed, and instead the District Welfare officer, Smt.
M.B. Verma, who is posted at Arrah, is in dual charge of the "Care Home".
The staff includes two whole time matrens, two male clerks and two night Guards and recently three Supervisors have been attached to the Home.
There are three teachers and one senior Instructress for imparting vocational training.
He points out that thirty inmates recently escaped from the "Care Home" and now three Home Guards have been posted.
His report discloses a sorry state of affairs.
He points out that the building in which the inmates are housed is a century old dilapidated house rented for the purpose.
The building is absolutely uninhabitable and unsafe, and during the rainy season the roof leaks almost at every point.
Five small damp and dirty rooms with no windows are used to accommodate twenty five inmates, while the remaining women have to sleep in an open verandah.
Only a few of the women have been provided with blankets and cots.
He reports that whereas the capacity of the "Care Home" is over one hundred, the Deputy Superintendent admitted before him that there were only twenty five thin blankets.
Most of the inmates were compelled to sleep on the broken floor without even a sheet to cover themselves.
There was no woollen clothing at all, nor were they provided with soap or oil.
The diet provided to them cost Rs.5 per day and was hardly adequate to sustain them.
As regards toilet facilities, he says that there is one municipal tap outside in the open, which also was not in proper working order.
There was acute scarcity of water.
One hand pump had been installed in the previous month.
Three dilapidated lavatories existed far away from the main apartment.
There was no bathroom or toilet inside the apartment and the inmates had to go out in the night to the distant toilets.
The report discloses further that the inmates stated that they were often beaten up in case they complained before the authorities, and most of them expressed a desire to be set free to earn their livelihood or to return to their families.
Twelve lunatic inmates 758 had been transferred to the Ranchi Mental Asylum, and eleven children had been sent to the Bal Bhawan, Deoghar.
The majority of the inmates were major? five of them being deaf and dumb. All of them were in protective custody by the order of various judicial and executive magistrates of the State.
There was no regular visit by any physician, the last visit of a doctor having taken place almost two months before.
India is a welfare State governed by a Constitution which holds the pride of place in the hearts of its citizens.
It lays special emphasis on the protection and well being of the weaker sections of society and seeks to improve their economic and social status on the basis of constitutional guarantees spelled out in its provisions.
It shows a particular regard for women and children, and notwithstanding the pervasive ethos of the doctrine of equality it contemplates special provision being made for them by law.
This is only to be expected when an enlightened constitutional system takes charge of the political and socio economic governance of a society, which has for centuries witnessed the relegation of women to a place far below their due.
We live in an age when this Court has demonstrated, while interpreting Article 21 of the Constitution, that every person is entitled to a quality of life consistent with his human personality.
The right to live with human dignity is the fundamental right of every Indian citizen.
so, in the discharge of its responsibilities to the people, the State recognises the need for maintaining establishments for the care of those unfortunates, both women and children, who are the castaways of an imperfect social order and for whom, therefore, of necessary provision must be made for their protection and welfare.
Both common humanity and considerations of law and order require the State to do so.
To abide by the constitutional standards recognised by well accepted principle, it is incumbent upon the State when assigning women and children to these establishments, euphemistically described as "Care Home", to provide at least the minimum conditions ensuring human dignity.
What we see before us in the instant case is a crowded hovel, in which a large number of human beings have been thrown together, compelled to subsist in conditions of animal survival, conditions which blatantly deny their basic humanity.
How else shall we describe an establishment where women are detained in miserable conditions, compelling most of them to sleep on broken floors, in damp and dank conditions, with no covering whatever to protect them from the chill wind and near freezing temperatures of the north Indian winter, who are fed a wretched health denying diet, are denied the basic amenities of convenient toilets and a private bathing place, who, 759 if they complain, are beaten up, and although attacked by disease and illness are unable to find timely medical relief.
It is clear that the Welfare Department of the State Government of Bihar views its responsibilities in regard to these women with a lightness which ill befits its existence and the public funds appropriated to it.
The name of "Care Home" given to these establishments is an ironic misnomer.
The primitive conditions in which the inmates are compelled to live shock the conscience.
The counter affidavit filed on behalf of the Welfare Department of the State Government seeks to minimise and gloss over the deplorable conditions faced by the inmates, and the presence of many of the facilities alleged to exist cannot be accepted in the face of the report of the learned District Judge.
The affidavit, sworn by the Assistant Director (Social Welfare), does not disclose that he visited the home personally.
The facts seem to have been supplied to him by others.
The report of the learned District Judge, on the contrary, is the report of an objective neutral observer who took the trouble of visiting the place himself.
We have every reason to prefer the facts set out in his report.
In the circumstances, we think it necessary to direct the State Government to provide suitable alternative accommodation expeditiously for housing the inmates of the present "Care Home".
It is said that the State Government has given two acres of land near the Ganga bridge at Patna to the Welfare Department for putting up a complex as a "Care Home" and for shifting to it such inmates as are also housed in a Government building.
It is stated that the Welfare Department has sanctioned 31.10 lakhs for establising a Care Home in the building and that Rs. 12 lakhs have been allocated for constructing the building.
We do not know how long it will take for the new building to be ready.
It is necessary meanwhile to put the existing building, in which the inmates are presently housed, into proper order immediately, and for that purpose to renovate the building and provide sufficient amenities by way of living rooms, bathrooms and toilets within the building, and also to provide adequate water and electricity.
A suitable range of furniture including Cots must be provided at once, and an adequate number of blankets and sheets, besides clothing, must be supplied to the inmates.
We note that the Welfare Department has stated that the allowance of the inmates is being increased from Rs. 150 per month to Rs. 200 per month and that besides they will be provided such amenities as Soap, oil and other toilet requisites.
The Welfare Department of the State Government will take immediate steps to comply with the directions we have framed for the welfare of the 760 inmates of the Care Home.
We direct the Welfare Department further to appoint a full time Superintendent to take care of the Home, and to ensure that a Doctor visits the Home daily.
We are constrained to note also that the inmates have been committed to the care of this Home under orders issued by various Courts in Bihar or by different Executive authorities.
The Welfare Department will submit a report within one month from today detailing the particulars of these cases and mentioning the judicial or executive authority concerned to the High Court, and the High Court will thereupon issue necessary instructions to the pertinent District authority for taking appropriate steps in the different cases for their early disposal.
With these directions, we dispose of this Writ Petition.
We make it clear, however, that in the event of no, or insufficient, compliance being made with this order, we will have no hesitation in reopening the case for such further steps as may be considered necessary for enforcing this order.
H.L.C. Petition disposed of.
|
This writ petition arose upon a letter received from a voluntary organisation alleging that the female inmates of a `Care Home ' in Bihar were compelled to live in inhuman conditions.
Pursuant to a direction made by the court, the District Judge, Patna visited the `Care Home ' and submitted a report on the conditions actually prevailing there.
Disposing of the writ petition, ^ HELD: Every person is entitled to a quality of life consistent with his human personality.
The right to live with human dignity is the fundamental right of every Indian citizen under article 21 of the Constitution.
And, so, in the discharge of its responsibilities to the people, the State recognises the need for maintaining establishments for the care of those unfortunates, both women and children, who are the castaways of an imperfect social order and for whom, therefore, of necessity provision must be made for their protection and welfare.
Both common humanity and considerations of law and order require the State to do so.
To abide by the constitutional standards recognised by well accepted principle, it is incumbent upon the State when assigning women and children to these establishments, to provide at least the minimum conditions ensuring human dignity.
[758D F] India is a welfare State governed by a Constitution which lays special emphasis on the protection and well being of the weaker sections of society and seeks to improve their economic and social status.
It shows a particular ragard for women and children, and notwithstanding the pervasive ethos of the doctrine of equality it contemplates special provision being made for them by law.
[758B C] What we see before us in the instant case is a crowded hovel, in which a large number of human beings have been thrown together, compelled to subsist in conditions of animal survival, conditions which 756 blatanly deny their basic humanity.
It is clear that the Welfare Department of the State Government of Bihar views its responsibilities in regard to these women with a lightness which ill befits its existence and the public funds appropriated to it.
The name of "Care Home" given to these establishments is an ironic misnomer.
The primitive conditions in which the inmates are compelled to live shock the conscience.
[758G; 759A B] The State Government should provide suitable alternative accommodation expeditiously for housing the inmates of the present "Care Home".
It is necessary meanwhile to put the existing building, in which the inmates are presently housed, into proper order immediately, and for that purpose to renovate the building and provide sufficient amenities by way of living room, bathrooms and toilets within the building, and also to provide adequate water and electricity.
A suitable range of furniture, including Cots must be provided at once, and an adequate number of blankets and sheets, besides clothing, must be supplied to the inmates.
The Welfare Department of the State Government will take immediate steps to comply with these directions.
[759D, F H] The inmates have been committed to the care of this Home under orders issued by various Courts in Bihar or by different Executive authorities.
The Welfare Department will submit a report within one month from today detailing the particulars of these cases and mentioning the judicial or executive authority concerned to the High Court, and the High Court will thereupon issue necessary instructions to the pertinent District autority for taking appropriate steps in the different cases for their early disposal.
[760B C]
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5776.txt
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minal Appeal Nos. 101 to 103 of 1970.
Appeals by special leave from the judgment and order dated October 10, 1969 of the Calcutta High Court in Criminal Revision Nos. 238, 289 and 290 of 1969.
D. Mukherjee and section Ghosh for the appellants (in all the appeals).
A. N. Mulla, J. M. Khanna, Vishnu Bahadur Saharaya and Yogindra Khushalani for the respondents, (in Cr. A. Nos. 101 & 103/70).
R. A. Gupta for respondent (in Cr. A. No. 102/70).
section C. Mazumdar for the State (in all the appeals).
The Judgment of the Court was delivered by VAIDIYALIGAM, J.
These three appeals by the complaint, by special leave, are against the common judgment and order dated August 10, 1969, of the Calcutta High Court in Criminal Revisions Nos. 238, 289 and 290 of 1969, setting aside the charge under section 120B read with section 409 I.P.C. framed against all the four accused and the charge under section 409 IPC framed against accused Nos 1 to 3.
The High Court by the same judgment, quashed the proceedings based upon the said charges, which were pending before the Presidency Magistrate, 7th Court, Calcutta in case No. C/3443 of 1967.
The appellant in all these three appeals, Amar Chand Agar walla, filed a complaint before the Chief Presidency Magistrate, Calcutta, on November 21, 1967, on the basis of which the four 181 accused persons, namely, Paramanada Agarwalla, Madan Mohan Gour, Jhumermal Agarwala and Shanti Bose, were required to answer charges under section 120B/409 and 409 IPC.
These persons will be referred to as accused Nos. 1, 2, 3 and 4 respectively.
The case was later on transferred to the Presidency Magistrate, 7th Court, Calcuttta, for disposal.
The 7th Presidency Magistrate, after recording the evidence of ten prosecution witnesses, framed a charge on September 7, 1968, under section 120B/409 against all the four accused and a charge under section 409 IPC against accused Nos.
1 to 3.
The allegations in the complaint were briefly as follows The complainant was a partner of M/s. Kalinga Bakery Bis cuit Confectionery and Mineral Water Company of Rourkela in Orissa and was granted actual users ' import licence on November 18, 1966, by the Joint 'Chief Controller of imports and Exports, Calcutta, for import of skimmed milk powder and other commodities upto the value of Rs. 60,000/ .
This commodity was for the purpose of being used in the licensee 's factory.
The complainant appointed M/s. Arun Importer (P) Ltd., owned, managed and controlled by accused Nos. 1 to 3, as his agents to import 52.5 bags of milk powder from New Zealand.
The first accused wrote a letter dated July 25, 1967, informing the complainant that the goods had already been shipped and that they would be arriving very shortly.
Accused Nos.
1 to 3 also offered to assist the complainant with a loan of Rs. 25,000/ to enable him to clear the shipping documents from the Bank.
The 4th accused was introduced by the other accused as a Customs Clearing Agent and on their suggestion, the, complainant appointed him as his clearing agent.
After clearing the shipping documents with the assistance of the loan provided by the accused, the complainant, however, was not informed about the actual arrival of the ship.
The complainant addressed a letter dated August 19, 1967, to accused No. 4 asking for information about the arrival of the goods.
None of the accused gave any intimation about the arrival of the goods.
However, to his surprise, the complainant read in the newspaper a report on August 22, 1967, about the police having recovered from the various parts of Calcutta several bags of milk powder stated to have been imported on his account.
The complainant rushed to Calcutta and contacted the accused but was not able to get any information.
Accused No. 4 flatly declined to even recognise the complainant or talk to him; accused Nos. 1 to 3, however, professed ignorance about the whole thing and hinted that accused No. 4 might have diverted the goods to other persons.
On August 26, 1967, an application was filed before the Chief Presidency Magistrate to direct the police to make an investigation under section 156(3) of the Criminal Procedure Code re 182 garding the missing quantity of milk powder.
In the said application, however, only Shanti Bose (the present accused No. 4) was cited as an accused, as the complainant did not have any reason to suspect the other accused.
The milk powder seized by the police was later on directed to be returned to the complainant by the High Court on his furnishing security.
Accused Nos. 1 to 3, coming to know about this proceeding, instituted on September 25, 1967, a suit against the complainant in the High Court (Suit No. 2283 of 1967) praying for a declaration that the plaintiff was the pledge of 316 bags of milk powder of the defendant and prayed for a decree in the sum of Rs. 26,744.87.
They also asked for various interim reliefs.
The complainant, during the pendency of the proceedings before the Chief Presidency Magistrate, came to know that all the accused persons had taken away on August 19, 1967, the entire quantity of 525 bags of milk powder, which had been imported on his account without his knowledge, consent or instructions and that they had also mis appropriated about 200 bags before the police could raid their premises.
On an ascertainment of these facts, the complainant withdrew his original complaint with the permission of the court and instituted the present complaint against all the accused.
On receipt of the complaints the Chief Presidency Magistrate ordered a judicial enquiry to be held by the 9th Presidency Magistrate.
In the judicial enquiry held by the latter, the complainant had brought on record various documents to substantiate his allegations.
As a result of the enquiry, the Chief Presidency Magistrate on December 26, 1967, summoned all the four accused persons under sections 120B/409 and 409 an transferred the case for disposal to the 7th Presidency Magistrate, The learned Magistrate, after a consideration of the materials placed before him by the complainant, framed on September 7, 1968 charges against all the accused under sections 120B/409 IPC and a charge under section 409 IPC against accused Nos. 1 to 3.
None of the accused persons moved the High Court against the order of the Magistrate issuing process or against the order dated 7 9 1968 framing charges against them.
It is seen from the records that a large volume of oral and documentary evidence had already been lot in and the trial itself had almost come to the closing stage.
What remained was only to examine two more witnesses on the side of the prosecution, as per order dated 24 21969, and also to examine one Durga Dutt Chowdhury as a court witness under section 540, Criminal Procedure Code, as per order dated 7 3 1969.
The witnesses examined so far by the prosecution had also been cross examined, by the defence.
183 While matters stood thus, the 4th accused moved the High Court in Criminal Revision No. 238 of 1969 for quashing the charges and the entire proceedings that had taken place before the Magistrate.
There was also a prayer in the alternative for stay of the criminal proceedings till the disposal of Civil Suit No. 2283 of 1967 Accused No. 2 filed a similar Revision No. 289 of 1969, followed by accused Nos. 1 and 3, who were the, petitioners in Criminal Revision No. 290 of 1969.
All the three Criminal Revisions were, heard together by the High Court and have been dealt with in its common judgment.
On behalf of the accused, five contentions were urged before the High Court for quashing the charges as well as the entire proceedings pending before the Presidency Magistrate.
The first contention related to the maintainability of the present proceedings by the complainant, when he himself was an accused in a case under section 5 of the Imports and Exports (Control) Act 1947, stated by the Central Bureau of Investigation, Economic Offences wing, Calcutta, in B. C. case No. 23/W/67.
it was urged before the High Court that though he had been discharged, he is, nevertheless, an interested complainant.
The High Court rejected this contention and held that, on that account, the present proceedings cannot be quashed.
The second contention of the accused related to the effect of ,the order of withdrawal of the earlier complaint on the present proceedings.
It was pleaded that the dismissal of the, first complaint operates as a bar to these proceedings.
However, this contention also was rejected by the High Court on the ground that an order of dismissal under section 203, Criminal Procedure Code, is no bar to the entertainment of a second complainant on the similar facts, though such a complaint can be entertained, only under exceptional circumstances.
The High Court ultimately held that the present proceedings are not unwarranted of unable in view of the first order of discharge in the circumstances of the present case.
The third contention that was taken before the High Court by the accused was that the factum of entrustment has not been established by clear and cogent evidence and as such, there cannot be any breach of trust, for less any dishonest conversion leading to a conspiracy.
The learned Judge held that it is difficult, at that stage, on the evidence adduced, to hold that there has not been any entrustment, especially as the whole case depends upon on appreciation of the entire evidence for coming to a conclusion one way or the other.
On this reasoning, this contention also was rejected.
184 It must be noted that the third contention was an invitation to the High Court to consider the evidence already adduced before the Magistrate and to come to a conclusion that no entrustment had been established.
The High Court, in our opinion, ,quite rightly, declined at that stage, to go into that question of tact and left it to the Magistrate to assess and appreciate the evidence and come to a conclusion one way or the other.
We are particularly referring to this aspect because, as will be seen later, ,the High Court adopted a different criteria when it dealt with the fifth contention of the accused.
The fourth contention of the accused was that both the first and the second complaints suppressed material facts, vitiating the present proceedings.
The fifth contention, as the High Court itself observes, related to the merits, namely, that the evidence on record does not establish the offences with which the accused are charged.
These two contentions have found favour with the High Court.
It is on the basis of the acceptance of these contentions that the entire proceedings have been quashed.
The fourth contention of the accused was that the complainant had suppressed material facts, which were within his knowledge, in the first complaint filed on August 26, 1967.
Particularly, it was stressed that the complainant had not even referred to the Civil Suit No. 2283 of 1967 instituted against him.
The said complaint also does not refer to the complainant having taken a loan of Rs. 25,000/ from the accused.
The learned Judge has accepted this criticism as justified.
It is not necessary for us to refer to, what according to the learned Judge were, certain omis sions made by the complainant in his original complaint filed on August 26, 1967.
But it is enough to state that the view of the learned Judge that even the suit instituted against the complainant had not been referred to, is not justified.
The complaint was filed on August 26, 1967, whereas the suit against the complainant was filed on September 26, 1967.
It is also the view of the learned Judge that the present complaint also.
does not refer to certain matters, which were within the knowledge of the com plainant.
We do not propose even to advert to these matters.
According to the High Court, there has been a suppression of some material facts in the two petitions of complaint and, therefore, the present proceedings must be held to be bad and repugnant effecting their maintainability.
The High Court has referred in this case to a decision of the Calcutta High Court which, in our opinion, has no bearing.
The decision is in Sunder Das Loghani vs Farun Rustom Iran(1).
That was a case of (1) A.I.R. 1939 Calcutta 320.
185 discharge of the accused under section 253 (2) of the Criminal Procedure Code, as the Magistrate was of the opinion that the complainant had deliberately suppressed several facts and that the complaint was a thoroughly dishonest one.
in the end the High Court has held that the Present Proceedings are bad and improper and, therefore, they have to be quashed.
The fifth and the last contention taken on behalf of the accused relates, as the High Court itself states, to the merits of the case and is based Upon the evidence on record, both oral and documentary.
After a consideration of certain items of evidence, the learned Judge has held that the evidence on record rules out any offence of breach of trust.
or a conspiracy to commit the same, by the accused persons and, therefore, the present croceedings are not maintainable and have to be quashed.
A representation appears to have been made on behalf of the complainant that a large volume of evidence, oral and documentary, has already been adduced and the trial has gone on for a long time and that only two more prosecution witnesses and a court witness remain to be examined.
On this basis it was pressed before the High Court by the complainant that the High Court should allow the proceedings to go on and to come to its logical conclusion and that the.
High Court should not interfere at that stage.
The learned Judge, however, considered this representation and held that the two remaining prosecution witnesses should not be allowed to be examined 'in the facts and circumstances of the case, as they cannot possibly have any material effect on the merits of the case.
The High Court further held that even the proposed examination of the court witness is not necessary, as it will only prejudice the accused and undo the effect of their cross examination.
On this basis, the representation made on behalf of the complainant was rejected.
On behalf of the appellant, Mr. D. Mookerjee very strenuously attacked the reasoning of the High Court for quashing the charges framed against the accused and the entire proceedings that head taken place before the Presidency Magistrate.
On the other hand, Mr. A. N. Mulla, learned counsel on behalf of the accused, urged that the High Court was justified, in the circumstances, in quashing the charges well as the entire proceedings so far taken place before the Presidency Magistrate.
The learned counsel appearing for the State supported the appellant and urged that the High Court was not justified in interfering with the proceedings when the trial had gone on for a considerably long time and was due to close, We have already referred to the 4th and the 5th contentions urged on behalf of the accused which have found favour with 186 the High Court.
We have already pointed out that the learned Judge quite rightly declined, when dealing with the third contention, to consider, on an appreciation of evidence, whether an entrustment has been proved.
This, the High Court has properly left to be decided by the Magistrate after the entire evidence is closed.
But when dealing with the fifth contention, which the High Court itself says, relative to the merits of the case, and has to be decided on the basis of the evidence on record, both oral and documentary, the High Court instead of adopting the same test, as it did when dealing with the third contention, embarked upon a fairly elaborate appreciation of the evidence on record and ultimately came to the conclusion that the evidence on record does not establish any breach of trust, or a conspiracy to commit the same, by the accused persons.
Regarding the fourth contention, which also has found acceptance at the hands of the High Court, it relates to what according to the accused was, suppression of certain material facts by the complainant in his two complaints.
In our opinion, the High Court was not justified, in the particular circumstances of this case, in quashing the charge, as well as the entire proceedings that had taken place before the Magistrate.
it is not as if the accused had moved the High Court at the earliest stage when the Presidency Magistrate issued sommons to them.
Nor had they approached the High Court when charges were framed against them.
The accused had 'been summoned, after a judicial enquiry by the Chief Presidency Magistrate on December 26, 1967, under sections 120B/409 and 409 IPC.
Before the Magistrate, the evidence.
oral and documentary, was adduced by the complainant in the presence of the accused.
On a consideration of such materials, the Presidency Magistrate framed charges against all the four accused as early as September 7, 1968.
If the case of the accused was that the allegations in the complaint do not constitute the offence complained of or that the complaint has to be quashed for any ground available in law.
they should have approached the High Court, at any rate.
immediately after the charges were framed.
The records disclose that it was the fourth accused, who moved the High Court to quash the proceeding on March 17, 1969, earlier than the other accused.
Even by that date, several prosecution witnesses, had been examined and they had also been cross examined by the accused.
Several items of documentary evidence had already been let in during the trial.
Only two prosecution witnesses and a court witness remained to be examined.
The proper course at that stage to be adopted by the High Court was to allow the proceedings to go on and to come to its logical conclusion, one way or the other,.
and decline to interfere with those proceedings.
The fourth contention related to the suppressions of certain 187 material in the complaint.
We do not propose to express any opinion on that aspect because, even assuming that there has been suppression, that is a matter to be considered by the Trial Magistrate.
Similarly, as to whether the evidence on record establishes that an offence of breach of trust has been committed, or not, is again a matter for the Trial Court to come to a conclusion, one way or the other, after an appraisal of the entire evidence that is let in by the prosecution and by the defence, if any.
The High Court was not justified at that stage to have embarked upon an appreciation of the evidence.
Here again, we do not express any opinion, on merits, as the matter is to be, considered by the Trial Magistrate.
The High Court was also equally not justified in holding that the two prosecution witnesses should, not be examined on the ground that their evidence will not have any material effect on the merits.
The further view of the High Court that the examination of the court witness will prejudice the accused, is also without any basis.
In fact, the High Courts decision on.
the question of these witnesses is really on a representation made on behalf of the complainant that the trial is almost coming to a close and that only two more prosecution witnesses and one court witness remain to be examined.
So far as we could see, the ' accused have not challenged the order of the Magistrate dated February 24, 1969, allowing the prosecution to examine Satanarayan Agarwalla and an officer of the Directorate of Industries, Government of Orissa; nor have they challenged the order dated March 7, 1969, of the Magistrate allowing the prayer of the prosecution for examining Durga Dutt Chowdhury as a court witness under section 540.
In holding that the proposed examination of Durga Dutt Chowdhury, as a court witness, will pre judice the accused, the High Court has not given due consideration to the decision of ;this Court in Jamatraj Kewalji Govani vs
The State of Maharastra(1).
It is not clear whether the High Court passed the order, in question, under section 561A or under section 439 of the Code.
of Criminal Procedure.
This Court has laid down the principles in R.,P. Kapur vs The State of Punjab(2), which have to beborne in mind by the High Court when its inherent jurisdiction under section 561A is invoked for quashing the proce edings pending before a subordinate court.
It has been 'emphasised that the inherent jurisdiction could be exercised to quash proceedings in a proper case, either to prevent the abuse of the.process of any court or otherwise to secure the ends of justice.
This Court has also indicated some of the categories of case where (1) ; (2) 188 the inherent jurisdiction could and should be exercised to quash proceedings.
However, the exercise of the power by the High Court, in the case before us, does not come within the ambit of the principles laid down by this Court in the above decision.
For instance, the second contention taken before the High Court by the accused related to the maintainability of the second complaint, when the first complaint had been withdrawn and the accused had been discharged.
If the High Court had accepted the contention of the accused in that regard, it may be that the High Court was justified in quashing ;the proceedings, though at a very late stage.
But on that point, the High Court 's decision is in favour of the complainant.
The other points taken into account by the High Court do not justify the exercise of its power under section 561A and that too at a very late stage of the proceedings.
Even assuming that the High Court was exercising jurisdiction under section 439, in our opinion, the present was not a case for interference by the High Court.
The jurisdiction of the High Court is to be exercised normally under section 439, Criminal Procedure Code, only in exceptional cases, when there is a glaring defect in the procedure or there is a manifest error of point of law and consequently there has been a flagrant miscarriage of justice.
The High Court has not found any of these circums tances to exist in the case before us for quashing the charge and the further proceedings.
The judgment and order of the High Court quashing the ,charges framed against the accused as well as the other proceedings based thereon, pending in case No. C/344 3 of 1967, are set aside.
The learned Presidency Magistrate will proceed with the further trial and give it a very expeditious disposal.
We make it clear that the directions given by the Chief Presidency Magistrate regarding the examination of two more prosecution witnesses and the court witness will stand, subject to any modifications that may be made by that Court in regard to the directions I already given by it.
In the result, the appeals are allowed.
V.P.S. Appeals allowed.
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As a result of a judicial enquiry in relation to a complaint by the appellant against the four respondents, summons were issued to the respondents, and before the Magistrate, evidence, oral and documentary, was adduced by the complainant (appellant) in the presence of the accused (respondents).
On a consideration of those materials, the Magistrate framed charges against I all the four accused under sections 120 B/409 1.
P.C. and under section 409, against accused 1 to 3, in September 1968.
Thereafter, the trial proceeded, a large volume of oral and documentary evidence was let in, and all that remained was the examination of two prosecution witnesses and a court witness before closing the trial.
All the prosecution witnesses, examined till then were also cross examined by the respondents.
At that stage, in March 1969, the 4th accused moved the High Court for quashing the proceedings and the other accused followed with similar petitions.
The High Court, in spite of the complainant representing that the trial had almost come to a close quashed the charges and proceedings on the grounds that, the complainant had suppressed material facts, that the two prosecution witnesses should not be allowed to be examined 'in the circumstances of the case ', that the ' examination of the court witness was not necessary as it would only prejudice the accused and under the effect of cross examination, and that the evidence on record ruled out any offence of breach of trust or a conspiracy to commit it.
Allowing the appeal to this Court, HELD : The High Court was in error (a) It is not as if the accused had moved the High Court at the earliest stage when summons was issued to them.
Nor had they ,approached the High Court when charges were framed against them.
If the case of the accused was that the allegations try the complaint did not constitute the offences complained of or that the complainant was to be quashed on any other ground available in law, the accused should have approached the High Court at least when the charges were framed.
[186DE] (b) Assuming there was a suppression of material facts by the complainant that was a matter to be considered by the trial Court.
Similarly, whether the evidence on record established that an offence of breach of trust or a conspiracy to commit it, had been committed, Is again a matter for the trial court to come to a conclusion after, an appraisal of the entire evidence let in by the prosecution and the defence.
The High Court was not justified, at that stage, to have embarked upon an appreciation of the evidence.
[187AC] (c) The accused never challenged the order of the trial court regarding the examination of prosecution witnesses or the court witness, and 180 the High Court was not justified in holding that they should not be examined, and hence, the order regarding their examination should stand.
Jamatraj Kewalji Govani vs The State of Maharashtra, , referred to.
(d) If the High Court had passed the order quashing the charges and proceedings in exercise of its inherent jurisdiction under s.561A, Cr.
P.C. then the exercise of the power by the High Court was not justified, because, the present case does not come within the ambit of the principles laid down by this Court, in R. K. Kapur vs The State of Punjab, [188 A C] (e) Even assuming that the High Court was exercising jurisdiction under section 439, Cr.
P.C., the present was not a. case for interference by the High Court.
The jurisdiction of the High Court is to be exercised nearly, under the section, only in exceptional cases when there is a glaring defect in the procedure or there is a manifest error on a point of law and consequently a flagrant miscarriage of justice.
[188D]
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3141.txt
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Civil Appeal No. 2501 of 1972.
From the Judgment and order dated 5 2 1970 of the Bombay High Court in Income Tax Reference No. 58/73.
AND CIVIL APPEAL NOS.
2502 2504 OF 1972 From the Judgment and Order dated 25th/26th Feb. 1971 of the Bombay High Court in Income Tax Ref.
No. 87/63.
V. section Desai, Dinesh Vyas, K. J. John and Sree Narain for the Appellants in all the appeals.
Hardyal Hardy, Champat Rai, B. B. Tawekley and Miss A Subhashini for the Respondent in all the appeals.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
Since these appeals by certificate involve a common question of law, we find it convenient to dispose them of by this common judgment.
881 Civil Appeal No. 2501 of 1972 is filed against the Judgment of the High Court of Bombay in Income Tax Reference No. 58 of 1963 and Civil Appeals Nos.
2502 2504 of 1972 are filed against the judgment of that High Court in Income Tax Reference No. 87 of 1965.
The assessee, M/s Sasoon J. David & Co. Pvt.
Ltd. (hereinafter referred to as 'the Company ') is the appellant in all these cases and the assessment years are 1957 58, 1958 59, 1959 60 and 1960 61, the relevant calendar years being 1956, 1957, 1958 and 1959 respectively.
The Company is an investment company and its shares were originally held either directly or through their nominees by Sir Percival David, Lady David and Mr. V. P. David (hereinafter collectively referred to as 'Davids ').
The issued capital of the Company consisted of 1000 ordinary shares of the face value of Rs. 10,000/ each.
According to the valuation made by the auditors, the assets of the Company were worth Rs. 155 lacs as on December 31, 1955.
At a meeting of the directors of the Company held on December 2, 1955, a resolution was passed recommending that the employees of the Company whose names were set out in the statement attached thereto be paid certain sums or annuity as set out against the names of each of them as and by way of retrenchment compensation and compensation for termination of employment and also for long and faithful services rendered by them to the Company in the past and that their services might be terminated.
It was also resolved to call an extra ordinary general meeting of the shareholders of the Company to consider and if thought fit to approve the recommendation made by the directors as stated above.
Accordingly an extra ordinary general meeting of the shareholders of the Company was held on January 17, 1956 but it was adjourned to January 25,1956.
On the adjourned date, the meeting passed a resolution approving the recommendation made by the directors to pay the employees retrenchment compensation and compensation for termination of employment and also additional retrenchment compensation and compensation for termination of employment in the case of some of them and to terminate their services on or after April 1, 1956.
Thereafter an agreement was entered into between Davids and Tata Sons Ltd. (hereinafter referred to as 'the Tatas ') on March 23, 1956 agreeing to sell the 1000 shares held by Davids or their nominees in the Company in favour of Tatas or their nominees for a sum of Rs. 155 lacs.
The said agreement inter alia provided that the sum voted by the Company for payment of gratuities and/or as compensation for loss of employment to existing directors and employees of the Company with respect to their services upto and inclusive of March 31, 1956 and a further amount of 882 Rs. 16,188/ payable to the Managing Director, Mr. Mathalone should be paid in accordance with the resolution by the Company and the amount so paid should be deducted from the purchase price of Rs. 155 lacs agreed upon.
It also provided that Davids should arrange to terminate the services of all employees with effect from March 31, 1956 and also to arrange that all directors (including the Managing Director) resign their offices and Tatas or their nominees should thereafter be entitled to appoint or elect all or any of the members of the staff and directors (including existing directors and members of the staff) of the Company as they deemed fit.
Of the 22 employees covered by the resolution of the directors dated December 2, 1955 followed by the confirmation at the extra ordinary general meeting of January 25, 1956, 9 were re employed and 13 persons were not re employed.
In the books of the assessee, there was a debit for a total sum of Rs. 1,64,899/ during the accounting year 1956, the details for which were as follows: Amount payble to the 22 employees as per resolution dated 2 12 1955 and 25 1 1956 Rs 1,04,626/ Amount described as "additional retrechment compensation and compensation for termination of employment and also for long and faitful services", as per resolutin No. 2 dated Rs 6,000/ Compensation for termiantion of pension Rs 21,200/ Annuity of Shri A.E. Joseph, former Director as per resolsution dated 2 12 1956 Rs 16,885/ Amount described as "compensation for loss of office.
Managing Director Mr. R. Mathalone" Rs 16,188/ Total : Rs 1,64,899/ It should be mentioned here that A.E. Joseph, the former Director of the Company had to be paid as per the resolution of the Company Rs. 16,885/ by way of annuity during a period of five years commencing with 1956.
During the assessment year 1957 58, the relevant previous year being 1956, the Company claimed deduction of Rs. 1,64,899/ referred to above before the Income tax Officer under section 10(2) (xv) of the 883 Indian Income tax Act, 1922 (hereinafter referred to as 'the Act ').
During each of the three succeeding assessment years with which we are concerned, the Company claimed deduction of Rs. 16,885/ being the annuity paid to Mr. A. E. Joseph pursuant to the resolution.
During the assessment year 1957 58, the claim in respect of the entire sum of Rs. 1,64,899/ was disallowed by the Income tax Officer on the ground that the services of the directors and employees had been terminated not because of business expediency but because Tatas, the purchasers of the shares made it a condition under the agreement.
The relevant part of the order read as follows: "Thus, it emerges that the expenditure of the type of gratuity would be allowable u/s 10(2) (xv) only if the persons retiring had such expectancy or they accepted lower salaries in such expectation and hence it was an incentive to existing employees of future employees.
As against that we find that here even before the Tatas took up the management of the company, services of the employees and directors were terminated and the amount of compensation fixed.
The fact that there was no expectancy or custom of such gratuity with the company is clearly borne out by the fact that many of the employees whose services are terminated had put in a number of years of service in some cases even going upto 40 years.
As against this the assessee has been pleading that most of the employees were very old and that as a result of change of staff the Company was able to effect considerable economy.
However, I understand that some of the old employees were reinstated and as stated the whole transaction was a part of the overall transaction of purchase of shares and passing over of control.
The manner in which the services of all the employees under the old management were terminated is also significant.
Thus I am unable to see how this expenditure can fall section 10(2) (xv).
I am unable to find any distinction between compensation paid to employees and those paid to directors and also any distinction between outright compensation paid to a director and annuity paid to a director.
None of the expenses are allowable and I add the whole amount claimed by way of gratuity, compensation for loss of employment and annuity or compensation for loss of office to a director or former director.
" Aggrieved by the decision of the Income tax Officer, the Company filed an appeal before the Appellate Assistant Commissioner of 884 Income tax.
The Appellate Assistant Commissioner after taking into account the records before the Income tax Officer and the statement filed by the Company before him found that the Income tax Officer was right in disallowing the claim even though he was of opinion that the Company had by the termination of services of the directors and the employees by payment of gratuity and/or compensation been benefited.
The relevant part of his order was as follows: "The only contention remaining to be considered is that the Income tax Officer was wrong in disallowing a sum of Rs. 1,64,899/ paid to certain employees and directors as compensation for termination of services.
The circumstances leading to the payment of this compensation have been narrated in detail in the order of the Income tax Officer.
It is strongly urged that the termination of the services of the persons concerned was of great benefit to the Company even considering the payment of the compensation since the establishment expenses were very substantially reduced as a result.
From the information furnished to me, this statement is no doubt quite justified.
However, it is seen that the termination of the services and the payment of compensation were not done wholly with a view to the business requirements of the company, but were bound up with the changing of hands of the shares of the company.
According to the agreement for the sale of all the shares of the company the sellers had to arrange to terminate the services of all the employees and also arrange that all directors resigned their offices.
It is expressly stated that this requirement was to enable the purchasers to appoint or elect all members of the staff and directors.
As a matter of fact some of the persons to whom compensation had been paid for termination of services were immediately re employed by the Company.
The decision to pay compensation cannot in the circumstances be said to have been taken solely with a view to the business requirement of the company though incidentally the company might have been benefited by it.
In view of what has been stated above.
I feel that the Income tax Officer was justified in his action.
The appellant has referred to the Bombay High Court decision in the case of F.E. Dinishaw Ltd., but the facts in the present case are not identical with those of the case mentioned.
" On further appeal to the Tribunal by the Company, the Tribunal affirmed the order of the Appellate Assistant Commissioner holding 885 that the inference drawn by the Income tax Officer that the payments in question were motivated by the reorganisation of share holding had not been challenged by the Company; that the reference made to the said payments in the agreement of sale of shares led to such an inference and that the expenditure had not been incurred for the purpose of the Company but purely as a result of the bargain between Davids and Tatas.
It was further held by the Tribunal that even assuming that the payments were beneficial to the Company, no deduction could be allowed since they had been made to benefit third parties.
Accordingly the Tribunal dismissed the appeal.
An application made under section 66(1) of the Act before the Tribunal was rejected.
Thereafter the Company filed an application before the High Court of Bombay under section 66(2) of the Act and the High Court directed the Tribunal to state a case and to refer the following questions of law for its opinion: "(1) Whether the Tribunal erred in law disallowing the amount of Rs. 1,64,899/ as a deduction under section 10 of the Indian Income tax Act, 1922 ? (2) Whether there was any evidence to justify the Tribunal 's finding that the payment of Rs. 1,64,899/ or any part thereof was made in view of and in order to effectuate the agreement entered into between the old shareholders and the new shareholders and that the payment had no commercial purpose behind it ? (3) Whether in any event the sum of Rs. 16,188/ paid to the Managing Director by way of pay in lieu of six months ' notice was allowable as a deduction under section 10 of the Indian Income tax Act, 1922 ?" Accordingly, the Tribunal drew up a statement of the case and referred the above questions.
Later on the Tribunal referred under section 66(1) the following question of law arising out of the orders of assessment for the assessment years 1958 59, 1959 60 and 1960 61 in respect of the annuity paid to Mr. A. E. Joseph: "Whether in computing the assessee 's business income of the accounting years 1957, 1958 and 1959, relevant for the assessment years 1958 59, 1959 60 and 1960 61, the sum of Rs. 16,885/ is an admissible deduction under section 10(2)(xv) of the Act? 886 It is not necessary to refer to the other matters involved in the orders of assessment of the years 1958 59, 1959 60 and 1960 61 and to the various stages of the cases until they reached the High Court.
Income tax Reference No. 58 of 1963 arising out of the assessment proceedings of the year 1957 58 was heard by a Division Bench of the High Court of Bombay and decided on February 5, 1970.
The High Court found that out of Rs. 1,64,899/ referred to in question No.1 only a sum of Rs. 21,200/ which was commutation of liability for payment of pension to some retired employees and/or widows of such employees and a sum of Rs. 16,188/ paid to Mr. Mathalone, Managing Director in lieu of six months notice that had to be given prior to termination of his service were allowable as deductions and that the Company was not entitled to claim deduction of the remaining sum of Rs. 1,27,511/ .
It accordingly answered question No.1 in the negative in so far as the sum of Rs. 1,27,511/ (excluding two items of Rs. 21,000/ and Rs. 16,188/ ) was concerned, question No. 2 in the affirmative in so far as the amount aggregating to Rs. 1,27,511/ (excluding the two items of Rs. 21,200/ and Rs. 16,188/ ) was concerned and question No. 3 in the affirmative.
The High Court was of the view that the expenditure of the sums amounting to Rs. 1,27,511/ paid to the employees and a director of the Company by way of retrenchment compensation or compensation for termination of service had not been incurred by the Company for commercial expediency and/or considerations.
It accordingly disallowed the claim made by the Company to the extent indicated above.
The Income tax Reference case arising from the assessment orders relating to assessment years 1958 59, 1959 60 and 1960 61 came before another Division Bench of the High Court and that Division Bench following the decision rendered by the High Court earlier disallowed the claim of the Company for deduction in respect of the payment of Rs. 16,885/ to Mr. A. E. Joseph in each of the accunting years relative to the assessment years in question.
Aggrieved by the judgments of the High Court of Bombay, the Company has filed these appeals.
We are concerned in these appeals with the claim of the Company in respect of a sum of Rs. 1,27,511/ out of Rs. 1,64,899/ referred to in questions Nos. 1 and 2 in the reference relating to the assessment year 1957 58 and the claim in respect of payment of Rs. 16,885/ made to Mr. A. E. Joseph during each of the three succeeding years.
The undisputed facts of the case are: The shares of the Company 887 were held by Davids or their nominees till they were transferred to Tatas; that according to the valuation made by the auditors of the Company, its assets were worth Rs. 155 lacs as on December 31, 1955; that at a meeting of the directors held on December 2, 1955, it had been resolved that the services of 22 employees should be terminated by paying retrenchment compensation; that on January 25, 1956 at the extra ordinary general meeting of the shareholders of the Company, it was resolved that the employees of the Company be paid certain sums or annuity set out against the names of each of them and their services should be terminated with effect from April 1, 1956; that an agreement was entered into between Davids and Tatas on March 23, 1956 regarding the sale of the shares in favour of the Tatas; that the said agreement referred to the resolution passed at the meeting of the shareholders of the Company; that the Company paid retrenchment compensation according to the said resolution and that the Tatas deducted from the purchase price the sum payable by the Company in accordance with the resolution of the Company from out of the consideration of Rs. 155 lacs which they had agreed to pay under the agreement dated March 23, 1956 to Davids.
Apart from the resolution of the Board of Directors of the Company dated December 2, 1955, the resolutions passed at the extra ordinary general meeting of the shareholders of the Company held on January 25, 1956, the agreement dated March 23, 1956 entered into between Davids and Tatas, the books of account of the Company showing payments made by the Company by way of retrenchment compensation and the fact that 9 of the 22 employees whose services had been terminated had been reemployed, there was no other evidence before the Income tax Officer.
The Income tax Officer presumably because of the proximity of the dates of the resolutions, the date of the agreement and the dates on which retrenchment compensation was paid to the employees came to the conclusion that the retrenchment of the employees had been effected as a part of the bargain entered into between Davids and Tatas and therefore compensation paid to the employees on retrenchment of their services and to the director on the termination of his service had not been paid in the course of the business of the Company by way of commercial expediency.
He accordingly disallowed the claim of the Company under section 10(2) (xv) of the Act.
Although the Appellate Assistant Commissioner in the course of his order observed that the Company had been benefited by reason of the retrenchment of the service of the employees as it had resulted in the reduction of the expenditure on the establishment, he disallowed the claim on the very same ground on which the Income tax Officer had rejected it.
The Triunal proceeded to dispose of the case before it on the basis that 888 the inference drawn by the Income tax Officer that the payments were motivated by the re organisation in the shareholding had not been questioned by the Company either before the Appellate Assistant Commissioner or before it.
We do not find in the order of the Appellate Assistant Commissioner that any concession had been made by the Company to the effect that the finding of the Income tax Officer referred to above was correct.
In the grounds of appeal before the Tribunal, the Company had stated that the Appellate Assistant Commissioner erred in holding that "the decision to pay compensation cannot in the circumstances be said to have been taken solely with a view to the business requirement of the Company though incidentally the Company might have benefited by it." The appellants submitted before the Tribunal that the above amount was expended wholly and exclusively for the purpose of their business and as such it should have been deducted as an admissiable expense in computing their income liable to income tax.
The Tribunal while deciding the question whether the sums paid by way of compensation were deductible or not observed that the fact that a reference to payment to the staff of compensation had been made in the agreement led to the inference that such payment was a part of the bargain between Davids and Tatas; that on account of such payment, the purchasers had actually been benefited while the Company had to make payment in order to give effect to the agreement and therefore there was no commercial purpose involved in making the said payment.
The Tribunal also held that even assuming that the Company was benefited by payment of compensation by reason of reduction in its establishment expenses, since the payment had been made as a result of the bargain between Davids and Tatas, it could not be allowed as a deductible expenditure.
It should be stated here that the Tribunal did not reverse the finding of the Appellate Assistant Commissioner that the Company had been benefited by such payment.
In fact it did not go into the question whether the payment had really resulted in any benefit to the Company.
The High Court, however, in the course of its judgment found that on account of the retrenchment of the employees and re employment of only 9 of them, the yearly wage bill of the Company for salaries was reduced from Rs. 1,14,197/ in 1955 to Rs. 67,268/ in 1956 and thereafter in 1957 and 1958 respectively to Rs. 54,124/ and Rs. 54,960/ .
In the instant case, it is necessary to bear in mind that the Company was neither dissolved nor was its business undertaking sold.
It continued to exist as a juristic entity even after the transfer of its 889 shares by Davids to Tatas.
On account of such transfer of shares, the transferees no doubt gained control on the Company.
But one important fact of the case which was lost sight of by the High Court and the Tribunal was that neither Davids nor Tatas derived any direct benefit out of the payment of retrenchment compensation to the employees even though such retrenchment might have facilitated the transfer of shares.
It is also not the case of the Department that the payment was excessive.
That there was a substantial reduction in the wage bill in the future years as a consequence of retrenchment was also not disputed.
It is too late in the day now, whatever may have been the position about two decades ago, to treat the expenditure incurred by a management in paying reasonable sums by way of gratuity, bonus, retrenchment compensation or compensation for termination of service as not business expenditure.
Such expenditure would ordinarily fall within the scope of section 10 (2) (xv) of the Act which authorised the deduction of any expenditure not being in the nature of capital expenditure or personal expenses of the assessee laid out of expended wholly and exclusively for the purpose of business or profession or vocation.
The High Court, however, declined to allow the deduction of the sums referred to above in these cases principally relying upon the decision of this Court in Gordon Woodroffee Leather Manufacturing Co. vs The Commissioner of Income tax, Madras(1).
The facts of that case were briefly thus: One J. H. Phillips was the Director of the assessee Company in that case from the year 1940.
On March 22, 1949, he wrote a letter to the assessee expressing his intention to resign from its Board as from April 4, 1949 and requested that his resignation be accepted.
On March 24, 1949, the Board of Directors of the assessee passed a resolution that his resignation be accepted and in appreciation of his long and valuable services to the assessee he be paid a gratuity of Rs. 50,000/ out of which the assessee was to pay Rs. 40,000/ and its Managing Agent was to pay Rs. 10,000/ .
Subsequently the resolution was approved at the extra ordinary general meeting of the assessee.
Accordingly a sum of Rs. 40,000/ was paid by the assessee to Mr. J. H. Phillips.
The assessee claimed deduction of the said sum of Rs. 40,000/ under section 10(2) (xv) of the Act.
The Income tax Officer as well as the Appellate Assistant Commissioner disallowed the said claim on the ground that the Company had no pension scheme; that the payment was voluntary and that the entry in the assessee 's books clearly indicated that the payment was 890 a capital payment.
The Tribunal upheld the order of the Appellate Assistant Commissioner.
It held that according to the resolution the gratuity was paid "for long and valuable services to the assessee", that there was nothing to indicate that Mr. J. H. Phillips had accepted a lower salary in expectation of getting a gratuity at the end of his service; that there was no such practice in the assessee company; that during the course of his service, he was being remunerated at a graduated scale of salary and a commission of 2 1/2% on the profits; that there was no "expectancy" that at the end of the service there would be recompense for faithful and efficient service and that he had been suitably rewarded by being given a commission on the profits "in order to whip up his enthusiasm".
It was also found by the Tribunal that in the books of the assessee, the amount had not been debited in the profit and loss account but was debited to the appropriation account thereby indicating that it was an extra payment or a payment made in the nature of a capital expense.
On a reference under section 66(1) of the Act, the High Court of Madras answered the question relating to the above item of expenditure against the assessee.
On appeal, this Court affirmed the decision of the High Court.
While holding that the claim made by the assessee did not satisfy the proper tests for claiming exemption under section 10(2) (xv) of the Act, this Court observed as follows: "In our opinion the proper test to apply in this case is, was the payment made as a matter of practice which affected the quantum of salary or was there an expectation by the employee of getting a gratuity or was the sum of money expended on the ground of commercial expediency and in order indirectly to facilitate the carrying on of the business.
But this has not been shown and therefore the amount claimed is not a deductible item under section 10(2) (xv).
" After quoting in the course of its judgment the above passage, the High Court proceeded to observe as follows: "Having regard to the test applicable in connection with the contentions made by Mr. Palkhiwala, what required to be investigated is whether the payments in question were made as a matter of practice which had affected the quantum of salary or whether there was an expectation by the employees (whose employment was terminated) of getting a gratuity or, in the alternative, the above sums were expended on the 891 ground of commercial expediency and in order indirectly to facilitate the carrying on of the business." After making the above observation, the High Court held that the Company had not placed any evidence to show that there was a practice in the Company to pay compensation even though its attention was drawn that in the past i.e. between 1946 and 1952, the Company had paid such compensation in two cases on the basis of one month 's basic salary for each year of service.
It also rejected the case of the Company that the amount involved had been expended on the ground of commercial expediency and in order indirectly to facilitate the carrying on of the business of the Company even though it observed that the yearly wage bill of the Company was reduced after such payment.
The High Court held that the consideration of reduction of the wage bill was foreign to the decision taken by the Company to terminate the services of the employees and to pay them retrenchment compensation and observed that the purpose of the payment so far as could be ascertained from the contents of the resolutions of the Board of Directors and the Company when read with the relevant contents of the agreement for sale was the carrying out of the obligation arising under the agreement.
It also held that the fact the expenses became reduced was insufficient to record a finding that the amount of retrenchment compensation was paid for commercial considerations or expediency.
From the perusal of the judgment of the High Court it becomes clear that the High Court placed more emphasis on the motive with which the amount was expended than the fact that the expenditure had been incurred in connection with the business of the Company and that such expenditure resulted in the reduction of the annual wage bill of the Company in the future years.
In order to claim deduction under section 10(2) (xv) of the Act, an assessee has to show that the expenditure in question (i) was not an allowance of the nature described in any of the clauses (i) to (xiv) of section 10(2); (ii) was not in the nature of a capital expenditure or personal expenses of the assessee and (iii) had been laid out or expended wholly and exclusively for the purposes of his business, profession or vocation.
Even assuming that the motive behind the payment of retrenchment compensation was that the terms of the agreement of the sale of shares should be satisfied, as long as the amount had been laid out or expended wholly and exclusively for the purpose of the business of the assessee, there appears to be no good reason for denying 892 the benefit of section 10(2) (xv) of the Act to the Company if there is no other impediment to do so.
The facts of these cases are very close to the facts found in (i) Commissioners of Inland Revenue vs Patrick Thomson Ltd. (in liquidation), (ii) Commissioners of Inland Revenue vs J. & R. Allan, Ltd. (in liquidation), (iii) Commissioners of Inland Revenue vs Pettigrew & Stephens Ltd.(1).
The respondent companies in the said cases were subsidiaries of a Company called Scottish Drapery Corporation Ltd., the control of which was acquired by the House of Fraser Ltd. Changes of organisation which were made in accordance with the policy of the House of Fraser Ltd. involved the termination of the contracts of service of the Managing Directors of the respondent companies and also the eventual liquidation of those companies.
Certain sums were paid by the companies to the managing directors in connection with the cancellation of their contracts, the payments being expressed in the first two cases to be in satisfaction of rights to future remuneration, and in the third to be in lieu of notice.
Before the Special Commissioners, the companies contended that the payments made by them to the Managing Directors in connection with the cancellation of their contracts had been made to relieve them from onerous contracts and were allowable deductions.
The Crown contended that the payments were not expenses of the companies ' businesses but were incidental to the schemes by which those businesses were acquired by the House of Fraser Ltd. and were made primarily for the benefit of that company.
The Commissioners, however, decided that the deductions claimed were allowable.
Upholding the findings of the Commissioners, the Lord President observed at page 156: "In my opinion the contention put forward by the Crown is unsound and the Special Commissioners were correct in rejecting it.
Admittedly in this case no question arises in regard to the words "wholly and exclusively", and if the Crown 's contention is unsound it is not disputed that the disbursement in question falls within section 137(a).
To succeed in their contention the Crown must establish two matters.
In the first place it must show that the liquidation involved a discontinuance of the trade carried on prior to it by the Respondent Company and the subsequent operation of a new trade carried on by House of Fraser.
In the second place it must show that the expenditure in question was laid 893 out for the purposes of the new trade.
Without both these steps, its argument fails.
In my opinion neither step in the argument is made out.
" In the present case also, it is seen that the Company continued to function even after its control passed on to the hands of Tatas and the expenditure in question was laid out for the purpose of the Company 's own trade and not for the trade of Tatas who were only the shareholders of the Company.
We cannot overlook the distinction between the Company and its shareholders.
As a result of the expenditure in question, the Company was in fact benefited and it was possible for it to earn more profits as a consequence of the reduction in the wage bill.
It was suggested in the course of the arguments before us that Tatas were actually benefited by the payment in question because the price payable by them for the shares was reduced by the amount spent by the Company.
We do not find any substance in this contention.
Admittedly the assets of the Company had been valued as on December 31, 1955 at Rs. 155 lacs.
Naturally the total value of the shares of the Company would be Rs. 155 lacs which Tatas had agreed to pay.
Subsequent to December 31, 1955, the Company had by passing the resolution incurred the liability to pay retrenchment compensation and compensation for termination of service as stated above.
On account of the said resolution, the total value of the assets of the Company was reduced by the amount payable to the employees by way of compensation.
It is natural that the purchaser of the shares would ordinarily claim reduction in the consideration payable for the shares by the amount which the Company had undertaken to pay as assets of the Company became reduced to that extent.
It cannot, therefore, be said that the Tatas were in any way benefited financially by reason of the reduction in the consideration payable by them for the shares.
We feel that the expenditure in respect of which deduction is claimed by the Company in this case falls within the third test laid down by this Court in the case of Gordon Woodroffee Leather Manufacturing Co. vs The Commissioner of Income tax, Madras (supra) viz. that the sum of money had been expended on the ground of commercial expediency and in order indirectly to facilitate the carrying on of the business.
We are of the view that the three tests laid down by this Court in the above case viz. (i) that the payment should have been made as a matter of practice which affected the quantum of salary; (ii) that there was an expectation by the employee of getting a gratuity and (iii) that the sum of money was expended on the ground of commercial expediency and in order indirectly to facilitate the carrying on of the business of the 894 assessee have to be read disjunctively and if they are so read, the present case which satisfies the third test should be held as falling under section 10(2)(xv) of the Act.
The High Court of Gujarat in Commissioner of Income tax, Gujarat vs Laxmi Cement Distributors Pvt.
Ltd. (1) and the High Court of Bombay in Commissioner of Income tax, Bombay City I vs Fairdeal Corporation Pvt.
Ltd.(2) and in Commissioner of Income tax, Bombay City I vs Patel Cotton Co. Pvt. Ltd.(3) have also understood the principle underlying the decision of this Court in Gordon Woodroffee Leather Manufacturing Co. vs The Commissioner of Income tax, Madras (supra) in the same way.
The High Court was, therefore, in error in holding that the amount involved in the case did not satisfy the test applicable to the expenditure allowable under section 10(2) (xv) of the Act.
The next contention urged on behalf of the Department was that since Davids and Tatas were indirectly benefited by the retrenchment of the services of the employees of the Company and payment of compensation to them and since there was no necessity to retrench the services of all the employees, the expenditure in question could not be treated as an expenditure laid out wholly and exclusively for business purposes of the Company.
It has to be observed here that the expression "wholly and exclusively" used in section 10(2)(xv) of the Act does not mean 'necessarily '.
Ordinarily it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business.
Such expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction under section 10(2) (xv) of the Act even though there was no compelling necessity to incur such expenditure.
It is relevant to refer at this stage to the legislative history of section 37 of the Income tax Act, 1961 which corresponds to section 10(2) (xv) of the Act.
An attempt was made in the Income tax Bill of 1961 to lay down the 'necessity ' of the expenditure as a condition for claiming deduction under section 37.
Section 37(1) in the Bill read "any expenditure. laid out or expended wholly, necessarily and exclusively for the purposes of the business or profession shall be allowed . " The introduction of the word 'necessarily ' in the above section resulted in public protest.
Consequently when section 37 was finally enacted into law, the word 'necessarily ' came to be dropped.
The fact that somebody other than the assessee is also benefited by the 895 expenditure should not come in the way of an expenditure being allowed by way of deduction under section 10(2) (xv) of the Act if it satisfies otherwise the tests laid down by law.
This view is in accord with the following observations made by this Court in The Commissioner of Income tax, Madras vs Chandulal Keshavlal & Co. Petlad(1) "Another fact that emerges from these cases is that if the expense is incurred for fostering the business of another only or was made by way of distribution of profits or was wholly gratuitous or for some improper or oblique purpose outside the course of business then the expense is not deductible.
In deciding whether a payment of money is a deductible expenditure one has to take into consideration questions of commercial expediency and the principles of ordinary commercial trading.
If the payment or expenditure is incurred for the purpose of the trade of the assessee it does not matter that the payment may inure to the benefit of a third party (Usher 's Wiltshire Brewery Ltd. vs Bruce) Another test is whether the transaction is properly entered into as a part of the assessee 's legitimate commercial undertaking in order to facilitate the carrying on of its business; and it is immaterial that a third party also benefits thereby (Eastern Investments Ltd. vs The Commissioner of Income tax, West Bengal) ; But in every case it is a question of fact whether the expenditure was expended wholly and exclusively for the purpose of trade or business of the assessee.
" In the instant case, it was the case of the Company that many of the employees were old and superfluous and the business could be carried on with a smaller number and the only way in which they could reduce the number was to terminate the services of all the employees by paying them compensation and thereafter re employing some of them only.
If the Company felt that that was a method which would inure to its benefit, it cannot be said that the payment of compensation was made with an oblique motive and without regard to commercial considerations or expediency.
The High Court, therefore, erred on the facts and in the circumstances of the case in holding that the sum of Rs. 1,27,511/ was not deductible under section 10(2) (xv) of the Act and in answering questions Nos.
(1) and (2) referred to it in Income tax Reference No. 58 of 1963 arising out of the assessment 896 order for the year 1957 58 against the assessee and in favour of the Department to the extent of Rs. 1,27,511/ .
Similarly it erred in disallowing the claim made in respect of Rs. 16,885/ for each of the three succeeding assessment years.
We, therefore, allow these appeals and hold that Rs. 1,27,511/ was also deductible under section 10(2)(xv) of the Act during the assessment year 1957 58 and sum of Rs. 16,885/ referred to above was allowable as a deduction during each of the three succeeding assessment years.
The Department shall pay costs to the appellant.
(Hearing fee one set only).
P.B.R. Appeals allowed.
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In January, 1956 the assessee company whose assets had been valued at Rs. 155 lacs as on December 31, 1955 decided to terminate the services of 22 of its employees with effect from 31st March, 1956 and to pay them retrenchment compensation and compensation for termination of employment.
Thereafter Davids, who held the shares of the company entered into an agreement with Tatas to sell to them all the shares for Rs. 155 lacs.
The agreement provided that compensation and gratuity payable to the Directors and employees whose services had been terminated and the annuity payable to the managing director should be deducted from the purchase consideration.
The assessee claimed deduction under section 10(2)(xv) of the Indian Income Tax Act, 1922 of a sum of Rs. 1.64 lakhs paid by way of retrenchment compensation and compensation for termination of service during the assessment year 1957 58 and a sum of Rs. 16,885 which was the amount of annuity paid to the managing director in each of the three succeeding assessment years.
The Income Tax officer disallowed the amounts on the ground that the services of the directors and employees had been terminated not as business expediency but because the purchasers of the shares made it a condition under the agreement.
On appeal the Appellate Assistant Commissioner, affirming the view of the Income Tax Officer, held that the decision to pay compensation could not be said to have been taken solely with a view to the business requirement of the company.
Dismissing the assessee 's appeal the Appellate Tribunal held that the expenses had not been incurred for the purpose of the company but purely as a result of the bargain between Davids and Tatas and assuming that the payments were beneficial to the assessees by reason of the reduction in its establishment expenses, no deduction could be allowed under section 10(2) (xv) since the payment was made to the benefit of a third party.
Relying principally upon the decision of this Court in Gordon Woodroffee Leather Manufacturing Co. vs The Commr.
of Income tax, [1962] Supp. 2 SCR 211, the High Court held that the amount involved in the case did not satisfy the test applicable to the expenditure allowable under section 10(2)(xv) of the Act and, therefore, disallowed the expenditure of Rs. 1.27 lakhs out of a sum of Rs. 1.64 lakhs on the ground that it had not been incurred for commercial expediency.
The High Court also disallowed the annuity paid to the managing director in the succeeding three assessment years.
879 Allowing the assessee 's appeals ^ HELD: 1(a) The three tests laid down by this Court in Gordon Woodroffee 's case viz., (1) that the payment should have been made as a matter of practice which affected the quantum of salary, (ii) that there was an expectation by the employee of getting a gratuity and (iii) that the sum of money was expended on the ground of commercial expediency and in order indirectly to facilitate the carrying on of the business of the assessee have to be read disjunctively.
So read the present case which satisfied the third test fell under section 10(2) (xv) of the Act.
The High Court was in error in holding that the amount in question did not satisfy any of the tests applicable to the expenditure allowable under the section.
[893H] (b) In order to claim deduction under the section an assessee has to show that the expenditure in question (1) was not an allowance of the nature described in any of the clauses (i) to (xiv) of the section, (ii) was not in the nature of a capital expenditure or personal expenses of the assessee and (iii) had been laid out or expended wholly and exclusively for the purposes of his business, profession or vocation.
[891G] (c) Even assuming that the motive behind the payment of retrenchment compensation was that the terms of the agreement of the sale of shares should be satisfied, as long as the amount had been laid out or expended wholly and exclusively for the purpose of the business of the assessee there could be no good reason for denying the benefit of this section if there was no other impediment to do so.
[891H] In the instant case the assessee company was neither dissolved nor was its business undertaking sold.
It continued to exist as a juristic entity and continued to function even after the transfer of its shares to Tatas.
The expenditure was laid out for the purpose of the assessee company 's own trade and not for the trade of Tatas who were only shareholders of the company.
As a result of the expenditure the company was benefited and it was possible for it to earn more profits as a consequence of the reduction in the wage bill.
It cannot be said that Tatas were in any way benefited financially by reason of reduction in the consideration payable by them for the shares.
[893B C] Gordon Woodroffae Leather Manufacturing Co. vs The Commissioner of Income tax, Madras, [1962] Supp.
2 SCR 211, applied.
(i) Commissioner of Inland Revenue vs Patrick Thomson, Ltd. (in Liquidation), (ii) Commissioners of Inland Revenue vs J. & R. Allan, Ltd. (In liquidation), (iii) Commissioners of Inland Revenue vs Pattigrew & Stephens, Ltd., , referred to.
Commissioner of Income tax, Gujarat vs Laxmi Cement Distributors (P) Ltd., , Commissioner of Income tax, Bombay City I vs Fairdeal Corporation (P) Ltd., ; Commissioner of Income tax, Bombay City I vs Patel Cotton Co. Pvt. Ltd., ; approved.
880 (d) Moreover it is too late in the day whatever might have been the position about two decades ago, to treat the expenditure incurred by the management in paying reasonable sums by way of gratuity and retrenchment compensation or compensation for termination of services as not business expenditure.
Such expenditure would ordinarily fall within the scope of section 10(2)(xv) of the Act.
[889C] 2.
The argument that since there was no necessity to retrench the services of all the employees, the expenditure could not be treated as one laid out wholly and exclusively for the purpose of business has no force.
The expression "wholly and exclusively" does not mean "necessarily".
Ordinarily it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business.
Such expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits the assessee can claim deduction under the section even though there was no compelling necessity to incur such expenditure.
The fact that somebody other than the assessee was also benefited by the expenditure should not come in the way of an expenditure being allowed by way of deduction under the section, if it satisfies otherwise the test laid down by law.
[894D G] In the instant case the company thought that its business could be carried on with a smaller number of employees and the only way to reduce the number was to terminate the services of all employees by paying compensation and to re employ only some of them.
Thereby the company reduced its expenditure on wages payable to its employees.
It could not therefore be said that compensation was paid with an oblique motive and without regard to commercial considerations or expediency.
[895F]
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4024.txt
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ivil Appeals Nos.
312 to 314 of 1972.
Appeals by Special Leave from the Judgment and Order dated the 19 3 71 of the Orissa High Court in C.W. Nos. 325 to 327/70.
Appellant No. 1 in person and D. N. Misra for the Appellants.
921 Gobind Das and G. section Chatterjee for the Respondent.
KRISHNA IYER, J. Three civil appeals, stemming from three revision petitions to the High Court of Orissa under the Orissa Estates Abolition Act, 1951 (Orissa Act I of 1952) (for short, the Act) have reached this Court, thanks to special leave granted to the appellant, who is common in all the cases.
The High Court, after deciding various issues, remanded the cases to the Compensation Officer under the Act, after over ruling most of the contentions pressed before it by the appellant.
Shri Achutananda Purohit, appellant, was the intermediary in respect of vast forests and other lands comprised in the estate of Jujumura in the district of Sambalpur.
This estate vested in the State on April 1, 1960 by force of the Act and the crucial question agitated before us, consequentially turns on the quantum of compensation awardable under Chapter V of the Act.
The appellant has received around Rs. 3,00,000/ but much more, according to him, is due and this controversy can be settled by examining his specific points.
Shri Purohit, appellant, is an Advocate by profession and is 83 years old.
He has argued in person and with passion.
We have listened with patience to all his submissions, good, bad and indifferent.
If we may anticipate ourselves, none of the nine submissions has appealed to us, save to the extent the High Court has upheld.
Even so, a minimal narration of the facts and a brief consideration of each argument is necessary and we proceed to do so.
While his arguments did not impress us, we were touched by his concluding words that he had been born and had grown in an adivasi village, in the only brahmin family and, in his evening years of life, proposed to give a substantial part of the compensation the State would give him for adivasi welfare.
Although he waxed sentimentally on this note, he did not convince us on his contentions.
With these prefatory observations, we proceed to formulate the many points urged and give our findings and reasons, one after the other.
We are directly concerned with the issue of compensation which is dealt with, as earlier stated, in Chapter V of the Act.
The Compensation Officer is charged with fixing the quantum in the prescribed manner.
A compensation assessment roll containing the gross asset and net income of each estate, together with the compensation payable in respect of such estate, has to be prepared by him.
Of course, when there is joint ownership, section 24 stipulates that the compensation shall be determined for the estate as a whole and not separately for each of the shares therein.
Section 26 has great relevance as it lays down the method of arriving at the gross asset and section 27 has like significance as it focuses on the manner in which the net income from an estate shall be computed by deducting certain items from the gross asset of the estate.
Section 28 states how the amount of compensation is to be determined and the methodology of payment.
There are a few other sections in Chapter VI which deal with payment of compensation.
The Act also provides for appeal, second appeal and 922 revision, the last being to the High Court and the earlier ones being to the Collector and a Board constituted under section 22.
The rule making power is vested in the government under section 47 and there is a routine 'removal of difficulties ' clause contained in section 50.
These furnish in bare outline the provisions with which we are directly concerned.
Against the background of law just projected, we may set out Shri Purohit 's points which, if we may say so, are substantially the same as have been argued by him in revision before the High Court with partial success.
For convenience of reference, we may extract the statement by the High Court of the contentions urged before it (and repeated before us) by the appellant: "(1) The provisions of section 37(3) read with section 26(2) (b) (v) of the Act make it clear that the date of vesting is the last date by which the calculation of compensation should have been made.
As admittedly compensation had not been calculated by the date of vesting, the Compensation Officer lost his statutory jurisdiction to do so.
It is this Court which, by its order dated 10 4 1969 in Civil Revisions 201, 202 and 203 of 1968 conferred new jurisdiction on the Compensation Officer to deal freshly with the case and therefore notwithstanding anything contained in the Act, the compensation has to be calculated according to the directions given by the Court; (2) The Court was fully aware of the statutory provision in section 26(2) (b) (v) of the Act, but in spite of it, the direction was that the Divisional Forest Officer should make the appraisement.
There was no direction that this report of the D.F.O. should be further subject to the approval of the Chief Conservator of Forests.
The calculation made by the Chief Conservator of Forests therefore has no statutory force but could be just a piece of evidence.
But as the Court directed that no further evidence on behalf of the State should be received, Ext.
A/1 is inadmissible in evidence.
(3) Assuming that in spite of the directions of the court the Compensation Officer is entitled to follow the procedure laid down in Section 26(2)(b)(v), the expression 'subject to the approval of the Chief Conservator of Forests ' does not refer to the appraisement made by the D.F.O. but refers to his appointment.
(4) Assuming that section 26(2) (b) (v) would have full force, what it contemplates is that the appraisement must be made by the D.F.O., and it is subject to the approval by the Chief Conservator of Forests.
But what has happened here is that the Chief Conservator himself made the appraisement without referring to the appraisement made by the D.F.O. and as such the appraisement made by the Chief Conservator is invalid.
(5) The report of the Chief Conservator of Forests is also invalid because of the fact that the appraisement is made 923 only with reference to the area of the disputed forests without taking into consideration the density of growth therein; (6) Unlike in case of fisheries etc., where the actual income is to be included in the gross assets, in the case of forests, the assumed income and not the actual income is to be included.
During the agricultural year immediately preceding the abolition, the petitioners had not actually derived any income from the forests and as such they were under no obligation to pay any income tax on such income.
Therefore, deduction of income tax from the gross assets is illegal and unwarranted.
(7) The slab system of calculation of compensation in the Act providing smaller multiples for estates yielding larger income is unconstitutional.
(8) Compensation money should be so calculated that the purchasing power of the amount of compensation to be paid on the date of actual payment will not be less than its purchasing power on the date of vesting; and (9) Interest should be calculated at not less than 12% per annum from the date of vesting till payment.
" The meat of the matter, the primary question agitated in the appeal, lopping off the fringe issues of lesser import, consists in the statutory methodology and functionaries prescribed by the Act for quantifying the compensation and the compliance therewith by the statutory machinery in the case of the appellant.
But before examining this essential issue we may dispose of the minor points pressed, so that the deck may be cleared for dealing with what deserves to be dealt with.
Point No. 9, in the catalogue already given, relates to the claim for 12% interest on the amount of compensation as against the statutory rate of 2 1/2%.
The policy of the law of agrarian reform postulates the extinguishment of ancient privileges and cornering of land resources, and the socio economic yardstick is different from what applies to ordinary purchases of real estate and this is manifest in the special provisions contained in article 31A and article 31B of the Constitution.
A similar principle applies to the award of interest which may sometimes be notional when feudal interests are puffed out.
We cannot import the notion of prevailing bank rates in such situations.
The dynamic rule of law, with a social mission, makes a meaningful distinction between rights steeped in the old system and compensation for deprivation of those interests, on the one hand, and the ordinary commercial transactions or regulation of rights untinged by social transformation urges, on the other.
This gives rationality to the seeming disparity.
Holmes once commented: 'It is revolting to have no better reason for a rule of law than that so it was laid down in the time of Henry IV '.
Here there is good reason to depart from the old rule of full compensation and it perhaps legitimates the reduced rate of recompense.
Moreover, the High Court has rightly pointed 924 out that the validity of section 37(3) of the Act which fixes a small rate of interest on the compensation amount has been upheld by the Supreme Court in Gajapati Narayan 's Case(1).
Point No. 8 has only to be stated to be rejected.
The contention is that on the date of vesting, which was well over two decades ago, the purchasing power of the rupee was much higher than its present value.
It is more or less a world phenomenon that the erosi on in value of the unit of currency has been taking place, but this invisible devaluation owing to the inflationary spiral does not affect the quantum of monetary compensation prescribed by statute.
For the purposes of the law, the rupee of long ago is the same as the rupee of today, although for the purposes of the market place and cost of living, the housewife 's answer may be different.
Law is sometimes blind.
The next point in the reverse order is equally unsubstantial and may be disposed of right away.
The appellant challenges the slab system of compensation provided in the Act which awards smaller multiples for estates yielding larger incomes, on the score of violation of the fundamental rights under the Constitution.
The short answer is that article 31(3) read with article 31(2) bars any challenge to the amount of compensation on acquisition by the State subject to compliance with the prescriptions in the said sub Articles, on the ground that the amount so fixed or determined is not adequate.
Presidential assent has been accorded to this State Act and so the ban operates.
Moreover, article 31A repels the applicability of articles 14, 19 and 31 to the acquisition by the State of any estate or of any rights therein etc.
This provision directly demolishes the contention of the appellant.
Point No. 6 in the list of contentions earlier reproduced is also bereft of force and we may make short shrift of it.
The argument is that for certain reasons the appellant could not derive and actual income from the forests taken over by the State from him and therefore there was no income tax payable on any agricultural income from these forests.
The contention is that therefore in arriving at the next income the deduction of income tax is not permissible.
Here again, the flaw in the submission consists in mis reading section 27 of the Act which expressly states that the net income from an estate shall be computed by deducting from the gross assets of such estate any sum 'which was payable by the intermediary as income tax in respect of any income . . derived from such estate for the previous agricultural year '.
No income, therefore no income tax, and therefore no deduction, is the syllogism of Shri Purohit.
He forgets that in the case of forests it is the assumed income and not the actual income that forms the basis of calculation of compensation.
Indeed, if the actual income were to be the foundation for computation of compensation on the premise that not actual income has accrued, the compensation might be zero.
On the other hand, statutory compensation is provided for on the formula of assumed income in the previous year.
Similarly, an assumed income tax also has to be worked out and deducted.
If 925 a notional income on the assumed basis can be used for fixing compensation, a notional income tax can be calculated and deducted.
The confusion that vitiates the argument is prompted by a circular letter of government regarding non deductability of income tax due to the State from the amount of compensation lying to the credit of estateholders.
We have examined the circular letter and are satisfied that it has no relevance to a situation like the present and it deals with a totally different matter.
In short, section 27 properly construed, can not lend itself to the meaning imputed to it by the appellant.
The serious question that survives for consideration is covered by the remaining points which more or less overlap.
The statutory scheme of compensation for forest lands consists of a machinery for assessment of the net income which is multiplied on a sliding scale and the method of challenge to the determination by the aggrieved owner of State.
Section 26(2) (b) (v) is relevant here and may be set out: "26(2) 'gross asset ' when used with reference to an estate means the aggregate of the rents, including all cesses, which were payable in respect of the estate for the previous agricultural year (b) by the raiyats or any other persons cultivating the land other than the land settled with the intermediary or intermidaris under Sub section (1) of Section 7 and includes: (v) gross income from forests calculated on the basis of the appraisement made of annual yield of the forests on the date of vesting by a Forest Officer subject to the approval of the Chief Conservator of Forests, such Forest Officer being not below the rank of a Divisional Forest Officer to be appointed in this behalf by the State Government.
" The expression 'Forest Officer ', used here, has been explained in section 26.
So the first step is for the Government to appoint Forest Officers from out of D.F.Os.
in the Forest Department, for the purposes of the Act.
Those Officers ascertain the income from the forest concerned and the figure so fixed is subject to the approval of the C.C.F. (Chief Conservator of Forests), presumably the top expert in the department.
The power to approve implies the power to disapprove or modify but not to report or arrive at an income de hors the Forest Officer 's Report altogether.
The section is clear that the gross income from forests must be calculated on the basis of appraisal of the annual yield on the date of vesting firstly, by a Forest Officer and, secondly, by the Chief Conservator of Forests screening it and approving it.
Indeed, preliminary to the appraisal operation, the intermediary receives a notice in Form 'D ' (rule 13) and he is expected to furnish a return of the relevant particulars and supporting information to enable correct appraisement.
In the present case, the appellant did submit the 'D ' return to the Compensation Officer and adduced some evidence to substantiate it.
The Compensation Officer passed an order adverse to the appellant, where upon he filed an appeal to the Collector which was rejected.
A Second 926 Appeal followed before the Board of Revenue which was dismissed.
Later, revision petition were filed before the High Court and G. K. Misra J., set aside the order disallowing the inclusion of the income from forests for ascertainment of compensation and directed a remand to the Compensation Officer.
The said order (the relevant portion of which we are concerned) runs thus: "He would immediately call upon the Divisional Forest Officer to make appraisement within three months from the receipt of the record.
The appraisement can be scientifically done by looking to the age of the trees as they stand now.
It is open to the petitioners to give evidence that after the date of vesting many of the trees and forest produce have been removed.
Besides the evidence already on record would be taken into consideration.
The Divisional Forest Officer who would make the appraisement will be examined as a witness for the Compensation Officer and would be subjected to cross examination.
No other evidence would be permissible as the State has not chosen to give any other evidence.
Under Rule 13(1 c) of the Orissa Estates Abolition Rules, 1952 the compensation officer may rely upon such other materials as may otherwise be ascertained by him.
But in such a case the materials must be brought to the notice of the petitioners who would be entitled to cross examine the witnesses connected therewith and may give rebutting evidence.
The compensation case is to be disposed of by the compensation officer within six months from today (10 4 1969) with intimation to this Court.
" Strictly speaking, the statutory requirement is for initial appraisal of the annual income by the Forest Officer.
The use of the expression 'Divisional Forest Officers is erroneous although Forest Officers are appointed from among Divisional Forest Officers.
Equally clearly, a slight error has crept into the Judge 's order because he does not make any reference specifically to the statutory requirement of approval of the Chief Conservator of Forests of the appraisement made by the Forest Officer.
However, what followed is interesting though erroneous.
The District Forest Officer (who, incidentally, happens to be a Forest Officer under the Act, having been appointed as required thereunder) made his appraisal of the annual income and submitted to the Chief Conservator who altered the annual yield and reduced it substantially.
But he pointed out that the Forest Officer had omitted to include the income from kendu leaves and added that sum to the income from forests.
Even so, the total figure was less than what the Divisional Forest Officer had recommended.
The Compensation officer accepted the report of the Chief Conservator and made the statutory calculation on that date.
Both the State and the appellant filed appeals to the Collector which were dismissed.
A second appeal was filed by the appellant before the Board of Revenue without success.
Then followed three revision petitions to the High Court which led to the order of remand now attacked before us in the present appeals.
927 From this narrative, what follows is that the Chief Conservator had substituted his appraisement which was accepted by the statutory tribunal.
Indeed, there was a fundamental difference in the basis adopted by the Forest Officer and the Chief Conservator in the matter of assessing the income of the forests in question.
We need not go into this detail except for the purpose of noticing that what the Chief Conservator did was not to approve wholly or in a modified form what the Forest Officer did but to make his own appraisal independently and without reference to the report of the statutory functionary, viz., the Forest Officer.
This was wrong and contrary to section 26, as was contended by the appellant and in a way accepted by the High Court.
We are in agreement with the course adopted by the High Court and the reasoning which has prevailed with it.
The direction given by the learned Judge in the remand order is correct although it may require a little clarification.
Having heard the appellant at some length, we see no flaw in the High Court 's order on this aspect of the matter.
It is astonishing that anyone should urge, as the appellant did, that the date of vesting is the last date by which the calculation of compensation should have been made and since that had not been done, the Compensation Officer had become functus officio in awarding compensation.
Before the date of vesting the State never can, nor does, fix the compensation through the Compensation officer in any of the agrarian reform laws, and these compensation operations are poststatutory exercises.
Therefore there is no substance in the functus officio argument.
If the officer had no jurisdiction, the land would be gone because of the vesting provision and no compensation would be forthcoming for want of jurisdiction a consequence the appellant never wants.
Technicality can be frightened away by technicality.
Nor is it right to contend, as the appellant did, that the Compensation Officer 's jurisdiction was created by the order of remand by the High Court.
No, it was created by the statute and canalised by the order of remand.
It follows that, after the present second remand, the re appraisal of the annual net income cannot be done solely by the Forest Officer without securing the approval of the Chief Conservator.
Nor can the Compensation Officer by pass the Chief Conservator on the misunderstood strength of the High Court 's first order of remand.
The true legal drill is and this holds good after the second remand order that the Forest officer will do the appraisement of the annual income, forward his report to the Chief Conservator of Forests who will take the said report into consideration and, if necessary, make modifications therein or approve it with such changes as he deems fit.
Certainly the Chief Conservator cannot be ignored by the Compensation Officer nor can the Chief Conservator ignore the assessment made by the Forest Officer and go through an independent exercise.
The integrated process has already been explained by us and will be followed in the proceedings to ensue on remand.
We may make it clear that now that a Forest officer has made an appraisement, the Chief Conservator of Forests will apply his mind to it and approve it as a whole or with such modifications as he thinks necessary and forward it to the Compensation Officer.
This will, among other things, save time.
Thereafter, the appropriate statutory course will follow.
Substantially, this 928 is what has been done by the learned Judge when allowing the revisions and remitting the case back to the Compensation Officer.
The take over of the forests of the appellant was effected as early as 1960 and 16 years have passed without the intermediary being out of the litigative woods.
The High Court has stated that a large part of the delay has been 'due to laches committed from time to time by the Officers who have been charged with the duty to calculate the compensation.
It is again due to mistakes committed by the authorities concerned that the matter is being remitted back to the Compensation Officer for disposal '.
The force of these observations constrains us to direct that the proceedings before the Compensation Officer shall be completed within six months from today.
In this context, it is perhaps not irrelevant to remember that the appellant, a freedom fighter, is an 83 year old man and, at this stage of his life, the State should show commisseration not merely in quickly disposing of the proceedings but also in not being cantankerous in awarding and disbursing the balance compensation.
With these directions and observations we affirm the orders under appeal but, while dismissing the appeals, direct the parties to bear their costs in this Court.
P.H.P. Appeals dismissed.
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The appellant was the intermediary in respect of vast forest and other lands in the State of Orissa.
The estates vested in the State in April 1960 by force of the Orissa Estates Abolition Act, 1951.
The appellant submitted necessary return for compensation as provided by the Act.
The Compensation Officer passed an order adverse to the appellant whereupon the appellant filed an appeal to the Collector which was rejected.
A second appeal filed before the Board of Revenue was dismissed.
Later on, Revision Petitions were filed in the High Court.
The High Court set aside the order and directed remand to the Compensation Officer.
Thereafter, the District Forest Officer made his appraisal of the annual income and submitted to the Chief Conservator of Forests who altered the actual yield and reduced it substantially.
Both the State and the appellant filed appeals to the Collector which were dismissed.
A second appeal was filed by the appellant before the Board of Revenue without success.
In the Revision Applications filed before the High Court which led to the remand now challenged in the present appeals the appellant contended before this Court: (1) The interest ought to have been awarded at 12 per cent as against the statutory rate of 2 1/2 per cent from the date of the vesting till payment.
(2) Compensation money should be so calculated that the purchasing power of the amount of compensation to be paid on the date of actual payment will not be less than the purchasing power on the date of vesting.
(3) The slab system of calculation of compensation in the Act providing smaller multiples for estates yielding larger income is unconstitutional.
(4) Unlike in case of fisheries etc., where the actual income is to be included in the gross assets, in the case of forests, the assumed income and not the actual income is to be included.
During the agricultural year immediately preceding the abolition, the petitioners had not actually derived any income from the forests and as such they were under no obligation to pay any income tax on such income.
Therefore, deduction of income tax from the gross assets is illegal and unwarranted.
(5) The compensation has not been computed in accordance with the scheme of the Act.
(6) The date of vesting is the last date by which the calculation of compensation should have been made and since that had not been done the Compensation Officer had become functus officio in awarding compensation.
Dismissing the appeals, ^ HELD: 1.
The policy of the law of agrarian reforms postulates the extinguishment of ancient privileges and cornering of land resources and the socio economic yardstick is different from what applies to ordinary purchases of real estate and this is manifest in the special provisions contained in Article 31A and 31B of the Constitution.
A similar principle applies to the award of interest which may sometimes be notional when feudal interests are puffed out.
The 920 dynamic rule of law with a social mission makes a meaningful distinction between rights steeped in the old system and compensation for deprivation of those interests on the one hand and the ordinary commercial transactions on the other.
[923 F G] 2.
It is more or less a world phenomenon that the erosion in value of the unit of currency has been taking place.
But this invisible devaluation owing to the inflationary spiral does not affect the quantum of monetary compensation prescribed by statute.
For the purposes of the law, the rupee of long ago is the same as the rupee of today although for the purposes of the, market place and cost of living, the housewife 's answer may be different.
[924B C] 3.
Article 31(3) read with Article 31(2) bars any challenge to the amount of compensation on acquisition by the State subject to the compliance with the prescriptions in the said sub articles on the ground that the amount so fixed or determined is not adequate.
Presidential assent has been accorded to this State Act and so the ban operates.
[924C D] 4.
The submission of the appellant proceeds on a misreading of section 27.
In the case of forests it is the assumed and not the actual income that forms the basis for calculation of compensation.
Similarly an assumed income tax also has to be worked out and deducted.
[924F G] 5.
The scheme of the Act is that the compensation must be calculated on the basis of appraisal of the annual yield of the forests on the date of vesting firstly by a Forest Officer and secondly by the Chief Conservator of Forests,screening it and approving it.
In the present case, the Chief Conservator had substituted his appraisement which was accepted by the statutory Tribunal.
There was a fundamental difference in the basis adopted by the Forest Officer and the Chief Conservator of Forests in the matter of assessing in the income of the Forest in question.
What the Chief Conservator did was not to approve wholly or in a modified form what the Forest Officer did but to make his own appraisal independently and without reference to the report of the statutory functionary.
This was wrong and contrary to section 26.
This Court is in agreement with the course adopted by the High Court and the reasoning which has prevailed with it.
[925C, 927A B] 6.
Before the date of vesting the State never can nor does fix the compensation through the Compensation Officer in any of the agrarian reform laws and these compensation operations are post statutory exercises.
Therefore, there is no substance in the funtcus officio argument.
If the officer had no jurisdiction the land would be gone because of the vesting provision and no compensation would be forthcoming for want of jurisdiction; a consequence the appellant never wants.
Technicality can be frightened away by technicality.
[927D E] 7.
After remand the Forest Officer will do the appraisement of the annual income, forward his report to the Chief Conservator of Forests who will take the said report into consideration and, if necessary, make the modifications therein or approve it with such changes as he deems fit.
Certainly, the Chief Conservator cannot be ignored by the Compensation Officer nor can the Chief Conservator ignore the assessment made by the Forest Officer and go through an independent exercise.
The take over of the forest of the appellant was effected as early as in 1960.
The High Court has stated that a large part of the delay has been due to laches committed from time to time by the officers charged with the duty to calculate the compensation.
It is therefore directed that the proceedings before the Compensation Officer shall be completed within six months from today.
[927F H, 928A B]
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3471.txt
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ivil Appeal No. 3 1543 155 of 1985.
From the Judgment and Order dated 26.3.
1985 of the Jammu & Kashmir High Court in L.P.A. (W) No. 59 of 1984.
For the Appellant In Person in Civil Appeal No. 3 154/85 M.N. Tiku, Rakesh Tiku and Pandey Associates for the Respondents.
431 M.N. Tiku, Rakesh Tiku and Pandey Associates for the Appellants.
For the Respondent In Person in Civil Appeal No. 3155/85.
The Judgment of the Court was delivered by KULDIP SINGH, J.
Jammu & Kashmir Industries Limited (hereinafter called 'company ') is a company registered under the Indian and is wholly owned and managed by the State of Jammu & Kashmir.
Pyare Lal Sharma was employed by the company as Chemical Engineer.
His serv ices were terminated by the Managing Director of the company on June 14, 1983.
Sharma 's writ petition was allowed by a learned Single Judge of the Jammu & Kashmir High Court.
On appeal by the company the Letters Patent Bench upheld the judgment but denied back wages to Sharma.
This is how these two appeals, one by the.company and the other by Sharma, are before us.
We may briefly notice the necessary facts.
Pyare Lal Sharma joined the company as Assistant Chemical Engineer on July 12, 1972.
In 1974 he was sent to England as management trainee but he returned back without completing the train ing.
Sharma 's conflict with the company started in 1976 when he filed a suit against the company in Jammu & Kashmir High Court with various reliefs including a direction that he be again sent to England on company 's expense.
The suit was dismissed and further appeal to the Division Bench was also dismissed.
He then filed another suit in the Delhi High Court claiming Rs.50 lakhs as damages from the company but the same did not proceed on technical grounds.
Thereafter, it seems, Sharma started suspecting mala fide in every action of the company and resorted to court proceedings even on slight pretext.
He challenged the order of transfer from Baramulla to the headquarters by way of suit in the Jammu & Kashmir High Court.
Interim stay, initially granted, was vacated by the High Court.
In December, 1979 he applied for leave on medical grounds without disclosing the ailment.
He remained absent from December 7, 1979 to March 7, 1980 without any sanctioned leave.
Disciplinary proceedings were initiated against him on the charge of unauthorised absence and he was placed under suspension on March 8, 1980.
He filed Writ Petition No. 58/80 in the Jammu & Kashmir High Court against suspension.
Ultimately Sharma expressed re grets and he was reinstated into service by an order dated May 15, 1980.
In April, 1981 he was transferred from head quarters to one of 432 the units.
He again filed a writ petition in the Jammu & Kashmir High Court challenging the order of transfer but the same was dismissed.
Thereafter he filed Writ Petition No. 4086 of 1982 in this Court which was heard by Chinnappa Reddy, J. (Vacation Judge) on 1st of June, 1982.
The learned Judge passed the following order: "Issue notice returnable on June 15, 1982.
Notice be also served on the counsel for the State of Jammu & Kashmir Mr. Altar Ahmad.
Mr. Altar Ahmad will take instructions from his clients and assist this Court to know the precise facts of the case which it is impossi ble to find from the petitioner.
1 have sug gested to the petitioner that he may engage a counsel but he does not appear to be inclined to do so.
Nor is he willing to be assisted by the counsel engaged by the court.
" The writ petition was, however, dismissed as withdrawn on June 15, 1982.
Sharma filed two more writ petitions being 293 of 1982 and 410 of 1982 in the Jammu & Kashmir High Court challenging the promotions of some other officers.
Sharma absented from duty on September 8, 1982.
He was asked to explain his absence.
A para out of his reply is as under: "I have been submitting charge sheet against you since last one year to authorities about your corrupt practices, communal character, and illegal financial advancement you have made but no action has been taken against you since you utilise political pressure and bribed the chairman.
" Sharma was served with a charge sheet dated September 24, 1982 and he was placed under suspension.
Use of deroga tory language in various communications was one of the charges against him.
He submitted his reply to the charge sheet on October 7, 1982.
Part of the opening paragraph is as under: "You have become frustrated, lost balance of mind and to cover the various irregularities committed by you for example . .
You will be prosecuted for levelling false charge sheet and false charges against me.
Coming to the charge sheet with above reverence I have to say as under." On October 22, 1982 an enquiry officer was appointed to enquire 433 into the charges against Sharma.
He challenged the order of suspension by way of Civil Writ Petition 661 of 1982 in the Jammu & Kashmir High Court.
The High Court stayed the sus pension by its order dated December 20, 1982.
The order of suspension having been stayed by the High Court it was incumbent on Sharma to have joined duty.
But inspite of company 's letters asking him to do so he remained absent.
Sharma filed Writ Petition 471/82, Writ Petition 129/83 and Letters Patent Appeal 24/83 for payment of his salary and allowances for various periods which were granted by the High Court.
It is also on record that while in service Sharma unsuc cessfully fought assembly elections on two occasions.
He filed his nomination papers for contesting elections to the Lok Sabha from Baramulla constituency.
But the nomination papers were rejected.
Regulation 16.14 of Jammu & Kashmir Industries Employees Service Rules and Regulations before amendment was as under: "The service of the permanent employee shall be terminated by the company, if (a) his post is abolished or (b) he is declared on medical grounds to be unfit for further service after giving three months ' notice or pay in lieu thereof.
For similar reasons the service of a temporary employee also be dispensed with after giving him one month 's notice or pay in lieu thereof.
" The above quoted regulation 16.14 was amended on April 20, 1983.
Amended regulation is as under: "16.14.
the services of an employee shall be terminated by the Company if: (a) his post is abolished, or (b) he is declared on medical grounds to be unfit for further service, or (c) if he remains on un authorised absence, or(d) if he takes part in active politics.
In the case of (a) and (b) above the services shall be terminated after giving three months notice to a permanent 434 employee and one month 's notice to a temporary employee or pay in lieu thereof.
In the case of (c) and (d) above the services of an employee shall be terminated if he fails to explain his conduct satisfactorily within 15 days from the date of issue of notice.
The management shall be empowered to take a decision without resorting to further enquiries.
By order of the Board of Directors.
" The company issued a show cause notice dated April 21, 1983 in terms of clause (c) of amended regulation 16.
The notice was in the following terms: "In compliance to the orders of the Hon 'ble High Court Your suspension was stayed till further orders vide Order No. JKI/319/82 dated 21.12.82 issued vide endorsement No. Adm.(P) 80 65/4866 dated 21.12.82.
From that date also you have continuously remained absent unautho risedly from your duties.
You are, therefore, served this notice to show cause within a period of 15 days as to why your services should not be terminated under rules of the Corporation." No reply to the show cause notice was submitted by Sharma.
By an order dated June 14, 1983 the Managing Direc tor of the company terminated his service,.
The termination order is reproduced as under: "Shri Pyare Lal Sharma Chemical Engineer, Jammu and Kashmir Industries Limited has remained on unauthorised absence continuously from 21.12.82 (since the date of his suspen sion was stayed as per orders from the Hon 'ble High Court).
Shri Sharma was served with a notice under Jammu & Kashmir Industries Limit ed Employees Service Rules to show cause within a period of 15 days as to why his services should not be terminated.
This notice was served to him under registered post but the same was received back in this office and later on delivered to him in person on 7.5.83 as per his request.
Shri Sharma has failed to explain his position.
It has now also been established that Shri Sharma was 435 taking part in active politics during the period of his un authorised absence and has filed nomination papers for contesting elec tion from 1 Baramulla Parliamentary Con stituency.
Now that his unauthorised absence as well as his taking part in the active politics has been established, and in exercise of the powers vested in the management under Jammu & Kashmir Industries Employees Services Regulations the services of said Shri Pyare Lal Sharma Chemical Engineer J & K Industries Limited are hereby terminated.
" Sharma challenged the order of termination by way of Writ Petition No. 70 of 1984 before the Jammu & Kashmir High Court.
Learned Single Judge by his judgment dated October 16, 1984 allowed the writ petition on three grounds.
The learned Judge found the impugned order violative of Rules of Natural Justice as no opportunity to show cause was afforded to Sharma in respect of the ground of taking part in active politics.
It was also held that the Board of Directors having appointed Sharma, The Managing Director who is subordinate authority could not terminate his services.
Finally, the learned Judge held regulation 16.14 to be arbitrary and as such violative of Article 14 of the Consti tution of India.
The Letters Patent Bench of the High Court dismissed the appeal of the company but denied back wages to Sharma.
The Bench held that Sharma 's services could not be terminated by an authority subordinate to the authority which appointed him.
The Bench also found that either three months notice or salary in lieu thereof under regulation 16.14 was mandatory.
The Division Bench did not agree with the other reasons given by the learned Single Judge in support of his judg ment.
Mr. Pyare Lal Sharma appeared in person and argued his case.
He has been of no assistant to us.
During the course of arguments we suggested to Mr. Sharma to engage a counsel which de declined.
We also repeatedly offered to him to have the services of a counsel engaged by the Court but he did not agree and insisted on arguing the case himself.
From the pleadings of the parties, documents on the record, the judgment of the learned Single Judge and of the Letters Patent Bench 436 and from Sharma 's arguments the following points arise for our consideration: 1.
Whether Regulation 16.14 is arbitrary and as such ultra vires Article 14 of the Constitution of India.
Whether three months ' notice or pay in lieu of the notice period was required to be given under Regulation 16.14.
The termination order having been passed by the Managing Director who was an authority subordinate to the Board of Direc tors which appointed Sharma, the order was bad on that ground.
Whether the impugned order is viola tive of rules of natural justice so much so that the ground of taking part in active politics was not mentioned in the show cause notice whereas it was relied upon in the termination order.
Whether the period of absence, which was prior to the date of coming into force of the amended Regulation 16.14, could be taken into consideration for invoking ground (c) of the Regulation.
We see no arbitrariness in Regulation 16.14.
The Regula tion has been framed to meet four different eventualities which may arise during the service of a company employee.
Under this regulation services of an employee may be termi nated (a) if his post is abolished or (b) if he is declared on medical grounds to be unfit for further service or (c) he remains on unauthorised absence or (d) if he takes part in active politics.
In the case of (a) and (b) three months notice to a permanent employee and one month notice to temporary employee or pay in lieu thereof is to be given.
In case of (c) and (d) a show cause notice, to explain his conduct satisfactorily, is to be given.
So far as grounds (a) and (b) are concerned there cannot be any objection.
When a post is abolished or an employee is declared medical ly unfit for further service the termination is the obvious consequence.
In the case of abolition of post the employee may be adjusted in some other post if legally permitted.
Ground (c) has also a specific purpose.
"Remains on un authorised absence" means an employee who has no respect for discipline and absents himself repeatedly and without any justification 437 or the one who remains absents for a sufficiently long period.
The object and purport of the regulation is to maintain efficiency in the service of the company.
The provision of show cause notice is a sufficient safe guard against arbitrary action.
Regarding ground (d) "acting politics" means almost whole time in politics.
Company job and active politics cannot go together.
The position of the civil servants who are governed by Article 311 is entirely different but a provision like grounds (c) and (d) in Regu lation 16.14 concerning the employees of companies/corpora tions/public undertakings is within the competence of the management.
We do not agree with the Division Bench of the High Court that three months ' notice or pay in lieu thereof was to be given to Sharma under Regulation 16.14.
It is clear from the plain language of the regulation that three months notice or pay in lieu, is only required when termination is under ground (a) or (b).
Regarding (c) and (d), the regula tion provides for a 15 days notice to explain the conduct satisfactorily and there is no requirement of any other notice or pay in lieu thereof.
We may now take up the third point.
Sharma was appointed as Chemical Engineer by the Board of Directors.
The powers of the Board of Directors to appoint officers of Sharma 's category were delegated to the Managing Director on Septem ber 12, 1974 and as such from that date the Managing Direc tor or became the appointing authority.
Needless to say that employees of the company are not civil servants and as such they can neither claim the protection of Article 311(1) of the Constitution of India nor the extension of that guaran tee on parity.
There is no provision in the Articles of Association or the regulations of the company giving same protection to the employees of the company as is given to the civil servants under Article 311(1) of the Constitution of India.
An employee of the company cannot, therefore, claim that he cannot be dismissed or removed by an authority subordinate to that by which he was appointed.
Since on the date of termination of Sharma 's services the Managing Direc tor had the powers of appointing authority, he was legally competent to terminate Sharma 's services.
The learned Single Judge allowed the writ Petition on the fourth point though the same did not find favour with the Division Bench.
Grounds (c) and (d) in regulation 16.14, exclusively and individually, are sufficient to terminate the services of an employee.
Once it is established to the satisfaction of the authority that an employee 438 remains on unauthorised absence from duty, the only action which can be taken is the termination of his services.
Similar is the case when an employee takes part in active politics.
The finding in the termination order regarding taking part in active politics cannot be sustained because no notice in this respect was given to Sharma but the order of termination can be supported on the ground of remaining unauthorised absence from duty.
This Court in State of Orissa vs Vidyabhushan Mohapatra, [1963] 1 Supp.
SCR 648 and Railway Board vs Niranjan Singh, has held that if the order can be supported on one ground for which the punishment can lawfully be imposed it is not for the courts to consider whether that ground alone would have weighed with the authority punishing the public servant.
Thus there is no force in this argument.
This takes us to the last point which we have discovered from the facts.
Regulation 16.14 before amendment consisted of only clauses (a) and (b) relating to abolition of post and unfitness on medical ground.
The company had no authori ty to terminate the services of an employee on the ground of unauthorised absence without holding disciplinary proceed ings against him.
The regulation was amended on April 20, 1983 and grounds (c) and (d) were added.
Amended regulation could not operate retrospectively but only from the date of amendment.
Ground (c) under which action was taken came into existence only on April 20, 1983 and as such the period of unauthorised absence which could come within the mischief of ground (c) has to be the period posterior to April 20, 1983 and not anterior to that date.
The show cause notice was issued to Sharma on April 21, 1983.
The period of absence indicated in the show cause notice is obviously prior to April 20, 1983.
The period of absence prior to the date of amendment cannot be taken into consideration.
When prior to April 20, 1983 the services of person could not be terminat ed on the ground of unauthorised absence from duty under Regulation 16.14 then it is wholly illegal to make the absence during that period as a ground for terminating the services of Sharma.
It is basic principle of natural justice that no one can be penalised on the ground of a conduct which was not penal on the day it was committed.
The date of show cause notice being April 21, 1983 the unauthorised absence from duty which has been taken into consideration is from December 20, 1982 to April 20, 1983.
Whole of this period being prior to the date of amendment of regulation 16.14 the same could not be made as a ground for proceeding under ground (c) of Regulation 16.14.
The notice served on the appellant was thus illegal and as a consequence the order of termination cannot be sustained and has to be set aside.
439 When the termination order is set aside by the courts normally the servant becomes entitled to back wages and other consequential benefits.
This case has a chequered history.
From 1976 onwards there has been continuous litiga tion and mistrust between the parties.
The facts which we have narrated above go to show that Sharma has equally contributed to this unfortunate situation.
In view of the facts and circumstances of this case we order that sixty per cent of the back wages be paid to Sharma.
Money already received by Sharma under orders of this Court or the High Court shall be adjusted and the balance paid to him.
If the money already paid to Sharma is more than what we have ordered then there shall be no recovery from him.
Civil Appeal 3154/85 is allowed to the extent indicated above, Civil Appeal 3155/85 filed by the company is dis missed.
C.M.P. 1213/ 88 is dismissed as infructuous.
There shall be no order as to costs.
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According to the Regulation 16.14 of the Jammu & Kashmir Industries Employees Service Rules & Regulations the serv ices of the permanent employee could be terminated if the post is abolished or he is declared medically unfit after giving three month 's notice or pay in lieu thereof and in case of temporary employee one month 's notice or pay in 429 lieu thereof.
This regulation was amended on April 20, 1983 by adding two more grounds namely, if the employee remains on an unauthorised absence or if he takes part in active politics, in such cases the services shall be terminated if he fails to explain his conduct satisfactorily within 15 days from the date of issue of notice and the management shall be empowered to take a decision without resorting to further enquiries.
Pyare Lal Sharma was employed as a Chemical Engineer by the Jammu & Kashmir Industries Ltd. hereinafter called 'Company '.
The Company issued a show cause notice on 21.4.83 in terms of the added clauses for his unauthorised absence from duty.
As no reply was submitted, the M.D. terminated his services by an order dated 14.6.1983.
Sharma challenged the order of termination by way of a writ petition before the J & K High Court.
Learned Single Judge allowed the Writ Petition on three grounds namely, violation of Rules of Natural Justice, that the Board of Directors having appoint ed Sharma, the M.D. who is subordinate authority could not terminate his services and that the regulation 16.14 was arbitrary and violative of article 14 of the Constitution of India.
The Letters Patent Bench of the High Court dismissed the appeal of the Company but denied backwages to Sharma.
Aggrieved by that order both the Company as well as Sharma came up in appeals before this court.
While allowing the appeal of Sharma partially and dismissing the appeal of the Company, this Court, HELD: That Regulation 16.14 was not arbitrary.
The provision of show cause notice is a sufficient safeguard against arbitrary action.
Under grounds (a) & (b) of the Regulations three months notice or pay in lieu thereof is required.
Regarding grounds (c) & (d) the regulations pro vide for 15 days notice to explain the conduct satisfactori ly and there is no requirement of any other notice or pay in lieu thereof.
[437C D] There is no provision in the Articles of Association or the regulations of the company giving same protection to the employees of the company as is given to the civil servants under article 311(1) of the Constitution of India.
An employee of the Company cannot, therefore, claim that he cannot be dismissed or removed by an authority subordinate to that by which he was appointed.
Since on the date of termination of Sharma 's services the M.D. had the powers of the appointing authority he was legally competent to terminate Sharma 's services.
[437F G] 430 Grounds (c) & (d) in regulation 16.14 exclusively and individually are sufficient to terminate the services of an employee.
Once it is established that an employee remains on an unauthorised absence from duty the only action which can be taken is termination of his services.
Similar is the case when an employee takes part in active politics.
The finding in the termination order cannot be sustained because no notice in this respect was given to Sharma but the order of termination can be supported on the ground of his remaining on unauthorised absence from duty.
[437H; 438A B] State of Orissa vs Vidyabhushan Mohapatra, [1963] 1 Supp.
SCR 648 and Railway Board vs Niranjan Singh, , relied upon.
It is a basic principle of natural justice that no one can be penalised on the ground of a conduct which was not penal on the day it was committed.
The date of show cause notice being April 21, 1983 the unauthorised absence from duty which has been taken into consideration is from Decem ber 20, 1982 to April 20, 1983.
Whole of this period being prior to the date of amendment of regulation 16.14, the same could not be made as a ground for proceeding under ground (c) of Regulation 16.14.
The Notice served on the appellant was thus illegal and as a consequence the order of termina tion can not be sustained and has to be set aside.
[438F G] When the termination order is set aside by the courts normally the employee becomes entitled to backwages and all other consequential benefits.
In view of the facts and circumstances of this case the court ordered that only sixty percent of the backwages be paid to Sharma.
Moneys already received by Sharma under orders of either this Court or High Court shall be adjusted and the balance paid to him.
If the money already paid to Sharma is more than what has been ordered to be paid now then there shall be no recovery from him.
[439A C]
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6108.txt
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: Criminal Appeal Nos. 486 to 489 of 1984.
From the Judgment and Order dated 5.4.1984 of the Bombay High Court in Criminal Revision Application No. 166/83 and Criminal Revision No. 234 of 1983 respectively.
M.C. Bhandare, A.M. Khanwilkar and Mrs. H. Wahi for the Appellants.
S.B. Bhasme and R.A. Gupta for the Respondents.
K. JAGANNATHA SHETTY, J.
These four appeals, by leave, arise out of the common judgment of Bombay High Court dated April 5, 1984 in Criminal Revision Applications 166 and 234 of 1983.
Criminal Appeal Nos. 486 and 487 of 1984 have been preferred by an Organisation called "Stree Atyachaar Virodhi Parishad".
It is an association committed to prevent atroci ties on women.
Criminal Appeal Nos. 488 and 489 of 1984 are by the State of Maharashtra.
563 The case relates to the death of a newly married girl called Chanda.
On June 15, 1981, Chanda was married to Ramesh.
The eider brother of Ramesh is called Dilip and Nathumal is their father.
The marriage of Ramesh and Chanda took place at Nerparsopant, District Yavatmal.
On the next day of the marriage, the bride and groom returned to the house of the latter at Arvi.
On June 19, 1981, they had gone to Amravati to have prayers in the Devi Tampie.
They came back in the same evening.
The day follow ing was a fateful day.
At about 2.30 PM on June 20, 1981, Chanda was seen with flames on the first floor of the resi dential building, with frantically crying for help.
That attracted some of the neighbours from the ground floor.
They rushed to rescue Chanda.
Three of them are: Bhanrao, Ballu alias Nandu and Ramdas.
They extinguished the flame which was practically engulfing Chanda.
The inmates in the house, however, did not render any such help.
Dilip who was on the first floor was seen coming down the stairs.
Shortly, thereafter two doctors came and the police also arrived.
Chanda was taken to Ervin Hospital at Amravati in an uncon scious condition.
She died in the hospital at about 9.00 pm on the same day.
Before the death, her dying declaration was said to have been recorded by the Executive Magistrate.
It was stated therein that when she was preparing tea in the kitchen, her saree caught fire accidentally and consequently she received the burn injuries.
The parents of Chanda were informed of the death.
They suspected foul play by the in laws of Chanda.
They lodged a report at Amravati Police Station complaining that Chanda 's death might have been the outcome of tension due to demand of dowry.
The Crime Branch of the CID investigated the case and charge sheeted Dilip and Nathumal under sec.
306 read with sec.34 IPC.
It was alleged that the Chanda has commit ted suicide by burning herself and Dilip and Nathumal abet ted her.
An investigation of the case revealed that Chanda had hostile atmosphere soon after her marriage.
She was not treated well in her husband 's house.
Vijay, her brother and Mani Chand, father have given statements that the in laws demanded unreasonable dowry which could not be complied with.
Even at the wedding ceremony, it seems, that they behaved badly on the payment of insufficient dowry.
After the marriage, when Vijay came to take his sister back home as per custom, he was not even permitted to meet her.
Kamala Bai, the maid servant accompanying Chanda was also sent back.
She has also 564 given detailed version about the unfavourable atmosphere around Chanda.
In addition to the statements of witnesses, there is a report of the Chemical Analyser and post mortem report.
These indicate that the death of Chanda could not be by accidental fire.
The trial court after considering all the facts and circumstances appearing on record and after heating the counsel for accused and Public Prosecutor was of priraa facie opinion that it was not a suicide but homicidal death.
Accordingly, the charge under sec.
302 IPC was framed against Dilip.
Nathumal, however, was discharged holding that the allegations against him do not justify the framing of any charge.
There were two revision applications before the High Court of Bombay.
The State filed a revision challenging the validity of discharge of Nathumal.
Dilip on his part ques tioned the correctness of the charge framed against him and demanded his discharge also.
The High Court dismissed the revision preferred by the State while accepting the revision of Dilip.
The High Court was of opinion that the charge under sec.
302 against Dilip was misconceived and there is not even a case against him to frame charge under sec.
306 IPC.
He was accordingly discharged.
The primary question for consideration before us, is whether the High Court was justified in interfering with the charge framed by the trial court against Dilip? The next question to be considered is whether it is necessary to put Nathumal also on trial with the material on record.
We have perused the judgments of the courts below and heard counsel on both sides.
We gave our anxious considera tion to the material on record.
Section 227 of the Code of Criminal Procedure having beating on the contentions urged for the parties, provides: "227.
Discharge If, upon considera tion of the record of the case and the docu ments submitted therewith, and after hearing the submissions of the accused and the prose cution in this behalf, the judge considers that there is no sufficient ground for pro ceeding against the accused, he shall dis charge the accused and record his reasons for so doing.
" 565 Section 228 requires the judge to frame charge if he consider that there is ground for presuming that the accused has committed the offence.
The interaction of these two sections has already been the subject matter of considera tion by this Court.
In State of Bihar vs Ramesh Singh, ; , Untwalia, J., while explaining the scope of the said sections observed (at 259): "Reading the two provisions together in juxta pesition, as they have got to be, it would be clear that at the beginning and the initial stage of the trial the truth, veracity and effect of the evidence which the Prosecu tor proposes to adduce are not to be meticu lously judged.
Nor is any weight to be at tached to the probable defence of the accused.
It is not obligatory for the judge at that stage of the trial to consider in any detail and weigh in a sensitive balance whether the facts, if proved, would be incompatible with the innocence of the accused or not.
The standard finding regarding the guilt or other wise of the accused is not exactly to be applied at the stage of deciding the matter under sec.
227 or sec.
228 of the Code.
At that stage the court is not to see whether there is sufficient ground for conviction of the accused or whether the trial is sure to end in his conviction.
Strong suspicion against the accused, if the matter remains in the region of suspicion, cannot take the place of proof of his guilt at the conclusion of the trial.
But at the initial stage if there is a strong suspicion which leads the court to think that there is ground for presuming that the accused has committed an offence then it is not open to the court to say that there is no sufficient ground for proceeding against the accused.
" In Union of India vs Prafulla Kumar Samal & Anr., ; at 234 35, Fazal Ali, J., summarised some of the principles: "(1) That the Judge while consider ing the question of flaming the charges under sec.
227 of the Code has the undoubted power to sift and weigh the evidence for the limited purpose of finding out whether or not a prima facie case against the accused had been made out.
(2) Where the material placed before the Court disclose grave suspicion against the accused which has not been properly explained, the Court will be fully justified in 566 framing a charge and proceeding with the trial.
(3) The test to determine a prima facie case would naturally depend upon the facts of each case and it is difficult to lay down a rule of universal application.
By and large, however, if two views are equally possible and the Judge is satisfied that the evidence produced before him while giving rise to some suspicion but not grave suspicion against the accused, he will be fully within his right to discharge the accused.
(4) That in exercising his jurisdic tion under the present Code is a senior and experienced Judge cannot act merely as a Post Officer or a mouth piece of the prosecution, but has to consider the broad probabilities of the case, the total effect of the evidence and the documents produced before the Court, any basic infirmities appearing in the case and so on.
This however, does not mean that the Judge should make a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial.
" These two decisions do not lay down different princi ples.
Prafulla Kumar case has only reiterated what has been stated in Ramesh Singh case.
In fact, sec.
227 itself con tains enough guidelines as to the scope of enquiry for the purpose of discharging an accused.
It provides that "the Judge shall discharge when he considers that there is no sufficient ground for proceeding against the accused".
The 'ground ' in the context is not a ground for conviction, but a ground for putting the accused on trial.
It is in the trial, the guilt or the innocence of the accused will be determined and not at the time of framing of charge.
The Court, therefore, need not undertake an elaborate enquiry in sifting and weighing the material.
Nor it is necessary to delve deep into various aspects.
All that the Court has to consider is whether the evidenciary material on record if generally accepted, would reasonably connect the accused with the crime.
No more need be enquired into.
So much is, we think, established law.
To be fair to the accused, we have examined the material on record and also perused the statements of some of the witnesses.
From the report of the Chemical Analyser, it will be seen that kero sene residue was found on each and every garment of the deceased.
The post mortem report also indicates, 567 besides burn injuries, that Chanda had sustained contusions on the back shoulders.
According to the doctor who conducted the postmortem, those contusions might have been caused with the blunt rounded object.
The learned Judge of the High Court has not adverted to these facts although the conten tion of the Public Prosecutor in this regard has been no ticed.
Not merely that, the events that proceeded the death of Chanda did not receive any consideration.
The statements of brother and father of Chanda and also that of Kamala Bai the maid servant of Chanda have been ignored.
The conduct of Dilip which was highlighted in the context and circumstances, was brushed aside with little significance.
It is said that Dilip was coming down from the staircase when Chanda was crying for help.
The manner in which he went on at that time, if true, did not bring him credit.
The High Court, however, said: "That the accused was passive is neither here nor there.
It all depends upon the mental response and reaction of an indi vidual whether he faces the risk and attempt to extinguish the flames or quietly watches the incident.
By no interpretation could it be stretched to show that the accused either actively committed the act of burning or ac tively aided the commission of suicide.
" Counsel for the State was very critical of the attitude adopted by the High Court in dealing with the case.
His criticism to some extent is not unjustified.
It may not be out of place to mention that "dowry" which is a deep rooted social evil appears to be the cause of ever so many unfortunate death of young ladies.
It is an offence brutal and barbaric.
It is generally committed inside the house and more often with a circumstance to give an impres sion that it was a suicidal death.
There will be all round attempt to cover up such offence by the family members rather than to expose it.
The Government has come forward with legislations from time to time to protect women and to punish those who commit attrocities on them.
In 1961 the Dowry Prohibition Act (Act 28 of 196 1) was passed prohibit ing the taking or giving dowry.
By the Criminal Law (Second Amendment) Act, 1983 (Act 46 of 1983) Chapter XX A was introduced in the Penal Code with sec.
498 A creating a new offence of cruelty.
It provides for punishment to husband or his relatives if they harass a woman with a view to coerce her to meet any unlawful demand for property.
Section 174 of the Criminal Procedure Code was also amended to secure post mortem in 568 case of suicide or death of a woman within seven years of her marriage.
Section 113 A has been introduced in the Evidence Act, 1872 raising presumption of cruelty as defined under sec.
498 A IPC against the husband or his relatives if the wife commits suicide within a period of seven years from the date of her marriage.
These provisions reflect the anxiety of the representatives of our people to deal firmly the menace of dowry deaths.
Again, there are sweeping changes made in the Dowry Prohibition (Amendment) Act, 1984.
A new offence called 'Dowry death ' has been created by introducing sec.
304 B in the Penal Code.
It raised presump tion of culpability against the husband or relative hitherto unknown to our jurisprudence.
It provides that where the death of a woman is caused by any bums or bodily injury or otherwise than under normal circumstances within seven years of her marriage and it is shown that soon before her death she was subjected to cruelty or harassment by her husband or any relative of her husband for or in connection with any demand for dowry, such death shall be called 'dowry death '.
The section also provides hat such husband or relative shall be deemed to have caused her death and shall be pun ished with imprisonment for a minimum of seven years but which may extend to life imprisonment.
We are referring to these provisions not that they are attracted to the present case.
It is only to emphasize that it is not enough if the legal order with sanction alone moves forward for protection of women and preservation of societal values.
The criminal justice system must equally respond to the needs and notions of the society.
The inves tigating agency must display a live concern and sharpen their wits.
They must penetrate into every dark corner and collect all the evidence.
The Court must also display great er sensitivity to criminality and avoid on all counts "soft justice".
In the instant case the trial court has considered every material on record in support of the charge framed.
The trial court has also given reasons why a charge under sec.
302 IPC is warranted against Dilip even though the police charge sheeted him under sec.
306 IPC.
The High Court has gone on a tangent mainly relying on the dying declaration as if it has been conclusively proved to be the true and faith ful version of the deceased.
Apart from that, we are unable to compromise ourselves with the approach made and the opinion expressed by the High Court in respect of many of the matters.
We wish to add a word regarding interference by the High court against a charge framed by the Sessions Court.
Section 227 which 569 confers power to discharge an accused was designed to pre vent harassment to an innocent person by the arduous trial or the ordeal of prosecution.
How that intention is to be achieved is reasonably clear in the section itself.
The power has been entrusted to the Sessions Judge who brings to bear his knowledge and experience in criminal trials.
Be sides, he has the assistance of counsel for the accused and Public Prosecutor.
He is required to hear both sides before framing any charge against the accused or for discharging him.
If the Sessions Judge after hearing the parties frames a charge and also makes an order in support thereof, the law must be allowed to take its own course.
Self restraint on the part of the High Court should be the rule unless there is a glaring injustice stares the Court in the face.
The opinion on any matter may differ depending upon the person who views it.
There may be as many opinions on a particular matter as there are courts but it is no ground for the High Court to interdict the trial.
It would be better for the High Court to allow the trial to proceed.
The counsel for the State was equally critical upon the discharge of Nathumal.
It was argued that Nathumal being the manager of the family ought to have taken care of Chanda and without his connivance, none would have demanded dowry and put Chanda on fire.
It is true that it is his obligation as manager of the family to protect Chanda and safeguard her rights.
We have no doubt that he has failed to perform his moral obligation.
But that by itself without anything more is not sufficient to frame a charge against him.
We, there fore, agree with the discretion exercised by the trial court and leave it at that.
In the result and for the reasons stated, we allow the criminal appeals to the extent indicated only as against Dilip.
We set aside the order of the High Court and restore that of the trial court.
The appeals against Nathumal are dismissed.
His discharge is confirmed.
We direct the court to proceed with the trial expeditiously.
Before parting with the case, we must place on record the useful service rendered by 'Stri Atyachar Virodhi Pari shad ' in this case.
It is a social welfare organisation.
It has come up to this Court spending its own money by prefer ring the appeals.
We very much appreciate the object of the organisation and the assistance rendered P.S.S. Appeals allowed partly.
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The deceased was seen in flames on the first floor of her in laws house crying for help within five days of her marriage with the younger brother of the respondent.
While neighbours rushed to her rescue and extinguished the flames, the inmates of the house did not render any such help.
The respondent who was on the first floor was seen coming down the stairs.
The deceased succumbed to the burn injuries in the hospital on the same day.
In her dying declaration recorded by the Executive Magistrate, she stated that when she was preparing tea in the kitchen her saree caught fire accidently.
The parents of the deceased suspected foul play by her in laws and lodged a report with the police.
An investiga tion.of the case revealed that the deceased had met hostile atmosphere soon after her marriage.
The parents gave state ments that the in laws demanded unreasonable dowry which could not be complied with and that at the wedding ceremony they had behaved badly on the payment of insufficient dowry.
Her brother who had gone to bring her back home was not permitted to meet her.
The maid servant sent along with her was also sent back.
The respondent and his father were charge sheeted under section 306 read with section 34 I.P.C.
The trial court came to a prima facie conclusion that it was not a suicide but homici dal death.
Accordingly, a charge under section 302 I.P.C. was framed against the respondent.
The respondent 's father was, however, discharged.
561 The High Court dismissed the revision petition of the State against the respondent 's father.
Wile accepting the respondent 's revision it took the view that the fact that the accused was passive was of no consequence that it all depends upon the mental response and reaction of an individ ual whether he faces the risk and attempts to extinguish the flames or quietly watches the incident, that it does not show that the accused actively committed the act of burning or actively added the commission of suicide, and held that the charge under section 302 against him was not made out, and there was not even a case against him to frame charge under section 306 I.P.C.
The appellant, a social welfare organisation and the State preferred appeals to the Supreme Court.
On the question: Whether the High Court was justified in interfering with the charge framed by the trial court against the respondent, and whether it was necessary to put his father also on trial with the material on record.
Partly allowing the criminal appeals, HELD: 1.
The High Court was not justified in interfering with the charge framed by the trial court against the re spondent accused.
The trial court had considered every material on record in support of the charge framed.
It had also given reasons why a charge under section 302 I.P.C. was warranted against the respondent even though the police had charge sheeted him under section 306 I.P.C. Section 227 Cr.
P.C. which confers power to discharge an accused was designed to pre vent harassment to an innocent person by the arduous trial or the ordeal of prosecution.
The power has been entrusted to the Sessions Judge who brings to hear his knowledge and experience in criminal trials.
If he after hearing the parties frames a charge and also makes an order in support thereof, the law must be allowed to take its own course.
State of Bihar vs Ramesh Singh, ; and Union of India vs Prafulla Kumar Samal & Anr., ; at 234 35, referred to.
Self restraint on the part of the High Court should he the rule unless there is glaring injustice staring the Court in the face.
In the 562 instant case, it had discharged the respondent mainly rely ing on the dying declaration as if it has been conclusively proved to be the true and faithful version of the deceased.
It did not advert to the report of the Chemical Analyser in which he found kerosene residue on each and every garment of the deceased, and the post mortem report which indicated that besides burn injuries the deceased had sustained contu sions on the back shoulders which might have been caused with a blunt round object.
The events that preceded the death of the deceased also did not receive any considera tion.
The statements of brother, father and the maid servant of the deceased have been ignored.
The respondent was seen coming down from the staircase when the deceased was crying for help.
The manner in which he went on at that time, if true, did not bring him credit.
The approach made by the High Court, therefore, cannot be accepted.
[569C; 566H; 567A C] 4.
Although it was the moral obligation of respondent 's father as manager of the family to protect the deceased and safeguard her life and he had failed to perform that obliga tion, that by itself without anything more is not sufficient to frame a charge against him.
The discretion exercised by the trial court in discharging him was, therefore, correct.
[569E]
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5950.txt
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Appeal No. 2435 of 1966.
Appeal from the judgment an order dated November 6, and December 6, 1962 of the Bombay High Court in First Appeal No. 453 of 1960.
3 3 5 V. section Desai.
R. G. Samant, P. C. Bhartari and J. B. Dada chanji,for the appellants.
V. M. Tarkunde, K. R. Chaudhuri.
K. Rajendra Chaudhuri and Hari Singh, for the respondents.
The Judgment of the Court was delivered by Ray, J.
This appeal is by certificate against the judgment dated 6 November/6 December, 1962 of the Bombay High Court dismissing the appellants ' suit filed on 14 September, 1959 against the respondents, inter alia, for possession of suit property.
By an indenture of lease dated 16 March, 1944 the respon dents became lessees of the appellants for a period of 5 years, from 1 March 1943 in respect of the agricultural lands belonging ,to Jivanji Jamasji Mistry 's Adarian Charities.
The appellants terminated the tenancy of the respondents by notice to quit dated 25 October, 1955.
The notice to quilt was effective on the expiry of 31 March, 1957.
The appellants without prejudice to the October, 1955 notice gave another notice to quilt dated 10 June, 1958 to deliver possession within 7 days.
The respondents contended that they were protected tenants under the Bombay Tenancy Acts 1939 and 1948 and, therefore,.
the appellants would not be entitled to possession.
The trial Court held that after 31 March, 1957 the respon dents continued in possession and the appellants allowed the respondents to continue in possession by extending the term of the lease at least for one year up to 31 March, 1958.
The trial Court hold that the notice dated 25 October, 1955 terminating the tenancy with effect from 31 March, 1957 could not therefore be relied on by the appellants.
As to the notice dated 10 June, 1958 the trial Court held that it was not a valid notice and a proper three months notice expiring with the year on 31 March, 'shouldhave.
been given by the appellants.
On appeal the High Court held that it was not necessary to consider whether the respondents had acquired the status of protected tenants.
The High Court held that the lease which was operative from 1 March, 1943 for a period of 5 years was under section 23(1)(b) of the Bombay Tenancy Act, 1939 as amended, in 1946 deemed to be for a period of not less than 10 years.
The lease was therefore effective up to 28 February, 1953.
Meanwhile the Bombay Tenancy and Agricultural Lands Act, 1948 came into force on 28 December, 1948.
The High Court held that section 5 of the Bombay Act, 1948 as it originally stood was in terms similar to section 23 of the 1939 Act but as a result of amendment of section 5 of the 1948 Act by the Bombay Act 33 6 XXXIII of 1952 the period of the lease was renewed up to 28 February, 1963 and therefore the appellants could not obtain a ,decree for posession.
Though section 5 of the 1948 Act as amended by the Bombay Act of 1952 was repealed by Bombay Act XIII of 1956 the High Court held that the tenants had acquired the vested right of protection against termination of tenancy merely on the ground of ,expiry of the duration fixed by agreement.
The High Court said that it was not necessary to decide whether the respondents had acquired the status of protected tenants.
The High Court held that by reason of the provisions of section 5 of the 1948 Act as amended in 1952 the respondents acquired renewed tenancy up to 28 February, 1963 and unless the plaintiff landlord could show that rights so acquired had ended they could not claim possession.
When the appeal came up for hearing before this Court on 13 February, 1970 this Court sent the matter back to the High Court for submitting a report.
on two questions.
First, whether on 1 March, 1953 , the respondents were protected tenants.
Second, if the respondents were protected tenants on 1 March, 1953 whether on that account the respondents had the right 'to ,claim the benefit of section 5 and other relevant sections of the Bombay Tenancy and Agricultural Lands Act 67 of 1948.
The High Court recorded the findings on 27 January, 1971.
The High Court recorded the answers that the respondents were protected tenants on 1 March, 1953 and, secondly, the respondents did not have the right to claim the benefit of section 5 or other relevant sections of the Bombay Tenancy and Agricultural Lands Act, 1948.
The respondents challenged the second finding of the High Court.
The Bombay Tenancy Act, 1939 came into effect on 2 April.
Section 3 of the 1939 Act spoke of a tenant who would be deemed to be a protected tenant if he held land continuously for a period of not less than 6 years immediately preceding 1 January, 1938 and cultivated such land personally during the said period.
The Bombay Tenancy Amendment Act, 1946 introduced changes into the 1939 Act.
These were sections 3A and 23.
Under section 3A of the 1946 Amendment Act every tenant on the expiry of one year from the date of the coming into force of the 1946 Amendment Act would be deemed to be a ' protected tenant for the purpose of the Act and his rights as protected tenant would be recorded in the Record of Rights, unless his landlord has within the said period made an application to the relevant authority for a declaration that he was not a protected tenant.
Under section 23 of the 1946 Amendment Act no lease of any land after the coming into force of the said section in the relevant 33 7 area was to be for a period of less than 10 years and secondly every lease subsisting on the said date, namely, coming into force of the Act or made after the said date in respect of any land in such area shall be deemed to be for a period of not less than 10 years.
The leases subsisting on the date when the 1946 Amendment Act came into force could not be terminated before the expiry of the period of 1 0 years only on the ground.
that the period of lease had expired but such a lease could be terminated by a tenant by surrendering the lease.
The Bombay Tenancy Amendment Act 1946 was brought into force from 8 November, 1946 throughout the Province of Bombay.
The effect of the 1946 Amendment Act in the present case was that the lease which was subsisting on that date, viz., 8 November, 1946 was deemed to be for a period of not less than 10 years from 1 March, 1943 when the lease came into effect.
The other important change as a result of the 1946 Amendment Act was that under section 3A of the Act the tenant was deemed to be a protected tenant for the purpose of this Act and his rights were to be recorded in the Record of Rights.
The facts found by the High Court in the present case are that the tenant respondents" rights were recorded and the appellants did not make an application after the coming into force of the 1946 Amendment Act that the respondents were not protected tenants.
Therefore, the res pondents were protected tenants and the lease was effective for10 years from the date of the lease.
This extension of the lease for 5 years beyond the period of 5 years mentioned in the lease was by virtue of the provisions in the statute.
The Bombay Tenancy Act, 1939 was repealed by the Bombay Tenancy and Agricultural Lands Act, 1948 referred to, as the 1948 Act.
It may be stated here that the 1948 Act repealed the whole of the Bombay Tenancy Act, 1939 except sections 3, 3A and 4 which were also modified in the manner mentioned in Schedule 1 to the 1948 Act.
In the present case, the High Court has recorded the finding that the respondents were protected tenants on 1 March, 1953.
That finding is not challenged by either side in the present appeal.
The respondents have challenged the other finding of the High Court that the respondents did not have the right to claim the benefit of section 5 or other relevant sections of the 1948 Act.
The rival contentions in the present appeal are on the effect of section 5 of the 1948 Act which was introduced as an amendment by Bombay Act 33 of 1952 in substitution of section 5 as it originally stood in the 1948 Act.
On behalf of the respondents it is said that they were protected tenants under the 1948 Act and the lease of the respondents which had come into existence on 338 1 March, 1943 was extended up to 28 February, 1953 and as a result of an amendment of section 5 by the 1952 Amending Act the period of the lease was extended up to 28 February, 1963, and therefore, the appellants could not claim eviction.
The appellants on the other hand contended that the respondents who had a subsisting lease dated 1 March, 1943 for 5 years received the benefit of statutory extension of the period by another 5 years up to 28 February, 1953, and on 1 March, 1953 the respondents were protected tenants who had an unlimited period of tenancy which could be terminated in accordance with the provisions of section 34 of the 1948 Act.
It was also said on behalf of the appellants that section 5 which was introduced into the 1948 Act by the Amending Act of 1952 which came into effect on 12 January, 1953 did not at all apply to protected tenants but only to ordinary tenants.
Even if it were assumed that section 5 of the 1948 Act as amended by the 1952 Act applied, it was said ,on behalf of the appellants that as a result of the Bombay Amending Act 13 of 1956 which came into effect on 1 August, 1956 section 88B introduced by the Amending Act of 1956 removed section 5 from the statute and the appellants were not entitled to invoke any protection under that section of the statute.
In order to appreciate these contentions it is necessary to refer to section 5 which was introduced into the 1948 Act by the Amending Act of 1952 which is as follows "5 (1) No tenancy of any land shall be for a period of than ten years.
Provided that at the end of the said period and thereafter at the end of each period of ten years in succession, the tenancy shall, subject to the provisions of sub sections (2) and (3); be deemed to be renewed for a further period of ten years on the same terms and conditions notwithstanding any agreement of the contrary.
(2)The landlord may, by giving the tenant one year 's notice in writing before the end of each of the period referred to in sub section (1), terminate the tenancy with effect from the thirty first day of March in the last year of each of the said period, if he bona fide requires the land for any of the purposes specified in sub section (1) of section 34, but subject to the provisions of sub sections (2) and (2A) of the said section, as if such tenant was a protected tenant.
(3)Notwithstanding anything contained in sub section (1): 33 9 (a) every tenancy shall, subject to the provisions of sections 24 and 25, be liable to be terminated at any time on any of the grounds mentioned in section 14; and (b) a tenant may terminate the tenancy at any time by surrendering his interest as a tenant in favour of the landlord : Provided that such surrender shall be in writing and shall be verified before the Mamlatdar in the prescribed manner".
The question in the forefront is whether section 5 introduced by the Amending Act of 1952 applied to protected tenants.
Counsel on behalf of the respondents contended not only that the said section 5 applied to protected tenants but also that if the said section 5 were held to be applicable only to ordinary tenants the respondentswho were protected tenants could claim the benefit of ordinarytenants by virtue of their position of contractual tenants.
The 1948 Act recognised a tenant to be a protected tenant if such person had been deemed to be a protected tenant under sections 3, 3A or 4 of the Bombay Tenancy Act, 1939.
Section 34 of the 1948 Act provided that notwithstanding anything contained in section 14 a landlord might terminate the tenancy of a protected tenant on the grounds and in the manner as provided in that section.
It therefore follows that a protected tenant had been given security under the 1948 Act for an unlimited duration and he could be accepted either on grounds mentioned in section 14 or for grounds mentioned in section 34 of the 1948 Act.
A protected tenancy therefore did not come to an end on the expiration of any particular period.
A protected tenancy could be brought to termination only on the grounds and in the manner mentioned in sections 14 and 34 of the 1948 Act.
It is also ncoticeable that no new protected tenancy could come into existence under the 1948 Act.
Section 5 of the 1948 Act as it originally stood provided that no tenancy could be for a period of less than ten years and no tenancy was to be terminated before the expiry of the period of 10 years except on the grounds mentioned in section 14.
Therefore, under section 5 of the 1948 Act as it originally stood, tenants other than protected tenants were given a security to the extent of 10 years only.
Persons other than protected tenants could under sections 14(2) and 15 of the 1948 Act be allowed 34 0 to hold over and in such case of holding over the tenancy "of such a tenant shall be deemed to have been renewed for a further period of 10 years from the date of the expiry on the same terms and conditions".
Therefore, under the 1948 Act prior to the amendment in 1952 there was on the one hand a protected tenant with a security for an unlimited period whose tenancy could be terminated for grounds and in the manner mentioned in sections 14 and 34 of the 1948 Act and on the other hand a person other than protected tenant who had a security for a period of 10 years with the possibility of a landlord allowing such a tenancy to hold over in which case he would have a further period of 10 years.
Unless :the tenancy was terminated in accordance with the provisions of the Act.
It is in this context that section 5 was introduced into the Act by the Amending Act of 1952.
The effect of the amended section 5 came up for consideration by this Court in Trimbak Damodhar Raipurkar vs Assaram Hiraman Patil & Ors.(1) The facts in that case were these.
A tenancy came into existence on 5 February, 1953 for 5 years.
Under the provisions of section 23 (1) (b) of the 1939 Act as amended in 1946 the subsisting lease was deemed to be for a period of not less than 10 years.
During the subsistence of the tenancy the 1948 Act came into existence.
A notice was given to the tenants calling upon them to deliver possession after expiration of the period of tenancy on 31 March, 1953.
Meanwhile, the 1952 Amending Act had come into effect on 12 January, 1953.
The tenant in that case relied on section 5 as amended in 1952.
That case was of an ordinary tenant and not of a protected tenant.
This Court held that the Amending Act 1952 repealed section 14(2) of the 1948 Act, amended section 5 of the 1948 Act and the effect of the amendment in that case was stated as follows : "Shortly stated the effect of this amendment was that the tenancy of the respondents, who were till then ordinary tenants as distinct from protected tenants, could not be terminated on the expiry of their tenancy except by giving one year 's notice and that too on the ground that the lands were required by the landlord for bona fide personal cultivation and that the income of the said lands would be the main source of income of the landlord".
Prior to the Amending Act of 1952 the tenancy of an ordinary tenant could be terminated on the grounds mentioned in section 14 before the expiry of the period of 10 years.
An ordinary tenant however could hold over under section 14(2) of the 1948 Act.
After the amendment of section 5 and the repeal of section (1) [19621 supp.
1 section C. R. 700 3 4 1 14(2) of the 1948 Act a tenancy contemplated in section 5 of the Act would at the end of each period of 10 years subject to the provisions of sub sections (2) and (3) be deemed to be renewed for a further period of 10 years.
This was a new protection afforded to tenancies mentioned in section 5 of the Act.
The second sub section of section 5 as amended in 1952 provided that the landlord by giving one year 's notice in writing before the end of each period of ten years referred to in section 5 (1) of the Act could 'terminate the tenancy with effect from the thirty first day , of March in the last year of each of the said period, if the landlord bona fide required the land for any of the purposes specified in section 34(1) but subject to the provisions of sub sections (2) and (2A) as if such tenant was a protected tenant.
On the one hand a tenant under section 5 as amended in 1952 could have a renewal of a further period of 10 years and on the other the landlord could terminate the tenancy at the end of the period of 10 years by giving a notice as mentioned in section 5(2) of the Act as amended in 1952.
The decision of this Court in Trimbak Damodhar Raipurkar 'section case (supra) noticed the distinction between ordinary tenants and protected tenants and applied section 5 as amended in 1952 to.
the case of an ordinary tenant as distinct from a protected tenant.
This decision also held that there was a statutory extension of the duration of the lease by virtue of the provisions of the Act.
It could not be said that when a lease for 5 years was extended as, a result of the provision of the statute that extension was in terms of the contract.
In Trimbak Damodhar Rajpurkar 's case (supra) this Court held that before the lease could expire on 31 March,, 1953 in that case the period of the lease had been extended for 10 years as a result of the amendment of section 5 by the Amending Act of 1952 which came into effect on 12 January, 1953, and it could not be terminated save and except as specified by a valid notice or a surrender.
The notice given in the month of March, 1952 in that case which called upon the tenant to deliver posses sion on the expiry of the statutory period of 10 years on 31 March, 1953 proved abortive by reason of the operation of the amendment of section 5 renewing the term of the tenancy for the period of ten years.
The principal reason as to why section 5 as amended in 1952 does not apply to a protected tenant is that the tenancy of a protected tenant under the 1948 Act was of unlimited time and the tenant other than a protected tenant had a security only for 10 years and it is only under section 5 as amended in 1952 that such a tenant other than a protected tenant became entitled to renewal of the tenancy for a further period of 10 years in succession as mentioned in the said section.
Secondly, section 5 and, in parti 3 42 cular, sub section (2) thereof as amended in 1952 spoke of termination of tenancy by the landlord by giving the tenant one year 's notice in writing if the landlord bona fide required the land for any of the purposes specified in sub section (1) of section 34 but subject to the provisions of sub sections (2) and (3) of the said section as if such a tenant was a protected tenant.
The words "as if such a tenant was a protected tenant ' indicate that the legislature treated section 5 as applying to tenancies other than protected tenancies.
If the word 'tenancy ' 'occurring in section 5 of the Act as amended in 1952 related to protected tenancy the words as if such a tenant was a protected tenant ' in section 5(2) would not have been necessary.
In the third place, section 5 of the 1948 Act as amended in 1952 was in Chapter II of the Act.
Chapter 11 related to general provisions regarding tenancies.
Sections 31 and 34 of the 1948 Act which related to protected tenants occurred in Chapter III of the 1948 Act.
The heading of Chapter III of the 1948 Act before the amendment thereof in 1956 was 'Protected tenants their special rights and privileges '.
The recognition of protected tenant was only under section 31 of the 1948 Act.
The termination of a tenancy of a protected tenant was specifically provided for only in section 34 of the Act.
Section 34 itself provided that notwithstanding anything contained in section 14 the tenancy of a protected tenant could be terminated as.
mentioned in section 34 of the Act.
It is true that section 14 of the Act occurred in Chapter 11 but that section was attracted only for termination of tenancy of a protected tenant because of the grounds mentioned in section 14.
These were spe cific provisions for protected tenants.
Fourthly, the termination of tenancy of a person other than a protected tenant after the amendment of section 5 in 1952 on the grounds mentioned in section 34 of the Act was by applying the grounds as if such tenant was a protected tenant.
It is, therefore, manifest that if section 5 as amended in 1952 applied to protected tenants the manner of termination of tenancy mentioned in section 5, namely, by giving one year 's notice in writing before the end of each period of ten years would have been totally inconsistent with the manner of termination of tenancy of a protected tenant.
A protected tenant had unlimited security of tenure with the exception of termination by one year 's notice on the grounds mentioned in section 34 whereas the tenancy of one other than a protect would continue to be, renewed for a period of ten years section 34 (1)only at the end of each period of ten years.
Fifthly, under the1948 Act no new protected tenancy could come into existence whereas a tenancy other than that of a protected tenant would continue to be renewed for a period of ten years in succession unless the tenancy was terminated at the end of one such period of ten years.
Finally, if a protected tenancy of 343 unlimited time was brought within the ambit of section 5 as amended in 1952 the protected tenancy would be contemplated to be renewed for periods of ten years in succession.
Any such renewal for periods of ten years would be destructive of the protected tenant 's unlimited security as to duration of tenancy.
In view of our conclusion that section 5 of the 1948 Act as amended in 1952 does not apply to protected tenancy for the reasons indicated above, it is not necessary to consider another contention advanced on behalf of the respondents that apart from protected tenancy section 5 of the 1948 Act as amended could be invoked as a part of contractual tenancy.
The reason is obvious.
The protection afforded by section 30 of the 1948 Act to contractual terms of tenancy is that the rights or privileges vested in the tenancy under any contract cannot be abridged or limited.
The provisions contained in section 5 of the 1948 Act as amended are provisions of the statute not applicable to protected tenants and a protected tenant cannot therefore claim the protection of such a statutory provision far less on the ground that it is a right or privileges arising out of any contract.
It has to be borne in mind that section 5 as amended in 1952 speaks of the fictional renewal of a tenancy for periods of ten years.
A protected tenant on the other hand acquired the statutory "Status or irremovability" when the 1948 Act recognised a protected tenant and nothing more was required to be done to renew or extend the duration of statutory tenure.
To apply the renewal of tenancy for periods of ten years under the amended section 5 would be to rob the protected tenancy of its unlimited security and truncate it into tenancy for period of ten years renewable as mentioned therein.
In the present case the tenancy under the lease which was for a 5 years commencing 1 March, 1943 was operative in duration upto 29 February, 1948.
The respondents by virtue of section 23 (1) (b) of the Tenancy Act of 1939 as amended in 1946 became entitled to an extension of 5 years under the statutory provisions.
This Court in Trimbak Damodhar Raipurkar 's case (supra) noticed that the extension of the duration of the lease was virtue of a statute.
This is described as a 'Statory security of tenure". "Various statutes give security of tenure to tenants.
The co called statutory tenancy created under the Rent Acts . . upon the determination of contractual tenancy is not, properly speaking, a species of tenancy, it is a personal right in the tenant not to have an order for possession made against him unless certain specified conditions are fulfilled; it is a " status of irremovability" (See Woodfall Landlord 'and Tenant, 27th Edition, Vol.
1 paragraph 703 pp.
295 to 296).
An ordinary tenant could invoke in aid the provisions of section 5 of the 344 1948 Act as amended in 1952 and even in that case the extended terms would be under the statute and #lot as part of the contractual term.
A protected tenant, as is the case here, is disentitie to be within the scope of the amended section 5.
The 1948 Act was amended by the Bombay Amending Act 13 of 1956 which came into effect on 1 August.
As a result of the 1956 amendment section 5 which had been introduced into the Act by the amended Act of 1952 ceased to be on the statute and a new section 5 was substituted.
But the new section 5 substituted in 1956 has no relevance to the present appeal.
The contention on behalf of the respondents was that section 5 as amended in 1952 had conferred a vested right on the respondents and therefore the deletion of the amended section 5 by the 1956 amendment could not take away the vested rights of the respondents.
The contention on behalf of the appellants as to the effect of substitution of the amended section 5 by a totally different section 5 of 1956 was first that section 5 did not apply and even if it applied it did not create a vested right and secondly if the statute conferred any protection or privilege the statute could ,take away such a protection or privilege.
This Court in Sidram Narsappa Kamble vs Sholapur Borough Municipality & Anr.(1) considered the effect of the 1956 Amendment Act in relation to protected tenants.
In the present appeal, in view of our conclusion that section 5 of the 1948 Act as amended in 1952 did not apply to protected tenants, it is not necessary to consider the contention advanced on behalf of the respondents whether they had any vested right in the amended section 5.
For these reasons the findings of the High Court dated 27 January, 1971 are upheld and the judgment dated 6 November 6 December, 1962 is set aside.
Counsel for both the parties submitted that the matter that matter would have to be remanded to the High Court for consideration as to whether there was a valid termination of tenancy.
The matter is remanded to the High Court for decision of the appeal as to whether there was a valid termination of tenancy.
(1) ; 345 In view of the fact that this is an old litigation we hope that the matter will be heard as soon as is convenient to the High Court.
The order of costs passed by the High Court is set aside.
Costs of this appeal will abide the result of the decision of the High Court.
The successful party would be entitled to costs.
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The respondents were lessees of the appellants for a period of 5 years from March 1, 1943.
They were protected tenants under the Bombay Tenancy and Agricultural Lands Act, 1948.
They contended that the appellants landlords could not claim eviction, because, being protected tenants their lease was extended by statute up to February 28, 1953, and as a result of the amendment of section 5 of the 1948 Act by amending Act of 1952 the period of lease was further extended upto February 28, 1963.
On the question whether a protected tenant could claim the benefit of section 5 as amended by amending Act of 1952, HELD : Section 5 of the 1948 Act as amended in 1952 did not apply to protected tenancy.
The principal reason was that the tenancy of a protected tenant under the 1948 Act was of unlimited time.
