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30 of 1950.
Appeal under article 132 (1) of the Constitution of India from the Judgment and Order dated 24th October, 1950, of the High Court of Judicature at Bombay (Bavdekar and Vyas JJ.) in Criminal Application No. 1003 of 1950.
M.C. Setalvad (Attorney General for India) and C.K. Daphtary (Solicitor General for India), with G.N. Joshi for the appellant.
Respondent ex parte.
676 1952.
May 26.
This is an appeal from an order of the Bombay High Court directing the release of the respondent who had been detained under section 3 of the Preventive Detention Act of 1950. 'The learned Attorney General states at the outset that Government does not want to re arrest the respondent but merely desires to test the High Court 's decision on certain points which will have far reaching effects on preventive detentions in the State of Bombay.
Following the precedent of their Lordships of the Privy Council in King Emperor vs Vimlabai Deshpande(1) we proceed to decide the appeal but direct that the respondent shall not in any event be re arrested in respect of the matters to which the appeal relates.
The respondent was originally arrested under an order of the District Magistrate, Belgaum, dated the 26th February, 1950, though he was then beyond the jurisdiction of that authority.
On the 11th of .July, 1950, the Bombay High Court held that a detention of that kind was invalid.
The decision was given in the case of In re GhateC (2).
This necessitated a review of 57 cases, among them the respond ent 'section Orders were passed in all those cases on the 17th of July, 1950.
About 52 of the detenus were released and in the remaining cases fresh orders of detention were passed by the Government of Bombay.
In the respondent 's case the order was in these terms: "Whereas the Government of Bombay is satisfied with respect to the person known as Shri Purushottam Jog Naik of Ulga Village, Taluka Karwar, District Kanara, that with a view to preventing him from acting in a manner prejudicial to the maintenance of public order, it is necessary to make the following order: Now, therefore, in exercise of the powers conferred by sub section (1.) of section 3 of the Preventive (1) I.L.R. at 655.
(2) 677 Detention Act, 1950 (No. IV of 1950), the Government of Bombay is pleased to direct that the said Shri Purushottam Jog Naik be detained.
By order of the Governor of Bombay, Sd/ V. T. Dehejia, Secretary to the Government of Bombay, Home Department.
Dated at Bombay Castle, this 17th day of July, 1950.
" He was served with the grounds of detention on the 26th of July, 1950, and with a fuller set on the 9th of August.
The original grounds were as follows: "In furtherance of your campaign for non payment of rent, you were instigating the people in the Belgaum Dis trict to commit acts of violence against landlords.
``In all probability, you will continue to do so.
" The second set gave the following additional particulars: "The people in Belgaum District, whom you were instigat ing to commit acts of violence against landlords in further ance of your campaign for non payment of rent, were the tenants in Hadalge and round about villages in the Khanapur Taluka of Belgaum District, and the said instigation was carried on by you for some months till your arrest in April, 1949.
" On the 24th of August, 1950, the respondent applied to the Bombay High Court under section 491 of the Criminal Proce dure Code for an order of release.
He succeeded, and the appeal is against that order.
The first ground on which the learned High Court Judges proceeded was that the detention order of the 17th July was defective as it was not expressed inproper legal form.
The basis of their reasoning is this.
Article 166(1) of the Constitution requires that " All executive action of the Government of a State shall be expressed to be taken in the name of the Governor.
" It will be seen that the order of detention states in the preamble 678 `` Whereas the Government of Bombay is satisfied. " and the operative part of the order runs " Now, therefore . the Government of Bombay is pleased to direct etc.
" It does not say that the Governor of Bombay is pleased to direct.
The learned Judges held that this is not an order expressed to be made in the name of the Governor and accord ingly is not protected by clause (2) of article 166.
They conceded that the State could prove by other means that a valid order had been passed by the proper authority, but they held that the writing, (Record No. 3), which purports to embody the order, cannot be used to prove that a valid order was made because the formula set out in article 166(1) was not employed.
We are unable to agree.
Now we do not wish to encourage laxity of expression, nor do we mean to suggest that ingenious experiments regard ing the permissible limits of departure from the language of a Statute or of the Constitution will be worthwhile, but when all is said and done we must look to the substance of article 166 and of the Order.
The short answer in this case is that the order under consideration is "expressed" to be made in the name of the Governor because it says "By order of the Governor.
" One of the meanings of "expressed" is to make known the opinions or the feelings of a particular person and when a Secretary to Government apprehends a man and tells him in the order that this is being done under the orders of the Governor, he is in substance saying that he is acting in the name of the Governor and, on his behalf, is making known to the detenu the opinion and feelings and orders of the Governor.
In our opinion, the Constitution does not require a magic incanta tion which can only be expressed in a set formula of words.
What we have to see is whether the substance of the require ments is there.
It has to be remembered that this order was made under the , and therefore had to conform to its terms.
Section 3 of the Act provides that the State Government may, if satisfied, 679 "make an order directing that such person be detained.
" It is true that under section 3 [(43 a) (a)] of the General Clauses Act the words "the State Government" mean the Governor, but if that be so, then the expression must be given the same meaning in the order which merely reproduces the language of section 3, not indeed because the General Clauses Act applies to the order (it does not) but because the order is reproducing the language of the Act and must therefore be taken to have the same meaning as in the Act itself, particularly as the order concludes with the words, " By order of the Governor of Bombay.
" It will be noticed that section 3 of the enables certain authorities specified by it to make orders of detention.
These include, not only State Governments but also the Central Government, any District Magistrate or Sub Divisional Magistrate and certain Commis sioners of Police.
The list does not include the Governor of a State.
Now, though the term "State Government" appearing in an enactment means the Governor of the State, there is no provision of law which equates the term Governor with the State Government of which he happens to be the head.
On the contrary, the Constitution invests him with certain func tions and powers which are separate from those of his Gov ernment.
It was therefore appropriate that the order in this case should have set out that the Government of Bombay was satisfied and not some other authority not contemplated by the Act and that that Government directed the detention.
It was also proper that the order should have been executed under the orders of the Governor authenticated, under the rules, by the signature of the Secretary.
It is true that addition of the words "and in his name" to the words "By order of the Governor of Bombay" would have placed the matter beyond controversy but we are unable to see how an order which purports to be an order 680 of the Governor of 'BombaY can fail to be otherwise than in his name.
If A signs his name to a communication that commu nication goes out in his name.
Equally, if he employs an agent to sign on his behalf and the agent states that he is signing under the orders of A, the document still goes forth in the name of A.
In our opinion, the High Court was wrong on this Point The next step in the High Court 's reasoning was this.
The learned Judges held that the writing produced as the order did not prove itself because of the defect we have just considered but that nevertheless it was open to the State Government to prove by other means that such an order had been validly made.
The learned Judges therefore called upon Government to make an affidavit setting out the facts.
An affidavit was made by the Home Secretary but the learned Judges were not satisfied and asked for a further affidavit.
The Home Secretary thereupon made a second one but the learned Judges were i still not satisfied and considered that the Minister in charge should have made an affidavit himself.
We do not intend to discuss this matter because once an order of this kind is unable to prove itself and has to be proved by other means it becomes impossible to lay down any rule regarding either the quantum of evidence necessary to satisfy the Court which is called upon to decide the question or the nature of the evidence required.
This is a question of fact which must be different in each case.
Of course, sitting as a court of appeal, it would have been necessary for us to decide this had we reached a different conclusion on the first point and had the State Government desired the re.arrest of the respondent.
But as we are only asked to deal with general principles, all we need say as regards this is that it is not necessary in every case to call the Minister in charge.
if the Secre tary.
or any other person, has the requisite means of knowledge and his affidavit is believed, that will be enough.
681 We wish, however, to observe that the verification of the affidavits produced here is defective. 'The body of the affidavit discloses that certain matters were known to the Secretary who made the affidavit personally.
The verifica tion however states that everything was true to the best of his information and belief.
We point this out as slipshod verifications of this type might well in a given case lead to a rejection of the affidavit.
Verifications should invar iably be modelled on the lines of Order XIX, rule 3, of the Civil Procedure Code, whether the Code applies in terms or not.
And when the matter deposed to is not based on person al knowledge the sources of information should be clearly disclosed.
We draw attention to the remarks of Jenkins C.J. and Woodroffe J. in Padmabati Dasi vs Rasik Lal Dhar(1) and endorse the learned Judges ' observations.
In fairness to the Home Secretary we deem it right to say that his veracity was neither doubted nor impugned by the High Court, but only his means of knowledge.
He was speaking of the "satisfaction" of the Minister and the High Court was not satisfied regarding his knowledge of the state of the Minister 's mind.
The learned Judges considered that the Minister himself would have been a more satisfactory source of information, but as we say, this is not a question of law.
As a matter of abstract law, of course, the state of man 's mind can be proved by evidence other than that of the man himself, and if the Home Secretary has the requisite means of knowledge, for example, if the Minister had told him that he was satisfied or he had indicated satisfaction by his conduct and acts, and the Home Secretary 's affidavit was regarded as sufficient in the particular case, then that would constitute legally sufficient proof.
But whether that would be enough in any given case.
or whether the ' 'best evidence rule" should be applied in strictness in that particular case, must necessarily depend upon its facts.
In the present case, there was the element that 57 cases were dealt with in the course of 6 days (1) Cal.
682 and orders passed in all on one day.
But we do not intend to enter into the merits.
All we desire to say is that if the learned Judges of the High Court intended to lay down as a proposition of law that an affidavit from the Minister in charge of the department is indispensable in all such cases, then they went too far.
The learned Attorney General contended that the Minis ter in charge could not be asked to divulge these matters because of article 163 (3) of the Constitution.
We donor decide this question and leave it open.
Another point which was argued related to the privilege which the Home Secretary claimed on behalf of the State Government under article 22 (6) of the Constitution.
Govern ment disclosed certain facts in the grounds furnished to the detenu and claimed privilege regarding the rest of the facts in its possession.
In our opinion, the grounds supplied were sufficiently specific and they could form a proper basis for the "satisfaction" of the Government.
As regards the rest, Government has claimed privilege in the affidavit of the Home Secretary on the ground of public interest.
This raises further questions which we do not intend to examine as the respondent is not to be re arrested.
The order of release was, in our opinion, wrong, but in view of Government 's undertaking not to re arrest the re spondent, we direct that he be not re arrested in respect of the matters to which this appeal relates.
Order of High Court set aside.
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The material portion of an order of detention made under 3 of the preventive Detention Act 1950, ran as fol lows: 675 "Whereas the Government of Bombay is satisfied with respect to the person known as J. N . . that with a view to preventing him from acting in a manner prejudicial to the maintenance of public order it is necessary to make the following order: Now, therefore, . . the Gov ernment of Bombay is pleased to direct that the said J.N. be detained.
By order of the Governor of Bombay (Sd.) V.T.D. Secretary to the Government of Bombay, Home Department".
The High Court of Bombay held that the order was defec tive as it was not "expressed to be in the name of the Governor" within the meaning of article 166 (1) and was not accordingly protected by article 166 (2): Held, that the order was not defective merely because it stated that the Government of Bombay was satisfied and that the Government of Bombay was pleased to direct that J.N. be detained, and, though the addition of the words "and in his name" to the words "By order of the Governor of Bombay" would have placed the matter beyond controversy, the order was really one expressed to be taken in the name of the Governor of Bombay within article 166.
Held further, that, assuming that the order was defec tive it was open to the State Government to prove by other means that such an order has been validly made.
It is not absolutely necessary in every case to call the Minister in charge; if the Secretary or any other person has the requi site means of knowledge and his affidavit is believed, that will be enough.
Verification should invariably be modelled on the lines of O. XIX, r. 3, of the Civil Procedure Code, whether the Code applied in terms or not, and when the matter deposed to is not based on personal knowledge the sources of informa tion must be clearly disclosed.
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ition No. 8353 of 1981.
Under Article 32 of the Constitution of India P.P. Rao and Parijat Sinha for the Petitioners.
M.M. Abdul Khader, Girish Chandra and Miss A. Subhashini for the Respondents.
Medical Service in the Indian Railways is structured in ascending levels.
At the base, for the purpose of this case, is the cadre of Assistant Divisional Medical Officers Class I (who before January 1, 1973 were described as Assistant Medical Officers Class II).
Above them is the cadre of Divisional Medical Officers.
The next above is the cadre of Medical Superintendents.
Still higher rank Chief Medical Officers, and the apex of the hierarchy is held by the Director General of Medical Services.
There are eight petitioners.
They were Assistant Medical Officers Class II and had been confirmed in that grade, one petitioner in 19 62 and the others in 1963.
During the years 1970 to 1972, the petitioners were selected by Departmental Promotion Committees for officiating appointments to the Class I posts of Divisional Medical Officers, when the Indian Railway Medical Service (District Medical Officers) Recruitment Rules, 1965 were in force.
Those rules were repealed and replaced by the Indian Railways Medical Service (District Medical Officers) Recruitment Rules, 1973.
Under the Rules of 1965 and the Rules of 1973, the posts of District Medical Officers were treated as selection posts.
To give effect to the recommendations of the Third Pay Commission, the scales of pay of existing categories of officers were revised.
The existing pay scale of Rs. 350 900 attached to the posts of Assistant Medical Officer was revised and split into two pay scales, a higher Class I scale of Rs. 700 1600 and a lower Class II scale of Rs. 650 1200.
The posts of Assistant Medical Officers were divided into those carrying the higher pay scale and those carrying the higher pay scale.
A very large number of posts of Assistant Medical Officer were upgraded to the higher pay scale of Rs. 700 1600, and were designated as "Assistant Divisional Medical Officer".
The petitioners were placed in the higher pay scale of Rs. 700 1600 and were designated as Assistant Divisional Medical Officers with effect from 827 January 1. 1973.
The screening of over 2000 Assistant Medical Officers for the purpose of upgrading them to the higher scale kept the Screening Committee busy from 1974 to 1976 or so, and practically no recruitment was made during those year either by permanent promotion or direct recruitment to the posts of Divisional Medical Officer.
The rules of 1973 were replaced by the Indian Railway Medical Service (Divisional Medical Officers/Senior Medical Officers) Recruitment Rules, 1975.
These, in their turn, yielded place to the Indian Railway Medical Service (Chief Medical Officers, Additional Chief Medical Officers, Medical Superintendents and Divisional Senior Medical Officers Recruitment Rules, 1978.
Under the Rules of 1978, promotion is effected on the principle of "non selection", an expression in the Rules which is construed by the Railway administration as "seniority cum suitability".
By a letter No. E (O) 1 78/SR 6/14 dated October 30, 1979 the Railway Board published a combined seniority list of Divisional Medical Officers recruited directly or by promotion.
The respondents Nos. 4 to 64 were shown in that list.
They include promotees as well as direct recruits.
The petitioners did not find place in the seniority list.
Subsequently, on the basis of their position in that seniority list, some of the respondent Divisional Medical Officers were appointed to officiate as Medical Superintendents by a Railway Board letter No. E(O)III 81 PN 6/199 dated August 31, 1981.
The petitioners challenge the combined seniority list of Divisional Medical Officers and the officiating promotions to the posts of Medical Superintendents.
The petitioners contend that the seniority assigned to the respondents Nos. 4 to 64 and the consequent promotions made thereafter violate Articles 14 and 16(1) of the Constitution.
The grievance operates in two dimensions, against the promotee respondents and against the direct recruit respondents.
We propose to consider first the grievance of the petitioners in respect of the seniority accorded to the promotee respondents as Divisional Medical Officers and their promotion to officiate as Medical Superintendents.
The case of the petitioners is that the petitioners were promoted as Divisional Medical Officers much before the promotee respondents, that their promotion was made 828 by selection on the basis of merit adjudged by Departmental Promotion Committees under the Rules of 1965, that they had continued in service as Divisional Medical Officers against vacancies in permanent posts without interruption for periods ranging respectively between 8 years to 12 years, and yet the promotee respondents, who had held such posts for shorter periods, had been confirmed before the petitioners and shown senior in the seniority list and preferred for promotion as Medical Superintendents.
It is contended that the petitioners should have been confirmed in the normal course, the order of their promotion against permanent vacancies.
The petitioners submit that the promotee respondents have been confirmed zone wise, and such confirmation cannot serve as a proper reference for determining seniority, because when confirmation is granted zone wise, it depends on the fortuitous accrual of vacancies arise arbitrarily at different times and in different numbers in different individual zone.
The petitioners contend that if the date of confirmation is adopted as the criterion, confirmation should not be reckoned on a zonal basis, but as if the vacancies arose in a single all India structure for, the petitioners say, a seniority list prepared for the purpose of Promotion to the post of Medical Superintendents, which is an all India cadre, should properly be drawn on an all India basis.
The petitioners urge that if confirmation has to be considered zone wise, then for the purpose of promotion to the all India cadre of Medical Superintendents the only logical and uniform criterion should be the total length of continuous service as Divisional Medical Officers reckoned from the date of promotion.
It is a criterion which makes the arbitrary chance of confirmation against fortuitous vacancies in individual zones irrelevant.
Finally, the petitioners urge that for the purpose of fixing seniority in the grade of Divisional Medical Officers the seniority ruling in the grade of Assistant Medical Officers or Assistant Divisional Medical Officers is of no material significance because under the Rules in force when the Promotions in instant case were made promotions were governed by the principle of selection on the basis of merit.
The respondents, on the other hand, maintain that the seniority list has been correctly prepared, that it contains the names of only those officers who were either directly recruited as Divisional Medical Officers or had been approved for permanent promotion against the quota of posts reserved for them in vacancies allotted among the individual Railways on the basis of the cadre position of each Rail 829 way, and that none of the petitioners qualified for inclusion in the seniority list as they had been promoted in an officiating capacity to temporary vacancies in the posts of Divisional Medical Officers.
The respondents contend that the petitioners have no right to be treated at par with those officers who were holding permanent posts on a confirmed basis, as confirmation was made on the basis of their selection for permanent promotion as Divisional Medical Officers.
It is stated that seniority was also fixed on that basis.
The respondents rely on a practice, followed by the Railway Administration for several years, under which three Select Lists were prepared.
List A set out the names of officers selected for substantive promotion against permanent vacancies.
List B included the names of officers selected for officiating promotion against temporary vacancies.
These officers were also considered subsequently by Departmental Promotion Committees for permanent promotion along with other eligible officers in the field.
The petitioners were placed in list B. The third list C, bore the names of officers included in List by earlier Departmental Promotion Committees but not considered as "suitable yet" for substantive promotion by subsequent Departmental Promotion Committees.
It is stated that in the Railway Administration, Class II officers were considered for substantive appointment to permanent vacancies in Class I posts for officiating appointment against temporary vacancies in Class I posts.
In each case, there was a separate selection by a Departmental Promotion Committee, and the selection was made zone wise.
The Departmental Promotion Committees, after considering the officers at five to six times the number of vacancies, made a selection on an assessment of their Confidential Records.
It is stated that officers selected for officiating appointment, and subsequently coming within the field of consideration for permanent appointment against permanent vacancies, were also considered for selection by subsequent Departmental Promotion Committees.
In this manner, it is said, all eligible Class II officers were considered for permanent appointment against permanent vacancies, and the most meritorious were selected.
It is pointed out that this practice was terminated in the Medical Department of the Railways after 1972, because with effect from January 1, 1973, the Class II posts of Assistant Medical Officer were upgraded as Class I posts of Assistant Divisional Medical Officers.
According to the respondents, at no time during the period ending with the year 1972, whenever Departmental Promotion Committees met for selecting officers against permanent vacancies 830 did any of the petitioners fall within the field of consideration for permanent appointment in view of their place of seniority in the class II posts.
It is also submitted that the promotion of the petitioners, then Assistant Medical Officers, to the post of Divisional Medical Officers in an officiating capacity against temporary vacancies cannot be traced to the Rules of 1965 or the Rules of 1973 because those rules dealt with promotion to permanent vacancies only.
Nor could the petitioners, when they became Assistant Divisional Medical Officers with effect from January 1, 1973, claim the benefit of the said Rules because those rules provided for selection of class II officers to class I posts.
The respondents urge that the principle which truly governs the petitioners in the matter of promotion from the posts of Assistant Divisional Medical Officers is the principle of seniority cum suitability in the former grade embodied in the Rules of 1978.
It is denied that this construction would amount to giving retrospective operation to the Rules of 1978.
It is explained that when the question of preparing the seniority list arose, the Rules of 1978 were in operation, and they provided for permanent promotion on the basis of seniority cum suitability, and the rule of selection on merit operating under the earlier Rules no longer prevailed, and, in any event, could not apply when an Assistant Divisional Medical Officer, which was a Class I post, was considered for promotion to the Class I post of Divisional Medical Officer Apparently, the promotee respondents were senior to the petitioners as Assistant Medical Officers or Assistant Divisional Medical Officers, and that seniority was made the basis of permanent promotion to the grade of Divisional Medical Officers.
The respondents dispute the proposition that promotion to the grade of Divisional Medical Officers must be made on the basis of the total length of service rendered as Assistant Medical Officers and Assistant Divisional Medical Officers considered on an all India basis as, they assert, promotion to vacancies has to be considered zone wise.
A perusal of the Rules of 1965 shows that there were 101 posts in the grade of Divisional Medical Officers.
The Rules of 1973 mention 109 posts.
The posts are not divided between permanent posts and temporary posts, and we must assume that the Rules refer to permanent posts only.
It appears that proceedings were taken by the Railway Administration from time to time for the promotion of Assistant Medical Officers, to the Class I posts of Divisional Medical Officers.
The Railway Ministry indicated the number of existing vacancies for the purpose of permanent promotion and the number of 831 anticipated vacancies for the purpose of officiating appointment, the number under each category being specified zone wise.
The selection for both categories was made on the basis of merit.
It may be noted that both under the Rules of 1965 and the Rules of 1973, the posts of Divisional Medical Officers were regarded as selection posts.
A Class I Departmental promotion Committee met on February 20, 1970 and considered the case of candidates who had completed five years and above of service as Assistant Medical Officers for such recruitment.
Both for substantive promotion and for officiating promotion the field of choice was extended to six times the number of vacancies.
Another Class I Departmental Promotion Committee met on October 22, 1971 and January 3, 1972.
A third Class I Departmental Promotion Committee held its meetings on September 29 and 30, 1972, and October 3, 1972.
The Minutes of the several meetings indicate that the petitioners Nos. 1 to 8 were selected for officiating a appointments, some of them being classified as "very goods" and others as "goods".
They were accordingly appointed to officiate as Divisional Medical Officers on different dates in 1971 and 1972 and the petitioner No. 7, the last to be promoted, was appointed in 1974.
The record shows that these were all regarded as officiating appointments to vacancies in the Class I posts of Divisional Medical Officers.
There is nothing before us to indicate why the Railway Ministry sought to fill some of the vacancies in the permanent posts on a substantive basis and the others on an officiating basis.
The respondents say that substantive appointments were made to permanent vacancies and officiating appointments were made to temporary vacancies.
We have carefully perused the copies of the official documents placed on the record before us.
They do not speak of temporary vacancies at all.
Nor is there any material suggesting the need for treating some of the vacancies as temporary.
There is nothing to show that the vacancies would have ceased to exist within the foreseeable future or upon the happening of some anticipated contingency.
On the contrary, the petitioners have continued to fill the vacancies for several years.
In the circumstances we are of opinion that the vacancies to which the petitioners were appointed should be regarded as permanents vacancies.
As regards the need for making officiating appointments, it was explained during oral argument that officiating appointments were made when some of the candidates considered for substantive appointment were found to be of inferior calibre for such appointment, and, therefore, some of the vacancies were left to be filled on 832 an officiating basis.
We are not impressed by the submission.
The communication of the Railway Ministry to the Departmental promotion Committee specifying the number and nature of the appointments to be made was issued long before the cases of individual officers were examined for promotion.
It was only after the Departmental Promotion Committee had been informed of the Railway Ministry s requirement that it commenced its task of selecting candidates for substantive appointment and for officiating appointment.
The field of choice for each category, substantive appointment or officiating appointment, was demarcated by the rule that the officers to be considered would be six times the number of vacancies.
According to the material placed before us by the respondents, the petitioners did not at any time fall within the field of choice for making substantive appointments.
That was because their seniority in the grade of Assistant Medical Officers did not at the relevant time bring them within the field of choice for substantive appointment.
They were considered for officiating appointment only, and not for substantive appointment.
It was the mere statistical fact of their seniority as Assistant Medical Officers, and not there merit, that precluded their consideration for substantive appointment as Divisional Medical Officers at the relevant time.
Now the petitioners had been selected for promotion by the same or similar Class I Departmental Promotion Committees as those selecting the substantively appointed Divisional Medical Officers, and in no sense were their functions and responsibilities any different from those of the substantively appointed Divisional Medical Officers.
It seems to us that if from the outset the temporary vacancies had been regarded as permanent vacancies, and substantive appointments had been made instead of officiating appointments, the petitioners would have been appointed substantively to those permanent vacancies.
In the entire field of choice in which they fall, they were found to be the most meritorious.
Ever since their respective appointments in 1971, 1972 and 1974 the petitioners have continued to serve without interruption as Divisional Medical Officers and were doing so when this writ petition was filed in 1981.
They have continued to serve in the posts for a significant number of years, and there is no indication that their appointments will come to an end merely because the vacancies have been described as temporary.
There is no material to show that their confidential Records contained any adverse entries or that otherwise they were not fit on there merit for substantive appointment to permanent vacancies.
Indeed, we are told that the petitioners have now been appointed 833 Divisional Medical Officers on a substantive basis.
It appears that the only reason why they were not originally appointed substantively to permanent vacancies as Divisional Medical Officers is that only a limited number of substantive appointments was desired by the Railway Ministry and the petitioners were not considered for these substantive appointments because they did not fall within the field of choice, having regard to their place of seniority in the lower grade of Assistant Medical Officers.
While there is no doubt that technically.
according to the terms of appointment, the petitioners were appointed on an officiating basis, we are reminded of the observations of this Court in Baleshwar Prasad vs State of U.P "We must emphasis that while temporary and permanent posts have great relevancy in regard to the career of government servants, keeping posts temporary for long, sometimes by annual renewals for several years, and denying the claims of the incumbents on the score that their posts are temporary makes no sense and strikes us as arbitrary, especially when both temporary and permanent appointments are functionally identified.
If in the normal course, a post is temporary in the real sense and the appointee knows that his tenure cannot exceed the post in longevity, there cannot be anything, unfair of capricious in clothing him with no rights.
Not so, if the post is, for certain depart mental or like purposes, declared temporary, but it is within the ken of both government, and the appointee that the temporary posts are virtually long lived.
It is irrational to reject the claim of the temporary appointee on the nominal score of the terminology of the post.
We must also express emphatically that the principle which has received the sanction of this Court 's pronouncements is that officiating service in a post is for all practical purposes of seniority as good as service on a regular basis.
" These are apposite observations bearing directly on the point before us.
We may point out that they were found relevant by this Court 834 in deciding O.P. Singla vs Union of India.
To our mind the petitioners are entitled to say that they should be considered at par for the purpose of fixing seniority, with those appointed to permanent posts in a substantive capacity.
Nothing has been placed before us to indicate why they should not be entitled to the benefits which the substantive holders of permanent posts enjoy.
It seems to us that for the purpose of determining seniority among promotees the t petitioners should be treated as having been appointed to permanent vacancies from the respective date of their original appointment and the entire period of officiating service performed by them should be taken into account as if that service was of the same character as that performed by the substantive holders of permanent posts.
As regards the practice on which the respondents have relied, of maintaining the three lists A, and that the petitioners were shown in List as being fit only for officiating promotion against a temporary vacancy, it seems to us that the circumstance makes no difference to the view taken by us.
We are of opinion that on the facts of this case, when the petitioners are continuing to hold the posts of Divisional Medical Officers for several years, the continued inclusion of their names in List is wholly meaningless.
If it is true that the length of continuous service reckoned from the date of promotion furnishes the criterion for determining seniority between the petitioners and the substantively appointed Divisional Medical Officers, that principle should apply with equal vigour as between the petitioners and those promotee respondents who also began to serve, like the petitioners, in officiating appointments as Divisional Medical Officers.
There is no reason why such promotee respondents, although appointed subsequently to the petitioners, should be treated as senior to them.
But it is said, the date of confirmation is the material date for determining relative seniority, and the promotee respondents were confirmed before the petitioners.
It appears that the Railway administration in according confirmation has been influenced by two principal factors.
One is that confirmation has been considered on zone wise.
Confirmation has been made as vacancies have arisen within a particular zone.
The vacancies differ from zone to zone.
835 They do not arise equally in different zones, but turn on factors peculiar to each zone, such as the strength of the cadre within the zone, and the differing number of vacancies arising in different zones at different times.
In other words, confirmation based on the placement of an officer within a particular zone must necessarily be determined by factors confined to that zone and unrelated to an all India standard.
It is apparent that confirmations limited by such a local perspective cannot serve as a legitimate base for drawing up a seniority list intended for effecting promotions to the all India cadre of Medical Superintendents.
To adopt the date of confirmation as the governing point in such circumstances is to inject an element of inequality into the very foundation of the promotion process.
I is conceivable that the Railway Administration has adopted the rule of according confirmations zone wise for certain practical considerations and, therefore, we do not propose to adjudicate on the validity of that practice.
But we do lay down that such confirmations cannot legitimately constitute the basic norm for drawing up a seniority list of Divisional Medical Officers for the purpose of promotion to the grade of Medical Superintendents.
In the circumstances, the true principle, in our opinion, must be that seniority should be related to the length of continuous service as Divisional Medical Officers reckoned from the date of promotion to the post.
This is subject of course to the exception that such service should not include any period served in a fortuitous, stop gap or ad hoc appointment.
Having said this, we may advert now to the other factor which appears to have influenced the Railway administration in assigning seniority.
The impugned seniority list was prepared in 1979.
It was drawn up when the Rules of 1978 had come into force.
It was drawn up at a time when the new rule of "non selection" embodied in the Rules of 1978.
Or "seniority cum suitability" as the respondents understand it, had begun to govern promotion to the grade of Divisional Medical Officers.
The Railway administration, following those rules, ignored the fact that the petitioners had been selected on their merit to those posts long before, and had occupied them all the years since.
The consequence of applying the rule of seniority cum suitability in the lower grade was to wipe out all the advantage claimed by the petitioners by virtue of the several years of continuous service, and to give an ascendancy to those Assistant Medical Officers who although promoted subsequently were confirmed earlier only by 836 reason of their seniority in the lower grade.
The question is whether the rule of seniority cum suitability can prevail.
The point would have been capable of easy resolution but for the complexity introduced in implementing the recommendations of the Third Pay Commission.
The Third Pay Commission recommended an upward revision of the scale of pay attached to different grades of posts in the Railways.
In the course of implementing the recommendation in relation to the Medical Department of the Railways, the Railway Ministry issued a letter No. PC III/74/PS 1/2 dated December 31, 1974 publishing a schedule showing the revised scales of pay.
The schedule contained a special provision in regard to the posts of Assistant Medical Officer.
The entry read: Designation Authorised Existing rates Revised Revised rates of post Scale of of non Scale of non Pay Practising of Pay Practising allowance allowance (Rs.) (Rs.) (Rs.) Assistant 350 25 33 1/3% of 700 40 1 5 stages Medical 500 30 pay subject 900 EB Rs. 150/
Officer 590 EB to a minimum 40 1100 6 10 stages: 30 800 of Rs. 150/ 50 1250 Rs. 200/
EB 35 900 per month EB 50 (Class II) 1600 (Class I) 11 15 stages: Rs. 250/
16th stage onwards: Rs. 300/
650 30 1 8 stages: 740 35 Rs. 150/
810 EB 35 880 40 1000 EB 9 13 stages: 40 1200 Rs. 200/
14 16 stages: Rs. 250/p.m.
Remarks: AMOs in the existing Class II scale of Rs. 350 900 will be screened to determine their fitness for the revised Class I scale of Rs. 700 1600 and only those found fit will be entitled to this revised Class I scale.
Those not found fit will be entitled only to revised standard Class II scale of Rs. 650 1200 until they are found fit for Class I by the Screening Committee.
Posts operated in the revised Class 837 I scale will be designated as "Assistant Divl.
Medical Officer".
Separate orders will be issued regarding the number of posts to be placed in each of the two scales from time to time.
It is apparent that the post of Assistant Medical Officer originally carried the Class II scale of Rs. 350 900.
That scale of pay was now substituted by two distinct scales of pay, a higher scale of Rs. 700 1300 (Class I) and a revised lower scale of Rs. 650 1200 (Class II).
Both scales of pay were shown against the posts of Assistant Medical Officer.
The Class I scale of Rs. 700 1600 was intended for Assistant Medical Officer who were found fit by a Screening Committee for that scale, and posts operating in that scale were designated as "Assistant Divisional Medical Officer".
The Assistant Medical Officers not found fit by the Screening Committee were entitled only to the lower Class II scale of Rs. 650 1200 until they were subsequently found fit for the Class I scale by the Screening Committee.
It is clear from the entry in the schedule that both groups of officers, those drawing the Class I higher scale as well as those drawing the Class II lower scale, were included under the single category "Assistant Medical Officer".
All Assistant Medical Officers were screened in order to determine who among them were superior to the others for the purpose of meriting the higher of the two revised scales of pay.
It was merely as a matter of convenience that Assistant Medical Officers who were allotted the higher revised scale were said to hold the posts designated as "Assistant Divisional Medical Officer Assistant", In short, all the officers comprising the two groups were Assistant Medical Officers, and an Assistant Divisional Medical Officer was nothing but an Assistant Medical Officer who drew the higher revised scale of pay.
That being so, the conclusion is inescapable that Assistant Divisional Medical Officers were, for the purpose of promotion as Divisional Medical Officers, governed by the Rules of 1965 and the Rules of 1973.
Those Rules mention Assistant Medical Officers as a source of recruitment, without referring to any limiting qualification that they should be officers drawing a Class II scale of pay.
The expression "Assistant Medical Officer" in those Rules is comprehensive enough to include all Assistant Medical Officers, whether drawing the Class II revised scale of pay or entitled to the Class I revised scale of pay.
And all such Officers were, under those Rules, governed by the principle of selection on merit for promotion as Divisional 838 Medical Officers.
It must be remembered that Assistant Medical Officers were designated as Assistant Divisional Medical Officers with effect from January 1, 1973, when the Rules of 1965 were still in force.
The Rules of 1973 came into force in August, 1973.
It is true that when Assistant Medical Officers were designated as Assistant Divisional Medical Officers in the revised Class I scale of Rs. 700 1600 by a notification such as Notification No. E (GP) 74/1/153 dated July 24, 1976, the notification spoke of the "appointment" of Class II Assistant Medical Officers as Assistant Divisional Medical Officers, but having regard to the terms of the schedule to the Railway University 's letter dated December 31, 1974 referred to earlier, such notification must be understood to mean that the Assistant Medical Officers had been assigned the Class I scale of Rs. 700 1600 and merely described as Assistant Divisional Medical Officers.
As explained earlier, they continued to belong to the broad category "Assistant Medical Officers".
In this connection, it is significant that upon Assistant Medical Officers being designated as Assistant Divisional Medical Officers under the new scheme, there was no corresponding amendment in the Rules of 1965 or the Rules of 1973.
It is for the first time, under the Rules of 1978, that we find that the post of Divisional Medical Officer is described as a "non selection" post to be filled by promotion from the ranks of Assistant Divisional Medical Officers and by direct recruitment.
In other words, the only Assistant Medical Officers now entitled to promotion as Divisional Medical Officers were those drawing the Class I scale of Rs. 700 1600 and designated as "Assistant Divisional Medical Officers".
What is important to remember is that the new sub division of Assistant Medical Officers described as Assistant Divisional Medical Officers was deemed to have taken birth on January 1, 1973.
five and a half years before the Rules of 1978 were brought into force.
It could never have been intended that this class of officers should exist in a vacuum where no rules operated.
There was no vacuum because they were comprehended within the expression "Assistant Medical Officer" in the Rules of 1965 and the Rules of 1973, and therefore no amendment was considered necessary in those Rules to take cognizance of this class or sub division.
We hold that the principle of selection by merit, enunciated in the Rules of 1965 and the Rules of 1973 governed the promotion of Assistant Medical Officers (including Assistant Divisional Medical Officers) to the posts of Divisional Medical Officer before the Rules of 1978 came into force.
Both before and after January 1, 1973, 839 during the period before the Rules of 1978 came into force, the principle of "non selection", that is seniority cum suitability in the lower grade, which was provided in the Rules of 1978 did not apply to the promotion of Assistant Medical Officers (including Assistant Divisional Medical Officers) to the posts of Divisional Medical officers.
It is also beyond dispute that having regard to the provisions of the Rules of 1978, those Rules can apply only to promotions and appointments to the posts of Divisional Medical Officers made under them, that is from and after August 12, 1978.
They cannot affect promotions and appointments already made before that date.
And as the act of confirmation does not amount to a fresh appointment but merely to setting the seal of approval on an appointment already made, it must follow that the Rules of 1978 cannot be applied for the purpose of confirming promotions and appointments made under the earlier Rules.
Consequently, upon all the considerations set forth earlier, the confirmation of the petitioners and all other officers appointed to the posts of Divisional Medical Officer before the Rules of 1978 came into force must be governed by the Rules of 1965 and the Rules of 1973.
It may be noted that promotions and appointments made under the Rules of 1965, on the repeal of those rules by the Rules of 1973, fall to be governed by the Rules of 1973, for while repealing tho Rules of 1965 Rule 9 of the Rules of 1973 provides: "Provided that anything done or any action under the rules so repealed shall be deemed to have been done or taken under the corresponding provisions of these rules.
" Significantly, such a saving provision is absent in the Rules of 1978.
this is as clear an indication as any that the scheme under the Rules of 1978 marked a complete departure from that embodied in the earlier Rules.
We hold that the confirmation of the petitioners and other officers appointed as Divisional Medical Officers fall to be considered under the Rules of 1965 or the Rules of 1973 and not under the Rules of 1978.
Accordingly, the rule of seniority cum suitability cannot be applied to the petitioners and the promotee 840 respondents, and all promotee respondents who were promoted to the posts of Divisional Medical Officer subsequent to the petitioners must be regarded as junior to them, notwithstanding that they may have ranked senior to the petitioners in the grade of Assistant Medical Officers (including Assistant Divisional Medical Officers).
This principle will rule even where confirmation is made zone wise, for in the absence of anything adverse in the officer 's conduct, quality of work or other relevant factor, confirmation should follow the order in which the original appointments have been made.
The respondents point out that the impugned Seniority List was prepared in 1979, when the Rules of 1978 were in force, and therefore the principle of seniority cum merit was made the basis of the Seniority List.
It is immaterial, in our opinion, that the Seniority List was prepared in 1979.
The inter se seniority between the members of a service will ordinarily depend on the date of entry into the grade.
That is an event governed by the rales of recruitment, whether it be direct recruitment or promotion on the basis of selection on merit or on the basis of seniority in the lower grade or some other factor.
Where seniority is fixed in a grade according to the length of service in that grade, that implies a reference back to the date of entry.
It is wholly immaterial when the Seniority List is prepared.
We approach the second part of this case now.
The petitioners challenge the seniority assigned to the direct recruit respondents in the impugned Seniority List.
They contend that the quota prescribed for direct recruitment and for promotion under the Rules has been wrongly applied at the stage of confirmation when it should have been applied at the stage of appointment.
They also contend that there is no provision for applying the principle of rotation of vacancies between direct recruits and promotees for the purpose of determining relative seniority between them.
And even if it can be said that the directive issued in 1976 constitutes a valid rule of rotation, it is open to prospective operation only and cannot be applied retrospectively.
Finally, the petitioners urge that the promotees should be held entitled to a weightage of five years on the basis of their service in the Class II posts of Assistant Medical Officers when considering their seniority in relation to direct recruits.
841 The case of the respondents that the inter se seniority between the direct recruit and the promotee Divisional Medical Officers has been carefully fixed with reference to the direct recruitment and promotional quotas in force from time to time, without affecting the date of confirmation of the Divisional Medical Officers.
It is explained that where the promotees have been promoted in excess of their quota in a particular year, they have to be pushed down to a later year for absorption when due within their quota, and seniority has been fixed accordingly.
It is pointed out that for some years direct recruitment could not be resorted to on the required scale as the restructuring of the Medical Department was under consideration with a view to improving the avenues of promotion.
In consequence direct recruits appointed in later years were brought up higher in the Seniority List in order to provide them their due position according to the quota of vacancies laid down for direct recruitment.
The respondents also point out that Divisional Medical Officers were allowed to count seniority only from the date of permanent absorption if such absorption was within their quota.
It is stated that from 1973 onwards representations were made by and on behalf of promotees Divisional Medical Officers to give them weightage in respect of their officiating service for the purpose of seniority in the cadre of Divisional Medical Officers vis a vis the direct recruits, and after giving due consideration to those representations and taking into regard the judgment of this Court in A. K. Subraman & Ors. etc.
vs Union of India & Ors., it was decided that inter se seniority between direct recruit Divisional Medical Officers and promotee Divisional Medical Officers promoted permanently should be fixed on a rotational basis with reference to the direct recruitment and promotional quotas in force from time to time.
It is maintained that the impugned Seniority List was prepared on the basis of those principles.
The petitioners, it is urged, cannot claim inclusion in that list as none of them had been promoted as Divisional Medical Officers on a permanent basis against the quota of seats reserved for such promotions under the relevant Rules.
The claim of the petitioners to a weightage of five years of substantive service rendered in the lower grade is disputed by the respondents on the ground that the principle providing such weightage for seniority has not been applied to the Medical Department of the Railways in view of the structural pattern of the Department.
842 The objection of the Respondents that the petitioners were not appointed to the posts of Divisional Medical Officers on a permanent basis and therefore they were not entitled to inclusion in the Seniority List can be disposed of shortly.
We have already held while examining the case of the petitioners vis a vis the promotee respondents that the petitioners were entitled to be treated at par with substantively appointed Divisional Medical Officers for the purpose of fixing seniority, and the circumstance that they were appointed in an officiating capacity was of no significance in this regard.
We have pointed out that for determining seniority among promotees the petitioners should be treated as having been appointed to permanent vacancies from the respective dates of their original appointments and the entire period of their officiating service should be taken into account as if that service was of the same character as that performed by the substantive holders of permanent posts.
We have held further that the promotee respondents appointed subsequently to the petitioners must be regarded as junior to them even though senior in the lower grade.
We have detailed the reasons for taking this view.
Applying the same criteria for determining the seniority between the petitioners and the direct recruits, we are of opinion that the petitioners must be held senior to the direct recruits appointed subsequently to them.
In this connection, it would be permissible to quote from the judgment of this Court in O. P. Singla (Supra), where the question was of fixing seniority between temporary promotees and direct recruits: "Promotees, who were appointed under Rule 16 have been officiating continuously, without a break, as Additional District and Sessions Judges for a long number of years.
It is both unrealistic and unjust to treat them as aliens to the Service merely because the authorities did not wake up to the necessity of converting the temporary posts into permanent ones even after some of the promotees had worked in those posts from five to twelve years.
The fact that temporary posts created in the Service under Rule 16(1) had to be continued for years on end shows that the work assigned to the holders of those posts was, at least at some later stage, no longer of a temporary nature.
And yet instead of converting the temporary posts into permanent ones, the authorities slurred over the matter and imperilled, though unwittingly 843 the reasonable expectations of the promotees . .
It is not fair to tell the promotees that they will rank as juniors to direct recruits who were appointed five to ten years after they have officiated continuously in the posts created in the Service and held by them, though such posts may be temporary." And further: "The best solution to the situation which confronts us is to apply the rule which was adopted in S.B. Patwardhan vs State of Maharashtra ; It was held by this Court in that case that all other factors being equal, continuous officiation in a non fortuitous vacancy ought to receive due recognition in fixing seniority between persons who are recruited from different sources, so long as they belong to the same cadre, discharge similar functions and bear the same responsibilities.
Since the rule of 'quota and rota ' ceases to apply when appointments are made under Rule 16 and 17, the seniority of direct recruits and promotees appointed under those Rules must be determined according to the dates on which direct recruit were appointed to their respective posts and the dates from which the promotees have been officiating continuously either in temporary posts created in the Service or in substantive vacancies to which they were appointed in a temporary capacity.
" Considerable emphasis has been laid by the respondents on the fact that in the present case the pertinent Rules laid down the respective direct recruitment and promotional quotas from time to time, and it was necessary to adjust the seniority between the direct recruit Divisional Medical Officers and the promotee Divisional Medical Officers in such a way that the quotas were maintained from year to year.
This implied, it is urged, the rotation of vacancies between the two classes reserving them for one or the other in an order which would ensure compliance with the quotas.
The Rules themselves do not lay down any principle of rotation.
They specify the quotas only.
It was for the first time on May 26/27, 1976 that the Railway Ministry by its letter No.
E(O)I 74/SR 6/10 directed that "the seniority of Class II officers of the Medical Department, 844 promoted to Class I Senior Scale against the quota earmarked for a particular year vis a vis the officers recruited against the direct recruitment quota for that year will be fixed on a rotational basis with reference to the direct recruitment and promotional quotas in force from time to time.
" This directive, however, can be of no assistance to the respondents.
It may be open to an administration to work the quota rule through a principle of rotation, but that implies that a quota rule is being actively operated and effect is being given to it.
In the present case, it must be borne in mind that the quotas laid down by the Rules were not observed at all by the Railway administration, and no direct recruitment was made during the years 1973 to 1976.
Indeed, the process of direct recruitment was employed on a substantial basis only from 1978 onwards.
Only one officer appears to have inducted by direct recruitment into the grade in 1977 and apparently none before.
The grade of Divisional Medical Officers was manned by promotees selected on their merit under the Rules of 1965 and the Rules of 1973 There was power under Rule 7 of the Rules of 1973 to relax the provisions of those Rules, which would include the provision requiring the observance of specified quotas for recruitment from promotional and from direct recruitment source It seems to us that the present case falls within the dicta of this Court in A. Janardhana vs Union of India and Others where the Court said: "We do propose to examine and expose an extremely undesirable, unjust and inequitable situation emerging in service jurisprudence from the precedents namely, that a person already rendering service as a promotee has to go down below a person who comes into service decades after the promotee enters the service and who may be a schoolian, if not in embryo, when the promotee on being promoted on account of the exigencies of service as required by the Government started rendering service." and concluded with the observations: "Even where the recruitment to a service is from more than one source and a quota is fixed for each service 845 yet more often the appointing authority to meet its exigencies of service exceeds the quota from the easily available source of promotees because the procedure for making recruitment from the market by direct recruitment is long, prolix and time consuming.
The Government for exigencies of service, for needs of public services and for efficient administration, promote persons easily available because in hierarchical service one hopes to move upward.
After the promotee is promoted, continuously renders service and is neither found wanting nor inefficient and is discharging his duty to the satisfaction of all, a fresh recruit from the market years after promotee was inducted in the service comes and challenges all the past recruitments made before he was borne in service and some decisions especially the ratio in Jaisinghani case as interpreted in two B.S. Gupta cases gives him an advantage to the extent of the promotee being preceded in seniority by direct recruit who enters service long after the promotee was promoted.
When the promotee was promoted and was rendering service, the direct recruit may be a schoolian or college going boy.
He emerges from the educational institution, appears at a competitive examination and starts challenging everything that had happened during the period when he has had nothing to do with service .
If this has not a demoralising effect on service we fail to see what other inequitous approach would be more damaging.
It is, therefore, time to clearly initiate a proposition that a direct recruit who comes into service after the promotee was already unconditionally and without reservation promoted and whose promotion is not shown to be invalid or illegal according to relevant statutory or non statutory rules should not be permitted by any principle of seniority to secure a march over a promotee because that itself being arbitrary would be violative of Articles 14 and 16." In the present case, there was no direct recruitment upto 1977 for certain administrative reasons, and no observance of the quota system embodied in the prevailing Rules.
The Assistant Medical Officers were pressed into service, promoted as Divisional Medical 846 Officers and were alone responsible for assuming the burden and discharging the functions and duties of those posts during all the years until direct recruitment was made.
It would be grossly unjust and discriminatory in the circumstances to require them to be junior to direct recruits brought in some years later.
The respondents rely on A.K. Subraman (supra).
In that case, however, the facts which the Court took into consideration and upon which it proceeded to render judgment were different.
The point raised in the present case falls more appropriately within the scope of the observations in A. Janardhana (supra), to which elaborate reference has been made earlier.
Indeed, when A.K. Subraman (supra) was considered subsequently by this Court in P.S. Mahal vs Union of India the Court expressly referred to the exception implied in Bishan Sarup Gupta vs Union of India as the effect of a serious deviation from the quota rule, and it recorded its agreement with A Janardhana (supra).
It said: "But this rotational rule of seniority can work only if the quota rule is strictly implemented from year to year.
Some slight deviations from the quota rule may not be material but as pointed out by Palekar, J. in the Bishan Sarup Gupta case, "if there is enormous deviation, other considerations may arise".
If the rotational rule of seniority is to be applied for determining seniority amongst officers promoted from different sources, the quota rule must be observed.
The application of the rotational rule of seniority when there is large deviation from the quota rule in making promotions is bound to create hardship and injustice and result in impetmissible discrimination.
That is why this Court pointed out in A.K. Subraman case that '. when recruitment is from two or several sources it should be observed that there is no inherent invalidity in introduction of quota system and to work it out by a rule of rotation.
The existence of a quota and rotational rule, by itself, will not violate Article 14 or Article 16 of the 847 Constitution It is the unreasonable implementation of the same which may, in a given case, attract the frown of the equality clause. ' (SCC para 28, p.333:SCC (L&S) p.50) The rotational rule of seniority is inextricably linked up with the quota rule and if the quota rule is not strictly implemented and there is large deviation from it regularity from year to year, it would be grossly discriminatory and unjust to give effect to the rotational rule of seniority.
We agree wholly with the observation of D.A. Desai, J. in A Janardhana vs Union of India that '. where the quota rule is linked with the seniority rule if the first breaks down or is illegally not adhered to giving effect to the second would be unjust, inequitous and improper. ' (SCC para 29, p.621 :SCC (L&S) p. 487) This was precisely the reason why the Court in the first Bishan Sarup Gupta case held that with the collapse of the quota rule, the rule of seniority set out in Rule 1 (f) (iii) also went.
" In our opinion, the directly recruited Divisional Medical Officers are entitled to seniority only from the date of their entry into service and not from any anterior date, and therefore cannot enjoy a seniority above the petitioners.
The date of appointment to a permanent vacancy, whether of a promotee or a direct recruit, will be the date for determining the seniority of the officer.
We may also observe that there is no ground for detaining the confirmation of the petitioners merely because the quota reserved for direct recruitment has not been filled.
As regards the claim to weightage made by the petitioners on the basis of their service in the lower grade of Assistant Medical Officers, we find no substance in the claim because the administrative instructions issued under the Railway Board 's letter No. E.54/SR 6/1/2 dated March 10, 1955, on which the petitioners rely, did not apply to the Medical Department of the Railways.
In the result, the writ petition is allowed, the Seniority List published by the Railway Ministry 's letter No. 752 E/530 (E1A) 848 dated November 22, 1979 as well as the appointments made to the posts of Medical Superintendents by the Railway Ministry 's letter No. E(O)III 81 PM6/199 dated August 31, 1981 are quashed.
The Railway administration is directed to draw up a fresh Seniority List of Divisional Medical Officers in accordance with the principles laid down in the judgment and to make fresh appointments from among the Divisional Medical Officers to the posts of Medical Superintendents.
The petitioners are entitled to their costs against respondents Nos. 1, 2 and 3.
A.P.J. Petition allowed.
|
The Indian Railways Medical Service consists of Assistant Divisional Medical Officers Class I (before January 1, 1973 described as Assistant Medical Officers Class II), Divisional Medical Officers, Medical Superintendents, Chief Medical Officers and Director General of Medical Services.
The Petitioners in the writ petition who were Assistant Medical Officers Class II were confirmed, one in 1962 and the others in 1963.
During the years 1970 to 72 they were selected by Departmental Promotion Committees for officiating appointments to the Class I post of Divisional Medical Officers.
At that time the Indian Railway Medical Service (District Medical Officers) Recruitment Rules 1965 were applicable.
Those Rules were repealed and replaced by the Indian Railway Medical Service (District Medical Officers) Recruitment Rules 1973.
Under the Rules of 1965 and the Rules 1973 the posts of District Medical Officers were treated as selection posts.
819 The existing pay scale of Rs. 350 900 attached to the post of Assistant Medical Officer was revised by the Third Pay Commission and split into two A pay scales, a higher Class I scale of Rs. 700 1600 and a lower Class II scale of Rs. 650 1200 and the posts of Assistant Medical Officers were divided into those carrying the higher pay scale and those carrying the lower pay scale.
The upgraded posts in the higher pay scale of Rs. 700 1600 were designated as "Assistant Divisional Medical Officers".
The petitioners were placed in the higher pay scale of Rs. 700 1600 and were designated as Assistant Divisional Medical Officers with effect from January 1, 1973.
The Rules of 1973 were replaced by the Indian Railway Medical Service (Divisional Medical Officers/Senior Medical Officers) Recruitment Rules 1975, which were further replaced by the Indian Railway Medical Service (Chief Medical Officers, Additional Chief Medical Officers, Medical Superintendents and Divisional Senior Medical Officers) Recruitment Rules, 1978.
Under these Rules promotion is effected on the principle of "non selection", that is, on "seniority cum suitability" basis.
The Rules of 1965 showed that there were 101 posts in the grade of Divisional Medical Officers.
The Rules of 1973 mentioned 109 posts and referred to them as permanent posts only.
The Railway Ministry for the promotion of Assistant Medical Officers to the Class I posts of Divisional Medical Officers indicated the number of anticipated vacancies for the purpose of permanent promotion and the number of anticipated vacancies for the purpose of officiating appointments, the number under each category being specified zone wise.
A Class I Departmental Promotion Committee met on several occasions and considered the cases of candidates who had completed five years and above of service as Assistant Medical Officers for substantive promotion and for officiating promotion, the field of choice being extended to six times the number of vacancies.
The petitioners were selected on the basis of merit and appointed to officiate as Divisional Medical Officers on different dates in 1971 and 1972, except petitioner No. 7 who was promoted and appointed in 1974.
The Railway Board on October 30, 1979 published a combined seniority list of Divisional Medical Officers recruited directly or by promotion.
Respondents Nos. 4 to 64 included both promotees and direct recruits and were shown in that list.
The petitioners did not find place in the seniority list.
Subsequently on the basis of that seniority list, some of the respondent Divisional Medical Officers were appointed on August 31, 1934 to of officiate as Medical Superintendents.
In the Writ Petition under article 32 the petitioners challenged the validity of the combined seniority list dated 30th October, 1979 of Divisional Medical Officers and of the officiating promotions to the posts of Medical Superintendents as violative of articles 14 and 16 of the Constitution, contending: that they were promoted as Divisional Medical Officers much earlier than the promotee respondents; that their promotion was made by selection on the basis of merit 820 adjudged by the Departmental Promotion Committees under the Rules of 1965; that they had continued in service as Divisional Medical Officers against vacancies in permanent posts without interruption for periods ranging between 8 years to 12 years, and that the promotee respondents, who had held such posts for shorter periods, had been confirmed before the petitioners and shown senior in the seniority list and preferred for promotion as Medical Superintendents; that the petitioners should have been confirmed in the normal course; that the promotee respondents have been confirmed zone wise, and such confirmation cannot serve as a proper reference for determine seniority because when confirmation is granted zone wise, it depends on the fortuitous accrual of vacancies arising arbitrarily at different times and in different numbers in different individual zones; that if the date of confirmation is adopted as the criterion, confirmation should not be reckoned on a zonal basis.
Promotion to the post of Medical Superintendents, which is an all India cadre post should properly be drawn on an All India basis and that if confirmation has to be considered zone wise then for the purpose of promotion to the all India cadre of Medical Superintendents the only logical and uniform criterion should be the total length of continuous service as Divisional Medical Officers reckoned from the date of promotion; that for the purpose of fixing seniority in the grade of Divisional Medical Officers the seniority in the grade OF Assistant Medical Officers or Assistant Divisional Medical Officers is of no material significance because under the Rules in force when the promotion in the instant case were made, the petitioners were governed by the principle of selection on the basis of merit; that the quota prescribed for direct recruitment and for promotion under the Rules has been wrongly applied at the stage of confirmation when it should have been applied at the stage of appointment and that there is no provision for applying the principle of rotation of vacancies between direct recruits and promotees for the purpose of determining relative seniority between them.
The respondents, however contended: that the seniority list has been correctly prepared, it contains the names of only those officers who were either directly recruited as Divisional Medical Officers or had been approved for permanent promotion against the quota of posts reserved for them in vacancies allotted among the individual Railways on the basis of the cadre position of each Railway, and that none of the petitioners qualified for inclusion in the seniority list as they had been promoted in an officiating capacity to temporary vacancies in the posts of Divisional Medical Officers; that the petitioners have no right to be treated at par with those officers who were holding permanent posts on a confirmed basis, as confirmation was made on the basis of their selection for permanent promotion as Divisional Medical officers and their seniority was also fixed on that basis.
According to the practice followed by the Railway Administration three select lists were prepared.
List A set out the names of officers selected for substantive promotion against permanent vacancies.
List included the names of officers selected for officiating promotion against temporary vacancies.
The petitioners were placed in List B. The third list.
List C, bore the names of officers included in List by earlier Depart mental Promotion Committees but not considered as "suitable yet" for substantive promotion by subsequent Departmental Promotion Committees.
The inter se seniority between the direct recruit and the promotee Divisional Medical 821 Officers has been carefully fixed with reference to the direct recruitment and promotional quotas in force from time to time, without affecting the date of confirmation of the Divisional Medical Officers.
The petitioners cannot claim inclusion in the impugned seniority list as none of them had been promoted as Divisional Medical Officers on a permanent basis against the quota of seats reserved for such promotions under the relevant Rules, and cannot get weightage of five years of substantive service rendered in the lower grade because the principle providing such weightage for seniority has not been applied to the Medical Department of the Railways.
Allowing the petition, ^ HELD: 1.
The seniority list published by the Railway Ministry 's letter No. 752 E/530 (EI A) dated November 22, 1979 as well as the appointments made to the posts of Medical Superintendents by the Railway Ministry 's letter No. E(O) III 81 PM6 199 dated August 31, 1981 are quashed.
The Railway Administration is directed to draw up a fresh Seniority List of Divisional Medical Officers and to make fresh appointments from among Divisional Medical Officers to the posts of Medical Superintendents.
[847 H; 848 A B] 2.
There is nothing to indicate why the Railway Ministry sought to fill some of the vacancies in the permanent posts on a substantive basis and the others on an officiating basis.
The explanation offered is that substantive appointments were made to permanent vacancies and officiating appointments were made to temporary vacancies.
The documents on record do not speak of temporary vacancies at all.
There is no material suggesting the need for treating some of the vacancies as temporary and to show that some vacancies would have ceased to exist within the foreseeable future or upon the happening of some anticipated contingency On the contrary, the petitioners had continued to fill the vacancies to which the petitioners were appointed should be regarded as permanent vacancies.
[831 D G] 3.
The explanation that officiating appointments were made when some of the candidates considered for substantive appointment were found to be of inferior calibre for such appointment and, therefore, some of the vacancies were left to be filled on an officiating basis is not plausible.
The communication of the Railway Ministry to the Departmental Promotion Committee specifying the number and nature of the appointments to be made was issued long before the cases of individual officers were examined for promotion.
It was only after the Departmental Promotion Committee had been informed of the Railway Ministry 's requirement that it commenced its task of selecting candidates for substantive appointment and for officiating appointment.
The material produced by the respondents shows that the petitioners did not at any time fall within the field of choice for making substantive appointments.
That was because their seniority in the grade of Assistant Medical Officers did not at the relevant time bring them within the field of choice for substantive appointment.
They were considered for officiating appointment only, and not for substantive 822 appointment.
It was the mere statistical fact of their seniority as Assistant Medical Officers, and not their merit, that precluded their consideration for substantive appointment as Divisional Medical Officers at the relevant time.
[831 H; 832 A D] 4.
If from the outset the temporary vacancies had been regarded as permanent vacancies, and substantive appointments had been made instead of officiating appointments, the petitioners would have been appointed substantively to those permanent vacancies.
In the entire field of choice in which they fall, they were found to be the most meritorious.
Ever since their respective appointments in 1971, 1972 and 1974 the petitioners have continued to serve without interruption as Divisional Medical Officers and were doing 50 when this writ petition was filed in 1981.
They have continued to serve in the posts for a significant number of years, and there is no indication that their appointments will come to an end merely because the vacancies have been described as temporary.
There is no material to show that their confidential Records contained any adverse entries or that otherwise they were not fit on their merit for substantive appointment to permanent vacancies.
The petitioners have now been appointed Divisional Medical Officers on a substantive basis.
The only reason why they were not originally appointed substantively to permanent vacancies as Divisional Medical Officers is that only a limited number of substantive appointments was desired by the Railway Ministry and the petitioners were not considered for those substantive appointments because they did not fill within the field of choice, having regard to their place of seniority in the lower grade of Assistant Medical Officers.
[832 F H; 833 A B] 5.
The petitioners are entitled to say that they should be considered at par, for the purpose of fixing seniority, with those appointed to permanent posts in a substantive capacity.
There is nothing to indicate why they should not be entitled to the benefits which the substantive holders of permanent posts enjoy.
For the purpose of determining seniority among promotees the petitioners should be treated as having been appointed to permanent vacancies from the respective dates of their original appointment and the entire period of officiating service performed by them should be taken into account as if that service was of the same character as that performed by the substantive holders of permanent posts.
[834 A C] Baleshwar Prasad vs State of UP.,[1981] 1 S.C.R. 449, 462 and O.P. Singla vs Union of India, , followed.
In the instant case, as the petitioners are continuing to hold the posts of Divisional Medical Officers for several years, the inclusion of their names in List is wholly meaningless.
[834 D] 7.
If length of continuous service reckoned from the date of promotion furnishes the criterion for determining seniority between the petitioners and the substantively appointed Divisional Medical Officers, that principle should apply 823 with equal vigour as between the petitioners and those promotee respondents who also began to serve, like the petitioners, in officiating appointments as Divisional Medical Officers.
There is no reason why such promotee respondents, although appointed subsequently to the petitioners, should be treated as senior to them.
[834 F] 8.
The date of confirmation is the material date for determining relative seniority.
The Railway administration in according confirmation has been influenced by two principle factors.
One is that confirmation has been considered zone wise.
Confirmation has been made as vacancies have arisen within a particular zone.
The vacancies differ from zone to zone.
They no not arise equally in different zones but turn on factors peculiar to each zone, such as the strength of the cadre within the zone, and the differing number of vacancies arising in different zones at different times.
In other words, confirmation based on the placement of an officer within a particular zone must necessarily be determined by factors confined to that zone and unrelated to an all India standard.
It is apparent that confirmations limited by such a local perspective cannot serve as a legitimate base for drawing up a seniority list intended for effecting promotion, to the all India cadre of Medical Superintendents.
To adopt the date of confirmation as the governing point in such circumstances is to inject an element of inequality into the very foundation of the promotion process.
It is conceivable that the Railway Administration has adopted the rule of according confirmations zone wise for certain practical consideration and the validity of that practice need not be adjudicated on.
But such confirmations cannot legitimately constitute the basic norm for drawing up a seniority list of Divisional Medical Officers for the purpose of promotion to the grade of Medical Superintendents.