Whereas a tenant other than a protected tenant had a security only for 10 years and it was only under section 5 as amended in 1952 that a tenant other than a protected tenant became entitled to renewal of the tenancy for a period of 10 years in succes sion as mentioned in the said section.
Any such renewal, for periods of ten years, of a protected tenancy, would be destructive of the protected tenant 's unlimited security as to duration of tenancy.
Secondly, if section 5 as amended in 1952 applied to protected tenants the manner of termination of tenancy mentioned in section 5, namely, by giving one year 's notice in writing before the end of each period of ten years would have been totally inconsistent with the manner of termination of tenancy of a protected tenant.
The tenancy of a protected tenant could be terminated by one year 's notice on the grounds mentioned in section 34 whereas the tenancy of one other than a protected tenant, could be terminated on the grounds mentioned in section 34(1) only at the end of each period of ten years.
Thirdly, if the word tenancy occurring in s.5as amended in 1952 related to protected tenancy the words "as if such atenant was a protected tenant in section 5(2) would not have been necessary".
And finally, section 5 as amended in 1952 was in Ch.
II which contained general provisions regarding tenancies and sections 31 and 34 of 1948 Act which related, to protected tenants occurred in Ch.
III of the 1958 Act.
[341 H 342 H] Trimbak Damodhar Rajpukar vs Assaram Patil, [1962] Supp.
1 S.C.R. 700, referred 'to.
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2978.txt
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ivil Appeal Nos.
804 810 of 1977.
Appeals by Special Leave from the Judgment and order dated 20 10 76 of the Allahabad High Court in Writ Petitions Nos.
1529, 1564 and 1568 to 1571/63.
AND WRIT PETITIONS Nos. 650, 651, 652 653, 48, 394, 395, 691, 670, 680, 681, 687 688/79, 412 415, 416 418/79.
Under Article 32 of the Constitution AND SPECIAL LEAVE PETITION (CIVIL) NOS.
5193, 5196 and 17 5517/79 From the Judgment and order dated 20 10 1976 of the Allahabad High Court in Civil Misc.
Writ Nos.
1523, 1544, 1528, 1541 and 1527/63.
R.K. Garg, P.C. Bhartari for the Appellant in C.A. 804/77.
G. L. Sanghi and P.C. Bhartari, for the Petitioner in W.P. No. 48/79 and in S.L.P. Nos.
5193 5196 and 5517/79.
P. C. Bhartari for the Appellant/Petitioners in C.A. 805 810/ 77 and W.P. 650, 651, 652, 653, 395, 691, 670, 680, 681, 687, 688/79 and other cases.
Shanti Bhushan P.C. Bhartari for the Petitioner in W.P. 394/79.
500 S.V. Gupte, Raj Narain Munshi and Sobhagmal Jain for RR.
7 in C.A. Nos.
804 810/77 and W.P. Nos.
650/79 and SLP (C) Nos.
5193 5196/79 and 5517/79.
Y.S. Chitaley, Raj Narain Munshi and Sobhagmal Jain for RR 7 in W.P. 48/79.
Raj Narain Munshi, Sobhagmal Jain and S.K. Jain for RR 7.
in W.P. 651, 652, 653, 394, 395, 691, 670, 680, 651, 687 688/79.
P.B. Sharma for RR 8 in W.P. 48/79.
O.P. Rana for the Intervener, State of U.P.
In all these appeals, writ petitions and special leave petitions the challenge is against the validity of the scheme framed by the State Transport Undertaking of U.P.
In giving special leave in Civil Appeals Nos. 804 to 810 of 1977 this Court restricted the special leave by stating "Special leave granted confined to the alleged conflict between section 68(c) of the and sections 7 and 16 of the U.P. Amendment Act of 1976, (Act 127/1976).
When the hearing in these matters started Mr. Garg, learned counsel for the appellants, submitted that there is no conflict between sec.
68C of the and sections 7 and 16 of the U.P. Amendment Act.
But his plea is that the amendment has not in any way affected or cured the defect in sec.
68C and there fore the defect in the scheme continues to render it invalid In terms of the restricted leave granted, we do not think it is strictly open to the learned counsel to raise the plea which he has taken before us.
But as several matters are involved and there is a conflict between two judgments of the Allahabad High Court we gave permission to the learned counsel to raise this question.
The point that is raised by Mr. Garg is that the introduction of sections 7 and 16 by the Amending Act 27 of 1976, the Uttar Pradesh Motor Vehicles (Special Provisions) Act, 1976 does not dispense with the requirements specified in sec.
68C as the two section relate only to approved schemes.
In order to appreciate learned counsel 's contention it is necessary to set out sec.
68C of the .
Section 68C reads as follows: 501 "Where any State transport undertaking is of opinion that for the purpose of providing an efficient, adequate, economical and properly coordinated road transport service, it is necessary in the public interest that road transport services in general or any particular class of such service in relation to any area or route or portion thereof should be run and operated by the State transport undertaking, whether to the exclusion, complete or partial, of other persons or otherwise, the State transport undertaking may prepare a scheme giving particulars of the nature of the services proposed to be rendered the area of route proposed to be covered and such other particulars respecting thereto as may be prescribed, and shall cause every such scheme to by published in the official Gazette and also in such other manner as the State Government may direct.
" Sec.
68C requires the State Transport Undertaking to prepare a scheme giving particulars of the nature of the services proposed to be rendered, the area or route proposed to be covered and such other particulars respecting thereto as may be prescribed.
It is thus necessary that the scheme should give (1) particulars of the services proposed to be rendered; (2) the area or route proposed to be covered, (3) such other particulars thereto as may be prescribed.
The scheme prepared under sec.
68C did not specify the number of services to be provided.
The Allahabad High Court in Shashi Kant Rai & ors.
vs Regional Transport Authority, Varanasi Region & ors.
held that if the particulars regarding the adequacy etc.
Of the proposed transport services are not given in the draft scheme then it will not be possible for the objectors to file any effective objection to the draft scheme in this regard and it would be difficult for the Hearing Authority to give its decision whether the draft scheme will be able to provide road transport services which would fulfil the four purposes mentioned in sec.
The Court held that the draft scheme must give particulars indicating how the proposed transport services would be efficient, adequate, economical and properly coordinated.
The scheme mentioned "adequate number of State transport services, according to traffic requirements are to be provided on the route or the portion thereof mentioned in cl.
(2) above.
The learned single Judge and the Division Bench of the Allahabad High Court were of the view that the draft scheme prepared under sec.
68 C was defective as the minimum number of services and the vehicles which were proposed to be introduced on the road had not been mentioned.
In order to get over the effects of the decision the U.P. Legislature introduced the 502 Uttar Pradesh Motor Vehicles (Special Provisions) Act, 1976 (U.P. Act No. 27 of 1976).
Section 7 of the Act reads as follows: "Nothing contained in section 68C or section 68D of the principal Act shall be deemed to require or ever to have required a specification being made in an approved scheme of the number of services to be provided.
" Section 16 of the Act is the validating section and runs as follows: "Notwithstanding any judgment decree or order of any court, any scheme prepared or published under section 68C, or approved or modified under section 68D of the principal Act or purporting to have been prepared, published, approved or modified shall not be deemed to be or have been in valid on the ground of the number of the services to be provided being not specified therein." Mr. R. K Garg, the learned counsel for the appellants, submitted that sec.
7 is applicable only to approved schemes i.e. for a scheme which had been approved under sec.
68D(3) and that its object is to cure the defect in approved scheme under sec.
68 D where the number of services provided is not mentioned.
The learned counsel would reach the section that nothing contained in the principal Act shall be deemed to require or ever to have required a specification of the number of services to be provided in an approved scheme.
He would emphasise the words "approved scheme" and submit that the change if any is as regards the particulars required under an approved scheme under sec.
68 D and that this section would not relate, to the scheme under sec.
The marginal note to sec.
7 states "Specification of number of services not an essential requirement of Section 68C or Section 68D." The intention therefore is to make specification of number of services not an essential requirement under sections 68C and 68D.
The section therefore is intended to cover sec.
68 C also.
It is seen the intention is carried out by the section providing that "Nothing contained in Section 68C or Section 68D of the principal Act shall be deemed to require . " The operation of the section is thus intended to apply both to sec.
68C and 68 D.
The result would be that if one of the requirements of sec.
68 C is that it should specify the number of services to be provided it shall be deemed that requirement was never there.
The reference to the approved scheme is because sec.
68 C and section 68 D form, part of the same procedure of publication of a scheme and approval of the scheme.
That this is the object is put beyond all doubt by introduction of the validating 503 section, section 16, which provides that in any scheme prepared or published under sec.
68 C or approved or modified under sec.
68D of the principal Act shall not be deemed to be invalid on the ground of number of services to be provided being not specified therein.
We are satisfied that sections 7 and 16 of the Act have validly provided that the specification of the number of services is not and shall be deemed to have never been an essential requirement in a scheme prepared and published under sec.
68 C or approved or modified under sec. 68 D.
The plea of the learned counsel therefore fails.
In this, view we hold that the decision in Shashi Kant Rai and ors.
v Regional Transport Authority, Varanasi Region, and Ors.
(supra) is erroneously decided.
When the arguments of Mr. Garg on this point and the reply thereto were heard, Mr. Shanti Bhushan, the learned counsel for one of the appellants, submitted that he may be permitted to raise the question of validity of sec.
68 C. He submitted that if the amended sections 7 and 16 of the U.P. Act have the effect of modifying sec 68 C, sec.
68 C itself would not be valid.
According to the learned counsel the requirement of sec.
68 C is that before a scheme is prepared and published the State Transport Undertaking must be of the opinion that for the purpose of providing an efficient, adequate, economical and properly coordinated road transport services, it is necessary in the public interest that the road transport services should be run and operated by the State Transport Undertaking.
In order to satisfy the requirements the learned counsel submitted that the scheme should give (1) particulars of the nature of the services proposed to be rendered; (2) area or route proposed to be covered and such other particulars respecting thereto as may be prescribed.
The first two requirements with which we are concerned are under sec.
68 C. Relying on a decision of this Court in B. H. Aswathanarayan Singh & ors.
vs State of Mysore and Ors.
the learned counsel submitted that if the requirement as to specification of the number of services to be provided in the draft scheme is dispensed with the particulars of the nature of services proposed to be rendered as required in sec.
68 C would be lacking.
The learned counsel referred to page 93 of the case (supra) wherein the Court observed that "when sec.
68 C provides for giving particulars of the nature of the services proposed to be rendered the intention is that such details should be given as are necessary to enable the objectors to make their objections.
We see no difficulty in holding that the details of the nature of services proposed to be rendered may not only be in the form of a precise number of vehicles and trips but also 504 in the form of minimum and minimum number of vehicles and trips on each route.
" Strong reliance is placed on the requirement that the details or the nature of services should not only be in the form of precise number of vehicles and trips but also in the form of minimum and maximum number of vehicles and trips on each route.
But this statement is explained in the next two sentences where the Court stated: "Furnishing of minimum and maximum number of vehicles and trips for each route would also in our opinion, satisfy the requirement that particulars should be furnished of the services proposed to be rendered.
Further the indication of minimum and maximum number of vehicles and trips for each route would give the necessary information to enable the objectors to oppose the scheme even with reference to the adequacy of the services proposed to be rendered.
" We do not think that the appellants are right in submitting that when the word "particulars" is used in this part of the section, it can only be satisfied if the exact number of vehicles and trips for each route is specified and that there is no other way of satisfying the requirement implicit in the use of the word "particulars".
It is thus clear that the exact number of vehicles and trips for each route need not be given and all that sec.
7 of the amended Act provides is that the draft scheme as well as the approved scheme need not specify the number of services.
The decision relied on by the learned counsel makes it clear that the number of vehicles and trips for each route need not be specified.
We 15 are therefore unable to accept the contention that the failure to specify the number of services would invalidate the draft scheme or the approved scheme.
The learned counsel Mr. Shanti Bhushan submitted that in any event as the maximum or minimum number of buses, vehicles and trips have not been mentioned, the scheme should be held to be inoperative.
This contention again is not factually substainable as the impugned scheme under sec.
68C which was notified in the U.P. Gazette on 4 12 1961 gave the required particulars.
Clause 3 of the scheme stated "Adequate number of State Road Transport passenger services according to traffic requirements are to be provided on the route mentioned in clause (2) above.
The provision of Transport service otherwise than under the scheme is prohibited.
" Clause 2 provided that State Road Transport passenger services shall be provided on the inter State route Agra Dholpur of Agra Region.
Clause 6 provided that the Transport Vehicles which may be used on the route indicated in clause (2) above, shall be of country type and their carrying capacity shall be 30 to 45 seats.
Clause 7 mentions the permits which have been cancelled.
A reading of the scheme would indicate that transport vehicles and services will be provided on the 505 routes taken over by country type vehicles with 30 to 45 seats capacity.
There is no material to show that any of the operators or others entitled to object to the scheme raised this objection before the scheme was approved in the year 1963.
When specifically asked whether such an objection was taken to the draft scheme the learned counsel for the appellants were unable to say that the objection was taken.
We feel it is futile for them to raise the plea after a lapse of about 15 years.
There is no substance in any of the contentions raised.
One cannot but express amazement at the tenacity of the operators in stalling any scheme for nationalisation of public transport.
The appeals, special leave petitions and writ petitions are dismissed with costs.
V.D.K. Appeals and petitions dismissed.
|
On the question whether sections 7 and 16 of the U.P. Motor Vehicles (Special Provisions) Act, 1976 (Act 127 of 1976) related only to "approved" Schemes under section 68D of the and, therefore, the approved scheme for inter state range Agra Dholpur of Agra region was inoperative, the Court, while dismissing the Writ Petitions and the connected special leave petitions.
^ HELD: (1) Sections 7 and 16 of U.P. Motor Vehicles (Special Pro visions) Act, 1976 have validly provided that the specification of the number of services is not and shall be deemed to have never been an essential requirement in a scheme prepared and published under section 68D of the .
[503A B] The marginal note to section 7 states "specification of number of services not an essential requirement of section 68C or section 68D", makes the intention clear that the section is intended to cover section 68C also.
The intention is also carried out by the Section providing that "Nothing contained in section 68C or section 68D of the Principal Act shall be deemed to require. " The operation of section 7 is thus intended to apply both to sections 68C and 68D.
The result would be that if one of the requirements of section 68C is that it should specify the number of services to be provided, it shall be deemed that requirement was never there.
The reference to the approved scheme is because section 68C and section 68D form part of the same procedure of publication of a scheme and approval of the scheme.
That this is the object is put beyond all doubt by the introduction of the validation section, section 16, which provides that in any scheme prepared or published under section 68C or approved or modified under section 68D of the Principal Act shall not be deemed to be invalid on the ground of number of services to be provided being not specified therein.
[502F H, 503A] Shashi Kant Rai & ors.
vs Regional Transport Authority, Varanasi Region and ors.
AIR 1978 All.
68 over ruled.
Failure to specify the member of services would not invalidate the draft scheme under section 68C or the approved scheme under section 68D of the .
It cannot be said that when the word "particulars" is used in this part of section 68C, it can only be satisfied if the exact number of vehicles and trips for each rank is specified, and, that 499 there is no other way of satisfying the requirement implicit in the use of the A word "particulars".
The exact number of vehicles and trips for each route need not be given and all that section 7 of the amended Act provides is that the draft scheme as well as the approved scheme need not specify the number of services.
[504C E] B.B. Aswathanarayan Singh & Ors.
vs State of Mysore & ors. , applied.
(3) In the instant case, the impugned scheme cannot be held to be inoperative for non mentioning of the maximum or minimum number of buses, vehicles and trips, since the scheme notified in U.P. Gazette on 4 12 1961 gave the required particulars.
A reading of the scheme would indicate that transport vehicles and services would be provided on the routes taken over by country type vehicles with 30 to 45 seats capacity.
Moreover, this objection which was not taken before the scheme was approved in 1963 would not be allowed to be taken after a lapse of 15 years.
[504 G H, 505 A B]
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4215.txt
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Civil Appeals Nos. 1461 to 1468 of 1 974.
From the Judgment and order dated the 14th April, 1974 of the Disciplinary Committee of the Bar Council of India, New Delhi.
in C. Appeals Nos. 15 to 19, 21, 22 and 25 of 1973 respectively.
H V. section Desai, Vimal Dave and Kailash Mehta, for the appellant (in all the appeals).
309 M. V. Dabolkar, for the respondent (In C. A. No. 1461/74).
Z. F. Bootwala and Urmila Sirur, for the respondent (In C. A. Nos. 1462 64/74) .
V. N. Ganpule and V. H. Dixit, for the respondent (In C. A. No. 1465/74).
K. G. Mandalia, for the respondent (In C. A. No. 1466/74).
E. Udayarathallam and A. K. Doshi, for the respondent (In C.A. No. 1467/ 74).
D. K. Raisinghani, for the respondent (In C.A. No. 1468/74).
K. K. Sinha and section K. Sinha, for the Bihar State Bar Council.
D. V. Patil and K. Hingorani, for the Bar Council of India.
The Judgment of A. N. RAY, C.J., H. R. KHANNA, K. K. MATHEW, A. C. GUPTA AND section M. FAZAL ALl, was delivered by A. N. RAY, C.J., M. BEG and V. R. KRISHNA IYER, JJ.
gave separate opinions.
RAY, C.J.
These appeals were placed before this Bench for consideration of the question whether the Bar Council of a State is "a person aggrieved" to maintain an appeal under section 38 of the hereinafter called the Act.
The Bar Council of Maharashtra on 8 August, 1964 considered a complaint received from the High Court against the respondents and resolved that the complaint received from the High Court against the respondents be referred to the disciplinary committee.
Another resolution was passed by the Bar Council of Maharashtra on the same day whereby Messrs Hotchand Advani, R. W. Adik and section C. Chagla were elected as members of the disciplinary committee to enquire into the complaints.
The aforesaid disciplinary committee met on 19 March, 1965 and heard the advocates for the Bar Council of the State of Maharashtra.
After considering the papers placed before the committee, it directed the Registrar to issue notices under section 35(2) of the Act to the "parties concerned including the Advocate General".
The committee also expressed the opinion that "there is a prima facie case of professional misconduct".
The Bar Council of Maharashtra on 18 May, 1965 issued notices under section 35 of the Act to the respondents.
The notice was described as a suo motu inquiry against the respondents.
The notice proceeded with the recital that it came to the notice of the Bar Council of Maharashtra that the respondents stood at the entrance of the Court House at the Presidency Magistrate 's Court, Esplanade, Fort Bombay and solicited work and generally behaved at that place in an undignified manner and the said acts amounted to professional and/or other misconduct and the Bar Council constituted disciplinary committee and the inquiry was entrusted to the committee consisting of Messrs H. G. Advani, R. W. Adik and section C. Chagla.
310 The said disciplinary committee heard evidence upto 31 August, 1968.
On 14 June, 1969, the Bar Council of Maharashtra passed a resolution requesting the aforesaid disciplinary committee to proceed with the inquiry which was pending before them prior to 31 March, 1969.
The disciplinary committee of the Bar Council of Maharashtra on 27 June, 1973 found the respondents guilty of conduct which seriously lowered the reputation of the Bar in the eyes of the public.
The disciplinary committee directed that the respondents would stand suspended from practising as advocates for a period of three years.
The suspension orders were to be operative from 1 August 1973.
The respondents preferred appeals before the Bar Council of India.
In these appeals, the respondents impleaded the Bar Council of Maharashtra as respondents.
The disciplinary committee of the Bar Council of India on 14 April, 1974 allowed the appeals and set aside the orders of the disciplinary committee of the Bar Council of Maharashtra.
While setting aside the orders of the disciplinary committee of the Bar Council of Maharashtra, the disciplinary committee of the Bar Council of India stated as follows: "The Bar Council of Maharashtra has not appeared even though they started the proceedings suo motu and we do not pass any orders as to costs and we direct each party will bear their costs.
However, we have gone through the evidence ourselves and also the same has been placed in detail by the appellants.
All that we can say is that we expected the Bar Council of Maharashtra to be represented in the ap peal because proceedings were started suo motu" These statements of the disciplinary committee of the Bar Council of India indicate that the Bar Council of Maharashtra should have appeared before the disciplinary committee of the Bar Council of India.
The scheme of the in short is as follows: There are State Bar Councils.
There is Bar Council of India Every Bar Council is a body corporate.
The functions of a State Bar Council are inter alia to entertain and determine cases of misconduct against advocates on its roll and to safeguard the rights, privileges and interests of advocates on its roll.
The functions of the Bar Council of India are inter alia to lay down standards of professional conduct and etiquette, to lay down the procedure to be followed by its disciplinary committee and the disciplinary committee of State Bar Councils, to safeguard the rights, privileges and interests of advocates and to exercise general supervision and control over State Bar Councils Disciplinary committees are constituted by each Bar Council.
A Bar Council is required to constitute one or more disciplinary committees each of which shall consist of three persons of whom two shall 311 be persons elected by the Council from amongst its members and the other shall be A person co opted by the Council from amongst advocates who possesss the qualifications specified in the proviso to section 3(2) of the Act and are not members of the Council, and the senior most advocate amongst the members of a disciplinary committee shall be its Chairman.
When the Executive Committees of a State Bar Council and of the Bar Council of India and an Enrolment Committee of a State Bar Council and the legal education committee of the Bar Council of India are to consist of members erected by the Council from amongst its members, it is noticeable that the disciplinary committees of Bar Council of State as well as of Bar Council of India shall consist of three persons of whom two shall be elected by the Council from amongst its members and the other shall be a person co opted by the Council from advocates who are not otherwise members of the Council.
Chapter V of the Act relates to the Conduct of Advocates.
Chap ter V contains sections 35 to 44.
Section 35 states that where on receipt of a complaint or otherwise a State Bar Council has reason to believe that any advocate on its roll has been guilty of professional other misconduct, it shall refer the case for disposal to its disciplinary committee.
The State Bar Council may, either of its own motion or on application made to it by any person interested, withdraw a proceeding pending before its disciplinary committee and direct that inquiry to be made by another disciplinary committee of the State Bar Council.
The disciplinary committee of a State Bar Council shall fix a date for the hearing of the case and shall cause a notice to be given.
to the advocate concerned and to the Advocate General of the State.
The disciplinary committee of the State Bar Council may make any of the following orders namely, (a) dismiss the complaint, or where the proceedings were initiated at the instance of the State Bar Council, direct that the proceedings be filed, (b) reprimand the advocate, (c) suspend the advocate for such period as it may deem fit, (d) remove the name of the advocate from the state roll of advocates.
Section 36 speaks of disciplinary powers of the Bar Council of India and provides that where on receipt of a complaint or otherwise the Bar Council of India has reason to believe that any advocate whose name is not entered on any State roll has been guilty of professional or other misconduct, it shall refer the case for disposal to its disciplinary committee.
The disciplinary committee of the Bar Council of India may either of its own motion or on a report by any State Bar Council or on an application made to it by any person interested, withdraw for inquiry before itself any proceeding for disciplinary action against any advocate pending before the disciplinary committee of any State Bar Council and dispose of the same.
Section 37 speaks of appeal to the Bar Council of India.
This section states that any person aggrieved by an order of the disciplinary 312 committee of a State Bar Council or the Advocate General of the state may, within sixty days of the date of communication of the order, prefer an appeal to the Bar Council of India.
Section 38 provides for appeal to the Supreme Court.
Section 38 states that any person aggrieved by an order made by the disciplinary committee of the Bar Council of India under section 36 or section 37 or the Attorney General of India or the Advocate General of the State, as the case may be, may prefer an appeal to the Supreme Court.
Section 49 of the Act provides that the Bar Council of India may make rules for discharging its functions under the Act and in particular such rules may prescribe inter alia the standards of professional conduct and etiquette to be observed by advocates.
The Bar Council of India in exercise of the rule making power under section 49(c) of the Act on 10 and l l July, 1954, approved the rules of standards of professional conduct and etiquette.
The standards of professional conduct and etiquette are described in five sections.
The first section deals with duty of advocates to the Court.
The second section speaks of duty of advocates to the clients.
The third section consists of rules regarding duty of advocates to opponent.
The fourth section prescribes duties of advocates to colleagues.
The fifth section lays down restrictions on advocates on other employments.
The present appeals touch on Rule 36 of the Rules of the Bar Council of India.
Rule 36 is in fourth section under the heading "duty to colleagues Rule 36 speaks that "an advocate shall not solicit work or advertise either directly or indirectly, whether by circular, advertisements, touts, personal communications, interviews not warranted by personal relations furnishing newspaper comments or procuring his photograph to be published in connection with cases in which he has been engaged or concerned.
The question for consideration is the meaning of the words any person aggrieved by an order made by the disciplinary committee of the Bar Council of India" occurring in section 38 of the Act.
It is noticeable that in section 37, the Advocate General of the State and in section 38, the Attorney General or the Advocate General of the State, as the case may be, have been given specific rights of appeal.
These rights were introduced into the Act by amendments made in the year 1974 by Amending Act 60 of 1973.
In Adi Pherozshah Gandhi vs H. M. Seervai, Advocate General of Maharashtra, Bombay(1), the question which fell for consideration was whether the appeal filed by the Advocate General of Maharashtra before the Bar Council of India was competent.
The majority view was that the Advocate General of the State was not competent to file an appeal to the Bar Council of India.
In the Maharashtra case (supra), the disciplinary committee of the State Bar Council was satisfied that that there was no reason to hold Adi Pherozshah Gandhi guilty of professional misconduct or other misconduct.
The Advocate General (1) 313 of Maharashtra filed an appeal before the Bar Council of India.
The appellant objected to the locus standi of Advocate General before the Bar Council of India.
That objection was overruled and the appeal filed by the Advocate General was accepted by the disciplinary committee of the Bar Council of India.
The disciplinary committee of the Bar Council of India held the advocate, Adi Pherozshah Gandhi guilty of misconduct and suspended him from practice for one year.
The advocate preferred an appeal under section 38 of the Act to this Court.
In view or majority decision, the appeal filed by Adi Pherozshah Gandhi was accepted by this Court on the ground that the Advocate General of Maharashtra was incompetent to file an appeal.
It is in this background that amendments have been introduced into sections 37 and 38 of the Act conferring right of appeal on the Advocate General of State and the Attorney General of India under sections 37 and 38 respectively.
The respondents contended on the ruling of this Court in Adi Pherozshah Gandhi s case (supra) that the Bar Council of the State is not a person aggrieved to maintain an appeal against a decision of its disciplinary committee for these reasons.
First, the Bar Council of a State is not an aggrieved person because Bar Council has not suffered ally legal grievance, and the decision of the Bar Council of India has not deprived the Bar Council of a State of anything.
Second, the allegation that order of the disciplinary committee of the Bar Council of India is wrongfully made does not by itself give any grievance to the Bar Council of a State.
The person must be aggrieved by the order and not by the consequences which ensue.
Third, it is not the duty of the State Bar Council to attempt to set right any alleged error of the disciplinary committee of the Bar Council of India.
The reason is that no such duty has been imposed or cast by law on the Bar Council of a State.
Fourth, a person can be said to be aggrieved by an order which is to his detriment, pecuniary or otherwise or causes him some prejudice in some form or other.
Fifth, the Bar Council of a State is subordinate to Bar Council of India and is, therefore, not competent to appeal against any orders of the superior body.
Finally, an appeal could have been filed by the Advocate General or the Attorney General of India who have the right to appeal but they have chosen not to do so.
The scheme and the provisions of the Act indicates that the constitution of State Bar Councils and Bar Council of India is for one of the principal purposes to see that the standards of professional conduct and etiquette laid down by the Bar Council of India are observed and preserved.
The Bar Councils therefore entertain cases of misconduct against advocates.
The Bar Councils are to safeguard the rights, privilege and interests of advocates.
The Bar Council is a body corporate.
The disciplinary committees are constituted by the Bar Council.
The Bar Council is not the same body as its disciplinary committee.
One of the principal functions of the Bar Council in regard to standards of professional conduct and etiquette of advocates is to receive complaints against advocates and if the Bar Council has reason to believe that any advocate has been guilty of professional or other misconduct it shall refer the case for disposal to its disciplinary committee.
The Bar Coun 314 cil of a State may also of its own motion if it has reason to believe that any advocate has been guilty of professional or other misconduct it shall refer the case for disposal to its disciplinary committee.
It is apparent that a State Bar Council not only receives a complaint but is required to apply its mind to find out whether there is any reason to believe that any advocate has ben guilty of professional or other misconduct.
The Bar Council of a State acts on that reasoned belief.
The Bar Council has a very important part to play first, in the reception complaints, second, in forming reasonable belief of guilt of professional or other misconduct and finally in making reference of the case to its disciplinary committee.
The initiation of the proceedings before the disciplinary committee is by the Bar Council of a State.
A most Significant feature is that no litigant and no member of the public can straightaway commence disciplinary proceedings against an advocate.
lt is the Bar Council of a State which initiates the disciplinary proceedings.
In finding out the meaning of the words "person aggrieved by an order made by the disciplinary committee of the Bar Council of India", two features are to be kept in the fore front.
First, there is no lis in proceedings before the disciplinary committee.
When the disciplinary committee exercises the power to reprimand the advocate, or suspend the advocate from practice or remove the name of the advocate, the committee does not decide a suit between the parties.
The Bar Council in placing a matter before the disciplinary committee does not act as prosecutor in a criminal case.
A complainant who prefers a complaint against an advocate is not like a plaintiff in a civil suit.
The complaint is examined by the Bar Council in order to find out whether there is any reason to believe that any advocate has been guilty of misconduct. 'The Bar Council may act on its own initiative on information which has come to its notice in the course of its duties.
Second, there is no party to the disciplinary proceedings.
It is because the Bar Council, the Attorney General, the Advocate General, as the case may be, all act in protecting the interests of advocates, the interests of the public.
In so acting there is no conflict between the advocate and another person.
The reason is that it is professional conduct, professional etiquette, professional ethics, professional morality, which are to be upheld, transgression of which results in reprimanding the advocate of suspending him from practice or removing his name from the roll.
With regard to the conduct of the advocates, the State Bar Council plays an important part, vis a vis the disciplinary committee constituted by the State Bar Council.
First, under section 35(1A) of the Act the State Bar Council may either of its own motion or on an application made to it by any person interested, withdraw a proceeding pending before its disciplinary committee and direct the inquiry to be made by ant other disciplinary committee of the State Bar Council.
This indicates the watch that the State Bar Council has to keep.
Its task does not cease on placing a matter before the disciplinary committee.
This provision shows on one hand the abiding interest of the State Bar Council in the matter and on the other the duty of guarding the professional ethics with which it is entrusted.
Second, under section 36(2) of the Act, a 'State Bar Council may make a report to the Bar Council of India to 315 withdraw before the disciplinary committee of the Bar Council of India any proceeding for disciplinary action against any advocate pending before the disciplinary committee of a State Bar Council.
These provisions indicate that after the State Bar Council has placed the matter before its disciplinary committee, the Bar Council continues its check on the proceedings.
These courses of action are procedural.
These steps do not give the State Bar Council any power to deal with the decisions of the disciplinary committee.
The reason why the State Bar Council is empowered under the Act to withdraw proceedings from one disciplinary committee and give it to another or to have the disciplinary proceedings withdrawn from the State for determination by the disciplinary committee of the Bal Council of India is that the State Bar Council is all the time interested in the task of preserving the profession against impurities in the standards of conduct.
The Bar Council is the collective representative of the lawyers, the public, in regard lo the observance of professional ethics by persons belonging to the noble profession.
The words `person aggrieved" are found in several statutes.
The meaning of the words "person aggrieved" will have to be ascertained with reference to the purpose and the provisions of the statute.
Some times, it is said that the words "person aggrieved" correspond to the requirement of locus standi which arises in relation to judicial remedies.
Where a right of appeal to Courts against an administrative or judicial decision is created by statute, the right is invariably confined to a person aggrieved or a person who claims to be aggrieved.
The meaning of the words "a person aggrieved" may vary according to the con text of the statute.
One of the meanings is that a person will be held to be aggrieved by a decision if that decision is materially adverse to him.
Normally, one is required to establish that one has been 'denied or deprieved of something to which one is legally entitled in order to make one "a person aggrieved".
Again a person is aggrieved if a legal burden is imposed on him.
The meaning of the words a "person aggrieved" is sometimes given a restricted meaning in certain statutes which provide remedies for the protection of private legal rights.
The restricted meaning requires denial or deprivation of legal rights.
A more liberal approach is required in the background of statutes which do not deal with property rights but deal with professional conduct and morality.
The role of the Bar Council under the is comparable to the role of a guardian in professional ethics.
The words "persons aggrieved" in sections 37 and 38 of the Act are of wide import add should not be subjected to a restricted interpretation of possession or denial of legal rights or burdens or financial interests.
The test is whether the words "person aggrieved" include "a person who has a genuine grievance because an order has been made which prejudicially affects his interests".
It has therefore, to be found out whether the Bar Council has a grievance in respect of an order or decision affecting the professional conduct and etiquette.
The pre eminent question is: what are the interests of the Bal.
Council? The interests of the Bar Council are the maintenance of standards of professional conduct and etiquette.
The Bar Council has 316 no personal or pecuniary interest.
the Bar Council has the statutory A duty and interest to see that the rules laid down by the Bar Council of India in relation to professional conduct and etiquette are upheld and not violated.
The Bar Council acts as the sentinel of professional code of conduct and is vitally interested in the rights and privileges of the advocates as well as the purity and dignity of the profession.
The interest of the Bar Council is to uphold standards of professional conduct and etiquette in the profession, which is founded upon integrity and mutual trust.
The Bar Council acts as the custodian of the high traditions of the noble profession.
The grievance of the Bar Council is to be looked at purely from the point of view of standards of professional conduct and etiquette.
If any decision of the disciplinary committee of the Bar Council of India is according to the State Bar Council such as will lower the standards and imperil the high traditions and values in the profession, the State Bar Council is an aggrieved person to safeguard the interests of the public, the interests of the profession and the interests of the Bar The Bar Council is "a person aggrieved" for these reasons First, the words "person aggrieved" in the Act are of wide import in the context of the purpose and provisions of the statute.
In disciplinary proceedings before the disciplinary committee there is no lis and there are no parties.
therefore, the word "person" will embrace the Bar Council which represents the Bar of the State.
Second, the Bar Council is "a person aggrieved" because it represents the collective conscience of the standards of professional conduct and etiquette.
The Bar Council acts as the protector of the purity and dignity of the profession.
Third, the function of the Bar Council in entertaining complaints against advocates is whn the Bar Council has reasonable belief that there is a prima facie case of misconduct that a disciplinary committee is entrusted with such inquiry.
Once an inquiry starts, the Bar Council has no control over its decision.
The Bar Council may entrust it to another disciplinary committee or the Bar Council may make a report to the Bar Council of India.
This indicates that the Bar Council is all the time interested in the proceedings for the vindication of discipline, dignity and decorum of the profession.
Fourth, a decision of a disciplinary committee can only be corrected by appeals as provided under the Act.
When the Bar Council initiates proceedings by referring cases of misconduct to disciplinary committee, the Bar Council in the performance of its functions under the Act is interested in the task of seeing that the advocates maintain the proper standards an(l etiquette of the profession.
Fifth, the Bar Council is vitally concerned with the decision in the context of the functions of the Bar Council.
The Bar Council will have a grievance if the decision prejudices the maintenance of standards of professional conduct and ethics.
For these reasons we hold that the Bar Council is an aggrieved person to maintain an appeal under the Act.
The appeals will now be heard on merits by a Division Bench.
317 BEG, J.
I not only concur with the conclusion reached by My Lord the Chief Justice and the reasons given to support it.
but I think that we can and should hold that there was actually a "lis" between tho Bar Council and the allegedly delinquent Advocates who were hauled up before its Disciplinary Committee, on complaints sent by the Executive Committee of the State Bar Council, for what were said to be acts of professional misconduct, The learned Chief Justice has very clearly and succinctly set out the reasons why a State Bar Council is a "person aggrieved" entitled to appeal against orders in disciplinary proceedings against members of the Bar of the State.
It represents the Bar of the State.
It is the "keeper of the conscience" and the guardian of the interests of members of the Bar.
It acts "as the protector of the purity and dignity of the (` profession." Its function in relation to disciplinary proceedings, is to entertain complaints against Advocates, and, when there is a prima facie case of misconduct, to initiate proceedings by sending the complaint to its Disciplinary Committee.
It has an interest in seeing that correct decisions are given upon matters involving allegations of misconduct against members of the Bar of the State.
My learned brother Krishna Iyer has indicated the wide range and the social significance and dimensions of this interest.
A State Bar Council is composed primarily of members elected from amongst Advocates of a State.
Its statutory functions are given in Section 6 of the (hereinafter referred to as 'the Act ').
Amongst these, we are especially concerned here with clauses (c) and (d) of Section 6(t) of the Act, which read as follows: (c) to entertain and determine cases of misconduct against advocates on its roll; (d) to safeguard the rights, privileges and interests; of advocate on its roll;" Under Section 9 of the Act, the State Bar Council constitutes its Disciplinary Committee consisting of "three persons of whom two shall be persons elected by the.
Council from amongst its members and the other shall be a person elected by the Council from amongst Advocates who possess the qualifications specified. ".
Under Section 10 it elects an Executive Committee of five members and an Enrolment Committee of three members.
Thus, the State Bar Council operates through its Committees.
Each Committee has distinct and separable functions.
Each could, therefore, be said to have a "persona" and an identity of its own which is distinguishable from that of the Bar Council as a whole.
Each Committee, no doubt, acts for the Bar Council, but its members are likely to be different although this is not necessarily so.
In any case, when the State Bar Council has sent a case to its Disciplinary Committee, under Section 35 of the Act, that Committee proceeds as an independent and impartial authority which tries a complaint and either dismisses lt or directs proceedings to be filed, or, upon finding an advocate guilty, punishes him by either reprimanding him, suspending him from practice for a specified period, or orders removal of his name 7 L 839 Sup CI/75 318 from its roll of advocates.
Indeed, Section 42(1) of the Act gives the Disciplinary Committee the powers of a Civil Court under the Civil Procedure Code; and, Section 42(2) enacts that its proceedings shall be "deemed" to be judicial proceedings for the purposes mentioned there.
At the trial of a complaint, opportunities to be heard must be given to the Advocate General and to the Advocate who is tried by it.
This has to be done because there are disputes and conflicting interests and points of view on which the Disciplinary Committee has to give its decisions.
Tho Advocate General can appear either personally or through an Advocate representing him.
He presumably represents public interest as well as the interests of the legal profession of which he is the formal head in the State.
It is true that there is no provision in Section 35 of the Act for impleading the State Bar Council which, on its executive side, initiates the proceedings by sending the case to its Disciplinary Committee.
But, if the Bar Council has a separable interest, as a guardian of the rights and privileges of the members of the Bar specifically mentioned by Section 6(1)(d) of the Act, there is no reason why I right to represent this interest before its on Disciplinary Committee well as before the Bar Council of India, on an appeal under Section 37 of the Act, or, on the further appeal to this Court under Section 38 of the Act, should be denied to it.
Neither Section 37 nor Section 38 of the Act mention the State Bar Council as a separate entity.
Nevertheless if, as we are holding, it can have the locus standi and rights of "person aggrieved", affected by the results of such proceedings, I see no reason why we should not say that in tho position of a party to a "lis" or a dispute between itself and the allegedly delinquent Advocate towards the decision of which the proceedings are directed.
The term "lis" is not confined to litigation by means of a suit in a Court of law.
In Butler vs Mountgarret it was held that a "suit is not necessary to constitute lis".
It was pointed out there that "a family . controversy capable of being litigated is a lis mota '.
In B. Johnson & Co. (Builders) vs Minister of Health(2), Lord Greene, M.R. said: `"Lis implies the conception of an issue joined between two parties, The decision of a lis. is the decision of that issue".
If the State Bar Council, acting through its through it Executive Committee, has found a prima facie case to be send and tried by its Disciplinary Committee, it performs the functions of a prosecuting agency.
lt does so i the discharge of its duty to safeguard '`the rights, privileges and interests ' of advocates as a whole on its roll which are affected by the misconduct of an advocate.
There arc, therefore, triable issues between it and the; (, individual Advocate accused of misconduct.
lt seems to mc that we could and should, therefore, hold that the State Bar Council, in its executive capacity, act as the prosecutor through its Executive Committee There is no incongruity in its Disciplinary Committee, representing is judicial want" functioning as an impartial Judge whose decisions ar. binding upon the State Bar Council.
If are were holding that Bar Council, dissatisfied with a decision of its Disciplinary Committee, can appeal against it, we her to, I think, as its logical corollary, also hold that it is (1) 7 H. L. Ca. 641.
(2) ; At 399. 319 a party to a "lis".
Our` opinion that it is a 'person aggrieved", within the meaning of that expression as used in Sections 37 and 38 of the Act, necessarily implies that.
The point of view stated above rests upon the distinction between the two different capacities of the State Bar Council; an executive capacity, in which it acts as the prosecutor through its Executive Committee, and a quasi judicial function, which it performs through s Disciplinary Committee.
If we can make this distinction, as I think we can, there is no merger between the prosecutor and the Judge here.
If one may illustrate from another sphere, when the State itself gets through it executive agencies to prosecute and then though its judicial wing to decide a case there is no breach of a rule of natural justice.
The prosecutor and the Judge could not be said to have the some personality or approach just because both of them represents different aspects or functions of the same State.
For the reasons given above, I do not see any objection to a participation of State Bar Council in its executive capacity, in a disciplinary proceeding against an Advocate on its roll, either at the initial or the appellate stages.
Before it can become a person aggrieved" by an order against which it could appeal, there must have been a "lis" or a dispute to be decided which gives rise to the order complained of.
To such a "lis" the State Bar Council, in its executive capacity must be deemed to be a party.
Apparently, its interests are presumed to be sufficiently represented by the Advocate General.
Hence, it was not considered necessary to provide for its separate representation by a notice to be given by its Disciplinary Committee; is provided for in the case of the Advocate General But, their seems to me to be no legal obstacle in the way of its separate representation, if.
it so desires, even before its own Disciplinary Committee.
It certainly has notice of every complaint whenever it send it to its Disciplinary Committee.
Its right to appeal in any event, as a "person aggrieved", seems squarely covered by the provisions of Sections 37 and 38 of the Act.
It may be mentioned here that the respondents themselves treated the Bar Council as a party interested in a "list", so that it could become a "person" aggrieved" by the setting aside of the orders against respondents, when they impleaded the State Bar Council as a respondent in their appeals to the Bar Council India.
Its statutory right to appeal to this Court under Section 38 is not affected by the mere fact that it did not put in appearance before the Bar Council of India.
KRISHNA IYER, J.
My concurrence the opinion which has been handed down by the learned Chief Justice is ordinarily dissuasive of a separated long note, save when a fresh perspective is to be presented or new frontiers are to be drawn by doing so.
Partially, my supplementary has this apology.
The tow day long arguments in this case have been devoted to a construction of two simple words in common use forming the 320 expression 'person aggrieved '.
Precedential erudition and traditional approaches not withstanding, the key to tho meaning of the expression in question lies in plain English plus the social fell of the Status and the public commitment of the legal profession, the regulation on which has been achieved by the (for short, the Act) wherein the above words occur.
Legal scholarship, to be fruitful, must focus on the life style of the law without getting lost in mere logomachy.
The short question is as to whether the State Bar Council is a person aggrieved ' within the meaning of section 38 so that it has locus standi to appeal to this Court against a decision of the Disciplinary Tribunal of the Bar Council of India which, it claims, is embarrassingly erroneous and, if left unchallenged, may frustrate the high obligation of maintaining standards of probity and purity and canons of correct professional conduct among the members of the Bar on its rolls.
I skip the facts as they have been 5 out in the judgment of the armed Chief Justice, except to state.
that a number of advocates, who are ranged as respondents, had been found guilty by the Disciplinary Tribunal of the State Bar Council of unseemly soliciting but,.
On appeal.
the disciplinary body of the National Bar Council, exonerated them on certain view of 'professional conduct ' which disturbed the State Bar Council and even the All India Bar Council, with the result that the former came upto this Court in appeal and.
the latter activity supported this stand.
The hackneyed phrase, 'person aggrieved is not merely of frequent occurrence m statutes and in the writ jurisdiction but has come up for judicial consideration in Anglo American and India courts in a variety of situations and legislative settings.
Notwithstanding the slippery semantics of such legalese, the Indian legislative draftsmen have continued to use them, out of linguistic allegiance to the British art, and Indian Judges have frequently sought interpretative light from English authorities of ancient vintage.
These 'borrowed ' drafting and interpretative exercises arc sometimes inept when time and country change and the context and text of the statute vary.
I stress this aspect since much of the time of the Courts in India is consumed by massive, and sometimes mechanical, reliance on exotic constructions and default in evolving legislative simplicity and avoiding interpretative complexity.
At a time when our Courts are on trial for delayed disposals and mystifying processes, this desideratum becomes all the more urgent.
Otherwise, why should decoding a single expression 'person aggrieved ' take two days of learned length ? Even.
in England, so well known a Parliamentary draftsman as Francis Bennion has recently pleaded in the Manchester Guardian against incomprensible law forgetting 'that it is fundamentally important in a free society that the law should be readily ascertainable and reasonably clear, and that otherwise it is oppressive and deprives 321 the citizen of one of his basic rights '.
It is also needlessly expensive and wasteful.
Reed Dickerson, the famous American Draftsman. said: 'lt cost the Government and the public many millions of dollars annually '.
The Renton Committee, in England, has reported on drafting reform but it is unfortunate that India is unaware of this problem and in a post Independence statute like the legislators should still get entangled in these drafting mystiques and judges forced lo play a linguistic game when the country has an illiterate laity as consumers of law and the rule of law is basic to our constitutional order.
Back to the issue.
Is the State Bar Council a 'person aggrieved '? No narrow.
pedantic, technical or centenarian construction can be blindly applied.
On the other hand, a spacious construction, functionally informed by the social conscience and the salutary purpose of the enactment must illumine the judicial effort.
So viewed, the ample.
import and breath of meaning of the words 'person aggrieved ' will .
embrace the State Bar Council,for reasons which 1 shall presently set out.
Each statute has a personality and a message.
Judicial interpretation is not bloodless and sterile exercise in spinning subtle webs sometimes cobwebs, out of words and phrases otherwise simples.
but to unfold the scheme of the Legislation insightfully, sense its social setting and read the plain intendment.
This living approach can do justice to law, We arc here concerned with a legislative outfit for a national Bar, organising and prescribing its statutory autonomy, elective structure, public functions, internal regulation and ultimate appeal to the Supreme Court where canons of good conduct have been allegedly breached by delinquent lawyers.
This conspectus will show what a vibrant and responsible role the Bar Council has to play at the State and national levels and any interpretation which will detract from this supervisory status of the Bar Council will be incongruous with the founding creed of the institution.
The paramount concern of the Bar Councils is the lawyer, the public and professional responsibility.
Anything that hurts the health of this system is a social trauma, a legal grievance, a special injury, for them.
After all, 'lawyer power ' lasts not through peak incomes of a few and security of statutory monopoly, but by the high comport and ethics of the many, screening and weeding deviants and delinquents.
Let us get a glimpse of the great expectations about The legal profession in society.
Long ago, De Toqueville trenchantly remarked that the profession of law.
"is the only aristrocratic element which can be amalgamated without violence with natural elements of democracy.
I cannot believe that a Republic could subsist if the influence of lawyers in public business did not increase in proportion to the power of the people.
" He rightly stressed that 'lawyers belong to the people by birth an.
interest, to the aristocracy by habit and taste '.
Thus the profession is 322 the connecting link between the community and the Administration given an enlightened, goal oriented group outgrowing its elitist mores indeed today lawyers are recruited also from the lower brackets.
India has huge number of law men who can be a force.
What Prof. Brabanti observed about the Pakistan Bar has some, only some though, relevance to India, and I quote: "The sheer size of the legal community, strongly organised into bar associations and closely allied with equally strong courts has not only been a major source for the diffusion and regeneration of norms generally, but by weight of numbers has enabled the courts to remain strong and has prevented the rise of administrative lawlessness.
There is s curious anomaly here.
The legal community, while often antagonistic to government and constraining executive action, is nevertheless closely identified normatively and culturally with the bureaucratic elite.
This identification curiously coupled with health antagonism actually enhances the strength of the legal community.
It derives popular support from its ostensible opposition to Government and at the same time elicits bureaucratic support in the community at large.
It has a net work of relationships in rural areas and the cities.
In short, the legal community is a force to be, reckoned with.
It has challenged the executive during and after martial law, it has defined efforts to restrict court jurisdiction, it has compelled justiciability of fundamental rights, it has forced abrogation of several restrictive enactments.
Is this law as an impendiment to political development ? Is this misallocation of scarce resources in the system? Is this unproductive use of non productive man power ? On the contrary, it seems to us that this is the Very genius of political development." Michael Hager, after quoting Prof. Brabanti, comments (in his article in the American Bar Association Journal, January 1972, Vol. 58, on .The Role of Lawyers in Developing Countries ') "The legal profession has a unique opportunity to effect change from within the political elite, to exert pressure from without and to win over the general public to development policies.
And as Mihaly and Nelson observed with respect to legal education, 'law graduates usually fan out not only into legal practice but also into responsible positions in business, government and politics '.
" The Bar is not a private guild, like that of 'barbers butchers and candlestick makers ' but, by bold contrast, a public institution committed to public justice and pro bono publico service.
The grant of monoply licence to practice law is based on three assumptions There is a socially useful function for The lawyer to perform.
(2) The lawyer is a professional person who will perform that function, and (3) His performance as a professional person is regulated by himself and more normally, by the profession as a whole.
The central function 323 That the legal profession must perform is nothing less than the administration of justice ( 'The Practice of Law is, a Public Utility ' `The Lawyer, The Public and Professional Responsibility ' by F. Raymond Marks et al Chicago American Bar Foundation, 1972, p.288 289).
A glance at The functions of the Bar Council, and it will be apparent that a rainbow of public utility duties, including legal aid to the pour, is cast on these bodies in the national hope that the members of this monopoly will serve society and keep to canons of ethics befitting an honourable order.
If pathological cases of member misbehaviour occur, the reputation and credibility of the Bar suffer a mayhem and who, out the Bar Council, is more concerned with and sensitive to this potential disrepute The few black sheep bring about? The official heads of the Bar i.e., the Attorney General and the Advocates General too are distressed if a lawyer 'stoops to conquer ' by resort to soliciting, touting and other corrupt practices.
I may now refer to A. P. Gandhi vs H. M. Seervai (1) where diver gent opinions were delivered but all concurred in treating the Bar Council as an 'aggrieved person '.
The earlier decision in Bhataraju (2) strikes a note in consonance with this view.
No hesitancy inhibits me from hazarding the opinion that the social canvas must be spread wide when making out the profile of a statute like the for the good reason that the Bar has a share in being the sentinel on the qui vive when the legal dykes of Right and justice are breached by authoritarianism or citizen wrong doing.
Nor do I conceal my halfhorror at any professional tribunal glossing over 'snatching briefs ' and 'dragging clients ' provided they are proved as less than gross misconduct.
If the salt lose their savour, wherewith shall they be salted ? However, I hasten to make it plain, to avoid prejudice to the parties.
that I totally desist from pronouncing on the merits of tho evidence in this case.
One more point.
A case of professional misconduct is not a lis in the British sense nor a case and controversy in the American meaning.
It is a public investigation about misconduct by one belonging to public profession where every member of the Bar with a reputation to lose has a stake and every one concerned with the justice administration is interested.
Traditionally used to the adversary system, we search for individual persons aggrieved.
But a new class of litigation public interest litigation where a section or whole of the community is involved (such as consumers ' organisations or NAACP National Association for Advancement of Coloured People in America), emerges.
In a developing country like ours, this pattern of public oriented litigation better fulfils the rule of law if it is to run close to the rule of life.
The Bar Council clearly comes within this category of organisations When a lawyer is involved.
I derive support for this philosophy of approach from academic and judicial opinion in England and America.
A question arose whether a railroad company BAR (Bangor and Aroostook Railroad) could bring an action against the stockholders for having drained BAR (1) [197] I S C. R. 863.
(2) [1955] 1 section C. R. 1055,1064.
324 improperly.
Although an academic critic took the view that the District Court was incorrect in its view that BAR was the 'sole beneficiary ', he went on to state that the public 's interest in the financial health of BAR provided a separate interest in bringing the action.
The learned author wrote: "It would seem to be incontestable that the public has a very n real interest in rail roads.
Railroads have been found vital to a healthy national economy; any such factor must.
a priori, be deemed a potent component of the public welfare.
As such, it is evident that a financially healthy railroad is of concern not only to its stockholders, but to the public as well Finding that the management of a railroad has obligations running to the public as well as fiduciary duties owing to the corporation 's stockholders, the Court concluded that, of these two responsibilities, tho public interest is paramount.
"It must be remembered," the Court cautioned, "that railways are public corporations organized for public purposes.
They all primarily owe duties to the public of a higher nature even than that of earning large dividends for their shareholders." (Review by James 1;.
Simon of Bangor & Aroostook R. R vs Bangor Punta operations, Inc (Bangor & Aroostook), ; Cir. 1973), cert.
granted, 94 S.Ct.
863 (1974) Columbia Law Review Vol.
74 No. 3, April 197 p. 528 at pp.
531 532).
Similarly, the American Supreme Court relaxed from the restrictive attitude towards 'standing ' in public action in Baker vs Carr ; (1962), vide Maryland Law Review, Vol.
XXXIII 1973 p.506: "In Baker, voters challenged the failure of the Tennessee legislature to reapportion itself since 1901; the plaintiffs lived l. in countries which had become under represented under the old law.
The Supreme Court held that these voters had the requisite standing to challenge the inaction of the legislature The Court expanded the notion cf direct injury to include mere 'debasement ' of a vote, rather than the total deprivation which had previously been required." American jurisprudence has recognised, for instance, the expanding importance of consumer protection in the economic system and permitted consumer organisations to initiate or intervene in actions, although by the narrow rule of 'locus standi ', such a course could not have been justified (see p. 807 New York University Law Review.
46. 1971).
In fact, citizen organisations have recently been Campaigning for using legal actions for protection of community interest, broadening the scope of 'standing ' in legal proceedings (see p.403 Boston University Law Review, Vol.
51, 1971).
325 In the well known case of Attorney,General of the Gambia vs Pierr sarr N. 'Jie(l), Lord Denning observed about the Attorney General 's standing thus: ".
The words 'person aggrieved ' are of wide import and should not be subjected to a restrictive interpretation.
They do not include, of course, a mere busy body who is interfering.
in things which do not concern him; but they do include a person who has a genuine grievance because an order has been made which prejudicially affects his interests.
Has the Attorney General a sufficient interest for this purpose ? Their Lordships think that he has.
The Attorney General in a colony represents the Crown as the guardian of the public interest.
It is his duty to bring before the judge any mis conduct of a barrister or solicitor which is of sufficient gravity to warrant disciplinary action.
" Ray, J (as he then was) crystallised this ratio in A.P. Gandhi (supra) thus: "The Judicial Committee construed the words 'person aggrieved ' to include the Attorney General of Gambia as representing the public interest." (p.927) "The profession touches the public on the one hand and the courts on the other.
On no other basis could the presence of J., the Advocate General be explained." (p.928) Although not strictly confined to 'standing ' with reference to suits jurists have thrown some light on this subject.
Professor S.A de Smith has observed: "All developed legal systems have had to face the problem of adjusting conflicts between two aspects of the public interest the desirability of encouraging individual citizens to participate actively in the enforcement of the law, and the undesirability of encouraging the professional litigant and the meddlesome interloper to invoke the jurisdiction of the courts in matters that do not concern him." (Quoted ill 'Standing Justifiability ' by V. section Deshpande Journal of the Indian Law Institute April June 1971 Vol. 13, No. 2, p. 174) Professor H.W.R. Wade has observed: "In other words, certiorari is not confined by a narrow conception of locus standi.
It contains an element of the actio (1) 326 popularis.
This is because it looks beyond the personal rights A of tho applicant; it is designed to keep the machinery of justice in proper working order by presenting inferior tribunals and public authorities from abusing their powers." (Standing and Justiciability bid, p. 175) The possible apprehension that widening legal standing With a public connotation may unloose a flood of litigation which may overwhelm the judges is misplaced because public resort to court to suppress public mischief is a tribute to the justice system.
In this very case, to grant an exclusionary windfall on the respondents is to cripple the Bar Council in its search for justice and insistence on standards.
I have been long on a short point, but brevity, where there is some thing to speak, is not the soul of wit but a sign of something different.
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The State Bar Councils created by the have been entrusted with the functions inter alia of entertaining and determining cases of misconduct against advocates on their rolls and to safeguard their rights, privileges and interests.
The Bar Council of India which is a national body created by the Act is entrusted with the work of laying down standards of professional conduct and etiquette and overseeing the functioning of the State Bar Councils.
Under section 35 of the Act, if a State Bar Council, either on receipt of a complaint or otherwise has reason to believe that any advocate on its roll has been guilty of professional or other misconduct, it shall refer the case to its Disciplinary Committee which, after due inquiry may impose certain penalties.
An appeal from the decision of the State Bar Council lies to the Bar Council of India.
Any "person aggrieved" by an order of the Disciplinary Committee of the Bar Council of India may, under section 38, appeal to the Supreme Court.
In exercise of the Powers conferred by the Act the Bar Council of India framed rules relating to professional conduct and etiquette, r. 36 of which says that advocates shall not solicit work or advertise themselves.
The State Bar Council, in the present case, issued notices to the respondents suo motu alleging that they stood at the entrance of the court house at the Presidency Magistrate 's Court, Fort Bombay and solicited work etc., and that the said act amounted to professional and/or other misconduct. 'the Disciplinary Committee of the State Bar Council found the respondents guilty of conduct which absolutely lowered the reputation of the Bar in the eyes of the public and suspended them from practising as advocates.
The respondents ' appeal to the Bar Council of India having been allowed, the State Bar Council has come up in appeal to this Court under section 38.
Before the Bar Council of India the State Bar Council had not appeared.
F On the question whether the State Bar Council is a "person aggrieved," Allowing the appeals, Held: ^ [By the full Court], The State Bar Council is an "aggrieved person" to maintain an appeal under the Act.
per Ray, C.J., Khanna, Mathew, Gupta and Murtaza Fazal Ali, JJ): (1) The Bar Council is a "person aggrieved" because (i) the words "person aggrieved" in the Act are of wide import in the context of the purpose and provisions of the statute and should not be subjected to a restricted interpretation of possession or denial of legal rights or burdens or financial interests.
In disciplinary proceedings before the Disciplinary Committee there is no lis and there are no parties.
The word 'person ' will embrace the Bar Council which represents the Bar of the State; (ii) the Bar Council represents the collective conscience of the standards of professional conduct and etiquette.
The Bar Council acts as the protector of the purity and dignity of the profession; (iii) the function of the Bar Council in entertaining complaints against advocates indicates that the Bar Council is interested in the proceedings for the vindication of discipline.
dignity and decorum of the profession; (iv) when the Bar Council ini 307 tiates proceedings by referring eases of misconduct to the Disciplinary Committee, the Bar Council, in the performance of its function under the Act, is interested in the task of seeing that the advocates maintain proper standards and etiquette of the profession and (v) the Bar Council is vitally concerned with the decision, in the context of its functions.
The Bar Council will have a grievance if the decision prejudices the maintenance of standards of professional conduct and ethics.
[315G: 316D G] (2) (a) The Bar Council acts as the sentinel of professional code of conduct and is vitally interested in the rights and privileges of the advocates as well as the purity and dignity of the profession.
[316A B] (b) The grievance of the Bar Council is to be looked at purely from the point of view of standards of professional conduct and etiquette.
If any decision of the Disciplinary Committee of the Bar Council of India is according to the State Bar Council such as will lower the standards and imperil the high traditions and values in the profession the State Bar Council is an "aggrieved person" to safeguard the interests of the public, the interests of the profession and the interests of the Bar.
[316B C] (3) The most significant feature in the matter of initiation of proceedings before the Disciplinary Committee is that no litigant and no member of the public can straightaway commence disciplinary proceedings against an advocate It is the Bar Council of a State which initiates the disciplinary proceedings.
There is no lis in proceedings before the Disciplinary Committee The Bar Council, in placing a matteu.
before the Disciplinary Committee, does not act as a prosecutor in a criminal case.
A complainant who prefers a complaint against an advocate is not like a plaintiff in a civil suit.
The Bar Council may act on its own initiative on information which has come to its notice in the course of its duties.
There is no party to the disciplinary proceedings because the Bar Council, the Attorney General, the Advocate General act in protecting the interests of advocates and the interests of ' the public.
In so acting there is no conflict between the advocate and any other person because it is professional conduct, professional etiquette, professional ethics, professional morality, which are to be upheld.
transgression of which results in reprimanding the advocate or suspending him from practice or removing his name from the roll.
[314B F] Adi Pherozshah Gandhi vs H. M. Seervai, Advocate General of Maharashtra.
Bombay [1971] I S.C.R. 863, referred to Beg J. (concurring): (1) There is no objection to a participation of a State Bar Council in its executive capacity in a disciplinary proceeding against an advocate on its roll either at the initial or at the appellate stages.
Before it can become a "person aggrieved" by an order against which it could appeal, there must have been a lis or a dispute to be decided which gives rise to the order complained of.
To such a "lis" the State Bar Council, in its executive capacity, must be deemed to be a party.
There seems to be no legal obstacles in the way of its separate representation even before its own Disciplinary Committee.
Its right to appeal as a "person aggrieved" is squarely covered by the provisions of sections 37 and 38 of the Act.
In the present case the respondents themselves treated the Bar Council as a party interested in the lis when they impleaded the State Bar Council as a respondent in their appeals to the Bar Council of India.
Its statutory right to appeal under section 38 is not affected by the mere fact that it did not put in appearance before the Bar Council of India.
[319D G] (2) The State Bar Council operates through its committees.
Each committee has distinct and separable functions.
Each could be said to have a "persona" and an identity of its own, which is distinguishable from that of the Bar Council as a whole [317G] 3 (a) If the Bar Council has a separable interest as a guardian of the rights and privileges of the members of the Bar, specifically mentioned by section 6(1)(d) of the Act.
there is no reason why a right to represent this interest before its 308 own Disciplinary Committee as well as before the Bar Council of India, on an A appeal under section 37 of the Act, or., on further appeal to this Court under section 38 of the Act should be denied to it.
[318C D] 4(a) When the State Bar Council can have locus standi and rights of a "person aggrieved" affected by the results of such proceedings there is no reason why it should not be in the position of a party lo a lis or dispute ' between itself and the allegedly delinquent advocate.
[318D E] (b) The term 'lis ' is not confined to litigation by means of a suit in a court of law.
[318E] Butler vs Mountgarret 7 H.L. Ca.
641 and B. Johnson & Co. (Builders) vs Minister of Health 399, referred to.
The State Bar Council in its executive capacity acts as the prosecutor through its Executive Committee.
There is no incongruity in its Disciplinary Committee representing its judicial wing, functioning as an impartial judge whose decisions are binding upon the State Bar Council.
It is a "person aggrieved" within the meaning of that expression used in sections 37 and 38 of the Act.
[318G H] Krishna Iyer, J. (concurring): (1) The Bar is not a private guild, like that of 'barbers, butchers and candlestick makers ' but, a public institution committed to public justice and pro bono publico service.
The grant of a monopoly licence to practice law is based on three assumptions; (i) there is a socially useful function for the lawyer to perform; (ii ) the lawyer is a professional person who will perform that function; and (iii) his performance as a professional person is regulated by himself and more formally, by the profession as a whole.
The central function that the legal profession must perform is nothing less than the administration of justice.
[322G H] (2) In a developing country the pattern of public oriented litigation better fulfils the rule of law if it is to rule close to the rule of life.
The Bar Council clearly comes within this category of organisations when a lawyer is involved.
(3) A case of professional misconduct is not a lis in the British sense nor a case and controversy in the American meaning.
It is a public investigation about misconduct by one belonging to a public profession where every member of the Bar with a reputation to lose has a stake and everyone concerned with the justice administration is interested. 'the Bar has a share in being the sentinel on the qui vive when the legal dykes of right and justice are breached by authoritarianism or citizen wrongdoing.
[323F Gl (4) The possible apprehension that widening legal standing with a public connotation may unloose a flood of litigation which may overwhelm the judges is misplaced because public resort to court to suppress public mischief is a tribute to the justice system.
In this case to grant an exclusionary windfall on the respondents is to cripple the Bar Council in its search for justice and insistence on standards.
[326B] G A. P. Gandhi vs H. M. Seeravai, [1971] 1 S.C.R. refered to.
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3278.txt
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N: Criminal Appeal Nos.
152 153 of 1972.
From the Judgment and Order dated 28 10 1970 of Delhi High Court in Criminal Revision Nos. 426/68 and 5/70.
AND CRIMINAL APPEAL NOS.
166 167 OF 1972 From the Judgment and Order dated 28 10 1970 of Delhi High Court in Criminal Revision Nos. 72 73/68.
626 Soli J. Sorabji, Addl.
of India, B. P. Maheshwari and Suresh Sethi for the Appellant in Crl.
A. Nos.
152 153/72.
V. M. Tarkunde, section C. Malik and B. R. Agarwala for RR 4 in Crl.
A. 152/72.
H. K. Puri for RR.
3 in Crl.
A.153/72 Mrs. Urmila Sirur for RR.
3 in Crl.
A. No. 152/72.
B. K. Jaggi for the Appellant in Crl.
A. No. 166 167/72.
H. section Marwah and M. N. Shroff for RR.
in Crl.
A. Nos.
166 167/72.
B. P. Maheshwari and Suresh Sethi for the Intervener.
The Judgment of the Court was delivered by FAZAL ALI, J.
These appeals by certificate arise out of a common Judgment delivered by the High Court of Delhi and will be disposed of by us by one judgment.
In Appeals Nos. 152 153/72, one Gian Singh sold toffees to the Food Inspector and as the toffees were found to be adulterated, a prosecution was launched against him under section 7/16 of the Prevention of Food Adulteration Act.
Gian Singh, however, produced in course of the trial a warranty given by the distributors and manufacturers as a result of which the Magistrate acquitted accused Gian Singh.
After having acquitted Gian Singh, the Magistrate issued notice under section 20A against the Respondents for being impleaded and prosecution on the ground that the articles manufactured by the distributors were adulterated.
The respondents went up in revision to the Sessions Judge which was dismissed.
But on further revision to the High Court the High Court allowed the petition and set aside the order of the Magistrate impleading the respondents.
In the other two appeals i.e. Crl.
Appeals Nos. 166 and 167/1972, the manufacturers were impleaded under section 20A before the acquittal of the last seller and that order was upheld by the High Court and, hence these appeals before us by the appellants.
The common question of law that arises for consideration in all these appeals is: whether or not the Magistrate is entitled to implead the distributors or manufacturers under section 20A even after acquitting the last seller on the ground that he is protected by a warranty.
In other words, the question for decision in these appeals turns upon the interpretation of section 20A and section 20 of the Prevention of Food Adulteration Act.
section 20A runs thus: "Where at any time during the trial of any offence under this Act, alleged to have been committed by any person, not 627 being the manufacturer, distributor or dealer of any of food, the Court is satisfied, on the evidence adduced before it, that such manufacturer, distributor or dealer is also concerned with the offence, then the Court may, notwithstanding anything contained in sub section(1) of section 351 of the Code of Criminal Procedure, 1898, or in Section 20 proceed against him as though a prosecution had been instituted against him under section 20".
The opening lines of section 20A clearly contemplate a contingency where the discretionary jurisdiction under this Act can be exercised only during the trial of any offence, that is to say, the stage at which the Magistrate can exercise his discretion under this Section must be before the trial has concluded and ended in acquittal or conviction.
section 20 which precedes section 20 A runs thus: "section 20 (1) No prosecution for an offence under this Act, not being an offence under section 14 or section 14A, shall be instituted except by or with written consent of the Central Government or the State Government or a person authorised in this behalf, by general or special order, by the Central Government or the State Government; Provided that a prosecution for an offence under this Act may be instituted by a purchaser referred to in section 12, if he produces in court a copy of the report of the public analyst alongwith the complaint.
(2) No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence under this Act.
(3) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, an offence punishable under subsection (IAA) of Section 16 shall be cognizable and non bailable".
A combined reading of section 20A and section 20 is that where a distributor or manufacturer or any other person is impleaded in the course of a trial, the obligation to get a fresh sanction for such person is dispensed with and the sanction obtained for the last seller in the trial will ensure for the benefit of the prosecution of the other person impleaded also and no further sanction is necessary.
It is manifest that this special statutory concession is given to the prosecution only if the conditions mentioned in section 20A are fulfilled and not otherwise.
In other words, the protection of section 20 is not available to the prosecution if the parties concerned are impleaded after the trial is over.
In such a case, a fresh trial will have to be started by obtaining sanction under 628 section 20.
This matter is no longer res integra as it has been fully considered by this Court in V. N. Kamdar vs Municipal Corporation, Delhi(1) where this Court observed as follows: ".
In order that the manufacturer, distributor or dealer may be impleaded under section 20A, it is necessary that there should be a trial for an offence committed under the Act by a person and that the manufacturer, distributor or dealer must be concerned in the offence.
When once the manufacturer, distributor or dealer is impleaded, the trial proceeds as if he is also an accused in the case.
That is made clear by the closing words of the section.
As already indicated, no prosecution for an offence under the Act can be instituted by a Food Inspector without the sanction specified in section 20.
The real purpose of enacting section 20A is to avoid.
as far as possible, conflicting findings.
If, in the prosecution instituted against the vendor, it is found that the vendor has sold the article of food in the same state as he purchased it and that while it was in his possession it was properly stored, and the vendor is acquitted, it would look rather ridiculous if in the prosecution against the manufacturer, distributor or dealer, it is found on the evidence that he did not give a false warranty, but that the article was not stored properly while it was in the possession of the vendor or that he did not sell the article in the same stage as he purchased it.
This being so, the object of the legislature in enacting the section will be frustrated if a Magistrate were to exercise his discretion improperly by failing to implead the manufacturer, distributor or dealer under section 20A in a case where he should be impleaded.
But that is no reason to hold that a separate prosecution against the manufacturer, distributor or dealer would be barred, if he is not impleaded under section 20A, and tried along with the person who is alleged to have committed an offence under the Act.
In order to avoid multiplicity of proceedings and conflict of findings, it is imperative that the Magistrate should implead these persons under section 20A whenever the conditions laid down in the section are satisfied.
As I said, it is a far cry from this to say that if this is not done, the manufacturer, distributor or dealer would get an immunity from a separate prosecution.
" For these reasons, therefore, and in the facts and circumstances of the case so far as Cr.
Appeals No. 152 153/1972 are concerned, the 629 Magistrate had no jurisdiction to implead the respondents after having concluded the trial by the acquittal of the last seller.
Similarly, the Magistrate was fully justified in Crl.
Appeals No. 166 and 167/72 in impleading the appellants during the course of the trial as the trial was still continuing and the case would, therefore, squarely fall under section 20A of the Act and no further sanction would be necessary.
For these reasons, therefore, all the appeals are dismissed.
N.K.A. Appeals dismissed.
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Toffees sold by a vender to a Food Inspector having been found to be adulterated, prosecution was launched against him.
The vendor produced a warranty in the Trial Court as a result of which he was acquitted by the Magistrate.
The Magistrate however directed notice to the respondents under section 20 A for being impleaded and prosecuted on the grounds that the articles manufactured and distributed the them were adulterated.
On revision, the Session Judge dismissed the same but on further revision to the High Court, it allowed the revision and set aside the order of the Magistrate, In the other two Criminal Appeals Nos. 166 & 167 of 1972, the appellants were impleaded under section 20A before the acquittal of the last seller and that order was upheld by the High Court.
On the question whether the magistrate was entitled to implead the distributors or manufacturers under section 20A even after acquitting the seller on the ground that he was protected by a warranty.
Dismissing the appeals ^ HELD :The opening lines of section 20A clearly contemplate a contingency where the discretionary jurisdiction under this Act can be exercised only during the trial of any offence, i.e. the stage at which the magistrate can exercise his jurisdiction under this section must be before the trial has concluded and ended in acquittal or conviction.
A combined reading of section 20A and 20 is that where a distributor or manufacturer or any other person is impleaded in the course of a trial, the obligation to get a fresh sanction for such a person is dispensed with and the sanction obtained for the last seller in the trial, will ensure for the benefit of the prosecution of the other person impleaded.
Therefore protection of section 20 is not available if the parties concerned are impleaded after the trial was over.
The special statutory concession is given to the prosecution only if the conditions mentioned in section 20A are fulfilled and not otherwise.
[627B C, F H] V. N. Kamdar vs Municipal Corpration of Delhi ; followed.
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4008.txt
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Appeal No. 212/55.
Appeal from the Judgment and Decree dated July 7, 1953, of the Calcutta High Court in Appeal from Original Order No. 157 of 1952, arising out of the Judgment and Decree dated March 28, 1952, of the said High Court in Civil Rule No. 1409 of 1951.
B. Sen and P. K. Bose for the appellants.
P. K. Ghosh for the respondent.
section C. Mazumdar for the Intervener (Gopalpur Land Development Society, Ltd.).
August 29.
The Judgment of the Court was delivered by SINHA C. J.
The only substantial question that arises for determination in this appeal, on a certificate granted by the Calcutta High Court under article 133 (1)(c) of the Constitution, is whether the Government of West Bengal was bound to frame a development scheme under the provisions of the West Bengal Land Development and Planning Act, 21 of 1948, which hereinafter will be referred to as the Act, when it exercised its power of emergency under section 7 of the Act.
The facts of this case lie within a very narrow compass and are as follows: The respondent was the owner of about 18 bighas of land in a certain village in the district of 24 Parganas.
By a notification dated January 6, 1950, and published in the Calcutta Gazette dated January 12, 1950, under section 4 of the Act, the Government declared that the cadastral survey 370 plots, particulars whereof were given in the notification, were likely to be needed for the settlement of immigrants and for creation of better living conditions in the locality.
Thereafter a notification was ' issued under section 6 read with section 7 of the Act and published in the Calcutta Gazette dated April 27, 1950, declaring that the plots covered by the notification under section 4 aforesaid were needed for the very same purposes as stated in the notification under section 4.
On or about December 16, 1950, possession of those plots, except three, was taken by the Government.
When the Government started to erect certain structures on the land thus acquired and stored building materials near about, the respondent moved the High Court under article 226 of the Constitution challenging the vires of the Act and impugning the legality of the proceedings taken under the Act.
The matter was heard by H. K. Bose, J., sitting singly.
Before him the grounds urged in support of the petition were that the release of the three plots from the acquisition proceedings rendered the entire proceedings bad in law; that there was no urgency for the Government to take steps under section 7 of the Act, and for issuing the notifi cation under section 6 ; and that the provisions of the Act infringed the fundamental rights of the respondent, petitioner in the High Court, enshrined in article 19(1)(f) of the Constitution.
The learned Judge, by his judgment dated March 28, 1952, negatived all those contentions and discharged the rule issued by the High Court on the Government of West Bengal and others under article 226 of the Constitution.
The respondent preferred an appeal under the Letters Patent.
The appeal was heard by a Division Bench consisting of G. N. Das and Debabrata Mookerjee, JJ.
By their judgment dated July 7, 1953, it was held that the Act did not infringe the provisions of article 31 (2) of the Constitution and that therefore it became unnecessary to express any opinion with respect to the provisions of article 19(1)(f).
But the Bench also examined the provisions of the Act in the light of article 19(1)(f) of the Constitution and came to the conclusion that there was no infirmity in the Act, 371 even on that score, Having decided all the points raised on behalf of the appellant before it, the High Court allowed the appellant to raise another controversy, which had not been raised before the learned single Judge, namely, whether it was incumbent on the Government to frame a development scheme, after A possession had been taken by it, of the land in question.
Ordinarily, such a controversy should not have been allowed to be raised for the first time in the court of appeal.
Be that as it may, it came to the conclusion that even though the Government was entitled to deal with the land on an emergency basis under section 7 of the Act, it was incumbent on the State Government to frame a development scheme after possession had been taken.
The main reason for this conclusion as given by the High Court is that though section 7 had armed the Government with the power to take possession of the property before framing a scheme of development, the section does not, in terms, dispense with the necessity of framing a development scheme, after the emergency had been declared and possession taken.
In that view of the matter, the court of appeal allowed the appeal in part and directed a writ of mandamus to issue to the respondents before it, requiring them to proceed to frame a development scheme in terms of the Act.
The State of West Bengal and other officials who had been impleaded as respondents in the High Court applied for leave to appeal to this Court from the said judgment of the appeal court.
The High Court granted the leave prayed for, on condition that the appellants paid for the representation of the respondent before this Court by a junior Advocate of this Court.
That is how the matter comes before this Court.
It was argued on behalf of the appellants that the appeal court had misapprehended the scope and effect of sections 4, 5, 6 and 7 of the Act; that the Act contemplated two categories of acquisition proceedings, namely, (1) acquisition under section 6, after compliance with the provisions of section 5 and (2) acquisition in case of an emergency under section 7 read with section 6 of the Act; that the condition precedent laid down in section 5 necessitating 48 372 the framing of a scheme before a declaration under section 6 of the Act was made, is specifically excluded in cases of emergency once a declaration of emergency under section 7 is made.
The High Court was, therefore, in error in insisting upon the framing of a development scheme under section 5 of the Act, when that section had not been made applicable to the case of an emergency acquisition.
Once the property has been acquired it vests in the Government and thereafter the original holder of the property has no say in the matter, except on the question of amount of compensation.
Mr. Sen, for the appellants, finally contended that if the High Court was right in insisting upon a scheme of development being framed, the whole purpose of declaring an emergency would be defeated.
The learned counsel for the respondent has not made any serious attempt to meet the contentions raised on behalf of the appellants, but has attempted to show that the provisions of the Act, in so far as they give special powers to Government to declare an emergency and then to proceed with the acquisition without the necessity of framing a scheme of development, were unconstitutional, both in view of the provisions of article 31(2) and article 19(1)(f).
He also made a very feeble attempt to rely upon the provisions of article 14 of the Constitution and to suggest that the respondent was being discriminated against in the application of the emergency provisions of the Act to his case.
In our opinion, the contentions raised on behalf of the appellants are manifestly well founded and the High Court was clearly in error in issuing the mandamus against the appellants.
Before dealing with the contentions raised on behalf of the parties, it is convenient, at this stage, to set out the relevant provisions of the Act.
The Act replaced the West Bengal Land Development and Planning Ordinance, 11 of 1948, which was in similar terms.
The Act and the Ordinance, which it replaced, were enacted apparently as a result of the emergency created by the continual exodus of Hindus from East Pakistan on a mass scale and the consequent immigration of a very large population into West Bengal ' as a result of the 373 partition.
The Act was enacted " to provide for the acquisition and development of land for public purposes ".
It adopts the definitions of " land ", " Collector " and " company " as in the Land Acquisition Act, 1 of 1894, to which it is, in its terms, supplementary.
In the definition section 2, " development scheme " means, a scheme for the development of land for any public purpose; and a " notified area " has been defined as an area declared as such under sub section
(1) of section 4.
" Public purpose " has been defined in cl.
(d) of section 2 as including (i) the settlement of immigrants who have migrated into the State of West Bengal on account of circumstances beyond their control, (ii) the establishment of towns, model villages and agricultural colonies, (iii) the creation of better living conditions in urban and rural areas, and (iv) the improvement and development of agriculture, forestry, fisheries and industries ; but does not include a purpose of the Union.
Section 3 authorises the State Government to appoint the " prescribed authority " for carrying out the purposes of the Act.
Section 4 is, in terms, analogous to section 4 of the Land Acquisition Act and authorises the State Government by notification in the Official Gazette to declare any area to be a notified area on being satisfied that that specified area is needed or is likely to be needed for any public purpose.
The Act was amended in 1955 by the West Bengal Act, XXIII of 1955, and one of the amendments made by that Act was to add section 4A making provision for objections to be taken by any person interested in any land within the notified area, for an opportunity of being heard and for an enquiry being made on the merits of such objections, and finally for submission to the State Government of a report on the objections raised.
We are not concerned in this case with section 4A, because it was inserted into the Act after the decision of the case by the High Court.
Section 5, with which we are mainly concerned in this case is in these terms: "5(1).
The State Government may direct the prescribed authority, or, if it so thinks fit in any case, authorise any Company ' or local authority, to prepare, in accordance with the rules, a development scheme 374 in respect of any notified area and thereupon such scheme shall be prepared accordingly and submitted, together with such particulars as may be prescribed by the rules, to the State Government for its sanction : Provided that no scheme shall be necessary for acquisition of land for the public purpose specified in sub clause (i) of clause (d) of section 2.
A development scheme submitted to the State Government under subsection (1) may, after taking into consideration any report submitted under sub.
section (2) of section 4A, be sanctioned by it either without any modification or subject to such modifications as it may deem fit.
" The proviso to a. 5 was added by the same amending Act (West Bengal Act XXIII of 1955) and is likewise inapplicable to this case.
Section 6 again is, in terms, analogous to section 6 of the Land Acquisition Act, which provides for the declaration to be published in the Official Gazette to the effect that the State Government was satisfied that any land in a notified area, for which a development scheme has been sanctioned under section 5(2) of the Act, is needed for the purpose of executing such a scheme, unless there already has been a declaration made under section 7 of the Act.
Section 7, which is another section, the construction of which is involved in this case, is in these terms: " In cases of urgency, if in respect of any notified area the State Government is satisfied that the preparation of a development scheme is likely to be delayed, the State Government may, at any time, make a declaration under section 6, in respect of such notified area or any part thereof though no development scheme has either been prepared or sanctioned under section 5." Section 8 makes the provisions of the Land Acquisition Act applicable to acquisition proceedings taken in pursuance of the declaration made, either under section 6 or section 7 of the Act, subject to certain reservations made in pursuance of the provisos to section 8, relating to taking possession, determination of the amount of compensation, and of market value.
The other sections of the Act are not relevant to the point in controversy in this case and, therefore, need not be adverted to.
375 It will be noticed that section 7 is in the nature of a proviso to section 6.
Section 7 provides that in cases of urgency, if the State Government is satisfied that the preparation of a development scheme is likely to be delayed, it may make a declaration tinder section 6 that the land was needed for a public purpose, even though no development scheme has either been prepared or sanctioned under section 5.
The section, therefore, in clear terms, authorises the State Government to issue the necessary declaration under section 6, which puts the machinery of land acquisition proceedings into motion, if it is satisfied that the public purpose necessitating the acquisition of the land in question would be subserved without the preparation of a development scheme.
The Act itself came into existence in circumstances of great urgency.
Naturally, therefore, in suitable cases, where the preparation of a development scheme would cause delay, the Government was authorised to proceed with the acquisition of land after making the necessary declaration under section 6.
As already indicated after that declaration has been made by Government in the Official Gazette and the necessary enquiry made about compensation and the making of the award, the property becomes vested in tile Government.
The question naturally arises whether there is anything in the Act which makes it obligatory on the State Government to prepare a scheme of development thereafter.
The High Court has recognised the need for taking speedy action to meet the emergency created by the heavy influx of immigrants.
The High Court has observed that section 7 does not, in terms, dispense with the framing of a development scheme and that it merely says that the Government may issue a declaration under section 6, even though no development scheme has been framed.
But the High Court has further observed that even after taking possession of the property under r. 8, framed under the Act, within three days, there is no reason why the normal process envisaged in the Act should not be gone through.
The argument proceeds further that the Act itself contemplated land planning and development and therefore the framing of a development scheme was an essential part of the 376 process.
Hence, in the view of the High Court the framing of a development scheme was necessary in the normal course before the declaration under section 6 is made by the Government, and in the case of urgency under section 7, after taking possession of the land in question.
In our opinion, such a construction of the provisions of the Act is not warranted by the terms of the Act.
The addition of the proviso to section 5, quoted above, makes it clear that the Legislature has recognised the necessity in special circumstances of not framing a scheme in the case of the public purpose contemplated in cl.
(d)(i) of section 2, namely, for the purpose of settlement of immigrants.
On a fair reading of the relevant provisions of the Statute, it becomes clear that the Act contemplated acquisitions of two distinct classes, namely, (1) where the Government bad first considered and sanctioned a development scheme under the provisions of section 5 and then made a declaration that the land in a notified area was needed for the purpose of executing the particular development scheme and (2) where the notification under section 6 is made without any development scheme being prepared and sanctioned under section 5.
Once the declaration is made under section 6, the machinery of the Land Acquisition Act, 1 of 1894, comes into operation, of course subject to the reservations contained in the provios to section 8, as aforesaid.
The Land Acquisition Act itself does not contemplate the preparation of any such scheme of development.
In other words, section 7 completely dispenses with the statutory necessity of pre paring a scheme of development as envisaged in section 5 of the Act in cases where the Government has taken the decision that it is necessary to proceed further with the acquisition proceedings without waiting for the preparation of a scheme.
To insist upon the preparation of a development scheme would amount to rendering the provisions of section 7 otiose.
There is no justification for the observation made by the High Court that the Legislature did not intend that the State Government should proceed with the land acquisition proceedings under the Act without framing a scheme of development.
377 The High Court has recognised the legal position that it is open to the Government to take possession of the land under acquisition within three days after the making of the declaration of urgency under section 7, but has insisted that, even after taking possession as a measure of urgency, the Government was bound to,, prepare a scheme of development.
If that were so, the question naturally arises: to what use the land so taken possession of was to be put.
The taking of possession in cases of urgency would itself predicate the use of the land thus taken possession of by the Government.
But if the Government were to wait for the preparation and sanction of the scheme before putting the land acquired to any use, the very purpose of declaring the urgency and the taking of possession would be defeated.
It is clear, therefore, that the Legislature did not mean to insist upon the preparation of a scheme of development in cases of land acquisition brought within the purview of section 7 of the Act.
That disposes of the appeal.
But the learned counsel for the respondent appealed to the provisions of articles 14, 19(1)(f) and 31(2) of the Constitution in aid of his contention that section 7 of the Act was ultra vires.
Apparently, there is no discrimination.
As already indicated, there are two classes of cases into which the land acquisition proceedings envisaged by the Act fall.
The two classes can be easily identified and the purpose of the classification is based on a rational consideration, having due regard to the purpose and policy underlying the Act, namely, to acquire land for the public purpose, inter alia, of resettling immigrants who had to leave their hearth and home on account of circumstances beyond their control.
Such cases of urgency, as come under section 7, are clearly meant to serve the main purpose of the Act.
In our opinion, therefore, there is no substance in the contention that discrimination is implicit in the provisions of section 7.
The attack on the Act based on articles 19(1)(f) and 31(2) of the Constitution is futile in view of the provisions of article 31B, which is in these terms: 378 " Without prejudice to the generality of the provisions contained in article 31A, none of the Acts and Regulations specified in the Ninth Schedule nor any of the provisions thereof shall be deemed to be void, or ever to have become void, on the ground that such Act, Regulation or provision is inconsistent with, or takes away or abridges any of the rights conferred by, any provisions of this Part, and notwithstanding any judgment, decree or order of any court or tribunal to the contrary, each of the said Acts and Regulations shall, subject to the power of any competent Legislature to repeal or amended it, continue in force.
" The Act in question is the last entry (serial number 20) in the Ninth Schedule.
Article 31B, quoted above, which renders the Act immune from all attacks based on the provisions of Part III of the Constitution relating to fundamental rights, makes it unnecessary to discuss with reference to the provisions of the statute that, even if the question were open, the Act does not stiffer from any such infirmity, as is attributed to it.
In view of the considerations set out above, we allow this appeal, set aside the judgment under appeal with costs here and in the High Court.
The respondent 's petition questioning the vires of the Act is dismissed.
Appeal allowed.
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By a notification under section 4 of the West Bengal Land Deve lopment and Planning Act, 1948, the Government declared that certain plots of land belonging to the respondent were needed for the settlement of immigrants from East Pakistan and for improving living conditions in the locality.
Thereafter a second notification was issued by the Government under section 6 read with section 7 of the Act declaring that the plots covered by the previous notification were needed for the same purpose as stated therein.
When the Government started to erect structures on the land thus acquired the respondent moved the High Court under article 226 of the Constitution challenging the vires of the Act and impugning the legality of the proceedings taken under tile Act.
The petition was heard by a judge of the High Court sitting singly who negatived all the contentions of the petitioner and discharged the rule.
On appeal by the respondent under the Letters Patent, a Division Bench of the High Court held that the Act did not infringe the provisions of articles 19(i)(f) and 31(2) of the Constitution.
The High Court further held that it was incumbent on the State Government to frame a development scheme after possession of the land had been taken even though the Government was entitled to deal with the land on an emergency basis under section 7 of the Act, which runs thus: " In cases of urgency, if in respect of any notified area the State Government is satisfied that the preparation of a development scheme is likely to be delayed, the State Government may, at any time, make a declaration under section 6, in respect of such notified area or any part thereof though no development scheme has either been prepared or sanctioned under section 5 ".
The High Court allowed the respondent 's appeal and directed a writ of mandamus to issue to the Government requiring them to proceed to frame a development scheme in terms of the Act.
On appeal by the State of West Bengal on a certificate granted by the High Court, 369 Held, that the High Court was in error in issuing the mandamus against the appellants.
Section 7 of the Act com pletely dispensed with the statutory necessity of preparing a scheme of development as envisaged in section 5 of the Act in cases where the Government had taken the decision that it was necessary to proceed further with the acquisition proceedings without waiting for a development scheme.
No discrimination was implicit in the provisions of section 7 of the Act and no fundamental right of the appellant was infringed either under article 14 or articles 19(1)(f) and 31(2) of the Constitution.
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942.txt
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vil Appeal Nos.
4008 09 of 1985.
From the Judgment and Order dated 26.9.1983 of the Patna High Court in C.W.J.C. No. 1634 of 1977.
WITH C.M.P. Nos.
5513 14 and 19577 78 of 1988.
375 Shanti Bhushan and P.D. Sharma for the Appellants.
Tapesh Chandra Ray, D.P Mukherjee, R.P. Singh and S.N. Jha for the Respondents.
M.P. Jha for the Intervener. ' The Judgment of the Court was delivered by KULDIP SINGH, J.
The question for our consideration in these appeals is whether by an executive order the Bihar State Government can merge the cadre of District Engineers which is a part of "Rural Engineering Organisation" with the cadre of Executive Engineers governed by statutory rules called the Bihar Engineering Service Rules, 1939 (hereinaf ter called the 1939 Rules).
Necessary facts to determine the above question are as under: The cadre of District Engineers was created by the erstwhile District Boards in the State of Bihar.
The re cruitment and conditions of service of the said cadre were governed by the Government District Engineers Service Rules, 1957 (hereinafter called the 1957 Rules) which were framed under the Bihar and Orissa Local Self Government Act, 1885 (hereinafter called the Act).
Apart from the District Engi neers, a Rural Engineering Cell of the Public Works Depart ment was also functioning in 'the rural areas.
Bihar Govern ment by an order dated February 9, 1965, integrated the two into one organisation called "Rural Engineering Organisa tion" (hereinafter called REO).
The REO was an entirely new department headed by a Chief Engineer with the powers of Inspector of Local Works under the Act.
Two posts of Superintendent Engineers, 19 posts of District Engineers and number of other subordinate posts were created under the Chief Engineer.
In the new set up the cadre of District Engineers created under the 1957 Rules became almost extinct and assumed a new shape under the REO.
On the other hand, the cadre of Executive Engineers in Bihar Public Works Department was governed by the 1939 Rules.
Rule thereof is as under: "4.
Sources of recruitment Recruitment to the service shall be made 376 (i) by direct recruitment, and (ii) by promotion from the Bihar Engineering Service, Class II . . " The Bihar Government by a Memorandum dated February 18, 1977, decided to merge the cadre of District Engineers belonging to the REO with the cadre of Executive Engineers of the Public Works Department.
The operative part of the order is as under: "Therefore, in the public interest, the Government has decided that the cadre of the District Engineers be merged with the equivalent/parallel cadre of Executive Engineers of Public Works Department.
" Vinay Kumar Verma and others, who were working as As sistant Engineers in the Bihar Engineering Service, Class II, challenged the above mentioned merger order before the Patna High Court on the following grounds: (i) Under the 1939 Rules Assistant Engineers are eligible for promotion to the posts of Executive Engineers.
By merg ing the cadres, the chances of promotion of the Assistant Engineers are likely to be adversely affected and as such merger order is arbitrary and is liable to be quashed.
(ii) That the District Engineers ' service was constituted under the 1957 Rules flamed by the State Government in exercise of the powers under Sections 36(a) to 36(f) of the Act.
The cadre of Executive Engineers in the Public Works Department was created by the 1939 Rules.
The two cadres having been created under their respective statutory rules, the same cannot be merged by an executive order.
The compo sition of cadres created by the statutory rules cannot be changed by an executive order.
(iii) Under Rule 4(i) and 4(ii) of the 1939 Rules, recruit ment to the cadre of Executive Engineers can only be by direct recruitment and by way of promotion.
The merger of the District Engineers cadre with the Executive Engineers is thus contrary to the 1939 Rules and as such cannot be sus tained.
The High Court found that the chances of promotion of the 377 Assistant Engineers were in no way adversely affected by the merger as the District Engineers came to the cadre of Execu tive Engineers along with their posts.
The High Court fur ther held that the Assistant Engineers who were in the lower cadre could not challenge the merger specially when the same did not affect their rights in any manner.
On the other two points the High Court relied on Rule 56 of the Bihar Service Code, 1952 which is in the following terms: "56(a) The State Government may transfer a Government serv ant from one post to another . . " The High Court held that the Government has the power under the above quoted rule to transfer a Government servant from one cadre to another.
According to High Court even though the merger is not explicitly under rule 56(a) but since the power is there the District Engineers be deemed to have been transferred to the Public Works Department in terms of the said Rule.
The High Court dismissed the writ petitions of the Assistant Engineers.
This is how these two appeals by way of special leave are before us.
Mr. Shanti Bhushan, learned Senior Advocate, appearing for the appellants has reiterated the above mentioned three points in his arguments before us.
We agree with the High Court that the appellants, who were Assistant Engineers in Bihar Engineering Service, Class 11, were not affected adversely by the impugned order in any manner.
The District Engineers were merged in the cadre of the Executive Engineers along with the permanent posts which they were holding on the date of merger.
The cadre of the Executive Engineers was thus enlarged with the result that more vacancies would become available in future to be filled by way of promotion from the cadre of Assistant Engineers.
The merger would thus operate to their advantage rather than disadvantage.
The second point as projected by Mr. Shanti Bhushan does not arise in the facts and circumstances of the present case.
It is no doubt correct that initially the cadre of the District Engineers was constituted by the 1957 Rules which were framed under the 1885 Act, but by the time the impugned order was issued in the year 1977, it was operating 378 as an entirely different cadre created in the year 1965 as a part of REO.
The REO, which was new department, consisted of a Chief Engineer, two Superintending Engineers, 19 posts of District Engineers, number of Assistant Engineers and Over seers.
The District Engineers were no longer a provincia lised cadre under the District Boards as created by the 1957 Rules but was a new cadre operating under the REO.
We are, therefore, of the view that the cadre of District Engineers under the REO was created by the State Government by an executive order and as such the State Government could further merge the same with any other cadre by an executive fiat.
The third limb of the argument based on Rule 4(i) and 4(ii) of the 1939 Rules may now be examined.
It is not disputed that the District Engineers were equivalent in rank to the Executive Engineers.
The pay scales were also identi cal.
The two equivalent and parallel cadres were operating in two different fields.
To achieve administrative efficien cy the State Government wanted to merge these cadres.
The Executive Engineers were governed by the 1939 Rules which are statutory, whereas the District Engineers created by Government order dated February 9, 1965 did not have any statutory flame work.
The statutory cadre of Executive Engineers has not been interfered with.
It is operating under the 1939 Rules.
The District Engineers are being merged with Executive Engineers and not the vice versa.
Rule 4(i) and 4(ii) of the 1939 Rules do not come into picture at all.
It is not a question of appointment of an individual to the service.
A group of persons similarly situated is sought to be brought into the service.
The State Government can always increase the number of posts in the cadre of Execu tive Engineers.
What is being done by the impugned order is that the incumbents of the posts are also being brought into the cadre along with the posts.
The conditions of service of the existing members of service are not being altered or affected to their prejudice in any manner.
In fact none of the Executive Engineers has challenged the impugned order.
After merger the District Engineers would also be governed by the 1939 Rules.
The impugned order being a policy deci sion is in a way supplemental to the Rules and does not go contrary to any of the provisions of the Rules.
We therefore see no force in the arguments of Shri Shanti Bhushan.
The view which we have taken to uphold the impugned order, we 379 do not wish to express any opinion on the applicability and interpretation of Rule 56 of the Bihar Service Code, 1952 on which the High Court has relied.
The appeals fail and are dismissed with no order as to costs.
The Civil Miscellaneous Petition Nos.
55 13 14 of 1988 and 19577 78 of 1988 are also dismissed as having become infructuous.
P.S.S. Appeals dismissed.
|
Rule 4 of the Bihar Engineering Service Rules, 1939 provided for recruitment to the cadre of Executive Engineers in the Bihar Public Works Department by (i) direct recruit ment, and (ii) promotion from Class II Service.
The State Government by a memorandum dated February 18, 1977 merged with the cadre of Executive Engineers of the Public Works Department, the cadre of District Engineers functioning under the Rural Engineering Organisation.
The latter cadre was constituted by the State in 1965 by integration of the Rural Engineering Ceil of the Public Works Department and the cadre of District Engineers created by the erstwhile District Boards under the Government District Engineers Service Rules, 1957 framed under sections 36(a) to 36(1) of the Bihar and Orissa Local Self Government Act, 1885.
The appellants Assistant Engineers assailed the said merger before the High Court on the ground that it adversely affected their chances of promotion, that the District Engineers ' Service was constituted under the 1957 Rules framed under the 1885 Act whereas the cadre of Executive Engineers in the Public Works Department was created by the 1939 Rules, and, as such the two cadres having been created under their respective statutory rules the same could not be merged by an executive order, and that since under rule 4(i) and 4(ii) of the 1939 Rules recruitment to the cadre of Executive Engineers could only be by direct recruitment and by way of promotion, the merger of District Engineers ' cadre with the Executive Engineers was contrary to the 1939 Rules.
The High Court negatived their contentions.
Dismissing the appeal, the Court, HELD: 1.
The appellants, who were Assistant Engineers in the Bihar Engineering Service, Class II were not affected adversely by the merger in any manner.
The District Engi neers were merged in the 374 cadre of the Executive Engineers along with the permanent posts which they were holding on the date of merger.
The cadre of the Executive Engineers was thus enlarged with the result that more vacancies would become available in future to be filled by way of promotion from the cadre of Assistant Engineers.
The merger would thus operate to their advantage rather than disadvantage.
[378E F] 2.
The provincialised cadre of District Engineers under the District Boards was constituted by the 1957 Rules but in the year 1977 when merger took place the District Engineers constituted an entirely different cadre which was created in the year 1965 as a part of Rural Engineering Organisation.
It did not have any statutory frame work.
Since the cadre of District Engineers under the Rural Engineering Organisation was created by the State Government by an executive order the State Government could further merge the same with any other cadre by an executive fiat.
The Executive Engineers were governed by the 1939 Rules which are statutory.
Their statutory character has not been interfered with.
The Dis trict Engineers were being merged with Executive Engineers and not the vice versa.
[378H, 379B,379D] 3.
Rule 4(i) and 4(ii) of the 1939 Rules do not come into picture at all.
It was not a question of appointment of an individual to the Service.
A group of persons similarly situated in respect of rank and pay scale was sought to be brought into the Service along with their posts.
The State Government could always increase the number of posts in the cadre of Executive Engineers.
The conditions of service of the existing members of Service are not being altered or affected to their prejudice in any manner.
[379E F] 4.
The merger order being a policy decision is in a way supplemental to the Rules and does not go contrary to any of the provisions of the Rules.
[379F G]
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6421.txt
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Civil Appeal No. 1234 of 1977.
From the Judgment and Order dated 19.8.74 of Allahabad High Court in Civil Writ Petition No. 4827 of 1974 R.K. Garg and Shakeel Ahmed Syed for the appellant.
Prithviraj, Mrs. section Dikshit, S.K. Kulshreshta and P. Mishra for the respondents .
The Judgment of the Court was delivered by VARADARAJAN, J.
This appeal by special leave is directed against an order of a Division Bench of the Allahabad High Court dated 19.8.1974 dismissing in limine Miscellaneous Writ Petition No. 4827 of 1974 which had been filed by the appellant for quashing the 246 first respondent 's order dated 3.5.1974 removing him from service pursuant to the finding of the second respondent, U.P. Administrative Tribunal, Lucknow dated 10.7.1972 that the appellant was guilty of three of the four charges framed against him.
The appellant was employed as a Deputy Superintendent of Police at Pilibhit at the relevant time.
The fourth charge of which the appellant 'has been exonerated was that he had transferred his Vespa Scooter bearing Registration No. UPI 9117 and valued at more than Rs. 500/ to One Lal Mohd. without obtaining the previous sanction of the appropriate authority and he thereby.
contravened Rule 24(2) of the U.P. Government Servants ' Conduct Rules, 1956.
The appellant 's defence was that the transfer was effected through a reputed dealer and therefore previous sanction of the appropriate authority was not necessary.
The Tribunal found that the transaction of sale of the scooter by the appellant to Lal Mohd was effected through M/s. Anand Agencies, automobile engineers and reputed dealers in scooters and therefore there was sufficient compliance with Rule 24(2).
Charges 1 to 3 were more serious ones.
The substance of the first charge was that the appellant while posted as Deputy Superintendent of Police at Pilibhit was granted 30 days leave with effect from 11.11.1967 and had to resume his duties on 10.12.1967 but failed to resume his duties and absented himself without previous permission or intimation to the Superintendent of Public and without good or sufficient cause.
He failed to report about his whereabouts until an application was made by him on 24.4.1968 for extension of the leave.
The appellant 's defence was that he suffered from an attack of a mental disease, melancholia and was under the treatment of Dr. Mukerji at Calcutta from 1.12.1967 to 20.4.1968 and he has informed about his sudden illness and had applied for extension of the leave directly and also through his wife and he had furnished his leave address when he proceeded on 30 days leave.
The substance of the second charge was that while applying for extension of leave on 20.4.1968 he attempted to willfully deceive the Inspector General of Police by attempting to make him believe that he had been ill from 1.12.1967 to 20.4.1968 and was under treatment of a doctor at Calcutta although in fact he had been to Pakistan during the period and had obtained a medical certificate through deceitful and fraudulent ' means.
The defence of the appellant was one of denial.
He reiterated that he was under treatment of Dr. Mukerji at Calcutta from 1.12.1967 to 20.4.1968 and contended that in that 247 period he was treated by Dr. Das at Howrah from 10.1.1968 to 30.1.1968 for injuries to his nose.
The substance of the third charge was that after having proceeded on leave with effect from 11.11.1967 he unauthorisedly and unlawfully visited Karachi in Pakistan some time between 22.11.1967 and 20.4.1968 without any valid passport or travel document and the he by contravened section 3 of the Passport Act, 1967.
The appellant denied the charge and contended that he had never visited Karachi and had been suffering from melancholia and treated by Dr. Mukerji at Calcutta.
A number of witnesses for the department and some witnesses tor the defence were examined before the Tribunal which a after considering the oral and documentary evidence found charges 1 to 3 against the appellant.
One Harish Kumar, Superintendent of Police who was appointed as an assessor in the inquiry conduct before the Tribunal agreed with the findings of the Tribunal.
Subsequently, the Tribunal submitted copies of its findings to the Government with its recommendation that the appellant may be dismissed from service.
The Governor accepted the Tribunal 's findings, took a tentative decision to dismiss the appellant from service; and issued a second show cause notice dated 29.9.1972 to him.
The appellant submitted his interim reply and final reply on 19.11.1972 and 31 3.1973 respectively.
After considering the appellant 's replies the Governor agreed with the Tribunal that the charges 1 to 3 are fully established against the appellant and ordered his removal from service by the order dated 1.8.1974.
The appellant challenged his removal from service in W.P. No. 4827 of 1974 which was dismissed in limine by a Division Bench of the Allahabad High Court.
Hence this appeal by special leave.
This appeal deserves to be allowed on a short point which unfortunately has not been noticed by the learned Judges of the High Court before dismissing the writ petition in limine.
The appellant had prayed for summoning 8 witnesses for being examined in his defence by filing an application dated 17.1.1972 for that purpose.
The Tribunal dismissed that application on 19.1.1972 on the ground that it had already taken into consideration the relevant rules in the Financial Code Volume III and that it does not consider it necessary to revise its views.
The Tribunal observed in that order that the appellant has to bear the expenses of the witnesses who are private persons if he wanted to have them examined in his 248 defence.
He was, however, given one week 's time to deposit a sum of Rs.900 initially by way of travelling and daily allowances for the witnesses as well as compensation for the loss of their professional income and he was ordered to make good any shortfall.
The appellant had not deposited that amount and the witnesses had not been summoned for being examined in his defence.
The question for consideration is whether on this account there is non compliance with the principles of natural justice.
The Tribunal has relied upon Rule 20A of the Travelling Allowances Rules (Financial Handbook Volume III) in making the above order.
Sub rule l of that Rule reads thus: "20A. (13 Persons, who, not being servants of the Government, are called as witnesses in a departmental inquiry either by the authority conducting the inquiry or on behalf of the government servant whose conduct is under inquiry, shall receive the same travelling allowance and diet money as are admissible to non official witnesses summoned in criminal cases, provided that in the case of such persons who are called on behalf of the government servant whose conduct is under inquiry, the payment of travelling allowance and diet money shall be subject to the following principles: (a) travelling allowances may be Paid to witnesses summoned in the event of the government servant concerned clearing himself; (b) such allowances will be paid only in respect of witnesses whose evidence is considered of material value by the authority conducting the inquiry; and (c) in exceptional cases the authority conducting the & inquiry may, on grounds to be recorded, recommend to the Government that the principles laid down above be departed from owing to special reasons.
In such cases it will be for the Government to decide, after taking into consideration all the circumstances of the case, whether the recommendation should be accepted or not.
The authority, conducting the inquiry shall determine the class of each witness for the purpose of calculating travel 249 ling allowance and diet money under the scale prescribed for witnesses in criminal case.
" This sub rule is not quite clear, for it does not say who should bear the expenses initially or whether the inference to be made by the inquiring authority under class (c) should be made before or 1 after the examination of the witnesses.
Clause (b) of this sub rule seems to have been considered satisfied in the present case as the Tribunal had decided to summon the witnesses provided the amount was deposited by the appellant as directed.
The appellant has contended in para 31 of his writ petition that in view of G.O. No. 4l97 R/VIIIA 500 (146)/68 travelling allowance and diet money of witnesses to be examined before the Tribunal must have been paid by the State Government but he was asked to deposit a sum of Rs.900 for the witnesses being summoned and this is in violation of the relevant provision relating to conduct of proceedings before the Tribunal.
The said G.O. marked Annexure 11 to the writ petition relates to one Kunhi Ram and was evidently intended to clarify.
Rule 20A of the Traveling Rules and it reads thus: "In continuation of G.O. No. 1371 1/VIII 2000 (10/61, dt.
July 3, 1961) I am directed to say that in the special appeal the appellant had contended that the additional S.P. Agra had asked him to deposit the expenses for T.A. etc.
of defence witnesses before he summoned them.
The position in this connection has been examined by the Govt and is being clarified here.
Under para 490(5) of the police regulations the S.P. has to decide whether he should refuse to summon a , witness whose evidence he does not consider material to the issue.
The witnesses who are accepted by the S.P. for being produced in defence can be either summoned by him or allowed to be produced by the party charged, So far as the question of payment of expenses for the journey by a defence witness is concerned it is not material when once a witness is permitted to be produced whether he is summoned officially or is called by the party charged himself.
The responsibility for payment of travelling expenses to the defence witnesses produced during departmental trial conducted under section 7 of the Police Act is of the Government.
Thus if a witness has been permitted to be produced in defence, it is not open to the inquiring officer to lay down a condition that this travelling expenses should be first deposited 250 before he is summoned.
However, no expenses are to be paid for persons who are not permitted to be produced in defence.
The position with regard to the payment of travelling expenses to the defence witnesses is as follows: (i) Govt.
servants who appear as defence witnesses to give evidence of the facts which come to their knowledge in their official capacity are governed by Rule 59(1) of the Financial Handbook Volume III for the purpose of travelling allowance; (ii) As regards govt.
servants who appear as witnesses to facts which have come to their knowledge in the private capacity and appear as private individuals the position under rule 59(2) of Financial Handbook Volume III is that they are entitled to receive their actual travelling expenses from the Court and as suck they will get T.A, on an ad hoc basis and as on tour.
Thus if he is a Govt.
servant travelling in a train. . as an ordinary passenger and has to bear witness to that in his private capacity he should be paid T.A. as on tour.
The Meharrirs of the Police Stations bringing records which they maintain at P.S.s. in their official capacity will be governed by class (1) above.
(iii) Non official witnesses called or allowed to be produced by the S.P. will get T.A. under rule 20A of Financial Handbook Volume Ill." This G.O. makes it clear that responsibility for payment of travelling allowance to defence witnesses produced in departmental inquiry conducted under section 7 of the Police Act is of the Government and that if a witness has been permitted to be produced in defence it is not open to the inquiry officer to lay down a condition that his travelling expenses should be first deposited by the delinquent officer before the witness is examined.
In the present case, the Tribunal has considered the witnesses to be material but has insisted on the appellant depositing initially a sum of Rs. 900 for the travelling expense and daily allowances of the witnesses with an obligation to make good any shortfall in those allowances and loss of professional income of the witnesses.
Mr. Prithvi Raj, Senior Counsel appearing 251 for the respondent State did not contend that this G.O. does not A apply to the case of the appellant.
Moreover, the appellant was under suspension from 11.12.1967 and there is nothing on record to show that he was financially sound and in a position to deposit the sum of Rs.900 and pay any further amount which may be required to meet any shortfall in the travelling and daily allowances and the loss of professional income of the 8 more witnesses whom he wanted to be examined on his side.
The failure to cause the production of those witnesses at the expense, of the Government might have caused prejudice to the appellant for it cannot be predicated what conclusion the Tribunal would have reached in regard to charges 1 to 3 if the evidence of those witnesses was available for its consideration.
We are, therefore, of the opinion that there is no compliance with the principles of natural justice in this case.
The appeal has to be allowed on this short ground and it is accordingly allowed.
The finding of the Tribunal that the appellant is guilty of charges l to 3 and the consequent order of the Government/Governor removing the appellant from service are quashed.
The matter is remitted to the Tribunal for fresh disposal after summoning at government expense such of the material witnesses as the appellant may wish to be examined in his defence.
The appellant shall be entitled to costs quantified at Rs. 2,000.
It is needless to say that the appellant would be entitled to subsistence allowances from the date of his removal from service until the proceedings taken against him terminate and final order is passed.
This shall be paid in six weeks.
|
In a departmental inquiry conducted by the second respondent U.P. Administrative Tribunal into certain charges levelled against the appellant a Deputy Superintendent of Police, the Tribunal dismissed the application of the appellant praying for summoning 8 witnesses for being examined in his defence.
The Tribunal relied upon rule 20A(1) of the Travelling Allowances Rules (Financial Handbook Volume III) and observed that the appellant had to deposit the expenses of the witnesses, who were private person, if he wanted to have them examined in his defence within a specified time.
The appellant did not deposit the amount and the witnesses were not summoned.
Pursuant to the finding of the Tribunal the appellant was removed from service.
The appellant filed a writ petition in High Court contending that in view of G.O. No. 4197 R/VIIIA/500(146)68 travelling allowance and diet money of witnesses to be examined before the Tribunal must have been paid by the State Government but he was asked to deposit a sum of Rs. 900 for the witnesses being summoned and this was in violation of the relevant provision relating to conduct of proceeding before the Tribunal.
The High Court dismissed the writ petition in limine.
In this appeal the question was whether on this account there was non compliance with the principles of natural justice., Allowing the appeal, ^ HELD: There is no compliance with the principles of natural justice in this case.
[251C] Rule 20A(1) of the Travelling Allowances Rules (Financial Handbook Volume III) is not quite clear, for it does not say who should bear the expenses initially or whether the reference to be made by the inquiring authority under clause (c) should be made before or after the examination of the witnesses.
Clause (b) of this sub rule seems to have been considered 245 satisfied in the present case as the Tribunal had decided to summon the witnesses provided the amount was deposited by the appellant as directed.
[249B C] G.O. No. 4191 R/VIIIA 500(146) which was evidently intended to clarify Rule 20A of the Travelling Rules makes it clear that responsibility for payment of travelling allowance to defence witnesses produced in departmental inquiry conducted under section 7 of the Police Act is of the Government and that if a witness has been permitted to be produced in defence it is not open to the inquiry officer to lay down a condition that his travelling expenses should be first deposited by the delinquent officer before the witness is examined.
[250G H] In the present case, the Tribunal has considered the witnesses to be material but has insisted on the appellant depositing initially a sum of Rs. 900 for the travelling expense and daily allowance of the witnesses with an obligation to make good any shortfall in those allowances and loss of professional income of the witnesses.
The respondent State did not contend that this G.O. does not apply to the case of the appellant.
Moreover, the appellant was under suspension from 11 12 1967 and there is nothing on record to show that he was financially sound and in a position to deposit the sum of Rs. 900 and pay any further amount which may be required to next any shortfall in the travelling and daily allowances and the loss of professional income of the 8 more witnesses whom he wanted to be examined on his side.
The failure to cause the production of those witnesses at the expense of the Government might have caused prejudice to the appellant for it cannot be predicated what conclusion the Tribunal would have reached in regard to charges 1 to 3 if the evidence of those witnesses was available for its consideration.
[250H, 251 A C]
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4779.txt
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ivil Appeal Nos.
4145 46 of 1986.
From the Judgment and order dated 10.7.85 and 11.11.85 of the High Court of Calcutta in Appeal No. 477 of 1984.
Tapas Ray and B.R. Agarwal for the Appellant.
758 V.A. Bobde, Rajiv Dutta and Ms. Mridula Ray for the Respondents.
The Judgment of the Court was delivered: SHARMA, J.
By the impugned judgment the Division Bench of the Calcutta High Court set aside the ex parte decree passed by the Original Side of the Court in favour of the plaintiff Sudha Devi, the present appellant.
The dispute between the parties is in regard to a flat in a building on Lord Sinha Road, Calcutta.
The plaintiff prayed for a decree for Rs.1,44,730 as past mesne profits besides future mesne profits at the rate of Rs.170 per day and for "if necessary, decree as against the third respondent for possession of the flat" described in the plaint.
By way of an alternative relief to the money claimed, an inquiry for determination of the mesne profits was asked for.
None of the defendants appeared.
At the ex parte trial the plaintiff examined one witness and tendered certain documents in evidence.
The learned Single Judge decreed the suit and the defendant No. 3 (present respondent No. 1) filed an appeal therefrom which was allowed on 10 7 1985 by the judgment which is under challenge in Civil Appeal No. 4146 of 1986.
The plaintiff thereafter filed an application with a prayer to modify the judgment and remand the suit for retrial.
The prayer was rejected by the order dated 11 10 1985.
Civil Appeal No. 4145 of 1986 is directed against this order.
According to the plaintiff 's case, the defendant No. 1 Baranagar Jute Factory Company Ltd. was the tenant in respect to the flat in question under the plaintiff.
The Jute Company defaulted in payment of rent and also wrongfully sublet the flat to the second defendant Sadhan Chattopadhyaya, which led to the filing of an eviction suit by the plaintiff.
Both the defendants were impleaded in the suit but they did not appear to contest.
An ex parte decree of eviction was passed on 19 2 1982.
It is further pleaded that subsequent to the decree, either of the two defendants or both wrongfully inducted the third defendant to occupy the demised flat.
The plaintiff was, therefore, entitled to the reliefs mentioned in the plaint.
The third defendant filed an application under the provisions of Order IX, Rule 13 of the Code of Civil Procedure for setting aside the ex parte decree, but later withdrew the same and assailed the decree in appeal on merits.
The Letters Patent Bench allowed the appeal and set aside the decree on the ground that the plaintiff, on the basis of the meagre evidence led by her, failed to establish her case.
759 4.
The fact that the plaintiff obtained an ex parte decree in the earlier suit against the defendant No. 1 and 2 is established by the copy of the decree exhibited in the case.
The allegation in the plaint so far as the third defendant is concerned, is in paragraph 7 in the following words: "7.
Subsequent to the said Decree on a date or dates which the plaintiff is unable to specify until after disclosure by the defendants, the first and/or second defendants wrongfully permitted and allowed the third defendant to occupy the said demised flat.
The first and/or second defendants by themselves and/or by the third defendant are still in wrongful possession of the said demised flat.
" The only evidence relevant to this part of the case is to be found in the oral evidence of the plaintiff 's sole witness Nand Kumar Tibrewal.
The High Court (in appeal) has declined to rely on his evidence mainly on the ground that the witness has not disclosed his concern with the suit property or his relationship with the plaintiff.
He has been rejected as incompetent.
The learned Counsel for the appellant contended that the witness (now deceased) was the husband of the plaintiff appellant and thus he was fully conversant with the relevant facts.
The criticism by the High Court that the witness did not state anything in his evidence which could connect him with the plaintiff or the property and thus make him competent was attempted to be met before us by relying on an affidavit filed in this Court.
We are afraid, the plaintiff cannot be allowed to fill up the lacuna in the evidence belatedly at the Supreme Court stage.
Besides, affidavits are not included in the definition of 'evidence ' in section 3 of the Evidence Act and can be used as evidence only if for sufficient reason court passes an order under Order XIX, Rules 1 or 2 of the Code of Civil Procedure.
This part of the argument of Mr. Tapas Ray must, therefore, be rejected.
The learned counsel next urged that even ignoring the relationship of the witness with the plaintiff, his evidence is adequate to prove the plaintiff 's case which has not been rebutted by any of the defendants either by filing a written statement or cross examining the witness.
Mr. Bobde, the learned counsel representing the defendant No. 3 (respondent No. 1 before us), contended that the witness contradicted the case pleaded in the plaint by positively stating that the defendant No. 3 was in possession of the flat in question from before the date of the decree passed in the earlier suit.
The plaintiff 's assertion in paragraph 7 of the plaint is thus contradicted and the suit 760 cannot be decreed on its basis.
The learned counsel proceeded to analyse the situation arising out of the records of the case to show that if the defendant No. 3 is held to be in possession since before the earlier decree, other issues would arise in the suit, on which the plaintiff will be required to lead further evidence.
The learned counsel strenuously argued that in the facts and circumstances of the case, the prayer of the plaintiff made after the disposal of the appeal before the Letters Patent Bench for remanding the suit to the learned Single Judge (Original Side) for retrial was fit to be allowed and that Civil Appeal No. 4145 of 1986 should be allowed by this Court.
On the failure of the defendants to appear in the suit, the learned trial Judge decided to proceed with the case ex parte.
Even in absence of a defence the court cannot pass an ex parte decree without reliable relevant evidence.
The fact that the plaintiff chose to examine some evidence in the case cannot by itself entitle her to a decree.
The High Court (in appeal) was, therefore, perfectly justified in scrutinising the evidence from this angle.
The suit was filed and the relief was claimed on the basis that the third defendant was inducted in the flat in question by the other two defendants after they had already suffered a decree, and there is not an iota of evidence led by the plaintiff to prove this story.
On the other hand, the evidence of the sole witness disproves this part of the case.
Having regard to the allegations in the plaint, the facts emerging from the documents and the oral evidence, it is clear that several other questions may arise for consideration if the defendant No. 3 is assumed to be in possession from before the earlier decree.
We, therefore, agree with Mr. Bobde that the plaintiff cannot be allowed a decree on the evidence led by her in the suit founded on the plaint as it is.
After hearing the learned counsel for the parties at considerable length, we also agree with Mr. Bobde that in the interest of justice the prayer made on behalf of the plaintiff before the High Court after the disposal of the appeal for remand and retrial of the suit is fit to be allowed.
As nobody is disputing this position before us, we do not consider it necessary to further deal with this aspect.
In view of the prayer made by the plaintiff in the High Court and in Civil Appeal No. 4145 of 1986 before this Court and the concession of the defendant No. 3 before us, we hold that the suit should be sent back to the learned Single Judge for retrial.
The plaintiff may file an application for amendment of her pleading, if so advised, and in that case the learned Single Judge shall dispose it of in accordance with law.
The defendants will thereafter be allowed to file their written statements within a 761 period to be indicated by the Court.
The suit will thereafter be taken up for further trial as expeditiously as may be possible.
The evidence already led by the plaintiff shall continue to be evidence in the suit.
In the result, the judgments of the High Court dated 10 7 1985 and 11 10 1985, passed in Appeal No. 477 of 1984 are set aside and the suit is remanded to the learned Single Judge for disposal in the light of the observations made above.
We feel that the suit ought to be disposed of as expeditiously as possible and we expect and hope that the trial Judge will be able to dispose it of within six months.
The appeals before us are allowed in the above terms.
The parties shall bear their own costs in this Court; but so for the costs in the High Court are concerned they shall abide the final result in the litigation.
P.S.S. Appeals allowed.
|
The plaintiff appellant filed a suit for ejectment of the tenant defendant No. 1 for default in payment of rent and also to have wrongfully sublet the flat to the second defendant.
None of the defendants appeared.
At the ex parte trial the plaintiff examined one witness and tendered certain documents in evidence.
The Single Judge decreed the suit.
Subsequently to the decree the two defendants are alleged to have inducted the third defendant (respondent No. 1) to occupy the demised flat.
The plaintiff filed an application for modification of the decree.
The respondent No. 1 first filed an application for setting aside the ex parte decree, but later withdrew it and assailed the decree in appeal.
The Letters Patent Bench allowed the appeal and set aside the decree on the ground that the plaintiff 's sole witness did not disclose his concern with the suit property or his relationship with the plaintiff and that on the basis of the meagre evidence led by her, she had failed to establish her case.
In the appeal to this Court it was contended on behalf of the appellant that the witness was the husband of the plaintiff appellant and thus he was fully conversant with the relevant facts and that the criticism by the High Court was not justified.
Reliance was placed on an affidavit filed in this Court.
It was further contended that even ignoring the relationship of the witness with the plaintiff, his evidence was adequate to prove the plaintiff 's case which has not been rebutted by any of the defendants either by filing a written statement or by cross examining the witness.
757 Allowing the appeals and remanding the suit for retrial.
^ HELD: 1.
The plaintiff cannot be allowed a decree on the evidence led by her in the suit founded on the plaint as it is.
Even in absence of a defence the Court cannot pass an ex parte decree without reliable relevant evidence.
The fact that the plaintiff chose to examine some evidence in the case cannot by itself entitle her to a decree.
The Letters Patent Bench was, therefore, justified in scrutinising the evidence from that angle.
[760B D] 2.
The suit was filed and the relief was claimed on the basis that the third defendant was inducted in the flat in question by the other two defendants after they had suffered a decree.
There is not an iota of evidence led by the plaintiff to prove this story.
On the other hand, the evidence of the sole witness, who positively stated that the defendant No. 3 was in possession of the flat in question from before the date of the decree passed in the earlier suit, disproves this part of the case.
If the defendant No. 3 is assumed to be in possession from before the earlier decree several other issues would arise for consideration on which the plaintiff will be required to lead further evidence necessitating retrial.
[760D E] 3.
Affidavits are not included in the definition of 'evidence ' in section 3 of the Evidence Act and can be used as evidence only if for sufficient reasons Court passes an order under Order XIX, Rules 1 or 2 of the Code of Civil Procedure.
The plaintiff appellant cannot be allowed to fill up the lacuna in the evidence belatedly at the Supreme Court stage.
[759E F] 4.
In view of the prayer made by the plaintiff in the High Court and in C.A. No. 4145 of 1986 before this Court for remanding the suit for retrial and the concession of defendant No. 3 before this Court, the judgments of the High Court are set aside and the suit is remanded to the Single Judge for retrial and disposal in accordance with law expeditiously.
[761B]
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5695.txt
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Civil Appeal No. 144 of 1956.
Appeal by special leave from the judgment and order dated the 9th July, 1955, of the former Madhya Bharat High Court in Civil Misc.
Case No. 27 of 1954.
M. A. Khan and Ratanaparkhi, for the appellant.
section N. Bindra and R. H. Dhebar, for the respondent.
October 30.
The following Judgment of the Court was delivered by IMAM J.
This is an appeal by special leave against the order of the Madhya Bharat High Court dated July 9, 1955, rejecting an application filed by the appellant under article 226 of the Constitution.
According to the appellant, his father Habibullah died more than twenty years ago leaving behind the appellant and his brother Bashirullah as his sole heirs.
Habibullah, on his death, left immovable properties in the city of Indore.
Bashirullah, who was unmarried, went mad in 1942 and died in 1950 without any issue.
On his death, the appellant became the sole owner of all the properties left by his father Habibullah.
On September 21, 1954, the respondent purported to serve on the appellant a notice tinder section 7 of the (XXXI of 1950), hereinafter referred to as the Act.
This notice was not served on him and was never pasted on the property concerned.
Service of the notice was, according to the appellant, not proper and therefore illegal.
The appellant desiring to know on what material the notice under section 7 of the Act was issued against him applied on October 1, 1954, for copies of the record and the evidence in the possession of the respondent on the basis of which he formed the opinion that Bashirullah, at his death, had left behind a son Iqbal and a wife Kamrunnissa who had migrated to Pakistan in consequence of which the estate inherited by them from Bashirullah became evacuee property.
The application was rejected by the respondent.
818 The appellant filed a petition under article 226 of the Constitution in the Madhya Bharat High Court, which was dismissed by that Court.
The High Court was of the opinion that two questions fell to be decided in the proceedings before it (I) was the notice dated September 21, 1954, issued by the respondent under section 7 of the Act, illegal and (2) was the refusal of the respondent to supply to the appellant copies of the record and the evidence in possession of the respondent prior to the issue of notice under section 7 of the Act unlawful? Both these questions were decided against the appellant.
The notice dated September 21, 1954, was issued under section 7 of the Act in accordance with the Rules framed under section 56 of the Act.
Under section 7 of the Act the notice has to be given to persons interested in the prescribed manner.
Rule 6 of the Rules framed under the Act requires the notice to be in Form I to be served on persons interested in the property proposed to be declared evacuee property.
We have compared the notice issued in the present case with Form I of the Rules and can find no difference between them in essential particulars.
It was said that the notice in the present case does not state the grounds upon which the property concerned was proposed to be declared evacuee property and Iqbal and Kamrunnissa evacuees.
This contention is without foundation because the notice in question definitely states under the heading "Grounds" that Iqbal and Kamrunnissa migrated to Pakistan after March 1, 1947, on account of the creation of the Dominions.
The notice specifies with sufficient clarity the particulars of the property proposed to be declared evacuee property.
There was no reliable material to prove the assertion of the appellant that the notice was not properly served.
We are, accordingly, of the opinion that the notice in question has not been proved to be illegal on account of contravention of any of the provisions of the Act or the Rules made thereunder.
It was next contended that there was no material before the respondent to justify his issuing the notice and, therefore, the notice was issued without 819 jurisdiction.
Section 7 of the Act provides that where the Custodian is of the opinion that any property is an evacuee property within the meaning of the Act he may, after causing notice thereof to be given in the prescribed manner to the persons interested and after holding such enquiry in the matter, as the circumstances of the case permitted, pass an order declaring any such property to be evacuee property.
It is for the Custodian to form his opinion on such material, as was before him, and on such information which he possessed.
The notice which he issued was in Form I of the Rules framed under the Act and it stated clearly that there was credible information in possession of the respondent that lqbal and Kamrunnissa were evacuees and that the property specified in the notice was evacuee property.
It was for the respondent to decide .
whether, on the information in his possession, he should issue a notice under section 7 of the Act.
It is not for this Court or any other Court to determine whether the information in possession of the respondent was adequate to justify the issuing of the notice.
The contention on behalf of the appellant in this respect cannot be supported on any valid ground.
It was next contended on behalf of the appellant that when bona fides of the respondent bad been challenged in the High Court, that Court should have sent for the record and seen for itself as to whether there was any justification for the issue of the notice under section 7 of the Act.
In our opinion, this contention cannot prevail as there is no material on the record to justify the accusation that the respondent acted with malafides in issuing the notice.
The respondent was free to believe or not to believe the information in his possession.
The mere issue of a notice would not make the persons named therein evacuees or the property mentioned therein evacuee property.
That stage could only be reached after the notice had been issued and after the holding of such enquiry, as the circumstances of the case permitted, when an order declaring the property to be evacuee property could be made in respect of a person who was an evacuee, as defined in 104 820 the Act.
In our opinion, it was unnecessary for, the High Court to have called for the record and to have examined it for itself in order to ascertain whether the respondent was justified in issuing the notice.
We have now to consider whether the application for copies filed by the appellant was improperly rejected.
On his behalf, it was contended that the application for copies should have been allowed as section 7 of the Act contemplates only one proceeding, from the commencement to the end, including the stage prior to the issue of notice, regarding the declaration of any property as evacuee property and that that proceeding is a judicial proceeding.
Since the appel lant was a party to the proceedings under section 7 of the Act, he was entitled to have copies of the record including the evidence which constituted the proceedings.
Reliance was placed on section 49 of the Act, which states that all records prepared or registers maintained under the Act shall be deemed to be public documents within the meaning of the Indian Evidence Act and shall be presumed to be genuine until the contrary is proved.
Reference was also made to section 45 of the Act which states that for the purpose of holding an enquiry under the Act, the Custodian shall have the same powers as are vested in a civil court under the Code of Civil Procedure when trying a suit, in respect of the following matters: (a) enforcing the attendance of any person and examining him on oath; (b) compelling the discovery and production of documents; (c) any prescribed matter; and the enquiry by the Custodian shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code and the Custodian shall be deemed to be a court within the meaning of sections 480 and 482 of the Code of Criminal Procedure.
There can be little doubt that the Custodian, while holding an enquiry under section 7 of the Act is acting in a judicial capacity and that, by virtue of Rule 35 of the Rules, any party to the enquiry would be entitled to copies of any application, 821 objection, petition, affidavit, or statement made by a party or a witness and any other document.
He would also be entitled to copies of the final original order passed by the Custodian or an order passed in appeal, revision or review.
The position, however, is quite different with respect to the material in possession of the Custodian on which he formed his opinion and on which he issued notice under section 7, because at that stage he was not holding an enquiry and was, therefore, not acting in a judicial capacity.
It is a misconception of the entire scheme of the Act to suppose that an enquiry under section 7 of the Act and the issuing of a notice previous to the holding of that enquiry is a single proceeding.
When issuing a, notice under section 7 the Custodian merely has some credible information which, in his opinion, justifies him in issuing it and thereafter to enquire into the matter before making a declaration that the property is evacuee property.
That information may, after the enquiry has been concluded, turn out to be entirely insufficient for making the required declaration.
In our opinion, there are two stages in the process whereby any property can be declared to be evacuee property under the Act.
One is the issuing of the notice to persons interested and the other an enquiry under section 7 of the Act.
The proceedings commence after the issue of a notice and not previous to it.
At the second stage, a party to the proceedings would be entitled to copies of the record and the evidence from the stage of the issuing of the notice until the conclusion of the enquiry but not previous to the issue of the notice.
In our opinion, the appellant would have been well advised to have responded to the notice issued to him and assisted the respondent in holding the enquiry.
The respondent would have had to consider all the material before him at the enquiry before he declared the property in question evacuee property.
If the material in the enquiry was insufficient to justify such a declaration, the appellant had the right of appeal against the order of the respondent.
In our opinion, the application of the respondent for copies was rightly rejected by the respondent as he was not, 822 entitled to copies of the material before the respondent previous to the issuing of the notice under section 7 of the Act.
The appeal, accordingly, fails and is dismissed with costs.
Appeal dismissed.
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The appellant and his brother owned certain properties inherited from their father.
The brother died and the appellant claimed to have become the sole heir.
The respondent issued a notice under section 7 of the , in respect of the share of the brother on the ground that the brother had left a widow and a son who had migrated to Pakistan.
The appellant, desiring to know on what materials the notice was issued, applied for copies of the materials on the basis of which he respondent had formed his opinion.
The application was rejected by the respondent.
The appellant filed a petition under article 226 of the Constitution in the High Court which was also dismissed.
The appellant obtained special leave and contended that the notice was issued without jurisdiction as there was no material before the respondent to justify his issuing of the notice and that the application for the copies had been improperly ejected by the respondent.
Held, that it was for the Custodian to form his opinion on such material as was before him and on such information which he possessed.
It is not for any Court to determine whether the information in the possession of the Custodian was adequate to justify the issue of a notice under section 7 of the Act: Held further, that the application for copies had been rightly rejected.
There are two stages in the process whereby any property can be declared to be evacuee property under the Act.
One is the issuing of the notice to persons interested and the other is the inquiry under section 7.
The proceedings commence after issue of the notice and not prior to it.
A party to the proceedings will be entitled to copies of the record and evidence from the stage of 817 the issuing of the notice until the conclusion of the enquiry but not previous to the issue of the notice.
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534.txt
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minal Appeals Nos.
30 34 of 1964.
Appeals by special leave from the judgment and order dated October 22, 1963 of the Allahabad High Court in Criminal Appeals Nos. 77 and 78 of 1963.
M. section K. Sastri, for the appellant (in Cr. A. No. 30 of 1964).
I. M. Lall and Ganpat Rai, for the appellants (in Cr. A. No. 31 of 1964).
V. 'Y. Sawhney, for the appellants (in Cr. A. Nos.
32 34/64).
0. P. Rana, Atiqur Pehman and C. P. Lal, for the res pondents May, 4.
The Judgment of the Court delivered by GAJENDRAGADKAR, C. J. Forty person were charged with having committed several offences the principal one of which was under section 302 read with section 149 of the Indian Penal Code.
The case against these persons was tried by the first Additional Sessions judge at Jhansi.
The other charges framed against them were under section 307 / 149, 201/ 149 & SI 1, 395, 396, 149 & 449, 1.
The learned trial Judge held that none of the char es had been proved against five of the accused persons. '.He also found that the charges under sections 395 & 396 were not proved against any of them.
In regard to the remaining charges.
he found that 35 out of 40 accused persons were guilty.
For the major offence charged under section 302/149, he sentenced 10 accused persons to death and 25 others to imprisonment for life.
He also directed that the said accused persons should undergo different terms of imprisonment for the remaining offences; but for the purpose of the present appeals, it is unnecessary to refer to them.
136 After the learned trial Judge pronounced his judgment on the 31st December 1962, the 35 accused persons who had been convicted by him preferred three appeals between them before the Allababad High Court, whereas the sentences of death imposed on 10 accused persons by the learned trial Judge were submitted to the said High Court for confirmation.
The High Court has held that 7 out of the 35 appellants before it were not proved to have committed any of the offences, and so, they were ordered to be acquitted.
In regard to the remaining 28 appellants, the High Court has confirmed the orders of conviction and sentence imposed on them by the trial Court.
In the result, the reference made to the High Court for confirmation of the sentences of death imposed on the 10 accused persons by the trial Court was allowed.
It is against this decision of the High Court that the present five appeals have been brought to this Court by special leave, and the number of accused persons who have brought these appeals before us is 16.
Before dealing with the points raised in these appeals, it is necessary to set out very briefly the relevant facts on which the prosecution case against the appellants and their co accused substantially rests.
The incident which has given rise to the present criminal proceedings took place on the 29th November, 1961 in village Bilati Khet in the district of Jhansi at about 8 a.m. It is clear that this village is cursed with keen rivalry and enmity between two factionsOne group was led by Gayadin who and four other members of his family were murdered on the said date.
All these murders were committed, according to the prosecution, by the members of the rival faction amongst whom are included the present appellants before us.
Criminal proceedings have continued between the parties for several years almost without interruption.
The rival group was led by Laxmi Prasad alias Laxmi Narain who is one of the appellants in this Court.
In the last election of the village Panchayat Laxmi Prasad succeeded as Pradhan of the village and defeated the candidate set up by Gayadin.
On the 28th November, 1961, a boundary dispute led to an incident between the members of the two groups.
This dispute related to two fields one of which belonged to Gayadin and 137 the other to Laxmi Prasad.
Attempts were made to settle this dispute by arbitration, but they failed.
It appears that Laxmi Prasad and the members of his group did not agree to submit to any arbitration and they left the meeting called for the purpose threatening that they would see that the matter in dispute between them was settled the next day.
It is on this grim note that the incident of the 28th November ended.
On the 29th November in the early morning, Bahoran, one of the sons of Gayadin, had gone out to ease himself.
He was then carrying a pharsa.
In the field he met Laxmi Prasad who attacked him with a lathi.
Bahoran retaliated this attack with his own pharsa and in the scuffle the nose of Laxmi Prasad was injured and it began to bleed; in fact, a part of the nose was actually cut.
Infuriated by this injury, Laxmi Prasad went to his house and collected the whole crowd belonging to his faction.
Bahoran eased himself and returned to his house.
Soon there after he washed his hands and went to the north where his father, brothers and other relations were warming themselves by fire.
At that stage, Ram Prasad and Dayaram rushed to the scene and informed them that Laxmi Prasad and his companions were all armed with guns, spears, swords, gandasas and lathis and were proceeding to the house of Gayadin determined to kill all the members of Gayadin 's family.
On receiving this alarming information, Gavadin and his friends and relatives thought of proceeding towards the house of Gayadin.
About that time, Laxmi Prasad and his companions reached near the house of Gayadin whereon Laxmi Prasad fired a gun.
Bhagwati was carrying a large quantity of cartridges in the folds of his dhoti and was instigating Laxmi Prasad to fire at everyone sitting near the fire to the north of the house and to exterminate the family of Gayadin.
On hearing this, everyone of the group sitting near the fire rushed into the house and closed the doors.
The assailants then broke open the doors of the house and entered the sehan of Gayadin.
Inside the house the assailants pursued Gayadin on the upper storey and killed him there.
Brindaban, Radha Saran and Dayaram were hiding in different rooms of the house; the doors of these rooms 138 were broken open and all the three of them were shot dead.
Bahoran and Shiroman Singh, both sons of Gayadin, escaped through the tiled roof into the cattleshed of Harbans which is situated towards the south east of Gayadin 's house.
Shiroman concealed himself in the godown while Bahoran concealed himself in the room in the upper storey where chaff had been stored.
After killing Gayadin, Brindaban, Radha Saran and Dayaram, the assailants mercilessly dragged the bodies of the victims out of the house of Gayadin and began their search for Bahoran and other male inmates of the house.
When the dead bodies were thus being dragged, Gori Dulaiya wife of Gayadin rushed after the assailants and implored them not to take the dead bodies away.
One of the assailants, however, struck her with a stick and she was forced to retrace her steps.
The dead bodies were then dragged towards the east of the house.
On reaching the cattleshed of Harbans, the assailants broke open the outer door of the house and entered into it.
They then injured Harbans and managed to discover Shiroman Singh who was promptly killed.
The five dead bodies were then taken into the field of Bhagwati.
In the field two big piles of cowdung cakes were prepared.
On one of the piles the bodies of Gayadin, Brindaban, Radha Saran and Davaram were placed and on the other Shiroman Singh 's body was put.
Kerosene oil was sprinkled on the bodies and fire was set to them.
That, in brief, is the story of the gruesome murders which have given rise to the present proceedings.
When the assailants had left the house of Gayadin dragging the dead bodies with them.
Rahoran came out of hi,, hiding place and rushed to the Police Station Krichh and lodged the First Information Report at about 11 o 'clock.
In this report,. .he gave all the material details in regard to the commission.of the offence and named the 35 persons as the assailants. .In fact, the first committal order passed on the 31st March,. .1962 in the present proceedings referred to 35 assailants.
Later.
five more persons were added to the list of assailants by the committal order made on the 14th May, 1962.
On receiving the first information report, the police party rushed to the scene of occurrence on cycles and they put off the burning fire and took out the half burnt 139 bodies of the five murdered persons.
These bodies were identified aid were sent for post mortem examination.
The injured persons Harbans, Ram Prasad, Mansa Ram and Smt.
Gori Dulaiya were sent for medical examination.
Post mortem examination was then held on the dead bodies and statements of witnesses were recorded in the course of investigation.
That led to the several charges framed against 40 persons and ultimately their trial in the Court of the First Additional Sessions Judge at Jhansi.
The case for the prosecution is sought to be established by the testimony of 12 eye witnesses.
All the accused persons denied that they had anything to do with the offences charged.
Their main contention was that a false case had been made against them and it was attempted to be supported by evidence of witnesses who were hostile to them and who had no regard for cruth.
The trial Judge, in substance.
rejected the defence plea and accepted the prosecution evi dence.
except in the case of five accused persons.
In appeal, several contentions were raised on behalf of the appellants, but they were rejected and in the result, the findings of the trial Court against the appellants were confirmed.
The High Court, however, reversed the conclusion of the trial Court in respect of 7 accused persons with whose cases we are not concerned in the present appeals.
The 12 persons who gave direct evidence against the appellants and their co accused persons are: Bahoran P.W. 1; Basanti Lal P.W.2; Rameshwar Dayal P.W.3; Prabhu Dayal P.W.5; Pancham P.W.6: Swarup Singh P.W.14; Kasturi P.W.15; Thakur Das P.W.16.
Shyamlal P.W.17; Harbans P.W.18; Dropadi P.W.19; and Kishori Lal P.W.20.
The High Court has critically examined the evidence given by these witnesses and has held that the evidence of Bahoran and Prabhu Dayal may be left out of account as it appeared to the High Court that the said evidence suffered from material infirmities.
The evidence given by the remaining 10 witnesses has, however, been accepted by the High Court as substantially true and correct.
Jr. dealing with this oral evidence, the High Court took into account the fact that most of these witnesses belonged to the faction of Gayadin and must, therefore, be regarded 140 as partisan.
It also considered another feature which characterised the evidence of all the witnesses and that was that they gave their account of the incident substantially in similar terms and did not assign particular parts in respect of overt acts to any of the assailants except Laxmi Prasad accused No. 1.
The approach adopted by the High Court shows that it decided to confirm the conviction of the accused persons against whom four or more witnesses gave a consistent account, and it is by the application of this test that 7 accused persons have been acquitted.
As to the sentence, the High Court realised that 10 persons had been ordered to be hanged and that it could not be said about all of them, except Laxmi Prasad, that they had actually fired a gun and caused the death of any of the five victims.
Even so, the High Court held that since they all formed members of the unlawful assembly the common object of which was to exterminate the male members of the family of Gayadin, they were all equally guilty of murder under s.302,/149, I.P.C. and it would not, therefore, be unreasonable to impose the penalty of death on such of the assailants is were shown to have carried guns in their hands on that occasion.
That is how the High Court upheld the orders of conviction passed against 28 persons who had brought their cases before it in appeal and confirmed the sentences of death imposed on I 0 of them.
In these appeals, Mr. Sawhney who has addressed the principal argument before us on behalf of the appellants, has urged that the High Court has failed in discharging its duty properly when it dealt with the appeals brought before it by the appellants and decided to confirm the sentences of death imposed on 10 of the accused persons.
In support of this argument, Mr. Sawhney has relied upon the decision of this Court in the case of Jumman & Ors.
vs The State of Punjab.
(1) In that case, this Court has emphasised the fact that the mandatory requirement prescribed by s.374 of the Code of Criminal Procedure shows that in dealing with reference for confirmation of death sentence imposed by the Sessions Judge, the High Court has to consider the entire case for itself before deciding whether the sentence of death (1) A.T.R. I957 S.C. 469 141 should be confirmed or not.
Section 374 provides that the sentence of death shall not be executed unless it is confirmed by the High Court.
In other words, the sentence of death imposed by the Court of Sessions is not effective until and unless it is confirmed by the High Court.
It is only when the High Court confirms the sentence of death that it is capable of execution.
That is why this Court emphasised the solemnity of the Proceedings brought before the High Court under s.374, and it pointed out that under s.375, the High Court is given the power to admit additional evidence if it thinks necessary to do so.
Proceedings brought before the High Court for confirmation of a death sentence give a right to the condemned prisoner to be heard on the merits and to require the High Court to consider the matter for itself without being influenced by the conclusions recorded by the Court of Sessions.
The conclusions of the High Court on the merits in such proceedings must be independent,.
and so, the High Court inevitably has to go into the whole of the evidence.
consider all the pros and cons of the case and satisfy itself that the offence charged under section 302, I.P.C. is established beyond reasonable doubt and the sentence of death submitted to it for its confirmation is fully justified.
Mr. Sawhney contends that this essential requirement of s.374 has not been complied with by the High Court when it dealt with the appeals brought before it in the present proceedings.
He also adds that since 10 persons have been ordered to be hanged, that itself is a reason why this Court should examine the evidence for itself and not hold that the appellants are concluded by concurrent findings of fact recorded by the Court below.
We are not impressed by this argument.
It is perfectly true that, in a murder trial when an accused person stands charged with the commission of an offence punishable under s.302, he stands the risk of being subjected to the highest penalty prescribed by the Indian Penal Code; and naturally judicial approach in dealing with such cases has to be cautious, circumspect and careful.
In dealing with such appeals or reference proceedings where the question of con firming a death sentence is involved, the High Court has also 142 to deal with the matter carefully and to examine all relevant and material circumstances before upholding the conviction and confirming the sentence of death.
All arguments urged by the appellants and all material infirmities pressed before the High Court on their behalf must be scrupulously examined and considered be fore a final decision is reached.
The fact that 10. persons had been ordered to be hanged by the trial Judge necessarily imposed a more serious and onerous res ponsibility on the High Court in dealing with the present appeals.
We have carefully considered the judgment delivered by the High Court in these appeals and we are satisfied that the criticism made by Mr. Sawhney that the High Court did not bestow due care and attention on the points involved in the case, cannot be regarded as well founded, The judgment shows that the arguments which were urged on behalf of the appellants, have been carefully examined, the evidence given by the respective witnesses has been accurately summarised and the infirmities in the said evidence closely scrutinised.
The relevance of the argument of the admitted enmity between the two factions of the village has been taken into account and the common features of the evidence tendered by the witnesses have not been overlooked.
After taking into account all the points which were urged before the High Court the High Court adopted what it thought to be a safe test before acting on direct evidence.