The principle must be that seniority should be related to the length of continuous service as Divisional Medical Officers reckoned from the date of promotion to the post; such service should not include any period served in a fortuitous, stop gap or adhoc appointment.
[834 G H; 835 A E] 9.
After implementation of the recommendations of the Third Pay Commission, all the officers comprising the two groups were Assistant Medical Officers, and an Assistant Medical Officer was nothing but as Assistant Medical Officer who drew the higher revised scale of pay.
The conclusion is inescapable that Assistant Divisional Medical Officers were, for the purpose of promotion as Divisional Medical Officers, governed by the Rules of 1965 and the Rules of 1973.
Those Rules mention Assistant Medical Officers as a source of recruitment, without referring to any limiting qualification that they should be officers drawing a Class II scale of pay.
The expression "Assistant Medical Officer" in those Rules is comprehensive enough to include all Assistant Medical Officers, whether drawing the class II revised scale of pay or entitled to the Class I revised scale of pay.
And all such Officers were, under those Rules, governed by the principle of selection on merit for promotion as Divisional Medical Officers.
The Assistant Medical Officers were designated as Assistant Divisional Medical Officers with effect from January 1, when the Rules of 1965 were still in force The Rules of 1973 came into force in August, 1973.
It is true that when Assistant Medical Officers were designated as Assistant Divisional Medical Officers in the revised Class I scale of Rs. 700 1600 by 824 Notification No. E(GP) 74/1/153 dated July 24,1976, the notification spoke of the "appointment" of Class II Assistant Medical Officers as Assistant Divisional Medical Officers, but having regard to the terms of the schedule to the letter dated December 31, 1974 such notifications must be understood to mean that the Assistant Officers had been assigned the Class I scale of Rs. 700 1600 and merely described as Assistant Divisional Medical Officers.
They continued to belong to the broad category of "Assistant Medical Officers".
Upon Assistant Medical Officers being designated as Assistant Divisional Medical Officers under the new scheme, there was no corresponding amendment in the Rules of 1965 or the Rules of 1973.
It is for the first time, under the Rules of 1978, that the post of Divisional Medical Officer is described as a "non selection" post to be filled by promotion from the ranks of Assistant Divisional Medical Officers and by direct recruitment.
The only Assistant Medical Officers now entitled to promotion as Divisional Medical Officers were those drawing the Class I scale of Rs 700 1600 and designated as Assistant Divisional Medical Officers".
The new sub division of Assistant Medical Officers described as Assistant Divisional Medical Officers was deemed to have taken birth on January 1, 1973 five and a half years before the Rules of 1978 were brought into force.
It could never have been intended that this class of Officers should exist in a vacuum where no rules operated.
There was no vacuum because they were comprehended within the expression "Assistant Medical Officer" in the Rules of 1965 and the Rules of 1973, and therefore, no amendment was considered necessary in those Rules to take congnisance of this class.
[837 E H; 838 A G] 10.
The principle of selection by merit, enunciated in the Rules of 1965 and the Rules of 1973 governed the promotion of Assistant Medical Officers (including Assistant Divisional Medical Officers) to the posts of Divisional Medical Officer before the Rules of 1978 came into force Both before and after January 1, 1973, during the period before the Rules of 1978 came into force the principle of "non selection", that is seniority cum suitability in the lower grade, which was provided in the Rules of 1978 did not apply to the promotion of Assistant Medical Officers (including Assistant Divisional Medical Officers to the posts of Divisional Medical Officers.
[838 G H; 839 A] 11.
The confirmation of the petitioners and all other officers appointed to the posts of Divisional Medical Officer before the Rules of 1978 came into force must be governed by the Rules of 1965 and the Rules of 1973.
The promotions and appointments made under the Rules of 1965, on the repeal of those rules by the Rules of 1973, fall to be governed by the Rules of 1973.
[839 D E] 12.
The inter se seniority between the members of a service will ordinarily depend on the date of entry into the grade.
That is an event governed by the Rules of recruitment, whether it be direct recruitment or pro motion on the basis of selection on merit or on the basis of seniority in the lower grade or some other factor.
Where seniority is fixed in a grade according to the length of service in that grade, that implies a reference back to the date of entry.
It is wholly immaterial when the seniority list is prepared.
[840 C E] In the instant case, applying the criteria for determining seniority vis a vis the promotee respondents and the petitioners to the case of petitioners and the 825 direct recruits, the petitioners must be held senior to the direct recruits appointed subsequently to them.
[842 D E] O.P. Singla vs Union of India, , followed.
The rules themselves do not lay down any principle of rotation.
They specify the quotas only.
It was for the first time on May 26/27, 1976 that the Railway Ministry by its Letter No E(O) I 74/SR 6/10 directed that the seniority of Class II officers of the Medical Department, promoted to Class I Senior Scale against the quota earmarked for a particular year vis a vis the officers recruited against the direct recruitment quota for that year will be filed on a rotational basis with reference to the direct recruitment and promotional quotas in force from time to time.
" This directive, however, can be of no assistance to the respondents.
It may be open to an administration to work the quota rule through a principle of rotation, but that implies that a quota rule is being actively operated and effect is being given to it.
In the present case, the quotas laid down by the Rules were not observed at all and no direct recruitment was made, during the years 1973 to 1976.
Indeed, the process of direct recruitment was employed on a substantial basis only from 1978 onwards.
There was power under Rule 7 of the Rules of 1973 to relax the provisions of those rules, which would include the provision requiring the observance of specified quotas for recruitment from promotional and from direct recruitment sources.
[843 G H; 844 A D] A. Janardhana vs Union of India & Ors., [1983] 3 S.C.C. 601, followed, and A.K. Subraman & Ors. etc.
vs Union of India & Ors., [1975] 2 S.C.R. 979 inapplicable.
P.S. Mahal vs Union of India, ; and Bishan Sarup Gupta vs Union of India, [1975] Supp.
S.C.R 491, referred to.
[847 E] 14.
The directly recruited Divisional Medical Officers are entitled to seniority only from the date of their entry into service and not from any anterior date, and therefore cannot enjoy seniority above the petitioners.
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5032.txt
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Appeal No. 176 of 1956 and Petition No. 165 of 1955.
Appeal by special leave from the judgment and order dated March 15/23,1955 of the Orissa High Court, in Civil Reference No, 4 of 1954, 169 N. C. Chatterji, D. N. Mukherjee and R. Patinaik, for the appellant.
Porus A. Mehta and R. H. Dhebar, for respondent No. 1. 1956.
November 29.
The Judgment of the Court was delivered by S.K. DAS J.
The appellant is Shri Lalit Mohan Das, a pleader of about 25 years ' standing.
who ordinarily practiced in the Courts at Anandapur in the district of Mayur bhanj in Orissa.
The Munsif of Anandapur, one Shri L. B. N. section Deo ' drew up a proceeding under sections 13 and 14 of the , against the pleader for grossly improper conduct in the discharge of his professional duty and submitted a report to the High Court through the District Judge of Mayurbhanj on December 12, 1953.
The District Judge forwarded the report, accompanied by his opinion, to the High Court of Orissa on March 9, 1954.
The recommendation of the Munsif was that the pleader should be suspended from practice for one year.
The reference was heard by the High Court of Orissa ' and by its order dated March 15, 1955, the High Court came to the conclusion that the pleader was guilty of grave professional misconduct and suspended him from practice for a period of five years with.
effect from March 15,1955, Shri Lalit Mohan Das then obtained special leave from this Court to appeal against the judgment and order of the Orissa High Court dated March 15 /23, 1955.
He also filed a petition under article 32 of the Constitution.
Learned counsel for the petitioner has not pressed the petition under article 32 and nothing more need be said about it.
We proceed now to deal with the appeal which has been brought to this Court on special leave.
The charges against the appellant were the following On July 15, 1953, the appellant was appearing on behalf of the defendant in Suit No. 81 of 1952 pending before the Munsif of Anandapur.
On that date, there were two other suits pending before the same Munsif.
There were petitions for time in all the three suits.
22 170 The Munsif wanted to take up the oldest suit for hearing, and the oldest suit being Suit No. 54 of 1952, it was taken up first and five witnesses for the plaintiff were examined.
Suit No. 81 of 1952 was postponed to August 18, 1953.
The appellant, who appeared for the defendant in that suit, was informed of the postponement.
When so informed, the appellant made a remark in open Court and within the hearing of the Munsif to this effect: " If the Peshkar is gained over, he can do everything." He then left the Court.
The Munsif was surprised at the remark made and asked the appellant to explain his conduct, by means of a letter sent the same day.
As the appellant sent no reply, the Munsif wrote again to the appellant on July 18, 1953.
To this letter the appellant sent the following reply: "Dear Sir, I am painfully constrained to receive memo after memo for some imaginary act of mine not in any way connected with my affairs for which if any explanation is at all warranted officiallv.
For your second memo I felt it desirable as a gentleman to reply.
Further I may request you to be more polite while addressing letters to lawyers.
Yours faithfully, Sd.
L. M. Das.
Pleader.
" It is obvious that the letter of the appellant was couched in very improper terms and considerably strained the relation between the Munsif and the appellant.
The appellant, it may be stated here, was at that time the President of the Anandapur Sub Divisional Bar Association which consisted of about 14 legal practitioners.
On July 21, 1953, Shri B. Raghava Rao, who was the predecessor in office of Shri Deo, came to Anandapur.
He was the guest of Shri A. V. Ranga Rao, the Sub Divisional Officer.
One Shri N. C. Mohanty, a pleader of.
Anandapur and who was related to the appellant, came to invite the two Munsifs to a luncheon on the occasion of a housewarming ceremony.
On hearing about the trouble between Shri Deo 171 and the appellant, Shri B. Raghava Rao interceded and it appears that the appellant was persuaded to come to the house of the Sub Divisional officer and to ,say that he was sorry for what had happened in court on July 15, 1953, and that he did not happean to insult Shri Deo; Shri Deo, it appears, accepted the apology and for the time being.
the trouble between the two was smoothed over.
A second incident, however, took place on September 25, 1953.
The appellant was appearing for a defendant in another suit before the Munsif It was Suit No. 101 of 1952.
This suit was fixed for hearing on September 21, 1953.
As that date was a holiday, the suit was taken up 'on September 22, 1953.
Another suit, Suit No. 86 of 1952, was also fixed for hearing on that date but Shri N. C. Mohanty, pleader for the defendants in that suit, took time on the ground of the illness of one of the defendants, which ground was supported by a medical certificate.
In Suit No. 101 of 1952 also, the defendants applied for time.
on the ground of illness of their witnesses; but there being no medical certificate in support of the allegation of illness and no witnesses having been summoned in that suit, the learned Munsif refused to grant time, and one Shri P. N. Patnaik who also represented the defendants agreed to go on with the suit.
The suit was then heard for two days, i. e., on September 22 and 23, 1953, and at the request of the defendants ' lawyers the hearing of arguments was postponed to September 25, 1953.
On that date the appellant came to Court accompanied by his junior Shri P. N. Patnaik, for the purpose of arguing the case on behalf of the defendants.
At the very outset of his arguments the appellant made the follwing remarks:The Court is unfair to me, while the Court was fair to Mr. Misra (meaning Shri Bhagabat Prasad Misra who was appearing for the plaintiffs in that suit).
The Court is accommodating and granting adjournments to Mr. Misra while it was not accommodating me.".
The Munsif took objection to these remarks but nothing untoward happened.
The appellant concluded his arguments.
172 A third incident brought matters to a climax, and this incident took place on September 29, 1953.
The appellant was appearing for the defendants in Suit No. 6 of 1951.
In that suit a preliminary point of jurisdiction and sufficiency of court fees was raised and Shri B. Raghava Rao, the predecessor in office of Shri Deo, had dealt with the point and decided it against the appellant 's client.
A Civil Revision taken to the High Court was also rejected. 'The appellant, however, again pressed the same preliminary point and on September.
29, 1953, Shri Deo passed an order dismissing the preliminary objection.
When this order was shown to the appellant, he stood up and shouted at the top of his voice I 'I on behalf of the Bar Association, Anandapur, challenge the order of the Court,.
The Court has no principle as it is passing one kind of order in one suit and another kind of order in another suit.
" The Munsif, it appears, was disgusted at the conduct of the appellant and he stood up and, left the Court room, directing the bench clerk to send a telegram to the District Judge.
, A telegram was accordingly sent to the District Judge asking him to come to Anandapur.
The District Judge asked for a detailed report which was sent on October 1, 1953.
On October 5, 1953, the Munsif drew up a proceeding against the appellant on a charge under section 13 of the referring therein to the three incidents mentioned above.
The appellant was asked to show cause by October 26, 1953.
On November 3, 1953, the appellant denied the allegations made and took up the attitude that the Munsif was not competent to hold the enquiry on the ground that the Munsif was in the position of a complainant.
The appellant gave a different version of what happened on the three dates in question.
With regard to the incident of July 15, 1953, the appellant 's plea was that some other client had come to him.
in connection with a criminal case pending in another Court and to that client the appellant had said that an enquiry should be made from the Peshkar as to the date fixed.
With regard to the incident, on September 25, 1953, the plea of the appellant was^ total denial, and with regard to the last incident, the appellant said 173 that the Munsif behaved rudely and wanted to ' assault the appellant, for which the appellant appears, to have filed a petition to the Governor of Orissa on September 30, 1953, for according sanction for the prosecution of the Munsif.
It may be stated here that on October 8, 1953, a resolution was passed, numbered Resolution 6, which purported to be a resolution on behalf of the Bar Association, Anandapur.
The resolution was in these termis: "Resolved that on September 29, 1953, the Court 's (Munsif) action on the.
dais in rising from the chair, thumping on the table, shouting at the top of his voice, and using the words 'shut up ' against one honourable member (President) of this Bar Association is quite unprecedented.
, undesirable and affecting the prestige of the Bar and may cause apprehension in the mind of the litigant public to get fair justice.
" It may be stated that some other members of the Bar dissociated themselves from the a id resolution at a later date.
The proceeding against the appellant under the stated, as we have said earlier, on October 5, 1953, and the appellant filed his written statement on November 3, 1953.
On November 5, 1953, the Munsif sent the record to the District Judge in connection with the plea of the appellant that the enquiry should be made by some other judicial officer.
The District Judge, however, took the view that under the provisions of sections 13 and 14 of the the enquiry should be made by the Munsif himself and the records were accordingly sent back to the Munsif.
Thereafter, the appellant non co operated and did not appear at the enquiry though more than one communication was sent to ham The enquiry was concluded on December 11, 1953, and the Munsif submitted his report.
the High Court through the District Judge on December 12, 1953.
On December 22, 1953, the appellant filed an application to the Additional District Judge for time to move the High Court to get an order to have the matter heard by some other judicial officer.
One month 's time was 174 accordingly granted and the Additional District Judge, for some reason which is not very apparent, sent the record back to the learned Munsif In the meantime, the Additional District Judge, it appears, made an effort to settle the trouble.
On December 23, 1953, he met the members of the Bar Association and the Munsif at the inspection bungalow at Anandapur on his way to Mayurbhanj.
At a meeting held there, a copy of a draft resolution to be passed by the members of the Bar Association, Anandapur, was made over.
This draft resolution was in these terms: "This Association re rets very much that an incident relating to the bench clerk of the Civil Court.
should have led to the subsequent unhappy differences between the Bench and the members of the Bar.
As in the interest of the litigant public it is felt not desirable to allow these strained feelings to continue further, this Association unanimously resolves to withdraw Resolution No. 6 dated October 8, 1953, passed against the Court and communicate copies of the same to the addressees previously communicated.
It is further resolved to request the Court to see to the desirability of withdrawing the proceedings that had been started against the various members of the Bar and their registered clerks on their expressing regret to the Court individually in connection with those proceedings.
It is further resolved that the members of the Bar involved in the proceedings be requested to take immediate steps in this direction.
The Association hopes that the bench clerk who has to some extent been the cause for this friction between the Bench and the Bar would be replaced by a person from a different place at an earlier date.
" On January 8, 1954, the appellant appeared in the Court of the Munsif and filed a written apology and expressed his regret.
His signature wag taken on the order sheet and the order of that date reads: "Sri L. M. Das, pleader, appears and expresses his regret.
So the proceeding No. 2 of 1952 is dropped.
Intimate Additional District Judge.
" No resolution, however, was passed in the terms 175 suggested by the Additional District Judge.
On January 19, 1954, two resolution,% were passed in the following terms: "No. 1.
In view of the fact that past misunderstandings between the Munsif and members of the Bar caused by an incident relating to the bench clerk of the Civil Court, have been removed by amicable settlement of differences existing between both parties, it is unanimously resolved that resolution No. 6 dated October 8, 1953, stands withdrawn.
No. 2.
It is further resolved that the copies of the above resolution be sent to the addressees previously communicated of resolution No. 6 of October 8, 1953.
" The learned Munsif, it appears, wanted to see the minute book of the Bar Association, presumably to find out in what terms the proposed resolution was passed.
There was again trouble between the Munsif and the appellant over the production.
of the minute book.
Ultimately, the minute book was produced, and on February 2,1954, the Munsif expressed the view that the resolution passed did not fully carry out the terms of settlement suggested by the Additional District Judge.
Accordingly, the proceeding was re opened and the record was re submitted to the District fudge.
The District Judge thereupon sent the report of the Munsif to the High Court accompanied by his opinion.
The High Court dealt with the report with the result which we have already indicated.
The main contention of Mr. N. C. Chatterji, who has appeared on behalf of the appellant is this.
He has submitted that there was no valid reason for reviving the proceeding against the appellant, after the proceeding had been dropped on January 8, 1954, on the submission of an apology and expression of regret by his client; because, in substance and effect, the terms of the settlement suggested by the Additional District Judge had been complied with.
According to Mr. Chatterji an expression of regret having been made earlier than the passing of the resolutions on January 19, 1954, by the Anandapur Bar Association and the bench clerk having already been transferred from 176 Anandapur, the resolutions could not be in the same terms as were suggested by the Additional District Judge; but the two resolutions passed on January 19, 1954 coupled with the expression of individual regret made on January 8, 1954, complied in substance with the essential terms of the draft resolution which the Additional District Judge had made over on December 23, 1953.
Mr. Chatterji has contended that this view of the matter has not been properly considered by the High Court.
He has submitted that in view of the order passed by the learned Munsif himself on January 8, 1954, the proceeding against the appellant should be treated as having been dropped and concluded on that date.
Mr. Chatterji has also drawn our attention to ground No. VI in the petition for special leave dated May 9, 1955, in which the appellant said that he was " willing and prepared to submit before this Court expressions of unreserved regret and apology for his error of judament and indiscretion, if any, in the discharge of his professional duties.
" We cannot accept the contention of Mr. Chatterji that the order passed by the learned Munsif on January 8, 1954, had the effect of terminating and bringing to an end the proceeding against the appellant.
The learned Judges of the High Court rightly pointed out that the report of the Munsif dated December 12, 1953, was a report which was submitted to the High Court.
Under the provisions of section 14 of the , such a report had to be forwarded to the High Court by the District Judge accompanied by his opinion.
It was not open to.
the Additional District Judge to send back the record to the Munsif The efforts of the Additional District Judge were, indeed, well intentioned; but at that stage, after the Munsif had made his report to the High Court, the High Court alone Was competent to pass final orders in the matter.
Apart, however, from that difficulty, we are not satisfied that the terms of settlement suggested by the Additional District Judge were fully complied with in this case.
It is true, that the appellant did express his 177 regret and to that extent the settlement suggested by the Additional District Judge was carried out.
It is also true that by the resolutions passed on January 19, 1954, the earlier resolution of October 8, 1953, was cancelled, but one essential and important part of the terms of settlement suggested by the Additional District Judge was that the Association should express regret at what had happened.
Resolution No. I dated January 19, 1954, was so worded as to give the impression that the misunderstanding between the Munsif and the appellant was all due to the bench clerk and that misunderstanding having been removed Resolution No. 6 dated October,$, 1953, should be withdrawn.
There is nothing in the resolution to show that the appellant was in any way at fault, a fault which he had expiated I by an expression of regret.
It may be pointed out that the earlier ,resolution, Resolution No. 6 dated October 8, 1953, had been communicated to a large number of persons and authorities and the later resolution dated January 19, 1,954, passed in the diluted form in which it was passed, could hardly undo the damage which had been made by the earlier resolution.
On merits we agree with the High Court that the appellant was undoubtedly guilty of grave professional, misconduct.
A member of the Bar undoubtedly owes a duty, to his client and must place before the Court all that can fairly and reasonably be submitted on behalf of his client.
He may even submit that a particular order is not correct land may ask for a review of that order.
At the same time, a member of the 'Bar is an officer of the Court and owes a duty to the Court in which he is appearing.
He must phold the dignity and decorum of the Court and must not do any thing to.
bring the Court itself into disrepute.
The appellant before us grossly ' overstepped the limits of proprieety when he made imputation$; of partiality and unfairiness against the Munsif in open Court.
In suggesting that the Munsif followed no principle in his orders the appellant was adding insult to injury, because the 'Munsif had merely up held an order of his predecessor on the preliminary point of jurisdiction and Court fees, 23 178 which order had been upheld by the High Court in s revision.
Scandalising the Court in such manner is really polluting the very fount of justice; such conduct as the appellant indulged in was not a matter between an individual member of the Bar and a member of the judicial service; it brought into disrepute the whole administration of justice.
From that point of view, the conduct of the appellant was highly reprehensible.
The appellant gave no evidence in support of his version of the incidents, though he had an opportunity of doingso, if he so desired.
The only point left for consideration, is the question of punishment.
On a matter of this nature, this Court would be reluctant to interfere with the order of the High Court as respects the disciplinary action to be taken against a member of the Bar who has been guilty of professional misconduct.
There are, however, two mitigating circumstances.
One is that the learned Munsif himself recommended suspension of practice for one year only.
The appellant was suspended from practice with affect, from March 15,1955.
The order of suspension has now lasted for a little more than a year and eight months.
The second mitigating circumstance is that the appellant did file la written apology and expressed regret to the learned Munsif onJanuary 8, 1954.
It is unfortunate that the appellantdid not take up a more contrite attitude in the High Court.
In this Court, the appellant tried to make out that the proceeding against him should not have been revived; he however showed his willingness to offer an apology and ex pression of regret Having regard to all the circumstances, we think that the punishment imposed errs on the side of excess.
We would accordingly reduece the period of susppusion to, two years only.
In the result, the petition, under article 32 is dismissed and the appeal is,also dismissed subject to the reduction of the period of suspension as indicated above.
In the circumstances of this case, there will be, no 'order for costs.
|
The appellant pleader who already had strained relation with the Munsif made certain objectionable remarks in open Court, suggesting partiality and unfairness on the part of the Munsif.
The Munsif drew up a proceeding under sections 13, 14 Of the , against the pleader and submitted a report to the High Court through the District judge.
An application to the Additional District judge was filed by the pleader, for time to move the High Court to get an order to have the matter heard by some judicial Officer other than the 168 Munsif who had made the report.
One month 's time was accordingly granted, and for some reason which is not very apparent, the Additional District judge sent the record back to the Munsif.
The Additional District judge made an effort to settle the trouble.
It was arranged that the pleader should apologise and a resolution should be passed by the members of the local Bar Association.
Accordingly, the pleader appeared in the Court of the Munsif and filed a written apology and expressed his regret, and the Munsif dropped the proceeding.
It was later found that the resolution was not passed in the terms suggested by the Additional District judge, and the terms of settlement suggested by the latter were not fully carried out.
Accordingly, the proceeding was re opened and the report was re submitted to the District judge who with his opinion forwarded the same to the High Court.
The High Court suspended the pleader for 5 years.
It was contended on behalf of the appellant that there was no valid reason for reviving the proceeding, after it had once been dropped on the submission of an apology and expression of regret.
Held, that the report under section 14 of the is a report which is submitted to the High Court.
When a report is made to the High Court by any Civil judge subordinate to the District judge, the report shall be made through the District judge and the report must be accompanied by the opinion of such judge.
Once the report has been made, it is not open to the District judge to send back the record to the Subordinate Civil judge, and no order passed by the Subordinate Civil judge can have the effect of terminating or bringing to an end the proceeding.
The High Court alone is competent to pass final orders on the report.
A member of the Bar is an officer of the Court, and though he owes a duty to his client and must place before the Court all that can fairly and reasonably be submitted on behalf of his client, he also owes a duty to the Court and must uphold the dignity and decorum of the Court in which he is appearing.
Making amputations of partiality and unfairness against the subordinate Civil judge in open Court is scandalizing the Court in such a way as to pollute the very fount of justice ; such conduct is not a matter between an individual member of the Bar and a member of the judicial Service.
With regard to disciplinary action against a member of the Bar, the Supreme Court would be reluctant to interfere with the order of the High Court unless there are clear mitigating circumstances.
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458.txt
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ivil Appeal No. 871 of 1962.
Appeal by special leave from the judgment and decree dated August 13, 1959, of the Madhya Pradesh High Court in Second Appeal No. 294 of 1959.
S.P. Sinha and M. 1.
Khowaja, for the appellant.
S.T. Desai and A. G. Ratnaparkhi, for the respondent.
This appeal arises from a suit filed by the appellants who are the representatives of residents of Nayapara Ward in particular and of the Muslim community of Raipur in general, in which they claimed an injunction restraining the respondent, Municipal Committee of Raipur, from committing acts of encroachment on their rights and the rights of 301 the Muslim community in holding Urs and other ceremonies on the plot in suit.
It appears that at Raipur, there is a piece of land called "Fazle Karim 's Bada" Khasra No. 649 measuring 4.62 acres.
Inside this Bada, there are three or four Municipal Schools.
The office of the Electric Power House is also located in one corner of the land.
Behind the School, there is a Pakka platform known as "Syed Baba 's Mazar".
Near the Electric Power House, there is a raised earth platform on which there is a flag.
This flag is called "Madar Sahib 's Jhanda".
Surrounding this land.
there is a brick wall which was made by the respondent several years past.
According to the plaint, Urs function is held every year in front of Syed Baba 's Mazar for the last several years.
On or about the 22nd October, 1956, the employees of the respondent started digging foundation at the places A, B, C and D shown on the map attached to the plaint.
These digging operations were commenced under the directions of the respondent.
because the respondent intended to construct another school building on the plot.
The appellants then served a notice on the respondent to desist from carrying on the digging operations on the ground that the property on which the said operations were being carried out, was a part of the wakf property.
When the respondent did not comply with the requisition contained in the said notice, the present suit was filed by the appellants on October 29, 1956.
This suit has been flied under O.1 r. 8 of the Code of Civil Procedure.
The case of the appellants is that the plot of land in suit was old Kabrasthan known as "Chuchu 's Takia", and is a permanent inalienable wakf property.
On this plot are tombs of renowned saints like Syed Baba.
and Madar Sahib 's Jhanda.
On a part of the plot.
every year Urs and other religious functions are performed.
In fact, the land has been registered under the Madhya Pradesh Public Trusts Act (No. 30 of 1951) (hereinafter called the Act) as trust property; as such, the respondent can claim no right or title to the said land.
That is the basis on which the appellants claimed injunction against the respondent.
The respondent disputed this claim.
It was urged in the written statement filed by the respondent that the land was never and could never be wakf property.
There was no tomb on the land.
There are only two so called tombs.
but they have no significance.
The Urs is of very recent origin and it is allowed to be held with the licence of the respondent.
The plot originally, belonged to private persons and had been acquired by the Government in land acquisition proceedings in 1910 11.
The respondent got the said land from the Government in 1922.
In 1932 33.
the Deputy Commissioner fixed rent of the land which is being paid by the respondent eversince.
On this land, the respondent has constructed some schools, and a part of the land which is lying vacant is allowed to be used by the people of the neighbourhood for traffic.
The respondent thus has full right to 302 construct on its own plot of land.
The representative character of the appellants was disputed by the respondent and their right to file the present suit was challenged.
On these pleadings, several.
issues were framed by the learned trial Judge.
They covered the title of appellants, the title of the respondent, and the right of the appellants to file the suit.
The issue with which we are concerned in the present appeal related to the registration of the plot in the register kept under the relevant provisions of the Act and its effect.
The appellants ' contention was that the said registration was conclusive against the respondent and in favour of the appellants ' claim.
This contention was rejected by the trial Judge, with the result that the appellants ' suit was dismissed.
With the findings recorded by the learned trial Judge on the other issues we are not concerned in the present appeal.
The matter then went in appeal.
and the appellate Court confirmed the conclusions recorded by the trial Court and dismissed the appeal.
The appellants challenged the correctness of the said appellate decree by preferring a second appeal in the High Court of Madhya Pradesh.
but the second appeal also failed.
and that has brought the appellants to this Court by special leave.
Thus. it would be noticed that the appellants have failed on the merits of their claim in all the courts below.
and the technical point raised by them that the registration of the plot under the relevant provisions of the Act concluded the matter.
has also been rejected.
It is this last point which has been urged before us by Mr. Sinha on behalf of the appellants.
Before we deal with this point.
however, it would be relevant to mention how the property came to be entered in the register kept under the relevant provisions of the Act.
The record shows that the Masjid Nayapara.
Raipur had been entered in the register as a public trust on June 25.
1954 in Case No. 23XXXiii/7 of 1952 53.
certain properties were entered in the said register in respect of this trust.
In 1956.
Abdul Karim.
Mutawali Masjid Naypara Raipur applied to the SubDivisional Officer.
Raipur alleging that the property now in suit also belonged to the public trust and should be included amongst its properties.
On this application, public notice was issued calling upon persons interested in the property to show cause why it should not be added to the properties of the wakf.
No objection was.
however.
received and on October 23.
the Sub Divisional Officer reported that the poperty be shown against the trust.
The said report was sanctioned by the Registrar.
Public Trusts on April 22.
That is how the property came to be registered as belonging to the public trust.
and it is on this entry that the whole argument of the appellants is based.
In considering the validity of the contention raised by Mr. Sinha before us.
it is necessary to examine broadly the scheme 303 of the Act and the material provisions on which Mr. Sinha relies.
The Act was passed in 1951 to regulate and to make better provision for the administration of public religious and charitable trusts in the State of Madhya Pradesh.
Section 2(4) of the Act defines a "public trust", and section 2(8) defines a "wakf". 'Working trustee ' is defined by section 2(9).
Section 3(1) provides that the Deputy Commissioner shall be the Registrar of public trusts in respect of every public trust; and section 3(2) imposes on the Registrar the obligation to maintain a register of public trusts, and such other books and registers and in such form as may be prescribed.
Section 4(1) deals with the registration of public trusts and in requires that within three months from the date on which the said section comes into force in any area or from the date on which a public trust is created, whichever is later, the working trustee of every public trust shall apply to the Registrar having jurisdiction for the registration of the public trust.
Section 4(3) lays down the particulars which have to be stated by the application which is required to be made under section 4(1).
All these particulars are in relation to the nature of the trust, its properties, the mode of succession to the office of the trustees, and other allied matters.
Section 4(4) empowers the Registrar to decide the merits of the application, while section 4(5) provides for an appeal against his decision which is required to be filed within 30 days of the order.
Mr. Sinha relies on a specific provision contained in section 4(5) which says that subject to the decision in such appeal.
the order of the Registrar under sub section (4) shall be final.
Section 4(6) requires the signing and verification of the application in the manner laid down in the code of Civil Procedure for signing and verifying plaints.
That takes us to section 5 which deals with the enquiry to be held by the Registrar on the application made before him under section 4(1).
Eight points are set down under section 5(1) which the Registrar has to consider.
Section 5(2) lays down that the Registrar shall give in the prescribed manner public notice of the inquiry proposed to be made under sub section (1) and invite all persons interested in the public trust under inquiry to prefer objections, if any, in respect of such trust.
Under section 6, the Registrar has to make his findings on the point specified by section 5(1); and under section 7, the Registrar causes entries to be made in the Register in accordance with his findings.
Section 7(2) naturally lays down that the entries made under section 7(1) shall be final and conclusive.
Section 8(1) allows a civil suit to be filed against the findings of the Registrar within six months from the date of the publication of the notice under section 7(2); such a suit can be filed by a working trustee or a person having interest in a public trust or any property found to be trust property.
Section 9 permits applications to be made for change in the entries recorded in the register.
It will be recalled that the application which was made in 1956 by Abdul Karim was under the provisions of section 9(1).
If an application is made for change in 304 the entries as, far instance, for adding to the list of properties belonging to the trust, a proceeding has to be taken for making the said change and this is prescribed by section 9(2).
Section 9(3) makes the provisions of section 8 applicable to any finding under section 9 as they would apply to a finding under section 6.
These provisions are contained in Chapter II of the Act.
Chapter III deals with the management of trust property; Ch.
IV with the problem of audit; Ch.
V with control; and Ch.
VI contains miscellaneous provisions, including section 35 which confers the rule making power on the State Government.
That, broadly stated, is the nature of the scheme of the Act and the material provisions which fall to be considered in the present appeal.
Mr. Sinha relies on the fact that under section 4(5) of the Act, the decision of the Registrar is made final, subject to the appellate decision, if any; and he also refers to the right of instituting a suit reserved by section 8.
His argument is that if any person who claims interest in the property which is alleged to be trust property fails to satisfy the Registrar about his claim, he can file a suit under section 8(1).
Section 8(1) allows a suit to be filed, subject to the conditions prescribed by it, and the right to file such a suit is given to a working trustee, or a person having interest in a public trust or any property found to be trust property.
The respondent is interested in the property in suit which is found to be trust property, and since it did not avail itself of the right to file a suit within the specified time, the order passed by the Registrar must be held to be final and conclusive against its claim.
If finality does not attach to such an order even after six months have expired within the meaning of section 8(1), then the provision contained in section 4(5) will serve no purpose whatever.
That is the manner in which Mr. Sinha has presented his case before us.
We are not impressed by this argument.
In testing the validity of this argument, we must bear in mind the important fact that the Act is concerned with the registration of public, religious and charitable trusts in the State of Madhya Pradesh, and the enquiry which its relevant provisions contemplate is an enquiry into the question as to whether the trust in question is public or private.
The enquiry permitted by the said provisions does not take within its sweep questions as to whether the property belongs to a private individual and is not the subject matter of any trust at all.
It cannot be ignored that the Registrar who, no doubt, is given the powers of a civil court under section 28 of the Act, holds a kind of summary enquiry and the points which can fall within his jurisdiction are indicated by clauses (i) to (x) of section 4(3).
Therefore, prima facie.
it appears unreasonable to suggest that contested questions of title, such as those which have arisen in the present case, can be said to fall within the enquiry which the Registrar is authorised to hold under section 5 of the Act.
Besides, it is significant that the only persons who are required to file their objections in response to a notice issued by the 305 Registrar on receiving an application made under section 4(1), are persons interested in the public trust not persons who dispute the existence of the trust or who challenge the allegation that any property belongs to the said trust.
It is only persons interested in the public trust, such as beneficiaries or others who claim a right to manage the trust, who can file objections, and it is objections of this character proceeding from persons belonging to this limited class that fall to be considered by the Registrar.
It cannot be said that the respondent falls within this class; and so, it would be idle to contend that it was the duty of the respondent to have filed objections under section 3(2).
It is true, section 8(1) permits a suit to be filed by a person having interest in the public trust or any preperty found to be trust property.
The interest to which this section refers must be read in the light of section 5(2)to be the interest of a beneficiary or the interest of a person who claims the right to maintain the trust or any other interest of a similar character.
It is not the interest which is adverse to the trust set up by a party who does not claim any relation with the trust at all.
That is why we think the finality on which Mr. Sinha 's argument is based cannot avail him against the respondent inasmuch the respondent was not a party to the proceedings and could not have filed any objections in the said proceedings.
Then again, the right to file a suit to which section 8(1) refers is given to persons who are aggrieved by any finding of the Registrar.
Having regard to the fact that the proceedings before the Registrar are in the nature of proceedings before a civil court, it would be illogical to hold that the respondent who was not a party to the proceedings can be said to be aggrieved by the findings of the Registrar.
The normal judicial concept of a person aggrieved by any order necessarily postulates that the said person must be a party to the proceedings in which the order was passed and by which he feels aggrieved.
It is unnecessary to emphasise that it would be plainly unreasonable to assume that though a person is not a party to the proceedings and cannot participate in them by way of filing objections, he would still be bound to file a suit within the period prescribed by section 8(1) if the property in which he claims an exclusive title is held by the Registrar to belong to a public trust.
Similarly, the right to prefer an appeal against the Registrar 's order prescribed by section 4(5) necessarily implies that the person must be a party to the proceedings before the Registrar; otherwise how would he know about the order? Like section 8(1), section 4(5) also seems to be confined in its operation to persons who are before the Registrar, or who could have appeared before the Registrar under section 5(2).
The whole scheme is clear, the Registrar enquires into the question as to whether a trust is private or public, 306 and deals with the points specifically enumerated by section 4(3).
Therefore, we have no hesitation in holding that the courts below were right in coming to the conclusion that the fact that the property now in suit was added to the list of properties belonging to the wakf, cannot affect the respondent 's title to it.
On the merits, all the courts below have rejected the appellants ' case and have upheld the pleas raised by the respondent in defence.
The result is, the appeal fails and is dismissed with costs.
Appeal dismissed.
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The first appellant, who was the Mutawalli of a public trust, filed a representative suit for an injunction restraining the respondent from committing acts of encroachment on the suit property, on the ground that the property was that of the trust and had been so registered by the Registrar of Public Trusts, under the Madhya Pradesh Public Trusts Act, 1951.
The suit was dismissed by the trial court and also on appeal.
In their appeal to the Supreme Court the appellants contended that, since the respondent did not avail itself of the ,right to file a suit within the specified time, the order passed by the Registrar must be held to be final and conclusive against the respondent.
HELD: The fact that the property in suit was added to the list of the properties belonging to the trust, could not affect the respondent 's title to it.
[306 A B] The enquiry which the Act contemplates is an enquiry into the question as to whether a trust is public or private and does not take within its sweep questions as to whether a property belongs to a private individual and is not the subject matter of any trust at all.
The only persons who are required to file their objections in proceedings before the Registrar are persons interested in the public trust not persons who dispute the existence of the trust or who challenge the allegation that any property belongs to the said trust.
Inasmuch as the respondent was not a party to the proceedings and could not have filed any objections in the proceedings the respondent was not bound to file an appeal under section 4(5) of the Act or a suit under section 8(1), challenging order of the Registrar.
Therefore, the finality given to the finding of the Registrar could not be availed of by the appellant as against the respondent.
[304 G; 305 A B, D E]
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1934.txt
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N: Special Leave Peti tion (Criminal) No. 216/1977.
(From the Judgment and Order dated 28 9 1973 of the Judicial Commissioner, Court, Goa Daman and Diu in Crl.
Appeal No. 17/72).
S.J.S. Fernandez, amicus curiae, for the petitioner.
The Order of the Court was delivered by KRISHNA IYER, J. A death sentence, with all its dreadful scenario swinging desperately out of the last breath of mortal life, is an excrutiating hour for the judges called upon to lend signature to tiffs macabre stroke of the execu tioner 's rope.
Even so, judges must enforce the laws, whatever they be, and decide according to the best of their lights, but the laws, are not always just and the lights are not always luminous.
Nor, again, are judicial methods always adequate to secure justice.
We are bound by the Penal Code and the Criminal Procedure Code, by the, very oath of our office.
Section 354(3) of the new Code gives the convicting judge, on a murder charge, a discretion to choose between capital sentence and life term.
It is true that in the present Code, the unmistakable shift in legislative emphasis is on life imprisonment for murder as the rule and capital sentence an exception, to be resorted to for reasons to be stated (Edige Annamma, , AIR).
Even so, the discretion is limited and courts can never afford to forget Benjamin ' Cardozo 's wise guidance: "The judge, even when he is free, is still not wholly free.
He is not to innovate at pleasure.
He is not a knight errant roam ing at will in pursuit of his own ideal of beauty or of goodness.
He is to draw his inspiration from consecrated principles.
He is not to yield to spasmodic sentiment, to vague and unregulated benevolence.
He is to exercise a discretion informed by tradition, methodized by analogy, disciplined by sys tem, and subordinated to the primordial necessity of order in the social life.
Wide enough in all conscience is the field of dis cretion that remains." (Cardoze: The Nature of the Judicial Proc ess: Wale University Press ( 1921 ) ).
We have heard counsel on the merits and.perused the paper book with some care and see no ground to disturb the conviction.
The question of 'sentence ' projects sharply before us and what we.
have stated above turns our focus on cicumstances justifying the graver sentence.
The learned Sessions Judge has given valid reasons as to why he is imposing the death sentence.
The guidelines laid down by this Court, in its precedents which bind us, tell us that if the offence has been perpetrated with attendant aggravating circumstances, if the perpetrator discloses an extremely depraved state of mind and diabolical trickery in committing the homicide, accompanied by brutal dealing with the cadaver, the court can hardly help in the present state of the law, avoiding infliction of the death penalty.
When discretion has been exercised by the trial Court and it is difficult to fault that 773 court on any ground, statutory or precedential, an appellate review and even referral action become too narrow to demol ish the discretionary exercise of power by the inferior court.
So viewed, it is clear that the learned Judicial Commissioner has acted rightly in affirming the death sentence.
We are unable to, grant leave on, this score either.
Counsel for the petitioner has urged that the affirma tion by the Judicial Commissioner 's court of Goa, Diu and Daman, of the Death sentence is illegal.
According to.
him section 377 of the old code (which govern the instant case), is a missile which will bit down the confirmation by the Judicial Commissioner.
The said section reads: "377.
In every case so submitted the confirmation of the sentence, or any new sentence or order passed by the High Court, shall, when such Court consists of two or more Judges, be made, passed and signed by at least two of them." This section means, as we understand it, that when the High Court concerned consists of two or more judges, the confirmation or other sentence shall be signed by at least two of them.
This provision obviously applies only to situations where the court, at the time of the confirmation of the death sentence.
, consists of two or more judges.
It is true that section 4 (1) (i) in relation to a Union Territory brings within the definition of the 'High Court ' the highest court of criminal appeal for that area viz. the Judicial Commissioner 's court.
It therefore follows that if, at the time the case for confirmation of the death sentence is being heard, the Judicial Commission er 's court consists of more than one judge, at least two judges must attest the confirmation.
In the present case it is common ground that when the case was heard and judg ment pronounced there was.
only one Judicial Commissioner, although the sanctioned strength was two.
So long as one Judicial Commissioner alone functioned in the court, section 377 was not attracted.
The necessary inference is that in the present case there is nothing illegal in a Single (i.e. the only) Judicial Commissioner deciding the refer ence.
We are aware that the insistence of the Code on two judges hearing the matter of such gravity as a death sentence involves is because of the law 's grave concern that human life shall not be judicially deprived unless at least two minds at almost the highest level are.
applied.
Even so, exceptional situations may arise where two judges are not available in a High Court and, in that narrow contingency, the Code permits what has now happened.
We cannot fault the judgment on this ground either.
Counsel for the petitioner contends that the Criminal Procedure Code is a general statute but the Goa, Daman and Diu (Judicial Commissioners Court) Regulation, 1963 is a special law which prevails against the general.
On that footing he argues that under Regulation, 8 (1) the Court of the Judicial Commissioner shall have only such jurisdiction as is exercisable in respect of Goa, Daman and Diu by the Tribunal de Relacao.
According to him, the said Tribunal did not have the powers of confirmation of death sentence, and, 774 therefore, the judicial Commissioner cannot exercise such power.
He also argues that under the said provision the Judicial Commissioner ' is the highest Court of Appeal and Revision but not of Reference and for that reason cannot exercise the powers under section 377 of the old Crimi nal Procedure Code.
We see no force in these twin submis sions.
A Code is complete and that marks the distinction between a Code and an ordinary enactment.
The Criminal Procedure Code, by that canon, is serf contained and com plete.
It defines a High Court which takes in a Judicial Commissioner 's Court.
(Section 4(1)(i).
We need not and indeed may not travel beyond the Code into the territory of the Regulation.
Even otherwise, there is nothing in Regulation 8 ( 1 ) which helps the petitioner.
It pro vides that the Judicial Commissioner shall be the highest criminal 'Court, Appeal and Revision ' used in that provision are words of the widest import and cover all proceedings which are not original proceedings but are by way of judicial review for a higher level.
Referral jurisdiction, under section 377, is skin to appeal and revision and we think that Regulation 8(1) does not disentitle the Judicial Commissioner from exercising power under section 377 of the Code: nor are we inclined to accept the submission that on the speculative assumption that the Tribunal de Relacao did not have the power to confirm death sentences, and, there fore, the Judicial Commissioner, acting as the High Court under the Code, cannot enjoy such power.
Regulation 8(1) does not limit the jurisdiction of the.
Judicial Commission er in the sense counsel wants us to accept.
We therefore hold that the Judicial Commissioner 's confirmation of the death sentence is not without jurisdiction.
Undeterred by the fact that the murder is gruesome counsel has pleaded that at least on the question of sen tence leave should be granted because his client is a young man and the sentence of death has been haunting him agonis ingly for around six years.
May be that such a long spell of torment may be one circumstance in giving the lesser sen tence.
Even s0, we have to be guided by the rulings of this Court which have not gone to the extent of holding that based on this circumstance alone, without other supplement ing factors or in the face of surrounding beastly circum stances of the crime, judicial clemency can attenuate the sentence.
Possibly, Presidential power is wider but judicial power is embanked.
We refuse special leave and dismiss the petition.
Petition dismissed.
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The petitioner was convicted for the offence of murder under section 302, I.P.C. and sentenced to death by the Trial Court.
The Judicial Commissioner, Goa confirmed the death sentence in the referred trial under section 374 of the 1898 Code of Criminal Procedure.
Dismissing the special leave petition to appeal, the Court.
HELD: (1) Discretion to choose between the capital sentence and life term under section 354(3) of the 1973 Code of Criminal Procedure is limited.
If the offence has been perpetrated with attendant aggravating circumstances, if the perpetrator discloses an extremely depraved state of mind and diaboli cal trickery in committing the homicide, accompanied by brutal dealing with the cadaver, infliction of death penalty cannot be avoided.
Special leave under article 136.
of the Constitution cannot be granted when it is difficult to fault the court on any ground, statutory or precedential.
[772 G H, 773 A] Ediga Annamma; , , referred to.
(2) Section 377 of 1898 Code of Criminal Procedure applies only to situations where the court at the time of the con firmation of the death sentence consists of two or more Judges.
Section 4(1)(i) of the Code of Criminal proce dure, in relation to a Union Territory, brings within the definition of "High Court", the highest court of criminal appeal for that area, namely, the Judicial Commissioner 's Court.
If, at the time the case for confirmation of death sentence is being heard, the Judicial Commissioner 's Court consists of more than one Judge, at least two Judges must attest the confirmation.
So long as one Judicial Commis sioner alone functions in the Court, section 377 was not attracted.
In the present case there is nothing illegal in a single (i.e.the only) Judicial Commissioner deciding the reference.
[773 D F] (3) Referral jurisdiction under section 377 is akin to appeal and revision.
Regulation 8(1) of the Goa, Daman and Diu (Judicial Commissioner 's Court) Regulation 1963 does not disentitle the Judicial Commissioner from exercising power section 377, Cr.
In the instant case, the Judicial Commis sioner 's confirmation of death sentence is not without jurisdiction.
[774 C D] (4) Judicial clemency cannot attenuate the sentence of death on the sole circumstance that the accused was a young man and the sentence of death been haunting him for long without other supplement factors or in the face of surround ing beastly circumstances of the crime.
Possibly, Presiden tial power wider but judicial power is embanked.
[774 E F] 10 707SCI/77 772
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3813.txt
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vil Appeal Nos.
23 19 2320 of 1981.
From the Judgment and Order dated 14.3.1980 of the Madras High Court in Writ Petition Nos. 4959 and 4960 of 1975.
236 Soli J, Sorabjee, Harish N. Salve, section Ganesh, Mahapa tra, P.S. Shroff and Mrs. P.S. Shroff for the Appellant.
N.A. Palkhiwala, Gauri Shanker, S.C. Manchanda, J.B. Dadachanji, Mrs. A.K. Verma, D.N. Mishra, M.S. Harau, Ram Chandran, Mrs. J. Ramachandran Ms. A. Subhashini and C.V. Subba Rao for the Respondents.
The Judgment of the Court was delivered by PATHAK, CJ.
These appeals by special leave are directed against the judgment and order of the High Court of Madras dismissing the writ petitions filed by the appellant against the refusal of the first respondent to rectify an assess ment order and pass consequential directions.
Shri Anantharamakrishnan, a reputed industrialist in Tamil Nadu, died in the state in Madras on 18 April, 1964.
He left behind his widow, Valli, his two sons, Sivasailam and Krish namoorthy and two daughters, Kalyani and Seetha.
Some time after his death, Sivasailam, as an accountable person ren dered the estate duty account.
All the heirs, other than Sri Sivasailam, who were also accountable persons wrote to the Assistant Controller of Estate Duty on 15 December, 1964 that as accountable persons they agreed to abide by the accounts , rendered by Sri Sivasailam and any explanation furnished by him with regard to the Estate Duty case would be binding on them.
Messrs. Amalgamations Private Ltd. (shortly referred to as 'Amalgamations ') is a company which holds shares in most of the companies including Simpson and Company Ltd. (shortly referred to as 'Simpson ') of the group.
By letter dated 27 April, 1965 Amalgamations informed the assessing authority that the deceased had transferred property in the form of shares in Simpson to it and that the deceased had controlling interest in that company at the time of his death.
On 13 September, 1965 the assessing authority wrote to Amalgamations that the deceased had transferred 80,377 shares of Simpson, and therefore Amalga mations was a controlled company within the meaning of section 17 of the Estate Duty Act.
By virtue of section 19(1) of the Estate Duty Act the controlled company had to be regarded as one of the persons accountable for the estate of the deceased.
Amalgamations was required to submit an account of the estate.
Amalgamations filed a return before the Assistant Controller.
No objection was raised by the heirs of the deceased or by Amalgama 237 tions to the latter being treated as an accountable person.
After due enquiry the assessment of Estate Duty was completed on 27 January, 1970 and the duty payable by the estate was determined at Rs. 1,67,74,697.58, of which provi sional duty had been paid in the amount of Rs.65,50,452.73 leaving a balance of Rs.1,02,24,244.85.
The assessment order was addressed to Amalgamations as well as Sri Sivasailam as accountable persons.
The Assistant Controller of Estate Duty proceeded on the basis that Amalgamations was a "controlled company" and the deceased had control over its affairs, and therefore valuation of the shares held by the deceased in the company had to be made in the manner laid down in Rule 15 framed by the Board under section 30(1)(e) of the Estate Duty Act.
The principal value of the assets was determined at Rs.2,12,29,998 and the duty was computed at Rs. 1,67,74,697.58.
There was no appeal against the assessment by any of the accountable persons.
Kalyani Sundaram, one of the daughters of the deceased and the appellant before us, became entitled to the death of Anantharamakrishnan to a fifth share in his estate under the Hindu Succession Act.
Her husband, K.S. Sundaram, as her agent constituted by power of attorney, wrote on 11 June, 1974 to the Assistant Controller seeking certain clarifica tions regarding the assessment.
The Assistant Controller replied on 25 June, 1974 referring to the specific agreement of the accountable persons to abide by the accounts rendered by Sri Sivasailam and to be bound by any explanation given by him.
The Assistant Controller referred to the fact that all subsequent proceedings had been completed after discus sion with Sri Sivasailam and Amalgamations and as the as sessment had now become final it was not possible to enter into any discussion concerning it.
On 2 January, 1975 the appellant 's husband as agent filed an application under section 61 of the Estate Duty Act contending that the assessment order was vitiated by several errors inasmuch as Rule 15 prescribed only the method of valuation of the shares and debentures of the controlled company and the Rule was an appendage to sections 36 & 37 of the Act, that unless property was transferred without considera tion by the deceased to Amalgamations and some benefit accrued to the deceased from the company section 17(1) of the Act would not be attracted, that the decision to treat Amalgama tions as an accountable person because of the transfer of shares rested on the transfer of shares made by the de ceased, that on a number of aspects of the case the assess ment order did not show any detail, and therefore a rectifi cation 238 order should be made indicating the exact amount included under section 17(1) of the Act as the property passing on the death of the deceased.
He required this information, he said, to enable him to work out the amount which his princi pal had to pay to Amalgamations by way of reimbursement of the duty.
If the apportionment of the duty had been effected by the order itself, he said, the need for rectification would not have arisen.
Section 61 empowers the Controller "to rectify any mistake apparent from the record" at any time within five years from the date of the order passed by him.
On 25 Janu ary, 1975 the Assistant Controller passed an Order declaring that he was unable to discover any mistake which called for rectification in the assessment order and therefore he declined to act under section 61 of the Act.
This order was challenged by the writ petitions out of which the present appeals arise.
The High Court dismissed the writ petitions.
Sethuraman, J. held that there was no apparent error, and therefore no reason for invoking section 61 of the Act and Balasubramanyan, J. in a concurring judgment, held likewise and also dealt with other aspects of the case.
BOth learned Judges were of the view that the proceeding reflected a private dispute between the appellant and other members of the family, and that the forum and remedy selected by the appellant were not appro priate for that purpose.
The fundamental question in these appeals is whether the appellant is right in invoking section 61 of the Act.
Learned counsel for the appellant contends that the heirs of the deceased on whom the estate devolves are liable to pay estate duty attributable to the property which falls to their respective shares and that if an accountable person pays any part of the estate duty in respect of any property not passing to him he is entitled to reimbursement by the person entitled to such property.
This, says learned coun sel, has no application in respect of the duty payable by virtue of section 17 of the Act, which provides that the slice of the assets of a controlled company shall be deemed to pass on the death of the deceased for the purposes of estate duty and the slice will be included in the property passing on his death if the deceased made a transfer of that property to the controlled company and benefit accrued to the de ceased in the three years ending his death.
The slice of the assets of the controlled company does not come to any heir; therefore no heir is called upon to pay the amount of estate duty attributable to the inclusion of that slice 239 in the chargeable estate.
By section 19 the controlled company itself is liable to pay the corresponding amount of estate duty.
In the present case, however, learned counsel urges, no slice of the assets of Amalgamations has been included in the estate of the deceased by the assessing authority as property deemed to pass on the death of the deceased and therefore the demand issued to the controlled company con stitutes a mistake apparent from the record.
The application of Rule 15 is also contested and this, according to learned counsel, is a clear mistake committed by the Controller.
It is urged that there is a mistake apparent from the record in the directions requiring Amalgamations to pay the entire amount of estate duty.
It seems to us that all the heirs other than Sivasailam had agreed that as accountable persons they would abide by the accounts rendered by Sivasailam, and any information furnished by him with regard to the estate duty matter would be binding on them.
The appellant cannot be heard now to dispute the quantum of liability and the basis on which the liability was computed.
Nor is it open to her to contend that it is not Amalgamations which is liable to pay the duty, but the duty is payable by the heirs of the deceased.
The assessment has become final and no appeal against it has been attempted.
It was for the benefit of the heirs that there was general agreement to have the assessment made on Amalgamations and indeed when the assessment was completed and finalised, no objection was taken.
The appellant acqui esced wholly and completely in the assessment to estate duty being made on Amalgamations.
No separate assessment was made on the appellant nor on the other heirs.
The assessment was completed in 1970 and the entire estate duty has now been paid up.
It was only after the entire estate duty was paid that the appellant filed the application for rectification on 2 January, 1975.
It was contended by learned counsel for the private respondents that the appellant enjoyed no locus standi in order to maintain the application under section 61 and these appeals thereafter, but we do not propose to enter into this question.
Further, it appears that this litigation is woven around a private dispute among the family members.
That is hardly any justification for invoking section 61 of the Act.
We have carefully perused the reasons given individually by the two learned Judges of the High Court and we are in complete agreement with them that there is no mistake appar ent on the record.
240 In support of the contention that there was a mistake apparent on the record, learned counsel has referred us to Hari Vishnu Kamath vs Syed Ahmed Ishaque and Others, ; , 1123; Hind Trading Company vs Union of India & Anr., ; ; M.K. Venkatachalam, Income Tax Officer and Another vs Bombay Dyeing and Manufacturing Co. Ltd.; , , 149 50 and Commissioner of Income Tax, Madras vs Mr. P. Firm, Muar, 15,822 but having regard to the facts of the case before us we do not find anything in those cases which can be of assistance to the appellant.
Learned counsel for the appellant states that having regard to the terms of the order granting special leave to appeal the appellant is justified in requesting the court to consider the issues on the merits.
We are unable to spell out such intent of the Court from the terms of the order granting special leave to appeal.
We do not think that the observations of the Court in Thungabhadra Industries Ltd. vs The Government of Andhra Pradesh; , , 180 affect the position before us.
The real question is whether the assessment was justi fied on Amalgamations or should it have been taken against the heirs of the deceased.
In our opinion, that question stands concluded now and upon all the facts and circum stances of the case we do not think it permissible for the appellant to have recourse to section 61 of the Act in order to re open the case.
The appeals are dismissed, there is no order as to costs.
Y.L. Appeals dis missed.
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Shri Anantharamakrishnan, a reputed industrialist died in Madras on April 18, 1964 intestate leaving behind his widow, Valli, two sons, Sivasailam and Krishnamoorthy and two daughters, Kalyani and Seetha.
Some time thereafter, his son Sivasailam, being an accountable person rendered the Estate Duty account.
All other heirs i.e. his mother, broth er and sisters, who were also accountable persons, being the heirs of the deceased wrote to the Assistant Controller of Estate Duty that as accountable persons they agreed to abide by the accounts rendered by Sivasailam and whatever explana tion is furnished by him would be binding on them.
M/s. Amalgamations Private Ltd. is a company which held shares in most of the companies including Simpson and Compa ny Ltd. in which company the deceased Anantharamakrishnan too held shares.
By a letter of April 27, 1965, Amalgama tions informed the assessing authority that the deceased had transferred property to it in the form of shares and that at the time of his death, he had controlling interest in the Company.
On September 13, 1965, the Assessing Authority wrote to Amalgamations that the deceased having transferred 80,377 shares of Simpson, as such Amalgamations was a con trolled company within the meaning of section 17 of the Estate Duty Act and thus the said company had to be regarded as one of the accountable persons in respect of the estate of the deceased.
Amalgamations was therefore required to submit an account of the estate.
Accordingly Amalgamations flied a return and no objection thereto was taken by any of the heirs.
Treating Amalgamations as a controlled company and in view of the fact that the deceased had control over its affairs, the assessing authority valued the shares as per the provisions of Rule 15 of the Rule framed by 234 the Board under Section 30(1)(e) of the Act.
The principal value of the shares was determined of Rs.2,12,29,998 and the duty was computed at Rs.1,67,74,697.58, out of which provi sional duty in the sum of Rs.65,50,542.73 had been paid.
The assessment order was addressed both to Amalgamations as also to Shri Sivasailam as accountable persons.
No appeal was preferred against the said assessment by the accountable persons.
K.S. Sundaram husband of the appellant as her agent and constituted power of attorney, on June 11, 1974 wrote to the Assistant Controller seeking certain clarifications.
The Assistant Controller referring to the agreement between the heirs of the deceased Anantharamakrishnan that they were bound by the accounts rendered or explanation given by Sivasailam, replied that, since all subsequent proceedings had been completed after discussion with Sivasailam and Amalgamations, the assessment had become final and that it was not possible to enter into any further discussion.
On 2nd January, 1975, appellant 's husband as agent filed an application under Sec.
61 of the Estate Duty Act, and it was contended by him that the assessment order was vitiated by several errors inasmuch as Rule 15 only prescribed the method of valuation of shares and debentures of the con trolled company and the rule was appendage to Sections 36 & 37 of the Act.
It was urged that the assessment order did not show any details and therefore a rectification order should be made indicating the exact amount included under Section 17(1) of the Act as the property passing on the death of the deceased.
He stated that he required this information to know the precise amount which his principal had to pay to Amalgamations, as the assessment order did not, in terms, indicate apportionment of the duty, for which reason rectification was required.
On January 25, 1975, the Assistant Controller declared by an order that he was unable to find any mistake in the assessment order which called for any rectification and therefore he declined to act under Sec.
61 of the Act.
Order passed by the Assistant Controller was challenged in the High Court by means of Writ Petitions.
The High Court dismissed the Writ Petitions holding that there was no error apparent on the record and therefore there was no reason for invoking Sec.
61 of the Act.
The High Court took the view that proceedings reflected a private dispute between the appellant and other members of the family.
Hence this appeal by the appellant.
235 Dismissing the appeal the Court, HELD: All the heirs other than Sivasailam had agreed that as accountable persons they would abide by the accounts rendered by Sivasailam and any information furnished by him with regard to the estate duty matter would be binding on them.
The appellant cannot be heard now to dispute the quantum of liability and the basis on which the liability was computed.
Nor is it open to her to contend that it is not Amalgamations which is liable to pay the duty, but the duty is payable by the heirs of the deceased.
The assessment had become final and no appeal against it had been attempt ed.
[239C D] The appellant acquiesced wholly and completely in the assessment to estate duty being made on Amalgamations.
[239E] The assessment was completed in 1970 and the entire estate duty has now been paid up.
It was only after the entire estate duty was paid that the appellant filed the application for rectification on January 2, 1975.
[239E F] The question whether the assessment was justified on Amalgamations or should it have been taken against the heirs of the deceased stands concluded now and upon all the facts and circumstances of the case it was not permissible for the appellant to have recourse to Sec.
61 of the Act in order to re open the case, as there was no mistake apparent on the record.
[240D E] That this litigation was woven around a private dispute among the family members.
[239G] Hari Vishnu Kamath vs Syed Ahmed Ishaque and Others, ; , 1123; Hind Trading Company vs Union of India & Anr., ; ; M.K. Venkatachalam, Income tax Officer and Another vs Bombay Dyeing and Manufacturing Co. Ltd., ; , 149 50; Commissioner of Income tax, Madras vs Mr. P. Firm Muar, ; ,822 and Thungabhadra Industries Ltd. vs The Government of Andhra Pradesh, ; , 180, referred to.
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6089.txt
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Appeal No. 76 of 1959.
Appeal from the judgment and decree dated November 16, 1951, of the Madras High Court in Second Appeal No. 1656 of 1947.
T. V. R. Tatachari, for the appellants.
K. N. Rajagopal Sastri and T. Satyanarayana, for the respondent No. 1., 1961.
September 22.
The Judgment of the Court was delivered by GAJENDRAGADKAR, J.
This is an appeal by a certificate granted by the High Court of Madras against its judgment and decree in Second Appeal 741 Suit No. 27 of 1939 filed by respondent 1 Gollapalli Ramalingamurthi against respondent 2 Immani Venkanna and his four sons appellants 1 to 4.
The appellants and respondent 2 are members of an undivided Hindu family.
The case for respondent 1 was that he had purchased the properties described ' in the Schedule attached to his plaint on April 1, 1936 in a sale held by the Official Receiver in the insolvency of respondent 2.
A registered sale deed was accordingly issued in favour of respondent 1 (exhibit P. 4) on September 21, 1936.
In pursuance of the said sale respondent 1 obtained possession and enjoyment of such properties after partitioning them with Rayudu, the brother of respondent 2.
In October, 1938, however, the appellants and respondent 2 trespassed on the said properties and so respondent 1 had to file the present suit claiming a declaration of his title in regard to the said properties, and asking for their possession and for past and future mesne profits.
That in brief is the nature of the suit from which the present appeal arises.
The claim thus made by respondents 1 was resisted by respondent 2 and the appellants on several grounds.
It was urged by respondent 2 that the transfer in favour of respondent 1 was benami and that respondent 1 was not the real owner of the properties.
In support of this case respondent 2 gave, what according to him, was the antecedent history of the sale in favour of respondent 1.
He alleged that he had sustained heavy losses in business conducted by him with the result that he was indebted to the extent of Rs. 25,000.
Apprehending that the suit properties would be lost to the family at the instance of his creditors he and his junior mother in law Kanthamani Seshamma approached respondent 1 's father in law Suryaprakasa Sastrulu for advice and on his advice respondent 2 executed a collusive and nominal mortgage deed for Rs. 1,000 (exhibit P. 9) in favour of respondent 1 on June 16, 1933.
Similarly, on the same advice a similar nominal transfer deed was executed in favour of respondent 1 on August 6, 1939, (exhibit P. 12) after the properties covered by the said document had been released from an earlier non possessory mortgage (exhibit P. II) which had been executed on July 21, 1930.
Thus, according to respondent 2 the documents executed in favour of respondent 1 were nominal and collusive and were not supported by any consideration.
Respondent 2 further alleged that the execution of the said collusive documents between him and respondent 1 came to the knowledge of some of his creditors and that led to an insolvency petition against respondent 2 by one of his creditors in 1.P. No. 91 of 1933.
This petition was filed in the Court of the Subordinate Judge at Ellore on September 15, 1933, against respondent 2.
In these insolvency proceedings respondent 2 was adjudicated insolvent and the Official Receiver, appointed to take charge of respondent 2 's properties, brought the said properties to sale subject to the aforesaid nominal mortgages in favour of respondent 1.
Kanthamani Seshamma purchased the said properties with her own money but benami in the name of respondent 1 on condition that respondent 1 would reconvey the said properties to the family of respondent 2 whenever called upon to do so.
The allegation of respondent 1 that he had obtained possession of the properties was denied, and it was urged that respondent 1 had no title to the properties and was entitled to no relief in the suit filed by him.
That is the substance of the pleas raised by respondent 2 and the appellants joined respondent 2 in making the same pleas by their separate written statement.
At the trial three issues were tried as preliminary issues; they were issues 5, 8 and 9.
Issues 8, and 9 were in regard to the court fees payable on the claim made in the plaint and regarding the pecuniary jurisdiction of the Court.
The Court found that it had jurisdiction to try the suit and it valued the subject matter of the suit at Rs. 2,411 7 2 on which additional court fees was paid by respondent 1.
Issue 5 was as to whether the sale in favour of respondent 1 bound the shares of the appellants in the family properties.
The learned trial judge answered this issue in favour of the appellants purporting to follow the Full Bench decision of the Madras High Court in Ramasastrulu vs Balakrishna Rao (1).
According to the said decision the right of respondent 2 as the father of the appellants and manager of the undivided Hindu family to sell the shares of his sons for purposes binding on the family did not vest in the Official Receiver on his insolvency, and so the sale effected by the Official Receiver in favour of respondent 1 did not, and could not, in law bind the shares of the appellants in the properties conveyed.
After these findings were recorded respondent 1 applied for the amendment of his plaint and the said amendment was allowed.
By this amendment respondent 1 alleged that the suit properties were the self acquired properties of respondent 2 and so the appellants had no interest therein.
On this alternative plea it was urged by respondent 1 that the properties sold by the Official Receiver to respondent 1 conveyed the entire properties which belonged to respondent 2 alone.
In addition to this alternative claim made by an amendment respondent 1 also made an alternative prayer that he should be either given possession of the whole of the properties or 1/5th of the properties according as the properties are found to be separate properties of respondent 2 or are held to be properties of the undivided family consisting of respondent 2 and the appellants.
These alternative grounds taken by respondent 1 by virtue of the amendment were traversed by respondent 2 and the appellants in their additional written statements.(1) I.L.R. 744
When the suit went to trial on the amended pleadings several issues were framed by the learned trial judge.
In addition to the issues arising on the pleadings the learned trial judge framed suo motu one more issue 1(a), whether respondent 1 was the benamidar of the appellants, and if yes whether the appellants could be allowed to plead the same as a defence in the suit.
The learned trial judge found that the suit properties were the joint family properties of respondent 2 and the appellants.
Alternatively he held that even if they were originally the self acquired properties of respondent 2 they had been blended with the family properties and thus became the properties of the undivided family.
He found that the shares of the appellants in the said properties did not vest in the Official Receiver and so were not conveyed to respondent 1.
He came to the conclusion that the purchase by respondent 1 from the Official Receiver was only a benami transaction for the benefit of the appellants and that respondent 1 had not obtained possession of the properties at any time.
According to the learned trial judge the sale in favour of respondent 1 was fraudulent and was brought into existence to defraud the creditors of respondent 2; and this fraud had been carried out and the creditors of respondent 2 had been defrauded.
Since the fraud had been carried out, the learned judge held respondent 2 and the appellants could not be allowed to plead the same as a defence in the suit.
As a result of this finding the learned judge passed a preliminary decree in favour of respondent 1 for 1/5th share in items 1 to 4 and 8 to 10 of the properties described in the Schedule attached to the plaint.
In regard to items 5 to 7 on which the dwelling house of the family was constructed the learned judge held that respondent 1 was entitled to monetary compensation.
Consistently with the preliminary decree thus passed as to the share of respondent 1 the learned judge 745 also directed that future mesne profits should be determined under O. 20, r. 12(c) of the Code of Civil Procedure.
Against this decree respondent 1 preferred an appeal, No. 288 of 1943, in the Court of the Subordinate Judge,, West Godavari at Ellore.
In this appeal he claimed that a decree should be passed in his favour in respect of the whole of the properties sold to him by the Official Receiver.
The appellants filed cross objections and urged that the learned trial judge was in the error in framing issue 1 (a) suo motu and challenged his conclusion on it.
The appellate Court agreed with the conclusions of the trial judge and so dismissed both the appeal and the cross objections.
Against this appellate decree respondent I filed a Second Appeal, No. 1656 of 1947, and the appellants filed cross objections.
This appeal came on for hearing before Mr. Justice Raghava Rao and it was urged before him that since the Provincial Insolvency (Amendment) Act No. 25 of 1948 which introduced section 28A had come into operation in the meanwhile retrospectively the decision of the Courts below that the Official Receiver could not in law have sold the appellant 's shares in the family properties could not longer be sustained.
This contention was raised by respondent 1.
It was met by the appellants by their counter contention that issue 1(a) had been sprung upon them as a surprise; it had been framed by the trial court after it had heard arguments on both sides and that the appellants had no opportunity to show that in fact the fraud contemplated by the parties had not been effectively carried out.
They alleged that if the fraud had not been carried out the principle of estoppel invoked against them could not come into play.
This contention raised by the appellants was accepted by the High.
Court which called for a finding by the trial co art on issue 1(a), after giving both the parties an opportunity to adduce evidence on the 746 question about the completion or otherwise of the fraud connected with the benami purchase.
After remand the trial court took evidence and made a finding that respondent 2 bad successfully played fraud on his creditors by getting the properties purchased by respondent 1 benami for his sons at the sale held by the Official Receiver.
In due course this finding was submitted by the trial court to the High Court.
Thereupon the appellants filed objections to the said finding.
After this finding was received the second appeal was again placed for bearing by Mr. Justice Ragghava Rao.
At the second hearing the appellants raised the point the amending Act by which section 28A was inserted in the Provincial Insolvency Act was ultra vires.
The learned judge overruled the objections made by the appellants against the finding submitted by the trail court on the issue remanded to it and accepted that finding; but in view of the fact that the vires of the amending Act was challenged he thought it exp edient that the second appeal should be heared by a Bench of two judges.
That is how the second appeal came before a division Bench of the Madras High Court for final disposal.
In its final judgment the High Court has observed that the argument that Act 25 of 1948 was ultra vires was not pressed before the High Court, that certain other grounds were sought to be raised by the appellants but they were not allowed to be raised; so that in the result the main argument urged before the High Court was whether having regard to the fact that the fraud contemplated by respondent 2 and respondent 1 had been effectively carried out it was open to the appellants to plead that fraud against respondent 1 in respect of his claim for possession of the suit properties in the present suit.
The High Court considered the conflicting decisions on this point and adhered to the view which has prevailed in the said High Court 747 since the decision in Vodiana Kamayya vs Gudisa. Mamayya (1) and held that the appellants and respondent 2 were estopped from setting up the fraud against respondent 1 in his present suit.
In the result respondent 1 's claim in respect of the whole of the properties conveyed to him by the Official Receiver has been decreed.
It is against this decree that the appellants have come to this Court with a certificate granted by the High Court and the principal point which has been argued before us on their behalf by Mr. Tatachari is that the High Court was in error in coming to the conclusion that in a case where both the transferor and the transferee ' were equal in fraud and where the fraud contemplated has been carried out it is not, open to the appellants to plead that fraud in defence against the claim made by respondent 1 to obtain possession of the properties conveyed to him benami by the Official Receive Mr. Tatachari contends that where the parties are equally guilty estoppel cannot be pleaded against the appellants and the estate must be allowed to remain where it rests.
The point thus raised lies within a narrow compass and the material facts which give rise to it are no longer in dispute.
The transaction in favour of respondent 1 is the result of a fraudulent plan to which both he and respondent 2 agreed.
In was effected with the mutual consent of the vendore and the vendee to defraud the creditors of the vendor.
That being so the transfer is not supported by any consideration and the transferee agreed to act as the benamindar until the transferor required him to reconvey the properties to his sons.
The object intended to be achieved and the fraud initially contemplated by both the parties have been achieved and the creditors of respondent 2 have been defrauded.
Possession of the properties, however, remained with respondent 2 and his sons the appellants; and in the present 748 section respondent 1 seeks to obtain possession of the properties on the ground that a deed of conveyance has been passed in his favour by the Official Receiver.
Thus both the parties are confederates in the fraud and are equally guilty.
Respondent 2 and the appellants seek to resist respondent 1 's claim to recover possession of the properties conveyed to claim on the ground that the conveyance is void having been effected for a fraudulent purpose which has been carried out.
They urge that it has not been supported by any consideration and no title has passed in favour of the transferee.
Respondent 1 sheets this challenge to his title by pleading that respondent 2 who participated in the fraud cannot be allowed to plead his own fraud in support of his refusal to part with the possession of the properties, and he urges that there is a conveyance duly executed in his favour on which the Court must act without permitting respondent 2 to challenge its validity.
The High Court his upheld the plea of respondent 1 and has not allowed either respondent for the appellants to plead the fraud in support of their defence.
Is this decision right? That is the question which falls to be decided in the present appeal.
Reported decisions bearing on this question show that consideration of this problem often gives rise to what may be described as a battle of legal maxims.
The appellants emphasised that the doctrine which is preeminently applicable to the present case is ex dolo malo non oritur action or ex turpi causa non oritur actio.
In other words, they contended that the right of action cannot arise out of fraud or out of transgression of law; and according to them it is necessary in such a case that possession should rest where it lies in pari delicto potior est conditio possidenties; where each party is equally in fraud the law favors him who is actually in possession, or where both parties are equally guilty the estate will lie where it falls.
On the other hand, respondent 1 argues that the proper maxim to apply is nemo allegans suam turpitudinum audiendumest, 749 whoever has first to plead turpitudinum should fail; that party fails who first has to allege fraud in which he participated.
In other words, the principle invoked by respondent 1 is that a man cannot plead his own fraud.
In deciding the question as to which maxim should govern the present case it is necessary to recall what Lord Wright, M. ' R. observed about these maxims in Berg vs Sadler and Moore (1).
Referring to the maxim ex turpi causa non oritur actio Lord Wright observed that "this maxim, though veiled in the dignity of learned language, is a statement of a principle of great importance; but like most maxims it is much too vague and much too general to admit of application without a careful consideration of the circumstances and of the various definite rules which have been laid down by the authorities".
Therefore, in deciding the question raised in the present appeal it would be necessary for us to consider carefully the true scope and effect of the maxims pressed into service by the rival parties and to enquire which of the maxims would be relevant and applicable in the circumstances of the case.
It is common ground that the approach of the Court in determining the present dispute must be conditioned solely by considerations of public policy.
Which principle would be more conducive to, and more consistent with, public interest, that is the crux of the matter.
To put it differently having regard to the fact that both the parties before the Court are confederates in the fraud, which approach would be less injurious to public interest.
Whichever approach is adopted one party would succeed and the other would fail, and so it is necessary to enquire as to which party 's success would be less injurious to public interest.
Out of the two confederates in fraud respondent 1 wants a decree to be passed in his favour and that means he wants the active assistance of the Court in reaching the properties possession of (1) , 162. 750 which has been withheld from him by respondent 2 and ' the appellants.
if the defense raised by the appellants is shut out respondent 1 would be entitled to a decree because there is an ostensible deed of conveyance which purports to convey title to him in respect of the properties in question; but, in the circumstances ', passing a decree in favour of respondent 1 would be actively assisting respon dent 1 to give effect to the fraud to which he was a party and in that sense the Court would be allowed to be used as an instrument of fraud and that is clearly and patently inconsistent with public interest.
On the other hand, if the Court decides to allow the plea of ' fraud to be raised the Court would be in a position to hold an enquiry on the point and determine whether it is a case of mutual fraud and whether the fraud intended by both the parties has been effectively carried out.
If it is found that both the parties are equally guilty and that the fraud intended by them has been carried out 'the position would be that the party raising the defence is not asking the Court 's assistance in any active manner; all that the defence suggests is that a confederate in fraud should not be permitted to obtain a decree from the Court because the document of title on which the claim is based really conveys no title at all It is true that as a result of permitting respondent 2 and the ' appellants to prove their plea they would incidentally be assisted in retaining their possession; but this assistance is of a purely passive character and all that the Court is doing in effect is that on the facts proved it proposes to allow possession to rest where it lies.
It appears to us that this latter course is less injurious to public interest than the former.
There can be no question of estoppel in such a case for the obvious reason that the fraud in question was agreed by both the parties and both parties have assisted 'each other ' in carrying out the fraud.
When it is said that a person cannot 751 plead his own fraud it really means that a person cannot be permitted to go to a Court of Law to seek for its assistance and yet base his claim for the Court 's assistanceon the ground of his fraud.
In this connection it would be relevant to remember that respondent 1 can be said to be guilty of a double fraud; first he joined respondent 2 in his fraudulent scheme and participated in the commission of fraud the object of which was to defeat the creditors of respondent 2, and then he committed another fraud in suppressing from the Court the fraudulent character of the transfer when he made out the claim for the recovery of the properties conveyed to him.
The conveyance in his favour is not supported by any consideration and is the result of fraud; as such it conveys no titile to him.
Yet, if the plea of fraud is not allowed to be raised in defence the Court would in substance be giving effect to a document which is void ab initio.
Therefore, we are inclined to hold that the paramount consideration of public interest requires that the plea of fraud should be allowed to be raised ' and tried, and if it is upheld the estate should be allowed to remain where it rests.
The adoption of this course, we think, is less injurious to public interest than the alternative course of giving effect to a fraudulent transfer.
This question has been the subject matter of judicial decisions in most of our High Courts; and it appears that the consensus of judicial opinion with the exception of the Madras High Court is in favour of the view which we have taken.
In Bombay the principle that in dealing with a contest between two participants in fraud possession should be allowed to remain where it rests appears to have been consistently accepted until Chief Justice Sir Lawrence Jenkins struck a note of dissent in Sidlingappa Bin Ganeshappa vs Hirwa Bin Tukasa (1).
Thereafter the correctness of (1) (1907) 1.L. R. 752 this judgment was sometimes doubted in the subsequent decisions of the said High Court [Vide : Lakshman Balvant Khisti V. Vasudev Mohoniraj Pande(1)] and finally the Full Bench of the said High Court reversed the said decision of Sir Lawrence Jenkins in Guddappa Chikkappa Kurbar vs Balaji Ramji Dange (2).
Since then the decision of the Full Bench has been consistently followed in the Bombay High Court.
The same view has been accepted by the Calcutta, Allahabad, Nagpur and Patna High Courts [Vida : Preomath Koer vs Kazi Mahomed Shazid(3).Emperor vs Abdul Sheikh(4), Vilayat Husain vs Misran (5), Nawab Singh vs Daljit Singh (6), Qader Baksh vs Hakim (7), Bishwanath g/o Karunashanker Shukla vs Surat Singh alias Chhuttu Singh s/o Bhabhut Singh (s), and J. C. Field Electric Supply vs K. Agarwala (9) (Case of illegal contract)].
In Madras the earlier decisions of the High Court appear to have, taken the same view [Vide: Venkataramana vs Viramma (10), Yaramati Krishnayya vs Chundru Papayya (11) and Raghavalu Chetty vs Adinarayana Chetty (12)].
In the case of Vodiana Kamayya vs Gudisa Mamayya (13), however, a Division Bench of the Madras High Court upheld the view that a person who has conveyed property benami to another for the purpose of effecting a fraud on his creditors cannot, where the fraud has been effected, set up the benami character of the transaction by way of defence in a suit by the transferee for possession under the conveyance.
Since then this view has prevailed in the Madras High Court [vide : Keppula Kotayyar Naidu vs Chitrapu Mahalak8hmamma (14) and Muthu K. R. A. R. P. L. Arunarhalam Chettiar vs Bangaswamy Chettiar (1.5)].
In our opinion (1) (2) I. L. R (3) (1903 4) 8 C. W. M. 620.(4) A. I. R. (5) All. 396.(6) (1936) 1.L. R. 58 All. 842.(7) (1932) 1.L. R. 13 Lab.(8) A.I. R. 3.(9)(1951) 1.R. 30 Pat.(10) (1887) 1.L. R.10 Mad.(11) (1 897) 1.L. R. (12) (1 909) 1.L. R. (13) (14) Mad.(15) Mad.753 the view taken by these subsequent decisions of the Madras High Court does not represent the true and correct approach to the question.
In this connection we may incidentally refer to the observations made by the Privy Council in T. P. Petherpermal Chetty vs R. Muntandi Servai.
In that case the Privy Council has no doubt dealing with the question on the basis that the purpose of the fraudulent conveyance had been defeated and so different principles naturally came into play.
While discussing the problem in its broad aspect, however, Lord Atkinson, who delivered the judgment of the Board, cited with approval the observations made in Mayne 's Hindu Law which clearly support the view that we have taken.
Says Mayne: 1 'The, fact that A has assumed the name of B in order to cheat X can be no reason whatever why a Court should assist or permit B to cheat A.
But if A requires the help of the Court to get the estate back into his own possession, or to get the title into his own name, it may be very material to consider whether A has actually cheated X or not.
If he has done so by means of his alias, then it has ceased to be a mere mask and has become a, reality.
It may be very proper for a Court to say that it will not allow him to resume the individuality which he has once cast off in order to defraud others.
If, however, he has not defrauded any one there can be no reason why the Court should punish his intention by giving his estate away to B, whose roguery is.
even more complicated than his own This appears to be the principle of the English decisions.
But where the fraudulent or illegal purpose has actually been effected by means of the colorable grant then the maxim applies In pari delicto potior est conditio possidentis.
The Court will help neither party and let the estate lie where it falls (2)".
Lord Atkinson has observed that this statement of the law is correct and in that sense (1) (1908) L. R. 35 1.A. 98.(2)Mayne 's Hindu Law, 7th Ed,p.595 para 446(35 I.A.p 102) 751 the view that we have taken may be said to be consistent with the opinion expressed by the Privy Council by approving the statement of the law made by Mayne.
In support of the contrary view reliance is usually placed on an early English decision in Doe, Dem.Roberts against Roberts, Widow (1).
In that case it was held that "ro man can be allowed to allege his own fraud to avoid his own deed; and, therefore, where a deed of conveyance of an estate from one brother to another was executed, to give the latter a colorable qualification to kill game.
The document was as against the parties to it valid and so sufficient to support an ejectment for the premises".
In dealing with the question raised Bayley, J. observed "by the production of the deed, the plaintiff established a prima facie title; and we cannot allow the defendent to be heard in a Court of Justice to say that his own deed is to be avoided by his own fraud;" and Holroyd, J., added that " 'a deed may be avoided on the ground of fraud, but then the objection must come from a person neither party nor privy to it, for no man can allege his own fraud in order to invalidate his own deed".
This decision has, however, been commented on by Taylor in his "Law of Evidence".
According to Taylor "it seems now clearly settled that a party is not estopped by his deed from avoiding it by proving that it was executed for a fraudulent, illegal or immoral purpose (2)".
The learned Author then refers to the case of Roberts (1) and adds "in the subsequent case of Prole vs Wiggins (3) Sir Nicholas Tindal observed that this decision rested on the fact that the defence set up was inconsistent 'with the deed".
Taylor then adds that ",the case, however, can scarcely be supported by this circumstance, for in an action of ejectment by the grantee of an annuity to recover premises.
(1) (2) Taylor 's "Law of Evidence", Vol.I, 11th Ed.p. 97, paragraph 93.(3) 35; ; 43 R. R. 621.755 on which it was secured, the grantor was allowed to show that the premises were of less value than the annuity, and consequently, that the deed required enrollment, although he had expressly covenanted in the deed that the premises were of greater value. . .
According to the learned author "the better opinion seems to be that where both parties to an indenture either know, or have the means of knowing, that it was executed for an immoral purpose, or in contravention of a statute, or of public policy, neither of them will be estopped from proving those facts which render the instrument void ab initio; for although a party will thus in certain cases be enabled to take advantage of his own wrong, yet this evil is of a trifling nature in comparison with the flagrant evasion of the law that would result from the adoption of an opposite rule" (P. 98).
Indeed, according to Taylor, although illegality is not pleaded by the defendant nor sought to be relied upon by him by way of defence, yet the Court itself, upon the illegality appearing upon the evidence, will take notice of it, and will dismiss the action Ex turpi causa non oritur actio.
No polluted hand shall touch the pure fountain of Justice" (P. 93).
To the same effect is the opinion of Story:(1) "In general, where parties are concerned in illegal agreements or other transactions, whether they are mala prohibita or mala in se, Courts of Equity following the rule of law as to participators hi a common crime will not interpose to grant any relief, acting upon the known maxim In pari delicto potior est conditio defendentis et posidentis The old cases often gave relief, both at law and inequity, where the party would otherwise derive an advantage from his inequity.
But the modern doctrine has adopted a more severely just and probably politic and moral rule, which is to leave the parties where it finds them giving no relief and no countenance to claims of this sort" '.
(1) Story ' s Equity Jurisprudence, Vol.I. section 421; English edition by Randell, 1920, section 298.756
In judicial decisions where this question has been considered a passage from the judgment of Lord Mansfield, C. J., in Holman vs Johnson (1) is often quoted.
If we may say so with respect the said passage very succinctly and eloquently brings out the true principles which should govern the decision of such cases.
Said Lord Mansfield, C. J., "the objection that a contract is immoral or illegal as between plaintiff and defendant sounds at all times very ill in the mouth of the defendant.
It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may say so.
The principle of public policy is this ex dolo malo non oritur actio.
No Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act.
If, from the plaintiff 's own stating or otherwise the cause of action appears to arise ex turpi causa or the transgression of a positive law of this country, there the court says he has no right to be assisted.
It is upon that ground the Court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff".
On behalf of the respondents it was urged that the principles on which the appellants rely are applicable to contracts and not to conveyances.
A conveyance, it is argued, rests on a different basis from a contract, and so the English decisions cannot be pressed into service by the appellants.
We are not impressed by this argument.
Even if respondent 1 has based his case on a conveyance the position still remains that as a result of the facts proved by respondent 2 and the appellants the conveyance is void ab initio.
It is a document fraudulently executed and as such it conveys no title to the transferee at all.
That being so we do not think that in giving effect to the considerations of (1) (1775) 1 Cowrer 341.757 public interest or policy it makes any difference that the deed on which the present suit is brought is one of conveyance.
It is then contended that in deciding the point raised by the appellants we must look to the provisions of section 84 of the and nothing else.
The is a comprehensive code and it is only in cases failing under section 84 that it would be permissible to the Court to apply the equitable principles or to invoke considerations of public policy as the appellants purport to do.
Section 84 provides that where the owner of property transfers it to another for an illegal purpose and such purpose is not carried into execution, or the transferor is not as guilty as the transferee, or the effect of permitting the transferee to retain the property might be to defeat the provisions of any law, the transferee must hold the property for the benefit of the transferor.
We do not see how this section is material or can give any assistance in the decision of the point before us.
In the present case the transferee is not in possession of the properties and the present case is not one of the three categories of cases contemplated by the section.
If the argument assumes that the only cases where equitable principles can be invoked are cases falling under section 84 and section 84 is exhaustive in that sense, we have no difficulty in rejecting the said argument.
Since the present case is entirely outside section 84 it inevitably falls to be considered on considerations of general policy, and as we have already held, judged in the light of such considerations it must be held that the public interest would be less injuriously affected if the property is allowed to remain where it lies.
Therefore, we must hold that the High Court was in error in not giving effect to the finding recorded by the trial court that the fraud mutually agreed upon and contemplated by respondents 1 and 2 had been effectively carried out and that in the 758 carrying out of the fraud both the parties were equally guilty.
The appeal must, therefore, be allowed and the suit instituted by respondent 1 must be dismissed.
In the circumstances of this case we direct that the parties should bear their own costs, throughout.
Appeal allowed.
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The conveyance in suit was the result of a collusive plan between respondent 1 and respondent 2 to defraud the latter 's creditors.
The agreement was that respondent 1 was to act as the benamidar for respondent 2 and his sons, the appellants.
The fraud succeeded and the creditors of respondent 2 were in fact defrauded.
Thereafter respondent 1 brought the present suit for declaration of title and recovery of possession against respondent 2 and the appellants on the basis or the conveyance.
The latter resisted the suit on the ground that the conveyance was fraudulent, unsupported by consideration and passed no title.
The High Court in second appeal held that the appellants and respondent 2 were estopped from pleading fraud in the suit and decreed the same.
The question was whether the view taken by the High Court was correct and the ostensible owner was entitled to a decree.
Held, that there could be no question of estoppel in a case where both the parties were guilty of fraud.
740 Where in a case, such as the present, one of the confederates in fraud seeks a, decree on a conveyance that resulted from such faud and the other takes plea 'of fraud in defence, the matter has to be decided on considerations of public policy.
Since one of the parties must succeed in any event, the proper approach for the Court to adopt would be the one that was less injurious to public interest, namely, to allow the plea of fraud to be raised in defence and, if upheld, allow the properties to remain where they were, than to decree a suit based on a fraudulent claim.
It could make no difference in such a case if the suit was based on a deed of conveyance and not a contract.
Vodiana Kamayya vs Oudisa Kamayya, (1917) 32 M.J.J. 484, Kepula Kotayyar Naidu vs Chitrapur Mahalakshmama, Mad. 646 and Mutho K.B.A.R.P.L. Arunachalam Chettiar vs Rangaswamy Chettiar, Mad. 289, disapproved.
Berg vs Sadler and Moore, , T. P. Petherperumal Chetty vs B. Muniandi Servai, (1908) L.R. 35 I.A. 98 and Holman vs Johnson, (1775) 1 Cowper, 34 1, referred to.
Deo, Dem.
Roberts against Roberts, Widow, (1819) 106 E. R. 401, considered.
Case law reviewed.
Section 84 of the is not exhaustive in its provisions and since the present case falls outside of that section, it has to be decided on considerations of general policy.
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Civil Appeal No. 291 of 1956.
Appeal from the judgment and order dated November 25, 1955, of the Circuit Bench of the Punjab High Court at Delhi, in Civil Writ Application No. 189 D of 1955.
280 Jai Gopal Sethi, J. B. Dadachanji, section N. Andley, Rameshwar Nath and P. L. Vohra, for the appellant.
R. H. Dhebar and T. M. Sen, for respondent No. 1.
G. section Pathak, V. P. Nayar and Janardan Sharma, for respondent No. 3. 1959.
May 13.
The Judgment of the Court was delivered by WANCHOO J.
This appeal comes before us on a certificate granted by the Punjab High Court under, article 133 (1) (a) and (c) of the Constitution.
The appellant is the manager, Hotel Imperial, New Delhi (here in after called the hotel) while the respondents are the Chief Commissioner, Delhi, the Additional Industrial Tribunal, Delhi , and the Hotel Workers ' Union, Katra Shahanshahi , Chandni Chowk, Delhi.
The main contesting respondent is respondent No. 3 (here inafter called the union).
A dispute arose between the hotel and its workmen in October 1955.
It was referred to an Industrial Tribunal on October 12, 1955, by the Chief Commissioner of Delhi.
The portion of the order of reference, relevant for our purposes, is in these terms Whereas from a report submitted by the Director of Industries and Labour, Delhi under section 12 (4) of the as amended, it appears that an industrial dispute exists between the management of the Hotel Imperial, New Delhi and its workmen as represented by the Hotel Workers ' Union, Katra Shahanshahi, Chandni Chowk, Delhi; AND whereas on a consideration of the said report the Chief Commissioner, Delhi, is satisfied that the said dispute should be referred to a tribunal Then follows the order referring the dispute to the Additional Industrial Tribunal, Delhi including the terms of reference.
Soon after the hotel filed a writ application in the Punjab High Court challenging the order of reference on a variety of grounds.
The writ application was heard by the High Court and dismissed on November 25, 1955.
The hotel then applied for leave to appeal to this Court, which was granted on 281 January 13, 1956.
The hotel obtained stay of the proceedings before the Additional Industrial Tribunal from this Court on February 27, 1956.
That is how this dispute which would have been otherwise decided long ago is still in its initial stage.
The main contention on behalf of the hotel is that the reference is incompetent and two grounds have been urged in support of it; namely, (1) the union could not be made a party to the reference under the , (hereinafter called the Act); and (2) the reference was vague, as it did not indicate how many of the 480 workers of thirty different categories working in the hotel were involved in the dispute.
We are of opinion that there is no force in these grounds of attack.
An " industrial dispute " for our purposes has been defined in section 2 (k) of the Act as meaning " any dispute or difference between employers and workmen. . which is connected with the employment or non employment or the terms of employment or with the conditions of labour, of any person." 'Section 10 (1) of the Act gives power to the appropriate government where it is of opinion that an industrial dispute exists or is apprehended to refer the dispute to a tribunal for adjudication.
It cannot be denied on the facts of this case that there was a dispute between the hotel and its workmen and it went to this length that the hotel decided to dismiss a large number of workmen on October 7, 1955.
It is also undoubted that the dispute was With respect to the terms of employment Qr conditions of labour of the workmen.
The Chief Commissioner would therefore have power under section 10 (1) of the Act to make a reference of the dispute to a tribunal for adjudication.
The attack of the hotel is on the form in which the reference was made and the contention is that the reference in this form is incompetent.
We have already set out the relevant part of the order of reference giving the form in which it was made.
The two parties to the dispute are clearly indicated, namely, (1) the employer which is the management of the hotel and (2) the workmen employed in the hotel.
The objection, however, is that the words "as represented 36 282 by the Hotel Workers ' Union, Katra Shahanshahi, Chandni Chowk, Delhi " which appear in the order of reference make it incompetent, inasmuch as the union could not be made a party to the reference.
We are of opinion that this objection is a mere technicality, which does not affect the competence of the order of reference.
The fact remains that the dispute which was referred for adjudication was between the employer, namely the management of the hotel, and its employees, which were mentioned as its workmen.
The addition of the words "as represented by the Hotel Workers ' Union, Katra Shahanshahi, Chandni Chowk, Delhi " was merely for the sake of convenience so that the tribunal may know to whom it should give notice when proceeding to deal with the reference.
That however did not preclude the workmen, if they wanted to be represented by any other union, to apply to the tribunal for such representation or even to apply for being made parties individually.
Section 36 of the Act provides that a workman who is party to a dispute shall be entitled to be represented in any proceeding under the Act by (a) an officer of a trade union of which he is a member, or (b) an officer of a federation of trade unions to which the trade union of which he is a member is affiliated; or (c) where the workmen is not a member of any trade union, by an officer of any trade union connected with, or by any other workman employed in, the industry in which the workman is employed.
The fact therefore that in the order of reference the quoted words were added for the sake of convenience as to where the notice to the workmen should be sent would not in our opinion make the reference incompetent.
The objection further is that even if the workman is entitled to be represented by an officer of a trade union of which he is a member, the reference in this case does not mention any officer of the trade union, but mentions the union itself.
This in our opinion is a technicality upon technicality, for the union not being a living person can only be served through some officer, such as its president or secretary and it is that officer who will really represent the workmen before the tribunal, We are therefore of 283 opinion that the reference which is otherwise valid does not become incompetent simply because it is mentioned therein that the workmen will be represented by such and such union in the dispute.
We may in this connection point out that the large 'majority of references under the Act which we have come across are usually in this form and the reason for it is obvious, namely, the convenience of informing the tribunal to whom it should send a notice on behalf of the workmen, whose number is generally very large.
We therefore reject the contention that the reference is bad simply because in the order of reference the words " as represented by the Hotel Workers ' Union, Katra Shahanshahi, Chandni Chowk, Delhi " have been added.
Equally, we see no force in the other ground of ,attack, namely, that the reference is bad because it does not specify how many of the 480 workmen of thirty different categories were involved in the dispute.
It is in our opinion unnecessary for the purposes of section 10 where the dispute is of a general nature relating to the terms of employment or conditions of labour of a body of workmen, to mention the names of particular workmen who might have been responsible for the dispute.
It is only where a dispute refers to the dismissal etc., of particular workmen as represented by the union that it may be desirable to mention the names of the workmen concerned.
In this case, the dispute was also about workmen to whom notice of dismissal had been given and in that connection the names of the workmen concerned were mentioned in the order of reference.
We may in this connection refer to State of Madras vs C. P. Sarathy (1), where a similar attack on the competence of a reference was made on the ground of vagueness.
I In that case the reference was in these terms: " WHEREAS an industrial dispute has arisen between the workers and managements of the cinema talkies in the Madras City in respect of certain matters; (1) [1953] S.C. R 334. 284 " AND WHEREAS in the opinion of His Excellency the Governor of Madras, it is necessary to refer the said industrial dispute for adjudication; Thereafter followed the order of reference, which did not even contain the terms of reference.
The order however indicated that " the Industrial Tribunal may, in its discretion, settle the issues in the light of a preliminary enquiry which it may hold for the purpose and thereafter adjudicate on the said industrial dispute." The Commissioner of Labour was requested to send copies of the order to the managements of cinema talkies concerned.
It was held there that " the reference to the Tribunal under section 10 (1) of the , cannot be held to be invalid merely because it did not specify the disputes or the parties between whom the disputes arose ".
It was further held that " the Government must, of course, have sufficient knowledge of the nature of the dispute to be satisfied that it is an industrial dispute within the meaning of the Act, as, for instance, that it relates to retrenchment or reinstatement.
But, beyond this no obligation can be held to lie on the Government to ascertain particulars of the disputes before making a reference under section 10(1) or to specify them in the order.
" The present reference as compared to the reference in that case cannot be called vague at all.
Here the parties to the dispute are clearly specified, namely, (1) the management of the hotel, and (ii) its workmen.
The nature of the dispute is also specified in, the terms of reference.
It was in our opinion entirely unnecessary to 'mention in the order of reference as to who were the workmen who were responsible for the dispute.
We are therefore of opinion that this attack on the ground of vagueness also fails.
There is no force in this appeal and it is hereby dismissed with costs to respondent No. 3.
In view of the fact that more than three years have passed since the reference was made, we trust that the Additional Industrial Tribunal will now dispose of the matter as expeditiously as it can.
Appeal dismissed.
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An industrial dispute between the hotel and its workmen was referred to an Industrial Tribunal.
The attack of the hotel was on the form of the order of reference, the main contention being that the reference was incompetent on the grounds that the Union could not be made a party to the reference under the Industrial Disputes Act, and that the reference was vague, as it did not indicate how many of the workers of different categories working in the hotel were involved in the dispute.
Held, that the order of reference was perfectly competent when the parties to it and the nature of the dispute were clearly specified.
The reference which was otherwise valid does not become incompetent simply because it was mentioned therein that the workmen will be represented by such and such Union in the dispute.
The addition of the name of the Union was merely for the sake of convenience so that the Tribunal may know to whom it should give notice when proceeding to deal with the reference ; that does not preclude the workmen from being represented by another Union or even being made parties individually.
It is unnecessary for the purpose of section 10 of the Act where the dispute was of a general nature relating to the terms of employment or condition of labour of a body of workmen to mention the names of particular workmen who might have been responsible for the dispute.
It was only where a dispute refers to the dismissal etc., of particular workmen as represented by the Union that it would be desirable to mention the names of the workmen concerned.
State of Madras vs C. P. Sarathy, , referred to.
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ition (Civil) No. 11704 of 1985 etc.
(Under Article 32 of the Constitution of India).
R.P. Gupta for the Petitioners.
V.C. Mahajan, Ms. A. Subhashini, B.K. Prasad, C. Ramesh and Hemant Sharma for the Respondents.
The Judgment of the Court was delivered by RANGANATHAN, J.
These two writ petitions were filed as 452 early as 1985 but they are still at the admission stage.
However notices have been issued to the respondents and we have heard counsel on both sides.
As both the writ petitions relate to the same subject matter, it will be convenient to dispose of them by a common order and we proceed to do so.
The controversy in these writ petitions is as to the proper principle for determination of seniority in the Transportation (Traffic) Department of the Indian Railways.
Though the petitioners in Writ Petition No. 11704 of 1985 belong to the Central Railways, the principle to be deter mined will have application over all nine Railways in the country and is being agitated in Writ Petition No. 12802 of 1985 by the All India Train Controller 's Association.
The officials with whom we are concerned in these writ petitions occupy Group C (Class III) posts in the above department.
The question of their inter se seniority has become material for their promotion to Group B (Class II) posts which really form the lowest rung of the management cadre.
75% of the vacancies arising in Group B (Class II) posts in each de partment are filled in by promotion on selection from among Group C (Class III) employees of the department on the basis of seniority cum merit.
The difficulty in determination of the inter se seniority arises because there are different streams of eligible Group C (Class III) employees, occupying posts with different scales of pay, who have to be consid ered for selection to Group B posts.
As only those employees from the different streams can be considered as fail within the zone of consideration as per seniority and as the zone of consideration is determined with reference to the number of vacancies in Group B for which the selection is held at any point of time, the position of an employee in the com bined seniority list of all the streams assumes great impor tance.
We are concerned with the selections for appointment to three Group B posts in the Operating Branch of the Traffic and Transportation Department.
These are: Assistant Operat ing Superintendent, Assistant Traffic Superintendent and Station Superintendent.
The four Group C streams which have the avenue of promotion to the above group B posts are: (1) The Control Stream, which consists of the Chief Controller, the Deputy Chief Controller and the Section Controller; (2) The Traffic Stream, which comprises of the Station Master, the Yard Master, Traffic Inspector and Signaller; (3) The Ministerial Stream, consisting of office staff and (4) The Running Stream, consisting of Guards.
We are here concerned only with the question of inter se seniority between the employees in the Control 453 Stream and those in the Traffic Stream.
As mentioned earlier, there are several grades and scales of pay prevailing in each of these streams.
It will be helpful to tabulate them here for convenient reference: Control Stream Post Scale of Pay Pre 1931 I Pay II Pay III Pay Commission Commission Commission Chief Controller360 500 450 575 450 575 8501040/1200 Deputy Chief 400 500 300 400 370 475 700 900 Controller Section Con troller Grade I 300 350 260 350 335 425 ) ) 470 750 Grade II 200 300 200 300 270 380 ) Traffic Stream Post Scale of Pay Pre 1931 I Pay II Pay III Pay Commission Commission Commission Station Supdt./120 165/) Jn.
S.M./CYM/80 160/) 300 400 450 575 700 900 TI (Higher) 200 300 ) Stn.
Master (Higher) Dy.
Supdt.
80 160 300 400 370 475 550 750 /YM/TI (Lower) SM (Lower) 60 65 80 170 130 225 330 560 Grade and others 80 120 100 185 205 330 425 640 150 225 200 300 250 380 455 700 260 350 335 425 550 750 The zone of consideration of the employees for promotion is fixed in the order of the combined seniority of the employees from the 454 different streams.
In each of the streams, seniority depends on the grade.
Normally, employees working in a higher grade on a regular basis are senior to those working in the lower grade.
To illustrate, the highest Group C grade was Rs.450 575 followed by the grades Rs.370475, Rs.335 485, Rs.335 425 and so on.
(We are referring here to the old pay scales which have since been revised).
The employees working in the grade Rs.450 575 were therefore placed on the top followed by those in the grades of Rs.370 475, Rs.335 485 and Rs.335 425.
This principle for determination of inter se seniority worked very well till 31.12.72 as the higher scales of pay in both the streams was the same.
According to the department, it became difficult to follow this principle when, consequent on the acceptation and implementation of the recommendations of the Third Pay Commission with effect from 1.1.
1973, higher or lower scales of pay came to be fixed in respect of certain posts which were having the same scale of pay upto 31.12.1972.
For example, the scale of pay of Rs.450 575 held by Station Masters and Traffic Inspectors in the Traffic Stream upto 31.12.72 was upgraded to the scale Rs.700 900 with effect from 1.1.73.
On the other hand, in the case of Chief Controllers of the Control Stream, the same scale of Rs.450 575 was replaced by a scale of Rs.840 1040/1200.
Similarly, in the case of Station Masters and Inspectors in the grade of Rs.370 475 in the Traffic Stream, the replacement was by the scale of RS.550 750 while in the case of Deputy Chief Controllers on the scale Rs.370 475, the replacement scale was Rs.700 900.
Thus the Control Stream gained an upper hand in the matter of seniority and, consequently, of promotions.
In an attempt to restore some balance and parity between the employees of the different streams, the Railway Board issued certain instructions on 26th October, 1976.
As per these instructions, the inter se seniority of the staff working in the grade of Rs.700 900 and the grades,above it in the different streams was to be based on the total length of service rendered by an employee in all the grades.
This did not satisfy all sections of the staff and difficulties were also experienced in applying the instructions.
For example, a Deputy Chief Controller, who had been in the grade of Rs.370 475 upto 31.12.72 and was placed on Rs.700 900 from 1.1.73, gained an advantage over his collegues in the other stream viz. the Station Masters and Traffic In spectors.
The matter was therefore reconsidered and modified instructions were issued on 11.7.77.
According to these instructions, for purposes of drawing out the combined seniority of Group C employees from different streams, the services rendered in the top most scale in one stream would be considered equivalent to the service rendered in the 455 top most scale in the other streams, even though the top most scale in the two streams might be different.
This rule also produced anomalies.
For example, if in one stream, the top most scale was Rs.700 900, in another Rs.550 750 and in yet another Rs.840 1040, the length of service rendered in all these grades by the employees was stated to be the basis to determine the combined seniority.
Thus an employee having ten years of service in the top most scale of Rs.550 750 in one stream would rank senior to another having slightly less than ten years of service in the top most scale of Rs.700 900 in another stream.
The Department, therefore, issued revised instructions in August '78/ February '79.
As per these instructions, where the top most scale prior to 1.1.1973 has been replaced by two different scales after 1.1.73, one higher and the other lower, service rendered in the lower scale will be notionally stepped up as if the service had been rendered in the higher scale.
For example, the grade of Rs.450 575 was replaced by Rs.8401040 for the Controllers and Rs.700 900 for Station Masters and Traffic Inspectors.
While drawing up the combined seniority, the service ren dered in the grade of Rs.700 900 by the Station Masters and Traffic Inspectors was to be treated as service rendered in the grade Rs.840 1040.
Similarly, the pre revised grade of Rs.370 475 had given rise to two scales, namely, Rs.700 900 and Rs.550 750, and, in that case, the service rendered in the grade Rs.550 750 was notionally treated as rendered in grade Rs.700 900 for drawing up the combined seniority.
This principle did not work well either.
It seems the circulars of 11.7.77 and August '78 were quashed by the Bombay High Court in W.P. No. 55 of 1980 by its order dated 14.12.83.
In the meantime, detailed consideration of the issues was undertaken in consultation with the federations of organised labour and it was finally decided that the combined seniori ty for purposes of Group B selection should be determined on the basis of the total length of service rendered by employ ees in any or in all the grades commencing from Rs.700 900 and above and these instructions were issued on 5.3.83.
In January 1984.
further instructions were issued which, while maintaining the principles laid down on 5.3.83, provided protection to senior employees, who got superseded in a stream for promotion to the higher nongazetted grade in that stream.
For example, if an employee in grade of Rs.700 900 supersedes one of his seniors in promotion to the grade of Rs.840 1040 within the stream, he would control the seniori ty of the employee whom he had superseded.
Such a superseded employee would be put to hardship when the combined seniori ty is drawn up along with employees from the other streams for purposes of selection to Group B.
In order to avoid the situation of a senior employee being subjected to such disability, instructions were issued on 6.1.
1984 that 456 an employee who supersedes his senior will be credited with the service of the senior whom he had superseded.
Aggrieved by these experiments which, according to them, only resulted in chaos and confusion, 45 employees of the Control Stream filed WP 11704/85 when, on the issue of a list published by the administration on the basis of these instructions on 15.6.85, they found themselves excluded from the panel of staff to be taken into consideration for promotion to Group B. They prayed that the circular of 6. 1.84 and the follow up action culminating in the Selection List be also set aside.
The petitioners are also aggrieved by a different set of steps initiated by the Railway Board.
A further discrimina tion against the control stream, it is alleged, has resulted from two circulars issued by the Board, one on 29.7.83 and the other on 26.12.83.
These circulars envisaged, what the petitioners call, "mass upgradations" and what the circulars call a "restructuring of the cadres".
The earlier of the two circulars applied to the traffic stream.
In so far as is relevant for our present purposes, the "upgradation" was on the following lines: Name of Existing Revised Revised Percentage Rema post scale Designation Scale of posts marks Yard Masters 455/700 Dy.
Chief 700 900 20% /Asst.
Yard Yard Masters Masters Yard Masters 550 750 Chief Yard 840 1040 10% of Masters post in scale of 700 900 Station 455 750 Station 700 900 10% Master Supdt.
Station 350 750 Station 840 1040 10% of Supdt./ Supdt.
posts in Station scale of Master Rs.700 900 2 Separate 700 900 43.5% This we Cadre of (10% of told, has Station these 'll not been 457 Masters/ carry scale given Asstt.
of Rs.840 effect Station 1040 to.
Superin tendants The circular stated that this restructuring will be with reference to the sanctioned strength as on 1.8.83.
The staff, who will be placed in the revised grade in terms of these orders will be eligible to draw pay on the higher grades from 1.8.83 with benefit of proforma promotion from 1.8.82.
It was made clear that the benefit of proforma fixation will be admissible only to the staff who are placed in the vacancies arising directly as a result of these restructuring orders.
The date of proforma fixation has later been shifted, from 1.8.82 to 1.8.83 by a circular dated 13.7.
The second circular, dated 20.12.1983 pertained to the control stream.
The restructuring was on the basis of the cadre strength as on 1.1.84 and the revision of scales was also to be effective from 1.1.84.
The pattern of restruc ture, in so far as it is relevant for our present purposes, is set out thus in the schedule: Existing Grade & Posts Existing Revised percentage percentage (i) 470 750 Not laid 15 (Section Controllers) down (ii) 700 900 " 58 ] (Dy.
Chief Controllers) ] ] ] ] (iii) 340 1040 " 23 ] 85 (Chief Controller ] Gr. II) ] ] ] (iv) 840 1200 " 4 ] (Chief Controller Gr.
II) 458 It was made clear that the cadre has been restructured keeping in view additional duties, responsibilities and heavier workload in some of the charges and that the revised grades were to be given to employees eligible therefore on such considerations in their existing positions.
Reference must be made to two more circumstances before we deal with the contentions urged before us.
The first is that the circular of 6.1.84 referred to above which, accord ing to the counsel for the petitioner introduced the princi ple of "chance seniority" was quashed by the Central Admin istrative Tribunal by its order dated 5.2.1988.
A copy of this order has not been made available to us.
Secondly, consequent on the said decision of the Tribunal, the Railway Board issued certain instructions on 22.12.88 which reads thus: "Consequent upon the judgment given by the Central Adminis trative Tribunal in connection with the above, matter has been reviewed in consultation with the representatives of the recognised organised federations and it has been decided in partial modification of the orders contained in Railway Board 's letters . . dated 28.5.83 and 6.11.84 that the integrated seniority of group C employees for promotion to group B posts should be determined on the basis of con solidated length of non fortuitous service rendered in the grade of Rs.700 900/2000 3200 and above ignoring promotions to the grade of Rs.840 1040/23753500 . " It may be mentioned that the petitioners were fully satisfied with the circular of 5.3.83 which according to them, gave effect to rule 321 of the Indian Railway Estab lishment Manual.
According to them, this equilibrium was unjustifiably disturbed by the circulars issued subsequent ly.
The principal grievance urged before us by learned counsel for the petitioner was that, as a result of the restructuring orders read with the order reckoning all persons working in salary grades of Rs.700 900 and above as one group for determining seniority, the control stream staff has been adversely affected to a considerable extent.
He points out that persons in the Traffic Stream who entered the supervisory grade of Rs.470 750 were placed in the grade of Rs.700 900 much later than the dates when those in the control stream entered the corresponding scale of Rs.455 700 will gain seniority over the latter.
He asks us to compare for this purpose the positions of officers in the control stream with seniority positions Nos. 90 to 190 with those occupying seniority positions Nos.
61 to 208 in the traffic 459 stream.
He contends that the staff employed in the control stream lose both monetarily as well as in terms of seniority by being placed in the scale of Rs.700 900 only w.e.f. 1.1.84 as compared to those of the traffic stream who re ceive such promotions and pay scales w.e.f. 1.8.83.
Leaving aside the question of monetary benefits for the time being, the submissions are: (i) that seniority should be determined on the total length of service as envisaged in rules 202 and 321 of the Indian Railways ' Establishment Manual, which read thus: "202 For selection to class II posts or Civil Engg.
Trans portation (power) and Mechanical Branch, Transportation (traffic) and Commercial, Signal and Telecommunication, Electric and Stores Department.
(i) Only permanent staff will be eligible (ii) all staff in grade Rs.335 425 and above provided they have rendered a minimum of 3 years non fortuitous service after reaching the stage of Rs.335 either in those grades or in a lower grade.
321 Relative Seniority of employees in an intermediate grade belonging to different seniority units appearing for a selection/non selection post in higher grade. 'When a post (selection as well as non selection) is filled by considering staff of different seniority units, the total length of continuous service in the same or equivalent grade held by the employee shall be determining factor for assign ing inter seniority irrespective of the date of confirmation of an employee with lesser length of continuous service as compared to another unconfirmed employees with longer length of continuous service.
This is subject to the proviso that only non fortuitous service should be taken in account for this purpose." (ii) that if all the grades in the eligible groups are to be clubbed together, the seniority should be reckoned as and from the date of entry into the lowest of the grades in Group 'C ' (class III) viz. Rs.470 750/455 700; 460 (iii) that even if the mass upgradations are to be upheld on principle, they must be directed to be made effective from the same date (whether it be 1.8.83 or 1.1.84) in respect of both the streams and should not be on different dates.
(iv) that the whole object and purpose of these circulars is to obliterate the effect of the recommendations of the Third (and even the Fourth) Pay Commissions, after assessing the duties and responsibilities of the staff in both streams, that the staff on the control stream deserve higher scales although these recommendations have been duly accepted and implemented by the Government.
According to the learned counsel, the traffic stream has a huge strength and a powerful union and, pressurised by their numbers, the Railway Board is attempting to take away, indirectly, the benefits given to the control stream by the Pay Commission 's recommendations and that too at a point of time when a fresh Pay Commission was in the process of being constituted.
Counsel also alleged that the All India Con trollers ' Association (which has filed writ petition No. 12802 on similar lines) has not been consulted at any stage and these circulars are being issued at the behest of the unions of the traffic staff and despite the representations and protests of the comparatively weaker union of the con trol staff.
On the other hand, Sri V.C. Mahajan, learned counsel for the Union of India, submitted that the petitioners have not placed any data before the Court to make out a case of discrimination.
He submits that after the Writ Petitions were filed in 1985 the Department has issued a circular dated 27.12.88 and a combined seniority list in March 1989.
The petitioners have not taken any steps to amend the Writ Petition to challenge this circular or this list or to show in what respect and to what extent the rights of the peti tioners have been prejudiced by the restructuring orders.
Turning to the "restructuring" circulars, counsel points out that in this case the Government has been hard put to evolve an equitable formula for fair promotional chances to the two sets of people in question.
Various attempts had been made earlier but they were not successful.
Finally the present formula has been evolved after consulting all the concerned unions.
It is not correct, he says, to say that the deci sions have been taken without consulting the representatives of the Controlling Stream.
It is submitted that, having regard to the few posts at the top of the scale, the Traffic Stream had been complaining of inadequate promotional oppor tunities.
The 461 Government has tried to solve the problem as best as it could and counsel refers to the following basic features behind the restructuring: (i) The date of entry into grades Rs.700 900 above will be taken as the starting point to reckon seniority.
This is the effect of the circular of 22.22.88 the validity of which has not been challenged in the petition.
(ii) Considering the large strength of employees in the Traffic Stream, viz. 4430, about 10% of the posts have been upgraded which will mean that about 443 persons will be in the above grades.
So far as the Control Stream is concerned, the percentage of posts in the above zone has been increased to about 35% of the 270 posts available with the result that about 211 people will be in the above grades.
As a result of the mass upgradation, a large percentage of people in the Control Stream immediately derive monetary benefits.
They have accepted these benefits and have been occupying the upgraded position since 1984 onwards.
(iii) The date of the upgradation in both the streams cannot be the same for the result of it would be that all the upgraded personnel will have seniority reckonable from the same date.
This being the position, their seniority will have to be based on the length of their services in the immediately lower scales or reckoned as from the date of their entry into the lowest of the Group C grades and this would, have revived the same problem which the Government was trying to solve.
That is why the Government fixed dif ferent dates for the two streams separated only by a short span of five months and this was neither unreasonable nor discriminatory.
Counsel submits that the Government was trying to forge out a solution that will be fair 'to both the streams and that the attempt of the petitioners to accept the upgrada tions of the scales in their stream but objecting to the other part regarding date of fixation should not be allowed to succeed.
He submits that if the petitioners were prepared to accept the same percentage of upgradation as the Traffic Stream persOnnel and give up the extra benefits received, the Government could reconsider the whole question afresh.
After hearing both counsel, we have reached the conclu sion that the materials before us are totally inadequate to come to any conclusion on the true impact of the circulars, In fact, to start with, we were 462 of the view that, in a matter like this, the proper remedy of the petitioners is to approach the Central Administrative Tribunal which has been set up for that very purpose.
But since counsel for the petitioners pleaded that the writ petitions have been pending here since 1985 and it would not be fair to the petitioners to sent them now to pursue that remedy, we heard the petitioners and the opposite parties at some length but, as will emerge from the above discussion, the exact position and impact of the circulars is very nebulous.
As pointed out by Sri Mahajan, the Department is trying to cope with the problem of giving fair promotional opportunities to two different streams which become eligible for promotion to Group B posts.
Since the counsel for the petitioner has stated that he has no quarrel with the circu lars of 5.3.83 and 22.12.88 and since the circular of 6.1.84 already stands quashed by the Central Administrative Tribu nal, the only grievance of the petitioners that survives is against the upgradation circulars.
Apart from the merits, there are three difficulties in considering the plea of the petitioners that the part of the two circulars fixing dif ferent dates of upgradation should alone be set aside: (a) The plea of the petitioners, if accepted, will affect a large number of persons in the traffic stream and even result in a number of reversions in all the Railways.
Though the petitioners have made some persons in the traffic stream working in the Central Railway parties, neither the persons likely to be affected in other parts of the country nor their union have been made parties.
(b) As discussed above, the circular of 20.12.83.
confers substantial benefits on members of the control stream.
A large number of them have been able to secure an upgradation to the scale of Rs.700 900 which, otherwise, may not have come to them for sometime, and they may or may not all be affected adversely by the date of upgradation.
It is also pointed out that upgradation in the traffic stream are subject to selection on the basis of a written test and viva voce, while the upgradations in the control stream are automatic based on seniority cum suitability.
It is, there fore, not clear even whether the All India Controller 's Union is speaking in one voice for all its members either for or against the circular of 20.12.83.
(c) As pointed out by Sri Mahajan, the Department has issued a seniority list in pursuance of its circular.
No attempt has been made to substantiate the grievances of the peti tioners by pointed factual references to that list.
463 Coming to the merits again, the inequity is not appar ant.
Having to deal with two different streams, differently placed, the Government has to find out an equitable solution and it has been groping towards it.
One method would perhaps have been to have fixed quotas for promotion from each of the streams but that is not necessarily the only method.
An alternative method is being attempted here and the princi ple that grades of Rs.700 900 and above should be considered together being conceded the Department is trying to give some weightage by granting upgradation to each stream based on its total strength in order to balance the promotional chances in both the streams.
It is possible that some indi vidual cases may be affected but no answer to the question whether any class discrimination has resuited can be given unless fuller details are available and the practical impact of the latest position is placed before us.
If a good number of persons in the control stream are benefitted monetarily despite the disadvantage to a few, in the matter of promo tion, it may be a question how far the Association of the Controllers will be able to make out a case of class dis crimination.
Even if we assume that the entire control stream would be adversely affected, the question will still remain whether the basis of differentiation is justified in the circumstances or amounts to arbitrary discrimination.
We express no opinion on these questions at this stage.
We would only say that, in the absence of adequate material before us, we are unable to reach any conclusion on the plea of discrimination.
We, therefore, dismiss the writ petition but we will leave it to the petitioners, if so advised, to move the Central Administrative Tribunal, with fuller facts and in the light of the latest developments, for appropriate relief after impleading all affected parties or their repre sentatives so that the entire picture may emerge and a just conclusion arrived at.
Y. Lal Petition dis missed.
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These writ petitions have been fried by Group 'C ' (class III) employees of the Railways working in its Transportation (Traffic) Department.
The said Department has different streams e.g. 'Control Stream ' and 'Traffic Stream ' and the employees working therein have different scales of pay.
For purposes of their promotion to Group B posts, it was neces sary to fix their inter se seniority, as only those employ ees from the different streams could be considered for promotion as would fall within the zone of consideration as per seniority list.
As the zone of consideration is deter mined with reference to the number of vacancies in Group B for which selection is held, at any point of time, the position of the employee in the combined seniority list of all the streams is important.
The zone of consideration of the employees for promotion Is fixed in the order of the combined seniority of the employees from the different streams.
The Department prior to the implementation of the recommendations of the Third Pay Commission fixed the inter se seniority of the employees of Group C employees on the basis of the grade i.e. employees working In a higher grade on a regular basis were treated senior to those working in the lower grade and the said principle worked well until the enforcement of the recommendations of the Third Pay Commis sion w.e.f.
1.1.1973, when higher or lower scales of pay came to be fixed in respect of certain posts which were having the same scale of pay upto 31.12.1972.
This presented difficulty in fixing the inter se seniority of the employees and the Railway Board in order to resolve the difficulty issued circulars from time to time indicating how their seniority should be fixed but for some reason or the other, the dissatisfaction amongst the employees in the matter of seniority continued.
Being aggrieved by the experiments which according to the petitioners only resulted in chaos and confusion, employees of the Control Stream have flied the writ petition on the Issue of a combined seniority list published by the administration on the basis 451 of instructions on 15.6.85, as they found themselves exclud ed from the panel of staff to be taken into consideration for promotion to Group B. They pray that the circular dt. 6.1.84 and the follow up action taken culminating in the Selection List be set aside.
The petitioner challenge the validity of two circulars issued by the Board, one on 29.7.83 and the other on 26.1.2.1983, restructuring the cadres as discriminatory as according to them they envisage 'mass upgradation ' to their detriment.
The question for determination is whether the principle adopted on the strength of these circulars for fixing the inter se seniori ty of these employees is proper.
Dismissing the writ petitions with liberty to the Peti tioners to move the Central Administrative Tribunal, if so advised with fuller facts, this Court, HELD: The inequity is not apparent.
Having to deal with two different streams, differently placed, the Government has to find out an equitable solution and it has been grop ing towards it.
One method would perhaps have been to have fixed quotas for promotion from each of the streams but that is not necessarily the only method.
An alternative method is being attempted here and the principle that grades of Rs.700 900 and above should be considered together being conceded the Department is trying to give some weightage by granting upgradation to each stream based on its total strength in order to balance the promotional chances in both the streams.
It is possible that some individual cases may be affected but no answer to the question whether any class discrimination has resulted can be given unless fuller details are available and the practical impact of the latest position is placed before the Court.
[463A C]
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6356.txt
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Criminal Appeal No. 177 of 1957.
Appeal by special leave from the judgment and order dated April 11, 1957, of the Punjab High Court in Criminal Appeal No. 7 D of 1955, arising out of the 463 judgment and order dated January 19, 1955, of the Court of Special Judge, at Delhi in Corruption Cas No. 2 of 1953.
G. section Pathak, R. Ganapathy Iyer and G. Gopalakrishnan, for the appellant.
C. K. Daphtary, Solicitor General of India, G.C. Mathur and R. H. Dhebar, for the respondents.
May 21.
The Judgment of the Court was delivered by SINHA J.
This appeal by special leave is directed against the judgment and order of the High Court on Judicature for the State of Punjab at Chandigarh dated April 11, 1957, affirming those of the Special Judge, Delhi, dated January 19, 1955, convicting the appellant under section 5(2) of the Prevention of Corruption Act (2 of 1947).
The sentence passed upon the appellant was six months ' rigorous imprisonment.
The facts leading upto this appeal, may shortly be stated as follows: During and after the Second World War, with a view to augmenting the food resources of the country, the Government of India instituted a "Grow More Food Division" in the Ministry of Agriculture.
section Y. Krishnaswamy, a Joint Secretary in; that Ministry, was placed in charge of that Division, with effect from January 2, 1947.
The appellant was working in that Department as Director of Fertilizers.
He was a former employee of the well known producers of fertilizers, etc., called "Imperial Chemical Industries ".
Fertilizers were in short supply and, therefore large quantities of such fertilizers had to be imported from abroad.
As chemical fertilizers were in short supply not only in India but elsewhere also, an international body known as the " International Emergency Food Council " (I.E.F.C.) had been set up in United States of America, and India was a member of the same.
That body used to consider the requirements of different countries in respect of fertilizers, and used to make allotments.
Russia was not a member of that Organisation.
Towards the end of 1946, a Bombay firm, called 'Messrs. Nanavati and Company ', 464 which used to deal in fertilizers and had bussiness contcts with Russia, offered to supply ammonium sulphate,from Russia to the Government of India.
In the years 1947 and 1948, considerable quantities of ammonium sulphate were obtained through Messrs. Nanavati and Company aforesaid.
One D. N. Patel, who was a former employee of Messrs. Nanavati and Company, joined a partnership business under the style of Messrs. Agri Orient Industries Limited of Bombay '.
This firm obtained a contract from the Government for the supply of twenty thousand tons of ammonium sulphate from United States of America, in February, 1950.
In the course of this business deal, the said patel experienced some difficulty in obtaining Government orders regarding some consignments.
The appelant was approached in that connection; and it is aleged that Patel paid to the appellant Rs. 10,000 at Bombay as bribe for facilitating matters.
But in spite of the alleged payment, difficulties and delays occurred and the consignments, even after they had reached heir destination in India, were not moving fast enough, thus, causing considerable loss to the firm in which Patel was interested.
Patel, therefore approached Shri K. M. Munshi who was then the Minister For Food and Agriculture in Delhi, and disclosed to him the alleged payment of bribe of Rs. 10,000, as also the fact that the appellant had been receiving arge sums of money by way of bribes for showing favours in the discharge of his duties in the Department.