It has held that unless at least four witnesses are shown to have given a consistent account against any of the appellants.
the case against them cannot be said to have been proved beyond reasonable doubt.
Having regard to the manner in which the High Court has dealt with the appeals brought before it, we are not prepared to hold that the general criticism made by Mr. Sawhney against the judgment of the High Court can be accepted.
In this connection, Mr. Sawhney strongly relied on the fact that the High Court has not considered one important point in favour of the defence, and that is in to the failure of the prosecution to tender three material witnesses whose names had been shown in the witness list in the calendar sent by the committing Magistrate to the trial Judge.
These witnesses are: Ram Prasad, Mansa Ram and 143 Rani Dulhan.
It appears that this contention was raised by the defence before the Trial Court and had been rejected by it.
The Government counsel appearing for the prosecution had made an application to the trial Court expressing his inability to examine the three witnesses for the reason that Ram Prasad and Mansa Ram had been won over by the defence and Rani Dulhan, the widow of one of the victims, was suffering from such mental shock that she was unable to depose coherently.
After this application was made and granted, the learned trial Judge did not insist upon the prosecution examining the three said witnesses.
Then followed three other applications by the defence (Nos. 247B, 248B and 249B) in which it was urged that the said three witnesses should be examined under s.540, Cr.
The learned trial Judge rejected these applications, and so, the case concluded without the said three witnesses giving evidence before the trial Court.
In rejecting the applica tions made by the defence, the learned Judge has carefully examined the validity of the defence contention that the evidence given by the said witnesses before the Committing Magistrate showed that they were material witnesses and the plea raised by them that the absence of their evidence would cause prejudice to the defence, and has held that the evidence which the said three witnesses may give was not essential for a just decision of the case and that it was unreasonable to suggest that the prosecution had an oblique moive in supressing their evidence.
This part of the judg ment clearly shows that all relevant aspects of the matter were examined by the trial Judge before he refused to exercise his powers under s.540, Cr.
It is obvious that this contention was not urged before the High Court, and so, we find no discussion of the point in the judgment of the High Court.
We are not prepared to accept Mr. Sawhney 's argument that even if this point was not raised by the appellants before the High Court, they are entitled to ask us to consider that point having regard to the fact that 10 persons have been ordered to be hanged.
It may be conceded that if a point of fact which plainly arises on the record, or a point of law which is relevant and material and can be argued with 144 out any further evidence being taken, was urged before the trial Court and after it was rejected by it was not repeated before the High Court, it may, in a proper case, be permis sible to the appellants to ask this Court to consider that point in an appeal under article 136 of the Constitution; afterall in criminal proceedings of this character where sentences of death are imposed on the appellants, it may not be appropriate to refuse to consider relevant and material pleas of fact and law only on the ground that they were not urged before the High Court.
If it is shown that the pleas were actually urged before the High Court and had not been considered by it, then, of course, the party is entitled as a matter of right to obtain a decision on those pleas from this Court.
But even otherwise no hard and fast rule can be laid down prohibiting such pleas being raised in appeals under article 136.
In the present case, however, we are satisfied that there is no substance in the contention which Mr. Sawhney seeks to raise before us.
It is not unknown that where serious offences like the present are committed and a large number of accused persons are tried, attempts are made either to terrorise or win over prosecution witnesses, and if the prosecutor honestly and bonafide believes that some of his witnesses have been won over, it would be unreasonable to insist that he must tender such witnesses before the Court.
It is undoubtedly the duty of the prosecution to lay before the Court all material evidence available to it which is necessary for unfolding its case; but it would be unsound to lay down is a general rule that every witness must be exa mined even though his evidence may not be very material or even if it is known that he has been won over or terrorised.
In such a case, it is always open to the defence to examine such witnesses is their witnesses and the Court can also call such witnesses in the box in the interest of justice under s.540, Cr.
As we have already seen, the defence did not examine these witnesses and the Court, after due deliberation, refused to exercise its power under s.540, Cr.
That is one aspect of the matter which we have to take into account.
145 The other aspect of the matter is that the trial Court has found that the evidence which these witnesses would have given was not essential for a just decision of the case.
What these witnesses might have said in the Sessions Court was judged by the trial Court in the light of their previous statements already recorded, and that is a finding which is purely one of fact.
If this finding was not challenged by the appellants before the High Court, we do not see how they can claim to argue before us now that the said finding is erroneous.
Besides, so far as Rani Dulhan is concerned, it seems to us utterly unreasonable to insist that before per mitting the prosecutor not to examine her, evidence should have been led to show that she was suffering from such mental shock that she was unable to give a coherent account of the tragic events that happened on that fateful morning.
One has merely to recall the fact that five male members of her family were butchered to death by the assailants to realise that the prosecutor 's statement that she was mentally unbalanced must be true.
Then, as to Ram Prasad and Mansa Ram having been won over by the defence, that again is a matter on which the trial Court appears to have been satisfied; otherwise it would have readily acceded to the request of the defence to exercise its powers under section 540.
We are inclined to think that it is because this part of the defence contention was felt to be inarguable that the Advocate for the appellants did not raise this point before the Court.
Therefore, we are not prepared to allow Mr. Sawhney to take us through the evidence in the case on the ground that one important contention raised by the defence has not been examined by the High Court.
Mr. Sawhney has then argued that where witnesses giving evidence in a murder trial like the present are shown to belong to the faction of victims, their evidence should not be accepted, because they are prone to involve falsely mem bers of the rival faction out of enmity and partisan feeling.
There is no doubt that when a criminal Court has to appreciate evidence given by witnesses who are partisan or interested, it has to be very careful in weighing such evidence.
51 S.C. IO 146 Whether or not there are discrepancies in the evidence; whether or not the evidence strikes the Court as genuine; whether or not the story disclosed by the evidence is prob able, are all matters which must be taken into account.
But it would, we think, be unreasonable to contend that evidence given by witnesses should be discarded only on the ground that it is evidence of partisan or interested witnesses.
Often enough, where factions prevail in villages and murders are committed as a result of enmity between such factions, criminal Courts have to deal with evidence of a partisan type.
The mechanical rejection of such evidence on the sole ground that it is partisan would invariably lead to failure of justice.
No hard and fast rule can be laid down as to how much evidence should be appreciated.
Judicial approach has to be cautious in dealing with such evidence; but the plea that such evidence should be rejected because it is partisan cannot be accepted as correct.
Then it is urged that the evidence given by the witnesses conforms to the same uniform pattern and since no specific part is assigned to all the assailants, that evidence should not have been accepted.
This criticism again is not well founded.
Where a crowd of assailants who are members of an unlawful assembly proceeds to commit an offence of murder in pursuance of the common object of the unlawful assembly, it is often not possible for witnesses to describe accurately the part played by each one of the assailants.
Besides, if a large crowd of persons armed with weapons assaults the intended victims, it may not be necessary that all of them have to take part in the actual assault.
In the present case, for instance, several weapons were carried by different members of the unlawful assembly, but it appears that the guns were used and that was enough to kill 5 per sons.
In such a case, it would be unreasonable to contend that because the other weapons carried by the members of the unlawful assembly were not used, the story in regard to the said weapons itself should be rejected.
Appreciation of evidence in such a complex case is no doubt a difficult task: but criminal courts have to do their best in dealing with such cases and it is their duty to sift the evidence carefully and decide which part of it is true and which is not.
In the 147 present case, the High Court has in fact refused to act upon the, evidence of Bahoran and Prabhu Dayal, because it appeared to the High Court that the evidence of these two witnesses suffered from serious infirmities.
Mr. Sawhney also urged that the test applied by the High Court in convicting the appellants is mechanical.
He argues that under the Indian Evidence Act, trustworthy evidence given by a single witness would be enough to convict an accused person, whereas evidence given by half a dozen witnesses which is not trustworthy would not be enough to sustain the conviction.
That, no doubt is true; but where a criminal court has to deal with evidence pertaining to the commission of an offence involving a large number of offenders and a large number of victims, it is usual to adopt the test that the conviction could be sustained only if it is supported by two or three or more witnesses who give a consistent account of the incident.
In a sense, the test may be described as mechanical; but it is difficult to see how it can be treated as irrational or unreasonable.
Therefore, we do not think that any grievance can be made by the appellants against the adoption of this test.
If at all the prosecution may be entitled to say that the seven accused persons were acquitted because their cases did not satisfy the mechanical test of four witnesses, and if the said test had not been applied, they might as well have been convicted.
It is, no doubt, the quality of the evidence that matters and not the number of witnesses who give such evidence.
But, sometimes it is useful to adopt a test like the one which the High Court has adopted in dealing with the present case.
Mr. Sawhney then attempted to argue that the High Court failed to give effect to the principles enunciated by this Court in the case of Baladin vs State of Uttar Pradesh( ').
In that case, it was observed by Sinha, J., who spoke for the Court, that it is well settled that mere presence in an assembly does not make a person, who is present, a number of an unlawful assembly unless it is shown that he had done something or omitted to do something which would make him a member of an unlawful assembly, or unless the case falls under s.142, I.P.C. The argument is (1) A.I.R. 1956 S.C. 181 148 that evidence adduced by the prosecution in the present case does not assign any specific part to most of the accused persons in relation to any overt act, and so, the High Court was in error in holding that the appellants were members of an unlawful assembly.
The observation of which Mr. Sawhney relies, prima facie, does seem to support his contention; but, with respect, we ought to add that the said observation cannot be read as laying down a general proposition of law that unless an overt act is proved against a person who is alleged to be a member of an unlawful assembly, it cannot be said that he is a member of such an unlawful assembly.
In appreciating the effect of the relevant observation on which Mr. Sawhney has built his argument, we must bear in mind the facts which were found in that case.
It appears that in the case of Baladin(1), the members of the family of the appellants and other residents of the village had assembled together; some of them shared the common object of the unlawful assembly, while others were merely passive wit nesses.
Dealing with such an assembly, this Court observed that the presence of a person in an assembly of that kind would not necessarily show that he was a member of an un lawful assembly.
What has to be proved against a person who is alleged to be a member of an unlawful assembly is that he was one of the persons constituting the assembly ,and he entertained along with the other members of the assembly the common object as defined by s.141, I.P.C. Section 142 provides that whoever, being aware of facts which render any assembly an unlawful assembly, intentionally joins that assembly, or continues in it, is said to be a member of an unlawful assembly.
In other words, an assembly of five or more persons actuated by, and entertaining one or more of the common objects specified by the five clauses of section 141, is an unlawful assembly.
The crucial question to determine in such a case is whether the assembly consisted of five or more persons and whether the said persons entertained one or more of the common objects as specified by section 141.
While determining this question, it becomes relevant. to consider whether the assembly consisted of some persons. .who were merely passive witnesses and had (1) A.I.R. 1956 S.C. 181 I49 joined the assembly as a matter of idle curiosity without intending to entertain the common object of the assembly.
It is in that context that the observations made by this Court in the case of Baladin(1) assume significance; otherwise, in law, it would not be correct to say that before a person is held to be a member of an unlawful assembly, it must be shown that he had committed some illegal overt act or had been guilty of some illegal omission in pursuance of the common object of the assembly.
In fact, s.149 makes it clear that if an offence is committed by any member of an unlawful assembly in prosecution of the common object of that assembly, or such as the members of that assembly knew to be likely to be committed in prosecution of that object, every person who, at the time of the committing of that offence.
is a member of the same assembly, is guilty of that offence; and that emphatically brings out the principle that the punishment prescribed by s.149 is in a sense vicarious and does not always proceed on the basis that the offence has been actually committed by every member of the unlawful assembly.
Therefore, we are satisfied that the observations made in the case of Baladin(l) must be read in the context of the special facts of that case and cannot be treated as laying down an unqualified proposition of law such as Mr. Sawhney suggests.
In this case, the High Court has carefully examined the evidence and has made a finding that the whole group of persons who constituted the assembly were members of the faction of Laxmi Prasad and they assembled together, armed with several weapons, because they entertained a common object in pursuance of which the five murders were committed on that day.
Therefore, there is no substance in the argument that the conclusion of the High Court that the appellants are guilty of the offences charged is not sup ported by the principles of law enunciated by this Court in the case of Baladin(1).
It is thus clear that the general grounds of attack urged before us by Mr. Sawhney in challenging the validity of the conclusions recorded by the High Court fail, and so, there (1) A.I.R.
I956 S.C. 181 150 would be no occasion or justification for this Court to con sider the evidence for itself.
That leaves one question still to be considered and that has relation to the sentence of death imposed on 10 persons.
Mr. Sawhney argues that in confirming the sentences of death imposed by the trial Court on 10 accused persons in this case, the High Court has adopted a mechanical rule.
The High Court has held that the 10 persons who carried fire arms should be ordered to be hanged, whereas others who have also been convicted under section 302/149, should be sentenced to imprisonment for life.
It is true that except for Laxmi Prasad, the charge under section 302/149 rests against the other accused persons on the ground that five murders have been committed by some members of the unlawfui assembly of which they were members, and the argument is that unless it is shown that a particular accused person has himself committed the murder of one or the other of the victims, the sentence of death should not be imposed on him.
In other words, the contention is that if a person is found guilty of murder under section 302/149 and it is not shown that he himself committed the murder in question, he is not liable to be sentenced to death.
In support of this argument, Mr. Sawhney has relied on certain observations made by Bose J. who spoke for the Court in Dalip Singh vs State of Punjab( ').
In that case, what this Court observed was that the power to. enhance a sentence from transportation to death should very. rarely be exercised and only for the stron gest reasons; and. it was added that it is not enough for the appellate court to. say or think that if left to itself it would have awarded the. greater penalty because the discretion does ,not belong to the. appellate court but to the trial Judge, and the only ground on which the appellate court can interfere is that the discretion has been improperly exercised.
These observations have no relevance in the present case, because we are not dealing With a case where the High Court has enhanced the sentence imposed by the trial Judge at all.
In fact, both the trial Court and the High Court are agreed that the sentences of death imposed on 10 persons are justi fied by the circumstances of the case and by the requirements (1) (1954] S.C.R. 145 151 of justice.
As a mere proposition of law, it should be difficult to accept the argument that the sentence of death can be legitimately imposed only where an accused person is found to have committed the murder himself.
Whether or not sentences of death should be imposed on persons who are found to be guilty not because they themselves committed the murder, but because they were members of an unlawful assembly and the offence of murder was committed by one or more of the members of such an assembly in pursuance of the common object of that assembly, is a matter which had to be decided on the facts and circumstances of each case.
In the present case, it is clear that the whole group of persons belonged to Laxmi Prasad 's faction, joined together armed with deadly weapons and they were inspired by the common object of exterminating the male members in the family of Gayadin, 10 of these persons were armed with fire arms and the others with several other deadly weapons, and evidence shows that five murders by shooting were committed by the members of this unlawful assesmbly.
The conduct of the members of the unlawful assembly both before and after the commission of the offence has been considered by the courts below and it has been held that in order to suppress such fantastic criminal conduct on the part of villagers it is necessary to impose the sentences of death on 10 members of the unlawful assembly who were armed with firearms.
It cannot be said that discretion in the matter has been improperly exercised either by the trial Court or by the High Court.
Therefore we see no reason to accept the argument urged by Mr. Sawhney that the test adopted by the High Court in dealing with the question of sentence is mechanical and unreasonable.
There are, however, three cases in which we think we ought to interfere.
These are the, case of accused No. 9 Ram Saran who is aged 18; accused No. II Asha Ram who is aged 23 and accused No. 16 Deo prasad who is aged 24, Ram Saran and Asha Ram are the sons of Bhagwati who is accused No. 2.
Both of them have been sentenced to death.
Similarly, Deo prasad has also been sentenced to death.
Having regard to the circumstances under which the unlawful assembly came to be formed, we are satisfied that these 152 young men must have joined the unlawful assembly under pressure and influence of the elders of their respective families.
The list of accused persons shows that the unlaw ful assembly was constituted by members of different families and having regard to the manner in which these factions ordinarily conduct themselves in villages, it would not be unreasonable to hold that these three young men must have been compelled to join the unlawful assembly that morning by their elders, and so, we think that the ends of justice would be met if the sentences of death imposed on them are modified into sentences of life imprisonment.
Accordingly, we confirm the orders of conviction and sentence passed against all the appellants except accused Nos. 9, 11 and 16 in whose cases the sentences are altered to those of imprisonment for life.
In the result, the appeals are dismissed, subject to the said modification.
Appeals dismissed.
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Forty persons belonging to a village faction and constituting an unlawful assembly were put up on trial before the Additional Sessions Judge under section 302 read with section 149 of the Indian Penal Code and other sections thereof for murdering 5 persons of the other faction with guns.
The trial Judge found 35 of them guilty and sentenced 10 of them, who carried fire arms, to death and the rest to imprisonment for life.
Three appeals were preferred by the convicted persons to the High Court and the sentences of death came up for confirmation under section 374 of the (1) L.R. 59 I.A. 2o6.
134 Code of Criminal Procedure.
The High Court acquitted 7 of the appellants and, concurring with the findings of the trial court, dismissed the appeals of the rest.
It confirmed the sentences of death passed on the 10 accused persons.
The appeals to this Court were preferred by those 10 and 6 others by special leave.
HELD: (i) In criminal appeals under article 136 of the Constitution involving sentences of death it would be improper to refuse to consider relevant pleas of fact or law on the ground that they had not been taken before the High Court.
when any such point had actually been urged and not considered by the High Court, the party urging it was entitled as a matter of right to obtain a decision from this Court.
Even otherwise no hard and fast rule can be laid down prohibiting such pleas being raised in such appeals.
(ii).It would be unsound to lay down as a general rule that every witness cited by the prosecution must be examined by it even though his evidence was not very material or he was known to have been won over or terrorised.
(iii). .Evidence of a witness could not be discarded only on the ground that he was a partisan or interested witness, particularly in cases of murder committed by a village faction, such mechanical rejection would invariably lead to failure of justice.
(iv).It was not improper for a criminal court having a large number of offenders and victims to deal with to adopt the test that the conviction of any particular accused could be sustained only if a particular number of witnesses gave a consistent account against him.
Such a test, even though mechanical, was not unreasonable.
Punishment prescribed by section 149 of the Indian Penal Code was in a sense vicarious and that section does not necessarily require that the offence must have been actually committed by every member of the unlawful assembly.
The observations of this Court in Baladin vs State of U.P. had to be read in the context of that case and could not be treated as laying down an unqualified proposition of law.
Baladin vs State of Uttar Pradesh, A.I.R. 1958 S.C. 181, explained.
(vi) It was. not correct to say that if a person was found guilty of murder under section 302/149 of the Indian Penal Code and it was not shown that he himself. .had committed the murder, no sentence of death could be inflicted on him.
Dalip Singh vs State of Punjab, [19541 S.C.R. 145, distinguished.
(vii). .There was no error in the exercise of their discretion by the courts below in the present case in making a distinction between the ten persons who carried fire arms and were sentenced to death and the others, who did not carry fire and were sentenced to imprisonment for life, under a common charge under sections 302/149.
I35 (viii).
Regard being had to the circumstances of the present case, the ends of justice would be properly served if the sentences of death passed on the three accused persons aged 18, 23 and 24, who had joined the unlawful assembly under pressure of their elders were modified to life sentences.
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1834.txt
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Appeal No. 1452 of 1987.
From the Judgment and Order dated 10.7.1986 of the Kamataka High Court in I.T.R.C. No. 198 of 1987.
WITH C.A. Nos. 4462/89, 1822, 1902, 1465/87, 675, 658, 4461/89, 6093/90, 6204/ 90, 6092.
and 6092 A of 1990.
H. Salve, P.H. Parekh, Ms. Meenakshi Grover, R. Nariman, Ms. R. Gill and Ms. Simi Kr.
for the Appellants.
B.B. Ahuja, Ranbir Chandra and Ms. A. Subhasini for the Respondent.
The Judgment of the Court was delivered by B.P. JEEVAN REDDY J.
These appeals are preferred against the judgment of the Karnataka High Court answering the question referred to it, at the instance of the revenue, in favour of the revenue and against the assessee.
The question referred under section 256 of the Income Tax Act, 196 1, read as follows: "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 1, 79, 742 could not be disallowed under section 40 (c) of the Income Tax Act, 1961." (The above question related to Assessment Year 1974 75.
The question referred for A.Y. 1975 76 was identical except in the matter of amount).
Since the facts in all the appeals are identical it would be sufficient to notice the facts in C.A. Nos. 6092 and 6092A/90 (Prakash Beedies (P) Lid.
vs Commr.
of Income Tax.
Karnataka, Bangalore).
Prior to 15.7.1992, a partnership firm called K.M. Anand Prabhu & Sons, Mangalore, consisting of three partners K.M. Vishnudas Prabhu, K.M. Ramdas Prabhu and K.M. Shankar Prabhu was engaged inter alia in the business of manufacturing and sale of beedies under the brand name 'Mangalore Prakash Beedies '.
On May 20, 1972 a Private limited company called Prakash Beedies 609 Limited (the assessee appellant herein), was incorporated with its registered off ice at Manoalore.
One of its objects was to take over business of the aforesaid firm.
Under an agreement dated July 15, 1972 between the firm and the company, the firm sold its rights and assets to the company on the terms and conditions set out therein.
Clause 4(a) of the agreement, which alone is material for the purposes of these appeals reads: "(a) For the use of the trade name the Company shall pay royalty to the Vendor at the rate of 10ps.
for every thousand beedies sold by the Company by using the trade name of the Vendor.
The royalty shall be worked out at the end of each quarter ending on March, June, September and December, on the sales made during each quarter.
The royalty fixed hereby shall not be varied for a period of one year and may be reviewed and/or revised thereafter wards from time to time".
The assessee was making payments to the firm every year on account of royalty in terms of said clause.
The three partners aforesaid of the firm were also the directors of the assessee company.
For the assessment years 1974 75 and 1975 76, the assessee claimed deduction of the amount paid by it to the firm on account of royalty in terms of clause 4(a) of the agreement.
The amounts paid during the accounting years relevant to the said assessment years were Rs. 3, 16, 526 and Rs. 3, 95, 742 respectively.
The I.T.O. allowed the deductions as claimed.
In exercise of the powers conferred on him by Section 263, the Commissioner of Income Tax initiated (suo moto) proceedings for revising the said assessments in so far as the aforesaid deductions were concerned.
After hearing the assessee, he passed orders on September 16, 1976 whereunder he disallowed payments to the firm over and above the ceiling prescribed in Section 40(c).
The assessee preferred appeals to the Tribunal against the orders of the I.T.O, The appeals were allowed and the orders of the I.T.O. restored.
On reference, the High Court answered to question in the negative i.e., in favour of the revenue and against the assessee, on the following reasoning : the three directors of the assessee company were also the partners in the firm to which royalty payments were made.
In law, a firm has no separate legal existence; it is not a juristic person or a distinct legal entity.
It is merely a collection or association of the individuals for carrying 610 on a business.
Merely because the firm is an assessable entity under the Income Tax Act it does not follow that it is a juristic or legal entity.
It must, therefore, be held that the payments made to the firm are in reality payments made to the directors.
Such payments clearly attract and fall within the mischief of Section 40(c).
The Commissioner was right in saying so and the opinion of the Tribunal to the contrary is unsustainable in law.
In these appeals, S/Shri Harish N.Salve and Rohinton Nariman assailed the correctness of the view taken by the High Court.
They submitted firstly that the payments were made not to the directors of the assessee but to a firm which was a separate entity.
A payment to a firm is not ipso facto a payment to the partners, directly or indirectly.
In a firm there may be other partners besides the directors of the assessee company.
It may also happen that the firm has no income to distribute because of the losses incurred by it which are set off against the income so received.
The High Court was in error in holding that payment to a firm is a payment to the partners.
Assuming that a partnership firm is not a separate juristic entity distinct from its partners, even so the payments were made to the said three persons not in their capacity as directors (qua directors) but in consideration of a valuable right parted by them in favour of the assessee company.
Such payments do not and cannot fall within the mischief of Section4O(c).
Section 40(c) was never intended to take in such payments.
A company may take on lease the house of its directors for its legitimate business purposes and pay rent which is reasonable having regard to the market conditions, or it may pay even less than the market rate of rent.
Whether the rent paid by the company to its director in such a case falls within Section 40(c), ask the counsel.
Another illustration given by the counsel is where a director supplies raw material to the assessee company for a price which is the appropriate market price.
Would such payment also fall under section 40(c), they ask.
The Budget speech of the Finance Minister in the Parliament, while introducing the said provision, is relied upon in support of their contention.
It is also argued that the words "remuneration, benefit or amenity" occurring in Section 40(c) must be read having regard to the context in which they occur applying the principle NOSCITORA SPCOOS (recognition of associated words).
If so read, the payments in question can never fall within the ambit of the said words.
Shri Ahuja, the learned counsel for the Revenue justified the reasoning and approach of the High Court having regard to the clear language employed in clause (c).
The genuineness or validity of the agreement between the assessee company and the firm is not disputed.
The factum of payments made on account of royalty in terms of clause 4(a) of the said agreement is also not disputed.
It is also 611 not disputed that in the beedi trade, brand name carries significant business value.
It is necessary to keep this factual context in mind while examining the question at issue.
Section 40(c) read as follows during the relevant assessment years "40.
Notwithstanding anything to the contrary in sections 30 to 39, the following amounts shall not be deducted in computing the income charge able under the head" profits and gains of business or profession", (a). . (b). . (c) in the case of any company (i) any expenditure which results directly or indirectly in the provision of any remuneration of benefit or amenity to director or to a person who has a substantial interest in the company or to a relative of the director or of such person, as the case may be, (ii) any expenditure or allowance in respect of any assets of the company used by any person referred to in sub clause (i) either wholly or partly for his own purposes of benefit, if in the opinion of the Income tax Officer any such expenditure or allowance as is mentioned in sub clause (i) and (ii) is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom, so, however, that the deduction in respect of the aggregate of such expenditure and allowance in respect of any one person referred to in sub clause (i) shall, in no case, exceed (A) where such expenditure or allowance relates to a period exceeding eleven months comprised in the previous year, the amount of seventy two thousand rupees; (B) where such expenditure of allowance relates to a period not exceeding eleven months comprised in the previous year, an amount calculated at the rate of six thousand rupees for each month or part thereof comprised in that period: 612 Provided that in case where such person is also and employee of the company for any period comprised in the previous year, expenditure of the nature referred to in clauses (i), (ii), (iii) and (iv) of the second proviso to clause (a) of sub section (5) of section 40A shall not be taken into account for the purposes of sub clause (A) or subclause (B), as the case may be; (iii) * * * * Explanation.
The provisions of this clause shall apply notwithstanding that any amount not to be allowed under this clause is included in the total income of any person referred to in sub clause (i);" The Budget speech of the Finance Minister, in so far as it mentions the reasons for introduction of clause (c) of Section 40, reads as follows: "I am firmly of the view that the fiscal instrument must be deployed to discourage payment of high salaries and remunerations which go ill with the norms of egalitarian society.
I accordingly propose to impose a calling on the remuneration of company employees which would be deductible in the computation of taxable profits.
The ceiling is being set at Rs. 5,000 per month.
Together with the existing ceiling of Rs. 1,000 per month in the case of perquisites, the allowable overall ceiling on remuneration and perquisites, for purposes of taxation, will be at Rs. 6,000 per month. . . " The object behind the provision undoubtedly was to discourage and disallow "payment of high salaries and remunerations which go ill with the norms of egalitarian society".
The provision was, of course, not confined to the directors. ' It took in relatives of directors, persons having substantial interest in the company and their relatives.
The clause vested in the I.T.O. the power to determine whether any such expenditure or allowances as is mentioned in the said clause was excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by or accruing to it therefrom.
In addition to it, a ceiling was also prescribed beyond which such expenditure or allowance could not go in any event.
At this juncture, it would be appropriate to notice the provision contained in sub section (2) of Sec 40A. Clause, A provides that where the assessee incurs any expenditure in respect of which payment has been made or is to be made to any 613 person referred to in clause (b) of the sub section, and the Income tax Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction.
Clause (b) mentions the categories of persons to whom the provision in clause (a) applies.
It includes directors of the company and their relatives among others.
Clause b) also takes in any payment to any company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has substantial, interest in the business or profession of the assessee.
In short, the net is cast very wide to ensure that excessive or unreasonable payments are not made to the persons in control of the affairs of the assessee in the name of paying for the goods, services and facilities rendered, supplied or extended by them, as the case may be.
That the payments made by the assessee company to the firm on account of royalty in terms of clause (4) (a) of the agreement fall within the meaning of the expression 'expenditure ' in sub clause (i) of clause (c) is not disputed.
The observations in CIT, Bombay.
vs M/s. Indian Engineering and Commercial Corporation Private Uinited (Civil Appeal Nos. 1583 and 1584 (NT) of 1977 decided on 13.4.1993 by us reported in ; do not say otherwise.
That case arose under Section 40(A) (5).
The payments in question were made to the directors by way of commission on sales.
The question was whether the said payments fell within sub clause (ii) of clause (a) of sub section (5) of section 40(A).
It was held that they did not.
While holding so it was observed that it is difficult to say that payment of certain cash amount by way of commission on sales, directly to an employee, can be said to fall within the words 'where the assessee incurs any expenditure which results directly or indirectly '.
" The said observations were made in response to the Revenue 's argument that the said payment constituted 'perquisites ' within the meaning of sub clause (ii) of clause (a) of Section 40(A) (5).
The observations are clearly confined to the said sub clause and have no relevance to any other provision in the Act.
The observations cannot be read dissociated from their context.
Coming back to the provisions of Section 4O(c) and the facts of the case before us the only question is whether the royalty payments to the firm fell within clause (c).
We assume for the purpose of this argument that in this case, payments to firm were payments to partners.
Even so, we think that the said payments did not fall within clause (C).
The payments were made in consideration of a valuable right parted by the partners/ directors of the assessee company in favour of the assessee.
SO long a,, the agreement whereunder the said payments were made is not held to be a mere 614 device or a mere screen, the said payments cannot be treated as payments made to the directors as directors (qua directors).
The payments were made by way of consideration for allowing the assessee to use a valuable right belonging to them viz., the brand name.
Such a payment may be liable to be scrutinised under subsection (2) of Section 40(A), but it certainly did not fall within the four corners of Section 40(c).
In T. T Ltd. vs LTO., Bangalore 1, a Bench of Karnataka High Court comprising D.M. Chandrashekhar, CJ.
and E.S. Venkataramiah,J. has taken a view which accords with the one taken by us.
Speaking for the Bench, E.S. Venkataramiah, J. (as he then was) observed: "A close reading of the above provision shows that section 40(c) refers to an expenditure in curred by making periodical payments to person mentioned in that clause apparently for any personal service that may be rendered by him.
It cannot have any reference to payments made by the assessee for all kinds of "services or facilities" referred to in section 4OA(2) (a).
It is argued that the proviso thereto suggests that any expenditure incurred for any kind of service which is referred to in the main part of section 40A (2) (a) and the expenditure referred to in section 40(c) belong to the same category.
This contention is not correct.
The expression "services" in section 40A (2) (a) is an expression of wider import. . .
If the remuneration, benefit or amenity referred to in section 40(c) is treated as the same as what is paid in return for "the goods, services or facilities" then irrespective of the fair market value of the goods, services and facilities provided by a person who may be a director or a person who has a substantial interest in the company or a relative of the director or of such person, as the case may be, only a maximum of Rs. 72,000 can be allowed to be deducted in computing the income of the company in any one year.
We do not think that Parliament ever intended that such a result should follow.
The goods, services and facilities referred to in section 40A (2) (a) are those which have a market value and which are commercial in character.
Many of the services and facilities referred to above are those which are nowadays provided by independent organisations. ' The said decision has been followed by the Punjab and Haryana High Court in Commissioner of Income Tax, Patiala vs Avon Cycles (P) Ltd. , The Calcutta High Court has also taken a similar view in India Jute Co. Ltd vs 615 Commr of Income Tax Mr. Ahuja, learned counsel for the Revenue submitted that the argument of the assessee that only the payments made to directors as directors fall within clause (c) and not the other payments, becomes inapt when the payments are made to the relative,,, of the directors or to persons holding substantial interest in the assessee company or their relatives.
The ceilinG prescribed in clause (c) cannot also be applied to such persons says the counsel.
The answer perhaps lies in the clause itself in the power vested in the I.T.O. to determine whether any expenditure or allowance is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by the assessee or accruing therefrom.
Any payment to a relative of a director or other persons mentioned in clause (c) will necessarily be examined applying the above test and if it is found that they are unwarranted, unreasonable or excessive, they will be disallowed.
Since such a situation does not arise herein, we need not pursue the argument further.
For the above reasons, we are of the opinion that the judgment under appeal cannot be sustained.
It must he held that the payments in question did not fall within section 40(c).
Accordingly, the appeals are allowed, the judgment of the High Court is set aside and the question referred to the High Court is answered in the affirmative, i.e., in favour of the assessee and against the revenue.
No costs.
U.J. R. Appeal allowed.
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A partnership firm consisting of three partners was engaged inter alia in the business of manufacturing and sale of beedies under the brand name "Mangalore Prakash Beedies".
On May 20,1972 a private limited company called prakash beedies Ltd. the assessee appellant was incorporated.
One of its objects was to take over the business of the aforesaid firms which it did under an agreement dated 15 July 1972 whereby the firms sold its rights and assets to the company.
For the use of the trade name, a royalty at 10p.
for every 1000 beedies was to be paid by the company to the firm.
This payment was made ever year by the assesse on account of royalty.
The three partners of the firms were also directors of the company.
The relevant assessment years were 1974 75 and 1975 76.
The facts in the other appeals are similar.
The assessee claimed deduction of the amount paid by it as royalty.
The ITO allowed the deductions as claimed.
The CIT in stio motu proceedings disallow the aforesaid deductions.
On appeal, the tribunal restored the order of the ITO.
On reference, the High Court answered in fan,our of the revenue as the three directors of the assessee company were also partners in the firm.
It held that in law, a firm is merely a collection or association of individuals for carrying on a business.
Merely because the firm is an assessable entity, under the Income Tax Act, it does not follow that it is a juristic or legal entity.
It must therefore be held that the payments to the firm were in reality made to the 607 directors, thus attracting section 40 (c).
Before this Court, it was contended for the assessee that payment to a firm is not ipso fact payment to the partners, directly or indirectly.
In any event, the payments were made to the three persons not in their capacity of directors (qua directors).
but in consideration of a valuable right parted by them in favour of the assessee company.
section 40(c) was never intended to take in such payments.
They relied on the budget speech of the Finance Minister and argued that the principle of interpretation noscitor a sociis must be applied to the words "remuneration, benefit or amenity".
The genuineness or validity of the agreement, the factum of payments as royalty, and that the brand name carries significant business value was not disputed.
The question before this Court was whether the royalty payments fail within section 40(c).
Allowing the appeal, this Court, HELD : 1.
Even assuming that the payments to firm were payments to partners, the said payments did not fall within section 40(c).
The payment, . were made In consideration of a valuable right parted by the firm/partners/ directors of the assessee company in favour of the assessee.
So long as the agreement whereunder the said payments were made is not held to be a mere device or a mere screen, the said payments cannot be treated as payments made to the directors (qua directors).
(613 H, 614 A) The payments were made by way of consideration for allowing the to use a valuable right belonging to them viz. the brand name.
Such a payment may be liable to be scrutinised under sub section.
(2) of section 40 (A), but it certainly did not fall within the four corners of section 40(c).
(614 A) T.T. (Pvt.) Ltd. vs ITO Bangalore , approved.
CIT Patiale vs Avon Cycles (p) Ltd. and India Jute Co. Ltd. vs CIT , referred to. 2.
The power vested in the ITO is to determine whether any expenditure of allowance is excessive or unreasonable having regard to the legitimate business needs of the company and the benefit derived by the assessee or 608 accruing therefrom.
Any payment to a relative of a director or other persons mentioned in clause (c) will necessarily be examined applying the above test and if it is found that they are unwarranted, unreasonable or excessive, they will be disallowed.
Such a situation does not arise herein.
(615 C) CIT, Bombay vs M/s. Indian Engineering and Commercial Corporation (p) Ltd. [1983] distinguished.
JT 683.
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7100.txt
|
ivil Appeal Nos.
216 217 of 1970.
Appeals by special leave from the Judgment and Order dated 3 12 1968 of the Bombay High Court in Second Appeal Nos.
1232 and 1214/1961.
V. section Desai, R. B. Datar and Lalit Bhardwaj and Naveen Sinha for the Appellants.
section V. Tambwaker for the Respondent.
The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
On April 15, 1930 Parisa Chougule, executed Exhibit 93, a deed of mortgage in favour of Ganesh, Dattatraya Kulkarni (father of the appellants) for a sum of Rs. 1600 in respect of single item of land.
On August 25, 1933, Parisa Chougule executed Exhibit 92 another deed of mortgage in favour of the same mortgagee for a sum of Rs. 1,000 in respect of ten items of land including the land previously mortgaged under Exhibit 93.
Both the mortgages were possessory mortgages but it appears from evidence that the land was leased back to the mortgagor for a stipulated rent.
Parisa Chougule died on June 15, 1934 leaving behind him three sons, Bhupal an adult and Anna and Dhanpal, minors.
On July 11, 1934, Bhupal borrowed a further sum of Rs. 131 and executed a simple mortgage Exhibit 91 in respect of the very ten 818 items of land covered by Exhibit 92.
On May 1, 1935, Bhupal purporting to act as the Manager of the joint family and the guardian of his minor brother executed a deed of sale Exhibit 90 in favour of Ganesh Dattatraya Kulkarni in respect of four out of the ten items of land mortgaged under Exhibits 93, 92 and 91.
The consideration for the sale was Rs. 3050 and was made up of the amounts of Rs. 1600 Rs. 1000 and Rs. 131/ due under three mortgages Exhibits 93, 92 and 91 respectively and a sum of Rs. 200 received in cash by Bhupal on the date of sale.
Six of the items which were mortgaged were released from the burden of the mortgages.
On September 23, 1946, Anna second son of Parisa became a major.
On August 31, 1951, Dhanpal third son of Parisa became a major.
On August 27, 1953 Anna and Dhanpal filed the suit out of which this appeal arises for a declaration that the sale deed dated May 1, 1935 was not for legal necessity and not for the benefit of the estate and therefore, not binding on them.
They also prayed that joint possession of their two third share may be given to them.
The Trial Court found that there was legal necessity for the sale to the extent of Rs. 2600 only, that the consideration of Rs. 3050 for the sale was inadequate as the lands were worth about Rs. 4000, that there was no such compelling pressure on the estate as to justify the sale and therefore, the sale was not for the benefit of the family and hence not binding on the two plaintiffs.
A decree was granted in favour of the two plaintiffs for joint possession of two third share of the lands subject to their paying a sum of Rs. 133/5 ans/4 ps.
to the second defendant.
On appeal by the second defendant the Assistant Judge, Kolhapur affirmed the finding of the Trial Court that there was legal necessity to the extent of Rs. 2600 only, that the value of the land was Rs. 4,000 and that there was no pressure on the estate justifying the sale.
The Assistant Judge found that there was no evidence to show that the defendant made any bonafide enquiry to satisfy himself that there was sufficient pressure on the family justifying the sale.
He however, held that the suit of the first plaintiff was liable to be dismissed as it was barred by limitation.
He, therefore, modified the decree of the Trial Court by granting a decree in favour of the second plaintiff only for possession of a one third share in the lands subject to payment of a sum of Rs. 866.66 ps.
to the second defendant.
The first plaintiff as well as the second defendant preferred second appeals to the High Court.
The High Court allowed the appeal filed by the first plaintiff and dismissed the appeal filed by the second defendant.
The legal representatives of the second defendant have preferred these appeals after obtaining special leave from this Court under Article 136 of the Constitution.
819 It is clear that these appeals have to be allowed.
The facts narrated above show that out of the consideration of Rs. 3050 for the sale there was undoubted legal necessity to the extent of Rs. 2600 the total amount due under the two deeds of mortgage executed by the father of the plaintiffs.
Out of the ten items of land which were mortgaged, only four were sold and the remaining six items were released from the burden of the mortgages.
The family was also relieved from the burden of paying rent to the mortgagee under the lease deed.
Surely all this was for the benefit of the family.
The value of the land sold under the deed of sale was found by the Courts below to be Rs. 4000.
Even if that be so it cannot possibly be said that the price of Rs. 3000 was grossly inadequate.
It has further to be remembered that there were continuous dealings between the family of the plaintiffs and the family of the second defendant, over a long course of years.
In those circumstances it is impossible to agree with the conclusion of the courts below that the sale was not binding on the plaintiffs.
The courts below appeared to think that notwithstanding the circumstance that there was legal necessity to a large extent it was incumbent on the second defendant to establish that he made enquiry to satisfy himself that there was sufficient pressure on the estate which justified the sale.
We are unable to see any substance in the view taken by the courts below.
When the mortgagee is himself the purchaser and when the greater portion of the consideration went in discharge of the mortgagors, we do not see how any question of enquiry regarding pressure on the estate would arise at all.
Where ancestral property is sold for the purpose of discharging debts incurred by the father and the bulk of the proceeds of the sale is so accounted, the fact that a small part of the consideration is not accounted for will not invalidate the sale.
In Gauri Shankar & Ors.
vs Jiwan Singh Ors.(1) it was found that Rs. 500 out of the price of Rs. 4000 was not fully accounted for and that there was legal necessity for the balance of Rs. 3500.
The Privy Council held that if the purchaser had acted honestly, if the existence of a family necessity for a sale was made out and the price was not unreasonably low, the purchaser was not bound to account for the application of the whole of the price.
The sale was upheld.
In Niamat Rai and Ors.
vs Din Dayal and Ors.(2) the manager of a joint family sold family property for Rs. 34,500 to satisfy pre existing debts of the extent of Rs. 38,000.
It was held that it was sufficient to sustain the sale without showing how the balance had been applied.
820 In Ram Sunder Lal & Anr.
vs Lachhmi Narain and Anr.(1).
, the vendee the sale in whose favour was questioned fourteen years after the sale, was able to prove legal necessity to the extent of Rs. 7744 out of a total price of Rs. 10,767.
The Privy Council after quoting a passage from the well known case of Hanoomanpersaud Pandey vs Mt. Babooee Munrai Koonweree,(2) upheld the sale.
The principle of these decisions has been approved by this Court in Radhakrishandas and Anr.
vs Kaluram.(3).
The learned counsel for the respondents relied upon the decision of this Court in Balmukand vs Kamla Wati & Ors.(4) That was a suit for specific performance of an agreement of sale executed by the manager of the family without even consulting the other adult members of the family.
The object of the sale was not to discharge any antecedent debts of the family nor was it for the purpose of securing any benefit to the family.
The only reason for the sale of the land was that the plaintiff wanted to consolidate his own holding.
The Court naturally found that there was neither legal necessity nor benefit to the estate by the proposed sale and the agreement therefore, could not be enforced.
We do not see what relevance this case has to the facts of the present case.
We accordingly allow the appeals and dismiss the suit with cost throughout.
N.K.A. Appeals allowed.
|
A mortgagor executed two deeds of mortgage in favour of the father of the appellants for Rs. 1600 and Rs. 1000 in respect of certain lands.
Both the mortgages were possessory mortgages but the land was leased back to the mortgagor for a stipulated rent.
The mortgagor died leaving behind him three sons, one adult and two minors.
The adult son borrowed a further sum of Rs. 131 by executing a simple mortgage and purporting to act as the Manager of the joint family and the guardian of his minor brothers, executed a deed of sale in favour of the father of the appellants in respect of four out of ten items of land previously mortgaged.
The consideration for the sale was Rs. 3050 which was made up of Rs. 1600.
Rs. 1000 and Rs. 131 due under three previous mortgages respectively and Rs. 200 received in cash on the date of sale.
The minor sons on becoming major filed a suit out of which this appeal arises, for a declaration that the sale deed executed was not for legal necessity, nor for the benefit of the estate and, therefore, not binding on them.
They also prayed for joint possession of their 2/3rd share.
The trial court found that there was legal necessity for the sale to the extent of Rs. 2600 only, the consideration of Rs. 3050 for the sale was inadequate as the lands were worth about Rs. 400 and that there was no compelling pressure on the estate to justify the sale and therefore the sale was not for the benefit of the family and hence not binding on the plaintiffs.
A decree was granted in their favour for joint possession of 2/3rd share of the lands subject to certain payment to the second defendant.
On appeal by the second defendant, the Assistant Judge held the suit of the first plaintiff to be barred by time and therefore modified the decree in favour of the second plaintiff.
On appeal by the first plaintiff and second defendant, the High Court allowed the appeal by the first plaintiff and dismissed the appeal filed by the second defendant.
Accepting the appeal of the legal representatives of the second defendant.
^ HELD: Out of the sale consideration of Rs. 3050 there was undoubted legal necessity to the extent of Rs. 2600 the total amount due under the two deeds of mortgage executed by the father of the plaintiffs.
Out of the ten items which were mortgaged, only four were sold and the remaining six items were released from the burden of the mortgages.
The family was also relieved from one burden of paying rent to the mortgagee under the lease.
All this 817 was for the benefit of the family.
The value of the land sold under the deed of sale was found by the Courts below to be Rs. 4000.
Even if that be so it cannot possibly be said that the price of Rs. 3000 was grossly inadequate.
Further there were continuous dealings between the family of the plaintiffs and the family of the second defendant over a long course of years.
In these circumstances it is impossible to say that the sale was not binding on the plaintiffs.
The Courts below appeared to think that notwithstanding the circumstance that there was legal necessity to a large extent it was incumbent on the second defendant to establish that he made enquiry to satisfy himself that there was sufficient pressure on the estate which justified the sale.
When the mortgagee was himself the purchaser and when the greater portion of the consideration went in discharge of the mortgages no question of enquiry regarding pressure on the estate would arise at all.
Where ancestral property is sold for the purpose of discharging debts incurred by the father and the bulk of the proceeds of the sale is so accounted, the fact that a small part of the consideration is not accounted for will not invalidate the sale.
[819 A E] Gauri Shankar & Ors.
vs Jiwan Singh & Ors.
A.I.R. 1927 P.C. 246 Niamat Rai & Ors.
vs Din Dayal & Ors.
1927 A.I.R. P.C. 121, Ram Sunder Lal & another vs Lacchmi Narain and another ; Hanooman Persaud Pandey vs Mt. Babooee Munrai Koonweree ; Radhakrishendas and another vs Kaluram A.I.R. 1967 S.C. 574, referred to.
Balmukand vs Kamla Wati & Ors.
A.I.R. 1964 S.C. 1385 held inapplicable.
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4176.txt
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Appeal No. 1997 of 1968.
Appeal by Special Leave from the Judgment and Order dated the 13th February, 1968 of the Bombay High Court in Special Civil Application No. 643 of 1967.
B.N. Lokur and A. G. Ratnaparkhi for the Appellant.
S.V. Gupte, R.B. Datar and Sanjeev Kumar for Respondents.
The Judgment of the Court was delivered by RAY, C.J.
This appeal by special leave is from the judgment dated 13 February 1968of the High Court of Bombay.
The appellant was owner of land covered by Survey No. 201/2, 194/13, 200/29 and 194/15.
The appellant 's wife sold this land to respondent No. 1 on 14 June 1946.
On 12 April 1962 the appellant made an application under ' section 70(b) of the Bombay Tenancy & Agricultural Lands Act (hereinafter referred to as the Bombay Act) for a declaration that he was a tenant of two of the four plots of land namely, Survey Nos. 194/15 and 200/29.
This dispute between the appellant and the respondent in regard to alleged tenancy claim for these two survey numbers went up to the Maharashtra Revenue Tribunal.
The Tribunal by order dated 19 March, 1954 rejected the claim of the appellant to tenancy in respect of the land covered by Survey Nos.
200/29 and 194/15.
Thereafter the respondent filed an application on 24 January 1963 under section 70(b) of the Bombay Act for a declaration that the appellant was not tenant of the remain ing two Survey Nos.201/2 and 194/13.
The respondent alleged that he never leased the land to the appellant.
The re spondent further said that he came to know about entry in the record of rights for the years 1955 56 on the strength of mutation alleged to have been made on 30 January 1956 and sanctioned on 13 November 1956.
This application of the respondent was resisted by the appellant on the ground that he was tenant of these two survey Nos.
201/2 and 194/13.
The matter was heard by the Mamlatdar.
By an order dated 31 July 1963 the Mamlatdar rejected the claim of the appellant to be.
a tenant.
Thereafter the matter was taken up to the District Deputy Collector.
The Deputy Collector by his order dated 27 June 1966 upheld the Mamlatdar 's order.
Before the Mamlatdar and the Deputy Collector the respondent examined himself.
He was cross examined and his attention was drawn in cross examination towards an alleged admission about the appellant being his tenant in the depo sition.
recorded by the Tenancy Aval Karkun in an earlier case on 10 September 1962.
The respondent denied that he made.any admission.
The previous deposition was not shown to him on that day.
673 On 9 July 1963 a certified copy of the deposition in the earlier proceedings was placed on record.
On that very day the.
appellant examined himself, saying that he was a tenant of the land and he had no other evidence to show in support of his case except the certified copy of the statement which was produced on that day.
The appellant also relied on the extracts of the record of rights showing that the respondent was shown as 'Kabze dar ' of Survey Nos.
201/2 and the appellant was shown as tenant of the same.
In regard to Survey No. 194/13 it also appeared from the record of rights that the respondent was shown as 'kabzedar ' and the appellant as a tenant.
On this evidence the Mamlatdar held that the appellant was not Cultivating the lands as a tenant of the respondent and he declared that the appellant was not a tenant.
The Deputy ColleCtor affirmed the order of the Mamlatdar.
The Maharashtra ReVenue Tribunal however by its order dated 9 January 1967 held that the appellant was proved to be a tenant of the land.
The respondent thereupon took the matter to the High Court under Article 227.
The High Court set aside the order of the Revenue Tribunal.
The appellant obtained special leave from this Court.
On behalf of the appellant three contentions were advanced.
First, that the respondent was bound by his admission that the appellant is a tenant.
Second, there is a presumption of the correctness of the record of rights under section 135 J of the Bombay Land Revenue Code 1879.
Third, the Maharashtra Revenue Tribunal was justified in setting aside the findings of fact of the Mamlatdar and the Deputy Collec tor because of error of law.
The admission on which reliance has been placed by counsel for the appellant suffers from three infirmities.
In the deposition of the respondent in Tenancy Case No. 6/61 62 dated 10 September 1962, the respondent gave evi dence in regard to dispute between the respondent and the appellant in relation to Survey Nos.
200/29 and 194/15 respondent said that he never kept the appellant as a tenant on the land.
In cross examination it was suggested to the respondent that the land bearing Survey No. 201/2 belonged to the respondent and that the appellant is a tenant in the land.
The respondent said as follows: "The land Survey No. '201/2 situate in Balkum belongs to me in Balkum.
The applicant is a tenant in the said land.
I do not take the rent in respect of the said land . .
I have prior to 15 20 years purchased this land from Sita ram Bhau.
Even the land bearing section No. 201/2 was purchased right from him.
I have never cultivated the land bearings section No. 201/2.
It was barren at that time.
When this land was to be acquired I learnt whether Sitaram Bhau was culti vating this land . or whether his name has been entered as a tenant against this land(?) I cannot say as to whose land is around the land beating section No. 201/2 or other Land.
" 674 This evidence read in its entirety is not an admission at all.
A person who says that 'I have taken no rent ' obviously says that there is no relationship of landlord or tenant.
The first infirmity in regard to this admission is that whatever was said by the respondent in regard to Survey No. 201/2 is irrelevant and inadmissible in the deposition of the respondent in that case.
Section 17 of the Indian Evidence Act states that 'An admission is a statement, oral or documentary, which suggests any inference as to any fact in issue or relevant fact, and which is made by any of the persons, and under the circumstances, hereinafter men tioned '.
In regard to dispute between the appellant and the respondent arising out of Survey No. 194/15 and 200/29, Survey Nos.
201/2 and 194/13 were neither issues in fact nor relevant fact.
The second infirmity against this admission being used against the respondent is that as long as the respondent was under cross examination, it was not brought to his notice.
It is said by counsel for the appellant relying on the decision of this Court in Bharat Singh and Anr.
vs Bhagira thi reported in 1966(1) S.C.R. 606, that this admission was proved by the appellant and this admission on the ruling Of the decision of this Court (Supra) is substantive evidence and is therefore admissible against the respondent.
The decision of this Court in Bharat Singh 's case (Supra) is that: "Admissions have to be clear if they are to be used against the person making them.
Admissions are substantive evidence by them selves, in view of sections 17 & 22 of the Indian Evidence Act, though they are not conclusive proof of the matters admitted.
" Admission proved are said in the decision to be "admissible evidence irrespective of whether the party making them appeared in the witness box or not and whether the party when appearing as witness was confronted with those statements in case it made a statement contrary to those admissions".
Counsel for the appellant submitted that the respond ent even though not confronted with the admissions would be bound by his admissions and the appellant would be enti tled to rely on the admissions as admissible.
There is the observation in the very next sentence in the aforesaid decision of this Court that "the purpose of contradicting the witness under section 145 of the Evidence.
Act is very much different from the purpose of proving .the admission".
It, therefore.
, follows that admission is relevant and it has to be proved before it becomes evidence.
If admission is proved and if it is thereafter to be used against the party who has made it the question comes within the provisions of Section 145 of the Evidence Act.
The provisions in the Indian Evidence Act that 'admission is not conclusive proof ' are to be considered in regard ,to two features of evidence.
First, what weight is to be attached to an admission ? In order to attach weight it has to 675 be found out whether the admission is clear, unambiguous and is a relevant piece of evidence.
Second, even if the admis sion is proved in accordance with the provisions of the Evidence Act and if it is to be used against the party who has made it, "it is sound that if a witness is under cross examination on oath, he should be given an opportunity if the document are to be used against him, to tender his explanation and to clear up the point of ambiguity or dis pute.
This is a general salutary and intelligible rule" (see Bal Gangadhar Tilak vs Shrinivas Pandit 42 Indian Appeals 135 at page 147).
The Judicial Committee in that case said, "it has to be observed with regret and with surprise that the general principle and the specific statu tory provisions have not been followed".
The general prin ciple is that before any person is to be faced with any statement he should be given an opportunity to see that statement and to answer the same.
The specific statutory provision is contained in Section 145 of the Indian Evidence Act that "A witness may be cross examined as to previous statements made by him in writing or reduced into writing, and relevant matters in question, without such writing being shown to him or being proved; but if it is intended to contradict him by the writing, his attention must, before the writing can be proved, be called to those parts of it which are to be used for the purpose of contradicting him".
The fore, a mere proof of admission, after the person whose admission is alleged to be has concluded his evidence, will be of no avail a cannot be utilised against him.
The third infirmity with regard to this admission is whether this is a clear and unequivocal admission.
The High Court said that"a certified copy of the deposition was placed on record on 9 July 1973, on which day against it does not appear that the contents of the deposition were read out to the respondent or that any attempt was made to obtain leave of the Court to further cross examine the witness." .The contents of the ' alleged admission .to which reference has been made are not unambiguous and cannot be accepted as an admission.
The contents are that he was not receiving any rent and the land was fallow.
Therefore, the High Court was right in rejecting the contentions advanced by the appellants that there was any admission and in set ting aside the decision of the Revenue Tribunal.
The second ' contention on behalf of the appellant is that the certain record of rights relied on by the appellant would establish that the appellant was a tenant.
The High Court ' rightly accepted the contention of the respondent that after a careful consideration of the evidence on record the fact finding courts, i.e. the Mamlatdar and the Special Deputy Collector recorded a finding that the appellant had not cultivated the land in dispute as the tenant of the respondent.
Therefore the Revenue Tribunal had no jurisdic tion to interfere and set aside the finding of fact.
As to the record of rights it appears that the High Court referred to two important features.
It is true that the record of rights relate to Survey Nos.
201/2 and 194/13 and there is mention of the appellant as tenant.
There is also a reference to the mutation proceedings.
The name of the respondent is shown as Kabjedar.
Two of the 9 112SC1/77 676 important heads in the record are 'Mode ' and 'Crops & fal lows '.
The Mode is shown as "I" and under Crops and fallows entry 'Paddy ' is shown.
The High Court referred to this feature of the record of rights Mode "I" means that the respondent cultivated as owner of the land that was never even case of the appellant.
The High Court rightly said that the irresistible conclusion therefore is that the extracts from the record of rights contain entries which do not have any relation to true facts.
If that is the posi tion with regard to these extracts, these cannot be relied on for inference that actually the land was cultivated and paddy crops were grown on the said land.
With regard to the record of rights counsel for the appellant said that presumption arises with regard to its correctness.
There is no abstract principle that whatever will appear in the record of rights will be presumed to be correct when it is shown by evidence that the entries are not correct.
Apart from the intrinsic evidence in the record of rights that they refer to facts which are untrue it also appears that the record of rights have reference to the mutation entry that was made by the Circle Officer on 30 January 1956.
Counsel for the respondent rightly contended that no presumption could arise for two principal reasons.
First, the oral evidence in this case nullified the entries.
in the record of rights as showing a state of affairs op posed to the real state of affairs and, second, no notice was ever given to the respondent with regard to mutation proceedings.
Therefore the respondent is right in contend ing that no presumption can validly arise from the record of rights.
The third contention on behalf of the appellant that the Tribunal was justified to interfere because of error of law is also unacceptable.
The provisions contained in section 76 of the Bombay Act enumerate the grounds on which there can be revision by the Revenue Tribunal.
One of the grounds is that there is 'error of law '.
In the present case the manner in which the Maharashtra Revenue Tribunal entertained the revision was by holding, as follows: "There is evidence that the applicant (meaning thereby the appellant) has been in actual possession of land since 1956 57 onwards".
However, the authorities below have rejected the entries as well as the opponents ' (meaning thereby the respondent) admission on the ground that the applicant did not support the entries by producing the rent receipts.
According to the authorities below the burden was on the applicant to prove his case by producing evidence to corroborate the entries.
The appellate authority has also observed that the alleged admission of the opponent, made in the other case was rejected by the Revenue Tribunal.
The authorities below arrived at the conclusion that the applicant 's possession was otherwise than lawful.
This concurrent finding of the authorities below is being challenged by the applicant in this revision application.
" The Revenue Tribunal seemed to consider the approach of the a Mamlatdar and the Deputy Collector to be erroneous because according to the Revenue Tribunal the burden was shifted to the respondent 677 to rebut the entry in the record of rights and .that the respondent failed to discharge that burden.
When the entire evidence is before the Court, it is well settled that the burden of proof becomes immaterial.
Further the Revenue Tribunal fell into error of enter taining the Revision when there was no error of law on the face of the record.
The presumption which was said to arise in the record of rights was before the Deputy Collector as well as the Mamlatdar.
If the authority entrusted with adjudication goes into the question and assesses the same, the decision may be right or wrong but that will not go to show that there is any error of law on the fact of record.
All the three contentions advanced by the appellant fail.
The appeal is for the foregoing reasons dismissed with costs.
P.H.P. Appeal dis missed.
|
The appellant was owner of the suit land.
The appel lant 's wife sold this land to respondent No 1.
Thereafter, the appellant made an application under section 70(b) of the Bombay Tenancy & Agricultural Lands Act, 1948, for a decla ration that he was a tenant of two of the 4 plots of the land.
The dispute went up to the Maharashtra Revenue Tribu nal who rejected the claim of the appellant to tenancy.
Thereafter, the respondent filed an application under sec tion 70(b) of the said Act praying for a declaration that the appellant was not a tenant in respect of the remaining two survey numbers also.
The respondent alleged that he never leased the land to the appellant and that he came to know of the entry of the record of rights for the year 1955 56 on the strength of mutation alleged to have been made on 30.1.1966.
The respondent was cross examined and it was suggested to him that he had made an admission in previ ous deposition although the said deposition was not shown to the respondent.
After the cross examination of the respond ent was over, a certified copy of the said deposition was placed on record.
Thereafter the appellant was examined and he relied on the extract of the record of rights.
The Mamlatdar rejected the claim of the appellant to be a tenant which was confirmed by the Deputy Collector.
The Maharash tra Revenue Tribunal held in exercise of its revisional powers that the appellant was proved to be a tenant of the land and set aside the concurrent findings of the two au thorities below.
In a writ petition filed by the respondent under article 227 of the Constitution the High Courts set aside the order of the Revenue Tribunal.
Dismissing the appeal by Special Leave, HELD : 1.
Admission on which reliance has been placed by the appellant suffers from 3 infirmities: (i) Earlier deposition related to two different survey numbers.
Whatever was stated about another survey number is irrelevant and inadmissible.
Since under section 17 of the Indian Evidence Act an admission is a statement, oral or documentary, which suggests any inference as to any fact in issue or relevant fact.
(ii) In fact there was no admission in the earlier proceed ings; and (iii) The deposition was not brought to the notice of re spondent when he was being cross examined.
Privy Council has laid down in the case of Bal Gangadhar Tilak that before any person is to be faced with any statement he should be given an opportunity to see that statement and to answer the statement.
[673 E, 674 A C, 675 A E] Bal Gangadhar Tilak vs Shrinivas Pandit 42 Indian Ap peals 135 at page 147, applied.
There is a presumption about the correctness of the record of rights.
However, there is no abstract principle that whatever will appear in the Record of Rights will be presumed to be correct.
In the present case it is shown by evidence that the entries are not correct.
[676 B D] 672 3.
Under section 76 of the Act power of Tribunal to interfere is limited.
There was no error of law on the face of the record.
If the authority entrusted with adjudication goes into the question and assesses the same, the decision may 'be right or wrong but that will not go to show that there is any error of law on the face of record.
[676 E, 677 A B]
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3707.txt
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Civil Appeal No. 2691 of 1982.
From the Judgment and Order dated the 4th day of June, 1982 of the Punjab and Haryana High Court in Election Petition No.2 of 1980.
Appellant in Person O.P. Sharma, K.R. Gupta, R.C. Gubrele, and R.C. Bhatia, for the Respondents.
385 The Judgment of the Court was delivered by FAZAL ALI, J.
This election appeal is directed against a judgment dated June 4, 1982 of the Punjab & Haryana High Court dismissing the election petition filed by the appellant against the respondent.
The present appeal arises out of an election to the Assembly constituency No. 3 Jullundur Cantt.
, which was held on 31.5.1980 and the result of which was declared on 3.6.1980.
Both the appellant and respondent No. 1 were the main rival candidates.
The total votes polled from the constituency were 47650, out of which the appellant polled 19710 whereas respondent No. 1 secured 20128 votes, the margin being rather small, viz., 418.
The appellant sought to challenge the election of respondent No. 1 on various grounds consisting of corrupt practices committed by him (respondent No.1) which, according to the appellant, materially affected the result of the election.
The appellant, who is an Advocate, argued his case with brevity and ingenuity and fairly conceded that he was not going to press all the allegations made in the petition but would confine his arguments only to the allegations pertaining to section 123(4) of the Representation of the People Act, 1951 (for short, to be referred to as the 'Act ').
In order to understand the ambit and scope within the confines of which the appellant has argued his case it may be necessary to extract sub section (4) "The publication by a candidate or his agent or by any other person, with the consent of a candidate or his election agent, of any statement of fact which is false, and which he either believes to be false or does not believe to be true, in relation to the personal character or conduct of any candidate or in relation to the candidature, or with drawl, of any candidate, being a statement reasonably calculated to prejudice the prospects of that candidate 's election.
" In view of the concessions made by the appellant, the case lies within a very narrow compass.
The allegations made by the appellant against the respondent consist of two categories (1) speeches having been made by the respondent or his friends near about the time of the election and after the respondent was nominated as a candidate, which amounted 386 to serious character assassination of the appellant by projecting him as a murderer of one Asa Ram, who died as far back as 1978.
According to the appellant, the respondent No. 1 carried out a vilifying compaign to show that he (appellant) was directly connected with the aforesaid murder so as to wean away the votes of the harijans of the locality and members of the Congress (l) party because Asa Ram was harijan and one of the supporters of Congress (I) party.
In this connection, the allegations made may be classed under two separate categories: (a) Utterances, speeches, news items and articles regarding the allegation that the appellant was directly connected with the murder of Asa Ram in 1978, and (b) speeches and news items made and issued by respondent No. 1 on various occasions proximate to the date of the election.
(2) Similar acts committed by respondent No. 1 in close proximity to the election, i.e., sometime in May 1980.
After having gone through the evidence statement of witnesses and he documents placed before us, we are unable to find any close connection or direct link between the imputations made against the appellant in 1978 and those made in 1980.
In none of the documents produced by the appellant, which refer to the activities of the first respondent, there is the slightest possible hint that the appellant had anything to do with the murder of Asa Ram.
Realising this difficulty the appellant sought the application of the doctrine of inuendo.
It is well settled that where this doctrine is applied it must be clearly proved that the defamatory allegation was made in respect of a person though not named yet so fully described that the allegation would refer to that person and that person alone.
Inuendo cannot be proved merely by inferential evidence which may be capable of two possibilities.
Furthermore, the allegations made in 1978 being far too remote and there being no continuous link between those allegations and the allegations made in 1980, the first category of the charge against the respondent cannot be sustained, more particularly because in 1978 a fresh election was not in the offing because the Janata Government came into power in 1977 and in normal course would have completed its full term in 1982.
Thus, at that time nobody could have predicted that the elections would be held only two years later which happened by a sudden spurt of events.
387 In these circumstances, we would place no reliance at all so far as the first category of the allegations against the respondent is concerned.
In N. Vimala Devi vs K. Madhusudhana Reddy( ') this Court completely ruled out documents containing instances of corrupt practice which had nothing to do with the 1972 election with which their Lordships were concerned in that case and in this connection while overruling an important document they observed thus: "We are not impressed by the argument on behalf of the respondent that exhibit A 57, which shows that even in 1970 a representation of a similar kind was made, shows that there were many others out to besmirch the name of the appellant.
Ex A 57 contains many instances which have nothing to do with the election in 1972 or the setting up of a Congress candidate in that election.
That is the affinity between exhibit A 48 and Ex A1.
" On a parity of reasoning, therefore, we cannot call into aid the allegations made as far back as 1978.
It is, therefore, not necessary for us to consider or to go into the evidence offered by the appellant as far as the 1978 incident it concerned.
Coming now to the second category of allegations, as the appellant has confined his arguments only to the averments made regarding the application of section 123 (4) of the Act, the ambit of the case is greatly reduced .
Before examining the allegations, we might mention that the learned election Judge of the High Court had dealt with all the allegations, and has given convincing and cogent reasons for holding that they had not been proved either by oral or documentary evidence.
It is now well settled by several authorities of this Court that an allegation of corrupt practice must be proved as strictly as a criminal charge and the principle of preponderance of probabilities would not apply to corrupt practice envisaged by the Act because if this test is not applied a very serious prejudice would be caused to the elected candidate who may be disqualified for a period of six years from fighting any election, which will adversely affect the electoral process.
Keeping in view, therefore, the strict standard of proof required in such cases , we proceed to consider the evidence on which the appellant has relied in order to determine whether or not the corrupt practice alleged has been proved.
In this connection, the first circumstance stressed before us was that a meeting 388 was convened in Gopal Nagar, Ward No. 22, on May 18, 1980 where respondent No. 1 and, with his consent , his friend Sansar Chand, delivered fiery speeches connecting the appellant with the murder of Asa Ram, which was deposed to by PWs 8 and 13.
PW 8 has stated that he attended a meeting on 18. 5.80 at Basti Guzan.
The learned Judge disbelieved his evidence as being wholly improbable.
Moreover, there is a contradiction in his evidence because at one place he says that Yash (respondent No. 1) spoke first and was followed by Sansar Chand and yet at another place he says that Sansar Chand spoke first and was followed by Yash.
It is impossible to conceive of such a contradiction if the witness apart from being interested and partisan had been present in the meeting throughout, he would not forget the sequence of such an important matter.
Another witness relied upon by the appellant was PW 13 who has also been disbelieved by the learned Judge, and he had admitted in his cross examination that he did not make a note of what Yash had spoken and yet he was able to give full and grotesque details of the speech when he was examined in the court, after more than a year and a half.
Furthermore, he states that when he talked to the appellant he was told that the respondent already knew about the meeting.
This shows that the appellant himself did not take this witness very seriously.
We, therefore , entirely agree with the appreciation of the evidence of these two witnesses made by the learned High Court Judge.
The evidence of PWs 8 and 13 however, is alleged to have been corroborated by a news item published in an Urdu daily 'Milap ' whose Chief Sub Editor (PW 5) was examined by the appellant.
But the witness far from supporting his case has deposed that he had absolutely no personal knowledge of the Report made by Prashar which was published on 24.5.80.
Moreover, it is very difficult for a court to rely on news items published on the information given by correspondents because that may not represent the true state of affairs.
In Samant N. Balakrishna etc.
vs George Fernandez & Ors. etc.
(1) while dwelling on the relevance and credibility of such type of news items this Court made the following observations: "The best proof would have been his own speech or some propaganda material such as leaflets or pamphlets etc., but none was produced.
A news item without any further proof of what had actually happened through witnesses is of no value.
It is at best a secondhand secondary evi 389 dence.
It is well known that reporters collect information and pass it on to the editor who edits the news item and then publishes it.
In this process the truth might get perverted or garbled.
Such news items cannot be said to prove themselves although they may be taken into account with other evidence if the other evidence is forcible." In the instant case, there is no evidence to show the actual record of the speech made by respondent No I or Sansar Chand and , therefore, the said news item does not advance the case of the appellant any further, particularly when it has been stoutly denied by respondent No. 1 and PW 5.
Reliance was also placed on another news item (exhibit PW 25/4) appearing on 20. 5.80 which also has to be rejected on the same ground as the first item.
The learned Judge has rightly pointed out in his judgment that PW 25, after he was shown the newspaper dated 12.5.80 (Ex.PW 25/3), has said that he did not know anything else, that is to say, neither the correspondent revealed the source from which he got the information nor does he say that he was actually present when the speeches were delivered.
On the other hand, RW 3, Dev Raj Puri, had clearly stated that certain changes were made in the items which he had filed and this statement of RW 3 was not challenged.
Thus the evidence furnished by the aforesaid items is also of little value to the appellant.
On the same principles of reasoning the reports of the meetings published in 'Milap ' regarding the speeches delivered on 17th and 28th May 1980 also suffer from the same infirmity.
Strong reliance was placed on the document, exhibit RW 24, which had been admitted by the first respondent.
We have gone through the entire speech published in the daily 'Milap ' on 18.5.80 and we do not find even a single word to connect the appellant with the murder of Asa Ram.
In fact, the entire speech reproduced in the said Paper does not at all show that the speaker viz. the first respondent, made any reference to the appellant at all.
In these circumstances, therefore, even the appellant himself had to admit before us that as the text of the speech has been reproduced, no allegation has been made against him.
The appellant however, tried in vain to argue that the afore 390 said speech would amount to inuendo because it has expressly referred to the circumstances under which Asa Ram was murdered.
By no stretch of imagination can the doctrine of inuendo be invoked to the aforesaid speech.
We therefore, reject this contention also.
After a careful consideration of the documents, the circumstances of the case and the oral evidence of the witnesses placed before us.
We find ourselves in agreement with the judgment of the High Court.
Indeed, it is very difficult to prove a charge of corrupt practice merely on the basis of oral evidence because in election cases, it is very easy to get the help of interested witnesses but very difficult to prove charges of corrupt practice.
In the instant case, the evidence both oral and documentary led by the appellant falls short of the standard of proof required to bring his case within the four corners of section 123 (4) of the Act.
We must, however, record our appreciation of the crisp and candid manner in which this case has been presented before us by the appellant.
For the reasons given above, the judgment of the High Court is affirmed and the appeal is dismissed but in the circumstances without any order as to costs.
S.R. Appeal dismissed.
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In the election to the Assembly constituency No 31 Jullundur Cantt., which was held on 31.5.1980, the total votes polled from the constituency were 47650, out of Which the appellant polled 19710, whereas the respondent Yash secured 418 votes more i.e. 20128 votes; Therefore, the appellant sought to challenge the election of Respondent No. 1 on various grounds consisting of corrupt practises committed by respondent No. 1 which materially affected the result of the election.
According to the appellant, Respondent No. 1 through speeches either made by him or his friend carried out a vilifying campaign to show that the appellant was directly connected with the murder of one Asa Ram a harijan and one of Supporters of Congress (l) party, so as to wean away the votes of the harijans of the locality and members of the Congress (l) party.
The Punjab and Haryana High Court disbelieved the oral evidence and found no nexus with the news items etc.
and dismissed the election petition.
Hence the appeal by special leave.
^ HELD 1.1 It is well settled that where the doctrine of inuendo is applied, it must be clearly proved that the defamatory allegation was made in respect of a person though not named yet so fully described that the allegation would refer to that person and that person alone.
Inuendo cannot be proved merely by inferential evidence which may be capable of two possibilities.[386F G] 1.2 In the instant case, the evidence statement of witnesses and the documents produced, do not call for any inference of any close connection or direct link between the imputations made against the appellant in 1978 and those made in 1980.
In none of the documents produced by the appellant which refer to the activities of the first respondent, there is the slightest possible hint that the appellant had anything to do with the murder of Asa Ram.
Further more, the allegations made in 1978 being far too remote and there being no continuous link between those allegations and the allegations made in 1980, the first category of the charge against the respondent cannot be sustained, more particularly because in 384 1978 a fresh election was not in the offing because the Janata Government came into power in 1977 and in normal course would have completed its full term in 1982.
Thus, at that time no body could have predicted that the election would be held only two years later which happened by a sudden spurt of events.
[386E F; G H] N. Vimala Devi vs K. Madhusudhana Reddy [1975] 3.
S.C.R. 128 followed.
2.1 It is now well settled by several authorities of the Supreme Court that an allegation of corrupt practice must be proved as a strictly as a criminal charge and the principle of preponderance of probabilities would not apply to corrupt practices envisaged by the Act because if this test is not applied a very serious prejudice would be caused to the elected candidate who may be disqualified for a period of six years from fighting any election, which will adversely affect the electoral process.[387F G] 2.2 In the instant case, the evidence both oral and documentary led by the appellant falls short of the standard of proof required to bring his case within the four corners of section 123(4) of the Representation of the People Act 1951(1).
About the speech made on May 18, 1980, the deposition of PW8 cannot be relied on inasmuch as it is impossible to conceive of contradictions made by him.
If the witness apart from being interested and partisan, had been present in the meeting throughout, he would not forget who spoke first.
Even P.W 13 cannot be believed since, while admitting in his cross examination that he did not make a noted of what Yash had spoken, yet he was able to give full and grotesque details of the speech, that too, when he was examined in the court after more than a year and half.
[390C D, 388B D] 3.
It is very difficult for a Court to rely on news items published in any newspaper on the basis of information gives by correspondents because that may not represent the true state of affairs.
It is at best a second hand secondary evidence.
[388F G] Samant N. Balakrishna vs George Fernandez & Ors. ; , reiterated.
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4794.txt
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vil Appeal No. 62 (N) of 1970 etc.
From the Judgment and Order dated 13.10.
1969 of the Madras High Court in W.A. No. 464 of 1967.
K. Parasaran, Attorney General, Dr. Y.S. Chitale, F.S. Nariman.
T.S. Krishnamurthy Iyer, A.K. Ganguli, B. Sen, L.N. Sinha, R.N. Sachthey, R.B. Datar, R.F. Nariman, K.J. John, H.N. Salve, Praveen Kumar, A.V. Rangam, T.Sridharan, K.D. Prasad, Mrs. Naresh Bakshi, K. Rajendra Choudhary, Ms. Seita Vaidialingam, V. Krishnamurthy, Ms. A. Subhashini, N. Net tar, G.S. Narayan, Badrinath Babu, Anip Sachthey and S.K. Agnihotri for the appearing parties.
The Judgment of the Court were delivered by SABYASACHI MUKHARJI, J.
The question involved in these appeals, special leave petitions and writ petitions is, whether levy of cess on royalty is within the competence of the State Legislature.
In order to appreciate the question, it is necessary to refer to certain facts.
Civil appeal No. 62/79 is an appeal by special leave from the judgment and order of the High Court of Madras, dated 13th October, 1969, in writ appeal No. 464/67.
The appellant is a public limited 698 company incorporated under the Indian Companies Act, 1913.
The Company at all relevant times, used to manufacture cement in its factory at Talaiyuthu in Tirunelveli district, and at Sankaridrug in Salem district of Tamil Nadu.
By G.O. Ms. No. 3668 dated 19th July, 1963, the Govt.
of Tamil Nadu sanctioned the grant to the appellant mining lease for limestone and kankar for a period of 20 years over an extent of 133.91 acres of land in the village of Chinnagoundanur in Sankaridrug Taluk of Salem district.
Out of the extent of 133.91 acres comprised in the mining lease, an extent of 126.14 acres was patta land and only the balance extent of 7.77 acres Govt.
The lease deed was in accordance with the Mineral Concession Rules, 1960.
The rates of royalty, dead rent and surface rent, were as follows: "Royalty: LIMESTONE Government Lands: Re.O.75 per tonne, but subject to a rebate of Re.O.38 per tonne to be given on Imestone beneficiated by froth flota tion method.
Patta Lands: Re.O.38 per tonne but subject to a rebate of Re.O. 19 per tonne to be given on limestone beneficiated by froth flotation method.
KANKAR Government Lands: Five per cent of the sale price at the pit 's mouth.
Patta Lands: 2 1/2% of the sale price at the pit 's mouth Dead rent: Government lands: Rs.25 (Rupees twentyfive only) per hectare per annum.
Patta lands: Rs. 12/50 (Rupees twelve & naya paise fifty only) per hectare per annum.
Surface rent and water rate: At such rate as the land revenue and cess assessable on the land are paid.
" The appellant started mining operations soon after the execution 699 of the lease deed and has ever since been paying the royal ties, dead rents and other amounts payable under the Deed.
Under section 115 of the Madras Panchayats Act (XXXV of 1958) (hereinafter called 'the Act '), as amended by Madras Act XVIII of 1964 (herein after called 'the amended Act '), as royalty the appellant was required to pay local cess @ 45 paise per rupee.
It may be mentioned that the said imposi tion was with retrospective effect along with local cess surcharge under section 116 of the Act.
The contention of the appellant is and was, at all relevant times, that cess on royalty cannot be levied.
This is the common question which falls for consideration and requires determination in these appeals and petitions.
To complete the narration of events, however, it has to be noted that the Collector sent a communication on 10th April, 1965, demanding cess or royalty payable under the Act on minerals carried on during the period 1.7.1961 to 31.12.1964, and the petitioner was threatened of serious consequences in case of default of payment on receipt of that communication.
Thereafter, writ petition No. 1864/65 was filed in the High Court of Madras.
By the judgment delivered and order passed on 23rd February, 1967.
a learned Single Judge of the Madras High Court Justice Kailasam dismissed the writ petition holding that the cess levied under section 115 of the act is a tax on land and, as such, falls under Entry 49 of the State List of the Schedule VII of the Constitution, and was within the competence of the State legislature.
Reliance was placed by the learned single Judge on the decision of this Court in H.R.S. Murthy vs Collector of Chittoor & Anr., ; He held that the cess levied under section 115 was a tax on land, though fixed with reference to the land revenue.
In regard to section 116 of the Act, the learned Single Judge held that the maximum limit had been prescribed by the Government by rules flamed under the Act, and, therefore, there was no arbitrariness about the levy.
Sub section 1 of section 115 of the Act enjoins that there shall be levied in every panchayat development block, a local cess at the rate of 45 paise on every rupee of land revenue payable to the Govt.
in respect of any land for every Fasli.
An Explanation to the said section was added and deemed always to have been incorporated by the Tamil Nadu Panchayats (Amendment and Miscellaneous Provisions) Act, 1964 being Tamil Nadu Act 18 of 1964, which provided as follows: "[Explanation.
In this section and in section 116, 'land revenue ' means public revenue due on land and includes 700 water cess payable to the Government for water supplied or used for the irrigation of land, royalty, lease amount or other sum payable to the Government in respect of land held direct from the Government on lease or licence, but does not include any other cess or the sur charge payable under section 116, provided that land revenue remitted shall not be deemed to be land revenue payable for the purpose of this section.]" Sub section 2 of section 115 of the Act provides that the local cess shall be deemed to be public revenue due on all the lands in respect of which a person is liable to pay local cess and all the said lands, the buildings upon the said lands and their products shall be regarded as the security for the local cess.
Sub section 3, 4 (a), (b), (c) and (d) of section 115 of the said Act deal with the application of the cess so collected for various purposes mentioned therein.
In the controversy before us, the said provisions need not be considered.
Section 116 of the Act is as follows: "116.
Every panchayat union council may levy on every person liable to pay land revenue to the Government in respect of any land in the panchayat union a local cess surcharge at such rate as may be considered suitable as an addition to the local cess levied in the panchayat development block under section 115 provided that the rate of local cess surcharge so levied (shall not exceed two rupees and fifty paise on every rupee of land revenue) payable in respect of such land.
" The words "shall not exceed two rupees & fifty paise on every rupee of land revenue" were substituted for the words "shall be subject to such maximum as may be prescribed" by section 3 of the Tamil Nadu Panchayats ' (2nd Amendment and Validation) Act, 1970, and these words were substituted for the words "shall not exceed one rupee and fifty paise on every rupee of land revenue" by section 2 of the Tamil Nadu Panchayats (Amendment) Act, 1972.
There was an appeal from the said decision of the learned Single Judge, to the division bench of the High Court.
The division bench by its judgment and order dated 13th October, 1969, dismissed the writ appeal, and held that local cess authorised by section 115 as aforesaid "was not land revenue but is a charge on the land itself and Section 115 701 merely quantified on the basis of the quantum of land reve nue".
The division bench held that the meaning of the Expla nation added to section 115 was that the cess is levied as a tax on land and is measured with reference to land revenue, royalty, lease amount etc.
as mentioned in the Explanation.
The division bench also relied on the decision of this Court in H.R.S. Murthy (supra), and further held that in the aforesaid view of the matter, it was not possible to accept the contention that section 115 of the Act read with the Explana tion contravened in any manner section 9 of the Mines and Miner als (Regulation and Development) Act, 1957.
By leave granted by this Court on 12th January, 1970 the appeal has been filed.
The appellant is bound to pay royalty to the Govt.
according to the rates provided in the Second Schedule to the said Act of 1957.
Clause (1) of Part VII of the lease document provides as follows: "The lessee/lessees shall pay the rent, water rate and royalties reserved by this lease at such times and in the manner provided in Part V and VI of these presents and shall also pay and discharge all taxes, rates, assessment and impositions whatsoever being in the nature of public demand which shall from time to time be charged, assessed or imposed by the authority of the Central and State Government upon or in respect of the premises and works of the lessee/lessees in common with other premises and work of a like nature except demands for land revenue.
" As mentioned hereinbefore, there is an obligation of the lessee to pay rent and other charges mentioned in the said Clause, and all other Central and State Government dues "except demands for land revenue".
The question, therefore, which arises is, is cess on royalty a demand of land revenue or additional royalty? For the appellants and/or petitioners we have heard Mr. Nariman,_ Dr. Chitale and Mr. Salve, and for the interven ers, S/Shri K.D. Prasad, Rajendra Choudhary and Ms. Seita Vaidialingam have made their submissions.
For the State of Tamil Nadu, Mr. Krishnamurthy Iyer and Mr. V. Krishnamurthy have made their submissions.
We have had the advantage of the submissions made by learned Attorney General on behalf of Union of India.
The issues are common in the writ peti tions as well as in the appeal and in the special leave petitions.
The question involved in the appeals and the writ petition is about the constitutional validity of Section 115(1) of the Act, in so far as it 702 sought to levy as local cess @ 45 naya paise on every rupee of the land revenue payable to the Government, the meaning of land revenue being artificially expanded by the explana tion so as to include royalty payable under the mining lease.
In this connection, it may be appropriate to refer to the Statement of Objects and Reasons for the amendment which stated, inter alia, as follows: "Under the Explanation to section 115 of the Act "land revenue" means public revenue due on land and includes water cess payable to the Government for water supplied or used for the irrigation of land but does not include any other cess or surcharge payable under section 116.
The Explanation does not cover "royal ties", lease amount or other sum payable to the Government in respect of land held direct from the Government on lease or licence which were included in the definition of "land revenue" under the Madras District Boards Act, 1920.
As under the Madras District Boards Act, 1920, certain panchayat union councils contin ued to levy the cess and surcharge under the Madras Panchayats Act, 1958 also.
It is con sidered that the levy should be on the same basis as under the Madras District Boards Act, 1920.
It is, therefore, proposed to include "royalty, lease amount and other sums payable to the Government" in the definition of land revenue in the Explanation to section 115 of the Act and also to validate the levy and collection of the cess and surcharge made hitherto on the said basis.
" It is obvious that the said amendment was intended to bring royalty within the Explanation and the definition of land revenue in section 115 as well as section 116 of the Act, and was effected by the Gazette Notification of 2nd Septem ber, 1964 by Act No. 18 of 1964.
In order to appreciate the controversy, it has no be understood that in this case royalty was payable by the appellant which was prescribed under the lease deed, the terms whereof have been noted hereinbefore.
The royalty had been fixed under the statutory rules and protected under those rules.
The royalty was fixed under the Mines and Minerals (Regulation & Development) Act, 1957 which is a Central Act by which the control of mines and minerals had been taken over by the Central Government.
It was an Act for the regulation of mines and development of minerals under the control of Union of India.
That 703 Act was to provide for the regulation of mines and the development of minerals under the control of the Union of India.
2 of the Act declares that it is expedient in the public interest that the Union of India should take under its control the regulation of mines and the develop ment of the minerals to the extent provided in the Act.
Section 9 of the Act provides as follows: "9.
(1) The holder of a mining lease granted before the commencement of this Act shall, notwithstanding anything contained in the instrument of lease or in any law in force at such commencement, pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub lessee from the leased area after such commencement, at the rate for the time being specified in the Second Schedule in respect of that mineral.
(2) The holder of a mining lease granted on or after the commencement of this Act shall pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub lessee from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral.
(2A) The holder of a mining lease, whether granted before or after the commencement of the Mines and Minerals (Regulation and Devel opment) Amendment Act, 1972, shall not be liable to pay any royalty in respect of any coal consumed by a workman engaged in a col liery provided that such consumption by the workman does not exceed one third of a tonne per month.
(3) The Central Government may, by notifica tion in the Official Gazette.
amend the Second Schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification: Provided that the Central Government shall not enhance the rate of royalty in respect of any mineral more than once during any period of three years.
" The Act was passed by virtue of the power of the Parliament 704 under Entry 54 of list I of the 7th Schedule.
Since the control of mines and the development of minerals were taken over by Parliament, the question that arises here is whether the levy or the impost by the State Legislature imposed in this case can be justified or sustained either under entry 49, 50 or 45 of list II of the 7th Schedule.
Courts of law are enjoined to gather the meaning of the Constitution from the language used and although one should interpret the words of the Constitution on the same princi ples of interpretation as one applies to an ordinary law but these very principles of interpretation compel one to take into account the nature and scope of the Act which requires interpretation.
It has to be remembered that it is a Consti tution that requires interpretation.
Constitution is the mechanism under which the laws are to be made and not merely an Act which declares what the law is to be.
See the obser vations of Justice Higgins in the Attorney General for the State of New South Wales vs The Brawery Employees Union of New South Wales, ; at 611 2.
In re: C.P. and Berar Sales of Motor Spirit & Lubricants Taxation Act, 1938, [1939] FCR at p. 1, Chief Justice Gwyer of the Federal Court of India relied on the observations of Lord Wright in James vs Common wealth of Australia, and observed that a Constitution must not be con strued in any narrow or pedantic sense, and that construc tion most beneficial to the widest possible amplitude of its powers, must be adopted.
The learned Chief Justice empha sised that a broad and liberal spirit should inspire those whose duty it is to interpret the Constitution, but they are not free to stretch or pervert the language of the enactment in the interest of any legal or constitutional theory, or even for the purposes of supplying omissions or correcting supposed errors.
A Federal Court will not strengthen, but only derogate from, its position, if it seeks to do anything but declare the law; but it may rightly reflect that a Constitution of a country is a living and organic thing, which of all instruments has the greatest claim to be con strued ut res magis valeat guam pereat. 'It is better that it should live than that it should perish '.
Certain rules have been evolved in this period, and it is wellsettled now that the various entries in the three lists are not powers but fields of legislation.
The power to legislate is given by article 246 and other articles of the Constitution.
See the observations of this Court in Calcutta Gas Co. vs State of West Bengal, [1962] Suppl 3 SCR 1.
The entries in the three lists of the Seventh Schedule to the Constitution, 705 are legislative heads or fields of legislation.
These demar cate the area over which appropriate legislature can oper ate.
It is well settled that widest amplitude should be given to the language of these entries, but some of these entries in different lists or in the same list may overlap and sometimes may also appear to be in direct conflict with each other.
Then, it is the duty of the court to find out its true intent and purpose and to examine a particular legislation in its pith and substance to determine whether it fits in one or the other of the lists.
See the observa tions of this Court in H.R. Banthia & Ors. etc.
vs Union of India & Ors.
, ; at 489 and Union of India vs Shri H.S. Dillon; , at 792.
The lists are designed to define and delimit the respective areas of respective competence of the Union and the States.
These neither impose any implied restriction on the legislative power conferred by Article 246 of the Constitution, nor prescribe any duty to exercise that legislative power in any particular manner.
Hence, the language of the entries should be given widest scope, D.C. Rataria vs Bhuwalka Brothers Ltd., ; , to find out which of the meaning is fairly capable because these set up machinery of the Govt.
Each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it.
In interpreting an entry it would not be reasonable to import any limitation by comparing or con trasting that entry with any other one in the same List.
It is in this background that one has to examine the present controversy.
Here, we are concerned with cess on royalty.
One can have an idea as to what cess is, from the observations of Justice Hidayatullah, as the learned Chief Justice then was, in M/s Guruswamy & Co. etc.
vs State of Mysore & Ors., where at page 571, the learned Judge ob served: "The word 'cess ' is used in Ireland and_.
is still in use in India although the word rate has replaced it in England.
It means a tax and is generally used when the levy is for some special administrative expense which the name (health cess, education cess, road cess etc.) indicates.
When levied as an increment to an existing tax, the name matters not for the validity of the cess must be judged of in the same way as the validity of the tax to which it is an increment." The said observations were made in the dissenting judg ment, but there was no dissent on this aspect of the matter.
Relying on the aforesaid observations, Mr Nariman appearing for the appellant and 706 the petitioners suggested that the impugned levy in this case is nothing but a tax on royalty and is therefore ultra vires the State legislature.
Mr. Krishnamurthy Iyer appear ing for the State of Tamil Nadu submitted that the cess in question in the instant case is a levy in respect of land for every fasli.
He urged that the words "a local cess at the rate of 45 naya paise on every rupee of land revenue payable" qualify the words "land revenue".
These words were only intended, according to Mr. Krishnamurthy Iyer, to mean cess payable.
It is, however, not possible to accept this submission, in view of the obligation indicated by the language of the provisions.
Cess is not on land, but on royalty which is included in the definition of 'land reve nue '.
None of the three lists of the 7th Schedule of the Constitution permits or authorises a State to impose tax on royalty.
This levy has been sought to be justified under Entry 45 of List II of the 7th Schedule.
Entry 45 deals with land revenue, which is a well known concept and has existed in India before the Constitution came into force.
In N.R. Reddy & Ors.
vs State of A.P. & Ors., [1965] 2 Andhra Law Times 297, Jaganmohan Reddy, J. as the learned Judge then was of the Andhra Pradesh High Court, while sitting in a division bench observed that no land revenue Act existed in the composite State of Madras nor had the ryotwari system ever been established by legislative enactment.
The learned Judge at p. 306 of the report observed that in the earlier days, sovereigns had in exercise of their prerogative right claimed a share of the produce of all cultivated land known as 'Rajabhagam ' or by any of the various other names, and had fixed their share or its commuted money value from time to time, according to their will and pleasure.
The learned Judge noted that as long as the share of the sovereign was being paid, the sovereign had no right to the possession of the lands, and the proprietorship of these lands was vested in the occupier, who could not be removed because another offered more.
The right of the sovereign to a share in the produce as observed by the Govt.
of Madras in 1856 "is not rent which consists of all surplus produce after paying the cost of cultivation and the profits of agricultural stock but land revenue only which ought, if possible, to be so lightly assessed as to leave a surplus or rent to the occu pier, when he in fact lets the land to others or retains it in his own hands.
" It was noted that the amount of tax that was levied before the Mohamedan Rule, amounted to 1/8th, 1/6th or 1/12th according to Manu depending on the differ ences in the soil and the labour necessary to cultivate it, and it even went up to 1/4th part, in times of urgent neces sity, as of war or invasion.
The later commentators, Yajnav alkya, Apastamba, Gautama, Baudhayana and Narada, have all asserted not only the right but the extent of the share.
When the British came to India they followed not only the precedent 707 of the previous Mohamedan Rulers who also claimed enormous land revenue, with this difference that what the Mohamedan Rulers claimed they could never fully realise, but what the British Rulers claimed they realised with vigour.
It is not necessary to refer in detail how land revenue developed in India after the advent of the British Rule.
There was an appeal from the said decision of the High Court of Andhra Pradesh and this Court dismissed the appeal in State of A. P. vs N.R. Reddy & Ors., ; It is, however, clear that over a period of centuries, land revenue in India has acquired a connot active meaning of share in the produce of land to which the King or the Govt.
is entitled to receive.
It was contended on behalf of the appellants that the impugned measure being a tax, not on share of the produce of the land but on royalty; royalty being the return received from the produce of the land, revenue was payable for winning minerals from the land.
In the premises it was contended that it cannot be attributable to Entry 45 of List II of the 7th Schedule, being not a land revenue.
It has, however, to be borne in mind that Explana tion to Section 115(1) was added and there was an amendment as we have noted before.
That very Explanation makes a distinction between land revenue as such and royalty which by amendment is deemed to be land revenue.
It is, therefore, recognised by the very force of that Explanation and the amendment thereto that the expression 'royalty ' in sections 115 & 116 of the Act cannot mean land revenue properly called or conventionally known, which is separate and dis tinct from royalty.
It was also contended on behalf of the respondent State of Tamil Nadu of Mr. Krishnamurthy Iyer that it could also be justified under Entry 49 of List II of the 7th Schedule as taxes on lands and buildings.
This, however, cannot be accepted.
In this connection, reference may be made to the decision of this Court in Raja Jagannath Baksh Singh vs The State of U.P. & Anr., ; where at p. 229 it was indicated that the expression 'lands ' in Entry 49 is wide enough to include agricultural land as well as non agricultural land.
Gajendragadkar, J. as the learned Chief Justice then was, observed that the cardinal rule of inter preting the words used by the Constitution in conferring legislative power was that these must receive the most liberal construction and if they are words of wide amplitude the construction must accord with it.
If general word was used, it must be so construed so as to extend to all ancil lary or subsidiary matters that can reasonably be included in it.
So construed, there could not be any doubt that the word 'land ' in Entry 48, List II of the 7th Schedule 708 includes all land whether agricultural or non agricultural.
Hence, since the impugned Act imposed tax on land and build ing which was within the competence of the State Legislature and its validity was beyond challenge but the Court observed that as there was Entry 46 in List H which refers to taxes on agricultural income, it is clear that agricultural income is not included in Entry 49.
If the State Legislature pur ports to impose a tax on agricultural income it would not be referable to Entry 49.
Mr. Krishnamurthy Iyer relied on the said principle.
But in the instant case, royalty being that which is payable on the extraction from the land and cess being an additional charge on that royalty, cannot by the parity of the same reasoning, be considered to be a tax on land.
But since it was not a tax on land and there is no Entry like Entry 46 in the instant situation like the posi tion before this Court in the aforesaid decision, enabling the State to impose tax on royalty in the instant situation, the State was incompetent to impose such a tax.
There is a clear distinction between tax directly on land and tax on income arising from land.
The aforesaid decision confirmed the above position.
In New Manek Chand Spinning & Weaving Mills Co. Ltd. & Ors., vs Municipal Corpn.
of the City of Allahabad & Ors.
, ; at 696, this Court after referring to the several decisions observed that Entry 49 of list II of the 7th Schedule only permitted levy of tax on land and building.
It did not permit the levy of tax on machinery contents in or situated on the building even though the machinery was there for the use of the building for a particular purpose.
Rule 7(2) of the Bombay Municipal Corporation Rules was held to be accordingly ultra vires in that case.
In S.C. Nawn vs W.T.O., Calcutta & Ors., ; this Court had occasion to consider this and upheld the validity of the Wealth Tax Act, 1957 on the ground that it fell within Entry 86 of List I and not Entry 49 of List II.
Construing the said Entry, this Court observed that Entry 49 list II contemplated a levy on land as a unit and the levy must be directly imposed on land and must bear a definite relationship to it.
Entry 49 of list Il was held to be more general in nature than Entry 86, list I, which was held to be more specific in nature and it is well settled that in the event of conflict between Entry 86, list I and Entry 49 of list II, Entry 86 prevails as per Article 246 of the Constitution.
In Asstt.
Commissioner of Urban Land Tax & Ors.
vs The Buckingham & Carnatic Co. Ltd. etc.; , at 278, this Court reiterated the principles laid down in S.C. Nawn 's case (supra) and held that entry 49 of list II was confined to a tax that was directly on land as a unit.
In Second Gift Tax Officer, Mangalore etc.
vs D.H. Nazareth etc.
; , at 200 it was held that a tax on the gift 709 of land is not a tax imposed directly on land but only on a particular user, namely, the transfer of land by way of gift.
In Union of India vs H.S. Dhillon, (supra), this Court approved the principle laid down in S.C. Nawn 's case as well as Nazareth 's case (supra).
In Bhagwan Dass Jain vs Union of India, ; at 816 this Court made a distinction between the levy on income from house property which would be an income tax, and the levy on house property itself which would be referable to entry 49 list II.
It is, there fore, not possible to accept Mr. Krishnamurthy Iyer 's sub mission and that a cess on royalty cannot possibly be said to be a tax or an impost on land.
Mr. Nariman is right that royalty which is indirectly connected with land, cannot be said to be a tax directly on land as a unit.
In this connec tion, reference may be made to the differentiation made to the different types of taxes for instance, one being profes sional tax and entertainment tax.
In the Western India Theatres Ltd. vs The Cantonment Board, Poona Cantonment, ; at 69 it was held that an entertain ment tax is dependent upon whether there would or would not be a show in a cinema house.
If there is no show, there is no tax.
It cannot be a tax on profession or calling.
Profes sional tax does not depend on the exercise of one 's profes sion but only concerns itself with the right to practice.
It appears that in the instant case also no tax can be levied or is leviable under the impugned Act if no mining activi ties are carried on.
Hence, it is manifest that it is nor related to land as a unit which is the only method of valua tion of land under entry 49 of list II, but is relatable to minerals extracted.
Royalty is payable on a proportion of the minerals extracted.
It may be mentioned that the Act does not use dead rent as a basis on which land is to be valued.
Hence, there cannot be any doubt that the impugned legislation in its pith and substance is a tax on royalty and not a tax on land.
On behalf of the State of Tamil Nadu, learned counsel Mr. Krishnamurthy Iyer sought to urge that it can also be sustained under entry 50, list II.
Entry 50 of list II of the 7th Schedule deals with taxes on mineral rights subject to limitation imposed by Parliament relating to mineral development.
Entry 23 of List II deals with regulation of mines and mineral development subject to the provisions of list I with respect to regulation and development under the control of the Union and entry 54 in list I deals with regulation of mines and minerals under the control of Union declared by the Parliament by law to be expedient in public interest.
Even though minerals are part of the State List they are treated separately, and therefore the principle that the specific excluded the general, must be applied.
See the observations of Waverly Jute Mills Co. Ltd. vs Raymon & Co. (1) Pvt. Ltd., [1963] 3 710 SCR 209 at 220, where it was held that land in entry 49 of list II cannot possibly include minerals.
In this connection, learned Attorney General appearing for the Union of India submitted before us that in order to sustain the levy, the power of the State Legislature has to be found within one or more of the entries of list II of the 7th Schedule.
The levy in question has to be either a tax or a fee or an impost.
If it is neither a tax nor a fee then it should be under one of the general entries under List II.
The expression 'land ' according to its legal significance has an indefinite extent both upward and downwards, the surface of the soil and would include not only the face of the earth but everything under it or over it.
See the obser vations in Anant Mills Co. Ltd. vs State of Gujarat & Ors., [19751 3 SCR 220 at 249.
The minerals which are under the earth, can in certain circumstances fall under the expres sion 'land ' but as tax on mineral rights is expressly cov ered by entry 50 of list II, if it is brought under the head taxes under entry 49 of list II, it would render entry 50 of list II redundant.
Learned Attorney General is right in contending that entries should not be so construed as to make any one entry redundant.
It was further argued that even in pith and substance the tax fell to entry 50 of list II, it would be controlled by a legislation under entry 54 of list I.
On the other hand, learned Attorney General submitted that if it be held to be a fee, then the source of power of the state legislature is under entry 66 read with entry 23 of list II.
Here also the extent to which regulation of mines and mineral development under the control of the Union is declared by Parliament by law to be expedient in the public interest, to the extent such legislation makes provi sions will denude the State Legislature of its power to override the provision under entry 50 of list II.
In view of the Parliamentary legislation under entry 54, list I and the declaration made under section 2 and provisions of section 9 of the Act, the State Legislature would be overridden to that extent.
section 2 declares that it is expedient in the public interest that Union should take under its control the regu lation of mines and the development of minerals to the extent provided therein.
In this connection, reference may be made to the decision of this Court in The Hingir Rampur Coal Co. Ltd. & Ors.
vs The State of Orissa & Ors., ; See also the observations in State of Orissa vs M.A. TuIloch & Co., ; and Baijnath Kedia vs State of Bihar & Ors., ; at 111 115.
Our attention was drawn to the decision of the division bench 711 judgment of the High Court of Mysore in M/s. Laxminarayana, Mining Co., Bangalore vs Taluk Der.
Board.
, AIR There speaking for the court, one of us, Venkataramiah J of the Mysore High Court, as the learned Chief Justice then was, observed that a combined reading of entries 23 and 50 in list II and entry 54 of list I, establishes that as long as the Parliament does not make any law in exercise of its power under entry 54, the powers of the State Legisla ture in entries 23 & 50 would be exercisable by the State Legislature.
But when once the Parliament makes a declara tion by law that it is expedient in the public interest to make regulation of mines and minerals development under the control of the Union, to the extent to which such regulation and development is undertaken by the law made by the Parlia ment, the power of the State Legislature under entries 23 & 50 of List II are denuded.
There the court was concerned with the Mysore Village Panchayats & Local Boards Act, 1959.
Thus, it was held that it could not, therefore, be said that even after passing of the Central Act, the state legislature by enacting section 143 of the Act intended to confer power on the Taluk Board to levy tax on the mining activities carried on by the persons holding mineral concessions.
It followed that the levy of tax on mining by the Board as per the impugned notification was unauthorised and liable to be set aside.
At p. 306 of the said report, it was held that royal ty under section 9 of the Mines and Minerals Act was really a tax.
To the similar effects are the observations of the High Court of Patna in M. Lal & Ors.
vs The State of Bihar & Ors.
, AIR 1965 Patna 491 at 494.
Mr. Krishnamurthy Iyer, however, referred to the decision of this Court in H.R.S. Murthy 's case (supra).
There under the terms of a mining lease the lessee worked the mines and won iron ores in a tract of land in a village in Chittor district and bound himself to pay a dead rent if he used the leased land for the extraction of iron ore, to pay a royalty on iron ore if it were used for extraction of iron and in addition to pay a surface rent in respect of the surface area occupied or used.
In the said decision the legislative competence of sections 78 & 79 of the Madras District Boards Act was upheld by which land cess was made payable on the basis of royalty.
This Court proceeded on the basis that other cess related to land and would therefore be covered by entry 49 of list II.
It was held that land cess paid on royalty has a direct relation to the land and only a remote relation with mining.
This, with respect, seems to be not a correct approach.
It was further observed that it was not necessary to consider the meaning of the expression 'tax on mineral right ' follow ing under Entry 50 of List II in as much as according to this Court, Parliament has not made any tax on mineral rights.
This is not a correct basis.
712 In H.R.S. Murthy 's case (supra), at p. 676 of the re port, it was observed by this Court as follows: "When a question arises as to the precise head of legislative power under which a taxing statute has been passed, the subject for enquiry is what in truth and substance is the nature of the tax.
No doubt, in a sense, but in a very remote sense, it has relationship to mining as also to the mineral won from the mine under a contract by which royalty is payable on the quantity of mineral extracted.
But that, does not stamp it as a tax on either the extraction of the mineral or on the miner al right.
It is unnecessary for the purpose of this case to examine the question as to what exactly is a tax on mineral rights seeing that such a tax is not leviable by Parliament but only by the State and the sole limitation on the State 's power to levy the tax is that it must not interfere with a law made by Parlia ment as regards mineral development.
Our attention was not invited to the provision of any such law created by Parliament.
In the context of sections 78 and 79 and the scheme of those provisions it is clear that the land cess is in truth a "tax on lands" within Entry 49 of the State List.
" It seems, therefore, that attention of the Court was not invited to the provisions of Mines and Minerals (Development & Regulation) Act, 1957 and section 9 thereof.
section 9(3) of the Act in terms states that royalties payable under the 2nd Sched ule of the Act shall not be enhanced more than once during a period of 4 years.
It is, therefore, a clear bar on the state legislature taxing royalty so as to in effect amend 2nd Schedule of the Central Act.
In the premises, it cannot be right to say that tax on royalty can be a tax on land, and even if it is a tax, if it falls within entry 50 will be ultra vires the State legislature power in view of section 9(3) of the Central Act.
In Hingir Rampur Coal Co. Ltd. vs The State of Orissa (supra), Wanchoo J. in his dissenting judg ment has stated that a tax on mineral rights being different from a duty of excise, pertains only to a tax that is levi able for the grant of the right to extract minerals, and is not a tax on minerals as well.
On that basis, a tax on royalty would not be a tax on mineral rights and would therefore in any event be outside the competence of the state legislature.
The Rajasthan, Punjab, Gujarat and Orissa High Courts have held that royalty is not a tax.
Bherulal vs State of Rajasthan & Anr., AIR ; Dr. S.S. Sharma & Anr.
vs State of 713 Pb.
& Ors., AIR at 84; Saurashtra Cement & Chemicals India Ltd. vs Union of India & Anr., AIR 1979 Guj.
180 at 184 and L.N. Agarwalla & Ors.
vs State of Orissa & Ors.
, AIR 1983 Orissa 210.
It was contended by Mr. Krishnamurthy Iyer that the State has a right to tax minerals.
It was further contended that if tax is levied, it will not be irrational to corre late it to the value of the property and to make some kind of annual value basis of tax without intending to tax the income.
In view of the provisions of the Act, as noted hereinbefore, this submission cannot be accepted.
Mr. Krish namurthy Iyer also further sought to urge that in entry 50 of list II, there is no limitation to the taxing power of the State.
In view of the principles mentioned hereinbefore and the expressed provisions of section 9(2) of the Mines & Minerals (Regulation & Development) Act, 1957, this submis sion cannot be accepted.
This field is fully covered by the Central legislation.
In any event, royalty is directly relatable only to the minerals extracted and on the principle that the general provision is excluded by the special one, royalty would be relatable to entries 23 & 50 of list II, and not entry 49 of list II.
But as the fee is covered by the Central power under entry 23 or entry 50 of list II, the impugned legisla tion cannot be upheld.
Our attention was drawn to a judgment of the High Court of Madhya Pradesh in Miscellaneous Peti tion No. 410/83 M/s Hiralal Rameshwar Prasad & Ors.
vs The State of Madhya Pradesh & Ors., which was delivered on 28th March, 1986 by a Division Bench of the High Court.
J.S. Verma, Acting Chief Justice, as His Lordship then was, held that development cess by section 9 of the Madhya Pradesh Karadhan Adhiniyam, 1982 is ultra vires.
It is not necessary in the view taken by us, and further in view that the said decision is under appeal in this Court, to examine it in detail.
In the aforesaid view of the matter, we are of the opinion that royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the competence of the State Legislature because section 9 of the Central Act covers the field and the State Legislature is denuded of its competence under entry 23 of list II.
In any event, we are of the opinion that cess on royalty cannot be sustained under entry 49 of list II as being a tax on land.
Royalty on mineral rights is not a tax on land but a payment for the user of land.
Mr. Krishnamurthy Iyer, however, submitted that in any event, the decision in H.R.S. Murthy 's case (supra) was the decision of the Constitution Bench of this Court.
Cess has been realised on that basis 714 for the organisation of village and town panchayats and comprehensive programme of measures had been framed under the National Extension Service Scheme to which our attention was drawn.
Mr. Krishnamurthy Iyer further submitted that the Directive Principle of State Policy embodied in the Consti tution enjoined that the State should take steps to organise village panchayats and endow them with power and authority as may be necessary to enable them to function as units of self Government and as the amounts have been realised on that basis, if at all, we should declare the said cess on royalty to be ultra vires prospectively.
In other words, the amounts that have been collected by virtue of the said provisions, should not be declared to be illegal retrospec tively and the State made liable to refund the same.
We see good deal of substance in this submission.
After all, there was a decision of this Court in H.R.S. Murthy 's case (supra) and amounts have been collected on the basis that the said decision was the correct position.
We are, therefore, of the opinion that we will be justified in declaring the levy of the said cess to be ultra vires the power of the State Legislature prospectively only.
In that view of the matter, the appeals must, therefore, be allowed and the writ petitions also succeed to the extent indicated above.
We declare that the said cess by the Act under section 115 is ultra vires and the respondent State of Tamil Nadu is restrained from enforcing the same any fur ther.
But the respondents will not be liable for any refund of cess already paid or collected.
The appeals are disposed of accordingly.
The special leave petitions and writ peti tions are also disposed of in those terms.
In the facts and the circumstances of the case, the parties will pay and bear their own costs.
OZA, J.
While I agree with the conclusions reached by my learned brother Hon ' Mukharji, J. I have my own reasons for the same.
The main argument in favour of this levy imposed by the State Legislature is on the basis of Entry 49 in List II of the Seventh Schedule conferring jurisdiction on the State Legislature.
The question therefore to be determined is whether the jurisdiction of the State Legislature under Item 49 of List II could be so exercised to impose a cess on the royality prescribed under Section 9 of the .
The entries which are relevant for the purpose of deter mining this questions are: Entry 54 List I reads: 715 "Regulation of mines and mineral development to the extent to which such regulation and development under the control of the Union is declared by Parliament by law to be expedient in the public interest.
" Entry 23 List II reads: "Regulation of mines and mineral development subject to the provisions of List I with respect to regulation and development under the control of the Union.
" Entry 49 List II reads: "Taxes on lands and buildings.
" Entry 50 List II reads: "Taxes on mineral rights subject to any limi tations imposed by Parliament by law relating to mineral development.
" The language of Entries 23 and 50 in List I1 clearly sub jects the authority or jurisdiction on the State Legislature to any enactment made by the Parliament.
Entry 23 talks of regulation and Entry 50 talks of taxes on mineral rights.
It therefore could not be disputed that if the cess imposed under section 115 of the Madras Village Panchayat Act is a cess or tax on mineral rights then that jurisdiction could be exercised by the State Legislature subject to the law enacted by the Parliament.
The Parliament in Section 9(1) of the has fixed the limits of royality on the mining rights.
It was therefore contended on behalf of the State that in fact what is imposed under Section 115 is not a cess on the mining rights or on royality but is a tax on land which clearly falls within the authority of the State legislature in Entry 49 of List II.
Section 9 of the reads: "9(1) The holder of a mining lease granted before the commencement of this Act shall, notwithstanding anything contained in the instrument of lease or in any law in force at such commencement, pay royalty in respect of any mineral removed or consumed by him or by his gent, manager, employee, contractor or sub lessee from the leased area 716 after such commencement, at the rate for the time being specified in the Second Schedule in respect of that mineral.
(2) The holder of a mining lease granted on or after the commencement of this Act shall pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub lessee from the leased area at the rate for the time being specified in the Second Schedule in respect of that mineral.
(2A) The holder of a mining lease, whether granted before or after the commence of the Mines and Minerals (Regulation and Develop ment) Amendment Act, 1972 shall not be liable to pay any royalty in respect of any coal consumed by a workman engaged in a colliery provided that such consumption by the workmen does not exceed one third of a tonne per month.
(3) The Central Government may, by notifica tion in the Official Gazette, amend the Second Schedule so as to enhance or reduce the rate at which royalty shall be payable in respect of any mineral with effect from such date as may be specified in the notification.
Provided that the Central Government shall not enhance the rate of royalty in respect of any mineral more than once during any period of three years.
" It is clear that by this Act alongwith Schedule limits on royality has been fixed and the authority has been given to Parliament alone to vary it and that too not more than once in a period of three years.
Admittedly royality as not based on the area of land under mining but per unit of minerals extracted.
Section 115 of the Madras Village Panchayat Act reads as under: "(1) There shall not be levied in every pan chayat development block, a local cess at the rate of 45 naye paise on every rupee of land revenue payable to the Government in respect of any land for every Fasli.
Explanation: In this Section and in section 116, 'land revenue ' means public revenue due on land and includes water cess payable to the Government for water supplied 717 or used for the irrigation of land, royalty, lease amount for other sum payable to the Government in respect of land held direct from the Government on lease or licence, but does not include any other cess or the surcharge payable under Section 116, provided that land revenue remitted shall not be deemed to be land revenue for the purpose of this Section.
(2) The local cess payable under this Sub section (1) shall be deemed to be public revenue due on the lands in respect of which a person is liable to pay local cess and all the said lands, the buildings upon the said lands and their products shall be regarded as the security for the local cess.
(3) The provisions of the Madras Revenue Recovery Act, 1864 (Madras Act II of 1864) shall apply to the payment and recovery of the local cess payable under this Act just as they apply to the payment and recovery of the revenue upon the lands in respect of which the local cess under this act is payable.
(4)(a) Out of the process of the local cess so collected in every panchayat development block, a sum representing four ninths of the proceeds shall be credited to the Panchayat Union (Education) Fund.
(b) Out of the proceeds of the local cess collected in every panchayat town in a pan chayat development block, a sum representing two ninths of the said proceeds shall be cred ited to the town panchayat fund.
(c) Out of the balance of the local cess credited in the panchayat development block, such percentage as the panchayat union council may fix shall be credited to the village panchayat fund, and the percentage shall be fixed so as to secure as nearly as may be that the total income derived by all the village panchayats in the panchayat union does not fall short of an amount calculated at 20 naye paise for each individual of the village population in the panchayat union.
(d) The balance of the proceeds of the local cess collected in the panchayat develop ment block shall be cre 718 dited to the funds of the panchayat union council.
" The explanation to sub clause I is the subject matter of controversy in this case.
Sub clause I provides for levy of 45 naye paise for every rupee of land revenue payable to the Government in the explanation a fiction is created thereby even the royalty payable have been included within the definition of "land revenue".
As it provides "royalty, lease amount or any other sum payable to the Government in respect of land.
" This phraseology has been incorporated by an amendment in 1964 by the Madras Village Panchayat Amendment Act, 1964 Section 13 wherein the explanation to Section 115 was substituted and substituted retrospectively wherein this royalty has also been included in the definition of 'land revenue ' and it is on this ground that it was mainly con tended that land revenue being a tax on land is within the authority of the State Legislature under Item 49 of List II and therefore the cess which is a tax on land revenue itself or an imposition on the land revenue and hence could not be anything else but a tax falling within the ambit of tax on land as provided by entry 49 List II and it was therefore contended that it would not fall within the ambit of entry 50 List II as if it falls within the ambit of entry 50 of List II, it would be beyond the authority of the State legislature as by passing the Parliament has denuded the State Legislature of its authority to levy any tax on mining rights.
Whether royality is a tax is not very material for the purpose of determination of this question in this case.
It is admitted that royality is charged on the basis of per unit of minerals extracted.
It is no doubt true that mineral is extracted from the land and is available, but it could only be extracted if there are three things: (1) Land from which mineral could be extracted.
(2) Capital for providing machinery, instruments and other requirements.
(3) Labour It is therefore clear that unit of charge of royalty is not only land but land + Labour + Capital.
It is therefore clear that if royalty is a tax or an imposition or a levy, it is not on land alone but it is a levy or a tax on mineral (land), labour and capital employed in extraction of the mineral.
It therefore is clear that royalty if is imposed by the Parlia 719 ment it could only be a tax not only on land but no these three things stated above.
It is not in dispute that the cess which the Madras Village Panchayat Act proposes to levy is nothing but an additional tax and originally it was levied only on land revenue, apparently land revenue would fall within the scope of entry 49 but it could not be doubted that royalty which is a levy or tax on the extracted mineral is not a tax or a levy on land alone and if cess is charged on the royalty it could not be said to be a levy or tax on land and therefore it could not be upheld as imposed in exercise of jurisdic tion under Entry 49 List II by the State Legislature.
Thus it is clear that by introducing this explanation to Section 115 clause (1) widening the meaning of word 'land revenue ' for the purposes of Section 115 and 116.
When the Legislature included Royalty, it went beyond its jurisdic tion under entry 49 List II and therefore clearly is without the authority of law.
But this also may lead to an interest ing situation.
This cess levied under Section 115 of the Madras Village Panchayat Act is levied for purposes indicat ed in the scheme of the Act and it was intended to be levied on all the lands falling within the area but as this cess on royalty is without the authority the result will be that the cess is levied so far as lands other than the lands in which mines are situated are concerned but lands where mines are situated this levy of cess is not in accordance with that law.
This anomaly could have been averted if the Legislature in this explanation had used words 'surface rent ' in place of royalty.
Even if the lands where mines are situated and which are subject to licence and mining leases even for those lands there is a charge on the basis of the surface of the land which is sometimes described as surface rent or sometimes also as 'dead rent '.
It could not be doubted that if such a surface rent or dead rent is a charge or an impo sition on the land only and therefore will clearly fall within the purview of entry 49 List H and if a cess is levied on that it will also be justified as tax on land falling within the purview of entry 49 and it will also be uniform as this cess would be levied in respect of the lands irrespective of the fact as to whether the land is one where a mine is situated or land which is only used for other purposes for which land revenue is chargeable.
R.S.S. Appeal allowed.
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The appellant company used to manufacture cement and was granted mining lease for limestone and kankar by the Govern ment of Tamil Nadu in accordance with the Mineral Concession Rules, 1960.
The royalty was fixed under the Mines and Minerals (Regulation & Development) Act, 1957 which is a Central Act by which the control of mines and minerals had been taken over by the Central Government for the regulation and development of minerals.
Sub section 1 of section 115 of the Madras Panchayats Act, 1958 enjoins that there shall be levied in every pan chayat development block, a local cess at the rate of 45 paise on every rupee of land revenue payable to the Govern ment in respect of any land for every Fasli.
An explanation to the said section was added, and was deemed always to have been incorporated by the Tamil Nadu Panchayats (Amendment and Miscellaneous Provisions) Act, 1964.
In this explanation a fiction was created whereby even the royalty payable had been included within the definition of "land revenue".
The appellant filed a writ petition in the High Court challenging the competence of the State legislature to levy cess on royalty.
A learned Single Judge dismissed the writ petition holding that the cess levied 693 under section 115 of the Madras panchayats Act was a tax on land and, as such, fell under Entry 49 of the State List of Schedule VII of the Constitution.
The Division Bench dis missed the appellant 's appeal and held that local cess authorised by section 115 was not land revenue but was a charge on the land itself, and section 115 merely quantified the basis of the quantum of land revenue.
The learned Single Judge, as well as the Division Bench, relied on the decision of this Court in H.R.S. Murthy vs Collector of Chittoor, ; Before this Court, it was contended on behalf of the appellant that the levy of cess on royalty in this case was nothing but a tax on royalty and was therefore ultra vires the State legislature.
On the other hand, it was contended that the cess in the present case was a levy in respect of land and could be justified or sustained either under entry 49, 50 or 45 of List II of the 7th Schedule to the Constitu tion.
It was further submitted that the cess having been realised on the basis of the decision of this Court in "H.R.S. Murthy" case, if at all, the Court shall declare the said cess on royalty to be ultra vires prospectively.
Allowing the appeal, this Court, HELD: (E.S. Venkataramiah, C J, Sabyasachi Mukharji, Ranganath Misra, B.C. Ray, K.N. Singh and section Natarajan, JJ. per Sabyasachi Mukharji, J.) (1) Courts of law are enjoined to gather the meaning of the Constitution from the language used, and although one should interpret the words of the Constitution on the same principles of interpretation as one applied to an ordinary law but these very principles of interpretation compel one to take into account the nature and scope of the Act which requires interpretation.
It has to be remembered that it is a Constitution that requires interpretation.
Constitution is the mechanism under which the laws are to be made and not merely an Act which declares what the law is to be.
[704B C] The Attorney General for the State of New South Wales vs The Brewery Employees Union of New South Wales; , , referred to.
(2) A Constitution must not be construed in any narrow or pedantic sense, and construction most beneficial to the widest possible amplitude of its powers, must be adopted.
A broad and liberal spirit should inspire those whose duty it is to interpret the Constitution, but 694 they are not free to stretch or pervert the language of the enactment in the interest of any legal or constitutional theory, or even for the purposes of supplying omissions or correcting supposed errors.
[704D E F] In re. ' C.P. Berar Sales of Motor Spirit & Lubricants Taxation Act, 1938, [1939] FCR p. 1 and James vs Common wealth of Australia, , referred to.
(3) It is well settled now that the various entries in the three lists are not powers but fields of legislation.
The power to legislate is given by Article 246 and other articles of the Constitution.
[704G] Calcutta Gas Co. vs State of West Bengal, [1962] Suppl.
3 SCR 1, referred to.
(4) It is well settled that widest amplitude should be given to the language of these entries, but some of these entries in different lists or in the same list may overlap and sometimes may also appear to be in direct conflict with each other.
Then, it is the duty of the court to find out its true intent and purpose and to examine a particular legislation in its pith and substance to determine whether it fits in one or the other of the lists.
Each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it.
[705A B & D] H.R. Banthia & Ors. etc.
vs Union of India & Ors.
, ; ; Union of India vs H.S. Dhillon, ; and D.C. Rataria vs Bhuwalka Brothers Ltd., ; , referred to.
(5) It is clear that over a period of centuries, land revenue in India has acquired a cannot active meaning of share in the produce of land to which the King or the Gov ernment is entitled to receive.
[707B] N.R. Reddy & Ors.
vs State of A.P., [1965] 2 Andhra Law Times 297 and State ofA.P.v.
N.R. Reddy & Ors., ; , referred to.
(6) There is a clear distinction between tax directly on land and tax on income arising from land.
[708C] Raja Jagannath Baksh Singh vs The State of U.P. & Anr.
, ; , referred to.
695 (7) Explanation to section 115(1) itself makes a dis tinction between land revenue as such and royalty which by amendment is deemed to be land revenue.
It is, therefore, recognised by the very force of that explanation and the amendment thereto that the expression 'royalty ' in sections 115 & 116 of the Act cannot mean land revenue property called or conventionally known, which is separate and dis tinct from royalty.
[707D E] (8) In the instant case, cess is not on land, but on royalty, which is included in the definition of 'land reve nue ', None of the three lists of the 7th Schedule of the Constitution permits or authorises a State to impose tax on royalty.
(9) Royalty which is indirectly connected with land, cannot be said to be a tax directly on land as a unit.
Royalty is payable on a proportion of the mineral extracted.
The Act does not use dead rent as a basis on which land is to be valued.
Hence, there cannot be any doubt that the impugned legislation in its pith and substance is a tax on royalty and not a tax on land.
[709E] New Manek Chand Spinning & Weaving Mills Co. Ltd. & Ors.
vs Municipal Corporation of the City of Allahabad & Ors.
, ; ; S.C. Nawn vs W.T.O. Calcutta & Ors., ; ; Asstt.
Commissioner of Urban Land Tax & Ors.
vs The Buckingham & Carnatic Co. Ltd. etc.; , ; Second Gift 'Fax Officer, Mangalore etc.
vs D.H. Nazareth etc.
; , ; Bhagwan Dass Jain vs Union of India, ; and The Western India Theatres Ltd. vs The Cantonment Board, Poona Cantonment, ; , referred to.
(10) Royalty is directly relatable only to the minerals extracted and on the principle that the general provision is excluded by the special one, royalty would be relatable to entries 23 & 50 of List II, and not entry 49 of List II.
[713D] (11) Royalty is a tax, and as such a cess on royalty being a tax on royalty, is beyond the competence of the State Legislature because section 9 of the Central Act covers the field and the State Legislature is denuded of its competence under entry 23 of List II.
In any event, cess on royalty cannot be sustained under entry 49 of List II as being a tax on land.
Royalty on mineral rights is not a tax on land but a payment for the user of land.
[713F G] 696 Waverly Jute Mills Co. Ltd. vs Raymon & Co. (1) Pvt. Ltd.; , ; Anant Mills Co. Ltd. vs State of Gujarat & Ors., ; The Hingir Rampur Coal Co. Ltd. & Ors.
vs The State of Orissa & Ors., ; ; State of Orissa vs M.A. Tulloch & Co., ; ; Baijnath Kedia vs State of Bihar & Ors., ; M/s. Laxminarayana Mining Co. Bangalore vs Taluk Dev Board, AIR ; M. Lal & Ors.
vs The State of Bihar & Ors.
, AIR 1965 Patna 491; Bherulal vs State of Rajasthan, AIR ; Dr. S.S. Sharma & Anr.
vs State of Punjab & Ors., AIR ; Saurashtra Cement & Chemi cals India Ltd. vs Union of India & Anr., ; L.N. Agarwalla & Ors.
vs State of Orissa, AIR 1983 Orissa 210 and M/s Hira lal Rameshwar Prasad & Ors.
vs The State of Madhya Pradesh & Ors., M.P. High Court Misc.
Petition No. 410/83, referred to.
H.R.S. Murthy vs Collector of Chittoor & Anr., ; , overruled.
(12) The amounts of cess have been collected on the basis of the decision of this Court in H.R.S. Murthy 's case.
The Court is therefore justified in declaring the levy of the said cess under section 115 to be ultra vires the power of the State legislature prospectively only.
The respondents will not be liable for any refund of cess already paid or collected.
[714C D & E] Per G.L. Oza, J. (1) Sub clause (1) of Section 115 provides for levy of 45 naya paise for every rupee of land revenue payable to the Government.
In the explanation a fiction is created whereby even the royalty payable has been included within the defi nition of 'land revenue '.
[718A] (2) The language of Entries 23 and 50 in List II clearly subjects the authority or jurisdiction on the State Legisla ture to any enactment made by the Parliament.
Entry 23 talks of regulation and Entry 50 talks of taxes on mineral rights.
It therefore could not be disputed that if the cess imposed under section 115 of the Madras Panchayats Act is a cess or tax on mineral rights then that jurisdiction could be exer cised by the State Legislature subject to the law enacted by the Parliament.
[715D E] (3) Unit of charge of royalty is not only land but land + labour + capital.
It is therefore clear that if royalty is a tax or an imposition or a levy, it is not on land alone but it is a levy or a tax on mineral (land), 697 labour and capital employed in extraction of the mineral.
It therefore is clear that royalty if it is imposed by the Parliament it could only be a tax not only on land but on the three things stated above.
[718H; 719A] (4) When the Legislature included royalty, it went beyond its jurisdiction under Entry 49 of List II and there fore clearly is without the authority of law.
[719D] (5) This may lead to an interesting situation.
As this cess on royalty is without the authority, the result will be that the cess is levied so far as lands other than the lands in which mines are situated are concerned but lands where mines are situated this levy of cess is not in accordance with the law.
This anamoly could have been averted if the Legislature had used words 'surface rent ' in place of royal ty.
Even if the lands where mines are situated and which are subject to licence and mining leases, even for those lands there is a charge on the basis of the surface of the land which is Sometimes described as surface rent or sometimes also as 'dead rent '.
[719E F]
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6227.txt
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N: Criminal Appeal No. 754 Of 1983 From the judgment and Order dated 5 7 1983 of the High ( 'court of Delhi in Crl.
(Main) No. 499 of 1983.
AND Writ Petition (Cd.) No. 1265 of 1982.
(Under Article 32 of the Constitution of India) Mukul Mudgal for the Appellant in Crl.
Appeal No. 754 of 1983 R.K. Jain , R.P. Singh , Suman Kapoor , D.S.Mehra and Miss 746 Sangeeta Aggarwal for the Petitioner in W.P. No. 1266 of 1982.
M.S. Gujarat , G.D. Gupta , R.N. Poodar and Miss Halida khatun , for the Respondent.
The Judgment of the Court was delivered by CHANDRACHUD , C.J.
We have before us an appeal and a writ petition , which are filed by two persons sentenced to life imprisonment for the offence of murder.
They contend that they are entitled to the benefit of Section 428 Or the Code of Criminal Procedure , that is to say , that the period of detention undergone by them prior to their conviction as undertrial prisoners must be off against the sentence of life imprisonment imposed upon them.
The appellant , Bhagirath , filed a petition in the Delhi High Court asking that his case be referred for the e orders of the Delhi Administration under paragraph 516 B of the Punjab Jail Manual since , though sentenced to life imprisonment , ha had undergone a period of detention in Jail amounting to 14 years together with the remissions earned by him.
A learned Single Judge of the High Court rejected that petition on the ground that , in computing the period of 14 years , the period sent by the convict in the jail as an under trial prisoner cannot be taken into account because , section 428 of the Code which allows such a set off applies only when an accused has been sentenced to imprisonment for a term ' , and the sentence of life imprisonment is not an imprisonment `for a term '.
In coming to the conclusion that section 428 has no application to cases which an accused is sentenced to life imprisonment , the learned Judge relied upon a judgment of this Court in Kartar Singh vs State of Haryana.
( ') The Petitioner in the companion writ petition , Rakesh Kaushik , has a somewhat similar grievance , though he has needlessly introduced extraneous matters in his pleadings.
One of his contentions is that the remissions earned by him as a convict must be taken (1) ; 747 into account while computing the period of 14 years under para graph 516 B of the Punjab jail Manual.
He contends also , that in any case , he ought to be given the benefit of sections 432 and 433 of the Code because , his case merits a favourable consideration by the Delhi Administration.
In support of his case , he relies upon an order dated March 3 , 1982 passed by this Court in Sukhlal Hansda vs State of West Bengal.
(1) According to the counter affidavit filed by the Deputy Secretary (Home) of the Delhi Administration , the petitioner 's case cannot be considered for petitioner 's release because he has not yet undergone 14 years of imprisonment , inclusive of remissions earned by him.
First , We would prefer to interpret section 428 of the Code of the Criminal Procedure on its own terms , that is , divorced from considerations arising under the Punjab Jail Manual or any other Jail Manual.
The Provisions of Jail Manuals vary from State to State.
Therefore , questions arising under those Manuals cannot be mixed up with questions arising under the Code , which is the law of the land.
Section 428 of the Code reads thus: "Period of detention undergone by the undergone by the accused to be set off against the sentence of imprisonment , Where an accused person has , on conviction , been sentenced to imprisonment for a term , not being imprisonment in default of payment of fine , the period of detention , if any undergone by him during the investigation , inquiry or trial of the same case and before the date of such conviction , Shall be set off against the term of imprisonment imposed on him on such conviction , and the liability of such person to undergo imprisonment on such conviction shall be restricted to the reminder , if any , of the trem of imprisonment imposed on him.
" The neat and , we believe , the simple question for decision is whether imprisonment for life is imprisonment "for a terms".
The reason why it is urged that imprisonment for life is not imprisonment for a term is that the latter expression comprehends only imprisonments for a fixed , certain and ascertainable period of time like six months , two years , five years and so on.
Since the sentence (1) Writ Petitions (Cod.) Nos.
1128 26 of 1982 748 of life imprisonment , as held by this Court in Gopal Vinayak Godse vs The Stale of Maharashtra , (1) is a sentence for life and nothing less and since , the term of life is itself Uncertain , the sentence of life imprisonment is for an uncertain term , that is to say , that it is not imprisonment for a term So goes the argument.
So does it go but it fails to carry much conviction.
Life is uncertain.
In more ways than one.
Who knows what good may come tomorrow and how many good tomorrows there are still to go ? But , philosophical digressions apart , especially optimistic , the fact that the term of life is of an uncertain duration does not justify the conclusion that the sentence of imprisonment for life is not for a term.
The relevant question and , the only one , to ask under section 428 is: Has this person been sentenced to imprisonment for a term ? For the sake of convenience , the question may be split into two parts.
One , has this person been sentenced to imprisonment ? And , two , is the imprisonment to which he has been sentenced an imprisonment for a term ? There can possibly be no dispute that a person sentenced to life imprisonment is sentenced to imprisonment.
Then , what is the term to which he is sentenced ? The obvious answer to that question is that term to which he has been sentenced is the term of his life.
Therefore , a person who is sentenced to life imprisonment is sentenced to imprisonment for term.
We see but little warrant for qualifying the word 'term ' by the adjective 'fixed ' which is not to be round in section 428.
The assumption that the word 'term ' implies a concept of ascertainability or conveys a sence of certainty ii contrary to the letter of the laws , as we find it in that section Even the marginal note to the section does not bear out that assumption.
It rather belies it.
And , marginal notes are now legislative and not editorial exercises.
The marginal note of section 428 shows that the object of the Legislature in enacting the particular provision was to provide that 'the period of detention undergone by the accused ' should 'be set off against the sentence of imprisonment ' imposed upon him.
There are no words of limitation either in the section or in its marginal note which would justify restricting the plain and natural meaning of the word 'term so as to comprehend only sentences which are imposed for a fixed or ascertainable period.
To say that a sentence of life imprisonment imposed upon an (1) ; , 444.
749 accused is a sentence for the term of his life does offence neither to grammar nor to the common understanding of the word 'term '.
To say otherwise offend not only against the language of the statute but against the spirit of the law , that is to say , the object with which the law was passed.
A large number of cases in which the accused suffer long undertrial detentions are cases punishable with imprisonment for life.
Usually ' those who are liable to be sentenced to imprisonment for life are not enlarged on bail.
To deny the benefit of section 428 to them is to withdraw the application of a benevolent provision from a large majority of cases in which such benefit would be needed and justified.
Arguments and counter arguments were advanced before us on the basis of provisions contained in sections 53 , 53A(4)(a) and (b) , 57 , 65 and 511 of the Penal Code.
The provision contained in section 57 that imprisonment foF life has to be reckoned as equivalent to imprisonment for twenty years is for the purpose of calculating fractions of terms of punishment.
We cannot press that provision into service for a wider purpose.
Nor , indeed , can we draw sustenance to our conclusion from the provision contained in section 51 I to the effect that whoever attempts to commit an offense punishable with imprisonment for life shall be punished with imprisonment "for a term which may extend to one half of the imprisonment for life".
The argument of Shri Mukul Mudgal that if one half of life imprisonment is "a term" exhypothesi , life imprisonment would be "a term of imprisonment" is attractive but slender.
But , equally , we do not consider that anything contained in the rest of the sections above noted , militates against the view which we have taken.
The modalities for working out the provision contained in section 428 in cases of persons sentenced to imprisonment for life should not present any serious difficulty in practice.
In the first place , by reason of section 433A of the Code of Criminal Procedure where a sentence of imprisonment for life is imposed on a person for an offence for which death is one of the punishments provided by law , or where a sentence of death imposed on a person has been commuted under section 433 to one of imprisonment for life; such person cannot be released from prison unless he has served at least fourteen years of imprisonment.
The only point to note is 750 that while upholding the constitutional validity of section 433A , it was held by this Court in Maru Ram vs Union of India , (1) that the section is prospective in operation , with the result that it cannot apply to cases which were decided by the trial Cout before December 18 , 1978 , being the date on which the section came into force mind is the one arising out of the judgment of this Court in Gopal Vinayak Godsease.
It was held by a Constitution Bench in that case that a prisoner sentenced to life imprisonment is bound to serve the a remainder of his life in prison unless the sentence imposed upon him is commuted or remitted by the appropriate authority.
It was further held that since such a sentence could not be equated with any fixed term , the Rules framed under the Prison Act entitled such a person to earn remissions but that , such remissions were to be taken into account only towards the end of the term.
Under section 432 of the Code of Criminal Procedure , the appropriate Government has the power to remit the whole or any part of the punishment to which a person has been sentenced.
Under section 433 of the Code , the appropriate Government has the power , inter alia , to commute the sentence of imprisonment for life to imprisonment for a term not exceeding fourteen years to fine.
The question of setting off the period of detention undergone by an accused as an undertrial prisoner against the sentence of life imprisonment can arise only if an order is passed by the appropriate authority under section 432 or section 433 of the Code.
In the absence of such order , passed generally or specially , and apart from the provisions , if any of the relevant Jail Maunal , imprisonment for life would mean , according to the rule in Gopal Vinayak Godse , imprisonment for the remainder of life.
The two cases before us were referred to a larger Bench because of the doubt entertained as regards the correctness of the decision in Kartar Singh , especially because of the apparently conflicting view taken by another Bench of this Court in Sukhlal Hansda vs State of West Bengal.
Both of those decisions were rendered by a three judge Bench.
In Kartar Singh , persons who were sentenced to life imprisonment challenged an order passed (1) [l981] 1 S.C.R , 1196.
751 by the Government of Haryana , denying to them the benefit of the period of undertrial detention under section 428 of the Code.
It was held by this Court that the Penal Code and the Criminal Procedure Code make a clear distinction between 'imprisonment for life ' and 'imprisonment for a term ' and , in fact , the two expressions are used in contradistinction with each other in one and the same section , the former meaning imprisonment for the remainder of the natural life of the convict and the latter meaning imprisonment for a definite or fixed period.
The Court proceeded to hold that an order of remission passed by the appropriate authority merely affects the execution of the sentence passed by the Court , without interfering with the sentence passed or recorded by the Court.
Therefore , section 428 which opens with the words "where an accused person has , on conviction , been sentenced to imprisonment for a term" , would come into play in cases where 'imprisonment for a term ' is awarded on conviction by a court and not where the sentence imposed upon an accused becomes a sentence for a term by reason of the remission granted by the appropriate authority.
Finally , according to the Court , 'the question is not whether the beneficent provision should be extended to life convicts on a priori reasoning or equitable consideration but whether on true construction , the section comprises life convicts within its purview".
The Court found support to its view in the objects and reasons for introducing section 428 in the Code , as set out in the Report of the Joint Committee.
We have considered with great care the reasoning upon which the decision in Kartar Singh proceeds.
With respect , we are unable to agree with the decision.
We have already discussed why 'imprisonment for life is imprisonment for a term , within the meaning of section 428.
We would like to add that we find it difficult to agree that the expressions 'imprisonment for life ' and imprisonment for a term ' are used either in the Penal Code or in the Criminal Procedure Code in contra distinction with each other.
Sections 304 , 305 , 307 and 391 of the penal Code undoubtedly provide that persons quilty of the respective offences shall be punished with imprisonment for life or with imprisonment for a term not exceeding a certain number of years.
But , that is the only manner in which the Legislature could have expressed its intention that persons who are guilty of those offences shall be punished with either of the sentences mentioned in the respective sections.
The 752 circumstance on which the learned judges have placed reliance in Kartar Singh , do not afford any evidence , intrinsic or otherwise ' of the use of the two expressions in contra distinction with each other.
Two or more expressions are often used in the same section in order to exhaust the alternatives which are available to the Legislature.
That does not mean that there is , necessarily , an antithesis between those expressions.
The reasoning in Kartar Singh that an order of remission does not interfere with the sentence recorded by the court but merely affects the execution of the sentence , stands answered by the interpretation which we have put upon the language of section 428 that persons sentenced to imprisonment for life are sentenced to imprisonment for a term.
It is not because of remission that a sentence of life imprisonment becomes an imprisonment for a term.
We have also already answered the last of the reasons given in Kartar Singh that the question is not whether the beneficent provision contained in section 428 should be extended to life convicts on equitable considerations.
We enter a most respectful caveat.
Equity sustains law and the twain must meet.
They cannot run in parallel streams.
Equitable considerations must have an important place in the construction of beneficent provisions , particularly in the field of criminal law.
To exclude such considerations is to denude law 's benevolence Or its true and lasting content.
Lastly , the view expressed by the Joint Committee in its Report does not yield to the inference that the "mischief sought to be remedied has no relevance where gravity of offence requires the imposition of imprisonment for life".
As we have indicated earlier , graver the crime , longer the sentence and , longer the sentence , greater the need for set offs and remissions.
Punishments are no longer retributory.
They are reformative.
The order passed by this Court in Sukhlal Hansda related to the cases of 24 prisoners who were sentenced to life imprisonment.
Most of those prisoners had undergone imprisonment for a period which , after taking account the remissions earned by them , exceeded fourteen years.
It was held by this Court that , for the purpose of considering whether the cases of those prisoners should be examined for premature release under the relevant provisions of the West Bengal Jail Manual , there was no reason why the period of 753 imprisonment undergone by them as undertrial prisoners should not be taken into account.
The Court directed that the cases of the prisoners should be considered by the State Government , both for the purpose of setting off the period of detention undergone by them as undertrial prisoners and for taking into account the remissions earned by them.
The order passed by the Court does not discuss the point which arises before us though , the observations made therein are consistent more with the view which we have taken than with the view taken in Kartar Singh.
For these reasons , we allow the appeal and the writ petition and direct that , the period of detention undergone by the two accused before us as undertrial prisoners , shall be set off against the sentence of life imprisonment imposed upon them , subject to the provision contained in section 433A and , provided that order have been passed by the appropriate authority under section 432 or section 433 of the Code of Criminal procedure.
N.V.K. Petion and Appeal allowed.
|
The appellant filed a writ petition in the High Court , contending that his case be referred for the order of the State Administration under Paragraph 516 of the Punjab Jail Manual , on the , ground that though sentenced to life imprisonment , he had under gone a period of detention in Jail amounting to 14 years together with the remission earned by him and that he should be released.
The aforesaid petition was rejected by a Single Judge following the decision of this Court in Kartar Singh vs State of Haryana ; , on the ground.
That in computing: the period of 14 years , the period spent by the convict in the jail as an undertrial prisoner cannot be taken into account because section 428 of the Code of Criminal Procedure which allowed such a set off applied only when an accused had sentenced to imprisonment for a term , ' and that the sentence of life imprisonment was not an 'imprisonment for a term '.
In the companion writ petition , the petitioner contended that the remis 744 sions earned by him as a convict must be taken into account while computing the period of 14 years under paragraph 516 B of the Punjab Jail Manual , and that in any case , ht ought to be given the benefit of sections 432 and 433 of the Code of Criminal Procedure because , his case merits a favorable consideration by the State Administration.
Allowing the Appeal and Writ Petition , ^ HELD: 1.
The period of detention undergone by the two accused as undertrial prisoners , shall be set off against the sentence of life imprisonment imposed upon them , subject to the provision contained in section 433A and , provided that orders have been passed by the appropriate authority under section 432 or section 433 of the Code of Criminal Procedure.
[753C D] 2.
The fact that the term of life is of an uncertain duration does not justify the conclusion that the sentence of imprisonment for life.
is not for a term .
[752C] 3 There can possibly be no dispute that a person sentenced to life imprisonment is sentenced to imprisonment.
The term to which such person has been sentenced b the term of his life Therefore a person who is sentenced to life imprisonment , is sentenced to imprisonment for a term.
[752C] 4.
Under section 432 of the Code of Criminal Procedure , the appropriate Government has the power to remit the whole or any part of the punishment to which a person has been sentenced.
Under section 433 of the Code , the appropriate Government has the power to commute the sentence of imprisonment for life to imprisonment for a term not exceeding fourteen year or to fine.
The question of setting off the period of detention undergone by an accused as an undertrial prisoner against the sentence of life imprisonment can arise only if an order is passed by the appropriate authority under r section 432 or section 433 of the Code.
In the absence of such an order passed generally or specially , and apart from the provisions if any , of the relevant Jail Manual , imprisonment for life would mean imprisonment for remainder of life.
[750D F] 5.
The assumption that the word term ' implies a concept of ascertainability or conveys a sense of certainty is contrary to the letter of the law , as found in section 428.
Even the marginal note to the section does not bear out that assumption.
It rather belies it.
[748F] 6.
Marginal notes are now legislative and not editorial exercises.
The marginal note of section 428 shows that the object of the Legislature in enacting the particular provision was to provide that 'the period of detention undergone by the accused ' should be 'set off against the sentence of imprisonment ' imposed upon him.
There are no words of limitation either in the section or in its marginal note which would justify restricting the plain and natural meaning of 745 the word 'term ' so as to comprehend only sentences which are imposed for a fixed or ascertainable period.
[748F G] 7.
To say that a sentence of life imprisonment imposed upon an accused is a sentence for the term of his life does offence neither to grammar nor to the common understanding of the word 'term .
To say otherwise would offend not only against the language of the statute but against the spirit of the law , that is to say , the object with which the law was passed.
A large number of cases in which the accused suffer long undertrial detentions are cases punishable with imprisonment for life.
Usually , those who are liable to be sentenced to imprisonment for life are not enlarged on bail.
To deny the benefit of section 428 to them is to withdraw the application of a benevolent provision from a large majority of cases in which such benefit would be needed and justified.
[748H; 748A B] 8.
Equity sustains law and the twain must meet.
They cannot run in parallel streams.
Equitable considerations must have an important place in the construction of beneficient provisions , particularly in the field of criminal law.
To exclude such considerations is to denude law s benevolence of its true and lasting content.
[752F] 9.
Graver the crime , longer the sentences , greater the need for set offs and remissions.
Punishments are no longer retributory.
They are reformative.
[752F] Kartar Singh vs State of Haryana ; over ruled , Sukhlal Hansda vs State of West Bengal Writ Petitions (Crl.) 1128 29 of 1982 , Gopal Vinayak Godse vs The Slate of Maharashtra [l961] 3 SCR 440 , 444 & Maru Ram vs Union of India [1981] I SCR 1196 referred.
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4992.txt
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ivil Appeal No. 3195 of 1979 etc.
From the Judgment and Order dated 20th June, 1979 of the Kerala High Court in Writ Appeal No. 302 of 1978.