The Minister aforesaid directed thorough enquiries to be made, and the matter was placed in the hands of the Inspector General of Special Police Establishment.
A departmental committee was also set up of three senior officers of the Department to hold a departmental inquiry, and ultimately, as a result of that inquiry, the Minister passed orders of dismissal of the appellant, in August, 1950.
A further inquiry in the nature of a quasi judicial inquiry, was held by the late Mr. Justice Rajadhyaksha of the Bombay High Court, in 1951.
The inquiry related to matters concerned with the import of fertilizers into India.
After receipt of the report of the inquiry by 465 the late Mr. Justice Rajadhyaksha, in January, 1952, and after consideration of the matters disclosed in that report, a first information report was lodged on April 4, 1952, and thorough investigations were made into the complaints.
The result was that two cases were instituted.
The first one related to an " alleged conspiracy involving the appellant, Krishnaswamy and one of the proprietors of Messrs. Nanavati and Company, and several others, relating to bribery and corruption in connection with the supplies of ammonium sulphate from Russia.
With that case, we are not concerned here.
The second case, out of which the present appeal arose, was instituted against two persons, namely the appellant and Krishnaswamy, that they had entered into a conspiracy to receive bribes and presents from various firms, in connection with the import of fertilizers.
The learned Special Judge, who heard the prosecution evidence, came to the conclusion that it did not disclose any conspiracy as alleged, except in certain instances which formed the subject matter of the charge of conspiracy which was being tried separately, as aforesaid.
The present case, therefore, proceeded against the appellant alone under two heads of charge, namely, (1) that he had been habitually accepting or obtaining, for himself or for others, illegal gratifications from a number of named firms and others, in connection with the import and distribution of fertilizers section 5(1) (a) of the Prevention of Curruption Act, 1947 (hereinafter referred to as 'the Act '), and (2) that he had been habitually receiving presents of various kinds by abusing his position as a public servants.
6 (1) (d) of the Act.
The High Court, in agreement with the learned Special Judge, found the evidence of P. Ws. 9 and 10, who were the principal prosecution witnesses as regards the passing of certain sums of money from certain named firms to the appellant, as wholly unreliable.
Further more, Patel, being in the position of an accomplice, his evidence did not find sufficient corroboration from other facts and circumstances proved in the case.
The High Court, not being is a position to accept the tainted evidence aforesaid, found that the case of payment of 59 466 particular sums of money by way of bribes, had not been established.
But relying upon the presumption under sub section
(3) of section 8 of the Act, the High Court came to the conclusion that the appellant had not satisfactorily accounted for the receipt of Rs. 73,000 odd in cash and about Rs. 18,000 by cheques, during the years 1947 and 1948, which sums were wholly disproportionate to the appellant 's known source of income, namely, his salary as a Government servant, and that, therefore, he was guilty of criminal mis conduct in the discharge of his official duties.
In that view of the matter, the High Court confirmed the conviction and sentence of six months ' rigorous imprisonment, passed by learned Special Judge of Delhi.
The learned counsel for the appellant has contended (1) that on the admitted facts, the ingredients of section 5(3) of the Act, had not been established, (2) that when the charge in respect of specific instances of corruption, has not been proved, as found by the courts below, it should have been held that the contrary of the presumption contemplated by section 5(3), namely, of the guilt of criminal misconduct, had been established, and (3) that the appellant 's statement under section 342 of the Code of Criminal Procedure, as also his statements contained in his written statement, had not been proved to be false, and that, therefore, it should have been held that the case against the appellant had not been proved beyond all reasonable doubt.
It is true that section 5(3) of the Act, does not create a new offence but only lays down a rule of evidence, enabling the court to raise a presumption of guilt in certain circumstances a rule which is a complete departure from the established principles of criminal jurisprudence that the burden always lies on the prosecution to prove all the ingredients of the offence charged, and that the burden never shifts on to the accused to disprove the charge framed against him.
With reference to the provisions of section 5(3) of the Act, it has been contended, in the first instance, that the charge of criminal misconduct in the discharge of his official duties, is now confined to the fact as disclosed in his bank accounts with the Imperial Bank of India 467 (New Delhi Branch) and the Chartered Bank of India, Australia and China (Chandni Chowk Branch), that his nett credit with those banks totalled upto a figure just over Rs. 91,000.
He accounted for that large balance by stating that he was the only son of his father who had been able to give him advanced education in England for a period of over seven years; that after his return to India, he had been holding highly paid posts for about 20 years in the Imperial Chemical Industries, in the Army and in the Government of India; that he had no children and no other dependants except his wife; that with his limited household expenses, he was able to save a good round sum out of his salary and allowances which were considerable, because his duty took him throughout the length and breadth of the country, thus enabling him to earn large sums of money by way of travelling allowances which he saved by staying with his friends and relations during his official tours.
He added that he had received a gratuity for services rendered to the Army, and also considerable sums of money as his provident fund from the Imperial Chemical Industries, towards the end of November, 1947.
He also stated that his deposits in the two banks aforesaid, represented sums of money saved in cash out of his salaries, allowances and gifts from his parents, as also re payments of loans advanced by him to his friends while he was in the Army, and later.
He added that some of the deposits in cash were really re deposits of earlier withdrawals from the banks, as also the sale proceeds of his old car sold in June, 1948, for Rs. 5,500, together with the sale proceeds of gold jewelry belonging to his wife.
He also tried to explain the large deposits of cash in 1948, by alleging that he had borrowed a sum of rupees 20,000 from one Ganpat Ram on a pronote (which he, later on, re paid and obtained a receipt), with a view to building a house of his own in Delhi, but as that negotiation fell through, he deposited that cash amount in his account in the two banks aforesaid in August, 1948, as the creditor aforesaid would not accept re payment of the loan within a period of two years, unless the interest for that period was also paid 468 at the same time.
With reference to those statements of the accused from the dock, it was contended by the learned counsel for the accused that in view of those facts, it could not be said that the accused had not accounted for those large deposits with the two banks aforesaid.
The High Court has pointed out that the matters alleged in the , statement aforesaid of the accused, were capable of being easily proved by evidence which had not been adduced; that allegation was no proof, and that his lucrative posts in the Imperial Chemical Industries and in the Army, were matters of history in relation to the period for which the charge had been framed.
The High Court, therefore, found it impossible to accept the appellant 's bare statement from the dock as to how amounts earned far in the past, could find their way into the banks during the years 1947 and 1948.
It has been repeatedly observed by this Court that this Court is not a Court of criminal appeal, and we would not, therefore, examine the reasons of the High Court for coming to certain conclusions of fact.
Apparently, the High Court considered all the relevant statements made by the accused under section 342 of the Code of Criminal Procedure and in his written statement, and came to the conclusion that those statements had not been substantiated.
We cannot go behind those findings of fact.
Reference was also made to cases in which courts had held that if plausible explanation had been offered by an accused person for being in possession of property which was the subject matter of the charge, the court could exonerate the accused from criminal responsibility for possessing incriminating property.
In our opinion, those cases have no bearing upon the charge against the appellant in this case, because the section requires the accused person to " satisfactorily account." for the possession of pecuniary resources or property disproportionate to his known sources of income.
Ordinarily, an accused person is entitled to acquittal if he can account for honest possession of property which has been proved to have been recently stolen (see illustration (a) to section 114 of the ).
The rule of law is that if there 469 is a prima facie explanation of the accused that he came by the stolen goods in an honest way, the inference of guilty knowledge is displaced.
This is based upon the well established principle that if there is a doubt in the mind of the court as to a necessary ingredient of an offence, the benefit of that doubt must go to the accused.
But the Legislature has advisedly used the expression "satisfactorily account".
, The emphasis must be on the word " satisfactorily ", and the Legislature has, thus, deliberately cast a burden on the accused not only to offer a plausible explanation as to how he came by his large wealth, but also to satisfy the court that his explanation was worthy of acceptance.
Another argument bearing on the same aspect of the case, is that the prosecution has not led evidence to show as to what are the known sources of the appellant 's income.
In this connection, our attention was invited to the evidence of the Investigating Officers, and with reference to that evidence, it was contended that those officers have not said, in terms, as to what were the known sources of income of the accused, or that the salary was the only source of his income.
Now, the expression " known sources of income " must have reference to sources known to the prosecution on a thorough investigation of the case.
It was not, and it could not be, contended that " known sources of income " means sources known to the accused.
The prosecution cannot, in the very nature of things, be expected to know the affairs of an accused person.
Those will be matters " specially within the knowledge" of the accused, within the meaning of section 106 of the Evidence Act.
The prosecution can only lead evidence, as it has done in the instant case, to show that the accused was known to earn his living by service under the Government during the material period.
The prosecution would not be justified in concluding that travelling allowance was also a source of income when such allowance is ordinarily meant to compensate an officer concerned for his out of pocket expenses incidental to journeys performed by him for his official tours.
That could not possibly be alleged 470 to be a very substantial source of income.
The source of income of a particular individual will depend upon his position in life with particular reference to his occupation or avocation in life.
In the case of a, Government servant, the prosecution would, naturally, infer that his known source of income would be the salary earned by him during his active service.
His pension or his provident fund would come into calculation only after his retirement, unless he had a justification for borrowing from his provident fund.
We are not, therefore, impressed by the argument that the prosecution has failed to lead proper evidence as to the appellant 's known sources of income.
It may be that the accused may have made statements to the Investigating Officers as to his alleged sources of income, but the same, strictly, would not be evidence in the case, and if the prosecution has failed to disclose all the sources of income of an accused person, it is always open to him to prove those other sources of income which have not been taken into account or brought into evidence by the prosecution.
In the present case, the prosecution has adduced the best evidence as to the pecuniary resources of the accused person, namely, his bank accounts.
They show that during the years 1947 and 1948, he had credit at the banks, amounting to a little over Rs. 91,000.
His average salary per mensem, during the relevant period, would be a little over Rs. 1,100.
His salary, during the period of the two years, assuming that the whole amount was put into the banks, would be less than one third of the total amount aforesaid, to his credit.
It cannot, therefore, be said that he was not in possession of pecuniary resources disproportionate to his known sources of income.
It was next contended that the burden cast on the accused by sub s.(3) of section 5 of the Act, was not such a heavy burden as lies on the prosecution positively to prove all the ingredients of an offence.
In that connection, reference was made to a number of decisions, particularly Rex vs Carrbriant(1), to the effect (1) , referred to under article 3907 at p. 1511 in Archbold Criminal Pleading Evidence and Practice ', 34th Edn. 471 that the onus of proof lies on the accused person to show that a certain proved payment was in fact not a corrupt payment, but that the burden is less heavy than that which, ordinarily, lies on the prosecution to prove its case beyond all reasonable doubt.
Reference was also made to Otto George Gfeller vs The King (1), Hate Sing Bhagat Singh vs State of Madhya Bharat (2) and Regina vs Dunbar(3).
In our opinion, those decisions do not assist the appellant in the present case.
In this case, no acceptable evidence, beyond the bare statements of the accused, has been adduced to show that the contrary of what has been proved by the prosecution, has been established, because the requirement of the section is that the accused person shall be presumed to be guilty of criminal misconduct 'in the discharge of his official duties " unless the contrary is proved.
" The words of the statute are peremptory, and the burden must lie all the time on the accused to prove the contrary.
After the conditions laid down in the earlier part of sub section
(3) of section 5 of the Act, have been fulfilled by evidence to the satisfaction of the court, as discussed above, the court has got to raise the presumption that the accused person is guilty of criminal misconduct in the discharge of his official duties, and this presumption continues to hold the field unless the contrary is proved, that is to say, unless the court is satisfied that the statutory presumption has been rebutted by cogent evidence.
Not only that, the section goes further and lays down in forceful words that " his conviction therefore shall not be invalid by reason only that it is based solely on such presumption.
" Lastly, it was argued that when the section speaks of the burden being on the accused person to prove the contrary, it must mean adducing evidence to disprove the charge.
The argument proceeds that as in the present case, the facts and circumstances mentioned in the charge had not been proved, the accused person must be acquitted as having disproved the charge with reference to the particular cases of bribery which had been held not proved.
In our opinion, there is a (1) A.I.R. 1943 P.C. 211.
(2) A.I R. (3) 472 fallacy in this argument.
The finding of the High Court and the court below, is that the prosecution had failed to adduce sufficient evidence to prove those particular facts and circumstances of criminal misconduct within the meaning of section 5(1)(a) of the Act, but the failure to bring the charge home to the accused under section 5(1)(a), does not necessarily lead to the legal effect contended for.
As soon as the requirements of sub section (3) of section 5 have been fulfilled,the Court will not only be justified in making, but is called upon to make, the presumption that the accused person is guilty of criminal misconduct within the meaning of section 5(1)(d).
In order to succeed in respect of the charge under section 5(1)(a), the prosecution has to prove that the accused person had accepted or obtained or agreed to accept or attempted to obtain from any person any gratification by way of bribe within the meaning of section 161 of the Indian Penal Code.
That charge failed because the evidence of P.W. 9 was not accepted by ' the High Court or the trial court.
The charge under section 5(1)(d) does not require any such proof.
If there is evidence forthcoming to satisfy the requirements of the earlier part of sub section
(3) of section 5, conviction for criminal misconduct can be had on the basis of the presumption which is a legal presumption to be drawn from the proof of facts in the earlier part of the sub section
(3) aforesaid.
That is what has been found by the courts below against the accused person.
Hence, the failure of the charge under cl.
(a) of sub section
(1) of section 5, does not necessarily mean the failure of the charge under section 5(1)(d).
In our opinion, the judgment of the High Court is correct, and the appeal is, accordingly, dismissed.
If the accused is on bail, he must surrender to his bail bond.
Appeal dismissed.
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The appellant was put up on trial on charges under sections 5(1)(a) and 5(1)(d) of the Prevention of Corruption Act, 1947.
Payments of particular sums by way of bribe were not proved against him.
But the High Court, holding that the appellant 's bare statements from the dock unsupported by any other acceptable evidence could not satisfactorily account for the large deposits standing to his credit in his bank accounts raised the presumption under section 5(3) of the Act and held him guilty of criminal misconduct in the discharge of his official duty under section 5(1)(d) of the Act, concerning the conviction and sentence passed on him by the 462 special Magistrate.
It was contended on behalf of the appellant that the charge relating to specific instances of bribery having failed, the contrary to the presumption under section 5(3) Of the Act should have been held as established and in absence of any finding that his statements were false it should have been held that the charge against him had not been proved beyond all reasonable doubt.
Held, that section 5(3) of the Prevention of Corruption Act did not create a new offence but only laid down a rule of evidence that empowered the Court to presume the guilt of the accused in certain circumstances, contrary to the well known principle of criminal law that the burden of proof was always on the prosecution and never shifted on to the accused.
The Legislature by using the expression " satisfactorily account " in section 5(3) of the, Act, cast the burden on the accused not only to offer a plausible explanation as to how he came by the large wealth disproportionate to his known sources of income, but also to satisfy the court that his explanation was worthy of credence.
Consequently, cases under the general law where it had been held that the accused could be exonerated if he offered a plausible explanation could have no application.
The expression " known sources of income " used in that section referred to such sources of income as became known to the prosecution as a result of the investigation and could not mean those that were witthin the special knowledge of the accused, and it was no part of the duty of the prosecution to lead evidence in that regard.
Where the prosecution fulfilled the conditions laid down by the earlier part of section 5(3) Of the Act, the statutory presumption had to be raised and it would be for the accused to rebut the same by cogent evidence.
Rex vs Carrbriant, , and Otto George Gfeller vs The King, A.I.R. (30) ; Hate Singh Bhagat Singh vs State of Madhya Bharat, A.I.R. 1953 S.C. 468 and Regina vs Dunbar, , held inapplicable.
The failure to substantiate a charge under section 5(1)(a) of the Act on evidence would not necessarily mean an acquittal in respect of a charge under section 5(1)(d) of the Act.
If the requirements of the earlier part of section 5(3) were established by evidence, conviction for criminal misconduct under section 5(1)(d) based on the presumption under section 5(3) Of the Act would be perfectly valid in law.
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775.txt
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Appeals Nos.
369 to 375 of 1967.
599 Appeals from the judgment and order dated October 15, 1966 of the Gujarat High Court in Special Civil Applications Nos.
1475, 1479, and 1480 of 1965, and 119, 120, 12.2 and 125 of 1966 respectively.
G.L. Sanghi and Ravinder Narain, for the appellants (in all the appeals).
Bishan Narain, R. H. Dhebar and section P. Nayar, for respondents Nos. 1 and 2 (in all the appeals).
Arun H. Mehta and I.N. Shroff, for respondent No. 3 (in all the appeals).
The Judgment of the Court was delivered by Shelat, J.
These appeals by certificate are directed against the judgment of the High Court of Gujarat dismissing the writ petitions filed by the appellants for quashing the notifications dated August 28, 1964 and October 18, 1965 respectively issued under sections 4 and 6 of the Land Acquisition Act,1 of 1894.
The appellants are the owners of the lands in question situate at Ranoli, District Baroda.
The 3rd respondent Company also owns about 140 acres of land in the same village.
The appellant 's lands are either situate adjacent to and between the Company 's lands and the railway lines or are enclaves surrounded by lands belonging to the Company.
On July 22, 1961 the State Government issued a notification under sec.
4 of the Act to the effect that the appellants ' said lands were or were likely to be needed for a public purpose,, viz., for a fertilizer factory.
That notification was withdrawn on September 11, 1961 as the lands were stated to be unsuitable for such a factory.
The Government however issued the very next day a fresh notification under sec.
4 in respect of the same lands, this time for the purpose of the 3rd respondent Company.
Some of these appellants thereupon filed writ petitions challenging its validity.
While these petitions were pending before the High Court this Court delivered its decision in what is known as the first Arora Case(1).
To get over the difficulties arising from that decision, first an Ordinance and then the Amendment Act XXXI of 1962, were passed.
The Amendment Act was brought into force from July 20, 1962 with retrospective effect.
The Central Government thereafter made Rules under sec.
55 of the Act called the Land Acquisition (Companies) Rules which were brought into force from June 22, 1963.
On July 24, 1963 the State Government withdrew the notification dated September 12, 1961 whereupon the writ petitions filed by the appellants challenging the said notifications were withdrawn.
In the meantime one D.K. Master, who was then the Special Land Acquisition Officer, Baroda, started an inquiry under Rule 4 of the said Rules.
On August 28,1964 the State Government issued a notification under (1) [1962] Supp. 2 S.C.R. 149:A.I.R. 600 sec.
4 stating that the appellants ' said lands were needed or were likely to be needed for the establishment of a factory of the 3rd respondent Company.
The appellants filed their objections in the inquiry then held under sec.
5A but they were rejected.
On October 18, 1965 the State Government issued sec.
6 notification declaring that the said lands were needed for the factory of the 3rd respondent Company which it was stated was taking steps or en,gaging itself for manufacture of optical bleaching agents, interme diate dye stuffs etc., which according to the Government was for a public purpose.
The appellants thereupon filed writ petitions from which these appeals arise challenging the two notifications dated August 28, 1964 and October 18, 1965 respectively.
When these writ petitions came on for hearing the State Government produced a notification dated October 11, 1963 authorising the Special Land Acquisition Officers of the State to perform the functions of the Collector under sec. 3(c).
On certain contentions having been raised on the basis of this notification, the High Court adjourned the hearing to enable the State Government to explain the circumstances and the reasons for issuing the said notification.
On August 25, 1966 the said Master filed a further affidavit clarifying the Government 's position and the circumstances in which he performed the functions of the Collector under sec. 3(c).
Before the High Court the appellants contended that the pro cedure laid down in the said Land Acquisition (Companies) Rules was not followed, that the purpose for which the acquisition was being made was not a public purpose within the meaning of sec.
40(1)(a), that the acquisition was made mala fide and in colourable exercise of power, that the State Government had not applied its mind to the facts of the case and lastly that the inquiry under sec.
5A was a quasi judicial inquiry and that as an opportunity to be heard was not given to the appellants the proceedings under sec.
5A violated natural justice.
Counsel, however, conceded that the inquiry under section 5A was administrative but contended that the appellants were still entitled to be heard before the State Government formed its satisfaction that the lands were required for the Company.
The High Court rejected all these contentions and dismissed the writ petitions.
Hence these appeals.
Counsel for the appellants formulated the following five pro,positions on which he impugned the High Court 's judgment: (1)that the inquiry under Rule 4 of the Land Acquisition (Companies) Rules and the consequent report made by Master to the Government were invalid; therefore there being no valid report under Rule 4 read with section 40, no notification either under s.4 ,,or sec.
6 could be validly issued; 601 (2) that sec.
6 notification was issued without complying with Part VII of the Act and without a valid consent of the State Government as required by sec.
39 and therefore no notification either under sec.
4 or sec.
6 could be lawfully issued; (3) that the acquisition was made mala fide and without ap plication of mind to the relevant facts; (4) that the acquisition did not involve any public purpose; and (5) that the State Government was bound to give an oppor tunity of being heard to the appellants before taking decision under sec.
5A, particularly when the report of the said Master was against the acquisition.
We shall consider these propositions in the order in which they were urged.
As regards propositions 1 and 2.
the argument was that Mas ter was only a Sp.
L.A. officer but was not the Collector within the meaning of Rule 4 and therefore the inquiry held by him under that Rule and the report made consequent thereto were invalid; that even if Master can be held to have been authorised to perform the functions of the Collector he was not "specially appointed" as Collector; that the State Government had not given any direction to him to make a report as required by Rule 4 and that the notification dated October 11, 1963 did not "appoint" but simply authorised him to perform the functions of the Collector.
It is not in dispute that as required by the said Rules the State Government had apponited a Land Acquisition Committee before it issued the notification under sec.
The affidavit of Master establishes that he worked as a Sp.
L.A. officer at Baroda from December 6, 1961 to April 29 1965.
On February 11, 1963 he was appointed to officiate as Special Land Acquisition Officer, Baroda.
On October 1. 1963 the Government wrote a letter to him forwarding the application dated September 11, 1963 of the 3rd respondent Company requesting the Government to acquire the lands in question and directing him to hold an inquiry according to the said Rules and to make a report.
The letter also stated that be was being authorised separately to perform the functions of the Collector and that on such authorisation he would be competent to make the inquiry.
On the same day,the Government issued a notification under sec.
3(c) authorising him to perform the function of the Collector within Baroda District.
But on October 11, 1963 the Government issued another notification superseding the notification of October 1, 1963 and authorising all Special Land Acquisition Officers in the State to perform the functions of the Collector under the Act within the area of their respective jurisdiction.
On October 10, 1963 Master had addressed a letter to the 602 Company to supply information for his inquiry under Rule 4.
On October 22, 1963 he issued notices to 27 owners of the lands proposed to be acquired but only 10 of them appeared before him and he recorded their statements on October 31, 1963.
There is thus no doubt that Master was instructed by the State Government to hold an inquiry and to submit his report.
Rule 4 requires the Collector to make an inquiry regarding the matters stated therein, such matters inter alia being that the land requested by the Company for acquisition is not excessive, that the Company has made efforts and offered reasonable.
price to buy the land from the owners, that if the land happens to be good agricultural land, there is no other alternative land suitable for the Company 's purpose and the approximate amount of compensation which would be payable if the lands were acquired.
The Collector after making such inquiry has to submit his report to the Government.
The Government then forwards it to the Land Acquisition Committee and the Committee has to advise the Government.
Rule 4 prohibits the Government from issuing notification under section 6 unless it has consulted the Committee and considered the said report as also the report made under section 5A and unless an agreement with the Company under section 41 has been executed.
The contention was that though Master held the inquiry and made the report he had functioned not as the Collector but in his capacity as the Special Land Acquisition Officer, Baroda, and therefore the notification under sec.
4 and section 6 were invalid.
The argument was, firstly, that Rule 4 does not define "collector" and therefore the word "collector" must mean the Collector of the District and secondly, that even if Master was appointed as the Collector as defined by sec.
3(c) his appointment as Collector was not valid as he was not specially appointed to perform the functions of the Collector.
It was said that the notification dated October 11, 1963 did not "specially" appoint Master but was a general notification authorising not only, Master but all the Special Land Acquisition Officers in the State appointed not only before the date of sec.
4 notification but also those who would be appointed in future.
In our view, these contentions cannot be upheld.
Section 3(c) defines a Collector to mean Collector of the District and includes Deputy Commissioner and any officer specially appointed by the Government to perform the functions of a Collector under the Act.
Section 20 of the General Clauses Act, X of 1897 provides that where a Central Act empowers making rules, the expressions used in such rules, if made after the commencement of that Act shall have the same meaning as in the Central Act, unless there is anything repugnant in the subject or context.
There being nothing repugnant in the subject or context, the word "collector" must have the same meaning in the rules as in sec.
3(c) which includes an officer specially appointed to perform the functions of the Collector.
If therefore Master can be said to have.
608 been specially appointed to perform the functions of the Collector Linder the Act no challenge can be entertained as to his competence to make the inquiry and the report under Rule 4 of the said Rules.
Sanghi conceded that the notification dated October 1, 1963 did "specially" appoint Master as the Collector.
Baroda but argued that as that notification was superseded it would not avail the respondents and therefore the question was whether the noti fication dated October 11, 1963 can be said to have specially appointed Master as Collector.
He argued that since that notification appointed all the Special Land Acquisition Officers to perform the functions of the Collector within their respective areas the appointments made thereunder must be regarded as general and not appointments specially made and therefore it cannot be said that Master or any one of them was specially appointed as required by sec. 3(c).
The argument therefore resolves itself to what is the true meaning of the words "specially appointed".
In our view, those words simply mean that as such an officer is not a Collector and cannot perform the functions of a Collector under the Act, he has to be "specially appointed", that is ' appointed for the specific purpose of performing those functions.
The word "specially ' has therefore reference to the special purpose of appointment and is not used to convey the sense of a special as against a general appointment.
The word "specially" thus connotes the appointment of an officer or officers to perform functions which ordinarily a Collector would perform under the Act.
It qualifies the word "appointed" and means no more than that he is appointed specially to perform the functions entrusted by the Act to the Collector.
It is the appointment therefore which is special and not the person. from amongst several such officers.
Besides, sec.
15 of the General Clauses Act provides that where a Central Act empowers an authority to appoint a person to perform a certain function, such power can be exercised either by name or by virtue of office.
There would therefore be no objection if the appointment is made of an officer by virtue of his office and not by his name.
Therefore even if the meaning of the word "specially" were to be that which is canvassed by Mr. Sanghi the Government could have issued separate notifications for each of the Sp.
L.A. officers authorising them individually to perform the functions of the Collector within their respective area of jurisdiction.
Instead of doing that, if one notification were to be issued authorising each of them to perform those functions there could be no valid objection.
Such a notification would have the same force as a separate notification in respect of each individual Sp.
L.A. officer.
Such a notification Would mean that the Government thereby appoints each of the existing Sp. L. A. officers to perform the functions of the Collector within, their respective areas.
It is true that the notification also declares that such of the Sp.
L.A. officers as may be appointed in future are also authorised to preform the Collector 's functions.
That only means that whenever a person would be appointed as a Sp.
L.A. 604 officer for a particular area, the notification would in effect invest him at the same time with the authority to perform the Collector 's functions.
The appointment of each of these officers therefore must be held to be special and not general.
But Mr. Sanghi argued that even so the notification did not "appoint" Master but merely authorised him to perform the Collector 's functions.
In our View.
the distinction is without difference.
In the context of sec.
3(c) when an officer is authorised to perform the functions of the Collector it means that he is appointed to perfore those functions.
The clause does not contemplate a separate or an additional post.
What it means is that some officer who is already in the Government employment is authorised to work as a Collector for the purposes of the Act.
In this sense whether he is appointed or authorised to perform the Collector 's functions he would be complying with the terms of that clause.
It was then urgued that the inquiry under Rule 4 is a quasi judicial inquiry and therefore it was incumbent on Master to give an opportunity to the appellants to be heard.
The Rule however provides that the officer conducting the inquiry has to hear the Company before making his report.
Whether he has also to hear tile owners of the land or not need not be decided in these appeals as Master had in fact given such an opportunity to the appellants by serving them with notices and recorded the statements of such of them who cared to appear before him.
There is therefore no merit in that contention.
Next it was urged that the inquiry under Rule 4 has to be held after the notification under sec.
4 is issued and not before and therefore the inquiry held by Master was no , valid.
We do not find anything in Rule 4 or in any other Rule to warrant such a proposition.
The inquiry, the report to be made consequent upon such inquiry.
obtaining the opinion of the Land Acquisition Committee, all these are intended to enable the Government to come to a tentative conclusion that the lands in question are or are likely to be needed for a public purpose and to issue thereafter sec.
4 notification.
In our view, no objection to the appointment of Master to perform the functions of the Collector under sec.
3(c) or to his competence to make the inquiry and the report under Rule 4 or their legality can be validly made It follows that the consent given by the State Government for initiating acquisition proceedings was validly given and was in compliance with the provisions of Part VII of the Act and the State Government could validly issue the impugned notifications.
This disposes of Mr. Sanghi 's propositions 1 and 2.
The third proposition is that the State Government exercised the power under the Act mala fide and without applying its mind to the facts of the case.
Paragraph 10 of the petition containing the plea as to mala fides is in general terms without any particulars.
Even such of the allegations that are to be found there arc more against the 3rd respondent Company than against the State Government.
These are based on the fact that the Company had 605 sufficient land of its own and the acquisition was therefore being made so that the Company may acquire the neighbouring lands without utilising its own lands.
It is true that the Company owns.
140 acres of land.
But as the affidavit of the Company 's officer shows out of these 140 acres 48 acres are ravine lands, unfit as factory sites.
According to the Company, those lands however will be utilised for housing accommodation for its 700 workmen and for amenities for them such as play grounds, a sports club.
a recreation centre and a co operative consumer society.
Forty acres out of, the rest of the land have already been used for constructing some: of the factories ' warehouses and godowns.
As regards the balance: of 60 acres, they do not form a compact block and contain in them small pockets belonging to the appellants.
The Company 's case was that unless these pockets are acquired and these 60 acres are made, into one compact lot it would not be possible to use them as factory site.
These lands are, besides, divided by a Nal which if filled Lip would block access to the appellant 's lands.
Unless the enclaves are acquired.
the said Nal which divides the Company 's lands car,not be filled up.
A portion of the lands in question is also necessary for an approach road leading to the proposed railway siding.
Some of the land will have to be kept open as otherwise the noxious fumes omitted by the factories would prove detrimental to the: health of the neighbours.
The documents produced by Master reveal that the inquiry,.
held by him ",as on the question whether the Company was trying to acquire excessive land.
It is therefore not possible that the Government failed to apply its mind having had Master 's report before it as also the report under sec.
5A as regards the extent of land needed by the Company.
It was however arzueed though somewhat vaguely that the Company would not require as much, as 40 acres for housing its workmen and also that the Company has its own land near the railway lines which can well be used for the proposed railway siding.
No effort however was made to show that the Company would not really need 40 acres for housing purposes.
As regards the proposed railway siding also there is no data to show that the Company 's land near the railway lines would be suitable for constructing such railway siding.
The appellant 's lands appear to be near the existing goods platform.
It may be that the Government found on the basis of the reports before it that the appellants ' lands near the goods platform would be more suitable for the railway siding than the Company 's land near the railway lines.
Mr. Sanghi then contended that the fact that the Government had been trying to acquire these lands since 1962 and has been issuing one notification after another shows the exercise of the, power to acquire was mala fide.
No 1 such inference can be drawn from such a fact only.
The fact, on the other hand, that the Government cancelled its first notification on the ground that these 606 lands were not suitable for a fertiliser factory gives a clear indication that it had applied its mind and relatives the allegation of mala fide exercise of power.
The correspondence which the Company produced during the hearing of the petitions shows that as soon as the decision in the first Arora Case(1) was given the Government at once cancelled the notification in spite 'of the Company 's request to continue it.
This negatives any suspicion as to collusion between the Company and the acquiring authority.
It is true that Master 's opinion was adverse to acquisition but the Government was not bound to accept it.
However, the fact that a responsible officer of the Government gave an adverse opinion is yet another indication that he was acting independently without being influenced by the Government or the Company.
In our view, the appellants failed to establish their allegation either as to mala fide or the non application of mind by the State Government.
The third proposition of Mr. Sanghi therefore must fail.
As regards proposition No. 4, the only argument urged was that when a particular land is being already used for one public purpose, in this case the manufacture of "sagol", a building material made from lime, the legislature could not have intended to empower the Government to destroy that purpose and substitute in its place another public purpose.
We need only say that a similar argument was urged in Somavanti 's Case (2 ) and rejected by this Court.
The last proposition of Mr. Sanghi was that even though an inquiry under section 5A may be an administrative inquiry, the State Government was bound to give an opportunity to be heard to the appellants after receiving the report thereunder and before making up its mind for the purpose of issuing sec.6 notification.
It is not in dispute that during sec.
5A inquiry the appellants were heard and their objections were taken on record.
Under sec.
5A, the Collector has to hear the objections of the owner.
take them on r ecord and then submit his report to the Government.
The section also requires him to send along with his report the entire record of his inquiry which would include the objections.
The report has merely recommendatory value and is not binding on the Government.
The record has to accompany the report as it is for the Government to form independently its satisfaction.
Both are sent to enable the Government to form its satisfaction that the acquisition is necessary for a public purpose or for the Company.
It is then that sec.
6 notification which declares that particular land is needed for either of the two purposes is issued.
The Government thus bad before it not only the opinion of Master but also all that the appellants had to say by way of objections against the proposed acquisition.
The appellants therefore had an opportunity of (1) [1962] Supp. 2 S.C.R. 149, (2) 607 being heard.
Neither sec.
5A nor any other provision of the Act lays down that a second opportunity has to be given before the issuance of section 6 notification.
This contention also therefore cannot be sustained.
These were all the contentions urged before us.
As none of them can be upheld the appeals have to be dismissed.
The appellants will pay to the respondents the costs of these appeals.
(One hearing fee).
R.K.P.S. Appeals dismissed.
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On October 1, 1963, the State Government issued a notification under section 3(c), authorising one M who was then the Special Land Acquisition Officer, Baroda, to perform the functions of a Collector and also directed him to hold an enquiry under the Land Acquisition (Companies) Rules on the application of the third respondent company requesting the government to acquire the appellant 's land.
In supersession of that notification, the Government issued another notification on October 11, 1963 authorising all Special Land Acquisition Officers to perform the functions of the Collector under the Act within the area of their respective jurisdiction.
After M had made an enquiry under Rule 4, the respondent State Government issued a notification under Section 4 of the Land Acquisition Act, 1894, on August 28.
1964 in respect of the appellant 's land which was stated to be required for the establishment of a factory by the third respondent company.
Objections filed by the appellants in an enquiry under section 5A were rejected and the State Government thereafter issued a notification under section 6 on October 18, 1965.
The appellants challenged the notification by writ petitions but these were, dismissed by the High Court.
In the appeal to this Court, it was contended on behalf of the appellants, inter alia.
(i) that M was only a Special Land Acquisition Officer and not the Collector within the meaning of Rule 4; in any event the notification of October 11, 1963 did not "specially" appoint him but was a general notification authorising all the Special Land Acquisition Officers in the State appointed not only before the date of section 4 notification but also those who would be appointed in future,.
furthermore, the notification did not "appoint" but simply authorised him to perform the functions of the Collector, the State Goverrunent had not given any direction to him to make a report as required by .Rule 4; therefore the enquiry held by him under that Rule and the ,report made was invailed and consequently no notification either under section 4 or section 6 could be validly issued; (ii) that the section 6 notification was issued without complying with Part VII of the Act and without the valid consent of the State Government as required by section 39; (iii) that the acquisition was made mala fide and without application of mind to the relevant facts: (iv) that the acquisition did not involve any public purpose: and (v) that the State Government was bound to give an opportunity of being heard to the appellants before taking a decision under section 5A particularly when the report made by M was against the acquisition, 598 HELD: Dismissing the appeal.
(i) No objection to the appointment of M to perform the functions of the Collector under section 3(c) or to his competence to make the enquiry and the report under Rule 4 or their legality can be validly made.
It follows that the consent given by the State Government in initiating acquisition proceedings was validly given and was in comp liance with the provisions of Part VII of the Act and the State Government could validly issue the impugned notifications.
[604G] There being nothing repugnant in the subject or context, the word "Collector" must, by virtue of section 20 of the , have the same meaning in the Rules as in section 3(c) of the Act which includes an officer specially appointed to perform the functions of the Collector.
[602H] The words "specially appointed" simply mean that as a Sp.
L.A. Officer is not a Collector and cannot perform the functions of a Collector under the Act.
he has to be "specially appointed", i.e. appointed for the specific purpose of performing those functions.
The word "specially" has therefore reference to the special purpose of appointing and is not used to convey the sense of a special as against a general appointment.
Furthermore, section 15 of the General Clauses Act provides that where a Central Act empowers an authority to appoint a Person to Perform a certain function such power can be exercised either by name or by virtue of office.
[603C F] In the context of section 3(c) when an officer is authorised to perform the functions of the Collector, it means that he is appointed to perform those functions.
The distinction between the two is without a difference.
[604B] There is no force in the contention that the enquiry under rule 4 has to be held after the notification under section 4 and not before.
There is nothing in rule 4 or any other rule to warrant such a proposition.
(ii) On the facts, the appellants had failed to establish their allegation either as to mala fides or the non application of mind by the State Government.
(iii) There is no force in the contention that when the appellant 's lands were already being used for the manufacture of a building, material and that was also a public purpose, the legislature could not have intended to empower the Government to destroy that purpose and substitute in its place another Public purpose.
[606D] Arora Case, [1962] Supp, 2 'S.C.R. 149: referred to.
(iv) It is not disputed that during the section 5A enquiry the appellants were heard and their objections were taken on record.
The record of the enquiry is required under section 5A to be sent to the Government so as to enable the Government to decide whether the acquisition is necessary for a public purpose or for a company.
The Government thus had before it not only the opinion of M but also all that the appellants had to say by way of objections against the proposed acquisition.
The appellants therefore had an opportunity, of being heard.
Neither section 5A nor any other provision of the Act lays down that a second opportunity has to be given before the issuance of the Section 6 notification.
[606F 607A]
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2278.txt
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Appeal No. 1864 of 1967.
Appeal under section 116 A of the Representation of the People Act, 1951 from the judgment and order dated August 21, 1967 of the Andhra Pradesh High Court in Election Petition No. 13 of 1967.
P. Ram Reddy and A.V.V. Nair, for the appellants.
681 D. Narsaraju, R.V. Pillai and A. Sitarama Reddy, for respondent No. 1 G. Narayana Rao, for respondent No. 2.
The Judgment of the Court was delivered by Mitter, J.
On April 6, 1967 the appellants before us, fled an Election Petition in the High Court of Andhra Pradesh challenging the election of the first respondent, B.N. Reddi, to the Andhra Pradesh Legislative Assembly from the Kollapur Constituency inter alia on the ground of corrupt practices committed by him, his election agent, polling agents and other workers mentioned in the schedule to the petition with his consent and praying for a declaration that the second respondent, K. Ranga Das, was duly elected from the said constituency.
The third respondent was another candidate who had contested the election but had fared very badly.
The first respondent secured 25,321 votes at the election overtopping the votes polled by the second respondent by approximately 1600.
The petitioners stated in paragraph 5 of the petition that one ' V.K. Reddi who had firfiled his nomination paper had been made to withdraw his Candidature by the first respondent on payment of an illegal gratification of a sum of Rs. 10,000/ .
This allegation was repeated in paragraph 10.
The first respondent was also charged with other corrupt practices m diverse other paragraphs of the petition.
The first respondent put in his written statement on 28th June, 1967; the second respondent put in his counter affidavit on June 26, 1967.
The issues were settled on July 24, 1967.
On August 4, 1967 the petitioners filed Application No. 161/1967 for impleading V.K. Reddi.
Thereafter they wanted to withdraw that application when the examination of witnesses had commenced.
On August 7, 1967 this application was dismissed.
On August 8, 1967 the first respondent 'filed Application No. 169/1967 praying for dismissal of the petition on the ground that although V.K. Reddi had been charged with corrupt practices he had not been impleaded as a party to the petition which was liable to be dismissed under the provisions of section 82(b) of the Representation of the People Act, 1951 (hereinafter referred to as the 'Act ') in compliance with section 86(1).
The election petitioners filed Application No. 187 of 1967 for withdrawing the allegations against V.K. Reddi, or, in the alternative, to implead him as a respondent.
They also filed Application No. 186/1967 for condoning the delay in seeking to implead V.K. Reddi in Application No. 187/1967.
The second respondent filed a number of applications of which it is necessary to take note of a few only.
Application No. 174/1967 was filed for condoning the delay in seeking to implead V.K. Reddi in Application No. 175/1967.
Application No. 175/1967 was for the purpose of 682 impleading V.K. Reddi as a party respondent to the election petition.
The learned trial Judge held that the allegations contained in election petition amounted to an imputation of corrupt practice to V.K. Reddi and although of the view that the prayer in Application No. 169/1967 for condonation of delay was allowable in suitable cases, he felt himself bound by the decision of Kumarayya, J. in Applications Nos.
150 155/1967 in Election Petition No. 11 of 1967 and dismissed the amendment application No 169/1967.
Before us a faint attempt was made to argue that the allegation against V.K. Reddi did not amount to a charge of corrupt practice but that it was the first respondent who was guilty of such a practice by making the payment of illegal gratification.
The argument has only to be set down to be rejected.
In paragraph 5 of the petition, the definite averment was that V.K. Reddi had been made to withdraw his candidature by the first respondent on payment of an illegal gratification of Rs. 10,000/ .
If the payment of Rs. 10,000/ amounts to an illegal gratification the taint attaches not only to the payer, the first respondent, but also to the payee,.
V. K. Reddi.
The second point urged was that the learned Chief Justice 's view in regard to the power of condonation of delay in impleading V.K. Reddi was correct and although he could not give effect to his own view because he felt himself bound by the decision of Kumarayya, J. we ought to accept the appeal and uphold his view.
This argument was developed as follows.
An election petition was in essence an application to the High Court for the purpose of the Indian and as such section 29(2) of the Act of 1963 was applicable to such petitions drawing in its chain the applicability of section 5 of the Act giving the court the power to admit the same if it was satisfied that the applicant had sufficient cause for not preferring the application within the prescribed period of limitation.
The Act as it now stands provides by section 80A that the court having jurisdiction to try an election petition shall be the High Court.
Under section 81 (1 ) "an election petition calling in question any election may be presented on one or more of the grounds specified in sub section
(1 ) of section 100 and section 101 to the High Court by any candidate at such election or any elector within forty five days, but not earlier than, the date of election of the returned candidate . " section 82 runs as follows : "A petitioner shall join as respondents to his petition 683 (a) where the petitioner, in addition to claiming a declaration that the election of all or any of the returned candidates is void, claims a further declaration that he himself or any other candidate has been duly elected, all the contesting candidates other than the petitioner, and where no such further declaration is claimed, all the returned candidates; and (b) any other candidate against whom allegations of any corrupt practice are made in the petition.
" Section 83 lays down inter alia that an election petition shall set forth full particulars of any corrupt practice that the petitioner alleges, including as full a statement as possible of the names of the parties alleged to have committed such corrupt practice and the date and place of the commission of such practice.
Section 86( 1 ) provides that: "The High Court shall dismiss an election petition which does not comply with the provisions of section 81, or section 82 or section 117.
" The last mentioned section relates to the giving of security for costs.
Sub section
(4) of section 86 gives any candidate not already a respondent, a right to be joined as one upon application to the High Court within fourteen days from the date of commencement of the trial and subject to any order as to security for costs which may be made.
Under sub section (5) "The High Court may, upon such terms as to.
costs and otherwise as it may deem fit, allow the particulars of any corrupt practice alleged in the petition to be amended or amplified in such manner as may in its opinion be necessary for ensuring a fair and effective trial of the petition, but shall not allow any amendment of the petition which will have the effect of introducing particulars of a corrupt practice not previously alleged in the petition.
" Sub sections
(6) and (7) aim at the speedy disposal of the election petitions.
Section 87 ( 1 ) provides that: "Subject to the provisions of this Act and of any rules made thereunder, every election petition shall be tried by the High Court, as nearly as may be, in accordance with the procedure applicable under the Code of Civil Procedure, 1908 to the trial of suits :" The proviso to the sub section gives the High Court discretion to refuse, for reasons to be recorded in writing, to examine any witness.
Sub section
(2) makes the provisions of the Indian Evidence 684 Act applicable in all respects to the trial of an election petition.
Section 98 shows the nature of the order to be made by the High Court at the conclusion of the trial of an election petition.
Section 99 makes it obligatory on the High Court while making an order under section 98 in cases where any charge is made in the petition of any corrupt practice having been committed at the election, to record a finding whether any corrupt practice has or has not been proved to have been committed at the election and the nature of that corrupt practice as also the names of all persons, if any, who have been proved at the trial to have been guilty of any corrupt practice and the nature of that practice.
There is.
a proviso to the section which lays down that a person who is not a party to the petition shall not be so named unless he has been given notice to appear before the High Court and to show cause to the contrary.
In case he does so, he is further given the right to.
cross examine any witness already examined by the High Court and to give evidence in his defence.
Entry 72 of List I of the Seventh Schedule vests in Parliament the exclusive power to make laws with respect to elections to Parliament, to the Legislatures of States and to the offices of President and Vice President as also the Election Commission.
Under article 329(b) lm15 "Notwithstanding anything in this Constitution (a) (b) no election to either House of Parliament or to the House of either House of the Legislature of a State shall be called in question except by an election petition presented to such authority and in such manner as may be provided for by or under any law made by the appropriate Legislature.
" In order to determine whether an election petition launched for the purpose of contesting the validity of an election is an application within the meaning of the Indian , it is necessary to examine the nature of the rights and liabilities involved therein and of the provisions of law which govern such determination.
The right of citizens to elect representatives of their choice either to the House of the People or to a Legislative Assembly of a State, the process of election beginning from the notification of general elections and the nomination of candidates, the general procedure at elections, taking of the poll and counting of votes and the publication of election results are all matters dealt with and covered by different provisions of the Act.
The right to elect is statutory and so are all the processes connected with the election.
There is no element of any common law right 685 in the process of election.
Part VI of the Act deals with disputes regarding election.
The second chapter of this Part shows how elections may be called in question, which courts have jurisdiction to try election petitions, how such a petition is to be presented, who are to be parties to the petition, what are to be the contents of the petition as also the relief which may be claimed by the petitioner.
The third chapter of this Part deals with the trial of election petitions.
The first section of this group makes it incumbent on the High Court to, dismiss an election petition straightaway if it does not comply with certain statutory requirements.
The next section is a guide to the procedure to be adopted by the High Court in the trial of an election petition.
This section does not equate an election petition with a suit but merely shows that subject to the provisions of the Act and.
of any rules made thereunder, the trial is to conform as nearly as possible to the trial of a suit under the Code of Civil Procedure.
This means that (a) the contestants have a right to file written statements, (b) both parties must disclose the documents on which they reply; (c) they must examine witnesses orally, if necessary, to substantiate the charges leveled or the defenses raised in the petition; and (d) the evidence to be adduced must comply with the requirements of the Indian Evidence Act.
There are however certain limitations as to the questions which may put to a witness contained in sections 94 and 95; the returned candidate has a right to recriminate under the provisions of section 97.
The High Court does not pass a decree as in the case of a suit but has to make an order in terms of section 98 which gives the nature of the orders to be made.
The High Court has to communicate the substance of its decision to the Election Commission and the Speaker or the Chairman as the case may be of the House of the People or of the State Legislature.
Chapter IV deals with withdrawal and abatement of election petitions.
Chapter IV A deals with appeals from the decisions of the High.
Court and Chapter V deals with costs and security for costs.
The above brief analysis is sufficient to show that the trial of an election petition is not the same thing as the trial of a suit.
As was pointed out by this Court in the case of Kamaraja Nadar vs Kunju Thevat(1), the provisions of the Act "go to show that an election contest is not an action at law or a suit in equity but is a purely statutory proceeding unknown to the common law . " The Court also emphasised on the peculiar character of an election petition by quoting from the observations of A. Sreenivasan vs Election Tribunal, Madras(2).
Reference was also made.
to the Tipperary case(3) where Morris, J. said: (1) at 596.
(2) 11 E.I. R. 278 at 293.
(3) 686 " . a petition is not a suit between two persons, but is a proceeding in which the constituency itself is the ' principal party interested.
" This aspect of an election petition was emphasised again in the ,case of Basappa vs Ayyappa(1) where it was held that the provisions of O. 23 r. 1 of the Code of Civil Procedure do not apply to election petitions and it would not be open to a petitioner to withdraw or abandon a part of his claim once an election petition was presented to the Election Commission.
Even though section 87 ( 1 ) of the Act lays down that the procedure applicable to the trial of an election petition shall be like that of the trial of a suit, the Act itself makes important provisions of the Code inapplicable to the trial of an election petition.
Under O. 6 r. 17 C.P.C. a court of law trying the suit has very wide powers in the matter of allowing amendments of pleadings and all amendments which will aid the court in disposing of the matters in dispute between the parties are as a rule allowed subject to the law of limitation.
But section 86(5) of the Act provides for restrictions on the power of the High Court to allow amendments.
The High Court is not to allow the amendment of a petition which will have the effect of introducing particulars of a corrupt practice not previously alleged in the petition.
With regard to the addition of parties which is possible in the case of a suit under the provisions of O. 1 r. 10 subject to the added party 's right to contend that the suit as against him was barred by limitation when he was irapleaded, no addition of parties is possible in the case of an election petition except under the provisions of sub section
(4 ) of section 86.
Section 82 shows who are necessary parties to an election petition which must be filed within 45 days from the date of election as laid down in section 81.
Under section 86(1) it is incumbent on the High Court to dismiss an election petition which does not comply with the provisions of section 81 or section 82.
Again the High Court must dismiss an election petition if security for costs be not given in terms of section 117 of the Act.
It is well settled that amendments to a petition in a civil proceeding and the addition of parties to such a proceeding are generally possible subject to the law of limitation.
But an election petition stands on a different footing.
The trial of such a petition and the powers of the court in respect thereof are all circumscribed by the Act.
The Indian of 1963 is an Act to consolidate and amend the law of limitation of suits and other proceedings and for purposes connected therewith.
The provisions of this Act will apply to all civil proceedings and some special criminal proceedings which can be taken in a court of law unless the application thereof has been excluded by any enact (1)[1959] S.C.R. 611.
687 ment: the extent of such application is governed by section 29(2) of the .
In our opinion however the cannot apply to proceedings like an election petition inasmuch as the Representation of the People Act is a complete and self contained code which does not admit of the introduction of the principles or the provisions of law contained in the Indian .
Before the recent amendment of the Representation of the People Act, election petitions had to be presented to the Election Commission and it was the Commission which was empowered under section 85 to dismiss the petition if the then provisions of section 81, section 83 and section 117 were not complied with.
It is only when the petition was not so dismissed that the Election Commission had to appoint an Election Tribunal for the trial of the petition.
Under section 85 the Commission had power to admit a petition presented after the prescribed period if it was satisfied that there was sufficient cause for the failure.
Section 90(4) of the Act of 1951 empowered the Tribunal to dismiss an election petition even if it had not been so dismissed by the Election Commission.
The Act as amended in 1966 gives the jurisdiction to try an election petition to the High Court of a State.
The provision for appeal in section 116 A was introduced in the Act for the first time in 1956 providing for an appeal from every order of the Tribunal under section 98 or section 99 to the High Court of the State in which the Tribunal was situate.
By sub section
(2) of section 116 A of the Act as amended in 1956 the High Court was, subject to the provisions of the Act, to have the same powers, jurisdiction and authority and was to follow the same procedure with respect to an appeal ' under this Chapter (Chapter IV A) as if the appeal were an appeal from an original decree passed by a court situate within the local limits of its civil appellate jurisdiction.
Sub section
(3) fixed the time limit for filing the appeal.
to a period of 30 days from the date of the order complained of.
The proviso to this sub section gave the High Court discretion to entertain an appeal after the expiry of the period of 30 days, if it was satisfied that the appellant had sufficient cause for not preferring the appeal within such period.
This section was amended again in 1966 and section 116 A( 1 ) now provides for an appeal from an order of the High Court under section 98 or section 99 to the Supreme Court on any question, whether of law or fact.
Sub section
(2 ) of the new section is on the same lines as the old sub section
(3) excepting that the Supreme Court has been substituted for the High Court and the High Court for the Tribunal in the old section.
While the Act of 1956 was in force this Court had to go into the question as to whether section 29(2) of the of 1908 would be applicable to an appeal preferred to the High Court 688 from an order of the Tribunal.
In Vidyacharan Shukla vs Khubchand Baghel (1) the main question before this.
Court was whether for the purpose of computing the period of 30 days prescribed under section 116 A(3) of the Act, the provisions, of section 12 of the could be invoked.
The High Court had proceeded on the basis that section 29(2) applied to the case of appeals under section 116 A of the Act and on that basis had held that the appeal was within time if it was 'computed after making the deductions permitted by section 12 of the .
There was a good deal of discussion in the case about the scope and extent of section 29(2).
We are no.t concerned with that in the present appeal.
According to the learned Chief Justice and Ayyangar, J. "even on the narrowest construction of the words 'different from those prescribed therefor in the first schedule ' occurring in the opening part of section 29(2), the exclusion of time provided for by article 12 of the would be permissible in computing the period of limitation for filing the appeal to the High Subba Rao, J. (as he then was) took the view that section 116 A did not provide an exhaustive and exclusive code of limitation and did not exclude the general provisions of the .
The majority view was that though the fight of appeal was conferred by section 116 A of the Act of 1951 it was still an appeal under the Code of Civil Procedure and to attract article 156 of the First Schedule to the , it was not necessary for an appeal to be an appeal under the Code of Civil Procedure in that the right to prefer the appeal should be conferred by the said Code.
In our view.
sub section
(2 ) of section 116 A empowered the High Court to treat an appeal under that section presented to it as if it were an appeal from an original decree passed by a court within the local limits of its civil appellate jurisdiction.
Consequently, the jurisdiction, powers and authority of the High Court would be the same as in an appeal from an original decree of a lower court.
In other words, in entertaining the appeal and disposing of it the High Court could exercise the same powers as were available to it in an appeal from a decree of a lower court.
To such an appeal the powers of the High Court under section 12 of the would necessarily 130 attracted, Mr. Ram Reddy attempted to press that decision to service in the appeal before us.
In our view, the situation now obtaining in an appeal to this Court from an order of the High Court is entirely different.
There is no section in the Act as it now stands which equates an order made by the High Court under section 98 or Is.
99 to a decree passed by a civil court subordinate to the High (1) ; 689 Court.
An appeal being a creature of a statute, the rights conferred on the appellant must be found within the four corners of the Act.
Sub section
(2) of the present section 116 A expressly gives this Court the discretion and authority to entertain an appeal after the expiry of the period of thirty days.
No right is however given to the High Court to entertain an election petition which does not comply with the provisions of section 81, section 82 or section 117.
It was argued that if a petition were to be thrown out merely because a necessary party had not been joined within the period of 45 days no enquiry into the corrupt practices alleged to have been committed at certain elections would be possible.
This is however a matter which can be set right only by the Legislature.
It is worthy of note that although the Act has been amended on several occasions, a provision like section 86(1) as it now stands has always been on the statute book but whereas in the Act of 1951 the discretion was given to the Election Commission to entertain a petition beyond the period fixed if it was satisfied as to the cause for delay no such saving clause is to be found now.
The legislature in its wisdom has made the observance of certain formalities and provisions obligatory and failure in that respect can only be visited with a dismissal of the petition.
It is to be noted however that even though the Indian does not apply to an election petition provisions like sections 9 and 10 of the providing for computation of time which are in pari materia with sections 12( 1 ) and 4 of the would apply to such a petition.
The last submission of counsel for the appellants was that the failure to implead V.K. Reddi did not make the election petition liable to dismissal under section 86 (1 ).
It was argued that after V.K. Reddi had withdrawn from contest he was no longer a candidate within the meaning of section 79(b) or 82(b) of the Act.
In our opinion, it is not open to him to argue that point in view of the decision of this Court in Hat Swarup vs Brij Bhushan(1).
It is to be noted that this decision does not stand by itself.
In Mohan Singh vs Bhanwarlal(2) an attempt was made to get the election petition dismissed in limine on the ground that one of the candidates at the election, namely, Himmat Singh, against whom allegations of corrupt practice were made in regard to withdrawal of his candidature was not joined as a respondent.
It was held by this Court that a mere offer to help in getting employment was not an offer of gratification within the meaning of section 123(1)(B) of the Act.
The Court however observed: "If therefore the petition contained any imputation of corrupt practice made against Himmat Singh, it could (1) ; (2) ; 690 not be regarded as properly constituted unless he was impleaded as a respondent, for, by the defmition of "candidate" in section 79(b), the expression "any other candidate" in section 82(b) must include a candidate who had withdrawn Iris candidature." (see at p. 18 ).
Reference may also be made to Amin Lal vs Hunna Mal(1).
It was however sought to be argued that section 99 enjoined upon the High Court to name all persons who had been proved at the trial to have been guilty of any corrupt practice and where such a person who not a party to the petition, he was not to be so named unless he had been given notice to appear before the High Court and asked to show cause why he should not be so named and if he chose to appear, he was to be given an opportunity of crossexamining any witness already examined by the High Court and of calling evidence in his own defence and of being heard.
This provision, to our mind, only enjoins upon the High Court to give an opportunity to a person sought to be held guilty of a corrupt practice if he was not a party to the petition, but it does not apply to a person who is a necessary party thereto.
An obvious case for the use of powers.
under section 99 would be that of an agent guilty of commission of a corrupt practice with the consent of the candidate.
Such a person would not be a necessary party to the petition but he must have an opportunity of showing cause and of being heard before the High Court can name him as guilty of a corrupt practice while making an order under section 98.
In our opinion, the appeal has no merits and must be dismissed with costs.
G.C. Appeal dismissed.
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The election of the first respondent to the Andhra Pradesh Legislative Assembly at the General Election hold in 1967 was challenged by the appellants in an election petition.
Various corrupt practices were alleged appellants to have been committed by the first respondent, his agents and supporters.
One of these was that the first respondent paid a bribe to one R who had also filed nomination papers, in order to secure his withdrawal as a candidate.
After the issues were framed the appellants made an application to the Court for impleading R but it was dismissed.
The first respondent then filed an application under section 86(1) praying for the dismissal of the election petition on the ground that there had been compliance with section 82(b) of the Representation of the People Act, 1951 inasmuch as R against whom corrupt practice had been alleged had not been made a party.
The appellants filed an application seeking to with draw the allegation against R and in the alternative to implied him as are not.
They also prayed for condonation of delay in making the respondent.
The learned Judge of the High Court trying the election petition dismissed the aforesaid applications and refused to condone the delay.
The ' appellants came to this Court.
The contentions in the appeal were: (i) that the allegation against R did not amount to an allegation of corrupt practice, (ii) that section 5 and section 29(2) of the were applicable to the case and the High Court and this Court had power to condone the delay made by the election petitioner in impleading a necessary party, (iii) that R, having withdrawn from the contest was not a 'candidate '.
and (iv) that the procedure under section 99 ought to have been followed in respect of R. HELD: (i) The taint of illegal gratification attaches not only to the payer but also to the payee.
It could not therefore be accepted that the allegation against R that he had received illegal gratification did not amount to corrupt practice.[682 C D] (ii) The plea for condonation of delay in impleading R could not be accepted.
It is well settled that amendments to a petition in a civil proceeding and the addition of parties to such a proceeding are generally possible subject to the law of limitation.
But an election petition stands on a different footing.
The trial of such a petition and the powers of the court in respect ' thereof are all circumscribed bY the Representation of the People Act.
The Indian of 1963 is an Act to consolidate and amend the law of limitation 67f suits and other proceedings and for 680 purposes connected therewith.
The provisions of this Act will apply to all civil proceedings and some special criminal proceedings which can be taken in a court of law unless the application thereof has been excluded by some enactment: the extent of such application is governed by section 29(2) of the .
However the cannot apply to proceedings like an election petition inasmuch as the Representation of the People Act is a complete and self contained code which does not admit of the introduction of the principles or the provisions of the 'law contained in the Indian .
[686 H 687 B] Kamaraja Nadar vs Kunju Thevar, and Basappa vs Ayyappa, ; applied.
A. Sreenivasan vs Election Tribunal, Madras, 11 E.L.R. 278 and Tipperary case, (1875) 30 'M & H. 19, referred to.
After the amendment of the Representation of the People Act in 1966 there is now no section in the Act which equates an order made by the High Court under section 98 or section 99 to a decree passed by a civil court subordinate to the High Court.
An appeal being a creature of statute, the rights conferred on the appellant must be found within the four corners of the Act.
Sub section
(2) of the present section 116 A expressly gives this Court the discretion and authority to entertain an appeal after the expiry of the period of thirty days.
No right is however given to the High Court to entertain a petition which does not comply with the provisions of section 81, section 82 or section 117.
Any hardship resulting from this situation is a matter which can be set right only by the Legislature.
The Legislature in its wisdom has made the observance of certain formalities and provisions obligatory and failure in that respect can only be visited with a dismissal of the petition.
[688H 689 C] Vidyacharan Shukla vs Khubchand Baghel, [1964] 6 S.C.R. 129, distinguished.
O bitter: Even though the Indian does not apply to an election petition provisions like section 9 and section 10 of the providing for computation of time which are in pari materia with sections 12 (1) and 4 of the would apply to such a petition.
[689 E] (iii) A candidate who has withdrawn from the election remains a 'candidate ' within the meaning of section 79(b) and section 82(b) of the Act.
[689 F] Har Swarup vs Bril Bhushan, [1967] IS.C.R. 342, Mohan Singh vs Bhanwarlal, ; and Amin Lal vs Hunna Mat ; relied on.
(iv) Section 99 only enjoins upon the High Court to give an opportunity to a person sought to be held guilty of a corrupt practice if he was not a party to the petition, but does not apply to a person who is a necessary party.
[690 C D]
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2459.txt
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minal Appeal No.56 '61.
Appeal by special leave from the judgment and order dated August 16, 1960, of the Bombay High Court in Cr. A. No. 225 of 59.
B. B. Tawakley and A. G. Ratnaparkhi, for the appellants.
M. section K. Sastri and P. D. Menon, for the respondent.
July 24.
The judgment of the Court was delivered by SHAH, J.
With special leave, the two appellants Bhagwanbhai Dulabai Jadav and Haribhai Maganbhai Bhandare hereinafter referred to as accused Nos. 1 and 5 respectively have appealed against the order passed by the High Court of Judicature at Bombay setting aside the order of the Judicial Magistrate, First Class, Thana acquitting them and three others of offences punishable under sections 65(a), 66 (b), 81 and 83 of the Bombay Prohibition Act, 25 of 1949 hereinafter called the Act.
The case of the prosecution may briefly be stated: On August 25, 1957, a "wireless message" alerting the officers posted on "watch duty" at Kasheli Naka, District Thana that a motor car bearing No BMY 1068 belonging to the first appeal lant was carrying "contraband goods", was received.
This motor car reached,the Kasheli Naka at about 388 2 30 p.m. on August 28.
The first accused was then driving the car the second accused was sitting by his side and accused 3 to 5 were sitting in the rear seats.
Panchas were called by the Sub Inspector of police Deshpande from a village nearby and in their presence the vehicle was searched and from the luggage compartment (which was opened with the key found on search on the person of the 5th accused), 43 sealed bottles of foreign liquor and a large number of packets of tobacco were found.
A search list was prepared and the five occupants of the vehicle were arrested.
The vehicle and the articles found therein were attached.
The vehicle was handed over to the Central Excise Authorities together with the ignition key and the key of the luggage compartment for taking proceedings in respect of packets of tobacco which were attached.
A charge sheet was then filed in the Court of the Judicial Magistrate, First Class, Thana against the five accused charging them with offences punishable under so.
65 (a), 66 (b), 81 and 83 of the Act.
The accused pleaded not guilty to the charge: they stated that the case was "false and entirely got up", that no "liquor or other contreband" was found in the motor. car and ,,the whole plot was engineered by the enemies of the 1st accused".
They denied that the motor car was searched in their presence.
The fifth accused denied that the key of the luggage compartment was found on his person.
The trial Magistrate held that the brosecution evidence was insufficient to establish that the persons accused before him were acting in conspiracy or were abetting each other in transporting contraband articles in the car and acquitted them.
Against the order of aquittal, the State of Bombay appealed to the High Court of Bombay.
The High Court observed that the trial court treated the case as "a mathematical problem", and 389 examined the evidence giving undue importance to minor discrepanies.
In the view of the High Court the evidence established that in consequence of information received from police station Vapi, motor oar No. BMY 1068 was stopped at 2 30 p.m. on August 28, 1957, near Kasheli Naka, that at that time the 1st accused was driving the motor car which belonged to him, that accused No. 2 was sitting near him and accused Nos.
3 to 5 were sitting in the rear seats, that the key of the luggage compartment was found on the person of the 5th accused, that on opening that compartment in the presence of the Panchas, 43 bottles of foreign liquor and a large number of packets of tobacco were found, and that the evidence warranted the conviction of all the accused for offences punishable under as.
65(a), 66(b), 81 and 83 of the Bombay Prohibition Act.
The High Court accordingly allowed the appeal against accused Nos. 1, 2 and 5 of all the offences and directed each of them to undergo rigorous imprisonment for one year and pay a fine of Rs. 500/ for each of the offences; and in default of payment of fine to rigorous imprisonment for 3 months in respect of each offence, and directed that the substantive sentences do run concurrently.
The appeal against accused Nos. 3 and 4 was dismissed because they could not be served with the notice of appeal.
The High Court was undoubtedly dealing with an appeal against an order of a quittal but the Code of Criminal Procedure placed no special limitation upon the powers of the High Court in dealing with an appeal against an order of aquittal.
The High Court is entrusted with power to review evidence and to arrive at its own conclusion on the evidence.
There are certainly restrictions inherent in the exercise of the power, but those restrictions arise from the nature of the jurisdiction which the High Court exercises.
In a Criminal trial the burden 390 always lies on the prosecution to establish the case against the accused and the accused is presumed to be innocent of the offence charged till the contrary is established.
The burden lies upon the prosecution, and the presumption of innocence applies with equal, if not greater, force in an appeal to the High Court against an order of acquittal.
In applying the presumption of innocence the High Court is undoubtedly slow to disturb findings based on appreciation of oral evidence for the court which has the opportunity of seeing the witnesses is always in a better position to evaluate their evidence than the court which merely persued the record.
In the present case, the High Court in our judgment, was right in holding that the trial court ignored the broad features of the prosecution case, and restricted itself to a consideration of minor discrepancies.
The Magistrate meticulously juxtaposed the evidence of different witnesses on disputed points and discarded the evidence in its entirety when discrepancies were found.
That method was rightly criticised by the High Court as fallacious.
The Magistrate had to consider whether there was any reliable evidence on question which had to be established by the prosecution.
Undoubtedly, in considering whether the evidence was realiable he would be justified in directing his attention to other evidence which contradicted or was inconsistent with the evidence relied upon by the prosecution.
But to discard all evidence because there were discrepancies without any attempt at evaluation of the inherent quality of the evidence was unwarranted.
Sub Inspector Deshpande spoke about the wireless message received at the Kasheli Naka, about the arrival of the motor oar of the first accused at 2 30 in the afternoon of August 28, 1957, about the search of the car in the presence of the Panchas and the discovery of 43 'bottle of foreign 391 liquor and packets of tobacco in the luggage compartment of the motor car.
Nothing was elicited in the cross examination which threw any doubt upon the truth of the story, and no adequate reason was suggested why he should be willing falsely to involve the accused, in the commission of a serious offence by fabricating false evidence.
He was corroborated by the contents of the "Panchnama", which was a written record contemporaneously made about the search, and the evidence of the Panch witness Pandu Kamliya.
Deshpande was also partially supported by headconstable Chodabrey.
The latter witness deposed that the motor oar driven by the lot accused was stopped at Kaheli Naka and panchas were called, but according to him, search was made before the panchas arrived and the bottles were taken out of the luggage compartment and placed near the car.
We agree with the view of High Court that the evidence of Head Constable Codabrey though some what inconsistent with the evidence of Sub Inspector Deshpande and the panch witness, accorded with their story that the liquor bottles were in the motor oar when it was stopped near the Kasheli Naka on the day in question.
That evidence by itself is sufficient to establish that the accused possessed the bottles of foreign liquor.
It was urged, however, that under the law making of a search in the presence of independent witnesses of the locality called for that purpose was obligatory, and as according to the evidence of Head Constable Chodabrey and Panch witness Laxman Ganpat the search was held without complying with the formalities prescribed by section 103 of the Criminal Procedure Code, the panchnama about the search of the motor car, and the evidence of the finding of the articles therein must be discarded and the rest of the evidence was not sufficient to displace the presumption of innocence which 392 by the order of acquittal was reinforced.
We are unable to agree with this contention.
Section 117 of the Act provides, "Save as otherwise expressly provided in this Act, all investigations, arrests, detentions in custody and searches shall be made in accordance with the provisions of the Code of Criminal procedure, 1898: provided that no search shall be deemed to be illegal by reason only of the fact that witnesses for the search were not inhabitants of the locality in which the place searched is situated".
In view of that provision it is obligatory upon a police officer about to make a search to call upon two or more respectable inhabitants of the locality in which the place to be searched is situate to attend and witness the search.
But a motor car is not a place within the meaning of as. 102 and 103 of the Code of Criminal Procedure; nor is there anything in the Act by which a motor car would be so regarded for purposes of a search.
The provisions relating to searches contained in a. 103 of the Code of Criminal procedure have therefore no application and in making a search of a motor vehicle, it was not obligatory upon the police officer to comply with the requirements thereof.
This is not, however, to say that the practice which is generally followed by police officers when investigating offences under the Act to keep respectable persons present on the occasion of the search of a suspected person or of a vehicle may be discarded.
Even though the statute does not make it obligatory, the police officers wisely carry out the search, if it is possible for them to secure the presence of respectable witnesses, in their presence.
This is a healthy practice which leads to cleaner investigation and is a guarantee against the oft repeated charge against police officers of planting articles.
It was strenuously urged by counsel for the appellants that the High Court did not attach suffi 393 cient importance to a piece of evidence which strongly militated against the truth of the prosecution case.
This piece of evidence.
, it was contended, related to the ignition key and the luggage compartment key, produced at the trial.
As we have already observed, the motor car together with the ignition key and luggage compartment key which were attached were handed over to the Excise Authorities for investigating the case in respect of tobacco which was attached with liquor.
The motor car and the keys were produced by the Excise Authorities at the instance of the accused before the Magistrate.
An attempt was made to open the luggage compartment of the motor car by using one of the keys and the trial Magistrate recorded his observations in that behalf.
He has stated that the keys were produced by the Sub Inspector of Central Excise and "with the white key the look of the carrier was tried for thirty minutes.
Oil was allowed to be put.
Even then the lock was not opened.
The yellow key was ,,.hen tried on the petrol tank and was opened immediately.
" It appears, however, from the evidence of Inspector Jambekar that the " 'white key was the ignition key and the yellow was the key of the luggage compartment".
It is true that Head Constable Chodabrey say, that the " 'white key" was the key of the luggage compartment and with that key the first accused bad opened the luggage compartment.
But we fail to appreciate why no attempt was made by the Trial Magistrate to ascertain whether the yellow key could be used for opening the luggage compartment and whether the white key fitted the ignition switch.
In view of this infirmity it is difficult to hold that the story of the finding of the key and the attachment of liquor after opening the luggage compartment of the motor oar was untrue.
394 The case tried by the Trial Magistrate was simple.
Thers is no dispute that the police officers had attached 43 bottles of foreign liquor at the kasheli Naka on the day in question.
It was the case of the accused that these bottles of liquor were not in their possession and Sub Inspector Deshpand made a false panchnama showing that these bottles were found in the luggage compartment of the motor car belonging to the first accused.
The primary question which the trial Magistrate had to consider was about the credibi lity of the prosecution evidence in the light of the defence set up by the accused.
The bottles of foreign liquor attached by the police exceeded Rs.2000/. in value: the trial Magistrate had to consider whether it was reasonably possible that the police officers could procure the bottles to falsely involve the accused, or having attached them from some other person, allow that person to escape and plant them in the motor car of the accused and then make a false panchnama.
No. attempt appears to have been made to examine the evidence in the light of the defence set up or suggested.
It was urged that one Inspector Mane of police station Bhilad was an enemy of the 1st accused.
But that does not explain the conduct of Sub Inspector Deshpande.
It would indeed be difficult for Deshpande to secure this large quantity of foreign liquor, and even if it could be secured no rational ground if; suggested why Deshpande would keep it with him on the possible chance of the first accused arriving at the Kasheli Naka.
The High Court has on a consideration of the evidence of Sub Inspecter Deshpande, the Panch witness Pandu Kamaliya and Head Constable Chodabrey come to the conclusion that the accused Nos. 1, 2 and 5 were guilty of possessing liquor in contravention of the provisions of the Act, and in our view the High Court was right in so holding.
395 But the order of conviction passed by the High Court and the sentence imposed are not according to law.
Section 65 of the Act penalises a person who in contravention of the provisions of the Act, or of any rule, regulation or order made or of any licence, pass, permit or authorization there under (a) imports or exports any intoxicant (other than opium) or hemp, and the expression "import" is defined in section 2(20) as meaning "to bring into the State otherwise than across a customs frontier.
" There is no evidence on the record that the accused or any of them imported the bottles of foreign liquor into the State.
The circumstance that the bottles contained foreign liquor and the accused were residents of the former Portuguese territory of Daman or a locality near about, was not, in our judgment, sufficient to prove that the accused bad imported those bottles.
The High Court was there fore, in our judgment, in error in convicting the accused of the offence under section 65(a).
Again, there is no evidence, and the High Court has considered none, which establishes that two or more persons had agreed to commit or caused to commit any offence under the Act.
Section 83 of the Bombay Prohibition Act provides punishment for conspiracy to commit or cause to commit an offence under the Act.
But an inference of conspiracy cannot be made from the facts proved in this case, viz. that the five accused Were, found in a motorcar which contained in its luggage compartment a number of foreign liquor bottles and some of the accused were blood relations, Conviction for the offence under a. 83 is therefore not warranted by the evidence.
Again, if accused Nos. 1 and 5 are proved to have committed the substantive offence punishable under section 66 (b) of the Act it is difficult to appreciate how they can also be convicted of abetting the commission of that offence.
The offence under section 81 of the Act is therefore also not made out.
The appellants 396 were accordingly liable to be convicted only of the offence under a. 66(b) of the Act, and the maximum term of imprisonment for a first offence punishable under that section is rigorous imprisonment for six months and a fine of Rs. 1, 000/ .
We accordingly modify the order passed by the High Court and maintain the conviction of accused Nos. 1 and 5 under a. 66 (b) and set aside the order of conviction under as.
65 (a), 81 and 83 of the Act and the sentence passed in respect of those offences.
We also modify the sentence imposed by the High Court for the offence under a. 66 (b) of the Act, and direct that each appellant do suffer rigorous imprisonment for six months and pay a fine of Rs. 500/ , and in default of payment of fine do suffer rigorous imprisonment for one month and fifteen days.
Subject to that modification the appeal is dismissed.
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The two appellants, who were tried along with there others, were acquitted by the Judicial Magistrate of charges under sections 65(a),66(b),81 and 83 of the Bombay Prohibition Act, 1949, but were convicted by the High Court in appeal by the State.
The Magistrate found that the prosecution evidence was insufficient to establish conspiracy or abetment in transporting the contraband liquor and tobacco found in the car on search.
The High Court took a different view of the evidence and allowed the appeal so far as the appellants and another were concerned.
It was urged on behalf of the appellants that the search was in contravention of section 103 of the Code of Criminal Procedure and the finding of the contraband articles had not been proved.
Held, that a motor car was not a 'place ' within the meaning of sections 102 and 103 of the Code of Criminal Procedure or the Bombay Prohibition Act, 1949, and section 103 of the Code had therefore no application to a search of a motor vehicle.
Consequently, it was not obligatory upon the Police Officer to comply with the formalities prescribed by that section nor upon the Court to discard the Panchnama or the evidence of the finding of the articles where no witnesses of the locality could be called.
Although the High Court in the convicting the appellants under section 66 (b) of the Prohibitiuontion Act, conviction under sections Act was not sustainable and must rate was in error in discarding the entire evidence because discrepancies therein without appraising its intrinsic value.
387 Held, further that the Code of Criminal Procedure places no special limitation on the powers of the High Court in deal ing with an appeal against acquittal, It can review the evi dence and arrive at its own conclusion.
The presumption of innocence applies with equal, if not greater force in such an appeal and the burden of proving its own case lying as always on the prosecution.
The High Court would not therefore lightly disturb findings arrived at by the trial court on appreciation of the oral evidences
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ivil Appeal No. 3237 of 1991.
From the Judgment and Order dated 10.10.1990 of the Delhi High Court in C.W. No. 3204 of 1990.
Soli J. Sorabjee, S.V. Deshpande and C.L. Sahu, Advs.
for the Appellant.
Dr. Y.S. Chitale, and S.K. Sinha for the Respondents.
The Judgment of the Court was delivered by VERMA, J.
Leave is granted.
Respondent No. 6, Jupiter Cooperative Group Housing Society Limited, was formed in 1979 for providing houses to its 130 members including the appellant Prem Jeer Kumar.
The appellant was earlier the Secretary and then the President of the Society till 1985, by which time substantial con struction had been completed.
The members were allotted three room flat for a sum of Rs. 1, 10,000.
In August, 1985, Respondent No. 3, Registrar, Delhi Cooperative Societies, appointed 784 an Administrator to look into the affairs of the Society since the appel.
lant and other office bearers had held the office for more than two terms.
The controversy giving rise to this proceeding relates to the alleged discrepancy re garding purchase of some building material in January, 1984, for the construction of flats for members of the Society in Vikas Puri at New Delhi.
The New Managing Committee of the Society formed in September, 1986, complained to the Regis trar, COoperative Societies alleging irregularities by the previous Managing Committee of which the appellant was the President.
This matter was referred to arbitration by order dated 12.10.1989 passed by the Joint Registrar (Arbitration) Cooperative Societies, Delhi Administration.
Respondent No, 1, Surender Gandotra was appointed the Arbitrator, who gave his AWard on 1.5. 1990.
The relevant portion of the Award is as under: "It is also interesting to discuss the conduct of these two respondents of this case, Shri Poonam Dhand and Shri P.J. Kumar as they have been moving applications after applications in this court raising vicious and frivolous grounds just to delay the delivery of justice in this case.
The miscellaneous applications relating to the dispute of juris diction of this court and then that since criminal proceedings are pending with the Delhi Police, proceedings in this Court should be kept pending till final decision in the criminal proceedings.
All these applications were properly attended, scrutinized and dis posed of legally.
It is also interesting that despite number of chances/opportunities having been given to the respondent to file reply to the main points of the claimant society, the defendants S/Shri Poonam Dhand and Shri P.J. Kumar did not file any reply and followed delaying and dilatory tactics and to defeat the ends of justice.
Even today 30th April, 1990, fixed for hearing none came from the side of S/Shir Poonam Dhand, P.J. Kumar either presonally or through Advocate.
The advocate of the claimant society Shri Tomar argued that ex parte proceedings may be initiated against the respondents who have absented from these proceedings.
In view of these cricumstances, and the conduct of 'respondents in this case 0right from the very inception of this case, there is no other alternative left for me but to proceed ex parte against the respondents S/Shri Poonam Dhand and P.J. Kumar.
Ex parte award is announced with the following details; .
785 Principal amount to be paid by the respon dents to the Jupiter Cooperative Societies Limited, Vikas Puri, New Delhi.
Rs 1,46,2 10.20 Interest at the rate of 18% from 17.4.1985 till all the dues are cleared by the respond ents.
Cost allowed Rs.5,000.00 With the above observations, ex parte award is given against the respondents S/Shri Poonam Dhand, P.3, Kumar who are jointly and severally responsible to pay the Jupiter Cooperative Group Housing Society Limited, Vikas Puri, New Delhi, principal amount of Rs. 1,46,210.00 NPS plus 18% interest from 17.4.1985 till all the dues are cleared and costs of Rs.5,000.
" , The appellant then filed an appeal under section 76 of the Delhi Cooperative Societies Act, 1972 (hereinafter referred to as 'the Delhi Act ') in the Delhi Cooperative Tribunal (Respondent No. 2) challenging the Award dated 1.5.1990.
The Tribunal held that the Arbitrator 's act of proceeding ex parte against the appellant is justified and taking the view that the appeal had no merit, dismissed the same.
The appellant then filed a writ petition in the High Court challenging the Award and dismissal of his appeal by the Tribunal on 3.7.1990.
The said writ petition has been dismissed by the High Court on 10.10.1990.
It is in these circumstances that the appellant assails the Award, dismiss al of the appeal and then the .writ petition.
The argument of Shri Sorabjee, learned counsel for the appellant, is that it is section 59 and not section 60 of the Delhi Act which applies to the present case.
In reply, Dr. Chitale on behalf of the contesting respondents contended that section 60 relating to arbitration and not section 59 pertaining to surcharge applies to the present case.
Sections59 and 60 of the Delhi Act, insofar as relevant, are quoted hereinbelow: "59.
Surcharge (1) If in the course of an audit, inquiry, inspection or the wind ing up of a cooperative society, it is found that any person, who is or was entrusted with the organisation or management of such society or who is or has at any time been an officer or an employee of the society, has made any payment contrary to this Act, the rules or the bye laWs or has caused any deficiency in the assets of the society by breach of trust or wilful negligence or has misappropriated or fraudulently retained any money 786 or other property belonging to such society, the Registrar may, of his own motion or on the application of the committee, liquidator or any creditor, inquire himself or direct any person authorised by him, by an order in writing in this behalf, to inquire 'into the conduct of such person; Provided that no such inquiry shall be held after the expiry of six years from the date of any act or omission referred to in this sub section.
(2) Where an inquiry is made under sub section (1), the Registrar may, after giving the person concerned an opportunity of being heard, make an order, requiring him to repay or restore the money or property or any part thereof, with interest at such rate, or to pay contribution and costs or compensation to such extent, as the Registrar may consider just and equitable." "60.
Disputes which may be referred to arbitration(1) Notwithstanding anything contained in any law for the time being in force, if any dispute touching the constitu tion, management or the business of a coopera tive society other than a dispute regarding disciplinary action taken by the society or its committee against a paid employee of the society arises (a) among members, past members and persons claiming through members, past members and deceased members, or (b) between a member, past member or person claiming through a member, past member or deceased member and the society, its com mittee or any officer, agent or employee of the society or liquidator, past or present, or (c) between the society or its commit tee and any past committee, any officer, agent or employee, or any past officer, past agent or past employee or the nominee, heirs or legal representatives of any deceased officer, deceased agent, or deceased employee of the society, or (d) between the society and any other cooperative society, between a society and liquidator of another society 787 or between the liquidator of another society.
such disputes shall be referred to the Regis trar for decisior and no court shall have jurisdiction to entertain any suit other proceedings in re spect of such dispute. (2) For the purposes of sub section (1), the following shall be deemed to be disputed touching the constitution management or the business of a cooperative society namely (a) a claim by the society for any debt or demand due to it from a member or the nominee, heirs or legal rep resentatives of a deceased member, whether such debt of demand is admitted or not; (b) a claim by a surety against the principal debtor where the society has recov ered from the surety any amount in respect of any debt or demand due to it from the princi pal debtor as a result Of the default of the principal debtor, whether such debt or demand is admitted or not; (c) any dispute arising in connection with the elec tion of any officer of a society other than a society mentioned in sub section (1) of section 31.
(3) If any question arises whether a dispute referred to the Registrar under this section is or is not a dispute touching the consitution, management or the business of cooperative society, the decision thereon of the Registra shall be final and shall not be called in question in an court.
i (4) . . . ." In substance the contention of the learned counsel for the appeal lant is that the proper action to take in such a case is to resort to section 59 dealing with surcharge and not to settlement of dispute by arbitration since it is not one of the disputes which may be referred to arbitration in terms of section 60 of the Delhi Act.
It was argued that sub section (2) of section 60 is exhaustive and not merely illustrative, which shows that the present dispute does not fall within the ambit 0 section 60.
Dr. Chitale, on the other hand, asserted that it is sub 788 section (1) of section 60 which indicates the true scope of section 60 while sub section (2) is merely illustrative and no exhaustive.
It was urged that clause (c) of sub section (1) of section 60 expressly provides that if any dispute touching the constitution, ' management or the business of the cooperative society arises between the society or its committee and any past committee, any officer, agent or employee or any past officer of the society, the dispute shall be refered to arbitration.
Reliance is placed on behalf of the appellant on Chander Nagar Cooperative House Building Society Ltd. and Anr.
vs Ashok Ohri, A. 1.
R. 1976 63 Delhi 299 wherein the learned Single Judge took the view that sub section (2) of section 60 of the Delhi Act is exhaustive and not merely illustra tive.
That decision overlooks the decision of this Court in Srirakulu referred hereafter and conflicts with it.
Further consideration of the same is, therefore, not necessary.
Dr. Chitale placed reliance in Pentakota Srirakulu vs The Cooperative Marketing Society Ltd.; , to contend that this point was concluded against the appellant.
In our opinion, the contention of Dr. Chitale has to be accepted.
The decision of this Court in Srirakulu was ren dered 'with reference to the Madras Cooperative Societies Act, 1932 (hereinafter referred to as 'the Madras Act ') wherein section 51 relating to settlement of disputes by arbitration was the provision corresponding to section 60 of the Delhi Act Clause (c) of sub section (L) of section 51 of the Madras Act was substantially the same as clause (c) of sub section (1)of section 60 of the Delhi Act.
The explana tion in sub section (1) of section 51 of the Madras Act was substantially similar to clause (a)of sub section (2) of section 60 of the Delhi Act.
The material part of section 51 of the Madras Act, on the basis of which the decision was endered in Srirakulu quoted therein is as under " section 51 Arbitration: Disputes: 51.
(1) If any dispute touching the business of a registered society (other than a dispute regarding disciplinary action taken by the society or its committee against a paid servant of the society) arises (a) . . . . . . . (b) . . . . . . 789 (c) between the society or its com mittee and any past committee, any officer, agent or servant, or any past officer, past agent or past servant, or the nominee, heirs or legal representatives of any deceased officer, deceased agent or deceased servant, of the society, or (d) . . . . . .
Explanation A claim by a registered society for any debt or demand due to it from a member, past member or the nominee, heir or legal representative of a deceased member, whether such debt or demand be admitted or not, is a dispute touching the business of the society within the meaning of this sub sec tion.
" In the Madras Act, section 49 was the provision correspond ing to section 59 of the Delhi Act.
It was, therefore, on the basis of similar corresponding provisions that the question arose for decision of this Court in Srirakulu.
In Srirakulu also the facts disclosed in the inquiry that certain loss was caused to the society by the acts of past Managing Committee and, therefore, a special officer ap pointed to look into the affairs of the society made a claim under section 51 of the Madras Act before the Registrar against the past President of the Society: It was held that the Registrar 's order under section 51 of the Madras Act could not be challenged.
We do not find any significant difference between the provisions of the Madras Act which form the basis .of this Court 's decision in Srirakulu and sections 59 and 60 of the Delhi Act with which we are con cerned to justify taking a different view as suggested by learned.
counsel for the appellant.
Following the view taken in Srirakulu, this appeal must fail.
Consequently, the appeal is dismissed with costs quantified at Rs.5,000.
N.P.V. Appeal dis missed.
|
On a complaint made by the Managing Committee of the 6th respondent Cooperative Housing Society, the third respond ent, Registrar, Cooperative Societies, referred the dispute relating to irregularities in the purchase of building material for construction of flats for members of society by the past Managing Committee, of which the appellant was the President at the relevant time, to arbitration.
The first respondent Arbitrator, gave his ex parte award, on the failure of the appellant and another person to file their reply to the claim of the claimant society, and directed the appellant and the other person to pay the society certain sum with interest thereon.
The appellant challenged the award before second re spondent, the Delhi Cooperative Tribunal, which dismissed the same holding that the Arbitrator 's act of proceeding ex parte was justified and that the appeal had no merit.
The appellant 's writ petition was also dismissed by the High Court.
In the appeal before this Court on behalf of the appel lant it was contended that it was Sec.
59 dealing with surchage which was applicable to the instant case and not Section 60, which pertained to settlement of disputes by arbitration since the dispute in question was one which could not be referred to arbitration in terms of Section 60 of the Act.
On behalf of the contesting respondents it was submitted that it was Section 60, which was applicable and not Section 59.
Dismissing the appeal, this Court, HELD: 1.1 Sub Section (1) of Section 60 of the Delhi Co operative 783 Societies Act, 1972 indicates the true scope of the Section 60, while sub section (2) is merely illustrative, and not exhaustive.
Clause (c) of sub section (1) expressly provides that if any dispute touching the constitution/management or the business of the cooperative society arises between the society or its committee and any past committee.
any offi cer, agent or employee or any past officer of the society, the dispute should be referred to the arbitration.
[787H, 788A B, D] 1.2 In the instant case, the dispute, viz. irregulari ties in the purchase of building material for construction of flats for the members of the Society by the previous Managing Committee, touches the management of the Society and fails within the ambit of Section 60 of the Act.
The third respondent, Registrar, Cooperative, Societies was, therefore, right in referring the dispute to arbitration.
[789D F] Pentakota Srirakulu vs The Cooperative Marketing Society Ltd. ; , followed.
Change Nagar Cooperative House Building Society Ltd. and Anr.
Ashok Ohri, AIR 1976 63 Delhi 239, disapproved.
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Appeal No. 226 of 1963.
95 Appeal from the judgment and order dated August 1, 1961, of the Calcutta High Court in Income tax Reference No. 75 of 1956.
section Chaudhuri, D. N. Mukherjee and D. N. Gupta, for the appellant.
K. N. Rajagopal Sastri and R. N. Sachthey, for the res pondent.
May 1, 1964.
The Judgment of the Court was delivered by SHAH J.
The appellant is a public limited company.
and has its registered office at Calcutta.
By an agreement dated May 1, 1925, the Fort William Jute Company Ltd. appointed the appellant its managing agent upon certain terms and conditions set out therein.
Under the agreement the appellant was to receive as managing agent remuneration at the rate of Rs. 3,000 per month, commission at the rate of ten per cent on the profits of the company 's working, additional commission at three per cent on the cost price of all new machinery and stores purchased by the managing agent outside India on account of the company, and interest on all advances made by the managing agent to the company on the security of the company 's stocks, raw materials and manufactured goods.
The appellant and its successors in business, whether under the same or any other style or firm, unless they resigned their office were entitled to continue as managing agent until they ceased to hold shares in the capital of the company of the aggregate nominal value of Rs. 1,00,000 and were on that account removed by a special resolution of the company passed at an Extraordinary meeting of the company, or until the managing agent 's tenure was determined by the winding up of the company.
In the event of termination of agency in the contingencies specified, the managing agent was to receive such reasonable compensation for deprivation of office, as may be agreed upon between the managing agent and the company and in case of dispute, as may be determined by two arbitrators.
By cl. 8, the managing agent was at liberty at any time to resign the office of managing agent by leaving at the registered office of the company previous notice in writing of its intention in that behalf.
The agreement did not specify any period for which the managing agency was to enure.
Since the successors of the appellant were also to continue as agents, unless they resigned or became disqualified, the duration was in a sense unlimited.
But by virtue of section 87 A(2) of the Indian Companies Act, 1913, the appointment of the appellant as managing agent would expire on January 14, 1957, i.e. on the expiry of twenty years from the date on which the Indian Companies (Amendment) Act, 1956, was brought into operation.
Section 87 A(2), however, did not prevent the managing agent from being re appointed after the expiry of that period.
Beside the managing agency of the Fort William Jute Co. Ltd. the appellant held at all material time managing agencies of five other limited companies, viz., Fort Closter Jute Manufacturing Co. Ltd., Bowreach Cotton Mills Co. Ltd., Dunbar Mills Ltd., Mothola Co. Ltd and Joonktollee Tea Co. Ltd. The appellant had advanced Rs. 12,50,000 to the Fort William Jute Co. Ltd. on the security of the stocks, raw materials and manufactured goods of that company.
The appellant held in 1952, 600 out of 14,000 ordinary shares of the face value of Rs. 100 each.
and 6,920 out of 10,000 preference shares also of the face value of Rs. 100 each.
On May 21, 1952, the appellant entered into an agreement with M/s Mugneeram Bangur & Co., the principal conditions of which were: (i) M/s Mugneeram Bangur & Co. to purchase the entire holding of shares of the appellant in the Fort William Jute Co. Ltd. ordinary shares at Rs. 400 each and preference ,hares at Rs. 185 each, and to make an offer to all holders of the company 's shares preference and ordinary to purchase their holdings at the same rates; (ii) M/s Mugneeram Bangur & Co. to procure repayment on or before June 30, 1952 of all loans 97 made by the appellant to the principal company; (iii) M/s Mugneeram Bangur & Co. to procure that the principal company will compensate the appellant for loss of office in the sum of Rs. 3,50,000, such sum being payable to the appellant after it submitted its resignation as managing agent; and (iv) M/s Mugneeram Bangur & Co. to reimburse the company the amount payable to the appellant.
The reasons for which the appellant agreed to relinquish the managing agency were set out in a letter dated May 28, 1952, addressed by the appellant to the members of the company intimating that M/s Mugneeram Bangur & Co. were willing to purchase the shares at the same rates at which they had agreed to purchase the share holding of the appellant.
It was recited in the letter that the installation of modern machinery in the company 's factory entailed heavy capital expenditure and it was necessary to obtain a loan secured by debentures charged on the company 's property; that large sums were required for renewals and replacements of machinery and it was not possible to obtain additional bank accommodation; that the appellant had maade large advances to the company exceeding Rs. 12,50,000 and, having regard to its other commitments, it was doubtful if it would be able to make available to the company addiional finance; that the arrangement with M/s Mugneeram Bangur & Co., by acceptance of the terms offered by them, was the most satisfactory method of solving the company 's difficulties; that it was in the best interests of the shareholders to terminate the appointment of the appellant which in the normal course would not fall due for renewal until January 14, 1957; that M/s Mugneeram Bangur & Co. had agreed to procure that the Fort William Jute Co. Ltd. will pay to the appellant Rs. 3,50,000 and that M/s Mugneeram Bangur & Co. will reimburse the company for the payment, it being anticipated that they will in Line course be appointed managing agents of the company.
98 The arrangement with M/s Mugneeram Bangur & Co. was carried out.
The appellant tendered its resignation with effect from July 1, 1952, in pursuance of the terms of the agreement and M/s Mungneeram Bangur & Co. were appointed as managing agent of the company.
The sum of Rs. 3,50,000 received by the appellant from the company which it is common ground was provided by M/s Mugneeram Bangur & Co. was credited in the profit and loss account of the appellant as received from the Fort William Jute Co. Ltd. on account of compensation for loss of office.
But in arriving at the net profit in the return for income tax for the year 1953 54 this amount was deleted.
In the proceedings for assessment for the year 1953 54 the Incometax Officer, Companies District 1V, Calcutta, included this amount in the appellant 's taxable income.
In appeal the Appellate Assistant Commissioner modified the assessment holding that the sum of Rs. 3,50,000 received by the appellant as compensation for surrendering the managing agency, which was to enure for five years more, and which in normal course might have continued for another term of twenty years, was a capital receipt.
The Appellate Tribunal confirmed the order of the Appellate Assistant Commissioner, observing that compensation received tinder an agreement for "an outright sale of such an agency to a third party", not being one which a businessman enters in the normal course of business, nor being one which amounts to modification, alteration or discharge of normal incidents of such a business, was not assessable to income tax as a revenue receipt.
At the instance of the Commissioner of Income tax, the Tribunal referred under section 66(1) of the Income tax Act, 1922, the following question to the High Court of Judicature at Calcutta: "Whether on the facts and in the circumstances of the case the sum of Rs. 3,50,000 received by the assessee to relinquish the managing agency was a revenue receipt assessable under the Indian Income tax Act?" 99 The High Court, for reasons which we will presently set out, answered the question in the affirmative.
With certificate granted by the High Court, this appeal is preferred by the appellant.
This case raises once again the question whether com pensation received by an agent for premature determination of the contract of agency is a capital or a revenue receipt.
The question is not capable of solution by the application of any single test: its solution must depend on a correct appraisal in their true perspective of all the relevant facts.
As observed in Commissioner of Income tax Nagpur vs Rai Bahadur Jairam Valji(1) by Venkatarama Aiyar, J.,: "The question whether a receipt is capital or income has frequently come up for determination before the courts.
Various rules have been enunciated as furnishing a key to the solution of the question, but as often observed by the highest authorities, it is not possible to Jay down any single test as infallible or any single criterion as decisive in the determination of the question, which must ultimately depend on the facts of the particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a decision.
Vide, Van Den Berghs Ltd. vs Clark [(1935) 3 I.T.R. (Engl.
Cas.) 17].
That, however is not to say that the question is one of fact, for as observed in Davies (H. M. Inspector of Taxes) vs Shell Company of China Ltd. (1952) 22 I.T.R. (Suppl.) 1) these questions between capital and income, trading profit or no trading profit, are questions which, though they may depend no doubt to a very great extent on the particular facts of each case, do involve a conclusion of law to be drawn from those facts '.
" (1) [1959] SUPP.
1 S.C.R. 110, 113. 100 The interrelation of facts which have a bearing on the ques tion propounded must therefore first be determined.
The managing agency was not, except in the circumstances set out in cl. 2 of the agreement, liable to be determined at the instance of the company before January 14, 1957, unless the appellant by giving notice of three weeks voluntarily resigned the agency.
At the date of termination the agency had five more years to run, and the Campanies Act did not prohibit renewal of the agency in favour of the appellant, after the expiry of the initial period of twenty years.
The appellant company was formed for the object, amongst others, (vide cl.
3(2) of the Memorandum of Association of the appellant) of carrying on the business of managing agencies.
The appellant was entitled under the terms of the agreement to receive so long as the agency enured 'Len per cent of the profits of the company 's working, three per cent on all purchases of stores and machinery abroad, and a monthly remuneration of Rs. 3,000.
The appellant submitted its resignation in exercise of the power reserved under cl. 8 of the managing agency agreement, but that resignation was it is common ground part of the arrangement with M/s Mugneeram Bangur & Co. dated May 21, 1952.
Under the terms of the managing agency agreement, the principal company was not obliged to pay any compensation to the appellant for voluntary resignation of the agency, but in consideration of the appellant parting with its shareholding and submitting resignation of the managing agency so as to facilitate the appointment of M/s Mugneeram Bangur & Co. as managing agent, the latter purchased the shareholding of the appellant, undertook to make available Rs. 3,50,000 for payment to the appellant and to discharge the debt due by the company to the appellant.
Payment of Rs. 3,50,000 was therefore an integral part of an arrangement for transfer of the managing agency.
A managing agency of a company is in the nature of a capital asset: that is not denied.
It is true that it is not like an ordinary asset capable of being transferred from one person to another.
Theoretically the power to appoint or dismiss the managing agent may lie with the directors of the company, but in practice the power lies with the person or per 101 sons having a controlling interest in the share holding of the company.
M/s Mugneeram Bangur & Co. were anxious to be appointed managing agents of the principal company, and for the purpose the appellant had to be persuaded to agree to a premature termination of its agency.
This was secured for a triple consideration; sale of shares held by the appellant at an a reed price, stipulation to discharge the liability of the company to repay the loans due by the company, and payment of Rs. 3,50,000 as compensation for termination of the appellant 's agency.
The High Court summarised the effect of the agreement between the appellant and M/s Mugneeram Bangur & Co. as follows: The sum of Rs. 3,50,000 described as compensation for loss of office of the managing agent was part of the whole scheme incorporated in the agreement.
Each clause of the agreement was a consideration of the other clauses and payment of compensation for the alleged loss of office did not, being part of the total scheme, stand by itself.
Determination of the managing agency of the appellant was not compulsory cessation of business: it was a voluntary resignation for which under the agency agreement the appellant was not entitled to any compensation, but by the device of procuring a purchaser the appellant was doing "business of selling the managing agency and getting a profit and value for it which it otherwise could not have got".
The High Court stamped this transaction with the nature and character of a "trading or a business deal", because in their view the managing agency of a company an institution peculiar to Indian business conditions which creates a managing agent as an alter ego.
of the managed company with authority to utilise the existing structure of the company 's Organisation to carry on business, earn profits, and in fact, virtually to trade in every possible sphere open to the company, may.
be regarded as circulating capital, where several managing agencies are conducted by an assessee.
Therefore in the view of the High Court the compensation received for surrendering the agency was remuneration received on account of conducting the business, and was income.
The judgment of the High Court proceeded substantially upon the following two grounds: 102 (1) that on the facts of the case, the managing agency held by the appellant of the Fort William Jute Co. Ltd. was stock in trade; and (2) that the appellant was formed with the object of acquiring managing agencies, and in fact held managing agencies of as many as six com panies.
Earning profits by conducting the management of companies, being the business of the appellant, compensation received as consideration for surrendering the managing agency was a revenue receipt.
We are unable to agree with the High Court that the managing agency of the Fort William Jute Co. Ltd. was an asset of the character of stock in trade of the company.
The appellant was formed with the object, among others, of acquiring managing agencies of companies and to carry on the business and to take part in the management, supervision or control of the business or operations of any other company, association, firm or person and to make profit out of it.
That only authorised the appellant to acquire as a fixed asset, if a managing agency may be so described, and to exploit it for the purpose of profit.
But there is no evidence that the company was formed for the purpose of acquiring and selling managing agencies and making profit by those transactions of sale and purchase.
A managing agency is not an asset for which there is a market, for it depends upon the personal qualifications of the agent.
Counsel appearing on behalf of the Commissioner concedes that the case that the managing agency was of the nature of stock in trade was not set up before the Tribunal, and he does not rely upon this part of the reasoning of the High Court in support of the plea that the compensation received by the appellant is a revenue receipt.
He relies upon the alternative ground, and contends that the managing agency of the Fort William Jute Co. Ltd. was part of the framework of the business of earning profit by working as managing agent of different companies, and in the normal course, termination of employment by the principal companies of the appellant as managing agent being a normal incident of such business, compensation received by the appellant is 103 not for loss of capital, but must be regarded as a trading receipt especially when the termination of the agency does not impair the structure of the business of the appellant.
In the present case there is a special circumstance which must first be noticed.
In truth the amount of Rs. 3,50,000 was received by the appellant from M/s Mugneeram Bangur & Co. in consideration of the former agreeing to forego the agency which it held and which M/s Mugneeram Bangur & Co. were anxious to obtain.
It was in a business sense a sale of such rights as the appellant possessed in the agency to M/s Mugneeram Bangur & Co. This is supported by the recitals made in cl. 2 of the agreement that if at any time within six months after the completion of such sale, M/s Mugneeram Bangur & Co. were unable to exercise the voting rights attached to the shares purchased by them the appellant will appoint any person nominated by M/s Mugneeram Bangur & Co. to attend and vote for them at any meeting of the company or the holders of any class of shares to be held within such period in such manner as M/s. Mugneeram Bangur & Co. may decide.
The object underlying the agreement was therefore to transfer he managing agency to M/s Mugneeram Bangur & Co. or at least to effectuate their appointment in place of the appelant as managing agent of the Fort William Jute Co. Ltd. All the stipulations and the covenants of the agreement, viewed in the light of the surrounding circumstances, do stamp the transaction as one of surrender of the rights of the appellant in the managing agency so that corresponding rights may arise in favour of M/s. Mugneeram Bangur & Co. It would be irrelevant in considering the true nature of he transaction, to project the somewhat legalistic con sideration that a managing agency is not transferable.
It is because it is not directly transferable, that the arrangement incorporated in the agreement was effected.
It would be difficult to regard such a transaction relating to a managing agency as a trading transaction.
Counsel for the assessee contended that even assuming at the form of the transaction under which for loss of the managing agency the appellant received compensation from the principal company is decisive, or has even a dominant 104 impact, and the ultimate source from which the compensation was provided is to be ignored, the compensation received for loss of agency by the agent must always be regarded under the Indian Income tax Act as capital receipt.
In support of that contention counsel placed strong reliance upon the judgment of the Judicial Committee in Commissioner of Income tax vs Shaw Wallace and Co.( ').
In the alternative, counsel pleaded that even if the extreme proposition was not found acceptable, the right of the assessee in the managing agency of the principal company was to enure for another five years and which in the normal course would have continued for another twenty years was an enduring asset and consideration received by the appellant for extinction of that asset was a capital receipt.
On behalf of the Income tax Department it was contended that Shaw Wallace & Co 's case( ') does not lay down any proposition of general application to compensation paid for determination of all agency contracts.
It was further submitted that, having regard to the nature of the agreement and the voluntary resignation submitted by the assessee no enduring asset remained vested in the assessee, and none was attempted to be transferred: the compensation directly paid by the principal company (which compensation was under the terms of the contract not payable) was only a "measure of profit" which the appellant would, but for the resignation, have earned, and was therefore in the nature of revenue.
It was also urged that compensation was not payaable to the assessee when resignation of the mainaging agency was tendered under cl. 8 of the agreement, and therefore the amount sought to be brought to tax was received by the assesseein the course of a normal trading transaction ofthe assessee.
Finally, it was urged that in any event, bythe loss ofthe agency the framework of the business ofthe assessee was not at all impaired, and therefore also the compsensation received must be regarded as revenue and no capital.
Whether a particular receipt is capital or income from business, has frequently engaged the attention of the court It may be broadly stated that what is received for loss of cap (1) L. R. 59 I. A. 206 105 tal is a capital receipt: what is received as profit in trading transaction is taxable income.
But the difficulty arises in ascertaining whether what is received in a given case is compensation for loss of a source of income, or profit in a trading transaction.
Cases on the borderline give rise to vexing problems.
The Act contains no real definition of income; indeed it is a term not capable of a definition in terms of a general formula.
Section 2(6C) catalogues broadly certain categories of receipts which are included in income.
It need hardly be said that the form in which the transaction which gives rise, to income is clothed and the name which is given to it are irrelevant in assessing the exigibility of receipt arising from a transaction to tax.
It is again not predicated that the income must necessarily have a recurrent quality.
We are not called upon to enter upon an extensive area of enquiry as to what receipts may be regarded as income generally, but merely to consider in this case whether receipt of compensation for surrendering the managing agency may be regarded as capital or as revenue.
In the absence of a statutory rule, payment made by an employer in consideration of the employee releasing him from his obligations under a service or agency agreement or a payment made voluntarily as compensation for determination of right to office arises not out of employment, but from cessation of employment and may not generally constitute income chargeable under sections 10 and 12.
It may be mentioned that this rule has been altered by the legislature by the enactment of section 10(5A) by the Finnance Act of 1955, which provides that compensation or other payment due to or received by a managing agent of an Indian company at or in connection with the termination or modification of his managing agency agreement with the company, or by a manager of an Indian company at or in connection with the termination of his office or modification of the terms and conditions relating thereto, or by any person managing the whole or substantially the whole affairs of any other company in the taxable territories at or in connection with the termination of his office or the modification of the terms and conditions relating thereto, or by any person holding an agency in the taxable territories for any part of the 106 activities relating to the business of any other person, at or in connection with the termination of his agency or the modification of the terms and conditions relating thereto, shall be deemed to be profits and gains of a business carried on by the managing agent, manager or other person, as the case may be, and shall be liable to tax accordingly.
But this amendment was made under the Finance Act,, 1955, with effect from April 1, 1955, and has no application to the present case.
The Indian Income tax Act is not in pari materia with the English Income tax Statutes.
But the authorities under the English Law which deal not with the interpretation of any specific provision, but on the concept of income, may not be regarded as proceeding upon any special principles peculiar to the English Acts so as to render them inappli cable in considering problems arising under the Indian Income tax Act.
It is well settled in England that money paid to compensate for loss caused to an assessee 's trade is nor income.
In Short Bros. Ltd. vs The Commissioner of Inland Revenue(l) a sum received as compensation for loss resulting from cancellation of a contract was held to be revenue in the ordinary course of the assessee 's trade, and liable to excess profits duty.
Similarly in The Commissioners of Inland Revenue vs The North fleet Coal and Ballast Co. Ltd.( '), compensation paid by a person who had agreed to purchase a certain quantity of chalk yearly for ten years, from a company which was the owner of a quarry, in consideration of being relieved of his liability under the contract was held chargeable to excess profits duty as trading profit in the hands of the company.
In The Commissioners of Inland Revenue vs Newcastle Breweries Ltd.(3) compensation received under an order of the War Compensation Court, under the Indemnity Act, 1920, in addition to what was paid by the Admiralty for rum taken over in exercise of the power under the Defence of the Realm Regulations was held to be revenue.
(1) (3) (2) 107 In Ensign Shipping Co. Ltd. vs The Commissioner of Inland Revenue( ') an amount paid by the Government to a ship owner to compensate him for loss resulting from detention of his ships during a coal strike, and for wages etc.
was held liable to excess profits duty.
Again as held in Burma Steam Ship Co. Ltd. vs Commissioners of Inland Revenue( ') money received by a ship owner from a firm of ship builders to compensate for loss resulting from the failure by the latter to complete repairs to a ship within the stipulated period was regarded as revenue.
These cases illustrate the principle that compensation for injury to trading operations, arising from breach of contract or in consequence of exercise of sovereign rights, is revenue.
These cases must, however, be distinguished from another class of cases where compensation is paid as a solatium for loss of office.
Such compensation may be regarded as capital or revenue: it would be regarded as capital, if it is for loss of an asset of enduring value to the assessee, but not where payment is received in settlement of loss in a trading transaction.
In Chibbet vs Joseph Robinson & Sons 3) the assessees who were ship managers employed by a steamship company under a contract which provided that they should be paid a percentage of ,he company 's income, were paid compensation for loss of office in anticipation of liquidation of the steamship company.
It was held that payment to make up for loss resulting from cessation of profits from employment was not itself an annual profit, but was payment in respect of termination of employment and was not assessable to tax.
In Du Cros vs Ryall (4) the assessee settled a claim made by his employee for damages for wrongful dismissal and paid 57,250 as compensation for wrongful dimissal.
It was held that No. part could be apportioned to salary and commission and the whole escaped assessment.
In Duff vs Barlow( ') the managing director of the appellant company who was employed for a period of ten (1) i2 T. C. 1169.
(3) (2) (5) (4) 19 T. C 444.
108 years was asked by it to manage the business of one of its subsidiaries, and to receive a percentage of profits made by the subsidiary.
The employment was terminated by mutual agreement two years after its commencement and 4,000 were paid as compensation to the managing director for loss of his rights of future remuneration.
This was held not taxable.
because it was a sum paid as compensation for loss of a source of income and hence a capital asset.
This case was followed in Henley vs Murray( ') where the appellant employed as a managing director of a property company under a service agreement which was not determinable till March 31, 1944, was also appointed a director of a subsidiary company.
At the request of the Board of directors of the property company the appellant resigned his office in the property company as well as its subsidiary and received from the property company an amount equal to the remuneration which he would, under the agreement, have been entitled to, if his appointment had not been determined.
It was held by the Court of Appeal that the use of the expression "compensation for loss of office" ' was not the determining factor when the bargain itself stood cancelled, and the sum paid was in consideration of total abandonment of all contractual rights which the other party had.
The receipt was in the circumstances not taxable.
The payment was not voluntarily made; the bargain was that the appellant should resign and in consideration thereof, In Barr, Grombie and Co. Ltd. vs Commissioners of Inland Revenue( ') the appellant company managed the ships of another company under an agreement for a period of fifteen years.
The shipping company went into liquidation and a sum exceeding pound 16,000 was paid to the appellant company for the eight years which were still to run to the date of expiry of the agreement.
Over a period upwards of sixteen years only two per cent of the appellant company 's income was derived from other managements, and on the liquidation of the shipping company the appellant company lost its entire business except for some abnormal and temporary business.
It was held by the Court of Ses (1) (2) 109 sion in Scotland that the sum in question was not a trading receipt of the appellant company.
Lord President Normand observed: "In the present case virtually the whole assets of the Appellant Company consisted in this agreement.
When the agreement was surrendered or abandoned practically nothing remained of the Company 's business.
It was forced to reduce its staff and to transfer into other premises, and it really started a new trading life.
Its trading existence as practised up to that time had ceased with the liquidation of the shipping Company.
" These cases establish the distinction between compensation for loss of a trading contract and solatium for loss of the source of income of the assessee.
But payment Of compensation for loss of office is not always regarded as capital receipt.
Where compensation is payable under the terms of the contract, which is determined, payment is in the nature of revenue and therefore taxable.
For instance in Henry vs Foster( ') it was held that when compensation stipulated under a contract is paid for loss of office, it is taxable under Sch. 'E ', and it was also held in Dale vs De Soissons(2) that compensation paid under an agreement to an Assistant of the managing director for premature termination of employment was held to be income.
The principle on which these cases proceeded was also applied by the Court of Session in Scotland in Kessal Parsons and Co. vs Commissioners of Inland Revenue(3) to a case in which there was no express term for payment of compensation on termination of employment.
The appellants in that case carried on business as agents on a commission basis for sale in Scotland of the products of various manufacturers, and entered into agency agreements for that purpose.
At the instance of the manufacturer concerned, one of the agreements which was for a period of three years was terminated at the end of the (1) (3) ; , 520 (2) 110 second year in consideration of a payment of pouns_ 1,500.
It was held by the Court of Session that no capital asset of the assessee was depreciated in value, or became of less use for the purpose of the assessee 's business.
The sum paid was accordingly included in the calculation of the taxable profits for the year in which it was received.
Lord President Normand Observed.
"We are not embarrassed here by the kind of difficulties which arise when, by agreement, a benefit extending over a tract of future years is renounced for a payment made once and for all.
The sum paid in this case is really and substantially a surrogatum for one year 's profits.
" The foundation of the distinction made in Kelsall Parsons and Co. 's case( '): Henry vs Foster( '): and Dale vs De Soissons(3) is to be found in the observations made by Lord Macmillan in Van Den Berchs Ltd. vs Clark( ').
In that case two companies which were manufacturers of ,margarine an margarine and similar products entered into an agreement with a view to end competition between them and to work in friendly alliance and to share the profits and losses in accordance with an elaborate scheme.
This arrangement was terminated by mutual agreement in consideration of the payment by the Dutch company pound 450,000 to the appellant company as damages.
It was held by the House of Lords that the amount was received by the appellant as payment for cancellation of the appellant company 's future rights under the agreements, which constituted a capital asset of the company, and that it was a capital receipt.
lord Macmillan observed.
"Now what were the Appellants giving up? They gave up their whole rights under the agreements for thirteen years ahead.
These agreements are called in the States Case "pooling agreements", but that is a very inadequate description of them, for they did much more than (1) ; ,620 (2) [1931] 145 L.T.R. 225 (3) [I950] 2 All E.R. 460 (4) ; , 431 111 merely embody a system of pooling and sharing profits.
If the Appellants were merely.
receiving in one sum down the aggregate of profits which they would otherwise have receiv ed over a series of years, the lump sum might be regarded as of the same nature as the ingredients of which it was composed.
But even if a payment is measured by annual receipt, it is not necessarily in itself an item of income.
" Cases which have lately arisen before the Courts in the United Kingdom have elaborated this distinction.
In Commissioner of Inland Revenue vs Fleming and Co.( ') the Court, of Session held following Kelsall Parsons & Cos ' case( '), that compensation paid to the assessee who carried on business as manufacturers ' agent and general merchants and had acted as the sole agents since 1903 for certain products of the manufacturers for termination in 1948 of the agency at the instance of the manufacturers was regarded as revenue.
In the view of Lord President Cooper the cases relating to determination of agencies, broadly speaking, fell on two sides of the line drawn in the light of the varying circumstances: (a) "the cancellation of a contract which affects the profit making sructure of the recipient of compensation and involves the loss of an enduring trading asset"; and (b) "the cancellation of a contract which does not affect the recipient 's trading structure nor deprive him of any enduring trading asset, but leaves him free to devote his energies and Organisation released by the cancellation of the contract to replacing the contract which has been lost by other like contracts", and held that the case fell within the second class, and not the first.
In Wiseburgh vs Domville(3) the appellant had entered into an agreement in 1942 under which he acted (1) (3) 36 T. C. 527 (2) ; , (20 112 as sole agent for the manufacturer.
In 1948 when this agreement could have been determined by notice expiring in October 1949, the manufacturer dismissed him.
The appellant received pound 4,000 as damages for breach of agreement.
The appellant had several agencies from time to time as agents and it was one of the incidents of agency business that one agency may be stopped and another may come and it being a normal incident of the kind of business that the appellant was doing, that an agency should come to an end, compensation paid was regarded as income on the principle laid down in Kelsall Parsons and Co. 's case( ').
In another case which soon followed Anglo French Exploration Co. Ltd. vs Clayson(2) the appellant company carried on business, among others, is secretary and agent for a number of other companies.
A South African Company appointed the appellant company as its secretary and agent at a remuneration of pound 1,500 per annum tinder a contract terminable at six months ' notice.
Under an arrangement with the purchaser of the controlling interest of the shareholders under which the appellant company was to resign its office as secretary and agent of the South African Company, an amount of pound 20,000 received by the appellant company was held by the Court of Appeal in the nature of a trading receipt.
In Blackburn vs Close Bros. Ltd.( ') the respondent company carried on business of merchant bankers and of a finance and issuing house and derived income in the form of allowances for performing managerial and secretarial services.
Following a dispute with one 'S ' for which the respondent company had agreed to provide secretarial services for three years at a remuneration of pound 8,000 per annum, the agreement was terminated within about 2 1/2 months from the date of its commencement.
pound 15,000 received by the respondent company as compensation for termination of the agreement was held to be a trading receipt.
Pennycuick J., held that the contract was one of a number of ordinary commercial contracts for rendering (2) (1) ; , 620 113 services by the assessee in the course of carrying on its trade, and therefore the sum received on the cancellation of the agreement was a receipt of a revenue nature.
It is manifest that the principle broadly stated in the earlier cases, that compensation for loss of office, or agency, must be regarded as a capital receipt, has not been approved in later cases.
An exception has been engrafted upon that principle that where payment even if received for termination of an agency agreement, the agency is one of many which the assessee holds, and the termination of the agency does not impair the pofit making structure, but is within the framework of the assessee 's business, it being a necessary incident of the business that existing agencies may be terminated and fresh agencies may be taken, the receipt is revenue and not capital.
A case on the other side of the line may be noticed: Sabine vs Lookers Ltd.( ').
Under agreements, annually renewed with the manufacturers, the respondent company had acted for many years as their main distributors in the Manchester area of the manufacturers ' products, which it bought for resale.
The respondent had sunk considerable sums in fixtures and equipment specially designed for the trade of wholesale dealers and carried a large stock of spare parts mainly for wholesale sale.
The whole of the trade of the respondent was geared to the display, sale, service and repairs of the manufacturers ' products.
Upto 1952 inclusive,, the manufacturers had included in its agreements with distributors a standard "continuity clause, giving the distributors, on certain conditions, the option of renewal for a further year.
But in 1953, the manufacturers adopted a new standard agreement, containing a new continuity clause which the respondent company regarded as giving it less security than before.
As compensation for loss resulting from the alterations, the manufacturers paid to the respondent company, a sum calculated on sales to the trade during the contract period.
It was held that this was a capital receipt, because, by the, modification the framework of the respondent 's business was impaired.
(1) 114 Elaborate arguments were presented before us on the decision of the Judicial Committee in Shaw Wallace & Co. 's Case( ').
The appellant contended that Shaw, Wallace 's Case( ') laid down a principle of general application applicable to all cases of compensation received from the principal as solatium for determination of the contract of agency.
Counsel for the Revenue contended that the principle should be restricted to its special facts, and cannot be extended in view of the later decisions.
It is necessary to closely examine the facts which gave rise to that case.
Shaw Wallace & Company carried on business as merchants and agents of various companies and had branch offices in different paris of India.
For a number of years they acted as distributing agents in India for the Burma Oil Company and the Anglo Persian Oil Company, but without a formal agreement with either company.
The two Oil Companies having combined decided to make other arrangements for distributing their products.
Each Company terminated its contract with Shaw Wallace & Company and paid compensation to it, which aggregated to Rs. 15,25,000.
This amount, subject to certain allowances, was sought to he assessed to income tax under sections 10 and 12.
The High Court of Calcutta held that the compensation received by the assessee was a capital receipt.
In appeal to His Majesty in Council the decision of the High Court was affirmed.
The Judicial Committee declined to seek inspiration from the English decisions cited at the Bar.
The Board observed that the expression "income" which is not defined in the Act connotes a periodical monetary return coming in with some sort of regularity, or 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.
They further observed that the income chargeable under head (iv) of section 6 business" read with section 10 is to be in respect of the profits and gains of any business carried on by the assessee, and therefore the sums which the Income tax Department sought to charge could only be taxable if they were the pro (1) L.R. 59 I.A. 2o6.
115 duce or the result of carrying on the agencies of the Oil Companies in the year in which they were received by the assessee.
But when once it was admitted that they were sums received, not for carrying on this business, but as some sort of solatium for its compulsory cessation, the answer seemed fairly plain.
The Board observed that if compen sation received for sale of the business or its goodwill was capital, the same reasoning ought to apply when the sum received was in the nature of a solatium for cessation of a part of the business, and it was a matter of no consequence that the assessee continued to pursue its other independent commercial interests, and profits from which were taxed in the ordinary course, for the sums sought to be taxed had no connection with the continuance of the assessee 's other business: the profits earned by the assessee, it was observ ed, were "the fruit of a different tree, the crop of a different field", and if under section 10 the compensation was not taxable, it was not taxable under section 12 under the head " other sources" as well.
The judgment of the Board proceeds upon the ground that compensation received not for carrying on the business, but as solatium for its compulsory cessation, would be regarded as capital receipt, and for the application of this principle, existence of other independent commercial in terests out of which profits were earned by the assessee was irrelevant.
Two comments may be made at this stage.
It cannot be said as a general rule, that what is determinative of the nature of the receipt is extinction or compulsory cessation of an agency or office.
Nor can it be said that compensation received for extinction of an agency may always be equated with price received on sale of goodwill of a business.
The test, applicable to contracts for termination of agencies is: what has the assessee parted with in lieu of money or money 's worth received by him which is sought to be taxed? If compensation is paid for cancellation of a contract of agency, which does not affect the trading structure of the business of the recipient, or involve loss of an enduring asset, leaving the tax payer free to carry on his trade released from the contract which is cancelled, the receipt will be a trading receipt: where the cancellation 116 of a contract of agency impairs the trading structure, or involves loss of an enduring asset, the amount paid for compensating the loss is capital.
The view expressed by the Judicial Committee has not met with unqualified approval in later cases, Lord Wright in Raja Bahadur Kamakshya Narain Singh of Ramgarh vs Commissioner of Income tax.
Bihar and Orissa( ') observed that it is incorrect to limit the true character of income, by such picturesque similies like "fruit of a different tree, or crop of a different field".
Again it cannot be said generally that compensation for every transfer or determination of a contract of agency is capital receipt: Kelsall Parsons & Co. vs Commissioner of Inland Revenue( '): Commissioners of Inland Revenue vs Fleming & Co. (3): Wise burgh vs Domville(4) and Commisiosner of Income tax and Excess Profits Tax, Madras vs South India Pictures Ltd.( ').
Nor is it true to say that where an assessee holds several agency contracts, each agency contract cannot without more be regarded as independent of the other contracts, and income received from each contract cannot always be regarded as unrelated to the rest of the business continued by the assessee.
The decision in Shaw Wallace Co. 's case( ') cannot therefore be read to yield the principle that compensation for loss of an agency may in all cases be regarded as capital receipt.
Nor does it lay down that where the assessee has several lines of business each line must in ascertaining the character of compensation for loss of a line of business be deemed an independent source.
This view is exemplied by decisions of this Court and a decision of the Madras High Court.
In the South India Pictures Ltd. 's case(5) compensation received for determination of the distribution rights of films was held taxable.
After the assessee had exploited partially its right of distribution of cinematographic films to which it was entitled under the terms of agreement under which he had advanced money to the producers, the agreements were cancelled and the producers paid an aggregate sum of Rs. 26,000 to the assessee towards commission.
It was held by Das C. J., (1) L. R, 70 1.
A. 180 (2) ; , 620 (3) (4) (5) 29 (6) L.R. 59 I.A. 2o6 117 and Venkaterama Aiyar, J., (Bhagwati J., dissenting) that the sum paid to the assessee was not compensation for not carrying on its business, but was a sum paid in the ordinary course of business to adjust the relations between the assessee and the producers, and was taxable.
Similarly in Rai Bahadur Jairam Valji 's cave( ') a contract for the supply of limestone and dolomite was terminated when the purchaser the Bengal Iron Company Ltd. found the rates uneconomical.
A suit was then filed by the respondent for specific performance of the contract and for an injunction restraining the company from purchasing limestone and dolomite from any other person.
A fresh agreement made between the respondent and the company fell through because of circumstances over which the parties to the agreement had no control.
The company then agreed to pay Rs. 2,50,000 to the respondent as solatium, besides the monthly instalments of Rs. 4,000 remaining unpaid under the contract of 1940.
The Income tax Department sought to bring to tax the amount of Rs. 2,50,000 and the balance due towards the monthly instalments of Rs. 4,000.
It was held by this Court that the sum of Rs. 2,50,000 was not paid to the respondent as compensation for expenses laid out for works at the quarry of a capital nature and could not be held to be a capital receipt on that account, the agreements were merely adjustments made in the ordinary course of business.
There was in the view of the Court no profit making apparatus set up by the agreement of 1941, apart from the business which was to be carried on under it and there was at no time any agreement which operated as a bar to the carrying of the business of the respondent and therefore the receipt of Rs. 2,50,000 was chargeable to tax.
Venkatarama Aiyar, J., observed, in at,agency contract the actual business consists of dealings between the principal and his customers, and the work of the agent is only to bring about the business: what he does is not the business itself, but something which is intimately and directly linked up with it.
The agency may, therefore, be viewed as the apparatus which leads to the business rather than the business itself.
Considered in this light the (1) [1959] Supp.
1 S.C.R. 110 118 agency right can be held to be of the nature of a capital asset invested in business.
But this cannot be said of a contract entered into in the ordinary course of business.
Such a contract is part of the business itself, not some thing outside it, and any receipt on account of such a contract can only be a trading receipt.
Because compensation paid on the cancellation of a trading contract differs in character from compensation paid for cancellation of an agency contract, it should not be understood that the latter is always, and as a matter of law, to be held to be a capital receipt.