F.S. Nariman, M. Chandrasekharan, K.R. Nambiar, C.V. Subba Rao, Ms. A. Subhashini, A.K. Ganguli, Mrs. R. Rangas wamy, Hemant Sharma, K. Swamy and Ms. section Relan for the appearing parties.
The Judgment of the Court was delivered by BHAGWATI CJ.
1.
The above cases are involving a company known as Madras Rubber Factory Ltd. (popularly known as MRF Ltd.) MRE has four factories; Kottayam (Kerala), Madras (Tamil Nadu), Arkonam (Tamil Nadu) and Goa (Union Territory) engaged in 852 the manufacture of automotive tyres, tubes and other rubber factory products.
Each of these factories are under juris diction of different Assistant Collectors.
The four proceed ings arising for our consideration are as under: (i) Civil Appeal No. 3195 of 1979 is an appeal by certifi cate filed by the Union of India through the Assistant Collector of Central Excise, Kottayam against the Judgment dated 20th June 1979 of the Division Bench of the High Court of Kerala from Writ Appeal No. 302 of 1978 allowing post manufacturing expenses under the new Section 4 of the Excise Act.
This relates to the Kottayam factory.
(ii) Civil Appeals Nos.
4731 32 of 1984 are appeals filed by Union of India through the Superintendent of Central Excise, Kottayam against the Judgment dated 1st April 1976 of the Division Bench of the High Court of Kerala allowing post manufacturing expenses under the old Section 4 of the Excise Act.
(iii) SLP (Civil) No. 10108 of 1980 is another appeal of the Union of India against the Judgment of the Additional Judi cial Commissioner, Goa, Daman and Diu allowing post manufac turing expenses under the old Section 4 of the Excise Act in respect of the factory at Goa.
In respect of new Section 4, the Union of India and MRF were agreed that the decision in Writ Appeal No. 302 of 1978 being the subject matter of Civil Appeal 3195 of 1979 would be applicable to the factory at Goa.
(iv) Civil Appeal No. 793 of 1981 is MRF 's Appeal under Section 35L of the Central Excise and Salt Act (as amended) ' against the order and decision dated 1st February 1984 of the Tribunal (CEGAT) deciding that the sale of tyres and other rubber products through their 42 Depots throughout India were not retail sales but were in the nature of whole sale sales and MRF was not entitled to deductions under Rule 6A of the Central Excise (Valuation) Rules, 1975 (hereinaf ter referred to as the "Valuation Rules").
These proceedings are now arising for our considera tion after the pronouncement of the Judgment by this Court in the case of Union of India & Others vs Bombay Tyres International Ltd., [1983] Vol.
14 Excise Law Times 1896) decided on the 7th October 1983 and the clarificatory order passed by this Court in the same case of Union of 853 India & Others vs Bombay Tyres International Ltd., reported in This clarification was given by the Supreme Court on 14th and 15th November 1983.
Pursuant to hearings held in this Court in several cases relating to post manu facturing expenses and after the latter clarificatory order in the case of Union of India & Others vs Bombay Tyres International Ltd. (supra), the Tribunal (CEGAT) decided the Review Notice and set aside the order of the Appellate Collector on 1st February 1984 and on 9th February 1984 the Civil Appeal No. 793 of 1984 was admitted.
Format orders were passed by this Court in the pending appeals relating to post manufacturing expenses.
Even in the present matters format orders were passed on or around 3rd May, 1984.
Format orders were also passed in the pending Writ Appeal No. 590 of 1979 pending before the High Court at Madras.
In accord ance with the format orders and within the timeframe stipu lated, amendments to price lists were to be filed by MRF Ltd. The present Appeals are now to consider the various deductions claimed by MRF Ltd. and/or disallowed and/or not allowed by the Assistant Collector, or allowed by the As sistant Collector, in the various jurisdictions qua the factories of MRF Ltd. in the cross Appeals of the Union of India and the MRF Ltd. 3.
For the sake of convenience, the deductions arising for consideration of this Court can be summarised as under: (i) TAC/Warranty discount (ii) Product discounts (iii) Interest on finished goods and stocks carried by the manufacturer after clearance (iv) Over riding commission to Hindustan Petroleum Corpora tion (v) Cost of distribution incurred at duty paid Sales Depots (vi) Interest on receivables (vii) 1% turnover discount allowed to RCS Dealers (viii) Secondary packing cost on tread rubber (ix) Discount to Government and other Departments 854 4.
The Appeals further also raise the issue of whether the price to the Defence Department Ex factory gate (ex factory) is to be considered as the wholesale cash price under old Section 4 as this was disallowed by the Assistant Collector, and further the issue as to the method of compu tation of assessable value where the selling price is a cum duty price.
This issue involves the consideration as to how excise duty has to be deducted, whether after deducting permissible deductions or otherwise.
We propose to deal with the issues as follows.
For the purpose of this Judgment we are not repeating and setting out the text of the un amended Section 4 and the amended Section 4 as the same are exten sively quoted in our Judgment in Union of India vs Bombay Tyres International Ltd., Recapitulating our Judgment in Union of India & Others vs Bombay Tyres International Ltd. (supra) we held that: "broadly speaking both the old s.4(a) and the new s.4(1) (a) speak of the price for sale in the course of wholesale trade of an article for delivery at the time and place of removal, namely, the factory gate.
Where the price contemplated under the old s.4(a) or under the new s.4(1) (a) is not ascertain able, the price is determined under the old s.4(b) or the new s.4(1)(b).
Now, the price of an article is related to its value (using this term in a general sense), and into that value are poured several components, including those which have enriched its value and given to the article its marketability in the trade.
Therefore, the expenses incurred on account of the several factors which have contributed to its value upto the date of sale, which apparently would be the date of delivery, are liable to be included.
Consequent ly, where the sale is effected at the factory gate, expenses incurred by the assessee upto the date of delivery on ac count of storage charges, outward handling charges, interest on inventories (stocks carried by the manufacturer after clearance), charges for other services after delivery to the buyer, namely after sales service and marketing and selling organisation expenses including advertisement expenses cannot be deducted.
It will be noted that advertisement expenses, marketing and selling organisation expenses and after sales service promote the marketability of the article and enter its value in the trade.
Where the sale in the course of wholesale trade is effected by the assessee through its sales organisation at a place or places outside the factory gate, the expenses incurred by 855 the assessee upto the date of delivery under the aforesaid heads cannot, on the same grounds, be deducted.
But the assessee will be entitled to a deduction on account of the cost of transportation of the excisable article from the factory gate to the place or places where it is sold.
The cost of transportation will include the cost of insurance on the freight for transportation of the goods from the factory gate to the place or places of delivery.
In the clarificatory order in Union of India & Ors.
vs Bombay Tyres International Ltd., reported in 1984 Vol.
17 ELT 329 we clarified that discounts allowed in the trade (by whatever name called) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale or by established practice.
The allowance and the nature of dis count should be known at or prior to the removal of the goods and shall not be disallowed only because they are not payable at the time of each invoice or deducted from the invoice price.
In relation to the first head of deduction, namely TAC/ Warranty discount, the petitioners contend that deduc tion on account of TAC/Warranty discount ought to be permit ted as a deduction for determining the assessable value.
It is submitted by them that this discount relates to the claims of the customers on account of any defect in the tyre already sold and assessed to duty.
Such claims are scruti nised by a committee of technical personnel of the assessee.
The Committee decides as to what amount of money should be refunded to the customers on account of the defect in the manufactured tyre already sold to the customers by which defect the tyre does not get its full life tenure.
Instead of refunding the amount in cash the customers are permitted to buy a new tyre, the price of which new tyre would be reduced by the amount refundable to customers as per deci sion of the committee. '17he petitioners contend that the TAC/Warranty discount satisfied all the criteria of a trade discount stipulated in our order dated 14th/15th November 1983 in that it is a discount established by practice since 1943, it is a discount given to the consumer of a MRF tyre in respect of a tyre purchased earlier, the factum of allow ance is known is trade prior to removal, the nature of the discount is not arbitrary or ad hoc and easily determinable.
The Revenue disputes this claim on the ground that it does not come within Section 4(4)(d)(ii) of the Act since the claim is not in accordance with the normal practice of the wholesale trade at the time 856 of removal of the goods in respect to which the claim is made and also on the ground that this is not normally claim able as trade discount.
We are inclined to accept the contention of the department.
Even though the giving of TAC/Warranty is estab lished by practice or capable of being decided, what is really relevant is the nature of the transaction.
The war ranty is not a discount on the tyre already sold, but relate to the goods which are being subsequently sold to the same customers.
It cannot be strictly called as discount on the tyre being sold.
It is in the nature of a benefit given to the customers by way of compensation for the loss suffered by them in the previous sale.
In our order dated 14 th/15th November 1983 we have said that trade discounts of any nature should be allowed to be deducted provided, however, the discount is known at or prior to the removal of the goods.
In the present case this condition precedent is not satisfied as the Committee de cides the claim subsequent to the removal of the tyre.
The Petitioners have further contended that the Excise Act and the Rules framed thereunder contemplate such an allowance and an abatement of duty on defective tyres.
Counsel for the Petitioners has drawn an attention to Rule 96 which reads as follows: "Rule 96.
Abatement of duty on defective tyres: If a manu facturer desires that certain tyres should, in consequence of damage sustained during the course of manufacture, be assessed on a value less than the standard selling price he shall declare in writing on the application for clearance of the goods, that such damage has been sustained and each such tyre shall be clearly legibly embossed or indelibly stamped with the word "Second", "Clearance" or "Defective".
There is, however, a distinction between a compensa tion in the nature of warranty allowance on a defective tyre after it has been sold and removed from the factory gate and selling a defective tyre as a "seconds" or "defective".
In our view the analogy of Rule 96 is not applicable.
A tyre being sold as a "seconds or "defective" would be sold at a discount, such discount being known before the goods were removed/cleared, thereby also satisfying the pre condition of section 4(4)(d)(ii) of the Excise Act.
The assessable value and price list submitted would be one relating to "seconds" tyres.
We, therefore, 857 disallow the claim in respect of TAC/Warranty discount.
The next head of deductions arising for our consid eration is in respect of product discounts.
This head com prises of 3 tyres of discounts: (1) Prompt Payment Discount (2) Year Ending Discount (3) Campaign Discount 13.
We deal with each of the heads individually as under: (i) Under the prompt payment discount scheme MRF in relation to up country Non RCS Bills in the replacement market except Government and DGS & D accounts, a rate of 0.75% on the total value of the invoice including sales tax, surcharge, etc.
is offered if the bill is cleared/paid for within 26 days from the date of invoice.
The Union of India disputes this claim on the ground that it is limited to only certain varieties of products as explained in the scheme document and is only for a limited period.
We are not in clined to accept the contention of the Union of India in this regard.
A prompt payment discount is a trade discount given to the dealers by MRF.
It is established under the terms of sale or by established practice and is known at or prior to the removal of the goods.
It squarely falls within our order of clarification in the case of Union of India & Ors.
vs Bombay Tyres International Ltd. (supra).
The MRF is entitled to deduction on this account.
(ii) In the Special year end Bonus to Dealers MRF pro poses and claims this deduction as a year end discount.
This Bonus of Rs.50 per tyre is for certain specific tyres and is receivable only on those invoices where payments are actual ly receivable within 45 days from the date of the invoice.
Under this scheme a declaration is to be received dealerwise and thereafter provision is to be made at the head office of MRF for the Bonus.
The allowance of the discount is not known at or prior to the removal of the goods.
The calcula tions are made at the end of the year and the Bonus at the said rate is granted only to a particular class of Dealers.
This is computed after taking stock of the accounts between MRF and its dealers.
It is not in the nature of a discount but is in the nature of a Bonus or an incentive much after the invoice is 858 raised and the removal of the goods is complete.
In the circumstances, we are of the opinion that MRF is not enti tled to deduction under this head.
(iii) MRF proposed "Superlug Piggy back campaign Bonus" in March/April 1983 for invoices during a particular period whereby bonus of Rs.50 per tyre for every Superlug tyre and/or any other particular variety of tyres is given.
The bonus was again applicable only on invoices for which pay ments were received within 45 days.
Details of bonus earn ings per dealer were to be computed after taking stock of the accounts between MRF and its dealers and the bonus amount was to be credited after June 1983 or mid July 1983.
On the same reasoning as the year ending discount/bonus scheme, the campaign bonus cannot be a permitted deduction to MRF.
The allowance of the discount is not known at or prior to the removal of the goods.
The quantum is unascer tained at the point of removal.
The discount is not on the wholesale cash price of the articles sold but is based on the total sales effected of a particular variety of tyre calculated after the removal.
We accordingly reject this claim of MRF.
Interest on finished goods from the date the stocks are cleared till the date of the sale was disallowed by the Assistant Collector, Kottayam.
This head has again been urged for our consideration as a proper deduction for deter mination of the assessable value.
As quoted in our judgment in Union of India and Ors.
vs Bombay Tyres International Ltd. (supra), we have held that expenses incurred on account of several factors which have contributed to its value upto the date of sale which apparently would be the date of delivery at the factory gate are liable to be included.
The interest on the finished goods until the goods are sold and delivered at the factory gate would therefore necessarily, according to the judgment in Bombay Tyres International case (supra) have to be included but interest on finished goods from the date of delivery at the factory gate up to the date of delivery from the sales depot would be an expense in curred after the date of removal from the factory gate and it would therefore, according to the judgment in Bombay Tyres International case (supra) not be liable to be includ ed since it would add to the value of the goods after the date of removal from the factory gate.
We would therefore have to allow the claim of MRF Ltd. as above.
859 15.
The next head of deduction relates to over riding commission to the Hindustan Petroleum Corporation which was disallowed.
MRF entered into a contract with Hindustan Petroleum Corporation Ltd. for sale of their products through HPC dealer network.
An overriding commission was agreed to, in consideration of HPC not agreeing to entering upon agreement with any other tyre manufacturing company vis a vis by reason of MRF undertaking not to enter upon any agreement with any other oil company.
The discount proposed was as a percentage of sale effected through the HPC dealers on half yearly basis.
On the face of it, the over riding commission payable to HPC is a commission for sales.
It is a compensation granted for the sale of MRF products through HPC dealers and is a commission for services rendered by the agent.
It is not a discount known at or prior to the removal of the goods and we accordingly reject this claim of MRF Ltd. 16.
Another head of deduction disallowed to MRF relates to interest on receivables (sundry debtors for sales).
MRF has represented that this cost is inbuilt in the price and is incurred on account of the time factor between the time the goods are delivered and the time the moneys are rea lised.
The cost is incurred only where credit terms are given in case of up country and other buyers where payment is made much after the sales are effected.
They contend that it is nothing but an extension of the principle underlying Rule 4 of the Central Excise (Valuation) Rules.
They contend that this is an adjustment in value required to be made to take into account and provide for the difference in the time of delivery and the realisation of the sale value.
As stated in our judgment in Union of India & Ors.
vs Bombay Tyres International Ltd. (supra), it is only those expenses incurred on account of factors which have contributed to its value upto the date of sale or the date of delivery which are liable to be included in the assessable value.
The interest cost and expenses on sundry debtors or interest on receivables is an expense subsequent to the date of sale and removal or delivery of goods and in our opinion MRF Ltd. would be eligible to claim deduction on this account.
The next head which was urged for our consideration relates to the cost of distribution incurred at the duty paid sales depots.
In our judgment in Union of India and Others vs Duphar Interfram Ltd. (Civil Appeal No. 569 of 1981) reported in 1984 Excise and Customs Reporter at page 1443, we have held that the cost of distribution is not to be included in the assessable value in case the wholesale dealers take delivery of the goods from outside duty paid godown.
The 860 wholesale dealers having taken delivery of the goods manu factured by MRF.
Ltd. and there being a removal of the goods from the factory gate, the cost of distribution at duty paid sales depots cannot be taken into account for the purpose of determining the assessable value of the goods.
The next head of deduction disallowed to MRF relates to discount to Government and other Departments.
In our view the Assistant Collector, Goa has rightly rejected the claim of MRF though the Assistant Collector, Kottayam allowed the claim of MRF.
MRF Ltd. sells its products at a lower price as per contract with the Government or its Departments.
Separate price lists for the Government and other Depart ments were filed by MRF distinct and different from the price lists in relation to dealers.
The position that dif ferent price lists for different classes of dealers or different classes of buyers is specifically recognised under section 4(1), proviso (i), of the Excise Act.
Different prices can be declared with reference to different classes of buyers and each price is deemed to be a normal price of such goods.
In this view of the matter, merely because the product is sold at a lower price to the Government and its Departments does not enable the MRF to contend that the difference in price with reference to an ordinary dealer and the Government is a discount to the Government.
The differ ence in price is not a discount but constitutes a normal price for the Government as a class of buyer and no deduc tion on this head is liable to MRF Ltd. 19.
The next question which arises for our consideration relates to special secondary packaging charges for tread rubber.
It has been the contention of the MRF that their case is covered by the judgment in Union of India & Ors.
vs Godfrey Philips India Ltd., reported in 1985 Vol.
The majority judgment in Godfrey Philips India Ltd. (Supra) holds that "on a proper construction of Sec.
4(4)(d)(i) of the Act read with the Explanation, the second ary packaging done for the purpose of facilitating transport and smooth transit of the goods to be delivered to the buyer in the wholesale trade cannot be included in the value for the purpose of assessment of excise duty.
If a packaging is not necessary for the sale of the product in the wholesale market at the factory gate, the same cannot be included in the value for the purpose of assessment of excise duty.
" It has been brought to our notice that in a Judgment delivered by the Bombay High Court in Misc.
Petition No. 1534 of 1979 (Judgment dated 7th January 1986) Bharucha J. of Bombay High Court in Bombay Tyres International Ltd. vs Union of India & Ors., has considered the Judgment in 861 Godfrey Philips India Ltd. (supra) with specific reference to the question of secondary packaging for tread rubber.
It has been brought to our notice that such packaging consists of cardboard cartons or wooden cases.
In that case the tread rubber as packed was produced before Bharucha J. He has described that the tread rubber is a strip of rubber approx imately 6 ' ' wide and about 1 ' ' thick which is tightly wound into a roll.
Each roll weighs between 15 Kgs and 40 Kgs.
The roll is not held together by any means.
The roll is inserted into a loose and open polythene bag.
That bag also cannot hold the roll together.
The bag is placed in a cardboard carton or a wooden case.
The cardboard carton is held to gether by rubber bands.
The wooden case is nailed together.
Though, it was contended that the cardboard cartons and wooden cases were in the nature of secondary packaging whose cost was not includable in the value of tread rubber, Bharu cha J. held that a roll of tread rubber cannot be sold without the cardboard carton or the wooden case.
It is further stated that the secondary packing in which tread rubber is sold is in the course of wholesale trade.
The secondary packing is not employed merely for the purpose of facilitating transport or smooth transit and is necessary for selling the tread rubber in the wholesale trade.
Bharu cha J. refused to remand the matter to the authorities as the tread rubber as packed had been produced before him and he was of the firm view that the cardboard cartons and the wooden cases are not such secondary packing materials as can be excluded in computing the assessable value of the Peti tioner 's tread rubber.
In the circumstances that this very issue has been decided on a visual personal inspection of Bharucha J. in the case of Bombay Tyres International Ltd. (supra) pronounced after the decision in Godfrey Philips India Ltd. (supra) we are of the view that the cost of cardboard cartons and wooden cases or any other special secondary packing charges incurred by the MRF on tread rubber should not be excluded from the assessable value.
Tread rubber is a product which if even slightly damaged becomes unfit or un usable.
The vital element "cushion compound" which is applied to the bottom of the tread rubber and which helps the tread rubber to stick to the buffed surface of the old tyre which is to be retreaded is very delicate.
A polythene sheet is put over the layer of the compound before the same is rolled and put into another polythene bag to avoid sticking to the outer side of the tread rubber and getting contaminated by dust.
It is stated that such production cannot be marketed without the poly thene bags and/or cardboard boxes.
These are the findings of the Assistant Collector, Goa and in the light of the cumula tive decisions of the Assistant Collector, Goa and of the Bombay High Court, we are of the view that the secondary special packing charges for tread rubber 862 cannot be deducted from the assessable value of tread rub ber.
In relation to the determination of wholesale price of tyres on the basis of the ex factory price for Defence supplies, with reference to the old Section 4 in view of our Judgment in Union of India vs Bombay Tyres International Ltd. (supra) also reported in ; at 376E, this Court has held that "in the new Section 4 in supersession of the old Section 4, no material departure was intended from the basic scheme for determining value of excisable arti cles.
" It has been contended by the Union of India that even after our format orders referred to above, MRF has not submitted any statement of deductions/amendments in respect of price lists filed nor submitted any fresh prices.
It claims several deductions on percentage basis by furnishing calculations vis a vis the entire company but did not fur nish item wise or factory wise break up of such claims.
Having held that there is no material departure in the basic scheme for determining the value of excisable articles in the old Section 4 and the new Section 4, there is nothing in the unamended Section 4 to justify an inference that the wholesale cash price of articles of similar description sold cannot be different for different classes of buyers in wholesale.
Different prices can be normal prices for the purposes of determination of the assessable value of the article.
We accordingly reject the contention of the MRF.
Even though the MRF has not filed a separate price list for the factory gate clearances to Defence Department under the old Section 4, in view of our now holding that there is no material schematic difference between old Section 4 and new Section 4, we permit MRF Ltd. to file revised price lists with reference to the class of buyers namely, Defence on a different basis for a different normal price and avail of all the necessary reliefs with reference to lower assessable value, if the same has not already been filed.
In so far as the deductions claimed towards excise duty paid on processed tyre cord, the contention of the MRF has been upheld by the Goa Bench in Special Civil Appeal No. 28 of 1983 and the claim has been allowed to MRF for deduc tion from selling price of excise duty on processed tyre cord.
This is in accordance with Section 4(4) (d)(ii) of the new Section 4 and we accordingly confirm that MRF is eligi ble to this deduction.
The last important issue relates to the method of computation of assessable value in a cum duty price at a factory gate sale.
The issue is whether excise duty should be first deducted or the permissible deduction should be first deducted from the selling price for the re 863 assessments before the Assistant Collectors.
The assessment of excise duty both in relation to Section 4 and in relation to the Valuation Rules is now subject to the definition contained in Section 4(4)(d) of the Excise Act.
The value as defined thereunder is to be arrived at after the cost of packaging of a durable nature or a returnable nature as also amounts of duty of excise, sales tax and other taxes and trade discount allowed in accordance with the normal prac tice of wholesale trade is determined.
It is thus implicit that no excise duty is payable on an element of excise duty in the price.
The value as contemplated under Section 4 cannot include a component of excise duty.
In the circum stances, where the computation of an assessable value has to be made from the factory gate sale price which is a cum duty price, the first question which will have to be addressed is what are the exclusions and permissible deductions from such a sale price.
The petitioners have contended that their cum duty price was arrived at after calculating and adding excise duty payable i.e., before actual duty was paid.
They contend that their price list for several articles is ap proved much in advance of the removal from the factory.
They contend that when the assessable value is to be arrived at, the same amount of excise duty which was pre determined and added to the factory price is naturally to be deducted first and only thereafter the permissible deductions should be deducted to arrive at the value.
For the purposes of argu ment, MRF submitted the following example for consideration: They suggested that their selling price should be con sidered (cum duty selling price) as Rs. 3200.
They further submitted that the permissible deductions whether on account of trade discount or on account of cost of secondary packag ing or sales tax or other taxes, packaging or sales tax or other taxes should hypothetically be considered at Rs.200.
The rate of excise duty chargeable is 60% ad valorem for automotive tyres.
Assuming for the sake of argument that the value of the product is actually Rs.2075.
In accordance with the provisions of Section 4(4)(d) permissible deductions are made.
The assessable value would be Rs. 1875 being the difference of Rs.2075 and Rs.200.
The excise duty at the rate of 60% would thereafter be computed on the sum of Rs. 1875 and would aggregate Rs. 1125.
The selling price which is a cum duty price would be the sum total of the assessable value, the permissible deductions and the excise duty.
Putting this as a mathematical formula the selling price (cum duty price) is equal to assessable value plus permissi ble deductions plus excise duty.
Cumduty Paid Selling Price = Assessable Value + Excise Duty + Permissible deductions.
Again excise duty is computed as a ratio of the assessable value where duty is ad valorem.
For the purposes of ascer 864 taining the assessable value, if three of the components namely, the cum duty selling price, the quantum of permissi ble deductions and the rate of excise duty are known, the proper and appropriate method of determining the assessable value would be the following formula: Assessable value = cum duty selling price permissible deductions divided by ( 1 + Rate of excise duty) Thus in the instant case working backward, if the cum duty selling price is known to be Rs.3200 and the permissi ble deductions are known to be Rs.200 and the rate of excise duty is known to be 60% the assessable value is computed aS under: Selling price permissible deductions = Rs.3200=RS.200 = Rs.3000 Assessable value is equal to difference in selling price and permissible deductions divided by 1 plus 60/100 which is equal to 3000/1.6 which is equal to Rs. 1875.
The excise duty at 60% ad valorem rate would be Rs. 1125 on the assessable value of Rs. 1875.
The mathematical formula enumerated above balances.
For example, if the cum duty paid selling price is equal to Rs.3200, the assessable value is Rs. 1875, excise duty is Rs. 1125 and permissible deductions is Rs.200, the aggregate of the assessable value, the permissible deductions and the excise duty is equal to the selling price (cum duty paid).
Any other method of computation of excise duty or assessable value is erroneous.
The Petitioner 's basis that the assessable value is to be arrived at by taking into consideration the same amount of excise duty which was hypothetically pre determined and added to the factory price and that this element in an attempt to compute the assessa ble value should naturally be deducted first, is putting the cart before the horse.
The excise duty is only known as a ratio of the assessable value when an ad valorem duty is included in the cum duty paid selling price.
The quantum of excise duty cannot be pre deducted or predetermined till the assessable value is known.
It is only the permissible deduc tions in concrete monetary terms and amount which are 865 known.
The cum duty paid sale price being available for computation and a known value of deductions permitted being also known, the assessable value and the excise duty as a ratio of the assessable value can be only decided by first deducting the permissible deductions, from the cum duty paid selling price and thereafter computing the value in accord ance with the equation mentioned above.
This has both a legal and a mathematical basis.
If the pre determined amount of excise duty as per the illustration given by MRF Ltd. is first deducted, the equation will not tally.
For example, if from a hypothetical cumduty price of Rs. 150 (comprised of the value of the product at Rs. 100 and ad valorem excise duty@ 50% at Rs.50) if the excise duty of Rs.50 is first deducted and thereafter the permissible deduction of Rs.5 is deducted, the assessable value arrived at would be Rs.95.
The rate of excise duty is 50% and the excise duty @50% of the assessable value of Rs.95 would be Rs.47.50 and not Rs.50 as earlier deducted.
There would be a constant differ ence of Rs.2.50 in the computation.
It is, therefore, an incorrect method of evaluating the assessable value in instances of cum duty selling price.
This interpretation is borne out by the definition contained in Section 4(4)(d) of the Excise Act.
MRF 's contention that the excise duty should be deducted first and then the permissible deductions is incorrect.
In ordinary cases where the factory price is not a cum duty price, the first step in arriving at the assessa ble value is to deduct the permissible deductions and there after to compute the excise on an ad valorem basis.
The excise duty cannot be computed unless the permissible deduc tions are first made.
The assessable value is arrived at only after the permissible deductions are made.
Excise duty is a ratio of the assessable value.
Ad valorem excise duty is computed only on assessable value after arriving at such assessable value by making proper permissible deductions.
Excise duty cannot be computed without proper determination of the assessable value, namely assessable value exclusive of permissible deductions.
Even in the cum duty sale price, the same principle must be followed to arrive at the assess able value.
To compute an excise duty as a pre determined amount without making the permissible deductions for reduc ing the cum duty selling price is a fallacy both legally and mathematically as demonstrated above.
The ad valorem excise duty can only be computed after reducing the assessable value by permissible deductions and then applying the tariff rate to the assessable value.
To reverse this sequence is to mis interpret the scheme and mode of levy of excise duty on the assessable value.
In the light of our aforesaid discussions and keep ing in line with our previous format orders, we direct the assessing authorities to 866 quantify and re determine the permissible deductions in accordance with our present Judgment.
The assessee, MRF Ltd. already having been required to file the permissible deduc tions/amendments to the price lists within a period of one month in the last instance in May 1984 is once again re quired by us to file fresh price lists in the light of our present Judgment within one month for all the periods under consideration.
The assessing authorities after hearing the assessee would quantify the correct assessable value in the light of our Judgment.
In making the assessments for each of the periods, the authorities would include the set off in respect of further refunds, if any, allowable on account of fresh deductions permitted and/or already allowed to the assessee.
MRF would be at liberty to obtain suitable direc tions in the pending Writ Appeal No. 590 of 1979 in the High Court of Madras in accordance with our Judgment.
We leave the parties to bear their own costs.
ORDER In respect of items claimed by the assessee which have been allowed by us in this judgment or where the allowance by Assistant Collector has been upheld the quantum will be adjusted by giving appropriate credit in the personal Ledger Accounts.
P.S.S. Appeals dis posed of.
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In Union of India vs Bombay Tyres International Ltd., ; , this Court held that under s.4 of the Central Excise and Salt Act, 1944, only those expenses which were incurred on account of factors contributing to the product 's value upto the date of sale or the date of deliv ery at the factory.
gate were liable to be included in the assessable value.
On November 14/15, 1983 the Court made a clarificatory order wherein it was stated that discounts allowed in the trade (by whatever name called) should be allowed to be deducted from the sale price having regard to the nature of the goods, if established under agreements or under terms of sale or by established practice, and that such allowance and the nature of discount should be known at or prior to the removal of the goods and should not be disallowed only because they were not payable at the time of each invoice or deducted from the invoice price.
The respondent Rubber Factory claimed various deductions of the nature of post manufacturing expenses for determining the assessable value of their products under s.4 of the Act which were disallowed 847 by the Excise authorities.
Its writ petitions were, however, allowed by the High Court.
In appeals by the Union of India for setting aside the High Court judgment it was contended for the respondent: (a) that the TAC/ Warranty discount, which was sought to be deducted for determining the assessable value, satisfied all the criteria of a trade discount stipulated in the clarifi catory order; (b) that the claim for deduction of product discounts prompt payment discount, year ending discount and campaign discount was justified on the same reasoning; (c) that the interest on finished goods from the date the stocks were cleared till the date of sale was a proper deduction for determination of the assessable value; (d) that the claim for deduction of interest on receivables (sundry debtors for sales) was justified on the ground that this cost was inbuilt in the price and was incurred on account of the time factor between the delivery of goods and realisa tion of moneys; (e) that the overriding commission allowed to the Hindustan Petroleum Corporation for exclusive sale of company 's products through their dealer net work was also of the nature of a discount; (f) that the cost of distribution at the duty paid sales depot was a proper deduction; (g) that the difference between the lower price at which the product was sold to the Government and the price charged from ordinary dealer was of the nature of a discount; (h) that the claim for deduction of special secondary packaging charges squarely falls within s.4(4)(d)(i) of the Act, and (i) that the company was entitled to the deduction of excise duty paid on processed typecord under s.4(4)(d)(ii).
The respondents also disputed the method of computation of 'assessable value ' in a cure duty price at a factory gate sale and contended that such value was to be arrived at by first deducting the predetermined excise duty added to the factory price and only thereafter the permissible deductions were to be deducted.
Disposing of the appeals, the Court, HELD: 1.1 The respondent company is not entitled to the deduction of TAC/Warranty discount for determining assessa ble value of tyres since it does not come within s.4(4)(d)(ii) of the Central Excise and Salt Act, 1944.
[856H, 857A, 855H] 1.2 Even though giving of TAC/Warranty is established by practice for the wholesale trade or capable of being decid ed, what is really relevant is the nature of the traction.
It is not a discount on the 848 tyres already sold, but relate to the goods which are being subsequently sold to the same customers.
It is in the nature of a benefit given to the customers by way of compensation for the loss suffered by them in the previous sale.
[8S6B] 1.3 A trade discount of any nature could be allowed to be deducted provided it is known at or prior to the removal of the goods.
In the instant case, this condition precedent is not satisfied as the committee decided the claim for TAC/Warranty subsequent to the removal of the tyre.
[856C] 1.4 The analogy of Rule 96 of the Central Excise Rules, 1944 relating to abatement of duty of defective tyres cannot be made applicable to justify the claim for deduction of the TAC/Warranty discount.
A tyre being sold as a "seconds" or "defective" would be sold at a discount, such discount being known before the goods were removed/cleared, thereby also satisfying the pre condition of s.4(4)(d,(ii) of the Excise Act.
The assessable vase and price list submitted would be one relating the 'seconds ' tyres.
[856G] Union of India vs Bombay Tyres International Ltd., [1984] 17 ELT 329, referred to.
2.1 The respondent is entitled to deduction of 'prompt payment discount ' which is a 'trade discount ' given to the dealers by the company.
It is established under the terms of sale or by established practice and is known at or prior to the removal of the goods [857E F] 2.2 The company is not entitled to deduction of the 'year ending discount '.
The allowance of the discount is not known at or prior to the removal of the goods.
The calcula tions are made at the end of the year and the bonus at the said rate is granted only to a particular class of dealers.
This is computed after taking stock of the accounts between the company and its dealers.
It is not in the nature of a discount but in the nature of a bonus or an incentive much after the invoice is raised and the removal of the goods is complete.
[857G 858A] 2.3 The campaign bonus cannot be a permitted deduction to the company.
The allowance of the discount is not known at or prior to the removal of the goods.
The qnantum is unascertained at the point of removal.
The discount is not on the wholesale cash price of the articles sold but is based an the total sales effected of a particular variety of tyre calculated after the removal.
[858D] 849 3.1 Expenses incurred on account of several factors which have contributed to the product 's value upto the date of sale, which apparently would he the date of delivery at the factory gate, are liable to he included in the assessa ble value.
[858F] 3.2 The company was justified in claiming deduction of interest an finished goods until they were sold and deliv ered at the factory gate.
But interest on finished goods from the date of delivery at the factory gate up to the date of delivery from the sales depot would be an expense in curred after the date of removal from the factory gate and it would, therefore, not he liable to he included since it would add to the value of the goods after the date of remov al from the factory gate.
[858G H] Union of India vs Bombay Tyres International Ltd., ; , referred to.
The interest cost and expenses on sundry debtors or interest on receivables is an expense subsequent to the date of sale and removal or delivery of goods and, therefore, the company would not he eligible to claim deduction on this account.
[859H] 5.
The overriding commission paid by the company to the Hindustan Petroleum Corporation for sale of their products exclusively through HPC dealer network is not deductible.
It was agreed to in consideration of the COrporation not agree ing to enter upon agreement with any other tyre manufactur ing company vis a vis by reason of the respondent undertaking not to enter upon any agreement with any other oil company.
It is a compensation granted for the sale of company 's products through HPC dealers and is a commission for services rendered by the agent.
It is not a discount known at or prior to the removal of the goods.
[859A C] 6.
The cost of distribution incurred at the duty paid sales depots is not to he included in the assessable value in case the wholesale dealers take delivery of the goods from outside such godown.
The wholesale dealers having taken delivery of the goods manufactured by the company and there being a removal of the goods from the factory gate, the cost of distribution at duty paid sales depots cannot he taken into account for the purpose of determining the assessable value of the goods.
[859H 860A] Union of India & Ors.
vs Duphar Interfram Ltd., , referred to.
850 7.
Merely because the product is sold at a lower price to the Government it cannot be said that the difference in price with reference to an ordinary dealer and the Govern ment is a discount to the Government.
The position that there can be different price lists of articles of similar description sold to different classes of dealers or differ ent classes of buyers in wholesale is specifically recog nised under s.4(1)(a), proviso (1) of the Act.
The lower price for the Government constitutes a normal price for it as a class of buyer and no deduction on this head is liable to the company for the purpose of determination of the assessable value of the article.
[860D, C, E] 8.1 Section 4(4)(d)(i) of the Act read with the Explana tion thereto makes it apparent that the 'secondary packag ing ' done for the purpose of facilitating transport and smooth transit of the goods to be delivered to the buyer in the wholesale trade cannot be included in the value for the purpose of assessment of excise duty.
If a packaging is not necessary for the sale of the product in the wholesale market at the factory gate, the same cannot be included in the value for the purpose of assessment of excise duty.
[860 FG] 8.2 In the instant case, the secondary packaging for tread rubber consists of cardboard cartons and wooden cases.
This secondary packing is not employed merely for the pur pose of facilitating transport or smooth transit but is necessary for selling the tread rubber in the wholesale trade.
The cost of these cardboard cartons and wooden cases or any other special secondary charges incurred by the company on tread rubber could not, therefore, be excluded from its assessable value.
[861A, D, E F] Union of India & Ors.
vs Godfrey Philips India Ltd., and Bombay Tyres International Ltd. vs Union of India & Ors., Bombay High Court M.P. No. 1534 of 1979 decided an January 7, 1986, referred to.
The company is eligible for deduction from selling price of tyre of excise duty paid on processed tyre cord.
This is in accord with s.4(4)(d)(ii) of new s.4 of the Act.
[862F G] 10.1 The assessment of excise duty both in relation to s.4 and in relation to the Valuation Rules is now subject to the definition contained in s.4(4)(d) of the Act.
The 'va lue ' as defined thereunder is to be arrived at after the cost of packaging of a durable nature or a returnable nature as also amounts of duty of excise, sales tax and other taxes and trade 851 discount allowed in accordance with the normal practice of wholesale trade is determined.
It is implicit that no excise duty is payable on an element of excise duty in the price.
The value as contemplated under s.4 cannot include a compo nent of excise duty.
[863AB] 10.2 The aggregate of the assessable value, the permis sible deduction and the excise duty is equal to the selling price (cure duty paid).
The excise duty is only known as a ratio of the assessable value when an ad valorem duty is included in the cure duty paid selling price.
The quantum of excise duty cannot be pre deducted or pre determined till the assessable value is known.
It is only the permissible deductions in concrete monetary terms and amount which are known.
The cum duty paid sale price being available for computation and the value of deduction permitted being also known, the assessable value and the excise duty as a ratio of the assessable value can be only found by first deducting the permissible deductions from the cum duty paid selling price and thereafter computing the value by dividing the difference by (1 +rate of excise duty).
This method has both a legal and mathematical basis.
To reverse this sequence is to mis interpret the scheme and the mode of levy of excise duty on the assessable value.
[864E G, 865B, 865G] 10.3 Where the factory price is not a cure duty price, the first step in arriving at the assessable value is to deduct the permissible deductions and thereafter to compute the excise on an ad valorem basis by applying the tariff rate to the assessable value.
[865D]
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5379.txt
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Civil Appeal No. 1800 of 1968 From the Judgment and order dated 20 10 1967 of the Delhi High Court in Civil Writ No. 1376 of 1967.
section N. Kacker, Sol.
Genl., section N. Anand and R. N. Sachthey for the Appellant.
V. M. Tarkunde and Gautam Goswami for Respondent No. 1.
Yogeshwar Prasad and (Mrs.) Rani Chhabra for the Interveners.
Ex parte against Respondents Nos. 2 and 3.
72 The Judgment of the Court was delivered by KOSHAL, J.
The facts giving rise to this appeal by the Delhi Administration on certificate granted by the High Court of Delhi against its judgment dated the 20th October 1967 in a petition under articles 226 and 227 of the Constitution of India (Civil Writ Petition No. 1376/ 67) are not in dispute and may be briefly stated.
The Governments of the States of Punjab and Delhi entered into an agreement about 3() years back providing for the running of public service vehicles in routes which covered each of the two States so that every one of such routes had one terminus in one of the States and the other in the other.
In pursuance of the agreement one of the Governments would issue permits under the (hereinafter referred to as the Act) and the same would be counter signed by the other State before the former plied its buses on the routes covered by such permits.
One such permit related to the Delhi Karnal route and was countersigned by the State Transport Authority Delhi in the following terms: "Countersigned for the portion of the route Delhi Karnal from 31 7 1967 to 30 11 1967 subject to the condition that tickets will be issued for the destinations bet wen Delhi and Karnal.
Destination board should be exhibited.
Bus will cover the full route and all other conditions applicable under Motor Vehicle Laws.
" Other permits for the Delhi Karnal route and other interstate routes were counter signed in the same terms.
The routes above mentioned were extended by the Punjab State authorities under permits granted by them for intra State routes connecting different towns in the State of Punjab itself.
Thus a permit was issued in favour of the Punjab roadways for the route from Karnal to Chandigarh so that the bus operating on the Delhi Karnal route would carry passengers from Delhi to Chandigarh via Karnal.
On the 25th July 1956, officers of the two States came to an agreement whereby the State of Punjab was given the right to extend its services on inter State routes to any town in the State of Punjab.
This agreement was subject to ratification by the Governments of the Two States, which`was, however, never accorded.
In the year 1966, the State of Delhi objected to the exploitation by the State of Punjab of the inter State routes in the manner above stated, that is, by extending them beyond the termini specified in that behalf under the counter signatures made by the State of Delhi and approached the Inter State Transport Commission (hereinafter called the commissions) constituted under sub section (1) of Section 63A of the Act with 73 a request for interference.
After hearing counsel for the two States the Commission passed an order dated 27th August, 1966, in favour of the State of Delhi. 'the operative part of that order alongwith the reasons listed by the Commission in support of it is extracted below: "Section 48(2) of the , prescribes that every stage carriage permit shall be expressed to B. be valid only for a specified route or routes of for a specified area.
It appears, therefore, that if a permit is expressed to be valid only for the one specified inter State route, the same transport vehicle covered by the same inter State permit can not be allowed to proceed further to another route with liberty to pick up passengers in route on a second route, which is C: an intra State route, as this would be in violation of the provisions of the Act.
There is no objection to the same vehicle running on another route under a different permit, but it would be objectionable if passengers who embark on the route covered by the inter State permit are given direct tickets to any town on the second route for which the vehicle holds on intra State permit.
The issue of scull a direct ticket would amount to extending the span to the inter State route, which is not permissible under the .
In other words, there can be no objecting to the linking of the two routes but this linking should not involve boarding of direct passengers, i.e., those holding one ticket for travel over both the routes on either of the two routes.
"On a careful consideration of the provisions of the , the Commission advise under Section 63A(2) (b) of the , that it would not be in order if one vehicle operating on two permits for two routes were to book direct passengers travelling on both the routes on direct tickets for places on both the routes.
Operations which would contravene this advice should be stopped and the services be so regulated to ensure that the provisions of the are not violated " The State of Punjab went up in appeal to the Inter State Trans port Appellant Tribunal (hereinafter called the 'Tribunal) under rule 24 of the Inter State Transport Commission Rules, 1960.
That appeal was dismissed on the 4th July 1967 through an order, paragraph 3 to 7 of which may be re produced for facility of reference: "3.
The learned counsel for the Delhi Administration replied that the issue of tickets was a condition of a permit under Section 48(3) (xiv) of the .
The 6 520SCI/78 74 inter State permit from Delhi to Karnal was, therefore, subject to the condition that tickets bearing specified particulars shall be issued to passengers and shall show the fares actually charged.
This must be construed to mean that the ticket which is issued as a condition attaching to a single permit would be restricted to the route or routes covered by that permit.
As the inter State route alone is covered by the permit which is countersigned by the Delhi Administration, the said permit would require the issue of a ticket only on the Delhi Karnal route but not beyond.
We think that the contention of the Delhi Administration is further supported by Section 42(1) of the under which no owner of a "transport vehicle" (which includes a stage carriage) shall use the vehicle in any public place, save in accordance with the conditions of a permit granted or countersigned by a Regional or a State Transport Authority authorising the use of the vehicle in that place in the manner in which the vehicle is being used.
The vehicle starting from Delhi on the Delhi Karnal route would be governed by the conditions of the inter State permit countersigned by the Delhi Administration.
The use of the vehicle at Delhi or, for the matter of that, at any place on the inter State route, must be governed by the conditions of the inter State permit alone.
We have already construed session 48(3) (xiv) to mean that the tickets which must be issued as a condition of the permit must relate to the route or routes or area covered by that permit.
It would follow therefore that tickets to be issued from Delhi could not be for any place which was beyond Karnal and, therefore, not covered by the inter State permit.
Learned Counsel for the Government of Punjab submitted that the Delhi Administration has countersigned only the inter State route covered by a permit issued by the Government of Punjab with the knowledge that the same permit was valid floor a further intra State route also.
however, cannot mean that the Delhi Administration are estopped from contending that under the conditions of the inter State permit, a ticket for a place beyond the Inter State route cannot be issued.
From the point of view of the convenience of the passengers, we would have liked the vehicle starting from Delhi to issue a long distance ticket to a place even beyond 75 Karnal so that the passengers starting from Delhi could A be assured of reaching their destination beyond Karnal.
Unfortunately, the attainment of this objective has been fettered by the existing provisions of the referred to above.
For the above reasons, therefore, we are of the view that the advice given by the Inter State Transport Commission was, on the whole, correct, though we have taken the liberty of adding to the reasons on which the advice could be supported.
The appeal is, therefore, dismissed." This order of the Tribunal was challenged by the State of Haryana (which had been carved out of the erstwhile State of Punjab in the meantime) in the petition under Articles 226 and 227 of the Constitution of India which we have mentioned above and which has been accepted by a Division Bench of the High Court of Delhi.
The High Court took note of the various provisions of the Act and concluded that there was no warrant for the proposition that tickets could not be issued at Delhi for stations beyond Karnal by the Haryana Roadways for a bus operating under a permit in respect of the Delhi Karnal route and that the Commission and the Tribunal had both erred in holding to the contrary.
The High Court observed that under clause (xiv) of sub section (3) of Section 48 of the Act, the Delhi State could impose conditions subject to which its countersignature in relation to a permit covering an inter state route was to be valid, but added that such.
conditions could only be those which were covered by that clause and no others.
It further found that no condition preventing the permit holder from issuing a direct ticket from Delhi to Chandigarh via Karnal was ever imposed by the State Transport Authority, Delhi, and also that such a condition could not be imposed inasmuch as (a) the same would not be relatable to the inter State route and (b) it would not be covered by clause (xiv) aforesaid.
It turned down a plea that the issuance of tickets from Delhi to Chandigarh by the Haryana Roadways affected the identity of the Delhi karnal route or amounted to its extension.
In the result, therefore, the High Court issued a writ of certiorari quashing the orders of the Commission and the Tribunal and restrained the Delhi Administration from interfering with the operation of the Stage carriages of the State of Haryana on the Delhi Haryana inter state routes on the plea that the issue of direct tickets beyond the terminal stations in Haryana on those routes was prohibited either by the provisions of the Act or by any condition attached by the State Transport Authority, Delhi.
Before us, the contentions raised on behalf of the appellant are: (1) The Regional Transport Authority, Delhi, had the power under sub sec.
(2) of Sec. 63 read with clause (xiv) above mentioned to impose, while according its counter signature to a permit relating to an inter State route, a condition to the effect that tickets shall not be issued for any station beyond the two specified termini and such a condition could be spelt out of the counter signature above extracted by necessary implication.
(2) The counter signatures covered only inter State routes having specified termini and the issuance of tickets by the Haryana Roadways for stations beyond the terminus located in the Haryana State and specified in a particular permit (which has been countersigned by the Delhi State authorities) amounted to an extension of the route which the Act did not permit.
We find no force in either of these contentions for the reasons which follow and which are substantially the same as advanced by the High Court in the detailed judgment under appeal.
Sub section (2) of Section 63 of the Act states: "(2) A Regional Transport authority when countersigning the permit may attach to the permit any condition which it might have imposed if it has granted The 'permit, .
and may likewise vary any condition attached to the permit by the Authority by which the permit was granted.
" The conditions which a Regional Transport Authority may attach to a permit while granting it are contained in clause (xiv) above mentioned which runs thus: (xiv) that tickers bearing specified particulars shall be is sued to passengers and shall show the fares actually charged and that records of tickets, issued shall he kept in a specified manner;" According to this clause, the conditions attached to the grant of a permit may be (a) that the tickets issued to passengers shall bear specified particulars; 77 (b) that the tickets shall show the fares actually charged; A and (c) that records of the tickets issue(l shall be kept in the manner specified.
None of these conditions embraces a restriction on the permit holder that he shall not ply his vehicle beyond the specified inter state route even if that is done under another permit which is valid according to law, and we, therefore, do not see how clause (vix) as above extracted read with sub sec.
(2) of section 63 of the Act helps the case of the appellant.
Nor can we agree with the plea that the counter signature above extracted could be construed as laying down a condition that the permit holder could not ply his vehicle beyond the specified terminus in the State of Haryana.
Learned counsel for the appellant has laid emphasis on the words "Tickets will be issued for the destinations between Delhi and Karnal.
Destination boards should be exhibited," and wants us to interpret them as implying a prohibition on the use of the concerned vehicles beyond Karnal.
We are of the opinion, however, that no such interpretation can be placed on them.
They merely lay down positive instructions which the permit holder had to carry out, namely, that he would not refuse the issue of a ticket between the two termini, i.e., Delhi and Karnal, and that he would also exhibit a board stating that the vehicle in question would cover the route from Delhi to Karnal.
Beyond that the words do not go and cannot be construed to mean that the vehicle could not ply beyond p Karnal or that a board saying that it was going to Chandigarh via Karnal cloud not be exhibited, or that tickets could not be issued for any stations except those lying between Delhi and Karnal.
In fact, the authority counter signing the permit had no concern at all with any route beyond Karnal.
The playing J of the vehicle from Karnal to Chandigarh would be governed not by the permit covering the Delhi Karnal route or by the counter signature on it but by another permit issued by the authority competent to deal with the route between Karnal and Chandigarh.
The first contention raised on behalf of the appellant is, therefore, found to be without substance.
We also find no force in the plea that the plying of vehicles by the Haryana Roadways beyond the inter State route under valid permits issued by the competent authority would amount to an 78 "extension" of the route such as is prohibited by the Act.
Reliance in support of the plea was placed on sub section
(8) of section 57 of the Act which lays down: "(8) An application to vary the conditions of any permit, other than a temporary permit, by the inclusion of Ba new route or routes or a new area or, in the case of a stage carriage permit, by increasing the number of trips above the specified maximum or by altering the route covered by it or in the case of a contract carriage permit or a public carrier 's permit, by increasing the number of vehicles covered by the Permit, shall be treated as an application for the grant of a new permit: Provided that it shall not be necessary so to treat an application made by the holder of a stage carriage permit who provides the only service on any route Or in any area to increase the frequency of the service so provided, without any increase in me number of vehicles.
" As pointed out by the High Court, the language of the sub section applies only to a case where the permit holder applies for the variation of the conditions of his permit by inclusion of a new route or routes or a new area or by increasing the number of services above the specified maximum.
In the case before us this situation does not arise at all inasmuch as the Haryana Roadways has not applied for the variation of any permit in any way and has, on the other hand, taken and exploited quite another permit for an entirely different route from another competent authority.
Apart from sub sec.
(8) above mentioned, we have not been referred to any provision of the Act in support of the plea under consideration which, therefore, fails.
Learned Counsel for the appellant drew our attention to a Possible unfortunate situation which might result from the conclusions which the High Court has reached and, in our opinion, reached rightly.
His apprehension was that in order to make more money and to avoid inconvenience to itself the Haryana Roadways, while operating under the permit pertaining to the Delhi Karnal route, would perhaps not issue any tickets to passengers bound for stations lying II in between Delhi and Karnal so long as it could find customers travelling directly from Delhi to Chandigarh and that in that event the real purpose of the counter signature would be wholly defeated.
We 79 would certainly not approve of such a situation but then it is nobody 's A case that the Haryana Roadways has been plying its buses on the Delhi Chandigarh route or, for that matter, any other route, in that fashion.
However, we may make it clear that if any long distance passengers are given preference over those leaving Delhi for a station lying between the termini specified in any permit bearing the countersignature of the Delhi State authorities, a peremptory condition attach ed to the counter signature would have been violated, and that State would be entitled to take such action as may be open to it under the law.
subject to this observation, the appeal fails and is dismissed, but with no order as to costs.
S.R. Appeal dismissed.
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The Governments of the States of Punjab and Delhi entered into an agreement about 30 years back providing for the running of public service vehicles on routes which covered each of the two States so that every one of such routes had one terminus in one of the States and the other in the other.
In Pursuance of the agreement one of the Governments would issue permits under the and the same would be countersigned by the other State before the former plied its buses on the routes covered by such routes.
One such permit related to the Delhi Karnal route and was countersigned by the State 'Transport Authority, Delhi.
The routes were extend d by the Punjab State authorities under permits granted by them for intra state routes connecting different towns in the State of Punjab itself.
Thus a permit was issued in favour of the Punjab Roadways for the route from Karnal to Chandigarh so that the bus operating on the Delhi Karnal route would carry passengers from Delhi to Chandigarh via Karnal.
In 1966, the appellant objected to the exploitation by the State of Punjab of the inter State routes in the manner above stated, that is, by extending them beyond the termini specified in That behalf under the counter signatures made by the State of Delhi, and approached the Inter State Transport Commission constituted under section 63 A of M.V. Act With a request for interference.
The Commission answered it in favour of the appellant State, and held that it would not be in order that if one vehicle operating of two permits for two routes were to book direct passengers travelling on both the routes.
Operations which would contravene this advice should be stopped and the services be so regulated to ensure that the provisions of the are not violated".
The State of Punjab went up in appellate to the Inter State Transport Appellate Tribunal under rule 24 of the Inter State Transport Commission Rules 1960.
The appeal was dismissed and the respondent State filed a writ petition in the Delhi High Court which was allowed by the Division Bench.
Dismissing the appeal by certificate the Court, ^ HELD: (1) According to clause (xiv) of sub section (3) of section 48 of the Motor Vehicles Act, 1959, the conditions attached to the grant of permit, under section 63(2) ibid, may be; (a) that the tickets issued to passengers, shall bear specified particulars; (b) that the tickets shall show the fares actually charged; and (C) that records of the tickets issued shall be kept in the manner specified.
None of these conditions embraces a restriction on the permit holder that he shall not ply his vehicles beyond the specified inter state route even if that is done under another permit which is valid according to law and, therefore, clause (xiv) of section 48(3) read with section 63(2) of the Act will be of no avail.
[76H, 77A C] 71 (2) 'The words "Tickets will be issued for the destinations between Delhi and Karnal.
Destination boards should be exhibited" merely lay down positive instruction which the permit holder had to carry out, namely, that he would not refuse the issue of a ticket between the two termini, i.e, Delhi and Karnal.
and that he would also exhibit a board stating that the vehicle in question would cover the route from Delhi to Karnal.
Beyond that the words do not go and cannot be construed to mean that the vehicle could not ply beyond Karnal or that a board saying, that it was going to Canceling via Karnal could not be exhibited, or that tickets could not be issued for any stations except those lying between Delhi and Karnal.
In fact, the authority counter signing the permit had no concern at all with any route beyond Karnal.
The plying to the vehicle from Karnal to Chandigarh would be governed not by the permit covering the Delhi Karnal route or by the counter signature on it by another permit issued by the authority competent to deal with the route between Karnal and Chandigarh.
[77D H] (3) The plying of vehicles by the Haryana,.
Roadways beyond the inter state route.
under valid permits issued by the competent authority does not amount to an "extension" of the route such as is prohibited by the Act.
[77H. 78A] The language of sub section (8) of section 57 of the Act applies only to a case Where the permit holder applies for variation of the conditions of his permit by inclusion of a new route or routes or a new area or by increasing the number of services above the specified maximum In the instant case, this situation does not arise at all inasmuch as the Haryana.
Roadways has not applied for The vacation of any permit in any way and has, on the other hand, taken and exploited quite another permit for an entirely different rout from another competent authority.
[78E F] OBSERVATlON: [If any long distance passengers arc given preference over those leaving Delhi for a station Lying between the termini; specified in any permit bearing the counter signature of the Delhi state authorities.
a peremptory condition attached to the counter signature would have been violated and that State would l be entitled to take such action as may be open to it under the law].
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3855.txt
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: Criminal Appeal Nos. 380 of 1989 and 323 of 1988.
From the Judgment and Order dated 28.1.1988 of the Allahabad High Court in Crl.
Appln.
No. 995 of 1987.
G. Ramaswamy, Additional Solicitor General, Anil Dev Singh, Miss A. Subhashini and R.P. Kapur for the Appellants.
R.L. Kohli, Manoj Saxena and R.D. Upadhyay for the Respondents.
The Judgment of the Court was delivered by DUTT, J.
These two appeals by special leave, one pre ferred by the State of U .P. and the other by the State Bank of India, are directed against the judgment of the Allahabad High Court whereby the High Court has quashed the criminal proceedings being Crime Case No. 40 of 1983 in the Court of Special Judge, Anti Corruption, only as against the respond ent R.K. Srivastava.
In quashing the proceedings in the exercise of its jurisdiction under section 482 Cr.
P.C., the High Court took the view that allegations made in the First Information Report 836 (FIR) did not constitute any offence.
In order to appreciate the view of the High Court, it is necessary to refer to the FIR which reads as follows: "An information has been received that Shri P.C. Saxena and Shri Ram Kumar Srivastava while posted and functioning as Accountant and Clerk cum Godown Keeper in the State Bank of India, Agriculture Development Branch, Budaun, respectively entered into a criminal conspira cy with Shri Sarwant Singh and his wife Smt.
Rajwant Kaur, Props.
of M/s. National Mill Store, Budaun, during the month of June, 1982 to cheat the State Bank of India, Budaun, and in pursuance of the said criminal conspiracy an.amount of Rs.54,600 ' was withdrawn on the basis of false credit entry made in the books of accounts of the Bank and connected credit and debit vouchers were also prepared and passed by the accused employees of the Bank and payment were made to the accused persons, namely, Shri Sarwant Singh and Smt.
Rajwant Kaur who tendered cheque No. 348459 dated 2.5.
1982 for Rs.18,600 cheque No. 348482 for Rs. 19,200, date 2.6.
1982 and cheque No. 502206 dated 2.6.82 for Rs. 16,800 = 54,600.
The above facts constitute offence punishable u/s 120 B, 420, 468,471 I.P.C. and 5(2) r/w 5(1)(d) of PC Act, 1947.
A regular case is therefore regis tered and its investigation is entrusted to Shri V.P. Arya, Inspector of this establish ment." According to the FIR, as against three cheques of the aggre gate amount of Rs.54,600, presumably of three different Banks, a credit entry was made in the accounts of M/s. National Mill Stores Co., Budaun, and M/s. New Manufacturing Co., Budaun, and their partners, Sardar Sarwant Singh and his wife Smt.
Rajwant Kaur, in the State Bank of India and the said sum of Rs.54,600 was allowed to be withdrawn by them by the respondent and the accused P.C. Saxena.
The allegations in the FIR appear to be vague and al though it is alleged that the respondent and the accused P.C. Saxena made false credit entries in the books of ac counts of the Bank and connected credit and debit vouchers were also prepared and passed by them, no 837 particulars of the same have been given.
It appears from the chargesheet that the said Shri Sarwant Singh and his wife Smt.
Rajwant Kaur and their firms, namely, M/s. National Mill Stores Co., Budaun, and M/s. New ManufaCturing Co., Budaun, have current accounts in the State Bank of India, Budaun.
After the said three cheques amounting to Rs.54,600 were tendered, the respondent and the accused P.C. Saxena sent the said cheques for clearance and allowed the said Shri Sarwant Singh and his wife Smt.
Rajwant Kaur to with draw the sum of Rs. 54,600 from their current account.
It is now a well settled principle of law that if the allegations made in the FIR are taken at their face value and accepted in their entirety do not constitute an offence, the criminal proceedings instituted on the basis of such FIR should be quashed.
In the instant case, on the basis of the said FIR the respondent and the said P.C. Saxena and Shri Sarwant Singh were charged under sections 120 B, 420, 468 and 471 I.P.C. and section 5(2) read with section 5(1)(d) of the Prevention of Corruption Act, 1947.
According to the appellant, as no prima facie case was made out against Smt.
Rajwant Kaur, wife of Shri Sarwant Singh, she has been dropped from the array of the accused persons.
The question is whether the facts disclosed in the FIR constitute the offences with which the accused have been charged.
It is manifestly clear from the allegations in the FIR that the respondent or the other accused had no inten tion whatsoever to make any wrongful gain or to make any wrongful loss to the Bank.
They had accepted the said three cheques amounting to Rs.54,600 and sent the same for clear ance after debiting the LOC account.
The said cheques have been encashed and the money was received by the State Bank of India.
It may be that there was some delay in crediting the LOC account or that the money against the three cheques were credited in the accounts of the said Shri Sarwant Singh and his wife, but the allegations made either in the FIR or in the charge sheet do not show that the respondent and the said P.C. Saxena had acted dishonestly, that is to say, acted with a deliberate intention to cause wrongful gain or wrongful loss.
In our opinion, the High Court has rightly held that the allegations made in the FIR do not constitute any offence of cheating, nor do they constitute any offence of forgery.
It is true that it has been alleged that the said sum of Rs.54,600 was withdrawn on the basis of false credit entries made in the books of accounts of the Bank and connected credit and debit vouchers were also prepared and passed by the respondent and the other accused.
When the said sum of Rs.54,600 838 had been allowed to be withdrawn by the said Shri Sarwant Singh and his wife, necessary entries had to be made in the books of accounts, but it is not understandable how these entries can be characterised as false entries.
No document has been referred to in the FIR as the outcome of forgery.
The High Court has rightly held that as the criminal proceedings have been started against the respondent on the basis of a FIR which does not contain any definite accusa tion, it amounts to an abuse of process of the court and, as such, is liable to be quashed.
We entirely agree with the view expressed by the High Court.
The High Court has quashed the proceedings only as against the respondent No. 1, R.K. Srivastava.
In our opin ion, when the allegations in the FIR are the same against all the accused persons, the entire proceedings as against all the accused persons including the said P.C. Saxena and the said Shri Satwant Singh should be quashed.
Accordingly, while we uphold the judgment of the High Court, we quash the entire criminal proceedings being Crime Case No. 40 of 1983 also as against the accused P.C. Saxena and Shri Sarwant Singh.
The appeals are disposed of as above.
N.P.V. Appeals disposed of.
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The respondents, two employees of a nationalised Bank and two account holders, were charged with offences punisha ble under Sections 120B, 420, 468, 471 I.P.C. and 5(2) read with Section 5(1)(d) of the Prevention of Corruption Act, 1947.
The F.I.R. alleged that the two Bank employees entered into a criminal conspiracy with the two account holders to cheat the Bank and, in pursuance thereof an amount of Rs.54,600 was allowed to be withdrawn by the account hold ers, who had tendered three cheques aggregating to Rs.54,600, on the basis of the false credit entries in the books of accounts of the Bank, and connected credit and debit vouchers were also prepared.
The case against one of the account holders was later dropped.
The High Court quashed the proceedings only against Respondent No. 1 on the ground that the allegations made in the F.I.R. did not constitute any offence of cheating or forgery.
Against this decision, the State as well as the Bank filed appeals in this Court.
Quashing the proceedings against all the respondents, HELD: 1.
If the allegations made in the FIR taken at their face value and accepted in their entirety do not constitute an offence, the criminal proceedings instituted on the basis of such FIR should be quashed.
[837C] In the instant case, the Respondent No. 1 and the other accused had accepted the three cheques in question and sent the same for clearance after debiting the LOC account.
The cheques were encashed and the money was received by the Bank.
It may be that there was some delay in crediting the LOC account or that the money against the three 835 cheques were credited in the accounts of the account hold ers, but the allegations made either in the FIR or in the charge sheet do not show that they had acted dishonestly, or with deliberate intention to cause wrongful gain or wrongful loss to the Bank.
When the amount was allowed to be with drawn by the account holders, necessary entries had to be made in the accounts of the Bank and these entries cannot be characterised as false.
No document has been referred to in the FIR as the outcome of forgery.
[837E F, 838A] The High Court was, therefore, right in holding that the allegations made in the FIR did not constitute any offence of cheating or forgery and that as the criminal proceedings had been started on the basis of a FIR which did not contain any definite accusation and it amounted to an abuse of process of the Court, they were liable to be quashed.
[837G, 838B] Since the allegations in the FIR are the same against all the accused persons, the entire proceedings as against all the accused persons should be quashed.
Accordingly, the entire criminal proceedings are quashed.
[838C]
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6145.txt
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iminal Appeals Nos.
57 and 58 of 1960.
Appeals by special leave from the judgment and order dated November 5/6, 1958, of the Bombay High Court at Nagpur in Criminal Appeal No. 94 of 1958.
Jai Gopal Sethi and G. C. Mathur, for the appellant (in Cr. A. No. 57 of 1960).
G. C. Mathur, for the appellant (in Cr. A. No. 58 of 1960).
Gopal Singh and D. Gupta, for the respondent.
December 5.
The Judgment of the Court was delivered by SUBBA RAO, J.
These two appeals raise rather an important question on the interpretation of the provisions of section 207A of the Criminal Procedure Code (hereinafter referred to as the Code). ' The facts that have given rise to these appeals may be briefly stated.
The appeals arise out of an incident that took place on November 29, 1957, when one Sadashiv was murdered in the courtyard of his house in village Nimgaon.
The case of the prosecution was that the four appellants, armed with sticks, went to the house of the deceased, dragged him 'out of the house and beat him with sticks in the courtyard; and that as a result of the beating he died on the next day at about 5 p.m. at Bhandara Hospital.
After investigation, the police submitted their report to the Magistrate under 'section 173 of the Code along with the relevant documents.
After forwarding the report, the officer in charge of the; police station furnished 892 the appellants with a copy of the report forwarded under sub section
(1) of section 173, the First Information Report recorded under section 154 and all other documents or relevant extracts thereof on which the prosecution proposed to rely, including the statements recorded under sub section (3) of section 161 and also intimated them of the persons the: prosecution proposed to.
examine as its witnesses.
The Magistrate posted the case for inquiry on February 10, 1958 and on that date the prosecution intimated that it did not intend to examine any witnesses in the Magistrate 's Court., , On behalf of the appellants no objection was raised, to,that course.
But the Magistrate adjourned the inquiry to February 12, 1958, as he wanted to consider whether any evidence was necessary to be recorded before commitment.
On February 12, 1958, reexpressed his opinion that no witness need.
be examined at that stage; thereafter, he framed charges against accused appellants under section 302, read with section 34, of the Indian Penal Code, and also under section 448 thereof and committed the appellants to the Sessions Court.
Before the learned Sessions Judge the prosecution led four types of evidence, i.e. (1) eye witnesses, namely, P.Ws. 6, 11, 20 and 25; (2) dying declaration, exhibit P 15, supported by P. Ws. 18,22 and 19; (3) the identification of the appellants in jail by P.Ws. 20 and 25; and (4) recovery of various articles at, the instance of the accused appellants.
The defence examined four witnesses.
On a consideration of the entire evidence, the learned Sessions Judge held that,the prosecution, case had been amply borne out and that the four appellants entered into the house of the deceased and beat him in the manner described by the prosecution wit nesses.
no less than 12 confused wounds were inflicted on the deceased, which resulted in the fracture of his ribs and injury to the lung,.
and as the, doctor opined that the death was due to shock and haemorrhage resulting from said fracture, the learned Sessions Judge hold that the accused appellants were guilty of murder and convicted them under s.302, read with a. 34, Indian Penal Code,and he further convicted them, under section 448 of the Indian 893 Penal Code for trespassing into the house of the deceased.
On these findings the learned Sessions Judge sentenced the appellants to undergo imprisonment for life on the first count and for 3 months rigorous imprisonment on the second count.
The appellants preferred an appeal against their convictions and sentences to the High Court of Bombay at Nagpur.
The learned Judges of the High Court, on a resurvey of the entire evidence, agreeing with the learned Sessions Judge, accepted the prosecution case, but they held that the appellants were guilty only under section 304, Part 1, read with section 34, Indian Penal Code, and in the result they reduced the sentence from life imprisonment to 10 years ' rigorous imprisonment in regard to appellant 1 and to 7 years ' rigorous imprisonment in regard to appellants 2 to 4.
Against the said convictions and sentences, the appellants have preferred, by special leave, appeals to this Court.
Criminal Appeal No. 57 of 1960 has been preferred by the first appellant and Criminal Appeal No. 58 of 1960 by appel lants 2 to 4.
Learned counsel for the appellants raised before us the following two points: (1) The Sessions Court and, on appeal, the High Court have not properly appreciated the evidence and the circumstances of the case in holding that the appellants had committed the offences.
(2) The trial and conviction of the appellants by the Sessions Court were null and void, as the Magistrate had no jurisdiction to commit the appellants to Sessions without examining witnesses under sub section
(4) of section 207A of the Code and that, as the order of 'committal was without jurisdiction, the defect was not cured either under section 532 or section 537 of the Code.
The first question does not merit any consideration.
Both the courts below have, carefully considered the evidence adduced by the prosecution as well as the accused appellants and have accepted the prosecution case.
It is a well established practice of this Court not to interfere on questions of fact, particularly when they are concurrent findings, except under exceptional circumstances.
We find, no such exceptional 894 circumstances in this case.
We, therefore, reject the first contention.
The second contention turns upon the interpretation of the relevant provisions of section 207A of the Code.
Before attempting to construe the relevant provisions of the section it would be helpful to notice briefly the history of the said section.
Under the Criminal Procedure Code, as it originally stood, in the matter of committal proceedings there was no distinction between the proceeding instituated on a police report and that instituted otherwise than on police report.
The main object of the committal proceedings was to hold an inquiry to ascertain and record the case which was to be tried before the Court of Sessions.
It was primarily to give an opportunity to an accused to know in advance the particulars of evidence that would be adduced against him in the Court of Sessions so that he could be in a position to prepare his defence.
Another object, which was no less important, was to enable the Magistrate to discharge an accused if there was no prima facie case against him.
This procedure prevented unnecessary harassment to such accused and at the same time saved the valuable time of the Sessions Court.
In practice the committal proceeding, whether intended by the Legislature or not, served another purpose, namely, it gave an opportunity to the accused to test the credibility of witnesses by bringing out the discrepancies between their evidence in the committing court, the statements made by them to the police under section 161 of the Code and the evidence given by them in the Court of Sessions.
Though very often accused persons took full advantage of this additional opportunity to test the veracity of the witnesses, as often as not, it had turned out to be duplication of trials with the resultants long delays in the disposal of criminal cases.
The advantage of committal proceeding.
was not solely for the accused, for the.
prosecution by examining the witnesses before the committing Magistrate secured their testimony in the sense that though it was tampered subsequenty it is unfortunately a frequent phenomenon in criminal, cases it could use the said evidence as substantive 895 one under section 288 of the Code.
The Legislature, in its wisdom, presumably thought that undue delay in the disposal of sessions cases was due to the elaborate and ' prolonged committal proceedings and stepped in to amend the Code in that respect.
The whole of section 207A has been inserted by Act XXVI of 1955.
While the section simplified the procedure in regard to commitment proceedings instituted on a police report, it confined the existing procedure to proceedings initiated otherwise than on a police report.
This distinc tion between the two classes of cases had a reasonable factual basis.
In the case of a police report, a thorough inquiry would have been made and the investigating officer would have sent a report to the Magistrate under section 173 of the Code.
The amended section 173 of the Code also enjoins on the officer in charge of the police station a duty to furnish before trial, free of cost, to the accused copies of the report forwarded under that section to the Magistrate, the First Information Report recorded under section 154 and all other documents or relevant extracts thereof on which the prosecution proposes to rely, including the statements, if any, recorded under section 164 of the Code and those recorded under sub section
(3) of section 161 and a list of witnesses whom the prosecution proposes to examine as its witnesses.
The Magistrate in a proceeding instituted on police report would ordinarily be in a position, on the said material to understand the case of the prosecution and know the nature of the evidence that would be adduced on the basis of which the accused is sought to be proceeded against.
The accused also would have an opportunity to know beforehand the case he would have to meet and the evidence that would be adduced against him.
But in a proceeding instituted otherwise than on a police report, no such maternal would be available and therefore the old procedure continued to apply to such a case.
With this background let us look at the provisions of section 207A of the Code.
The relevant provisions of section 207A of the Code may now be read: Section 207A: (1) When, in any proceeding instituted on a police report, the Magistrate receives the 896 report forwarded under section 173, he shall, for the purpose of holding an inquiry under this section, fix a date which shall be a date not later than fourteen days from the date of the receipt of the report, unless the Magistrate, for reasons to be recorded, fixes any later date.
If, at any time before such date, the officer conducting the prosecution applies to the Magistrate to issue a process to compel the attendance of any witness or the production of any document or thing, the Magistrate shall issue such process unless, for reasons to be recorded, he deems it unnecessary to do so.
At the commencement of the inquiry, the Magistrate shall, when the accused appears or is brought before him, satisfy himself that the documents referred to in section 173 have been furnished to the accused and if he finds that the accused has not been furnished with such documents or any of them, he shall cause the same to be so furnished.
The Magistrate shall then proceed to take the evidence of such persons, if any, as may be produced by the prosecution as witnesses to the actual commission of the offence alleged, and if the Magistrate is.
of opinion that it is necessary in the interests of justice to take the evidence of any one or more of the other witnesses for the prosecution, he may take such evidence also.
The accused shall be at liberty to cross examine the witnesses examined under sub section (4), and in such case, the prosecutor may re examine them.
(6) When the evidence referred to in sub section (4) has been taken and the Magistrate has considered all the documents referred to in section 173 and has, if necessary, examined the accused for the purpose of enabling him to explain any circumstances appearing in the evidence against him and given the prosecution and the accused an opportunity of being heard, such Magistrate shall, if he is of opinion that such evidence and documents disclose no grounds for committing the accused person for trial, record his reasons ,and discharge him, unless it appears to the Magistrate 897 that such person should be tried before himself or some other Magistrate, in which case he shall proceed, accordingly.
When, upon such evidence being taken, such documents being considered, such examination (if any) being made and the prosecution and the accused being given an opportunity of being heard, the Magistrate is of opinion that the accused should be committed for trial, he shall frame a charge under his hand, declaring with what offence the accused is charged.
On the interpretation, of sub section
(4), which is the main sub section under scrutiny in the present case, the High Courts in India have expressed conflicting views.
It would not be necessary to consider the said decisions in detail, but it would be enough if we state the conflicting views, which areas follow: (1) Under sub section
(4) the prosecution is bound to examine all the eye witnesses indicated in the police report, and the discretion of the Magistrate to examine witnesses under the second part of the said sub section is only in respect of witnesses other than the eye wit nesses: vide M. Pavalappa vs State of Mysore (1), State vs Andi Betankar (2), Ghisa vs State (3 ) and Chandu Satyanarayana vs The State (4).
(2) The Magistrate 's power to examine eye witnesses under the first part of sub section
(4) is confined only to such witnesses as are produced in court by the officer conducting the prosecution and if he has not produced any such witnesses, the Magistrate cannot examine any eye witnesses under the second part of the said sub section, for, according to this view, the second part deals with only witnesses other than eye ,witnesses.
(3) If the prosecution has not produced any eye witnesses the court may not in its discretion examine any witness under the second part, but can, if satisfied, discharge or commit the accused to sessions on the basis of the documents referred to in section 178 of the Code: vide State vs Lakshmi Narain (5), State, of U. P. vs Satyavir (6).
(4) The first part confers a power on a Magistrate only to examine the eyewitnesses produced, but (1) A.I.R. (3) A.I.R. 1919 Raj.
(5) A.I.R. 1960 All. 237.
(2) A.I.R. 1958 Orissa 241.
(4) A.I.R. 1959 A.P.651.
(6) A.I.R. 1959 All.
898 the second part empowers him to examine any witness other than those produced, whether eyewitnesses or not, and in a case where the prosecution failed to discharge its duty to produce any witnesses or any important eye witnesses, the court would not be exercising its judicial discretion if it commits the accused to sessions on the basis of documents referred to under section 173 of the Code without examining at least the important witnesses: vide State vs Yasin (1), In re Pedda Amma Muttigadu (2), A. Ishaque vs The State (3) and Manik Chand vs The State (4).
We have gone through the judgments of the High Courts cited at the Bar and derived considerable assistance from them for deciding the question raised.
But as the question is to be primarily decided on the interpretation of the relevant provisions, we think, without any disrespect to the learned Judges, that it is not necessary to consider the said decisions in detail.
Now let us look at the relevant provisions of section 207A of the Code to ascertain its intendment.
Sub section
(4) is the most important section vis a vis the taking of evidence.
It is in two parts, the first part provides for the examination of witnesses produced by the prosecution and the second part for the examination of other witnesses.
One of the fundamental rules of interpretation is that if the words of a statute are in themselves precise and unambiguous "no more is necessary than, to expound those words in their natural and ordinary sense, the words themselves in such case best declaring the intention of the legislature".
The first part of the sub section reads: "The.
Magistrate shall then proceed to take the evidence of such persons, if any, as may be produced by the prosecution as witnesses to the actual commission of the offence alleged.
" The word "shall" imposes a peremptory duty on the Magistrate to take the evidence; but the nature of the said evidence is clearly defined thereafter.
The clause "as may be produced by the prosecution as witnesses to the actual commission of the offence alleged" governs the words "such persons"; (1) A.I.R. 1958 All.
(3) A.I.R. 1958 Cal.
(2) A.I.R. 1959 A.P. 469.
(4) A.I.R. 1958 Cal.
324. 899 with the result that the duty of the Magistrate to take evidence is only confined to the witnesses produced by the prosecution.
Learned counsel for the appellants contends that it could not have been the intention of the Legislature to permit the prosecution to keep back the eye witnesses in the committal court and therefore the word "produced" should be read as "cited".
To accept this interpretation is to substitute the word "cited" in place of the word "produced": such a construction is not permissible, especially, when the plain meaning of the word used by the Legislature is clear and unambiguous, and the acceptance of that meaning does not make the section otiose.
The phrase "if any" between the words "such persons" and the aforesaid clause emphasizes that the prosecution may not produce any such persons, in which case the obligation to examine such witnesses cannot arise.
The wording of the second part of the sub section is also without any ambiguity and it reads: "and if the Magistrate is of opinion that it is necessary in the interests of justice to take the evidence of any one or more of the other witnesses for the prosecution, he may take such evidence also.
" No doubt the word "may" in the clause "he may take evidence" imposes duty upon the Magistrate to take other evidence; but that duty can arise only if he is of opinion that it is necessary in the interests of justice to take the evidence.
The fulfilment of the condition that gives rise to the duty is left to the discretion of the Magistrate.
The duty to take evidence arises only if he is of the requisite opinion.
Doubtless the discretion being a judicial one, it should be exercised reasonably by the Magistrate.
If he exercises it perversely, it may be liable to be set aside by a superior court.
If so, what do the words "other.
witnesses" mean? Do they mean witnesses other than eyewitnesses or witnesses, eye witnesses or not, other than those produced before the Magistrate, by the prosecution? The witnesses who will depose to the prosecution case may be of different categories, namely, (i) witnesses who are eye witnesses to the actual commission of the offence alleged; (ii) witnesses who speak to the facts 900 which afford a motive for the commission of the offence; (iii) witnesses who speak to the investigation and to the facts unfurled by the investigation; and (iv) witnesses who speak to the circumstances and facts probablizing the commission of the offence, which is technically described as substantive evidence.
Sub section (4) enjoins on the Magistrate a duty to examine the first category of witnesses produced by the prosecution.
The word "actual" qualifying the word "commission" emphasises the fact that the said witnesses should be those who have seen the commission of the offence.
We have held in interpreting the first part that the Magistrate should examine only such witnesses who are produced before him by the prosecution; but there may not be eyewitnesses in a case, or, if there are, the prosecution may not have produced all of them before the Magistrate.
The second part of the sub section therefore confers a discretionary power on the Magistrate to examine any one or more of witnesses of all categories, including the eye witnesses who have not been produced by the prosecution within the meaning of the first part of the said sub section.
But it is said that sub sections
(6) and (7) indicate that taking of evidence by the Magistrate is a condition precedent for making an order of discharge or of committal and, therefore, the provisions of Sub section
(4) must be so construed as to impose a duty on the Magistrate to examine some witnesses.
Firstly, we cannot hold that the sub sections impose any such condition.
The argument is that the clause in subs.
(6), namely, "When the evidence referred to in subsection (4) has been taken" is a condition precedent for making an order of discharge.
The adverb "when" in the clause in the context denotes a point of time and not a condition precedent.
The clause means nothing more than that an order of discharge can be made under sub section (6) after the events mentioned therein have taken place.
Secondly, the two clauses necessarily refer to the corresponding or appropriate situations under the earlier sub sections.
The first clause will not come into play if the Magistrate has not taken any evidence.
So too, in sub section (7) also the 901 adverb "when" denotes the time when the Magistrate can make the order of committal.
If evidence has, not been taken, that sub section is not applicable a the Magistrate proceeds to make an order of committal on other material referred to in the sub section.
On the other hand ', if the said two sub sections are construed as imposing a condition precedent for making an order of discharge or commitment, as the case may be, the said two sub sections will directly, come into conflict with the provisions of sub section
When one.
sub section clearly confers a discretion on the Magistrate to take or not to take evidence, the other subsections take it away.
It is not permissible to create conflict by construction, when by an alternative construction all the three sub sections can be harmonized and reconciled.
If the construction suggested by learned counsel for the appellants be adopted, it would also lead to an anomaly in that the Magistrate, though the documents referred to in section 173 clearly pronounce the innocence of the accused, has to go through the pretence of examining one or more witnesses to satisfy the provisions of the sub section.
Reliance is placed upon section 251A of the Code relating to warrant cases whereunder the Magistrate is authorized, upon consideration of all the documents referred to in section 173 and upon making such examination of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, to discharge the accused, if he considers the charge against the accused to be groundless; but if he is of opinion that there is ground that the accused has committed an offence alleged against him, he shall frame in writing a charge against the accused.
By contrasting this provision with section 207A, it is contended that if the construction put forward by learned counsel is not accepted, the obvious difference between the two.
procedures indicated by the Legislature would be obliterated.
We cannot agree with this contention.
The difference between the two procedures is that, in a case covered by section 207A, evidence will have to be taken under certain 902 contingencies, whereas under section 251A no evidence need be taken at all.
That distinguishes the different procedures under the two sections and it is not the province of the court to add any further conditions or limitations to those provided by the Legislature.
We are fortified in our view by a decision of this Court in Macherla Hanumantha Rao vs The State of Andhra Pradesh (1).
There the point in controversy was whether sa.
207 and 207A, inserted in the Code by the Amending Act XXVI of 1955, violated the provisions of article 14 of the Constitution.
In support of the contention that they violated article 14 of the Constitution, it was sought to be made out that the provisions of section 207A of the Code, in comparison and contrast with other provisions of Ch.
XVIII of the Code, prescribed a less advantageous position for the accused persons in a proceeding started under a police report than the procedure prescribed in other cases in the succeeding provisions of that chapter.
This Court held that there was a reasonable classification to support the difference in the procedures.
Sinha J., as he then was, who spoke for the Court, in order to meet the argument based on discri mination, considered the scope of the new section.
In doing so, the learned Judge observed thus at p. 403: "The magistrate then has to record the evidence of such witnesses as figure as eye witnesses to the occurrence, and are produced before him.
He has also the power ' in the interest of justice, to record such other evidence of the prosecution as he may think necessary, but he is not obliged to record any evidence.
Without recording any evidence but after considering all the documents referred to in section 1973 and after examining the accused person and after hearing the parties, it is open to the magistrate to discharge the accused person after recording his reasons that no ground for committing the accused 1 for trial has been made out, unless he decides to try the accused himself or to send him for trial by another magistrate.
If, on the other hand, he finds that the accused should be committed for trial, he is required to frame a charge (1) ; 903 disclosing the offence with which the accused is charged.
" Then the learned Judge proceeded to consider the scope of section 208 of the Code.
After having found that there was obvious difference in the procedure, the learned Judge came to the conclusion that "the Legislature has provided for a clear classification between the two kinds of proceedings at the commitment stage based upon a very relevant consideration, namely, whether or not there has been a previous inquiry by a responsible public servant whose duty it is to discover crime and to bring criminals to speedy justice".
It will thus be seen that the observations of the learned Judge at p. 403 cannot be said to be obiter, as learned counsel asks us to hold, for the construction of the provisions of section 207A was necessary to ascertain whether there was reasonable classification or not.
Assuming that the said observations are obiter, even then, they record the considered opinion of five learned Judges of this Court.
The view we have expressed also is consistent with the said observations.
Our view could now be expressed in the following propositions: (1) In a proceeding instituted on a police report, the Magistrate is bound to take evidence of only such eye witnesses as are actually produced by the prosecution in court.
(2) The Magistrate, if he is of opinion that it is in the interest of justice to take evidence, whether of eye witnesses or others, he has a duty to do so.
(3) If the Magistrate is not of that opinion and if the prosecution has not examined any eye witnesses, he has jurisdiction to discharge or commit the accused to sessions on the basis of the documents referred to in s, 173 of the Code.
(4) The discretion of the Magistrate under sub section (4) is a judicial discretion and, therefore, in appropriate cases the order of discharge or committal, as the case may be, is liable to be set aside by a superior court.
Before closing we would like to make some observations.
Rarely we come across cases where the prosecution does not examine important eye witnesses, for such a procedure would entail the danger of the said witnesses being tampered with by the accused, with 904 the result that there will not be any evidence taken by the committing Magistrate which could be used as substantive evidence under section 288 of the Code.
Even if the prosecution takes that risk, the Magistrate shall exercise a sound judicial discretion under the second part of sub section
(4) of section 207A in forming the opinion whether witnesses should be examined or not, and any perverse exercise of that discretion can always be rectified by a superior court.
Rut there may be a case where the Magistrate can make up his mind definitely on the documents referred to in section 173 without the aid of any oral evidence and in that event he would be within his rights to discharge or commit the accused, as the case may be.
In this view, it is not necessary to express our opinion whether even if the Magistrate acted illegally in committing an accused without taking any evidence, the said illegality is cured either by section 537 of the Code or any other section thereof.
In the result, the appeals fail and are dismissed.
Appeals dismissed.
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On the date fixed for the inquiry the prosecution intimated to the Magistrate that it did not intend to examine any witness in the Magistrate 's Court.
The Magistrate adjourned the inquiry to consider whether it was necessary to record any evidence before commitment.
On the adjourned date he expressed his opinion that no witnesses need be examined, framed charges against the appellants and committed them to the Sessions Court.
The appellants contended that the Magistrate had ' no jurisdiction to commit them to Sessions without examining witnesses under sub section
(4) of section 207 A of the Code of Criminal Procedure.
Held, that the order of commitment was valid and the Magistrate had jurisdiction to make it 'Without recording any evidence.
The position under section 207 A of the Code is that: (i) the Magistrate is bound to take evidence of only such eye witnesses as are actually produced by the prosecution before the Committing Court; 891 (ii) the Magistrate if he is of opinion that it is in the interests of justice to take evidence whether of.
eye witnesses, or of others, he has a duty to do so; (iii). .the
Magistrate, if he is not of that opinion and if the prosecution has not examined any eye witnesses, he has jurisdiction to discharge or commit the accused on the basis of the documents referred to in section 173 of the Code; (iv).the discretion of the Magistrate is a judicial dis cretion which is liable to be corrected by a superior Court, Macherla Hanumantha Rao vs The State of Andhra Pradesh, ; , relied on.
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1062.txt
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Civil Appeal No. 2592 of 1972.
Appeal by Special Leave from the Judgment and Order dated 9 11 1971 of the Andhra Pradesh High Court in Case Referred No. 4 of 1970.
section T. Desai, T. A. Ramachandran, Mrs. J. Ramachandran and M. N. Tandon for the Appellant.
section C. Manchanda, Miss A. Subashini and D. B. Ahuja for the Respondent.
The Judgment of the Court was delivered by PATHAK, J.
This appeal, by special leave, is directed against a judgment of the Andhra Pradesh High Court, concerning the scope of section 271(1)(c) of the Income Tax Act, 1961.
The assessee is an Abkari contractor.
It filed a return of its income for the assessment year 1959 60, disclosing a total turnover of Rs. 10,92,132 and an income of Rs. 7,704.
The Income Tax Officer did not accept the correctness of the return.
He found that on 12th December, 1957 and 16th January 1958 the excess of expenditure over the disclosed available cash as Rs. 17,720 and Rs. 650,66 respectively.
He also noticed several deposits, totaling Rs. 28,200, entered in the names of certain Sendhi shop keepers.
The assesee 's explanation that the excess expenditure was met from amounts deposited with him by some shop keepers but not entered in his books was not accepted.
The alternative explanation that expenditure incurred earlier had possibly been recorded later was also rejected.
In regard to the cash deposits of Rs. 28,200 the assessee explained that they represented amounts deposited with it as security.
That explanation was rejected insofar as deposits totalling Rs. 21,000 were concerned.
The Income Tax Officer rejected the account books of the assessee and estimated the assessee 's income on an overall figure of Rs. 5,00,018.
In appeal before the Appellate Assistant Commissioner and thereafter before the Income Tax 621 Appellate Tribunal, the assessee succeeded in getting the assessed income reduced to Rs. 1,30,000 in addition to the book profits.
Penalty proceeding were taken against the assessee and the case was referred to the Inspecting Assistant Commissioner.
The assessee reiterated the explanation which it had offered in the assessment proceedings.
Predictably, the Inspecting Assistant Commissioner rejected the explanation and held that the items of cash deficit and cash deposits represented concealed income resulting from the suppressed yield and low selling rates mentioned in the books.
He observed that the assessee had concealed the particulars of his income and furnished inaccurate of it, and therefore imposed a penalty of Rs. 75,000 under s.271(1)(c) of the Income Tax Act, 1961.
On appeal by the assessee, the Appellate Tribunal held that there was no positive material to establish that the cash deposits represented concealed income.
In regard to the cash deficits, the Appellate Tribunal noticed that for the assessment year 1957 58 an addition of Rs. 2,00,000 had been made to the book profits and it observed that some part of that amount could have been ploughed back into the business.
It held that an amount of Rs. 90,000 representing unledgerised cash credits of that year could be said to have been introduced in this year.
Allowing the appeal, the Appellate Tribunal set aside the penalty order made by the Inspecting Assistant Commissioner.
At the instance of the Commissioner of Income Tax, the following question was referred to the High Court: "Whether on the facts and in the circumstances of the case, the Tribunal is justified in holding that no penalty is leviable ?" The High Court held that the Appellate Tribunal was not justified in holding that no penalty was leviable.
In this appeal, it is urged by learned counsel for the assessee that the High Court erred in interfering with a finding of fact, that the penalty proceedings being quasi criminal the burden of proof lay on the Revenue to establish that a penalty was attracted and that the intangible addition of Rs. 2,00,000 represented real income and the Appellate Tribunal was right in considering that an amount of Rs. 90,000 was available to cover the cash deficits.
Section 271(1)(c) of the Income Tax Act, 1961 provides: "271(1).
If the Income Tax Officer or the Appellate Assistant Commissioner in the course of any proceedings under this Act is satisfied that any person (a) * * * * 622 (b) * * * * (c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income he may direct that such person shall pay by way of penalty. . . . " This is the provision as it stood at the relevant time.
It is now settled law that an order imposing a penalty is the result of quasi criminal proceeding and that the burden lies on the Revenue to establish that the disputed amount represents income and that the assessee has consciously concealed the particulars of his income or has deliberately furnished inaccurate particulars.
Commissioner of Income Tax, West Bengal and Another vs Anwar Ali.
It is for the Revenue to prove those ingredients before a penalty can be imposed.
Since the burden of proof in a penalty proceeding varies from that involved in an assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted as a finding to that effect in the penalty proceeding.
In the penalty proceeding the taxing authority is bound to consider the matter afresh on the material before it and, in the light of the burden to prove resting on the Revenue, to ascertain whether a particular amount is a revenue receipt.
No doubt, the fact that the assessment order contains a finding that the disputed amount represents income constitutes good evidence in the penalty proceeding but the finding in the assessment proceeding cannot be regarded as conclusive for the purposes of the penalty proceeding, That is how the law has been understood by this Court in Anwar Ali (supra), and we believed that to be the law still.
It was also laid down that before a penalty can be imposed the entirety of the circumstances must be taken into account and must point to the conclusion that the disputed amount represents income and that the assessee has consciously concealed particulars of his income or deliberately furnished inaccurate particulars.
The mere falsity of the explanation given by the assessee, it was observed, was insufficient without there being in addition cogent material of evidence from which the necessary conclusion attracting a penalty could be drawn.
These principles were reiterated by this Court in Commissioner of Income Tax, Madras vs Khoday Eswarsa and sons.
In the present case, the Appellate Tribunal has relied entirely on the basic that an intangible addition of Rs. 2,00,000 had been made to the book profits of the assessee for the assessment year 1957 58 623 and it inferred that an amount of Rs. 90,000 was available for being put to use in the year with which we are concerned.
Now it can hardly be denied that when an "intangible" addition is made to the book profits during an assessment proceeding, it is on the basis that the amount represented by that addition constitutes the undisclosed income of the assessee That income, although commonly described as "intangible", is as much a part of his real income as that disclosed by his account books.
It has the same concrete existence.
It could by available to the assessee as the book profits could be.
In Lagadapati Subha Ramiah vs Commissioner of Income tax, Madras the Andhra Pradesh High Court adverted to this aspect of secret profits and their actual availability for application by the assessee.
That view was affirmed by the Madras High Court in section Kuppuswami Mudliar vs Commissioner of Income Tax, Madras.
There can be no escape from the proposition that the secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw sufficient for meeting expenditure or introducing amounts in his account books.
But it is quite another thing to say that any part of that fund must necessarily be regarded as the source of unexplained expenditure incurred or of cash credits regarded during a subsequent assessment year.
The mere availability of such a fund cannot, in all cases, imply that the assessee has not earned further secret profits during the relevant assessment year.
Neither law nor human experiences guarantees that an assessee who has been dishonest in one assessment year is bound to be honest in a subsequent assessment year.
It is a matter for consideration by the taxing authority in each case whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year.
In each case the true nature of the cash deficit and the cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case.
Evidence may exist to show that reliance cannot be placed completely on the availability of a previously earned undisclosed income.
A number of circumstances of vital significance may point to the conclusion that the cash deficit or cash credit cannot reasonably be related to the amount covered by the intangible addition but must be regarded as pointing to the receipt of undisclosed income earned during the assessment year under consideration.
It is open to the Revenue to rely on all the circumstances pointing to 624 that conclusion.
What those several circumstances can be is difficult to enumerate and indeed, from the nature of the enquiry, it is almost impossible to do so.
In the end, they must be such as can lead to the firm conclusion that the assessee has concealed the particulars of his income or has deliberately furnished inaccurate particulars.
It is needless to reiterate that in a penalty proceeding the burden remains on the Revenue of proving the existing of material leading to that conclusion.
The Appellate Tribunal erred in law in confining itself to the fact that an intangible addition had been added to the assessee 's book profits two years before and that a part of that amount remained available to the assessee thereafter, the High Court is right in departing from that limited approach and in insisting on a consideration of all the relevant facts and circumstances of the case relied on by the Revenue for purpose of determining whether the Revenue has succeeded in discharging its burden.
But while considering the legal principles involved in the application of section 271(1)(c) the High Court, in our opinion, has erred in entering into the facts of the case and determining in point of fact that the assessee earned income during the relevant previous year and that he was guilty of concealing such income or furnishing inaccurate particulars of it.
Having found that the legal basis underlying the order of the Appellate Tribunal was not sustainable, the High Court should have limited itself to answering the question raised by the reference in the negative, leaving it to the Appellate Tribunal to take up the appeal again and redetermine it in the light of the law laid down by the High Court.
It is the Appellate Tribunal which has been entrusted with the authority to find facts.
A High Court is confined to deciding the question of law referred to it on facts found by the Appellate Tribunal.
That is the kind of order we now propose to make.
Because the finding of the Appellate Tribunal that no penalty leviable rests on an erroneous legal basis, we endorse the opinion of the High Court that the question referred must be answered in the negative.
But as the High Court should not have rendered findings of fact, we vacate the finding of fact reached by the High Court, without expressing any opinion on their correctness, leaving it to the Appellate Tribunal in exercise of its duty under section 260(1) of the Income Tax Act to take up the appeal and to redetermine it conformably to this judgment and in the light of the principle laid down in it.
The appeal is disposed of accordingly.
There is no order as to costs.
S.R. Case remitted to Tribunal.
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The appellant, assessee in an Abkari contractor.
It filed a return of its income for the assessment year 1959 60, disclosing a total turnover of Rs. 10,92,132/ and an income of Rs. 7,704/ .
The Income Tax Officer did not accept the correctness of the return.
He found that on 12th December, 1957 and 16th January, 1958 the excess of expenditure over the disclosed available cash was Rs. 17,726/ and Rs. 65,066 respectively.
He also noticed several deposits, totalling Rs. 28,200, entered in the names of certain Sendhi shopkeepers.
The Income Tax Officer rejected the account books of the assessee and his explanations for the discrepancies thereof and estimated the assessee 's income on an overall figure of Rs. 5,00,018.
In appeal before the Appellate Assistant Commissioner and thereafter before the Income Tax Appellate Tribunal the assessee succeeded in getting the assessed income reduced to Rs. 1,30,000 in addition to the books profits.
Penalty proceedings were taken against the assessee and the case was referred to the Inspecting Assistant Commissioner, who imposed a penalty of Rs. 75,000 under section 271(1)(c) of the Income Tax Act, 1961.
On appeal by the assessee, the Appellate Tribunal held that there was no positive material to establish that the cash deposits represented concealed income.
In regard to the cash deficits, the Appellate Tribunal noticed that for the assessment year 1957 58 an addition of Rs. 2,00,000 had been made to the book profits, and it observed that some part of that amount could have been ploughed back into the business.
It held that an amount of Rs. 90,000 representing unledgerised cash credits of that year could be said to have been introduced in that year.
Allowing the appeal, the Appellate Tribunal set aside the penalty order made by the Inspecting Assistant Commissioner.
On a reference to the High Court, at the instance of the Commissioner of Income Tax, the High Court held that the Appellate Tribunal was not justified in holding that no penalty was leviable.
Hence the appeal by special leave.
Directing the Appellate Tribunal to take up the appeal under section 260(1) of the Income Tax Act, the Court ^ HELD: An order imposing a penalty is the result of quasi criminal proceedings.
The burden of proof lies on the Revenue to establish that the disputed amount represents income and that the assessee has consciously concealed the particulars of his income or has deliberately furnished inaccurate particulars.
It is for the Revenue to prove these ingredients before a penalty can be imposed.
[622B C] 619 Since the burden of proof in a penalty proceeding varies from that involved in an assessment proceedings a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted as a finding to that effect in the penalty proceeding.
In the penalty proceeding the taxing authority is bound to consider the matter afresh on the material before it and, in the light of the burden to prove resting on the Revenue, to ascertain whether a particular amount is a revenue receipt.
No doubt, the fact that the assessment order contained a finding that the disputed amount represents income constitutes good evidence in the penalty proceeding but the finding in the assessment proceeding cannot be regarded as conclusive for the purposes of the penalty proceeding.
Before a penalty can be imposed the entirety of the circumstances must be taken into account and must point to the conclusion that the disputed amount represents income and that the assessee has consciously concealed particulars of his income or deliberately furnished inaccurate particulars.
The mere falsity of the explanation given by the assessee is insufficient without there being in addition cogent material or evidence from which the necessary conclusion attracting a penalty could be drawn.
[622C G] Commissioner of Income Tax, West Bengal and Anr.
vs Anwar Ali ; Commissioner of Income Tax, Madras vs Khoday Eswara and Sons, ; applied.
When an 'intangible ' addition is made to the book profits during an assessment proceeding, it is on the basis that the amount represented by that addition constitutes the undisclosed income of the assessee.
That income although commonly described as 'intangible ', is as much a part of his real income as that disclosed by his account books.
It has the same concrete existence.
It could be available to the assessee as the book profits could be.
[623A B] 3.
Secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books.
Any part of that fund need not necessarily be regarded as the source of unexplained expenditure incurred or of cash credits recorded during a subsequent assessment year.
The mere availability of such a fund cannot, in all cases, imply that the assessee has not earned further secret profits during the relevant assessment year It is a matter for consideration by the taxing authority, in each case, whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year.
In each case the true nature of the cash deficit and the cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case.
Evidence may exist to show that reliance cannot be placed completely on the availability of a previously earned undisclosed.
income.
A number of circumstances of vital significance may point to the conclusion that the cash deficit or cash credit cannot reasonably be related to the amount covered by the intangible addition but must be regarded as pointing to the receipt of undisclosed income earned during the assessment year under consideration.
It is open to the Revenue to rely on all the circumstances pointing to that conclusion.
What those several circumstances can be is difficult to enumerate and indeed, from the nature of the enquiry, it is almost impossible to do so.
However, they must be such as can lead to the firm conclusion that 620 the assessee has concealed the particulars of his income or has deliberately furnished inaccurate particulars.
[623C H, 624A] Lagadapti Subha Ramiah vs Commissioner of Income Tax, Madras, ; section Kuppuswami Mudaliar vs Commissioner of Income Tax, Madras, ; approved.
In an income tax reference, a High Court should confine itself to deciding the question of law referred to it on facts found by the Appellate Tribunal.
It is the Appellate Tribunal which has been entrusted with the authority to find facts.
[624D E]
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4213.txt
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Appeal No. 405 of 1957.
Appeal from the judgment and order dated May 15, 1956, of the Calcutta High Court in I.T.R. No. 20 of 1953.
section Mitra, B. Das and section N. Mukherjee, for appellants Nos. 2 to 41.
A. N. Kripal and D. Gupta, for the respondent.
November 23.
The Judgment of the Court was delivered by HIDAYATULLAH, J.
The point involved in this appeal is a very short one; but it requires a long narration of facts to reach it.
The appeal is against the judgment and order of the High Court of Calcutta dated May 15, 1956, arising out of an Income tax Reference.
By the Calcutta Municipal Act VI of 1863, there was established a Corporation under the name of "The Justices of the Peace for the Town of Calcutta".
By a notification issued on November 2, 1864, one square mile of land forming part of the Panchannagram Estate was acquired by the Government of Bengal at the instance of the Justices.
Section CXII of the Municipal Act provided that the Justices might "agree with the owners of any land for the absolute purchase thereof. . for any other purpose whatever connected with the conservancy of the Town".
Under section CXIII, it was provided that if there was any hindrance to acquisition by private treaty, the Government of Bengal upon the representation of the Justices would compulsorily acquire the land and vest 600 such land in the Justices on their paying compensation awarded to the proprietor.
The action which was taken by the notification was under section CXIII of the Municipal Act, and the acquisition was under Act VI of 1857, an Act for the acquisition of land for public purposes.
The Panchannagram Estate was permanently settled under Regulation 1 of 1793.
After the acquisition, the proprietor of Panchannagram Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs. 386 7 1.
This represented the proportionate land revenue on the land acquired.
In August, 1865, the Justices were required to pay Rs. 54,685 2 10 as compensation payable to the proprietor and to other persons holding interest in the land.
Another piece of land which is described as an open level sewer, was also acquired about the same time, and separate compensation was paid for it.
With the amount of conveyance charges, the total compensation thus paid by the Justices was Rs. 57,965 8 10.
On October 27,1865, the Government called upon the Justices to pay a further sum of Rs. 7,728 13 8.
This order has not been produced in the case; but from other correspondence, it is easy to see that the amount represented an amount capitalized at 20 years ' purchase of land revenue attributed to the area acquired, which, as has been stated above, came to Rs. 386 7 1.
This payment was made on or about January 12, 1866.
Similarly, another amount was paid in July of the same year for redemption of the land revenue in respect of the strip of land for the open sewer.
On December 5, 1870, a conveyance was executed by the Secretary of State in favour of the Justices of the Peace.
It was there stated, inter alia: "Whereas the Honourable the Lieutenant Governor of Bengal hath thought fit that the said land so acquired as aforesaid would be vested in the said Justices of the Peace for the Town of Calcutta a Corporation created by and authorised to hold land under the said Act No. VI of 1863 of the Council of the Lieutenant Governor of Bengal to the end and intent 601 that the said land may be held by the said Justices for a public purpose, namely, for the conservancy of the Town. . and subject in every way to the same ' Act but free and discharged from all payment of land revenue, land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government in respect thereof; NOW THIS IN DENTURE WITNESSETH. .to hold the saidpieces of land, hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose namely for the conservancy of the town upon the trusts and subject to the powers, provisions, terms and conditions contained in the said Act No. VI of 1863 of the Council of the Lieutenant Governor of Bengal and to the rules heretofore passed or hereafter to be passed by the Government of Bengal under the the said last mentioned Act;".
On January 23, 1880, a temporary lease of the land known as the 'Square Mile ' was granted by the Justices of the Peace to the predecessors in title of the appellant (assessee), Srish Chandra Sen who has, since the filing of the appeal, died, leaving behind 40 legal representatives who have been shown in the cause title of the appeal.
The lease was renewed for further periods, and the rent was also progressively increased.
The conservancy arrangements for which the land 'was held were carried out, but, the lessee had the right to carry on cultivation with the aid of sewage.
The assessee derived from this land various kinds of income, some being purely agricultural and some, non agricultural.
For the assessment year 1942 43, the total agricultural income was computed at Rs. 99,987 9 6, and non agricultural income, at Rs. 12,503 8 0.
Agricultural income tax was charged by the State of Bengal under the Agricultural Income 602 tax Act, on the agricultural income less expenses.
For the assessment years, 1943 44, 1944 45, 1945 46 and 1946 47, the assessments were made along similar lines.
In 1947, the Income tax Officer reassessed the income for the assessment year, 1942 43 after reopening the assessment under section 34 of the Income tax Act on the ground that the so called agricultural income had escaped assessment to income tax under the Indian Income tax Act.
Assessments for the other years, 1943 44, 1944 45, 1945 46 and 1946 47 were also reopened, and the income in those years wag also similarly reassessed.
The assessee appealed to the Appellate Assistant Commissioner against all these orders of the Income tax Officer, but his appeals failed.
Against the orders of the Appellate Assistant Commissioner, appeals were filed before the Income tax Appellate Tribunal (Calcutta Bench).
The Tribunal dealt with the assessment for 1942 43 separately, and allowed the appeal as regards assessment for that year.
It held that the reassessment was improper under section 34 of the Income tax Act, because the Income tax Officer had not proceeded on any definite information but in the course of a "roving enquiry".
The Tribunal also held that the income was exempt from taxation to income tax under section 4(3)(viii) of the Act, inasmuch as this income was derived from land used for agricultural purposes, which continued to be assessed to land revenue.
In the appeals arising out of assessments for the subsequent years, a common order was passed by the Tribunal, remanding the appeals to the Appellate Assistant Commissioner for a rehearing.
The Tribunal stated that the appellants had filed a number of documents to establish that land revenue was assessed on the land which, the Department contended, proved the contrary.
The Tribunal felt that the matter should be reconsidered by the Appellate Assistant Commissioner, and hence remanded the cases.
The Appellate Assistant Commissioner in the rehearing held that the land in question continued subject to land revenue, and that the lump sum payment was merely payment of revenue in advance.
He accordingly allowed the appeals, and ordered exclusion of the income 603 from the assessments for the four years in question.
On appeal by the Department, the Tribunal changed its opinion, and came to the conclusion that the ' payment of a lump sum was not a payment in advance of the land revenue due from year to year but was land revenue capitalised.
It referred to the deed by which the proprietorship in the land was ves ted in the Corporation by the Secretary of State, and stated that by the document and the capitalisation of land revenue, the demand for land revenue was extinguished for ever.
It accordingly allowed the appeals, and restored the orders of assessment made by the Income tax Officer.
The assessee next moved the Tribunal for a reference setting out a number of questions which, he contended, arose out of the Tribunal 's order.
The Tribunal referred the following question of law for the opinion of the High Court: "Whether on the facts and in the circumstances of this case the Tribunal 's conclusion that the land was not assessed to land revenue within the meaning of section 2(1)(a) of the Indian Income tax Act is justified?" The reference was heard by Chakravarti, C. J., and Sarkar, J., (as he then was).
In an elaborate judgment, the learned Chief Justice upheld the conclusions of the Tribunal, and answered the question in the affirmative.
Sarkar, J., in an equally elaborate order expressed his doubts about the correctness of the Chief Justice 's reasons, but declined to disagree with him.
The question that arises in this case, as we have stated in the opening of this judgment, is a very short one.
It is an admitted fact that by payment of ' a lump sum the liability to pay land revenue was redeemed and no land revenue was de manded or was ever demandable from the Justices or their assigns in perpetuity.
The contention of the assessee is that this redemption saved the Justices from the liability for payment but did not affect the assessability of the land to revenue under Regulation I of 1793.
Unless, it is contended,.
there was a cancellation of the assessment, a,% is to be found in the 604 Land Tax and Tithe Redemption Acts in England, the liability must be deemed% to continue and land would still be assessed to land revenue for purposes of section 2(1)(a) of the Indian Income tax Act.
That section reads as follows: "2(1) 'Agricultural income ' means (a) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in (the taxable territories) or subject to a local rate assessed and collected by Officers of (the Government) as such".
It is not denied that both the conditions, namely, "used for agricultural purposes" and "is either assessed to land revenue or subject to a local rate. . . have to co exist.
It is admitted by the Department that there is no question of subjection to a local rate assessed and collected, in this case.
The income derived from the land was from its use for agricultural purposes, and the first condition is thus satisfied.
The dispute centres round the point whether the land .can be said to be assessed to land revenue, in spite of the lump sum payment in 1865.
In the High Court, the matter was examined from three different points of view.
The first was the effect of acquisition of the land by Government upon the continued assessability of the land to land revenue.
The learned Chief Justice held that by the acquisition the assessment ceased to subsist.
The second was the effect of the redemption of land revenue by the Justices by a lump sum payment.
The learned Chief Justice was of opinion that it had the effect of cancelling the assessment.
The last was the effect of the grant free from land revenue, about which the learned Chief Justice was of opinion that it freed the land from assessment to land revenue.
Sarkar, J., agreed as to the first, but expressed doubts about the second and third propositions.
According to the learned Judge, the acceptance of a lump sum payment in lieu of recurring annual payments was more a matter of agreement than a cancellation of assessment to land revenue.
The matter has been argued before us from the 605 argument about the interpretation to be placed on the, conveyance by the Secretary of State which, according to him, only freed the Justices from 'payment ' of the assessed land revenue but did not cancel the assessment.
No Act of Legislature bearing upon the power of Government to accept a Iump sum payment in lieu of the annual demands for land revenue has been brought to our notice.
Counsel admitted that they were unable to find any such legislative provision.
We have thus to proceed, as did the High Court, without having before us the authority of a legislative enactment.
The only materials to which reference was made are: an extract from the explanatory notes in the Revenue Roll of the Touzi which shows that an abatement of land revenue pro tanto was granted to the proprietor of Panchannagram Estate, and a despatch from the Secretary of State for India (Lord Stanley) No. 2 (Revenue) dated December 31, 1858 recommending redemption of land revenue by an immediate payment of a sum of equivalent value, together with a Resolution of Government (Home Department No. 3264 (Rev) dated October 17, 1861) on permission to redeem the existing land revenue by the immediate payment of one sum equal in value to the revenue redeemed.
By the resolution, it was provided that such redemption would be limited to 10 per cent of the total revenue in the Collectorate and the price to be paid was to be fixed at 20 years ' purchase of the existing assessment.
It may be mentioned that in Despatch No. 14 dated July 9, 1862, the Secretary of State for India (Sir Charles Wood) did not agree with the earlier policy, but did not cancel it.
It may thus be assumed that what was done was under the authority of the Crown, which was then paramount, which paramountcy included the prerogative to free land from the demand of land revenue with or without conditions.
We have, therefore, to examine three things: the effect of acquisition on the continuance of the assessment to land revenue, the effect of redemption by a down payment on the same, 77 606 and the effect of the grant, free from land revenue, to the Justices.
The acquistion was under Act VI of 1857.
That Act provided in B. XXVI as follows: "When any land taken under this Act forms part of an estate paying revenue to Government, the award shall specify the net rent of the land including the Government Revenue, and the computed value of such rent: and it shall be at the discretion of the Revenue authorities either to pay over the whole of such value to the owner of the estate on the condition of his continuing to pay the jumma thereof without abatement; or to determine what proportion of the net rent shall be allowed as a remission of revenue, in which case a deduction shall be made from the said value proportionate to the value of such remission.
" This provision only saved the Estate assessed to land revenue from liability to pay land revenue proportionately falling upon the land acquired compulsorily, subject to a like proportionate reduction in the amount of compensation payable to the proprietor of the estate, but the provision cannot be stretched to mean that the liability of the land actually acquired, to land revenue in the hands of grantees from the Government also ceased.
Be that as it may, it is hardly necessary to view the present case from this angle at all, because, whether the land acquired continued to be subject to an assessment or must be deemed to be reassessed as a separate estate, the result would be the same if Government demand still subsisted on it, as, in fact, it did.
There could have been no redemption of the liability by a down payment if no land revenue could have been demanded.
The fact that the recurring liability was redeemed by a lump sum payment itself shows that in the view of Government as well as of the Justices, the 'Square Mile ' was still subject to the recurring demand and was thus still assessed to land revenue.
It is, therefore, not profitable to investigate the effect of acquisition on the continued liability of the land to land revenue between the time there was acquisition and the vesting of the land in the Justices.
For the above reason, we need not examine at 607 length the case in Lord Colchester vs Kewnoy where the acquisition by the Crown was held not to make, the area acquired immune from land tax, because the burden of the tax would then have fallen upon the remaining land situated in the unit from which it was acquired and on which unit a quota of the land tax was chargeable.
Such a position does not arise here, because the Panchannagram Estate was given abatement and a lump sum was paid to free the land acquired from the liability to land revenue.
Similarly, the decision of this Court in The Collector of Bombay vs Nusserwanji Rattanji Mistri and Others (2), where on the acquisition of some Foras lands held under Foras Land Act (Bombay Act VI of 1851) the Foras tenure was declared to have come to an end and on the same lands being resold by Government as freehold, they were declared not to be subject to assessment to which they were previously subject, is not very helpful.
There do not appear to be any rules prior to 1875, which were framed under the Land Acquisition Act of 1870 (Act X of 1870) and which are to be found in the Calcutta Gazette of July 7, 1875, p. 818.
If there were, they have not been brought to our notice.
But a practice similar to the rules seems to have obtained under section XXVI of the Act of 1857.
That Act also did not contain any provision for making rules, as are to be found in the subsequent Acts for compulsory acquisition of land.
In the absence of any statutory law or rules, we must take the facts to be that after acquisition the Panchannagram Estate was given abatement of land revenue, and the demand for land revenue was transferred to the land acquired and granted to the Justices.
At that stage, the liability to assessment remained, and it was that liability which was redeemed by a down payment.
We next consider the effect of redemption.
Learned counsel for the appellant contends that redemption in this connection means that by a single payment, the liability for periodical payments is saved but the assessment on the land remains uncancelled.
He has cited Wharton 's Law Lexicon to show the meaning of (1) (2) ; 608 the word "redemption", which is "commutation or the substitution of one lump payment for a succession of annual ones: e.g. See the Land Tax and the Tithe Redemption Acts and many other statutes".
Redemption is the act of redeeming which in its ordinary meaning is equal to bringing off a charge or obligation by payment.
To what extent this redemption freed the land or its holder from the obligation depends not so much upon what the obligation was before redemption as what remained of that obligation after it.
Here, the payment itself was meant to be "an immediate payment of one sum equal in value to the revenue redeemed" (vide the Resolution of Government dated October 17, 1861).
By the down payment, the entire land revenue to be recovered from that land was redeemed.
The payment was equal to the capitalised value of the land revenue.
When such a payment took place, it cannot be said that the assessment for land revenue remained.
The land was freed from that assessment as completely as if there was no assessment.
Thenceforward, the land would be classed as revenue free, in fact and in law.
In The Land Law of Bengal (Tagore Law Lectures, 1895) p. 81 section C. Mitra described these revenue free lands as follows: "There is another class of revenue free lands which comes within these rules laid down in the Registration and Tenancy Acts, namely, lands of which Government has, in consideration of the payment of a capitalised sum, granted proprietary title free in perpetuity from any demand of land revenue.
" That this is what had happened here is quite apparent from the conveyance by the Secretary of State vesting the land in the Justices.
It is significant that there is no mention of the payment of Rs. 7,728 13 8, nor of the assessability of the lands to land revenue.
On the other hand, the deed of conveyance merely reaffirmed the position, which existed before by stating: ". to hold the said pieces of land, hereditaments and premises intended to be conveyed with the appurtenances except as aforesaid unto the said Justices of the Peace for the Town of Calcutta and their successors for ever free and clear and for ever discharged 609 from all Government land revenue whatever or any payment or charge in the nature thereof.
" There can be no doubt that the land revenue was for ever extinguished and the land became free from land revenue, assessment in perpetuity.
It cannot thereafter be said that the land was still assessed to land revenue.
Mr. Mitra made a great effort to construe the operative part quoted above with the aid of the recital in the deed, where it was stated: ". but free and discharged from all payment of land revenue, land tax and all and every tax or imposition in the nature of revenue derivable from land payable to Government.
He drew attention to the word 'payment ', and contended that what was saved was payment of land revenue.
He argued that in case of ambiguity it was permissible to construe the operative portion of a deed in the light of the recitals, and cited Halsbury 's Laws of England, 3rd Edn., Vol.
XI, p. 421, para.
680, Gwyn vs Neath Canal Co. (1) and Orr vs Mitchell (2).
If there was any ambiguity in the operative portion of the deed, we may have taken the aid of the recitals.
But there is no ambiguity in the deed.
The history of redemption is a matter of record, and it is plain that Government was accepting a down payment and freeing land from land revenue.
This is precisely what was done, and the result of the down payment is set out with great clarity in the deed itself, and it is that there was no land revenue assessed on or demandable from that land.
In fact, no demand or payment or charge in the nature of land revenue could ever be made on it.
In view of this, it is, in our judgment, quite satisfactorily established that this land was not assessed to land revenue and the income from it did not fall within section 2(1)(a) of the Income tax Act.
The answer given by the High Court was thus correct.
In the result, the appeal fails, and will be dismissed with costs.
(1868) L R. Appeal dismissed (2) , 254.
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By a notification dated November 2, 1864, a piece of land forming part of the Panchannagram Estate which was permanently settled under Regulation 1 of 1793, was acquired by the Government of Bengal at the instance of the justices of the Peace for the Town of Calcutta, which was a corporation established under the provisions of the Calcutta Municipal Act, 1863, and the justices were required to pay the compensation payable to the proprietor of the Estate.
After the acquisition, the proprietor of the Estate was granted abatement of land revenue assessed on the Estate to the extent of Rs. 386 7 1, being the proportionate land revenue on the land acquired.
On October 27, i865, the Government called upon the justices to pay a sum of Rs. 7,728 13 8, which represented the amount capitalised at 20 years ' purchase of land revenue attributed to the area acquired.
On December 5, i870, the Secretary of State executed in favour of the justices of the Peace a conveyance of the land acquired, which stated, inter alia, that it was "ever free and clear and for ever discharged from all Government land revenue whatever or any payment or charge in the nature thereof to the end and intent that the said land may be used for a public purpose, namely, for the conservancy of the town." On January 23, 1880, a lease of the land was granted by the Justices to the predecessors in title of the appellant, under which the lessee had the right to carry on cultivation with the aid of sewage.
Before the income tax authorities the appellant claimed that the agricultural income derived by him from the land was not liable to income tax, but the claim was rejected on the ground that on the payment of a lump sum in 1865 the liability to pay land revenue was redeemed and no land revenue was demanded thereafter; consequently, the income derived from the land was not agricultural income within the meaning of section 2(1) of the Indian Income tax Act, 1922, and was not, therefore, exempt from tax.
The appellant 's contention was that the redemption only saved the justices from liability for payment but did not affect the assessability of the land to revenue under Regulation 1 of 1793.
599 Held, that by the down payment of a lump sum in 1865 the entire land revenue to be recovered from the land was redeemed and the land became free from land revenue assessment in perpetuity, as completely as if there was no assessment.
Thereafter, the land could not be said to be assessed to land revenue within the meaning of section 2(1) of the Indian Income tax Act, 1922, and, consequently, the income derived therefrom could not be considered to be agricultural income under that section.
The Collector of Bombay vs Nusserwanji Rattanji Mistri and others; , , distinguished.
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1011.txt
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ivil Appeal Nos.
1192 94 of 1971.
From the judgment and order dated the 20th October, 1976 of the High Court of Madras in Tax Cases Nos.
205 to 207 of 1971.
S.T. Desai, A.K. Verma and J.B. Dadachanji for the Appellant.
A.K. Sen and A.V. Rangam for the Respondent.
The Judgment of the Court was delivered by VENKATARAMIAH J.
The appellant in these three appeals by special leave is a company engaged in the business of manufacture and sale of art silk yarn.
It has its factory at Sirumughai in the District of Coimbatore in the State of Tamil Nadu.
The appellant is registered as a dealer carrying on business at Coimbatore.
In the course of its business, it sold during the relevant period large quanti 46 ties of art silk yarn to various purchasers some of whom were weavers residing in the States of Maharashtra and Gujarat who had been issued cards under a scheme called 'Export Promotion Scheme ' entitling them to buy specified quantities of art silk yarn from specified manufacturers.
The question involved in these appeals relates to the exigibility of the sales effected in favour of Export Promotion Scheme card holders belonging to the States of Maharashtra and Gujarat to tax under the (hereinafter referred to as 'the Act ').
The assessment years are 1962 63, 1963 64 and 1964 65.
The details of the Export Promotion Scheme for distribution of art silk yarn referred to above were these: There were certain weavers in India who were entitled to an incentive in the form of import licences to import art silk yarn from abroad.
The said import entitlement was cut to a certain extent and indigenous art silk yarn at concessional price was allotted to them.
To regulate the scheme of allotment, a committee called the 'Art Silk Yarn Distribution Committee ' was constituted by the Government of India.
The Committee made allotments to different weavers by issuing allotment cards.
These allotment cards contained details of the quantity of allotment and the rayon yarn manufacturer from whom the allotted quantity of yarn could be drawn.
As per the terms of the card, the yarn manufacturer should offer to the allottee rayon yarn within seven days of the date of the card without waiting for the allottee to approach him.
A firm contract for the supply of yarn should be completed within a period of twenty one days from the date of allocation of the card.
If a firm commitment was not entered into by the allottee with the yarn manufacturer within twenty one days from the date of allocation of the card, the yarn manufacturer should return the allocation card to the Distribution Committee with suitable remarks on the card and a covering letter explaining the reasons for the return of the card.
Even in the case of actual fulfilment of the quota covered by the allocation card, the said card should be returned to the Distribution Committee after the delivery of the yarn was completed.
This in brief was the Scheme.
In the instant case, the appellant had supplied art silk yarn to certain card holders who were residing, as stated earlier, outside the State of Tamil Nadu.
It is stated that the appellant had a selling agent and distributor by the name M/s. Rayonyarns Import Company Ltd. at Bombay and the case of the appellant was that it had 47 supplied art silk yarn to the card holders in the States of Maharashtra and Gujarat through the said agent and the delivery of the goods was effected at Bombay.
In the assessment proceedings before the Joint Commercial Tax Officer, Coimbatore for the year 1964 65, the appellant claimed that the sales of art silk yarn through its agent at Bombay were not inter State sales as defined by section 3(a) of the Act as the movement of the goods in question from the State of Tamil Nadu to the State of Maharashtra or the State of Gujarat was not occasioned by the sales in question and that they were in fact sales which had taken place outside the State of Tamil Nadu.
The Joint Commercial Tax Officer rejected the contention of the appellant and treated the sales effected in favour of the Export Promotion Scheme card holders through the appellant 's agent at Bombay as inter State sales and levied tax under the Act accordingly.
He also revised the orders of assessment for the years 1962 63 and 1963 64 bringing to tax the turnover relating to transactions of similar nature during those years.
In the appeals filed by the appellant against the order of assessment for the year 1964 65 and of revised assessment for the years 1962 63 and 1963 64 before the Appellate Assistant Commissioner, (Commercial Taxes), Coimbatore, the orders passed by the Joint Commercial Tax Officer were affirmed.
The appellant then filed three appeals before the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Coimbatore against the orders passed in appeal by the Appellate Assistant Commissioner.
The Tribunal also held that the sales in favour of the Export Promotion Scheme card holders outside the State of Tamil Nadu were inter State sales and were liable to be taxed under the Act.
Aggrieved by the orders of the Tribunal, the appellant preferred three revision petitions before the High Court of Madras.
These petitions were dismissed.
Thereafter the appellant has come up in appeal to this Court by special leave.
Section 3(a) of the Act provides that a sale or purchase of goods shall be deemed to take place in the course of inter State trade or commerce if the sale or purchase occasions the movement of goods from one State to the other.
In order to substantiate its case, the appellant has placed before us the documents relating to one transaction stating that the decision on the true nature of the said transaction would govern all other transactions of sale in dispute as they were all of a similar kind.
Those documents relate to the supply of art silk yarn to a firm known as M/s. Ramesh Silk Fabrics at Surat in the State of Gujarat made in June, 1964.
The purchaser was issued an allocation card on November 7, 1963 bearing No. 48 3124.
Under the card, M/s. Ramesh Silk Fabrics was entitled to purchase 273 Kgs.
of indigenous art silk yarn from the appellant.
The following were the relevant terms of the card: "1.
The rayon manufacturers and/or our approved dealers shall ensure that the quantity sold is not more than the quantity allocated as indicated in column No. 4(b) on the reverse of the card.
The rayon manufacturer shall offer yarn to the allottee within seven days from the date of allocation card without waiting for the allottee to approach him.
Contract for the supply of yarn shall be concluded within 21 days from the date of the allocation card.
Particulars of the quantity of yarn sold by the rayon yarn manufacturer his approved dealer with the date of or sale shall be entered and signed by the seller in column (5) on the card.
No supply shall be made on allotment card on which corrections have not been attested by the Secretary or the Manager.
If firm commitment is not entered into by the allottee with the yarn manufacturer, the yarn manufacturer shall return the allocation card to the Distribution Committee, with suitable remarks on the card and a covering letter explaining the reasons for returning the card.
Allocation cards shall be returned to the Distribution Committee after the delivery of yarn has been completed.
" At the back of his allocation card, in column 4(a) the appellant is shown as the manufacturer and in column 4(b) the quantity allotted is shown as 273 Kgs.
Column (5) of the allocation card shows that quantity of 268 Kgs. had been supplied as per Invoice No. BC/132.
Then we have the Invoice No. BC/132 prepared in the name of the appellant by its agent, Rayon yarn Import Co. Pvt. Ltd. and signed by the agent for and on behalf of the appellant.
The cases containing goods sold had been marked as 5829, 8479 and 8505.
The Invoice contains a note which reads as follows: 49 "We have charged you 2% Central Sales Tax for which purpose you are required to send us immediately your regular 'C ' form correct in all respects as required by the law in force for the time being in the absence of which you are required to remit us balance sum of Rs . being the difference between the rate charged and the revised rate at 10% applicable in such case.
" But actually 2% tax was added and it was shown in the invoice as local sales tax of Maharashtra at 2% of the price.
A delivery order dated June 3, 1964 prepared by the agent at Bombay on behalf of the appellant also refers to the numbers of the cases containing goods as 5829, 8479 and 8505.
What is of significance is a letter dated May 23, 1964 written by the agent at Bombay to the appellant.
By that letter, the agent requested the appellant to send from the factory 69 cases of yarn bearing specific numbers including case No. 5829, 8479 and 8505.
The said letter further stated that the invoices of sale would be sent after the goods were sold by the agent.
What is attempted to be made out by the appellant is that the appellant was informing its agent at Bombay from time to time as and when goods were manufactured the number of the cases in which the goods had been packed and at the request of its agent it had despatched the goods to Bombay but not as a result of any sale of the said goods in favour of a purchaser.
According to the appellant, the sale had taken place at Bombay and the movement of goods to Bombay from the State of Tamil Nadu was not connected with the sale in question.
In order to constitute an inter State sale as defined in section 3(a) of the Act, two factors should co exist (i) a sale of goods and (ii) movement of goods from one State to another under the contract of sale.
If there is a conceivable link between a contract of sale and the movement of goods from one State to the other in order to discharge the obligation under the contract of sale, the inter position of an agent of the seller who may temporarily intercept the movement ought not to alter the inter State character of the sale.
The facts which are glaring in this case are: (1) the allotment of a certain quantity of art silk yarn produced by the appellant in favour of the allocation card holder; (2) the requirement that the appellant should offer to sell the quantity of goods allotted to the card holder within seven days; 50 (3) the requirement that contract of sale should be completed within twenty one days of the date of the allocation card; (4) the requirement that the card should be returned to the Committee if no contract of sale was concluded as stated above; and (5) the fact that the goods have been supplied expressly against the quota allotted under the allocation card.
Admittedly the allocation card bearing No. 3124 was issued on November 7, 1963 and it required the appellant to offer to sell the quantity of art silk yarn mentioned in it to the purchaser within seven days without even waiting for the purchaser approaching the appellant with a request to supply the goods in question.
The card contemplated a contract of sale to be completed within twenty one days of the date of its issue.
The invoice in question contained the number of the allocation card.
In the letter dated May 23, 1964 the agent requested the appellant to send the cases bearing Nos.
5829, 8479 and 8505 by lorry from Sirumughai and the said boxes were later on admittedly delivered to the purchaser on June 3, 1964.
These facts cumulatively suggest that the goods in question had been transported from the factory site of the appellant to Bombay for delivery to the purchaser as a result of the contract of sale established in accordance with the terms of the allocation card.
It is, however, argued on behalf of the appellant relying upon the decision of this Court in Tata Engineering and Locomotive Co. Ltd. vs Commissioner of Commercial Taxes, Jamshedpur and Anr.
that the sale effected by the appellant 's agent at Bombay could not be treated as the immediate case of movement of goods from the State of Tamil Nadu to the State of Maharashtra or the State of Gujarat, as the case be may.
The facts in the aforesaid case are distinguishable from the facts in the present case since it was held in that case that the procedure followed by the manufacturer, the appellant in that case together with the absence of any firm orders placed by the purchasers indicated that there were no transactions of sale within the meaning of section 2(g) of the Act and assuming that any firm orders had been received by the appellant therein, they could not be regarded as anything but mere offers.
This Court further held in that case that the appropriation of goods was done 51 at the appellant 's stockyard situated in the State where the vehicles were delivered to purchasers and it was open to the appellant till then to allot any vehicle to any purchaser or to transfer a vehicle from one stockyard to another.
One strong circumstance which existed in that case was the absence of the firm orders which occasioned the movement of goods from the State of Bihar to other States as can be seen from the following passage in that decision: "As regards the so called firm orders it has already been pointed out that none have been shown to have existed in respect of the relevant periods of assessment.
Even on the assumption that any such orders had been received by the appellant they could not be regarded as anything but mere offers in view of the specific terms in Exhibit 1 (the dealership agreement) according to which it was open to the appellant to supply or not to supply the dealer with any vehicle in response to such order.
" In the instant case there is clear evidence of the existence of a prior contract of sale as per terms of the allocation card.
The fact that actual sale pursuant to the said contract of sale had taken place subsequently does not militate against the transaction being treated an inter State sale under Section 3 (a) of the Act, since the movement of the goods delivered to the buyer was occasioned by the contract of sale brought into existence under the terms of the allocation card.
It was, however, faintly suggested that the evidence of what took place between the appellant and the allottee within twenty one days of the issue of the allocation card was lacking in this case.
Evidence about these facts was within the knowledge of the appellant and the appellant had not placed it before the assessing authority.
It is likely that if such evidence had been produced it would have gone against the appellant.
Even apart from that the finding recorded by the assessing authority the appellate authority, the Tribunal and the High Court on the basis of the terms of the allocation card and other material on record that there was a contract of sale within the stipulated time between the appellant and the allottee of art silk yarn is unassailable.
In the circumstances no assistance can be derived by the appellant from the case of Tata Engineering and Locomotive Co. Ltd. (supra).
The decision of this Court in Kelvinator of India Ltd. vs The 52 State of Haryana relied on by the appellant has also no bearing on this case.
The assessee in that case had its factory where it manufactured refrigerators at Faridabad in the State of Haryana and it moved the goods manufactured by it to its godown at Delhi.
The excise pass utilised for such movement was always in favour of self.
During the transport of goods, the assessee paid octroi payable for bringing goods into Delhi.
At Delhi, the assessee sold the goods to its distributors.
The Court on a consideration of the material before it held that even though there were prior distribution agreements entered into between the assessee and its distributors, the goods in question had not been moved pursuant to the said agreements from Faridabad to Delhi, and hence there was no inter state sale.
The facts of this case are, however, close to the facts in English Electric Company of India Ltd. vs The Deputy Commercial Tax officer & Ors.
Here also the assessee had its factory in the State of Tamil Nadu.
Its registered office was at Calcutta but it had branch offices at Madras, Bombay and other places.
A Bombay buyer wrote to the Bombay branch of the appellant in that case asking for lowest quotation in respect of the goods which were being manufactured in the factory in Tamil Nadu.
After some correspondence between the Bombay branch and the Madras branch, the Bombay branch, wrote to the Bombay buyer giving all the required particulars.
The Bombay buyer thereafter placed an order with the Bombay branch for certain goods.
The Bombay branch informed the Madras branch about the order placed by the Bombay buyer.
On receipt of the invoice from the Madras branch the Bombay branch wrote to the Bombay buyer that some of the goods indented by him were ready for despatch and asked for despatch instructions.
On receipt of such instructions, the Bombay branch asked the Madras Branch to send goods to Bombay.
The railway receipts were sent through the Bombay branch.
The goods were delivered to the Bombay buyer through clearing agents and the insurance charges were collected from the Bombay buyer.
The assessee claimed in the assessment proceedings that the sale was not an inter State sale but one which had taken place at Bombay between the Bombay branch and the Bombay buyer, The said contention was rejected by this Court with the following observations: "The appellant in the present case sent the goods direct from the Madras branch factory to the Bombay buyer 53 at Bhandup, Bombay.
The railway receipt was in the name of the Bombay branch to secure payment against delivery.
There was no question of diverting the goods which were sent to the Bombay buyer.
When the movement of goods from one State to another is an incident of the contract it is a sale in the course of inter State sale.
It does not matter in which State the property in the goods passes.
What is decisive is whether the sale is one which occasions the movement of goods from one State to another.
The inter State movement must be the result of a covenant, express or implied, in the contract of sale or an incident of the contract.
It is not necessary that the sale must precede the inter State movement in order that the sale may be deemed to have occasioned such movement.
It is also not necessary for a sale to be deemed to have taken place in the course of inter State trade or commerce, that the covenant regarding inter State movement must be specified in the contract itself.
It will be enough if the movement is in pursuance of and incidental to the contract of sale.
When a branch of a company forwards a buyer 's order to the principal factory of the company and instructs them to despatch the goods direct to the buyer and the goods are sent to the buyer under those instructions it would not be a sale between the factory and its branch.
If there is a conceivable link between the movement of the goods and the buyer 's contract, and if in the course of inter state movement the goods move only to reach the buyer in satisfaction of his contract of purchase and such a nexus is otherwise inexplicable, then the sale or purchase of the specific or ascertained goods ought to be deemed to have taken place in the course of inter State or commerce as such a sale or purchase occasioned the movement of the goods from one State to another, The presence of all intermediary such as the seller 's own representative or branch office, who initiated the contract may not make the matter different.
Such an interception by a known person on behalf of the seller in the delivery State and such person 's activities prior to or after the implementation of the contract may not alter the position.
" In the instant case, the allocation card was first sent in November, 1963 asking the appellant directly to make an offer of the 54 goods to the allottee.
The allottee was expected to communicate his desire to purchase the goods within twenty one days of the date of the allocation card.
Such communication brought into existence a contract sale directly between the appellant and the buyer.
The goods were admittedly sent pursuant to the said contract of sale.
The interposition at a later stage of the selling agent who acted on behalf of the appellant in the preparation of the invoice and the delivery of the goods would not alter the true character of the sale as the selling agent was just a conduit pipe.
The goods having been despatched from one State to another State pursuant to a contract of sale which came into existence directly between the appellant and the buyer within a few days after the date of the allocation card, the sale was an inter State sale.
The Tribunal and the High Court were, therefore, right in upholding the orders of the assessing authority levying tax under the Act on all sales which had taken place in favour of the Export Promotion Scheme card holders in Gujarat and Maharashtra even though the selling agent of the appellant at Bombay had on behalf of the appellant also dealt with such card holders at Bombay, as the transactions in question satisfied the tests laid down in the case of English Electric Company of India Ltd. (supra).
In the result the appeals fail and are dismissed with costs.
P.B.R. Appeals dismissed.
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To regulate the allotment of indigenous art silk yarn, the Government of India constituted the Art Silk Yarn Distribution Committee which issued allotment cards to individual weavers.
Under the terms of the card without waiting for the allottee to approach the manufacturer the manufacturer had to offer the allottee art silk yarn within seven days of the date of allocation of the card and within a period of 21 days from the date of allocation of the card, a firm contract for the supply of yarn was to be completed.
The appellant, a manufacturer of art silk yarn with its factory in the State of Tamil Nadu, supplied yarn to cardholders in the States of Maharshtra and Gujarat by delivering the goods at Bombay through its selling agent at that place.
On the question of exigibility of the goods to Central Sales tax the appellant claimed that since the goods were despatched to Bombay at the request of the agent and not as a result of any sale in favour of the purchaser the sale had taken place at Bombay, and secondly since the movement of goods from the State of Tamil Nadu to Bombay was not connected with the sales the sales were not inter State sales within the meaning of section 3 (a) of the Central Sales Tax Act.
This claim was rejected by the Joint Commercial Tax Officer and his order was upheld at the different stages of appeal.
The High Court dismissed the appellant 's revision petitions.
On the question whether the sales were inter State sales, the Court ^ HELD: The goods having been despatched from one State to another pursuant to a contract of sale that came into existence directly between the buyer and seller within a few days after the date of the allocation card, the sale was an inter State sale.
To constitute an inter State sale within the meaning of section 3(a) of the Central Sales Tax Act there must co exist a sale of the goods and movement of 45 goods from one State to another under the contract of sale.
Where there is a link between a contract of sale and movement of goods from one State to another pursuant to the contract of sale, interposition of an agent ought not to alter the inter State character of the sale.
[49 F] In the instant case the card contemplated a contract of sale to be completed within 21 days of the date of its issue.
The agent requested the appellant to despatch certain number of cases to a purchaser and that was done.
These facts cumulatively suggest that the goods had been 'transported from the factory in Tamil Nadu to Bombay for being delivered to the purchaser as a result of contract of sale established in accordance with the terms of the allocation card.
[49 G 50 B;E] The fact that actual sale pursuant to the said contract had taken place subsequently does not militate against the transaction being treated as an inter State sale under section 3(a) because the movement of goods delivered to the buyer was occasioned by the contract of sale brought into existence under the terms of the allocation card.
[51 E] The authorities below have found, on the basis of the terms of the allocation card and other material on record, that there was a contract of sale within the stipulated time between the parties.
[51 G] English Electric Company of India Ltd. vs The Deputy Commercial Tax Officer & Ors., (1976) 38 S.T.C. 475, followed.
Tata Engineering and Locomotive Co. Ltd. vs Assistant Commissioner of Commercial Taxes.
Jamshedpur & Anr.
(1970) 26 S.T.C. 354 and Kelvinator of India Ltd. vs State of Haryana (1973) 32 S.T.C. 629, held inapplicable.
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N: Criminal Appeal No. 168of 1991.
From the Judgment and Order dated 26.7.1989 of the Madya Pradesh High Court in Crl.
A. No. 102 of 1984.
G.L. Sanghi and A.K. Sanghi for the Appellants.
The facts are few and simple.
The first appellant Rajendra, on 30th June, 1982, while running a shop under the name and style of M/s. Kumarvad Bros. in Khargaon Municipal ity, was found exhibiting and offering for sale tea dust, the quantity of which was about 11/2 kgs.
D.P. Nath, P.W. 1, the Food Inspector for Khargaon purchased tea dust in the requisite quantity for test.
The purchased tea was dealt with in the prescribed manner as per rules on the subject.
The purchase and other attendant documents were witnessed by Madan, P 'W ' 2 and another.
The Public Analyst, Bhopal, to whom one of the three samples was sent for analysis opined that the food article fell below the prescribed standard as its contents were present in quantities not within the prescribed limits of variabili ty.
The report of the Public Analyst was communicated to the first appellant as well as to his two brothers, the second and third appellants, because it appears that at the time of 99 the sale of the tea to the Food Inspector, he was told by the first appellants that the court 's intervention could be sought to have one of three brothers.
The accompanying covering letter suggested to the appellants that the court 's intervention could be sought to have one of the samples kept by the Local Health Authority examined one more time.
The appellants did not avail of the opportunity and faced the prosecution launched under section 7 read with section 16 of the before the Chief Judicial Magistrate, Khargaon.
Before the Trial Magistrate the facts as alleged by the prosecution regarding sale by the first appellant to the Food Inspector and of the article of food being adulterated as per report of the Public Analyst were not disputed.
Shelter, however, was taken behind the provisions of Rules 7(3) and 9 A of the Prevention of Food Adulteration Rules, 1955, as then standing, whereunder the Public Analyst was required to send his report to the Local Health Authority within 45 days, which he had not done, and the Local Health Authority was required to 'immediately ' after the institu tion of prosecution forward a copy of the report of the result of the analysis to the appellants.
Since there was a delay of nearly a month on that count the Trial Magistrate viewed this lapse as total to the prosecution.
Furthermore, the Trial Magistrate took the view that in the covering letter while sending the report, nowhere had the appellants been told that they had a right to have the second sample with the Local Health Authority analysed by the Central Food Laboratory in terms of section 13(2) of the Act.
The Trial Magistrate perhaps had in mind that had this been mentioned, the appellants may have chosen to avail of the opportunity of the analysis by the Central Food Laboratory and such report would have superseded the report of the Public Ana lyst, whether for or against the appellants.
On these two grounds the learned Trial Magistrate recorded acquittal of the appellants.
The High Court on appeal by the State of Madhya Pradesh, reversed the Order of acquittal and recorded conviction of the appellants add sentenced each one of them to six months ' rigorous imprisonment and to pay a fine of Rs.5000 each.
This has occasioned the appeal before us.
Our attention was brought to the aforesaid rules and section 13(2) of the Act and the case law on the subject.
Rule 7(3) requires that the Public Analyst shall within a period of 45 days of the receipt of any sample for analysis, deliver to the Local Health Authority, a report of the result of such analysis in Form III.
The Trial Magistrate found that this duty was not discharged by the Public Ana lyst within 100 the prescribed period of 45 days.
The High Court, however, recomputed the period and came to the conclusion that such duty was performed within the prescribed period.
That find ing is one of fact and nothing has been addressed to us in that regard.
So far as the Local Health Authority being required to 'immediately ' after the institution of prosecu tion send a copy of the report of the result of the analysis in Form III, its failure to do so instantly was held to be of no consequence, relying on a judgment of this Court in Tulsiram vs State of Madhya Pradesh, ; where in the word 'immediately ' was interpreted to convey 'reason able despatch and promptitude ' intending to convey a sense of continuity rather than urgency.
This Court then ruled at page 497 as follows: "The real question is, was the Public Ana lyst 's report sent to the accused sufficiently early to enable him to properly defend himself by giving him an opportunity at the outset to apply to the court to send one of the samples to the Central Food Laboratory for analysis.
If after receiving the Public Analyst 's report he never sought to apply to the court to have the sample sent to the Central food Laborato ry, as in the present case, he may not be heard to complain of the delay in the receipt of the report by him, unless, of course, he is able to establish some other prejudice.
Our conclusions on this question are: The expres sion 'immediately ' in Rule 9 A is intended to convey a sense of continuity rather than urgency.
What must be done is to forward the report at the earliest opportunity, so as to facilitate the exercise of the statutory right under section 13(2) in good and sufficient time before the prosecution commences leading evidence.
Non compliance with Rule 9 A is not fatal.
It is a question of prejudice.
" Tulsirarn 's case was thus a complete answer to the conten tion to contrary.
The next question which requires consideration is wheth er all the appellants are guilty of the crime.
From the material available on the record, we find no basis to sus tain the conviction of the second and third appellants, Om Prakash and Subhash.
There is no evidence worth the name to conclusively prove their complicity beyond reasonable doubt.
The first appellant is alleged to have told the Food Inspec tor on the date of sale of tea dust that the shop was being run in partnership by him with his two brothers.
This was the only case set up by 101 the prosecution at the trial.
No evidence was gathered or tendered to prove the partnership.
On the facts, which are eloquent, the first appellant alone made the sale of tea dust to the Food Inspector and not all.
Burden was on the prosecution to prove the existence of the partnership.
We do not propose to indulge in the refinery of civil law but have to adopt the cautious approach to adjudge criminality of the accused appellants.
Even it the Food Inspector is believed that the first appellant told him that 'the business on the shop was being run in partnership that per he was not enough to inculpate the remaining two appellants without further evidence '.
We find an area of doubt in this sphere and extending the same to the second and third appellants order their acquittal.
They be discharged from their bail bonds.
Fine, if paid, be refunded to them.
The case of the first appellant stands singled out.
His conviction was well deserved which is hereby maintained confirming the sentence of imprisonment but reducing the fine to Rs. 1000, in default of payment of which further rigorous imprisonment for one month is ordered.
He shall surrender to his bail bonds.
The excess fine, if paid, be refunded to the first appellant.
As a result the appeal of appellants 2 & 3 is allowed and that of appellant No. 1 dismissed, subject, however to the reduction of sentence.
R.P. Appeal dis posed of.
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Appellant No. 1 was found exhibiting and offering for sale tea dust.
P.W. 1, the Food Inspector purchased tea dust in the requisite quantity for test.
Appellant No. 1 told P.W. 1 that the shop which was being run by him was a part nership concern of the three brothersappellant No. 1 to 3.
On receipt of Public Analyst 's report, prosecution was lanuched against the appellants under section 7 read with section 16 of the .
Before the trial Magistrate the facts regarding sale by appellant no.1 of the food article and the same being adul terated as reported by the Public Analyst were not disputed.