An "agency contract which has the character of a capital asset in the hands of one person may assume the character of a trading receipt asset in the hands of another, as for example, when the agent is found to make a trade of acquiring agencies and dealing with them.
" Therefore, when the question arises whether the payment of compensation for termination of an agency is a capital or a revenue receipt, it must be considered whether the agency was in the nature of a capital asset in the hands of the agent, or whether it was only part of his stock in trade.
The learned Judge also observed that payments made in settlement of rights under a trading contract are trading receipts and are assessable to revenue, but where a trader is prevented from doing so by external authority in exercise of a paramount power and is awarded compensation therefor, whether the receipt is a capital receipt or a revenue receipt will depend upon whether it is compensation for injury inflicted on a capital asset or on stock in trade.
In Pairce Leslie and Co. Ltd. vs Commissioner of Income tax, Madras( ') the assessee company took up managing agencies of several plantation companies.
The managing agencies were liable to termination, but the assessee was entitled to compensation by the terms of the agreement.
The Talliar Estates Ltd. was one of the companies managed by the assessee.
The agreement was a composite agreement about the managing agency rights and certain other rights.
When the Talliar Estates Ltd. went into liquidation the assessee received Rs. 60,000 by way of compensation for loss of office and the question arose (1) 119 whether that amount was income in the hands of the assessee.
The Madras High Court held that the loss of one of several managing agencies had little effect on the structure of the assessee 's business even in tea or on its profit earning apparatus as a whole and the termination of the agreement with the Talhar Estates could well be said to have been brought about in the ordinary course of business of the assessee and therefore the amount received was a trading receipt.
In the South India Picture Ltd. 's case(): Rai Bahadur Jairam Valji 's case( ') and Peirce Leslia Company 's case( ') it was held that the receipt of compensation for loss of agency was in the nature of revenue.
In the South India Pictures Ltd. 's case( ') the amount received was not compensation for not carrying on its business, but was a sum paid in the ordinary course of business to adjust the relations between the assessee and the producers; the termination of the agreements did not radically or at all affect or alter the structure of the assessee 's business, and the amount received by the assessee was only so received towards commission i.e. as compensation for the loss of commission which it would have earned, had the agreements not been terminated.
Therefore, the amount was not received by the assessee as the price of any capital assets sold or surrendered or destroyed, but the amount was simply received by the assessee in the course of its going distributing agency business and therefore it was an income receipt.
In that case the majority of the Court held on three distinct grounds, viz., (i) that the assessee did not part with any capital asset; (ii) that the amount was received in the course of the distributing agency business which was continued, and (iii) that the termination of the agreements did not radically or at all affect or alter the structure of the assessee 's business, that the sum received was revenue.
Rai Bahadur Jairam Valji 's case( ') was one of compensation received for termination of a trading contract.
In Peirce Leslie and Company 's case( ') there was termination of office, but it was held to be brought about in the ordinary course of the trading operations of the assessee.
(i) (2) [1959] Supp.
I S.C.R. iio (3 120 On the other side of the line are cases of Commissioner of Income tax, Hyderabad Deccan vs Vazir Sultan and Sons( ') and Godrej and Co. vs Commissioner of Incometax, Bombay City (2).
In Vazir Sultan and Son 's case( ') the majority of the Court held that compensation paid for restricting the area in which a previous agency agreement operated was a capital receipt, not assessable to incometax.
It was held that the agency agreements were not entered into by the assessee in the carrying on of their business, but formed the capital asset of the assessee 's business which was exploited 'by the assessee by entering into contracts with various customers and dealers in the respective territories; it formed part of the fixed capital of the assesssee 's business and was not circulating capital or stockin trade of their business and therefore payment made by the company for determination of the contract or cancellation of the agreement was a capital receipt in the hands of the assessee.
In Godrej and Co. 's case( ') the managing agency agreement in favour of the assessee of a limited company which was originally for a period of thirty years and under which the assessee was entitled to a commission at certain rates was modified and remuneration payable to the managing agents was reduced.
As compensation for agreeing to this reduction, the assessee received Rs. 7,50,000 which was sought to be taxed as income in the hands of the assessee.
This Court held, having regard to all the attending circumstances, that the amount was paid not to make up the difference between the higher remuneration and the reduced remuneration, but in truth as compensation for releasing the company from the onerous terms as to remuneration as it was in terms expressed to be; so far as the assessee firm was concerned it was received as compensation for the deterioration or injury to the managing agency, by reason of the release of its rights to get higher remuneration and, therefore, a capital receipts.
On an analysis of these cases which fall on two sides of the dividing line, a satisfactory measure of consistency (1) 36 (3) (2) 37 r.
T.R. 381 121 in principle is disclosed.
Where on a consideration of the circumstances, payment is made to compensate a person for cancellation of a contract which does not affect the trading structure of his business, nor deprive him of what in substance is his source of income, termination of the ,contract being a normal incident of the business, and such cancellation leaves him free to carry on his trade (freed from the contract terminated the receipt is revenue: Where by the cancellation of an agency the trading structure of the assessee is impaired, or such cancellation results in loss ,of what may be regarded as the source of the assessee 's income, the payment made to compensate for cancellation of the agency agreement is normally a capital receipt.
In the present case, on a review of all the circumstances, we have no doubt that what the assessee was paid was to compensate him for loss of a capital asset.
It matters little whether the assessee did continue after the determination of its agency with the Fort William Jute Co. Ltd to conduct the remaining agencies.
The transaction was not in the nature of a trading transaction, but was one in which the assessee parted with an asset of an enduring value.
We are, therefore, unable to agree with the High Court that the amount received by the appellant was in the nature of a revenue receipt.
We accordingly record the answer on the question submitted by the Tribunal in the negative.
The appellant would be entitled to its costs in this Court.
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By an agreement with the Fort William Jute Company in 1925 the appellant company became its Managing Agent.
The terms, inter alia, were that the appellant or its successors, unless they chose to resign, were to continue as Managing Agent until they ceased to hold certain shares in the capital of the company and were on that account removed by a resolution of the company or their tenure of office was determined by the winding up of the company.
On termination of the agency, the Managing Agent was to get such reasonable compensation as was agreed upon between the Managing Agent and the company.
Besides this managing agency the appellant held five other managing agencies.
In 1952, the appellant by in agreement with M/s. Mugneeram Bangur & Co., agreed to relinquished the managing agency of the Fort William Jute Co., Ltd., in their favour in consideration of M/s. Mugneeram Bangur and Co. taking over the shares held by the appellant, procuring repayment of loans advanced by the appellant to the Fort William Jute Company and further procuring that the Fort William Jute Company.
will pay com pensation to the appellant.
The appellant intimated the members of the latter company that it would be in the best interest of the share holders to terminate the appellant 's agency which would otherwise continue till 1957 and that M/S. Mugneeram Bengur & Co. had agreed to reimburse the Fort William Jute Co. Ltd. for payment of Rs. 3,50,000 as compensation to the appellant.
The arrangement with M/s. Mugneeram Bangur & Co. was accepted by the Fort William Jute Co. and the appellant tendered resignation.
M/s. Mugneeram Bangur and Co. 94 became the Managing agent.
The appellant received the sum of Rs. 3,50,000 and credited the sum in its profit and loss account as having been received from the Fort William Jute Co. Ltd. on account of compensation for loss of office and in calculating the net profit for the purpose of income tax for the year 1953 54 did not include this amount in the return.
The Income tax Officer in assessment included the amount in the appellant 's taxable income.
The Assistant Appellate Commissioner on appeal modified the assessment holding that the sum received by the appellant as compensation for surrendering the managing agency, which was to enure for five years more and might have continued for another twenty years, was a capital receipt.
The Appellate Tribunal confirmed the order of the Appellate 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 circumstances of the case the sum of Rs. 3,50,000 received by the assessee to relinquish the managing agency was a revenue receipt assessable under the Indian Income tax Act?.
The High Court answered the question in the affirmative.
HELD: that the answer should be in the negative.
The transaction in question was not a trading transaction, but one in which the assessee parted with an asset of enduring value.
The compensation received was compensation for loss of capital.
It was inconsequential whether the appellant conducted the remaining agencies after the determination of the one in question.
Where payment is made as compensation for cancellation of a contract which does not affect the trading structure of the business, nor causes 'deprivation of what in substance is source of income, and is a normal incident of the business, the compensation is revenue.
But where the cancellation impairs the trading structure or results in loss of the source of income, the compensation paid for the cancellation of the agreement is normally capital receipt.
Commissioner of Income tax Nagpur vs Rai Bahadur Jairam Yalji, , referred to.
Commissioner of Income tax vs Shaw Wallace and Co. L.R. 59 I.A. 206, explained.
Raja Bahadur Kamakshaya Narain Singh of Ramgarh vs Commissioner of Income tax, Bihar and Orissa, L.R. 70 I.A. 180, Commissioner of Income tax and Excess Profits Tax Madras vs South India Pictures, , Peirce Leslie and Co. Ltd. vs Commissioner of Income tax, Madras, , Commissioner of Income tax, Hyderabad Deccan vs Vazir Sultan and Sons.
and Godrej & Co. vs Commissioner of Income tax, Bombay City, , discussed.
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1829.txt
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vil Appeal Nos. 1553 to 1556 of 198 1 etc.
From the Judgment and Order dated 20.3.1981 of the Kerala High Court in W.P. Nos. 166, 177,223 and 243 of 1980.
T.S. Krishnamurthy Iyer, G.L. Sanghi M.M. Abdul Khader, M.K. Ramamurthi, G. Vishwanatha Iyer, Ms. Shanta Vasudeavan, A.S. Nambiar, K.M.K. Nair, E.M.S. Anam, V.J. Francis, O.V. Radhakrishnan and N. Sudhakaran, for the appearing parties.
The Judgment of the Court was delivered by PATHAK, CJ.
These appeals by graduate Excise Inspectors are directed against the judgment and order dated 20 March, 1981 of the High Court of Kerala holding that the amendment to Special Rule 2 of the Kerala Excise & Prohibition Subor dinate Service Rules is ultra vires.
The writ petitions were filed by non graduate Excise Inspectors alleging that the amendment to Special Rule 2 of the aforesaid Rules violates Articles 14 and 16 of the Constitution inasmuch as an invidious discrimination has been made between graduates and non graduates by prescribing a ratio between them in the matter of promotion from the post of Excise Preventive Officer to that of Second Grade Excise Inspectors.
As all the cases have proceeded on a common factual basis, we shall take up the appeal arising out of O.P. 3760 of 1978 for the purpose of this judgment.
The petitioner in O.P. 3760 of 1978 joined the post of Excise Guard on 2 April, 1960.
He was promoted on 12 Janu ary, 1966 as Excise Preventive Officer.
In the list of Preventive Officers in the 204 Excise Department as on 1 August, 1970 he was ranked No. 131 while the third respondent was ranked at number 390.
The third respondent was promoted earlier although he was junior to the petitioner.
This was on the ground that he was a graduate and the petitioner was a non graduate.
The peti tioner contended that as graduates and non graduates were both regarded as eligible for promotion to the post of Second Grade Excise Inspectors no differentiation should have been made between them when prescribing a rule of quota for promotion.
The writ petition was heard by a learned Single Judge, who held that the amendment to Special Rule 2 was violative of Articles 14 and 16 of the Constitution.
It may be noted that the original Special Rule 2 of the Special Rules for the Kerala Excise and Prohibition Subordinate Service was amended by G.O.P.No.
79/78/TD dated 23 June, 1978 whereby the ratio 1:3 between graduate and non gradu ates was introduced into the Special Rules in the matter of promotion from the category of Excise Preventive Officers to that of Second Grade Excise Inspectors.
The amendment was deemed to have come into force retrospectively from 9 Sep tember, 1974 when the Special Rules were brought in.
The learned Single Judge directed the respondents in the case to cause the Departmental Promotion Committee to be convened within two months to prepare a select list in order that promotions on a regular basis could be made.
Against the judgment of the learned Single Judge in the different cases, appeals were filed before a Division Bench of the High Court.
Two contentions were raised on behalf of the appellants, who in some of the appeals were the State of Kerala and the Deputy Commissioner of Excise, Board of Revenue, Trivandrum and in other cases were a number of private respondents in the original petitions and who held the post of Excise Inspector.
Two contentions were raised by the appellants before the Division Bench of the High Court.
It was contended that the preference shown to graduates by prescribing under the amended special Rule 2 the ratio 1:3 represents the recogni tion of graduation as a standard of merit and, it was urged, officers with more merit in the post of Excise Inspectors would promote administrative efficiency.
It was also con tended that the amendment to Special Rule 2 is the result of an historical background which justifies preferential treat ment.
It was pointed out that as graduates and non graduates had all along been treated differently in the matter of promotion to the post of Excise Inspector, the classifica tion brought about by amending Special Rule 2 could not be regarded as unreasonable.
205 It will be appropriate to set forth the historical background out of which the present controversy arises.
From the year 1935, in the erstwhile State of Travancore prefer ence was given to graduates in the matter of promotion.
When the State of Kerala was constituted by the merger of the Travancore and Cochin areas with effect from 1 November, 1956 a rule was promulgated in the Excise Department of Kerala prescribing a ratio in the matter of promotion to the post of Excise Inspectors by an order dated 23 August, 1957.
The Rule regulated appointments to posts of Guards, Preven tive Officers and Second Grade Inspectors in the Excise Department.
Clause (d) related to Second Grade Excise In spectors and it provided: "(d) Second Grade Excise Inspectors: A margin of twentyfive per cent of the vacancies in the cadre of Second Grade Excise Inspectors will be left for being filled up by direct recruitment by the Public Service Commission of graduates .
The remaining seventy five per cent will be filled up by promoting L.D. Clerks . . and Preventive Officers on a 50:50 basis observing the ratio.
of 3:1 between graduates and non graduates in either case.
" Clause (d) applied to personnel of the Travancore Cochin area.
The officers allotted from Madras were governed by the Madras Rules pending the issue of common rules applicable to both.
By reason of this Order 25 per cent of the post of Second Grade Excise Inspectors were to be filled up by direct recruitment, 37 1/2 per cent by promoting Lower Division Clerks and 37 1/2 per cent by promoting Preventive Officers.
Within the promotion quota of Preventive Officers promotion was to be effected between graduates and non graduates in the ratio of 3: 1.
This rule applied to Travancore and Cochin personnel appointed prior to 1 November, 1956.
After taking note of the situation in different parts of the State, the Government order dated 19th November, 1957 prescribed the ratio of 1:1 between graduates and non graduates on an interim basis.
It was mentioned there that the ultimate aim was to do away with the distinction between graduates and non graduates in offices other than the Secretariat, the Public Service Commission and the High Court.
Subsequently, however, it was clarified on 8 July, 1966 that the Order was intended to apply to ministerial posts only and not to executive posts such as those of Preventive Officers.
The question of the applicability of the graduate and non graduate ratio was examined by the High Court in Writ Petitions filed 206 in 1972, and the High Court directed the Government to look into the matter and finalise the provisional promotion of Excise Inspectors accordingly.
It was thereafter that Spe cial Rules for the Kerala Excise and Prohibition Subordinate Service dated 9 September, 1974 were published.
They provide for appointment to the posts of Excise Inspectors by direct recruitment, promotion from the category of Excise Preven tive Officers and recruitment by transfer from among Upper Division Clerks employed in the Excise Department.
The Rules did not provide for any graduate non graduate ratio in the matter of promotion, apparently because the ratio had al ready been provided earlier by the Government order dated 23 August, 1957.
But meanwhile the High Court held that the Government order dated 23 August, 1957 could not be applied to those appointed after the formation of the State of Kerala.
To fill up the vacuum in respect of appointments after 1 November, 1956 an order dated 4 October, 1974 was made applicable retrospectively to all appointments on or after 1 November, 1956 till the date of issue of the Special Rules for the Excise Subordinate Service.
It adopted the ratio of 3:1 between graduates and non graduate for promo tion to the post of Second Grade Excise Inspectors for the entire State of Kerala, and it specifically provided that this graduate non graduate ratio 3:1 would apply to the case of persons who had entered the Excise Department on or after 1 November, 1956, and that it would operate until the coming into force of the Kerala Excise and Prohibition Subordinate Service Rules.
This was, however, challenged in the High Court and the High Court held that it was not open to the Government to apply the ratio of 3:1 by an executive order passed in 1974 and made retrospectively from 1 November, 1956 inasmuch as an executive order could not be given retrospective effect.
There was, therefore, no provision in law prescribing a graduate non graduate ratio governing appointments made on and from 1 November.
As has been stated Special Rules for the Excise Subordinate Service dated 9 September, 1974 had been published meanwhile.
Spe cial Rule 2 was amended with effect from 9 September, 1974, the date of commencement of the Special Rules, providing for a ratio of 1:3 between graduates and non graduates as from 9 September, 1974.
In consequence.
while up to 9 September, 1974 there was no valid Rule in force applying a graduate non graduate ratio for promotion, there was a rule intro duced in 1978 by amendment to the Special Rules prescribing a ratio from 9 September, 1974 onwards.
The gap between 1 November, 1956 and 9 September, 1974 was sought to be filled thereafter by an Order dated 6 March, 1981 which provided that the appointment of Excise Inspectors during the period from 1 November, 1956 and ending 8 September, 1974 from 207 among Clerks and Preventive Officers who have entered serv ice on or after 1 November, 1956 would be made in the ratio of 1:1 between Clerks and Preventive Officers.
simultaneous ly observing the ratio 01 ' 3: l was observed between gradu ates non graduates. 'The Rule was deemed to have into force from 1 November, 1956.
It will thus be evident that in the case of Preventive Officers appointed on or after 1 November, 1956, the gradu ate non graduate ratio of 3:1 was observed between 1 Novem ber, 1956 and 8 September, 1974, and it became 1:3 from 9 September, 1974 onwards.
The plea of the non graduate Preventive Officers that there should be no preference in favour of the graduate officers was accepted, as we have seen, by the learned Single Judge and upheld in appeal by the Division Bench of the High Court.
In these appeals by graduate Excise Inspectors, it is contended that there was good and substantial reason for maintaining the ratio between graduate and non graduate Officers, and the history of the evolution of the service supported the maintenance of such ratio, and that the High Court proceeded erroneously in assuming that the observance of the ratio between graduates and non graduates produced an invidious discrimination violative of articles 14 and 16 of the Constitution.
We are referred to Mohammad Shujat Ali & Ors.
vs Union of India & Ors. etc.
; , where this Court upheld the differentiation between graduate supervisors and non graduate supervisors for the purpose of promotion as Assistant Engineers.
But it is clear that this was on the ground that the two categories of supervisors had been kept distinct and apart under the Cadre Rules from the beginning, with different pay scales and different treatment for the purpose of promotion.
Reference was also made of State of Jammu & Kashmir vs Triloki Nath Khosa & Ors., ; , but it was held there that having regard to the object of achieving administrative efficiency in the.
Engineering Service it was a just qualification to maintain a distinction between Assistant Engineers who were degree holders and those who were merely diploma holders.
In S.L. Sachdev & Anr.
vs Union of India & Ors.
, ; again the discrimination between UDCs drawn from Audit Offices and other UDCs in the matter of the eligibility qualification for promotion was justified on the basis that the one enjoyed greater experience and that the distinction based on length of service was directly related to the object of the classification.
In Col. A.S. Iyer and Others vs
V. Balasubramanyam and Others, ; upon which reliance 208 has been placed by the Appellants, the recruits were from two different sources which had not completely fused into one integrated service but were instead allowed to maintain their separate identity, and regard was had to their basic functional character, operational capabilities and 'futuris tic ' uses to support the differential treatment between military engineers and civilian engineers.
H.H. Shri Swamiji of Shri Admar Mutt, etc.
vs The Commissioner, Hindu Reli gious & Charitable Endowments Department & Ors., ; is a case where we find it difficult to see any argument in favour of the appellants, for the passage there in to which our attention has been drawn specifically al ludes to the circumstance that the passing of time results in altering a fact situation which has the consequence of wearing out the basis on which the differentiation is found ed.
So also in Motor General Traders and Anr.
vs State of Andhra Pradesh & Others, ; it was observed by this Court that an exemption provision initially valid could become discriminatory where with the passage of time the nexus with the object did not survive any longer.
We have also heard submissions made by learned counsel for the appellants in Civil Appeals Nos. 1554 and 1556 of 1981, and they have elaborated on the points raised by learned counsel in Civil Appeal No. 1553 of 1981 with some differences of nuance and emphasis.
In essence, the conten tion remains the same.
It seems to us that the history of the evolution of the Kerala Excise and Prohibition Subordinate Service has shown no uniformity either in approach or in object.
The history has varied with the circumstances prevailing before and after the reorganisation of the State on 1 November, 1956.
Originally when more emphasis was laid on the induction of graduate the ratio of graduate to non graduate officers was maintained at 3: 1.
But from 9 September, 1974 the ratio was changed inversely to 1:3.
More non graduates were now in ducted into the Service.
The trend shows, if anything, that it ran in favour of absorbing more non graduates.
The condi tions pertaining to the service, and respecting which the constitution of the service varied from time to time, showed fluctuations.
A consistent or coherent policy in favour of graduates was absent.
This is not a case where the cadre of officers was kept in two separate divisions.
It was a single cadre, and they were all equal members of it.
There is no evidence that graduate Preventive Officers enjoyed higher pay than non graduate Preventive Officers.
The High Court has noted that the nature of the duties of Preventive Offi cers whether graduate or non graduate was identical, and both were put to field work.
Non graduate Preventive 209 Officers were regarded as competent as graduate Preventive Officers.
There is no evidence of any special responsibility being vested in graduate Preventive Officers.
Once they were promoted as Excise Inspectors there was no distinction between graduate and non graduate Excise Inspectors.
In our opinion the learned Single Judge as well as the Division Bench are right in holding that the prescription of a ratio dividing the quota of promotion between graduate Preventive Officers and non graduate Preventive Officers is invalid on the ground that it violates articles 14 and 16 of the Constitution.
The other contention raised before the High Court, namely that the ratio 1:3 between graduates and non gradu ates is supportable on the ground that the recognition of graduation is recognition of merit, and that more merit in the post of Excise Inspectors would be conducive to better administrative efficiency, is shortly disposed of.
Ordinari ly, it is for the Government to decide upon the considera tions which, in its judgment, should underlie a policy to be formulated by it.
But if the considerations are such as prove to be of no relevance to the object of the measure framed by the Government it is always open to the Court to strike down the differentiation as being violative of articles 14 and 16 of the Constitution.
In the present case, we have already commented on the circumstance that the conditions of employment and the incidents of service recognise no dis tinction between graduate and non graduate Officers and that for all material purposes they are effectively treated as equivalent.
Accordingly, this contention must also be rejected.
In the result, the appeals fail and are dismissed but there is no order as to costs.
R.S.S. Appeals failed.
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The respondents, who were non graduate Excise Preventive Officers in the Excise Department, had challenged in the High Court the amendment made to the original Special Rule 2 of the Special Rules for the Kerala Excise and Prohibition Subordinate Service whereby the ratio of 1:3 between gradu ates and non graduates was introduced in the matter of promotion from the category of Excise Preventive Officers to that of Second Grade Excise Inspectors.
They had contended that as graduates and non graduates were both regarded as eligible for promotion to the post of Second Grade Excise Inspectors.
no differentiation should have been made between them when prescribing a rule of quota for promotion.
The learned Single Judge allowed the writ and held that the amendment to Special Rule 2 was violative of Articles 14 and 16 of the Constitution.
The State of Kerala and the private appellants, who were graduate Excise Preventive Officers and were holding the post of Second Grade Excise Inspectors.
filed appeals.
It was contended by them before the Division Bench that (i) the preference shown to gradu ates in the matter of promotion represented the recognition of graduation as a standard of merit which would promote administrative efficiency, and (ii) the amendment to Special Rule 2 was the result of a historical background which justified preferential treatment.
It was pointed out that as graduates and non graduates had all along been 202 treated differently in the matter of promotion to the post of Excise Inspector, the classification brought about by amending Special Rule 2 could not be regarded as unreasona ble.
The Division Bench held that the amendment to Special Rule 2 of the Kerala Excise & Prohibition Subordinate Serv ice Rules was ultra vires.
Dismissing the appeals, this Court HELD: (1) The history of the evolution of the Kerala Excise and Prohibition Subordinate Service has shown no uniformity either in approach or in object.
The history has varied with the circumstances prevailing before and after the reorganisation of the State.
The conditions pertaining to the service.
and respecting which the constitution of the service varied from time to time, showed fluctuations.
A consistent or coherent policy in favour of graduates was absent.
This is not a case where the cadre of officers was kept in two separate divisions.
It was a single cadre, and they were all equal members of it.
There is no evidence that graduate Preventive Officers enjoyed higher pay than non graduate Preventive Officers.[208E G] Mohammad Shujat All &.
vs Union of India ; and Col. A.S. Iyer vs V. Balasubramanyam, ; , distinguished.
(2) The Conditions of employment and the incidents of serv ice the instant case, recognise no distinction between graduate and non graduate Officers and for all material purposes they are effectively treated as equivalent.
The nature of the duties of Preventive Officers whether graduate or non graduate was identical, and both were put to field work.
Non graduate Preventive Officers were regarded as competent as graduate Preventive Officers.
There is no evidence of any special responsibility being vested in graduate Preventive Officers.
[208H; 209A, E] State of Jammu & Kashmir vs Triloki Nath Khosa, ; ; S.L. Sachdev vs Union of India, [1980] 1 S.C.R. 971, distinguished.
H.H. Shri Swamiji of Shri Admar Mutt vs Commissioner, Hindu Religious & Charitable Endowment Department, ; and Motor General Traders vs State of Andhra Pra desh; , , referred to.
(3) Ordinarily, it is for the Government to decide upon the considerations which, in its judgment, should underlie a policy to be 203 formulated by it.
But if the considerations are such as prove to be of no relevance to the object of the measure framed by the Government.
it is always open to the Court to strike down the differentiation as being violative of Arti cles 14 and 16 of the Constitution.
[209D E] (4) The learned Single Judge as well as the Division Bench were right in holding that the prescription of a ratio dividing the quota of promotion between graduate Preventive Officers and non graduate Preventive Officers is invalid on the ground that it violates Articles 14 and 16 of the Con stitution.
[209B C]
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6083.txt
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l Appeal No. 1519 of 1968.
Appeal under section 116A of the Representation of the People Act, 1951 from the judgment and order dated May 28, 1968 of the Madras High Court in Election Petition 11 of 1967.
R.M. Seshadri and R. Gopalakrishnan, for the appellant.
section V. Gupte, A. C. Muthanna, S.S. JavaIi, Anjali K. Verma and O.C. Mathur, for respondent No. 1.
G. Ramanujam and A. V. Rangam, for intervener.
C.J., This appeal is directed against the judgment of the High Court of Madras, 28th May 1968, by which the election of the appellant Seshadri has been set aside.
The election in question was to the Madras Legislative Council from the Madras District Graduates Constituency.
That constituency consisted of 19,498 votes and the total votes polled were 12,153.
Since the voting was by a single transferable vote, three 1029 out of the five candidates were eliminated at different counts with the result that their votes were transferred to the second person named by the elector on the ballot.
At the final count the appellant Seshadri received 5643 votes and G. Vasantha Pai (his nearest rival) who is the first respondent in 'the appeal received 5388 votes.
Seshadri was, therefore, elected by a majority of 255 votes.
The election petition was filed by G. Vasantha Pai to question the election of Seshadri on many grounds.
Only one ground prevailed, namely, that he had employed cars which had been hired or procured for the conveyance of the voters to the polling booths which numbered 73 in this constituency.
The other charges were numerous but they need not be mentioned here because in our opinion this charge has been substantiated.
It may be mentioned that Seshadri filed a petition of recrimination but it was dismissed because he failed to furnish security required under the Act.
Later he corrected this mistake but the petition was not accepted because it was held to be delayed.
The learned Judge who ' heard the case held that instead of Seshadri, Vasantha Pai deserved to be declared elected under the law.
In this appeal, therefore, Seshadri contends that the decision in his respect was erroneous and in the alternative that in any event Vasantha Pal could not be declared as the successful candidate.
We shall deal with these two points separately.
It may further be mentioned that in the original order passed by the learned Judge he had not named Seshadri as guilty of corrupt practice.
By a subsequent order he reviewed his previous order and gave a declaration.
This point also will require to be considered in this judgment.
The allegation in the election petition was that a large number of motor cars were hired or procured from various sources for the conveyance of the voters to the polling booths.
These were sometimes occupied by persons wearing badges which bore the name of Seshadri and sometimes were received at the polling booths by persons who wore the same badges.
From this, it is inferred that the motor cars were used for the conveyance of voters by Seshadri as one of the contesting candidates.
Such conduct, if it is established, amounts to a corrupt practice under section 123(5) of the Representation of People Act.
The short question, therefore, on the first point is whether Seshadri was guilty of this corrupt practice.
The appeal has been fought by Seshadri on the grounds that the plea which was included on this head in the election petition was vague and not sufficiently definite so as to give him notice of the charge he had to meet, that a charge of corrupt practice is of the nature of a criminal charge and must therefore be 1022 proved by the election petitioner himself beyond all reasonable doubt, that there exists some room for doubt and therefore he should have the benefit of it and that the learned Judge who tried the case improved both the pleading on the subject and the evidence led by the election petitioner by calling certain witnesses and looking into documents which he had procured on his own behalf.
It is therefore contended that all the evidence which the learned Judge collected suo motu should not be locked at and the case of the petitioner should be confined to the bare plea which was raised in this case.
If this is so, says Seshadri, the election petition deserves to be dismissed because the case as found was not clear in the plea and was certainly lacking in the proof as required by law.
Since the matter is one fought primarily with regard to pleadings in the case, we shall begin by setting out the pleas which have been advanced by the election petitioner.
The plea consists of several parts.
The election petitioner states that the Swatantra Party and its agents conveyed the voters to and from the polling booths in certain cars hired or procured from M/s Kumarswamy Automobiles and T.S. Narayanan, Authorised Tourist Taxi Operators.
The petitioner goes on to say that the detailed analysis of the use of the cars and particulars of the user are given in a schedule attached to his petition.
That schedule names a large number of cars which were used and at many polling booths in different divisions for the purpose of carrying the voters to the polling booths.
Some of these cars came admittedly from the garage of Messrs. Kumarswamy Automobiles and some others from the other motor garage named by us or were loaned for the day by certain private owners including companies.
The essence of this plea is that cars were procured or hired for the conveyance of the voters.
There is, however, no mention in the plea as to who had hired the vehicles or caused them to be procured and it is this fact which has been made much of by Seshadri in the appeal before.
His contention is that without the particulars being sufficiently full and precise, it was not possible for him to controvert the case set up against him, particularly as the case of the election petitioner was supplemented by the learned Judge by calling at a later stage court witnesses who deposed to the connection between the cars and Seshadri.
We have, therefore, to determine first whether the plea which was raised was sufficient for the purpose of investigation before we go to see whether the plea has received adequate support through evidence.
Seshadri personally argued his appeal on two separate occasions.
On the first occasion he confined himself entirely to the pleas he expounded it and urged in support that the plea in the election petition did not allege anything nor did the evidence in 1023 support establish anything further.
But before the case concluded, Seshadri made a request to us that as he had misunderstood his own position with regard to the appeal, regard being had to certain observations of the Court, he had not argued the case fully on the first occasion and he should be allowed an opportunity to supplement his arguments by urging the points de novo.
Since Seshadri was conducting his case in person and appeared to be under some emotional stress, we felt that the ends of justice would be satisfied if we accorded him a second opportunity and this is how the case was set down again for hearing.
On the second occasion Seshadri supplemented his arguments with numerous citations from the law reports in support of two propositions, namely, that the particulars should be complete before the evidence could be looked into and secondly that amendment of the pleadings through evidence is not permissible.
It may be mentioned here that the evidence in the case discloses that not one, two or three cars were used but as many as 63 cars were employed.
This evidence has been weighed by the learned Judge.
He has gone critically into every aspect of it and come.
to the conclusion that many cars in fact were used.
The learned counsel for Vasantha Pai placed in our hands a tabulated statement of the evidence bearing upon the use of the cars and having looked into the judgment of the learned Judge as also the evidence with the aid of the tabulated statement, we are satisfied and it is sufficient to say for us that we entirely agree with the conclusion of the learned Judge that many cars were, in fact, used for conveyance of voters in this constituency.
The alternative suggestion that on some of the days an election from the Teachers ' Constituency was going on and that since the polling booths were sometimes located for the two constituencies in the same building, it is possible that the cars were used for that election and not this, does not merit any consideration.
The suggestion is extremely vague and the evidence even more tenuous.
It is said that one Varadachari was responsible for the hiring of the cars and that in our opinion does not stand either substantiated or any scrutiny.
We are therefore satisfied with the finding of the learned Judge in the High Court that cars that were employed for conveyance of voters and that they were in fact used in this constituency and none other.
The question then remains as to who was responsible for this? Now the plea on this subject, as we have said, is contained in several parts of the election petition.
One part we have summarised above.
The second part was that the Swatantra Party_ was supporting Seshadri and that the workers of the Swatantra Party were working strenously for his success.
From this it has been reasoned in the High Court that the Swatantra Party was an agent of Seshadri.
Its actions therefore would be his actions L6Sup.
C.I/69 14 1024 if he was a Consenting party.
In this connection it is also stated that Seshadri was being supported by some persons connected with him who helped him by procuring these vehicles for the conveyance of the voters.
In the schedule which is filed with the plaint a large number of cars is mentioned and the schedule shows in one of its columns to which polling booths were the voters carried.
It is too detailed to be reproduced here.
Suffice it to say that it contains names of six divisions and 17 polling booths.
It also mentions over two dozen cars which were so used.
In the body of the election petition, the petitioner further stated as follows: "Besides Tourist Taxis, the petitioner understands the Private Commercial Firms and Cinema Producers placed at the disposal of the first respondent their cars for conveying voters.
The persons who were conveying the voters were members of the Swatantra Party, who were acting as the Agents of the first respondent under the guidance in particular of Mr. H.V. Hande.
The Agents of the first respondent wore a distinctive badge with R.M. Seshadri printed in bold letters attached to a blue ribbon and pinned to their shirts.
They were either escorting the voters or receiving them at the polling stations specified above.
In Booth Nos. 60 to 65, prominent among the persons so escorting was Violin Mahadevan who had a badge pinned to his shirt and who the petitioner understands is a member of the Swatantra Party.
In Saidapet South, the petitioner states, the car MSS 3336 conveying the voters was in charge of an Advocate 's Clerk by name T.K. Vinayagam of No. 16, Karani Garden II Street, Saidapet, Madras 15.
The said Vinayagam was wearing a badge of Mr. Seshadri.
At Raja Annamalaipuram the petitioner learns that a green coloured Station Wagon MSP 5398 was in charge of Mr. Venkataraman, member of the Swatanthra Party and residing at 30, IV Main Road, Raja Annamalaipuram, Madras 28.
The petitioner states that in almost every polling booth, Tourist Taxis and cars engaged by the first respondent were being used by the Swatanthra Party Agents for conveying voters.
" Seshadri contends that in this plea only four names are mentioned, namely, H.V. Hande, Violin Mahadevan, T.K. Vinayagam and Venkatraman.
He starts therefore by analysing whether the connection between these persons and him had been successfully established and further whether they were responsible for 1025 conveying voters to the polling booths in the cars.
He examines critically the evidence of these witnesses before us and also the other evidence bearing upon the subject and contends that the evidence taken as a whole does not establish their connection with him or with the voters or with the cars.
We shall, therefore, begin by considering what was said about these persons by Seshadri.
In regard to Hande, Seshadri 's contention is that no other person had spoken about Hande excepting the petitioner (P.W. 33) and he spoke about him only in one place.
He therefore states that the evidence on this part is extremely insufficient because it depends upon the interested word of the petitioner himself.
He refers us to his deposition contained in pages 419 to 531 of the Paper Book, but he draws our attention in particular to certain passages where only one car was mentioned by him in connection with Hande.
That car was MSR 7065.
The evidence of the election petitioner was that as he was emerging from Doraiswamy Road he found that this car was going past him with a gentleman with a blue upper cloth.
The gentleman looked at him and he found that it was Hande.
According to Seshadri this evidence was not sufficient to show that Hande was conveying voters to the polling booth.
On this part of the case Seshadri is right because the evidence of the complicity of Hande with the hiring or procuring of the cars was not established nor his complicity with regard to the carriage of voters to the polling booths.
With regard to Vinayagam, Seshadri 's argument is that the fact is deposed to by the election petitioner himself who said that he had seen a car with a lady and a gentleman arriving at the polling booth and that a lawyer 's clerk opened the door and received them.
This car bore the number MSS 3336.
Support for this evidence is sought by the election petitioner through the evidence of Laxshaman Hegde (P.W. 15) who said that he had seen an Ambassador car carrying two voters just halting at the polling booth.
Two voters whom he knew from before came down from the car.
A 'short gentleman ' directed them to the polling booth.
Vasantha Pai then asked the witness if the person was known to the witness.
As he did not know the name of the gentleman he could not tell him but Vasantha Pai noted the number of the car.
This person who received the voters at the polling booth was later identified by the witness as Vinayakam.
The way in which he obtained this information has been given by him in his deposition.
He appears to have obtained it from the person concerned.
Whatever it may be, there is nothing incriminating in a worker of the party receiving a voter at the polling booth.
Polling agents cannot canvass within 100 meters but there is nothing to show in the law that they cannot open the door of a car in which a voter has arrived.
The gravamen of the charge, as Seshadri correctly points out was that Vinaya 1026 kam was wearing a badge such as we have described and that of course is a different matter and we are not concerned with it here.
On the whole, therefore, this evidence does not show that the cars were hired by Seshadri.
It only furnishes some link in the circumstantial chain to which we shall later refer and that in our opinion is the only use to which this evidence can be put.
The next person connected with the use of the car is Venkatraman.
Three persons deposed to his connection.
of these one is the election petitioner himself; the others are P.Ws. 23 and 27.
Seshadri argues that we should not believe these witnesses; one because he is himself a party and the other two because they were connected intimately with the prospects of Vasantha Pal.
K.V. Padmanabha Rao (P.W. 23) is said to be the junior of Vasantha Pal and was canvassing for him.
He was standing near the vehicle with a list, presumably of the voters, and at that time several vehicles arrived there.
He stated that he connected Venkataraman with Seshadri because he was moving about in the company of one Sivasankaran (Junior of Seshadri) in the IInd Main Road.
He had also seen him with Sivasankaran going with lists in his hand from house to house.
Later he found out from some of his friends what was the purpose of this visit and was told that they were asking the voters whether they needed any conveyance for the next day 's polling, as they had command over a large number of vehicles.
The latter part of the evidence is hearsay and Seshadri is perfectly right in claiming that it should not be accepted.
The fact remains that the witness did see Venkataraman moving with the clerk of Seshadri and therefore there is room for thinking that they were connected together.
T.L. Ram mohan (P.W. 27), it is said, was assisting Vasantha Pai.
He wrote a letter Ext.
P 109 and his evidence is also described as hearsay.
We need not therefore go by his evidence to reach the conclusion that the cars were hired by Seshadri or some one on his behalf.
We can only use this evidence if there were some other evidence to which it can be read as corroborative, because by itself it does not furnish proof of the hiring of vehicles by Seshadri.
it only shows that the vehicles were in fact used and that the vehicles were bringing voters to the polling booth.
The connection of Violin Mahadevan was deposed to by four witnesses.
V. Murali (P.W. 5) who works in the chamber of two lawyers Rao and Reddy admitted that he.was working for Vasantha Pai.
He also said that he saw Violin Mahadevan wearing the badge and standing near the polling booth.
He stated this to Vasantha Pai and communicated to him his own observation.
He admitted that he did not know Violin Maha .
devan from before but somebody had told him about him.
He could not name the voters who had been brought.
He saw that Violin Mahadevan was wearing the same badge which we have 1027 described and the voters were accosted by persons wearing the same badge and were received at the polling booth.
section Ramamurthy (P.W. 10) saw Venkataraman.
He admitted that he had not seen anybody brought by Venkataraman and he also did not know the names of the voters who were brought.
But the evidence of section Ramamurthy (P.W. 10) is sufficient to show that the voters did in fact come by cars to the polling booth.
Therefore to that extent, his evidence is material in determining whether the alleged corrupt practice was committed or not.
A. Sankaran (P.W. 20) also saw Violin Mahadevan receiving voters at the polling booths.
Seshadri contends that as the plea was limited to the naming of these four persons, it is clear that the plea as made was insufficient to bring home the charge which is now brought to his door, namely, that he had hired or procured these vehicles.
As has been said above, the hiring and procuring of the vehicles is a totally different matter.
These witnesses only speak to what they saw at the polling booths and their evidence is believable that voters were brought to the polling booth.
The question is by whom? The case then goes on to another point and that is: Where did the cars come from? Neither side had examined either Kumarswamy or the owner of the other garage or any other person.
The learned Judge then felt that he should examine some court witnesses and he summoned three, namely, Kumarswamy (C.W. 2), Krishnaswamy (C.W. 3) and one Ganesan (C.W. 1).
He also called for a report from the police as to whom the cars belonged and he perused the evidence of these three witnesses as also the report sent by the police and come to the conclusion that the hiring or procuring was by Seshadri himself.
A great deal of argument is therefore directed by Seshadri to exclude the evidence of these witnesses and the reference to the police to find out to whom the cars belonged.
In this connection Seshadri cites a number of ruling which he says show quite clearly that a plea cannot be allowed to be magnified particularly by evidence not brought by the parties, but at the instance of the Court.
This requires an examination closely.
The first contention of Seshadri is that the Court trying the election petition is limited by the law which is contained in the Representation of the People Act and the Rules made thereunder.
This law, according to him, confers no power upon the Presiding Judge to enter the arena to summon witnesses on his own behalf.
The learned Judge who summoned witnesses passed a very short order while doing so.
He did not refer to any law on the subject but extracted a passage from the trial of Warren Hastings in which it was stated that a Judge 'is not to be a dummy but is to take an active interest in the case.
Seshadri contends therefore that the action of the Judge in summoning the court 1028 witnesses was entirely erroneous and that this evidence should be excluded.
The Vower of a Civil Court to summon court witnesses is contained in O. XVI r. 14 of the Code of Civil Procedure.
Now the Representation of People Act enjoins that all the powers under the Code can be exercised and all the procedure as far as may be applicable to the trial of civil suits may be followed in the trial of election petitions.
It would appear therefore that in the absence of any prohibition contained in the law, the Court has the power to summon a court witness if it thinks that the ends of justice require or that the case before it needs that kind of evidence.
It must be remembered that an election petition is not an action at law or a suit in equity.
It is a special proceeding.
The law even requires that an election petitioner should not be allowed to withdraw an election petition which he has once made and that the election petition may be continued by another person, so long as another person is available.
The policy of election law seems to be that for the establishment of purity of elections, investigation into all allegations of real practices including corrupt practices at elections should be thoroughly made.
Here was a case where a large number of cars were used presumably for the purpose of carrying voters to the booths.
The question is: in the face of this voluminous evidence was it not open to the judge if evidence was available to establish who had procured or hired vehicles, to summon witnesses who could depose to the same ? In our opinion, such a power was properly exercised by the learned judge.
Although we would say that the trial should be at arms length and the Court should not really enter into the dispute as a third party, but it is not to be understood that the Court never has the power to summon a witness or to call for a document which would throw light upon the matter, particularly of corrupt practice which is alleged and is being sought to be proved.
If the Court was satisfied that a corrupt practice had in fact been perpetrated, may be by one side or the other, it was absolutely necessary to find out who was the author of that corrupt practice.
Section 98 of the Act itself allows the Court to name a person who is guilty of corrupt practice after giving him notice and this would be more so in the case of a candidate whose name.
appears to be connected with the corrupt practice, the proof whereof is not before the Court but can be so brought.
In such a ease we think that the court would be acting within its jurisdiction in using O. XVI r. 14 to summon witnesses who can throw light upon the matter.
Having disposed of this preliminarg objection, we are now in a position to consider the evidence which was brought; but before doing so, we must show its relevance to the pleas which had been raised in the case, because much discussion was made 1029 of the law of pleadings in the case.
We have pointed out above that the plea in essence was that cars were used for the purpose of conveying voters contrary to the prohibition contained in the Election Law.
The names of the booths and the divisions in which the booths were situated together with the particulars of the cars and the persons primarily concerned with cars at the polling booths have been mentioned.
It is true that the drivers of the cars or the voters themselves have not been examined.
But it has been sufficiently pleaded and proved that the cars were in fact used.
The connection of Seshadri with the use of the cars has been specifically pleaded.
In our opinion, the rest were matters of evidence which did not require to be pleaded and that plea could always be supported by evidence to show the source from where the cars were obtained, who hired or procured them and who used them for the conveyance of voters.
This is exactly what has happened in this case.
The learned Judge after reaching the conclusion that a large number of cars were used for conveying voters to the polling booths,.
felt impelled further to consider who was responsible for hiring them.
The names of the two garages were already given and there was the allegation that certain companies and cinema producers were also helping Seshadri by the loan of cars.
Since the name of Kumarswamy 's garage was mentioned, it was but natural for the Judge to have summoned the proprietor of the garage.
The proprietor of the garage came and gave the story about the use of the cars by some other candidate but not Seshadri.
lie however brought on record documents to show that the cars were hired on payment from his garage by one Krishnaswamy.
The next step was therefore to summon Krishnaswamy and he was therefore summoned and questioned.
Krishnaswamy admitted that he had hired these cars and paid bills amounting to a few thousand rupees.
It is obvious that these cars were not employed for any other purpose that day except for election work.
It is ridiculous to imagine that they were ordered for a picnic or for a marriage which did not take p1ace.
Therefore the inference was that Krishnaswamy had hired these cars to convey voters to the polling booths.
The question therefore boils down to this, for whom was Krishnaswamy working? Here we have the evidence of various types against Krishnaswamy.
Kumarswamy and Krishnaswamv have been amply proved in the ease to be connected with Seshadri.
Kumarswamv was shown exhibit c 2A. lie stated that it was an order form filled bV R. Krishnaswamy.
He also admitted that he had received payments and that the trip sheets of the cars were maintained for that date.
Those trip sheets are C 7 to C 36.
Now with regard to these trip sheets, it may be stated that in some of them there was mention that the cars were used for election work, but subsequently it was 1030 found that someone had rubbed out that entry.
We are not here to find out who was guilty of attempting to create evidence by rubbing this out.
The fact remains that some of the trip sheets still read clearly that the cars had been used for election work.
exhibit C 6 was the bill which was issued for these cars, and it was issued to Krishnaswamy.
Therefore the cars were engaged at least from Kumarswamy garage for conveying voters and they were hired by Krishnaswamy and he paid for them.
Now Krishnaswamy is connected intimately with Seshadri.
He was employed by two companies in which Seshadri was a Director.
A party was arranged in honour of Seshadri to celebrate his victory.
The arrangement for this was made by Krishnaswamy although the expenses for the party were paid by Seshadri by cheque.
Seshadri contends that his entire accounts were.
examined but it was not proved from those accounts that he had paid any money towards the hire of the cars.
It is not possible for anyone to say how Seshadri, if he was willing to pay for the cars, would have procured the money.
It would have been the worst thing for him to have paid the amount by cheque so that it could enter into the accounts.
Obviously such payments would be made in a way that they could not be traced back to the person actually paying the amount.
The connection, however, of Krishnaswamy with the hiring of the cars and with the celebration of the victory of Seshadri furnishes a very important link in the chain of reasoning.
It is quite clear to us that the Swatantra Party was in favour of Seshadri.
Seshadri relies upon finding which has been given by the Court in which it is stated that the Judge found that the first respondent, the Swatantra party and the persons mentioned therein acted as agents of the first respondent and committed corrupt practices under section 123(5) with which we are now dealing.
The argument was that this finding.
is somewhat obscure because it shows that the first respondent was the agent of the first respondent himself.
It seems to us that the learned Judge in recording this finding gave it unthinkingly taking the words from the plea in the petition.
It is quite clear that the learned Judge reaches the conclusion that the Swatantra party was working actively in support of Seshadri.
It is of course not proved, that he was the adopted candidate of the party nor is it proved that he had appointed any particular person as his agent, but it is quite clear that the Swatantra party was actively supporting him.
Thus there is the presence of the workers of the Swatantra party like Hande, Vinavakam, Violin Mahadevan and Venkatraman on the scene at the polling booths.
It may also be mentioned that in one of the trip sheets, one Kalyanasundaram had signed in token of the cars having been used.
This Kalyanasundaram was the polling agent of Seshadri.
The circumstantial 1031 evidence is now complete.
There is the hiring of the cars from the Kumaraswamy Garage by Krishnaswamy, the payment of money by Krishnaswamy to the garage, Krishnaswamy 's attachment to Seshadri because of his past connection and the further proof that he arranged the party on his behalf after his victory and the trip sheet was signed by Kalyanasundaram the polling agent of Seshadri.
The amount paid was so large that only a candidate would incur that expense, and no supporter.
If there was any doubt as to who hired or procured these cars, it is resolved by the concatenation of circumstances which clearly demonstrate that it could have been only Seshadri and no one else who had hired these vehicles.
We can infer this circumstantially even though direct evidence be not available.
In addition, there is the patent fact that Seshadri did not himself go into the witness box and clear these facts standing out against him although opportunity ' was offered.
It is true that Seshadri complained before us that the plea was vague, that it had been magnified by the evidence brought in this manner and the Court allowed the election petitioner to take advantage of the evidence so brought, but we have already held that the evidence was legitimately brought and that it could be led in the case.
As to the plea, we have already shown that it was sufficiently cogent to establish the connection between Seshadri and the hiring and procuring of the cars.
The missing links were supplied by that evidence by showing the connection of the only person who had hired the cars and paid several thousand rupees for their hire.
If that person is intimately connected with Seshadri, the conclusion is inescapable that it was Seshadri for whose benefit the cars were hired or procured.
In our opinion, the circumstantial chain of evidence is sufficient to show the connection between him and the use of the cars for the conveyance of voters.
As to the rulings which were cited before us, it is sufficient to say that each case is decided on its own facts, and circumstances.
It is true that better particulars can only be given by the party, but that is only where better particulars are required.
It was not necessary for Vasanta Pai to have pleaded his evidence in this behalf.
He made a very full plea by giving the numbers of the cars, by naming the polling booths at which voters were brought and by stating quite categorically that it was Seshadri who had procured these cars for the conveyance of voters.
Rest was matter of evidence and the facts had to be established by evidence.
It may be that without the evidence of Kumaraswamy and Krishnaswamy the case might have taken a different turn but we have already pointed out that the learned Judge very correctly brought these two persons intimately connected with the cars into the Case before him, and to give their version.
Their version is partly 1032 true and partly false and the false evidence was to exclude Seshadri from the charge.
In our opinion, this also demonstrates the connection between these persons and Seshadri which had been established in other ways through their own mouths.
We accordingly hold that this corrupt practice was brought home.
It remains to consider the argument of Mr. Gupte whether Vasanta Pai could be declared elected.
This will depend on our reaching the conclusion that but for the fact that voters were brought through this corrupt practice to the polling booths, the result of the election had been materially affected.
In a 'single transferable vote, it is very difficult to say how the voting would have gone, because if all the votes which Seshadri had got, had gone to one of the other candidate who got eliminated at the earlier counts, those candidates would have won.
We cannot order a recount because those voters were not free from complicity.
It would be speculating to decide how many of the voters were brought to the polling booths in the cars.
We think that we are not in a position to declare Vasanta Pai as elected, because that would be merely a guess or surmise as to the nature of the voting which would have taken place if this corrupt practice had not been perpetrated.
In the result therefore, we set aside the direction that Vasanta Pai is elected to the constituency.
There will inevitably have to be a fresh election in this constituency.
In so far as Seshadri is concerned, we think that he was properly named as guilty of corrupt practice although that order was incorporated by the learned Judge through a review.
It was his duty to have named persons who had been guilty of corrupt practice and he made this up later.
There is no need for any specific power for review since the power to name any person guilty of corrupt practice is already contained in the Act.
Whether it comes in the original judgment or by a supplementary or complementary order, is not much to the purpose; that order was correctly made.
In the result, the appeal fails and it will be dismissed with costs.
R.K.P.S. Appeal dismissed.
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The appellant was elected to the Madras Legislative Council from the Madras District Graduates Constituency.
His election was challenged by the Respondent, his nearest rival candidate by an election petition alleging, mainly, that a large number of cars had been employed for the conveyance of voters to the polling booths in violation of section 123(5) of the Representation of the People Act, 1951.
The High Court held that the corrupt practice was established and set aside the appellant 's election.
It also declared the respondent elected in his place.
The original order passed by the High Court did not :name the appellant as guilty of corrupt practice but the Court, by a subsequent order reviewing its previous order, gave a declaration to that effect.
In the appeal to this Court, it was contended by the appellant that the plea in the petition regarding violation of section 123(5) was vague and not sufficiently defined so as to give him notice of the charge he had to meet, and furthermore, that the learned Judge who tried the case improved both the pleading on the subject and the evidence led by the election petitioner by calling certain witnesses and looking into documents which he had no power to do.
It was therefore contended that all the evidence which the learned Judge collected suo motu should not be looked at and if the case of the petitioner was confined to the bare plea raised, the petition would deserve to be dismissed because it was not clear in the plea and was lacking in proof.
HELD: dismissing the appeal: On the facts, the High Court had rightly found that many cars were employed for the conveyance of voters in the constituency.
The circumstantial chain of evidence was sufficient to show the connection between the appellant and the use of the cars for the conveyance of voters.
The corrupt practice under section 123(5) was therefore brought home.
A B] (i) The plea in the petition in essence was that cars were used for the purpose of conveying voters contrary to the prohibition contained in the Election Law.
The names of the booths and the divisions in which the booths were situated together with the particulars of the cars and the persons primarily concerned with cars at the polling booths had been mentioned.
The connection of the appellant with the use of the cars had been specifically pleaded.
Sufficient particulars of the allegation had therefore been given and the rest were matters of evidence which did not require to be pleaded.
(ii) The power of a Civil Court to summon court witnesses is contained in O. XVI r. 14 of the Co& of Civil Procedure.
The Representation of People Act enjoins that all the powers under the Code can be exercised and all the procedure as far as may be ,applicable to the trial 1020 of civil suits may be followed in the trial of election petitions.
The court trying an election petition therefore has the power to summon a Court witness if it thinks that the ends of justice require or that the case before it needs that kind of evidence.
The policy of election law seem to be that for the establishment of purity of elections, investigation into to be that for the nasal factices including corrupt practices at elections all allegations of malpractices include corrupt practices at elections should be thoroughly made.
In the present case a large number of cars were obviously used presumably for the purpose of carrying voters to the booths.
In the face of this voluminous evidence it was open to the judge, if evidence was available to establish who had procured or hired judge, summon witnesses who could depose to the same.
Such a vehicles, to exercised by the learned judge .
[1028 B F] (iii) In the present case it was not possible to reach the conclusion the voters were brought to the polling booths in violation of that 23(5), the result de the election had been materially affected.
In a single transferable vote, it is very difficult to say how the voting would have gone, because if all the votes which the appellant had got, had gone to one of the other candidates who were eliminated at the earlier counts, those candidates could have won.
The declaration of the respondent 's election would be merely a guess or surmise as to the nature of the voting which would have taken place if the corrupt practice had not been perpetrated and the High Court 's direction declaring him elected must therefore be set aside.
[1032 B D] (iv) The appellant was properly named as guilty of corrupt practice although the order was incorporated by the learned Judge through a review.
It was his duty to have named persons who had been guilty of corrupt practice and he made this up later.
There is no need 'for any specific power for review since the power to name any person guilty of corrupt Practice is already contained in the Act.
Whether it comes in the original judgment or by a supplementary or complementary order, is not much to the purpose that order was correctly made.
[1032 E]
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2550.txt
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Appeal No. 197 of 1956.
Appeal from the judgment and order dated August 6,1954, of the Bombay High Court in Appeal No. 30 of 1954, arising out of the judgment and order dated January 28, 1954, of the said High Court in Insolvency No. 74 of 1951.
1385 M. C. Setalvad, Attorney General for India, section N. Andley and J. B. Dadachanji, for the appellants.
Purshottam Tricumdas and I. N. Shroff, for the respondent.
February 20.
The following Judgment of the Court was delivered by GAJENDRAGADKAR J.
This appeal by special leave arises from the notice of motion taken out by the respondent official assignee under section 55 of the Presidency towns Insolvency Act against the appellants for a declaration that a deed of gift executed by the insolvent Daulatram Hukamchand on May 22, 1950, in favour of the appellants was void.
It appears that some creditors of Daulatram filed a petition in the High Court of Judicature at Bombay, Insolvency Case No. 74 of 1.951, for an order that the said Daulatram be adjudged insolvent as he had given notice of suspension of payment of the debts on August 2, 1951.
Daulatram was adjudicated in solvent on August 21, 1951, with the result that the estate of the insolvent vested in the respondent under section 17 of the Act.
On September 26, 1951, the respondent took out the present notice of motion.
The impugned deed of gift has been executed by the insolvent in favour of his wife and three sons who are the appellants before us.
In reply to the notice of motion appellants I to 3 filed a joint affidavit setting out the facts and circumstances under which the said deed of gift had been executed by the insolvent in their favour.
In substance, the appellants ' case was that, though the document purported to be a gift, it was really a transaction supported by valuable con sideration and as such it did not fall within the mischief of section 55 of the Act.
At the hearing of this notice of motion before Mr. Justice Coyajee, when the appellants sought to lead evidence in support of this plea, the respondent objected and urged that the evidence which the appellants wanted to lead was inadmissible under section 92 of the Indian Evidence Act.
The learned Judge, however, overruled the respondent 's objection and allowed the appellants to lead 1386 their evidence.
In the end the learned Judge did not accept the appellants ' contention and, by his judgment delivered on January 28, 1954, he granted the declaration claimed by the respondent under section 55 of the Act.
Against this judgment and order the appellants preferred an appeal (No. 30 of 1954) which was heard by Chagla C. J. and Shah J.
The learned Judges took the view that Mr. Justice Coyajee had erred in law in allowing oral evidence to be led by the appellants in support of their plea that the transaction evidenced by the deed of gift was in reality a transfer for consideration.
The learned Judges held that the gift in question had been executed by the donor in favour of the donees out of natural love and affection and that, under section 92, it was not open to the appellants to lead evidence to show that the transaction was supported not by the consideration of natural love and affection but by another kind of valuable consideration .
On this view of the matter the learned Judges did not think it necessary to consider the oral evidence actually led by the appellants and decide whether Mr. Justice Coyajee was right or not in rejecting the said evidence on the merits.
That is how the appeal preferred by the appellants was dismissed on August 6, 1964.
On September 23, 1954, the application made by the appellants for a certificate was rejected by the High Court at Bombay; but special leave was granted to the appellants by this Court on November 3, 1954, and that is how the appeal has come before us for final disposal.
The principal point which arises in this appeal is whether the appellants were entitled to lead oral evidence with a view to show the real nature of the impugned transaction.
In deciding this question, it would be necessary to consider the true scope and effect of sections 91 and 92 of the Evidence Act.
Chapter VI of the Evidence Act which begins with section 91 deals with the exclusion of oral by documentary evidence.
Section 91 provides that, " when the terms of a contract, or of a grant, or of any other disposition of property, have been reduced to the form of a document, 1387 and in all cases in which any matter is required by law to be reduced to the form of a document, no evidence shall be given in proof of the terms of such contract, grant or other disposition of property, or of such matter, except the document itself, or secondary evidence of its contents in cases in which secondary As, evidence is admissible under the provisions hereinbefore contained.
" The normal rule is that the contents of a document must be proved by primary evidence which is the document itself in original.
Section 91 is based on what is sometimes described as the " best evidence rule ".
The best evidence about the contents of a document is the document itself and it is the production of the document that is required by section 91 in proof of its contents.
In a sense, the rule enunciated by section 91 can be said to be an exclusive rule inasmuch as it excludes the admission of oral evidence for proving the contents of the document except in cases where secondary evidence is allowed to be led under the relevant provisions of the Evidence Act.
Section 92 excludes the evidence of oral agreements and it applies to cases where the terms of contracts, grants or other dispositions of property have been proved by the production of the relevant documents themselves under section 91 ; in other words ' it is after the document has been produced to prove its terms under section 91 that the provisions of section 92 come into operation for the purpose of excluding evidence of any oral agreement or statement, for the purpose of contradicting, varying, adding to or subtracting from its terms.
The application of this rule is limited to cases as between parties to the instrument or their representatives in interest.
There are six provisos to this section with which we are not concerned in the present appeal.
It would be noticed that sections 91 and 92 in effect supplement each other.
Section 91 would be frustrated without the aid of section 92 and section 92 would be inoperative without the aid of section 91.
Since section 92 excludes the admission of oral evidence for the purpose of contradicting, varying, adding to or subtracting from the terms of the document properly proved 176 1388 under section 91, it may be said that it makes the proof of the document conclusive of its contents.
Like section 91, section 92 also can be said to be based oil the best evidence rule.
The two sections, however, differ in some material particulars.
Section 91 applies to all documents, whether they purport to dispose of rights or not, whereas section 92 applies to documents which can be described as dispositive.
Section 91 applies to documents which are both bilateral and unilateral, unlike section 92 the application of which is confined only to bilateral documents.
Section 91 lays down the rule of universal application and is not confined to the executant or executants of the documents.
Section 92, on the other hand, applies only between the parties to the instrument or their representatives in interest.
There is no doubt that section 92 does not apply to strangers who are not bound or affected by the terms of the document.
Persons other than those who are parties to the document are not precluded from giving extrinsic evidence to contradict, vary, add to or subtract from the terms of the document.
It is only where a question arises about the effect of the document as between the parties or their representatives in interest that the rule enunciated by section 92 about the exclusion of oral agreement can be invoked.
This position is made absolutely clear by the provisions of section 99 itself.
Section 99 provides that " persons who are not parties to a document or their representatives in interest may give evidence of any facts tending to show a contemporaneous agreement varying the terms of the document.
" Though it is only variation which is specifically mentioned in section 99, there can be no doubt that the third party 's right to lead evidence which is recognized by section 99 would include, a right to lead evidence not only to vary the terms of the document, but to contradict the said terms or to add to or subtract from them.
If that be the true position, before considering the effect of the provisions of section 92 in regard to the appellants ' right to lead oral evidence, it would be necessary to examine whether section 92 applies at all to the present proceedings between the official assignee who is the respondent and the 1389 donees from the insolvent who are the appellants before us.
Does the official assignee represent the insolvent, and can he be described as the representative ininterest of the insolvent, when he moves the Insolvency Court under section 55 of the Presidency towns Insolvency Act ? It is true that, under section 17 of the Act, on the making of an order of adjudication, the property of the insolvent wherever situate vests in the official assignee and becomes divisible among his creditors; but the property in respect of which a declaration is claimed by the official assignee under section 55 has already gone out of the estate of the insolvent, and it cannot be said to vest in the official assignee as a result of the order of adjudication itself.
Besides, when the official assignee makes the petition under section 55 he does so obviously and solely for the benefit of the creditors.
An insolvent himself has, and can possibly have, no right to challenge the transfer effected by him.
In this respect the official assignee has a higher title than the insolvent and, when, under section 55, he challenges any transfer made by the insolvent, he acts not for the insolvent or on his behalf, but in the interest of the whole body of the insolvent 's creditors.
In theory and on principle, as soon as an order of adjudication is made, all proceedings in regard to the estate of the insolvent come under the control of the Insolvency Court.
It may be said that the official assignee in whom the estate of the insolvent vests is to guard not only the interests of the creditors of the insolvent but also " public morality and the interest which every member of the public has in the observance of commercial morality "(1).
There is no doubt that it is the Insolvency Court alone which has jurisdiction to annul the insolvent 's transactions, whether the case is governed by the Presidency towns Insolvency Act or by the Provincial Insolvency Act; and so the proceedings taken under section 55 cannot be deemed to be proceedings taken for and on behalf of the insolvent at all.
(1) " The Law of Insolvency in India " By Rt.
Sir D. F. Mulla, Kt. 2nd Ed., p. 231.
1390 The provisions of section 55 themselves support the same conclusion.
Under section 55, any transfer of property not being a transfer made before and in consideration of marriage or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration shall, if the transferor is adjudged insolvent within two years of the date of transfer, be void against the official assignee.
This section, like section 53 A of the Provincial Insolvency Act, makes the impugned transfers voidable at the instance of the official assignee or the receiver.
The transfers in question are not declared void as between the parties themselves; they are avoided by the official assignee or the receiver and their avoidance is intended to enure for the benefit of the whole body of the creditors of the insolvent.
The relevant sections of the two Insolvency Acts in effect require the Insolvency Courts to set aside the impugned transactions in exercise of the Insolvency Courts ' exclusive jurisdiction in that behalf The obvious object of these provisions is to bring back to the insolvent 's estate, property which has left the estate by the impugned act of the insolvent himself and make the said property available for distribution amongst his creditors.
It would, therefore, be impossible to hold that, when the official assignee makes a petition under section 55 of the Act, he is acting as a representative ininterest of the insolvent.
In this connection it would be relevant to remember that, in cases governed by the Presidency towns Insolvency Act, the practice in Calcutta and Bombay consistently allows a creditor who has proved his debt to file a petition to set aside the transfer under section 55 of the Act if he shows that the official assignee, on being tendered a reasonable indemnity has unreasonably refused to make an application.
Similarly, under section 54 A of the Provincial Insolvency Act, a creditor himself can make the application if the receiver refuses to take any action.
Now, if an application is made by a creditor for setting aside a voluntary transfer effected by the insolvent, there can be no doubt that the creditor is not the representative 1391 in interest of the insolvent and the creditor would obviously not be affected by the provisions of section 92 of the Indian Evidence Act.
It would really be anomalous if section 92 were to apply to proceedings instituted by the official assignee under section 55 though the said section cannot and would not apply to similar proceedings instituted by a creditor.
Having regard to the object with which section 55 has been enacted, the nature of the proceedings taken under it, and the nature and effect of the final order which is contemplated under it, it is clear that, like the creditor who may apply, the official assignee also cannot be said to be the representative in interest of the insolvent in these proceedings.
If that be the true position, section 92 cannot apply to the present proceedings between the respondent and the appellants; and so there can be no doubt that the respondent would not be precluded from leading evidence of an oral agreement for the purpose of contradicting, varying, adding to or subtracting from the terms of the impugned document.
The question raised by Shri Purushottam which still remains to be considered is whether the appellants who undoubtedly are the representatives in interest of the insolvent can avoid the application of a. 92.
In our opinion, the answer to this question must be in favour of the appellants.
It is urged before us by Shri Purushottam that the scheme of the relevant provisions of Ch.
VI of the Indian Evidence Act is inconsistent with the appellants ' contention that they can lead oral evidence about the alleged agreement which may tend to change the character of the transaction itself.
Shri Purushottam bases his argument mainly on the provisions of section 91 read with section 99 of the Act.
He contends that section 91 requires the production and proof of the document itself for the purpose of proving the contents of the document; and by necessary implication all evidence about any oral agreement which may affect the terms of the document is excluded by section 91 itself.
We are not impressed by this argument.
As we have already observed, sections 91 and 92 really supplement each other.
It is because section 91 by itself would not have excluded 1392 evidence of oral agreements which may tend to vary the terms of the document that section 92 has been enacted; and if section 92 does not apply in the present case, there is no other section in the Evidence Act which can be said to exclude evidence of the agreement set up by the appellants.
What section 91 prohibits is the admission of oral evidence to prove the contents of the document.
In the present case, the terms of the document are proved by the production of the document itself.
Whether or not the said terms could be varied by proof of an oral agreement is a matter which is not covered by section 91 at all.
That is the subject matter of section 92; and so, if section 92 does not apply, there is no reason to exclude evidence about an oral agreement solely on the ground that if believed the said evidence may vary the terms of the transaction.
Shri Purushottam 'also relied upon the provi sions of section 99.
His argument is that it is only persons who are not parties to a document or their representatives in interest who are allowed by section 99 to give evidence of facts tending to show a contemporaneous agreement varying the terms of the document.
lit other words, the effect of section 99 is not only to allow strangers to lead such evidence, but to prohibit parties or their representatives in interest from leading such evidence independently of tile provisions of section 92 of the Evidence Act.
We do not read section 99 as laying down any such prohibition by necessary implication.
As a matter of fact, from the terms of section 92 itself, it is clear that strangers to the document are outside the scope of section 92 ; but section 99 has presumably been enacted to clarify the same position.
It would be unreasonable, we think, to hold that section 99 was intended not only to clarify the position with regard to the strangers to the document, but also to lay down a rule of exclusion of oral evidence by implication in respect of the parties to the document or their representatives in interest.
In our opinion, the true position is that, if the terms of any transfer reduced to writing are in dispute between a stringer to a document and a party to it or his representative in interest, the restriction imposed by section 92 in regard to 1393 the exclusion of evidence of oral agreement is inapplicable; and both the stranger to the document arid the party to the document or his representative in interest are at liberty to lead evidence of oral agreement notwithstanding the fact that such evidence, if believed, may contradict, vary, add to or subtract from its terms.
The rule of exclusion enun ciated by section 92 applies to both parties to the document and is based on the doctrine of mutuality.
It would be inequitable and unfair to enforce that rule against a party to a document or his representative in interest in the case of a dispute between the said.
party or his representative in interest on the one hand and the stranger on the other.
In dealing with this point we may incidentally refer to the relevant statement of the law by Phipson in his treatise on " Evidence": " Where the transaction has been reduced into writing merely by agreement of the parties ", it is observed, " extrinsic evidence to contradict or vary the writing is excluded only in proceedings between such parties or their privies, and not in those between strangers, or a party and a stranger; since strangers cannot be precluded from proving the truth by the ignorance, carelessness, or fraud of the parties (R. vs Cheadle, 3 B. and Ad. 833); nor, in proceedings between a party and a stranger, will the former be estopped, since there would be no mutuality " (1).
The result is that section 92 is wholly inapplicable to the present proceedings and so the appellants are entitled to lead evidence in support of the plea raised by them.
It appears that the attention of the learned Judges who heard the appeal in the High Court at Bombay was not drawn to this aspect of the matter.
That is why they proceeded to deal with the question about the admissibility of oral evidence led by the appellants on the assumption that section 92 applied.
We must accordingly set aside the decree passed by the court of appeal in the High Court at Bombay and send the appeal back to that Court for disposal on the merits in accordance with law.
In the circum (1) Phipson on Evidence 9th Ed., p. 602.
1394 stances of this case, we think that the fair order as to costs of this appeal would be that the costs should abide the final result in the appeal before the High Court at Bombay.
Appeal allowed.
Case remanded.
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One D executed, on May 22, 1950, a deed of gift in favour of the appellants, his wife and sons.
Upon the application of his creditors D was adjudged an insolvent on August 21, 1951 and his estate vested in the respondent.
On September 26, 1951, the respondent took out a notice of motion under section 55 of the Presidency towns Insolvency Act for a declaration that the deed of gift was void.
In reply the appellants pleaded that the transaction, though it purported to be a gift, was in reality a transfer for valuable consideration.
The respondent objected that the evidence which the appellants sought to lead in support of their plea was inadmissible under section 92 of the Indian Evidence Act : Held, that section 92 of the Evidence Act was not applicable to the proceedings and the appellants were entitled to lead evidence in support of the plea raised by them.
Section 92 is only applicable to cases as between parties to an instrument or their representatives in interest.
Where, however the dispute is between a stranger to an instrument and a party to it or his representative in interest, section 92 is inapplicable, and both the stranger and the party or his representative are at liberty to lead evidence of oral agreement notwithstanding the fact that such evidence if believed, may contradict, vary, add to or subtract from its terms.
In the present case, though the appellants were the representatives in interest of the insolvent, the respondent, when he made the petition under section 55 of the Presidency towns Insolvency Act, was not acting as a representative in interest of the insolvent, and, therefore, the proceedings were not between the parties to the instrument or their representatives in interest.
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Civil Appeal No. 1376 of 1978.
(Appeal by special leave from the judgment and order dated the 1st February, 1978 of the Kerala High Court in M.F.A. No. 53 of 1977) L.N. Sinha, Attorney General, J. M. Joseph, K John and Shri Narain for the Appellant.
D C.S. Vaidlyanathan, (A.C.), for the Respondent.
The Judgment of the Court was delivered by CHANDRACHUD, C.J.
The question which arises in this appeal by special leave is whether a debt owed by the respondent, an agriculturist, to the appellant The State Bank of Travancore falls within the purview of the Kerala Agriculturists ' Debt Relief Act, 11 of 1970, hereinafter called 'the Act '.
The respondent had an overdraft Account with the Erattupetta Branch of the Kottayam Orient Bank Ltd., at the foot of which he owed a sum of over Rs. 3000/ to the Bank.
The said Bank which was a 'Banking Company ' as defined in the Banking Regulation Act, 1949, was amalgamated with the appellant Bank with effect from June 17, 1961 in pursuance of a scheme of amalgamation prepared by the Reserve Bank of India in exercise of the powers conferred by section 45 (4) of the Banking Regulation Act and sanctioned by the Central Government under sub section (7) of section 45.
Upon the amalgamation, all assets and liabilities of the Kottayam Orient Bank stood transferred to the appellant Bank.
The notification containing the scheme of amalgamation was 342 published in the Gazette of India Extra ordinary dated May 16, 1961 .
The appellant filed a suit (O.S. No. 28 of 1963) in the Sub Court, Meenachil, against the respondent for recovery of the amount due from him in the overdraft Account with the Kottayam Orient Bank, the right to recover which had come to be vested in the appellant as a result of the aforesaid scheme of amalgamation.
That suit was decreed in favour of the appellant, but when it took out execution proceedings in the Sub Court, Kottayam, the respondent filed a petition under section 8 of the Act seeking amendment of the decree in terms of the provisions of the Act.
The respondent claimed that he was an agriculturist within the meaning of the Act and was therefore entitled to the benefit of its provisions, including those relating to the scaling down of debts.
The learned Subordinate Judge assumed, what was evidently not controverted, that the respondent was an agriculturist.
But the learned Judge held that the respondent was not entitled to the benefit of the provision regarding scaling down of the debt because the debt, having been once owed by him to the Kottayam Orient Bank Ltd., which was a 'Banking Company as defined in the Banking Regulation Act, 1949, was outside the purview of section 5 of the Act which provided for the scaling down of debts owed by agriculturists.
According to the learned Judge, the respondent was only entitled to the benefit of the proviso to section 2 (4) (l) of the Act under which the amount could be repaid in eight half yearly instalments.
Since the relief which the respondent had asked for was that his debt should be scaled down and since he was held not entitled to that relief, his application was dismissed by the learned Judge.
The respondent preferred an appeal to the High Court of Kerala, the maintainability of which was challenged by the appellant on the ground that no appeal lay against the order passed by the Subordinate Judge on the application filed by the respondent under section 8 of the Act.
The High Court accepted the preliminary objection but granted permission to the respondent to convert the appeal into a Civil Revision Application and dealt with it as such.
In view of the general importance of the questions involved in the matter, the revision application was referred by a Division Bench to the Full Bench.
It was contended in the High Court on behalf of the appellant, Bank that the debt owed to it by the respondent was excluded 343 from the operation of the Act by reason of section 2 (4) (a) (ii) and section 2 (4) (1) of the Act.
By its judgment dated February 1, 1978 the High Court rejected that contention, allowed the Revision Application and held that the respondent was entitled to all the relevant benefits of the Act, including the benefit scaling down of the debt.
The Bank questions the correctness of that judgment in this appeal.
Section 8 of the Act provides, in so far as is material, that where, before the commencement of the Act, a court has passed a decree for, the repayment of a debt, it shall, on the application of a judgment debtor, who is an agriculturist, apply the provisions of the Act to such a decree and shall amend the decree accordingly.
It is in pursuance of this section that the respondent applied to the executing Court for amendment of the decree.
Section 4(1) of the Act provides that notwithstanding anything contained hl any law or contract or in a decree of any court, but subject to the provisions of sub section (5), an agriculturist may discharge his debts in the manner specified in sub sections (2) and (3).
Sub section (2) of section 4 provides that if any debt is repaid in seventeen equal half yearly instalments together with interest at the rates specified in section 5, the whole debt shall be deemed to be discharged.
Sub section (3) specifies the period within which the instalments have to be paid.
The respondent claims the benefit of the provision contained in section 4 (1) of the Act.
In order to decide whether the respondent is entitled to the relief claimed by him, it would be necessary to consider the provisions of sections 2 (1) and 2 (4) of the Act.
The short title of the Act shows that it was passed in order to give relief to indebted agriculturists in the State of Kerala.
The State Legislature felt the necessity of passing the Act because, the Kerala Agriculturists ' Debt Relief Act, 31 of 1958, conferred benefits on agricultural debtors in respect of debts incurred by them before July 14, 1958 only.
The Statement of objects and Reasons of the Act slows that the agricultural indebtedness amongst the poorer sections of the community showed an upward trend after July 14, 1958 owing to various economic factors.
A more comprehensive legislation was therefore introduced by the State Legislature in the shape of the present Act in substitution of the Act of 1958.
The Act came into force on July 14, 1970.
Section 2 (1) of the Act which defines an "agriculturist" need not be reproduced because it was common ground at all stages bet 344 ween the parties that the respondent is an agriculturist within the meaning of the definition in section 2 (1).
Section 2 (4) of the Act, in so far as is material for our purposes, reads thus: "Section 2 (4):"debt" means any liability in cash or kind, whether secured or unsecured, due from or incurred by an agriculturist on or before the commencement of this Act, whether payable under a contract, or under a decree or order of any court, or otherwise, but does not include: (a) any sum payable to: (i) the Government of Kerala or the Government of India or the Government of any other State or Union territory or any local authority; or (ii) the Reserve Bank of India or the State Bank of India or any subsidiary bank within the meaning of clause (k) of section 2 of the State Bank of India (Subsidiary Act, 1959, or the Travancore Credit Bank (in liquidation) constituted under the Travancore Credit Bank Act, IV of 1113: Provided that the right of the bank to recover the sum did not arise by reason of: (A) any assignment made or (B) any transfer effected by operation of law, subsequent to the 1st day of July, 1957".
As stated above, the respondent is admittedly an agriculturist and he owes a sum of money to the appellant Bank under a decree passed in its favour by the Sub Court, Meenacil, in O.S. No. 28 of 1963.
The liability which the respondent owes to the appellant Bank is therefore a "debt" within the meaning of section 2 (4) of the Act.
But certain liabilities are excluded from the ambit of the definition of "Debt".
The liabilities which are thus excluded from the definition of debt are specified in clauses (a) to (n) of section 2 (4).
We are concerned in this appeal with the liabilities specified in clause (a) (ii) and clause (1) of section 2 (4), which are excluded from 345 the operation of clause 2 (4).
We will first consider the implications of the exclusion provided for in sub clause (ii) of clause (a) of section 2 (4).
Under the aforesaid sub clause, any sum payable to a subsidiary bank within the meaning of section 2 (k) of the , is excluded from the definition of "debt".
Section 2 (k) of the Act of 1959 defines a "subsidiary bank" to mean any new bank, including the Hyderabad Bank and the Saurashtra Bank.
The expression "new bank" is defined in section 2 (f) of the Act of 1959 to mean any of the banks constituted under section 3.
Section 3 provides that with effect from such date, as the Central Government may specify, there shall be constituted the new banks specified in the section.
Clause (f) of section 3 mentions the State Bank of Travancore amongst the new banks which may be constituted under section 3.
It is thus clear that the appellant Bank, namely, the State Bank of Travancore, is a subsidiary bank as contemplated by sub clause (ii) of clause (a) of section 2 (4) of the Act.
If the matter were to rest there, the decretal amount payable by the respondent to the appellant Bank will not be a debt within the meaning of section 2 (4) of the Act, since the appellant is a subsidiary bank within the meaning of section 2 (k) of the .
But by reason of clause (B) of the proviso to section 2 (4) (a) (ii) of the Act, the amount payable to a subsidiary bank is not to be regarded as a debt within the meaning of the Act, only if the right of the subsidiary bank to recover the amount did not arise by reason of any transfer effected by operation of law subsequent to July 1, 1957.
The proviso is thus in the nature of an exception to the exceptions contained in section 2 (4) (a) (ii) of the Act.
The respondent initially owed a sum exceeding Rs. 3000/ to the Erattupetta Branch of the Kottayam Orient Bank Ltd. which was amalgamated with the appellant Bank with effect from June 17, 1961 pursuant to an amalgamation scheme prepared by the Reserve Bank of India.
All the rights, assets and liabilities of the Kottayam Orient Bank were transferred to the appellant Bank as a result of the amalgamation.
The notification containing the scheme of amalgamation was published on May 16, 1961.
Thus, the right of the appellant Bank, though it is a subsidiary Bank, to recover the amount from the respondent arose by reason of a transfer effected by operation of law, namely, the scheme of amalgamation, which came into effect after July 1, 1957.
Since clause (B) of the proviso to section 2 (4) (a) (ii) is attracted, the appellant Bank will not be entitled to the benefit of the exclusion contained in section 2 (4) (a) 346 (ii) of the Act and the respondents claim to the benefits of the Act will remain unaffected by that provision.
That makes it necessary to consider the question whether the appellant Bank can get the advantage of any of the other exclusionary clauses (a) to (n) of section 2 (4) of the Act.
The only other clause of section 2 (4) which is relied upon by the appellant in this behalf is clause (1), according to which the word 'debt ' as defined in section 2 (4) will not include: "any debt exceeding three thousand rupees borrowed under a single transaction and due before the commencement of this Act to any banking company; (emphasis supplied) Provided that in the case of any debt exceeding three thousand rupees borrowed under a single transaction and due before the commencement of this Act to any banking company, any agriculturist debtor shall be entitled to repay such debt in eight equal half yearly instalments as provided in sub section (3) of section 4, but the provisions of section 5 shall not apply to such debt.
" The question for consideration is whether the amount which the respondent is liable to pay under the decree was "due before the commencement of the Act to any Banking Company".
Turning first to the question whether the appellant Bank is a banking company, the learned Subordinate Judge assumed that it is, but no attempt was made to sustain that finding in the High Court.
Shri Abdul Khader, who appears on behalf of the appellant conceded before us that it is not a banking company.
The concession is rightly made, since according to section 2(2) of the Act, 'Banking Company ' means a banking company as defined in the Banking Regulation Act, 1949.
Section S(c) of the Act of 1949 defines a banking company to mean any Company which transacts the business of banking in India (subject to the provision contained in the Explanation to the section).
Thus, in order that a bank may be a banking company, it is in the first place necessary that it must be a "company".
The State Bank of Travancore, which is the appellant before us, is not a 'company ' properly so called.
It is a subsidiary bank which falls within the definition of section 2(k) of the .
It was established by the Central Government in accordance with the Act of 1959 and is not a 'company ' and 347 therefore, not a banking company.
It must follow that the decretal debt which the respondent is liable to pay to the appellant is not owed to a banking company.
It was indeed not owed to any banking company at all on July 14, 1970, being the date on which the Act came into force.
It may be recalled that the respondent owed a certain sum exceeding three thousand rupees to the Kottayam Orient Bank Ltd., a banking company, on an overdraft account.
That Bank was amalgamated with the appellant Bank with effect from May 16, 1961, as a result of which the latter acquired the right to recover the amount from the respondent.
It filed Suit No. 28 of 1963 to recover that amount and obtained a decree against the respondent.
lt is precisely this small conspectus of facts, namely, that the amount was at one time owed to a banking company but was not owed to a banking company at the commencement of the Act, which raises the question as regards the true interpretation of clause (1) of section 2 (4).
The fact that the amount which the respondent owes to the appellant was not owed to a banking company on the date on which the Act came into force, the appellant not being a banking company, does not provide a final solution to the problem under consideration.
The reason for this is that clause (1) of section 2(4) speaks of a debt "due before the commencement" of the Act to any banking company, thereby purporting to make the state of affairs existing before the commencement of the Act decisive of the application of that clause.
The contention of the learned Attorney General, who led the argument on behalf of the appellant, is that the respondent owed the debt before the commencement of the Act to a banking company and, therefore, the appellant is entitled to claim the benefit of the exclusion provided for in clause (1).
The argument is that, for the purposes of clause (1), it does not matter to whom the debt is owed on the date of the commencement of the Act: what matters is to whom the debt was owed before the commencement of the Act.
The learned Attorney General is apparently justified in making this submission which rests on the plain language of clause (1) of section 2(4), the plain, grammatical meaning of the words of the statute being generally a safe guide to their interpretation.
But having considered the submission in its diverse implications, we find ourselves unable to accept it.
348 In order to judge the validity of the submission made by the Attorney General, one must of necessity have regard to the object and purpose of the Act.
The object of the Act is to relieve agricultural indebtedness.
In order to achieve that object, the legislature conferred certain benefits on agricultural debtors but, while doing so, it excluded a class of debts from the operation of the Act, namely, debts of the description mentioned in clauses (a) to (n) of section 2(4).
One class of debts taken out from the operation of the Act is debts owed to banking companies, as specified in clause (1).
The reason for this exception is obvious.
It is notorious that money lenders exploit needy agriculturists and impose upon them harsh and onerous terms while granting loans to them.
But that charge does not hold true in the case of representative institutions, like banks and banking companies.
They are governed by their rules and regulations which do not change from debtor to debtor and which, if any thing, are intended to benefit the weaker sections of society.
It is for this reason that debts owing to such creditors are excepted from the operation of the Act.
A necessary implication and an inevitable consequence of the Attorney General 's argument is that in order to attract the application of clause (1) of section 2 (4), it is enough to show that the debt was, at some time before the commencement of the Act, owed to a banking company; it does not matter whether it was in its inception owed to a private money lender and, equally so, whether it was owed to such a money lender on the date of the commencement of the Act.
This argument, if accepted, will defeat the very object of the Act.
The sole test which assumes relevance according to that argument is whether the debt was owed, at any time before the commencement of the Act, to a banking company.
It means that it is enough for the purpose of attracting clause (1) that, at some time in the past, may be in a chain of transfers, the right to recover the debt was vested in a banking company.
A simple illustration will elucidate the point.
If a private money lender had initially granted a loan to an agricultural debtor on usurious terms but the right to recover that debt came to be vested in a banking company some time before the commencement of the Act, the debtor will not be able to avail himself of the benefit of the provisions of the Act because, at some point of time before the commencement of the Act, the debt was owed to a banking company.
And this would be so irrespective of whether the banking company continues to be entitled to recover the debt on the date of the commencement of the Act.
Even if it assigns its 349 right to a private individual, the debtor will be debarred from claiming the benefit of the Act because, what is of decisive importance, according to the Attorney General 's argument is the fact whether, some time before the commencement of the Act, the debt was due to a banking company.
We do not think the Legislature could have intended to produce such a startling result.
The plain language of the clause, if interpreted so plainly, will frustrate rather than further the object of the Act.
Relief to agricultural debtors, who have suffered the oppression of private moneylenders, has to be the guiding star which must illumine and inform the interpretation of the beneficent provisions of the Act.
When clause (1) speaks of a debt due "before the commencement" of the Act to a banking company, it does undoubtedly mean what it says, namely, that the debt must have been due to a banking company before the commencement of the Act.
But it means something more: that the debt must also be due to a banking company at the commencement of the Act.
We quite see that we are reading into the clause the word "at" which is not there because, whereas it speaks of a debt due "before" the commencement of the Act, we are reading the clause as relating to a debt which was due "at" and "before" the commencement of the Act to any banking company.
We would have normally hesitated to fashion the clause by so restructuring it but we see no escape from that course, since that is the only rational manner by which we can give meaning and content to it, so as to further the object of the Act.
There is one more aspect of the matter which needs to be amplified and it is this: When clause (1) speaks of a debt due before the commencement of the Act, what it truly means to convey is not that the debt should have been due to a banking company at some point of time before the commencement of the Act, but that it must be a debt which was incurred from a banking company before the commencement of the Act.
Thus, the application of clause (1) is subject to these conditions: (i) The debt must have been incurred from a banking company; (ii) the debt must have been so incurred before the commencement of the Act, and (iii) the debt must be due to a banking company on the date of the commencement of the Act.
These are cumulative conditions and unless each one of them is satisfied, clause (1) will not be attracted and the exclusion provided for there 350 in will not be available as an answer to the relief sought by the debtor in terms of the Act.
Our attention was drawn by the Attorney General to the provisions of sections 2 (4) and 2 (4) (j) of the Act the former using the expression "on or before the commencement" of the Act and the latter "at the commencement" of the Act.
Relying upon the different phraseology used in these two provisions and in clause (1) inter se, he urged that the legislature has chosen its words carefully and that when it intended to make the state of affairs existing "at" the commencement of the Act relevant, it has said so.
We are not impressed by this submission.
Section 2 (4) which defines a "debt" had to provide that debt means a liability due from or incurred by an agriculturist "on or before the commencement" of the Act.
It could not be that liabilities incurred before the commencement of the Act would be "debts" even though they are not due on the date of commencement of the Act.
The words "on or before the commencement" of the Act are used in the context of liabilities "due from or incurred" by an agriculturist.
For similar reasons, clause (j) had to use the expression "at the commencement" of the Act, the subject matter of that clause being debts due to widows.
The benefit of the exclusion provided for in clause (j) could only be given to widows to whom debts were due "at the commencement" of the Act.
The legislature could not have given that benefit in respect of debts which were due before but not at the commencement of the Act.
Thus, the language used in the two provisionals on which the learned Attorney General relies is suited to the particular subject matter with which those provisions deal and is apposite to the context in which that language is used.
We have given to the provision of clause (1) an interpretation which, while giving effect to the intention of the legislature in the light of the object of the Act, brings out the true meaning of the provision contained in that clause.
The literal construction will create an anomalous situation and lead to absurdidities and injustice.
That construction has therefore to be avoided.
Any other interpretation of clause (1) will make it vulnerable to a constitutional challenge on the ground of infraction of the guarantee of equality.
The object of the Act being to confer certain benefits on agricultural debtors, the legislature would be under an obligation, while excepting a certain category of debts from the operation of the Act, to make a classification which will answer the test of article 14.
Debts incurred from banking companies and due to such companies at the commencement of the Act would fall into 351 a separate and distinct class, the classification bearing a nexus with A the object of the Act.
If debts incurred from private money lenders are brought within the terms of clause (1) on the theory that the right to recover the debt had passed on to a banking company sometime before the commencement of the Act, the clause would be unconstitutional for the reason that it accords a different treatment to a category of debts without a valid basis and without the classification having a nexus with the object of the Act.
In State of Rajasthan vs Mukanchand section 2 (e) of Jagirdar 's Debt Reduction Act, 1937 was held invalid on the ground that it infringed Article 14 of the Constitution.
The object of that Act was to reduce the debts secured on jagir lands which had been resumed under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act.
The Jagirdar 's capacity to pay debts had been reduced by the resumption of his lands and the object of the Act was to ameliorate his condition.
It was held that no intelligible principle underlies the exempted category of debts mentioned in section 2(e) since the fact that the debts were owed to a government or to a local authority or similar other bodies, had no real relationship with the object sought to be achieved by the Act.
In Fatehand Himmatlal vs Slate of Maharashtra, in which the constitutionality of the Maharashtra Debt Relief Act, 1976 was challenged, it was held by this Court that the exemption granted by the statute to credit institutions and banks was reasonable because liabilities due to Government, local authorities and other credit institutions were not tainted by the view of the debtor 's exploitation.
Fatehchand would be an authority for the proposition that clause (1), in the manner interpreted by us, does not violate Article 14 of the Constitution.
Shri Vaidyanathan, who appears on behalf of the respondent, contended that the claim made by the appellant Bank falls squarely under section 2 (4) (a) (ii) of the Act and that if the appellant is not entitled to the benefit of the specific provision contained therein, it is impermissible to consider whether it can claim the benefit of some other exclusionary clause like clause (1).
Counsel is right to the extent that the appellant is not entitled to claim the benefit of the provision contained in section 2 (4)(a)(ii) because of Proviso B to that 352 section.
The simple reason in support of this conclusion is that the right of the appellant to recover the debt arose by reason of a transfer effected by operation of law subsequent to July 1, 1957.
We have already dealt with that aspect of the matter.
But we are not inclined to accept the submission that if a particular case falls under a specific clause of section 2 (4) which is found to be inapplicable, the creditor is debarred from claiming the benefit of any of the other clauses (a) to (n).
The object of the exclusionary clauses is to take category of debts from out of the operation of the Act and there is no reason why, if a specific clause is inapplicable, the creditor cannot seek the benefit of the other clauses.
The exclusionary clauses, together, are certainly exhaustive of the categories of excepted debts but to make those clauses mutually exclusive will be to impair unduly the efficacy of the very object of taking away a certain class of debts from the operation of the Act.
We are not therefore, inclined to accept the submission made by the learned counsel that section 2 (4) (a) (ii) is exhaustive of all circumstances in which a subsidiary bank can claim the benefit of the exceptions to section 2 (4).
For these reasons we affirm the view of the High Court that the exclusion provided for in clause (1) of section 2 (4) of the Act can be availed of if the debt is due to a banking company at the time of the commencement of the Act.
We have already indicated that the other condition which must be satisfied in order that clause (1) may apply is that the debt must have been incurred from a banking company before the commencement of the Act.
For these reasons we dismiss the appeal.
Appellant will pay the costs of the respondent throughout.
S.R. Appeal dismissed.
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The respondent had an overdraft account with the Erattupetta Branch of the Kottayam orient Bank Ltd. at the foot of which he owed a sum of over Rs. 3000/ to the Bank.
The said Bank which was a 'Banking Company ' as defined in the Banking Regulation Act, 1949, was amalgamated with the appellant Bank with effect from June 17, 1961.
The appellant Bank filed a suit (O,S, 28 of 1963) in the Sub Court, Meenachil, against the respondent for recovery of the amount due from him in the overdraft Account with the Kottayam orient Bank, the right to recover which had come to be vested in the appellant as a result of the scheme of amalgamation.
The suit was decreed in favour of the appellant but when it took out execution proceedings in the Sub Court, Kottayam, the respondent filed an application under section 8 of the Kerala Agriculturists ' Debt Relief Act claiming that being an agriculturist within the meaning of that Act, he was entitled to the benefit of its provisions including those relating to the scaling down of debts.
The learned Subordinate Judge dismissed the application holding: (i) that the respondent was not entitled to the benefit of the provisions regarding scaling down of the debt because the debt, having been once owed by him to the Kottayam orient Bank Ltd. which was a Banking Company as defined in the Banking Regulation Act, 1949, was outside the purview of section S of the Act which provided for the scaling down of debts owed by agriculturists; and (ii) that he was only entitled to the benefit of the proviso to section 2(4) (l) of the Act under which the amount could be repaid in eight half yearly instalments The Revision Application preferred by the respondent was referred to the Full Bench of the High Court.
It was contended on behalf of the appellant Bank that the debt owed to it by the respondent was excluded from the operation of the Act by reason of section 2 (4) (a) (ii) and section 2 (4) (1) of the Act.
By its judgment dated February 1, 1978 the High Court rejected that contention, allowed the Revision Application and held that the respondent was entitled to all the relevant benefits of the Act, including the benefit of scaling down of the debt and hence the appeal by special leave.
339 Dismissing the appeal, the Court ^ HELD: 1:1.
The appellant Bank will not be entitled to the benefit of the exclusion contained in section 2 (4) (a) (ii) of the Kerala Agriculturists ' Debt Relief Act, 1970 in view of clause (B) of the proviso to the section and the respondent 's claim to the benefits of the Act will remain unaffected by that provision.
[345H, 346 A] 1: 2.
The respondent is admittedly an agriculturist and he owes a sum of money to the appellant Bank under a decree passed in its favour by the Sub Court, Meenachil, in O.S. No. 28 of 1963.
The liability which the respondent owes to the appellant Bank is, therefore a "debt" within the meaning of section 2 (4) of the Act.
[344 F G] However, since the appellant Bank, namely, the State Bank of Travancore, .
is a subsidiary bank within the meaning of section 2 (k) of the and also as contemplated by sub clause (ii) of clause (a) of section 2(4) of the Act, the decretal amount payable by the respondent to the appellant Bank will not be a debt within the meaning of section 2(4) of the Act.
[345 C D] 1: 3.
By reason of clause (B) of the proviso to section 2 (4) (a) (ii) of the Act, which proviso is in the nature of an exception to the exceptions contained in the said section the amount payable to a subsidiary bank is not to be regarded as a debt within the meaning of the Act, only if the right of the subsidiary bank to recover the amount did not arise by reason of any transfer effected by operation of law subsequent to July 1, 1957.
Here, the notification containing the scheme of amalgamation was published on May 16.
Thus, the right of the appellant Bank, though is a subsidiary Bank, to recover the amount from the respondent arose by reason of a transfer effected by operation of law, namely, the scheme of amalgamation, which came into effect after July 1, 1957.
[345 D E, G] 2: l.
The State Bank of Travancore, is not a 'company ' properly so called.
It is a subsidiary bank.
It was established by the Central Government in accordance with The Act of 1959 and is not a 'company and, therefore not a banking company.
Therefore, the decretal debt which the respondent is liable to pay to the appellant is not owed to a "banking company".
It was indeed not owed to any "banking company" at all on July 14, 1970 being the date on which the Act came into force.
[346 G H, 347 A] 3: 1.
The exclusion provided for in clause (I) of section 2 (4) of the Act can be availed of, if the debt is due to a banking company at the time of the commencement of the Act.
[352 D E] 3: 2.
The object of the Act is to relieve agricultural indebtedness.
In order to achieve that object, the legislature conferred certain benefits on agricultural debtors but, while doing so, it excluded a class of debts from the operation of the Act, namely, debts of the description mentioned in clauses (a) to (n) of section 2 (4).
One class of debts taken out from the operation of the Act is debts owed to banking companies, as specified in clause (1).
The reason for this exception being that, unlike money lenders who 340 exploit needy agriculturists and impose upon them harsh and onerous terms while granting loans to them, representative institutions, like banks and banking companies, are governed be their rules and regulations which do not change from debtor to debtor and which, if anything, are intended to benefit the weaker sections of society.
[348 A C] 3: 3.
Relief to agricultural debtors who have suffered the oppression of private money lenders, has to be the guiding star which must illumine and inform the interpretation of the beneficient provisions of the Act.
When clause (1) speaks of a debt due "before the commencement" of the Act to a banking company, it does undoubtedly mean what it says, namely, that the debt must have been due to a banking company before the commencement of the Act.
But it means something more: that the debt must also be due to a banking company at the commencement of the Act.
Reading into the clause the word "at" which is not there, is the only rational manner by which meaning and content could be given to it, so as to further the object of the Act.
[349 B E] Further clause (I) speaks of a debt due before the commencement of the Act, what it truly means to convey is not that the debt should have been due to a banking company at some point of time before the commencement of the Act, but that it must be a debt which was incurred from a banking company before the commencement of the Act.
[349 E F] Thus, the application of clause (I) is subject to these conditions: (i) The debt must have been incurred from a banking company; (ii) the debt must have been so incurred before the commencement of the Act; and (iii) the debt must be due to a banking company on the date of the commencement of the Act.
These are cumulative conditions and unless each one of them is satisfied, clause (I) will not be attracted and the exclusion provided for therein will not be available as an answer to the relief sought by the debtor in terms of the Act.
[349G H, 350 A] 3: 4.
Section 2 (4) which defines a "debt" had to provide that debt means a liability due from or incurred by an agriculturist "on or before the commencement" of the Act.
It could not be that liabilities incurred before the commencement of the Act would be "debts" even though they are not due on the date of commencement of the Act.
The words "on or before the commencement" of the Act are used in the context of liabilities "due from or incurred" by an agrieculturist.
For similar reasons, clause (j) had to use the expression "at the commencement" of the Act, the subject matter of that clause being debts due to widows.
The benefit of the exclusion provided for in clause (j) could only be given to widows to whom debts were due "at the commencement" of the Act.
The legislature could not have given that benefit in respect of debts which were due before but not at the commencement of the Act.
Thus, the language used in the two provisions is suited to the particular subject matter with which those provisions deal and is apposite to the context in which that language is used.
[350 C F] 3:5.
The object of the Act being to confer certain benefits on agricultural debtors, the legislature would be under an obligation, while excepting a certain category of debts from the operation of the Act, to make a classification which will answer the test of article 14.
Debts incurred from banking companies and 341 due to such companies at the commencement of the Act would fall into a separate and distinct class, the classification bearing a nexus with the object of the Act.
If debts incurred from private money lenders are brought within the terms of clause (I) on the theory that the right to recover the debt had passed on to a banking company sometime before the commencement of the Act, the clause would be unconstitutional for the reason that it accords a different treatment to a category of debts without a valid basis and without the classification having a nexus with the object of the Act.
[350G H, 357A B] State of Rajasthan vs Mukanchand ; ; Fatehchand Himmatlal vs State of Maharashtra, ; , applied.
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4447.txt
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Appeals Nos. 2116, 2217, 2218, 2126 to 2128 of 1970 , 33, 144 ,157, 159 to 163 and 164 to 166 of 1971.
Appeals from the judgments and orders dated the September 5, 1970 of the Andhra Pradesh High Court in Writ Petitions Nos.
2720 of 1970 etc.
section V. Gupte and G. Narayana Rao for the appellants (in 2116 of 1970).
C.A. No. M. Natesan and G. Narayana Rao for the appellants (in C.A. No. 2217 of 1970).
G. Narayana Rao for the appellants (in C. As.
2218 of 1970, 144, 157, 159 to 163 and 164 to 166 of 1971).
M. C. Setalvad and W. C. Chopra, for the appellants (in C.As.
No. 2126, of 1970).
Polesseti Ramachandra Rao and W. C. Chopra for the appel lants (in C.As.
2127 and 2128 of 1970).
section T. Desai and K. Rajendra Chowdhary, for the appellants, (in C.A. No. 33 of 1971).
P. Ram Reddy and P. Parameshwara Rao, for the respon dents (in all the appeals).
369 The Judgment of the Court was delivered by p. Jaganmohan Reddy, J.
This batch of Appeals is by Cer tificate against a common Judgment of the Andhra Pradesh High Court dismissing the Writ Petitions filed by several dealers in jaggery who challenged the vires and constitutionality of Sections 2, 5, 8 and 9 of the Andhra Pradesh, General Sales Tax Amendment Act 9 of 1970 (hereinafter called the "Amendment Act").
The Appellants are Commission Agents carrying on trade in jaggery.
Agriculturists who prepare jaggery out of surplus sugarcane which they are unable to sell to the Sugar factories employ the Appellants as their Commission Agents to sell that jaggery.
We will take the facts in Civil Appeal No. 2116 of 1970 as typical of the common question arising in all these Appeals.
The Appellants carry on business of Commission Agent in jaggery in Anakapalli, Visakhapatnam and at varies places in West Godavari.
In the course of their business the Appellants arrange, for the sale of jaggery charging a small commission for their services and renders an account to the respective principals in respect of these sales.
In the pattis issued to the Agriculture the name of the persons to whom jaggery is sold is specifically mentioned.
The baskets of each principal are separately marked.
The stock register also indicates the number of baskets of jaggery held in the name of the Commission Agents.
Every buyer is fully ap prised of the fact that he is purchasing the jaggery of specified agriculturist principals and not that of the Appellants.
This procedure it is said has been in vogue for a long time.
Till about 1963 under Section 11 of Madras General Sales Tax Act as well as under the Andhra Pradesh General Sales Tax Act 1957 (hereinafter called the "Principal Act") Commission Agents were required to obtain and were being issued licences and if they conformed to the conditions of those licences they were not subjected to tax.
In 1963 the Principal Act was amended by Andhra Pradesh General Sales Tax Amendment Act 16 of 1963 which substituted a new Section II for that which was in force fill then.
The new Section II changed the preexisting structure of assessment in that, the Agents of Resident Principals were made liable for assessment and collection of Tax through the liability of the Agent was made co extensive with that of the Principal.
The Sales Tax authorities however were making assessments of the turn over of the Agents in respect of the purchase and sales of jaggery of several principals notwithstanding the fact that the turnover upto Rs. 10000/ of each was not exigible to tax.
These assessments were challenged in a batch of writ petitions in Irri Raju & Ors.
vs The Commercial Tax Officer, Tedeplalligudem & Anr.(1) in which the, High Court of Andhra Pradesh hold that the (1) Sales Tax Cases Vol.
XX (1967) p. 501.
24 1 SC India/71 370 provisions of the principal Act indicated that the Agent is a dealer in respect of each of the principals, that he is deemed to be as many dealers as there are principals and therefore the total turn over of the Agent in respect of the several principals could not be computed for assessing him when in fact the turnover of each of the principals was below the limit i.e. Rs. 10.000/ .
As a consequence of this.
decision, the Andhra Pradesh General Sales Tax Amendment Act 5 of 1968 was enacted and a new Section 1 1 was substituted for the then existing Section.
This Section II was given retrospective effect from the 1st August 1963.
The object of this Amendment was to enable the 'Taxing authorities to assess, levy and collect tax or penalty under the Sales Tax Act from the Agent irrespective of the fact that such principal is not liable to pay the tax or penalty in respect of that transaction on account of the turn over of the principal being less than the minimum turnover specified in sub section of section 5.
The proviso to the new Section II however authorised the Tax or penalty assessed or levied on or due from the Agent to, be, recovered by the Assessing authorities from the Principals instead of from the Agents, only if the principal is liable to pay tax or penalty.
This new Section was also challenged on various grounds in a batch of writ petitions in Sri Konathala Venkata Ramana & Budha Apparao vs State of Andhra Pradesh & Anr.(1).
The High Court held that even after the amendment the liability of the Agent continues to be based on the principal of representation and whether he is a dealer in respect of an the principals or only one principal, his liability is co extensive with that of the principal.
It also held that while there is no conflict between Section 5 and Section II of the Act, Section II which authorises the imposition of a tax independently of the liability of the principal or which takes away or limits the rights of the Agent to reimburse himself or withhold moneys due to the principal only where the principal is liable is discriminatory and is hit by Article 14.
In view of this Judgment, which in fact restored the legal position to that prevailing prior to the Amendment, large sums of money in which assessments had been made and tax collected became refundable To meet this situation the Legislature enacted the Andhra Pradesh General Sales Tax Amendment Act 9 of 1970.
The effect of the.
Amendments made by Sec.
2. 5, 8 and 9 of the Amendment Act is that a proviso was added to Section 5(1), a new Section II was substituted for the old Section II with retrospective effect from 1 8 63.
The, amended Section 11 it may be noticed (1) Sales Tax Cases Vol.
371 was identical with Section 1 1 as it stood on 1 8 1963.
The first schedule to the principal Act was also amended by adding jaggery as item 77 which was made taxable at the point of first sale at 5 paise in the Rupee.
It was further provided that as soon as this entry came into force on the date fixed by a Notification the proviso to Section 5 (A) added by Section 2 of the Amending Act would cease to have effect.
Section 8 of the Amending Act purported to validate the assessments already made while Section 9 granted exemption from liability to pay tax in certain cases.
We have already noticed that jaggery was being taxed at the point of the first purchase of its sale between 1 2 6o and 31 7 63 but by reason of the Amendment introduced by Act 16 of ' 1963 a multiple point tax on safe subject to an exemption of a turn over of Rs. 10000/ became leviable at 2 paise pet Rupee from 1 8 63 which rate was enhanced to 3 paise from 1 4 1966 by Amendment Act 7 of 1966.
A single point taxation was however levied on items in Schedule 1 and 2 of the Act which became chargeable as such under Section 5(2).
We are not concerned with schedule 3 which deals with declared goods but schedule 4 specified the goods which are exempt in terms of Section 8.
All other sales which do not fall within the schedules are as earlier stated exigible to multiple point tax under Section 5(1) of the Act subject to the minimum of Rs. 10,000/ .
The Appellants had before the High Court of Andhra Pradesh raised several contentions but the principal attack was confined to 3 aspects of the Amendment Act.
Firstly that Section II read with the new proviso to Section 5 (1) makes an invidious distinction between dealers in jaggery on the one hand and dealers in other commodities on the other by perpetuating an unreasonable classification which is based on no intelligible differentia nor can any reasonable nexus be discerned with the object that the Amendment seeks to achieve.
Secondly that Section 9 has to be read as part of Section 2 of the Amendment Act by which a new proviso is added to Section 5(1) of the Principal Act and is a part of Section 11 substituted by the Amendment Act.
If so read the new proviso to Section 5(1) and the new Section II would be violative of article 14 inasmuch as the dealers in jaggery similarly situated have been invidiously discriminated by levying tax from those, dealers who have collected the tax and the dealers who have not collected the tax.
Thirdly that the basis of the amendment is an imposition of a tax not on the transaction of sale or purchase of jaggery but on the, collection or non collection of the tax by the dealers, as such it is also bit by Article 14 of the Constitution.
The High Court rejected all these contentions except the one relating, to the validity of Section, 9.
the State of Andhra Pradesh as well as the Appellants in Civil Appeal No. 33 of 1971 had 372 contended that that provision which granted an, exemption from.
payment of tax to, dealers who bad not, in fact collected the tax from their principal was, valid and did, not suffer from the vice of discrimination under article 14 because not only was the classification reasonable but that it was based on an intelligible differentia having a nexus with the object of the impugned Act.
We shall however deal with last mentioned aspect presently but before we do so on the threshold of the argument of them Appellants there is a valid objection to the maintainability of the Writ Petitions filed by the dealers who as Agents of the Principals had collected tax from the purchasers which as a consequence of the two decisions, of the High Court referred to earlier was illegal.
After the, amendment Act the levy and collection by the dealers became prima facie legal.
In so, far as jaggery is concerned there was also no question of any, exemption of the minimum turnover of the principal of Rs. 10,000, so That the hardship which a Corn mission Agent dealer had to undergo in trying to determine whether the, turn over of each of his principals was below Rs. 10,000 before he could collect Sales Tax was no longer there.
After the Amendment by removing the exemption of Rs 10,000 on sale of jaggery which was given retrospective effect, the dealer agents could not now complain, which complaint had been held by the High Court to be justified, that while the principals were exempted from tax upto Rs. 10,000 the tax is being levied on the agents turn over irrespective of that exemption.
In any case whatever objections the principals may have to the constitutional validity of the provisions introduced by the amending Act under Article 14 the Agent dealers certainly have no locus standi to complain about discrimination between Principals inter se.
That apart the dealers are not expected to and in fact do not pay any money of their own towards the tax which is levied.
The tax so levied and paid to the assessing authorities by the dealer agent is, under the provisions of the Act, not returnable nor can the principal under the provisions of the Act make any claim against such dealer Agents.
Shiri Gupte on behalf of the Appellants was unable to tell us that there were among the Appellants any principals who had a direct interest in challenging the validity of the provisions on the ground of discrimination.
Shri Motilal Setalvad on behalf of the Appellants in Civil Appeals Nos.
2126 to 2128 of 1970 strenuously contended that the Appellants have an interest and can maintain the Writ Petitions because they were dealers within the meaning of Section 2(e) and are persons who are aggrieved because of the assessment made or likely to be made and tax recovered from them.
He has further contended that this Court has in several cases hold that even a notice issued to any person under the provisions of an impugned Act which is likely to cause prejudice will 373 entitle him to challenge the Constitutional Validity of the law under which the notice is given.
If so, where an assessment has been made the assessee has a right to challenge the provisions of the Amendment Act under which the levy and Collection of tax have been given retrospective validity.
Apart from the question that 'this argument does not take into account the distinction between an at tack under article 14 and an attack under article 19 it overlooks the fact that what is sought to be recovered from the Appellant is in respect of a tax collected on the past dealings and not with respect to the future transactions.
We had pointed ' out that tax had already been collected no doubt at first illegally but due to the amendment Act that collection has become legal and has also dealer be is liable to pay that amount to the State la. respect of the Asses sments made.
As there is nothing to show that what is sought to be recovered from the dealer is more than what he hits collected, he 'has not suffered any loss nor any disadvantage which would entitle him to seek a remedy under article 226 of the Constitution.
Shri P. RamchandraTao in Civil Appeal No. 2127 of 1970 had nothing now to add to the arguments advanced by the learned Advocates for the Appellants.
On this short ground alone we dismiss all the Appeals except Civil Appeal No. 33 of 1971 but in the circumstances without costs.
Appeal in Civil Appeal No. 33 of 1971: In this Appeal Shri section T. Desai contends that the High Court had erroneously struck down Sec. 9 of the Amendment Act.
of the Amendment Act is as follows: "9(1) where any sale of jaggery has been effected during the period between the 1st August 1963 and the commencement of Section 5 of this Act in so far as it relates to item 77, and the dealer effecting such sale has not collected ally amount by way of tax under the principal Act ,on the ground that no such tax could have been levied or collected in respect of such sale, or any portion of the turnover relating to such sale, and where no such tax could also have been levied or collected if the amendments made in the principal Act by this Act had not been made, then, notwithstanding anything contained in Section 8 or the said amendments, the dealer shall not be liable to pay any tax under the principal Act, as amended by this Act, in respect of such sale or such part of the turnover relating to such sale.
(2)For the purposes of sub section (1), the burden of proving that no amount by way of tax was collected under the principal Act in respect of any sale referred to in sub section (1) or in respect of any portion of the 374 turnover relating to such sale, shall be on the dealer effecting such sale".
This Section is enacted by the legislature with the object of removing short comings in the principal Act which were found wanting by judicial interpretation.
The interregnum between the declaration by the High Court of certain provision of the Act as being unconstitutional and the attempt of the legislature to remedy the defects and to give retrospective effect thereto created two distinct categories between the same class of dealers namely those who had collected the tax whether they were assessed or not and those who had not collected the tax.
This classification is certainly reasonable and is related to the object which the Amendment Act seeks to achieve.
The dealers who had not collected the tax could not have collected it as the law stood and therefore the legislature did not think it just or proper to collect tax from those who were not liable.
Even this exemption as can be seen is given to only those persons who can establish that they have not in fact collected it, the burden of which is upon those who claim the exemption.
It is unnecessary to deal with hypothetical cases.
The mere fact that in many cases it was not collected because the assessment could not be completed cannot be a valid ground nor can it even now be made in regard to those assessments which are now pending (a matter upon which we do not pronounce) cannot be valid grounds to declare the classification as arbitrary or unreasonable, which reason seems to have weighed with the High Court.
We think not only the classification reasonable but there is an intelligible differentia furnishing a nexus with the object the Amendment Act seeks to achieve.
In this view we set aside the Judgment of the High Court declaring Section 9 as unconstitutional and allow the appeal, but in the circumstances without costs.
G. C. Appeal allowed.
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The appellants carried on the business of Commission Agents in Jaggery in Andhra Pradesh.
They arranged for the sale of jaggery charging a small commission for their service and rendering an account to their Principals in respect of those sales.
Every buyer was fully apprised of the fact that he was purchasing jaggery of specified agriculturist Principals and not that of the appellants.
Till about 1963 under section II of the Andhra Pradesh General Sales Tax Act, 1957, commission agents were required to obtain and were being issued licences and if they conformed to the conditions of those licences, they were not subjected to tax.
In 1963 the principal Act was amended by Andhra Pradesh General Sales Tax Amendment Act 16of 1963.
By the new section I I introduced by the Amending Act the Agentsof resident Principals were made liable for assessment and collection of tax though the liability of the Agent was made co extensive with that of the principal.
The High Court held that in assessing the Agent the turnover of those Principals whose turnover was below the taxable limit of Rs. 10,000 could not be taken into account.
As a consequence of this decision the Andhra Pradesh General Sales Tax Amendment Act 5 of 1968 was enacted and a new section I 1 substituted for the existing section.
This section II was given retrospective effect from 1st August 1963.
The object of this amendment was to enable the taxing authorities to assess levy and collect tax or penalty under the Sales Tax Act from the Agent irrespective of the fact that the Principal was not liable to tax.
This new section was also struck down by the High Court, on the ground that it was violative of article 14 of the Constitution.
In view of this judgment which restored the legal position to that prevailing before the Amendment, large sums of money which bad been collected as tax from the Agents became refundable.
To meet this situation the Andhra Pradesh Legislature enacted the Andhra Pradesh General gales Tax Amendment Act 9 of 1970, Section 8 of which validated the assessments already made.
Under section 9 Agents who had not collected the tax from their Principals were exempted from tax.
Under section I I Agents who had collected the tax were made liable to pay the same.
In writ petitions under article 226 filed by Agents it was contended that section II as amended and section 9 of the Amending Act were violative of article 14.
The High Court held that section 1 1 was valid but section 9 violated article 14.
In appeal filed against the High Court 's judgment by certificate, HELD:(i) The appeals filed by the agents were not maintainable.
What was sought to be recovered from the appellants was in respect of a tax collected on past dealings and not with respect to the future transactions.
The tax had already been collected, no doubt at first illegally, but 368 due to the Amendment Act, that collection had become legal and as dealers, the appellants were liable to pay that amount to the State.
As there was nothing to show that what was sought to be recovered from the dealer was more than what he had collected he had not suffered any loss nor any disadvantage which would entitle him to seek a remedy under article 226 of the Constitution [373B C] (ii) Section 9 had been wrongly struck down by the High Court as invalid.
This section was enacted by the legislature with the object of removing shortcomings in the principal Act which were found wanting by judicial interpretation.
The interregnum between the declaration by the High Court of certain provisions of the Act as being unconstitutional and the attempt of the legislature to remedy the defects and to give retrospective effect thereto created two distinct categories between the same class of dealers namely those who had collected the tax whether they were assessed or not and those who had not collected the tax.
This classification was certainly reasonable and was related to the object which the Amendment Act sought to achieve.
The dealers who had not collected the tax could not have collected it as the law stood and therefore the legislature thought it just or proper to collect the tax from those who were not liable.
Even this exemption was given to those who could establish that they had not in fact collected it, the burden of which was upon those who claimed the exemption.
[374D E],
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2958.txt
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Appeals Nos. 21 to 23, 46, 47, 125 and 274 of 1969.
Appeals from the judgment and orders dated April 10, 1968 of the Madras High Court in Writ Petitions Nos.
387 of 1968 etc.
section V. Gupte, G. Ramanujam and A. V. Rangam, for the appel lants (in C.As.
21 to 23 of 1969) and the respondent (in C.As.
Nos. 46, 47, 125 and 274 of 1969).
V. K. T. Chari, T. N. C. Rangarajan and D. N. Gupta, for the appellants (in C.As.
Nos. 46 and 47 of 1969) and the respondents (in C.As.
Nos. 21 and 23 of 1969).
V. K. T. Chari, A. R. Ramanathan, T. N. C. Rangarajan and R. Gopalakrishnan, for the appellant (in C.A. No. 125 of 1969).
K. C. Rajappa, section Balakrishnan and section Laxminarasu, for the appellant (in C.A. No. 274 of 1969).
K. C. Rajappa, section Balakrishnan, section Laxminarasu and N. M. Ghatate, for the respondents (in C.A. No. 22 of 1969).
The Judgment of the court was delivered by Ramaswami, J.
In these appeals which have been heard together a common question of law arises for determination, namely, whether the Madras Urban Land Tax Act, 1966 (12 of 1966) is constitutionally valid.
In 1963 the Madras Legislature enacted the Madras Urban Land Tax Act, 1963 which came into force in the city of Madras on the 1st of July, 1963.
In the Statement of Object and Reasons of the 1963 Act it was stated that the Taxation Enquiry 271 Commission and the Planning Commission were suggesting the need for imposing a suitable levy on lands put to non agricultural use in urban areas.
The State Government, after examining the report of the Special Officer, decided to levy a tax on urban land on the basis of market value of the land at the rate of 0.4% on such market value.
Section 3 of the Act of 1963 (which win be referred to as the old Act) provided that there shall be levied and collected for every fasli year commencing from the date of the commencement of the Act, a tax on urban land from every owner of urban land at the rate of 0.4% of the average market value of the urban land in a sub zone as determined under subsection (2) of section 6.
Section 7 provided for the determination of the highest and lowest market value in a zone.
For determining the average market value, the Assistant Commissioner shall have regard to any matters specified in clauses (a) to (e) of sub section 2 of section 6; namely: (a) the locality in which the urban land is situated; (b) the predominant use to which the urban land is put, that is to say, industrial, commercial or residential; (c) accessibility or proximity to market, dispensary, hospital, railway station, educational institution, or Government offices; (d) availability of civil amenities like water supply, drainage and lighting; and (e) such other matters as may be prescribed.
The constitutional validity of Act 34 of 1963 was challenged and in Buckingham & Carnatic Co., Ltd. vs State of Madras(1) a Division Bench of the Madras High Court held that the im pugned Act fell under Entry 49, List 11 of Schedule VII to the Constitution and was within the legislative competence of the State Legislature.
But the, Act was struck down on the ground that article 14 of the Constitution was violated, because the charging section of the Act levied the tax on urban land not on the market value of such urban land but on the average value of the lands in the locality known as a sub zone.
The new Act (Act 12 of 1966) was passed by the State Legislature after the decision of the Madras High Court.
In the new Act provisions relating to fixation of average market value in the sub zone were omitted.
Instead, section 5 of the new Act provides that there shall be levied and collected from every year commencing from the date of the commencement of the Act a tax on each urban land from the owner of such urban land at the rate of 0.4% of the market (1),(1966) II M.L.J. 172.
272 value of such urban land.
Section 2(10) defines "owner" as follows "Owner includes (i) any person (including a mortgagee in possession) for the time being receiving or entitled to receive, whether on his own account or as agent, trustee, guardian, manager or receiver for another person or for any religious or charitable purposes, the rent or profits of the urban land or of the building constructed on the urban land in respect of which the word is used; (ii) any person who is entitled to the kudiwaram in respect of any inam land; but does not include (a) a shrotriemdar; or (b) any person who is entitled to the melwaram in respect of any inam land but in respect of which land any other person is entitled to the kudiwaram.
Explanation.
For the purposes of clause (9) and clause (10) inam land includes lakhiraj tenures of land and shrotriam land.
Section 2(13) defines 'land ' to mean any land which is used or is capable of being used, as a building site and includes garden or grounds, if any, appurtenant to a building but does not include any land which is registered as wet in the revenue accounts of the Government and used for the cultivation of wet crops.
" Section 6 states "For the purposes of this Act, the market value of any urban land shall be estimated to be the price which in the opinion of the Assistant Commissioner, or the Tribunal, as the case may be, such urban land would have fetched or fetch, if sold in the open market on the date of the commencement of this Act".
Section 7 provides for the submission of returns by the owner of urban land and reads "Every owner of urban land liable to pay urban land tax under this Act shall, within a period of one month from the date of the publication of the Madras Urban Land Tax Ordinance, 1966 (Madras Ordinance 273 III of 1966) in the Fort St. George Gazette, furnish to the Assistant Commissioner having jurisdiction a return in respect of each urban land containing the following particulars, namely : (a) name of the owner of the urban land, (b) the extent of the urban land, (c) the name of the division or ward and the street, survey number and subdivision number of the land and other particulars of such urban land, (d) the amount which in the opinion of the owner is the market value of the urban land.
" Section 1 0 deals with the procedure for the determination of the market value by the Assistant Commissioner and states : (1) Where a return is furnished under section 7 the Assistant Commissioner shall examine the return and made such enquiry as he deems fit.
If the Assistant Commissioner is satisfied that the particulars mentioned therein are correct and complete he shall, by order in writing determine the market value of the urban land and the amount of urban land tax payable in respect of such urban land.
(2) (a) Where no examination of the return and after the enquiry the Assistant Commissioner is not satisfied that the particulars mentioned therein are correct and complete he shall serve a notice on the owner either to attend in person or at his office on a date to be specified in the notice or to produce or cause to be produced on that date any evidence on which the owner may rely in support of his return.
(b) The Assistant Commissioner after hearing such evidence as the owner may produce in pursuance of the notice under clause (a) and such other evidence as the Assistant Commissioner may require on any specified points shall, by order in writing, determine the market value of the urban land and the amount of urban land tax payable in respect of such urban land.
(c) Where the owner has failed to attend or produce evidence in pursuance of the notice under clause (a) the Assistant Commissioner shall, on the basis of the enquiry made under clause (a), by order in writing determin e the market value of the urban land and the amoun t of urban land tax payable in respect of such urban land.
" 274 Section 11 enacts : (1) Where the owner of urban land has failed to furnish the return under section 7 and the Assistant Commissioner has obtained the necessary information under section 9 he shall serve a notice on the owner in respect of each urban land specifying therein (a) the extent of the urban land, (b) the amount which, in the opinion of the Assistant Commissioner, is the correct market value of the urban land, and direct him either to attend in person at his office on a date to be specified in the notice or to produce or cause to be produced on that date any evidence on which the owner may rely.
(2) After hearing such evidence, as the owner may produce and such other evidence as the Assistant Com missioner may require on any specified points, the Assistant Commissioner shall, by order in writing, determine the market value of the urban land and the amount of urban land tax payable in respect of such urban land.
(3) Where the owner has failed to attend or to produce evidence in pursuance of the notice under subsection (1) the Assistant Commissioner shall, on the basis of the information obtained by him under section 9, by order in writing, determine the market value of the urban land and the amount of the urban land tax payable in respect of such urban land.
" Section 20 provides for an appeal to the Tribunal from the orders of the Assistant Commissioner : "(1) (a) Any assessee objecting to any order passed by the Assistant Commissioner under section 10 or 11 may appeal to the Tribunal within thirty days from the date of the receipt of the copy of the order.
(b) Any person denying his liability to be assessed under this Act may appeal to the Tribunal within thirty days from the date of the receipt of the notice 1 of demand relating to the assessment :.
Provided that no appeal shall lie under clause (a) or clause (b) of this sub section unless the urban land tax has been paid before the appeal is filed.
275 (2) The Commissioner may, if he objects to any order passed by the Assistant Commissioner under section 10 or 11, direct the Urban Land Tax Officer concerned to appeal to the Tribunal against such order, and such appeal may be filed within sixty days from the date of the receipt of the copy of the order by the Commissioner.
(3) The Tribunal may admit an appeal after the expiry of the period referred to in clause (a) or clause (b) of sub section (1) or in sub section (2), as the case may be, if it is satisfied that there was sufficient cause for not presenting it within that period.
(4) An appeal to the Tribunal under this section shall be in the prescribed form and shall be verified in the prescribed manner and shall be accompanied by such fee as may be prescribed.