The appellants however, argued that the Public Analyst did not send the report within the period prescribed under r. 7(3) Prevention of Food Adulteration Rules, 1955 and the Local Health Authority did not forward the copy of the result of the analysis to the appellants 'immediately ' after institution of the prosecution as envisaged by r. 9A.
Since there was a delay of nearly a month on that count, the trial Magistrate viewed this lapse as fatal to the prosecution.
He also held that in the covering letter while sending the report, it was not mentioned that the appellants had a right to have analysed the second sample by the Central Food Laboratory in terms of section 13(2) of the 96 97 Act.
He, therefore, acquitted the appellants.
On appeal by the State, the High Court reversed the order of acquittal.
It convicted the appellants and sen tenced each of them to six months ' rigorous imprisonment and to pay a fine of Rs.5000 each.
Aggrieved the appellants preferred the appeal by special leave to this Court.
On consideration of evidence regarding guilt of all the appellants and requirements of section 13(2) of the and rr.
7(3) and 9A of the Prevention of Food Adulteration Rules, 1955, Disposing of the appeal, this Court, HELD: 1.
In the instant case, there was no basis to sustain the conviction of appellants No. 2 and 3.
There was no evidence worth the name to conclusively prove their complicity beyond reasonable doubt.
The only case set up by the prosecution against these appeliants was that appellant No. 1 was alleged to have told the Food Inspector that the shop was being run in partnership by him with his these two brothers.
Appellant No. 1 alone made the sale in question to the Food Inspector.
Burden was on the prosecution to prove the existence of partnership.
Even if the Food Inspector is believed that appellant No. 1 told him that the shop was being run in partnership, that per he was not enough to inculpate the remaining two appellants without further evidence.
There is an area of doubt in this sphere and extending the same to appellants No. 2 and 3, they are acquitted.
[100G H; 101A B] The case of first appellant stood singled out.
His conviction was well deserved, which should be maintained and the sentence confirmed.
However, fine was to be reduced to Rs.1,000.
[101C] 2.
The expression 'immediately ' in r. 9A of the Preven tion of Food Adulteration Rules, 1955, is intended to convey a sense of continuity rather than urgency.
What must be done is to forward the report at the earliest opportunity, so as to facilitate the exercise of the statutory right under section 13(2) in good and sufficient time before the prosecution commences leading evidence.
Non compliance with r. 9 A is not fatal.
It is a question of prejudice.
The word 'immedi ately ' was to be interpreted to convey 'reasonable despatch and promptitude ' intending to convey a sense of continuity rather than urgency.
The High Court was right in holding that failure to send instantly a copy of the analysis 98 report to the appellants was of no consequence.
[100A F] Tulsiram vs State of Madhya Pradesh, ; , relied on.
On the question of compliance of r. 7(3) in regard to the period of submission of the report by Public Analyst to the Local Health Authority, the High Court 's conclusion, reached by it after recomputing the period, that such duty was performed within the prescribed period was a finding of fact and nothing was addressed before this Court in that regard.
[99G H; 100A]
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Civil Appeals Nos. 1848 and 1849 of 1974.
Appeals by Special Leave from the Judgment and Orders dated the 27 11 1973 & 23 5 74 of the Delhi High Court in L.P.A. No. 172/73 and Civil Writ No. 237 of 1974 respectively.
Hardyal Hardy, section K. Mehta, K. R. Nagaraja and P. N. Puri for the Appellants.
1062 Mrs. Shyamla Pappu and Girish Chandra for Respondents 1 3.
R. N. Sachthey for Respondents 4 5.
The Judgment of the Court was delivered by SARKARIA, J.
This judgment will govern the disposal of these two appeals which arise out of a common judgment of the High Court of Delhi dismissing the writ petitions filed by the appellants and others, under Article 226 of the Constitution.
On November 27, 1972, the Administrator of Delhi, made an order under section 5 of the Indian Telegraphs Act.
1885 (for short, the Act) authorising the Superintendent of Police, North District, to take temporary possession "until further orders" of certain specified telephones installed in rooms and cabins of the building known as Coronation Hotel, Fatehpuri, Delhi.
The order reads as under: "Whereas the Administrator of Delhi is satisfied that illegal forward trading (satta) in agricultural commodities is being practised on a large scale through the following telephones installed in the rooms/cabins in the premises of the Coronation Hotel, Fatehpuri, Delhi, thereby affecting adversely the price of the supply essential to the life of the community.
Whereas public emergency exists and the Administrator, Delhi is satisfied that the continuation of satta at the aforesaid premises through the telephones given above is prejudicial to public interest and as such it is necessary to take temporary possession of all the aforesaid telephones from the premises in question." Another order in similar terms was made on December 4, 1972 by the Administrator for taking over certain other telephones.
Four subscribers, who were affected by these orders challenged their validity by writ petitions in the High Court.
A Bench of the High Court allowed those petitions and quashed the orders in question on the ground that resort cannot be had to section 5(1) of the Act for taking temporary possession of the subscribers ' telephones.
The General Manager, Telephones, Delhi also, made orders on November 28, 1972 and December 5, 1972, purporting to act under Rule 422 of the Indian Telegraphs Rules, 1951, (for short, the Rules) for disconnecting the telephones and non exchange lines.
One of those orders, dated November 28, 1972, may be extracted as a specimen: "The Delhi Administration has certified vide order No. F5/20/72/C HG dated 27 11 1972 that public emergency exists and that continuation of "satta ' at the premises of Coronation Hotel Fatehpuri through the telephones is pre judicial to public interest.
1063 The undersigned in exercise of the powers conferred under rule 422 of Indian Telegraphs Rules, 1951 hereby orders to disconnect the telephones and Non exchange Lines mentioned in the list supplied by Delhi Administration (copy attached).
" Thereupon the appellants filed C.W. 470 of 1973 in the High Court praying for a writ to quash these orders of the General Manager and for restoration of their telephone connections.
This writ petition was heard by a learned Single Judge of the High Court who allowed the same and quashed the impugned orders and further directed that the telephones be restored to the appellants.
Aggrieved, the Union of India and other respondents carried a special appeal to the appellate Bench of the High Court.
Before the appellate Bench it was contended that the impugned action was bad because: (a) no prior notice in regard to the same was given to the appellants; (b) the Divisional Engineer did not apply his mind and record his own satisfaction about the existence of any emergency and as such there was a contravention of Rules 421 and 422 which had to be read together; (c) the reason given in the impugned order, to the effect, that the appellants were making illegal and improper use of their telephones inasmuch as they were transmitting messages and information in regard to satta business which had been banned, was irrelevant and extraneous to Rule 422 under which the impugned action has been purportedly taken; (d) the emergency contemplated by Rule 422 is not the same as a 'public emergency ' declared under s.5, but is an emergency arising out of the breakdown of the telecommunications due to a technical defect, labour trouble, vis major, fire or the like, the existence of which was to be established to the satisfaction of the Divisional Engineer and not any extraneous authority.
Stress was laid, in this connection, on the fact that the word "emergency" in Rule 422 is not qualified by the prefix "public", instead, the words used are "any emergency".
The High Court negatived these contentions.
In its opinion, the requirement of notice could be dispensed with under r. 422 if the General Manager, Telephones, was satisfied that the telephones were being used by the subscribers for illegal forward trading and that such use was contrary to public interest in view of the existence of "economic" emergency.
It further held that the words "any emergency" in Rule 422 include an 'economic emergency ', and on the basis of the certificate in regard to the existence of an "economic emergency" issued under section 5, by the Delhi Administration.
The Divisional Manager was competent in exercise of his powers under Rule 422 to pass the impugned orders.
In the result, it set aside the decision of the learned Single Judge and dismissed the writ petition with the observation that "the telephone authorities should treat these disconnections as temporary and allow the petitioners to get back their connections, if the General Manager is satisfied that the emergency caused by the shortage in supply of the commodities on which the forward trading was banned, was over".
1064 Hence these appeals.
The contentions canvassed before the High Court have been repeated before us.
Before dealing with the same, it will be worthwhile to have a look at the relevant statutory provisions.
Section 5 of the Act provides: "(1) On the occurrence of any public emergency, or in the interest of the public safety, the Central Government or State Government or any officer specially authorised in this behalf by the Central Government or a State Government may, if satisfied that it is necessary or expedient so to do, take temporary possession (for so long as the public emergency exists or the interest of the public safety requires the taking of such action) of any telegraph established, maintained or worked by any person licensed under this Act.
(2) On the occurrence of any public emergency or in the interest of the public safety, the Central Government or a State Government or any officer specially authorised in this behalf by the Central Government or a State Government may, if satisfied that it is necessary or expedient so to do in the interest of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States or public order or for preventing incitement to the commission of an offence, for reasons to be recorded in writing, by order, direct that any message or class of messages to or from any person or class of persons or relating to any particular subject, brought for transmission by or transmitted or received by any telegraph, shall not be transmitted, or shall be intercepted or detained, or shall be disclosed to the Government making the order or an officer thereof mentioned in the order: Provided that press messages intended to be published in India of correspondents accredited to the Central Government or a State Government shall not be intercepted or detained, unless their transmission has been prohibited under this sub section.
" The material rules are these: "421.
Disconnection of telephones.
Where the Divisional Engineer is satisfied for reasons to be recorded in writing that it is necessary to do so, he may, after giving the subscriber a notice in writing for a period which shall not except in emergent cases be less than 7 days, disconnect the telephone, and in such case, the subscriber shall be entitled to refund of rent for the unexpired portion of the period for which the connection or service was given.
1065 422.
Right of disconnection in emergency.
The Divisional Engineer may, in the event of any emergency, disconnect any subscriber, with or without notice.
In case such disconnection exceeds a period of seven days, the subscriber shall be entitled to proportionate refund of rent.
Illegal or improper use of telephones.
A subscriber shall be personally responsible for the use of his telephone.
No telephone shall be used to disturb or irritate any person or for the transmission of any message or communication which is of an indecent or obscene nature or is calculated to annoy any person or to disrupt the maintenance of public order in any other manner contrary to any provision of law." Section 5(1), if properly construed, does not confer unguided and unbridled power on the Central Government/State Government/Specially Authorised Officer to take possession of any telegraph.
Firstly, the occurrence of a 'public emergency ' is the sine qua non for the exercise of power under this section.
As a preliminary step to the exercise of further jurisdiction under this section the Government or the authority concerned must record its satisfaction as to the existence of such an emergency.
Further, the existence of the emergency which is a pre requisite for the exercise of power under this section, must be a 'public emergency ' and not any other kind of emergency.
The expression 'public emergency ' has not been defined in the statute, but contours broadly delineating its scope and features are discernible from the section which has to read as a whole.
In sub section (1) the phrase 'occurrence of any public emergency ' is connected with and is immediately followed by the phrase "or in the interests of the public safety".
These two phrases appear to take colour from each other.
In the first part of sub section
(2) these two phrases again occur in association with each other, and the context further clarifies, with amplification, that a 'public emergency ' within the contemplation of this section is one which raises problems concerning the interest of the public safety, the sovereignty and integrity of India, the security of the State, friendly relations with foreign States or public order or the prevention of incitement to the commission of an offence.
It is in the context of these matters that the appropriate authority has to form an opinion with regard to the occurrence of a 'public emergency ' with a view to taking further action under this section.
Economic emergency is not one of those matters expressly mentioned in the statute.
Mere 'economic emergency ' as the High Court calls it may not necessarily amount to a 'public emergency ' and justify action under this section unless it raises problems relating to the matters indicated in the section.
Rules 421 and 422 occur in serial order in a section of Part V under the group caption, "Telephone connections and other services".
Rule 421 requires the Divisional Engineer to record his satisfaction, supported by reasons, for the proposed disconnection of the telephone.
It further requires that authority to give a notice in writing to the subscriber.
Such notice shall ordinarily be of not less than seven 1066 days.
In emergent cases, the period of this notice can be less than seven days.
But even in emergent cases under this Rule, the notice cannot be dispensed with altogether.
Rule 422 empowers the Divisional Engineer to disconnect any subscriber 'in the event of any emergency ' with or without notice.
The existence of "any emergency" to the satisfaction of the Divisional Engineer, appears to be a necessary pre requisite to the exercise of the power under this rule.
It is significant that while section 5 speaks of the occurrence of a 'public emergency ', satisfaction with regard to the existence of which is to be recorded by the appropriate authority mentioned in that section, Rule 422 purports to empower the Divisional Engineer to take action thereunder in the event of "any emergency".
The scope of the words "any emergency" in Rule 422 is apparently wider than the expression "public emergency" used in section 5.
It follows that the satisfaction is regard to the existence of "any emergency" under Rule 422 is to be of the Divisional Engineer.
He has to arrive at such satisfaction rationally on relevant material which may include any certificate or report of the appropriate Government as to the occurrence of a 'public emergency '.
The requirement of recording such satisfaction by the Divisional Engineer, with reasons therefor, is implicit in the Rule.
That will be a minimal safeguard against arbitrary exercise of this drastic power.
In this connection, it will not be out of place to mention here, that sub section (2) of section 5 which made the Certificate of the Central/State Government conclusive proof as to the existence of a 'public emergency ', stood deleted and replaced by a different provision, at the time when the impugned action was taken in this case.
That is an additional reason for holding that it was the Divisional Engineer who had to form his own opinion as to the existence of an emergency, before taking action under r. 422.
Having heard the Counsel on both sides, we are of opinion, that the impugned Order suffers at least from one apparent defect of jurisdiction.
Assuming that the General Manager was competent to make an order under Rule 422, the power has been exercised mainly on a ground which is not a relevant consideration under this Rule.
This ground as recited in the Delhi Administration Notification of December 4, 1972 and reproduced in the impugned order of the General Manager, Telephones, is that illegal forward trading (satta) in agricultural commodities is being practised in a large scale through the telephones in question at the premises of Coronation Hotel, Fatehpuri.
In other words, the impugned action has been taken chiefly on the ground that the appellants have been making improper or illegal use of these telephones.
This being the position, the appropriate course to be followed was that laid down in Rule 427 read with Rules 416 and 421.
But this was not done.
It is well settled that where a power is required to be exercised by a certain authority in a certain way, it should be exercised in that manner or not at all, and all other modes of performances are necessarily forbidden.
It is all the more necessary to observe this rule 1067 where power is of a drastic nature and its exercise in a mode other than the one provided, will be violative of the fundamental principles of natural justice.
Now, in the present case, if the telephones of the appellants were to be disconnected on the ground of misuse, then they had to give, in consonance with the principles of natural justice, opportunity to the appellants to explain their conduct before taking action under Rule 427 read with Rules 416 and 421.
Resort to the wrong and more drastic course provided in Rule 422, on a ground which was not germane to an action under that Rule, vitiates the impugned order, particularly when it is manifest that in making the impugned order, the General Manager was influenced more by this ground and less, if at all, by the existence of 'public emergency ' certified by the Delhi Administration.
For the foregoing reasons we accept these appeals, allow the writ petitions, quash the impugned orders and direct the respondents to restore the telephone connections to each of these appellants.
However in the circumstances of the cases we make no order as to costs.
S.R. Appeals allowed.
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The appellants ' telephones were disconnected and taken temporary possession of by the Superintendent of Police, North District and the General Manager, Telephones respectively on various dates acting under the instructions of the Administrator, Delhi, who was personally satisfied that illegal forward trading (satta) in agricultural commodities was being practised on a large scale by them through their telephones.
The Orders were purportedly made under section 5(1) of the Indian Telegraphs Act, 1895, and Rule 422 of the Indian Telegraphs Rules, 1951.
These orders were assailed by the appellants by a writ petition under article 226 of the Constitution which was allowed by a single Judge of the High Court, resulting in a special appeal by the Union of India, which was accepted.
Negativing the contention of the appellants/respondents viz.; that the impugned action of disconnection and temporary taking over of the telephones was bad because: (a) No statutory notice was ever given as required under Rules 421 and 422.
(b) The Divisional Engineer did not apply his mind and record his own satisfaction about the existence of "any emergency" and as such there was a contravention of Rules 421 and 422 which had to be read together.
(c) The reason given in the order to the effect that the appellants were making illegal and improper use of the telephones by transmitting messages and information in regard to Satta business which had been banned, was irrelevant and extraneous to Rule 422.
(d) The emergency contemplated by Rule 422 is not the same as "public emergency" declared under section 5, but "any emergency", the existence of which was to be established to the satisfaction of the Divisional Engineer and not any extraneous authority, the appellate Bench of the High Court held, (i) that, the requirement of notice could be dispensed with under Rule 422 by the General Manager Telephones, if he was satisfied that the telephones were being used by the subscribers for illegal forward trading (ii) that, such use was contrary to public interest in view of the existence of "economic" emergency (iii) that the words " any emergency" in Rule 422 includes an "economic emergency" and (iv) that, on the basis of the certificate in regard to the existence of an 'economic emergency" the Divisional Manager was competent to pass the impugned order in exercise of his powers under Rule 422.
While allowing the appeals by special leave the Court, ^ HELD : (1) section 5(1) of the Indian Telegraphs Act, 1895, if properly construed does not confer unguided and unbridled power on the Central Government/State Government/Specially Authorised Officer to take possession of any telegraph.
[1065 C] 1061 (2) Conditions pre requisite for the exercise of power under this section and Rule 422 are: (a) the occurrence of a "public emergency" not any other kind of emergency.
(b) recording of its satisfaction as to the existence of such an emergency by the Government or the Authority concerned on grounds germane to an action under the rule [1065 C D] (3) The expression "public emergency" has not been defined in the statute.
Read as a whole, s.5, with the two phrases in sub section (i) viz. "occurrence of any public emergency" and "or in the interest of public safety", clarifies that a "public emergency", within the contemplation of that section, is one which raises problems concerning the interest of public safety", the sovereignty and integrity of India, the security of the State, friendly relations with foreign States or public order, or the prevention of incitement to the commission of an offence.
It is in the context of these matters that the appropriate authority has to form an opinion with regard to the occurrence of a "public emergency" with a view to taking further action under section 5.
[1065 D F] (4) "Economic Emergency" is not one of these matters expressly mentioned in the statute.
Mere "economic emergency" may not necessarily amount to a "public emergency" and justify action under section 5 unless it raises problems relating to the matters indicated therein.
[1065 F G] (5) Notice under Rule 421 cannot be dispensed with.
The scope of the words "any emergency" in Rule 422 is wider than the expression "public emergency" under section 5.
The subjective satisfaction as to the existence of "any emergency" under Rule 422 is that of the Divisional Engineer, on a rational basis on relevant material which may include any certificate or report of the appropriate Government as to the occurrence of a "public emergency".
The requirement of recording such satisfaction by the Divisional Engineer with reasons therefor, is implicit in the Rule.
That will be a minimal safeguard against arbitrary exercise of the drastic power.
[1066 A, C D] (6) The ground for disconnection and taking over temporary possession of the telephones viz., 'that illegal forward trading (satta) in agricultural commodities is being practised" amounts to "improper or illegal use of telegraphs and is not a relevant consideration under Rule 422.
The appropriate course to be followed was that laid down in R. 427 read with Rr. 416 and 421, after giving an opportunity to explain their conduct, in consonance with the principles of natural justice.
[1066 F G] (6) It is well settled that where a power is required to be exercised by a certain authority in a certain way, it should be exercised in that manner or not at all, and other modes of performance are necessarily forbidden.
It is all the more necessary to observe this rule where the power is of a drastic nature and, its exercise in a mode other than the one provided, will be violative of the fundamental principle of natural justice.
Resort to the wrong and more drastic course provided in rule 422, on a ground which was not germane to an action under that rule violates the impugned order, particularly when it is manifest, in the instant case that the authority was influenced more by this ground and less, if at all, by the existence of "public emergency" certified by the State [1066 H, 1067 A B]
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Appeal No. 205 of 1952.
Appeal from the Judgment and Order dated the 16th September, 1952, of the High Court of Judicature at Madras (Subba Rao J.) in Writ Petition No. 599 of 1952 filed under the Special Original Jurisdiction of the High Court under article 226 of the Constitution of India.
M.C. Setalvad, Attorney General.for India (G. N. Joshi, with him) for the appellant and Intervener.
Mohan Kumaramangalam, for the respondent.
February 27.
The judgment of the court was delivered by PATANJALI SASTRI C.J.
This is an appeal from an order of a Single Judge of the High Court of Judicature at Madras issuing a writ of prohibition restraining the 1146 Election Commission, a statutory authority constituted by the President and having its offices permanently located at New Delhi, from enquiring into the alleged disqualification of the respondent for membership of the Madras Legislative Assembly.
The respondent was convicted by the Sessions Judge of East Godavari and sentenced to a term of seven years ' rigorous imprisonment in 1942, and he was released on the occasion of the celebration of the ludependence Day on 15th August, 1947.
In June, 1952, there was to be a by election to a reserved seat in the Kakinada constituency of the Madras Legislative Assembly, and the respondent, desiring to offer himself as a candidate but finding himself disqualified under section 7 (b) of the Representation of the People Act, 1951, as five years had not elapsed from his release, applied to the Commission on 2nd April, 1952, for exemp tion so as to enable him to contest the election.
No reply to the application having been received till 5th May, 1952, the last day for filing nominations, the respondent filed his nomination on that day, but no exception was taken to it either by the Returning Officer or any other candidate at the scrutiny of the nomination papers.
The election was held on 14th June, 1952, and the respondent, who secured the largest number of votes, was declared elected on 16th June, 1952.
The result of the election was published in the Fort St. George Gazette (Extraordinary) on 19th June, 1952, and the respondent took his seat as a member of the Assembly on 27th June, 1952.
Meanwhile, the Commission rejected the respondent 's application for exemption and communicated such rejection to the respondent by its letter dated 13th May, 1952, which however was not received by him.
On 3rd July, 1952, the Speaker of the Assembly read out to the House a communication received from the Commission bringing to his notice "for such action as he may think fit to take", the fact that the respondent 's application for exemption had been rejected.
A question as to the respondent 's disqualification having thus been raised, the Speaker referred the question to the Governor of 1147 Madras who forwarded the case to the Commission for its "opinion" as required by article 192 of the Constitution.
The respondent having thereupon challenged the competency of the reference and the action taken thereon by the Governor, the Commission notified the respondent that his case would be heard on 21st August, 1952.
Accordingly, the Chief Election Commissioner (who wag the sole Member of the Commission for the time being) went down to Madras and heard the respondent 's counsel and the Advocate General of Madras on 21th August, 1952, when it was agreed that, in case the petitioner 's counsel desired to put forward any further representations or arguments, the same should be sent in writing so as to reach the Commission in Delhi by 28th August, 1952, and the Commission should take them into consideration before giving its opinion to the Governor.
On the same day (21st August, 1952) the respondent applied to the High Court under article 226 of the Constitution contending that article 192 thereof was applicable only where a member became subject to a disqualification after he was elected but not where, as here, the disqualification arose long before the election, in which case the only remedy was to challenge the validity of the election before an Election Tribunal.
He accordingly prayed for the issue of a writ of mandamus or of prohibition directing the Commission to forbear from proceeding with the reference made by the Governor of Madras who was not, however, made a party to the proceeding.
On receipt of the rule nisi issued by the High Court, the Commission demurred to the jurisdiction of the court to issue the writs asked for, on the ground that the Commission was not "with in the territory in relation to which the High Court exercised jurisdiction".
A further objection to the maintainability of the application was also raised to the effect that the action of the Governor in seeking the opinion of the Commission could not be challenged in view of the immunity provided under article 361 (1), and that the Commission itself, which had not to "decide" the question of disqualification, but had merely to give its 1148 "opinion", could not be proceeded against under article 226.
On the merits, the Commission contended that article 192 was, on its true construction, applicable to cases of disqualification arising both before and after the election and that both the reference of the question as to the respondent 's disqualification to the Governor of Madras and the latter 's reference of the same to the Commission for its opinion were competent and valid.
The application was heard by Subba Rao J. who overruled the preliminary objections and held that article 192 on its true construction applied only to cases of supervening disqualifications and that the Commission had, therefore, no jurisdiction to deal with the respondent 's disqualification which arose long before the election took place.
He accordingly issued a writ prohibiting the Commission from proceeding with the enquiry in regard to the question referred to it by the Governor under article 192.
The learned Judge, however, granted a certificate under article 132 that the case involved substantial questions of law as to the interpretation of the Constitution, and the Commission has accordingly preferred this appeal.
A preliminary objection was raised by Mr. Mohan Kumaramangalam, who argued the case for the respondent with marked ability, that the appeal brought from the judgment of a single Judge was barred under article 133(3) of the Constitution despite the certificate granted by the learned Judge overruling the same objection which was also raised before him.
It has been urged that, so far as civil matters are concerned, the more comprehensive provisions in article 133(1) (c) for the grant of a certificate of fitness for appeal to the Supreme Court completely overlap article 132(1) which relates only to one specific ground, namely, a substantial question of law being involved as to the interpretation of the Constitution, and that the court 's power, therefore, to grant a certificate of fitness on any ground including the ground referred to above, must be deem ed to arise under article 133(1) (c), with the result that the exercise of such power is excluded by the opening 1149 words of clause (3) of that article which bars an appeal from the judgment, decree or final order of one Judge of a High Court.
The argument was sought to be reinforced by reference to clause (2) of that article and the proviso to article 145(3) both of which contemplate appeals involving substantial questions of law as to the interpretation of the Constitution being brought without a certificate having been obtained under article 132.
The argument has no force.
While it is true that constitutional questions could be raised in appeals filed without a certificate under article 132, the terms of that article make it clear that an appeal is allowed from "any judgment, decree or final order of a High Court" provided, of course, the requisite certificate is given, and no restriction is placed on the right of appeal having reference to the number of Judges by whom such judgment, decree or final order was passed.
Had it been intended to exclude the right of appeal in the case of a judgment etc., by one Judge, it would have been easy to include a reference to article 132 also in the opening words of article 133(3), as in the immediately preceding clause.
If the respondent 's contention were accepted, not only would article 132 become redundant so far as it relates to civil proceedings, but the object of the Explanation to that article, which was designed to supersede the decision of the Federal Court in section Kuppuswami Rao vs The King (1) and thus to secure a speedy determination of constitutional issues going to the root of a case, would be defeated, as the Explanation is not made applicable to the same expression "final order" used in article 133(1).
The whole scheme of the appellate jurisdiction of the Supreme Court clearly indicates that questions relating to the interpretation of the Constitution are placed in a special category irrespec tive of the nature of the proceedings in which they may arise, and a right of appeal of the widest amplitude is allowed in cases involving such questions.
We accordingly overrule the preliminary objection and hold that the appeal is maintainable.
(1) 149 1150 Turning now to the question as to the powers of a High Court under article 226, it will be noticed that article 225 continues to the existing High Courts the same jurisdiction and powers as they possessed immediately before the commencement of the Constitution.
Though there had been some conflict of judicial opinion on the point it was authoritatively decided by the Privy Council in the Parlakimedi case(1) that the High Court of Madras the High Courts of Bombay and Calcutta were in the same position had no power to issue what were known as high prerogative writs beyond the local limits of its original civil jurisdiction, and the power to issue such writs within those limits was derived by the court as successor of the Supreme Court which had been exercising jurisdiction over the Presidency Town of Madras and was replaced by the High Court established in pursuance of the Charter Act of 1861.
The other, High Courts in India had no power to issue such writs at all.
In that situation, the makers of the Constitution, having decided to provide for certain basic safeguards for the people in the new set up, which they called fundamental rights, evidently thought it necessary to provide also a quick and inexpensive remedy for the enforcement of such rights and, finding that the prerogative writs which the Courts in England had developed and used whenever urgent necessity demanded immediate and decisive interposition, were peculiarly suited for the purpose, they conferred, in the States ' sphere, new and wide powers on the High Courts of issuing directions, orders, or writs primarily for the enforcement of fundamental rights, the power to issue such directions, etc., "for any other purpose" being also included with a view apparently to place all the High Courts in this country in somewhat the same position as the Court of King 's Bench in England.
But wide as were the powers thus conferred, a two fold limitation was placed upon their exercise.
In the first place, the power is to be exercised "throughout the territories in relation to which it exercises jurisdiction", that is to say, the writs issued (1) 70 I.A, 129 1151 by the court cannot run beyond the territories subject to its jurisdiction.
Secondly, the person or authority to whom the High Court is empowered to issue such writs must be "within those territories", which clearly implies that they must be amenable to its jurisdiction either by residence or location within those territories.
Such limitation is indeed a logical consequence of the origin and development of the power to issue prerogative writs as a special remedy in England.
Such power formed no part of the original or the appellate jurisdiction of the Court of King 's Bench.
As pointed out by Prof. Holdsworth (History of English Law, Vol. 1, p. 212 et seq.) these writs had their origin in the exercise of the King 's prerogative power of superintendence over the due observance of the law by his officials and tribunals, and were issued by the Court of King 's Bench habeas corpus, that the King may know whether his subjects were lawfully imprisoned or not; certiorari, that he may know whether any proceedings commenced against them are conformable to the law; mandamus, to ensure that his officials did such acts as they were bound to do under the law, and prohibition, to oblige the inferior tribunals in his realm to function within the limits of their respective jurisdiction.
See also the introductory remarks in the judgment in the Parlakimedi case(1).
These writs were thus specifically directed to the persons or authorities against whom redress was sought and were made returnable in the court issuing them and, in case of disobedience, were enforceable by attachment for contempt.
These characteristics of the special form of remedy rendered it necessary for its effective use that the persons or authorities to whom the court was asked to issue these writs should be within the limits of its territorial jurisdiction.
We are unable to agree with the learned Judge below that if a tribunal or authority permanently located and normally carrying on its activities elsewhere exercises jurisdiction within those territorial (1) 70 I.A. 129, 140.
1152 limits so as to affect the rights of parties therein, such tribunal or authority must be regarded as "function 'mg" within the territorial limits of the High Court and being therefore amenable to its jurisdiction under article 226.
It was, however, urged by the respondent 's counsel that the High Court had jurisdiction to issue a writ to the Commission at New Delhi because the question referred to it for decision related to the respondent 's right to sit and vote in the Legislative Assembly at Madras and the parties to the dispute also resided in the State of Madras.
The position, it was claimed, was analogous to the court exercising jurisdiction over persons outside the limits of its jurisdiction, provided the cause of action arose within those limits.
Reliance was placed upon the following observations of the Privy Council in the Parlakimedi case(1): "The question of jurisdiction must be regarded as one of substance and that it would not have been within the competence of the Supreme Court to claim juisdiction over such a matter as the present of issuing certiorari to the Board of Revenue on the strength of its location in the town.
Such a view would give jurisdiction to the Supreme Court in the matter of the settlement of rents of ryoti holdings in Ganges between parties not otherwise subject to its jurisdiction, which it would not have had over the Revenue Officer who dealt with the matter at first instance.
" We cannot accede to this argument.
, The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226 which makes no reference to any cause of action or where it arises but insists on the presence of the person or authority within the territories" in relation to which the High Court exercises jurisdiction.
Nor is much assistance to be derived from the observations quoted above.
That case arose out of proceedings before a special Revenue Officer for settlement of fair rent for certain holdings within the zemindary estate of Parlakimedi situated beyond the local limits of the original civil jurisdiction of the Madras High Court.
Dissatisfied (1) 70 I.A. 129.
1153 with the settlement made by the Revenue Officer, the ryots appealed to the Board of Revenue which had its offices at Madras.
The appeal was accepted by a single member of the Board who reduced the rent as desired by the ryots.
The zemindar appealed by way of revision to the Collective Board which sanctioned an enhancement.
Thereupon the ryots applied to the High Court for the issue of a writ of certiorari to bring up and quash the proceedings of the Collective Board which passed the order complained of in the town of Madras.
The Privy Council considered the question of jurisdiction from two separate standpoints: "(a) independently of the local civil jurisdiction which the High Court exercises over the Presidency town; or (b)solely by reason thereof, as an incident of the location of the Board of Revenue within the town.
" On question (a), they examined the powers of the Supreme Court at Madras to issue certiorari beyond the Presidency Town under clause 8 of the Charter of 1800, as it was suggested that the High Court succeeded to the jurisdiction and powers of the Supreme Court which had been granted the same powers of issuing prerogative writs as the Court of King 's Bench in England throughout the Province, and they recorded their conclusion thus: " Their Lordships are not of opinion that the Supreme Court would have had any jurisdiction to correct or control a country court of the company deciding a dispute between Indian inhabitants of Ganjam about the rent payable for land in that district.
" Then, dealing with question (b) and referring to their decision in Besants case(1) that the High Courts of Calcutta, Madras and Bombay had power to issue certiorari in the exercise of their local jurisdiction, they held that the principle could not be applied "to the settlement of rent for land in Ganjam merely on the basis of the location of the Board of Revenue as a body which is ordinarily resident or located within (1) 46 I.A. I 76.
1154 the town of Madras, or on the basis that the order complained of was made within the town.
if SO, it would seem to follow that the jurisdiction of the High Court would be avoided by the removal of the Board of Revenue beyond the outskirts of the town and that it would never attach but for the circumstance that an appeal is brought to, or proceedings in revision taken by, the Board of Revenue.
" Then followed the passage already quoted on which the respondent 's counsel laid special stress.
It will thus be seen that the decision is no authority for dispensing with the necessity of the presence or location, within the local limits of the court 's jurisdiction, of the person or authority to whom the writ is to be issued, as the basis of its power to issue it.
Their Lordships considered, in the peculiar situation they were dealing with, that the mere location of the appellate authority alone in the town of Madras was not a sufficient basis for the exercise of jurisdiction whereas both the subject matter, viz., the settlement of rent for lands in Ganjam, and the Revenue Officer authorized to make the settlement at first instance were outside the local limits of the jurisdiction of the High Court.
If the court in Madras were, recognised as having jurisdiction to issue the writ of certiorari to the appellate authority in Madras, it would practically be recognising the court 's jurisdiction over the Revenue Officer in Ganjam and the settlement of rents for lands there, which their Lordships held it never had.
That was the "substance" of the matter they were looking at, and their observations lend no support to the view that if the subject matter or the cause of action and the parties concerned were within the territorial limits of the jurisdiction, the High Court could issue prerogative writs to persons or authorities who are not within those limits.
In any case, the decision did not turn on the construction of a statutory provision similar in scope ' purpose or wording to article 226 of the Constitution, and is not of much assistance in the construction of that article.
1155 It was said that it could not have been contemplated that an inhabitant of the State of Madras, feeling aggrieved by a threatened interference with the exercise of his rights in that State by an authority located in Delhi and acting without jurisdiction, should seek his remedy under article 226 in the Punjab High Court.
It is a sufficient answer to this argument of inconvenience to say that, the language of the article being reasonably plain, it is idle to speculate as to what was or was not contemplated.
Our attention has been called to certain decisions of High Courts dealing with the situation where the authority claiming to exercise jurisdiction over a matter at first instance is located in one State and the appellate authority is located in another State.
It is not necessary for the purposes of this appeal to decide which High Court would have jurisdiction in such circumstances to issue prerogative writs under article 226.
In the view we have expressed above as to the applicability of article 226 to the present case, it is unnecessary to enter upon a discussion of the question whether article 192(1) applies only to members who, having been already elected, have become subject to a disqualification by reason of events happening after their election; but having heard the point fully argued before us, we think it right to express our opinion thereon, especially as both sides have invited us to do so in view of its general importance.
The relevant provisions of the Constitution on which the determination of the question turns are as follows: 190.
(3) If a member of a House of the Legislature of a State (a) becomes subject to any of the disqualifications mentioned in clause (1) of article 191 ; or (b) resigns his seat by writing under his hand addressed to the Speaker or the Chairman, as the case may be, his seat shall thereupon become vacant, 1156 191.
(1) A person shall be disqualified for being chosen as, and for being, a member of the Legislative Assembly or Legislative Council of a State (a) if he holds any office of profit under the Government of India or the Government of any State, specified in the First Schedule, other than an office declared by the Legislature of the State by law not to disqualify its holder; (b) if he is of unsound mind and stands so declared by a competent court; (c) if he is an undischarged insolvent; (d) if he is not a citizen of India, or has voluntarily acquired the citizenship of a foreign State, or is under any acknowledgment of allegiance or adherence to a foreign State; (e) if he is so disqualified by or under any law made by Parliament.
(1) If any question arises as to whether a member of a House of the Legislature of a State has become subject to any of the disqualifications mentioned in clause (1) of article 191, the question shall be referred for the decision of the Governor and his decision shall be final.
(2) Before giving any decision on any such question, the Governor shall obtain the opinion of the Election Commission and shall act according to such opinion.
If a person sits or votes as a member of the Legislative Assembly or the Legislative Council of a State. . when he knows that he is not qualified or that he is disqualified for membership thereof, or that he is prohibited from so doing by the provisions of any law made by Parliament or the Legislature of the State, he shall be liable in respect of each day on which he so sits or votes to a penalty of five hundred rupees to be recovered as a debt due to the State.
As has been stated already, the respondent 's conviction and sentence in 1942 disqualified him both for being chosen as, and for being, a member of the Legislative Assembly under article, 191 (1) (e) read with section 7 of the Representation of the People Act, 1951, 1157 passed by Parliament, the period of five years since his release on 15th August, 1947, not having elapsed before the date of the election.
The respondent having thus been under a disqualification since before his nomination on 15th March, 1952, could he be said to have "become" subject to that disqualification within the meaning of article 192 ? The rival contentions of the parties centred round the true interpretation to be placed on that word in the context of the provisions quoted above.
The Attorney General argued that the whole fasciculus of the provisions dealing with "disqualifications of members", viz., articles.190 to 193, should be read together, and as articles 191 and 193 clearly cover both preexisting and supervening disqualifications, articles 190 and 192 should also be similarly understood as relating to both kinds of disqualification.
According to him all these provisions together constitute an integral scheme whereby disqualifications are laid down and machinery for determining questions arising in regard to them is also provided.
The use of the word "become" in articles 190 (3) and 192 (1) is not inapt, in the context, to include within its scope preexisting disqualifications also, as becoming subject to a disqualification is predicated of "a member of a House of Legislature", and a person who, being already disqualified, gets elected, can, not inappropriately, be said to "become" subject to the disqualification as a member as soon as he is elected.
The argument is more ingenious than sound.
Article 191, which lays down the same set of disqualifications for election as well as for continuing as a member, and article 193 which prescribes the penalty for sitting and voting when disqualified, are naturally phrased in terms wide enough to cover both preexisting and supervening disqualifications; but it does not necessarily follow that articles 190 (3) and 192 (1) must also be taken to cover both.
Their meaning must de end on the language used which, we think, is reasonably plain.
In our opinion these two articles go together and 150 1158 provide a remedy when a member incurs a disqualification after he is elected as a member.
Not only do the words " becomes subject" in article 190(3) and "has become subject" in article 192(1) indicate a change in the position of the member after he was elected, but the provision that his seat is to become thereupon vacant, that is to say, the seat which the member was filling theretofore becomes vacant on his becoming disqualified, further reinforces the view that the article contemplates only a sitting member incurring the disability while so sitting.
The suggestion that the language used in article 190(3) can equally be applied to a pre existing disqualification as a member can be supposed to vacate his seat the moment he is elected is a strained and farfetched construction and cannot be accepted.
The Attorney General admitted that if the word " is " were substituted for "becomes" or " has become ", it would more appropriately convey the meaning contended for by him, but he was unable to say why it was not used.
It was said that on the view that articles 190(3) and 192(1) deal with disqualifications incurred after election as a member, there would be no way of unseating a member who became subject to a disqualification after his nomination and before his election, for, such a disqualification is no ground for challenging the election by an election petition under article 329 of the Constitution read with section 100 of the Representation of the People Act, 1951.
If this is an anomaly, it arises out of a lacuna in the latter enactment which could easily have provided for such a contingency, and it cannot be pressed as an argument against the respondent 's construction of the constitutional provisions.
On the other hand, the Attorney General 's contention might, if accepted, lead to conflicting decisions by the Governor dealing with a reference under article 192 and by the Election Tribunal inquiring into an election petition under section 100 of the Parliamentary statute referrred to above.
For the reasons indicated we agree with the learned Judge below in holding that articles 190(3) and 192(1) 1159 are applicable only to disqualifications to which a member becomes subject after he is elected as such, and that neither the Governor nor the Commission has jurisdiction to enquire into the respondent 's disqualification which arose long before his election.
As, however, we have held that the High Court was not competent under article 226 to issue any prerogative writ to the appellant Commission, the appeal is allowed and the writ of prohibition issued by the learned Judge is quashed.
We make no order as to costs.
Appeal allowed.
Agent for the appellant and the Intervener: G. H. Rajadhyaksha.
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The respondent, who had been convicted and sentenced to rigorous imprisonment for seven years, was elected a member of Madras Legislative Assembly.
At the instance of the Speaker the Assembly, the Governor of Madras referred to the Election Commission, which had its offices permanently located at New Delhi, the question whether the respondent was disqualified and could be allowed to sit and vote in the Assembly.
The respondent thereupon applied to the High Court of Madras under article 226 of the Constitution for a writ restraining the Election Commission from enquiring into his alleged disqualification for membership of the Assembly: Held, that the power of the High Court to issue writs under article 226 of the Constitution is subject to the two fold limitation 1145 that such writs cannot run beyond the territories subject to its jurisdiction and the person or authority to whom the High Court is empowered to issue such writs must be amenable to the jurisdiction of the High Court either by residence or location within the territories subject to its jurisdiction.
The High Court of Madras bad therefore no jurisdiction to issue a writ under article 226 of the Constitution against the Election Commission.
Held further, that articles 190(3) and 192(1) are applicable only to disqualifications to which a member becomes subject after heis elected as such, and neither the Governor nor the Election Commission had jurisdiction to enquire into the respondent 's disqualification which arose long before his election.
A tribunal or authority permanently located and normally carrying on its activities outside the territorial limits of a High Court cannot be regarded as functioning within those territorial limits and therefore amenable to the jurisdiction of that High Court, merely because it exercises jurisdiction within those territorial limits so as to affect the rights of parties therein.
The fact that the matter referred to it for decision related to the opposite party 's right to sit and vote in the Legislative Assembly at Madras and the parties to the dispute resided in the State of Madras could not give jurisdiction to the High Court of Madras to issue such a writ against the Election Commission.
An appeal lies to the Supreme Court under article 132 of the Constitution even from a judgment, decree or final order of a Single Judge of a High Court, provided the requisite certificate is given.
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Civil Appeal No. 3400 of 1987.
From the Judgment and order dated 23.1.1986 of the Andhra Pradesh High Court in Writ Appeal No. 22 of 1985.
M.K. Ramamurthi, Attar Singh and G.N. Rao for the Appellant.
T.V.S.N. Chari for the Respondents.
The Judgment of the Court was delivered by SHARMA, J.
The appellant 's application for appointment as a District Munsif by the State of Andhra Pradesh in the quota reserved for Scheduled Castes was rejected by the Andhra Pradesh Public Service Commission (briefly described as the 'Commission '), respondent No. 1, which the appellant challenged before the Andhra Pradesh High Court by a writ petition.
The learned Single Judge allowed the prayer and directed the first respondent to consider the candidature of the appellant for the appointment in question.
The respondents challenged the decision under Clause 15 of the Letters Patent in the High Court in Writ Appeal No. 22 of 1985.
The appeal was allowed and the writ petition was dismissed.
We have granted leave under Article 136 of the Constitution allowing the appellant to appeal against the said decision.
The appointment of District Munsifs is regulated by Andhra Pradesh State Judicial Service Rules (hereinafter referred to as the Rules).
In response to an advertisement issued by the 'Commission ' for filling up a large number of vacancies of District Munsifs by direct recruitment, the appellant applied.
Subsequently a second advertisement was issued on 27.5.1984 with reference to vacancies reserved for Scheduled Castes, and the appellant made a second application.
His present claim is with respect to these reserved posts.
After passing the Law Examination the appellant got himself enrolled as an Advocate on the rolls of the State Bar Council on 24.2.1977 and practised law till 31.3.1981.
On 1.4.1981 he was appointed in the service of Hindustan Shipyard, an undertaking owned by the Government of India, and claims to have remained in charge of the legal cell.
As stated earlier, he applied in pursuance of the second advertisement dated 27.5.1984 notified by the 'Commission 38 In the opinion of the 'Commission ' the appellant did not fulfil the necessary qualification fixed under the Rules, and was therefore ineligible for appointment.
The Rules have laid down three modes for appointment, namely, by direct recruitment, by promotion and by transfer.
Rule 12 requires inter alia as an essential qualification for a candidate for appointment as a District Munsif that he should be in actual practice and should have been so engaged for not less than 3 years in a court of civil or criminal jurisdiction.
Since the appellant was not in actual law practice, reliance has been placed on his behalf on the Proviso tc the aforementioned Rule, which is quoted below: "Provided that in the case of a person who is already in Government service and who applied for appointment to the post of District Munsif by direct recruitment, he must have actually practised for a period of not less than 3 years immediately prior to the date of his entering the Government service.
It is contended that as the appellant had practised for a requisite period immediately prior to the date of his entering the service of Hindustan shipyard, he must be held to be qualified for appointment.
The appellant 's claim is being refuted by the respondents on the ground that he was not in Government service.
The stand of the respondents appears to be well founded.
The Hindustan Shipyard, although a fully owned undertaking of the Central Government, cannot be equated with the Government or State except for the purposes of Part III of the Constitution.
The undertaking has a separate legal entity.
The expression "State" does not by reason of Article 12 of the Constitution include the undertaking except for the limited purpose which is not attracted in the present case.
Mr. Ramamurthy, the learned counsel for the appellant, appreciating this position, contended that the word "Government '.
should be deleted from the Proviso mentioned above, so as to save it from the vice of discrimination.
The argument is that no distinction ought to be made between the experience which a candidate acquires in Government service and the experience one acquires in any other service, whether public or private in nature.
The learned counsel urged that it is true that the appellant cannot claim to be qualified on the strength of the Proviso as it stands now but to save it from being struck down as illegal, the Court should omit the word 'Government '.
There is no doubt that the expression "Government service" mentioned in the Proviso includes service either under the State Government or the Government of India.
Sub rule (15)(a) of the definition Rule 2 explains that the expression "recruited direct" would refer to a candidate including a person in the service of Government of India or the Government of a State to be recruited directly subject to certain conditions mentioned therein.
The learned counsel for the respondents, therefore, rightly said that a servant under the Government of India must be included within the scope of the Proviso.
Mr. Ramamurthy, learned counsel for the appellant, fairly conceded that the appellant who is in the service of Hindustan Shipyard and is not serving directly the Union of India cannot take advantage of the Proviso, if the same as it stands is held to be legally valid.
The attack is on its vires on the ground of illegal discrimination.
We do not find any merit in this submission.
What is forbidden by the Constitution is discrimination between persons who are substantially in similar circumstances or conditions.
An equal treatment does not arise as between persons governed by different conditions and different sets of circumstances.
It is obviously permissible to classify persons into groups and such groups may be differently treated if there is a reasonable basis for such difference or distinction.
Having regard to the difference in the nature of service under the Government and that of the other services, therefore, a classification based on that line cannot be struck down on the ground of illegal discrimination.
The Proviso in question must be held to be valid and effective 8.
The High Court in the writ appeal while upholding the Proviso has interpreted it differently which does not appear to be correct.
However, since the learned counsel for the respondents while defending the decision whereby the appellant 's writ application was rejected, has stated that the interpretation put by the Division Bench was not correct and he does not support it, it is not necessary to consider that aspect in detail.
In view of our finding in paragraph 7 above, upholding the validity of the Proviso, as it is, the appellant must fail.
Before closing, however, we would like to point out that the appellant cannot succeed even if the enabling provision in the Proviso relaxing the qualification clause of Rule 12 is held to be ultra vires.
Besides, we have serious doubt whether a court can reframe a rule and give effect to it as suggested on behalf of the appellant, but we do not consider it necessary to deal with this aspect any further.
In the result, the appeal fails and is dismissed but, in the circumstances, without costs.
N.P.V. Appeal dismissed.
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% The appellant who had enrolled himself as an Advocate on 24.2.77 and practised law till 1.4.81 when he was appointed in the service of the Hindustan Shipyard, an undertaking owned by the Government of India, applied for the post of a District Munsif, in pursuance of an advertisement dated 25.4.84 issued by the respondent No. 1 Andhra Pradesh Public Service Commission for filling up, by direct recruitment, of vacancies reserved for the Scheduled Castes.
His application was rejected by the respondent No. I, as in its opinion, he did not fulfil the necessary qualification fixed under Rule 12 of the Andhra Pradesh State Judicial Service Rules and was, therefore, ineligible for appointment.
The appellant challenged the aforesaid decision before the High Court.
A Single Judge allowed the writ petition and directed the first respondent to consider the appellant 's candidature.
The Letters Patent Appeal filed by the respondent was allowed and the writ petition was dismissed.
In the appeal by special leave, the appellant contended that as he had practised for a requisite period immediately prior to his entering 36 service of Hindustan Shipyard, an undertaking owned by the Government of India, he must be held to be qualified for appointment, that no distinction ought to be made between experience acquired in Government service and the one in any other service, whether public or private in nature, that this discrimination was illegal and ultra vires and that the word "Government" should be deleted from the proviso to Rule 12 so as to save it from the vice of discrimination.
The respondents opposed the appeal on the ground that the appellant was not in Government service.
Dismissing the appeal, ^ HELD: 1.1 There is no doubt that the expression "Government service" mentioned in the proviso to Rule 12 of the Andhra Pradesh State Judicial Service Rules includes service either under the State Government or the Government of India.
Sub rule (15)(a) of Rule 2 explains that the expression "recruited direct" would refer to a candidate including a person in the service of Government of India or the Government of State to be recruited directly subject to service conditions mentioned therein.
[39A B] In the instant case, the Hindustan Shipyard, although a fully owned undertaking of the Central Government cannot be equated with the Government or State except for the purpose of part III of the Constitution.
The undertaking has a separate legal entity.
The expression "State" does not by reason of Article 12 of the Constitution include the undertaking except for the limited purpose which is not attracted in the present case.
The appellant who is in the service of Hindustan Shipyard and is wt serving directly the Union of India cannot take advantage of the proviso.
[38E F] 1.2 What is forbidden by the Constitution is discrimination between persons who are substantially in similar circumstances or conditions.
An equal treatment does not arise as between persons governed by different conditions and different sets of circumstances.
It is obviously permissible to classify persons into groups and such groups may be differently treated if there is a reasonable basis for such difference or distinction.
[39C D] Having regard to the 'difference in the nature of service under the Government and that of the other services, therefore, a classification based on that line cannot be struck down on the ground of illegal discrimination.
The Proviso to Rule 12 must be held to be valid and effective.
[39D E] 37
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5551.txt
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Appeal No. 61/1959.
Appeal by special leave from the judgment and order dated December 4, 1957, of the Orissa High Court in O.J.C. No. 449 of 1956.
607 C. K. Daphtary, Solicitor General of India, D. N. Mukherjee and T. M. Sen, for the appellants.
The respondent did not appear.
September 8.
The Judgment of the Court was delivered by SHAH J.
The respondent was appointed in the year 1950 a Sub Inspector on probation in the Orissa Police force.
In view of the adverse reports received against him on July 28, 1954, notice was served on the respondent calling upon him to show cause why he should not be discharged from service " for gross neglect of duties and unsatisfactory work ".
In the notice, ten specific instances of neglect of duty and two instances of misconduct acceptance of illegal grati fication and fabrication of official record were set out.
By his explanation, the respondent submitted that action had already been taken against him by the Superintendent of Police in respect of instances of neglect of duty set out in the notice and no further action in respect thereof could on that account be taken against him, because to do so would amount to imposing double punishment.
He denied the charge relating to misconduct and submitted that it was based on the uncorroborated statements of witnesses who were inimical to him.
He also asked for an opportunity to cross examine those witnesses.
The Deputy Inspector General of Police considered the explanation and observed: "I have carefully gone through the representation of the probationary section I.
His argument that he has already been punished by the section P. for specific instances of bad ' work does not help him very much since all these instances of bad work during the period of probation have to be taken together in considering his merits for confirmation or otherwise.
The section 1. has already had long enough of chance to work under different section Ps.
though in one District, but he has not been able to procure a good chit from anyone.
He has also been adversely reported against after the representation dealt with therein was submitted.
It 78 608 is, therefore, no good retaining him further in service.
He is discharged from the date on which this order is served on him ".
The Deputy Inspector General of Police on December 11, 1954, in discharging the respondent from service, passed a formal order as follows: " Probationary section I. Ramnarayan Das of Cuttack District is discharged from service for unsatisfactory work and conduct with effect from the date the order is served on him ".
The respondent then presented a petition under article 226 of the Constitution in the High Court of Judicature, Orissa, challenging the validity of the order passed and praying for the issue of a writ in the nature of certiorari or any other writ quashing the order of discharge.
Inter alia, the respondent urged, (1) that the order of discharge was invalid since he was not given a reasonable opportunity to show cause against the action proposed to be taken in regard to him within the meaning of article 311(2) of the Consti tution, (2) that the order of discharge was invalid since he was not afforded an opportunity to be heard nor was any evidence taken on the charges framed.
The High Court by order dated December 4, 1957, set aside the order of discharge.
In the view of the High Court, the Deputy Inspector General of Police had taken into consideration allegations of corruption in passing the impugned order and also that he had refused to give to the respondent an opportunity to cross examine witnesses on whose statements the charge of misconduct was made.
The High Court observed that by discharging the respondent from service without holding an enquiry as contemplated by r. 55 of the Civil Services (Classification, Control and Appeal) Rules and without complying with the requirements of article 311(2) of the Constitution, an " indelible stigma affecting his future career " had been cast.
Against the order issuing the writ quashing the order discharging the respondent from service, this appeal has been preferred by special leave.
The respondent was undoubtedly at the time when proceedings were started against him and when he 609 was discharged from service, a probationer, and had no right to the post held by him.
Under the terms of his appointment the respondent was liable to be( discharged at any time during tile period of his probation.
By r. 668 of the Police Manual of the Orissa State, in so far as it is material, it is provided : " All officers shall in the first instance be appointed or promoted on probation.
Where the period of probation is not otherwise provided for in the Rules, it shall be for a period of two years in the case of executive officers.
The authority empowered to make such appointment or promotion may at any time during such probation period and without the formalities laid down in Rule 820 remove an executive officer directly appointed or revert such an officer promoted who has not fulfilled the conditions of his appointment or who has shown himself unfitted for such appointment or promotion ".
Rule 681 of the Police Manual by cl.
(b) in so far as it is material provides, " Those promoted from the rank of Assistant Sub Inspector shall be confirmed (Rule 659(e)) and those appointed direct shall be on probation for a period of two years.
At the end of that period, those pronounced competent and fit will be confirmed by the Deputy Inspector General.
The others will be discharged by the same authority ".
Rule 55 B of the Civil Services (Classification, Control and Appeal) Rules, in so far as it is material provides : " Where it is proposed to terminate the employment of a probationer, whether during or at the end of the period of probation, for any specific fault or on account of his unsuitability for the service, the probationer shall be apprised of the grounds of such proposal and given an opportunity to show cause against it, before orders are passed by the authority competent to terminate the employment".
Notice to show cause whether the employment of the respondent should be terminated was, by r. 55 B made obligatory.
The Deputy Inspector General of Police who had appointed the respondent apprised 610 him by notice of the grounds on which the order of discharge was proposed to be made and required him ,,to show cause why action as proposed should not be taken.
The notice consisted of two parts, (1) relating ;to ten heads of " gross neglect of duty and unsatisfactory work " and (2) " suspicious and un police man like conduct " in which specific instances of fabrication of public records and acceptance of illegal gratification were set out.
The Deputy Inspector General of Police by his order which ha; been set out hereinbefore, expressly observed that he had, in considering the case of the respondent for confirmation, to take into account the reports received by him.
The formal order communicated to the respondent also stated that the respondent was discharged from service for unsatisfactory work and conduct.
The reasons given in the order clearly indicate that the notice served upon the respondent was under r. 55 B of the Civil Services (Classification, Control and Appeal) Rules for ascertaining whether he should be confirmed or his employment terminated.
Prima facie, the order is one terminating employment of the respondent as a probationer, and it is not an order dismissing him from service.
The High Court has however held that the order of discharge amounted to imposing punishment, because the respondent had been " visited with evil consequences leaving an ineligible stigma on him affecting his future career ".
The respondent has not appeared before us to support the judgment of the High Court, but the learned Solicitor General who appeared in support of the appeal has very fairly invited our attention to all the materials on the record and the relevant authorities which have a bearing on the case of the respondent.
In Shyam Lal vs The State of Uttar Pradesh and the Union of India (1), it was held that compulsory retirement under the Civil Services (Classification, Control and Appeal) Rules of an officer did not amount to dismissal or removal within the meaning of article 311 of the Constitution.
In that case, the public servant (1) ; 611 concerned was served with a notice to show cause in respect of three specific items of misdemeanor as a public servant to which he submitted his explanation.
Thereafter, the President, after considering the case and the recommendation of the commission appointed to investigate the case, decided that the public servant should be retired forthwith from service ".
This order was challenged by a petition under 226 of the Constitution filed in the High Court at Allahabad.
In an appeal against the order dismissing the petition, this court held that the order compulsorily retiring the public servant involved " no element of charge or imputation " and did not amount to dismissal or removal within the meaning of article 311(2) of the Constitution and the order of the President was not liable to be challenged on the ground that the public servant had not been afforded full opportunity to show cause against the action proposed to be taken in regard to him.
In Parshottam Lal Dhingra vs Union of India (1) this court by a majority held that if an officer holding an officiating post had no right under the rules governing his service to continue in it, and such appointment under the general law being terminable at any time on reasonable notice, the reversion of the public servant to his substantive post did not operate as a forfeiture of any right: that order " visited him with no evil consequences " and could not be regarded as a reduction in rank by way of punishment.
Bose, J., who disagreed with the majority observed that the real test was whether evil consequences over and above those that ensued from a contractual termination, were likely to ensue as a consequence of the impugned order: if they were, article 311 of the Constitution would be attracted even though such evil consequences were not prescribed as penalties under the Rules.
In that case, Das; C. J., in delivering the judgment of the majority, entered upon an exhaustive review of the law applicable to the termination of employment of public servants and at pp.
861.863 summarised it as follows: (1) ; 612 " Any and every termination of service is not a dismissal, removal or reduction in rank.
A termination of service brought about by the exercise of a contractual right is not per se dismissal or removal, as has been held by this court in Satish Chander Anand vs The Union of India (1).
Like wise the termination of service by compulsory retirement in terms of a specific rule regulating the conditions of service is not tantamount to the infliction of a punishment and does not attract article 311(2) as has also been held by this court in Shyam Lal vs The State of Uttar Pradesh (2). .
In short, if the termination of service is founded on the right flowing from contract or the service rules then, prima facie, the termination is not a punishment and carries with it no evil consequences and so article 311 is not attracted.
But even if the Government has, by contract or under the rules, the right to terminate the employment without going through the procedure prescribed for inflicting the punishment of dismissal, or removal or reduction in rank, the Government may, nevertheless, choose to punish the servant and if the termination of service is sought to be founded on misconduct, negligence, inefficiency or other disqualification, then it is a punishment and the requirements of article 311 must be complied with.
As already stated, if the servant has got a right to continue in the post, then, unless the contract of employment or the rules provide to the contrary, his services cannot be terminated otherwise than for misconduct, negligence, inefficiency or other good and sufficient cause.
A termination of the service of such a servant on such grounds must be a punishment and, therefore, a dismissal or removal within article 31 1, for it operates as a forfeiture of his right and he is visited with the evil consequences of loss of pay and allowances.
It puts an indelible stigma on the officer affecting his future career. .
But the mere fact that the servant has no title to the post or the rank and the Government has, by contract, express or implied, or under the rules, the right to reduce him to a lower post does not mean that an order of reduction of a servant (1) ; (2) ; 613 to a lower post or rank cannot in any circumstances be a punishment.
The real test for determining whether the reduction in such cases is or is not by way of punishment is to find out if the order for the reduction also visits the servant with any penal consequences. .
The use of the expression, " terminate " or " discharge " is not conclusive.
In spite of the use of such innocuous expressions, the court has to apply the two tests mentioned above, namely, (1) Whether the servant had a right to the post or the rank or (2) Whether he has been visited with evil consequences of the kind hereinbefore referred to ? If the case satisfies either of the two tests then it must be held that the servant has been punished and the termination of his service must be taken as a dismissal or removal from service. . " The respondent had no right to the post held by him.
Under the terms of his employment, the respondent could be discharged in the manner provided by r. 55 B. Again mere termination of employment does not carry with it " any evil consequences " such as forfeiture of his pay or allowances, loss of his seniority, stoppage or postponement of his future chances of promotion etc.
It is then difficult to appreciate what " indelible stigma affecting the future career " of the respondent was cast on him by the order dis charging him from employment for unsatisfactory work and conduct.
The use of the expression " discharge " in the order terminating employment of a public servant is not decisive : it may, in certain cases amount to dismissal.
If a confirmed public servant holding a substantive post is discharged, the order would amount to dismissal or removal from service; but an order discharging a temporary public servant may or may not amount to dismissal.
Whether it amounts to an order of dismissal depends upon the nature of the enquiry, if any, the proceedings taken therein and the substance of the final order passed on such enquiry.
Where under the rules governing a public servant holding a post on probation, an order terminating the probation is to be preceded by a notice to show cause 614 why his service should not be terminated, and a notice is issued asking the public servant to show cause whether probation should be continued or the officer should be discharged from service the order discharging him cannot be said to amount to dismissal involving punishment.
Undoubtedly, the Government may hold a formal enquiry against a probationer on charges of misconduct with a view to dismiss him from service, and if an order terminating his employment is made in such an enquiry, without giving him reasonable opportunity to show cause against the action proposed to be taken against him within the meaning of article 311(2) of the Constitution, the order would undoubtedly be invalid.
The Solicitor General invited our attention to a recent judgment of this court, State of Bihar vs Gopi Kishore Prasad (1)in which, delivering the judgment of the court, the learned Chief Justice extracted five propositions from the authorities and particularly from Parshottam Lal Dhingra 's case (2), dealing with the termination of employment of temporary servants and probationers.
The third proposition set out in the judgment is as follows: " But instead of terminating such a person 's service without any enquiry, the employer chooses to hold an enquiry into his alleged misconduct, or inefficiency, or for some similar reason, the termination of service is by way of punishment, because it puts a stigma on his competence and thus affects his future career.
In such a case, he is entitled to the protection of article 311(2) of the Constitution ".
This proposition, in our judgment, does not derogate from the principle of the other cases relating to termination of employment of probationers decided by this court nor is it inconsistent with what we have observed earlier.
The enquiry against the respondent was for ascertaining whether he was fit to be ' confirmed.
An order discharging a public servant, even if a probationer, in an enquiry on charges of misconduct, negligence, inefficiency or other disqualification, may (1) A.I.R. [1960] section C. 689.
(2) ; 615 appropriately be regarded as one by way of punishment, but an order discharging a probationer following upon an enquiry to ascertain whether he should be 0 confirmed, is not of that nature.
In Gopi Kishore Prasad 's case (1), the public servant was discharged from service consequent upon an enquiry into alleged misconduct, the Enquiry Officer having found that the public servant was " unsuitable " for the post.
The order was not one merely discharging a probationer following upon an enquiry to ascertain whether he should be continued in service, but it was an order as observed by the court " clearly by way of punishment ".
There is in our judgment no real inconsistency between the observations made in parshottam.
Lal Dhingra 's case (2) and Gopi Kishore Prasad 's case (1).
The third proposition in the latter case refers to an enquiry into allegations of misconduct or inefficiency with a view, if they were found established, to imposing punishment and not to an enquiry whether a probationer should be confirmed.
Therefore the fact of the holding of an enquiry is not decisive of the question.
What is decisive is whether the order is by way of punishment, in the light of the tests laid down in Parshottam Lal Dhingra 's case (2).
We have carefully considered the evidence and the authorities to which our attention has been invited and we are definitely of opinion that the High Court was in error in holding that the order discharging the respondent from service amounted to dismissal which attracted the protection of article 311(2) of the Constitution.
In that view of the case, this appeal will be allowed and the petition for a writ dismissed.
There will be no order as to costs throughout.
Appeal allowed.
(1) A.I.R. 1960 S.C. 689.
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The respondent was appointed a Sub Inspector on probation in the Orissa Police Force.
A notice was served on him to show cause why he should not be discharged from service " for gross neglect of duties and unsatisfactory work ".
He submitted his explanation and asked for opportunity to cross examine certain witnesses.
The Deputy Inspector General of Police considered the explanation unsatisfactory and passed an order discharging the respondent from service " for unsatisfactory work and conduct ".
The respondent contended that the order was invalid on two grounds: (i) that he was not given a reasonable opportunity to show cause against the proposed action within the meaning of article 311(2), and (ii) that he was not afforded an opportunity to be heard nor was any evidence taken on the charges.
Held, that the order of discharge did not amount to dismis sal and did not attract the protection of article 311(2) of the Constitution and was a valid order.
The services of the respondent, ' who was a probationer, were terminated in accordance with the rules and not by way of punishment.
He had no right to the post held by him and under the terms of his appointment he was liable to be discharged at any time during the period of his probation.
The notice given to the respondent was under Rule 55 B of the Civil Services (Classification, Control and Appeal) Rules which made it obligatory to give such notice before terminating the services of a probationer.
The enquiry was merely for ascertaining whether he was fit to be confirmed.
Shyam Lal vs The State of U. P., ; and Purshottam Lal Dhingra vs Union of India, ; , referred to.
State of Bihar vs Gopi Kishore Prasad, A.I.R. 1960 S.C. 689, distinguished.
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946.txt
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ivil Appeal No. 1202 of 1974.
From the Judgment and Order dated 19.7.1972 of the Madras High Court in Writ Petition No. 1064 of 1967.
Anil Dev Singh and C.V.S. Rao for the Appellant.
Ambrish Kumar and A.T.M. Sampath for the Respondent.
The Judgment of the Court was delivered by K.N. SAIKIA, J.
This appeal by Special Leave is from the Judgment and Order of the High Court of Judicature at Ma dras, dated 19th July, 1972 in Writ Petition No. 1864 of 1967, allowing the petition and quashing the demand made by the appellant under Rule 10 A of the Central Excise Rules, hereinafter referred to as 'the Rules ', payable by the respondent under the Central Excise and Salt Act, 1944, hereinafter referred to as 'the Act '.
M/s. Ramakrishnan Kulwant Rai, the respondent firm, owned the Steel Rolling Mill, located at No. 4 B, 4 C, North Railway 447 Terminus Road, Royapuram, Madras 13.
The said Mill was leased out to a partnership firm known as M/s. Steel Indus tries.
After termination of the lease the respondent firm took back possession of the said Mill on 1 8 1962 and in formed the Central Excise Authorities about this by their letter dated 16 11 1962 and resumed manufacture of Steel from scraps and was advised to take out a licence for which it applied on 30 11 1962.
Though the respondent firm had ultimately sold away the Rolling Mill on 8 4 1963, the Superintendent of Central Excise, by his letter dated 13 10 1965 demanded a sum of Rs. 31,0 18.2013 as excise duty.
On information furnished by the firm about its manu facture of only 775.455 metric tonnes of Steel, the Deputy Superintendent of Central Excise reduced the demand to a sum of Rs. 6,4 19.38p only, and the demand was reiterated by notice dated 13 4 1967, pursuant whereto the respondent firm showed cause on 15th May, 1967 but the Assistant Collector of Customs, by his order dated 14th June, 1967, confirmed the demand.
The respondent firm challenged the demand by moving writ petition No. 1864 of 1967 in the High Court of Judicature at Madras contending, inter alia, that it was manufacturing steel products prior to 13 6 1962, only suspending manufac ture during the period of lease and resuming thereafter, and as such, was entitled to exemption from payment of duty; that the demand for payment of duty was time barred; that rules 10 & 10A invoked in support of the demand were ultra vires inasmuch as there was no provision in the Act to enable the Government to frame rules for the recovery of duty short levied.
The High Court by the impugned order following its earlier judgment in writ petition Nos. 265 & 266 of 1967, which relied upon its earlier decision in writ petition No. 1055 of 1968, upheld the contention of the respondent firm holding that Rule 10 A did not apply to cases where there had been no prior levy of excise duty in respect of the articles manufactured during the relevant period and that the duty was sought to be recovered only by the issue of demand under Rule 10 A of the Rules.
The High Court having rejected leave to appeal, the.
appellant obtained special leave on 23 7 1974.
Mr. Anil Dev Singh, learned counsel for the appellant submits that it is necessary to decide the substantial question of law of general importance, namely, whether Rule 10 A of the Rules, as it stood at the relevant time, was valid or not as conflicting decisions have been creating difficulties for the department in collecting short levies or escaped excise duties.
Counsel refers us to , AIR 1972 S.C. 448 2563, and The learned counsel states that Rule 10 A was in force upto 6 8 1977 whereafter it was amended with effect from that date and the amended rule continued till 16 11 1980 where after it was enacted as Section 11 A of the Act by the Amendment Act 25 of 1978 and that Section came into force with effect from 1.7 11 1980.
Mr. Ambrish Kumar, the learned counsel for the respond ent submits that the learned standing counsel for the Cen tral Government having conceded that the rationale of the decision in Haji J.A. Kareem Sait vs Dy.
Commercial Tax Officer, Mettupalayam, 18 STC .370, which held that sub Rule (7) of Rule 5 of the Central Sales Tax (Madras) Rules 1957, providing for limitation and determination of escaped turn over by best judgment was in excess of the rule making power and the sub Rule as a whole, was therefore, invalid, would apply with equal force to Rule 10 A as well and that in view of the same decision he would not be able to sustain the demands under Rule 10 A and yet he could sustain the demand under Rule 9(2) of the Rules, it is no longer open to the appellant to challenge the validity of Rule 10 A in this appeal, and that too after so many years.
Counsel for the appellant answers that the learned standing counsel thereby cannot be said to have conceded that Rule 10 A was invalid.
He had only said that in view of the decision in 18 STC 370, he would not be able to sustain the demands under Rule 10 A; and that even if it could be taken as a concession, the appellant could not be estopped from showing that the rule is valid so that Central Excise revenue is not allowed to escape.
We agree with the learned counsel for the appellant and proceed to examine the validi ty of Rule 10 A as it stood at the relevant time.
Rule 10 A of the Rules read as under: "10 A. Residuary powers for recovery of sums due to Government Where these Rules do not make any specific provision for the collection of any duty or any deficiency in duty if the duty has for any reason been short levied, or of any other sum of any kind payable to the Central Government under the Act or these Rules, such duty, deficiency in duty or sum shall, on a written demand made by the proper officer, be paid to such person and at such time and place as the officer may specify.
" Rule 10 A provided the machinery for collection of tax from the assessee after the goods had left the factory premises.
This rule con 449 templated that the duty or deficiency in duty was payable on a written demand made by the proper officer in cases where either the Rules did not make any specific provision for the collection of any duty or of any deficiency in duty if the duty had for any reason been short levied.
Therefore, before Rule 10 A could be resorted to, it had to be found that either the Central Excise Rules did not make any specific provision for the collection of duty in respect whereof a demand was being made by the proper officer, or that there was no specific provision therein for the collection of the deficiency in duty which had been short levied for any reason.
It was a residuary provision and it applied only when there was no other specific provision in the Rules.
Where there had been no assessment at all there was no reason why claim and demand of the respondent could not be said to be recoverable under Rule 10 A.
The learned counsel for the appellant submits that this Rule is perfectly valid being covered by the rule making powers under the Act while the learned counsel for the respondent, submits that it is ultra vires the Act being not covered by its rule making powers.
The question, therefore, is whether the Rule is valid.
Chapter II of the Act deals with levy and collection of duty.
Under Section 3 of the Act duties specified in First Schedule to the Act were to be levied.
Sub section (1) of Section 3, at the relevant time, read as follows: "(1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India, and a duty on salt manufactured in, or import ed by land into, any part of India as, and at the rates, set forth in the First Schedule.
" In Citadel Fine Pharmaceuticals vs Dis trict Revenue Officer, Chingleput, , where the enactment, namely, the Medicinal and Toilet Preparations (Excise Duties) Act (XVI of 1955) was silent on the question of levies of escaped assessment, it was held that the Rules made under that Act could not extend the charging power and Rule 12, in so far as it sought to extend the charging power under Section 3 of that Act, was held to be invalid and without jurisdic tion.
Rule 12 of those Rules read as follows: "12.
Residuary powers for recovery of sums due to 450 Government Where these rules do not make any specific provision for the collection of any duty or of any deficiency in duty if the duty has for any reason been short levied, or of any other sum of any kind payable to the collecting Government under the Act or these rules, such duty, deficiency in duty or sum shall on written demand made by the proper officer, be paid to such person and at such time and place, as the proper officer may specify.
" Rule 12 was somewhat similar to RUle 10 A of the Rules and had been held to be ultra vires on the ground that it did not have the required statutory backing.
In M/s. Agarwal Brothers vs The Union of India, , it was held that a licence issued under the Central Excise Rules was personal to the licensee and therefore, a transferee of factory licensed to manufacture iron and steel products from the former licensee could only be treated as a new licensee after the relevant date mentioned in the Notification No. 13 1 of 1962, dated 13th June, 1962, and as the petitioner applied for a licence much later, the exemption under the Notification was not available to the petitioner who could not be applying for renewal of the earlier licence held by the transferors and hence the exemption under the Notifica tion was not available to the petitioner.
Demand, therefore, could only be made under Rule 10 A which, it was held, could not be invoked in view of the decisions in W.P. No. 1053/68, namely the Citadel Fine (supra).
A Division Bench of Kerala High Court in Kerala Poly thene vs Superintendent, Central Excise, since reported in , held that Rule 10 A of the rules was not ultra vires the rule making power conferred by the Act on the Central Government.
Balakrishna Eradi, J., as he then was, observed that the scope of the rule making power con ferred by Section 3(1) of the Act was wide enough to embrace all matters relating to the manner in which both the levy and the collection of duties of excise on all excisable goods other than salt were to be made.
The provision con tained in Rule 10 A was thus fully within the scope of the said power and hence it was not correct to say that Rule 10 A was ultra vires the rule making power conferred by the Act on the Central Government.
The cases of Agarwal Brothers (supra) and Citadel Fine Pharmaceuticals (supra) were dis tinguished pointing out that there was much difference in scopes of Section 3 of the Medicinal and Toilet Preparations (Excise Duties) Act (XVI of 1955) and of Section 3 of the Act.
Comparing the provisions of the two Sections it was observed that there was funda 451 mental difference in their policy and scheme.
Under Section 3 of the Medicinal and Toilet Preparations Act only the manner of collection of the duties was left to be prescribed by the rules and levy of the duty was to be made at the rates specified in the Schedule to the Act.
In enacting Section 3 of the Act i.e. Central Excise and Salt Act, the Parliament had empowered the rule making authority to pre scribe by rules the manner of levy of duties and also the manner of collection of duties of excise on all excisable goods other than salt.
Manifestly the rule making power conferred by this Section is very much wider in its ambit than the power conferred on the rule making authority under Section 3 of the Medicinal and Toilet Preparations (Excise Duties) Act whereunder only the manner of collection of duties could be laid down by rules.
We respectfully agree with this view.
We also find that in Agarwal Brothers (supra) though one of the questions raised was the validity of Rule 10 A of the Rules, the Court did not consider the said question on merits in view of the submission made by the standing counsel for the State Government on the basis of Rule 10 A in the light of the earlier decisions of the same High Court, striking down Rule 12 of the Medicinal and Toilet Preparations (Excise Duties) Rules.
That decision can not obviously be regarded as authority supporting the con tention that Rule 10 A was ultra vires the rule making power.
We find that Rule 10 A, was incorporated because of the decision of the Nagpur High Court in Messrs Chhotabhai Jethabhai Patel vs Union of India, After that decision the Central Government by a notifica tion, dated December 8, 195 1, amended the Rules by addition of the new Rule 10 A.
The assessee challenged the validity of the Rule but a full bench of the Nagpur High Court re jected the assessee 's contention and held that Rule 10 A covered a case for increased levy on the basis of a change of law.
That decision was challenged before this Court unsuccessfully.
This Court in Chhotabhai Jethabhai Patel and Co. vs The Union of India, ; , reject ed the assessee 's claim regarding non applicability of Rule 10 A stating that it had been specifically designed for the enforcement of a demand like the one in that case.
We also find that in N.B. Sanjana vs Elphinstone Spin ning and Weaving Mills Company Ltd., [2971] 1 SCC 337, while holding that Rule 10 A did not apply to the facts of that case, this Court observed that Rule 10 A did not apply as the specific provision for collection of duty in a case like that was specially provided for by Rule 10 and, therefore, action should have been taken under that Rule.
452 In Assistant Collector vs National Tobacco Co. Ltd., ; , this Court held that the High Court erroneously refused to consider whether the impugned notice in that case fell under Rule 10 A.
It was observed that Rules 10 and 10 A seemed to be so widely worded as to cover any inadvertance, error etc.; whereas Rule 10 A would appear to cover any deficiency in duty if the duty had, for any reason, been short levied, except that it would be outside the purview of Rule 10 A if its collection was expressly provided by any Rule.
It was further observed that both the Rules as they stood at the relevant time dealt with collec tion and not with assessment and what was said in N.B. Sanjana 's case (supra) that Rule 10 A was of residual in character and would be inapplicable if a case fell within a specified category of cases mentioned in Rue 10, was reiter ated.
In D.R. Kohli vs Atul Products Ltd., [1985] 2 S.C.R. 832, this Court pointed out the differences between the two Rules namely Rule 10 and Rule 10 A as: "(i) whereas Rule 10 applies to cases of short levy through inadvertence, error, collusion or misconstruction on the part of an officer, or through mis statement as to the quantity, the description or value of the excisable goods on the part of the owner, Rule 10 A was a residuary clause applied to those cases which were not covered by Rule 10 and that; (ii) whereas under Rule 10, the deficit amount could not be collected after the expiry of three months from the date on which the duty or charge was paid or adjusted in owner 's account current or from the date of making the refund, Rule 10 A did not con tain any such period of limitation.
" It would thus be clear that this Court interpreted Rule 10 A, distinguished it from Rule 10 and applied it to the appropriate facts and circumstances of different cases.
It would be reasonable to infer that in none of the cases any doubt about the validity of the Rule 10 A was entertained.
We may now examine the contention that at the relevant time Rule 10 A was not covered by the rule making power conferred on the Central Government by Section 37.
Section 37 dealt with power of Central Government to make Rules.
Sub section (1) said: "The Central Government may make rules to carry into effect the purposes of this Act." Sub section (2) enumerated the matters the rules might provide for 'in particular ' and "without prejudice to the generality of the foregoing power." Thus, the section did not require that the enumerated rules would be exhaustive.
Any rule if it could be shown to have been made "to carry into effect the pur poses of the Act" would 453 be within the rule making power.
Chapter II of the Act dealt with the levy and collection of duty.
Section 3 as it stood at the relevant time provided that duties specified in the First Schedule were to be levied.
We have quoted Sub section (1).
The First Schedule contained Item Nos.
description of goods and rates of duty.
Section 3 has subsequently been amended by the Finance Acts of 1982 and 1984, and the Cen tral Excise Tariff Act of 1985.
This section, it would be seen, expressly empowered the levy and collection of duties of excise on all excisable goods as provided in the Act including its First Schedule.
It could not, therefore, be said that Rule 10 A was not covered by the above provision.
It is an accepted principle that delegated authority must be exercised strictly within the limits of the authori ty.
If rule making power is conferred and the rules made are in excess of that power the rules would be void even if the Act provided that they shall have effect as though enacted in the Act as was ruled in State of Kerala vs K.M. Charia Abdullah & Co., ; Therein the High Court having declared rule 14 A of the Madras General Sales Tax Rules, 1939 as ultra vires, on appeal, this Court by majori ty held that the validity of the rule, even though it was directed to have effect as if enacted in the Act, was always open to challenge on the ground that it was unauthorised.
The validity of the delegated legislation is generally a question of vires, that is, whether or not the enabling power has been exceeded or otherwise wrongfully exercised.
Scrutinising the provisions of Rule 10 A in the light of the above principles and pronouncements of this Court, we have no doubt that Rule 10 A of the Rules, as it existed at the relevant time, was valid and not ultra vires the rule making power.
Demand notices lawfully issued under the rule by the competent authority could not, therefore, be challenged on the ground of the rule 10 A itself being ultra vires.
Wheth er those could be challenged on any other ground must neces sarily depend on the facts and circumstances of the case.
The High Court having proceeded on the basis that Rule 10 A was not available to support the demand notice, we set aside the impugned order of the High Court, allow the ap peal, and remand the case to the High Court for disposal in accordance with law.
We leave the other questions open.
Under the peculiar facts and circumstance of the case, we leave the parties to bear their own costs.
Y. Lal Appeal al lowed.
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Respondent firm owned a Steel Rolling Mill situate at Madras.
The said mill was leased out to a partnership firm viz., M/s. Steel Industries and after the expiry of the lease period, the Respondent took back the possession of the Mill on 1.8.1962 and informed the Central Excise Authori ties, who advised the Respondent to take out a licence for which it applied on 30.11.1962 Respondent sold away the Rolling Mill on 8.4.1963.
The Superintendent of Central Excise by his letter dated 13.10.1965 raised a demand of Rs.31,018.20 p. on the respondent on account of excise duty.
The Respondent having informed the Department that the firm had manufactured only 775.455 metric tonnes of steel, the demand of excise duty was reduced to Rs.6,419.38 p. only.
The Respondent, though pleaded that it was not liable to pay excise duty demanded, yet the Assistant Collector of Customs by his order dated 14.6.1967 confirmed the demand.
The Respondent firm challenged the validity of the demand by filing a Writ Petition in the High Court.
Respond ent contended before the High Court that (i) it was entitled to exemption of duty; (ii) that the demand for payment of excise duty was time barred and (iii) that Rules 10A under which the demand has been made are ultra rites as there was provision in the Act to enable the Government to frame rules for the recovery of duty short levied.
The High Court allowed the Writ Petition and upheld the contention advanced by the Respondent holding that Rule 10A did not apply to cases where there has been no prior levy of excise duty in respect of the articles manufactured during the relevant period.
Hence this appeal by the Department.
445 The question that arose for determination by this Court was whether Rule 10A of the Rules, as it stood at the rele vant time, was valid? Counsel for the appellant wile plead ing that the Rule was valid submitted that it was necessary to decide this question in view of the conflicting decisions creating difficulty for the Department in collecting short levies or escaped excise duty.
Counsel referred to decisions reported in 1972(2) MLJ 476; ; ; ; and 1977(2) Tax L.R. 1680.
Counsel for the Respondent urged that the Standing Counsel for the Central Government had conceded the ration ale of the decision in Haji J.A. Kateera sait vs Dy.
Commer cial Tax Officer, Mettupalayam;, 18 STC 370 which held that Sub Rule (7) of Rule S of the Central Sales Tax (Madras) Rules 1957 was in excess of the rule making power and as such the Sub rule as a whole was invalid.
In view of the said decision, the appellant would not be able to sustain the demand under Rule 10A; and it is no longer open to the appellant to challenge the validity of Rule 10A in the appeal.
Allowing the appeal and remanding the matter to the High Court, Court, HELD: Chapter II of the Act deals with levy and collec tion of duty.
Under Section 3 of the Act, duties specified in First Schedule to the Act were to be levied.
Rule 10A provided the machinery for collection of tax from assessee after the goods had left the factory premises.
This rule contemplated that the duty or deficiency in duty was payable on a written demand made by the proper officer in cases where either the rules did not make any specific provision for the collection of any duty or of any deficiency in duty, if the duty had for any reason been short levied.
It was a residuary provision and it applied only when there was no other specific provision in the Rules.
Where there had been no assessment at all there was no reason why claim and demand of the Respondent could not be said to be recoverable under Rule 10A. [449E; 448H; 449B C] The validity of the delegated legislation is generally a question of vires, that is, whether or not the enabling power has been exceeded or not.
Rule 10A as it existed at the relevant time, was valid and not ultra vires the rule making power.
Demand notice lawfully issued under the rule by the competent authority could not, therefore, be chal lenged on the ground of the Rule 10A itself being ultra vires.
Whether these could be challenged on any other ground must necessarily depend on the facts 446 and circumstances of each case.
[453E F] Kerala Polythene vs Superintendent Central & Excise, M/s. Chhotabhai Jethabhai Patel vs Union of India, Stateof Kerala vs K.M. Charie Abdullah & Co., [1965] 1 S.C.R.601.
Any rule if it could be shown to have been made 'to carry into, effect the purposes of the Act ' would be within the rule making power.
[452H; 453A] Citadel Fine Pharmaceuticals vs District Revenue Offi cer, Chingleput, ; M/s. Agarwal Brothers vs Union of India, ; N.B. Sanjane vs Elphin stone Spinning and Weaving Mills Company Ltd., ; Assistant Collector vs National Tobacco Co. Ltd., ; and D.R. Kohli vs Atul Products Ltd., ; , referred to.
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ivil Appeal No. 1837 of 1990.
From the Judgment and Order dated 17.1.1989 of the Patna High Court in C.W.J.C. No. 4276 of 1988, A. Sharan for the Appellants.
Pankaj Kalra and Pramod Swarup for the Respondents.
The Judgment of the Court was delivered by AHMADI, J.
Delay condoned.
Special leave granted.
This appeal arises out of the decision of the Patna High Court 470 whereby it struck down the selection made for appointments in the junior teaching posts in medical colleges in the State and directed a fresh selection list to be prepared after shifting the last date for receipt of applications to 30th June, 1988.
The facts giving rise to this appeal, briefly stated, are as under.
The State of Bihar published an advertisement inviting applications for appointment to the posts of (i) Assistant Professor (clinical subject); (ii) Registrar; (iii) Assist ant Clinical Pathologist; (iv) Anesthetist; (v) Resident Medical Officer and (vi) Demonstrator (Tutor) in non clini cal subject for different Medical Colleges and Medical College Hospitals in the State of Bihar.
For the post of Assistant Professor only such officers who had worked as Resident or Registrar in Medical Hospital recognised for imparting M.B.B.S. studies by the Medical Council of India and having three years experience of such post were consid ered eligible.
The last date for receipt of the application was fixed as 31st January, 1988.
Pursuant to the said adver tisement applications were received from eligible candidates and the select list or panel was prepared for appointments to the respective posts.
The respondents and some interven ors who held appointments as junior teachers in one or the other Medical Colleges in the State questioned the validity of the State 's action of inviting applications for prepara tion of a list for appointments to the advertised posts mainly on the ground that the last date for receipt of applications fixed as 31st January, 1988 (hereinafter called 'the cut off date ') deprived them of the opportunity to compete for the posts as they did not complete the requisite experience criterion of three years by that time.
It was contended that this cut off date was arbitrarily fixed and was, therefore, violative of Article 14 of the Constitution.
The High Court took the view that the State Government had deviated from its usual practice of fixing the cut off date as 30th of June of the relevant year.
This is clear from the following observation made by the High Court: " . . advertisement in the past including one in the year 1983 (Annexure 1) always fixed 31st June as the date " . (Emphasis supplied) The use of the word 'always ' indicates that the High Court was under the impression that in the past the cut off date was always fixed as 31st June (it should be 30th June) for the preparation of the panel for appointments to the posts in question.
Elsewhere also in the judgment there are obser vations which disclose that the High Court laboured 471 under the belief that the cut off date was always fixed as 30th of June of the relevant year.
This becomes obvious from the following criticism also: "If the State is determined to achieve such a goal and is ready to make its activity predictable it is a welcome sign but such desired predictability can equally be achieved by adhering to the schedule of the past and maintaining 30th June of the years as the last date for the application.
If they had not followed any rule in the past and they propose to follow a rule in this regard in future, they can do so without causing any violation to any legal right of any incumbent by at least showing adherence to the reckoning date which until now had been the last date of the month of June of the year." (Emphasis supplied) On this line of reasoning the High Court came to the conclu sion 'that the State Govermnent had acted arbitrarily in fixing the last date fox receipt of applications as 31st January, 1988 under the advertisement published on 29th December, 1987.
The High Court while upholding the conten tion based on Article 14 further observed "we would have ignored the arbitrariness in taking 31st January of the year as the reckoning date had we not taken notice of recalci trance of the, respondents in taking no step in the years intervening the selection in the year 1983 and the present selection".
The High Court, therefore, felt satisfied that there was no rationale in departing from the past practice and selecting 31st January, 1988 as the last date.
It is felt that in all fairness 30th of June of the year would be 'the .preferable date ' for reckoning the eligibility of the candidates.
The State Government was, therefore, directed to shift the last date for receipt of the applications from 3 1st January 1988 to 30th June, 1988 and to prepare a fresh panel thereafter and make appointments to the posts in question therefrom.
The State of Bihar feeling aggrieved by this order has approached this Court by special leave.
The learned counsel for the State submitted that the decision of the High Court was based on an erroneous premise that the cut off date for eligibility purposes was 'always ' fixed as 30th of June of the relevant year in the past.
In order to dispel this assumption made by the High Court without examining the past advertisements the State Government has placed before us the advertisements issued from 1974 to 1980 which shows that different cut off dates were fixed under these different advertisements and at no time in the past between 1974 and 1980 was 30th of June fixed as the 472 relevant date.
It is true that the High Court did not have the benefit of the earlier advertisements but it is equally true that there was no material on the record of the High Court for concluding that in the past the cut off date was 'always ' fixed as 30th of June of the relevant year.
From the copies of the advertisements from 1974 to 1980 it tran spires that generally the cut off date was fixed between one to one and a half months after the date of issuance of the advertisement.
In the year 1983 for the first time the cut off date was fixed as 30th June, 1983.
On some occasions in the past the cut off date was extended, depending on the facts and circumstances obtaining at the relevant point of time.
It, therefore, becomes obvious from this documentary evidence that the factual premise on which the High Court has based its judgment is clearly erroneous.
The High Court was in error in thinking that in the past the cut off date was always fixed as 30th of June of the relevant year.
In fact except for a solitary occasion in 1983 when the cut off date was fixed as 30th June, 1983, at no other time in the past was that date fixed as the last date for receipt of the applications.
No advertisements were admittedly issued after 1983 and before the advertisement in question.
The present advertisement was published on 29th December, 1987 and the last date for receipt of applications was fixed thereunder as 3 ist January, 1988 leaving a time gap of a little over a month.
As pointed out earlier, on a perusal of the adver tisements issued from 1974 to 1980 it becomes obvious that normally the cut off date was fixed one or one and a half months after the date of advertisement.
It was, therefore, not the uniform practice of the State Government to fix the cut off date for eligibility purposes as 30th of June of the relevant year as was assumed by the High Court.
Once it is found that the High Court has based its decision on an erroneous assumption of fact, the decision cannot be allowed to stand.
It was, however, argued by the learned counsel for the respondents that the State Government should not be permit ted to introduce new facts in the form of advertisements issued from 1974 to 1980.
We do not think that such a tech nical approach would be justified for the simple reason that the assumption of fact made by the High Court is not borne out from record.
No material was placed before the High Court to justify the conclusion that 30th of June of the relevant year was 'always ' fixed as the cut off date in the past.
The High Court 's assumption of fact is, therefore, based on no evidence at all.
We have, therefore, thought it fit to permit the State Government to place material on record to justify its contention that the High Court had committed a grave error in assuming that in the past the cut off date was always fixed as 30th of June of the rele vant year.
473 It was next contended that this Court should not inter fere in exercise of its extra ordinary Jurisdiction under Article 136 of the Constitution.
In support of this conten tion reliance was placed on the observations of this Court in Municipal Board.
Pratabgarh & Anr.
vs Mahendra Singh Chawla & Ors., wherein this Court while correcting an error of law refused to interfere with the decision of the High Court directing reinstatement of the workman on the finding that the termination order was in valid.
That was, however, a case where the Court came to the conclusion that the employee was a capable hand and his services were actually needed by the appellant Municipal Board.
It was in those special circumstances that this Court while correcting the error refused to interfere with the order of reinstatement.
The decision, therefore, turned on the special facts of that case.
The appellant invited our attention to two decisions of this Court, namely, Union of India & Anr.
vs M/s. Pararnes waran Match Works & Ors., [1975]1 SCC 305 and Uttar Pradesh Mahavidyalaya Tadarth Shikshak Niyamitikaran Abhiyan Samiti, Varanasi vs State of U.P. & Ors.
in sup port of its contention that the High Court was in error in holding that the State had acted arbitrarily in fixing the cut off date.
In the first mentioned case by Notification No. 162 dated 21st July, 1967, which superseded the earlier notifications, provision was made that if a manufacturer gave a declaration that the total clearance from the factory will not exceed 75 million matches during a financial year, he would be entitled to a concessional rate of duty.
This Notification was amended by Notification No.205 dated 4th September, 1967, clause (b) whereof confined the concession, inter alia to factories whose total clearance of matches during the financial year 1967 68, as per declaration made by the manufacturer before 4th September, 1967, was not estimated to exceed 75 million matches.
Thus, the conces sional rate of duty could be availed of only by those who made the declaration before 4th September, 1967.
The re spondent was not a manufacturer before 4th September, 1967 as he had sought for a licence on 5th September, 1967 and was therefore, in no position to made the declaration before 4th September, 1967.
The respondent, therefore, challenged the cut off date of 4th September, 1967 as arbitrary.
Deal ing with the contention, this Court observed as under: "In the matter of granting concession or exemption from tax, the Government has a wide latitude of discretion.
1t need not give exemption or concession to everyone in order 474 that it may grant the same to some.
As we said, the object of granting the concessional rate of duty was to protect the smaller units in the industry from the competition by the larger ones and that object would have been frustrated, if, by adopting the device of fragmentation, the larger units could become the ultimate beneficiaries of the bounty.
" While pointing out that a classification could be rounded on a particular date and yet be reasonable, this Court observed that the choice of a date as a basis for classification cannot always be dubbed as arbitrary even if no particular reason is forthcoming for the choice unless the circum stances show it to be capricious or whimsical.
When it is necessary for the legislature or the authorities to fix a line or a date and there is no mathematical or logical way of fixing it precisely, the decision of the legislature or authority must be accepted unless it is shown to be capri cious or whimsical or wide off the reasonable mark.
In the second mentioned case this Court, while upholding the con stitutional validity of section 31 B of the U.P.Higher Educational Service Commission Act, 1980, answered two contentions, namely, (1) adoption of the cut off date in the said section as 3rd January, 1984 for the purposes of regu larisation of the services of ad hoc teachers appointed by the management of the affiliated colleges was arbitrary and irrational and violative of Article 14 inasmuch as equals were treated as unequals, and (ii) the Legislature could not arbitrarily adopt 3rd January, 1984 as the cut off date for regularisation of the services of ad hoc teachers merely because that was the date on which the 1983 order expired.
Agreeing with the High Court that the fixation of the date for the purposes of regularisation was not arbitrary or irrational, this Court observed that the object of section 3 I B was to regularise the services of ad hoc teachers ap pointed under the 1983 order till 3rd January, 1984.Ad hoc teachers who had been appointed prior to that date had legal sanction and therefore they constituted a distinct class.
This Court, therefore, felt that the legislature could not have adopted any other basis for purposes of regularisation and refused to interfere with the High Court 's order.
In the present case as pointed out earlier the past practice was to fix the last date for receipt of applica tions a month or one and a half months after the date of actual publication of the advertisement.
Following the past practice the State Government fixed the last date for re ceipt of applications as 31st January 1988.
Those who had . the required experience of three years by that date were, therefore, eligible to apply for the posts in question.
The respondents and some 475 of the intervenors who were not completing the required experience by that date, therefore, challenged the fixation of the last date as arbitrary and violative of Article 14 of the Constitution.
It is obvious that in fixing the last date as 31st January, 1988 the State Government had only followed the past practice and if the High Court 's attention had been invited to this fact it would perhaps have refused to inter fere since its interference is based on the erroneous belief that the past practice was to fix 30th of June of the rele vant year as the last date for receipt of applications.
Except for leaning on a past practice the High Court has not assigned any reasons for its choice of the date.
As pointed out by this Court the choice of date cannot be dubbed as arbitrary even if no particular reason is forthcoming for the same unless it is shown to be capricious or whimsical or wide off the reasonable mark.
The choice of the date for advertising the posts had to depend on several factors, e.g., the number of vacancies in different disciplines, the need to fill up the posts, the availability of candidates, etc.
It is not the case of any one that experienced candi dates were not available in sufficient numbers on the cut off date.
Merely because the respondents and some others would qualify for appointment if the last date for receipt of applications is shifted from 31st January, 1988 to 30th June, 1988 is no reason for dubbing the earlier date as arbitrary or irrational.
We are, therefore, of the opinion that the High Court was clearly in error in striking down the Government 's action of fixing the last date for receipt of applications as 31st January, 1988 as arbitrary.
It was lastly contended that the State Government had given an undertaking to the High Court that 'no appointment shall be made from any previous panel and that, as decided by this Court, if the panel, which is likely to be prepared pursuant to the advertisement in question, is allowed, appointments shall be made from the same panel or if that panel is not allowed and a new panel is required to be prepared, as directed by this Court, appointments shall be made from the same panel '.
This undertaking, in our opinion, cannot preclude the State from challenging the decision of the High Court.
In the result, this appeal succeeds.
The impugned deci sion of the High Court is set aside and the Writ Petition which has given rise to this appeal will stand dismissed with no order as to costs throughout.
Y. Lal Appeal allowed.
|
The State of Bihar published an advertisement inviting applications for appointments to the junior teaching posts in medical colleges in the State of Bihar.
For the post of Assistant Professor.
only such officers who had worked as Resident or Registrar in Medical Hospitals recognised for imparting M.B.B.S. studies by the Medical Council of India and having three years experience of such post were consid ered eligible.
The last date for receipt of applications was fixed as 31st January 1988.
Pursuant to the said advertise ment.
applications from eligible candidates were received and a select list or panel was prepared for appointments to the respective posts.
The respondents and some other inter venors who were working then in the Medical colleges as junior teachers challenged the State action in fixing the 3 1st of January 1988 as the cut off date for receipt of applications for the advertised posts.
as they had by then not completed three years which was prescribed as the requi site experience.
It was contended by them that the cut off date was arbitrarily fixed and was therefore violative of Article 14 of the Constitution.
The High Court took the view that the State Government in fixing the 31st January 1988 as the cut off date.
had deviated from its usual practice of fixing the cut off date as 30th of June of the relevant year.
Hence this appeal by the State of Bihar by special leave.
It is contended by the State that the decision of the High Court was based on an erroneous premise that the cut off date for eligibility purposes was 'always ' fixed as 30th of June of the relevant year in the past.
Allowing the appeal, this Court.
HELD: The past practice was to fix the last date for receipt of applications a month or one and a half months after the date of actual publication of the advertisement.
Following the past practice the State 469 Government fixed the last date for receipt of applications as 31st January 1988.
These who had completed the required experience of three years by that date were.
therefore.
eligible to apply for the posts in question.
[474G H] The choice of date cannot be dubbed as arbitrary even if no particular reason is forth coming for the same unless it is shown to be capricious or whimsical or wide off the reasonable mark.
The choice of 'the date for advertising the post had to depend on several factors, e.g. the number of vacancies in different disciplines.
the need to fill up the posts.
the availability of candidates etc., [475C D] Merely because the respondents and some others would qualify for appointment if the last date for receipt of applications is shifted from 31st January 1988 to 30th June 1988.
is no reason for dubbing the earlier date as arbitrary or irrational.
[475D] The High Court was clearly in error in striking down the Government 's action of fixing the last date for receipt of application as 31st January 1988 as arbitrary.
[475E] Municipal Board, Pratabgarh & Anr.
vs Mahendra Singh Chawla & Ors., ; Union of India & Anr.
vs M/s. Parameswaran Match Works & Ors., ; and Uttar Pradesh Mahavidyalaya Tadarth Shikshak Niyamitika ran Abhiyan Samiti, Varanasi vs State of Uttar Pradesh & Ors., , referred to.
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Appeal No.327 of 1955.
Appeal by special leave from the judgment and order dated January 31,1955, of the Bombay High Court, in Special Civil Application No. 1100 of 1954.
V. M. Limaye, section N. Andley, J. B. Dadachanji and Rameshwar Nath, for the appellants.
N. P. Nathwani, K. L. Hathi and R. H. Dhebar, for the respondent.
December 7.
The Judgment of the Court was delivered by section E. Das J.
section K. DAS J.
This is an appeal by special leave from a decision of the High Court of Bombay, dated January 31, 1955, by which it dismissed with costs a writ application (No. 1100 of 1954) made by the petitioners therein, who are now appellants before us.
It raises for consideration and decision a land revenue 395 problem of some complexity, which resulted from the enactment of the Bombay Taluqdari Tenure Abolition Act, 1949, (Bombay Act LXII of 1949), hereinafter referred to as the Abolition Act.
The problem is if the appellants, holders of certain lands known as "Lalliti " lands, are liable to the State Government concerned for payment of land revenue under the provisions of the Bombay Land Revenue Code, 1879 (Bombay Act V of 1879), hereinafter referred to as the Revenue Code ' after the enforcement of the provisions of the Abolition Act.
The problem has to be considered in the light.
of certain incidents of taluqdari tenures in the Ahmedabad district of Gujrat, with special reference to the changes through which those tenures had gone in the past by legislation or otherwise.
For the purposes of this appeal it is not necessary to give a full history of taluqdari estates in Gujrat; but it is necessary to explain what is meant by " Lal liti lands.
We get from such books as Baden Powell 's Land systems of British India " and Dandekar 's " The law of Land Tenure in the Bombay Presidency ", from both of which learned counsel for the parties have extensively quoted before us, a short history of the Taluqdars of Gujrat and of their estates.
Shortly stated, the history is this: Taluqdars of Gujrat (they were not known as Taluqdars then, because the name was given much later) originally occupied the position of Chiefs or Rulers.
This was before the Mahomedan rule in Gujrat.
When the Mahomedans invaded Gujrat, they found the country partitioned out into estates of large or small Chiefs, whom they forcibly deprived of all but one fourth of their possess ions, and the portion thus left took the name of 'wanta ' (divided).
Some 'wantas ' were free of payment of pent or revenue; other 'wanta ' estates paid a tribute in the shape of an " udhad jama " (fixed sum).
After the Moguls came the Marathas.
The accession and domination of the Marathas made no substantial difference to the position of these semi independent chiefs, except that the annual payments varied under the Maratha rule.
Then came the British, who for sometime continued 396 to realise annual payments according to past years; but very soon a significant change took place and the nature of the payment was altered, and instead of tribute, the Government assumed it to be rent or revenue.
The rent or revenue was also increased by about 50 per cent.
and the result was that the holders of these lands fell into pecuniary embarrassment and became impoverished and needy.
A system of annual leases was then introduced: this remedy, however, proved worse than the disease, and it was sought to improve the 'position of the Taluqdars by legislation it is not necessary for our purpose to refer to the details of that legislation till we come to the Gujrat Taluqdars ' Act, 1888 (Bombay Act VI of f888), which was a landmark in the history of Taluqdari tenures.
We shall have occasion later to refer to some of the provisions of this Act.
It is sufficient to state here that by the time the aforesaid Act was passed the Taluqdars of certain districts of Gujrat including Ahmedabad had really become mere owners of proprietary estates, who held lands directly from Government,and the Act provided, inter alia, for the revenue administration of their estates.
Under the provisions of the Act, the Settlement Registers were prepared for each village, which served the purpose of the Record of Rights in those estates.
In these estates, large areas of lands were granted presumably by the Taluqdars to cadets, widows of the family, and relations for maintenance, and to village servants and others, either in reward for past services or as remuneration for services to be performed.
The holders of these transferred lands paid no revenue either to the Taluqdar or to Government generally.
These grants fell into three categories: (i) those made prior to British rule ; (ii) those made between 1818 and 1888, that is, after the introduction of British rule and before the passing of the Gujrat Taluqdars ' Act, 1888 ; and (iii) those made after 1888.
The lands thus transferred were called " Lal liti " lands because they were recorded inred ink in the old 'faisal patrakas ' and in the Settlement Registers also, they were recorded in red ink but were shown as subject to " jama (land revenue) 397 liabilities of varying character.
The pre British transfers were recognised by Mr. Peile (later Sir James Peile) who was the Taluqdari Settlement Officer 1866, and the holders of these lands generally paid no " jama ".
The 1818 1888 transfers were those which were not so recognised by prescription, and when these lands reverted to the Taluqdar, they became his ordinary lands liable to payment of full.
" jama ".
The post Act grants were covered by section 31 of the Gujrat Taluqdars ' Act, 1888 (see in this connection " The Land Problems of Re organised Bombay State by Dr. G. D. Patel, pp. 174 175).
Such, in brief, is the history of Taluqdari estates and " Lal liti " lands, so far as that history has a bearing on the problem before us.
It is necessary now to state the facts which have given rise to the present appeal.
In their writ petition to the High Court, the appellants said that they were holders of " Lal liti " lands in villages Kharad and Rajka of the Dhanduka taluq of Ahmedabad district and were enjoying the lands without payment of any " jama " (land revenue) since the pre British rule, though the circumstances in which their predecessors originally got the lands are lost in antiquity.
They said inter alia that the exemption from payment of land revenue which they had all along enjoyed was not affected by the Abolition Act or by any later legislation like the Bombay Personal Inams Abolition Act, 1952 (Bombay Act LXII of 1953), and that the demand for payment of land revenue made by the State Government of Bombay for 1950 1953 was not authorised by law.
In the alternative, they also said that they were not liable to any assessment of land revenue till August, 1953.
Accordingly, they prayed for appropriate writs (a) quashing the demands for payment of land revenue and (b) directing the State of Bombay, the Collector of Ahmedabad and the Revenue Officer of Dhanduka (who are now respondents before us), to forbear from taking any steps to enforce payment of land revenue for the " Lal liti " lands held by them.
A number of similar applications, presumably filed by other holders of "Lal liti" lands, were also pending in the High Court, 51 398 So far as we can gather from the record before us, there were three sets of such applications.
The High court delivered its leading judgment on writ application No. 1098 of 1954 and the application of the appellants herein (No. 1100 of 1954) was dismissed with costs on the grounds given in the leading judgment.
The High Court held in effect that the holders of " Lal liti " lands were liable to payment of land revenue under section 5 of the Abolition Act, read with the provisions of the Revenue Code, and the objections raised thereto, on their behalf were not legally valid.
Having been unsuccessful in their application for a certificate under Article 133(1)(c) of the Constitution, the appellants applied for and obtained special leave from this Court on June 29, 1955.
They then preferred the present appeal.
Learned counsel for the appellants has challenged the correctness of the decision of the High Court on various grounds.
It will be convenient to take these one by one.
The first point urged is that the relevant provisions of the Abolition Act do not apply to " Lal liti " lands, which are not " taluqdari lands " within the meaning of the Abolition Act, and, therefore, no liability for payment of land revenue in respect of " Lal liti " lands can arise under section 5 thereof.
At this stage, we must read the relevant provisions of the Abolition Act.
The expressions " Taluqdari land " and " Taluqdari tenure " are defined in section 2, clauses (3) and (4): Section 2 :. . . . . . " (1 ). . . . . (lA). . . . (2). . . . . . . (3) ' Taluqdari land ' means land forming part of a taluqdari estate and includes land forming part of such estate and held by a cadet of a taluqdar 's family for the purpose of maintenance; (4) ' Taluqdari tenure ' means land tenure on which the taluqdari land is held Section 3 states: " With effect from the date on which this Act comes into force 399 (i)the taluqdari tenure shall wherever it prevails be deemed to have been abolished; (ii)save as expressly provided by or under the provisions of this Act, all the incidents of the said tenure attaching to any land comprised in a taluqidari estate shall be deemed to have been extinguished " Section 5, which is of great importance for the purpose of this appeal, read as follows before it was amended in 1953.
Section 5 (1) " Subject to the provisions of subsection (2), (a)all taluqdari lands are and shall be liable to the payment of land revenue in accordance with the provisions of the Code and the rules made there under, and (b)a taluqdar holding any taluqdari land or a cadet of a taluqdari family any taluqdari land hereditarily for the purpose of maintenance immediately before the coming into force of this Act, shall be deemed to be an occupant within the meaning of the Code or any other law for the time being in force.
(2)Nothing in sub section (1) shall be deemed to affect (a)the right of any person to hold any taluqdari land wholly or partially exempt from payment of land revenue under special contract or any law for the time being in force; (b)the right of any person to pay Jama under any agreement or settlement recognised under section 23 or under a declaration made under section 22 of the Taluqdars ' Act so long as such agreement, settlement or declaration remains in force under the provisions of this Act." Now, the argument on behalf of the appellants has proceeded on the following lines; learned counsel for them has submitted that the expression " Taluqdari land " is defined as land forming part of a taluqdari estate; but the expression " taluqdari estate" is not defined, though the expression " Taluqdari tenure " is defined; therefore, taluqdari estate can only mean, 400 such land or estate in which the taluqdar has some subsisting interest; but in " Lal liti " lands, at least of the taluqdar retains no interest after the grant, and, therefore, " Lal liti " land is not taluqdari land within the meaning of section 5 of the Abolition Act.
We have now to consider the soundness of this line of argument.
In the High Court as also before us an attempt was made on behalf of the respondents to establish that the taluqdar retained a reversionary right to " Lalliti " lands in case the holder died without any heir.
The High Court said rightly in our opinion, that on the materials placed before it, it could not be said that the respondents had established that position.
The High Court then considered the meaning of the expression ' taluqdari estate ' and said that it was used in a descriptive sense and was not equivalent to the expression 'Taluqdar 'sestate '.
Said the High Court: " Therefore, the expression " Taluqdari estate " is a comprehensive expression including all lands which at one time belonged to the Taluqdar.
In the eye of the law, although the lands might have been alienated by the Taluqdar, they still form part of the estate.
Therefore, the expression is more an expression indicating a particular tenure rather than a particular interest enjoyed by the Taluqdar .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Therefore, if the lands, the subject matter of the petition did at any time belong to the Taluqdar which he subsequently alienated, they would be covered by the definition in the Act of 1949, not withstanding the fact that when the Act was passed the Taluqdar had no interst in those lands.
" We are in agreement with the view thus expressed by the High Court.
Having regard to the history of the gig Lal liti " lands to which we have earlier adverted and the provisions of the Gujrat Taluqdars ' Act, 1888, it is manifestly clear that " Lal liti " lands are lands which form part of a taluqdari estate, even though no ' jama ' was actually paid for such lands to the taluqdar or to Government.
It is necessary to refer here 401 to sections 4, 5 and 22 of the Gujrat Taluqdars ' Act, 1888.
Section 4 empowers the Government to direct a revenue survey of any Taluqdari estate; section 5 lays down what particulars the Settlement Registers prepared by the Survey Officer in respect of a taluqdari estate shall contain.
One of such particulars is " the name and description and the nature and extent of interest of every alienee and of every incumbrancer of the estate or any portion thereof together with a specification of (i) the aggregate area over which such interest extends; (ii) the amount and nature of rent or land revenue, if any, payable or receivable by such alienee and incumbrancer, etc.".
It is not disputed before us, and the High Court has referred to it, that in the Settlement Registers prepared in respect of the two villages in question under section 5 of the Gujrat Taluqdars ' Act, 1888, the interest of the appellants in the " Lal liti " lands held by them was shown as comprised within the Dhanduka Taluqdari estate.
This clearly showed that these " Lal liti " lands formed part of a taluqdari estate, apart altogether from the question what interest, if any, the taluqdar retained in them after the alienation.
Section 22 of the Gujrat Taluqdars ' Act, 1888, also points the same way.
It lays down how the " jama " of a taluqdar 's estate is to be calculated: it says that the aggregate of the survey assessments of the lands composing such estate, minus such deduction, if any, as the Government shall in each case direct, shall be the " jama ".
Along with their petition, the appellants filed an annexure marked A": that annexure, besides showing the lands of the appellants within a taluqdari estate, also showed the "Jama " payable for each plot of land.
This again showed that whether the "jama " be actually paid or not, the " Lal liti " lands held by the appellants formed part of a taluqdari estate.
We accordingly hold that learned counsel for the appellants is not right in his contention that " Lal liti " lands are not part of a taluqdari estate and, therefore, are not 'taluqdari lands ' within the meaning of the Abolition Act.
Learned counsel for the appellants referred us to certain decisions of the Bombay High Court as to the 402 meaning of the expression " Taluqdar 's estate " in section 31 of the Gujrat Taluqdars ' Act, 1888, and contended that it meant an estate held by the Taluqdar as a Taluqdar and on the same analogy, he urged that land forming part of a taluqdari estate must also mean land in which the taluqdar has some interest as a taluqdar (Khoda Bhai vs Chaganlal (1), Bichesbha Mansangji vs Vela Dhanji Patel (2) and Taluqdari Settlement Officer vs Chhagan Lal Dwarkadas (3) ).
We do not think that those decisions are of any help to the appellants for the simple reason that the analogy does not apply; we are concerned here not with the meaning of the expression " taluqdar 's estate " occurring in section 31 of the Gujrat Taluqdars ' Act, 1888, but with the meaning of a different expression, viz. " taluqdari estate " in section 2(3) of the Abolition Act.
Moreover, in some of the decisions relied on by the learned counsel, it was recognised that there was a distinction between taluqdar 's estate ' and 'taluqdari estate.
We were also addressed at some length on the effect of the relinquishment of his land by the taluqdar in favour of the Collector (Nathuram Hiraram Thakur vs The Secretary of State for India(4)) or the effect of an attachment of the village under section 144 of the Revenue Code on failure of the taluqdar to pay the assessment (Tulla Sobharam Pandya vs The Collector of Kaira (5)).
We do not think that it is necessary in the present case to consider those questions.
We now go to the second point urged on behalf of the appellants.
This point was not urged before, nor considered by, the High Court in the writ application in which it gave its leading judgment.
The appellants wished to urge the point in the High Court on their own application, but were told that if the decision of the High Court in Writ Application No. 1098 of 1954 was wrong, it could be corrected only by this Court.
The argument on this point is based on section 5(1) of the Abolition Act, which we have quoted earlier, and is in two parts: firstly, it is contended that if clauses (a) (1) (2) (3) (191O) (4) (5) 403 and (b) of sub section (1) of section 5 are read together, the only reasonable conclusion is that clause (a) is merely declaratory and clause (b) is the operative clause and according to that operative clause, the persons who become liable for payment of land revenue are only two in number, namely, (1) a taluqdar holding any taluqdari land and (2) a cadet of a taluqdari family holding any taluqdari land with hereditary rights for the purpose of maintenance immediately before the coming into force of the Abolition Act, and, therefore, the holder of " Lal liti " lands, assuming them to be taluqdari lands, has no liability under section 5(1); secondly, it is contended that even if clauses (a) and (b) of subsection (1) of section 5 are read distributively the holder of Lal liti " lands has still no liability, because cl.
(a) makes taluqdari lands liable to the payment of land revenue in accordance with the provisions of the Revenue Code and there is no provision in that Code under which a " Lal liti " holder can be made liable to the payment of land revenue.
We take the first part of the argument first.
How should we read clauses (a) and (b) of sub section (1) of section 5 of the Abolition Act ? Learned counsel for the appellants states that if clause (a) is also read as a clause which operates to charge all taluqdari lands with liability for payment of land revenue, then clause (b) becomes a wholly unnecessary surplusage.
On the other hand, learned counsel for the respondents points out that if the intention was to fasten liability on two categories of persons only, taluqdars and cadets, then clause (a) was really unnecessary.
We think that both the clauses have a meaning and purpose.
Clause (a) makes all taluqdari lands liable to the payment of land revenue in accordance with the provisions of the Revenue Code.
Section 3 of the Abolition Act abolishes taluqdari tenure and extinguishes all its incidents.
If there was only abolition of taluqdari tenures without anything more, there would have been a void.
Obviously enough, it was necessary to say what would happen to taluqdari lands after abolition of the taluqdari tenure.
Therefore, clause (a) states that all taluqdari lands shall be liable, 404 to the payment of land revenue in accordance with the provisions of the Revenue Code.
What then is the meaning of clause (b)? It is a deeming provision by which the taluqdar and his cadet shall be deemed to be an occupant within the meaning of the Revenue Code; and I occupant ' under the Revenue Code means a holder in actual possession of unalienated land '.The word 'alienated ' has also a special meaning in the Revenue Code; it means I transferred in so far as the rights of Government to payment of rent or land revenue are concerned, wholly or partially, to the ownership of any person '.
Clause (b) merely clarifies the position of the taluqdar and his cadet under the Abolition Act; it does not in any way derogate from clause (a); nor does it cut down the width of amplitude of clause (a).
We are of the view that clauses (a) and (b) should be read together, but not in the sense suggested by the learned counsel for the appellants.
Clause (b) clarifies the position as respects two categories of persons; but that does not mean that if a third category of persons properly come under clause (a), they will not be liable to payment of land revenue on a specious and unwarranted assumption that clause (b) as the operating clause cuts down the amplitude of clause (a).
The true view is that clause (a) is a general provision and applies the Revenue Code to all taluqdari lands, while clause (b) is a particular deeming provision with regard to the taluqdar and his cadet.
Now, as to the second part of the argument.
It is necessary to read here section 136(1) of the Revenue Code: " Section 136 (1): In the case of unalienated land the occupant, and in the case of alienated land or taluqdari land, the superior holder, shall be primarily liable to the State Government for the payment of the land revenue,, including all arrears of land revenue, due in respect of the land.
Joint occupants and joint holders who are primarily liable under this section shall be jointly and severally liable.
" The question is if the holder of " Lal liti " lands is, after the Abolition Act, an occupant of unalienated 405 land within the meaning of section 136; if he is, then he is liable to the payment of land revenue under section 5(1)(a) of the Abolition Act read with section 136 of the Revenue Code.
In dealing with this question, which has caused us some anxiety, we must remember the meaning of the expressions ' occupant ' and 'alienated ' used in the Revenue Code.
The argument on behalf of the appellants is that a " Lal liti " holder is not an occupant of unalienated land; the respondents contend that he is, after the enforcement of the Abolition Act.
On a careful consideration of the question we have come to the conclusion that the contention of the respondents is correct.
In respect of " Lal liti " lands, Government made no ,separate settlement with the holder of such lands; the settlement was made with the taluqdar, within which settlement " Lal liti " lands were included.
The right of Government to payment of land revenue was never transferred to the holder of " Lal liti " lands though it is true that some of the taluqdars got a deduction under section 22 of the Gujrat Taluqdars ' Act, 1888, for the " Lal liti " lands.
We have been addressed at some length as to what was the position of taluqdars and " Lal liti " holders previous to the Abolition Act.
On behalf of the respondents it has been submitted that one characteristic of the taluqdari tenure was that the taluqdari estate was neither alienated nor unalienated within the meaning of the Revenue Code; because the taluqdars were not grantees of the British but enjoyed proprietary rights in their estates even before the advent of British rule.
As to " Lal liti " lands, they were not generally taken into account at the time of calculating the " jama " payable by the taluqdars to Government; and as a result, they were not covered by the Settlement guarantee operating in favour of the taluqdar.
Therefore, so the argument on behalf of the respondents has proceeded, holders of "Lal liti" lands became liable to payment of full assessment on the footing that they became occupants 52 406 of unalienated land, with effect from the date on which the Abolition Act came into force.
Learned counsel for the respondents has also drawn our attention to the list of amendments in the Revenue Code made by Schedule 1 of the Abolition Act in support of his contention that the taluqdars and all taluqdari lands have been brought into the scheme of the Revenue Code by the necessary amendments of section 136 and other sections of the Revenue Code.
The narrow question before us is, as we have stated earlier, whether a " Lal liti " holder is an 'occupant ' of "unalienated land ' within the meaning of the Revenue Code.
We are of the view that whatever may have been his position earlier, on the abolition of the taluqdari tenure by the Abolition Act he became a holder in actual possession of land in respect of which the Government had not transferred its rights to the payment of revenue, wholly or partially to the ownership of any person.
Therefore, the second point urged on behalf of the appellants fails in both parts.
We need notice very briefly three other points urged on behalf of the appellants; because we are in such complete agreement with the High Court with regard to them, that it is unnecessary to re state in detail the reasons which the High Court has already given.
(1) As to the saving clause (c) of section 17 of the Abolition Act, the High Court has rightly pointed out that it is the usual saving clause which says in effect that the repeal of the Gujrat ' Taluqdars ' Act, 1888, shall not be deemed to effect any declaration made or any agreement or settlement recognised etc.
under the provisions of the repealed Act.
The aforesaid saving clause affords, no protection against the liability imposed by section 5 of the Abolition Act.
(2) Learned counsel also relied on section 5(2)(a) of the Abolition Act, before its repeal by the Bombay Personal Inams Abolition Act, 1952 (Bombay Act 42 of 1953), and based his alternative claim thereon.
Here again, the High Court rightly pointed out that there was no special contract in favour of the appellants as to exemption from payment of land revenue 407 nor was there any law for the time being in force (after the Abolition Act) which granted the holder of " Lal liti" lands exemption, wholly or partially, from pay ment of land revenue; therefore, the appellants were entitled to no protection under section 5(2)(a) of the Abolition Act till August 1, 1953.
(3) Lastly, it was submitted that there was a settlement for thirty years with the taluqdari estate in question in 1925 26 and in the absence of any fresh settlement under the provisions of the Revenue Code, a "Lal liti" holder was not liable to pay land revenue within that period.
This point is completely answered by section 4 of the Abolition Act which in terms says that all revenue surveys or revised revenue surveys of taluqdari estates under section 4 of the Gujrat Taluqdars ' Act, 1888, and all settlement made shall be deemed to have been made under Chapters VIII and VIIIA of the Revenue Code and the settlement registers and other records prepared at such surveys shall be deemed to have been prepared under the corresponding provisions of the Revenue Code.
We know that the "Lal liti" lands of this case were shown in the Settlement Registers prepared under the Gujrat Taluqdars ' Act, 1888.
In view of the provisions of section 4 of the Abolition Act, no fresh settlement was necessary.
For the reasons given above, we hold that the appellants have failed to show that the decision of the High Court is wrong.
The appeal is accordingly dimissed with costs.
Appeal dismissed.
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The appellants who were holders of certain lands known as Lal liti " lands were assessed to land revenue under the provisions of the Bombay Land Revenue Code, 1879, after the Bombay Taluqdari Tenure Abolition Act, 3 1949, came into force.
"Lal liti " lands were granted originally by Taluqdars in Gujrat to cadets, widows of the family and relations for maintenance and to village servants and others, either in reward for past services or as remuneration for services to be performed.
Before the establishment of British rule, Taluqdars had the position of semi independent chiefs, but subsequent to the establishment of British rule they became mere owners of proprietary estates holding lands directly from Government, and in respect of such estates the Gujrat Taluq dars ' Act, 1888, was passed providing for their revenue administration.
The appellants claimed that these lands had been enjoyed without payment of any " jama " since pre British times and that the exemption from payment of land revenue was not affected by the Bombay Taluqdari Tenure Abolition Act, 1949.
The High Court took the view that the lands were liable to be assessed under section 5 of that Act.
It was contended for the appellants, inter alia, that no liability for payment of land revenue in respect of " Lal liti " lands could arise under section 5 of the Act, because (1) the Taluqdar retained no interest in such lands after the grant and, consequently, such lands were not taluqdari lands within the meaning of section 2(3) of the Act, (2) clause (a) of section 5(1) of the Act was merely declaratory, 394 while cl.
(b) was the operative clause by which the only persons liable for payment of land revenue were (i) a taluqdar holding any taluqdari land and (ii) a cadet of a taluqdari family holding any taluqdari land for maintenance, and (3) even assuming thatcl.
(a) made taluqdari lands liable to the payment of land revenue Code, a " Lal liti " holder could not be made liable, because he was not an occupant of unalienated land within the meaning of section 136(1) of the Code.
Held:(1) that having regard to the history of " Lal liti lands and the provisions of the Gujrat Taluqdar 's Act, 1888, such lands are lands which form part of a taluqdari estate, even though no " jama " was actually paid to the taluqdar or to Government, and are, therefore, taluqdari lands within the meaning of section 2(3) of the Bombay Taluqdari Abolition Act, 1949; (2)that cl.
(a) of section 5(1) of the Bombay Taluqdari Abolition Act was a general provision and applied the Bombay Land Revenue Code to all taluqdari lands, while cl.
(b) was a particular deeming Provision with regard to the taluqdar and his cadet and (3)that whatever might have been the position of a " Lal liti " holder earlier, on the abolition of the Taluqdari tenure by the Bombay Taluqdari Abolition Act, he became a holder in actual possession of land in respect of which the Government had not transferred its rights to the payment of revenue, wholly or partially,to the ownership of any person.
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821.txt
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ivil Appeal No. 830 of 1988.
275 From the Judgment and Order Dated 7.12.1987 of the Allahabad High Court in Civil Misc.
No. Nil 1987.
A.K. Ganguli and Sunil Kumar Jain for the Appellant.
Gopal Subramanium and Ashok K. Srivastava for the Re spondents.
The Judgment of the Court was delivered by RANGANATHAN, J.
The petitioner is a concern engaged in the business of manufacture of electric motors, pump sets and their parts.
It applied for exemption from sales tax in respect of the goods manufactured by it in terms of a noti fication issued by the State Government on 30.9.1982 under section 4A of the Uttar Pradesh Sales Tax Act, 1948 (herein after called the 'Act ').
This application was rejected by a Division Level Committee by an order dated 9.2.
1987 and a further review application was also dismissed on 27.10.1987.
Thereupon the appellant filed a writ petition which was also rejected by the High Court by a short order dated 7.12.1987.
Aggrieved by this denial of the exemption, which it claims it is entitled to, the appellant has preferred this appeal.
Section 4A of the Act reads as under: "4 A. Exemption from sales tax of certain goods for specified period (1) Notwithstanding anything co tained in section 3 or section 3 A, where the State Government is of the opinion that it is necessary so to do for increasing the produc tion of any goods or for promoting the devel opment of in any districts or parts of dis tricts in particular, it may on application or otherwise, by notification, declare that the turnover of sales in respect of such goods by the manufacturer thereof shall, during such period not exceeding seven years from the date of starting production by such manufacturer, and subject to such conditions as may be specified, be exempt from sales tax or be liable to tax at such reduced rate as it may fix.
(2)It shall be lawful for the State Government to specify in the notification under sub section (1) that the 276 exemption from, or reduction in, the rate of tax shall be admissible (a) generally in respect of all such goods manufactured subsequent to the date of such notification; or (b) in respect of such of those goods only as are manufactured in a new unit, the date of starting production whereof fails on or after the first day of October, 1982; or (c) only if the manufacturer had not discon tinued production of such goods for a period exceeding six months at a stretch in any assessment year.
Explanation For the purposes of this section (i) 'new unit ' means a factory or workshop using machinery, accessories or components not already used or acquired for use in any other factory or workshop in India but does not include any factory or workshop established on the site of an existing factory or workshop manufacturing the same goods or any addition to or extension of an existing factory or workshop; and (ii) 'date of starting production ' means the date on which any raw material required for use in the manufacture or packing of the specified goods is purchased for the first time or the date of installation of power connection, where needed, whichever is later.
In pursuance of the above section, the State Government published a scheme for the grant of exemption from sales tax to certain industrial units in the State.
The scheme, ac cording to its introduction, had been introduced "in order to encourage capital investment and establishment of new industrial units in the State".
It granted exemption to the industrial units established in certain areas of the State during the period from 1.10.1982 to 31.3.1985 and producing certain categories of goods.
It is not necessary to refer in detail to the provisions of the scheme or other conditions of exemption.
It is sufficient to say that this exemption was conferred only on units established on or after 1.10.1982 but before 31.3.1985.
The scheme also makes it clear that though it referred to units "established" this really is a reference to the date of commencement of produc tion by the industrial 277 unit.
This is also in accord with the terms of the statute and in particular sub section (2) of 4A.
The appellant 's claim to exemption has been rejected on a very short ground, namely, that it had not commenced production after 1.10.1982.
In the application filed by the appellant for exemption the appellant had mentioned that the date of actual com mencement of use of electricity for production was the 4th of December, 1982, which was also the actual date of com mencement of production.
The appellant also claimed that upto 30.9.1984 it had produced and sold electric motor parts for Rs.2,70,590.
The General Managers of the District Indus trial Centers at Deoband and Saharanpur and the Assistant Engineer of the Industrial State of Roorkee endorsed the following recommendation on the application: " . .
I have checked with the use of power and other sources that the unit started actual production from 4.12.1982 and the production made is self manufactured and is within the prescribed production capacity.
1 am fully satisfied with the facts produced by the Unit and I recommend that this unit is eligible to get exemption from sales tax/inter state sales tax . with effect from date of production commencement for 5 6 7 years under section 4 A of the Sales Tax Act vide G.O. No. 8244 Bha/18 11 231(A)Bha/39, dated 30.9.82.
" The difficulty in the appellant 's way appears to have been created by a certificate which had been produced by it before the Division Level Committee along with its applica tion.
This purported to be a certificate by a firm known as Krishna Trading Co. (in which the proprietor of the appel lant was a partner).
This certificate dated 4.12.
1981 reads as follows: "It is certified that the Trial Production of Kupla Bhatti was made today is 4.12.1981 expenses for which were incurred by our compa ny by purchasing raw material for its own ex penses under the agreement dated 15.5.1981 entered into.
M/s Janta Machine Tools was assured by the company to supply very soon all the remaining machines and installing them and making its trial production at its own ex penses.
" The Division Level Committee, while rejecting the applica tion 278 dated 9.2.1987, essentially gave only one reason for the rejection.
It was stated that the date of the alleged trial production was really the date of commencement of production and this fell prior to 1.10.1982.
As stated earlier the assessee preferred a review appli cation pointing out that the trial production could not be treated as commencement of actual production.
This review application was disposed of on 27.10.1987.
In its order the Committee observed: "On joint inquiry into the reality of your unit being conducted by the General Manager and sales tax officer of Deoband Industries Department they have reported that Shri Suresh Datt Sharma the proprietor of M/s Janta Ma chine Tools is partner of one third share in M/s Krishna Trading Company also.
No purchase of raw material was declared by M/s Krishna Trading Company in the year 198 1 82, and therefore, the certificate of trial production issued by M/s Krishna Trading Company on 4.12.
1981 is baseless and untrue.
In joint inquiry report it is also clear that your unit has purchased from M/s Krishna Trading Company Kupla etc.
of Rs.69,000 on 21.5.81, whereas M/s Krishna Trading Company have declared sale of Rs. 13,035 only in 198 1 82 as per file of the Sales Tax Department.
In the joint inquiry Report it is also mentioned that your unit got electricity on 21.11.1982 and on inquiry the unit informed that the trial production was done with the help of a generator.
Your unit could not give any certificate for purchasing or hiring a generator and now it has declared to have hired the generator for 4 5 hours from M/s Mitra Industries Deoband.
In the inquiry report it is also made clear that a unit cannot use a generator of other unit without prior permission of the electricity depart ment.
xx xx xx On the above discussion it is concluded that the unit in question wants to (get) illegal benefit of exemption from sales tax by produc ing wrong facts.
The trial production done by M/s. Krishna Trading Company on 4.12.
1981 is proved to have been done by the unit in ques tion itself and not by them.
Thus, the unit was established before l. 10.82.
The unit established before 1.10.82 is therefore not entitled to exemption from sales tax.
" 279 In our opinion, the rejection of the assessee 's applica tion proceeds on a total misconception of the facts.
The conclusion of the Division Level Committee is that produc tion was commenced by the appellant on 4.12.81 but this conclusion is based on no evidence.
It is true that the appellant produced a certificate showing that some produc tion was done on 4.12.
1981 but the appellant 's case was that this was merely a trial production.
It is not quite clear whether the District Level Committee completely doubts any trial production having taken place at all, or whether its conclusion is that there was a trial production, on 4.12.1981.
If its conclusion is the former one, it does not affect the appellant 's claim.
Assuming that the Committee has come to the conclusion that the production on 4.12.81 was conducted not by M/s Krishna Trading Company but by the appellant itself, the fact still remains that what had happened on that date was only trial production.
The mere fact that a certificate by M/s Krishna Trading is disbe lieved cannot lead to the conclusion that the assessee had produced goods on 4.12.81.
If one is to go by the definition contained in the explanation to section 4A for determining when the production started, one has to concentrate on the date of purchase of raw materials or on the date on which the electricity was brought into use for commercial produc tion.
The appellant 's claim that it had manufactured goods by 30.9.1984 is not denied.
Production had, therefore, commenced before 31.3.
There is no suggestion by the Department or the Committee, and there is no material to show that the appellant had purchased raw materials suffi cient to carry out normal commercial production at any time prior to 1.10.82.
It is an admitted fact that the assessee was able to obtain electricity for use for commercial pro duction only in November 1982.
This lends support to the appellant 's contention that the production could not have been effected by the assessee prior to that date.
In fact, this is a point on which emphasis is laid in the order dated 27.10.1987.
That being so, there is no iota of evidence or material on the basis of which the appellant 's claim that it had started production in December 1982 could have been rejected.
On the other hand, the recommendation and endorse ment of the General Manager, District Industries Centre, which has been extracted earlier, also supports the appel lant 's contention that it had started production on 4.12.1982 and this report was given after verifying the actual position on the spot.
For the reasons above mentioned we are of the opinion that the denial of the exemption to the appellant under the notification dated 30.9.82 was not justified.
The rejection of the appellant 's application in this regard is quashed and the appellant is declared entitled to the 280 exemption in terms of the notification.
We should not be understood, however, to have expressed any opinion as to the amount of exemption available to the appellant under the notification.
That will be a matter for consideration of the authorities in respect of each of the years concerned in respect of which the claim is made for exemption.
The appeal stands allowed, but in the circumstances, we make no order as to costs.
G.N. Appeal allowed.
|
The State Government in pursuance of Section 4A of the Act formulated and published a scheme for grant of exemption from Sales Tax, to encourage capital investment and estab lishment of new industrial units which were established during the period from 1.10.1982 to 31.3.1985 and producing certain categories of goods.
Though the scheme referred to units established, it actually referred to the date of commencement of production.
The appellant, a concern engaged in the business of electric motors, pump sets and their parts, applied for the exemption.
The appellant claimed that the date of actual commencement of use of electricity for production was 4th December, 1982 and that was the actual date of commencement of production.
The same was endorsed by the General Manag ers, District Industrial Centers and the Assistant Engineer concerned, while recommending the application.
But the difficulty had arisen on account of a certificate attached to the application for exemption.
It was given by a firm which had entered into an agreement with the appellant for supply of machines and installation.
According to the cer tificate, trial production commenced on 4.12.1981.
The Division Level Committee, before which the application was filed, rejected it, saying that the date of trial production was really the date of commencement of production and it fell prior to 1.10.1982.
The appellant preferred a review claiming that trial production could not be treated as commencement of actual production.
The review application was also dismissed and it was held that the unit was estab lished before 1.10.1982 and, therefore, was not entitled to the exemption.
Thereafter, the appellant filed a writ peti tion before the High Court.
It was rejected.
274 Claiming that it is entitled to the exemption, the appellant has preferred this appeal, by special leave.
Allowing the appeal, HELD: 1.1 The appellant is entitled to the exemption, in terms of the notification dated 30.9.1982.
The rejection of the application for exemption proceeds on a total misconcep tion of facts.
The conclusion that production was commenced on 4.12.1981 is not based on any evidence.
It does not affect the appellant 's claim even if there was any doubt about the trial production having taken place at all.
Wheth er trial was conducted by the other firm or the appellant itself, the fact remains that only trial production took place on 4.12.1981.
The mere fact that the certificate is disbelieved cannot lead to the conclusion that the appellant had produced the goods on 4.12.1981.
[279A D] 1.2 To go by Section 4A of the Act to determine the date of commencement of production, the date of purchase of raw material or the date on which electricity was brought into use would be relevant.
The appellant 's claim that it had manufactured goods by 30.9.1984 is not denied.
Production had, therefore, commenced before 31.3.1985.
There is no suggestion by the Department or the Committee, and there is no material to show that the appellant had purchased raw materials sufficient to carry out normal commercial produc tion at any time prior to 1.10.1982.
It is an admitted fact that the assessee was able to obtain electricity for use for commercial production only in November 1982.
This lends support to the appellant 's contention that the production could not have been effected by the assessee prior to that date.
In fact, this is a point on which emphasis is laid.
That being so, there is no iota of evidence or material on the basis of which the appellant 's claim that it had started production in December 1982 could have been rejected.
On the other hand, the recommendation and endorsement of the Gener al Manager, District Industries Centre also supports the appellant 's contention that it had started production on 4.12.1982 and this report was given after verifying the actual position on the spot.
[279D G] 2.
As regards the amount of exemption available to the appellant, it is a matter for consideration of the authori ties in respect of each of the years concerned in respect of which the claim is made for exemption.
[280B]
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5934.txt
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N: Criminal Appeal No. 353 of 1986 915 From the Judgment and order dated 25.2.1986 of the Patna High Court in C.W.J.C. No. 227 of 1985.
R.K. Garg and Miss Rani Jethmalani for the Petitioner.
D. Goburdhan for the Respondents.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
This Appeal and the Writ Petition challenge the order passed by the District Magistrate, Dhanbad under section 12(2) of The Bihar Control of Crimes Act, 1981 (hereinafter called the said 'Act ').
The order was passed on 15th January, 1985 and was served on the petitioner on 7th December, 1985.
The impugned order was approved by the Government on 15th January, 1985.
The said Act was an Act to make special provisions for the control and suppression of anti social elements with a view to maintenance of public order.
Section 12 deals with power to make orders for detaining persons, Clause (d) of section 2 of the said Act states "Anti Social Element ' as a person who is: (i) either by himself or as a member of or leader of a gang, habitually commits, or attempts to commit or abets the commission of offences, punishable under Chapter XVI or Chapter XVII of the Indian Penal Code; or (ii) habitually commits or abets the commission of offences under the Suppression of Immoral Traffic in Women and Girls Act, 1956; or (iii) who by words or otherwise promotes or attempts to promote on grounds of religion, race, language caste or community or any other grounds whatsoever, feelings of enmity of hatred between different religions, racial or language groups of castes or communities; or (iv) has been found habitually passing indecent remarks to, or teasing women or girls; or (v) who has been convicted of an offence under Section 25, 26,27, 28 or 29 of the Arms Act of 1959.
916 Under section 3, the power is thereof externment on certain conditions.
Sub sections(1) and (2) of section 12 of the said Act provides as follows: "12.
Power to make orders detaining certain persons (l) The State Government may if satisfied with respect to any person that with a view to preventing him from acting in any manner prejudicial to the maintenance of public order and there is reason to fear that the activities of anti social elements can not be prevented otherwise than by the immediate arrest of such person, make an order directing that such anti social element be detained.
(2) If, having regard to the circumstances prevailing or likely to prevail in any area within the local limits of the jurisdiction of a District Magistrate, the State Government is satisfied that it is necessary so to do, it may by an order in writing direct, that during such period as may be specified in the order, such District Magistrate may also, if satisfied as provided in sub section (1) exercise the power conferred upon by the said sub section: Provided that the period specified in an order made by the State Government under this sub section shall not, in the first instance exceed three months, but the State Government may, if satisfied as aforesaid that it is necessary so to do, amend such order to extend such period from time to time by any period not exceeding three months at any one time.
" The other provisions are not material for the present purpose.
In so far as these are relevant have been dealt with in the judgment under appeal and it is not necessary to reiterate these again.
The High Court in the judgment under appeal has referred to the order of detention exhaustively.
The High Court has narrated the facts in the judgment under appeal and stated as follows: "On 11.3.84 on a confidential information a raid was organised under the leadership of the officer in charge of 917 Dhanbad Police Station to apprehend one Sri Raghunath Singh an absconder detenu of the National Security Act.
According to the confidential information he was going to witness a Qwali programme at Sijua gate within Jagota Police station.
As soon as the raiding party reached the Sijua gate they saw that Raghunath Singh was coming out of club and was going towards Sijua More.
The police cordoned him and told him about his arrest under the National Security Act.
On this the aforementioned Raghunath Singh called one Sakaldeo Singh who was coming towards him alongwith his associates duly armed.
Sakaldeo Singh immediately reached the spot and asked the detenu and his other associates to open fire.
As ordered the detenu opened fire on the police party.
The police party, however, escaped injury.
Meanwhile Raghunath Singh took the position and opened fire from his revolver which hit the S.I. Sri.
R. K. Verma, a member of the raiding party who fell on the ground.
The police party also opened fire but the detenu and his associates, quite in number, under the coverage of firing fled away by breaking the cordon of the police party.
The incident took place at about 1.50 a.m. in presence of a large gathering which was witnessing the Qwali programme.
This created great panic and alarm amongst the people who were witnessing the programme and they started running helter and skelter for their lives.
A complete confusion prevailed in the programme and the police had a hard time to control the situation.
This adversely affected the public order.
The people were so much afraid that they stopped moving freely in the area.
It is alleged that the detenu is a terror in the area and nobody dares to speak against him.
He is an uncrowned king of the Mafia World and the people living in the area are under the constant threat of life and property.
A case bearing Jogta P.S. Case No. 22 dated 11.3.84 under section 142/149/307/ 326/353/333/224/225 I.P.C./27 Arms Act was registered for this incident and charge sheet had already been submitted in the case.
Besides the aforesaid ground two cases have been referred to in the order of detention as background to show the criminality of the detenu: 1.
Kenduadih P.S. Case No. 43 dated 11.3.83 under section 302/34 I.P.C./25(1A)/27 of the Arms Act/3/5 of the 918 Explosive Substance Act.
In this case the detenu with his associates is alleged to have murdered one Sri Nagendra Singh in broad day light and a charge sheet in this case had already been submitted.
The other case referred to as a background is that numbered as Kenduadih P.S. Case No. 31 dated 11.3.84 under section 25(1A)/35 Arms Act.
In this case a DBBL gun looted in Keswar P.S. Case No. 5/84 under section 395 of the Indian Penal Code was recovered from the detenu 's house besides cartridges of various Arms.
A charge sheet in this case had also been submitted.
" Upon these materials, the District Magistrate, in his order of detention, has reiterated that he was satisfied that the petitioner is an anti social element and habitually commits offences punishable under Chapters XVI and XVII of the Indian Penal Code and as such his movements and acts adversely affect the public order.
The District Magistrate further stated that he was satisfied on ground No. 1 referred to hereinbefore.
In so far as Jogta P.S. Case No. 22 dated 11.3.84 is concerned, it was with regard to the same incident which resulted in the detention of the petitioner/appellant.
So far as the background was concerned, the incident No. 2 mentioned therein was Kunduadih P.S. Case No. 31 dated 11.3.84 with regard to the same date i.e. 11.3.84 but with regard to a different occurrence.
In that case a gun was looted and a case under I.P.C. was instituted under section 395 of the Indian Penal Code.
Said gun was recovered from the petitioner 's/appellant 's house beside cartridges of various arms and a charge sheet had been submit ted in connection with Jogta P.S. Case No. 22 dated 11;3.84.
These cases were pending at the relevant date.
Therefore, there was no question of the acquittal or termination of the petitioner one way or the other in respect of both the incidents of the same date.
In respect of Incident No. 1 referred to hereinbefore i.e. Kenduadih P.S. Case No. 43 dated 11.3.84 under section 302/34 I.P.C./25(1A)/27 Arms Act/3/5 Explosive Substance Act in which the petitioner/ appellant and his associates are alleged to have murdered Sri Nagendra Singh in the broad day light, a charge sheet had been submitted but the case had not been tried or terminated in any manner.
All these cases were pending disposal.
919 There is a proximity between these incidents betraying a nature and a tendency of committing these offences.
But it cannot be denied that these indicate, in the facts of this case, that the petitioner/appellant was one who habitually committed offences which are at least punishable under I.P.C.
We have noted who is an anti social element under the Act.
The petitioner/appellant has not yet been convicted under any of these sections referred to hereinbefore.
So far as the incidents referred to hereinbefore betray criminal propensity.
The first incident is of a case which was one year prior to the date of the detention order and the other incident was of the same date.
If in this background, an appropriate authority charged with the implementation of the Act comes to the satisfaction that the petitioner/appellant is one who is habitually committing or abetting the commission of offences, such a conclusion is neither irrational nor unreasonable.
In Vijay Narain Singh vs State of Bihar & Ors.
, ; , this Act came up for consideration by this Court.
But in that case the facts were entirely different.
In that case the petitioner was facing trial for offences under section 302 read with section 120B, 386 and 511 of the Indian Penal Code and was allowed to be enlarged on bail by the High Court.
But before the petitioner was released in that case the District Magistrate passed an order on 16th August, 1983 under section 12(2) of the said Act for detention of the petitioner.
The grounds of detention supplied to the petitioner related to the incidents which took place in 1975 and 1982.
There is a gap of 6 7 years in between the majority of the judges in that decision (O. Chinnappa Reddy and E.S. Venkataramiah, JJ) observed that the law of preventive detention is hard law and therefore should be strictly, construed.
Care should, therefore, be taken that liberty of a person is not jeopardized unless his case fell squarely within the four corners of the relevant law.
A.P. Sen, J. disagreed.
It is not necessary to discuss the decision in detail in view of the facts of that case and difference of the facts in this case.
We only reiterate that what the majority of the learned judges said was that while adequacy or sufficiency was no ground of a challenge, rele vancy or proximity were grounds of challenge.
We may respectfully add that proximity would be relevant in order to determine whether an order of detention was arrived at irrationally or unreasonably.
It is well settled that the detaining authority is not the sole judge of what national security or public order requires.
But neither is the court the sole judge of the position.
When power is given to an authority to act 920 on certain facts and if that authority acts on relevant facts and arrives at a decision which cannot be described as either irrational or unreasonable, in the sense that no person instructed in law could have reasonably taken that view, then the order is not bad and the Court cannot substitute its decision or opinion, in place of the decision of the authority concerned on the necessity of passing the order.
See in this connection the observations of The Barium Chemicals Ltd. and Anr.
vs The Company Law Board and others, Preventive detention for the social protection of the community is, as noted and observed in Vijay Narain Singh 's case (supra), a hard law but, it is a necessary evil in the modern society and must be pragmatically construed, so that it works.
That is how law serves the society but does not become an impotent agent.
Anti social elements creating havoc have to be taken care of by law.
Lawless multitude bring democracy and constitution into disrepute.
Bad facts bring hard laws hut these should be properly and legally applied.
It should be so construed that it does not endanger social defence or the defence of the community, at the same time does not infringe the liberties of the citizens.
A balance should always be struck.
The executive authority is not the sole judge of what is required for national security or public order.
But the court cannot substitute its decision if the executive authority or the appropriate authority acts on proper materials and reasonably and rationally comes to that conclusion even though a conclusion with which the court might not be in agreement.
It is not for the court to put itself in the position of the detaining authority and to satisfy itself that untested facts reveal a path of crime provided these facts are relevant.
See in this connection the observations of O. Chinnappa Reddy, J. in Vijay Narain Singh 's case (supra) at Pages 440 and 441.
In the facts of this case and having regard to the nature of the offences, the impugned order cannot be said to be invalid and improper one.
The High Court has very exhaustively dealt with this aspect and we respectfully agree with the High Court 's view.
There is no analogy between the instant case and the facts of Vijay Narain Singh 's case (supra) decided by this Court.
On materials on record it cannot be said as the High Court has rightly pointed out that the power of preventive detention has been 921 used to clip the 'wings of the accused ' who is involved in a criminal prosecution.
Certain allegations had been made that all materials had not been supplied to the accused.
This is not true because as the High Court noted that all relevant F.I.Rs were received by the petitioner and in token whereof he had put his signature in black and white in his own hand.
The fact that the petitioner was in jail has been taken into consideration.
How these factors and to what extent these should be taken into consideration have been discussed by this Court in Writ Petition (Criminal) No. 296 of 1986 (With SLP (Criminal) No. 1265 of 1986).
It is not necessary to reiterate them.
In the instant case the limits have not been transgressed.
In the background of the facts of this case that all the relevant documents were in fact supplied and no other document was asked for, the observations of this Court in Ichchu Devi Chorana vs Union of India & Ors., ; at 651 on which reliance was placed by Mr. Garg on behalf of the petitioner/appellant do not apply.
Mr. Goberdhan, on behalf of the State of Bihar, rightly pointed out that in the facts and circumstances of this case and the background of the scheme of this Act, there was no scope of the application of the principles reiterated by this Court in Ibrahim Ahmed Batti vs State of Gujarat and others; , at 558.
Similarly the observations of this Court in State of Punjab vs Jagdev Singh Talwandi ; at 62 & 63, upon which Mr. Garg relied can have no application.
All the relevant documents were supplied.
All the statutory safeguards were complied with.
In view of the backgrounds in the facts and circumstances of this case and the grounds mentioned in the affidavit of the District Magistrate filed before the High Court in the case under appeal as well as in Writ Petition in this Court and the facts found by the High Court which are based on cogent and reliable evidence, there is no ground for interference with the order of detention.
Preventive detention as reiterated is hard law and must be applied with circumspection rationally, reasonably and on relevant materials.
Hard and ugly facts make application of harsh laws imperative.
The detenu 's rights and privileges as a free man should not be unnecessarily curbed.
922 No other points were urged before us.
This Court has reiterated in Writ Petition (Criminal) No. 296 of 1986 with SLP (Criminal) No. 1265 of 1986 the relevant aspect of the preventive detention law.
In that view of the matter it is not necessary to reiterate those principles again here.
Preventive detention is a necessary evil in the modern restless society.
But simply because it is an evil, it cannot be so interpreted as to be inoperative in any practical manner.
Judged by all relevant standards, the impugned order of detention in the case of the petitioner cannot be said to be either illegal or beyond the authority of law.
Before we conclude we must point out that another point was taken that in the order there was no mention of the period of detention.
There could not be an indefinite detention.
The State Government has clearly notified the period of detention of the petitioner and indicated that he should be in detention till 6th December, 1986.
This appears at Annexure I at page 52 of the Paper Book of Criminal Appeal No. 353 of 1986.
The said order was passed under section 22 of the said Act by the State Government.
In the premises the Writ Petition fails and is dismissed.
The Criminal Appeal is also dismissed.
A.P.J. Petition and Appeal dismissed.
|
The Bihar Control of Crimes Act, 1981 was enacted to make special provisions for the control and suppression of anti social elements with a view to maintenance of public order.
Section 2(d) defines "Anti Social Element" and section 12 deals with power to make orders for detaining certain persons.
Upon the materials, the District Magistrate, hl his order of detention under section 12(2) has stated that he was satisfied that the petitioner was an anti social element and was habitually committing offences punishable under Chapters XVI and XVII of the Indian Penal Code and as such his movements and acts adversely affected the public order.
The incidents referred to in the grounds of detention showing criminal propensity of the petitioner had taken place one year prior to the date of passing of the detention order.
The petitioner unsuccessfully challenged his detention before the High Court.
Dismissing the writ petition as well as the appeal, this Court, ^ HELD: 1.
Preventive Detention for social protection of the community is a hard law but, it is a necessary evil in the modern society and must be pragmatically construed, so that it works.
That is how law serves the society but does not become an impotent agent.
Anti social elements creating havoc have to be taken care of by law.
Lawless multitude bring democracy and Constitution into disrepute.
Bad facts bring hard laws but these should be properly and legally applied.
It should be so construed that it does not endanger social defence or the defence of the community, at the same time does not infringe the liberties of the citizens .
A balance should always be struck.
[920B D] 914 2.
The executive authority is not the sole judge of what is required for national security or public order.
But, the court cannot substitute its decision if the executive authority or the appropriate authority acts on proper materials and reasonably and rationally comes to that conclusion even though a conclusion with which the court might not be in agreement.
It is not for the court to put itself in the position of the detaining authority and to satisfy itself that untested facts reveal a path of crime provided these facts are relevant.
[920E F] 3.
If, in the background of a case, and having regard to the definition of 'anti social element ' in section 2(d) of the Bihar Control of Crimes Act, 1981, an appropriate authority charged with the implementation of the Act, comes to the satisfaction that the detenu is one who is habitually committing or abetting the commission of offences, such a conclusion is neither irrational nor unreasonable.
[919C D] 4.
In the instant case, it cannot be said that the power of preventive detention has been used to clip the 'wings of the accused ' who was involved in a criminal prosecution.
The fact that the petitioner was in jail has been taken into consideration and all the relevant documents were in fact supplied to him.
Judged by all relevant standards the order of detention cannot be said to be either illegal or beyond the authority of law.
Therefore, there was no ground for interference with the order of l detention.
[920H; 921A G] 5.
While adequacy or sufficiency is no ground of a challenge, relevancy or proximity are grounds of challenge and proximity would be relevant in order to determine whether an order of detention was arrived at irrationally or unreasonably.
[919G H] Vijay Narain Singh vs State of Bihar & Ors., ; and The Barium Chemicals Ltd. and Anr.
vs The Company Law Board and others, [1366] (Supp.) SCR 311, followed.
Ichchu Devi Choraria vs Union of India & Ors., ; at 651, Ibrahim Ahmed Batti vs State of Gujarat and others; , at 558 and State of Punjab vs Jagdev Singh Talwandi, [1984] 2 SCR at 62 & 63 inapplicable.
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5135.txt
|
Civil Appeals Nos.
4065 67 of 1982.
Appeals by special leave from the judgments and orders dated 30.11.81 and 14.9.1981 of the Madras High Court in O.S.A. No. 148 of 1981 and Company Appeal Nos. 880 881 of 1981.
M.K. Ramamurthy, Somyaji, Ambrish Kumar, Miss Nitya Ramakrishnan for the Appellants in CA.
No. 4065/82.
G. Vasanta Pai, S.N. Kacker, O.C. Mathur and D.N. Mishra for the Respondents in CA.
4065 of 1982 and for the Appellants in CA.
4066 67/82.
R.K Garg, A.T.M. Sampath and P.N. Ramalingam for the Appellants in CA.
4066 67/82.
935 V.M.
Tarkunde, E.C. Aggarwala, R. Satish, V.K. Pandia and T.S. Vishwanath Rao for the Respondent Nos. 6 9 and 11.14 in CA.
4066 67 of 1982.
O.C. Mathur, Ravinder Narain and D.N. Mishra for the Respondents in C.A. 4065 of 1982.
M. Natesan and M. Raghuraman for the Intervener.
The following Judgments were delivered BHAGWATI J.
These three appeals by special leave raise a short but interesting question of law relating to the right of workmen employed in a company to appear and oppose a petition for winding up of the company.
The controversy between the parties arises out of a petition for winding up a private limited company called Ramakrishna Industries (P) Limited (hereinafter referred to as a company).
The Company has three units, one a textile mill in the name of Jotie Mills which employs about 500 workmen, another, a workshop for manufacture of textile and other machinery which employs about 400 workmen and the third a printing press which brings out a Tamil daily, called "Nav India" and employs about 100 workmen.
It is a closed company in which there are two groups of shareholders, one group consisting of respondent Nos. 1 to 5 and the other consisting of respondent Nos 7 to 14.
Respondent Nos. 1 to 5 hold 608 shares and respondent nos.
7 to 14 687 shares while the remaining 300 shares belong to a Trust in which both the groups are equally represented on the Board of Trustees.
It appears that a serious dispute arose between Respondent nos.
1 to 5 on the one hand and Respondent nos. 7 to 14 on the other in regard to the management of the affairs of the company and since the dispute could not be settled amicably, Respondent nos. 1 to 5 filed a petition for winding up the Company on two grounds set out in clauses (e) and (f) of section 433 of the .
One ground was that the Company is unable to pay its debts and the other was that it is just and equitable that the Company should be wound up.
The winding up petition was filed by Respondent nos.
1 to 5 not only as contributories but also as creditors of the Company.
Immediately on filing the winding up petition on 13th July 1981, Respondent nos. 1 to 5 submitted an application, being company application No. 844 of 1981, for an interim injunction and on this application, an ex parte order was made by the learned Company 936 Judge restraining the Company which was respondent No. 6 in the winding up petition as also Respondent nos.
7 to 14 from borrowing any monies from banks, financial institutions or others without the prior permission of the Court and from alienating and/or creating any charge or encumbrance over any of the assets of the Company in its various enterprises.
The immediate consequence of this ex parte order of injunction was that the Jotie Mills Employees Co operative Store stopped issuing any provisions or supplies to the workmen from 18th July 1981 and the workmen were also unable from 23rd July 1981 to enjoy the benefits under the Employees State Insurance Scheme.
The workmen also apprehended that on account of the ex parte order of injunction, they may not be able to get their wages which were due to be paid on 7th August 1981.
Now some of the workmen were members of the National Textile Workers Union, some others were members of the Coimbatore District National Textile Employees Union while still some others were members of the Coimbatore District Engineering Workers Union.
The Coimbatore District National Textile Employees Union with a view to protecting the interests of its members made an application, being company application No. 880/81 on 28th July 1981 for impleading itself as a respondent.
The Coimbatore District Engineering Workers Union also made a similar application to the Company Judge on the same day, being Company Application No. 881 of 1981.
So also the National Textile Workers Union made an application, being company application No. 883 of 1981, to the Company Judge on 29th July 1981 praying that it may be permitted to intervene in the winding up petition and that the ex parte order of injunction may be vacated.
Respondent nos.
1 to 5 filed their affidavit in reply to these three applications and the principal contention raised by them was that the National Textile Workers Union, the Coimbatore District National Textile Employees Union and the Coimbatore District Engineering Workers Union had no locus standi to appear and oppose the winding up petition, since the workmen who were members of these three unions were neither creditors nor contributories of the company.
These three applications came up for hearing before the Company Judge and after hearing full arguments on both sides, the Company Judge made an order dated 14th September 1981 rejecting all the three applications on the ground that under the , the workmen had no right either to get impleaded in the winding up petition or even to intervene in the winding up petition.
The Company Judge 937 followed the decision of a single Judge of the Bombay High Court in In re Edward Textiles Limited(1) in taking this view.
The Company Judge conceded and this concession had to be made because of the observations of this Court in Fertilizer Corporation Kamgar Union and Ors.
vs Union of India and Ors.(2) and of the High Court of Bombay in Bhalchandra Dharamaji Makaji vs Alcock Ashdown and Co. Ltd.(3) that the factors to be taken into account by the court while disposing of a winding up petition would include the interest of the workmen of the company, but observed that "the duty of the court to consider the interest of the worker of the company would not create a right in such workers to intervene in the absence of express provision in the and in the teeth of such right specifically conferred only on the creditors and contributories.
" The National Textile Workers Union thereupon preferred an appeal before a Division Bench of the High Court but the Division Bench also took the same view and held that though it was undoubtedly true that while disposing of a winding up petition preferred on the ground that it is just and equitable to wind up the company, the court must consider the interest of the workmen, it does not mean "that everybody who is remotely interested in the company can file an application to implead himself as a party in the petition for winding up" and "merely because in considering the question whether to wind up or not the court has also to take the larger point of public interest including that of the workers into consideration, it will not clothe the Unions with any locus standi to file applications for impleading themselves as parties or to be heard in the company petition.
" The Division Bench accordingly rejected the appeal and this led to the filing of Special Leave Petition No. 9661 of 1981 in this Court by the National Textile Workers Union.
The Coimbatore District National Textile Employees Union and the Coimbatore District Engineering Workers Union did not prefer any appeal against the judgment of the Company Judge before the Division Bench of the High Court but they preferred Special Leave Petitions Nos. 10248 and 10249 of 1981 directly in this Court against the judgment of the Company Judge.
We issued notice on all the three Special Leave Petitions and when the Respondents appeared before us, we intimated to them that we will dispose of the entire controversy between the parties on the Special Leave Petitions and that is how full and detailed arguments 938 were advanced before us at the hearing of the Special Leave Petitions.
We now proceed to dispose of these cases after granting special leave to appeal in each of the three special leave petitions.
Before we proceed to discuss the basic and vital question that arises for consideration in these appeals, it is necessary to set out a few further facts which may have some bearing on the final relief to be granted by us.
On the same day on which respondent Nos. 1 to 5 filed the winding up petition and applied for interim injunction, they also made an application, being Company Application No. 843 of 1981, praying for appointment of Provisional Liquidator of the company.
Respondent Nos. 6 to 14 appeared at the time when this application was presented and asked for time to file their affidavit in reply and time was granted by the Company Judge upto 10th August, 1981.
Respondent Nos.
6 to 14 thereafter filed an affidavit in reply on 10th August, 1981 and after hearing both sides in a bitterly contested argument, the Company Judge made an order on 7th December 1981 appointing the official liquidator as Provisional Liquidator of the Company.
The workmen represented by the National Textile Workers ' Union, the Coimbatore District National Textiles Employees ' Union and the Coimbatore District Engineering Workers ' Union did not have an opportunity of being heard before the order appointing Provisional Liquidator was passed by the Company Judge, because as pointed out above, their applications for impleading themselves as parties in the winding up petition or in any event, for being allowed to intervene in the winding up petitions were rejected by the Company Judge on 14th September, 1981 and this rejection was confirmed by the Division Bench of the High Court on 30th September 1981.
The result was that the order appointing Provisional Liquidator of the company came to be made by the Company Judge without any opportunity being given to the workmen represented by these three Unions to appear and show cause against the making of such order.
It may be pointed out that the order appointing Provisional Liquidator was stayed for some time by the Division Bench of the High Court in an appeal preferred by respondent Nos.
6 to 14 but the application for stay was ultimately dismissed by the Division Bench and the Official Liquidator immediately thereafter took charge of the affairs of the company.
We may now proceed to consider the question that arises for determination before us.
The question, briefly stated, is: when a 939 petition for winding up a company is filed in court, are the workmen of the company entitled to ask the court to implead them as parties in the winding up petition or to allow them to appear and contest the winding up petition or they have no locus standi at all so far as winding up petition is concerned and they must helplessly watch the proceedings as outsiders though the result of the winding up petition may be to bring about termination of their services and thus affect them vitally by depriving them of their means of livelihood ? It is a well established principle of administrative law that no order entailing adverse civil consequences can be made by the State or a public authority unless the person affected is afforded an opportunity to show cause against the making of such order by controverting the allegations made against him and presenting his own positive case, but in case of a winding up petition, it was contended on behalf of respondents Nos. 2 to 5, that though the result of successful termination of a winding up petition may, and in most cases, would be to put an end to the services of the workmen and throw them on the streets, they are not entitled to an opportunity to be heard against the making of the winding up order, because under the , it is only the creditors and contributories and in certain specified contingencies, the Registrar and the Central Government who can present a petition for winding up a company and the workmen have no locus at all in a winding up petition except where their dues have remained unpaid in which case they would be entitled to be heard in a winding up petition, but that would be in their capacity as creditors and not as workmen.
It was also urged on behalf of respondent Nos. 1 to 5 that in any event, even if workmen have a right to intervene in a winding up petition in the present case, it was not the workmen who had applied for being heard in the winding up petition but the applications were made by the three unions and since a Union of workmen has no right to be heard, the applications of the three unions were rightly rejected.
This last contention of respondent Nos. 1 to 5 is obviously untenable and it need not detain us.
It is incontrovertible and this indeed could not be disputed on behalf of respondent Nos. 1 to 5 that the applications were made by the Unions on behalf of the workmen represented by them and though made in the name of the unions, the applications were in reality and substance applications of the workmen who were members of each respective union.
The controversy therefore really is not whether the unions of workmen are entitled to be heard in a winding up petition but whether the workmen have such right when a winding up petition is filed against 940 a company.
We may straight away point out that though the applications made by the Coimbatore District National Textile Employees and Coimbatore District Engineering Workers Union were for impleading them as parties in the winding up petition, it was conceded on behalf of these two unions that they were not pressing their applications for being added as parties, because there was no procedure known to for any one to be impleaded as a party in a winding up petition and even the creditors and contributories were not entitled to be added as parties and they were claiming only the right to appear and be heard in support or opposition to the winding up petition.
The contention of these two unions was therefore a limited one and that was also the narrow contention advanced on behalf of National Textile Workers ' Union, namely, that the workmen represented by them were entitled to intervene in the winding up petition and to be heard before any order was made by the Company Judge in the winding up petition, because any such order might affect the interest of the workmen.
It was pointed out on behalf of the three unions that even if an interim order were to be made by the Company Judge which might prejudicially affect the workmen by freezing the resources of the company so as to make it difficult for the company to pay the wages of the workmen or bringing about stoppage of the business of the company resulting in non payment or diminution of their wages or termination of their services, the workmen must surely be afforded an opportunity to be heard before any such interim order is made.
It would be contrary to every recognised principle of fair judicial procedure and violative of the rule of audi alteram partem which constitutes one of the basic principles of natural justice to deny to the workmen the right to be heard before an order is made by the Company Judge prejudicially affecting their interest.
Additionally, reliance was also placed on behalf of the three unions on Rule 34 of the Companies (Court) Rules 1959 which provides as follows: "Rule 34.
Notice to be given by persons intending to appear at the hearing of petition Every person, who intends to appear at the hearing of a petition, whether to support or oppose the petition, shall serve on the petitioner or his advocate, notice of his intention at the address given in the advertisement.
The notice shall contain the address of such person, and be signed by him 941 or his advocate, and save as otherwise provided by these rules shall be served (or if sent by post, shall be posted in such time as to reach the addressee) not later than two days previous to the day of hearing, and in the case of a petition for winding up not later than five days previous to the day of hearing.
Such notice shall be in Form No. 9, with such variations as the circumstances may require, and where such person intends to oppose the petition, the grounds of his opposition, or a copy of his affidavit if any, shall be furnished along with the notice.
Any person who has failed to comply with this rule shall not except with the leave of the Judge, be allowed to appear at the hearing of the petition.
" The argument urged on behalf of the three unions was that this rule confers a right on the workmen to appear at the hearing of the winding up petition either to support it or to oppose it and clearly recognises that they are entitled to intervene and be heard in the winding up petition.
Respondent Nos.
1 to 5 however seriously challenged the locus of the workmen to appear and be heard in the winding up petition and contended that so far as the winding up petition is concerned, it is only the creditors and contributories and in certain specified contingencies the Registrar and the Central Government who are entitled to appear at the hearing of the winding up petition whether to support or to oppose it.
The right to be heard in the winding up petition, contended respondent Nos. 1 to 5 is governed solely by the provisions of the and since no such right is conferred on the workmen by any provision of the , the workmen are not entitled to intervene in the winding up petition, even though the making of a winding up order may result in termination of their services.
The workmen, according to respondent Nos. 1 to 5, could appear at the hearing of the winding up petition and make their submissions only in their capacity as creditors if any part of their wages remained unpaid by the company but they had no locus to appear in their capacity as workers.
These rival contentions urged on behalf of the parties raised an interesting question of law which we shall now proceed to consider.
942 There is one very important consideration which we must bear in mind while dealing with this question and it is necessary to advert to it at the present stage.
The concept of a company has undergone radical transformation in the last few decades.
The traditional view of a company was that it was a convenient mechanical device for carrying on trade and industry, a mere legal frame work providing a convenient institutional container for holding and using the powers of company management.
The company law was at that time conceived merely as a statute intended to regulate the structure and mode of operation of a special type of economic institution called company.
This was the view which prevailed for a long time in juristic circles all over the democratic world including United States of America, United Kingdom and India.
That was the time when the doctrine of laissez faire held sway and it dominated the political and economic scene.
This doctrine glorified the concept of a free economic society in which State intervention in social and economic matters was kept at the lowest possible level.
But gradually this doctrine was eroded by the emergence of new social values which recognised the role of the State as an active participant in the social and economic life of the citizen in order to being about general welfare and common good of the community.
With this change in socio economic thinking, the developing role of companies in modern economy and their increasing impact on individuals and groups, through the ramifications of their activities, began to be increasingly recognised.
It began to be realised that the company is a species of social organisation, with a life and dynamics of its own and exercising a significant power in contemporary society.
The new concept of corporate responsibility transcending the limited traditional views about the relationship between management and shareholders and embracing within its scope much wider groups affected by the trading activities and other connected operations of companies, emerged as an important feature of contemporary thought on the role of the corporation in modern society.
The adoption of the socialistic pattern of society as the ultimate goal of the country 's economic and social policies hastened the emergence of this new concept of the corporation.
The socio economic objectives set out in of the Constitution have since guided and shaped this new corporate philosophy.
We shall presently refer to some of the Directive Principles of State Policy set out in Part IV which clearly show the direction in which the corporate sector is intended to move and the role which it is intended to play in the social and economic life of the nation.
But, one thing is certain 943 that the old nineteenth century view which regarded a company merely as a legal device adopted by shareholders for carrying on trade or business as proprietors has been discarded and a company is now looked upon as a socio economic institution wielding economic power and influencing the life of the people.
It is now accepted on all hands, even in predominantly capitalist countries, that a company is not property.
The traditional view that the company is the property of the shareholders is now an exploded myth.
There was a time when a group controlling the majority of shares in a company used to say: "This is our concern.
We can do what we like with it.
" The ownership of the concern was identified with those who brought in capital.
That was the outcome of the property minded capitalistic society in which the concept of company originated.
But this view can no longer be regarded as valid in the light of the changing socio economic concepts and values.
Today social scientists and thinkers regard a company as a living, vital and dynamic, social organism with firm and deep rooted affiliations with the rest of the community in which it functions.
It would be wrong to look upon it as something belonging to the shareholders.
It is true that the shareholders bring capital, but capital is not enough.
It is only one of the factors which contributes to the production of national wealth.
There is another equally, if not more, important factor of production and that is labour.
Then there are the financial institutions and depositors, who provide the additional finance required for production and lastly, there are the consumers and the rest of the members of the community who are vitally interested in the product manufactured in the concern.
Then how can it be said that capital, which is only one of the factors of production, should be regarded as owner having an exclusive dominion over the concern, as if the concern belongs to it? A company, according to the new socio enconomic thinking, is a social institution having duties and responsibilities towards the community in which it functions.
The Supreme Court pointed out as far back as 1950 in Chiranjeetlal vs Union of India: "We should bear in mind that a corporation, which is engaged in production of commodities vitally essential to the community, has a social character of its own and it must not be regarded as the concern primarily or only of those who invest their money in it." 944 Pt.
Govind Ballabh Pant also pointed out in one of his speeches: ". industry is not an isolated concern of the shareholders or the managing agents alone.
It reacts on the entire people in the country, on their economic conditions, on employment or standard of living, on everything that conduces to the material well being.
" The same view was also expressed at the International Seminar on Current Problems of Corporate Law, Management and Practice held in New Delhi where it was observed that "an enterprise is a citizen.
Like a citizen it is esteemed and judged by its actions in relation to the community of which it is a member as well as by its economic performance.
" That is why it is regarded as one of the paramount objectives of a company to bring about maximisation of social welfare and common good.
This necessarily involves reorientation of thinking in regard to the duties and obligations of a company not only vis a vis the shareholders but also vis a vis the rest of the community affected by its operations such as workers, consumers and the Government representing the society.
There was at one time a serious controversy between two schools of thought, one represented by Adolf Berle and the other by Professor Dodd, as regards the nature of duties and obligations owed by directors representing management of a company.
Adolf Berle took the view that directors are trustees only for shareholders that is the traditional view which directly flows from a purely capitalistic approach which identifies ownership and dominion with capital while Prof. Dodd believed that directors are trustees not only for shareholders but also for the entire community.
Ultimately, however, in his subsequent book, "Twentieth Century Capitalist Revolution", Adolf Berle conceded that Prof. Dodd was right and that modern directors are not limited to running business enterprise for maximum profit motive alone, but are in fact administrators of community system or of a social institution.
That is why we find that in recent times there is considerable thinking on the subject of social responsibilities of corporate management and it is now acknowledged even in highly developed countries like the United States and England that maximisation of social welfare should be the legitimate goal of a company and shareholders should be regarded not as proprietors of the company, but merely as suppliers of capital entitled to no more than reasonable return and the company should be responsible not only to shareholders but also to workers, consumers and the other 945 members of the Community and should be guided by considerations of national economy and progress.
This new concept of a Company was felicitously expressed by Desai, J sitting as a Judge of the Gujarat High Court in Panchmahal Steel Ltd. vs Universal Steel Traders(1) in the following words: "Time honoured approach that the company law must safeguard the interest of investors and shareholders of the company would be too rigid a framework in which it can now operate.
New problems call for a fresh approach.
And in ascertaining and devising this fresh approach, the objective for which the company is formed may provide a guide line for the direction to be taken.
As Prof. De Wool of Belgium puts it, the company has a three fold reality economic, human and public each with its own internal logic.
The reality of the company is much broader than that of an association of capital; it is a human working community that performs a collective action for the common good.
In recent years a debate is going on in the world at large on the functions and foundations of corporate enterprise.
The "preservationists" and the "reformers" are vigorously propounding their views on the possible reform of company, the modern trend emphasising the public interest in corporate enterprise.
" The learned judge elaborated this "modern trend" by quoting from Prof. Gower 's book on "The Principles of Modern Company Law": "One section of the community whose interests as such are not afforded any protection, either under this head or by virtue of the provisions for investor or creditor protection, are the workers and employees of the taken over company.
This is a particularly unfortunate facet of the principle that the interest of the company means only the interest of the members and not of those whose livelihood is in practice much more closely involved.
" We are concerned in these appeals only with the relationship of the workers vis a vis the company.
It is clear from what we have stated above that it is not only the shareholders who have supplied capital who are interested in the enterprise which is being run by a company but the workers who supply labour are also equally 946 interested because what is produced by the enterprise is the result of labour as well as capital.
In fact, the owners of capital bear only limited financial risk and otherwise contribute nothing to production while labour contributes a major share of the product While the former invest only a part of their moneys, the latter invest their sweat and toil, in fact their life itself.
The workers therefore have a special place in a socialist pattern of society.
They are no more vendors of toil, they are not a marketable commodity to be purchased by the owners of capital.
They are producers of wealth as much as capital.
They supply labour without which capital would be impotent and they are, at the least, equal partners with capital in the enterprise.
Our constitution has shown profound concern for the workers and given them a pride of place in the new socio economic order envisaged in the Preamble and the Directive Principles of State Policy.
The Preamble contains the profound declaration pregnant with meaning and hope for millions of peasants and workers that India shall be a socialist democratic republic where social and economic justice will inform all institutions of national life and there will be equality of status and opportunity for all and every endeavour shall be made to promote fraternity ensuring the dignity of the individual.
Every one is assured under Article 14 equality before the law and equal protection of the laws and implicit in this provision is the guarantee of equal remuneration for men and women for some work or work of a similar nature.
Traffic in human beings and begar and other similar forms of forced labour are prohibited under Article 23 and Article 24 mandates that no child below the age of 14 may be employed in any factory or mine or engaged in any other hazardous employment.
These two Articles recently came up for construction before this Court in People 's Union for Democratic Rights & Ors.v.
Union of India & Ors.(1) Article 38 imposes obligation on the State, albeit unenforceable in a court of law, to "strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which social justice shall inform all the institutions of the national life".
This is followed by Article 39 which inter alia obliges the State to direct its policy towards securing that the citizens, men and women equally have the right to an adequate means of livelihood, the ownership and control of the material resources of the community are so distributed as best to subserve the common good, the operation of the economic system 947 does not result in the concentration of wealth and means of production to the common detriment, there is equal pay for equal work for both men and women and the health and strength of workers, men and women and the tender age of children are not abused and citizens are not forced by economic necessity to enter avocations unsuited to their age or strength.
The State is directed by Article 41 to make effective provision, within the limits of its economic capacity and development, for securing the right to work and Article 42 requires the State to make provision for securing just and humane conditions of work and for maternity relief.
Article 43 provides that the State shall endeavour to secure, by suitable legislation or economic organisation or in any other way, a living wage, conditions of work ensuring decent standard of life and full enjoyment of leisure and social and cultural opportunities.
Then follows Article 43A which is intended to herald industrial democracy and in the words of Krishna Iyer, J. mark "the end of industrial bonded labour".
That Article says that the State shall take steps, by suitable legislation or in any other way, to secure the participation of workers in the management of undertakings, establishments or other organisations engaged in any industry.
The constitutional mandate is therefore clear and undoubted that the management of the enterprise should not be left entirely in the hands of the suppliers of capital but the workers should also be entitled to participate in it, because in a socialist pattern of society, the enterprise which is a centre of economic power should be controlled not only by capital but also by labour.
It is therefore idle to contend thirty two years after coming into force of the Constitution and particularly after the introduction of Article 43A in the Constitution that the workers should have no voice in the determination of the question whether the enterprise should continue to run or be shut down under an order of the court.
It would indeed be strange that the workers who have contributed to the building of the enterprise as a centre of economic power should have no right to be heard when it is sought to demolish that centre of economic power.
The principal argument urged against the right of the workers to be heard in the winding up petition was that under the scheme of the , it is only the creditors and contributories who are entitled to appear and be heard in a winding up petition.
The is a self contained code exhaustive in regard to all matters relating to companies and since there is no provision in that Act conferring on the workers a right to intervene 948 in a winding up petition, no such right can be spelt out in their favour outside the provisions of that Act Respondent Nos. 6 to 9 relied upon various provisions of the in support of their contention that the workers have no locus in a winding up petition but we do not think these provisions lend any support to that contention.
The first provision relied upon by Respondent Nos. 6 to 9 was section 439 which inter alia provides as to who shall be entitled to make an application for winding up of a company.
It is no doubt true that this section confers the right to present a winding up petition only on certain specifically enumerated persons and the workers are not included in that enumeration and therefore obviously, the workers have no right to prefer a petition for winding up of a company.
The right to apply for winding up of a company being a creature of statute, none other than those on whom the right to present a winding up petition is conferred by the statute can make an application for winding up a company and no such right having been conferred on the workers, they cannot prefer a winding up petition against a company.
But from this exclusion of the workers from the right to present a winding up petition, it does not follow as a necessary consequence that the workers have no right to appear and be heard in a winding up petition filed by one or more of the persons specified in section 439.
It may be that the workers have no right to present a winding up petition against the company, but if a winding up petition is properly filed by any of the persons entitled to do so under section 439, they may still be entitled to appear and be heard in support or opposition to the winding up petition.
That would depend upon whether their interest is likely to be affected by any order which may be made on the winding up petition.
The next section relied upon by respondent Nos. 6 to 9 was section 440 which says that where a company is being wound up voluntarily or subject to the supervision of the court, a petition for its winding up by court may be presented by any person authorised to do so under section 439 or the official Liquidator, but the court shall not make a winding up order unless it is satisfied that the voluntary winding up or winding up subject to the supervision of the court cannot be continued with due regard to the interests of the creditors or contributories or both.
It was urged on behalf of respondent Nos. 6 to 9 that this section shows that the winding up of a company is intended to be for the benefit of the creditors and the contributories and the interest of the workers has no place at all in the winding up and is not required to be taken into account in winding up the company.
This argument 949 is also in our opinion futile because what this section deals with is the stage after the winding up has commenced, whether voluntary or subject to the supervision of the court, while we are concerned with a stage anterior to the making of a winding up order.
There can be little doubt that the object of winding up being to realise the assets of the company, pay the preferential claims and expenses of liquidation and then discharge the debts of the creditors in full or pari passu and if after paying to the creditors, there is any surplus, distribute the same among the shareholders by way of dividend and ultimately dissolve the company, it is only the creditors and the contributories who would be affected by any action taken in the course of winding up of the company and that is why we find several provisions in the which speak of winding up being carried on with due regard to the interest of the creditors and the contributories or after consultation with them or confer rights on the creditors and the contributories to make applications for diverse purposes with a view to effective winding up of the company.
Such provisions are for instance to be found in section 464, 466, 478, 517, 542, 543, 549, 556, 557 and 560.
These provisions apply at a stage after a winding up order is made by the court or the voluntary winding up has commenced or an order is made for continuance of winding up subject to the supervision of the court, when winding up having been ordered or resolved, what remains to be done is only to wind up the company, pay the creditors and if there is any surplus, distribute the same among the shareholders.
These provisions do not deal with a situation prior to the making of the winding up order when the question is whether the company should be ordered to be wound up or not.
While the company is continuing to subsist, the workers would be employed in the enterprise which is being run by the company and they would be earning their livelihood from such employment, but if an order for winding up is made, their services would, except in cases where the business of the company is continued, stand terminated by reason of sub section (3) of section 445 which provides that a winding up order "shall be deemed to be notice of discharge to the officers and employees of the company, except when the business of the company is continued.
" Ordinarily when a winding up order is made, the business of the company would cease to continue and even if the Liquidator is authorised to carry on the business, such continuance would be only for the beneficial winding up of the company and the logical and inevitable end would be the ultimate discontinuance of the business.
The making of a winding up order 950 on a petition for winding up would therefore almost certainly have an adverse consequence on the workers in as much as the continuance of their service would be seriously jeopardised and their right to work and earn their livelihood would be disastrously imperilled.
Now it is an elementary principle of law, well settled as a result of several decisions of this Court and particularly the decisions in State of Orissa vs Dr. Bini Pani,(1) A.K. Kraipa vs Union of India,(2) and Maneka Gandhi vs Union of India(3) that no order involving adverse civil consequences can be passed against any person without giving him an opportunity to be heard against the passing of such order and this rule applies irrespective of whether the proceeding in which it is passed is a quasi judicial or an administrative proceeding.
The audi alterum partem rule which mandates that no one shall be condemned unheard is one of the basic principles of natural justice and if this rule has been held to be applicable in a quasi judicial or even in an administrative proceeding involving adverse civil consequences, it would a fortiori apply in a judicial proceeding such as a petition for winding up of a company.
It is difficult to imagine how any system of law which is designed to promote justice through fairplay in action can permit the court to make a winding up order which has the effect of bringing about termination of the services of the workers without giving them an opportunity of being heard against the making of such order.
It would be violative of the basic principle of fair procedure and unless there is express provision in the which forbids the workers from appearing at the hearing of the winding up petition and participating in it, the workers must be held entitled to appear and be heard in the winding up petition.
That is the minimum requirement of the principle of audi alterum partem which cannot be ignored save on pain of invalidation of the order of winding up.
Here we do not find any provision in the which in so many terms excludes the workers from appearing at the hearing of the winding up petition with a view to supporting or opposing it and the only ground on which the right of the workers to appear and be heard in the winding up petition is disputed is that there is no specific provision in the Act entitling them to do so and the right to apply for winding up as also to participate in the proceedings in the course of winding up is conferred only on the creditors and the 951 contributories.
But, we have pointed out above that merely because the right to apply for winding up a company is not given to the workers it does not mean that they cannot appear to support or oppose a winding up petition which is properly filed by one or the other persons specified in section 439.
There would, in fact, be no point in conferring the right to apply for winding up of a company on the workers since they cannot have any interest in demolishing the enterprise which is the source of their livelihood and particularly when the only effect of the winding up order would be to render them unemployed and to bring about winding up of the company for the benefit of the creditors and the contributories.
So also the circumstance that the right to be consulted or to make applications in the course of the winding up of a company is conferred only on the creditors and the contributories does not in any way militate against the right of the workers to appear and be heard in the winding up petition because once the winding up order is made, the assets of the company have to be realised, the creditors have to be paid and if there is any surplus it has to be distributed among the contributories and therefore at that stage it is only the creditors and the contributories who have an interest and that is why in the course of the winding up it is the creditors and the contributories who have been given a voice.
That has nothing to do with the question whether the company should be wound up or not which is a question in which the workers are vitally concerned and on which they must obviously be heard before any decision is taken by the court.
This view which we are taking is in accord with the decision of the High Court of Bombay, namely, Bhalchandra Dharmajee Makaji and Ors.
vs Alcock Ashdown & Co. Ltd. & Ors.
where the Company Judge, while disposing of an application for appointment of Official Liquidator as Provisional Liquidator, pending the hearing and final disposal of the main petition for winding up, said: "After the amendment of sections 397 and 398 of the by sections 10 and 11 of the Companies (Amendment) Act (LIII of 1963), it would appear that the affairs of the company have to be conducted not only in the best interest of its members for their profit but also in a manner which is not prejudicial to public interest.
The element of public interest enters into the management of the companies after 1963.
The modern corporation has 952 become the accepted instrument of social policy, because it affects a large part of the economic life of the community.
It has become an instrument for the improvement of the economic standards of the people and for economic growth of the nation.
Society depends for some of its needs on corporate enterprise.
It has therefore an interest in its stability and efficiency as an economic institution.
The element of public interest also arises from the responsibility for ensuring a minimum wage to the numerous employees in the corporate sector.
It is necessary to see that people who put their labour and lives into a concern get fair wages, continuity of employment and a recognition of their jobs where they have trained themselves to highly skilled and specialised work.
In deciding whether the court should wind up a company or change its management the court must take into consideration not only the interest of the shareholders and creditors but also public interest in the shape of the need of the community and the interest of the employees.
This, in my opinion, is the requirement of sections 397 and 398 of the .
" If in deciding whether the court should wind up a company or change its management the court must take into consideration not only the interest of the shareholders and creditors but also amongst other things the interest of the workers, it is axiomatic that the workers must have an opportunity of being heard for projecting and safeguarding their interest before a winding up order is made by the court.
The Division Bench of the Madras High Court has of course conceded in the judgment under appeal that "in considering the question whether to wind up or not the court has to take the larger point of public interest including that of the workers into consideration" but that in the opinion of the Division Bench would not "clothe the workers with any locus standi to file an application for being heard in the winding up petition.
With the greatest respect to the learned Judges constituting the Division Bench, we must express our emphatic disapproval of this approach.
It amounts to the court telling the workers: "No doubt in deciding whether the company should be wound up or not, we are bound to take into consideration your interest but you need not be heard because we know best what your interest requires." This paternalistic attitude towards the workers that though they are most vitally concerned and their interest is required to be taken into consideration, they need not be heard because the court in its wisdom knows, 953 presumably more than the workers themselves, what is in their interest and they should leave their fate into the hands of the court without even a whisper of an argument sounds like a relic of a by gone age and must be abandoned.
If the interest of the workers has to be taken into account, the workers must have a say because they know best where their interest lies and they must have an opportunity of placing before the court relevant material bearing upon their interest.
Considerable reliance was however placed on behalf of respondent Nos.
6 to 9 on the statement of the law on this point contained in the leading text books on company law.
Respondent Nos. 6 to 9 drew our attention to Palmer Company Precedents (17th Edn.) volume 2 at page 77 where it is stated that any creditor or shareholder may appear to support or oppose the petition but no one else can do so even if he has an indirect interest in the continued existence of the company.
So also in Buckley on the (14th Edn.) at page 546 the law has been stated in the following terms, namely, "the only persons entitled to be heard are the company, its creditors and contributories . the court may in its discretion hear other persons who have an interest in order to learn what public grounds there are in favour of, or in opposition to, the winding up. but such persons can be heard only as amici curiae and cannot appeal.
" Our attention was also invited to Halsbury 's Laws of England 4th Ed.
Vol. 7 where a similar statement of the law is to be found at page 614 paragraph 1028.
Now it is undoubtedly true that according to the statement of the law contained in these three leading text books, it is only the company, the creditors and the contributories who are entitled to appear on the winding up petition and no other persons have a right to be heard, but this statement of the law is based on the old decision in Re.
Bradford Navigation Company which was carried in appeal and decided as Re.
Bradford Navigation Company.
This decision given by the English Courts over a hundred years ago when a company was regarded merely as a legal device brought into being as a result of a contractual arrangement between the shareholders for the purpose of carrying on trade or business and the workers were looked upon as no more than employees of the company working under a master and servant relationship and the interest of the public as consumers or otherwise was a totally irrelevant consideration and it can have no validity in the present times when the entire concept of a company has changed and it has been transformed into a dynamic 954 socio economic institution in which capital and labour are both equal partners, possibly with heavy weightage in favour of labour and the interest of the public as consumers as also the general welfare and common good of the community constitute a vital consideration.
We cannot allow the dead hand of the past to stifle the growth of the living present.
Law cannot stand still; it must change with the changing social concepts and values.
If the bark that protects the tree fails to grow and expand alongwith the tree, it will either choke the tree or if it is a living tree, it will shed that bark and grow a new living bark for itself.
Similarly, if the law fails to respond to the needs of changing society, then either it will stifle the growth of the society and choke its progress or if the society is vigorous enough, it will cast away the law which stands in the way of its growth.
Law must therefore constantly be on the move adopting itself to the fast changing society and not lag behind.
It must shake off the inhibiting legacy of its colonial past and assume a dynamic role in the process of social transformation.
We cannot therefore mechanically accept as valid a legal rule which found favour with the English courts in the last century when the doctrine of laissez faire prevailed.
It may be that even today in England the courts may be following the same legal rule which was laid down almost a hundred years ago, but that can be no reason why we in India should continue to do likewise.
It is possible that this legal rule might still be finding a place in the English text books because no case like the present one has arisen in England in the last 30 years and the English courts might not have had any occasion to consider the acceptability of this legal rule in the present times.
But whatever be the reason why this legal rule continues to remain in the English text books, we cannot be persuaded to adopt it in our country, merely on the ground that it has been accepted as a valid rule in England.
We have to build our own jurisprudence and though we may receive light from whatever source it comes, we cannot surrender our judgment and accept as valid in our country whatever has been decided in England.
The rule enunciated in re: Bradford Navigation Company case (supra) does not commend itself to us and though it has been followed by a single Judge of the Bombay High Court in re Edward Textiles Limited (supra), we do not think it represents correct law.
We may also mention that on behalf of the appellants some reliance was placed on Rule 34 of the Companies (Court) Rules 1959 in support of their contention that not only the creditors and the contributories but also other persons are entitled to appear at the 955 hearing of a winding up petition and the workers cannot therefore be excluded.
This Rule provides that every person who intends to appear at the hearing of a winding up petition, whether to support or to oppose it, shall serve on the petitioner or his advocate notice of his intention at the address given in the advertisement and such notice shall be in form No. 9 and where such person intends to oppose the winding up petition, the grounds of his opposition or a copy of his affidavit if any shall be furnished along with the notice.
The appellants contended that under this Rule any one who wants to appear in a winding up petition can do so, provided he serves on the petitioner or his advocate, notice of his intention at the address given in the advertisement and complies with the other requirements of this Rule and therefore if the workers desire to appear at the hearing of the winding up petition, they are entitled to do so.
The answer given on behalf of respondent Nos. 6 to 9 to this contention was that Rule 34 is applicable only after a winding up petition is admitted and an order is made for advertisement of the winding up petition and it has no application at the stage when the winding up petition is before the court only for the purpose of deciding whether or not it should be admitted and advertised.
It was also urged on behalf of respondent Nos. 6 to 9 that in any event Rule 34 does not confer a right on any and every person to appear at the hearing of the winding up petition, intends so to appear he must take various steps set out in that Rule beginning with service of notice on the petitioner or his advocate before he can be heard on the winding up petition.
We are inclined to agree with this contention of respondent Nos.
6 to 9.
It is obvious that the object and purpose of Rule 34 is not to confer a right on any one to appear at the hearing of the winding up petition but merely to provide the procedure to be followed before a person who is otherwise entitled to appear in a winding up petition can be heard in support or opposition of the winding up petition.
This rule cannot therefore be relied upon by the appellants as conferring a right on the workers to appear at the hearing of a winding up petition.
But, one thing is clear that this Rule does postulate that apart from the creditors and contributories there may be other persons who are entitled to appear at the hearing of the winding up petition because it is not confined in its application to the creditors and contributories but uses the generic impression "every person" and to this limited extent it does undoubtedly lend some support to the contention of the appellants.
956 We are therefore of the view that the workers are entitled to appear at the hearing of the winding up petition whether to support or to oppose it so long as no winding up order is made by the court.
The workers have a locus to appear and be heard in the winding up petition both before the winding up petition is admitted and an order for advertisement is made as also after the admission and advertisement of the winding up petition until an order is made for winding up the company.
If a winding up order is made and the workers are aggrieved by it, they would also be entitled to prefer an appeal and contend in the appeal that no winding up order should have been made by the Company Judge.
But when a winding up order is made and it has become final, the workers ordinarily would not have any right to participate in any proceeding in the course of winding up the company though there may be rare cases where in a proceeding in the course of winding up, the interest of the workers may be involved and in such a case it may be possible to contend that the workers must be heard before an order is made by the court.
We think that even when an application for appointment of a provisional liquidator is made by the petitioner in a winding up petition, the workers would have a right to be heard if they so wish because the appointment of a provisional liquidator may adversely affect the interest of the workers.
But we may make it clear that neither the petitioner nor the court would be under any obligation to give notice of such application to the workers.
It would be for the workers to apply for being heard and if they do so, they would be entitled to appear and be heard on the application for appointment of provisional liquidator.
The workers therefore in the present case had a right to be heard before the provisional liquidator was appointed by the Company Judge but the circumstance that the workers were not so heard would not have the effect of vitiating the order appointing provisional liquidator, because on the view taken by us, it would be open to the workers to apply to the court for vacating that order and it would be for the court after considering the material produced before it and hearing the parties to decide whether that order should be vacated or not.
We accordingly allow the appeals, set aside the order, dated 14th September 1981 made by a Single Judge of the High Court and confirmed by the Division Bench on 13th September 1981 and direct that the three Unions shall be entitled to appear and be heard in the winding up petition.
There will be no order as to costs of these appeals.
957 CHINNAPPA REDDY, J.
I agree with my brother Bhagwati.
I wish to add a few words not because I have much more to say, nor ever hope to say what he has said, more felicitously but because my brother Venkataramiah has disagreed and my regard for him compels me to add a few words of explanation. ". you take my life when you do take the means whereby I live" (Shakespeare: The Merchant Venice).
This indeed is the cry of the workers of Ramakrishna Industries (P) Ltd. who desire to be heard before the bread is taken out of their mouths.
A battle royal appears to be raging between two rival groups of shareholders of the company.
A petition for winding up the company has been presented by one group of shareholders.
And an application for the appointment of a provisional liquidator too.
Quite apart from Sec.
445 (3) of the which provides that the order for winding up shall be deemed to be notice of discharge of the officers and employees of the company, except when the business of the company is continued, it is plain that the future of the workers is at stake and their right to work is in jeopardy as a result of the presentation of the winding up petition.
Unlike the shareholders, to most of whom the shares they hold represent mere investments and to some of whom, the means to control the affairs of the company, to the workers, the life of the company is their own and its welfare is theirs.
They are so intimately tied up that their interest in the survival and the well being of the company is much more than the interest of any shareholder be he an investor, a 'corporate commander ' or a corporate manipulator.
How then is it possible that these persons the workers whose very existence may be under threat of extinction are to be denied a hearing, even if sought, when a petition for winding up is presented to a court.
It is said that the does not contemplate a hearing to the workers.
Only contributories and creditors may be heard it seems.
Workers may not be allowed to throng the company court, only those who buy, sell and control shares and the usurers, the stockbrokers and the money brokers.
Those who invest money may be heard, those who invest their lives may not be heard.
No. The does not prohibit a hearing to the workers.
The does not say who may be heard.
The does not provide for all situations.
The Company Judge must decide some matters.
He must use his imagination.
He must use his discretion.
But, without transgressing any legal norms Company Law is not a field in which 958 'finality is to be expected '.
The law 'falls to be applied to a growing and changing subject matter '.
This is recognised in the report of the Jenkins Committee in the United Kingdom and in this country, in the Statement of Objects and Reasons to the Companies Amendment Act of 1974.
So, when new situations arise, as indeed they are bound to arise having regard to the complexities of growth and change, the Company Judge cannot retreat into the Corporate shell but must expand and expound.
He must take the bull by the horns.
as it were.
He must recognise and expose the reality of the workers ' interest and the dubiety of the interest of the others.
He must acknowledge the transformation which corporations are presently undergoing from capitalist contrivances into socialist instruments.
No doubt, it was the creative genius of the bourgeoisie that invented the corporations and the companies, invested them with a corporate soul and a juristic personality and called them legal entities in order to meet the growing and complex demands of modern industry and management, to conduct business and commercial activities more conveniently and efficiently, and essentially to foster, consolidate and stabilise the capitalist system of society under whose aegis alone the exploiting class could thrive and continue to exploit the working class.
Corporations became the symbol of competitive capitalism.
But the historical processes continue at work.
The movement is now towards socialism.
The working classes, all the world over, are demanding 'workers ' control ' and 'Industrial Democracy '.
They want security and the right to work to be secured.
They want the control and direction of their lives in their own hands and not in the hands of the industrialists, bankers and brokers.
Our constitution has accepted the workers ' entitlement to control and it is one of the Directive Principles of State Policy that the State shall take steps, by suitable legislation or in any other way, to secure the participation of workers in the management of undertakings, establishments or other organisations engaged in any industry.
It is in this context of changing norms and waxing values that one has to judge the workers ' demand to be heard.
And, what do the workers want? They want to be heard lest their situation be altered unheard.
They invoke natural justice, so to claim justice.
They invoke the same rule which the courts compel administrative tribunals to observe.
Can courts say natural justice need not be observed by them as they know how to render justice without observing natural justice? It will surely be a travesty of 959 justice to deny natural justice on the ground that courts know better.
There is a peculiar and surprising misconception of natural justice, in some quarters, that it is, exclusively, a principle of administrative law.
It is not.
It is first a universal principle and, therefore, a rule of administrative law.
It is that part of the judicial procedure which is imported into the administrative process because of its universality.
"It is of the essence of most systems of justice certainly of the Anglo Saxon System that in litigation both sides of a dispute must be heard before decision. 'Audi Alterum Partem ' was the aphorism of St. Augustine which was adopted by the courts at a time when Latin Maxims were fashionable". 'Audi Alterum Partem is as much a principle of African ' as it is of English legal procedure; a popular Yoruba saying is: 'wicked and iniquitous is he who decides a case upon the testimony of only one party to it" (T.O. Elias: The Nature of African Customary Law).
Courts even more than administrators must observe natural justice.
It is said that the does not confer any special rights on the workers, they are virtual strangers to the Act and so why should they be heard in the petition for winding up ? The duty to hear those asking to be heard is not dependent on the vesting of any right under the very statute in respect of which jurisdiction is being exercised by the court, but on any right whatever which may come under threat.
Surely it is not the law that rights other than those created by a particular statute may be taken away in proceedings under that statute without affording a hearing to those desiring to be heard.
If the statute says only so and so will be heard and no other, of course, no other will be heard.
If the statute does not say who may be heard, but prescribes the procedure for the hearing, that procedure must be followed by every one who want to be heard and what applies to one will apply to the other.
If creditors and contributories desire to be heard and are heard, so shall workers.
After hearing the workers, the court may say that, on the facts and circumstances of the case, it is not necessary to hear them further; but they cannot be turned away at the very threshold.
It may be that it is not for them to support or oppose the winding up petition for any of the traditional reasons.
But they may make suggestions which may avert winding up, save the company and save their own lives.
They may have suggestions to make for restructuring the company or for the transfer of the undertaking as a running business.
The workers themselves may offer to run the industry forming themselves into a society.
They may have a myriad suggestions to 960 make, which they can do if they are allowed to be heard.
If every holder of a single share out of thousands may be heard, if every petty creditor may be heard, why can 't the workers be heard ? It is said that once the workers are allowed to enter the Company Court, the flood gates will be opened, all and sundry will join in the fray and utter confusion will prevail.
These are dark forebodings for which there is no possible justification.
The interest of the workers is limited.
It is the interest of the others, those that battle for control and for power that may create chaos and confusion.
It must not be forgotten that the court is the master of the proceedings and the ultimate control is with the court.
Parties may not be impleaded for the mere asking or heard for the mere seeking.
The court may well ask the reason why, if some one seeks to be heard.
Workers will not crowd the Company Court and the Court will not be helpless to keep out those whom it is not necessary to hear.
It is said that workers will not be allowed to intervene in a partition or a partnership action to oppose partition or dissolution of partnership and so why should they be allowed to intervene in a winding up petition.
That is begging the question.
There is no reason why workers may not be allowed, in appropriate cases, to intervene in partition and partnership actions to avert disaster and to promote welfare.
As we said, impleading and hearing are not for the mere asking and seeking.
Re Bradford Navigation Company and passages from textbooks for which the case is the source of authority were relied upon, to urge that none but contributories and creditors may be heard in winding up petition.
Re Bradford Navigation Company is a relic of an alien past.
Fortunately it is not a binding precedent.
While we have learnt and borrowed a great deal from British Jurisprudence, we have been drawing the line now and then, here and there, because their law, their jurisprudence suits their genius and ours must develop according to our genius.
Our needs are different; our social, political and economic bases are different; our aspirations are different; our systems are different; the stages of our development are different.
We have a written constitution which is omnipresent when our laws are made, tested, interpreted or executed.
We look to the constitution for guidance and inspiration when we interpret the laws.
The 42nd Amendment of the Constitution has introduced new lights into the Constitution.
The Constitution is now openly socialist.
The Directive Principles of State Policy repeatedly emphasise the role and interest of the workers.
Article 43 A, also introduced by the 42nd 961 Amendment contemplates workers ' participation in the management of industry.
Other Directive Principles require the State to make provision for securing the right to work, for securing just and humane conditions of work and for securing the right to an adequate means of livelihood.
The State is enjoined to direct its policy towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good and that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.
Obviously, it is nationalisation that is in view and nationalisation must mean the setting up of public corporations and the transformation of private corporations into public corporations.
Truly the Constitution envisages workers ' control and nationalisation as two of the roads to socialism.
Private corporations hitherto regarded as bastions of private property and leaders of capitalist economy are undergoing transformation and, are surely acquiring the character of public institutions.
The public interest element is now quite a predominant factor in the itself.
There are several provisions in the which take notice of the element of public interest.
There are other enactments like the Monopolies and Restrictive Trade Practices Act, the Industries Regulation and Development Act, under whose provisions, the activities of a company may be scrutinised in the public interest.
There are a host of other legislations involving employment and welfare of labour, to which the managements of companies are subject.
The transformation of a company 's character from private to public is going on right before our eyes even as the institution of private property is also losing its diathesis.
It is in this context of ferment and development that we must consider the problem before us.
There is no sanctity attached to the age of a judgment or to the circumstance that the decision is that of an English Court from where we have borrowed most of our company law.
Re Bradford Navigation Company was decided in the heydays of laissez faire at a time when individualism dominated every field and the public interest was but a slow runner.
Now the position is reversed.
Laissez faire has long been dethroned and all interests are increasingly subordinated to the public interest.
Corporations are themselves assuming a public character and function like mini States but surely they will not be allowed to function as slave States where the voice of the slave may never be heard.
In Britain itself corporate law and labour law have changed considerably and are still changing.
Courts no longer view trade 962 unions with suspicion, as conspiracies as they once did.
The right to work, the right to collectively bargain and the right to strike are well recognised.
After nationalisation of certain important and crucial industries by the successive Labour Governments, workers ' participation in management has become a reality and today a considerable measure of workers ' control of management has been achieved in industry.
There are now persistent demands that Company Law too should recognise the interest of workers in a company.
Prof. Gower in his "The Principles of Modern Company Law" says: "One section of the community whose interests as such are not afforded any protection, either under this head or by virtue of the provisions for investor or creditor protection, are the workers and employees of the taken over company.
This is a particularly unfortunate facet of the principle that the interest of the company means only the interest of the members, and not of those whose livelihood is in practice much more closely involved".
Again he says, later, "The vexed question of the relationship between the employees and the company which employs them is, in fact, a dominant theme in the current debate which flows over from company to labour law.
It is generally accepted that it is unreal for company law to ignore, as at present our law largely does, that the workers are as much, if not more, a part of the company as the members of it".
That is the way the wind is blowing in Britain and there is, therefore, good reason for holding that the rule in Bradford Navigation Company is not valid in the present times.
I may conclude by a reference to the following observations made in another connection by D.A. Desai, J in Panchmahals Steel Ltd. vs Universal Steel Traders(1).
"Time honoured approach that the company law must safeguard the interest of investors and shareholders of the company would be too rigid a framework in which it can 963 now operate.
New problems call for a fresh approach .
As Prof. De Wool of Belgium puts it, the company has a three fold reality economic, human and public each with its own internal logic.
The reality of the company is much broader than that of an association of capital; it is a human working community that performs a collective action for the common good.
In recent years, a debate is going on in the world at large on the functions and foundations of corporate enterprise.
The "preservationists" and the "reformers" are vigorously propounding their views on the possible reform of company, the modern trend emphasising the public interest in corporate enterprise".
The case itself is an instructive one and demonstrates how an imaginative Company Judge may help to restructure and infuse new life into a company whose life is ebbing out, within the four corners of the statute and keeping in view the interests not merely of the creditors and the contributories but also the interests of the workers.
Viewed from any angle, of natural justice, of the constitution or of the expanding theory of company law, there, appears to be no obstacles to a Company Judge hearing the workers, when asked, after a winding up petition is presented.
I agree with the order proposed by Bhagwati, J. VENKATARAMIAH, J. I had the privilege of reading the draft judgment prepared by my learned brother, Bhagwati, J. but I regret my inability to agree with him.
Messrs Ramakrishna Industries (P) Ltd. (hereinafter referred to as 'the Company ') which is carrying on its business at Coimbatore in the State of Tamil Nadu is a closely held private limited company governed by the Indian (hereinafter referred to as 'the Act ').
The Company 's paid up capital is Rs. 15,95,000 divided into 1595 equity shares of Rs. 1,000 each, the bulk of 964 which is held by the members of a Hindu family whose relationship is as follows: V. Rangaswami Naidu = Chinnammal (wife) (deceased) (deceased) (7 shares) (10 shares) V. Kamalammal =R. Venkata P.R. Rama = Mrs. Raje (wife) swami Naidu Krishnan swari (164 shares) (20 shares) (34 shares) Ramakrishnan (85 shares) V. Radha V. Mano V. Rajkumar krishnan haran (148 shares) (164 shares) (146 shares) =Thulasi = Anusuya K. Prabhu R. Baba Chandersekhar S.R.K. Prasad (160 shares) (168 shares) (161 shares) The group of R. Venkataswami Naidu holds 642 shares and the group of P.R. Ramakrishnan is holding 608 shares.
17 shares stand in the name of late V. Rangaswami Naidu and his wife and 300 shares are held by V. Rangaswami Naidu Educational Trust.
R. Venkataswami Naidu and P.R. Ramakrishnan are trustees for life of V. Rangaswami Naidu Educational Trust having control over the shares held by the Trust.
They are also treated as Life Directors.
Only 5 shares stand in the name of others.
V. Kamalammal, Mrs. Rajeswari Ramakrishnan, V. Radhakrishnan V. Manoharan, K. Prabhu and R. Baba Chandersekhar are directors and V. Rajkumar is the Managing Director of the Company.
The Company is thus under the exclusive control and management of the members belonging to one family.
Serious differences having arisen amongst them regarding the management of the affairs of the Company, P.R. Ramakrishnan, his wife and sons filed a petition being Company Petition No. 30 of 1981 on the file of the High Court of Madras on July 13, 1981 for the winding up of the Company under section 965 433(e) and (f) of the Act on the ground that it was just and equitable to do so in view of the alleged deadlock that had arisen in the administration of the affairs of the Company.
The petition charged the members belonging to the group of R. Venkataswami Naidu with acts of misconduct, waste and malversation, a detailed reference to which is unnecessary for purposes of this case.
Along with the above petition, the petitioners therein filed Company Application No. 843 of 1981 praying for the appointment of a Provisional Liquidator and Company Application No. 844 of 1981 for an interim order restraining the Company and other respondents from borrowing moneys from bankers and other financial institutions without prior permission of the Court and from otherwise alienating the assets of the Company pending disposal of the said application.
The learned Company Judge passed an interim order on July 13, 1981 itself restraining until further orders the eleven respondents named in the application from borrowing any moneys from banks, financial institutions or others without prior permission of the Court and from alienating and/or creating any charge or encumbrance over any of the assets of the Company in its various enterprises.
The above interim order was passed even though on the same date application was opposed by the counsel for the respondents therein.
The case was adjourned for further consideration to August 10, 1981.
On August 19, 1981, the above interim order was made absolute in the following terms : "In the result there will be an injunction restraining respondents 1 to 6 from borrowing any moneys from banks, financial institutions or others and from alienating and/or creating any charge or encumbrance over any of the assets of the first respondent company in its various enterprises except that the first respondent company is entitled to honour any pending contract entered into by the company with third parties before the presentation of the application, all its existing commitments vis a vis its staff and labourers, electric charges, central excise duty, LIC premium, payments due to employees cooperative stores, telephone bills and sales tax dues, availing the existing bank facilities with any of its bankers, subject to the condition that the particulars for all these payments and the source from which such payments were to be met, are furnished in detail to the applicants.
It is again made clear that the company is always at liberty to approach court for further directions 966 and that the applicant 's right to impugn any such transaction under section 536(2) is left untouched".
In the meanwhile three trade unions viz. the Coimbatore District National Textile Employees ' Union, Coimbatore; the Coimbatore District Engineering Workers ' Union, Coimbatore and the National Textile Workers ' Union (INTUC), applicants in Company Application Nos. 880, 881 and 883 of 1981 respectively applied to the Court to implead them as respondents to the winding up petition i.e. Company Petition No. 30 of 1981 alleging that their interests had been adversely affected by the interim order which according to them had the effect of preventing the management of the Company from paying amounts due to workers and also making payments for securing supplies to the stores from which the workers were buying articles of food and other provisions.
These applications were opposed by the petitioners in the winding up petition stating that the trade unions being neither creditors nor shareholders had no locus standi to be impleaded as respondents to the petition.
It may be mentioned here that the Company Petition for winding up had not yet been advertised at that stage and Rule 34 of the Companies (Court) Rules, 1959 was not attracted.
The Company Judge dismissed these applications filed by the trade unions for impleading them as respondents by his order dated September 14, 1981.
Against that order only the National Textile Workers ' Union (INTUC) filed an appeal before the Division Bench of the High Court being OSA No. 148 of 1981.
That appeal was dismissed by the Division Bench on September 30, 1981.
The petition for special leave to appeal (Civil) No. 1961 of 1981 was filed before this Court under Article 136 of the Constitution by the National Textile Workers ' Union (INTUC) on November 6, 1981.
The said Special Leave Petition came up for orders before a Bench of three Judges on November 19, 1981.
On that date notices were issued to the respondents.
The High Court was permitted to pass its orders on the application for appointment of a provisional liquidator which was pending before it but it was ordered that in the event of a provisional liquidator being appointed, he should not take any steps which would prejudically affect the workers.
The above order was further modified by this Court on December 1, 1981.
The petition was posted for hearing and disposal before a Bench of five Judges as the matter involved an important question of law relating to the locus standi of the trade unions to be impleaded as respondents to a winding up petition and their right to oppose or support it.
967 Petitions for Special Leave to Appeal (Civil) Nos. 10248 and 10249 of 1981 filed respectively by the Coimbatore District National Textile Employees ' Union and the Coimbatore District Engineering Workers ' Union directly against the order of the Company Judge dated September 19, 1981 rejecting their applications for being impleaded as parties to the Company Petition are also heard along with the above Petition for special leave to appeal (Civil) No. 9661 of 1981.
At the outset it should be noted that the company law in force in India i.e. the Act, as in England, is an amalgam of certain principles of the law of contract, of the law of persons and of the law of partnership which require the partners of a firm to be just and faithful towards each other.
A company is an association of persons for some common object or objects.
A Company has a legal personality.
It is an artificial person as opposed to a natural person.
It comes into existence on its registration in accordance with law.
The memorandum of association and the articles of association of a company which are filed at the time of its registration are considered as the constitutional documents which contain the fundamental terms which govern it.
The memorandum contains conditions some of which are basic to its existence even though they may be alterable by following the prescribed procedure.
The articles which contain the terms relating to the internal regulation may be altered by the members by passing appropriate resolution.
The articles are, however, subject to the terms of the memorandum.
Both these documents should, however, conform to the Act.
The actions of the company are subject to the doctrine of ultra vires whose purpose is to protect investors in the company and to protect the interests of its creditors.
The directors of a company are its agents and they stand in a fiduciary relationship to the company.
The duties of good faith which are imposed by this fiduciary relationship are virtually identical with those imposed on trustees.
The directors are generally expected not to place themselves in a position where their duties towards the company conflict with their personal interests.
A company ceases to be in existence on its dissolution which follows the winding up proceedings which may be either by the Court or voluntary winding up (either members ' voluntary winding up or creditors ' voluntary winding up) or winding up subject to supervision of the Court.
There are detailed provisions in the Act governing the different winding up proceedings referred to above.
The principles of administrative law which concern the control of governmental power have not much relevance to the 968 administration of the affairs of a company, the primary purpose of administrative law being the imposition of checks on the powers of government or its officers so that they may not either abuse their powers or go out of their legal bounds.
In particular, the proceedings relating to winding up by Court are subject to the orders of higher courts in appeal and are not amenable to interference by superior courts as in the case of actions of government or its officers.
The winding up proceedings by Court are governed by the Act and the Rules made thereunder.
We have been taken through various English text books on Company Law such as 'Palmers Company Law ', 'Gore Browne on Companies ', 'Buckley on the Companies Acts ' and Gower 's Principles or Modern Company Law.
In none of them there is any statement to the effect that officers and employees (who are not creditors or contributories) of a company for whose winding up a petition is filed would be entitled as of right to be impleaded as parties and to contest the petition.
There is also no authority of English Courts recognising such a right in any trade union.
It is not also shown that any such right of a trade union is recognised by the Indian law which more or less corresponds to English law in this regard The decision of the Bombay High Court In re.
Edward Textile Ltd.(1) is a clear authority for the proposition that any rate trade unions have no locus standi to oppose a winding up petition.
We shall proceed to decide this case on the assumption that the application for impleading was made in fact on behalf of the workers and not by the trade unions.
The main argument urged in support of these appeals is that because under section 445(3) of the Act the passing of a winding up order of a company by the Court amounts to a notice of discharge to the officers and the employees of the Company, except when the business of the company is continued, the officers and employees should be afforded an opportunity to contest a winding up petition after being impleaded as parties and if possible avoid the winding up of the company.
To appreciate this contention, it is necessary to refer to some of the provisions of the Act.
Section 433 of the Act sets out six circumstances in which a company may be wound up by the Court.
A company may be wound up by the Court on one or more of the following grounds, namely, (a) if the company has by 969 special resolution, resolved that the company may be wound up by the Court, (b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting, (c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year, (d) if the number of members is reduced, in the case of a public company, below seven, and in the case of private company below, two, (e) if the company is unable to pay its debts and (f) if the Court is of opinion that it is just and equitable that the company should be wound up.
Section 439 of the Act provides that an application to the Court for the winding up of a company shall be made by way of a petition presented to the Court subject to the provisions of that section.
A petition for winding up of a company may be filed by all or any of the following viz. the company, its creditors including any contingent or prospective creditors or by any contributory.
Such a petition can be filed by the Registrar of Companies and in a case falling under section 243, by any person authorised by the Central Government Sub section (2) of section 439 of the Act treats certain classes of persons as creditors for purposes of that section.
Sub section (3) of section 439 treats the holder of a fully paid up share also as a contributory even though he may not be liable to contribute any further sum to the assets of a company in the event of its being wound up and a contributory may file a petition for winding up provided he is not debarred from doing so by sub section (4) of section 439.
The Registrar can file a petition under clauses (b), (c), (d), (e) and (f) of section 433 of the Act subject to the conditions specified in section 439 except in cases where he is authorised under section 439(1)(f) Sub sections (6), (7) and (8) of section 439 of the Act refer to the other conditions governing the filing of a winding up petition.
When a company has passed a special resolution resolving that the company may be wound up by the Court, the employees and workers can have hardly any ground to object to the winding up of the company.
The position is the same when any of the defaults mentioned in clauses (b) and (c) of section 433 of the Act are committed by the company.
The officers and employees of the company also cannot get over the deficiency in the required number of members of a company referred to in clause (d) of section 433.
When a company is unable to pay its debts, a creditor may move a petition for the winding up of the company.
Such a creditor cannot be compelled to prove his claim not merely against the company but also against the officers and employees.
When there is a deadlock 970 in the management of the company arising out of disputes amongst the directors or where some directors without any justification exclude some other directors from the management of the company, it would be unreasonable to expect the excluded directors to fight the case both against the directors who are responsible for their exclusion and also against the officers and employees who are neither creditors nor contributories but who may be supporting the contesting directors.
The law on the question as to who can be heard as of right in a winding up proceeding is set out in paragraph 1028 in Volume 7 of Halsbury 's Laws of England (4th Edition) thus: ".
Only the petitioner, the company, and creditors and contributories are entitled to appear on the petition; other parties have no right to be heard, and, even if court of first instance elects to hear them as amici curiae, they have no right of appeal.
" The above passage is based on the decision of the English Court in In re.
Bradford Navigation Company(1) where Sir W.M. James, L J. observed at page 601 thus: "I am of opinion that this preliminary objection must prevail.
It appears to me that the Appellants ' argument is based upon a misconception of what a winding up order and what a winding up petition is.
It is a substitute for a suit for winding up a partnership.
It is a power applicable by the Act of Parliament to corporations as well as to unincorporated societies.
Partners have a right to file a bill one against the other, and to have the usual decree for the administration of the partnership property, and for the settling of the partnership accounts and liabilities.
In the case of large companies, winding up was thought to be a more convenient course than a common partnership suit, but in every other respect it is the same.
In a common partnership suit nobody can be made a party, or can be heard, except the partners themselves, and, originally, a winding up was the same thing.
Contributories were the only persons who could be heard; but as creditors were interfered with by the operation of the winding up, the Act of Parliament has made a winding up a matter both for creditors and contributories.
A creditor may present a petition for 971 winding up, and both creditors and contributories are heard upon that; but it is new to me to say that any person who has an interest in, or a right to or in respect of, some of the property of the company, large or small, has right to appear as a litigant here, because that company chooses to apply for an order with respect to itself.
In this case the company was desirous of being wound up.
I am of opinion that the winding up order does not in the slightest degree derogate from any right whatever which any member of the public has with respect to this canal The winding up will deal with such rights as the partners in the partnership can deal with themselves.
The Court will deal with it just as the partners themselves could have dealt with it".
In the Court below the Court might very well say to a person so situated, "I should be glad to hear you as amicus curiae, if you have an interest, that I may know what public grounds there are.
" There the Court might use its discretion, and think it right to hear such an objection; but when it comes before me on a Petition of Appeal from the Order, then the Appellant must show that he fills some character in which he has a right to litigate with the company.
I am of opinion that he does not fill any such character, and that the Petition of Appeal must be refused with costs.
" This decision may be of the last century but there is hardly any justification to depart from it even now unless compelled by the statute to do so.
That only the company, creditors and contributories (apart from the Central Government or the Registrar when they choose to intervene under the express provisions of law) are entitled to participate in the winding up proceedings is emphasised by sections 447 and 557 of the Act.
They read: "447.
Effect of winding up order An order for winding up a company shall operate in favour of all the creditors and of all the contributories of the company as if it had been made on the joint petition of a creditor and of a contributory." "557.
Meetings to ascertain wishes of creditors or contributories. (1) In all matters relating to the winding up 972 of a company, the Court may (a) have regard to the wishes of creditors or contributories of the company, as proved to it by any sufficient evidence; (b) if it thinks fit for the purpose of ascertaining those wishes, direct meetings of the creditors or contributories to be called, held and conducted in such manner as the Court directs; and (c) appoint a person to act as chairman of any such meetings and to report the result thereof to the Court.
(2) When ascertaining the wishes of creditors, regard shall be had to the value of each creditor 's debt.
(3) When ascertaining the wishes of contributories, regard shall be had to the number of votes which may be cast by each contributory.
" That a company, the Official Liquidator, the liquidator, creditors and contributories alone can effectively participate in and contest the winding up proceedings is clear from some of the other provisions of the Act governing the winding up proceedings.
Under section 450(2) of the Act before appointing a provisional liquidator, the Court has to given notice to the company and give a reasonable opportunity to it to make its representations, if any, unless, for special reasons to be recorded in writing, the Court thinks fit to dispense with such notice.
The Court may, under section 466 of the Act at any time after making a winding up order, on the application either of the Official Liquidator or of any creditor or contributory, make an order staying the winding up proceedings on being satisfied that there are good reasons to pass such an order.
Section 478(3) authorises any creditor or contributory in addition to the Official Liquidator to take part in the public examination of promoters, directors etc.
held for the purpose of enquiring into the conduct of such promotees or directors in connection with the promotion or formation or the conduct of the business of the company.
Section 517 of the Act provides that in a voluntary winding up, an arrangement entered into by the company and the creditors as provided therein is binding on the creditors and any creditor or contributory who is aggrieved by such arrangement may 973 appeal to the Court.
Under section 518, the liquidator or any contributory or any creditor may apply to the Court in a voluntary winding up proceeding to determine any question arising in the winding up of a company.
Under section 542 of the Act on the application of the Official Liquidator or the liquidator, or any creditor or contributory of the company the Court may, if it thinks fit and proper so to do, declare that any persons who were knowingly parties to the carrying on of business of the company with intent to defraud creditors or any other person shall be personally responsible for all or any of the debts or liabilities as the Court may direct.
The Court can exercise power to assess damages against delinquent directors of a company which is ordered to be wound up under section 543 on the application of the Official Liquidator, or of the Liquidator, or of any creditor or contributory made within the prescribed time.
In the case of a voluntary winding up under section 546 any creditor or contributory may apply to the Court with respect to exercise of any power by the liquidator under section 546(1).
Section 549(1) of the Act provides that at any time after the making of an order for the winding up of a company by or subject to the supervision of the Court, any creditor or contributory of the company may, if the Supreme Court, by rules prescribed so permit and in accordance with and subject to such rules but not further or otherwise, inspect the books and papers of the company.
Any creditor or contributory may under section 556 apply to the Court to enforce the duty of liquidator to make returns etc.
These and other provisions of the Act show that only the company, the Official Liquidator, liquidator, creditors, contributories or the Registrar have a statutory right to participate as of right in the winding up proceedings as provided in the Act.
The workers or their trade unions have not been given any such right.
The words 'every person ' in Rule 34 of the Companies (Court) Rules, 1959 (which is almost similar to the corresponding English Rule) do not entitle a worker who is neither a shareholder nor a contributory to support or oppose a winding up petition under that Rule because they refer only to a person who is otherwise entitled to do so under the Act.
We should also bear in mind that an anamolous result that may flow from the acceptance of the case of the workers is that whereas in a winding up by Court they may get an opportunity to contest the petition, the voluntary winding up proceedings or winding up under the supervision of the Court would go on without any such contest although in all cases ultimately the 974 workers will be discharged from service.
A construction which leads to such a discriminatory result should be avoided.
When once we extend the right to contest a winding up petition to workers either on the principle of equity or of administrative law, on the same principle it would logically follow that all others who may have dealings with such as commission agents, selling agents etc.
whose contracts with the company are going to be terminated by reason of its liquidation also have to be allowed to contest the winding up proceedings.
Such a claim is not permissible.
On this question, it may be useful to refer to the case of Ex Parte Maclure.
In that case a person entered into an agreement with an insurance company to act as their agent for five years, and to transact no business except for the company, in consideration of which he was to receive a fixed salary and also a commission of 10 percent, on all business transacted.
Before the five years expired the company was wound up voluntarily.
It was held, affirming the decision of Romilly M.R., that the agent was not entitled to prove against the company for the loss of his commission during the remainder of the term of five years.
James L.J. said: "I am clearly of opinion that the Master of the Rolls was right. .It is the case of a person engaging a servant, and saying, 'I engage you for five years, I will pay you 500 a year for that period that sum is secured to you and then, in order to give you an inducement to carry on the business effectually, properly, and prudently, I will give you 10 per cent, commission upon the net profits to be earned by that business.
I am of opinion that this was a contract which did not give the servant the right to determine what the extent of the business was to be.
He could not call upon the directors to issue new policies to accept new premium, or to take new risks, if they were not minded to do it.
He could not say, 'Such a person has brought in a policy of insurance, and you must accept that." Because if he had a right to say 'You must carry on the business ' he would also have a right tc say 'You must carry on the business in the usual and proper manner, ' and that would be giving a servant the right of controlling the master in the mode in which he chose to carry on his business.
Now, I am quite satisfied that the meaning of the contract was nothing of the kind.
It was never intended to give the servant the right of dictating as to the extent of business, whether more or less, or nothing, but be simply took the chance of 975 the company finding it a profitable business and carrying it on.
The company had a right to reduce the business to a minimum ; and if they had a right to reduce it to a minimum, they had a right to reduce it to nothing as far as he was concerned.
" It is because of some doubts that had been expressed earlier about the continuance of the employment of the employees of a company ordered to be compulsorily wound up that section 445(3) was enacted making it clear that the passing of the order of winding up amounts to a notice of discharge of the employees concerned.
Section 445(3) corresponds to the termination of service brought about by the abolition of a post under a Government or by the closure of a business, neither of which as the law stands today requires compliance with the principles of natural justice.
It may, however, attract section 25 FFF of the in appropriate cases.
In the Act, there are specific provisions dealing with the rights of employees of a company.
Sections 417 to 420 of the Act deal with employees ' securities and provident funds and clauses (b) to (f) of section 530(1) deal with preferential payments to be made to the employees of a company in liquidation from out of its assets.
Section 635 B of the Act deals with the protection to which the employees are entitled during investigation into the affairs of a company.
Rule 152 of the Companies (Court) Rules, 1959 (read with Form No. 67) relates to proof of arrears of workmen 's wages.
The right to resist a winding up petition is not one such right.
It is true that public interest which may include within its scope interests of employees of a company has to be kept in view by the Court as observed in Bhalchandra Dharmajee Makaji and Ors.
vs Alcock, Ashdown and Co. Ltd. and Ors.(1) in exercising certain powers under the Act.
Sections 388 B, 394, 396, 397 and 408 of the Act do refer to the concept of public interest.
These provisions deal with the power of the Central Government to remove managerial personnel from office on the recommendation of the High Court, compromises, arrangements and reconstruction of companies and power of the Court and the Government to prevent oppression or mismanagement of affairs of a company.
They do not, however, state that trade unions can as of right intervene in the proceedings arising under them.
976 It is not correct to say that there is no other remedy at all for workmen who are likely to be affected by the winding up order made by the Court.
Section 15 A of the Industrial (Development and Regulation) Act, 1951 (Act No. 65 of 1951) which applies to textile industry as well confers power on the Central Government to carry out investigation into the affairs of a company in liquidation.
It reads : "15 A. Power to investigate into the affairs of a company in liquidation (1) Where a company, owning an industrial undertaking is being wound up by or under the supervision of the High Court, and the business of such company is not being continued, the Central Government may, if it is of opinion that it is necessary, in the interest of the general public and, in particular, in the interests of production, supply or distribution of articles or class of articles relatable to the concerned scheduled industry, to investigate into the possibility of running or restarting the industrial undertaking, make an application to the High Court praying for permission to make, or cause to be made, an investigation into such possibility by such person or body of persons as that Government may appoint for the purpose.
(2)Where an application is made by the Central Government under sub section (1), the High Court shall, notwithstanding anything contained in the (1 of 1956) or in any other law for the time being in force grant the permission prayed for.
" The provisions of Chapters III AA and III AB of the Industrial (Development and Regulation) Act, 1951 confer on the Central Government powers regarding management or control of industrial undertakings owned by companies in liquidation and power to provide relief to certain industrial undertakings including those to which Chapter III A is applicable.
Chapter III AC of that Act deals with the power of the Central Government in respect of liquidation and reconstruction of companies.
In particular, section 18 FD(1) of that Act inter alia provides that if, on receipt of the report submitted by the authorised person, the Central Government is satisfied in relation to a company, owning the industrial undertaking, which is being wound up by the High Court, that its assets and liabilities are such that in the interests of its creditors and 977 contributories the industrial undertaking should be solid as a running concern, as provided in section 18 FE thereof it may by order decide accordingly.
Sub section (2) of section 18 FD of that Act states that notwithstanding anything contained in sub section (1) thereof the Central Government may prepare a scheme for reconstruction of a company if it is satisfied having regard to all relevant circumstances mentioned therein that it is proper to do so.
When such a scheme is prepared, the Central Government has to send it to the registered trade unions, if any, of the employees concerned for their suggestions and objections.
(See section 18 FF(3)).
Any scheme finally approved would prevail notwithstanding anything contained in sections 391 to 394 A (both inclusive) of the Act.
It is open to the workers or their trade unions to move the Central Government to take appropriate steps under the aforesaid provisions in order to protect the interests of the workers who are likely to be affected by the winding up orders.
Article 43A of the Constitution clearly states that the State shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings, establishments or other organisation engaged in any industry.
The High powered Expert Committee on Companies and MRTP Acts headed by Justice Rajinder Sachar of the Delhi High Court has also made certain recommendations about provisions to be made for workers ' participation in management of companies.
(Vide paragraphs 18.127 to 18.143 of the Report).
Parliament may take early steps to implement some of the recommendations made by the said Committee.
It is significant that there is no recommendation made even in this Report about the right of trade unions to contest winding up petitions.
If the workers are issued shares then they would no doubt be entitled to participate in the winding up proceedings as contributories.
This may be one way of solving the problem by legislative means.
Another way of providing a forum to the workers representative in matters relating to the winding up of a company is to amend section 292 of the Act as suggested in para 11.27 and para 18.137 of the Report of the Sachar Committee.
Those paragraphs are reproduced below for ready reference: "11.27 The workers ' representation on company Board makes it necessary to provide that companies must ensure that certain decisions are necessarily taken at the Board level and the Board do not delegate 978 the powers in respect of these matters to committees or other functionaries in the organisation, otherwise the participation of workers at the Board level is likely to prove ineffective.
The powers and functions which cannot be delegated by the Board, and which must be within the exclusive jurisdiction of the Board to take policy decision are in respect of the following matters: (a) winding up of the company; (b) changes in the memorandum and articles of association; (c) changes in the capital structure of a company (e.g. as regards the relationship between the Board and the shareholders a reduction or increase in the share capital; as regards the relations between the Board and senior management, the issue of securities on a takeover or merger); (d) disposal of a substantial part of the undertaking; (e) the allocation or disposition of resources to the extent not covered in (a) to (d) above; and (f) the appointment, removal, control and remuneration of management, whether as members of the Board or in their capacity as executives or employees.
The suggestion regarding (a) to (e) above is on the same line as the present power of the Board to declare dividend.
In other words, the shareholders will not be able to exercise powers mentioned in (a) to (e) above unless recommended by the Board.
We would, therefore, suggest that section 292 be amended to provide for the exercise of the foregoing powers of the Board of a company which is required by law to ensure participation of workers in management." "18.137 In order to ensure effective participation by workers ' representatives at the Board level section 292 should be amended to provide that certain decisions are necessarily taken only at the Board level and no delegation to Committees of the Board or to other functionaries is made.
" 979 These suggestions emphasise that at present workers have no right to contest winding up proceedings.
It is also open to Parliament to make a law on the lines of sections 63 to 69 of the Employment Protection Act, 1975 passed by the Parliament in the United Kingdom to give any additional protection necessary for workmen who are likely to be affected adversely by the winding up proceedings.
(See Palmer 's Company Law (22nd Edn.
I, p. 919)).
Parliament may also consider the introduction of a provision corresponding to section 74 of the of 1980 passed by the British Parliament.
Such steps may mitigate any hardship that may be caused to the workers as a consequence of the winding up of a company.
It has to be emphasised that the privilege of making suggestions to the Court in the public interest is different from the right to be impleaded as a party with the concomitant right to enter into contest with the other parties and of taking an order in appeal before higher courts.
The latter right has to be conferred expressly by the statute on any person who wishes to exercise it.
Under the existing law, the workers or their unions may make any suggestions to the Court at any stage but they cannot claim to be impleaded as parties to the winding up petition as of right.
The decision of this Court in Fertilizer Corporation Kamgar Union (Regd.), Sindri and Ors.
vs Union of India and Ors.(1) does not lend any support to the case of the trade unions.
In that case which attracted the principles of administrative law the petitioner trade union pleaded that Article 14, Article 19(1)(g) and Article 311 of the Constitution had been violated by the sale of the plant and equipment of a factory in which its members were working.
Ultimately the petition was dismissed by this Court.
One of the distinguishing features of that case is that the factory involved in that case was in the public sector and owned by the Government against which a petition under Article 32 of the Constitution was maintainable.
Chandrachud C.J. observed in the course of his judgment at pages 60 61 thus: "Secondly, the right of Petitioners 3 and 4 and of the other workers to carry on the occupation of industrial workers is not, in any manner affected by the impugned 980 sale.
The right to pursue a calling or to carry on an occupation is not the same thing as the right to work in a particular post under a contract of employment.
If the workers are retrenched consequent upon and on account of the sale, it will be open to them to pursue their rights and remedies under the Industrial laws.
But the point to be noted is that the closure of an establishment in which a workman is for the time being employed does not by itself infringe his fundamental right to carry on an occupation which is guaranteed by Article 19(1)(g) of the Constitution.
Supposing a law were passed preventing a certain category of workers from accepting employment in fertiliser factory, it would be possible to contend then that the workers have been deprived of their right to carry on an occupation.
Even assuming that some of the workers may eventually have to be retrenched in the instant case, it will not be possible to say that their right to carry on an occupation has been violated.
It would be open to them, though undoubtedly it will not be easy, to find out other avenues of employment as industrial workers.
Article 19(1)(g) confers a broad and general right which is available to all persons to do work of any particular kind and of their choice.
It does not confer the right to hold a particular job or to occupy a particular post of one 's choice.
Even under Article 311 of the Constitution, the right to continue in service falls with the abolition of the post in which the person is working.
The workers in the instant case can no more complain of the infringement of their fundamental right under Article 19(1)(g) than can a Government servant complain of the termination of his employment on the abolition of his post.
The choice and freedom of the workers to work as industrial workers is not affected by the sale.
The sale may at the highest affect their locum, but it does not affect their locus, to work as industrial workers.
This is enough unto the day on article 19(1)(g).
" On the question of locus standi of workers to maintain the petition, the learned Chief Justice observed at pages 65 66 thus: "That disposes of the question as regards the maintainability of the writ petition.
But, we feel concerned to point out that the maintainability of a writ petition which 981 is correlated to the existence and violation of a fundamental right is not always to be confused with the locus to bring proceedings under Article 32.
These two matters often mingle and coalesce with the result that it becomes difficult to consider them in water right compartments.
The question whether a person has the locus to file a proceeding depends mostly and often on whether he possesses a legal right and that right is violated.
But, in an appropriate case, it may become necessary in the changing awareness of legal rights and social obligations to take a broader view of the question of locus to initiate a proceeding, be it under Article 226 or under Article 32 of the Constitution.
If public property is dissipated, it would require a strong argument to convince the Court that representative segments of the public or at least a section of the public which is directly interested and affected would have no right to complain of the infraction of public duties and obligations.
Public enterprises are owned by the people and those who run them are accountable to the people.
The accountability of the public sector to the Parliament is ineffective because the parliamentary control of public enterprises is "diffuse and haphazard".
We are not too sure if we would have refused relief to the workers if we would have found that the sale was unjust, unfair or mala fide." Krishna Iyer, J. in his concurring opinion observed at pages 70 71 thus: "A pragmatic approach to social justice compels us to interpret constitutional provisions, including those like articles 32 and 226, with a view to see that effective policing of the corridors of power is carried out by the court until other ombudsman arrangements a problem with which Parliament has been wrestling for too long emerges.
I have dwelt at a little length on this policy aspect and the court process because the learned Attorney General challenged the petitioner 's locus standi either qua worker or qua citizen to question in court the wrong doings of the public sector although he maintained that what had been done by the Corporation was both bona fide and correct.
We certainly agree that judicial interference with the Administration cannot be meticulous in our Montesquien 982 system of separation of powers.
The court cannot usurp or abdicate, and the parameters of judicial review must be clearly defined and never exceeded.
If the Directorate of a Government company has acted fairly, even if it has faltered in its wisdom, the court cannot, as a super auditor, take the Board of Directors to task.
This function is limited to testing whether the administrative action has been fair and free from the taint of unreasonableness and has substantially complied with the norms of procedure set for it by rules, of public administration.
" A reading of the aforesaid passages shows that the Court was concerned in that case with operations in a public sector company and the activities of the Government.
These observations cannot have any relevance to a case involving the affairs of a company which is governed only by express provisions of company law and other relevant statutes.
As the law stands today, workers cannot contend that a factory owned by and individual proprietor, on his death, should not be divided amongst his heirs, even though they may lose their jobs.
They cannot resist a partition suit, in which one of the items of property in respect of which relief is claimed is the factory in which they are working, filed by a junior member of Hindu joint family against the manager contending that the said factory is the separate property of the manager and should not, therefore, be partitioned merely because they may be discharged from service in the event of the suit being decreed.
They cannot resist the suit for dissolution of a firm which owns the factory in which they are working even though at the distribution of the assets of the firm, the factory may have to be dismantle and sold.
The position cannot be different in the case of a company which is wound up by the Court.
As the law stands today, the workers in a factory owned by a company do not have any hand in the birth of a company, in its working during its existence and also in its death by dissolution.
If the law expressly says that a memorandum of a company should be signed by some future employees of the company, or that there should be workers ' representatives on its board of directors or that the company should not be wound up without consulting the wishes of the workers, then they can certainly claim all such rights.
Workers ' participation in the affairs of a company or the ushering in of an industrial democracy is quite a laudable object.
That is the reason 983 for enacting Article 43 A of the Constitution which requires the State to take steps, by suitable legislation or in any other way, to secure the participation of workers in the management of undertakings, establishments or other organisations engaged in any industry.
The Legislature has not taken any concrete steps in this regard.
But, can the Court step in and introduce drastic amendments into the company law ? Surely, it cannot.
Even though there is no express statement in our constitutional law incorporating in it the doctrine of separation of powers, in the interpretation of the Constitution this Court has broadly adopted the said doctrine.
(See Smt.
Indira Nehru Gandhi vs Shri Raj Narain (1).
Even though by virtue of its power of interpretation of law the Court in an indirect way is making law, it should be stated that there are well recognised limitations on the power of the Court making inroads into the legitimate domain of the Legislature.
If the Legislature exceeds its power, this Court steps in.
If the Executive exceeds its power, then also this Court steps in.
If this Court exceeds its power, what can people do ? Should they be driven to seek an amendment of the law on every such occasion ? The only proper solution is the observance of restraint by this Court in its pronouncements so that they do not go beyond its own legitimate sphere.
It is true that there are now new kinds of weapons like consumers ' protection agitations against big companies whose activities are likely to affect the life of the community adversely.
But, for those agitations to be effective the Legislature should wake up and make appropriate laws under which the consumers can bring action against erring companies.
In the absence of any such law, this Court cannot issue directions to the companies on the basis of complaints from the members of the public.
There are several areas where it is necessary for the Legislature to make law.
A reading of the provisions in Part IV of the Constitution shows that many of them are still to be implemented by the passing of appropriate legislation.
Article 41 of the Constitution dealing with the right to work, Article 43 dealing with living wages etc for workers, Article 44 which insists upon the introduction of a uniform civil code for all citizens and Article 47 dealing with the duty of the State to raise the level of nutrition and the standard of living of the people are some of the articles which have to be implemented either by the Legislature or by the Executive.
984 Would this Court compel the Executive by issuing a writ to implement the policy underlying Article 41, Article 43 and Article 47 without being backed up by necessary laws ? Would this Court enforce a uniform civil code in respect of all citizens, without the aid of an appropriate legislation even though the concept of equality is enshrined in the Constitution and Article 44 specifically requires the State to endeavour to secure for all citizens a uniform civil code ? It may not do so The only solution for many of these social problems is to appeal to the appropriate organs of the State to do their assigned job in the best interests of the Community.
It is wrong to think that by some strained construction of law, the Court can find solution to all problems.
In this very case, when arguments were going on I suggested that it may be appropriate to issue notice to the Company Law Administration of the Union of India so that the Court could have the benefit of the views of the Government.
It was not, however, acceded to by the majority.
The presence of the Union Government in the present case as a party might have brought to its attention the need for initiating necessary legislation, if it really felt that it was advisable to do so, for providing an opportunity to workers of a company also to contest the winding up proceedings.
It is, however, a matter for regret that no tangible steps appear to have been taken to amend the Act even though the Sachar Committee Report which contains many recommendations which when implemented would make the companies which are centres of economic power accountable to the society at large and make them fall in line with the current views on their social responsibilities, was forwarded to the Government more than four years ago.
It may be that the employees or their trade unions are interested in requesting the Court to dispose of the factory as going concern so that their employment may not be affected.
How are they interested in supporting one set of directors against whom charges of waste, misappropriation and mismanagement are made by the other set who are alleged to have been totally excluded from management by attempts amounting to oppression ? In the instant case the trade unions concerned have filed almost a common statement containing their grounds of objection along with their notice to appear in the proceedings filed under Rule 34 of the Companies (Court) Rules 1959 pursuant to the advertisement issued by the 985 Court.
The grounds of objection filed by the Coimbatore District National Textile Employees ' Union are set out below in extenso : 1.
That the Company Petition is not maintainable under the , hereinafter referred to as the `Act '.
That no case has been made out by the petitioners under section 433(f) of the Act.
That, on the facts and circumstances of the case, it is not just and equitable that the company should be wound up.
That another remedy is available to the petitioners and hence the Company cannot be wound up by virtue of section 443(2) of the Act.
That the objector craves leave to reserve his right to amplify and elaborate the above grounds in the counter affidavit to be filed to the company petition.
" It is seen from the foregoing that the trade unions are only interested in supporting the cause of the respondents against whom allegations are made by the petitioners in the Company Petition by making certain general submissions, without traversing the various allegations made in it.
The respondents who are already on record and who are actually contesting the petition are capable of looking after their interests and need not rely upon the support of the trade unions who are neither creditors nor contributories and who do not know the details of the internal administration of the affairs of the Company.
The petitioners in the Company Petition would be in a more disadvantageous position if they have to face the opposition of the trade unions also.
Such a situation should not be created by extending the area of controversy by a liberal interpretation of the provisions of law when there are no compelling reasons to do so.
The High Court has in this case passed necessary orders in order to protect the interests of the employees in Company Application No. 844 of 1981 and in C.M.P. No. 11159 of 1981.
The order passed in Company Application No. 844 of 1981 is already set out above.
986 In C.M.P. No. 11159 of 1981 the High Court has passed the following order: "This is a petition filed by the appellants in O.S.A. No. 128 of 1981 for permitting the first appellant/company to raise with its Bankers viz., Bank of Baroda, Coimbatore, a temporary loan of an amount not exceeding Rs. 5,25,000 for the purpose of paying bonus to the workers of Jothi Mills, as per the Memorandum of settlement entered into between the Company and its workers under section 18(1) of the on 10.10.1979 by pledging or charging the assets of the Company. . .
Though in form the appellants have prayed for raising of a loan for honouring the commitment of Rs. 5,25,000 towards bonus for the workers of Jothi Mills by pledging or charging the assets of the company during the argument the learned counsel for the appellants was willing to avail of the existing facilities in the Central Bank as provided in the order Itself.
Though for availing the existing bank facilities there is no need for any specific direction from this Court as the order appealed against itself gives such liberty, the learned counsel for the appellants by way of abundant caution requires such an interim direction in this petition.
The learned counsel for the respondents pointed out that availing of the existing facilities referred to in the order of Shanmukhan, J., is a facility that was available as on 13.7.1981 we think the learned counsel for the respondents is well founded in this contention.
(sic) But even so if the Banks as on 13.7.1981 the petitioners are entitled to avail the same in order to honour the commitment relating to bonus for workers.
Since the order under appeal itself permits the petitioners to avail of the existing Bank facilities with any of its Bank though the application in form asked for raising of the loan with the Bank of Baroda, Coimbatore, we make it clear that it is open to the petitioners to avail of the Bank loan facilities with the Central Bank within the limits prescribed as on 13.7.1981.
This is the only clarification that need be given in this petition and no further orders are necessary." (emphasis added) These orders show that the High Court has kept in its view the interests of workers while giving directions in the case from 987 time to time and that there is no longer any ground to complain about.
According to the petitioners in the winding up petition the occasion for the complaint of the workers had been cleverly engineered by the contesting respondents.
Be that as it may, as the orders of the High Court stand today the workers can always approach it by way of a company application for appropriate orders whenever they feel that their working conditions are adversely affected during the pendency of the proceedings.
It is not necessary that the workers or the trade unions should be impleaded as parties to the Company Petition enabling them to contest the winding up petition.
Their presence on record is not necessary for complete and effectual adjudication of the winding up petition.
The trade unions are, therefore, neither necessary nor proper parties to the winding up petition on the facts and in the circumstances of this case including the element of public interest involved in any liquidation proceeding.
Before concluding it should be stated that it is not correct to hold that the order of the High Court `smacks of elitism ' or `sounds like a relic of feudal age ' or is an `obnoxious ' one.
The High Court has decided the case in accordance with the prevailing view in the country.
No case in which a different view is taken is cited before us.
Nobody disputes the proposition that law should not be static.
It should no doubt grow but it should have its legitimate birth and in a case like this in the precincts of the Legislature.
It should be the result of the exercise of legislative judgment, particularly when a departure from express provisions of a statute or an established practice is to be made.
Judges are not expected to know all aspects of every such matter.
A discussion involving a comprehensive view of all interests which are likely to be effected by any decision which makes a serious departure from a well settled principle of law would not take place before a court where only the parties to a case or their lawyers are heard.
Members of the public also would not know what is happening in courts.
The publicity which a proceeding in the Legislature would receive is not given to the proceedings in Court.
Even the elected representatives of the people who are charged with the duty of making laws may not know what is happening in a court of law.
Therefore, it is always better to leave such matters to the decision of the Legislature, instead of the court, sometimes by a majority of one assuming power to make a new law.
It is no doubt true that the view of the High Court is also in conformity with the view prevailing in England.
That does not mean that the High Court has surrendered its judgment to a foreign 988 practice, because that is the very view which is being followed till now in the Indian courts.
We should not forget that the very concept of company law is foreign to our country.
It originated in Great Britain and our company law contained in successive Acts passed by the Indian Legislature is modelled on British law and experience.
There is a large body of company jurisprudence which is common to all the Commonwealth countries.
There may, however, be some local changes but the pattern appears to be common.
The practice of relying on foreign decisions whatever may be their age only when they are in conformity with what we wish to hold and of condemning them only on the ground that they are ancient foreign decisions when they do not accord with our views is not correct.
A foreign decision (even though it may not be binding) is either worthy of acceptance or not depending upon the reasons contained in it and not on its origin or age.
There is no reason why we should not follow a well reasoned foreign decision unless it is opposed to our ethics, tradition and jurisprudence or otherwise unsuited to Indian conditions.
Can we say that the law of habeas corpus which has found its way into India from England is bad only because it came from a foreign country or has an ancient origin ? The writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari referred to in article 32 and article 226 of the Constitution of India, the rule of promissory estoppel, the principle of audi alterum partem and many other principles which are applied by the Indian courts are all of foreign origin.
Even the socialist principle is not entirely of Indian origin.
It is difficult to shut our eyes to realities of life.
Moreover, it is difficult even though it may not be impossible to administer the company law as it is now in force in India without the aid of the principles laid down by some of the leading English cases like Salomon vs Salomon & Co.(1) laying down the principle of corporate personality, Ashbury Railway Carriage & Iron Co. vs Riche(2) dealing with the rule of ultra vires, Royal British Bank vs Turguand(3) laying down the rule of `indoor management ', Hedley Byrne & Co. Ltd. vs Heller & Partners Ltd.(4) which establishes the liability for negligent mis statements in prospectuses, Foss vs 989 Harbottle(1) and Burland vs Earle(2) dealing with the principle of `the fraud on a minority ' and Ebrahimi vs Westbourne Galleries(3) dealing with the application of the `just and equitable ' principle in ordering the winding up of a company.
A reading of the decision of this Court in Needle Industries (India) Ltd. & Ors.
vs Needle Industries Newey (India) Holding Ltd. & Ors.(4) rendered by Chandrachud, C.J. shows the importance of foreign decisions in deciding case arising under the Indian Company law which out of necessity has to keep pace with the well established principles prevailing in many other parts of the world for sustaining international trade and commerce.
Adoption of an universal system of mercantile law and obedience to the conventions of the International Labour Organisation constitute two important compulsions of modern international economic life.
It may be that the workers who are likely to be affected by the winding up need a larger protection.
That can be done only by legislative action.
This Court cannot, however, make any order which will conflict with the existing law.
In the result the appeals fail and are dismissed.
No costs.
BAHARUL ISLAM, J.
I have carefully read the judgments prepared and orders proposed by my Brothers Bhagwati and Venkataramiah JJ.
I entirely agree with Bhagwati J. and regret my inability to agree with Venkataramiah J. Any provision of any statute has to be interpreted keeping in view the letter and spirit of the Constitution.
Any interpretation that is not in consonance with the letter and spirit of the Constitution is obnoxious and unacceptable.
In the winding up proceedings in question, the National Textile Workers ' Union filed the petition before the High Court with a prayer to be heard before any order for winding up was passed.
The reason was the workers ' apprehension of termination of their services in case of winding up of the Company.
It is true, there is no express provision in the giving the workers any right to be heard in a winding up proceeding before the Court.
There is no express bar either.
Learned counsel for Respondents Nos.
6 to 9, in support of his contention that the workers had no right to be 990 heard in a winding up proceeding, cited Halsbury 's Laws of England, volume 7 page 614 para 1028 (4th Edition).
The learned author has stated the law on the subject thus : "Only the petitioner, the Company and creditors and contributories are entitled to appear on the petition ; other parties have no right to be heard, and even if the Court at the first instance elects to hear them as amici curiae, they have no right of appeal.
" This statement of the law has been made on the authority of the judgment in Bradford Navigation Co. rendered as early as 1870: (1970) 5 Ch.
A, Page 600).
Learned counsel also cited Palmer Company Precedents (17th Edition) Vol. 2, page 77, in which the law to the above effect was stated.
Learned counsel has submitted that the Company Law in India is the same as in the Company Law in England.
The law cited may be good law for England with altogether a different system of economy ; but is abhorrent to India, particularly after the Constitution (42nd Amendment) Act, 1976, by which the "Socialist" and "Secular" concepts have been added and incorporated into the Preamble of our Constitution.
Our `Democratic Republic ' is no longer merely `Sovereign ' but is also `Socialist ' and `Secular '.
A Democratic Republic is not Socialist if in such a Republic the workers have no voice at all.
Our Constitution has expressly rejected the old doctrine of the employers ' right to `hire and fire '.
The workers are no longer ciphers ; they have been given pride of place in our economic system.
The workers ' right to be heard in a winding up proceeding has to be spelt out from the Preamble and Articles 38 and 43 A of the Constitution and from the general principles of natural justice.
AMARENDRA NATH SEN, J.
I have read the judgment of my learned brother Bhagwati, J. and also the judgment of my learned brother Venkataramiah, J. I cannot persuade myself to agree with the judgment of my learned brother Bhagwati, J.
I agree with the judgment and order proposed by my learned brother Venkataramiah, J. I shall indicate my reasons for the view that I have taken.
The material facts of this case have been set out in the judgment of my learned brother Bhagwati J. and also in the judgment of my learned brother Venkataramiah, J.
The arguments advanced 991 from the Bar have been considered by both of them.
It does not, therefore, become necessary for me to reproduce them in this judgment.
Whether the employees of a Company in their capacity as employees can claim as a matter of right to appear and be heard in a petition presented to court for the winding up of the Company, is the question for decision in this case.
The right of an employee in his capacity as such to be heard in a proceeding for winding up of a company has been canvassed as a proposition of law.
The contention urged on behalf of the trade unions representing the workers of the company is that whenever a petition is presented to a Court for the winding up of a company, the employees of the company have the right to appear and be heard in the said proceeding.
The principal argument advanced on behalf of the trade unions representing the workers is that the employees of a company are equal partners of the management of the company, if not the more important one, and the company, in view of the socio economic role it plays and it has to play in the country, can no longer be considered to be the concern of the members of the company.
Further, the argument is that the employees very materially contribute to the working of a company and help the company in effectively playing its socio economic role and promoting the interests not only of the company, but also the larger interests of the nation and an order of winding up seriously affects the interest of the employees, virtually taking away the means of their livelihood.
It has been submitted that as an order of winding up of the company affects so seriously the interests of the employees, the employees must have a say and must be heard in a proceeding for winding up before the Court.
I have earlier observed that the arguments advanced from the Bar on behalf of the trade unions have been noted at length by my learned brothers Bhagwati and Venkataramiah, JJ.
The arguments no doubt express noble sentiments which I share ; but, in my opinion, the arguments fail to establish that the employees have a right to appear and be heard in a petition presented to a Court for the winding up of a company.
If the right is to be conceded to employees on these grounds it must logically follow that every employee of a company, whether he is a worker within the meaning of the or he is a member of the management 992 staff, must enjoy the same right to appear and be heard in every such proceeding for the winding up of the company.
An order for winding up affects all the employees of a company, whether they are workers belonging to any trade union or not or whether they are officers of the company, high or low, not being members of any union or association.
Further if the right to participate in a winding up proceeding is to be judged from the view point of the interest of any party who may be prejudicially affected as a result of an order of winding up being made, various other parties who have trade relations with the company must necessarily be held to have the same right to be heard in a winding up proceeding.
It is common knowledge that various persons, apart from the employees of the company, also depend for their survival on the supplies of various materials, ingredients and components to the company and with the liquidation of a company, all such persons who are making their living out of their dealings with the company have to go without occupation and have to face disaster.
Persons having existing contracts with the company are also seriously prejudiced when an order of winding up of the company is made.
If the test of injury and adversely affecting the interests are considered to be sufficient to entitle a party to a hearing in a proceeding on the footing that they are persons aggrieved, no suit for dissolution of a partnership can also be decided without impleading the employees of the firm and various other parties having trade relations with the firm, as the dissolution of a firm may prejudicially affect the interests of the employees or the various other persons dealing with the firm.
It has to be borne in mind that a company can only be wound up in accordance with the provisions of the Indian .
The right to have a company wound up is a right created by the Statute.
The entire proceeding in relation to the winding up of a company is regulated by the statute, namely, the Indian (hereinafter referred to as the Act) and the procedure to be followed is further supplemented by the provisions contained in the rules made under the Act known as the Companies (Court) Rules, 1959 (hereinafter referred to as the Rules).
The various modes of winding up of the company, under what circumstances a company may be wound up by Court and who are the persons competent to present a petition to Court for the winding up of the company and who are the persons entitled to 993 be heard on such a petition, are provided for in the Act and in the Rules.
It has to be borne in mind that apart from the right of the Court to order the winding up of a company in an appropriate case, the Act recognises that a company may go into liquidation without any intervention by the Court and also under the supervision of Court, provided the necessary conditions laid down in the Act in this regard are complied with.
Where the Company goes into liquidation without reference to court or under the supervision of the Court, the employees of the company who have to meet the same fate of losing their employment, as and when the company is wound up by the Court, do not and cannot have any voice or say in the procedure to be adopted for the liquidation of the company.
In the case of winding up of any company by Court, the parties who can move the Court for winding up of the company are specifically mentioned in the Act and only such persons are competent to present the winding up petition.
The procedure to be followed on such a petition for winding up of the company being presented to court and the parties who are entitled to be heard on the petition are dealt with and provided for in the Act and the Rules.
The right of appearance and of being heard in a winding up proceeding has been conferred on persons whom the Legislature considered to be necessary or proper parties for effective adjudication of the proceeding before the Court.
The Act provides that a creditor to whom a company is indebted in a sum exceeding Rs. 500 and whose debt has not been paid by the company notwithstanding the statutory notice being served on the company is entitled to present a petition for the winding up of the company and in such a case, the creditor whose debt cannot be properly disputed, is entitled to an order of winding up on the ground of insolvency of the company.
If a company is commercially insolvent and is unable to pay its debts, the company has necessarily to be wound up and the employees of the company can have hardly anything to say in such a case for assisting the Court in deciding the matter.
My learned brother Venkataramiah, J. has referred to the various provisions of the Act and also to relevant Rules, which go to indicate that no such right of the employees to appear and participate in a winding up proceeding is recognised.
Rule 34 of the Rules on which strong reliance was placed by the learned counsel 994 appearing on behalf of the trade unions, is not of any assistance.
The said Rule reads as follows: "Every person, who intends to appear at the hearing of a petition, whether to support or oppose the petition, shall serve on the petitioner or his advocate, notice of his intention at the address given in the advertisement.
The notice shall contain the address of such person, and be signed by him or his advocate, and same as otherwise provided by these rules shall be served (or if sent by post, shall be posted in such time as to reach the addressee) not later than two days previous to the day of hearing, and in the case of a petition for winding up not later than five days previous to the day of hearing.
Such notice shall be in Form No. 9, with such variations as the circumstances may require, and where such person intends to oppose the petition, the grounds of his opposition or a copy of his affidavit if any, shall be furnished along with the notice.
Any person who has failed to comply with this rule shall not except with the leave of the Judge, be allowed to appear at the hearing of the petition.
" This particular Rule appears in Part I and in Part I of the Rules, general provisions are made.
This Rule only lays down the procedure to be followed by any person who intends to be heard at the hearing of a petition, whether to support or oppose the petition, and this Rule does not deal with the competence or right of any particular person to appear at the hearing of any petition nor does this rule create any right in any person.
Part III of the Rules makes specific provisions with regard to winding up by Court.
Rule 9B in Part III reads: "Every contributory or creditor of the company shall be entitled to be furnished by the petitioner or by his advocate with a copy of the petition within 24 hours of his requiring the same on payment of the prescribed charges.
" For properly and effectively adjudicating upon any winding up petition, the parties must necessarily know the grounds contained in the petition on which the Court has been moved for the winding up of the company to make representation with regard to the same.
Rule 9B requires that copies of the petition in terms of the said rules are to be furnished to every contributory or creditor of the company and the said rule makes no mention of the employees of 995 the company.
I agree with my brother Venkataramiah, J. that on a proper consideration of the relevant provisions of the Act and also of the Rules, an employee of a company in his capacity as such does not have any right to appear and be heard in a petition presented to Court for the winding up of the company.
It will be noticed on an analysis of the provisions of the Act that from the stage of the formation of the company till the very last stage of its dissolution, company jurisprudence does not recognise any right of an employee in his capacity as an employee of the company in the matter of formation of the company, its functioning and its ultimate winding up.
The Act, however, makes necessary provisions as to deposit of employees ' security monies with a Scheduled Bank in section 417 of the Act.
The Act also makes suitable provision in Section 418 about Provident Funds of Employees.
Necessary provisions for preferential payment of wages or salary of an employee in case of winding up of a company have been made in Section 530 of the Act.
For safeguarding what the Legislature considers to be public interest, the Legislature in various sections of the Act has made suitable provisions casting various obligations on the company with penal consequences and has conferred powers on the Government.
The introduction of article 43A in the Constitution which reads "The State shall take steps, by suitable legislation or in any other way, to secure the participation of workers in the management of undertakings, establishments or other organisations engaged in any industry" does not affect the position in any way.
Participation in the management of a company does not by itself create any right in any such person to appear and be heard in a winding up petition.
Unless otherwise named personally as a party to a winding up petition, no person merely on the ground that he happens to be in the management of the company is entitled as a matter of right to appear and be heard in a winding up proceeding.
Persons in management of the company may, if they are so authorised, appear and participate in a winding up proceeding on behalf of the company and representing the company.
They will, however, be entitled to appear if they are members or creditors of the company in such capacities, but not as members of the management.
A director of a company must of necessity be a member of the company, as provided in the Act.
996 It is worth mentioning that the Indian is based on the English and both the Acts contain more or less similar provisions.
The provisions of the Indian with regard to the winding up of the Company are almost alike to the provisions contained in the English .
As early as 1870 the English Court in Re: Bradford Navigation Co.(1) held on a consideration of the provision of the English Act that no person had a right to be heard against a petition for winding up of a company except creditors and contributories.
It is no doubt true that this decision, still holds good and is considered to be good law, as will be evident from the comments in authoritative text books on the subject.
In Halsbury 's Laws of England (4th Edn.), Vol.
VII at p. 614, it has been laid down "Only the petitioners, the company, and creditors and contributories are entitled to appear on the petition; other parties have no right to be heard, and, even if the Court of first instance elects to hear them as amici curiea, they have no right of appeal.
" In Palmer 's Company Precedents (7th Edn), Part II, the following observations appear at p. 77: "Any creditor or shareholder may appear to support or oppose the petition.
But no one else can do so, even if he has an indirect interest in the continued existence of the company.
" On the basis of the decision in Re: Bradford Navigation Co. (supra), the following comments have been made at p. 546 in Buckley on the , 14th Edn.
I : "The only persons entitled to be heard are the company, the creditors and contributories.
The Court may, in its discretion hear other persons who have an interest in order to learn what public grounds there are in favour of, or in opposition to, the winding up but such persons can be heard only as amici curiae, and cannot appeal." Various legislations for the benefit and welfare of the employees have since been passed in England and the Company Act in England also did undergo various changes from time to time.
The employees of a company in England are affected in the same way as the employees of a company in India when an 997 order for winding up of the company is made.
It cannot be said that workers in England are not conscious of their status and position and of the important role they play in the proper functioning of a company and in England there are also the trade unions of the workers for defending, protecting and improving the conditions and rights of the workers.
Despite all these, the right of an employee or any trade union representing the workers to participate and be heard in a winding up petition is not recognised in England.
I have to observe that Mr. Ramamurthi, learned counsel appearing for one of the trade unions, has placed very strong reliance on the following observations of this Court in the case of Hind Overseas Private Limited vs Raghunath Prasad Jhunjhunwala and Ors.(1): "Although the Indian is modelled on the English , the Indian Law is developing on its own lines.
Our law is also making significant progress of its own as and when necessary.
Where the words used in both the Acts are identical, the English decisions may throw good light and reasons may be persuasive.
But as the Privy Council observed long ago in Ramanandi Kuer vs Kalawati Kuer(2).
It has often been pointed out by this Board that where there is a positive enactment of the Indian Legislature, the proper course is to examine the language of that statute and to ascertain its proper meaning uninfluenced by any consideration derived from the previous state of the law or of the English Law upon which it may have been founded.
If it was true in the twenties it is more apposite now that the background conditions and circumstances of the Indian society, the needs and requirements of our country call for a somewhat different treatment.
We will have to adjust and adapt, limit or extend, the principles derived 998 from English decisions, entitled as they are to great respect, suiting the conditions of our society and the country in general always, however, with one primary consideration in view that the general interests of the shareholders may not be readily sacrificed at the altar of squabbles of directors of powerful groups for power to manage the company.
" These observations, to my mind, are of no assistance in deciding the question involved in this appeal.
These observations were made in different context.
These observations, however, indicate that where the provisions of the Indian Act and the English Act are alike, the decisions of the English Courts throw good light and the reasons may be persuasive, it is no doubt true that the decisions of the English Courts do not have a binding effect and the proper course for this Court while considering or interpreting an enactment of the Indian Legislature is to examine the language of the Statute to ascertain its proper meaning unifluenced by any consideration derived from the provisions of the English Law upon which it may have been founded.
Principles of construction of a statute are well settled.
It is significant to note that no decision of any Court in India could be cited where the claim of an employee in his capacity as an employee to participate and be heard in a petition for winding up of the company as a matter of right has been accepted.
On the other hand, the settled legal position in this country so far has been that no employee could claim any such right.
It is interesting to note that though in this country also the provisions of the have undergone various changes from time to time and various enactments for the welfare of the workers have been passed from time to time, the Legislature in our country did not consider it proper or necessary to amend the provisions of the Indian to confer any such right on the workers.
I, however, wish to make it clear that although an employee of a company as an employee of a company cannot claim to appear and be heard in a petition for winding up of the company as a matter of right, yet in any appropriate case the Court in a winding up proceeding may require or permit any employee to appear at any stage of a winding up proceeding and hear him, if the Court be of the opinion that the employee or the employees should be heard in 999 the interests of administration of justice and for proper disposal of any matter.
It appears that in this very case, the Court at an earlier stage of the proceeding had, in fact, heard the employees and redressed their just grievance.
With these observations I agree with the order proposed by my learned brother Venkataramiah, J. H.L.C. Appeals allowed.
|
The respondents were two groups of shareholders of a private limited company which had a thousand persons under its employment.
A group of shareholders filed a petition for winding up the company under cls.
(e) and (f) of section 433 of the Indian along with applications for an interim injunction and for appointment of a provisional liquidator.
The Company Judge passed an order of injunction restraining the company from borrowing any moneys from banks, financial institutions or others without the prior permission of the court.
Three trade unions representing the employees of the company filed applications for being impleaded as respondents/interveners in the winding up petition claiming that the interests of the employees had been adversely affected by the interim order.
The Company Judge rejected these applications.
A Division Bench of the High Court turned down the appeal preferred by one of the unions and that union sought special leave to appeal against the order of the Division Bench while the other two unions sought special leave to appeal against the order of the Company Judge.
The Court granted special leave to all the three unions and permitted the Company Judge to pass orders on the application pending before him for appointment of a provisional liquidator with the direction that the liquidator shall not take any steps which would prejudicially affect the employees.
It was contended on behalf of the appellants that since an order winding up a company amounts to notice of termination of services of its employees under section 445(3) and since even an interim order freezing the resources of the company might affect the interest of the employees by making it difficult for the company to pay their wages, etc., it would be contrary to fair judicial procedure and violative of the rule audi alteram partem to deny the employees the right to be heard before any order prejudicially affecting their interests is made.
The 923 employees who contribute materially to the working of a company and enable it to effectively play its socio economic role are equal, if not more important, partners in the running of the company and they must be heard in a proceeding for winding up of the company.
It was further urged that under r.34 of the Companies (Court) Rules, 1959 the employees have a right to appear at the hearing of a winding up petition either to support or to oppose it.
On behalf of the respondents it was contended that the employees of a company have no locus standi in a winding up petition as the Act does not contain any provision conferring such a right on them; that since the Act is a self contained Code exhaustive in regard to all matters relating to a company, no such right could be spelt out in their favour outside the provisions of the Act that r. 34 of the Companies (Court) Rules, 1959 does not confer such a right on them and that, under the various provisions of the Act including sections 439 and 440, it is only the creditors and contributories and in certain specified contingencies, the Registrar and the Central Government, who are entitled to participate in the proceedings for winding up of a company.
It was further contended that in this case it was not even the employees, but the three trade unions, who had applied for being heard, and since the trade unions had no right to be heard, their applications had been rightly rejected.
Allowing the appeals, ^ HELD : By Majority : Per Bhagwati, Chinnappa Reddy and Baharul Islam, JJ.
(Venkataramiah and Amarendra Nath Sen, JJ.
dissenting): The workers of a company are entitled to appear at the hearing of the winding up petition whether to support or to oppose it.
They have a locus standi to appear and be heard both before the petition is admitted and an order for advertisement is made as also after the admission and advertisement of the petition until an order is made for winding up the company.
The workers also have a right of appeal against a winding up order.
But when a winding up order has become final, the workers ordinarily would not have any right to participate in any proceeding in the course of winding up, the company though there may be rare cases where in a proceeding in the course of winding up, the interests of the workers may be involved and in such a case it may be possible to contend that the workers must be heard before an order is made by the court.
Even in an application for appointment of a provisional liquidator the workers have a right to be heard if they so wish but neither the petitioner in the winding up petition nor the court is under any obligation to give notice of such application to the workers.
[956 A E] In the instant case the circumstance that the workers were not heard by the Company Judge before he passed the order appointing the provisional liquidator would not have the effect of vitiating the order but it would be open to the workers to apply to the court for vacating that order.
[956 F G] (i) The making of a winding up order on a petition for winding up would have an adverse consequence on the workers inasmuch as the continuance of their service would be seriously jeopardised and their right to work and earn 924 their livelihood would be disastrously imperilled.
It is an elementary principle of law that no order involving adverse civil consequences can be passed against any person without giving him an opportunity to be heard against the passing of such order.
If the audi alteram partem rule has been held to be applicable in a quasi judicial or even in an administrative proceeding, it would a fortiori apply in a judicial proceeding such as a petition for winding up of a company.
No system of law which is designed to promote justice through fair play in action can permit the court to make a winding up order which has the effect of bringing about termination of the services of the workers without giving them an opportunity of being heard against the making of such order.
Unless there is express provision in the Act which forbids the workers from appearing at the hearing, the workers must be held entitled to appear and be heard in the winding up petition.
[950 A E] State of Orissa vs Dr. Bina Pani, ; ; A.K. Kraipak vs Union of India, and Maneka Gandhi vs Union of India, [1978] 2 S.C.R. 621 referred to.
(ii) There is no provision in the Act which excludes the workers from appearing at the hearing of a winding up petition.
Merely because the right to apply for winding up a company is not given to them it does not follow as a necessary consequence that the workers have no right to appear and be heard in a winding up petition filed by one or more of the persons specified in section 439.
In fact, there would be no point in conferring that right on the workers since they cannot have any interest in demolishing the enterprise which is the source of their livelihood.
So also, the circumstance that the right to make applications or be consulted in the course of the winding up of a company is conferred under section 440 and other provisions of the Act only on the creditors and contributories does not in any way militate against the right of the workers to appear and be heard in the winding up petition.
Once the winding up order is made, the assets of the company have to be realised, the creditors to be paid and if there is any surplus it has to be distributed among the contributories and, therefore, at that stage, it is only the creditors and contributories who have an interest and that is why in the course of the winding up it is the creditors and contributories who have been given a voice.
Sections 440, 464, 466, 478, 517, 542, 543, 549, 556, 557 and 560 deal with a stage after the winding up has commenced.
These sections have nothing to do with the question whether the company should be wound up or not.
D F; 951 B; 951 C E; 949 A H] (iii) After the amendment of sections 397 and 398 of the Act by sections 10 and 11 of the Companies (Amendment) Act, 1963, the court, while deciding whether a company should be bound up, has to take into consideration not only the interest of the shareholders and editors but also public interest in the shape of the need of the community and the interest of employees.
It is therefore axiomatic that the workers must have an opportunity of being heard for projecting and safeguarding their interest before a winding up order in made.
[951 G: 952 E F] In the instant case, the Division Bench of the High Court, after conceding that the court had to take into consideration the interest of the workers, went wrong in holding that the workers had no locus standi to file an application for being heard in the winding up petition.
[952 G H; 953 A B] 925 Fertilizer Corporation Kamgar Union and Ors.
vs Union of India and Ors.
, ; , referred to.
Bhalchandra Dharmajee Makaji and Ors.
vs Alcock Ashdown and Co. Ltd. and Ors.
, , approved.
(iv) It is true that according to the statement of law contained in the leading text books on Company Law, it is only the Company, the creditors and the contributories who are entitled to appear in a winding up petition and no other persons have a right to be heard.
This statement of the law is based on a decision rendered by the English Courts over a hundred years ago when a company was regarded merely as a legal device brought into being as a result of a contractual arrangement between the shareholders for the purpose of carrying on trade or business and the workers were looked upon as no more than employees of the company working under a master and servant relationship and the interest of the public as consumers or otherwise was a totally irrelevant consideration.
It can have no validity in the present times when the entire concept of a company has changed.
[953 F H] In re.
Bradford Navigation Company [1870] 5 Ch.
A.C. 600, held inapplicable.
In re.
Edward Textiles Limited, , overruled.
(v) Our Constitution has shown profound concern for the workers and given them a pride of place in the new socio economic order envisaged in the Preamble and the Directive Principles of State Policy.
Article 43A states that the State shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings, establishments or other organisations engaged in any industry.
The constitutional mandate is therefore clear and undoubted that the management of the enterprise should not be left entirely in the hands of the suppliers of capital but the workers should also be entitled to participate in it.
In a socialist pattern of society the enterprise which is a centre of economic power should be controlled not only by capital but also by labour.
It cannot therefore be contended that the workers should have no voice in the determination of the question whether the enterprise should continue to run or be shut down under an order of the court.
The workers who have contributed to the building of the enterprise have every right to be heard when it is sought to demolish that centre of economic power.
[946 C; 947 D F] People 's Union for Democratic Rights vs Union of India and Ors.
(W.P. No. 8143 of 1981 decided on September 18, 1982) referred to.
(vi) It is not only the shareholders who have supplied capital who are interested in the enterprise which is being run by a company but the workers who supply labour are also equally, interested because what is produced by the enterprise is the result of labour as well as capital.
The owners of capital bear only limited financial risk and otherwise contribute nothing to production while labour contributes a major share of the product.
While the former invest only a part of their moneys the latter invest their sweat and toil; in fact, their life itself.
926 The workers therefore have a special place in a socialistic pattern of society.
They are no more vendors of toil; they are not a marketable commodity to be purchased by the owners of capital.
They are producers of wealth as much as capital; they supply labour without which capital would be impotent.
[945 G H: 946 A B] (vii) The concept of a company has undergone radical transformation in the last few decades.
The old nineteenth century view which regarded a company merely as a legal device adopted by shareholders for carrying on trade or business as proprietors has been discarded and a company is now looked upon as a socioeconomic institution wielding economic power and influencing the life of the people.
The view that a company is the property of the shareholders can no longer be regarded as valid.
Apart from capital and labour there are other factors which contribute to the production of national wealth; the financial institutions and depositors who provide the additional finance required for production and the consumers and the rest of the members of the community who are vitally interested in the product manufactured.
A company, according to the new socio economic thinking, is a social institution having duties and responsibilities towards the community in which it functions and one of its paramount objectives is to bring about maximisation of social welfare and common good.
This necessarily involves reorientation of thinking in regard to the duties and obligations of the company not only vis a vis the shareholders but also vis a vis the rest of the community affected by its operations such as workers, consumers and the Government representing the society.
[942 B; 943 A G; 944 C D] Chiranjit Lal Chowdhri vs Union of India, [1950] S C.R. 869, referred to.
Panchmahal Steel Ltd. vs Universal Steel Traders, approved.
per Chinnappa Reddy, J. (concurring) (i) Quite apart from section 445(3), it is plain that the future of the workers is at stake and their right to work is in jeopardy as a result of the presentation of the winding up petition.
The workers are so intimately tied up that their interest in the survival and the well being of the company is much more than the interest of any shareholder.
They cannot be denied a hearing when their very existence is under threat of extinction.
[957 D G] (ii) It is not correct to say that natural justice is exclusively a principle of administrative law.
It is first a universal principle and, therefore, a rule of administrative law.
Courts, even more than administrators, must observe natural justice.
[959 A C] (iii) The Act does not prohibit a hearing to the workers.
It does not provide for all situations.
The law "falls to be applied to a growing and changing subject matter".
The Company Judge must acknowledge the transformation which corporations are presently undergoing from capitalist contrivances into socialist instruments and recognize the reality of the workers interest.
The 927 working classes, all the world over, are demanding "workers ' control" and "industrial democracy".
They want the right to work to be secured.
Our Constitution has accepted the workers ' entitlement to control and it is one of the Directive Principles of State Policy.
It is in this context of changing norms and waxing values that the workers ' demand to be heard has to be judged.
[957 G H; 958 B C E F G] (iv) The duty to hear those asking to be heard is not dependent on the vesting of any right under the very statute in respect of which jurisdiction is being exercised by the Court but on any right whatever which may come under threat.
It is not the law that rights other than those created by a particular statute may be taken away in proceedings under that statute without affording a hearing to those desiring to be heard.
[959 D E] (v) It is not correct to say that once the workers are allowed to enter the company court, the flood gates will be opened, all and sundry will join in the fray and utter confusion will prevail.
The court is the master of the proceedings and the ultimate control is with the court.
Parties may not be impleaded for the mere asking.
The court may ask the reason why, if someone asks to be heard.
[960 B C] (vi) The contention that since workers are not allowed to intervene in a partition or dissolution of partnership they should also not be allowed to intervene in a winding up petition cannot be accepted.
There is no reason why workers may not be allowed, in appropriate cases to intervene in such actions to avert disaster and to promote welfare.
[960 D] (vii) There is good reason for holding that In re.
Bradford Navigation Company is not valid in the present times.
It was decided in the heydays of laissez faire at a time when individualism dominated every field and the public interest was but a slow runner.
Now the position is reversed.
In Britain itself Corporate law and labour law have changed considerably.
After nationalisation of certain important and crucial industries a considerable measure of workers ' control of management of industry has been achieved in that country.
One should rather look to the Constitution for guidance and inspiration while interpreting the laws.
After the 42nd Amendment, the Constitution is openly Socialist.
The Directive Principles of State Policy emphasize the role and interest of the workers.
article 43A contemplates workers ' participation in the management of the industry.
There are several provisions in the Act itself which take notice of the element of public interest.
There are other enactments like the Monopolies and Restrictive Trade Practices Act and the Industries Regulation and Development Act under whose provisions the activities of a company may be scrutinized in public interest.
There are legislations involving employment and welfare of labour to which the managements of the companies are subject.
The problem before the court must be considered in this context of ferment and development.
G H; 962 A B; 960 G H; 961 D F] In re.
Bradford Navigation Company, [1870] 5 Ch.
A.C. 600, held inapplicable.
Panchmahal Steel Ltd. vs Universal Steel Traders, approved.
928 per Baharul Islam, J. (concurring) The statement of law contained in the English authorities cited by counsel for respondents may be good law for England with altogether a different system of economy but it is not applicable in our country, particularly after the Constitution (42nd Amendment) Act, 1976, by which the "Socialist" and "Secular" concepts have been incorporated in the Preamble to our Constitution.
The workers ' right to be heard in a winding up proceeding has to be spelt out from the Preamble and articles 38 and 43 A of the Constitution and from the general principles of natural justice.
[990 D F] per Venkataramiah and Amarendra Nath Sen, JJ.
(dissenting) Under the existing law the workers or their unions may make any suggestions to the Court at any stage but they cannot claim to be impleaded as parties to the winding up petition as of right.
The privilege of making suggestions to the court in public interest is different from the right to be impleaded as a party with the concomitant right to enter into contest with the other parties and of making an order in appeal before higher courts.
The latter right has to be conferred expressly by the statute in any person who wishes to exercise it.
[979 D] (i) The principles of administrative law have not much relevance to the administration of the affairs of a company, the primary purpose of administrative law being the imposition of checks on the powers of government or its officers so that they may not either abuse their powers or go out of their legal bounds.
In particular, the proceedings relating to winding up by court are subject to the orders of higher courts in appeal and are not amenable to interference by superior courts as in the case of actions of government or its officers.
[967 H, 968 A B] (ii) The law on the question as to who can be heard as of right in a winding up proceeding is clear and is based on the decision of the English Court in In re.
Bradford Navigation Company.
The decision may be of the last century but there is hardly any justification to depart from it even now unless compelled by the statute to do so.[970 B D; 971 E] In re.
Bradford Navigation Company, [1870] 5 Ch.
A.C. 600, referred to.
Halsbury 's Laws of England (4th Ed.) Vol.
7 Para 1028 referred to.
(iii) That only the company, creditors and contributories (apart from the Central Government or the Registrar when they choose to intervene under the express provisions of the Act) are entitled to participate in the winding up proceedings is clear from sections 439, 447 and 557.
Sections 450(2), 466, 478(3), 517, 518, 542, 543, 546(1), 549(1) and 556 show that only the Company, the official liquidator, liquidator, creditors, contributories or the Registrar have a statutory right to participate as of right in the winding up proceedings.
The workers or their trade unions have not been given any such right.
[969 C D; E H; 973 A F] 929 In re.
Edward Textiles Ltd., approved.
(iv) Under section 433, a company may be wound up by the court on one or more of the following grounds : (a) if the company has, by special resolution, resolved that it may be wound up by court; (b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting; (c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year; (d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two; (e) if the company is unable to pay its debts; and (f) if the court is of opinion that it is just and equitable that the company should be wound up.
As regards the ground mentioned at (a), when a company has passed a special resolution that it may be wound up by the court, the employees and workers can have hardly any ground to object.
The position is the same when any of the defaults mentioned in (b) and (c) are committed by the company.
The officers and employees of the company also cannot get over the deficiency in the required number of members of a company referred to in (d) above.
When a company is unable to pay its debts and a creditor moves a petition for winding up under (e) above, he cannot be compelled to prove his claim not merely against the company but also against the officers and employees.
When there is a deadlock in the management of the company arising out of disputes amongst the directors or when some directors without any justification exclude some other directors from the management of the company and a petition for winding up is filed under (f), above, it would be unreasonable to expect the excluded directors to fight a case both against the directors who are responsible for their exclusion and also against the officers and employees who are neither creditors nor contributories but who may be supporting the contesting directors.
[968 H; 969 A B; 969 F H; 970 A B] In the instant case, it is seen from the grounds of objection filed by the trade unions that they are only interested in supporting the cause of one set of respondents against the other by making certain general submissions.
The petitioners in the Company Petition would be in a more disadvantageous position if they have to face the opposition of the trade unions also in addition to the respondents to that petition.
Such a situation should not be created by extending the area of controversy by a liberal interpretation of the provisions of law when there are no compelling reasons to do so.
[985 E G] (v) There are specific provisions in the Act and the Rules (sections 417 to 420, 530(1)(b) to (f) and 635 B and r. 152 read with Form No. 67) dealing with the rights of employees of a company.
The right to resist a winding up petition is not one such right.
[975 D E] (vi) It is because of some doubts that had been expressed earlier about the continuance of the employment of the employees of a company ordered to be compulsorily wound up that section 445(3) was enacted making it clear that the passing of the order of winding up amounts to a notice of discharge of the employees concerned.
Section 445(3) corresponds to the termination of service brought about by the abolition of a post under a Government or by the closure of a business, neither of which as the law stands today requires compliance with the principles of natural justice.
[975 B C] 930 (vii) It is true that public interest which may include within its scope interests of employees of a company has to be kept in view by the courts in exercising certain powers under the Act.
Sections 388 B, 394, 396, 397 and 408 do refer to the concept of public interest.
These provisions deal with the powers of the Central Government and the Court.
They do not, however, state that trade unions can as of right intervene in the proceedings arising under them.
[975 F H] Bhalchandra Dharmajee Makaji and Ors.
vs Alcock, Ashdown and Co. Ltd. and Ors., referred to.
In the instant case the High Court has passed necessary orders to protect the interests of the employees.
As these orders stand today, the workers can always approach the High Court by way of a company application for appropriate orders whenever they feel that their working conditions are adversely affected during the pendency of the proceedings.
It is not necessary that the workers or the trade unions should be impleaded as parties to the winding up petition enabling them to contest the same; their presence on record is not necessary for a complete and effectual adjudication of the petition.
The trade unions are, therefore, neither necessary nor proper parties to the winding up petition on the facts and in the circumstances of this case including the element of public interest involved in any liquidation proceeding.
[985 H; 986 H; 987 A C] (viii) In Fertilizer Corporation Kamgar Union (Regd) Sindri and Ors.
vs Union of India and Ors.
, [1981] 2 S.C.R. 52 the court was concerned with operations in a public sector company and the activities of the government.
The observations contained therein cannot have any relevance to a case involving the affairs of a company which is governed only by the express provisions of company law and other relevant statutes.
[982 C] (ix) As the law stands today, the workers in a factory owned by a company do not have any hand in the birth of a company, in its workingur ding its existence and also in its death by dissolution.
Workers ' participation in the affairs of a company or the ushering in of an industrial democracy is quite a laudable object.
That is the reason for enacting article 43 A. article 43 A clearly states that the State shall take steps by suitable legislation or in any other way to secure the participation of workers in the management of undertakings etc.
The High powered Expert Committee on Companies and MRTP Act, has made certain recommendations in this behalf in paragraphs 11.27 and 18.137 of its report and it is for the Parliament to take steps to implement them.
The legislature has not taken concrete steps in this regard.
The suggestions made by the committee emphasize that at present workers have no right to contest winding up proceedings.
It is significant that there is no recommendation made even in this report about the right of trade unions to contest winding up petitions.
The court cannot step in and introduce drastic amendments into the company law.
Many of the Directive Principles are still to be implemented by passing appropriate legislation.
This Court cannot compel the executive by issuing writs to implement the policy underlying them.
There are well recognized limitations on the power of the court making inroads into the legitimate domain of the legislature.
If the legislature exceeds its power, this Court steps in.
If the executive exceeds its power, 931 then also this court steps in.
If this court exceeds its power what can people do ? Should they be driven to seek an amendment of the law on every occasion ? The only proper solution is the observance of restraint by this court in its pronouncements so that they do not go beyond its own legitimate sphere.
It may be that the workers who are likely to be affected by the winding up need a larger protection.
That can be done only by legislative action.
This Court cannot make any order which will conflict with the existing law.
[982 G H; 983 A; 977 E F; 983 G; 983 B D; 989 C] (x) The proposition that law should not be static but should grow cannot be disputed.
But it should be the result of the exercise of legislative judgment, particularly when a departure from express provisions of a statute or an established practice is to be made.
A discussion involving a comprehensive view of all interests which are likely to be affected by any decision in such a matter is not possible before a court where only the parties to a case or their lawyers are heard.
[987 D F] (xi) It is not correct to say that there is no other remedy at all for workmen who are likely to be affected by the winding up order made by the court.
It is open to the workers or their trade unions to move the Central Government to take appropriate steps under the Industrial (Development and Regulation) Act, 1951 the provisions of which provide that where a company owning an industrial undertaking is being wound up by or under the supervision of the High Court and the business of such company is not being continued, the Central Government may investigate into the possibility of running or restarting the industrial undertaking, provide relief to it or take steps to ensure that the undertaking is sold as a running concern, or prepare a scheme of reconstruction of the company and send it to the trade unions of employees concerned inviting their suggestions and objections.
[976 A H; 977 A C] (xii) When once the right to contest a winding up petition is extended to workers either on the principle of equity or of administrative law, on the same principle it would logically follow that all others who may have dealings with the company such as commission agents, selling agents.
whose contracts with the company are going to be terminated by reason of its liquidation also have to be allowed to contest the proceedings.
Such a claim is not permissible.
[974 B] Ex parte Maclure, , referred to.
(xiii) It is no doubt true that the view of the High Court is also in conformity with the view prevailing in England.
That does not mean that the High Court has surrendered its judgment to a foreign practice because that is the very view which is being followed till now in the Indian Courts.
A foreign decision is either worthy of acceptance or not depending upon the reasons contained in it and not its origin or age.
There is no reason why we should not follow a well reasoned foreign decision unless it is opposed to our ethics, tradition and jurisprudence or otherwise unsuited to our conditions.
Moreover, it is difficult, even though it may not be impossible, to administer the company law as it is now in force in India without the aid of the principles laid down by some of the leading English cases.
[987 H: 988 A F] 932 Needle Industries (India) Ltd. and Ors.
vs Needle Industries Neway (India) Holding Ltd. and Ors., ; , referred to.
per Amarendra Nath Sen, J. (agreeing with Venkataramiah, J.) (i) If the right to participate in a winding up proceeding is to be judged from the view point of the interest of any party who may be prejudicially affected as a result of an order of winding up being made, it must logically follow that not only every employee of the company but also various other parties and persons who have trade relations or dealings with the company must necessarily be held to have the same right to be heard in such a proceeding; further, no suit for dissolution of a partnership can also be decided without impleading the employees of the firm and other parties having trade relations with the firm.
[992 A E; 991 H] (ii) A company can only be wound up in accordance with the provisions of the Act.
The right to have a company wound up is a right created by the statute.
The entire proceeding in relation to the winding up is governed by the provisions of the Act and the Rules.
The Act recognises that a company may go into liquidation without any intervention by the Court and also under the supervision of the court.
Where the company goes into liquidation without reference to court, the employees of the company who have to meet the same fate of losing their employment cannot have any voice or say in the procedure to be adopted for liquidation of the company.
[992 F G; 993 B C] (iii) The right of appearance and of being heard in a winding up proceeding has been conferred on persons whom the legislature considered to be necessary or proper parties for effective adjudication of the proceeding before the court.
If a company is commercially insolvent and is unable to pay its debts, it has necessarily to be wound up and the employees can have hardly anything to say in such a case for assisting the court in deciding the matter.
[993 E G] (iv) Although an employee cannot claim to appear and be heard in a winding up petition as a matter of right, the court may, in any appropriate case, require or permit any employee to appear at any stage of a winding up proceeding and hear him, if it is of the opinion that it is necessary in the interest of administration of justice and for proper disposal of any matter.
[998 H; 999 A] (v) The legislature has made suitable provisions in the Act for safeguarding what is considered to be in the interest of employees or in public interest.
The introduction of article 43A in the Constitution does not affect the position in any way.
Participation in the management does not by itself create any right to appear and be heard in a winding up petition.
Unless otherwise named personally as a party to such a petition, no person, merely on the ground that he happens to be in the management of the company, is entitled to appear and be heard in a winding up proceeding.
Persons in management may, if so authorised, appear and participate in such a proceeding on behalf of the company.
[995 D; 995 E H] 933 (vi) The Indian and the English Companies Acts contain similar provisions.
As early as in 1870 the English court held that no person had a right to be heard against a petition for winding up of a company except creditors and contributories.
That decision still holds good and is considered good law.
The English Act has undergone changes from time to time with the passing of various legislations for the benefit and welfare of employees.
An order winding up a company affects the employees in England in the same way as it does in India.
It cannot be said that workers in England are not conscious of the important role they play in the functioning of a company.
Despite all these, the right of an employee or any trade union representing the workers to participate and be heard in a winding up petition is not recognised in England.
Even in our country, though the provisions of the Act have undergone changes and various enactments for the welfare of the workers have been passed from time to time, the legislature has not considered it proper or necessary to amend the Act to confer any such right on the workers.
[996 A D; 996 H; 997 A B; 998 F] In re Bradford Navigation Company, [1870] 5 Ch.
A.C. 600, referred to.
Halsbury 's Laws of England (4th Ed.) Vol.
p. 614; Palmer 's Company Precedents (7th Ed.) Part II, p. 77 and Buckley on the , (14th Ed.) Vol.
I, p. 546 referred to.
Hind Overseas Private Ltd. vs Raghunath Prasad Jhunjhunwala and Ors.
, ; , distinguished.
By majority: Per Bhagwati, Chinnappa Reddy and Baharul Islam, JJ.
(Venkataramiah and Amarendra Nath Sen, JJ.
dissenting): Trade unions are competent to make applications before the Company Judge hearing a winding up petition on behalf of the workers represented by them.
[956 H] In this case the applications were made by the unions on behalf of the workmen represented by them and though made in the name of the Unions the applications were in reality and substance applications of the workmen who were members of each respective Union.
The controversy therefore really is not whether the unions of workmen are entitled to be heard in a winding up petition but whether the workmen have such right when a winding up petition is filed against a company.
[939 G H] per Venkataramiah and Amarendra Nath Sen, JJ.
(dissenting): In none of the English text books on Company Law there is any statement to the effect that trade unions of officers and employees of a company for whose winding up a petition is filed would be entitled as of right to be impleaded as parties and to contest the petition.
It is not also shown that any such right of a trade union is recognised by the Indian Law which more or less corresponds to English Law in this regard.
The decision of the Bombay High Court in In re Edward Textiles Ltd. is a clear authority for the proposition that at any rate trade unions have no locus standi to oppose a winding up petition.
We shall proceed to decide this case on the assumption that the application for impleading was made in fact on behalf of the workers and not by the trade unions.
[968 C F] 934 In re Edward Textiles Ltd., , referred to.
By the Full Court: Rule 34 of the Companies (Court) Rules, 1959 does not confer a right on the workers to appear at the hearing of a winding up petition.
[955 G; 973 G; 994 E F] per Bhagwati, Chinnappa Reddy and Baharul Islam, JJ.: The object and purpose of r. 34 is not to confer a right on anyone to appear at the hearing of the winding up petition but merely to provide for the procedure to be followed before a person who is otherwise entitled to appear in a winding up petition can be heard in support of or in opposition to the winding up petition.
[955 F] per Venkataramiah, J: The words "every person" in r. 34 of the Companies (Court) Rules, 1959 do not entitle a worker who is neither a shareholder nor a contributory to support or oppose a winding up petition under that rule because they refer only to a person who is otherwise entitled to do so under the Act.
An anomalous result that may flow from the acceptance of the case of the workers is that whereas in a winding up by court they may get an opportunity to contest the petition, the voluntary winding up proceedings or winding up under the supervision of the court would go on without any such contest although in all cases ultimately the workers will be discharged from service.
A construction which leads to such a discriminatory result should be avoided.
[973 G H; 974 A] per Amarendra Nath Sen, J.: Rule 34 only lays down the procedure to be followed by any person who intends to be heard at the hearing of a petition; it does not deal with the right of any person to appear at the hearing nor does it create any such right in any person.
Rule 9B in part III of the Rules makes specific provision in that behalf.
[994 E F]
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4569.txt
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'Appeals Nos.950 957, 1141 1143 and 1703 1712/1966.
Appeals by special leave from the judgement and order dated September 9, 1964 of the Assam and Nagaland High Court in Civil Rules Nos. 115, 128, 134, 136, 151, 161, 197 and 160 of 1963.
501 section V. Gupte, Solicitor General and Naunit Lal, for the appellant n C. As.
950 957 of 1966.
Naunit Lal, for appellants in C. As.
1141 1143 and 17031712 of 1966.
Hareshwar Goswami, K. Rajendra Chaudhury and K. R. Chau dhury, for respondent No. 1 in C. A. No. 950 of 1966.
K. R. Chaudhury and K. Rajendra Chaudhury, for respondent No. 1 in C. As.
Nos. 952 and 953 of 1966.
D. N. Mukherjee, for respondent No. 1 in C. A. No. 1142 and respondents Nos. 2 8, 10, 11, 13 18, 20 22, 24, 26 and 27 in C.A. No. 1143 of 1966.
Vineet Kumar, for respondent No. 2 in C. As.
950 957 of 1966.
The Judgment of the Court was delivered by Wanchoo, J.
These twenty one appeals (eleven by special leave and ten on certificates granted by the High Court) arise from the judgment of the Assam High Court and will be dealt with together, as they raise common questions.
We shall therefore set out the facts of one case relating to Kripanath Sarma in C.A. 950.
In the year 1947 the Assam Legislature passed an Act known as the Assam Primary Education Act, No. XIII of 1947, in order to provide for development of primary education in the State.
That Act was repealed by the Assam Basic Education Act, No. XXVI of 1954 (hereinafter referred to as the 1954 Act) which was passed to provide for development, expansion, management and control of basic education and with a view to introduce gradually universal, free and compulsory basic education in the State.
The 1954 Act provided for a State Advisory Board for Basic Education hereinafter referred to as the State Advisory Board).
It further made provision for the constitution of Regional Boards for Basic Education known as School Boards for each region in a district.
These School Boards were to control basic education in their regions and among the powers conferred on School Boards was the power to appoint and punish basic school teachers and attendance officers.
The scheme of the 1954 Act was therefore to entrust the conduct of basic education to School Boards.
The State Advisory Board was a central body whose function was to advise the State Government on matters relating to the control and direction of the activities of School Boards, the making of grants to School Boards, the method of recruitment and the conditions of service of basic school teachers and attendance officers, the training of teachers and the making of provision for such training, 502 the curriculum, duration, standard and syllabus of basic education, the preparation, publication and selection of text books, the medical inspection and treatment of children and any other matter which the State Advisory Board considered necessary for carrying out the purposes of that Act fully and effectively or on which the State Government might consult the State Advisory Board.
The 1954 Act was repealed by the Assam Elementary Education Act, No. XXX of 1962, (hereinafter referred to as the Act).
In the present appeals we are mainly concerned with the Act.
Section 3 of the Act provides for the constitution of a State Board for Elementary Education (hereinafter referred to as the State Board) and the State Board was made a corporate body with perpetual succession and a common seal.
The functions of the State Board were defined in section 10 which inter alia provides that the State Board shall lay down principles for allocation of grants for carrying out the purposes of the Act to local authorities, lay down procedure and conditions and hold such tests as may be necessary for recruitment of teachers of elementary schools on such terms and conditions of service as may be prescribed, lay down conditions for recognition, expansion and amalgamation of schools and openings of schools, and do any other act which it considers necessary for carrying out the purposes of the Act fully and effectively.
Under section 15 the State Board has to perform its duties and carry out its functions in accordance with such rules of business as may be prescribed.
The main change in the Act was that the School Boards func tioning under the 1954 Act were abolished and in their place the Deputy Inspectors of Schools, by virtue of their office, were made Assistant Secretaries of the State Board with the same headquarter and jurisdiction as they had as Deputy Inspectors of Schools.
They were inter alia authorised to operate the fund placed at their disposal by the State Board, to appoint their office staff, and ill particular by cl.
(iii) of section 14 (3) "to appoint teachers in recognised schools on the advice of a Committee constituted by the State Board under section 16 and transfer them as necessary and also grant such leave, other than casual leave, to them as may be admissible.
" Section 16 authorised the State Board to constitute Advisory Committees for the purpose of section 14 (3)(iii).
The Act was to come into force at once and it actually came into force from October 5, 1962.
Section 34(2) of the Act provides that as soon as it came into force all teachers and other employees of schools maintained by School Boards would be taken over by the State Board subject to the condition that the total emoluments of the employees at the time they 503 were taken over would be protected and their seniority would be maintained.
Section 38 provides that "all teachers existing or to be appointed in any Elementary School recognised under the Act, except in the case of the A utonomous Districts, shall be deemed to have been employed by the State Board.
" Section 54 is the rule making provision and gives power to the State Government to make rules for carrying out the purposes of the Act.
Section 55 provides for the repeal of the 1954 Act and sub section
(2) thereof provides for savings in the following terms: "Notwithstanding the repeal all authorities constituted, appointments, rules, orders or notifications made under the said Act shall be deemed to be constituted or made under this Act, and continue to function or to be in force until actions under the provisions of this Act are taken.
" It will be noticed that the saving clause provides that all authorities constituted under the 1954 Act shall be deemed to.
be constituted under the Act and shall continue to function until action under the provisions of the Act is taken.
It appears that by virtue of this provision the State Advisory Board continued even after October 5, 1962, as apparently it took sometime to constitute the State Board under the Act.
On November 20, 1962, the State Advisory Board passed a resolution, the relevant part of which is in these terms "Subject to the exceptions enumerated below, all teachers who are not matriculates or who have not passed the Teachers ' Test but who are working as teachers in.
schools shall be discharged with effect from 31 3 1963.
" It is unnecessary to refer to the exceptions, for we are not concerned with them.
in pursuance of this resolution, the Secretary to the State Advisory Board wrote a letter to all the Secretaries, School Boards, who were no other than the Deputy Inspectors of Schools and who became Assistant Secretaries of the State Board under section 14 of the Act.
This letter began with the following paragraph: "In inviting a reference to the subject indicated above (the subject indicated being removal of non T.T. and undermatric L.P. (Jr. Basic) Teachers and appointment of L.P. (Jr. Basic) Teachers"), "I have the honour to state that henceforward the following principle adopted by the State Advisory Board for Basic Education in its meeting held on 20th November, 6sup, Cl/66 4 504 1962 should be strictly followed.
In case of any doubt, this office may be approached for clarification." Then followed a copy of the resolution passed on November 20, 1962.
The letter also contained directions as to the policy with regard to appointments in future vacancies with which we are not concerned.
It concluded with the following paragraph: "Further, you are requested to submit a statement showing the names of non T.T. or under matric teachers, if any, aft er 31st March, 1963 stating the reasons for their retention.
In case there will be none after the said date, please submit a nil report.
This report should invariably reach this office by the 20th April 1963 at the latest.
" It appears that after March 31, 1963, action began to be taken on these instructions and a letter was issued to Kripanath Sarma on April 9, 1963 , the relevant part of which is in these terms: "Under Departmental Instructions regarding removal of under matric and non T.T. Teachers, service of Shri Kripanath Sarma, H.P. Janigog No. 1, L.P. School is hereby terminated with immediate effect.
" We may add that similar letters were addressed to other teachers who are respondents in the present appeal, though they were addressed in some cases in May 1963 and in one case as late as August 1963.
In a few cases letters of removal were addressed to some of the respondents in the present appeals as late as September 1963.
But it is remarkable that no letter was addressed to anyone before March 3 1, 1963 intimating that his service would be terminated from March 31, 1963.
On termination of the services of teachers who are now res pondents in these appeals before us, a number of writ petitions were filed in the High Court challenging the orders of termination.
The main point raised in the petitions was that the Secretary, School Board or the Assistant Secretary, State Board under whose signature the letters of termination of service were issued had no autho rity under the Act to terminate the services of the respondents.
It was also contended in the alternative that the respondent teachers were holding civil posts under the State and termination of their services was in violation of the provision of article 311(2) of the Constitution.
These petitions were opposed on behalf of the State and in some cases by the State Board.
Their case was that under section 14 (3)(iii) of the Act, the Deputy Inspectors of Schools who are the Assistant Secretaries of the State Board had the power to terminate the services of teachers.
In the alternative, it was contended that even if that was not so, the teachers were employees of the State 505 Board and therefore under the general law it was open to the State Board to terminate their services and that was what was done in effect.
Lastly, it was contended that the respondent teachers were not holding civil posts under the State and therefore article 311(2) of the Constitution did not apply in their case.
The High Court did not decide whether the respondent teachers were holding civil posts, whether article 311(2) of the Constitution applied to them, and whether there had been a breach of the provisions thereof.
It was, however, of opinion that section 14(3)(iii) did not give power to the Assistant Secretary (assuming that the letters terminating services of the respondents were issued under that provision) to terminate services of teachers who had been taken over under section 34(2) of the Act and who had not been appointed under section 14(3)(iii) by the Assistant Secretary.
It held therefore that the letters to the respondent teachers terminating their services whether issued in the name of Secretary, School Board or Assistant Secretary, State Board, were beyond his power as he could not terminate the services of these teachers.
As to the alternative argument namely, that these teachers were the employees of the State Board and it was the State Board which had terminated their services the High Court held that orders of termination could not be held valid as the State Board which is a statutory body had not acted under the provisions of the Act or the Rules under which a statutory body had to act.
In ' consequence the petitions were allowed and the orders terminating the services of the respondents were set aside.
Thereupon the appellants came to this Court in some cases on certificates obtained from the High Court and in others on special leave obtained from this Court.
The main contention before us on behalf of the appellants is two fold.
In the first place it is urged that under section 14(3)(iii) of the Act read with section 18 of the Assam General Clauses Act, No. 11 of 1915, (hereinafter referred to as the 1915 Act), the orders of termination passed by the Secretary, School Board or the Assistant Secretary, State Board were within his power.
In the alternative, it is urged that the respondents were in any case employees of the State Board under the Act and their services could be terminated by the State Board and that was in effect what was done and therefore the termination of their services was perfectly valid.
We shall first consider whether the Deputy Inspector of Schools,in his capacity as the Assistant Secretary of the State Board, could terminate the services of the respondents in view of section 14(3)(iii) of the Act read with section 18 of the 1915 Act.
We have already set out S.14(3)(iii).
It gives powers to appoint teachers to the Deputy Inspector of Schools as the Assistant Secretary of the State Board.
The argument, based on section 18 of the 1915 Act, is that the power to appoint includes the power to suspend or dismiss and therefore the 506 Assistant Secretary had the power to terminate the services of the respondents.
Section 18 of the 1915 Act is in these terms: "Where, by any Act, a power to make any appointment is conferred, then, unless a different intention appears, the authority having power to make the appointment shall also have power to suspend or dismiss any person appointed by it in exercise of that power.
The High Court referred to section 16 of the General Clauses Act, No. X of 1897, though strictly speaking it is section 18 of the 1915 Act which has to be applied.
The High Court was of the view that as appointments under section 14 by the Assistant Secretary had to be made on the advice of the Advisory Committee, the relevant provision in the General Clauses Act was of no avail to confer a power of dismissal on the Assistant Secretary under section 14(3)(iii), for that only applies unless a different intention appears.
The High Court thought that, as the Assistant Secretary did not have complete power to appoint teachers and could only do so on the advice of the Advisory Committee, there was a different intention in section 14(3)(iii), and that was that no dismissal could be made by the Assistant Secretary because he had in reality no complete power to appoint.
It is urged that this view of the High Court is incorrect.
Now as we read section 14(3)(iii) of the Act, it is obvious that the power of appointment is only in the Assistant Secretary, though that power has to be exercised on the advice of the Committee constituted under section 16 of the Act.
Even assuming that the recommendation of the Committee is necessary before appointment is made by the Assistant Secretary, the fact still remains that it is not the Committee which appoints, and the appointment is made only by the Assistant Secretary.
Even if the word "advice" in this provision is equated to the word "recommendation", it is still clear that the Committee only recommends and it is the Assistant Secretary who is the appointing authority on the recommendation of the Committee.
It may be that the Assistant Secretary cannot make the appointment without the advice or recommendation of the Committee.
Even so, in law, the appointing authority is only the Assistant Secretary, though this power is to be exercised on the advice or recommendation of the Committee.
In these circumstances, it cannot be said that there is any different intention appearing from the fact that the appointment has to be made on the recommendation or advice of the Committee.
The appointing authority would still be the Assistant Secretary and no one else, and there is no reason why, if he is the appointing authority, he cannot dismiss those appointed by him with the aid of section 18 of the 1915Act.
We cannot therefore agree with this view of the High Court.
But there is another difficulty in the present case which stands in.
the way of the Assistant Secretary having the power to dismiss 507 teachers who had been taken over under section 34(2) of the Act and thus had been appointed before the Act came into force.
Section 18 of the 1915 Act says that the authority having power to make an appointment shall have the power to suspend or dismiss any person appointed by it in exercise of that power.
Therefore the authority which appoint scan only dismiss such persons as have been appointed by it.
It cannot dismiss persons appointed by any other authority, for such persons have not been appointed by it in the exercise of its power as appointing authority.
In the present case, as we have already pointed out, the office of the Assistant Secretary of the State Board was created for the first time by the Act.
Therefore, all those persons who had been appointed before the Act came into force could not possibly be appointed by the Assistant Secretary, for there was no such authority in the earlier enactment repealed by the Act.
In the earlier Act the appointing authority was the School Board, for there was no Assistant Secretary of the State Advisory Board thereunder.
Therefore a person appointed before the Act came into force by the School Board cannot be said to have been appointed by the Assistant Secretary of the State Board or its predecessor the State Advisory Board, for there was no such authority in the earlier enactment.
In the circumstances we are of opinion that the Assistant Secretary could not dismiss teachers appointed before the Act came into force, for there was no such authority existing before that.
It is however urged that section 55 provides that all appointments under the 1954 Act shall be deemed to have been made under the Act and therefore the appointments under the 1954 Act by the School Boards must be deemed to have been made by the Assistant Secretary under section 14(3)(iii) of the Act.
We are of opinion that this contention cannot be accepted in view of the specific provision contained in the Act under section 34(2) and section 38.
Section 34(2) lays down that all teachers and other employees of schools maintained by the School Board would be taken over by the State Board.
This being a specific provision relating to teachers, we cannot take recourse to the general deeming provision contained in section 55(2) with respect to appointment of teachers and other employees of schools maintained by School Board.
Further section 38 specifically says that all teachers then existing would be deemed to have been employed by the State Board.
Reading therefore section 34(2) and section 38 together, the conclusion is inevitable that there is no occasion for the application of the deeming provision in section 55 in the case of these teachers.
In the face of these two specific provisions the general deeming provision contained in section 55(2) cannot be used to come to the conclusion that those teachers who were existing from before are to be deemed to have been appointed by the Assistant Secretary under section 14(3)(iii).
We are therefore in agreement with the High Court, though for slightly different reasons, that the services of the respondent teachers could not be terminated by the Assistant 508 Secretary of the State Board under section 14(3) (iii) of the Act read with s.18 of the 1915 Act.
This brings us to the alternative argument, namely, whether the respondents have been dismissed by the State Board.
There is no doubt that reading section 34(2) and section 38 together, the existing teachers were taken over by the State Board and became its employees.
Therefore, as their employer, the State Board would have power under the general law of master and servant to terminate their services unless that power was in any way circumscribed by statute.
The case of the respondents is not that that power of the State Board is so circumscribed (subject of course to the argument that these employees are protected under article 311 of the Constitution); their case is that the State Board never terminated their services, and that the orders of termination were passed only by the Assistant Secretary who had no authority to do so.
On the other hand, it is contended on behalf of the appellants that the services of the respondents were terminated by the State Board, and in this connection reliance is placed on the resolution of November 20, 1962 to which reference has already been made.
The question that arises therefore is whether the said resolution can be said to have terminated the service of anyone at all.
It certainly begins by saying that "all teachers who are not matriculates or who have not passed the Teachers ' Test but who are working as teachers in schools shall be discharged with effect from 31 3 1963".
It is not in dispute that at the time when this resolution was passed there was no list of teachers who were not matriculates or who had not passed the Teachers ' Test before the State Advisory Board .
So the resolution in our opinion cannot be read as amounting to terminating anyone 's service and must only be read as laying down principles which would have to be applied for dispensing with the services of certain teachers from March 31,1963 if conditions mentioned in the resolution are satisfied.
Legally, a resolution like this cannot be read as an order dismissing persons whose names were not even known to the authority passing it If this resolution really amounted to an order of discharge of particular persons, it should have been communicated to them, for without such communication it would be of no use for the purpose of terminating the services of anybody: (see Bachittar Singh vs The State of Punjab)(1).
It is not in dispute that this resolution was not communicated to any teacher as such and obviously it could not be communicated to any teacher who might even be governed by its terms for the State Advisory Board did not know to which particular teachers it might or might not apply.
It must therefore be read not as an order terminating the services of anybody but as an (1) [1962] 3 Supp.
S.C.R. 713.
509 indication of policy to be pursued for discharge of teachers as from March 31, 1963.
That this is so is clear from the letter of December, 15, 1962 to which reference has already been made.
This letter was addressed by the Secretary of the State Advisory Board to all the Secretaries of School Boards.
It incorporated the resolution of November 20, 1962, and treated it in the opening part of the letter as enunciating for the future the principles to be strictly followed in the matter of removal of non T.T. and under matric L.P. (Jr. Basic) teachers and appointment of L.P. (Jr. Basic) teachers.
The very fact that this letter was addressed to the Secretaries of all School Boards and not to any teacher shows that the resolution, of November 20, 1962 did not terminate anyone 's services but merely laid down principles to be followed for termination of services of certain teachers as from March 31, 1963, if the terms of the resolution applied.
We cannot therefore read either the resolution of November 20, 1962 or the letter of December 15, 1962 as an order terminating the services of any teacher who may be non T.T. or undermatric.
Further we may refer to the last paragraph of this letter which has a significance of its own.
It asks the Secretary, School Board to submit a statement showing the names of non T.T. teachers or under matric teachers, if any, after March 31, 1963, stating the reasons for their retention.
Clearly neither the resolution nor the letter was therefore terminating the services of anyone, for the last paragraph permitted the Secretaries of School Boards to retain, if necessary, non T.T. teachers or under matric teachers and required them to state the reasons why such retention took place after March 31, 1963.
If the resolution of November 20, 1962 or the letter of December 15, 1962 terminated the services of any teacher in terms, such a paragraph as the last paragraph in the letter of December 15, 1962 could not be there.
It is also remarkable that services of not a single teacher came to an end on March 31, 1963.The letters intimating to the teachers that their services were terminated began from April 9, 1963 and continued upto some date in September 1963.
If the resolution of November 1962 or the letter of December 15, 1962 had terminated the services of all teachers governed by it from March 31, 1963 we fail to understand how letters terminating their services were issued to various respondent teachers on various dates from April to September 1963.
It is perfectly clear therefore that the resolution did not terminate the services of any teacher; it merely laid down principles to be applied for terminating services of teachers from March 31, 1963.
We should have expected that if the State Advisory Board intended to terminate services of such teachers itself, the names of non T.T. or under matric teachers should have been called for by it before 510 March 31, 1963 and thereafter it should have passed a specific resolution terminating the services of those particular teachers and this resolution should have been communicated to the teachers concerned.
If that had been done, it could have been said that the State Board had terminated the services of the teachers concerned.
But we cannot possibly read the resolution or the letter as terminating the services of any teacher at all.
They merely laid down principles which had to be applied later on by somebody else who was expected to terminate the services of the teachers concerned.
Then it is urged that the resolution may be taken to amount to a delegation by the State Board of its authority to terminate services of teachers after laying down principles for such termination.
We consider that there is no force in this contention either.
The resolution has not a word to show that it was delegating the authority of the State Board for terminating services of teachers to any other authority, (assuming that such a delegation is possible).
There is nothing in the resolution to show even if it were to be treated as a delegation by the State Board to terminate services of these teachers, to which authority such delega tion was being made.
The fact that a copy of the resolution was addressed to the Secretaries, School Boards by the Secretary, State Board cannot mean that authority was being delegated to the Secretaries of School Boards, even assuming that School Boards could be functioning after October 5, 1962, when the Act makes no provision for any School Board.
If delegation was possible, that delegation had to be made by the State Board itself by a resolution and not by the Secretary of the State Board.
Nor can we accept the argument that the Assistant Secretaries were carrying out the instructions of the State Board contained in the letter of December 15, 1962, for we can only see in a case of this kind where services of teachers were terminated one of two possibilities, i.e. either the services had to be terminated by the State Board itself, which we have shown did not take place, or the services had to be terminated by somebody else to whom the authority of the State Board was delegated (if such a delegation was possible at all) and that also we have shown is not done.
We can see of no third way in which the resolution of November 20, 1962 could be implemented by a subordinate authority, unless that subordinate authority had power itself to terminate the services of teachers.
We have already held that the Assistant Secretary had no such authority under section 14(3)(iii) of the Act read with section 18 of the 1915 Act.
Therefore, the orders issued in the present case terminating the services of the respondent teachers were invalid, for they were not orders of the State Board terminating 511 the services of the respondents; they must be held to be orders of the Assistant Secretary who had no power to terminate the services of the respondents.
The appeals therefore fail and are hereby dismissed with costs, one hearing fee.
V.P.S. Appeals dismissed.
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The respondents were Elementary School teachers appointed under the Assam Basic Education Act, 1954.
The Act was repealed by the A, %am Elementary Education Act, 1962, which came into force on 5th October, 1962.
Under the 1962 Act a State Board was to be constituted, and in the place of the School Boards functioning under the 1954 Act, the Deputy Inspectors of Schools were made Assistant Secretaries of the State Board within their respective jurisdictions.
Section 34(2) provide,% that all the Elementary School teachers appointed under the 1954 Act would be taken over by the State Board and section 38 provides that the school teachers shall be deemed to have been employed by the State Board.
In November 1962, the State Advisory Board, which was cons tituted under the 1954 Act and which continued to function even after 5th October 1962 (because the State Board under the latter Act was not yet constituted) passed a resolution that all teachers who were not matriculates or who had not passed the Teachers ' test should be discharged with effect from 31st March 1963.
In December 1962, the Secretary of the Advisory Board communicated the resolution to the Assistant Secretaries and requested them to submit a statement, before 20th April 1963, showing the names of teachers, who were non matries or who had not passed the test and who were retained after 31st March 1963, stating the reasons for their retention.
Between April 1963 and September 1963, the Assistant Secretaries issued letters intimating the respondents that their services were terminated.
The respondents thereupon filed writ petitions in the High Court which were allowed.
In appeal to this Court.
HELD : (i) The Assistant Secretaries had no power to terminate the services of the respondents.
Under s.14(3)(iii) of the 1962 Act, the power of appointment of an elementary school teacher is in the Assistant Secretary though the power has to be exercised on the advice of the Committee constituted under section 16.
Even if the word "advice" is equated to "recommendation", the Committee only recommends and it is the Assistant Secretary who is the appointing authority.
Therefore, if be was the appointing authority he could dismiss those appointed by him with the aid of section 18 of the Assam General Clauses Act, 1915, under which, unless a different intention appears, the power to appoint includes the power to dismiss; and it cannot be said that a different intention appears from the fact that the appointment has to be made on the recommendation or advice of the Committee.
But the respondents, in fact had been appointed before the 1962 Act came into force and could not possibly have been appointed by the Assistance Secretaries, for there were no such authorities in the earlier enactment repealed by the 1962 Act.
Nor, can the appellant rely on section 500 55(2) of the 1962 Act, under which all appointments made under the 1954 Act shall be deemed to have been made under the 1962 Act, because,, the specific provisions contained in sections 34(2) and 38 lay down that the teachers would be taken over and deemed to have been employed by the State Board.
[506 E H; 507 B D; E H] (ii) The services of the respondents could have been terminated by the.
State Board, but the orders terminating the services in the present case were not those of the State Board but of the Assistant Secretaries and were therefore invalid.
The resolution of the State Advisory Board of November, 1962, and the letter of its Secretary, addressed to the Assistant Secretaries in December, 1962, were not orders terminating the services of any of the respondents because : (i) when the resolution was passed there was no list of teachers who were non matrics or who had not passed the Teachers ' test and legally, such a resolution could not be read as an order dismissing persons whose names were not even known to the authority passing the resolution; (ii) if it really amounted to an order of discharge it should have been communicated to the respondents for without such communication it was of no use; (iii) the services of not a single teacher were in fact terminated on 31st March 1963; (iv) the fact that the resolution was communicated to the Assistant Secretaries and not to any teacher shows that it merely laid down principles to be followed for the termination of services of certain teachers; (v) the letter permitted the Assistant Secretaries to retain, if necessary, teachers who were not matrics or who had not passed the test; and (vi) the letters terminating the services of the respondents were in fact issued after 31st March 1963.
[508 E H; 509 C, E, F] (iii) The resolution could not be taken to amount to a delegation to the Assistant Secretaries, by the State Board.
, of its authority to terminate the services of teachers after laying down principles for such termination.
The resolution ha , not a word to show that it was so delegating assuming that such a delegation was possible.
The fact that a copy of the resolution was addressed by the Secretary to the Assistant Secretaries could not mean that the authority was so delegated.
If delegation was possible, it could only be made by the State Board itself by a resolution and not by its Secretary.
[510 C E] (iv) It could not also be said that the Assistant Secretaries were only carrying out the instructions of the State Board contained in the letter of December 1962.
Either the services had to be terminated by the State Board itself, which was not done; or the services had to be terminated by the Assistant Secretaries to whom the authority was delegated (if such a ,delegation was possible), but that also was not done.
There was no third way in which the resolution of November 1962 could be implemented by the Assistant Secretaries unless they themselves bad the power to terminate the services; but in the instant case, they had no such authority.
15 1 0 F H]
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2148.txt
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Appeal No '.
741 of 1965.
Appeal by special leave from the judgment and decree dated April 1, 1963 of the Kerala High, CourT in Appeal Suit No. 480 of 1958.
Sarjoo Prasad and M. R. K. Pillai, for the appellant.
section V. Gupte and A. G. Pudissery, for the respondent.
The Judgment of the Court was delivered by Shah, J.
On October 9, 1950, a deed styled an "indenture of mortgage" was executed by the Cochin Chemicals and Refineries Ltd., hereinafter called 'the Company ' and N. C. John a Director of the Company, in favour of I the State of Travancore Cochin.
The relevant terms of the indenture were "In consideration of the sum of Rupees 2.5 lakhs (2,50,000) borrowed by the mortgagor No. I from the mortgagee (the receipt of which sum mortgagor No. 1 doth hereby admit and acknowledge) mortgagor No. I hereby covenants with the mortgagee as follows : (a) That the mortgagor No. I shall supply to the mortgagee 3,000 tons of groundnut cake at the rate of 600 tons per month within a period of five months commencing with the first day of November 1950 and ending with the last day of March 1951.
(b)That the account for the groundnut cakes supplied by mortgagor No. I to the mortgagee will be settled and adjusted against the loan amount of Rs. 2.5 lakhs: and interest thereon at 41 % per annum at the end of March 1951, the groundnut cakes supplied being valued at the average, price fixed by the Government during the period for purchases from other sources.
If 'on such adjustment any amount is found due to the mortgagor No. I the same will be paid by the mortgagee.
If how 558 ever it is found that the price of the groundnut cakes supplied is not sufficient to make up the loan amount with the interest thereon, mortgagor No. I shall pay the deficit amount to the,mortgagee immediately after the settlement of account.
(c)That mortgagor No. 1 shall deliver the groundnut cakes.
at any, depot in the Travancore Cochin State as may from time to time be required by the Director of Agriculture from the mortgagee free of transport charges.
" II."For the consideration aforesaid the mortgagor No. 1 hereby transfers by way of simple mortgage to the mortgagee" all the assets described in Sch. 1, "and mortgagor No. 2 hereby transfers by way of simple mortgage to the mortgagee" the assets described in Sch.
11, "to the intent that the said premises shall remain and be charged as security for the payment to the mortgagee of the said principal money, interest and costs in accordance with the Covenants herein before contained.
" III."The mortgagors hereby covenant with the mortgagee as follows: The indenture was executed by the Company and N. C. John.
and also by the Secretary to the Government of Travancore Cochin on behalf of His Highness the Rajpramukh.
A supplementary deed was executed on November 7, 1950, whereby it was agreed that Without prejudice to the right to recover the amount secured or any portion thereof as I stipulate , it shall also be recoverable under the Revenue Recovery Act for the time being in force or in other manner as the mortgagee may deem fit.
It is common ground that the amount acknowledged in the indenture was not advanced at the date of the indenture and was never advanced thereafter.
The Company arranged for the supply of goods agreed to be sold under the terms of paragraph I(a) and wrote from time to time letters to the appropriate officers of the State asking them to give instructions about the depots where the supplies were to be made.
In reply to the letter Ext.
H, the Assistant Director of Agriculture by Ext.
M, dated January 3, 1951, replied that "I write to invite your attention to my letter of even No. dated 12 12 1950 and to inform you that I shalt be placing orders for the supply of groundnut cake as soon as I get orders from Government providing the necessary funds for paying you the advance of Rs. 2 and 1 2 lakhs." 559 No instructions for supply were however given to the Company to supply the goods agreed to be purchased by the State.
The Company instituted on March 9, 1953, an action against the State of Travancore Cochin for a decree for Rs. 3,600/ being damages for failure to advance the loan of Rs. 2,50,000/ , and Rs. 1,68,600/ as damages for breach of contract to purchase 3,000 tons of groundnut cake under the indenture.
The Trial Court decreed the suit for Rs. 3,600/ being damages for failure.
to advance the loan, and for Rs. 1,23,000/ being damages for breach of contract to purchase groundnut cake.
In appeal to the High Court, the liability of the State to compensate the Company for failure to take delivery of the goods offered to be delivered alone was challenged.
The High Court confirmed the decree passed by the Trial Court negativing the contention raised on behalf of the State that the obligation to take delivery of the goods agreed to be purchased was contingent on the Government 's advancing Rs. 2,50,000/ .
The State has appealed to this Court with special leave.
Two questions arise for determination in this appeal (1) Whether under the terms of the indenture the State by refusing to advance the loan of Rs. 2,50,000/was absolved from the obligation to purchase the goods referred to in paragraph I(a) of the indenture; and (2) Whether in the circumstances of the case, the Company was not entitled to claim damages for breach by the State to purchase the goods agreed to be purchased.
The indenture incorporated two transactions: (1) a mortgage in favour of the State by the Company and N. C. John charging properties belonging to the two mortgagors for repayment of Rs. 2,50,0001/ ; and (2) the Company agreeing to sell and the State agreeing to purchase 3,000 tons of groundnut cake at the rate of 600 tons per month for five Months to be supplied at any of the depots in the Travancore Cochin State as may from time to time be designated, by.
the Director of Agriculture.
The indenture expressly recited that the amount of Rs. 2,50,000/ was ad vanced to the Company but the supplementary deed dated Nov ember 7, 1950, and the correspondence make it clear that though the money was recited to have been actually advanced, it was :pot in fact advanced but it was intended by the State Government to advance it.
For some reason where it is difficult to 'ascertain from the record, the State Government did not carry out its obligation to advance the money, after obtaining the indenture and the supplementary deed from the Company and its Director.
But even as late as January 3, 1951, as is clear from Ext.
M the Assistant Director of Agriculture reiterated the promise that the money 560 will be advanced and delivery of goods offered by the Company will be accepted.
Counsel for the State contended that so long as the loan was not advanced by the State, the mortgage was not in law effective, and the Company could not enforce the contract relating to groundnut cake agreed to be purchased by the State, for the obligation undertaken was in consideration of the loan of Rs., 2,50,000/ and arose only when the loan was advanced.
But the assumption, that if the State did not advance the loan which it had undertaken to advance, the indenture was ineffective, cannot be accepted.
There is no such express term in the deed, and none can be implied from the covenants and the surrounding circumstances.
A transaction of mortgage formally, executed does not become void or ineffective merely because the mortgagee fails to advance the amount of money undertaken to be advanced by him.
If without advancing the *mount agreed to be advanced, he sues on the title created under the deed of mortgage, the Court will not award him a decree for anything more than what he has But that is not to say that the mortgage is invalid In Tatia vs Babaji(1),Farran, C.J., observed : "I am not, however,. . .prepared to assent to the train of thought which puts conveyances of lands in the mofussil perfected by possession or registration where the consideration expressed in the conveyance to have been aid has not in act been paid in the same category as contracts void for want of consideration.
" Similar observations were made in Rashik Lal vs Ram Narain and others( '), where Karamat Hussain, J., observed at p. 276 ". .
Mortgage under the Transfer of Property Act is a transfer of an interest in the land mortgaged, and not a mere contract.
It therefore follows that no sooner a valid mortgage deed is registered, an interest in the property mortgaged, in the absence of any contract to the contrary, vests in the mortgagee notwithstanding the fact that the mortgage money has not been paid by the mortgagee to the ' mortgagor.
The mere non payment of the mortgage money cannot have the effect of rendering the mortgage invalid.
" Sulaiman, J., in Dip Narain Singh vs Nageshar Prasad and others(2) observed that once a. document transferring immovable property has been registered, the transaction passes out of the domain of a mere contract and into one of a conveyance.
Such a completed transaction is governed by the provisions of the (1) I.L.R. (3) I.L.R. 52 All.
(2) I.L.R. 34 All.
273, 561 Transfer of Property Act and so much of the Contract Act as is applicable thereto.
The argument that because the amount was not advanced by the State to the Company, the mortgage was void or ineffective therefore cannot be accepted.
Nor do the terms of the indenture justify the plea that the liability of the State to purchase 3,000 tons of groundnut cake from the Company was conditional upon the State advancing Rs. 2 50,000/ .
The two transactions incorporated in the indenture were undoubtedly inter related.
The price payable for the supplies of groundnut was to be adjusted towards the amount advanced or to be advanced by the State.
But by failing to advance the amount the State could not avoid liability to carry out the obligation to purchase the, goods contracted to be purchased.
Even if it be assumed that the indenture incorporated reciprocal promises the State to advance Rs. 2,50,000/ and the Company to deliver 3,000 tons of groundnut cake in the absence of any express provision to that effect the contract could not be terminated by the default of the State.
Breach of contract by one party does not automatically terminate the obligation under the contract : the injured party has the option either to treat the contract as still in existence, or to regard himself as discharged.
If he accepts the discharge of the contract by the other party, the contract is at an end.
If he does not accept the discharge, he may insist on performance see the judgment of the House of Lords White and Carter (Councils) Ltd. vs McGregor(1).
The case before the House was a Scottish case, but the law of Scotland is not different on the matter under consideration from the English law, and the Indian Contract Act closely follows the English Common Law in that matter.
It cannot, therefore, be said that by refusing to advance the loan which the State had undertaken to advance, the obligation to purchase groundnut cake from the Company came to an end.
Nor is there any substance in the, second contention that the State was by its default liable to compensate the Company only for loss arising out of its failure to advance the money, and not out of its failure to purchase the goods.
The State had undertaken to advance Rs. 2,50,000/ to the Company.
It had also undertaken to take delivery of 3,000 tons of groundnut cake offered by the Company under the terms of contract of sale.
These were two independent, though inter related transactions, and by committing a breach of its own, obligation to advance the sum of Rs. 2,50,000/the State did not absolve itself from liability for the breach arising from the refusal to take delivery of the goods offered.
The cause, of action arising out of the refusal to take delivery of the goods offered was independent of the cause of action arising out of the (1) [1962] A.C.413=[1961] 3 AII.
E.R.1178. 562 breach committed by the State in not advancing the loan.
The two causes of action were cumulative and not alternative.
There is therefore no warrant for the plea that by claiming damages for loss suffered by it as a result of the failure to advance the loan, the Company elected to give up its claim for damages for breach of the contract to take delivery of 3,000 tons ' of groundnut cake by the State.
The appeal fails and is dismissed with costs.
R.K.P.S. Appeal dismissed.
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A mortgage deed was executed by the respondent company and one of its directors in favour 'of the State of Kerala.
It was provided inter alia by the terms of the deed that in consideration of the State granting a loan of a sum of Rs. 2.5 lakhs to the company, the latter would supply to the State 3,000 tons of ground ,nut cake within a specified period and make deliveries in accordance with instructions to be given by the State, and the account for this supply will be adjusted against the loan amount and the interest thereon.
It was common ground however that the loan amount, though acknowledged in the mortgage deed as received by the company, was never in fact advanced by the State.
The respondent company arranged for the supply of goods as agreed and sought the necessary instructions for delivery, but, these we 're never given.
The company instituted a suit in March 1953 against the appellant State for damages for failure to, advance the loan amount and for breach of contract to purchase the groundnut cake.
The trial court decreased the suit for Rs. 36,000 being damages for failure to advance the loan and for Rs. 1,23,000 as damages for breach of contract.
An appeal to the High Court challenging the liability of the State to compensate the company for failure to take delivery of the goods was dismissed.
It was contended on behalf of the State that the obligation to take delivery of the goods agreed to be purchased was contingent upon the Government 's advancing the loan amount, so long as the amount was not advanced by the State, the mortgage was not in law effective and the Company could not enforce the contract relating to ground nut cake a. reed to be purchased by the State.
, HELD : Dismissing the appeal) A transaction of mortgage formally executed does not become void or ineffective merely because the mortgagee fails to advance the amount of money undertaken to be advanced by him.
Under the terms of the mortgage deed liability of the State to purchase the groundnut cake.
from the Company was not made conditional upon the State advancing the loan.
By failing to advance the loan amount the State could not avoid liability to carry out the obligation to purchase the goods contracted to be purchased.
Even if it be assumed that the indenture incorporated reciprocal promises, in the absence of any express provision to that effect the contract could not be terminated by the default of the State.
Breach of contract by one party does not automatically terminate the obligation under the contract : the injured party has the option either to treat the contract as still in existence, or to regard himself as discharged.
If he accepts the discharge of the contract by the other party, the contract is 557 at an end.
If he does not accept the discharge, he may insist on performance.
[560 C D; 561 D].
Tatia v Babaji, I.L.R. , Rashik Lal vs Ram Narain and Others, I.L.R. 34 All.
273, Dip Narain Singh V. Nageshar Prasad and Others, I.L.R. 52 All.
338, White and Carter (Councils) Ltd., vs Mc Gregor, ; referred to.
There was no substance in the, contention, that the State was by its default liable to, compensate the Company only for loss arising out of its failure to advance the money, and not out of its 'failure to purchase the goods.
The State 's undertakings to advance the loan and to take delivery of ground nut cake were two independent, though inter related transactions; and by committing a breach of its own obligation to advance the loan, the State did not absolve itself from liability for the breach arising from its refusal to take delivery of the goods offered [561 F H].
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2377.txt
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N: Criminal appeal No. 383 of 1991.
From the Judgment and Order dated 17.7.1990 of the Orissa High Court in Crl.
Rev. No. 382 of 1986.
Janaranjan Das for the Appellants.
A.K. Panda for the Respondent.
The Judgment of the Court was delivered by RAY, J.
Special leave granted.
Arguments heard.
This appeal by special leave is directed against the judgment and order dated July 17, 1990 passed by the High Court of Orissa in Criminal Revision No. 382 of 1986 dismissing the revision and affirming the concurrent findings of the courts below.
The prosecution case in short is that on 19th March, 1983 at about 7.p.m.
while the victim girl Srimanthini Samal (P.W. 2) was going to the house of Rama Samal, for study, the appellant Gagan informed her that the other appellant Prafulla and others had tied her tutor Rabi Babu in a nearby mango grove and her father was present there.
Having believed the version of the appellant Gagan, her agnatic uncle, she accompanied him and ultimately the appellants forcibly took her to a lonely house in hills where she was made to sit on a chair and the appellant Gagan forcibly thrushed in her mouth a liquor bottle and she was made to drink the liquor.
Thereafter both the appellants after having undressed her committed sexual assault on her.
Then she was brought to expression highway from where she was bodily lifted to a truck standing there and left her in the truck.
While the said truck was unloading materials near village Kurujanga, the victim girl stealthily left the truck and concealed her presence near a fence.
Subsequently, one Purusottam Mohanty rescued her and brought her to his house and then she was left to the house of one Niranjan Rout (P.W. 8), who was distantly related to her and took shelter till her father took her back on being 842 informed.
On the information lodged by her father (P.W. 1) in the police station of Badachana a case under sections 363 and 376 read with section 34 of the I.P.C. was registered against the accused appellants and after investigation the I.O. sent the victim girl as well as the appellants for medical examination and after completion of the investigation a charge sheet was submitted against the appellants to stand their trial.
The pleas of the appellants were a total denial of the prosecution case.
The appellant Prafulla took the plea the there was a marriage proposal of the victim girl with him but when it was disclosed that she had illicit relationship with her tutor Rabi, he refused to marry her for which this false case was foisted against him.
The plea of the other appellant Gagan as suggested to the informant, was that due to his previous enmity he was falsely implicated with the alleged crime.
The appellants were committed to the Court of Sessions.
The learned Assistant Sessions Judge after considering the evidences on record rejected the defence pleas, and found that the accused appellants committed rape on the victim girl without her consent relying on the provisions of Section 114(A) of the Evidence Act, and convicted them under section 376(2)(g) I.P.C. and sentenced each of the accused appellants to rigorous imprisonment for three years considering the young age of the appellants.
The Assistant Sessions Judge, however, acquitted the appellants from the charge under section 366 I.P.C. as the victim girl was more than 16 years of age at the time of occurrence.
Against this judgment and order of conviction the appellants filed an appeal being Criminal Appeal No. 153 of 1984 in the Court of First Additional Sessions Judge, Cuttack.
The Additional Sessions Judge considered the pleas of the appellants as well as duly scrutinized and appraised the evidences on record and found that the accused appellants committed rape on the victim girl without her consent and affirmed the conviction and sentence imposed by the Trial Court dismissing the appeal.
The appellants thereafter filed a Revision Case being Criminal Revision No. 382 of 1986 in the High Court of Orissa at Cuttack against the said judgment and order passed by the First Additional Sessions Judge, Cuttack.
The High Court duly considered and appraised the evidences of all the 9 P. Ws. including the deposition of the victim girl Srimanthni Samal (P.W. 2), the evidence of her father (P.W. 1) as well as the evidence of her mother (P.W. 3) and the evidences of the two Doctors (P.W. 4) and P.W. (5) and held that the accused persons committed rap on P.W. 2 forcibly without her con 843 sent.
It has been further found from the reliable evidences of P.Ws. 1 and 3 that as soon as P.W. 2 met her mother, P.W. 3, P.W. 2 told her mother about both the accused persons committing rape on her in a solitary house and also about the accused persons taking her away to the highway and keeping her in a truck, and corroborate the version of P.W. 2 regarding the occurrence of rape committed n her by both the accused persons.
It has been further observed that even though the P.Ws. 7 and 8 became hostile still then their evidences can be safely relied on as the same fully corroborates the version of P.W. 2 that on the relevant night the she, with the help of P.W. 7 had taken shelter in the house of P.W. 8 P.W. 6 who the driver of the truck No. ORG 4839 also stated in his evidence that the accused persons and two others took the victim girl and left her in the truck.
P.W. 6 further admitted that as he stopped the truck at village Ambura for unloading the boulders, the girl had stealthily left his truck and inspite of his searching her, he could not trace her.
This fully supports the version of P.W. 2 that she left the truck and concealed herself near a fence in darkness.
The learned Judge, therefore, held "Hence, on a careful scrutiny of the evidences of the hostile witnesses P.Ws. 6 and 8 it is seen that even they corroborate the evidence of the victim gild, P.W. 2 on material aspects of the prosecution case.
" In cases of rape, generally it is difficult to find any corroborative witnesses except the victim of the rape.
It has been observed by this Court in Bharwada Bhoginbhai Hirjibhai vs State of Gujarat, ; as follows: "Corroboration is not the sine qua non for a conviction in a rape case.
In the Indian setting, refusal to act on the testimony of a victim of sexual assault inthe absence of corroboration as a rule, is adding insult to injury.
Why should the evidence of the girl or the woman who complains of rape or sexual molestation be viewed with the aid of spectacles fitted with lenses tinged with doubt, disbelief or suspicion? To do so is to justify the charge of male chauvinism in a male dominated society.
A girl or a woman in the tradition bound non permissive society of India would be extremely reluctant even to admit that only incident which is likely to reflect on her chastity had ever occurred.
She would be conscious of the danger of being ostracized by the society or being looked down by the society including by her own family members, 844 relatives, friends, and neighbours.
She would face the risk of losing the love and respect of her own husband and near relatives, and of her matrimonial home and happiness being shattered.
If she is unmarried, she would apprehend that it would be difficult to secure an alliance with a suitable match from a respectable or an acceptable family.
In view of these and similar factors, the victims and their relatives are not too keen to bring the culprit to book.
And when in the face of these factors the crime is brought to light there is a built in assurance that the charge is genuine rather than fabricated.
" The above observation has been made by this Court relying on the earlier observations made by this Court in Rameshwar vs The State of Rajasthan, with regard to corroboration of girl 's testimony and version.
Vivian Bose, J, who spoke for the Court observed as follows: "The rule, which according to the case has hardened into one of law, is not that corroboration is essential before there can be a conviction but that the necessity of corroboration, as a matter of prudence, except where the circumstances make it safe to dispense with it, must be present to the mind of the judge, . . . .The only rule of law is that this rule of prudence must be present to the mind of the judge or the jury as the case may be and be understood and appreciated by him or them.
There is no rule of practice that there must, in very case, be corroboration before a conviction can be allowed to stand.
" In the instant appeal as had been stated hereinbefore that P.W. 2, the victim girl has clearly stated in her evidence that she had been taken to a solitary house in the hills by the appellant No. 1 Gagan Bihari Samal and there she was made to drink liquor and thereafter she was undressed and forcibly subjected to sexual intercourse by both the accused appellants one after the other.
He uncontroverted testimony has been accepted by all the courts and the courts concurrently found that she was raped without her consent.
It has been tried to be contended on behalf of the appellants that the amended section 114(A) was brought into the Evidence Act after the commission of the offence for which the appellants were charged and as such no assumption can be made on the basis of this provision.
This submission is of no avail in as much as it is clearly evident that the victim girl protested and 845 struggled while she was subjected to sexual assault forcibly by the accused persons and this clearly evinces absence of consent on part of the victim girl in such sexual intercourse apart from the legal presumption that follows from the provisions of Section 114(A) of the Evidence Act.
The learned counsel on behalf of the appellants further tried to argue on the basis of some minor discrepancies in the evidences of P.W. 2 that the prosecution case was a false one and it has been foisted on the appellants due to enmity and also due to accused Prafulla, one of the appellants, having disagreed to marry the victim girl.
The courts below have clearly found that the defence case was not at all sub stantiated by any cogent evidence.
So this contention is not at all tenable.
It is apropos to mention here the observation made by this Court in the case of State of Orissa vs Nakula Sahu and Ors., ; which are set out herein: "Although the revisional power of the High Court under Section 439 read with section 435 is as wide as the power of Court of appeal under Sec.
423 of the Code, it is now well settled that normally the jurisdiction of the High Court under Section 439 is to be exercised only in exceptional cases when there is a glaring defect in the procedure or there is a manifest error on a point of law which has consequently resulted in flagrant miscarriage of justice.
Inspite of the wide language of Section 435, the High Court is not excepted to act under Section 435 or Section 439 as if it is hearing an appeal.
" The High Court of Orissa referred to the said observation and rightly held that the High Court cannot be expected to re appraise the evidence as a court of appeal.
This Court hearing an appeal by special leave cannot consider and re appraise the evidences once again in the face of concurrent findings of facts arrived at by all the courts below.
For the reasons aforesaid we dismiss the appeal and uphold the conviction and sentence as found by the High Court.
R.P. Appeal dismissed.
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The appellants forcibly took P.W. 2 to a lonely place on 19.3.1983, made her to drink liquor and committed sexual assault on her.
Thereafter they left her in a truck.
While the said truck was unloading materials near a village, the victim stealthily left the truck and concealed herself near a fence.
P.W. 7 rescued her and took her to the house of P.W. 8, one of her distant relative, from where her father P.W. 1 took her back and lodged the report at the police station.
A case under sections 363 and 376 read with section 341.I.P.C. was registered against both the appellants.
After completion of the investigation, a charge sheet was submitted and the appellants were tried for the aforesaid offences.
The appellants denied the prosecution allegations and pleaded that they were falsely implicated because of refusal by one of them to marry the girl and previous enmity with the other.
The Assistant Sessions Judge rejected the defence pleas, and found that the appellants committed rape on the victim without her consent, and relying on section 114A of the Evidence Act, convicted the appellants under section 376(2)(g), I.P.C. and sentenced each of them to rigorous imprisonment for three 840 years.
Since the victim was more than 16 years of age, the appellants were acquitted of the charge under section 363, I.P.C. On dismissal of their appeal against the conviction and sentence by the Addl.
Session Judge, the appellants filed a revision application before the High Court.
The High Court duly considered and appraised the evidence and held that the appellants committed rape on PW 2 forcibly without her consent.
Ultimately the appellants came in appeal by special leave to this Court.
Dismissing the appeal, this Court, HELD: 1.
In cases of rape, generally it is difficult to find any corroborative witnesses except the victim of the rape.
However, corroboration is not the sine que non for a conviction in a rape case.
In the Indian setting, refusal to act on the testimony of a victim of sexual assault in the absence of corroboration as a rule, is adding insult to injury.
[843D F] Bharwada Bhoginbhai Hirjibhai vs State of Gujarat, ; and Rameshwar vs The State of Rajasthan, ; , relied on.
In the instant case, the victim girl clearly stated in her evidence that she had been taken to a solitary house in the hills by appellant No. 1 where she was made to drink liquor and thereafter she was undressed and forcibly subjected to sexual intercourse by both the accused appellants one after the other.
Her uncontroverted testimony was accepted by all the courts and they concurrently found that she had been raped without her consent.
[844F G] 3.
Apart from the legal presumption that flows from the provisions of section 114A of the Evidence Act, it is clearly evident in the instant case, that the victim girl protested and struggled while she was subjected to sexual assault forcibly by the accused persons and this clearly evinces absence of consent on her part in such sexual intercourse.
[844H; 845A] 4.
The High Court rightly held that it cannot be expected to re appraise the evidence as a court of appeal while exercising its revisional power under section 401 Cr.
P.C. [845E F] 841 State of Orissa vs Nakula Sahu and Ors., ; , relied on.
This Court hearing an appeal by special leave cannot consider and re appraise the evidence once again in the face of concurrent findings of facts arrived at by all the courts below.
[845F]
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6740.txt
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l Appeal No. 4803 of 1984 From the Judgment and Order dated 7.8.84 of the Allahabad High Court in Civil Misc.
Application No. 10968 of 84 & S.A. No. 2182.
K.K. Venugopal, R N. Karanjawala & Mrs. Manik Karanjawala for the appellant.
R.Parasaran, Attorney General of India.
K section Cooper, Csril section Shroff ', section section Shroff and section A. Shroff for the respondents.
Ashok Desai, Anil Diwan Pinaki Mishra and Praveen Kumar for respondent No. 1,.
Dr. Y. section Chitale, V.D. Mehta V. A. Bobde, S Swarup K.J. John for respondent No. 2.
Soli J. Sorabjee, Y. D. Mehta, S Swarup and K, J. John for respondents Nos.
Anil Dewan, R. Karanjawala, Mrs. Manik Karanjawala and Arun Jetly for the Intervenor.
Miss Bina Gupta for the Intervenor.
T section Krishnamurthi and Vineet Kumar for the Intervenor.
The Judgment of the Court was delivered by 862 VENKATARAMIAH, J.
This appeal by special leave is filed against the order dated August 7, 1984 passed by the High Court of Allahabad in Civil Misc.
Application No. 10968 of 1984 in Special Appeal No. 2 of 1982 on its file.
The dispute involved in this case relates to the validity of an extraordinary general meeting of the Swadeshi Polytex Ltd. (hereinafter referred to as 'the Polytex Company '), a company governed by the (hereinafter referred to as 'the Act ') held pursuant to a notice dated February 11, 1984 issued under section 169 of the Act by some of its members.
The controlling interest in the Swadeshi Cotton Mills Company Ltd. (hereinafter referred to as 'the Cotton Mills Company ') which is also governed by the Act was acquired by Mangturam Jaipuria and his family in 1946.
Sitaram Jaipuria is the adopted son of Mangturam Jaipuria.
After his adoption Mangturam Jaipuria got a natural son, Rajaram.
In or about the year 1964, Sitaram Jaipuria became the Chairman and Managing Director of the Cotton Mills Company.
In 1970, the Jaipuria family decided to promote another company and accordingly the Polytex Company was established.
In 1970, Rajaram became the Managing Director of the Cotton Mills Company and Sitaram continued as its Chairman.
Sitaram became the Chairman and Managing Director of the newly established Polytex Company in which the Cotton Mills Company had acquired 10 lakhs shares of Rs. 10 each.
From about 1975 76 on account of a very serious set back in its financial position the Cotton Mills Company could not meet the wage bill, the dues of the U.P. Electricity Board and several other monetary claims against it.
There were serious labour troubles in its factory and its work virtually became paralysed.
The total liability of the Cotton Mills Company was in the order of Rs. 2 34 crores in the year 1977.
On October 27, 1977, the Collector of Kanpur passed an order under section 128 A of the U.P. Land Revenue Act, 1901 (hereinafter referred to as 'the Land Revenue Act ' read with section 5 of the Uttar Pradesh Government Electrical Undertakings (Dues Recovery) Act, 1958 appointing a Receiver in respect of the Cotton Mills Company for a period of six months with various powers specified therein and in particular to seize I lakh of shares of the Polytex Company of the face value of Rs 10 lakhs held by the Cotton Mills Company and to pledge them in favour of the State Government of Uttar Pradesh against a loan for the purpose of meeting the dues payable to the employees of the Cotton Mills Company and he made a further order under section 149 of the Land Revenue Act read with section 5 of the U. P. Government Electrical Undertakings (Dues Recovery) Act, 1958 863 attaching the remaining 9 lakhs shares of the Polytex Company held by the Cotton Mills Company and empowering the receiver to seize them Both the order appointing the Receiver and the order attaching 9 lakhs shares were incorporated in the same document, the relevant part of which read thus: ORDER "Whereas electricity dues are payable by M/s Swadeshi Cotton Mills Co. Ltd., Kanpur, to the U.P. State Electricity Board and recovery certificates for the amount enumerated below have been received for realisation of the dues above mentioned from the said consumer: Recovery certificates dated 29.9.76, 31.12.76, 16 12.76, 29.12.76, 16.7.76, 17.9.76 and 3.10.77 1,06,22,423.17 Less amount paid 19,00,000.00 Balance 87,22,423.17 Add: Collection charges 10,62,242.31 TOTAL RECOVERABLE 97,84,665.48 And whereas, for the expeditious recovery of the dues outstanding as above, without affecting adversely the running of the mills, it is just and proper that a Receiver be appointed over the mills at Kanpur, belonging to M/s Swadeshi Cotton Mills Co. Ltd. Now, therefore, I, K.K. Baksi, Collector, Kanpur, in exercise of the power under sub section (1) of section 182 A of U.P. Land Revenue Act of 1901 read with section 5 of U.P. Government Electrical Undertakings (Dues Recovery) Act, 1958, do hereby appoint Shri L.N. Batra, A.D.M. Kanpur as Receiver of the said mills belonging to M/s Swadeshi Cotton Mills Co. Ltd., for a period of six months with immediate effect and direct that the Receiver shall exercise the following powers: 1.
The Receiver shall exercise supervision over the sales of products of the said mills and the disbursement of receipts from day to day.
That the receiver shall ensure that the receipts of the said mills are, after the payment of labour dues and 864 other essentials for the running of the Mill, appropriated towards recoverable arrears against M/s Swadeshi Cotton Mills Co. Ltd. as Land Revenue.
That the receiver shall, if necessary, for the running of the said mills borrow money from State Government or other financial institutions and other appropriate arrangement in this behalf for the repayment of the amount and the recovery thereof as arrears of land revenue.
That the Receiver shall seize the shares held by M/s. Swadeshi Cotton Mills Co. Ltd., of M/s. Swadeshi Polytex Ltd.
Of the face value of Rs. 10 lacs (Ten lacs) and shall be competent to pledge, the same by way of security for the borrowings referred to above.
That the Receiver shall be competent also to make payment to the Punjab National Bank against the guarantee dated 16.12.1976 and relieve the State Government of its liabilities thereunder correspondingly.
That in the event of Guarantee furnished by the State Government in favour of Punjab National Bank dated.
16.12.76.
being invoked, the Receiver shall be competent to make the payment to the State Government against the liability accruing therefrom 7.
That the Receiver shall have access to all books of accounts.
ledger, cash books, Stock books and all other documents kept or maintained by M/s Swadeshi Cotton Mills Co. Ltd. in course of business.
That the Receiver shall be competent for the reasons to be recorded also to put a restraint against any transaction being entered into by M/s. Swadeshi Cotton Mills Co. Ltd., involving the business and assets of the mills and which are not in the interest thereof or may be detrimental to the same in his opinion.
That the Receiver shall have all powers incidental or ancillary for Carrying out of the functions and the powers referred to above.
That subject to the above and to any directions that I may, hereafter issue from time to time,the 865 present management of the said mills shall continue to run A the mill and business.
In view of the urgency the order is being made expert with the direction, however, that a notice to show cause shall issue to M/s. Swadeshi Cotton Mills Company Ltd. for November 15, 1977.
And further, in exercise of the power under section 149 of U.P. Land Revenue Act 1901 read with section 5 of U.P. Government Electrical Undertakings (Dues Recovery) Act of 1958, I hereby direct attachment and sale of shares held by M/s. Swadeshi Cotton Mills Co. Ltd. in M/s. Swadeshi Polytex of the face value of Rs. 90 lacs (Ninety lacs) and hereby empower the Receiver to seize the same.
Sd/ K.K. Baksi Dated : Kanpur Collector, kanpur October 27, 1977.
" On the same date i.e. On October 27, 1977 the Receiver pledged 1 lakh of shares as per the order of the Collector in favour of the Government of Uttar Pradesh against a loan of Rs. 13.5 Lakhs.
i he Receiver also took possession of 9 Lakhs shares as per the order made under section 149 of the Land Revenue Act.
Subsequently the Receiver pledged on November 9, 1977, 1 lakh shares out of the above 9 lakhs shares in favour of the Government of Utter Pradesh against a loan of Rs. 15 lakhs and on January 4, 1977, 1.5 lakhs shares against a further loan Thus out of the 10 lakhs shares of the Polytex Company of the face value of Rs. 1 crore held by the Cotton Mills Company, 3.5 Lakhs shares stood pledged in favour of the Government of Uttar Pradesh and the remaining 6.5 lakhs shares of the face value of Rs. 65 lakhs remained with the Receiver.
The events which have led to this appeal are, however, these: In the year 1976, the Cotton Mills Company filed a petition under sections 397 and 398 of the Act against the Polytex Company alleging oppression and mismanagement of the Polytex Company by Sitaram Jaipuria and other directors of the Polytex Company in Company Petition No. 20 of 1976 on the file of the Allahabad High Court.
That petition was dismissed by the Company Judge of the High Court on April 19, 1982.
Against his decision an appeal was filed by the Cotton Mills Company in August, 1982 in Special Appeal No. 2 866 of 1982 before the Division Bench of the High Court.
That appeal is still pending.
On February 11, 1981, the Cotton Mills Company and four others, namely, Rajaram Jaipuria, Mahabir Prasad Dalmia, Siyaram Sharma and K.B. Agarwal who together held 10, 01, 950 shares of the value of Rs. 10 each sent a notice to the Polytex Company which was received by it on February 15, 1984 under section 169 of the Act requiring the Board of Directors of the Polytex Company to call an extraordinary general meeting of the Polytex Company to consider and, if thought fit, to pass with or without modification the following as ordinary resolutions: "1. "RESOLVED that the appointment of Shri Sitaram Jaipuria as Managing Director of Swadeshi Polytex Ltd., be and is hereby terminated prior to the expiry of his term, in exercise of the powers conferred by Article 110 of the Articles of Association of the Company.
" 2. "RESOLVED further that Shri Sitaram Jaipuria be and is hereby removed from the office of Director and consequently from the office of the Managing Director of the Swadeshi Polytex Ltd." 3. "RESOLVED further that resolution passed at the 13th Annual General Meeting of Swadeshi Polytex Ltd. in respect of item 7 "Special Business" of the Notice dated 31st January, 1983 of the said 13th Annual General Meeting for the remuneration of Shri Sitaram Jaipuria as Managing Director be and is hereby rescinded".
4. "RESOLVED that Shri Ashok Jaipuria be and is hereby removed from the office of Director of Swadeshi Polytex Ltd." 5. "RESOLVED that in the vacancy caused by the a removal of Shri Ashok Jaipuria, Shri Sitaram Singhania, be and is hereby appointed as a Director of Swadeshi Polytex Ltd. and in respect of whose appointment special notices have been received from some members indicating their intention to appoint Shri Sitaram Singhania as a Director of the Company." 867 6. "RESOLVED that Shri B.M. Kaul be and is hereby removed from the office of Director of Swadeshi Polytex Limited.
" 7. "RESOLVED that in the vacancy caused by the removal of Shri B.M. Kaul, Dr. Rajaram Jaipuria be and is hereby appointed as a Director of Swadeshi Polytex Ltd. and in respect of whose appointment special notices have been received from some members indicating their intention to appoint Dr. Rajaram Jaipuria as a Director of the Company.
" 8. "RESOLVED that Shri P.B. Menon be and is here removed from the office of Director of Swadeshi Polytex Ltd." 9. "RESOLVED that in the vacancy caused by the removal of Shri P.B. Menon, Shri R D. Thapar, be and is hereby appointed as a Director of Swadeshi Polytex Ltd., and in respect of whose appointment special notices have been received from some members indicating their intention to appoint Shri D.R. Thapar as a Director of the Company." " The requisitionists of the meeting also asked the Polytex Company to treat the said notice as a special notice under section 284 (2) and (5) read with section 190 of the Act for appointment of Sitaram Singhania, Rajaram Jaipuria and R.D. Thapar in place of Ashok Jaipuria, B.M. Kaul (who was also the Chairman of the Cotton Mills Company) and P.B. Menon respectively as directors of the Polytex Company.
They enclosed an explanatory statement as required by section 173 of the Act to the notice containing reasons for moving the aforeaid resolutions.
On receipt of the notice, an emergent meeting of the Directors of the Polytex Company was held on February 23, 1984 to consider the above said notice issued under section 169 of the Act.
the following is the material part of the minutes of the said meeting: "REQUISITION NOTICE" The Board was informed that a notice had been received at the Registered Office of the Company on 15th February 1984 from Swadeshi Cotton Mills Co. Ltd. 868 (SCM) and four other shareholders requestioning an Extraordinary General Meeting of the Company under Section 169 of the .
The requisition notice received from SCM was read before the Board.
The Board considered the motives behind the requisition and took serious note of the false and baseless allegations made in the explanatory note enclosed to the notice of requisition.
The Secretary pointed out few technical defects in the requisition notice.
The draft notice and the explanatory statement was placed before the meeting.
The same was perused and discussed and the following resolutions were passed: "RESOLVED that an Extraordinary General Meeting of the Company, pursuant to the requisition received by the Company on 15th February, 1984 under Section 169 of the from Swadeshi Cotton Mills Co. Ltd. & others be held at the Registered Office of the Company on Wednesday, the 28th March 1984 at 10.30 A.M." "RESOLVED further that the Secretary be and is hereby authorised to issue notice for convening the aforesaid meeting, as per draft placed before the Board and initialed by the Chairman for the purposes of indentification and to take such other steps as may be required in this regard.
" The Board was of the view that the financial institutions should be informed of this development and the directors who wish to make their representation to the shareholders may be requested to do so.
The Secretory was directed to take necessary steps in this regard.
" The Board of Directors also prepared and circulated an explanatory statement pursuant to section 173 of the Act along with the notice issued to the shareholders calling the extraordinary general meeting to be held on March 28, 1984.
The requisitionists of the meeting filed an application before the Division Bench in special Appeal No. 2 of 1982 for appointing a Chairman of the meeting.
section Jagannathan who was a member of the Board of Directors as the nominee of I.F.C.I. was appointed as the chairman of the meeting by the Division Bench on March 23, 1984.
The meeting was, however, adjour.
869 ned as a shareholder had obtained an order of temporary injunction A restraining the holding of the meeting in a suit filed by him at the court of the Munsif,Alipore (West Bengal).
When the requistionists applied to the High Court of Allahabad to fix a fresh date of the meeting, the High Court declined to do so by its order dated May 22, 1984 because the temporary injunction order had been issued by a court not subordinate to it.
It appears that another shareholder applied for injunction in a suit filed in the Civil Judge 's court at Gwalior and a third shareholder moved the City Civil Court, Madras for a similar relief.
Then the requisitionists filed two special Leave Petitions before this Court against the order of the Allahabad High Court passed the following order on the said petitions which were numbered as Civil Appeals Nos.
2597 98 of 1984: "Special league granted.
The High Court of Allahabad shall make a fresh order directing the holding of the meeting of the Company and that meeting shall be held in accordance with the order of the High Court notwithstanding any order of injunction etc.
issued by any other court or authority in India or to be issued hereafter.
If any person has any grievance about the holding of the meeting he shall approach the High Court of Allahabad for appropriate directions.
If the requisitionists or the Company wish to held the meeting early they may approach the vacation Judge of the High Court of Allahabad who has all the powers of the Company Judge to make fresh orders.
The appeals are disposed of accordingly." Again on July 4, 1984 a further order was passed by this Court as follows: "Mr. Sorabjee and Mr. Mridul state that the extra ordinary general meeting may be called on any day to be fixed by the High Court in the second week of August, 1984.
They also state that the venue of the meeting shall be determined by the Chairman, Shri Jagannathan, appointed by the High Court.
No further orders are necessary on prayer b and c in the application dated 25th June, 19 i l made before the Allahabad High Court by the petitioner.
" Accordingly the meeting W3S fixed to be held on August 14, 1984.
Since there was a motion for the adjournment of the meeting 870 this Court was again approached by the parties by an application for a further direction which was disposed of on September 4, 1984.
In the meanwhile the appellant No. I Balkrishan Gupta had filed an application before the High Court of Allahabad in Special Appeal No. 2 of 1982 questioning the right of the requisitionists issue notice under section 169 of the Act to call the extraordinary general meeting.
His contention was that since a Receiver had been appointed by the Collector in respect of the shares held by the Cotton Mills Company and they had also been attached, the shares held by the Cotton Mills Company could not be taken into consideration for determining the required qualification to issue the notice under section 169 of the Act requisitioning the extraordinary general meeting and that if those shares were omitted from consideration then the shares held by the other requisitionists would not be sufficient to issue the said notice.
That application was dismissed by the High Court by its order dated August 7, 1984.
This appeal by special leave is filed against the said order of the High Court.
In this appeal this Court passed the following order on September 14, 1984: "All the learned counsel for the parties in this petition agree that the meeting which is now adjourned to 24.9.84 should be held on that day and the agenda of the meeting should be discussed and voted upon.
We make an order accordingly.
The result of the voting shall be reported to this Court by the Chairman within one week after it is ascertained The resolutions passed at the meeting shall not come into effect until further orders by this Court.
The matter may be listed in the third week of October, 1984.
" After the report submitted by the Chairman of the meeting was received by this Court, this Court passed a further order on October, 12, 1984 which reads as follows: "The report of the Chairman of the extraordinary general meeting which has been submitted to this Court in a sealed cover is opened and perused by the Court.
The report states that all the resolutions other than the resolution for adjournment have been lost.
The photostat copies of the report along with the enclosures may be made avail able to the parties at their expense.
List the matter on 29.10.1984 before this Bench.
" After the above order was passed, the Industrial Development Bank of India and the Industrial Finance Corporation of India WHO 871 were aggrieved by the result of the counting of votes given on the taking of poll at the meeting filed applications before this Court questioning the correctness of ' the report of the Chairman as regards the result of the meeting They contended that the Chairman had wrongly rejected the votes cast on their behalf and if these votes had been taken into consideration the resolutions would have been duly passed.
Some shareholders who were opposed of the removal of the sitting Directors also filed an application for being impleaded.
All these applications were allowed on November 19, 1984 and all parties agreed that the validity of the meeting and of its result reported to the court should be decided by this Court During the hearing a writ petition filed in the High Court of Bombay was also withdrawn to this Court for being heard along with these cases.
At the conclusion of the hearing of the above cases, the parties filed a compromise petition requesting the Court to make an order in terms thereof.
On the basis of the said compromise the Court passed an order on February 1, 1985, the material part of which reads thus: 1.
The Board of Directors of Swadeshi Polytex Ltd. (hereinafter referred to as 'SPL ') shall be re constituted pending the holding of the next Annual General Meeting of SPL as under: (a) Four nominees of Financial Institutions (including one to be selected and communicated by IDBI/ IFCI to SPL) including the representative of the U.P. State Industrial Development Corporation.
(b) Four nominees of Shri Sitaram Jaipuria (herein after referred to as 'SRJ ') including SRJ.
(c) Four nominees of Dr. Rajaram Jaipuria(herein after referred to as 'RRJ ' ') including RRJ.
All nominations under sub clauses (b) and (c) above shall be made by February 9, 1985.
Nominations under sub clause (a) (except the nominee of the U. P. State Industrial Corporation) shall be made within ten days of the date of this order.
The re constituted Board shall start functioning from February I 1, 1985.
The Secretary of SPL is directed to convene the re constituted Board meeting within 15 days of the order.
872 2(a) SRJ and RRJ shall designate one nominee each out of their respective nominees directors as Executive Directors.
The said Executive Directors shall jointly carry on the management of SPL and will have all the powers of the Managing Director and control of finance.
If any difference of opinion arises it shall be referred to the Board of Directors.
2 (b) All committees of the Board shall stand dissolved.
SRJ shall continue as the Managing Director of the Company and he voluntarily undertakes not to exercise any powers or functions of the Managing Director till his re election at the next Annual General Meeting of SPL.
SRJ will continue to be the Chairman of the Company and as such will preside over the Board meetings of SPL.
He voluntarily undertakes not to have any second or casting vote.
All minutes of the Board meetings shall be prepared by a nominee of the Financial Institutions and shall be signed by the Chairman, 6.
The next Annual General Meeting of the SPL shall be called and held on May 15, 1985.
Th, Chairman of the said Annual General Meeting shall be appointed by this Court.
All the Members of the re constituted Board appointed pursuant to clause 1 above (excluding nominees mentioned in clause 1 (a) ) including non rotational Directors i. e. SRJ and/or Shri F. R. Beshania shall resign and a new Board shall be elected at the said Annual General Meeting.
All shareholders of SPL (including SRJ and RRJ shall be entitled to propose names of any persons for appointment as Directors of SPL at the said Annual General Meeting.
Members of the re constituted Board may if they so desire seek re election at the said Annual General Meeting.
All pending matters before this Court including the Transfer Case No. I of 1985 and all Civil Misc.
Petitions in Civil Appeal No. 4803 of 1984 save and except Civil 873 Appeal No. 4803 of 1984 (Balkrishan Gupta & Ors.
vs Swadeshi Polytex Ltd & Ors.) shall stand withdrawn and all questions raised in all such withdrawn proceedings are expressly left open.
All allegations against the Financial Institutions, the Chairman of the IDBI and the Government in Transfer Case No. 1 of 1985 and Civil Misc.
Petitions Nos.
39900 of 1984 and 340 of 1985 shall stand withdrawn.
Votes cast by the Financial Institutions at the next Annual General Meeting of SPL to be held on May 15, 1985 shall not be questioned by the parties hereto an any ground.
The Civil Appeal No. 4803 of 1984 (Balkrishan Gupta & Ors.
vs Swadeshi Polytex Ltd. & Ors.) shall be disposed of on merits.
Notice of Board meeting to all members of the re constituted Board shall be sent by Registered Post Acknowledgment due.
It shall be open to the Board of Directors if it so chooses to review any delegation of powers.
There shall be no disciplinary action by way of victimization of any employee.
SRJ shall obtain the resignation of the present members of the Board of Directors (excluding the nominees of Financial Institutions).
Liberty is reserved to the parties to apply to this Court.
The undertakings that have to be filed in accordance with the above order shall be filed in this Court within one week from today.
The next Annual General Meeting which is ordered to be held on May 15.
1985 shall be held notwithstanding any order, direction or injunction of any other Court in India.
The parties are at liberty to apply to this Court for nominating a Chairman for the next Annual General Meeting.
Judgment in Civil Appeal No. 4803 of 1984 is reserved.
All the other cases referred to above stand disposed of 874 in terms of this order.
" The parties, however, requested the Court to decide the question relating to the right of the Cotton Mills Company to join as a requisitionist of a meeting under section 169 of the Act or to vote at a meeting of the company since it was likely that one or the other member might raise it as an issue at the next meeting.
We shall, therefore, proceed to decide the said question by this judgment.
The principal ground urged on behalf of the appellants is that the extraordinary general meeting had not been validly called since the Cotton Mills Company had ceased to enjoy the privileges of a member of the Polytex Company by reason of the appointment of a Receiver by the Collector of Kanpur in respect of the ten lakhs shares in the Polytex Company held by the Cotton Mills Company, the attachment of the 9 lakhs shares out of the said 10 lakhs shares and also the pledge of 3,50,000 shares out of the said 10 lakhs shares with the Government of Uttar Pradesh as security for the loans advanced by it.
The total paid up equity share capital of the Polytex Company is Rs. 3,90,00,000 (39,00,000 shares of Rs. 10 each) and it is not disputed that if the 10 lakhs shares held by the Cotton Mills Company are omitted from consideration, the remaining requisitionists would not have sufficient voting strength to issue a notice under section 169 of the Act.
The appellants contend that the Cotton Mills Company could not, therefore, join the other requisitionists in issuing the notice under section 169 of the Act calling upon the Polytex Company to call the extraordinary general meeting and without the support of the shares held by the Cotton Mills Company, the remaining requisitionists would not have been eligible to requisition the meeting.
The material part of section 169 r.f the Act reads: "Calling of extraordinary general meeting on requisition. 169.
(1) The Board of directors of a company shall, on the requisition of such member or members of the company as is specified in sub section (4), forthwith proceed duty to call an extraordinary general meeting of the company.
(2) The requisition shall set out the matters for the consideration of which the meeting is to be called, shall be signed by the requisitionists, and shall be deposited at the registered office of the company.
875 (3) The requisition may consist of several documents in like form, each signed by one or more requisitionits.
(4) The number of members entitled to requisition a meeting in regard to any matter shall be: (a) in the case of a company having a share capital.
such number of them as held at the date of the deposit of the requisition, not less than one tenth of such of the paid up capital of the company as at that date carries the right of voting in regard to that matter;. " We have already referred to the order of the Collector appointing the Receiver in respect of the shares in question, attaching them and ordering that 3,50,000 shares be pledged in favour of the Government of Uttar Pradesh.
Section 150 of the Act requires every company to keep a register of members containing the names, address and the occupation, if any, of each member and other particulars mentioned therein.
Section 153 of the Act provides that no notice of any trust, express, implied or constructive, shall be entered on the register of members.
Section 153B of the Act, however, provides that notwithstanding anything contained in section 153, where any shares in a company are held in trust by any person, he (the trustee) shall within such time and in such form as may be prescribed make a declaration to the public trustee appointed under section 153A of the Act in accordance with and subject to the rest of the provisions of section 153B of the Act.
It is clear from the relevant provisions of the Act which are referred to hereafter that a member can participate and exercise his vote at the meetings of a company in accordance with the Act and the articles of association of the company.
Section 41 of the Act defines the expression "member" of a company.
The subscribers of the memorandum of association of a company shall be deemed to have agreed to become members of the company and on its registration shall be entered as members in its register of members.
A subscriber of the memorandum is liable as the holder of shares which he has undertaken to subscribe for.
Any other person who agrees to become a member of a company and whose name is entered in its register of members shall be a member of the company.
In his case the two conditions namely that there is an agreement to become a member and that his name is entered in the register of 876 members of the company are cumulative.
Both the conditions have to be satisfied to enable him to exercise the rights of a member.
Subject to section 42 of the Act, a company or a body corporate may also become a member.
When once a person becomes a member, he is entitled to exercise all the rights of a member until he ceases to be a member in accordance with the provisions of the Act.
The voting rights of a member of a company are governed by section 87 of the Act.
Section 87 of the Act says that subject to the provisions of section 89 and sub section (2) of section 92 of the Act every member of a company limited by shares and holding any equity share capital therein shall have a right to vote, in respect of such capital, on every resolution placed before the company and his voting right on a poll shall be in proportion to his share of the paid up equity capital of the company.
Regulations 8 and 86 (a) of the Articles of the PolYtex Company read: "8.
Save as herein otherwise provided, the Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or as by law required, be bound to recognise any trust, be nami or equitable or other claim to or interest in any such share or any fractional part of such share on the part of any other person whether or not it shall have express or other notice thereof.
(a) On show of hands every holder of Equity shares entitled to vote and present in person or by proxy shall have one vote and upon a poll every holder of equity shares entitled to vote and present in person or by proxy shall have one vote for every Equity share held by him.
" A person ceases to be a member by transferring his share to another person, by transmission of his share by operation of law, by forefeiture of share, by death, or by any other reason known to law.
In the case before us therefore three points arise for consideration at this stage.
They are: (i) Whether by reason of the appointment of the Receiver under the Land Revenue Act in respect of the shares of the Polytex Company held by the Cotton Mills 877 Company, the Cotton Mills Company had ceased to have the rights of a member under section 169 of the Act ? (ii) Whether by the attachment of the shares under section 149 of the Land Revenue Act, the Cotton Mills Company suffered any diminution or curtailment in its rights as a shareholder in respect of the shares so attached ? (iii) Whether by the pledge of certain shares, the Cotton Mills Company suffered any such diminution or curtailment ? In the Act, the expressions 'a member ', 'a share holder ' or 'holder of a share ' are used as synonyms to indicate the person who is recognised by a company as its owner for its purposes.
What does ownership of a share connote? 'Ownership in it most comprehensive signification; says Salmond, 'denotes the relation between a person and any right that is vested in him.
That which a man owns in this sense is a right.
The right of ownership comprises benefits like claims, liberties, powers, immunities and privileges and burdens like duties, l abilities, disabilities.
Whatever advantages a man may have as a result of the ownership of a right may be curtailed by the disadvantages, in the form of burdens attached to it.
As observed by Dias, an owner may be divested of his claims etc.
arising from the right owned to such an extent that he may be left with no immediate practical benefit.
He remains the owner nonetheless because his interest will outlast that of other persons in the thing owned.
The owner possesses that right which ultimately enables him to enjoy all rights in the thing owned by attracting towards himself those rights in the thing owned which for the time being belong to others, by getting rid of the corresponding burdens.
An owner of a land may get rid of the interest of a mortgagee in it by redeeming the mortgage, may get physical possession of land by terminating a lease and may get rid of an attachment by discharging the debt for which it is attached.
A Receiver appointed by a court or authority in respect of a property holds it for the benefit of the true owner subject to the orders that may be made by such court or authority.
the different kinds of rights of ownership flowing from the ownership of a right depend upon the nature of the right owned.
A person who is a shareholder of a company has many rights under the Act.
Some 878 of them, with which we are concerned in this appeal principally, are (i) the right to vote at all meetings (Section 87), (i;) the right to requisition an extraordinary general meeting of the company or to be a joint requisitionist (Section 169), (iii) the right to receive notice of a general meeting (Section 172), (iv) the right to appoint proxy and inspect proxy registers (Section 176), (V) in the case of a body corporate which is a member, the right to appoint a representative to attend a general meeting on its behalf (Section 187) and (vi) the right to require the company to circulate his resolution (Section 188).
The question for consideration is when does a shareholder cease to be entitled to exercise any of these rights ? Section 182 A of the Land Revenue Act which provides for the appointment of a Receiver in respect of the assets of a defaulter who is liable to pay an arrear of revenue or any other sum recoverable as an arrear of revenue reads thus: "182 A. Appointment of Receiver (1) Notwithstanding anything in this Act, when an arrear of revenue or any other sum recoverable as an arrear of revenue is due, the Collector may, in addition to or instead of any of the processes hereinbefore specified, by order (a) Appoint, for such period as he may deem fit, a Receiver of any movable or immovable property of the defaulter: (b) Remove any person from the possession or ousted of the property: (c) Commit the same to the possession, custody or management of the Receiver; (d) Confer upon the receiver all such powers, as to bringing and defending suits and for the realisation, management, protection, preservation and improvement of the property, the collection of the rents and profits thereof, the application and disposal of such rents and profits, and the execution of documents, as the defaulter himself has or such of those powers as the Collector thinks fit.
(2) Nothing in this Section shall authorise the Collector to remove from the possession or custody of property any person whom the defaulter has not a present right to remove.
879 (3) The Collector may from time to time extend the A duration of appointment of the Receiver.
(3 A) No order under sub section (1) or sub section (3) shall be made except after giving notice to the defaulter to show cause, and after considering any representations that may be received by the Collector in response to such notice: Provided that an interim order under sub section (1) or sub section (3) may be made at any time before or after the issue of such notice: Provided further that where an interim order is made before the issue of such notice the order shall stand vacated if no notice is issued within two weeks from the date of the interim order.
(4) The provisions of Rules 2 to 4 of Order XL, contained in the First Schedule to the Code of Civil Procedure, 1908, shall apply in relation to a Receiver appointed under this section as they apply in relation to a Receiver appointed under this section as they apply in relation to a Receiver appointed under the Code with the substitution of references to the Collector for references to the Court.
" Section 149 of the Land Revenue Act which provides for the attachment and sale of movable property belonging to a defaulter reads thus: "149.
Attachment and sale of movable property I`he Collector may, whether the defaulter has been arrested or not, attach and sell his movable property.
Every attachment and sale ordered under this section shall be made, according to the law in force for the time being for the attachment and sale of movable property under the decree of a Civil Court.
In addition to the particulars mentioned in clauses (a) to (c) of the proviso to Section 60 of the Code of Civil Procedure, 1908 (Act V of 1908), articles set aside exclusively for the use of religious endowments shall be exempted from attachment and sale under this section.
The costs of the attachment and sale shall be added to the arrear of revenue, and shall be recoverable by the same procedure.
" 880 We shall first consider the effect of appointment of a Receiver in respect of the shares in question.
A perusal of the provisions of section 182 A of the Land Revenue Act shows that there is no provision in it which states that on the appointment of a person as a Receiver the property in respect of which he is so appointed vests in him similar to the provision in section 17 of the Presidency Towns Insolvency Act, 109 where on the making of an order of adjudication the property of the insolvent wherever situate would vest in the official assignee, or in section 28 (2) of the which states that on the making of an order of adjudication, the whole of the property of the insolvent would vest in the court or in the Official Receiver.
Sub section (4) of section 182 A of the Land Revenue Act provides that Rules 2 to 4 of Order XL of the Code of Civil Procedure, 1908 shall apply in relation to a Receiver appointed under that section.
A Receiver appointed under Order XL of the Code of Civil Procedure only holds the property committed to his control under the order of the court but the property does not vest in him.
The privileges of a member can be exercised by only that person whose name is entered in the Register of Members.
A Receiver whose name is not entered in the Register of Members cannot exercise any of those rights unless in a proceeding to which the company concerned is a party and an order is made therein.
In Mahathalone vs Bombay Life Assurance Co. Ltd 1 it has been laid down clearly that a Receiver appointed by 3 court in respect of certain shares which had not been duly entered in the Register of Members of the company concerned as belonging to him could not acquire certain newly issued shares which could be obtained by the members of the company.
This Court observed at page 143 thus: "Mr. Pathak argued that the plaintiff was entitled to reliefs A and B, both in his suit as well as in the receiver 's suit and that the receiver 's suit was wrongly dismissed by the High Court.
We ate unable to agree.
In our opinion, the High Court rightly held that the receiver appointed in the suit of Sir Padampat could not acquire the newly issued shares in his name.
that privilege was conferred by section 105 only on a person whose name was on the register of members.
The receiver 's name admittedly was not in the register and the company was not bound to entertain that application.
Mr. Pathak argued that may be so but the ceiver was not making an application in his individual (1) ; 881 right but he had been armed by the court with power to A apply in the right of the defendant Reddy.
The fact how ever is that the receiver made the application in his own name.
Even if Mr. Pathak 's contention is right the company was no party to the suit filed by Sir Padampat against Reddy and that being so, no order could be issued to the company in that suit to recognize the receiver as a shareholder in place of Reddy.
" Even where the holder of a share whose name is entered in the Register of Members hands over his shares with blank transfer forms duly singed, the transferee would not be able to claim the rights of a member as against the company concerned until his name is entered in the Register of Members.
This Court in Messrs Howrah Trading Co. Ltd. vs The Commissioner of Income tax, Calcutta has observed at pages 453 454 thus: "The position of a shareholder who gets dividend when his name stands in the register of members of the company causes no difficulty whatever.
But transfers of shares are common, and they take place either by a fully executed document such as was contemplated by Regulation 18 of Table A of the Indian Companies Act, 1913, or by what are known as 'blank transfers ' In such blank Transfers, the name of the transferor is entered, and the transfer deed signed by the transferor is handed over with the share scrip to the transferee, who, if he so chooses, complete s the tarns for by entering his name and then applying to the company to register his name in place of the previous holder of the share.
The company recognises no person except one whose name is on the register of members, upon whom alone calls for unpaid capital can be made and to whom only the dividend declared by the company is legally payable.
Of course, between the transferor and the transferee, certain equities arise even on the execution and handing over of 'a blank transfer ', and among these equities is the right of the transferee to claim the dividend declared and paid to the transferor who is treated as a trustee on behalf of the transferee.
These equities, however, do not touch the company, and no claim by the transferee whose name is not in the register of members can be made against the company, if the transferor retains the money in his own hands and fails to pay it to him.
(1) [1959] Supp. 2 S.C.R. 448 882 A Glance at the scheme of the Indian Companies Act,1913, shows that the words "member", "shareholder" and "holder of a share" have been used interchangeably in that Act.
Indeed, the opinion of most of the writers on t e subject is also the same.
Buckley on the Companies Act, 12th Edition, Page 803 has pointed out that the right of a transferee is only to call upon the company to register his name and no more.
No rights arise till such registration takes place.
" In this case this Court followed the dictum of Chitty, J. in re: Wala Wynaad Indian Gold Mining Company(1) which emphasised that the entry of the name of person in the Register of Members was an essential condition for exercising voting rights at the meeting of the company concerned.
In "Buckley on the Companies Acts" (14th Edn.), Vol.
I, page 972 it is stated thus: "Company cannot enquire into beneficial ownership As between the shareholder and the company, the person entitled to exercise the right of voting is the person legally entitled to the shares, the member whose name is on the register.
" In Kurapati Venkata Mallayya & Anr.
vs Thondepu Ramaswami & Co. & Anr.(2) this Court had occasion to consider the validity of a suit instituted by a Receiver to collect debts due to a party to a suit in his own name.
The Count upheld the right of the Receiver to maintain the suit observing that a Receiver invested with full powers to administer the property which is Custodian legis or who is expressly authorised by the court to institute a suit for collection of debts was entitled to institute a suit in his own name provided he did so in his capacity as a Receiver.
But in the course of the said decision this Court approved the decision of the Calcutta High Court in Jagat Tarini Dasi vs Naba Gopal Chaki( ') in which it had been stated: "On the whole, we are disposed to take the view that, although a Receiver is not the assignee or beneficial owner of the property entrusted to his care, it is an incomplete and inaccurate statement of his relation to the property to say that he is merely its custodian" (Underlining by us).
Thus whatever may be the other powers of a Receiver dealing with the property which is in custodian legis while in his custody, he is not to be construed as either an assignee or beneficial owner of such property.
(1) (2) [1963] Supp. 2 S.C.R. 995.
(3) [1907] .
, 883 In Wise vs Lansdell(1) it was held that in the case of a bankrupt A whose name was still on the Register of Members of a company as between himself and the company, the bankrupt, so long as his name remained on the register was entitled to vote in respect of the shares, though as between himself and the mortgagees he could vote only as they dictated.
But the right to vote was held to be unimpaired as long as his name appeared on the Register.
In a later case, Morgan & Anr.
vs Gray & Ors (2) after referring to the decision in Wise vs Lansdell (supra) Danckwerts 1.
Observed: "It seems to me that, unless there is some provision in the company 's articles or in the Companies Act which empowers me to say that the bankrupt is no longer a member of the company, and is, therefore, unable to vote, expressly.
I must come to the conclusion that the bankrupt still remains a member as long as he is on the register, notwithstanding that by taking appropriate steps under the appropriate provisions the trustee in bankruptcy may be able to secure registration of himself as the proprietor of the shares.
Unless and until that is done, and as long as the bankrupt remains on the register of the company, he remains a member in respect of those shares and is entitled, as it seems to me, to exercise the votes which are attribute able to that states, notwithstanding that he has no longer any beneficial interest in the shares and that the company is entitled to pay any dividends to his trustee in bankruptcy.
" The following statement in Kerr on Receivers (13th Edn.) at page 310: "the power of the company and its directors to deal with the property comprised in the appointment (both property subject to a floating charge and property subject to a fixed charge), except subject to the charge, are paralysed" which was relied on by the appellants is not of much use to them.
it only means that the authority competent to appoint a Receiver may give directions regarding the property It does not imply that the right of the company to exercise the right to vote on the basis of the shares of another company held by it at the meeting of such other company becomes automatically suspended.
Under section 51 of the Code of Civil Procedure, 1908 a (1)[1921] I Ch.
(2)[1953] I Ch. 83 at p. 87. 884 Receiver may be appointed by a civil court on the application of a A decree holder in execution of a decree for purposes of realising the decree debt.
This is only a mode of equitable relief granted ordinarily when other modes of realization Or the decretal amount are impracticable.
A Receiver appointed under that section will be able to realise the amounts due from a garnishee and his powers are taking to the powers of a Receiver appointed under Order 40 rule 1 of the Code of Civil Procedure, 1908.
But he would not have any beneficial interest in the assets of the judgment debtor.
He collects the debts not as his own but as an officer of the court.
We do not also find any substance in the contention of the appellant based on section 137 of the Act.
Section 137 of the Act provides that if any person obtains an order for the appointment of a Receiver of, or of a person to manage, the property of a company, or if any person appoints such Receiver under any powers contained in any instrument he shall, within thirty days from the date of the passing of the order or of the making of the appointment under the said powers, give notice of the fact to the Registrar, and the Registrar shall, on payment of the prescribed fee, enter the fact in the register of charges maintained under section 130 of the Act.
It is not clear in this case whether any entry had been made in the register of charges of the order Or appointment of Receiver in this case.
Even granting that such an entry had been made, it would not have the effect of taking away the right of the Cotton Mills Company to exercise the right to vote in respect of the shares in question.
We do not also find any substance in the argument based on sections 153B, 187B and 187C of the Act.
Section 153 of the Act states that no notice of any trust, express, implied or constructive, shall be entered in the register of members or of debenture holders.
Section 153B of the Act requires that notwithstanding anything contained in section 153, well any shares in, or debentures of, a company are held in trust by any person, the trustee shall, make a declaration to the public trustee.
Section 187B of the Act provides that save as otherwise provided in section 153B but notwithstanding anything contained in any other provisions of the Act or any other law or any contract, memorandum or articles, where any shares in a company are held in trust by a person as trustee, the rights and powers (including the right to vote by proxy) exercisable at any matinee of ' the company or at any meeting of any class of members of the company by the trustee as a member of the company cease to be exercisable by the trustee as such member and become exercisable l l by the public trustee.
Section 187C of the Act makes it incumbent 885 upon a person whose name is entered in the Register of Members of a company but who does not hold the beneficial interest in the share in question in such form as may be prescribed specifying the name and other particulars of the person who holds the beneficial interest in such share.
The Companies (Declaration of Beneficial Interest in Shares) Rules, 1975 are made in this connection.
it is obvious from the foregoing that none of the provisions referred to above has any bearing on the question before us.
Mere appointment of a Receiver in respect of certain shares of a company without more cannot, therefore, deprive the holder of the shares whose name is entered in the Register of Members of the company the right to vote at the meetings of the company or to issue a notice under section 169 of the Act.
The consequence of attachment of certain shares of a company held by a shareholder for purposes of sale in a proceeding under section 149 of the Land Revenue Act is more or less the same.
The effect of an order of attachment is what section 149 of the Land Revenue Act itself says.
Such attachment is made according to the law in force for the, time being for the attachment and sale of movable property under the decree of a civil court.
Section 60 of the Code of Civil Procedure, 1908 says that except those items of E property mentioned in its proviso, lands.
houses, or other buildings, goods money, banknotes, cheques, bills of exchange, hands, promissory notes, Government securities, bonds or other securities of money, debts, shares in a corporation and all other saleable property, movable or immovable, belonging to a judgment debtor, or over which, or the profits of which, he has a disposing power which he may exercise for his own benefit, whether the same be held in the name of the judgment debtor, or by another person in trust for him or on his behalf, is liable for attachment and sale in execution of a decree against him.
Section 64 of the Code of Civil Procedure, 1908 states that where an attachment of a property is made, any private transfer or delivery of the property attached or of any interest therein and any payment to the judgment debtor of any debt, dividend or other monies contrary to such attachment, shall be void as against all claims enforceable under the attachment.
What is forbidden under section 64 of the Code of Civil Procedure is a private transfer by the judgment debtor of the property attached contrary to the attachment, that is, contrary to the claims of the decree holder under the decree for realisation of which the attach 886 ment is effected.
A private transfer under section 64 of the Code of Civil Procedure is not absolutely void, that is, void as against all the world but void only as against the claims enforceable under the attachment.
Until the property is actually told, the judgment debtor retains title in the property attached.
Under Rule 76 of Order 21 of the Code of Civil Procedure, 1908, the shares in a Corporation which reattached may sold through a broker.
In the alternative such shares may be sold in public auction under Rule ?7 thereof.
On such sale ' either under Rule 76 or under Rule 77, the purchaser acquires title.
Until such sale is effected, all other rights of the judgment debtor remain unaffected even if the shares may have been seized by the officer of the count under Rule 43 of Order 21 of the Code of Civil Procedure, 1908 for the purpose of effecting the attachment, or through a Receiver or though an order in terms of Rule 46 of Order 21 of the Code of Civil Procedure may have been served on the judgment debtor or on the company concerned.
On behalf of the appellants, relying upon the decision in Hawks vs Mc. Arthur & Ors(1) it is contended that the order of the Collector attaching the hare was in the nature of a charging order which 'deprived the Cotton Mills Company of its rights in them.
Having carefully gone through the said decision, we find that it has not much relevance to the case In that case the Chairman and the Manager of a company had purchased certain shares of the company held by one of its members in two separate lots after paying consideration therefore contrary to Article 13 of the Company 's Articles of Association which granted a right of pre emotion to all the other members in respect of the shares in question.
Immediately after the said purchases were made another member of the company obtained a money decree against the transferor of the shares and also a charging order over the shares standing in the name of the transferor but which had been sold earlier either to the Chairman or the Manager.
He claimed that since the transfer of the shares was contrary to Article 13 of the company 's Articles of Association, the transfer was void and hence he was entitled to enforce the charging order against those shares for realising his decretal amount.
The Court negatived his claim holding that notwithstanding the complete failure to comply with the company 's articles in regard 'to the procedure to be followed before shares could be transferred, the transferees having paid to the transferor the full consideration for the shares had obtained equitable rights therein and as their rights accrued earlier than the equitable right (1)[1951] 1 A 887 of the plaintiff under the charging order, their rights must prevail over his claim.
It was argued before us that the order of the Collector being an order in the nature of a charging order the Receiver had obtained an equitable right in the shares in question and there being no other legal or equitable right which would prevail over it, the Cotton Mills Company had lost its right to the shares The statement of facts of the above decision itself shows that it has no bearing on the case before us.
it is to be noted that a charging order under the English Law is not the same as an attachment of property or appointment of a Receiver under the Land Revenue Act.
We may here state that charging orders under the English Law are made under Order 50 of the English Supreme Court Practice under which the English court may for the purpose of enforcing a judgment or order of that court under which a debtor is required to pay a sum of money to a creditor, make an order imposing on any such property of the debtor as may be specified in the order, a charge for securing the payment of any money due or to become due under the judgment or order Such an order is referred to as the 'charging order '.
A charging order on the property or assets of the debtor is one of the modes of enforcement of a judgment or order for the payment of money to the creditor.
It is, however, not a direct mode of enforcement in the sense that the creditor can immediately proceed to recover the fruits of his judgment, but it is rather an indirect mode of enforcement in the sense that it provides the creditor with security, in whole or in part, over the property of the debtor.
It makes the creditor a secured creditor who having obtained his charging order must proceed, as may be necessary according to the nature of the property charged, to enforce his charge in order to obtain the actual proceeds of his charge to satisfy his judgment, in whole or in part.
Subject to the other p provisions of law, a charge imposed by a charging order will have effect and will be enforceable in the same court and in the same manner as an equitable mortgage created by the debtor by writing under his hand.
A short passage in Mull 's Code of Civil Procedure (14th Edn), Vol.
II at page 1510 is instructive and it reads thus: "There is no provision in the Code for charging orders, but on the Original Side of the High Courts, which has inherited the older jurisdiction of the Court of Chancery, it is the practice in cases where it is considered undesirable to grant immediate execution to make a charging order in the form made in the case of Kewny vs Attril When the a8sets require nursing, the advantage of a 888 charging order is that it enables the Court on the one hand to gain time and on the other hand to protect the decree holder.
It also avoids the confusion that might ensue if the Court were to allow a direct attachment while it is administering the assets of the partnership.
The effect of a charging order is to constitute the decree holder a secured creditor although he undertakes to deal with the charge subject to the further orders of the Court.
" An order of attachment cannot, therefore, have the effect of depriving the holder of the shares of his title to the shares.
We are of the view that the attachment of the shares in the Polytex Company held by the Cotton Mills Company had not deprived the Cotton Mills Company of its right to vote at the meeting or to issue the notice under section 169 of the Act The fact that 3,50,000 shares have been pledged in favour of the Government of Uttar Pradesh also would not make any difference Sections 172 to 178 A of the deal with the contract of pledge.
A pawn is not exactly a mortgage.
As observed by this Court in Lallan Prasad vs Rahamat Ali & Anr.(l) the two ingredients of a pawn are: "(1) that it is essential to the contract of pawn that the property pledged should be actually or constructively delivered to the Pawnee and (2) a Pawnee has only a special pore party in the pledge but the general property therein remains in the pawner and woolly reverts to him on discharge of the debt.
A pawn therefore is a security, where, by contract a deposit of goods is made as security for a debt.
The right to property vests in the pledge only so far as is necessary to secure the debt .
The pawner however has a right to redeem the property pledged until the sale.
" In Bank of Bihar vs State of Bihar and Ors.
(2) also this Court has reiterated the above legal position and held that the pawnee had a special property which was not of ordinary nature on the goods pledged and so long as his claim was not satisfied no other creditor of the pawner had any right to take away the goods or its price.
Beyond this no other right was recognised in a pawnee in the above decision.
Under section 176 of the if the pawner makes default in payment of the debt, or performance, at the stipulated time, of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon (1)[1967] 2 S.C.R. 233 at p. 238 239.
(2)1971] Supp, S.C.R. 299.
889 the debt or promise, and retain the goods pledged as a collateral A security, or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale.
in the case of a pledge, however, the legal title to the goods pledged would not vest in the pawnee.
The pawnee has only a special property.
A pawnee has no right of foreclosure since he never had the absolute ownership at law and his equitable title cannot exceed what is specifically granted by law.
In this sense a pledge differs from a mortgage.
In view of the foregoing the pawnee in the instant case i. e. the Government of Uttar Pradesh could not be treated as the holder of the shares pledged in its favour.
the Cotton Mills Company continued to be the member of the Polytex Company in respect of the said shares and could exercise its rights under section 169 of the Act.
It may be stated here that the Government of Uttar Pradesh and the Collector who are parties to this appeal have not questioned the correctness of the judgment of the High Court.
One other subsidiary contention urged on behalf of the appellants relates to the effect of an order made by the Central Government on April 13,1978 under section 18 AA (1) '(a) of the Industries (Development and Regulation (Act, 1951 taking over the management of Sideshow Cotton Mills along with five other industrial units belonging to the Cotton Mills Company which was the subject matter of dispute in Sideshow Cotton Mills vs Union of India(l) and the order of extensions passed by the Central Government on November 26,1983 which is the subject matter of dispute in a case now pending before this Court.
It is urged on behalf of the appellants that on the passing of the above said orders the Cotton Mills Company lost its right to exercise its voting rights in respect of the shores in question.
There is no substance in this contention.
What was taken over under the above said orders was the management of the six industrial units referred to therein and not all the rights of the Cotton Mills Company.
The shares belong to the company and the orders referred to above cannot have any effect on them.
The Department of Company Affairs, Government of India rightly expressed its view in the letter written by C. Khushaldas, Director in the Department of Company Affairs on April 9, 1979 to B. M. Kaul, Chairman of the Cotton Mills Company that the voting rights in respect of these shares continued to vest with the Cotton Mills Company and the manner in which those voting rights were to be exercised was to be determined by the Board of Directors (1) 11981]2 S.C.R.533 890 of the Cotton Mills Company.
Hence the passing of the orders under section 18AA (1) (a) of the Industries (Development and Regulation) Act, 1951 has no effect on the voting rights of the Cotton Mills Company.
It is also significant that the Directors of the Polytex Company who what that a Receiver had been appointed in respect of the shares in question, that they had been attached by the Collector, that a part of them had also been pledged in favour of the Government of Uttar Pradesh and that orders had been passed under section 18AA (1) (a) of the Industries (Development and regulation) Act, 1951 taking over six industrial units of the Cotton Mills Company did not question the validity of the notice.
The Polytex Company had in this case rightly treated the registered holder i.e. the Cotton Mills Company as the owner of the shares in question and to call the meeting in accordance with the notice issued under section 169 of the Act.
The appellant cannot, therefore, be allowed to raise any dispute about the validity of the meeting on any of the grounds referred to above.
In the result the appeal fails and it is dismissed with costs.
The costs of all the parties to the above appeal and other connected cases shall, however, be borne by the Polytex Company.
Subject to the above order, the order passed by this Court on February 1, 1985 shall remain in force.
M.L.A. Appeal dismissed.
|
Section 169 (1) of the Companies Act provides that the Board of directors of a company shall, on the requisition of such number of members of the company as is specified in sub section (4), forthwith proceed duly to call an extraordinary general meeting of the company, Sub section 4(a) says that the number of members entitled to requisition a meeting in regard to any matter shall be in the case of a company having a share capital, such number of them as held at the date of the deposit of the requisition, not less than one tenth of such of the paid up capital of the company as at that date carries the right of voting in regard to that matter.
The Swadeshi Cotton Mills Company Ltd. (for short, the Cotton Mills Company), had 10 lakhs shares out of 39,00,000 shares of Rs. 10/ each in the respondent Swadeshi Polytex Ltd. (for short, the Polytex Company).
On 855 27th October, 1977, the Collector of Kanpur passed an order under section 182A A of the U.P. Land Revenue Act 1901 (for short, the Land Revenue Act, road with section 5 of the U.P. Government Electrical Undertakings (Dues Recovery Act 1958 appointing a Receiver in respect of the Cotton Mills Company, since it could not meet the wage bill, the dues of the U.P. Electricity Board and several other monetary claims against it from about 1975 76 on account of a serious set back in its financial position.
By the said order, he empowered the Receiver to seize 1 lakh of shares of the Polytex Company and to pledge them in favour of the State Government of Uttar Pradesh against a loan for the purpose of meeting the dues payable to the employees of the Cotton Mills Company.
He made a further order under section 14g of the Land Revenue Act read with section 5 of the U.P. Government Electrical Undertakings (Dues Recovery) Act 1958 attaching the remaining 9 lakhs shares of the Polytex Company held by Cotton Mills Company and empowering the Receiver to seize them.
Pursuant to the Orders of the Collector, the Receiver seized 10 lakhs shares held by the Cotton Mills Company and pledged 3 5 lakhs shares in favour of the Government of U.P. and kept the remaining 6.5 lakhs shares with him.
The Cotton Mills Company and four others share holders who together held 10,01,950 shares of Rs. 10 each in the Polytex Company sent a notice to the Polytex Company under section 169 of the Act requiring the Board of Directors of Polytex Company to consider and pass certain resolutions regarding removal of its Managing Director and three directors and appointment of some other persons in their place.
Pursuant to such requisitions, the directors of the Polytex Company resolved to hold the extraordinary meeting on March 28, 1984.
However, the meeting could not be held, since some of the share holders had obtained temporary injunctions restraining the holding of the meeting.
The matter ultimately came up before the Supreme Court in Special Leave Petitions when it directed the High Court to make an order for holding the meeting notwithstanding any order of injunction etc.
issued by any other court or authority in India.
Accordingly, the meeting was filed for 14th August 1984.
But, in the meanwhile, appellant No. 1 moved an application before the High Court, in an appeal already pending between the Cotton Mills Company and the Polytex company questioning the right of the requisitionists to issue notice under section 169 of the Act to call the extraordinary general meeting.
The High Court dismissed the application Hence this appeal by Special Leave.
The appellants contended that: (1) Since a Receiver had been appoint ed by the Collector in respect of the shares held by the Cotton Mills Company and they had also been attached, the shares held by the Cotton Mills Company could not be taken into consideration for determining the required qualification to issue the notice under s 169 of the Act requisitioning the extraordinary general meeting and that if those shares were omitted from consideration then the shares held by the other requisitionists would not be sufficient to issue the said notice.
In other words the extraordinary general meeting had not been validly called since the Cotton Mills Company had 856 ceased to enjoy the privileges of a member of the Polytex Company by reason of the appointment of a Receiver by the Collector of Kanpur in respect of the ten lakhs shares in the POLYTEX Company held by the Cotton Mills Company, the attachment of the 9 lakhs shares out of the said 10 lakhs and also the pledge of 3,50,000 shares out of the said 10 lakhs shares with the Government of Uttar Pradesh as security for the loans advanced by it; (ii) The order OF the Collector being an order in the nature of a charging order; the Receiver had obtained an equitable right in the shares in question and there being no other legal or equitable right which would prevail over it, the Cotton Mills Company had lost its right to the shares; and (iii) By virtue of an order made by the Central Government on April 13, 1978 under 8.
18AA (1) (a) of the Industrial (Development & Regulation) Act 1951 taking over the management of Swadeshi Cotton Mills along with its five other industrial units, the Cotton Mills Company had lost the right to exercise its voting rights in respect of the shares in question.
Dismissing the appeal, ^ HELD: 1.
(i) In the Act, the expressions 'a member ', 'a share.
holder ' or 'holder of a share ' are used as synonyms to indicate the person who is recognised by a company as its owner for its purposes.
What does ownership of a share connote ? Ownership in its most comprehensive signification says Salmond, 'denotes the relation between a person and any right that is vested in him.
That which a man owns in this sense is a right '.
The right of ownership comprises benefits like claims liberties, powers, immunities and privileges and burdens like duties, liabilities, disabilities.
Whatever advantages a man may have as a result of the ownership of a right may be curtailed by the disadvantages in the form of burdens attached to it.
As observed by Dias, an owner may be divested of his claims etc.
arising from the right owned to such an extent that he may be left with no immediate practical benefit.
He remain the owner nonetheless because his interest will outlast that of other persons in the thing owned.
The owner possesses that right which ultimately enables him to enjoy all rights in the thing owned by attracting towards himself those rights in the thing owned which for the time being belong to others, by getting rid of the corresponding p73 burdens.
[871 D F] 1.
(ii) Section 41 of the Act defines the expression "member" of a company.
Subject to section 42 of the Act, a company or a body corporate may also become a member.
When once a person becomes a member, he is entitled to exercise all the rights of a member until he ceases to be a member in accordance with the provisions of the Act.
A persons ceases to be a member by transferring his share to another person, by transmission of his share by operation of law, by forfeiture of share, by death, or by any other reason known to law.
A person who is a shareholder of a company has many rights under the Act.
Some of them, are: (i) the right to vote at all meetings Section 87.
(ii) the right to requisition an extraordinary general meeting of the company or to be a joint requisitionists (Section 169), (iii) the 857 right to receive notice of a general meeting (Section 172).
(iv) the right to A appoint proxy and inspect proxy register (Section 176), (v) in the case of a body corporate which is a member, the right to appoint a representative to attend a general meeting on its behalf (Section 181) and (vi) the right to require the company to circulate his resolution (Section 188).
Therefore, it is clear from the relevant provisions of the Act which are referred to above that a member can participate and exercise his vote at the meetings of a company in accordance with the Act and the articles of association of the company.
[875 G, 876 A, 878 A B,] 2.
(i) Section 150 of the Act requires every company to keep a register of members containing the names, address and the occupation, IF any, of each member and other particulars mentioned therein.
The privileges of a member can be exercised by only that person whose name is entered in the Register of Members.
A Receiver whose name is not entered in the Register of Members cannot exercise any of these rights unless in a proceeding to which the Company concerned is a party an order is made authorising him to do so.
Even where the holder of a share whose name is entered in the Register of Members hands over his shares with blank transfer forms duly signed, the transferee would not be able to claim the rights of a member as against the company concerned until his names is entered in the Register of Members.
[875 D, 880 D 13, 881 G] Mathalone vs Bombay Life Assurance Co. Ltd., ; and Messers Howrah Trading Co. Ltd. vs The Commisioner of Income tax, Calcutta, [1959] Supp.
2 S.C.R. 448, followed.
In re: Wala Wynaad Indian Gold Mining Company, [18821 , Kurapati Venkata Mallayya & Anr.
vs Thondeput Ramaswami & Co. & Anr.
[1963] Supp. 2 S.C.R 995 and Jagat Tarini Dasi vs Naba Gopal Chaki, Cal. 305, referred to.
Wise vs Landsdell, and Morgan & Anr.
vs Gray &: Ors., at p.87, relied upon.
2, (ii) A perusal of the provisions of s.182A of the Land Revenue Act shows that there is no provisions in it which states that on the appointment of a Person as a receiver the property in respect of which he is so appointed vests in him similar to the provision in s.l7 of the Presidency Towns Insolvency Act, 1909 where on the making of an order of adjudication the property of the insolvent wherever situate would vest in the official assignee, or in s.28(2) of the which states that on the making of an order of adjudication, the whole of the property of the insolvent would vest in the court or in the official Receiver.
Sub section (4) of section 182A of the Land Revenue Act provides that Rules 2 to 4 of Order XL of the Code of Civil Procedure 1908 shall apply in relation to a Receiver appointed under that section.
A Receiver appointed under order XL of the Code of Civil Procedure only holds the property committed to 858 his control under the order of the court but the property does not vest in him.
A receiver appointed by a court or authority in respect of a property holds it for the benefit of the true owner subject to the orders that may be made by such court or authority.
Under s.51 of the Code of Civil Procedure, 1908 a Receiver may be appointed by a civil court on the application of a decree holder in execution of a decree for purposes of realising the decree debt.
This is only a mode of equitable relief granted ordinarily when other modes of realisation of the decretal amount are impracticable.
A Receiver appointed under that section will be able to realise the amounts due from a garnishee and his powers are akin to the powers of a Receiver appointed under Order 40 Rule I of the Code of Civil Procedure, 1908.
But be would not have any beneficial interest in the assets of the judgment debtor.
He collects the debts not as his own but as an officer of the court.
Thus whatever may be the other powers of a Receiver dealing with the property which is custodia legis while in his custody, he is not to be construed as either an assignee or beneficial owner of such property.
[880 A, 887 H, 888 A B, 882 H] 2.
(iii) Section 137 of the Act provides that if any person obtains an order for the appointment of a Receiver of, or of a person to manage, the property of a company, or if any person appoints such Receiver and any powers contained in any instrument he shall within thirty days from the date of the passing of the order of the making of the appointment under the said powers, give notice of the fact to the Registrar; and the Registrar shall on payment of the prescribed fee, enter the fact in the register of charges maintained under s.130 of the Act.
It is not clear in the instant case whether any entry had been made in the register of charges of the order of appointment of Receiver.
Even granting that such an entry had been made, it would not have the effect of taking away the right of the Cotton Mills Company to exercise the right to vote in respect of the shares in question.
[884 C E] 3.
There is no substance in the argument based on ss.153B, 187B and 187C of the Act.
Section 153 of the Act states that no notice of any trust, express implied or constructive, shall be entered in the register of members or of debenture holders.
Section 153B of the Act requires that notwithstanding anything contained in s.153 where any shares in, or debentures of a company are held in trust by any person, the trustee shall, make a declaration to the public trustee.
Section 187B of the Act provides that save as otherwise provided in s.153B but notwithstanding anything contained in any other provisions of the Act or any other law or any contract, memorandum or articles, where any shares in a company are held in trust by a person as trustee, the rights and powers (including the right to vote by proxy) exercise able at any meeting of the company or at any meeting of any class of members of the company by the trustee as a member of the company cease to be exercisable by the trustee as such member and become exercisable by the public trustee.
Section 187C of the Act makes it incumbent upon a person whose name is entered in the Register of Members of a company but who does not hold the beneficial interest in the share in question in such form as may be prescribed specifying the name and other particulars of the persons who holds the beneficial interest in such share.
The Companies (Declaration of beneficial Interest in shares) Rules, 1975 are made in this connec 859 tion.
It is obvious from the foregoing that none of the provisions referred A to above has any bearing on the question before this Court.
Thus, more appointment of a Receiver in respect of certain shares of a company without more cannot, therefore, deprive the holder of the shares whose name is entered in the Register of Members of the Company the right to vote at the meeting of the company or to issue a notice under s.169 of the Act.
1884 F H, 885 A C] 4.
Under Rule 76 of Order 21 of the Code of Civil Procedure, 1908, the shares in a Corporation which are attached may be sold through a broker.
In the alternative such shares may be sold in public auction under Rule 77 thereof.
On such sale either under Rule 76 or under Rule 77 the purchases acquires title.
Until such sale is effected, all other rights of the judgment debtor remain unaffected even if the shares may have been seized by the officer of the court under Rule 43 of Order 21 of the Code of Civil Procedure, 1908 for the purpose of effecting the attachment, or through a Receiver or though an order in terms of Rule 46 of Order 21 of the Code of Civil Procedure may have been served on the judgment debtor or on the company concerned.
The consequence of attachment of certain shares of a company held by a shareholder for purposes of sale in a proceeding under s.149 of the Land Revenue Act is more or less the same.
The effect of an order of attachment is what s.l49 of the Land Revenue Act itself says.
Such attachment is made according to the law in force for the time being for the attachment and sale of movable property under the decree of a civil court [886 B C, 885 D] 5.
(i) It is to be Doted that a charging order under the English Law is not the same as an attachment of property or appointment of a Receiver under the Land Revenue Act.
Charging Orders under the English Law are made under order 50 of the English Supreme Court Practice under which the English court may for the purpose of enforcing a judgment or order of that court under which a debtor is required to pay a sum of money to a creditor make an order imposing on any such property of the debtor as may be specified in the order, a charge for securing the payment of any money due or to become due under the judgment or order.
Such an order is referred to as the 'charging order '.
A charging order on the property or assets of the debtor is one of the modes of enforcement of a judgment or order for the payment of money to the creditor.
It is, however, not a direct mode of enforcement in the sense that the creditor can immediately proceed to recover the fruits of his judgment, but it is rather an Indirect mode of enforcement in the sense that it provides the creditor with security, in whole or in part, over the property of the debtor.
It makes the creditor secured creditor who having obtained his charging order must proceed, as may be necessary according to the nature of the property charged, to enforce his charge in order to obtain the actual proceeds of his charge to satisfy his judgment, in whole or in part.
Subject to the other provisions of law a charge imposed by a charging order will have effect and will be enforceable in the same court and in the same manner as an equitable mortgage created by the debtor by writing under his hand.
An order of attachment cannot, therefore, have the effect of depriving the holder of the shares of his title to the shares Therefore, the attachment of the shares in the Polytex Company held by the Cotton 860 Mills Company had not deprived the Cotton Mills Company of its right to vote at the meeting or to issue the notice under s.169 of the Act.
[887 B F, 888 C] Hawks vs Mc Arthur & Ors.
[l9SIl 1 All E.R. 22, inapplicable.
(ii) The fact that 3,50,000 shares have been pledged in favor of the Government of Uttar Pradesh also would not make any difference.
Sections 172 to 178 A of the deal with the contract of pledge.
A pawn is not exactly a mortgage.
The two ingredients of a pawn are: "(1) that it is essential to the contract of pawn that the property pledged should be actually or constructively delivered to the pawnee and (2) a pawnee has only a special property in the pledge but the general property therein remains in the pawner and wholly reverts to him on discharge of the debt.
A pawn therefore is a security where by contract a deposit of goods is made as security for a debt The right to property vests in the pledged only so far as is necessary to secure the debt.
The pawner however has a right to redeem the property pledged until the sale.
Under s.116 of the if the pawnor makes default in payment of the debt, or performance, at the stipulated time, of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or promise, and retain the goods pledged as a collateral security, or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale In the case of a pledge, however, the legal title to the goods pledged would not vest in the pawnee.
the pawnee has only a special property.
A pawnee has no right of foreclosure since he never had absolute ownership at law and his equitable title cannot exceed what is specifically granted by law.
In this sense, a pledge differs from a mortgage in view of the foregoing the pawnee in the instant case i.e. the Government of Uttar Pradesh could not be treated as the holder of the shares pledged Fin its favour.
The Cotton Mills Company continued to be the member of the Polytex Company in respect of the said shares and could exercise its right under s.l69 of the Act.
[888 D H, 889 A.Cl Lallan Prasad vs Rahmat Ali & Anr., ; pp.
238 239 Bank of Bihar vs State of Bihar & Ors., [1971] Supp.
S.C.R. 299 and Swadeshi Cotton Mills vs Union of India, ; refereed to.
There is no substance in the contention that on the passing of an order by the Central Government under s 18A (1) (a) of the Industries (Development and Regulation) Act, 1951 taking over the management of the Cotton Mills Company alongwith its five other industrial units, the Cotton Mills Company lost its right to exercise its voting rights 861 in respect of the shares in question.
What was taken over under the above A said orders was the management of the six industrial units referred to therein and not all the rights of the Cotton Mills Company.
The shares belong to the company and the orders referred to above cannot have any effect on them.
Hence the passing of the orders under s.l8AA (1) (a) of the Industries (Development and Regulation) Act, 1951 has no effect of the voting rights of the Cotton Mills Company.
[889 B H, 890 A]
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4936.txt
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(Crl.) No. 116 of 1990.
(Under Article 32 of the Constitution of India).
R.K. Garg, N.D. Garg, Rajiv Kr.
Garg and P.C. Choudhary for the Petitioner.
U.R. Lalit and Ms. Kamini Jaiswal for the Respondents.
The Judgment of the Court was delivered by VERMA, J.
The short question arising for decision by us is the true meaning of Sub section (2) of Section 427 of the Code of Criminal Procedure, 1973 and its effect.
For an Offence of murder committed on 17.9.1978 the petitioner, Ranjit Singh, was convicted under Section 302 I.P.C. by the Sessions Judge on 6. 3.1979 and sentenced to life imprisonment which was confirmed by the High Court of Punjab & Haryana.
While the petitioner was on parole after his conviction and sentence for first murder, he was tried for the second murder committed On October 25, 1980 and convicted under Section 303 I.P.C.
This conviction was altered to one under Section 302 I.P.C. and for the second murder, also the petitioner was sentenced by this Court on 30.9.
1983 to life imprisonment instead of death sentence.
This Court while disposing of the.
petitioner 's appeal, in this manner, directed as under: 746 "We feel that life imprisonment would be the proper sentence that should be imposed upon the appellant.
We accordingly reduce the sentence of death imposed upon him and, sen tence him to suffer rigorous imprisonment for life.
However, since the present murder was committed by him within a span of one year of his earlier conviction and that too when he was released .on parole we are clearly of the view that the instant sentence of imprisonment for life awarded to him should not run concur rently with his earlier sentence Of life imprisonment.
We therefore, direct that in case any remission or commutation in respect of his earlier sentence is granted to him the present sentence should .commence thereafter.
" The petitioner has now filed this Writ Petition under Arti cle 32 of the Constitution for issuance of a suitable writ or direction to correct,the above direction given in the 0order dated September 30, 1983 to bring it in consonance with Section 427(2) Cr. P.C. and consequently for his re lease on the ground that both life sentences had to run concurrently in accordance with Section 427(2) Cr.
P.C. and he is entitled to relief because he has undergone fourteen years sentence of imprisonment with remissions at the time of filing the Writ Petition on February 19, 1990.
This is how the question of construction of Section 427(2) Cr.
P.C. arises in the present case.
Section 427 of the Code of Criminal Procedure, 1973 is as under: "427.
Sentence on offender already sentenced for another offence (1) When a person already undergoing a sentence of im prisonment is sentenced on a subsequent con viction to imprisonment or imprisonment for life, such imprisonment ' or imprisonment for life shall commence at the expiration of the imprisonment to which he has been previously sentenced, unless the Court directs that the subsequent sentence shall run concurrently with such previous sentence: Provided that where a person, who has, been sentenced to imprisonment by an order under Section 122 in default of furnishing security is, whilst undergoing such sentence, sentenced to imprisonment for an offence committed prior to the making of such order, the latter sen tence shall commence immediately.
747 (2) When a person already undergoing a sentence of imprisonment for life is sen tenced on a subsequent conviction to.
impris onment for a term or imprisonment for life, the subsequent sentence shall run concurrently with such previous Sentence . ' ' Shri R.K. Garg, learned counsel for the petitioner strenu ously urged that this Court 's above quoted direction in the judgment dated 30.9.1983 passed in Criminal Appeal No. 418 of 1982 while affirming the conviction under Section 302 I.P.C. for the second murder and imposing the punishment of life imprisonment for it 'also amounts to directing that the two sentences of life imprisonment are tO run consecutively and not concurrently which is in direct conflict with Sub section (2) of Section 427 Cr.
P.C. He ,urged that the life 'span of a person Could be only one and therefore ,any subsequent life sentence must run concurrently and not consecutively which is the clear mandate :of Section 427(2).
On this basis, it was, urged that this Court 's direction in the above manner on the petitioner 'S conviction for the second offence of murder is contrary to Section 427(2) of the Code 01 Criminal Procedure, 1973.
This is the basis of the reliefs claimed on behalf of the .petitioner.
In reply, Shri U.R. Lalit.
appearing.
on behalf of respondents, con tended that the direction of this Court properly construed is not contrary to Section 427(2) Cr.
P.C. and, therefore, the question of issuing any writ or directions claimed by the petitioner does not arise.
We may straightaway mention that the question of grant of relief under Article 32 of the Constitution does not arise on the above facts.
The petitioner 's incarceration is the result of a valid judicial order and, therefore, ' there can be no valid claim to the infringement of any fundamental right which alone can be the foundation for a writ under Article 32 of the COnstitution.
The only question, it ap pears, therefore, is about the correct construction of the direction given by this Court in its judgment dated 30.9.1983 in Criminal Appeal No. 418 of 1982 in the fight of the true meaning of Section427(2) Cr.
The meaning of a sentence of imprisonment for life is no longer res integra; It was held by a Constitution Bench in Gopal Vinayak Godse vs The State of Maharashtra and Others, ; that a sentence of transportation for life or imprisonment for life must prima facie be treated as transportation Or imprisonment for the whole of the remain ing period of the convicted person 's natural life.
It was further held: 748 "Unless the said sentence is commut ed or remitted by appropriate authority under the relevant provisions of the Indian Penal Code or the Code of Criminal Procedure, a prisoner sentenced to life imprisonment is bound in law to serve the life term in prison.
" The contention that a sentence of life imprisonment was to be treated as a sentence of imprisonment for a fixed term was expressly rejected.
This view was followed and reiterat ed in Maru Ram vs Union of India & Ant., [1981] 1 S.C.R. 1196 while considering the effect of Section 433A introduced in the Code of Criminal Procedure, 1973 with effect from 18.12.1978.
The Constitution Bench in Maru Ram summarised one of its conclusions as under: "We follow Godse 's case (supra) to hold that imprisonment for life lasts until the last breath, and whatever the length of remissions earned, the prisoner can claim release only if the remaining sentence is remitted by Govern ment.
" Another conclusion in Maru Ram was that the mandatory mini mum of 14 years ' actual imprisonment prescribed by Section 433A which has supremacy over the Remission Rules and short sentencing statutes made by the various States will not operate against those whose cases were decided by the trial court before the 18th December, 1978 when Section 433A came 'into force but Section 433A would apply to those sentenced 'by the trial court after 18.12.1978 even though the offence was committed prior to that date.
From these decisions it is obvious that the mandatory minimum of 14 years '.
actual imprisonment prescribed by Section 433A is applicable to petitioner in respect of both sentences of life imprisonment since the conviction by the trial court even for the first murder was after 18.12.1.978, the second offence itself being committed after '18.12.1978.
There is no dispute that the mandatory minimum of 14 years ' actual imprisonment, as required by Section 433A even for the first sentence of life imprisonment, has not been served out by the petitioner and, therefore, irrespective of the points raised in this petition on the basis of Section 427(2) Cr.
P.C. the petitioner cannot claim relief much less a writ under Article 32 of the Constitution in the absence of the remaining sentence being remitted by the Government.
This alone is sufficient to refuse any relief under Article 32 of the Constitution.
The question now is of the meaning of Section 472(2) Cr. P.C, and its effect, in the present case, in view of the above quoted direc 749 tion Of this Court in its judgment dated 30.9.1983.
Sub section (1) of Section 427Cr.
P.C. provides for the situation when a person already undergoing a sentence of imprisonment is sentenced on a subsequent conviction to imprisonment or life imprisonment.
In other words, Sub section (1) of Section 427 Cr.
P.C. deals with an offender who while undergoing sentence for a fixed term is ' subse quently convicted to imprisonment for a fixed term or for life.
In such a situation, the first sentence, being for a fixed term, expires on a definite date which is known when the subsequent conviction is made.
, Sub section (1) says that in ' such a situation, the date of expiry of the first sentence which the offender is undergoing being known, ordinarily the subsequent sentence would commence at the expiration of the first term of imprisonment unless the Court .directs the subsequent sentence to run concurrently with the previous sentence.
Obviously, in cases ' covered by Sub section (1)where the sentence is for a fixed ' term, the subsequent sentence Can be consecutive unless directed to run concurrently.
Sub section (2), on the other hand, pro vides for an offender "alreadly undergoing sentence of imprisonment for life" who is sentenced on a subsequent conviction to imprisonment for a term or for life.
It is well settled since the decision of this Court in Gopal Vinayaka Godse and reiterated in Maru Ram that imprisonment for life is a sentence for the remainder or the life of the offender unless the remaining sentence is commuted or remit ted by the appropriate authority.
This being so at the.stage of sentencing by the Court On a subsequent conviction, the earlier sentence of imprisonment for life must be understood in this manner and, therefore, there can be no question of a subsequent sentence of.
impriosnment for a term or for life running consecutively which is the general rule laid down in Sub .
section (1) of Section 427.
As rightly contended 'by Shri Garg, and not disputed by Shri Lalit, the earlier sentence of imprisonment for life being understood to mean as sentence to serve the remainder of life in prison unless commuted or remitted by the appropriate authority and a person having only one life ' span, the sentence on a subse quent conviction of imprisonment for a term or imprisonment for life can only be superimposed to the earlier life sen tence and certainly not added to it since extending the life span of the offender or for that 'matter anyone is beyond .human might.
It is this obvious situation which is stated in sub section (2) of Section 427 since the general ' rule enunciated in sub section (1) thereof is that without the Court 's direction the subse .
quent sentence will.
not run concurrently, but consecutively.
The only situation in which no direction of the Court is needed to make the subse quent sentence run concurrently with the previous sentence is 750 provided for in Sub section (2) which has been enacted to avoid any possible controversy based on Sub section.
(1) if there be no express direction of the Court to that effect.
Sub section (2) is in the nature of anexCeption to the general rule enacted in Sub section (1) of Section 427 that 'a sentence on subsequent conviction commences on expiry of the first sentence unless the Court directs it to run concurrently.
The meaning and purpose of Sub sections (1) & (2)of Section 427 and the object of en,acting Sub section ?)is, therefore, Clear.
We are not required to say anything regarding the practical.
effect of remission or commutation of the sentences since that question does not arise in the present case.
The limited controversy before us has been indicated.
The only question now is of 'the meaning and effect of the above quoted direction in this Court 's judgment dated 30.9.1983 It is obvious that the direction .of this Court must be con strued to harmonise with Section 427(2) Cr.
P.C. which is the statutory mandate apart from being the obvious truth.
The subsequent sentence of imprisonment for life has, there fore, to run concurrently with the read as sentenceof imprisonment for life awarded to the petitioner.
Thed exercise is to construe the last sentence in the direction which re under: "We, therefore, direct that in case any remission or commutation .in respect of his earlier sentence is grant ed to him the present sentence should commence thereafter.
" It is in the background of this ultimate direction that the proceeding portion has to be read.
This last sentence in the direction means that in case, any remission or commutation is granted in respect of the earlier.
sentence.
of life imprisonment alone then the benefit of that remission or .commutation will not ipso facto be available in respect of the sub.
sequent sentence of life imprisonment which would continue to be unaffected by the remission or commuta tion in respect of the earlier sentence alone.
In other WordS, the operation of the superimposed subsequent sen tence, of life imprisonment shall not be wiped out .merely because in respect of the corresponding earlier sentence of life imprisonment any remission or commutation has been granted by the appropriate authority.
The consequence is that the petitioner would not 'get any practical 'benefit of any remission or commutation respect of his earlier sentence because of the superimposed subsequent life sen tence unless the same corresponding benefit in respect of the subsequent sentence.
is also .granted tO the petitioner.
It is in this manner that the direction is given for the, two Sentences of life impri 751 sonment not to run concurrently.
The ultimate direction contained in the last sentence is obviously for this purpose.
So construed the direction of this Court in the judgment dated 30.9.1983 in Criminal Appeal No. 418 of 1982 fully harmonises with Section 427(2) Cr.
P.C. This is the clarification we make of this Court 's judgment dated 30.9.
1983 in Criminal Appeal No. 4 18 of 1982.
We have already stated that this petition 'for the issuance of a writ Under Article 32 of the Constitution is untenable.
We have, there ' fore, treated it as a petition for clarification of the judgment dated 30.9.1983 in Criminal Appeal No. 418 of 1982.
Accordingly, the petition is disposed of with this clarifi cation.
R.P. Petition disposed of.
|
The petitioner who was convicted under section 302 IPC on 6.3.1979 and sentenced to life imprisonment; was also tried for a second murder committed while he was on parole after his conviction and sentence for the first murder, and was convicted under section '303 IPC.
Altering the conviction to one under section 302 IPC, for the second murder this Court sentenced him to life imprisonment instead of death sentence and by its judgment dated 30.9.1983 directed that in case any remission and commutation in respect of his earlier sentence 'was granted, the latter sentence should commence thereafter.
The petitioner filed a writ petition under Article 32 of the Constitution.
praying for his release on the ground that both the life sentences had to run concurrently in accord ance with section 1427(2) Cr. P.C., and as he had undergone 14 years sentence of imprisonment with remissions at the time of filing the writ petition on .February 19, 1990, he was entitled to be released. 'It was contended that this Court 's direc, tion dated 30.9.83 was .contrary to section 427(2) of the Code of Criminal 743 Procedure, 1973 since it amounted to directing that the two sentences of life imprisonment were to run consecutively and not concurrently.
On behalf of the respondents it was contended that the direction of this Court, properly construed, was not contrary to.s.
427(2) Cr.
P.C. and, therefore, the question of issuing any writ or directions as claimed by the peti tioners did not arise.
Disposing of the petition treating it as one for clari fication of the judgment dated 30.9.1983 this Court, HELD: 1.1 A sentence of transportation for life or imprisonment for life must prima facie be treated as trans portation or imprisonment for the whole of the remaining period of the convicted person 's natural life unless the remaining sentence is 'commuted or remitted by the appropri ate authority.
This being so at the stage of sentencing by the Court on a subsequent conviction, the earlier sentence of imprisonment for life must be understood in this manner and, therefore, there can b no question of a subsequent sentence of imprisonment for a term or for life running consecutively which is the general rule laid down in sub s (1) ors.
427, Cr.
P.C. [747G; 749D E] 1.2 The earlier sentence of imprisonment for life being under stood to mean as sentence to serve the remainder of life in prison unless commuted or remitted by the appropri ate authority and a person having only one life span, the sentence on a subsequent conviction of imprisonment for a term or imprisonment for life as envisaged by section 427(2) of the Cr.
P.C., can only be superimposed to the earlier life sentence and certainly not added to it since extending the life span of the offender or for that matter anyone is beyond human might.
[749F G] It cannot be said that a sentence of life imprisonment is to b treated asasentence of imprisonment for a fixed term.
[748B] Gopal Vinayak Godse vs The Stateof Maharashtra & Ors., ; and MaruRam vs Union of India & Anr., ; , followed.
2.1 The operation of the superimposed subsequent sen tence of Iife imprisonment should not be wiped out merely because in respect of to correspondingI earlier sentence of life imprisonment any remission or commutation was granted by the appropriate.authority.
[75lF G] 744 2.2 In the instant case, the last sentence in the direc tion meant that in case, any remission or commutation was granted in.
respect.
of the earlier sentence of life impris onment alone then the benefit of that remission or commuta tion would not ipso facto be available in respect of the subsequent sentence of life imprisonment which would contin ue to be unaffected by the remission or commutation in respect of the earlier sentence alone.
The consequence would be that the petitioner would not get any practical benefit of any remission or commutation in respect of his earlier sentence because of the superimposed subsequent life sen tence unless the same corresponding benefit in respect of the subsequent sentence was also granted to the petitioner.
It was in this manner that the direction 'was given for the two sentences of life imprisonment not to run concurrently.
[750E H; 751A] The subsequent sentence of imprisonment for life had, therefore, to run concurrently with the earlier sentence of imprisonment for life awarded to the petitioner.
[750C D] 3.
The general rule enunciated in sub,section (1) of section 427 Cr.
P.C. is that without the Court 's direction the subsequent sentence will not run concurrently but consecu tively.
[749G] The only situation in which no direction of the Court is needed to make the subsequent sentence run concurrently with the previous sentence iS provided for in sub,section (2) which has been enacted to avoid any possible controversy based on sub,section (1) if there being no express direction of the Court to that effect.
[749G H; 750A] Sub,section (2) is in the nature of an exception to the general rule enacted under sub section (1) of section 427 0Cr.
P.C. [T50A] 4.1 The mandatory minimum of 14 years ' actual imprison ment prescribed by section 433A Cr.
P.C. which has supremacy over the Remission Rules and short sentencing statutes made by the various States would not operate against those whose cases were decided by the trial court before the 18th Decem ber, 1978 when section 433A Cr.
P.C. 'came into force but the section would apply to those sentenced by the trial court after 18.12.1978 even though the offence was committed prior to that date.
[748D E] Maru Ram vs Union of India & Anr., ; , followed.
745 4.2 In the instant case, section 433A Cr.
P.C. was applicable to petitioner in respect of both sentences of life imprison ment since the conviction by the trial court even for the first murder was after 18.12.1978, the second offence itself being committed after 18.12.1978.
The mandatory minimum of 14years ' actual imprisonment as required by section 433A even for the first sentence of life imprisonment was not served out by the petitioner, and, therefore, irrespective of the points raised in the instant petition on the basis of section 427(2) Cr.
P.C. the petitioner could not claim relief much less a writ under Article 32 of the Constitution in the absence of the remaining sentence being remitted by the Government.
[748E G] 5.
The petitioner 's incarceration was the result of a valid judicial order and, therefore, there could be no valid claim to the infringement of any fundamental right which alone could be the foundation for a writ under Article 32 of the Constitution.
[747E F]
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6807.txt
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Civil Appeal No. 692 & 693 of 1981.
From the Judgment and Order dated 19.5.1980 of the Delhi High Court in W.P. Nos.
883 of 1978 and 1079 of 1979.
R.K. Habbu, R.B. Hathikhanwala and B.R. Aggarwala for the Appellants.
Soli J. Sorabjee, Attorney General (NP), Kapil Sibal, Additional Solicitor General, Ms. Indu Malhotra, P. Parmeshwaran and C.V.Subba Rao for the Respondent.
The Judgment of the Court was delivered by RANGANATHAN J.
These two appeals involve a common question and can be disposed of by a common judgment.
The question is whether the appellant companies (hereinafter referred to as the 'assessees ') are entitled to full "draw back ' of the customs duty which they had paid on the import of di methyl terephthalate (shortly referred to as 'DMT ') for manufacture of polyester staple fibre yarn.
The assessees converted the DMT into polyester staple fibre in their factory at Thane and then sent it to Bhilwara in Rajasthan where the Rajasthan Spinning and Weaving Mills blended it with indigenous viscose staple fibre to spin out certain varieties of blended yarn.
It is common ground that the product manufactured by this process was exported by the assessees to Imperial Chemical Industries Pvt.
Ltd. Singapore, who had supplied the DMT free of charge to the assessees.
The answer to the question revolves around the interpretation of Section 75 of the read with the Customs and Central Excise Duty Draw Back Rules, 1971.
291 Section 75 of the empowers the Central Government, by notification in the official gazette, to direct, in respect of goods of any class or description manufactured in India and exported to any place outside India, that draw back should be allowed of the duties of customs chargeable under the Act on any imported materials of a class or description used in the manufacture of such goods, in accordance with and subject to the rules framed under sub section (2) of the said section.
Sub section 2, which confers a rule making power, enacts that such rules may, among other things, provide: "(a) for the payment of draw back equal to the amount of duty actually paid on the imported materials used in the manufacture of the goods or as is specified in the rules as the average amount of duty paid on the materials of that class or description used in the manufacture of export goods of that class or description either by manufacturers generally or by any particular manufacturer;" There is a similar provision in section 37 of the Central Excises & Salt Act, 1944 enabling grant of draw back of the excise duty paid in relation to such manufacture.
The Central Government framed the Customs and Central Excise Duties Drawback Rules, 1971 (hereinafter referred to as 'the rules '), in exercise of the powers conferred on it under these two statutes.
These are composite rules under the above two provisions and enable drawback being availed of in relation to customs duty as well as in relation to duties of central excise.
Some relevant provisions of these rules may be quoted here.
Rule 3, in so far as it is relevant for our present purposes, reads as follows: Rule 3: Drawback: (1) Subject to the provisions of (a) the (52 of 1962) and the rules made thereunder.
(b) the (1 of 1944) and the rules made thereunder, and (c) these rules, (a) drawback may be allowed on the export of goods specified in Schedule II at such amount, or at such rates, as 292 may be determined by the Central Government.
xxx xxx xxx (2) In determining the amount or rate of drawback under this rule, the Central Government shall have regard to: (a) the average quantity or value of each class or description of the materials from which a particular class of goods is ordinarily produced or manufactured in India.
(b) the average quantity or value of the imported materials or excisable materials used for production or manufacture in India of a particular class of goods.
(c) the average amount of duties paid on imported materials or excisable materials used in the manufacture of semis, components, and intermediate products which are used in the manufacture of goods.
(d) the average amount of duties paid on materials wasted in the process of manufacture and catalytic agents: Provided that if any such waste or catalytic agent is used in any process of manufacture or is sold, the average amount of duties on the waste or catalytic agent so used or sold shall also be deducted.
(e) the average amount of duties paid on imported materials or excisable materials used for containing or packing the exported goods.
(f) the average amount of duties of excise paid on the goods specified in Schedule 1: and (g) any other information which the Central Government may consider relevant or useful for the purpose.
Rule 4.
Revision of rates: The Central Government may revise the amounts or rates determined under rule 3.
xxx xxx xxx 6.
Cases where amount or rate of drawback has not been determined: 293 (1)(a) Where no amount or rate of drawback has been determined in respect of any goods, any manufacturer or exporter of such goods may, before exporting such goods, apply in writing to the Central Government for the determination of the amount or rate of drawback therefor stating all relevant facts including the proportion in which the materials or components are used in the production or manufacture of goods and the duties paid on such materials or components.
(b) On receipt of an application under clause (a) the Central Government shall after making or causing to be made such inquiry as it deems fit, determine the amount or rate of drawback in respect of such goods.
Cases where amount or rate of drawback determined is low (l) Where in respect of any such goods, the manufacturer or exporter finds that the amount or rate of drawback determined under rule 3 or, as the case may be, revised under rule 4 for that class of goods is less than three fourths of the duties paid on the materials or components used in the production or manufacture of the said goods, he may make an application in writing to the Central Govermment for fixation of the appropriate amount or rate of drawback stating all relevant facts including the proportion in which the materials or components are used in the production or manufacture of the goods and the duties paid on such materials or components.
(2) On receipt of the application referred to sub rule (1) the Central Government may, after making or causing to be made such inquiry as it deems fit, allow payment of drawback to such exporter at such amount or at such rate as may be determined to be appropriate if the amount or rate of drawback determined under rule 3 or, as the case may be, revised under rule 4, is in fact less than three fourth of such amount or rate determined under this sub rule.
Schedule II to the notification by which the rules were promulgated listed the items the export of which entitles an assessee to avail of the drawback facility.
Item 25 of the list reads thus: "Synthetic and regenerated fibre, textile yarn, thread, twines, cords and ropes 294 It is common ground that the goods exported by the assessees fall under item 25 above.
There is also no controversy that the DMT imported by the assessees was used for the manufacture of the above commodity and that, on the import of the DMT, the assessees have paid customs duty.
The rates of drawback available in respect of various goods were notified by the Central Government in due course.
Against serial no 25, the notification set out the rates of drawback as follows: Serial Sub Si.
Description of Rate of No. No. goods Drawback 25.
SYNTHETIC AND REGENERATED FIBRES AND/TEXTILE YARN/ THREAD, TWINES, CORDS AND ROPES Brand rate to be 2501 Synthetic and regenerated fixed on an fibre and textile yarn, application from thread, twines, cords and the individual ropes not elsewhere manufacturer specified.
exporter.
2502 (a) Yarn of above 21 BWS Counts or above 14 n.f. counts, spun wholly out of either viscose rayon fibre or acetate fibre or polyster fibre, polyamide fibre or acrylic fibre or wool, or from a combination of two and not more than two of the above mentioned fibres, or a combination of any one of the above mentioned fibres with either cotton or silk (but excluding yarn spun out of fibres obtained from fibre wastes, yarn waste or fabric wastes, by gernetting or by any other process: (a) Cellulosic fibre content: Rs. 1.80 (Rupees one and paise eighty only) per kg.
295 (b) Polyester fibre content: Rs.43.15 (Rupees forty three and paise fifteen only) per kg.
(c) Acrylic fibre content: Rs.37.75 (Rupees thirty seven and paise seventy five only) per kg.
(d) Polyamide fibre content: Rs. 16.40 (Rupees Sixteen and paise forty only) per kg.
(e) Wool contents: (i) in the worsted yarn of Rs. 18.95 (Rupees Weaving quality made wool Eighteen and paise top.
ninety five only) per kg.
(ii) in the worsted yarn of Rs. 13.55 (Rupees weaving quality not made from Thirteen and paise fifty wool top.
five only) per kg.
(iii) in the worsted Hosiery Rs. 16.65 (Rupees Sixteen yarn and worsted hand knitting and paise sixty five yarn made from wool top.
only) per kg.
(iv) in the worsted hosiery yarn Rs.11.25 (Rupees Eleven and worsted hand knitting yarn and Paise twenty five not made from wool top.
only) per kg.
(v) Bye content if the yarn is Rs.0.85 (Eighty five dyed paise only) per kg.
xxx xxx xxx It will be seen from the above table that the assessees are entitled to a drawback of Rs.43.15 per kg.
of the polyester fibre content of the yarn exported by them.
We are informed that this is the rate of central excise duty payable in respect of the manufacture of yarn having polyester fibre content.
For reasons to be stated presently, the assessees had to pay no central excise duty for the manufacture and hence there was admittedly no question of the assessee getting a drawback to this extent.
The point raised by the assessee is that, having paid customs duty on the DMT , it was entitled to a drawback in respect of the customs duty paid by it on the DMT.
Since this was not included in the notification of the Central Government, the assessees made an application to the Ministry of Finance on 23.3.1977 requesting that drawback of the entire customs duty may be sanctioned.
This request, 296 however, was rejected by the Central Government by a communication dated 12.3.1978.
This communication was in the following terms: "Under Rule 3 of the Customs and Central Excise Duties Drawback Rules 1971, all industry rates of drawback on polyester viscose blended yarn have been determined and announced under serial No. 2502 of the Drawback Schedule.
The said rates have been determined at the material time, after taking into consideration: (a) duty incidence of raw materials used in the manufacture of viscose fibre, plus the Central Excise duty on viscose fibre and (b) the Central Excise duty on polyester fibre in respect of polyester yarn.
However, no raw material duty for manufacture of polyester yarn was taken into account, as the same (DMT) is available indigenously and is exempted from Central Excise Duty.
For the rates determined effective from 18.8.1977 however the duty incidence on DMT has also been taken into consideration on the basis of weighted average of imported and indigenous material.
" The assessees, dissatisfied with this decision of the Central Government, preferred a writ petition in the Delhi High Court, which was dismissed by the High Court on 19.5.80.
Hence the present appeals.
At this stage, it may be necessary to outline some facts which may be relevant for appreciating the background in which the assessees ' counsel urged strongly the equitable, if not also legal, claims of the appellant for the drawback of the customs duty.
Counsel claims that the assessees were almost the first group of entrepreneurs in India to manufacture polyester fibre yarn.
They had been fortunate enough to obtain a contract from the Imperial Chemical Industries, Singapore.
By a letter dated 2.4.75 this concern agreed to supply free of cost the DMT required for the manufacture of blended yarn consisting of 67 per cent polyester and 33 per cent viscose fibre.
The DMT was to be converted in polyester fibre, blended with viscose indigenously and shipped to a customer of the ICI in Sri Lanka.
Thereupon, on 2.6.75, the assessees obtained customs clearance permits for import of 392 tons of DMT and also of 178 tons of viscose staple fibre.
Eventually, however, the viscose staple fibre was obtained indigenously and the import permit, to this extent, was not utilised by the assessee.
At the 297 time of obtaining this permit, the assessees also obtained permission to convert the imported DMT into polyester fibre under customs bond.
The condition attached to the Customs Clearance permit was in the following terms: "The firm will convert the imported DMT into polyester fibre under Customs bond.
The firm will then move the polyester fibre so manufactured and the imported viscose staple fibre under bond to the bonded warehouse of Rajasthan Spinning and Weaving Mills, Bhilwara Messrs. Rajasthan Spinning and Weaving Mills will then manufacture under bond polyester viscose yarn on behalf of the firm.
The polyester viscose fibre yarn will then be exported by the firm to the overseas buyers who have supplied the DMT and viscose staple fibre on CCP basis or their nominees. .
If these conditions had been fulfilled the assessees would have had no problems.
The polyester fibre would have been manufactured under customs bond and this would have obviated payment of customs duty by the assessees.
So also, the production of the blended yarn at the Rajasthan Spinning and Weaving Mills would have been under Central excise supervision and no excise duty would have been payable on the manufacture.
Unfortunately, however, the customs authorities were not in a position to permit the conversion of the DMT into polyester fibre under customs bond for reasons which are not at present relevant and which are not being challenged in these proceedings.
The assessees 's request for the manufacture of polyester fibre under: customs bond was declined by the customs authorities on 2.4.1976.
Perhaps anticipating this difficulty, the Association of Polyester Staple Fibre Manufacturers at Bombay made an application to the Central Government on 26.3.1976 praying for exemption from customs duty on DMT required for the manufacture of polyester staple fibre.
This letter points out: "Members of this Association manufacture polyester staple fibre.
One of our members has received an advance licence for the import of DMT, a photostat copy of which we attach herewith.
This DMT is to be used for manufacture in polyester fibre and the polyester fibre then converted into yarn to be supplied against export orders.
Our members wish to explore possibility of larger export business in this manner.
Indigenous supplies of both DMT and glycol are 298 insufficient to meet the domestic market requirements and export business can only be done by import of the two materials.
Fulfilling export orders by using advance licences as the one issued to our member poses certain problems because the licence stipulated manufacture under Customs Bond.
You will appreciate the difficulty in manufacturing under bond when the fibre for export constitutes only a portion of the total manufacture of the factory.
If DMT and glycol could be included in the schedule to the customs Notification GSR 183, the procedural difficulties in manufacturing under Bond will not apply.
Exports of yarn made from raw materials obtained against advance licences could earn considerable foreign exchange because of the value added during processing.
One of the assessees also made a similar request and, eventually, a notification was issued on 2nd August, 1976 under section 25 of the exempting DMT from customs duty.
The Government of India also wrote to one of the present appellants on 9.9.76 drawing attention to the said notification and stating that with the issue of this notification.
The assessees ' problem would appear to have been solved.
This, however, was not correct.
The notification exempted future imports of DMT from customs duty but the assessees, having imported the DMT earlier, had to clear the same after paying customs duty thereon.
Hence their request for a drawback of the customs duty already paid by them, the refusal of which has led to the present litigation.
On behalf of the appellants, it is contended that the contains provisions enabling thd Government either to exempt goods under section 25 from the levy of Customs duty at the time of import or failing this, to permit a drawback of customs duty paid in the event of the conditions set out in section 75 being fulfilled.
In the present case, an exemption under section 25 of the was in fact notified but unfortunately this happened only in August, 1976.
By this time, the assessees had already imported the DMT.
This they were obliged to do because of a time bound programme for export of the manufactured fibre to Sri Lanka.
Counsel states that, from the very outset, the assessees had proceeded on the footing that they would be obtaining exemption from customs and excise duty because, apart from getting some conversion charges from the ICI, their own margin of profit on the transaction was not substantial.
That is why even at the time of obtaining the customs clearance permit they had sought for permission to convert DMT into polyester under customs bond.
If that had been 299 done, there would have been no necessity to pay customs duty at all.
Unfortunately, because the department lacked facilities to supervise such an operation, the attempt of the assessees was only partially successful in that they were able to get only the production of the blended fibre done under Central Excise supervision.
The initial stage of conversion from DMT to polyester fibre could not be done under customs bond.
It is pointed out that the Government of India had exempted DMT from customs duty only on the basis of the representations made by the assessees and it is urged that the refusal to grant drawback of customs duty to assessees is wholly unjustified.
The object of section 75 of the , read with section 27 of the Central Excise Act, is obviously to provide that in cases where certain goods are imported for complete utilisation in the manufacture of goods which are exported, the importer should be able to obtain relief in respect of customs and excise duties.
In the present case there is no controversy that the D.M.T. imported by the assessee was utilised for the manufacture of polyester staple fibre and that the final product was fully exported to Sri Lanka.
The notification made under the rules framed for this purpose, however, provides only for a drawback in respect of the excise duty involved in the manufacture of polyester staple fibre but not the customs duty on the raw material actually imported.
Sri Habbu, learned counsel, contends that this notification, in fact, is contrary to the provision contained in rule 3 which obliges the Government, in determining the amount or rate of drawback, to have regard, among other things, to the amount of duties paid on imported or excisable material used in the manufacture of the exported goods.
He submits that, in so far as the rates prescribed by the Central Government do not take into account the element of import duty on DMT, the fixation is not in accordance with the rule.
According to him, therefore, this case 'falls under rule 6 which enables an assessee to apply to the Central Government to determine a drawback where none has been determined.
The Central Government, he submits, was in error in rejecting the assessees ' application as one falling under rule 7 and, therefore not maintainable both in law and equity.
Having heard the learned counsel for the assessees at some length, we are of opinion that the High Court was right in rejecting the assessees contentions.
We think that the assessees ' arguments are based on a basic misapprehension that, under the Acts and rules, a manufacturer is automatically entitled to a drawback of the entire customs and excise duties paid by him if the terms and conditions of 300 section 75 are fulfilled.
Though section 75 of the and section 37 of the Central Excises & Salt Act empower the Government to provide for the repayment of the customs and excise duties paid by individual manufacturers also, the rules as framed (rule 3 in particular) provides only for a refund of the "average amount of duty paid on materials" of any particular class or description of goods used for the manufacture of export goods of that class or description by manufacturers generally, except to the extent prescribed under rule 7 (to be noticed presently).
The rules do not envisage a refund of an amount arithmetically equal to the customs duty or central excise duty which may have been actually paid by an individual importer cum manufacturer.
If that had been the statutory intendment, it would have been simple to provide that in all cases where imported raw materials are fully used in the manufacture of goods which are exported, the assessee would be entitled to a drawback of the customs or excise duties paid by him for the import or on the manufacture.
On the other hand, section 75(2) requires the amount of drawback to be determined on a consideration of all the circumstances prevalent in a particular trade and the fact situation relevant in respect of each of various classes of goods imported and manufactured.
The need for providing an elaborate process of determination as envisaged in rule 3 is this.
There may be different manufacturers of a particular manufactured item.
Some of them may be using indigenous material and some may be importing some of the raw material.
Similarly, in the process of manufacture also, there may be difference between manufacturer and manufacturer.
That is why the drawback rules provide for a determination of the drawback after taking into account the "average" amount in respect of each of the various items specified in rule 3 in relation to each type of goods listed in Schedule II.
The notification issued also determines the composite drawback available in respect of both customs and excise duties to importers cum manufacturers in respect of various categories of goods.
In other words, the amount of drawback is not intended to be the amount of the duties that may have been paid by individual manufacturers; it is to be determined by considering the overall position prevalent in the country in respect of each of the categories of trade in the goods specified in Schedule II.
We think that, if this basic principle is understood, the decision of the Govermment would become intelligible and rational.
There is no controversy that, in this case, the goods exported fall under item 25.
Learned counsel sought to contend that the goods here fall under sub item 2501 but this is clearly untenable.
Sub item 2501 represents a residuary category which will not be attracted to the 301 goods here which clearly fall under sub item 2502.
The notification prescribes different amounts of drawback under this it@m depending on the composition of the yarn and the nature of its contents.
It specifies an amount of Rs.43.15 per Kg.
as the relief by way of drawback available against the goods with which we are concerned which fall under clause (b) of item 2502.
This much indeed, was conceded before the High Court.
Once we understand the principles on which and the scheme according to which the rates of drawback are to be and are determined as explained earlier, the plea of the appellants, that the amount of drawback determined is nothing more than the excise duty payable on manufacture of blended fibre with polyester fibre, content and that the notification has erred in overlooking the customs duty paid on imported DMT, is wholly untenable.
We say this for two reasons.
First, the rates prescribed constitute a composite rate of drawback fixed having regard to the liabilities under the as well as the Central Excises & Salt Act.
It would not be correct, in principle, to bifurcate the amount so fixed into its two constituents and to say, merely because the amount fixed is equal to one of the duties, that the other has not been taken into account.
In theory, the drawback determined could have taken into account both sets of duties in part only.
It cannot be said to be merely the customs duty drawback or central excise duty drawback.
Though it does appear that the various rates of drawback prescribed under item 2502 are equal to the rates of excise duty payable on the manufacture of the various items referred to therein, the nature of exemption granted is one of relief under both enactments.
It is immaterial whether this quantum of relief benefits the assessee in respect of one or other or both of the levies which he has to discharge.
The attempt to identify and correlate the rebate granted to the central excise duty paid does not therefore appear to be correct in principle.
But, this ground apart, we think there is force in the point made by the learned counsel for the Union of India and accepted by the High Court that at the time when these drawback rates were fixed, the Government of India took into account both the import duty as well as the excise duties which would be payable on the manufacture of the goods the export of which was intended to be encouraged.
After examining the condition in the trade, it was found that D.M.T. was easily available in India at that time and that, therefore, it would not be necessary to grant any relief in respect of drawback of customs duty on the imported material because that would only result in assessees 302 attempting unnecessarily to import a raw material which was available in the country itself.
In fact, this is the aspect on which the Delhi High Court has laid considerable emphasis.
Learned counsel for the appeallants contends that this is factually and that this is clearly shown by the very fact that Government of India itself, in August, 1976, decided to grant exemption in respect of customs duty for the import of D.M.T. He submits that if D.M.T. had been easily available indigenously at that time, the question of granting exemption under section 25 would not have appealed to the Government at all.
He, therefore, submits that, in fixing the rate of drawback the Central Government had proceeded on the footing that no import duty would be payable on the DMT and that it will be sufficient to grant relief in respect of Central excise duty alone.
We find that, on this aspect, the position is not so simple as submitted by the learned counsel for the appellants.
We have already extracted reply of the Government of India to the assessees ' representation which clearly mentions that DMT is available indigenously and that, therefore, no duty in manufacture of polyester yarn was taken into account.
This is a statement of fact and there is no material placed before us to contradict the same except for the cor respondence referred to earlier.
If one looks carefully at the corres pondence, one will find that it does not support the assessees 'case.
For one thing the memorandum submitted by the Association of March 1976 itself proceeds on the footing that DMT is available locally but not sufficient to meet the domestic market requirments.
This, clearly, is a reference to something which happened after the present appellants had imported their goods and started the manufacture.
Indeed, it is their claim that they were fore runners in this field.
Fol lowing up on the assessees ' attempt to obtain imports of DMT and exporting the goods manufactured, other polyester staple fibre manufacturers also proposed to explore the possibilities of such imports and exports and what the letter says would only appear to be that the indigenous supplies of DMT and Glycol may not be enough to meet the domestic market requirements if the business is so expanded.
By the time the notification fixing the rates was issued, import duty on DMt had been removed and, therefore, there was no purpose in granting a drawback of customs duty.
In these circumstances, the customs duty was rightly not taken into account in fixing the rate of drawback.
The letter of the Government dated 9.9.76 is only an answer to the assessees ' prayer that its problem may be solved by granting an exemption for DMT from customs duty and refers only to the position after the notification of exemption.
It is not reply to the assessees ' representation in respect of the past which was filed only much later in 1977.
The correspondence in the case is, therefore, of no 303 help to the assessees.
It may also be pointed out that the assessees appear to have imported DMT not because it was not locally available but only because it was able to get it free of cost from the ICI which was a benefit which other manufacturers, if any, could not have enjoyed.
We are, therefore, of opinion that High Court was right in concluding that the rate of drawback in respect of the goods in ques tion was fixed after taking into consideration the aspect of customs duty payable in respect of DMT and that a conscious decision was taken that no relief in this respect should be granted as DMT was available in the Country itself.
It cannot,therefore, be said that this is a case where the fixation is contrary to the terms of rule 3 and that the assessees ' application for determination of a rate in his case should be taken as an application under rule 6.
Rule 6 is also inapplicable for the reason that an application under rule 6 should be made before the export of the manufactured goods which does not seem to be the case here.
The assessees ' reliance on rule 6, therefore, fails.
It is true the fixation of rates of drawback on the average basis indicated in rule 3 could work hardship in individual cases.
Provi sion for this contingency is made in rule 7.
The assessees ' application was rightly treated as one made under this rule and they could, if at all seek relief only if their case fell within its terms.
This rule, unfortu nately does not provide for relief in every case where an individual manufacture has to pay customs and excise duty to a larger extent than that determined for his class of goods.
Relief is restricted only to cases when the margin of difference is substantial and to the extent specified in rule 7.
The High Court has discussed this point at length and demonstrated, by giving necessary figures, how the assessees ' case does not fulfill the term of the rule and this conclusion is not, in fact, challenged by the learned counsel for the appellants.
The Government was, therefore, right in rejecting the appellants ' request made under section 7 of the Drawback Rules.
For the reasons above mentioned, we agree with the High Court that the order of the Central Government rejecting the assessees 'application was well founded and cannot be interfered with.
Learned counsel for the appellants brings to our notice a manual published by the Directorate of Publication.
Ministry of Finance, Department of Revenue explaining the scope of the rules as well as two notifications issued by the Government on 9.6.1978 and 1.2.1982 respectively and submits that the present case falls within the terms of these notifica tions.
We are constrained to point out that these are notifications issued subsequent to the period of the controversy before us: also this 304 is material which was not placed before the authorities or the High Court.
We, therefore, find ourselves unable to permit the assessee to rely upon them at this late stage.
However, having regard to the circumstances and the subsequent policy in the above rules, we think it is a fit case in which the Central Government could consider whether, on equitable grounds, the assessee can be given relief in respect of the customs duty on DMT paid by it.
In this context, it is worthwhile noting that the assessee saved foreign exchange for the country by importing DMT free of cost.
The entire manufactured product has also been exported and earned foreign exchange.
The appellants also apparently gave impetus to other manufacturers for the export of blended fibre on large scale.
If only the appellants had imported the DMT a few months later, they would have been entitled to exemption from customs duty and would not have suffered the present handicap.
They also did obtain the permission of the Government to convert DMT into polyester fibre under customs bond but this could not be implemented for reasons beyond their control.
Having regard to all these circumstances, it would seem only just and fair that the assessees should not be denied a benefit of which all other persons have since availed of.
We, therefore, think that this is a fit case in which the Government should consider, in case the assessees make an application within two months from today, whether the assessees could be granted the relief prayed for, if only on equitable grounds, and pass appropriate orders on such applications.
With the above observations, these appeals are dismissed.
But in the circumstances, we make no order as to costs.
Y. Lal Appeals dismissed.
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The appellants are manufacturers of Polyester fibre yarn.
They obtained a contract from the Imperial Chemical Industries, Singapore for the supply of the said yarn and the said concern had agreed to supply to the appellants free of cost the di methyl terephthalate (DMT) D required for the manufacture of Polyester staple fibre yarn.
The DMT was required to be converted into polyester fibre, blended with viscose indigenously and shipped to a customer of the ICI in Sri Lanka.
The appellant assessees obtained customs clearance permits for import of 392 tons of DMT and also of 178 tons of viscose stable fibre.
The appellants also obtained permission to convert the imported DMT into polyester fibre under customs bond.
The appellants imported the DMT and paid the customs duty in respect thereof Section 75 of the empowers the Central Government to allow the drawback of the duties of customs chargeable under the Act on any imported materials of a class or description in the manufacture of such goods in accordance with and subject to the rules under sub section (2).
There is an identical provision in section 37 of the Central Excises & Salt Act, 1944 enabling grant of draw back of the excise duty paid in relation to such manufacture.
The Central Government framed the Customs and Central Excise Duties Drawback Rules 1971 enabling drawback being availed of in relation to customs as well as in relation to duties of central excise.
Schedule II to the notification listed the items the export of which entities an assessee to avail of the drawback facility.
DMT as such was not included in the notification in respect of which drawback could have been availed of by the assessees.
The assessee therefore made an application to the Ministry of Finance on 23.3.1977 requesting that since it had paid customs duty on DMT, it was entitled to its drawback, more 289 particularly when its request for the manufacture of the polyester fibre under customs bond had been declined by the customs authorities.
The application filed by the appellants was rejected bY the Central Government on 12.3.1978, though on a representation made by the Members of the Association of manufacturers of Polyester staple fabric a notification had been issued on 2.8.76 under Section 25 of the Customs Act B exempting DMT from Customs duty.
The appellant thereupon filed writ petition in the Delhi High Court which was dismissed by the High Court.
Hence these appeals.
Dismissing the appeals, but recommending to the Central Government to consider the case of the appellants on equitable grounds whether the relief could be granted to it, this Court, HELD: Though Section 75 of the and Section 37 of the Central Excises & Salt Act 1944 empower the Government to provide for the repayment of the customs and excise duties paid by individual manufacturers also, the rules as framed (rule 3 in particular) provide only for a refund of the 'average amount of duty paid on materials, of any particular class or description of goods used for the manufacture of export goods of that class or description by manufacturers generally, except to the extent prescribed under rule 7.
[30OA B].
The rules do not envisage a refund of an amount arithmeticaly equal to the customs duty or central excise duty which may have been actually paid by an individual importer cum manufacturer.
If that had been the statutory intendment, it would have been simple to provide that in all cases where imported raw materials are fully used in the manufacturers of goods which are exported, the assessee would be entitled to a draw back of the customs or excise duties paid by him for the import or on the manufacture.
[300C] There is no controversy that, in this case, the goods exported fall under item 25.
R was sought to be contended that the goods fall under sub item 2501, but this is clearly untenable.
Sub item 2501 represents a residuary category which will not be attracted to the goods which clearly fall under sub item 2502.
The notification prescribes different amounts of drawback under this item depending on the composition of the yarn and the nature of its contents.
It specifies an amount of Rs.43.15 per kg.
as the relief by way of drawback available against the goods with which we are concerned which fall under clause (b) of item 2502.
[30OH 301B] 290 The High Court was right in concluding that the rate of drawback in respect of the goods in question was fixed after taking into consideration the aspect of the customs duty payable in respect of DMT and that a conscious decision was taken that no relief in this respect should be granted as DMT was available in the country itself.
It cannot therefore, be said that this is a case where the fixation is contrary to the terms of rule 3, and that the assessee 's application for determination of a rate in his case should be taken as an application under rule 6.
[303B) Rule 6 is also inapplicable for the reason that an application under rule 6 should be made before the export of the manufacturer 's goods which does not seem to be the case here.
[303C]
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6654.txt
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:Civil Appeal No. 1970(NT) of 1975 & 855(NT)/1975.
From the Judgment and Order dated 22.4.1974 of the Allahabad High Court in Civil Miscellaneous Writ No. 152 of 1974 Dr. V. Gauri Shankar, Miss A. Subhashini and K.C. Dua for the Appellants.
S.C. Manchanda, Ms. section Janani, Mrs. Urmila Kapoor and Ms. Meenakshi for the Respondent.
The Judgment of the Court was delivered by MISRA, J.
Civil Appeal No. 1970 of 1975 is by the Reve nue by certificate of the High Court while the other is an appeal by the assessee by special leave.
Both arise out of the same judgment of the Allahabad High Court dated 22.4.1974 in an application under article 226 of the Constitu tion by the assessee challenging the notices issued under section 148 read with sections 142(1) and 143(2) of the Income Tax Act of 1981, all dated 7th of March, 1973 relating to the assess ment year 1965 66.
The notice under section 148 was on the basis of three cash credit entries dated 22nd of August, 1964 from Messrs Meghraj Dulichand, Messrs Associated Commercial Organisation Private Limited and Messrs Laxminarain Atmaram, the first two being for a sum of Rs. 30,000 each and the last one for a sum of Rs.40,000.
The High Court ultimately found: "The result is that the notice dated 7th March 1973, was within jurisdiction only in regard to the cash credit entry from the firm Meghraj Dulichand of Calcutta.
In regard to the other two transactions, the case did not fall within the purview of clause (a) of section 147.
607 As seen above, the Income Tax Offi cer had no material in his possession on the basis of which he could have reason to believe (mere suspicion apart) that income had escaped assessment.
For this reason the case was not covered by clause (b) of section 147 either.
In regard to those two items the notice was totally without jurisdiction.
The Income Tax Officer had no jurisdiction to re open the assessment in respect of these two cash credit entries.
In this view it is unnecessary to decide whether the notice was barred by time on the footing that it was covered by clause (b) to section 147.
In the result, the petition succeeds and is allowed in part.
The respondent Income Tax Officer is directed not to re open the assessment of the petitioner firm for the assessment year 1965 66 in relation to the cash credit entries of Rs.30,000 from M/s. Associated Commercial Organisation Private Ltd. and of Rs.40,000 in respect of M/s. Laxminarain Atmaram.
" The appeal by the Revenue is in relation to the two transactions totaling Rs.70,000 and the appeal by the asses see is in regard to the remaining one in respect of a sum of Rs.30,000.
Dr. Gouri Shankar appearing for the Revenue has contended that it was not for the High Court to go into the question as to whether the notice under section 148 of the Act was partly valid and partly not because if the Income Tax Officer proceeded to issue notice under section 148 of the Act for reopening the assessment, he would require the assessee to furnish a fresh return and the entire assessment proceed ing has to be re done after the assessee furnishes the return.
In the present case, along with the notice under section 148 of the Act the Income Tax Officer did call upon the assessee to furnish a return as required under section 142 of the Act.
That notice casts an obligation on the assessee to make a fresh return and therein it was obliged to make a complete disclosure of its income in accordance with law and it was open to the Income Tax Officer to examine not only the three items referred to in the notice but also whatever came within the legitimate ambit of an assessment proceeding.
This being the legal position, Dr. Gouri Shankar for the Revenue contends, once the High Court sustained the notice in respect of a sum of Rs.30,000 that gave full jurisdiction to the Income Tax Officer to reopen the assessment and take to a fresh assessment proceeding.
The High Court should not have examined the tenability of the assessee 's 608 contenton in regard to the two transactions of Rs.30,000 and Rs.40,000 and that aspect should have been left to be con sidered by the Income Tax Officer while making the reassess ment.
A Division Bench of the Punjab High Court in Commission er of Income Tax, Punjab, Himachal Pradesh & Bilaspur, Simla vs Jagan Nath Maheshwary, examined this aspect of the matter with reference to a proceeding for reassessment under section 34 of the earlier Act of 1922 and came to hold: "When a notice is issued under section 34 based on a certain item of income that had escaped assessment, it is permissible for the Income tax authorities to include other items in the assessment, in addition to the item which had initiated and resulted in the notice under section 34." A Division Bench of the Andhra Pradesh High Court in Pulavarthi Viswanadham vs Commissioner of Income Tax, Andhra Pradesh, considered the same position with refer ence to section 34 of the earlier Act.
After extracting the two clauses in sub section
(1) of section 34, the Court held: "It is immediately plain that when once the Income tax Officer reaches the conclusion on the material that is before him that there has been a non disclosure as regards part of the income, profits or gains chargeable to income tax by the assessee, he is entitled to issue a notice either under clause (a) or (b), as the case may be, under section 22(2) of the In come tax Act." After extracting section 22(2) the High Court proceeded to say: "What emerges from sub section (2) of section 22 is that when once an assessee is required to submit a return of his income, he is obliged to disclose the totality of his in come.
The question that falls to be decided on the language of these two sections is whether after notice is issued under section 34(1)(a) the assessment should be limited to items which escaped assessment by reason of the failure on the part of the assessee to dis close all his income, profits or gains which are subject to tax.
The contention of learned counsel for the assessee is that having regard to the terms of clause (b) it was not within the powers of the Income tax 609 Officer to bring to charge such of the items as have escaped from being taxed without any remissness on his part.
It is only items that escaped assessment due to omission or failure of the assessee that come within the range and sweep of section 34, continues learned counsel for the assessee.
We do not think that we can accede to this proposition.
When once the assessment is reopened, no distinction could be made between items falling under clause (a) and those coming within the pale of clause (b).
As pointed out by a Division Bench of this Court in R.C. No. 12 of 1960 (Parimisetti Seetharamamma vs Commissioner of Incometax, , to which one of us was a party: " . . when once an assessment is reopened under section 34, the Income tax Officer proceeds de novo under the relevant sections of the Income tax Act, i.e., he issues notice under section 22(2) and proceeds to assess the assessee.
He has to follow the same procedure as in the case of the first assessment as is clear from the clause in section 34 and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that subsection.
The proceedings under section 34 must be deemed to relate to proceedings which commence with publication of notice under section 22(1).
" The view taken by the two High Courts has been supported by this Court in V. Jaganmohan Rao & Ors.
vs Commissioner of Incometax & Excess Profits Tax, Andhra Pradesh, There, repelling the same argument on behalf of the assessee this Court said: "This argument is not of much avail to the appellant because once proceedings under section 34 are taken to be validly initiated with regard to two thirds share of the income, the jurisdiction of the Income tax Officer cannot be confined only to that portion of the income.
Section 34 in terms states that once the Income tax Officer decides to reopen the assessment he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under section 22(2) and may proceed to assess or reassess such income, profits or gains.
It is, therefore, manifest that once assessment is reopened 610 by issuing a notice under sub section (2) of section 22 the previous under assessment is set aside and the whole assessment proceedings start afresh.
When once valid proceedings are started under section 34(1)(b) the Income tax Officer had not only the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year.
" No serious effort, however, was made by Mr. Manchanda appearing for the assessee respondent to counter this sub mission advanced on behalf of the Revenue.
Accepting the legal position indicated in these cases we come to the conclusion that it was not for the High Court to examine the validity of the notice under section 148 in regard to the two items if the High Court came to the conclusion that the notice was valid at least in respect of the remaining item.
Whether the Income Tax Officer while making his reassessment would take into account the other two items should have been left to be considered by the Income Tax Officer in the fresh assessment proceeding.
With this conclusion the decision of the High Court would ordinarily have been reversed.
As we have already stated, the assessee has also appealed against that part of the judgment of the High Court which was adverse to it.
Mr. Manchanda contended that in this case the regular assessment had been made for the assessment year 1965 66 on 22.1.1966.
Notice under section 147 of the Act was issued on 7th of March, 1973, i.e., more than seven years after the assessment had been completed.
The three amounts mentioned in the notice under section 148 of the Act were found in the assessee 's accounts by the Income Tax Officer when he exam ined the same in course of the assessment proceedings.
We had called upon the assessee to substantiate the genuineness of the transactions and the assessee had produced material to support the same.
The Income Tax Officer accepted the documents produced and treated all the three transactions to be genuine and on that footing completed the assessment.
The primary facts were before the Income Tax Officer at the time of the regular assessment and he called upon the assessee to explain to his satisfaction that the entries were genuine and on the basis of materials provided by the assessee satisfaction was reached.
It was then open to the Income Tax Officer to make further probe before completing the assess ment if he was of the view that the material provided by the assessee was not sufficient for him to be satisfied that the assessee 's contention was correct.
This Court in Calcutta Discount Company Limited vs I. T. 0., held that the expression 'Material facts ' used in el.
(a) 611 referred only to primary facts and the duty of the assessee was confined to disclosure of primary facts and he had not to indicate what factual or legal inferences should properly be drawn from the primary facts.
In the facts appearing on the record we are in agreement with Mr. Manchanda that cl.
(a) of section 147 did not apply to the facts of the case as the alleged escapement of income for assessment had not resulted from failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that year.
The notice in the instant case did not indi cate whether it was a case covered by cl.
(a) or cl.(b).
On our finding that cl.
(a) was not invokable, the power under cl.
(b) could be called in aid under section 149(1)(b) of the Act within four years from the end of the relevant assessment year.
Admittedly, the notice has been issued beyond a period of four years and, therefore, the notice itself was beyond the time provided under the law.
On the facts appearing in the case the High Court overlooked to consider this aspect of the matter.
Since the proceedings before the High Court were under article 226 of the Constitution and not by way of reference under the Act, the jurisdiction of this Court is not advisory and confined to the questions referred for opinion.
On the facts we are satisfied that ends of justice require our intervention and we would accordingly allow the appeal of the assessee by holding that the notice under section 148 of the Act cannot be sustained in law for the reasons indicated above.
The appeal by the assessee is allowed and the appeal by the Revenue is dismissed.
The notice under section 148 of the Act is quashed.
Both parties are directed to bear their respec tive costs throughout.
G.N. Appeal by the assessee is allowed and Appeal by the revenue is dismissed.
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In respect of assessment year 1965 66, the Income tax Officer issued notices to the assessee under section 148 read with sections 142(1) and 143(2) of the Act on the ground that income has escaped assessment in respect of three cash credit entries totaling Rs. 1 lakh.
The assessee challenged the notices by way of writ petitions before the High Court.
The High Court gave a finding that the notice was within jurisdiction only in respect of an entry of Rs.30,000 and in respect of the other two entries viz. Rs.40,000 and Rs.30,000 it directed the Income tax Officer not to reopen the assessment.
These two appeals are against the High Court 's judgment.
The appeal by ReVenue, by certificate, is in respect of the two entries of Rs.40,000 and Rs.30,000 and the other appeal of the assessee, by special leave, is in respect of the entry of Rs.30,000.
On behalf of the Revenue, it was contended that once the High Court sustained the notice in respect of a sum of Rs.30,000, that gave full jurisdiction to the Income tax Officer to reopen the assessment and that the High Court should not have examined time tenability of the assessee 's contention in regard to the two transactions of Rs.30,000 and Rs.40,000 and that aspect should have been left to be considered by the Income tax Officer while making the reas sessment.
The contention of the assessee was that the notice was issued more than 7 years after the assessment was completed and was also beyond the period of limitation, viz., four years, that the escapement of the income from assessment had not resulted from failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.
605 Allowing the appeal of the assessee, and dismissing the appeal by the Revenue.
HELD: 1.
The notice issued under section 148 of the Act is quashed.
It was not for the High Court to examine the valid ity of the notice under section 148 in regard to the two items if the High Court came to the conclusion that the notice was valid at least in respect of the remaining item.
Whether the Income tax Officer while making the reassessment would take into account the other two items, should have been left to be considered by the Income tax Officer in the fresh assess ment proceeding.
[610C D] CIT.
Punjab, H.P. & Bilaspur, Simla vs Jagan Nath Ma heshwary, 32 AIR 418 and Pulavarthi Viswanadham vs CIT.
A.P., approved.
V. Jagan Mohan Rao & Ors.
vs CIT & Excess Profits Tax, A.P., and Parimisetti Seetharamamma vs CIT, referred to.
2.1 The three amounts mentioned in the notice under section 148 of the Act were found in the assessee 's account by the Income tax Officer when he examined the same in course of the assessment proceedings.
He had called upon the assessee to substantiate the genuineness of the transactions and the assessee had produced material to support the same.
The Income tax Officer accepted the documents produced and treated all the three transactions to be genuine and on that footing completed the assessment.
The primary facts were before the Incometax Officer at the time of the regular assessment and he called upon the assessee to explain to his satisfaction that the entries were genuine and on the basis of materials provided by the assessee, satisfaction was reached.
It was then open to the Income Tax Officer to make further probe before completing the assessment if he was of the view that the material provided by the assessee was not sufficient for him to be satisfied that the assessee 's contention was correct.
[610E H] 2.2 The expression 'material facts ' used in section 147(a) referred only to primary facts and the duty of the assessee was confined to disclosure of primary facts and he had not to indicate what factual or legal inferences should properly be drawn from primary facts and this clause did apply to the facts of the present case as the alleged escapement of income for assessment had not resulted from failure on the part of the assessee to disclose fully and truly all materi al facts necessary for its assessment for that year.
The notice in the instant case, did not indicate 606 Whether it was a case covered by cl.
(a) or cl.
On the finding of this Court that cl.
(a) was not invokable, the power under cl.
(b) could be called in aid under section 149(1)(b) of the Act within four years from the end of the relevant assessment year.
Admittedly, the notice has been issued beyond a period of four years and, therefore, the notice itself was beyond the time provided under the law.
The High Court overlooked to consider this aspect of the matter.
[610H; 611A C] Calcutta Discount Company Ltd. vs ITO, , followed.
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5959.txt
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ivil Appeal Nos.
565 570 of 1978.
Appeal from the Judgment and Order dated 8 2 1977 of the Calcutta High Court in Income Tax Reference Nos 398, 399 and 400/69 and 456 of 1969.
Devi Pal and D. N. Gupta for the Appellant.
section T. Desai, B. B. Ahuja and Miss A. Subhashini for the Respondent.
The Judgment of the Court was delivered by TULZAPURKAR, J.
These appeals, by certificates are directed against the common judgment and order rendered by the Calcutta High Court on February 8, 1977 in Income Tax Reference No.156 of 1969 and Income Tax References Nos. 398, 399 and 400 of 1969, whereby the assessee 's claim for deduction under s.36(1)(iv) of the Indian Income Tax Act, 1961 (hereinafter referred to as 'the Act ') in respect of three sums of Rs.95,421/ , Rs.1,00,564/ and Rs.1,17,969/ out of the total contributions made by the assessee to a recognised Provident Fund for the assessment years 1962 63, 1963 64 and 1964 65 respectively was disallowed and the principal question raised in these appeals is whether the expression "salary" as defined in Rule 2(h) in Part A of the Fourth Schedule to the Act includes "Commission" paid by the assessee to its salesmen in terms of their contracts of employment ? The assessee is a private limited company and carries on the business of manufacture and sale of duplicating machines and accessories.
It has in its regular employment three categories of salesmen machine salesmen, mixed salesmen and supply salesmen.
As a term of the contract of employment between the assessee and the salesmen of the aforesaid categories, the assessee, besides paying a fixed monthly salary also paid commission to them at fixed percentage of turnover achieved by each salesman, the rate of percentage varying according to the class of article sold and the category to which the salesman belonged.
The assessee maintained a regular Provident Fund for its employees which was recognised by the Commissioner of Income Tax some time in 1937 and the said recognition continued and was in force during the relevant years in question.
In the previous years ending 31st December 1961.
31st December 1962 and 31st December 1963 rele 792 vant to the assessment years 1962 63, 1963 64 and 1964 65 the assessee made contributions, out of its own moneys, to the individual accounts of these salesmen in the said Provident Fund on the basis of salary and commission paid to them and claimed such contributions as allowable deductions under section 36(1) (iv) of the Act and in that behalf reliance was placed by the assessee upon Rule 2 of the assessee company 's Recognised Provident Fund Scheme Rules under which "salary" meant not only the fixed monthly salary but also the commission and dearness allowance as might be paid by the company to its employees.
Out of such total contributions the Income Tax Officer disallowed the sums of Rs. 95,421/ , Rs. 1,00,564/ and Rs. 1,17,969/ on the ground that these amounts pertained to the commission paid by the assessee to its salesmen for the three years respectively and that under Rule 2(h) of Part A of the Fourth Schedule to the Act, which was applicable, the expression "salary" did not include such commission.
Three appeals, for the aforesaid three years, filed by the assessee were heard by two different Appellate Assistant Commissioners, one of whom rejected the appeal for the assessment year 1962 63 in view of Rule 2 (h) of Part A of the Fourth Schedule to the Act but the other Appellate Assistant Commissioner allowed the appeals for the assessment years 1963 64 and 1964 65 by accepting the assessee 's contention.
The assessee as also the Revenue preferred appeals to the Appellate Tribunal.
On the one hand, relying upon the dictionary meaning of the expression "salary" as given in the Shorter Oxford Dictionary and Stroud 's Judicial Dictionary and upon the manner in which the term was defined in Rule 2 of the assessee 's Recognised Provident Fund Scheme Rules, it was contended on behalf of the assessee that the commission of the nature paid by it to its salesmen was nothing but a composite part of the salary itself, the same being determinable as per the terms of the contract and as such the contributions on the basis of such commission made by the assessee to the Provident Fund were deductible under s.36(1)(iv) of the Act; it was further contended that since these payments were being admittedly made to a Provident Fund recognised by the Commissioner of Income Tax, which recognition was in force during the relevant years, the Taxing Authorities could not disallow the deduction claimed by the assessee, and the view taken by the Appellate Assistant Commissioner in respect of assessment years 1963 64 and 1964 65 was canvassed for acceptance.
On the other hand, the Revenue contended before the Tribunal that the definition of the expression "salary" as given in Rule 2(h) of Part A of the Fourth Schedule to the Act which applied to the recognised Provident Fund governed the matter and since that definition excluded all other allowances and perquisites the commission 793 paid by the assessee to its salesmen, which was nothing but some sort of allowance, could not be regarded as salary and, on that basis the Tribunal was pressed to accept the contrary view taken by the Appellate Assistant Commissioner for the assessment year 1962 63.
The Tribunal on a consideration of the rival submissions held that the commission paid by the assessee to various classes of salesmen was a part of the contractual obligation and as such was a part of the salary of the employees and contributions made on that basis were liable to be deducted under s.36(1)(iv) of the Act.
It also took the view that since the Provident Fund maintained by the assessee was a recognised Fund and since it fulfilled the condition laid down in Rule 4(C) of Part A of the Fourth Schedule to the Act the contributions by the employer to the same would be entitled to deduction under the said provision.
In this view of the matter the Tribunal by its order dated June 12, 1968 allowed the assessee 's appeal and dismissed the appeals of the Department.
At the instance of the Revenue the following two questions were referred to the High Court for its opinion: "(1) Whether, on the facts and in the circumstances of the case, the sums of Rs. 95,421/ , Rs. 1,00,564/ and Rs. 1,17,969/ disallowed by the Income Tax Officer out of the total contributions made by the assessee towards the provident fund were allowable under section 36(1)(iv) of the Income Tax Act, 1961 for the assessment years 1962 63, 1963 64 and 1964 65 respectively ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provident fund maintained by the assessee satisfied the condition laid down in Rule 4(c) of the Fourth Schedule, Part 'A ' of the Income Tax Act, 1961 ?" The former question was the subject matter of Income Tax Reference No.156 of 1969 made under s.256(1) of the Act while the latter was the subject matter of Income tax References Nos. 398, 399 and 400 of 1969 made under s.256(2) of the Act.
These References were heard together and disposed of by the High Court by a common judgment and order dated February 8, 1977.
Rejecting the contentions urged on behalf of the assessee the High Court answered both the questions in the negative and in favour of the Revenue.
In doing so the High Court principally relied upon (3) Rule 2(h) of Part A of the Fourth Schedule to the Act where the expression "salary" has been defined as inclusive of dearness allowance but exclusive of all 794 other allowances and perquisites, (b) Circular No. 6 dated January 16, 1941 issued by the Central Board of Revenue under the Indian Income Tax Act, 1922 but which has been continued under s.297(k) of the Act, which provided that unless commission and bonuses are fixed periodical payments not dependent on a contingency, they are not covered by the term "salary" as used in Chapter IXA of the Act (1922 Act) and (c) observations of this Court in M/s Bridge & Roofs Co. Ltd. vs Union of India and Ors.
to the effect that "commission and other similar allowances are excluded from the definition of "basic wages" under the Provident Fund Act 1952 because it was not a universal rule that each and every establishment must pay commission to its employees".
The High Court further held that the Circular No. 80 dated March 4, 1972 on which reliance was placed by the assessee and which stated that "if the terms and conditions of service are such that commission is paid not as a bounty or benefit but is paid as a part and parcel of the remuneration for services rendered by the employees such payment may partake of the nature of salary rather than as a benefit or perquisite" could not be availed of because the same was not in existence during the relevant years and further it had been issued under s.40(c) (iii) of the Act and would not apply to s.36(1)(iv).
The High Court also held that the ordinary meaning of "salary" was a fixed monthly payment while "commission" was not such payment and, therefore, it could not be included within the scope and ambit of the term "salary", the meaning of which could not be extended by the assessee company by defining it in a particular manner in its Provident Fund Scheme Rules for the purposes of recognition of its Fund and deductibility as well.
The High Court 's view on both the questions is challenged by the assessee in the instant appeals preferred on the strength of the certificates granted by that Court under s.261 of the Act.
Counsel for the assessee raised a two fold contention in support of the appeals.
In the first place he contended that once recognition was granted by the Commissioner of Income Tax to the Provident Fund maintained by the assessee under the relevant rules and such recognition was in force during the relevant assessment years, the Taxing Authorities could not disallow the deductions claimed by interpreting the expression "salary" in Rule 2(h) of Part A of the Fourth Schedule to the Act so as to exclude the "commission" that was paid by the assessee to its salesmen, for, by doing so the Taxing Authorities would be sitting in judgment over the recognition granted and allowed to be retained by the Commissioner of Income Tax to the assessee.
It was 795 pointed out that Rule 4 of Part A of the Fourth Schedule to the Act set out the conditions, particularly, the one contained in cl.(c) of the said rule that were required to be satisfied before recognition could be granted and in the instant case the Commissioner after having been satisfied that the said conditions had been fulfilled had granted recognition to the Provident Fund maintained by the assessee.
In particular, counsel placed reliance upon the correspondence which took place between the assessee and the Commissioner of Income Tax, West Bengal, during the course of which, the Commissioner had by his letter dated September 9, 1937 required the assessee to inform him of the basis on which the commission payable to the salesmen participating in the fund was computed with a view to seeing whether the commission would be includible in the definition of "salary" for purposes of Chapter IXA of the 1922 Act and the assessee had by its reply dated September 11, 1937 stated that the commission was the monthly amount payable to the salesmen in accordance with their written contract and was based on a fixed term of rate and that it was after such correspondence that recognition was granted to the Provident Fund of the assessee and that the said recognition had continued and was in operation during the relevant assessment years.
He, therefore, urged that it was not open to the Taxing Authorities to reach a conclusion that the Provident Fund of the assessee did not satisfy the condition laid down in Rule 4(c) of Part A of the Fourth Schedule to the Act during the relevant years nor was it open to them to disallow the deductions claimed under s.36 (1)(iv) of the Act by interpreting the expression "salary" in Rule 2(h) in Part A of the Fourth Schedule to the Act as being exclusive of the commission of the nature and kind paid by the assessee to its salesmen.
Secondly, counsel contended that on a true and proper construction of the expression "salary occurring in the said Rule 2(h) the commission of the nature and type paid by the assessee to its salesmen under the terms of their contract of employment would be included or covered by that expression.
According to him, commission in business practice covered various kinds of payments made under different circumstances and in the cases where a servant was employed by a businessman and as a condition of his employment it was agreed that he would be paid for his services at a fixed rate of percentage over the turnover it was clear that such commission payable to the employee will par take of the character of "salary" received by him for his services.
the percentage basis being the measure of the salary; in other words, according to him, there was no difference between the concept of salary and the concept of commission if the latter was of the aforesaid nature or kind and as such the expression salary in Rule 2 (h) would include such commission.
In this behalf he relied upon a decision of the Allaha 796 bad High Court in the case of Raja Ram Kumar Bhargava vs Commissioner of Income Tax, U.P. He urged that the decision of this Court in M/s Bridge & Roofs Co. Ltd. vs Union of Indian & Ors.
(supra) on which the High Court has relied was inapplicable since it was a case under the Provident Fund Act, 1952 and this Court was required to construe the term 'basic wages ' appearing in that Act and in that context it observed that that term did not include any bonus, commission or other similar allowances.
He, therefore, urged that the Tribunal was right in allowing the deductions claimed by the assessee under s.36(1)(iv) of the Act.
On the other hand, counsel for the Revenue contended that notwithstanding the recognition accorded to the assessee 's Provident Fund by the Commissioner of Income Tax the assessee had to satisfy the taxing authorities every year that the Provident Fund maintained by it satisfied the conditions of Rule 4, particularly, the one contained in Rule 4(c) of Part A of the Fourth Schedule to the Act and if for any particular assessment year the assessee 's Provident Fund failed to satisfy the condition in Rule 4(c) of Part A of the Fourth Schedule to the Act the assessee could not claim deduction under s.36(1)(iv) of the Act in respect of such portion of the contribution made by it to the Fund as was in breach of the said condition.
Secondly, he urged that by relying upon the fact of recognition obtained by it and the further fact that such recognition had remained in force during the relevant assessment years the assessee could not by pass the real question that arose for determination before the taxing authorities for the relevant assessment years, namely, whether the expression 'salary ' as defined in Rule 2(h) of Part A of the Fourth Schedule to the Act included or excluded commission paid by the assessee to its salesmen and he urged that the definition of the expression 'salary ' as given in the said Rule 2(h) clearly showed that the 'salary ' did not include commission, for, according to him, the definition merely included dearness allowance and excluded all other allowances and perquisites and commission payable by the assessee to its salesmen was nothing but an allowance paid without reference to any time factor which is associated with salary or wages as an important concomitant thereof.
In this behalf reliance was also placed by him upon the Circular No.6 dated January 16, 1941 issued by the Central Board of Revenue under the 1922 Act and continued under s.297(k) of the 1961 Act wherein on the question whether the term 'salary ' as used in Chapter IXA (of the old Act) 797 included commissions and bonuses paid to the employees, the Board expressed its view that "unless commissions and bonuses are fixed periodical payments not dependent on a contingency they are not covered by the term 'salary ' as used in Chapter IXA of the Act." Counsel further contended that in the matter of deductions claimable in respect of contributions to the Provident Fund the position of the employer could not be different from that of the employee and in regard to employee 's contribution the condition required to be satisfied in Rule 4 (b) was to the effect that the contribution of an employee in any year shall be a definite proportion of his 'salary ' for that year and shall be deducted by the employer from the employee 's 'salary ' in that proportion at each periodical payment of such salary in that year, and credited to the employee 's individual account in the Fund and under s.80C read with Rule 7 of Part A of the Fourth Schedule to the Act the employee is entitled to a deduction in respect of his contribution which pertains to a definite proportion of the 'salary ' which would not include commission.
He therefore, urged that the High Court was right in answering both the questions against the assessee and in favour of the Revenue.
As stated at the outset, in our view, the main question raised in these appeals is whether the expression 'salary ' as defined in Rule 2(h) of Part A of the Fourth Schedule to the Act includes commission payable by an assessee to his or its employees in terms of their contracts of employment ? We shall, therefore, address ourselves to that question first and then deal with the aspect regarding the true impact of the recognition granted by the Commissioner of Income Tax under the relevant Rules to a Provident Fund maintained by an assessee.
The expression 'salary ' has been defined in section 17 of the Act as well as in Rule 2(h) of Part A of the Fourth Schedule to the Act but each of the said definitions serves a different purpose.
Section 17 defines the expression 'salary ' for purposes of sections 15 and 16 which deal with "Salaries" as a head of income, and under cl.(iv) of sub s.(1) that expression includes: "any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages.
" In Part A of the Fourth Schedule to the Act, which contains rules relating to Recognised Provident Funds the word 'salary ' has been defined in Rule 2(h) thus : "Salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.
" 798 Since we are concerned in this case with contributions made to a recognised Provident Fund and deductions thereof under section 36(1) (iv) it will be the definition of 'salary ' as given in Rule 2(h) of Part A of the Fourth Schedule to the Act and not the one given in section 17 that will be applicable and will have to be considered.
Under section 36(1) (iv) the deduction allowable is in respect of "any sum paid by the assessee as an employer by way of contribution towards a Recognised Provident Fund or an approved superannuation fund, subject to such limits as may be prescribed for the purpose of recognising the Provident Fund or approving the superannuation fund, as the case may be." Rule 2(c) of Part A of the Fourth Schedule defines contribution" as meaning "any sum credited by or on behalf of any employee out of his salary, or by an employer out of his own monies, to the individual account of an employee, but does not include any sum credited as interest." Rule 4 of Part A of the Fourth Schedule lays down the conditions which are required to be satisfied by a Provident Fund in order that it may receive and retain recognition and the conditions in cls.(b) and (c) are material and these conditions are: "4(b) the contributions of an employee in any year shall be a definite proportion of his salary for that year, and shall be deducted by the employer from the employee 's salary in that proportion, at each periodical payment of such salary in that year, and credited to the employee 's individual account in the fund; (c) the contributions of an employer to the individual account of an employee in any year shall not exceed the amount of the contributions of the employee in that year, and shall be credited to the employee 's individual account at intervals not exceeding one year.
" It may be stated that so far as the employer is concerned the contributions credited by him to the employee 's individual account in the funds are deductible under section 36(1) (iv) whereas the contributions of an employee are deductible in the computation of his total income under s.80C read with Rule 7 of Part A of the Fourth Schedule to the Act and the scheme of cls.(b) and (c) of Rule 4 of Part A of the Fourth Schedule does suggest that in the matter of deductions claim 799 able in respect of contributions to the recognised Provident Fund the position of both the employer and the employee would be the same; but since in the case of an employee his contributions are to be a definite proportion of his salary for a particular year, the question whether such proportion would be inclusive of commission received by him from his employer must depend upon the true meaning or construction of the expression 'salary ' as occurring in Rule 2(h) of Part A of the Fourth Schedule; in other words, in the matter of deductions claimable in respect of contributions to the Recognised Provident Fund qua both the employer and the employee the question has to be answered by reference to the true meaning of the expression 'salary ' occurring in Rule 2(h).
Now, Rule 2(h) of Part A of the Fourth Schedule does not define the expression 'salary ' conceptually but merely proceeds to state what is included therein and what is excluded therefrom and, therefore, one is required to turn to the dictionary meaning of that expression as also to ascertain how judicial decisions have understood that expression.
According to the Shorter Oxford English Dictionary (3rd Edn.) 'salary ' means: "To recompense, reward; to pay for something done;" In Jowitt 's Dictionary of English Law (1959 Edn.) the term is explained thus: "a recompense or consideration generally periodically made to a person for his service in another person 's business; also wages, stipend or annual allowance." In Stroud 's Judicial Dictionary (4th Edn.) the expression 'salary ' is explained at item (2) thus: "Where the engagement is for a period, is permanent or substantially permanent in character, and is for other than manual or relatively unskilled labour, the remuneration is generally called a salary".
[Per Latham C. J., in Federal Commissioner of Taxation vs Thompson (J. Walter) (Aus.) Pty. Ltd. 69 C.L.R. 227].
It appears that conceptually 'salary ' and 'wages ' connote one and the same thing, namely, remuneration or payment for work done or services rendered but the former expression is generally used in connection with services of a higher or non manual type while the latter is used in connection with manual services.
In Gordon vs Jennings Grover J. observed as follows: 800 "Though this word (wages) might be said to include payment for any services, yet, in general, the word 'salary ' is used for payment or services of a higher class, and 'wages ' is confined to the earnings of labourers and artisans." In Mohmedalli vs Union of India this Court, while repelling the contention that the Employees ' Provident Fund Act 1952 was intended by Parliament to apply to employees who were mere wage earners and not salaried servants, has made observations clearly indicating that there is no difference between the two concepts of salary and wages.
Chief Justice Sinha speaking for the Court observed in para 10 of the judgment as follows: "It is a little difficult to appreciate the distinction sought to be made.
Both 'salary ' and 'wages ' are emoluments paid to an employee by way of recompense for his labour.
Neither of the two terms is a 'term of art '.
The Act has not defined wages; it has only defined "basic wages" as all emoluments which are earned by an employee while on duty or on leave with wages in accordance with the terms of the contract of employment and which are paid or payable in cash to him,. . 'Salary ', on the other hand, is remuneration paid to an employee whose period of engagement is more or less permanent in character, for other than manual or relatively unskilled labour.
The distinction between skilled and unskilled labour itself is not very definite and it cannot be argued, nor has it been argued, that the remuneration for skilled labour is not 'wages '.
The Act itself has not made any distinction between 'wages ' and 'salary '.
Both may be paid weekly, fortnightly or monthly, though remuneration for the day 's work is not ordinarily termed 'salary '.
Simply because wages for the month run into hundreds, as they very often do now, would not mean that the employees is not earning wages, properly so called.
A clerk in an office may earn much less than the monthly wages of a skilled labourer.
Ordinarily he is said to earn his salary.
But, in principle, there is no difference between the two.
" It will thus appear clear that conceptually there is no difference between salary and wages both being a recompense for work done or 801 services rendered, though ordinarily the former expression is used in connection with services of non manual type while the latter is used in connection with manual services.
It is further common knowledge that this compensation to the labourer or artisan could be a specified sum for a given time of service or a fixed sum for a specified work i.e. payment made by the job, the commonest example of the latter category being a piece rated worker.
In other words, the expression 'wages ' does not imply that the compensation is to be determined solely upon the basis of time spent in service; it may be determined by the work done; it could be estimated in either way.
If conceptually salary and wages mean one and the same thing then salary could take the form of payment by reference to the time factor or by the job done.
In fact, in the case of salary the recompense could be determined wholly on the basis of time spent on service or wholly by the work done or partly by the time spent in service and partly by the work done.
In other words, whatever be the basis on which such recompense is determined it would all be salary.
Having reached the above conclusion, we have to consider the nature of recompense that is being made by the assessee to its salesmen, whether the whole of it partakes of the character of salary or not? The definition of 'salary ' in Rule 2(h) includes dearness allowance if the terms of employment so provide and excludes all other allowances and perquisites.
It does not in terms exclude 'commission ' as such and, in our view rightly, for, though ordinarily according to the Shorter Oxford English Dictionary 'commission ' means 'a pro rata remuneration for work done as agent ', in business practice commission covers various kinds of payments made under different circumstances.
In Raja Ram Kumar Bhargava vs Commissioner of Income Tax, U.P. (supra) the Allahabad High Court has pointed out how in certain circumstances commission payable to an employee may, in fact, represent the salary receivable by him for the services rendered to the employer.
At page 694 of the report the relevant observation run thus: "The word "commission", in business practice, covers various kinds of payments made under different circumstances.
There are cases where a servant is employed by a businessman and, as a condition of his employment, it is agreed prior to the services having been rendered that he would be paid for his services at a fixed rate of percentage of the turnover or profits.
In such a case, it is clear that the commission payable to the employee will, in fact, represent the salary to be drawn by him for his services.
The payment on the percentage basis will only determine the measure of the salary.
" 802 It is thus clear that if under the terms of the contract of employment remuneration or recompense for the services rendered by the employee is determined at a fixed percentage of turnover achieved by him then such remuneration or recompense will partake of the character of salary, the percentage basis being the measure of the salary and therefore such remuneration or recompense must fall within the expression 'salary ' as defined in Rule 2(h) of Part A of the Fourth Schedule to the Act.
In the instant case before us, admittedly, under their contracts of employment the assessee has been paying and did pay during the previous years relevant to the three assessment years to its salesmen, in addition to the fixed monthly salary, commission at a fixed percentage of the turnover achieved by each salesman, the rate of percentage varying according to the class of article sold and the category to which each salesman belonged.
The instant case is therefore, an instance where the remuneration so recompense payable for the services rendered by the salesmen is determined partly by reference to the time spent in the service and partly by reference to the volume of work done.
But it is clear that the entire remuneration so determined on both the basis clearly partakes of the character of salary.
In our view, therefore, the commission paid by the assessee to its salesmen would clearly fall within the expression 'salary ' as defined in Rule 2(h) of Part A of the Fourth Schedule to the Act and as such the three sums of Rs. 95,421/ , Rs. 1,00,564/ and Rs. 1,17,969/ representing proportionate contributions appertaining to the commission paid by the assessee to its salesmen would be deductible under section 36(1) (iv) of the Act.
Turning to the Circular dated January 16, 1941 issued by the Central Board of Revenue on which counsel for the Revenue has relied, it cannot, in our view, affect the question of deductibility, for, if the commission paid by the assessee to its salesmen is covered by the expression 'salary ' on its true construction, which, according to us, it does, the Board 's view or instructions cannot detract from the legal position arising on such proper construction.
In any case we are of the view that by the said Circular what the Board wants to keep out of the term 'salary ' are payments by way of commission which do not partake of the character of salary.
Similarly the decision of this Court in M/s. Bridge & Roof Co. 's case (supra) on which the High Court has relied cannot avail the Revenue.
In the first place it was a case under the Provident Fund Act, 1952 where this Court was required to construe the expression 'basic wages ' as defined in section 2(b) of that Act and to decide whether 'production bonus ' was included in that expression and it was in that context that this Court made observations 803 to the effect that the said expression as defined therein did not include any bonus, commission or other similar allowances.
Secondly, as against the definition of 'basic wages ' in section 2(b) (ii) which excluded any dearness allowance, house rent allowance, over time allowance, bonus, commission or any other similar allowance, section 6, of the Act provided for inclusion of dearness allowance for the purposes of contribution and, therefore, this Court was concerned with trying to discover some basis for the exclusion in cl.
(ii) of section 2(b) as also for the inclusion of dearness allowance and retaining allowance (if any) in section 6 of that Act and the Court found that the basis for inclusion in section 6 and exclusion in cl.
(ii) of section 2(b) was that whatever was payable in all concerns and was earned by all permanent employees was included for the purpose of contribution under section 6 but whatever was not payable by all concerns and was not earned by all employees of a concern was excluded for the purposes of contribution and that is why commission or similar allowances were excluded from the definition of 'basic wages ', for commission and allowances were not necessarily to be found in all concerns nor were they necessarily earned by all the employees of the same concern.
It is, therefore, clear that the ratio of the decision and the observations made by this Court in a different context in that case would be inapplicable to the facts of the present case.
Having regard to the above discussion it is clear that the High Court 's view on the first question is clearly unsustainable and that question must be answered in favour of the assessee and against the Revenue.
Dealing next with the second question it seems to us clear that having regard to our view on the proper construction of the expression 'salary ' occurring in Rule 2(h) of Part A of the Fourth Schedule to the Act it must be held that the Tribunal was right in holding that the Provident Fund maintained by the assessee satisfied the condition laid down in Rule 4(c) of Part A of the Fourth Schedule and that question also must be answered in favour of the assessee and against the Revenue However, we would like to make some observations with regard to the true impact of the recognition granted by the Commissioner of Income Tax to a Provident Fund maintained by an assessee.
The facts in the present case that need be stressed in this behalf are that it was as far back as 1937 that the Commissioner of Income tax had granted recognition to the Provident Fund maintained by the assessee under the relevant rules under 1922 Act, that such recognition had been granted after the true nature of the commission payable by the 804 assessee to its salesmen under their contracts of employment had been brought to the notice of the Commissioner and that said recognition had continued to remain in operation during the relevant assessment years in question; the last fact in particular clearly implied that the Provident Fund of the assessee did satisfy all the conditions laid down in Rule 4 of Part A of the Fourth Schedule to the Act even during the relevant assessment years.
In that situation we do not think that it was open to the taxing authorities to question the recognition in any of the relevant years on the ground that the assessee 's Provident Fund did not satisfy any particular condition mentioned in Rule 4.
It would be conducive to judicial discipline and the maintaining of certainty and uniformity in administering the law that the taxing authorities should proceed on the basis that the recognition granted and available for any particular assessment year implies that the Provident Fund satisfies all the conditions under Rule 4 of Part A of the Fourth Schedule to the Act and not sit in judgment over it.
There is ample power conferred upon the Commissioner under Rule 3 of Part A of the Fourth Schedule to withdraw at any time the recognition already granted if, in his opinion, the Provident Fund contravenes any of the conditions required to be satisfied for its recognition and if during assessment proceedings for any particular assessment year the taxing authority finds that the Provident Fund maintained by an assessee has contravened any of the conditions of recognition he may refer the question of withdrawal of recognition to the Commissioner but until the Commissioner acting under the powers reserved to him withdraws such recognition the taxing authority must proceed on the basis that the Provident Fund has satisfied all the requisite conditions for its recognition for that year; any other course is bound to result in chaos and uncertainty which has to be avoided.
Having regard to the above discussion, both the questions are accordingly answered in favour of the assessee and the appeals are allowed with costs.
P.B.R. Appeal allowed.
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The expression "salary," under section 17(1)(iv) of the Income Tax Act, 1961, includes "any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages"; under r. 2(h) in Part A of the Fourth Schedule to the Act, which contains Rules relating to recognised Provident Funds, the term `salary ' includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites, where an assessee, as an employer, has paid any sum by way of contribution towards a recognised provident fund, section 36(1)(iv) allows such sum as a deduction in computing the income subject to such limits as may be prescribed for the purpose of recognising the provident fund.
The term "contribution ' is defined in r. 2(c), of part A of the Fourth Schedule as any sum credited by or on behalf of any employee out of his salary or by an employer out of his own moneys to the individual account of an employee but does not include any sum credited as interest.
The assessee maintained a provident fund which was recognised by the Commissioner of Income tax in 1937.
Under r. 2 of the Provident Fund Scheme Rules "salary" meant not only fixed monthly salary but also commission and dearness allowance as might be paid by the company to its employees.
As a term of the contract of employment, in addition to monthly salary, the assessee paid to each of the salesmen commission at a fixed percentage of turnover achieved by them.
The assessee 's shares of the contribution to the provident fund was calculated on the basis of both salary as well as the commission paid to each of the salesmen.
In respect of assessment years 1962 63, 1963 64 and 1964 65 the assessee claimed the whole amount paid by it towards provident fund contributions, as a deduction allowable under section 36(1)(iv) of the Income tax Act and for this purpose it relied on r. 2 of its Provident Fund Scheme Rules.
Out of the total Provident Fund contributions claimed as allowable deduction under section 36(1)(iv) the Income tax Officer disallowed that part of the assessee 's contribution which related to the amounts calculated on the basis of commission paid to the salesmen on the ground that under r. 2(h) of Part A of the Fourth Schedule the expression "salary" did not include commission paid to the employees.
789 The assessee 's appeal in respect of the assessment year 1962 63 was rejected by an Appellate Assistant Commissioner; but in respect of the other two assessment years another Appellate Assistant Commissioner allowed its appeals.
On further appeals both by the assessee and the Department the Appellate Tribunal held that the commission paid being a part of the contractual obligation, it was a part of the salary paid to the employees and therefore contributions made towards provident fund on the commission were allowable as a deduction under section 36(1)(iv) of the Act, and secondly since the provident fund was a recognised fund which fulfilled the conditions laid down in r. 4(c) of Part A of the Fourth Schedule, the employer 's contributions were entitled to be deducted.
The High Court answered the reference in favour of the Department.
It held that since commission, unlike salary, was not a fixed monthly payment it could not be included within the meaning of "salary" and that the meaning of the term "salary" could not be extended by the assessee by defining it in a particular manner in its provident fund scheme rules for the purpose of recognition of its fund.
The High Court relied upon a circular dated January 16, 1941 issued by the Central Board of Revenue which provided that unless commission and bonuses were fixed periodical payments not dependent on a contingency, they were not covered by the term "salary".
On further appeal to this Court it was contended on behalf of the Revenue that the definition of "salary" in r. 2(h) clearly showed that it did not include commission and since commission was nothing but an allowance paid without reference to any time factor which is associated with salary or wages, it is not deductible under section 36(1) (iv).
Allowing the assessee appeals, ^ HELD : The commission paid by the assessee to its salesmen would clearly fall within the expression "salary" as defined in r. 2(h) of Part A of the Fourth Schedule to the Act and the amounts representing proportionate provident fund contributions made by the assessee to its salesmen would be deductible under section 36(1)(iv) of the Act.
[802 E] 1(a) The expression "salary" has been defined in section 17 as well as in r. 2(h) of Part A of the Fourth Schedule.
But each of the definitions serves a different purpose.
Since this case is concerned with contributions made to a recognised provident fund and deductions thereof under section 36(1)(iv), it would be the definition of "salary" as given in r. 2(h) of Part A of the Fourth Schedule, and not the one given in section 17, that will be applicable.
A B] (b) Conceptually salary and wages connote one and the samething viz., remuneration or.
payment for work done or services rendered.
The former expression is generally used in connection with services of higher or non manual type while the latter is used in connection with manual services.
If conceptually salary and wages mean one and the same thing then salary could take the form of payment by reference to the time factor or by the job done.
In the case of salary the recompense could be determined wholly on the basis of time spent on service or wholly by the work done or partly by the time spent on service and partly by the work done.
In other words, whatever be the basis on which such recompense is determined it would all be salary.
[799 G; 801C] 790 Gordon vs Jennings, ; Mohmedalli vs Union of India, AIR 1964 SC 980: referred to.
(c) The definition of "salary" in r. 2(h) includes dearness allowance if the terms of employment so provide and excludes all other allowances and perquisites.
It does not, in terms, exclude commission.
But though the dictionary meaning of the term "commission" is "a pro rata remuneration for work done as agent", in business practice commission covers various kinds of payments made under different circumstances.
[801 E] (d) If under the terms of the contract of employment remuneration or recompense for the services rendered by the employee is determined at a fixed percentage of turnover achieved by him, then such remuneration or recompense will partake of the character of salary, the percentage basis being the measure of the salary.
Therefore, such remuneration or recompense must fall within the expression "salary" as defined in r. 2(h).
[802 A] In the instant case under the term of the contract of employment the assessee had been paying to the salesmen, in addition to the fixed monthly salary.
commission at a fixed percentage of the turnover.
It is, therefore, a case where remuneration or recompense payable for the services rendered by the salesman is determined partly by reference to the time spent in the service and partly by reference to the volume of work done.
The entire remuneration so determined on both the bases clearly partakes of the character of salary.
[802 C D] (e) The Circular dated January 16, 1941 issued by the Central Board of Revenue did not affect the question of deductibility because if the commission paid by the assessee to its salesmen was covered by the expression "salary" on its true construction, the Board 's view or instructions could not detract from the legal position arising on such construction.
What the Board, by the said circular, wanted to keep out of the term "salary" were payments by way of commissions which did not partake of the character of salary.
[802 F G] Bridge & Roofs Co. Ltd. vs Union of India & Ors. ; at p. 1477: held inapplicable.
2(a) The Tribunal was right in its view that the provident fund maintained by the assessee satisfied the condition laid down in r. 4(c) of Part A of the Fourth Schedule.
[803 G].
(b) After taking into account the true nature of the commission payable by the assessee to its salesmen under the terms of the employment, the Commissioner granted recognition to the provident fund, as far back as 1937 and that recognition continued to remain in operation during the relevant assessment years.
The provident fund clearly satisfied all the conditions laid down in r. 4 of Part A of the Fourth Schedule.
It was, therefore, not open to the Taxing Authorities to question the recognition on the ground that the assessee 's provident fund did not satisfy any particular condition mentioned in r. 4.
For the sake of certainty and uniformity in administering the law the Taxing Authorities should proceed on the basis that the recognition granted and available for any particular assessment year implied that the provident fund satisfied all the conditions in that rule.
Under r. 3 the Commissioner had ample power to withdraw at any time the recognition already granted if the provident fund contravened any of the conditions required to be satisfied for its recognition.
791 But until the Commissioner withdrew such recognition, the Taxing Authorities must proceed on the basis that the provident fund satisfied all the requisite conditions for its recognition for that year.
Any other course would result in uncertainty.
[803 H 804 F]
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3944.txt
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Appeal No. 889 of 1971.
Appeal from the order dated December 9, 1970 of the Madhya Pradesh High Court in Miscellaneous Petition No. 267 of 1969.
L. section Baghel, Pramod Swarup and section section Khanduja, for the appellants.
R. Paniwani and section K. Gambhir, for respondent No. 1.
R. P. Kapur, for respondents Nos. 2 and 3.
The Judgment of U Court was delivered IV Hegde, J. This is an appeal by certificate.
It relates to the .elections to Municipal Council, Sidhi.
The elections were held 60 in 1969.
In that election six persons ie.
four appellants and respondents 5 and 6 in this appeal were elected.
Thereafter the first respondent herein an elector and apparently a busy body filed a petition under Article 226, of 'the Constitution in the High Court of Madhya Pradesh challenging the validity of the election of all the returned candidates on several grounds.
The High Court accepted that petition and set aside the election of all the returned candidates.
The only ground on which the election of the returned candidates was set aside is that the returned candidates in their nomination papers had merely mentioned the number of the wards for which they were candidates but had failed to mention the names of those wards.
It is not the case of the election petitioner nor is it the finding of the High Court that there was any difficulty in identifying the ward in which the concerned returned candidate wanted to seek election.
The Returning Officer did not find any such difficulty.
He accepted their nomination papers.
Admittedly every ward had a specific number in addition to having a name.
The High Court was of the opinion that the successful candi dates failure to, mention the name of the wards in their nomination papers was fatal and therefore the Returning Officer was not competent to accept their nomination.
It thought that it was mandatory for all the, candidates to mention in their nomination papers the names of the wards in which they wanted to seek election.
Further it opined that a mere mentioning of the number of the ward may lead to clerical errors and therefore the rule making authority had prescribed that the name of the ward also should be mentioned in the nomination paper.
It is nobody 's case that in the nomination papers with which we are concerned there are any errors as regard the ward numbers.
Let us now examine whether the High Court was justified in taking such a technical view of the matter.
The election to the municipal councils is regulated by Rule 13 of the Rules framed under the Madhya Pradesh Municipalities Act, 1961.
Rule 13 (1) reads "13(1)(i).
On or before the date fixed for filing nomination paper of candidates each candidate shall, either in person or by his proposer or seconder, between the hours of 11 O 'clock in the forenoon and 3 O 'clock in the afternoon, deliver to the supervising officer a nomination paper completed in For IV. and subscribed by the candidate himself as assenting to the nomination and by two duly qualified voters of the ward as proposer and seconder.
61 The relevant column in Forma IV reads "Name and number of the ward".
Going back to Rule 13 it is necessary to notice sub rule (vi) of that rule which says.
: "The supervising officer shall not reject any nomination paper on the ground of any defect which is not a substantial character.
" The question for decision is whether the non mentioning of the names of the wards in the nomination papers is a defect of a substantial character ? For deciding that question we must first find out the reason behind the rule requiring the candidates to mention the names and the number of the wards in which they want to contest.
It is obvious that the particulars in question are required to identify the constituency in which a candidate is desirous of seeking election.
That purpose will be served if either the number of the ward or its name is given unless there are more than one wards having the same name.
Once the number of the ward is mentioned in the nomination paper the identification of the constituency is complete.
The name of the ward is merely an additional piece of evidence to identify the constituency.
if the number of the ward is mentioned there will be no difficulty for the Returning Officer to find out in which constituency the candidate wants to seek election.
We have no hesitation in holding that the nomination papers of the returned candidates were rightly accepted by the Returning Officer as they substantially complied with rules.
If a nomination is accepted by the Returning Officer the presumption is that the nomination is a valid nomination.
It is for the party who challenges its validity to establish his plea by showing that there was no substantial compliance with law.
Form III in the Rules prescribes the form of notice calling for election of councillors.
That form reads : "Election of Councillor(s) for Ward(s) No. . of the .
Municipality, Tehsil District . .
This form shows that even when the authorities call upon the electors to elect councillors they do so with reference to ward numbers and not with reference to the names of the wards evidently because in the case of names of the wards more than one ward may have the same or similar names but in the case of number no such difficulty can arise.
If there is a possibility of an error creeping into numbers there is similar possibility in the case of names.
The candidates have to guard against such errors.
The question whether the failure to mention the name of the constituency, in which the candidate wants to seek election in his nomination paper per se vitiates his nomination came up for consi 62 deration before this Court in Rangilal Chowdhury vs Dahu San & ors.
That case related to a bye election for the Dhanbad assembly constituency in the Bihar State.
In his nomination paper the candidate had mentioned the constituency in which he was seeking election as 'Bihar '.
nomination paper was rejected by the Returning Officer on the ground that the candidate had not mentioned the name of the constituency in which he desires to seek election.
This Court differing from the opinion taken by the Returning Officer held that the nomination paper was valid in law.
The ground on which this Court came to.
that conclusion was that the election in question was a bye election; it pertained to only one constituency ie.
Dhanbad.
That, being so there was no difficulty for the Returning Officer to identify the constituency in which the candidate wanted to seek election.
The ratio of that decision is that so long as there is no difficulty in identifying the constituency in which the candidate wants to seek election any omission in filling the, column relating to tile constituency will be considered as unsubstantial.
A somewhat similar view was taken by this Court in Ram Awadesh Singh vs Smt.
Sumitra Devi & Ors.(2) Mr. Panjwani appearing for respondent No. 1 invited our attention to certain decisions where the courts had taken the view that the particulars mentioned in the nomination papers before them did not sufficiently comply with the rules.
That was because, that from the particulars given in the nomination papers it was not possible to definitely identify the constituency in which the concerned candidates desired to contest. 'nose decisions were rendered on the peculiar facts of those cases.
The real test as mentioned earlier is whether from the particulars given in a nomination paper the constituency from which the candidate wants to seek election can be reasonably identified.
Once it is held that test is satisfied then the requirement of the rule is met.
Any failure to give further particulars canno t be considered as substantial.
In the result this appeal is allowed and the order of the High Court is set aside and the Writ Petition is dismissed.
The first respondent will pay the costs of the appellants herein both in this court as well as the High Court.
The other respondents will bear their own costs S.C. Appeal allowed.
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According to Rule 13 framed under Madhya Pradesh Municipalities Act, 1961, a candidate for election to the Municipal Council shall deliver to the supervising officer a nomination paper completed in Form IV and the relevant column in Form IV required the candidate to mention the "name and number of the Ward".
Further, sub rule (IV) of Rule 13 provided that the 'supervising officers shall not reject any nomination paper on the ground of any defect which is not of substantial character High Court in a writ petition set aside the elections of 6 persons to the 'Municipal Council on the ground that they only mentioned the question whether the number of the wards but not their names.
On non mentioning the names of the wards in teh nomination paper was a defect of a substantial character, HELD .
: The nomination papers of the returned candidates were rightly accepted by th` Returning Officer as they substantially complied with the Rule.
The particulars in question were required to identify the constituency in which a candidate was desirous of seeking election.
That purpose was served when either the number and the ward, or its name was given unless them were, more than on a ward having the same name the identification of the constituency was complete.
The name of the ward .was merely an additional piece of evidence to identify the constitute Once the number of the ward was mentioned there was no difficulty for the Returning Officer to find out in which constituency tin candidates wanted to seek election.
[61D] Rangila Chowdhury vs Dultu Sen & Ors. ; and Rain Awadesh Singh vs Smt.
Sumitra Devi & Ors., A.I.R. , referred to.
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3081.txt
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Civil Appeal No. 1188 of 1976.
Appeal by special leave from the Award dated 27 2 1976 of the Industrial Tribunal, Maharashtra in Complaints (I.T.) Nos.
48 53 and 55 63 of 1973 in Ref.
(I.T.) No. 375 of 1972 published in the Maharashtra Govt.
Gazette L dated 3 6 1976.
M. K. Ramamurthi and Naunit Lal for the Appellant.
Sachin Chaudhuri and B. R. Aggarwala for the Respondent.
The Judgment of the Court was delivered by JASWANT SINGH, J.
This appeal by special leave is directed against the common award dated February 27, 1976 of the Industrial Tribunal, 615 Maharashtra, Bombay rejecting as not maintainable complaints Nos.
48 of 1973 to 63 of 1973 made by the appellants against the respondent (hereinafter referred to for brevity as 'the Company) under section 33(A) of the (hereinafter called 'the Act ') in reference (IT) No. 336 of 1972.
The facts material for the purpose of this appeal are: The appellants (hereinafter described as 'Workmen ') were employees of the Company.
During the pendency of the above mentioned reference No. 336 of 1972 before the Second Labour Court, Bombay for adjudication of a dispute, 344 workmen of the Company including the appellants went on an indefinite peaceful strike with effect from August 30, 1972, pursuant to the strike notice given to the Company by their registered union called 'The Association of Chemical Workers ' in support of its demand for re instatement of three of the union leaders who had been dismissed by the Company.
On the even date i.e. August 30, 1972, the Company put up a notice stating that the strike embarked upon by the workmen was illegal and those participating in the said strike were liable to disciplinary action for misconduct as per Company 's certified standing orders Nos.
22(b) and 24(a).
On September 7, 1972, the Company issued notices to the appellants and 10 others asking them to report for duty on or before September 18, 1972, failing which their absence would be construed as voluntary abandonment of service and their names would be struck off from the muster rolls of the Company.
On September 19, 1972, the Company sent separate communications to the appellants and 10 others informing them that since "by not reporting for duty they had confirmed its presumption that they were no longer interested to continue in service of the Company and had totally abandoned the Company 's service" their names had been struck off from the rolls of the Company from that date.
Along with its communication, the Company sent a cheque to each one of the appellants for the amount due to him on account of gratuity, leave salary and one month 's salary.
On September 26, 1972, the appellants wrote to the Company returning the cheques sent by the Company and stating that its letter dated September 7, 1972 which had reached them only on September 20, 1972 had already been replied by letter dated September 21, 1972, that they were interested in the service of the Company and had neither voluntarily abandoned the service of the Company and did they wish to do so, and that they would, report for work the moment the strike was called off 616 by their union.
On October 23, 1972 the Company wrote to the appellants acknowledging their letter dated September 26, 1972 but stating therein that it did not wish to revise its earlier decision under which their names had been struck off the rolls.
It is to be noted that in its letter the Company did not refute the averment made by the appellants in their letter dated September 26, 1972 that the Company 's letter dated September 7, 1972 had reached them only on September 20, 1972.
On the even date i.e., September 26, 1972, the appellants ' union wrote to the Labour Commissioner complaining about the arbitrary termination of service of 25 workmen (including the appellants) and emphasising that they had not abandoned service.
On October 2, 1972, the appellants and other striking workmen addressed letters to the Works Manager of the Company protesting against the action of the Company in removing them from service and asserting that the said action was by way of victimization for their participation in the strike.
On March 30, 1973, the union made a formal demand calling upon the Company to re instate the appellants and others who had been removed from service on the ground that they had abandoned their service.
On May 19, 1973, certain proposals for settlements were made on behalf of the employees whose services were terminated by the Company and requesting the Company for re instatement of the appellants and 10 other workmen.
On July 5, 1973, the union wrote a letter to the Assistant Commissioner of Labour, Naupada, soliciting his intervention in the dispute concerning the re instatement of the 16 employees including the appellants.
The Assistant Commissioner thereupon summoned the parties for discussion on July 19, 1973 but his attempts at conciliation did not bear any fruit.
Thereafter, the appellants made the aforesaid complaints before the Industrial Tribunal with the result as stated above.
Appearing in support of the appeal Mr. Ramamurti has vehemently urged that the action of the Company in removing the names of the appellants from its rolls was illegal and arbitrary, that the appellants had not abandoned the Company 's service, that at any rate the termination of their services could only be in terms of the Company 's standing orders and since the standing orders did not provide for treating the workmen as having abandoned service in case they were absent in connection with the notified strike, the Company 's action was manifestly illegal and invalid.
Three questions arise for consideration in this case, namely: (1) what is the true meaning of the expression 'abandonment of service '; 617 (2) whether in the circumstances of the case it could be said that the appellants had voluntarily abandoned the service of the Company; and (3) whether the action of the Company in removing the names of the appellants from its rolls on the presumption that they had abandoned service would constitute a change in the conditions of service of the appellants ? We will deal with these questions seriatim: Re.
Question No. 1: In the Act, we do not find any definition of the expression 'abandonment of service '.
In the absence of any clue as to the meaning of the said expression, we have to depend on meaning assigned to it in the dictionary of English language.
In the unabridged edition of the Random House Dictionary, the word 'abandon ' has been explained as meaning 'to leave completely and finally; for sake utterly; to relinquish, renounce; to give up all concern in something '.
According to the Dictionary of English Law by Earl Jowitt (1959 edition) 'abandonment ' means 'relinquishment of an interest or claim '.
According to Blacks Law Dictionary 'abandonment ' when used in relation to an office means 'voluntary relinquishment.
It must be total and under such circumstances as clearly to indicate an absolute relinquishment.
The failure to perform the duties pertaining to the office must be with actual or imputed intention, on the part of the officer to abandon and relinquish the office.
The intention may be inferred from the acts and conduct of the party, and is a question of fact.
Temporary absence is not ordinarily sufficient to constitute an abandonment of office '.
From the connotations reproduced above it clearly follows that to constitute abandonment, there must be total or complete giving up of duties so as to indicate an intention not to resume the same.
In Buckingham Co. vs Venkatiah & Ors.
it was observed by this Court that under common law an inference that an employee has abandoned or relinquished service is not easily drawn unless from the length of absence and from other surrounding circumstances an inference to that effect can be legitimately drawn and it can be assumed that the employee intended to abandon service.
Abandonment or relinquishment of service is always a question of intention, and normally, such an intention cannot be attributed to an employee without adequate evi 618 dence in that behalf.
Thus, whether there has been a voluntary abandonment of service or not is a question of fact which has to be determined in the light of the surrounding circumstances of each case.
Question No. 2: This takes us to the consideration of the second question, namely, whether in the circumstances of the instant case, it could be said that the appellants had voluntarily abandoned the service of the Company.
It may be recalled that the appellants had along with 229 other workmen gone on indefinite and peaceful strike which ended on October 22, 1972) in response to the strike notice given by the union to the Company to press its demand for re instatement of its three dismissed leaders and had not only by their letters dated September 21, 1972 and September 26, 1972 unequivocally intimated to the Company that they did not intend to abandon the service but had also returned the cheques sent to them by the Company on account of their leave salary gratuity etc.
The appellants stand that the letter of the Company dated September 7, 1972 was received by them on September 20, 1972 and not earlier was never denied or refuted by the Company in the correspondence that passed between the parties.
Thus, there was nothing in the surrounding circumstances or the conduct of the appellants indicating or suggesting an intention on their part to abandon service which in view of the ratio of Gopal Chandra Misra 's case, can be legitimately said to mean to detach, unfasten, undo or untie the binding knot or link which holds one to the office and the obligations and privileges that go with it Their absence from duty was purely temporary and could by no stretch of imagination be construed as voluntary abandonment by them of the Company 's service.
In Express Newspaper (P) Limited vs Michael Mark & Anr.,(2) which is on all fours with the present case, it was held that if the employees absent themselves from the work because of strike in enforcement of their demands, there can be no question of abandonment of employment by them.
In the present case also the appellant 's absence from duty was because of their peaceful strike to enforce their demand.
Accordingly, we are of the view that there was no abandonment of service on the part of the appellants.
Re Question No. 3: Let us now advert to the last but the most crucial question, namely, whether the action of the Company in removing the names of the appellants from its rolls during the pendency of the proceedings before the Labour Court in respect of the industrial dispute on the presumption that they had abandoned Company 's service 619 constituted an alteration in the conditions of service applicable to them immediately before the commencement of the said proceedings which prejudiciously affected them.
Although the learned counsel appearing on behalf of the respondent has taken us through the certified standing orders as applicable to the appellants, he has not been able to point out anything therein to indicate that the company could terminate the services of the appellants on the ground of abandonment of service because of their going on strike in enforcement of their demands.
Thus, their being no provision in the certified standing orders by virtue of which the Company would have terminated the services of the appellants in the aforesaid circumstance, the impugned action on the part of the Company clearly amounted to a change in the condition of service of the appellants during the admitted pendency of the industrial dispute before the Labour Court which adversely affected them and could not be countenanced.
We are fortified in this view by the aforesaid decision of this Court in Express Newspapers (P) Limited vs Michael Mark & Anr.
(Supra) where repelling an identical contention to the effect that the failure of the workmen to return to work by a notified date clearly implied abandonment of their employment, it was held that the management cannot by imposing a new term of employment unilaterally convert the absence of work into abandonment of employment.
It was further held in that decision that if the strike was in fact illegal, the management could take disciplinary action against the employees under the standing orders and dismiss them.
If that were done, the strikers would not have been entitled to any compensation under standing orders but that was not what the appellants purported to do and the respondents were, therefore, entitled to relief.
For the foregoing reasons, we are unable to uphold the impugned action of the Company and the award under appeal which are manifestly illegal.
In the result, we allow the appeal, set aside the aforesaid award of the Industrial Tribunal and direct the Company to reinstate the appellants.
The appellants shall also be entitled to the costs of the appeal.
A point which requires to be clarified and has been brought to the notice of the Court after the judgment was delivered relates to back wages from 19 9 72 to the date of reinstatement.
The rule in such cases is that where reinstatement has been directed by the Court, the entire back wages must follow as a matter of course.
Of course there is a discretion in the court having regard to special circumstances if any to modify this normal rule.
In the present case the period stretches over six years and Shri Sachine Chaudhary brings to our notice the fact that 620 back wages have to be computed, if ordered in full, on a much higher scale because of two settlements which have raised the scales of wages substantially.
While there is no case specifically put forward that the workmen concerned have been employed elsewhere during this period, still we take a total view the whole case and direct that for the entire period from 1972 to the date of reinstatement, 75 per cent of the wages will be paid to all the workmen concerned on the scales and revised scales as the case may be.
P.B.R. Appeal allowed.
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In support of their demand for reinstatement of certain dismissed union leaders a number of workmen, including the appellants had gone on an indefinite peaceful strike.
The Company (respondent) put up a notice that the strike was illegal and that the striking workmen were liable to disciplinary action for misconduct.
A week later, the company issued individual notices to the appellants and other workmen calling upon them to report for duty, failing which their absence would be construed as voluntary abandonment of service and that their names would be struck off the muster rolls.
A few days later the company informed the workmen concerned that by not reporting for duty they had confirmed its presumption that they were no longer interested to continue in its service that they had totally abandoned its service.
The names of the appellants had been struck off the rolls.
In final settlement of the workers ' claims for gratuity, leave salary and a month 's salary a cheque was sent to each of the appellants.
But the appellants returned the cheques to the company pointing out that they were interested in the service of the company and that they had neither voluntarily abandoned the service nor did they wish to do so and that they would report for work as soon as the strike was called off.
Thereafter, although there were prolonged negotiations between the union and the company, the company did not take them into its service.
Since a dispute was pending before an Industrial Tribunal application was made under section 33A of the .
The Tribunal rejected the workers ' demand for reinstatement.
In appeal to this Court it was contended on behalf of the appellants, that (i) removing their names from the rolls was illegal and arbitrary; (ii) the appellants had not voluntarily abandoned the company 's service and (iii) since termination of service could only be in accordance with standing orders, and since the standing orders in this case did not provide for treating the workmen as having abandoned the service in case they were absent in connection with a strike, the company 's action in terminating the appellants ' services was illegal.
Allowing the appeal, ^ HELD: The impugned action of the company and the award of the Tribunal were illegal.
[619 E] 1.
To constitute abandonment there must be total or complete giving up of duties so as to indicate an intention not to resume the same.
Failure to perform duties pertaining to an office must be with actual or imputed intention on 614 the part of the officer to abandon and relinquish the office.
The intention may be inferred from the acts and conduct of a party and is a question of fact which could be determined in the light of surrounding circumstances in each case.
Temporary absence is not ordinarily sufficient to constitute abandonment of office.
[617 D F] Buckingham Co. vs Venkatiah & Ors., ; ; referred to.
The absence of workmen from duty was purely temporary and cannot be construed as their voluntary abandonment of the company 's service.
There was nothing in the surrounding circumstances or the conduct of the workmen indicating or suggesting an intention on their part to abandon service.
To abandon service means to detach, unfasten, undo or untie the binding knot or link which holds one to the office and obligations and privileges that go with it.
[618 C E] In the instant case the workmen went on a peaceful strike.
By their letters they unequivocally intimated to the company that they did not intend to abandon service.
They had returned the cheques sent to them by the company.
Union of India vs Gopal Chandra Misra ; referred to.
Since there was no provision in the certified standing orders, by virtue of which the company could have terminated the services of the workmen, the impugned action amounted to change in the conditions of service of the workmen during the pendency of the industrial dispute which adversely affected them.
[619 A] Express Newspapers (P) Ltd. vs Michael Mark & Anr., ; applied.
In cases where reinstatement had been directed by the Court it is the rule that the entire back wages must follow as a matter of course.
In the special circumstances of this case the workmen are entitled to wages at 75% for the entire period from the date of termination of their services to the date of reinstatement.
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3937.txt
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Appeal No. 2221 of 1993.
From the Judgment and Order dated.5.5.
1993 of the Madhya ' Pradesh High Court in M.P. No. 4420 of 1991.
Harish N. Salve and L.R. Singh for the Appellant.
Anoop Choudhary, A.K. Sanghi, S.V. Deshpande and section K. Agnihotri for the Respondents.
The Judgment of the Court was delivered by Mohan, J.
Leave granted in SLP filed by Indian Medical Council, Jabalpur.
All these appeals are dealt with under a common judgment since they arise out of the same judgment passed in Misc.
Petition No.4420 of 1991 by the Madhya Pradesh High Court, Jabalpur Bench.
One Dr.
Nelson ,father of respondent1 was serving in Madhya Pradesh State Public Health in the Department of Surgery in the Medical College at Jabalpur.
His wife, Dr. (Mrs.) Shobha Nelson was also working as a Lecturer in the Department of Obstetrics and Gynecology in Medical College in a purely temporary capacity.
Nelson applied for foreign assignment.
He was selected for the same.
Therefore.
a request was made by the Government of India (Department of Personnel and Administrative Reforms) vide its letter dated 2nd of January.
1975 790 requesting the State Government to spare the services of Dr .
S.K. Nelson for foreign assignment with Zanzibar Government.
The Under Secretary to the Government of Madhya Pradesh, Department of Public Health and Family Planning replied on 15.4.1975 that it was not possible for the State Government to spare his services.
However, Dr. Nelson proceeded on two months ' vacation with effect from 1.5.75.He wrote a letter to the Dean of Medical College Jabalpur that he was proceeding, on long leave owing, to unavoidable family circumstances.
Even after the expiry of the period of leave he did not rejoin the post.
His request for further extension of leave was rejected.
Notwithstanding the same Dr. Nelson and his wife proceeded to Tanzania and the first respondent, Silas Nelson, also accompanied them.
It also requires to be mentioned in passing that a request was made to the Government of madhya Pradesh to spare the services of Dr. Shobha Nelson.
It was pointed out by tile State Government that she being ;A temporary servant she had no lien and she will have to resign the State service before joining her duties in Zanzibar.
She also absented unauthorisedly and proceeded to Tanzania along with her husband.
The first respondent claimed to have passed G.C.E. 'O ' level as well as 'A ' level examinations from the University of London conducted by the Education Council of the Government at Dar es Salam in Tanzania.
He also claimed that he had obtained credits in 'A ' level in three subjects i.e. Biology, Physics and Chemistry and 'O ' level in six subjects i.e. Biology, Chemistry, English language.
English Literature, Mathematics and Physics.
On this basis he claimed that he was entitled to admission in any Medical College in India.
According to him these examinations are considered to be equivalent qualifying examinations and pre requisite for admission to any Medical College.
It was also stated that Rani Durgawati University of Jabalpur had given an equivalence certificate.
He obtained admission in Muhmbili Medical College in the Faculty of Medicine.
which is affiliated to the University of Dar es Salam, in the year 1989.
lie had completed one year at the same college and University.
Thereafter he was pursuing his study in the second year.
Having regard to the fact that he had studied the subjects in Anatomy, Physiology, Biochemistry, Preventive and Social Medicine including, Behavioural Science and Biostatistics, Medical Psychology and Developmental Studies and Medical Surgery, he had undergone a wider course.
Therefore, according to him, he possesses the eligibility criteria for admission to the MBBS Degree Course at Jabalpur.
A request was made by the father of the first respondent to nominate the first respondent to MBBS Course directly under Central Government quota.
This request related not only to the first respondent but also his sister.
However, the Central Government advised Dr. Nelson to approach the Medical Council oflndia 791 and the concerned University in jabalpur seeking their concurrence to the migration of his two children from the University of Dar es Salam.
Tanzania to Medical College in jabalpur.
On 20th December, 1989, Dr. nelson approached the appellant, Medical Council of India (hereinafter referred to as the Council) for grant of no objection to the transfer.
This request was turned down on 12.1.90 as migration was not permissible under the Rules.
The position was further made clear by the letter of the appellant dated 28.12.90.
Aggrieved by this the first respondent and his sister Kumari Divya Nelson filed Writ Petition Misc.
Petition No. 2535 of 1990 before the Madhya pradesh high Court at Jabalpur.
The prayer was for a writ of mandamus to direct the respondents to grant admission to them to the 2nd year of MBBS Degree Course at Medical College jabalpur.
It was contended that the Council had not authority to object or refuse the issue of no objection certificate since its primary function is to prescribe minimum standards of medical education.
It is the University alone which should be concerned about the admission.
The High Court by its judgment dated 12.7.91 allowed the writ petition.
It directed the appellant and other authorities to consider the case of respondent 1 and his sister within a period of two months for their admission in the Medical College, jabalpur in the light of clause 'E ' of the mandatory recommendations approved under Section 33 of the .
It was also held that though the Council had considered the case of the candidates yet it had not looked into the individual merits regarding their eligibility for transfer to Medical College,jabalpur which affiliated to Rani Durgawati Vishwa vidyalaya, jabalpur.
Besides teh impugned letter of the council does not show any application of mind as it is not speaking order.
In complete with the above directions the Executive Committee of the appellant (Council) reconsidered the case on 20.8.91.
The question was whether the migration of the respondent on individual merit to Medical College.
jabalpur under clause v 'e ' of the Migration Rules was permissible.
It was concluded that the migration could not be allowed since the ground were not sufficient for such migration.
It was also of the view that the facts stated for considering the individual case on merits were not relevant.
What is important to be considered is the course of study the student had already undergone vis a vis the course being taught in the Medical College in Which the migration is sought.
The candidate had not also finished enough materials to make comparison with 792 the course of study conducted in medical College at jabalpur.
For these reasons the request for migration was rejected.
The same was reiterated by a letter dated 4.1.92.
After this, a review petition was filed to recall the order dated 12.7.91 of the High Court.
However the review petition was dismissed by the High Court.
An application for contempt was also dismissed.
There upon Misc, Petition No. 4420 of 1991 came to be filed seeking admission in the 2nd year or the 1st professional M.B.B.S. Course at Medical College, Jabalpur on the same grounds as were alleged previously.
direction was issued on 23.12.1991 to give provisional admission.
After admission of the writ petition the same order was continued.
Though an application was preferred by the respondents 2 to 4 to have the order vacated on the ground that migration from an unrecognized Medical College to a recognised Medical College was not permissible, the same was dismissed.
Some interesting development took place during this stage.
The candidates did not produce the required document.
Hence provisional admission was not granted to them by the respondents 2 to 4.
That led to the filing of Interlocutory Application No. 2805 of 1992 for further direction.
Respondents 2 to 4 also filed an application for direction on 26.3.92 inter alia pointing out that before grant of provisional admission, the writ petitioners were required to submit proof of their having passed 1st year course at Tanzania.
In the absence of such proof the admission was impossible.
Further in which year of the MBBS course the first respondent was to be admitted, was not free from difficulty.
it was averred that even without passing the first year from the university of Dar es Salam the claim is made for admission to the second year.
This is nothing but fraud the High Court strangely permitted the writ petitioner.
Kumari Divya Nelson to withdraw herself from the petition and it directed respondent 1 alone could prosecute his studies.
The authorities were directed to grant provisional admission his filing necessary forms and depositing admission fees without insisting on the production of any other certificate or testimonials or syllabus of Dar es Salam University.
For non compliance with this direction a contempt application was taken but by the first respondent.
On peril of contempt the Dean (Respondent 4) had not other option but to comply with the order of provisional admission.
Against this order directing provisional admission without insisting on the production of any other documents SLP (C) No. 10498 of 1992 was preferred.
Leave was granted on 7.9.92 by this court staying the operation of the order dated 18.5.92 of the High Court.
This Court directed that the interim order well subsist 793 till the disposal of the writ petition before the High Court and requested the High Court to dispose of the writ petition of the respondent I expeditiously.
By the impugned judgment dated 5th March, 1993 the writ petition was allowed The resolution dated 20th August, 1991 refusing to accede to the request of the writ petitioner respondent (1) for migration was quashed holding that there was no application of mind by the Council.
lt is under these circumstances these appeals by special leave to appeal have come to be preferred.
Mr. harish N. Salve, learned counsel for the appellant would submit the following grounds attacking the impugned judgment: The High court erred in directing admission to respondent I in recognised medical college in India from an unrecognized college by way of migration/ transfer.
WI the more so.
when such impermissibility has been recognised by this Court in Medical Council of India, New Delhi vs Rajendra section Sankpal and Ors.
(C. A Nos. 3 4 of 1991 dated 21.10.92) and order dated 6.12.1990 of this Court passed in Medical Council of India vs Ms. Sunita Anant Chavan & Ors.
(I.A. Nos. 2 7 in Transfer Petition (Civil) Nos. 230 235 of 1989).
The High Court misread Regulation V. Under that Regulation migration is allowed from a recognised medical college to another recognised college and that too within three moths after passing of the first professional examination.
In so far as the first respondent has neither undergone study in a medical college recognised by the Council nor has he passed the first professional examination, he could not he admitted to the second year.
The first respondent failed in the subject of Anatomy which is one of the papers taught in the first year at Dar es Salam University.
Under the Examination Regulation of the said University he was required to sit in the supplementary examination in the failed subject before the beginning of the next academic year.
Thus he was required to clear the said paper within six weeks.
Should he fails in the supplementary examination he ceases to be a student of the College/University.
In so far as the first respondent did not take the supplementary examination he ceased to be a student of Dar es Salam University.
Therefore, the question of migration could not arise at all.
The first yen course of Dar es SalamlJniversitv is not equivalent to the first phase of MBBS Examination in India.
794 Equivalence has to be decided by only an expert body, that too, on technical and academic matters.
It is not in the domain of assessment or evaluation by the Court.
The High Court should not have embarked on the determination of equivalence on the basis of sketchy materials placed before it.
The High Court erred in relying on.
Minakshi Malik, vs University of Delhi; , There, the candidate was not, in any matter, ineligible while here, the first respondent is ineligible.
The High Court erred overlooking that an administrative authority like the appellant is not required to pass reasoned orders.
The decree awarded by Dar es Salam University is not recognised and :Is not included under any of the Schedules of the Medical Council of India Act, 1956.
Therefore, there was no occasion for the appellant to decide the equivalence.
Should the first respondent be anxious he should have placed all the materials.
In opposition to this, learned counsel for the respondents, argues that the Council has taken a self contradictory stand.
In one breath, it will contend that there are no materials to decide the equivalence and in the other breath it would say it is not equivalence.
Under these circumstances, in view of the cryptic order passed, the High Court itself decided finding that the Council had not applied its mind.
The High Court was satisfied on the basis of documents there is equivalence.
The High Court is well entitled to do so.
More so, having regard to the ruling of Minakshi Malik 's case (supra) Equity also must weigh in favour of the first respondent.
In any event, the first respondent had passed his pre Medical test successfully in the year 199 1.
He also belong s to scheduled tribe.
Therefore, on the basis of these two documents his candidature could be considered for admission to first year MBBS Course for the ensuing academic year of 1993 94 as otherwise, the career of a young man would be completely ruined.
The factual position with regard to study of the first respondent in Dar es Salam University requires to be carefully analysed.
The claim of the first respondent is that he has passed G.C.E. 'O ' level as well as 'A ' level examinations from the University of London conducted by the Education Council of the Government at Dar es Salam in Tanzania.
He claims to have obtained credits in 'A ' level in the following three subjects (i) Biology, (ii) Physics; and 795 (iii) Chemistry In `O ' level he claim.
,; to have obtained credits in the following six subjects (i) Biology, (ii) Chemistry, (iii) English Language, (iv) English Literature, (v) Mathematics; and (vi) Physics On this basis, he claims admission to any Medical College in India as these are considered to be equivalent qualifying examinations and prerequisite for admission to any Medical College.
It is claimed on behalf first respondent at Rani Durgawati University of Jabalpur has given an equivalence certificate.
That is extracted below "With reference to your above cited letter, it is to inform you that students have passed in five subjects at least at the G.C.E. (Ordinary Level) and two subjects at the (Advanced Level) from University of London, are treated as having successfully completed the 12 year Pre University/Higher Secondary in India.
Hence, if your son Shri Silas Supragya Nelson has passed above examination then he may appear in Pre Medical test examination as desired by you." According to first respondent, he was admitted in Muhmbili Medical College in the Faculty of Medicine which is affiliated to the University of Dar es Salam in the year 1989 and has completed one year at the same College and University.
In the First year he had studied subjects in Anatomy, Physiology Biochemistry, Preventive and Social Medicine which includes Behavioural Science and Bio statistics, Medical.
Psychology and Development Studies & Medical Surgery whereas at Rani Durgawati University, the subjects taught in the first year are Anatomy, Physiology, and Biochemistry.
Thus the courses followed at Dar es Salam University are much wider.
It was further claimed that his course in the said Medical College is equivalent to first year course of MBBS Degree awarded by Rani Durgawati University, Jabalpur and, therefore, he possesses the eligibility criteria for admission to the MBBS Degree Course at Jabalpur.
796 On the said basis migration is sought.
Dar es Salam University is not recognised by the Medical Council of India.
Therefore, front all unrecognised institution admission is sought to a recognised institution.
With the object of maintaining and regulating, standards of medical education in the country, the Parliament enacted "the ".
Under Section 6 of the Act.
the Medical Council of ' India has been incorporated, which is a body corporate having a perpetual succession and a common seal Section 12 of the Act makes provisions for recognition of medical qualifications granted by medical institutions in countries with which there is a scheme of reciprocity.
Under this section, the schedules are given providing list of recognised medical institutions & qualifications.
The first schedule gives list of recognised medical qualifications granted by universities/medical institutions in India; whereas schedule second gives the list of recognised medical qualifications granted by medical institutions outside India.
University of Dar es Salam & its medical institution is not included in the second schedule and therefore the qualifications imparted by that institution are not recognised.
That apart, section 14 of the Act makes provisions for recognition of medical qualifications (granted by countries in which there is not scheme of reciprocity.
The Central Government has not considered Dar es Salam University for such recognition.
It was in this context the following order came to be passed by the appellant "The Director, Medical Education, Madhya Pradesh, Bhopal Subject: Migration of Silas Nelson and Divya Nelson from Dar es Salam Medical College, Tanzania to Medical Collage, Jabalpur.
Sir, With reference to your letter No. 6151/DME/IV dated 12.5.1990 I am to state that the matter regarding, Migration of Silas Nelson and Divya Nelson from Dar es Salam Medical College, Tanzania to Medical College,Jabalpur was duly placed before the Executive Committee of this Council at its meeting held on 20th August, 1991 for consideration.
The Committed decided as under: 797 The Executive Committee considered the matter with regard to the migration of the above candidates on individual merit to Medical College Jabalpur under Clause V(e) of the migration rules and did not allow these migration since the grounds are not sufficient for migration and the facts stated in the individual cases are not very relevant for grant of permission for migration.
For considering any such cause of migration, it is important to consider the cause of study the student has already undergone vis a vis the course being taught in the Medical Colleges in which the migration is sought.
Further it is observed that the candidates seeking their migration have also brought no records to show the course of study being conducted at their medical college for making comparison with the study being conducted in Medical College, Jabalpur.
Hence the applications for migration of the above candidates are rejected.
Your faithfully, (Mrs. M. Sachdeva) Off.
Secretary.
" Concerning migration the rule also is to the effect that the same can be allowed by the University concerned within three months after the passing of the first professional examination.
Then, the question of equivalence arises.
The equivalence came to be decided in the following manner: "Reference Letter dated 28.12.1991 of Dy.
Registrar (General) R.D. University, Jabalpur.
Regarding letter of ku.
Divya Nelson and 2/ Silas Nelson to the University.
I have gone through prospectus of University of Dar es Salam (1990 90) For M.D. degree which is equivalent to M.B.B.S. of Universities abroad (as per letter No. H/Q/G.N/17862 dated 2nd May, 1990 of Director of Training and Occupational Health Service, attached in the file).
For examination at the end of first year in Dar es Salam University the subjects are: 798 Anatomy/Histology Behavioural Sciences Only one Biochemistry Year study.
Physiology Development studies Where in Indian Universities the First MBBS Course which is of 18 months the subjects examined are (As premedical Council of India) Anatomy Physiology one and half, Biochemistry Year study As the detailed syllabus of the 5 subjects taught in one year at Dar es Salam University is not given in the Prospectus, it is difficult to know whether the course is equal as only three subjects are taught in Indian University for one and half years indicating that these subjects are taught in more detail here in our University.
However, in general the subjects taught there in first year included Anatomy, Physiology and Biochemistry (along with other two subjects) which are also the subjects of first M.B.B.S. (one and half years course) here also.
For mote clarification, the Medical Council of India may be consulted because they are the main authority in India in this respect.
Dean, Faculty of Medicine of our University was also consulted in this matter/ sd/ Protessor & Head.
Dept. of Biochemistry Medical College & Chairman Board of Studies for Anatomy, Physiology & Biochemistry.
This may be put up before the standing for confirmation.
" We cannot understand when this was the position with reference to equivalence how the High Court had donned the role of an expert body and would say as follows "The petitioner has filed documents showing that Dr. R.K. Gupta, Reader in Pharmacology of the Medical College, Jabalpur was sent on deputation for teaching in the medical college affiliated to Dar es Salam University.
The petitioner, by filing the documents, wants to show that persons having requisite qualifications for teaching in the Medical College, Jabalpur were posted or appointed at the medical college affiliated to Dar es Salam University.
The documents filed by the petitioner show that the subjects taught in the first year M.B.B.S. at Muhibili Medical 799 College, Dar es Salam University and the subjects taught at the Medical College, Jabalpur are the same.
to us the material consideration is the qualifications necessary for admission to the first year M.B.B.S. course.
The documents on record show that the educational qualifications for admission to the Medical College, Jabalpur and the Muhbili Medical College of Dar es Salam University are the same and there is equivalence of courses.
As there is equivalence of courses required for admission to the first year M.B.B.S. courses in Muhibili Medical College and the Medical College, Jabalpur, the petitioner is entitled to be transferred to the first year M.B.B.S. course of the Medical College, Jabalpur and should be permitted to appear in the examination conducted by the Rani Durgawati University, Jabalpur.
" This is totally unwarranted because the High Court does not have the necessary expertise in this regard.
As to the equivalence we have already extracted the opinion of the Chairman of Board of Studies for Anatomy, Physiology and Biochemistry.
From the above extract it is clearly seen that the Council is the main authority in this respect.
Then again, the High Court had gone wrong in concluding that the individual cases are relevant for the grant of permission for migration.
In our considered view, as rightly concluded by the Council, what is material is the course of study which a student has undergone vis a vis the courses being taught in the Medical College in which the migration is sought.
What the Council was endeavouring to point out was the materials placed before it by the present first respondent were not sufficient to decide the equivalence.
The criticism of the Council, by the High Court, is also not warranted.
First of all, no certificate was produced by the first respondent that he had completed the first year course in Dar es Salam.
Unless and until that is done the question of admission to the second year MBBS could not arise.
The first respondent had not appeared in the supplementary examination.
If that is so, according to the Regulations of Dar es Salam University, he is deemed to have discontinued from that Course.
In such a case the question of giving admission to Medical College at Jabalpur could never arise.
Therefore, looked at from any point of view, the Medical Council of India which is the authority to decide the equivalence, has come to the correct conclusion, in that, there cannot be a migration from unrecognised institution to a recognised Medical College.
The judgment of the High Court is wholly unsupportable.
Once we have arrived at this conclusion the question arises whether the case of the first respondent could be considered for the academic year 1993 94 based on his performance in the pre Medical test for the year 1991.
The statement of 800 marks obtained in pre Medical Test, 1991 is as under: "Subjects Max.
Marks Marks Obtained Physics 300 127 Chemistry 300 220 Botany 300 160 Zoology 300 214 English 300 217 1200 721" He also claims that he belongs to Scheduled Tribe.
We do not have material to show as to whether he was granted admission to any Medical College on the basis of his performance in the pre Medical test for the year 199 1.
However, in the petition for special leave to appeal the appellant has made the following averments "In the said Count er affidavit, on oath the respondent no.1 deliberately, knowingly an d willfully made a false statement that he had never appeared in the Pre Medical Test held in the year 1991 and failed.
It was further stated that in fact it was his younger brother Sushrut who had appeared in the T.M.T Examination of 1992.
The petitioner herein has made an inquiry and has come to know that the respondent no.1 appeared in the Pre Medical Test, 1991 vide application No. 27811 and was allotted Roll No. 624227 but failed to qualify and complete in the said test. .
Since the writ petitioner respondent no.1 appeared in the Pre Medical Test, 1991 vide application No. 27811 and was allotted Roll No. 624227 but failed to qualify and complete, he was not at all eligible for admission to the undergraduate medical course in India.
" If this be the correct position, he would not be entitled to be considered for admission for the academic year 1993 94 on the basis of his performance in the Pre Medical test held in the year 199 1.
It is for the concerned authority to verify the factual situation and decide the matter.
801 We make it clear that if his case has already been considered for admission on the basis of performance in the Pre Medical test 1991 and rejected there is no need to consider his case once again for the year 1993 94.
Otherwise, it may be considered on the basis of performance in the pre Medical test for the year 1991 as against the quota intended for Scheduled Tribe, if his status as belonging to Scheduled Tribe is established provided there is no legal impediment in doing so.
Subject to the above directions, civil appeals will stand allowed.
However, there shall be no order as to costs.
I.A. No. 1 of 1993 in SLP (C) 6161 of 1993 is also allowed.
U.P. Appeal allowed.
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In 1989, respondent 1 and his sister applied for migration from Mumbili Medical College in the Faculty of Medicine, affiliated to the University of Dar es Salam to a recognised medical college in India.
The Medical Council of India turned down this application.
A writ petition was filed in the Court at Jabalpur.
The High Court directed that the appellant and other authorities consider the case of the petitioners.
Thereafter the Executive Committee of the Medical Council reconsidered the case on 20th August, 1991.
It found that the grounds for migration were not sufficient; that it was.
the course of stud already undergone vis a vis that being taught in the medical college in which migration was sought, and not the facts of individual case, which was relevant.
Also the candidate had not furnished enough materials to make the comparison.
The Council therefore rejected the application.
A review petition and contempt petition filed in the High Court were dismissed.
Thereupon, in a miscellaneous petition filed on the same grounds seeking admission in the second year or the 1 year professional MBBS Course at Medical College, Jabalpur the High Court directed that the petitioners be given provisional admission.
The petitioners however, did not produce the required documents and the college did not provisionally admit them.
In an interlocutory application, the High Court permitted one of the petitioners to withdraw herself from the petition and directed that the other petitioner 788 (respondent I before this Court) he granted provisional admission on his filing necessary forms and depositing the fees without insisting ton the Production of any other certificate or testimonials or syllabus (of Dar es Sala in University On fear of contempt, the Dean had to comply with this order.
On an application before it, this Court stayed the interim order and requested the High Court to dispose of the main petition expeditiously.
The High Court allowed the %Tit petition and quashed the resolution dated 20th August, 1991.
refusing migration, holding that there was no application of mind by the Council.
On appeal before this Court, it was contended that the High Court erred in directing admission of respondent in a recognised medical college from an unrecognised medical college by way of migration , that Regulation V had been misread and that not having under gone study in a recognised medical college nor having passed the first professional examination, he could not be admitted to the second year; that he had failed in anatomy and had not sat for his supplementary examination and had therefore ceased to be a student of Dar es Salam University and that the first year course at Dar es Salam University and in India were not equivalent.
Equivalence in any case, it was urged, is to be decided by an expert body and is not in the domain of the Court.
For respondent 1, it was argued that the self contradictory stand of the Council on equivalence had led to the High Court deciding the issue; that equity was in his favour; that he had in any event passed his pre medical test in 1991; and that he belongs to a scheduled tribe.
Allowing the appeal, this Court, HELD: 1.
The Medical Council has come to the correct conclusion that there cannot he migration from unrecognised institution to a recognised medical college.
(799 G) Dar es Salam University has not been recognised as provided in the Indian Medical Council Act, 1956.(7% A) 2.
The High Court does not have the necessary expertise to determine equivalent.
The Medical Council is the main authority in this respect.
(799 C) 789 3.
what is material for grant of permission for migration is the course of study which a student has undergone vis a vis the courses being taught in the medical college in which the migration is sought, and not the individual case.
(799 D) The material placed before the Council was not sufficient to decide equivalence.
The concerned authority is to verify the disputed factual position concerning his performance in the 1991 pre Medical test and decide on considering him for admission for the academic year 1993 94.
(800 E G)
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7118.txt
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Appeal No. 605 of 1964.
Appeal by special leave from the judgment and decree dated April 12, 1963 of the Andhra Pradesh High Ccurt in S.A. No. 124 of 1959.
281 P. Ram Reddy and A. V. V. Nair, for the appellant.
H. R. Gokhale, section P. R. Vital Rao, K. Rajendra Chaudhari and K. R. Chaudhuri, for the respondent.
The Judgment of the Court was delivered by Subba Rao, C.J.
This appeal by special leave raises the question whether a suit would lie at the instance of the present trustees of a temple for rendition of accounts of the management of the temple by the ex trustees.
The appellant is Sri Vedagiri Lakshmi Narasimha Swami temple situated at Narasimhuly konda, Nellore taluk, in the State of Andhra Pradesh, represented by its trustees.
The respondent and two others were non hereditary trustees of the said temple and functioned as such for a term of five years ending with January 1951.
The respondent was the managing trustee during that period.
The new trustees were appointed by order of the Hindu Religious Endowments Board dated January 21, 1951 ; but they were able to obtain possession of the temple only on July 21, 1952.
They, representing the temple, filed O.S. No. 246 of 1953 in the Court of the Subordinate Judge, Nellore against the respondent and others for the following three reliefs : (1) to direct all or such of the defendants as may be found liable to render a true and proper account of their management of the temple and its properties since the date of their functioning as trustees and to pay over to the new trustees such amounts as may be found due ; (2) to assess the amount due to the temple as a result, of the various acts of malfeasance, misfeasance and nonfeasance of the defendants 1 to 3 in respect of their management, and to direct them to pay the same to the new trustees ; and (3) to direct the defendants 1 to 3 to deliver to the new trustees all documents, accounts, registers, section 38 register, jewels and movable properties, after rendering a true account thereof and failing such delivery, to pass a decree against the defendants for their value, or pass such decree against them for such damages as the temple had sustained.
In the plaint, the new trustees alleged that the defendants were guilty of acts of misfeasance, malfeasance and nonfeasance and also of gross negligence.
The defendants, inter alia, apart from denying the said allegations made against them, pleaded that the suit was not maintainable in a civil court in view of the provisions of section 87 of the Madras Hindu Religious and Charitable Endowments Act, 1951 (Act 19 of 1951), hereinafter called the Act.
The learned Subordinate Judge, by his judgment dated August 12, 1953, held that the suit was maintainable.
He also found that defendants 1 to 3 were liable to render an account of their management during the period of their trusteeship and to pay damages for the loss suffered by the temple on account of theinr 282 acts of misfeasance, malfeasance and nonfeasance.
In the result, he passed a preliminary decree in favour of the new trustees directing the respondent and defendants 2, 5 and 6 the legal representatives of defendant 3, to render a true and proper account of their management of the temple and its properties for the period commencing from the beginning of 1946 to the date when the plaintiffs took possession of the temple in July 1952 and to pay such amounts as may be found due from them on taking accounts.
The 1st defendant, the ex managing trustee of the temple, preferred an appeal against the said decree to the court of the District Judge, Nellore.
To that appeal, the plaintiffs were made respondents.
Pending the appeal, the plaint was amended and the words "of pass such decree against them for such damages as the temple has sustained thereby" were deleted from prayer 3 of the plaint.
The learned advocate for the plaintiffs made an endorsement on the plaint and the appeal memo stated as follows : "Plaintiffs have given up prayer in respect of the damages as endorsed by the learned advocate on behalf of the plaintiffs on the plaint on 20 8 1958.
" The learned District Judge also recorded in his judgment that the appellant (respondent herein) did not press his appeal in respect of the claim for damages given up by the plaintiffs.
Prima facie this amendment related only to the prayer to deliver to the new trustees the documents and other movable properties and did not affect the other prayers for rendition of accounts on the ground of malfeasance, misfeasance and nonfeasance of the defendants.
The learned District Judge understood the finding given by the learned Subordinate Judge as follows : "Setting out all these things in detail in paras 13 and 14 of his judgment, the learned Subordinate Judge came to the conclusion that it was sufficient to say that there is liability to account in respect of the management on the part of the ex trustees, i.e., defendants 1 and 3, and that they are liable to pay to temple whatever damages it has suffered on account of their acts of misfeasance, malfeasance and nonfeasance." After considering the relevant evidence and the case law on the subject, he came to the following conclusion : " I have no hesitation to hold that the plaintiffs have established liability for ex trustees to render account of their management to deliver possession of the other property yet to be delivered and also the records men tioned in the plaint.
" The learned District Judge, therefore, agreed with the learned Subordinate Judge that the defendants had to render accounts 283 of their management of the temple and to pay to the temple damages suffered by it on account of their acts of misfeasance, malfeasance and nonfeasance.
In the result the decree of the learned Subordinate Judge was confirmed.
But, on Second Appeal, Jaganmohan Reddy, J., of the Andhra Pradesh High Court, held that the suit for accounts was not maintainable.
The reasoning of the learned Judge is found in the following observations : "It is true that a suit for back accounting on the authority of the decisions cited above does not lie and unfortunately in this case though the frame of the suit was for recovery of damages for negligence of the trustees in not taking leases, in not filing rent suits, in not collecting rents and generally for other acts of negligence, that plea was given up by the respondents, probably because they were not in a position to establish these facts.
The learned advocate for the respondents admits that this plea was given up by the clients and in the circumstances the only relief that the respondents claim against the appellant now is one for general accounting relating to the management or administration of the trust property and applying the principle laid down by the two judgments of this Court in Venkataratnam vs Narasimha Rao (1) and Sri Saraveswaraswami Vari temple vs Veerabhadrayya (2), 1 cannot but hold that suit will not he and in this view, the appeal is allowed and the judgments and the decrees of the courts below are set aside." Though, prima facie, as we have said earlier, we are inclined to hold that what was given up by the appellant was only a part of the third relief, in view of the unambiguous admission made by the learned advocate for the appellant and recorded in the judgment of the High Court, we have no option but to hold that the appellant had given up the plea of wilful default against the defendants and confined the relief only to a rendition of accounts by them in respect of their management of the temple during their tenure and to pay the amount that might be found due to the appellant.
Mr. P. Ram Reddy, learned counsel for the appellant temple, raised before us three points : (1) The suit was for damages for gross negligence and the learned Judge did not appreciate the correct scope of the concession made by the learned advocate appearing for the temple before him.
(2) Section 93 of the Act is not a bar to a suit by the present trustees against the ex trustees for rendition of accounts of their management of the temple (1) M15Sup.
CI/66 5 (2) 284 properties and recovery of the amounts due from them.
(3) The learned Judge went wrong in holding that a suit for back accounting would not lie.
On the first point we have already expressed our opinion earlier that, in view of the unambiguous concession made by the learned advocate for the appellant before the High Court, we must hold that the suit, after the amendment of the plaint, was confined only to rendition of accounts, not on account of wilful default or negligence, but only for rendition of accounts by the ex trustees of their management and to pay the amounts due to the present trustees.
The question, therefore, is whether the present trustees can demand a rendition of accounts from the ex trustees in respect of their management without alleging against them any acts of negligence or wilful default and, if so, whether section 93 of the Act was a bar to the maintainability of a suit for the relief of rendition of accounts in a civil court.
It is common place that no trustee can get a discharge unless he renders accounts of his management.
This liability is irrespective of any question of negligence or wilful default.
In the present case, the ex trustees admittedly did not give an account of their management though they put the plaintiffs in possession of the properties in the year 1952 and that too after adopting a course of obstructive attitude.
They are, therefore, liable to render accounts of their management to the present trustees.
The decisions relied upon by the learned Judge to not sup port the view that an ex trustee need not render accounts in the absence of allegations of negligence or wilful default.
In V. K. Kelu Achan vs C.S. Sivarama Pattar (1) one of the questions raised was whether the 1st defendant therein, who was a karnavan of a tarwad and also the manager of temple properties, should be made to give a general rendition of accounts of his management from 1900.
It was found in that case that the 1st defendant was not personally responsible for any loss to the temple, that no relief for rendition of accounts was asked for against him and that he was not the person who was maintaining the accounts.
on those facts, the High Court refused to give a decree against the 1st respondent for back accounting.
In the course of the judgment the following observations were made : "It is a general principle also that back accounting will not be decreed except on proof of dishonesty and malversation, and we have not found any such proof here against the present trustee.
" These observations do not circumscribe the scope of the court 's discretion, but only lay down a guide for its exercise.
They must (1) A.I.R. 1928 Madras 879, 887.
285 be read in the context of the facts found in that case.
Nor the decision in The Madura etc.
Devasthanams vs Doraiswami Nayudu(1) lays down any such wide proposition.
There, the executive officer of a temple sought to recover from its ex trustee a certain amount by way of damages on foot of gross negligence.
It was found that the trustee was not guilty of any wilful default and that he was justified in acting upon the vouchers and accounts furnished by the law department of the Devasthanam and also that it was not established that any items were really due to the temple.
On those facts the suit was dismissed.
Briefly stated, that was a suit for rendition of account on the ground of wilful default in the course of management of the temple affairs and, as no wilful default had been established, the suit for accounts was dismissed.
, It is not an authority for the position that unless wilful default is established an ex trustee need not account to the present trustee and to pay to him the amount due under the said accounts.
In the case of rendition of accounts by an ex trustee to a present trustee, it will necessarily relate to back accounting, for no question of accounting in future arises in his case.
The question that invariably arises in such a context is as to what period he shall be made liable to render accounts.
That depends upon the facts of each case.
Sir Thomas Flumer, M. R., said in Attorney General vs Exetor Mayor (2) : "It has, I think, been properly stated on both sides, that there is no fixed limit of time in directing an account against a trustee of a charity,. .
It does not, however, follow that the relief will be given after a great length of time, it being the constant course of Courts of Equity to discourage stale demands ; even in cases of fraud, in which, if recent, there would have been no doubt, lapse of time has induced the Courts to refuse their interference.
In cases of charities, this principle has often been acted on.
When there has been a long period, during which a party has, under an innocent mistake, misapplied, a fund, from the leaches and neglect of others, that is, from no one of the public setting him right, and when the accounts have in consequence become entangled, the Court, under its general discretion, considering the enormous expense of the enquiries, the great hardships of calling upon representatives to refund what families have spent, acting on the notion of its being their property, has been in the habit, while giving the relief, of fixing a period to the account.
" These observations were followed by a Division Bench of the Madras High Court in Sanyasayya vs Murthamma (3).
Where (1) (2) ; (3) A.I.R. 1919 Madras 943. 286 a suit was filed for an account for the year 1884 and the 1st defendant was asked to account for the management of his father and grand father, the learned Judges of the Madras High Court fixed the period of accounting at 12 years.
The said observations were also followed by the Andhra High Court in Hariharabrahmam vs Janakiramiah (1) and, having regard to the circumstances in that case, the said High Court directed accounts to be taken for a period of six years prior to 1938.
In the present case the learned subordinate Judge and the learned District Judge, in exercise of their discretion, having regard to the circumstances of the case, directed the respondent to render accounts of his management from the beginning of the year 1946 to the date when then plaintiffs took possession of the temple in July 1952.
We do not see any justification to interfere with the discretion of the courts in that regard.
The next question is whether section 93 of the Act is a bar to the maintainability of the suit.
The said section reads : "No suit or other legal proceeding in respect of the administration or management of a religious institution or any other matter or dispute for determining or deciding which provision is made in this Act shall be instituted in any Court of law, except under, and in conformity with, the provisions of this Act." The learned counsel for the appellant contended that in order to invoke this section the following conditions shall be complied with: (1) The suit shall be in respect of the administration or management of a religious institution ; (2) it shall be in respect of any other matter in dispute ; and (3) for determining or deciding such a suit or other legal proceeding there shall be a provision in the Act ; if there is such a provision, such a suit or proceeding could not be instituted in any court of law except under, and in conformity with, the provisions of the Act.
The further argument was that the administration or management referred to in section 93 related to section 58 of the Act, and the other matters of dispute related to section 57 thereof, and that, as the suit for rendition of accounts did not fall either under section 57 or under section 58 of the Act, the present suit for such a relief was outside the scope of section 93 of the Act.
Mr. Gokhale, learned counsel for the respondent, contended that Ch.
VII of the Act provided for rendition of accounts and a machinery for determining or deciding disputes in respect thereof, and that, therefore, no suit or other legal proceeding could be taken in any court except under and in conformity with the provisions of that Chapter.
(1) A.I.R. 1955 Andhra 18.
287 Under section 9 of the Code of Civil Procedure, the courts shall have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred.
It is a well settled principle that a party seeking to oust the jurisdiction of an ordinary civil court shall establish the right to do so.
Section 93 of the Act does not impose a total bar on the maintainability of a suit in a civil court.
It states that a suit of the nature mentioned therein can be instituted only in conformity with the provisions of the Act; that is to say, a suit or other legal proceeding in respect of matters not covered by the section can be instituted in the ordinary way.
It therefore imposes certain statutory res trictions on suits or other legal proceedings relating to matters mentioned therein.
Now, what are those matters ? They are : (1) administration or management of religious institutions ; and (2) any other matter or dispute for determining or deciding which provision, is made in the Act.
The clause "determining or deciding which a provision is made in this Act", on a reasonable construction, cannot be made to qualify "the administration or management" but must be confined only to any other matter or dispute.
Even so, the expression "administration or management" cannot be construed widely so as to take in any matter however remotely connected with the administration or management.
The limitation on the said words is found in the phrase "except under and in conformity with the provisions of this Act.
" To state it differently, the said phrase does not impose a total bar on a suit in a civil court but only imposes a restriction on suits or other legal proceedings in respect of matters for which a provision is made in the Act.
Any other construction would lead to an incongruity, namely, there will be a vacuum in many areas not covered by the Act and the general remedies would be displaced without replacing them by new remedies.
The history of this provision also supports the said interpretation.
Sub section (2) of section 92 of the Code of Civil Procedure says : "Save as provided by the , no suit claiming any of the reliefs specified in subsection (1) shall be instituted in respect of any such trust as is therein referred to except in conformity with the provisions of that sub section.
" Suits for reliefs mentioned in sub s.(1) of section 92 of the Code of Civil Procedure can only be instituted in special courts and in the manner mentioned therein.
Construing the said sub section, a Full Bench of the Madras High Court in Appanna vs Narasinga (1) held that a suit by a trustee of a public religious trust against a co trustee for accounts did not fall within the section, though the relief claimed (1) Madras 113.
288 was the one specified in sub section
(1), cl.
The reason given was that the relief was sought not in the larger interest of the public but merely for the purpose of vindicating the private rights of one ,of the trustees and of enabling him to discharge the duties and liabilities which were imposed upon him by the trust.
Another Full Bench of the Madras High Court in Tirumalai Tirupati Devasthanam ,Committee vs Udiavar Krishnayya Sahnbhaga (1) held that the ,said section did not apply where the general trustees of a public temple sued the trustees of certain offerings given to the deity, for accounts, on the ground that in that suit the right of the public was not sought to be enforced but only the personal rights of the trustees qua the trustees.
These decisions indicate that section 92 of the Code of Civil Procedure does not impose a general embargo on filing of a suit in a civil court, but only directs that suits of the nature mentioned in sub s.(1) thereof shall not be instituted in a civil court except in conformity with the provisions of the said 'sub section.
If a suit does not fall within the ambit of section 92(1) of the Code of Civil Pro cedure, it is not hit also by sub s.(2) thereof.
When the Madras Hindu (2 of 1927) was passed, in respect of the endowments covered by that Act, section 73 of that Act replaced section 92 of the Code of Civil Procedure.
Sub section (4) ,thereof, which was added by Madras Act X of 1946 read : "No suit or other legal proceeding claiming any relief provided in this Act in respect of such administration or management shall be instituted except under and in conformity with the provisions of this Act." The expression "except under and in conformity with the provisions of this Act" in the said sub section is also found in section 93 of the Act.
The scope of the said sub section came under judicial scrutiny in Manjeshwar Srimad Anantheswar Temple vs Vaikunta Bhakta (2) Therein Horwill, J., summarised the legal position reached in respect of the construction of that section thus : "It will be seen therefore that from 54 Mad. 1011 (Vythilinga Pandarasannadhi vs Temple Committee, Tinnevelly) onwards there was a considerable body of opinion that the general scope of section 73, Hindu , is the same as section 92, Civil P.C., that the last paragraph of s .
73 of the Act is meant to refer only to the classes of cases referred to in section 73(1) and other sections of the Act, and that suits which do not fall within the scope of these sections can be tried under the general law.
I have not come across any case in which these opinions were dissented from or contrary opinions expressed," (1) A.I.R. 1943 Madras 466.
(2) A.I.R. 1943 Madras 228, 230.
289 Sub section (4), which corresponds to section 93 of the Act, was held not to impose a total bar on a civil suit but only confined to suits relating to the classes of cases referred to in section 73(1) and other sections of the Act.
Section 93 of the Act enlarges the scope of section 73(4) thereof It bars not only suits or legal proceedings in respect of administration or management of religious institutions but also in respect of any other matter or dispute for determining or deciding which provision is made in the Act.
By repeating the phrase "except under and in conformity with the provisions of the Act" which had received authoritative judicial interpretation when it remained in section 73(4) of the earlier Act, the Legislature must be held to have accepted the interpretation put upon the phrase by the courts.
It follows that section 93 will apply only to matters for which provision has been made in the Act.
It does not bar suits under the general law which do not fall within the scope of any section of the Act.
Even so, the learned counsel for the respondent contended that Ch.
VII of the Act provided a complete machinery for deciding disputes in regard to accounts and, therefore, no suit for accounting against an ex trustee could be filed in a civil court.
This interpretation was accepted by two decisions of the Andhra Pradesh High Court.
The decision in Venkataratnam vs Narasimha Rao(1) dealt with a case of a suit filed with the permission of the Advocate General for removing the trustee, for framing a scheme for the management of the trust property, for appointing a new trustee and for accounts and other incidental reliefs.
The contesting defendant pleaded inter alia that because of the provisions of the Madras Act 19 of 1951, the suit could not be entertained by the civil court, and that section 93 was a bar to such a suit.
The Andhra Pradesh High Court held that section 93 of the Act clearly interdicted the determination of the subject matter of the suit by a civil court.
The reasoning of the decision is summarized thus : "Now the suit is entirely based on allegations of breach of trust and every one of the reliefs prayed for in the plaint can flow from appropriate action that officers named in the Act may take.
The first relief sought in the present plaint can result from action taken under section 45 of the Act ; the second and third reliefs from action under section 58; the fourth from action under section 60 ; the 6th relief from action under section 57 and the relief numbered and lettered as 6(a) from action under section 87.
" The High Court also observed "In our opinion, all these are 'matters or disputes for determining or deciding which provision is made ' in the Act." (1) , 323. 290 On that basis it held that section 93 of the Act was a bar to the maintainability of the suit.
It may be mentioned that the observation that the fourth relief could result from action under section 60 appears to be a mistake, for section 60 applies only to a defunct religious insti tution.
In Sri Sarveswaraswami Vari Temple vs Rudrapaka Veerabhadrayya(1) Seshachelapati, J., speaking for the court, said thus "It will be seen, as correctly observed by the learned Subordinate Judge, that the section has two limbs.
The first limb interdicts suits or other legal proceedings with respect to the administration or management of the re ligious institution.
The second limb enacts an embargo on suits and legal proceedings on any other matter in dispute for the determination of which a provision had been made in this Act.
" There, the suit was by the present trustees for the recovery of the temple properties from the hereditary archakas.
The High Court held that such a suit was not one in respect of the administration or management of the temple and, therefore, it did not attract the embargo entered in the first limb of the section.
This decision, therefore, held that unless the suit fell within the classes of suits mentioned in section 93 of the Act, the provisions of the section were not attracted.
It leads us to the consideration of the scope of Chapter VII of the Act.
If Chapter VII of the Act provides for determining or deciding a dispute in respect of rendition of accounts, section 93 of the Act would be attracted.
The heading of the said Chapter is "Budgets, Accounts and Audit".
Section 70 provides for the presentation of budgets and the particulars to be mentioned therein.
Section 71 enjoins upon a trustee of every institution to keep regular accounts of receipts and disbursements.
Section 71(4) prescribes for an audit of the accounts every year.
Section 72 directs the auditor to send a report of the results of the audit to the prescribed authorities.
Section 73 enumerates the matters in respect of which the auditor has to send his report.
Section 74 directs the prescribed authorities to send the said report to the trustees for remedying the defects pointed out therein.
The Area Committee, one of the prescribed authorities under section 74(2) of the Act, has to forward to the Commissioner the report of the auditor along with the report of the trustees, if any, and with his remarks.
If the Commissioner thinks that the trustee or any other person is guilty of misappropriation or wilful waste of funds of the ninstitu (1) , 251.
291 tion or of gross neglect resulting in a loss to the institution, after making the requisite inquiry, certify the amount so lost and direct the trustee or such person to pay within a specified time such amount personally and not from the funds of the religious institution.
On the receipt of such an order, the trustee can apply to a court to modify or set aside the same.
Instead of filing an application to the Court, he has an alternative remedy to file an appeal to the Government which shall pass such order as it thinks fit.
Under sub section
(7) of section 74, an order of surcharge under the section against a trustee shall not bar a suit for accounts against him except in respect of the matter finally dealt with by such order.
Sub section (8) thereof provides a machinery for collecting the said amounts from the trustee or other person by way of surcharge.
Relying upon the scheme of this Chapter, it is contended that it provides an exhaustive and self contained machinery for scrutinizing the accounts, for orders of surcharge and to recover the amount surcharged from the trustee or other persons and for a suit to set aside such orders or alternatively for an appeal to the Government and that, therefore, no suit for rendition of accounts would lie dehors the provisions of the Act.
We find it difficult to accept this argument.
Chapter VII only provides for a strict supervision of the financial side of the administration of an institution.
The scope of the auditor 's investigation is limited.
It is only an effective substitute for the trustee himself furnishing an audited account.
It is concerned only with the current management of a trustee.
It does not even exonerate a trustee of his liability to render accounts except to a limited extent mentioned in sub section
(7) of section 74 ; it only facilitates the rendition of accounts.
Under sub section
(7) of section 74, an order of surcharge under that section against a trustee shall not bar a suit against him except in matters finally dealt with in such order.
This shows by necessary implication that a suit can be filed for accounts against a trustee in other respects.
In any view, it has nothing to do with the management of a temple by a previous trustee.
It is con tended that under sub section
(5) of section 74 the trustee or any other person aggrieved by such order may file a suit in the civil court or prefer an appeal to the Government questioning the order of the Commissioner and, therefore, it is open to any member of the public to file a suit under the Act.
"Any person" there only refers to a person mentioned in sub section
(3) of section 74, i.e., a person who is guilty of misappropriation or wilful waste of the funds of the institution etc.
It obviously refers to a trustee or some other person in management of the institution who is guilty of misappropriation.
We, therefore, hold that Chapter VII of the Act has no bearing on the question of liability of an ex trustee to render account to the present trustee of his management.
Chapter VII does not provide for 292 determining or deciding a dispute in respect of such rendition of accounts.
If so, it follows that section 93 of the Act is not a bar to the maintainability of such a suit.
In the result, we set aside the decree of the High Court and restore that of the learned Subordinate Judge.
The respondent will pay the costs of the appellant throughout.
V.P.S. Appeal allowed.
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The trustees of a tempter filed a suit for rendition of accounts 'against ,the ex trustees, in respect of their management of the temple.
The trial court and the first appellate court, in their discretion and having regard to the circumstances of the case, directed the defendants to render accounts for about six years prior to the plaintiffs taking possession of the temple.
The High Court held that the defendants were not obliged to render accounts in the absence of allegations of acts of negligence or willful default, and that, section 93 of the Madras Hindu Religious and Charitable Endowments Act, 1951, was a bar to the maintainability of the suit.
In appeal to this Court, HELD : (i) No trustee can get a discharge unless he renders account of his management irrespective of any question of negligence or wilful default.
The defendants, therefore, were liable to render accounts of their management to the plaintiffs.
As regards the period for which they should be made liable to render accounts, it would depend upon the facts of each case, and there was no Justification for interfering with the discretion of the lower courts in that regard.
[284 D E; 286 C] Case law referred to.
(ii) Section 93 is not a bar to the maintainability of the suit.
[292 A] The section only imposes a restriction on suits or other legal proceedings in respect of matters for which a provision has been made in the Act.
The legislative history of the section shows that even in regard to suits or other legal proceedings relating to administration or management of religious institutions, restriction is imposed only in respect of matters for which a provision is made in the Act.
It does not bar suits under the general law which do not fall within the scope of any of the sections of the Act.
Chapter VII of the Act, on which reliance was placed by the defendants as providing a complete machinery for deciding disputes in regard to accounts, has no bearing on the question of the liability of an ex trustee to render account of his management to the present trustee and does not provide for determining or deciding a dispute in respect of such rendition of accounts.
C; 291 H; 292 A] Case law referred to.
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Appeal No. 91 of 1953.
Appeal from the Judgment and Decree dated the 12th day of June 1951 of the High Court of Judicature at Calcutta in Appeal from Original Decree No. 56 of 1951 arising out of the Decree dated the 8th day of March 1951 of the said High Court exercising its Ordinary Original Civil Jurisdiction in Suit No. 3993 of 1950.
H.J. Umrigar, Rameshwar Nath and Rajinder Narain for the appellant.
A.N. Sinha and P. C. Dutta for the respondent.
December 6.
The judgment of the Court was delivered by JAGANNADHADAS J.
This is an appeal, by leave of the High Court of Calcutta under article 133 (1) (c) For these two sections 45 B and 45 G (inserted by Act XX of 1950) two now sections 45 B and 45 U wore inserted by section 10 of Act LII of 1953.
1099 of the Constitution, from its judgment in its appellate jurisdiction confirming that of a Single Judge of the Court.
The point involved is a short one and arises on the following facts.
The respondent before us, Associated Bank of Tripura Ltd., went into liquidation on the 19th December, 1949.
A month prior to the liquidation, i.e., on the 19th November, 1949, the appellant before us and the Bank entered into an agreement whereby the appellant became a tenant of the Bank in respect of a certain parcel of land.
One of the terms of the tenancy agreement was that the appellant should vacate the land demised on 24 hours ' notice.
After the Bank went into liquidation the Liquidator served on the appellant on the 18th April, 1950, a notice terminating his tenancy and calling upon him to vacate the land and to hand over possession by the end of April, 1950.
This not having been done, the Liquidator filed an application on the original side of the High Court under section 45 B of the Banking Companies Act for ejectment of the appellant and obtained an ex parte decree against him on the 10th July, 1950.
On the 28th August, 1950, the appellant applied for setting aside the ex parte decree but the application was dismissed on the 7th September, 1950.
Consequently the appellant filed the present suit on the 12th September, 1950, in the original side of the High Court, asking for a declaration that the ex parte decree against him was made without jurisdiction and was a nullity and that he continued to be a tenant notwithstanding the said ex parte decree.
The plaint does not specifically mention the reason for claiming the decree to be without jurisdiction or nullity.
But the point taken at the trial was that the Court had no power to deal with a question relating to the ejectment of the appellant from the demised land, in a summary proceeding initiated on an application but could pass the decree only on a suit regularly instituted.
This contention was raised on the basis of a judgment of the Calcutta High Court given on the 24th August, 1950, that in respect of such a relief under section 45 B a summary proceed 141 1100 ing is not maintainable but that a suit has to be filed.
This decision has since been reported in Sree Bank vs Mukherjee(1).
The learned trial Judge before whom the present suit came up was of the opinion that though the ex parte decree for ejectment was obtained on a wrong proceeding, there was no inherent lack of jurisdiction in the Court and that the fact of the decree having been obtained in a wrong proceeding did not render it a nullity.
This view of the learned Judge was affirmed by the Appellate Bench.
It has not been disputed before us that the relief by way of ejectment.
of the appellant from the land demised is one which would fall within the scope of section 45 B of the Banking Companies Act and that the Liquidator could obtain the said relief by an appropriate proceeding in the High Court.
Indeed, the learned appellate Judges specifically held that the Court had by virtue of section 45 B, jurisdiction over the subject matter of the dispute and this view has not been challenged having regard to the wide and comprehensive language of the section.
But what is urged is that the Court having followed the view taken in the Sree Bank Case (supra) (whose correctness was not challenged before it) that the appropriate proceeding to obtain such a relief was only a suit, it should have, consistently therewith, held the decree obtained on a mere application to be invalid.
In the Court below the question as to whether the decree obtained on a wrong proceeding was one so wholly without jurisdiction as to be a nullity or whether it was vitiated only by a mere irregularity in the mode of obtaining the relief, and hence not open to attack in collateral proceedings was the subject matter of elaborate consideration.
It appears to us, however, that it would be more satisfactory to consider and decide whether the basic assumption which gave rise to this argument, viz. that the appropriate proceeding under section 45 B was only a suit and not an application, is correct.
It is necessary for this purpose to notice the relevant sections.
Section 45 A of the Banking Companies Act, 1949, as amended by Act XX of 1950 (1) 1101 defines 'Court ' for the purposes of Part III and Part III A of the Act as "the High Court exercising jurisdiction in the place where the registered office of the Banking Company concerned, which is being wound up, is situated".
The said section also provides that "notwithstanding anything to the contrary contained in the Indian Companies Act, 1913, or in any notification, order or direction issued thereunder or in any other law for the time being in force, no other court (i.e. a court other than the one as above defined) shall have jurisdiction to entertain any matter relating to or arising out of the winding up of a banking company".
Next is section 45 B (1) which is in the following terms: "Notwithstanding anything to the contrary contained in the Indian Companies Act, 1913, or in any other law for the time being in force, the Court shall have full power to decide all claims made by or Against any banking company and all questions of properties and all other questions whatsoever, whether of law or fact, which may relate to or arise in the course of the winding up of the banking company coming within the cognizance of the Court".
Section 45 G authorises the Court to make rules consistent with the Act concerning the mode of proceedings for the decision of claims and other proceedings under the Act.
This group of sections in Part III A constitute a wide departure from the corresponding provisions of the Indian Companies Act.
Under various sections thereof the liquidator, after an order for winding up of a company is made, can approach a Company Court for exercising certain powers in aid of and to expedite the process of liquidation.
The procedure normally adopted for the purpose is by way of application.
But the scope of matters in respect of which the liquidator can obtain the help of the Company Court by summary procedure is rather limited.
In respect of other matters and particularly in the matter of collecting assets or recovering properties from third parties, (not covered by sections 185 and 186) the liquidator has to invoke the help of the 1102 appropriate Court in the ordinary way.
This as is wellknown leads to a great deal of inevitable delay and expense.
When in 1949 special legislation in respect of Banking Companies was taken up, it was one of the stated objects, to provide a machinery by which proceedings in liquidation of Banking Companies could be expedited and speedily terminated.
It was found, however, that the Act of 1949, as originally enacted, was inadequate to achieve that purpose.
It is in this situation that the Amending Act of 1950 introduced into the Act of 1949 an entire Chapter, Part III A, consisting of sections 45 A to 45 H under the heading "Special provisions for speedy disposal of winding up proceedings".
It appears to us that, consistently with this policy and with the scheme of the Amending Act, where the liquidator has to approach the Court under section 45 B for relief in respect of matters legitimately falling within the scope thereof, elaborate proceedings by way of a suit involving time and expense, to the detriment of the ultimate interests of the company under liquidation, were not contemplated.
In the absence of any specific provision in this behalf in the Act itself and in the absence of any rules framed by the High Court concerned under section 45 G, the procedure must be taken to be one left to the judgment and discretion of the Court, having regard to the nature of the claim and of the questions therein involved.
In the Sree Bank Case (supra), the question that arose for direct consideration was one of limitation.
But in considering it and when pressed with the argument that, if the appropriate proceeding was by way of an application and not a suit, difficulties might arise as to the question of limitation, the learned Judges felt it unnecessary to consider whether or not the Limitation Act applies to the applications under section 45 B and if so what would be the period which would govern such applications.
They proceeded to decide the particular case before them, viz. a case relating to a debt due to the Bank, on the view that "there is nothing in the Companies Act or the Banking Companies Act which permits a 1103 liquidator to recover debts from debtors of a Banking Company by a summary proceeding such as an application to the Company Judge" and therefore held that no application for recovery would lie and that only a suit should have been brought for which the period of limitation was the ordinary period provided in the Limitation Act.
It appears to us, with great respect to the learned Judges, that this approach as to the nature of the proceeding required or permitted under section 45 B of the Banking Companies Act was not correct.
The question is not whether section 45 B permitted summary proceedings but the question is whether the section prescribed definitely a particular method of proceeding and whether consistently with the policy of the Act it was not to be presumed that a speedy and cheap remedy was to be available to the Liquidator, unless the Court in its discretion thought fit to direct or the rules of the High Court provided that a claim of a particular nature had to be pursued by a suit.
It is to be remembered that section 45 B is not confined to claims for recovery of money or recovery of property, moveable or immoveable, but comprehends all sorts of claims which relate to or arise in the course of winding up.
Obviously the normal proceeding that the section contemplated must be taken to be a summary proceeding by way of application.
We are clearly of the opinion that in the present case the Court which passed the ex parte decree was fully competent to decide the matter raised before it on summary application and to pass the ex parte decree which has been challenged by the suit and that the decree of the Courts below dismissing the suit is correct.
We are not to be supposed to have expressed any opinion on the question of limitation which was raised before the High Court in the Sree Bank Case (supra).
That is a question which may have to be decided in an appropriate case when it is raised directly.
The appeal is accordingly dismissed with costs.
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The object of the Banking Companies Act, 1949 is to provide a machinery for expeditious and speedy termination of proceedings in liquidation and in the absence of any specific provisions of the Act to the contrary or any rules framed by the High Court under section 45 G of the Act (inserted by Act XX of 1950) the normal procedure for deciding all claims under section 45 B of the Act (inserted by Act XX of 1950) should be a summary proceeding originating with an applica tion.
But the court in its discretion may think fit to direct or the rules of the High Court may provide that a suit is the proper remedy in view of the nature of claim made and the questions involved in such claim.
Sree Bank vs Mukherjee ([1950] , referred to.
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