(5) The Tribunal may after giving both parties to the appeal an opportunity of being heard, pass such orders thereon, as it thinks fit and shall communicate any such orders to the assessee and to the Commissioner in such manner as may be prescribed." Section 30 confers power of revision in the Board of Revenue: and is to the following effect : (1) The Board of Revenue may, either on its own motion or on application made by the assessee in this behalf, call for and examine the records of any proceeding under this Act (not being a proceeding in respect of which an appeal lies to the Tribunal under section 20) to satisfy, itself as to the regularity of such proceeding or the correctness, legality or propriety of any decision or order passed therein and if, in any case, it appears to the Board of Revenue that any such decision or order should be modified, annulled, reversed or remitted for reconsideration, it may pass orders accordingly : Provided that the Board of Revenue shall not pass any order under this subsection in any case, where the decision or order is sought to be revised by the Board of Revenue on its own motion, if such decision or order had been made more than three years previously : Provided further that the Board of Revenue shall not pass any order under this section prejudicial to any 276 party unless he has had a reasonable opportunity of making his representations.
" Section 33 states : "(1) The Tribunal, the Board of Revenue, the Commissioner, the Assistant Commissioner, or the Urban Land Tax Officer or any other officer empowered under this Act shall, for the purposes of this Act, have the same powers as are vested in a Court under the Code of Civil Procedure, 1908 (Central Act V of 1908), when trying a suit in respect of the following matters, namely : (a) enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavit; (d) issuing commissions for the examination of witnesses; and any proceeding before the Tribunal, the Board of Revenue, the Commissioner, the Assistant Commissioner the Urban Land Tax Officer or any other officer empowered under this Act shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purposes of section 196, of the Indian Penal Code (Central Act XLV of 1860).
(2) In any case in which an order of assessment is passed ex parte under this Act, the provisions of the Code of Civil Procedure, 1908 (Central Act V of 1908), shall apply in relation to such order as it applies in relation to a decree passed ex parte by a Court.
" The validity of the new Act was challenged in a group of writ petitions before the Madras High Court on various constitutional grounds.
By a common judgment dated the 10th April, 1968 a Full Bench of five Judges overruled all the contentions of the petitioners with regard to the legislative competence of the Madras Legislature to enact the new Act.
However, the Full Bench by a majority of 4 to 1 struck down section 6 of the new Act as being violative of articles 14, 19(1)(f) of the Constitution.
The State of Madras and other respondents to the writ petitions (hereinafter ,called the respondents for the sake of convenience) filed appeals 277 Nos.
21 to 23 of 1969 under a certificate granted by the High Court under articles 1,32 and 1 3 3 (I) (a), (b) and (c) of the Constitution.
The writ petitioners (hereinafter called the petitioners) have filed C.As Nos. 46, 47, 125 and 274 of 1969 against the same judgment on a certificate, granted by the High Court under article 132 of the Constitution.
The first question to be considered in these appeals is whether the Madras Legislature was competent to enact the legislation under Entry 49 of List 11 of Schedule VII of the Constitution which reads : "Taxes on lands and buildings".
It was argued on behalf of the petitioners that the impugned Act fell under Schedule VII, List 1, Entry 86, that is "Taxes on the capital value of the assets, exclusive of agricultural land, of individuals and companies; taxes on the capital of companies.
" The argument of Mr. V. K. T. Chari may be summarised as follows : The impugned Act was, both in form and substance, taxation of capital and was hence beyond the competence of the State Legislature.
To tax on the basis of capital or principal value of assets was permissible to Parliament under List 1, Entries 86 and 87 and to State under Entry 48 of List II.
Taxation of capital was the appropriate method provided for effecting the directive principle under article 39 of the Constitution, namely, to prevent concentration of wealth.
Article 366(9) contains a definition of 'estate duty ' with reference to the principal value.
Entry 86 of List I (Taxes on capital value of assets exclusive of agricultural land) and Entry 88 (Duties in respect of succession to such property) form a group of entries the scheme of which is to carry out the directive principle of article 39(c).
The Constitution indicated that capital value or principal value shall be the basis of taxation under these entries and, therefore, the method of taxation of capital or principal value was prohibited even to Parliament in respect of other taxes and to the States except in respect of Estate Duty on agricultural land.
Such in effect is the.
argument of Mr. V. K. T. Chari.
But in our opinion there is no warrant for the assumption that entries 86, 88 of List I and Entry 48 of List II form a special group embodying any particular 'scheme.
The directive principle embodied in article 39(c) applies both to Parliament and to the State Legislature and it is difficult to conceive how entries 86 to 88 of List I would exclude any power of the State Legislature to implement the same principle.
The legislative entries must be given a large and liberal interpretation, the reason being that the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of a mere sixplex enumeratio of broad categories.
We see no reason, therefore, for holding that the entries 86 and 87 of List I preclude the State Legislature from taxing capital value of lands and buildings under 13SupCI69 4 278 Entry 49 of List II.
In our opinion there is no conflict between Entry 86 of List I and Entry 49 of List 11.
The basis of taxation under the two entries is quite distinct.
As regards Entry 86 of List I the basis of the taxation is the capital value of the asset.
It is not a tax directly on the capital value of assets of individuals and companies on the valuation date.
The tax is not imposed on the components of the assets of the assessee.
The tax under Entry 86 proceeds on the, principle of aggregation and is imposed on the totality of the value of all the assets.
It is imposed on the total assets which the assessee owns and in determining the net wealth not only the encumbrances specifically charged against any item of asset, but the general liability of the assessee to pay his debts and to discharge his lawful obligations have to be taken into account.
In certain exceptional cases, where a person owes no debts and is under no enforceable obligation to discharge any liability out of his assets it may be possible to break up the tax which is leviable on the total assets into components and attribute a component to lands and buildings owned by an assessee.
In such a case, the component out of the total fax attributable 'Lo lands and buildings may in the matter of computation bear similarity to a tax on lands and buildings levied on the capital or annual value under Entry 49, List II.
But in a normal case a tax on capital value of assets bears no definable relation to lands and buildings which may or may not form a component of the total assets of the assessee.
But Entry 49 of List II, contem plates a levy of tax on lands and buildings or both as units.
It is not concerned with the division cf interest or ownership in the units of lands or buildings which are brought to tax.
Tax on lands and buildings, is directly imposed on lands and buildings, and bears a definite relation to it.
Tax on the capital value of assets bears no definable relation to lands and buildings which may form a component of the total assets of the assessee.
By legislation in exercise of power under Entry 86, List I tax is contemplated to be levied on the value of the assets.
For the purpose of levying tax under Entry 49, List 11 the State Legislature may adopt for determining the incidence of tax the annual or the capital value of the lands and buildings.
But the adoption of the annual or capital value of lands and buildings for determining tax liability will not make the fields of legislation under the two entries overlapping.
The two taxes are entirely different in their basic concept and fall on different subject ' matters.
In Ralla Ram vs Province of East Punjab(1) the Federal Court held that the tax levied by section 3 of the Punjab Urban (1) 279 Immoveable Property Tax Act, 17 of 1940 on buildings and lands situated in a specified area at such rate not exceeding twenty per cent.
of the annual value of such buildings and lands, as the Provincial Government may by notification in the official Gazette direct in respect of each such rating area was not a tax on income, but was a tax on lands and buildings within the meaning of Item No. 42 of List 11 of the Seventh Schedule of the Government of India Act, 1935.
In that case it was contended that under the provisions of the Punjab Act the basis of the tax was the annual value of the buildings and since the same basis was used in the Income tax Act for determining the income from property and generally speaking the annual value is the fairest standard for measuring income and, in many cases, is indistinguishable from it, the tax levied by the impugned Act was in substance a tax on income.
The Court pointed out that the annual value is not necessarily actual income, but is only a standard by which income may be measured and merely because the Income tax Act had adopted the annual value as the standard for determining the income, it did not follow that, if the same standard is employed as a measure for any other tax, that latter tax becomes also a tax on income.
It was held by the Court that in substance the property tax levied by section 3, Punjab Urban Immoveable Property Tax Act, 1940 fell within item 42 of the Provincial List and was not a tax on income falling within item 54 of the Federal List although the basis of the tax was the annual value of the building.
The same view has been expressed by this Court in Sudhir Chandra Nawn vs Wealth Tax Officer(1) wherein it was held that the power to levy tax on lands and buildings under Entry 49 of List II did not trench upon the power conferred on Parliament by Entry 88 of List I and, therefore, the enactment of the Wealth Tax Act by Parliament was riot ultra vires.
The problem in this case is the problem of characterisation of the law or classification of the law.
In other words the question must be asked : what is the subject matter of the legislation in its "pith and substance" or in its true nature and character for the purpose of determining whether it is legislation with respect to Entry 47 of List 11 or Entry 86 of List 1.
In Gallahagher vs Lynn 2 ) the principle is stated as follows : "It is well established that you are to look at the true nature and character of the legislation the, pith and substance of the legislation.
If on the view of the statute as a whole, you find that the substance of the legislation (1) ; (2) [1937] C. 853 870 280 is within the express powers, then it is not invalidated if incidentally it affects matters which are outside the authorized field.
The legislation must not under the guise of dealing with one matter in fact encroach upon the forbidden field.
Nor are you to look only at the object of the legislator.
An Act may have a perfectly lawful object e.g. to promote the health of the inhabitants, but may seek to achieve that object by invalid methods, e.g., direct prohibition of any trade with a foreign country.
In other words, you may ' certainly consider the clauses of an Act to see whether they are passed 'in respect of ' the forbidden subject.
" In the case of Subrahmanyan Chettiar vs Muttuswami Goundan(1) Sir Maurice Gwyer, C.J. said : "It must inevitably happen from time to time that legislation, though purporting to deal with a subject in one list, touches also on a subject in another list, and the different provisions of the enactment may be so closely intertwined that blind adherence to a strictly verbal interpretation would result in a large number of statutes being declared invalid because the Legislature enacting them may appear to have legislated in a forbidden sphere.
Hence the rule which has been evolved by the Judicial Committee whereby the impugned statute is examined to ascertain its 'pith and substance ', or its 'true nature and character ', for the purpose of determining whether it is legislation with respect to matters in this list or in that : Citizens Insurance Company of Canada vs Parsons(); Russell vs The Queen(3); Union Colliery Co. of British Columbia vs Bryden(4); Att.
Gen. for Canada vs Att.
Gen. for British Columbia(5); Board of Trustees of Lethbridge Irrigation District vs Independent Order of Foresters(6).
In my opinion this rule of interpretation is equally applicable to the Indian Constitution Act.
" For the reasons already expressed we hold that in pith and substance the new Act in imposing a tax on urban land at a percentage of the market value is entirely within the ambit of Entry 49 of List II and within the competence of the State Legislature and does not in any way trench upon the field of legislation of Entry 86 of List I. (1) [194O] F.C.R. 188 at 201.
(2) [1881] 7 A.C. 96.
(3) [1882] 7 5) 301 A.C. III.
(6) 281 It was then said that as Entry 49 of List 11 provides for taxes on lands and buildings, the impugned Act which imposes tax on lands alone cannot be held to fall under that entry.
It was submitted that when the Legislature taxed land deliberately the legislation fell under List 11 of Entry 45, i.e., "land revenue, including the assessment and collection of revenue, the maintenance of land records, survey for revenue purposes and records of rights and alienation of revenues ' ' and not under Entry 49 of that List.
The legislative history of Entry 49 of List 11 does not however lend any support to this argument.
Before the Government of India Act, 1935 lands and buildings were taxed separately and all that was done under the Government of India Act, 1935 and ' the Constitution was to combine the two entries relating to land and buildings into a single entry.
Section 45 A of the Government of India Act, 1919 provided for making rules under the Act for the devolution of authority in respect of provincial subjects to local Governments, and for the allocation of revenues or other moneys to those Governments. ' The Government of India by a notification dated December 16, 1920 made rules under that provision called the "Scheduled Tax Rules".
These Rules contained two schedules.
The first Schedule contained eight items of tax or, fee.
The Legislative Council of a Province may without obtaining the previous sanction of the Governor General make and take into consideration any law imposing for the purposes of the local Government any tax included in Schedule I. Schedule II contained eleven items of tax.
In making a law imposing or authorising any local authority to impose for the purposes of such local authority any tax in Schedule 11, the Legislative Council required to previous sanction of the Governor General.
In Schedule II, item No. 2 was tax on land or land values and item 3 was a tax on buildings.
In the Government of India Act, 1935 the two entries were combined and List 11, Entry 42 is "Taxes on lands and buildings and hats and Windows".
The legislative history of Entry 49, List 11 does not, therefore, lend any support to the argument that Entry 49 of List 11 relating to tax on land and buildings cannot be separated.
On the other hand we are of opinion that Entry 49 "Taxes on lands and buildings" should be construed as taxes on land and taxes on buildings and there is no reason for restricting the ampli tude of the language used in the Entry.
This view is also borne out by authorities.
In Raja Jagannath Baksh Singh vs The State of U.P.(1) the question at issue was whether the tax imposed by the U.P. Government on land holdings under the U.P. Large Land Holdings Tax Act, 1957 (U.P. Act 31 of 1957) 'was constitutionally valid.
It was held that the legislation fell under Entry (1) 282 49 of List 11 and the tax on land would include agricultural land also.
Similarly in H. R. section Murthy vs Collector of Chittoor & Anr.(1) it was held that the land cess imposed under sections 78 and 79 of the Madras District Boards Act (Mad.
Act No. XIV of 1920) and Mines and Minerals (Regulation and Development) Act, (Act 67 of 1957) was a tax on land falling under Entry 49 of the State List.
We are of opinion that the argument of Mr. V. K. T. Chari on this aspect of the case must be rejected.
We proceed to consider the argument that no machinery is provided for determining the market value and the provisions of the new Act, therefore, violate article 14 of the Constitution.
The argument was stressed by Mr. V. K. T. Chari that the guidance given under the 1963 Act has been dispensed with and the Assistant Commissioner is not bound to take into account, among other matters, the sale price of similar sites, the rent fetched for use and occupation of the land, the principles generally adopted in valuing land under the Land Acquisition Act and the compensation awarded in recent land acquisition proceedings.
We see no justification for this argument.
The procedure for determining the market value and assessment of urban land is described in Chapter III of the new Act.
Section 6 provides that the market value of the urban land "shall be estimated to be the price which in the opinion of the Assistant Commissioner, or the Tribunal, as the case may be, such urban land would have fetched or fetch, if sold in the open market on the date of the commencement of this Act.
" It was said on behalf of the petitioners that the opinion which the Assistant Commissioner has to form is purely subjective and may be arbitrary.
We do not think that this contention is correct.
Having regard to the language and context of section 6 of the new Act we consider that the opinion which the Assistant Commissioner has to form under that section is not subjective but should be reached objectively upon the relevant evidence after following the requisite formalities laid down in sections 7 to 11 of the new Act.
Instead of the Assistant Commissioner classifying the urban land and determining the market value in a zone, the present Act requires a return to be submitted by the owner mentioning the amount which, in the opinion of the owner, is the market value of the urban land.
On receipt of the return, if the Assistant Commissioner is satisfied that the particulars mentioned are correct and complete, he may determine the market value as given by the owner of the land.
If he is not satisfied with the return, he shall serve a notice to the owner asking him to attend his office with the relevant evidence in support of his return.
After bearing the owner and considering the evidence produced, the Assistant Commissioner may determine the (1) 28 3 market value.
In case the owner fails to attend or fails to produce the evidence, the Assistant Commissioner is empowered to assess the market value on the basis of an enquiry made by him.
Section 11 prescribes the procedure for determining the market value when the owner fails to furnish a return as required under section 7.
The section requires the Assistant Commissioner to serve a notice on the owner specifying amongst other things the amount, which in the opinion of 'the Assistant Commissioner, is the correct market value and directing the owner to attend in person at his office on a date specified in the notice or to produce any evidence on which the owner may rely.
After hearing such evidence as the owner may produce and considering such other evidence as may be required, the Assistant Commissioner may fix the market value.
The proceeding before the Assistant Commissioner is judicial in character and his opinion regarding the market value is reached objectively on all the materials produced before him.
Section 20 provides for an appeal by the assessee objecting to the determination of the market value made by the Assistant Commissioner to a Tribunal within thirty days from the date of the receipt of the copy of the order.
The Act requires that the Tribunal shall consist of one person only who shall be a judicial officer not below the rank of a Subordinate Judge.
By section 30, the Board of Revenue is empowered either on its own motion or on application made by the assessee in this behalf, to call for and examine the records of any proceedings under the Act (not being a proceeding in respect of which an appeal lies to the Tribunal under section 20) , to satisfy itself as to the regularity of such proceeding or the correctness, legality or propriety of any decision or order passed therein, and if it appears to the Board of Revenue that any such decision or order should be modified, annulled , reversed or remitted for reconsideration, it may pass orders accordingly.
Section 32 enables the urban land tax officer, or the Assistant Commissioner, or the Board of Revenue or the Tribunal to rectify any error apparent on the face of the record at any time within three years from the date of any order passed by him or it.
Section 33 confers power on the Assistant Commissioner to take evidence, to require discovery and production of documents and to receive evidence on affidavit etc.
Thus the Act envisages a detailed procedure regarding submission of returns, the making of an assessment after hearing objections and a right to appeal to higher authorities.
We are hence unable to accept the contention of the petitioners that the provisions of section 6 of the new Act are violative of article 14 of the Constitution.
It is necessary to state that the High Court decided the case in favour of the respondents mainly on the ground that investment 284 of the power to determine value of the urban land under section 6 of the Act constituted excessive delegation of authority and so violative of articles 19(1) and 14 of the Constitution.
(see the judgment of Veeraswami, J., who pronounced the main judgment in the High Court.
But Mr. V. K. T. Chari did not support this line of reasoning, in his arguments before this Court.
On the other hand learned counsel conceded that the power of determining the value of the urban land being judicial or quasi judicial in character the doctrine of excessive delegation of authority had no application.
We pass on to consider the next contention raised on behalf of the petitioners namely that the Act should be struck down as an unreasonable restriction on the right to acquire, hold and dispose of property and as such violative of article 1 9 (1) (f) of the Constitution.
It was argued that the test of reasonableness would be that the tax should not be so high as to make the holding of 'the property or the carrying on of the activity (business or profession) which is subject to taxation, uneconomic according to accepted rates of yield.
In this connection it was said that the new Act by imposing a tax on the capital value at a certain rate was not correlated to the income or rateable value and, therefore, violates the requirement of reasonableness.
We are unable to accept the proposition put forward by Mr. Chari.
It is not possible to put the test of reasonableness into the straight jacket of a narrow formula, The objects to be taxed,, the quantum of tax to be levied, the conditions subject to which it is levied and the social and economic policies which a tax is designed to subserve are all matters of political character and these matters have been entrusted to the Legislature and not to the Courts.
In applying the test of reasonableness it is also essential to notice that the power of taxation is generally regarded as an essential attribute of sovereignty and constitutional provisions relating to the power of taxation are regarded not as grant of power but, as limitation upon the power which would otherwise be practically without limit.
It was observed by this Court in Rai Ramakrishna vs State of Bihar(1) : "It is of course true that the power of taxing the people and their property is an essential attribute of the Government and Government may legitimately exercise the said power by reference to the objects to which it is applicable to the utmost extent to which Government thinks it expedient to do so.
The objects to be taxed so long as they happen to be within the legislative competence of the Legislature can be taxed by the legislature according to the exigencies of its needs, because (1) A.T.R. 1963 S.C. 1667 at 1673.
28 5 there can be no doubt that the State is entitled to raise revenue by taxation.
The quantum of tax levied by the taxing statute, the conditions subject to which it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the Legislature, and in dealing with the contention raised by a citizen that the taxing statute contravenes article 19 Courts would naturally be circumspect and cautious.
Where for instance it appears that the taxing statute is plainly discriminatory, or provides no procedural machinery for assessment and levy of the tax, or that it is confiscatory, Courts, would be justified in striking down the impugned statute as unconstitutional.
In such cases, the character of the material provisions of the impugned statute is such that the Court would feel justified in taking the view that, in substance, the taxing statute is a cloak adopted by the Legislature for achieving its confiscatory purposes.
This is illustrated by the decision of this Court in the case of Kunnathat Thathunni Moopil Nair vs State of Kerala ; where a taxing statute was struck down because it suffered from several fatal infirmities.
On the other hand, we may refer to the case of Jagannath Baksh Singh vs State of Uttar Pradesh ; where a challenge to the taxing statute on the ground that its provisions were unreasonable was rejected and it was observed that unless the infirmities in the impugned statute were of such, a serious nature as to justify its description as a colourable exercise of legislative power, the Court would uphold a taxing statute." As a general rule it may be said that so long as a tax retains it&.
character as a tax and is not confiscatory or extortionate, the reasonableness of the tax cannot be questioned.
Mr. Chari submitted that the existing property tax under section 100 of the City Municipal Corporation Act and the tax on urban lands under the new Act both enacted under Entry 49 of the State List, one of them imposing a tax on the capital value of urban lands and the other on the annual value of lands and buildings exhaust an unreasonably high proportion of income.
I Or instance, it is pointed out that in W.P. No. 2835 of 1967 the annual income on property was Rs. 6,000 and the proposed market value for the lands alone comes to Rs. 10,40,000.
The urban land tax at 0.4% of the market value is Rs. 4,160 and the income tax at the rate applicable to the petitioner was Rs. 1.234.
The total tax burden in the aggregate under the three beads was Rs. 6,794, which 286 exceeds the rental income.
In W.P. No. 3686 of 1967 the municipal annual value was Rs. 4,095, the property tax was Rs. 1,098 and the urban land tax at 0.4% was Rs. 1,523.
The proportion of the two taxes together to yearly or annual municipal value worked out to Rs. 62.5%.
It was, therefore, said that the taxes put together would practically exhaust the total income and the charging section in the new Act was unreasonable.
The answer to the contention is that the charge is on the market value of the urban land and not on the annual letting value on which the municipal property tax is based.
The basis of the two taxes being .different it is not permissible to club together the two taxes and complain of the cumulative burden.
If the tax is on the market value of the urban land as it is in this case it does not admit of a complaint that it takes away an unreasonably high proportion of the income.
A tax on land values and a tax on letting value, though both are taxes under Entry 49 of List II cannot be clubbed together in order to test the reasonableness of one or the other for the purposes of article 19 (I).
But so far as the new Act is concerned we consider that the levy at 0.4% of the market value of the urban land is by no means confiscatory in effect.
It was also pointed out by Mr. V. K. T. Chari that in certain cases the market value of the urban land was arrived at by applying what is known as the contractor 's method not to the building which stands on the land whose value is, ascertained by that means but to some other building on a different land taken for comparison.
It was said that it was difficult enough for a to apply the contractor 's method of valuation to his own building which could be done by a competent architect after taking into account all measurements.
But it is absolutely an impossible task to check up or make objections to the contractor 's method applied to another man 's property which cannot be trespassed upon.
It was said that the contractor 's method was the last resort in valuation when a building has to be valued apart from the land and that it was a wrong application of the formula to use it to value the land without the building particularly when valuation of land can be made by applying the principles of the Land Acquisition Act.
But this argument has no bearing on the constitutional validity of the charging section or the machinery provisions of the Act.
It is, however, open 'to the writ petitioners to challenge the validity of the particular valuation in any particular case by way of an appeal under a statute or to move the High Court for grant of writ under article 226 of the Constitution.
The impugned Act provides for the retrospective operation of the Act.
Section 2 states that except sections 19, 47 and 48, other sections shall be deemed to, have come into force in the City of 287 Madras on the 1st day of July, 1963 and sections 19 and 47 shall be deemed to have come into force in the City of Madras on the 21st May, 1966.
It also provides that section 48 shall come into force on the date of the publication of the Act in the Fort St. George Gazette.
Section 6 enacts that the market values of the urban lands shall be estimated to be the price which in the opinion of the Assistant Commissioner or the Tribunal such urban land would have fetched or fetch if sold in the open market on the date of the commencement of the Act,, that is, from 1st July, 1967.
The urban land tax is, therefore payable from 1st July, 1963.
It is contended on behalf of the petitioners that the retrospective operation of the law from 1st July, 1963 would make it unreasonable.
We are unable to accept the argument of the petitioners as correct.
It is not right to.
say as a general proposition that the imposition of tax with retrospective effect per se renders the law unconstitutional.
In applying the test of reasonableness to a taxing statute it is of course a relevant consideration that the tax is being enforced with retrospective effect but that is not conclusive in itself.
Taking into account the legislative history of the present Act we are of opinion that there is no unreasonableness in respect of the retrospective operation of the new Act.
It should be noticed that the Madras Act of 1963 came into force on 1st July, 1963 and provided for the levy of urban land tax at the same rate as that provided under the new Act.
The enactment was struck down as invalid by the judgment of the Madras High Court which was pronounced on the 25th March, 1966.
The legislature by giving retrospective effect to Madras Act 12 of 1966 that the urban land must be taxed on the date on which the 1963 Act came into force the new Act cured the defect from which the earlier Act was suffering.
In Rai Ramkrishna 's case(1) the question at issue was whether the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961 (17 of 1961) was violative of article 1,9(5) and (6) of the Constitution for the reason that it was made retrospective with effect from 1st April, 1950.
It appears that the Bihar Finance ,Act, 1950 levied a tax on passengers and goods carried by public service motor vehicles in Bihar.
In an appeal arising out of a suit filed by the passengers and owners of goods in a representative capacity, the Supreme Court pronounced on the 12th December, 1960 a judgment declaring Part III of the said Act unconstitutional.
Thereafter an Ordinance, namely, Bihar Ordinance No. 2 of 1961 was issued on the 1st of August, 1961 by the State of Bihar.
By this Ordinance, the material provisions of the earlier Act of 1950 which had been struck down by this Court were validated and brought into force retrospectively from the (1) ; 288 date when the earlier Act had purported to come into force.
Subsequently, the provisions of the said Ordinance were incorporated in the Act, namely, the Bihar Taxation on Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961 which was duly passed by the Bihar Legislature and received the assent of the President on 23rd September, 1961.
As a result of the retrospective operation of this Act, its material provisions were deemed to have come into force on April 1, 1950, that is to say, the date on which the earlier Act of 1950 had come into, force '.
The appellants challenged the validity of this Act of 1961.
Having failed in their writ petition before the High Court, the appellants came to this Court and the argument was that the retrospective operation prescribed by section 1 (3) and by a part of section 23 (b) of the Act so completely altered the character of the tax proposed to be retrospectively recovered that it introduced a serious infirmity in the legislative competence of the Bihar Legislature itself.
The argument was rejected by this Court and it was held that having regard to the relevant facts of the case the restrictions imposed by the said retrospective operation was reasonable in the public interest under article 19(5) and (6) and also reasonable under article 304(b) of the Constitution.
In our opinion the ratio of this decision applies to the present case where the material facts are of a similar character.
In this context a reference may be made to a recent review of retroactive legislation in the United States of America : "It is necessary that the legislature should be able to cure inadvertent defects in statutes or their administration by making what has been aptly called 'small repairs '.
Moreover, the individual who claims that a vested right has arisen from the defect is seeking a windfall since had the legislature 's or administrator 's action had the effect it was intended to and could have had, no such right would have arisen.
Thus, the interest in the retroactive during 'of such a defect in the administration of government outweighs the individual 's interest in benefiting from the defect. .
The Court has been extremely reluctant to override the legislative judgment as to the necessity for retrospective taxation, not only because of the paramount governmental interest in obtaining adequate revenues, but also because taxes are not in the nature of a penalty or a contractual obligation but rather a means of apportioning the costs of government among those who benefit from it.
Indeed, as early as 1935 one commentator observed that "arbitrary retroactivity" may continue . to rear its head 289 in tax briefs, but for practical purposes, in this field, it is as dead as wager of law." (Charles B. Hochman in at p. 705).
In view of the legislative background of the present case we are of opinion that the imposition of the tax retrospectively from 1st July, 1963 cannot be said to be an unreasonable restriction.
We, therefore, reject the argument of the petitioners on this aspect of the case, For these reasons we hold that the Madras Urban Land Tax Act, 1966 (Act 12 of 1966) must be upheld as constitutionally valid.
We accordingly set aside the judgment of the Madras High Court dated the 10th April, 1968 and order that writ petitions filed by the petitioners should be dismissed.
In other words C.As 21 to 23 are allowed and C.As 46, 47, 125 and 274 are dismissed.
There will be no order with regard to costs of these appeals.
21 to 23 of '69 allowed.
R.K.P.S. C.As. 46, 47, 125 and 274 of '69 dismissed.
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By section 3 of the Madras Urban Land Tax Act, 1963, a tax was levied on every owner of urban land at the rate of 0.4 % of the average market value of the urban land as determined under section 6(2) of the Act.
The vires of the Act was challenged by a writ petition and the impugned Act.
was struck down on the ground that it violated article 14 of the Constitution because the charging section levied the tax on urban land not on the market value of such land but on the average value of the land in a sub zone .
Thereafter the State Legislature passed the Madras Urban Land Tax Act 12 of 1966 which omitted the provisions relating to fixation of average market value in the sub zone, and instead provided in section 5 for the levy of a tax on urban land from the owner at the rate of 0.4% of the market value of 'such urban land.
The validity of the new Act was again challenged in a group of writ petitions before the High Court which held that the Madras Legislature was competent to enact the new Act but that it was violative of articles 14 and 19(1)(f) of the Constitution.
In appeals to this Court it was contended, inter alia, on behalf of the petitioners (1) that the impugned Act fell under Entry 86, List I and not under Entry 49 of List 2, so that the State Legislature was incompetent to pass the Act; furthermore as Entry 49, List 2 provides for taxes on land and buildings, the impugned Act which imposed tax on land alone could not be held to fall under the Entry; (ii) that the machinery was provided for determining the market value and the matter having been left to the arbitrary determination of the Assistant Commissioner, the provisions of the new Act were violative of article 14 of the Constitution (iii) that the Act was an unreasonable restriction on the right to acquire, hold and dispose of property and as 'such was violative of article 19 (1) (f) of the Constitution; furthermore together with the existing property tax under section 100 of the City Municipality Corporation Act the tax under the impugned Act exhausted an unreasonably high proportion of income and on this account also it was an unreasonable restriction; it was also contended that the giving of retrospective operation to the Act from July, 1963 made it unreasonable.
HELD: The Madras Urban Land Tax Act 12 of 1966 was constitutionally valid.
(i) In pith and substance the new Act in imposing a tax on urban land at a percentage of the market value is entirely within the ambit of 269 Entry 49 of List II and within the competence of the State Legislature, it does not in any way trench upon the field of legislation of Entry 86 of List 1.
[280 G H] There was no conflict between Entry 86 of List I and Entry 49 of List II.
The tax under Entry 86 proceeds on the principle of aggregation and is imposed on the totality of the net value of an assets.
Entry 49 of List II, contemplates a levy of tax on lands and buildings or both as units; it is not concerned with the division of interest or ownership in the units of land or buildings which are brought to tax.
[278 E F] The legislative entries must be given a large and liberal interpretation, the reason being that the allocation of the subjects to the Lists is not by way of scientific or logical definition but by way of a mere sixplex enumeratio of broad categories.
[277 G H] Ralla Ram vs Province of East Punjab, , Sudhir Chandra Nawn vs Wealth Tax Officer, A.I.R. 1969 S.C. 59; Gallahagher vs Lynn, at p. 870; and Subrahmanyan Chettiar vs Mittuswami Goundan, [1940] F.C.R. 188 at 201; referred to.
The legislative history of Entry 49, List II, does not lend any support to the argument that Entry 49 of List if relating to tax on land and, buildings cannot be separated.
On the other hand Entry 49 "Taxes on lands and buildings" should be construed as taxes on land and taxes on buildings and there is no reason for restricting the amplitude of the language used in the Entry.
[281 G] Raja Jagannath Baksh Singh vs The State of U.P., ; ; and H. R. section Murthy vs Collector of Chittoor and Anr., ; ; referred to.
(ii) The provisions of section 6 of the new Act were not violative of article 14 of the Constitution.
Having regard to the language and context of section 6 of the new Act, the opinion which the Assistant Commissioner has to form under that section is not subjective but should foe reached objectively upon the relevant evidence after following the requisite formalities laid down in sections 7 to 1 1 of the new Act.
The proceeding before the Assistant Com missioner is judicial in character and his opinion regarding the market value is reached objectively on all the materials produced before him.
[282 F] (iii) The new Act was also not violative of article 19(1) (f) of the Constitution.
It is not possible to put the test of reasonableness into the straight jacket of a narrow formula.
The, objects to be taxed, the quantum of tax to be levied; the conditions subject to which it is levied and the social and economic policies which a tax is designed to subserve are all matters of political character and these matters have been entrusted to the Legislature and not to the Courts.
In applying the test of reasonableness it is also essential to notice that the power of taxation is generally regarded as an essential attribute of sovereignty and constitutional provisions relating to the power of taxation are regarded not as grant of power but as limitation upon the power which would otherwise be practically without limit.
[284 E] Rai Ramakrishna vs State of Bihar, ; at 1673; referred to.
270 The charge under the City Municipality Corporation Act was a tax .,on the annual letting value whereas the charge under the Act of 1966 was .on the market value of the urban land.
The basis of the two taxes being different, it was not permissible to club the two together and complain of the cumulative burden.
As a general rule, so long as a tax retains its character as a tax and is not confiscatory or extortionate, the reasonableness of the tax cannot be questioned.
In so far as the new Act of 1966 was concerned, it could not be said that the levy at 0.4% of the market value of the urban land was confiscatory in effect [285 F] (iv) In view of the legislative background of the new Act of 1966, which replaced the earlier Act of 1963, it could not be said that the imposition of the tax retrospectively 'from July, 1963, was an unreasonable restriction.
[289 B]
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2616.txt
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Civil Appeal No. 1207 of 1975.
(Appeal by special leave from the judgment and order dated 5 8 1975 of the Punjab & Haryana High Court in Letters Patent Appeal No. 459/75).
J.S. Wasu, Adv.
General, Punjab and O.P. Sharma, for the appellants.
V.C. Mahajan and S.S. Khanduja, for respondent No. 1.
P.K. Pillai, for respondent No. 1.
The Judgment of the Court was delivered by KHANNA, J.
This is an appeal by special leave by the State of Punjab against the order of the Punjab & Haryana High Court, whereby at was directed that the Minister in charge of Irrigation Department be impleaded as a party in the writ petition filed by V.P. Duggal respondent.
The Minister was also directed to file his affidavit.
In the writ petition filed by him, Duggal respondent challenged notification dated January 29, 1974 fixing the seniority of the engineers n the Irrigation Department of the Punjab Government.
During the course of the heating of the writ petition, an order was made by the High Court on November 18, 1974 that the Minister concerned might give a personal hearing to the parties and thereafter pass the necessary order in the matter.
The Minister concerned thereafter heard the parties and made a speaking order on February 18, 1975 affirming the earlier seniority list.
The writ petition was thereafter amended, and 97 in the amended petition, Duggal respondent also challenged the validity of .the later order of February 18, 1975.
At the resumed hearing of the writ petition, the learned Judge hearing the petition directed that the Minister con cerned be impleaded as a party in the petition, as in the view of the learned Judge, allegation had been made against the Minister that he had deviated from the normal procedure while passing the impugned order dated February 18, 1975 inasmuch as he had dealt with the matter directly and by passed the Secretary of the Department.
Direction was also issued that the Minister should file an affidavit in regard to the allegations made in the petition.
At the hearing of the appeal before us, the learned Advo cate General for the State of Punjab has contended that the allegations made in the amended petition do not disclose any personal animus on the part of the Minister concerned and as such the High Court was in error in directing that the Minister be impleaded as a party.
The learned Advocate General has also assailed the direction of the High Court in sofar as the Minister has been called upon to file his personal affidavit.
As against that, Mr. Mahajan on behalf of Duggal respondent has urged that looking to the facts of the case if the High Court came to the conclusion that the Minister was a necessary or proper party, this Court should not interfere in the matter.
We have given the matter our consideration, and it seems to us that the direction for the impleading of the Minister as a party was given by the High Court with a view to apprise the Minister of the allegations made in the petition and thus to afford him an opportunity of controverting those allegations, if he so deemed proper.
Taking the totality of the facts and circumstances of the case, we do not feel persuaded to interfere with the order of the High Court adding the Minister as a party to the writ petition.
The High Court was, however, in our opinion in error in direct ing that the Minister concerned should file his affidavit.
It is essentially for the Minister concerned to decide in the light of the allegations made in the petition as to whether he should or should not file an affidavit.
We, therefore, decline to interfere with the order made by the High Court insofar as it has directed that the Minister be impleaded as a party.
The other part of the order whereby the Minister concerned was directed to file his personal affidavit is set aside.
The appeal shall stand disposed of accordingly.
The parties in the circumstances shall bear their own costs.
M.R. Appeal partly allowed.
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The respondent challenged the validity of a Government Notification, and also the Minister 's order upholding the same.
At the hearing, the High Court directed that the concerned Minister be impleaded as a party, and file his personal affidavit.
Challenging the directions, the appel lant contended before this Court, that the allegations against the Minister did not disclose any personal ammus on his part, and he was not liable to be added as a party or to file his affidavit.
Partly allowing the appeal, the Court, HELD: The direction for the impleading of the Minister as a party was given by the High Court with a view to ap praise the Minister of the allegations made in the petition and thus to afford him an opportunity of controverting those .allegations, if .he so deemed proper.
We decline to interfere.
It is essentially for the Minister concerned to decide in the light of the allegations made in the petition as to whether he should or should not file an affidavit.
[97 E F]
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3527.txt
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Appeal No. 1958 of 1968.
Appeal by special leave from the judgment and order dated August 2, 1966 of the Allahabad High Court in Special Appeal No. 960 of 1964.
G. B. Pai, Bhuvnesh Kumari, O. C. Mathur, J. B. Dadachanji & Co., for the appellant.
Danial Latifii and section Ramachandran, for respondents Nos. 4 and 5.
The Judgment of the Court was delivered by VAIDIALINGAM, J.
The short question that raises for consideration in this appeal, by special leave, is whether the State Government has power under section 6G of the U.P. (hereinafter to be referred to as the Act) to withdraw an order already passed referring a dispute for adjudication.
The facts leading up to the filing of the Writ Petition by the appellant are as follows The appellant, a public limited company, carrying on business of manufacture and sale of sugar from sugarcane, employs about a thousand workmen in its factory at Baitalpur.
The appellant retired three workmen, namely, Chhatradheri Lal Chandrika Prasad Srivastava and Bal Karan.
This led to an industrial dispute.
The State Government by Notification No. 785/LC/XVIII/LA 97(GR)/1959 dated October 25, 1960, referred the said dispute to the Labour Court, Gorakhpur, for adjudication.
This reference (hereinafter to be referred to as Reference, No. 1) was registered by the Labour Court as Adjudication Case No. 93 of 1960.
The parties filed their written statements and proceedings went on resulting in the Labour Court passing an award dated February 26, 1961, holding) that the retirement of the three workmen was neither legal nor justified.
This award was published in the U.P. Gazette dated May 6, 1961, by the State Government 's Notification dated April 4, 1961, No. 1176(EIO)36/ A/46(ST) 59.
There were similar disputes regarding the retirement of several other workmen and accordingly that dispute was referred by the State Government to the same Labour Court for adjudication by Notification No. 322(LC)XVIII LA 115,(GS)/1959 dated October 31, 1960.
This reference (hereinafter to be, referred to as Reference No. 11) was registered by the Labour Court as Adjudication Case No. 98 of 1960.
At this stage it must be mentioned that Reference No. 11 related to several workmen numbering about thirty or forty which included also the three Workmen covered by Reference No. 1.
The three workmen covered by Reference No. 1 made an application to the Labour Court for deleting their names from Reference No. 11 on the ground that their grievance is the subject of adjudication in Case No. 93 of 1960.
Though the appellant opposed this application, the Labour Court by its order dated February 21, 1961, accepted the prayer of the three workmen and as such they ceased to have anything to do further in Reference No. 11.
Adjudication Case No. 98 of 1960, arising out of Reference No. 11, also resulted in an award being passed by the Labour Court on February 27, 1961.
In this award, the Labour Court had decided the dispute on merits.
But it has specifically stated that it is not record ' any finding with 'regard to the ing 69 three workmen covered by Reference No. 1, as their names have been excluded from Adjudication Case No. 98 of 1960, arising out of Reference No. 11.
This award dated February 27, 1961, was published in the State Gazette on April 4, 196f.
We have earlier mentioned that the award dated February 26, 1961, in Adjudication Case No. 93 of 1960, arising out of Reference No. 1, was published in the State Gazette on May 6, 1961.
After the award was made on February 26, 1961, the State Government issued a Notification on February 28, 1961, withdrawing the Notification dated October 25, 1960, making Reference No. 1.
The order of withdrawal runs as follows "GOVERNMENT OF UTTAR PRADESH LABOUR (A) DEPARTMENT No. 167(LG)/XVIII LA 97(GR)/1959 Dated Kanpur, February 28, 1961 ORDER Whereas an industrial dispute between the employers and the workmen of the concern known as Shree Sitaram Sugar Co. Ltd., Baitalpur, Distt.
Deoria relating to retirement of the workmen, was referred for adjudication to the Labour Court at Gorakhpur in G.O. No. ' 785(LC)/XVIILLA 97 (GR)/1959, dated October 25, 1960.
And whereas the same dispute is also covered by G.O. No. 822 (LC)/XVIII LA 115(GR)/1959, dated October 31, 1960, as amended by G.O. No. 912(LC)/XVIII LA115(GR)/1959, dated November 21, 1960, referring the same question of retirement of workmen to Labour Court at Gorakhpur; Now, therefore, in exercise of the powers conferred by sub section (1) of section 6 G of the U.P. (U.P. Act No. XXVIII of 1947), the Governor is pleased to order that G.O. No. 785(LC)/ XVIII LA 97(GR)/1959, dated October 25 1960, referring the said dispute for adjudication, shall be and is hereby withdrawn." Sd/ J. Prasad Under Secretary.
" It will be noted from the above Notification that the State Government had withdrawn its previous order referring the dispute by Virtue of powers stated to be conferred under subsection (1) of section 6 G of the Act.
We have also referred to the fact that the award in Reference No. 1 was published in the State Gazette on May 6, 1961.
It will be noted that the material dates to be considered with regard to Reference No.1 are as follows : (a) The dispute was referred for adjudication by Notification dated October 25, 1960.
(b) The award was made on February 26, 1961.
70 (c) The Notification dated October25, 1960, referring the dispute was withdrawn by Notification dated February 28, 1961.
(d) The award was published in the State Gazette dated May 6, 1961.
It will be noted from these dates that the order withdrawing the original reference was made two days after the Tribunal had passed the award.
The publication of the award was after the State Government had withdrawn its original order making the reference.
The appellant filed the Writ Petition in the High Court under Article 226 for the issue of writ of certiorari quashing the award dated February 26, 1961 and also for a mandaus directing the State Government to withdraw its Notification dated May 6, 1961, publishing the award.
The proceedings before the High Court related to the matters arising out of Reference No. 1.
According to the appellant, the, award dated February 28, 1961, had become ineffectual and useless in view of the State Government having withdrawn the Notification dated October 25, 1960, referring the dispute for adjudication.
Its further contention was that having withdrawn on February 28, 1961, its previous order referring the dispute, the State Government had no power to publish the award, as it had done on May 6, 1961 and that the said order publishing the award had to be revoked.
The union contested the Writ Petition on the ground that the State Government has no power under section 6 G to withdraw an order already passed referring a dispute for adjudication and that, in any event, it has no such power after an award has been made by a Labour Court or Tribunal.
According to the union, the order of withdrawal dated February 28, 1961, is of no effect and that the publication of the award on May 6, 1961, was valid and that the State Government cannot be called upon to revoke the same.
The learned single Judge posed two questions for consideration (1) whether the power to withdraw under section 6 G of the Act is confined to withdrawal for purposes of transferring the proceedings to another Court or Tribunal; and (2) whether the power under section 6 G can be exercised at any stage until the award of the Labour Court or Tribunal has become enforceable under section 6 A of the Act.
The learned single Judge did not consider the first question and proceeded on the assumption that under section 6 G the State Government has power to Withdraw a reference already made.
But, after considering the second question, he came to the conclusion that the power of Withdrawal cannot be exercised after in award had been made by the Tribunal concerned.
In this view, the learned single Judge held that the order of withdrawal dated February 28, 1961, was of no effect and that tie publication of the award on May 6, 1961, was according to law.
In this view, the Court declined to grant any relief to the appellant.
71 The appellant challenged the decision of the learned single Judge in Special Appeal No. 960 of 1964.
The Division Bench of the Allahabad High Court has held that the State Government has power under section 6 G to withdraw any proceedings pending before a. Labour Court or Tribunal.
But it held that as the award had been made on February 26, 1961, there were no proceedings pending before the Labour Court on February 28, 1961, when the order of withdrawal was passed by the State Government.
In this view the Division Bench held that it was not open to the State Government to withdraw the proceedings after the award had been made by the Tribunal and, therefore, the Notification dated February 28, 1961, is of no effect.
By judgment and order dated August 2, 1966, the learned Judges confirmed the order of the single Judge and dismissed the Special Appeal.
The management has come to this Court in this appeal.
Mr. G. B. Pai, learned counsel for the appellant, placed considerable stress on the language of section 6 G of the Act and pointed out that in addition to the power of transferring a proceeding from one Labour Court or Tribunal to another, the said section, has conferred an absolute right on the State Government to withdraw an order already passed referring a dispute for adjudication.
There is only an obligation on the State Government to make the order in writing and also give reasons for the action taken by it.
The counsel very heavily relied on section 6 D of the Act and urged that this power of withdrawing a reference can be exercised till the date when the award becomes enforceable.
Therefore, the mere fact that an award has been made does not take away the power of the State Government to, withdraw a reference.
In the case before us, the counsel pointed out that the award had been made only on February 26, 1961 and the reference had been withdrawn by the State Government on February 25, 1961, long before the award had become enforceable.
The counsel urged that, in view of the circumstances pointed out above, the view of the High Court that the State Government has no power to withdraw the reference, as the award has been made, is erroneous.
Mr. Daniel Latifi, learned counsel for the workmen concerned, on_ the other hand, urged that the view of the High Court that there is a power under section 6 G in the State Government to withdraw a reference is erroneous.
The counsel pointed out that section 6 G confers on the State Government only a power to transfer a proceeding from one Labour Court or Tribunal to another.
The counsel also pointed out that section 6 D has no bearing in the construction of section 6 G of the Act.
When there is no power in the State Government to Withdraw a reference, the counsel pointed out, the question at what stage the proceedings can be withdrawn is purely academic.
Even assuming that there is a power under section 6 G an the State Government to withdraw an order of reference already made, that section, the counsel pointed out, does not give power to order such withdrawal after an award has been passed.
According to him once an award has been made by a Labour Court or Tribun proceedings before it come to a close and there is nothing for being withdrawn by the State Government.
The counsel supported the reasoning of the High Court that section 6 G does not confer any Power on the State Government to 72 withdraw an order of reference after an award had been made by the Labour Court or Tribunal concerned. ' In our opinion, the first and foremost question that should have been considered by the High Court is whither section 6 G confers a power on the State Government to withdraw an order earlier passed referring a dispute for adjudication.
It is only when this point is answered in the affirmative the, further question is upto what stage can the power of withdrawal be exercised by the State.
The, State of Uttar Pradesh was a party before the learned single Judge as well as the High Court and is 2nd respondent in the appeal before us.
We have already referred to the fact that the relief that was asked for by the appellant was by way of writ of mandamus directing the State Government to withdraw the publication, made in the Gazette of May 6, 1961, of the award by its order dated April 4, 1961.
This relief was asked for by the appellant on the ground that the order dated February 28, 1961, of the State, Government withdrawing the reference was well within its power.
In the Writ Petition the powers and functions of the State Government under the Act came squarely for consideration.
Under those circumstances one would have expected the State Government to appear before this Court and place its point of view regarding the points under consideration.
Unfortunately, the State Government has chosen to remain exparte in this appeal.
Hence we have to decide the points in controversy only on the basis of the contentions advanced on behalf of the employer and the workmen.
It is now necessary to refer to certain relevant provisions of the Act.
According to the preamble, the Act has been enacted to provide for powers to prevent strikes and lock outs and for the settlement of industrial disputes and other incidental matters.
Section 2(c) states : " ' Award ' means an interim or final determination of any industrial dispute or of any question relating thereto by, any Labour Court or Tribunal and includes an arbitration award made under Section 5 B." The above definition takes in both interim and final awards. 'Section 4 K gives power to the State Government to refer for adjudication an industrial dispute to the Labour Court or an Industrial Tribunal under the circumstances mentioned therein.
Section 5 gives power to the State Government to include other undertakings in any adjudication.
Section 6 dealing with the proceedings before a Tribunal, Submission of the award and its publication runs as follows : "6.
Awards and action to be taken thereon (1)Where an industrial dispute, has been referred to a Labour Court or Tribunal for adjudication, it shall hold its proceedings expeditiously 'and shall as soon as it is practicable on the conclusion thereof.
submit its award to the State Government.
(2)The award of a Court or Tribunal shall be in writing and shall be signed by its Presiding Officer.
73 (3)Subject to the provisions of sub section (4) every arbitration award and the award of a Labour Court or Tribunal, shall within a period of thirty days from the date of its receipt by the State Government, be published in such manner as the State Government thinks fit.
(4)The State Government may before publication of an award of a Labour Court or Tribunal under sub section (3), remit the award for reconsideration of the adjudicating authority , and that authority shall, after reconsideration submit its award to the State Government, and the State Government shall publish the award in the manner provided in sub section (3).
(5)Subject to the provisions of section 6 A, an award published under sub section (3) shall be final and shall not be called in question in any court in any manner whatso ever.
(6)A Labour Court, Tribunal or Arbitrator any "either of its own motion or on the application of any party to the dispute, correct any clerical or arithmetical mistake in the award, or errors arising therein from I any accidental.
slip or omission; whenever any correction is made as aforesaid, a copy of the order shall be sent to the State Government and the provision of this Act, relating to the publication of an award shall mutatis mutandis apply thereto.
" The above section clearly indicates that when once an industrial dispute has been referred for adjudication, the Labour Court or Tribunal has to conduct its proceedings expeditiously and it has to submit its award to the State Government.
The award has to be published within thirty days of its receipt by the State Government.
Power has no doubt been given to the State Government, before publication of an award, to remit the same for reconsideration.
When the same is received after reconsideration, the State Government is bound to publish the same, as provided under sub section (3).
An award published under sub section (3) is final subject to the provisions of section 6 A.
The Labour Court or Tribunal has power to correct any clerical or arithmetical mistake in the award.
But if any such correction is made, a copy of the order making the correction will have to be sent to the State Government.
The provisions relating to Publication of an award apply to the order making a correction in the award.
Section 6 A deals with the commencement of the award.
The general rule, as provided under sub section (1) is that an award becomes enforceable on the expiry of thirty days from the date of its publication under section 6.
Sub ,section (3) provides for a slightly different period depending upon the circumstances mentioned, therein.
Sections 6 D and 6 G are as follows "6 D. Commencement and conclusion of proceedings, Proceedings before a Labour Court or Tribunal shall be deemed to have commenced on the date of reference of a 74 dispute, to adjudication, and such proceedings shall be deemed to have concluded on the date on which the award becomes enforceable under section 6 A." "6 G. Power to transfer certain proceedings (1)The State Government may, by order in writing and for reasons to be stated therein, withdraw any proceeding under this Act, pending before a Labour Court or Tribunal or transfer a proceeding from one Labour Court or Tribunal to another Labour Court or Tribunal, as the case may be, for the disposal of the proceeding and the Labour Court or Tribunal to which the proceeding is so transferred may, subject to any special directions in the order of transfer, proceed either de novo or from the stage at which it was so transferred; Provided that where a proceeding under section 6 E or section 6 F is pending before a Tribunal, the proceeding may also be transferred to a Labour Court.
(2) Without prejudice to the provisions of sub section (1) any Tribunal, if so authorized by the State Government, may transfer any proceeding under section 6 E or section 6 F pending before it to any one of the Labour Courts specified for the disposal of such proceedings by the State Government by notification in the Official Gazette and the Labour Court to which the proceeding is so transferred shall dispose of the same." Sections 6 D and 6 G substantially correspond to sub section (3) of section 20 and section 33 B respectively of the (Central Act XIV of 1947).
It must be stated that a superficial reading of sub section (1) of section 6 G in isolation will give the impression that the State Government has got two distinct and separate powers, namely (a) to withdraw any proceedings under the Act pending before a Labour Court or Tribunal,; or (b) to transfer the proceedings from one Labour Court or Tribunal to another Labour Court or Tribunal for disposal of the same.
It is on the basis of such a reading of the section that Mr. Pai, the learned counsel, urged that there is an absolute power in the State Government to withdraw an order already passed referring a dispute for adjudication.
This power ' according to the learned counsel, is distinct and separate front the power given under the same section to the State Government to transfer a proceeding from one Labour Court or Tribunal to another.
If we do not accept the contention of Mr. Pai that section 6 G confers two such distinct and separate powers, section 6 D will not assist the appellant.
It is only if we hold that the Government has a power to withdraw simpliciter, the further question regarding the stage upto which the power could be exercised.
will arise for consideration.
75 We have already pointed out that section 6 casts a duty on the Tribunal, when a dispute has been referred to it, to deal with it expeditiously and to submit its award to the State Government.
The State Government has also an obligation to publish the award within thirty days of its receipt.
No doubt sub section (4) of section 6 gives power to the State Government, before publishing the award, to remit the same for reconsideration.
But still a duty is cast upon the State Government to publish the award as reconsidered by the Tribunal within thirty days of its receipt.
Section 6 A also gives certain powers toy the State Government regarding the award, which normally becomes enforceable under sub section (1) on the expiry of thirty days from the date of its publication.
Section 6 G, in our opinion, deals only with the power of the State Government to transfer a proceeding from one Labour Court or Tribunal to another and for purposes of such transfer to withdraw the proceedings from the Labour Court or Tribunal from whom it is being transferred.
We are free to admit that the wording of sub section (1) is capable of being construed as conferring on the State Government a power to withdraw any proceedings or to transfer a proceeding from one Labour Court or Tribunal to another.
But having regard to the scheme of section 6 G, read in the light of the other provisions referred to earlier, the section will have to be interpreted as giving to the ,State Government only a power to transfer a proceeding from one Labour Court to another.
When section 6 makes it obligatory that an award has to be made by the Tribunal concerned, and that it has to, be published by the State Government within thirty days of its receipt and declare that the award on publication becomes final, it is idle to expect that the legislature intended to nullify the entire proceedings.
by conferring an absolute power of withdrawal on the State Government under section 6 G.
The proper way of reading section 6 G is to limit the power of withdrawal, referred to therein, only for the purpose of transferring the proceedings from one Labour Court or Tribunal to another.
That the expression 'or ' in section 6 G(1) interposed between 'withdraw any proceedings '.
. or 'transfer a proceeding ' will have tar be understood as 'and '.
So read, the power conferred under section 6 G on the State Government is that of withdrawing any proceedings from one Labour Court or Tribunal and transferring the same to another.
Mr. Pai drew our attention to section 33 B of the Central Act and emphasised that the said section is words differently from section 6 G of the Act.
According to him, the wording of section 33 B clearly shows that the withdrawal of any proceedings is only for transferring the same to another Labour Court or Tribunal.
On the other hand, the counsel pointed out that a different phraseology has been used in section 6 G indicating the conferment of two distinct powers.
We have already referred to this aspect and expressed the view that a superficial reading of section 6 G will support the contention of Mr. Pai.
If the expression 'or ', as mentioned earlier, is read as 'and ', the section does not present any difficulty.
That having due regard to the scheme of the statute and the purpose sought to be served the expression 'or ' can be read under certain circumstances as 'and ' as has been laid down 76 by this Court in Mazagaon Dock Ltd. vs The Commissioner of Income Tax and Excess Profits Tax.(1) Adopting the same principle and having due regard to the object of section 6 G, which essentially is only to confer in the State Government a power to transfer a proceeding from one Labour Court or Tribunal to another, the expression 'or ' has to be read in section 6 G as 'and ', If so read, sub section (1) of section 6 G confers on the State Government only a power to withdraw a proceeding from one Labour Court or Tribunal and transfer the same to another.
It is needless to state that transfer of a proceeding can only be when it is pending before A Labour Court or Tribunal.
Section 6 D, in our opinion, has no relevancy in construing section 6 G. Section 6 D is enacted for a totally different purpose.
For instance section 6 E provides for conditions of service etc.
to remain unchanged in certain circumstances during the pendency of proceedings.
Similarly under section 6 F a question may arise whether an employer has contr avened the provisions of section 6 E during the pendency of proceeding before a Labour Court or Tribunal.
It may be quite essential to consider whether any proceedings were pending before a Labour Court or Tribunal.
For the purpose of considering the question whether ,any proceedings were pending, the Act has created a fiction under section 6 D by indicating the starting point of a proceeding before a Labour Court as well as its conclusion.
The starting point of the proceedings has been fixed from the date of the reference and its termination has been fixed as the date on which the award becomes enforceable under section 6 A.
During this period broadly it has to be considered that proceedings are pending before a Labour Court or Tribunal.
We need not refer to the other provisions of the Act where the duration of the pendency of proceedings may assume importance.
Section 6 D can be invoked only in those cases.
But it does not come into the picture, as mentioned earlier, in construing section 6 G. Mr. Pai referred us to the decision of this Court in The Sirsilk Ltd., and Others vs Government of Andhra Pradesh & Another(2), where the provisions of section 17 and 18 of the Central Act were read in harmony and the State Government was directed not to publish the award though its publication was mandatory.
We are not faced with ,such a situation in the case before us.
We have already referred to the fact that in Adjudication Case No. 98 of 1960, arising out of Reference No. 11, respondents 4 to 6 herein had requested the Labour Court to exclude them from the said adjudication on the ground that they are already covered by Adjudication Case No. 93 of 1960, arising out of Reference No. 1.
The Labour Court passed an order on February 21, 1961, excluding the said three workmen from Adjudication Case 'No. 98 of 1960.
That means the said three workmen had no further interest in the said Adjudication Case.
If that is so, the award passed on February 26, 1961, in the case arising out of Reference No. 1 was perfectly correct and the publication of the said award on May 6, 1961, was also in pursuance of the mandatory provisions of the Act. 'There is no question of any conflict between the two awards.
Hence the appellant cannot seek any assistance from the decision of this (1) (2) 77 Court in The Sirsilk Ltd., and Others vs Government of Andhra Pradesh& Another(1) and it cannot ask for a writ of mandamus directing the State Government to cancel the publication of the award.
We are in agreement with the view of the High Court that the appellant is not entitled to any relief, though for different reasons.
The appeal fails and is dismissed with costs.
G.C Appeal dismissed.
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The appellant company retired three of its workmen and the industrial dispute thus arising was referred to the Labour Court, Gorakhpur, for adjudication The reference was registered by the Labour Court as Adjudication Case No. 93 of 1960.
The parties filed their written statement and proceedings went on resulting in the Labour Court passing an order dated February 26, 1961 holding that the retirement of the three workmen was neither legal nor justified.
There were similar disputes regarding the retirement of several other workmen and the dispute relating to them was referred to the same Labour Court and this reference was registered as Adjudication Case No. 98 of 1960.
The three workmen whose cases were the subject matter of the first reference were also included in the second reference.
They applied to the Labour Court to have their names deleted from the second reference, and they were accordingly deleted.
The Labour Court gave its award in the second reference on February 27, 1961.
In this award the Labour Court specifically stated that it was not recording any finding with regard to the three workmen covered by the first reference.
On a representation made by the appellant the State Government issued a notification on February 28. 1961 withdrawing the first reference relating to the three aforesaid workmen.
This was purported to be done under sub section (1) of section 6 G of the U.P.
Even so the State Government published the award in the first reference on May 6, 1961.
The appellant filed a writ petition in the High Court under article 226 of the Constitution for the issue of a writ of certiorari quashing the award dated February 26, 1961 and also for a mandamus directing the State Government to withdraw its Notification dated May 6. 1961.
The single Judge as well as the Division Bench decided against the appellant.
In appeal before this Court, HELD : (i) The wording of sub section (1) of section 6 G is capable of being construed as conferring on the State Government a power to withdraw any proceedings or to transfer a proceeding from one Labour Court or Tribunal to another.
But having regard to the scheme of section 6 G read in the light of the other provisions of the Act the section will have to be interpreted as giving to the State Government only a power to transfer a proceeding from one Labour Court to another.
When section 6 makes it obligatory that an award has to be made by the tribunal concerned and that It has to be published by the State Government within 30 days of its receipt and declares that the award on is idle to expect that the legislature intended to by conferring an absolute power of withdrawal on Government State section 6 G.
The proper way of reading section 6 G is to limit the power of withdrawal referred to therein only for the purpose of transferring proceedings from one Labour Court or Tribunal to another.
[75D] The provisions of section 33B and section 6 D of the Act did not support a contrary conclusion.
Sirsilk Ltd. and Others vs Government of Andhra Pradesh & Another ; , distinguished.
(ii) The expression 'or ' in section 6 G (1) interposed between 'withdraw any proceedings ' or 'transfer a proceeding ' will have to be understood as 'and '.
[75H] Mazagaon Dock Ltd. vs The Commissioner of income tax and Excess Profits Tax; , relied on.
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3155.txt
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Appeal No. 1672 of 1973.
Appeal by special leave from the judgment and order dated the 9th January, 1973 of the Madras High Court in C.R.P. No. 2486 of 1972.
Y. section Chitale, C. section Prakasa Rao and A. T. M. Sampath, for the appellant.
K. section Ramamurthy, V. Subramanian and Vineet Kumar, for the respondent.
The judgment of the Court was delivered by BHAGWATI J.
There were fifteen applicants before the Regional Transport Authority, Chingleput for grant of a stage carriage permit to ply a bus on the route Red Hills to Kancheepuram.
This route covers a distance of 501 miles of 81.27 kilometers and is a 'long :route, ' within the meaning of that expression as used in rule 155A of the Motor Vehicles Rules, 1940.
Out of fifteen applicants, only two are before us, namely, the appellant and the respondent.
The appellant was applicant No. 7, while the respondent was applicant No. 6.
The Regional Transport Authority, after considering the applications, made an order dated 19th June, 1971 granting the permit to the respondent, though on marking according to the provisions contained in clause (3) of rule 155A, the respondent obtained only 7.40 marks as against 9.00 marks obtained by the appellant.
The main ground ,on which the Regional Transport Authority preferred the respondent to the appellant was that the respondent was a single bus operator, while the appellant was a multi bus operator having four stage carriage permits including a stage carriage permit recently granted to him.
The appellant and seven other applicants, who were aggrieved by the decision of the Regional Transport Authority, granting a permit to the respondent, preferred appeals before the State Transport Appellate Tribunal impleading the respondent as the opposite party in the appeals.
The State Transport Appellate Tribunal took the.
view that at tile date of the consideration of the applications by the Regional Transport 93 Authority, the respondent had a workshop but it was housed only in a thatched shed and not in a pucca fire proof building and the respondent was, therefore, not entitled to two marks under clause (3) (E) of rule 155A and his total marks should, therefore, have been 5.40 and not 7.40.
The Regional Transport Authority had refused to grant two marks to the appellant on account of sector qualification on the ground that he had been plying only on temporary permits but this view did not find favour with the State Transport Appellate Tribunal which held that under clause (3) (C) of rule 155A it was immaterial whether sector experience was derived by an applicant under a temporary permit or a permanent permit and the appellant was, therefore, entitled to two marks under that clause on account of sector experience even though gained by operation on temporary permits.
So far as the past record was concerned, the State Transport Appellate Tribunal relied heavily on the fact that the history sheet of the appellant was clean without any adverse entry while the respondent had one adverse entry in the history sheet relating to his single stage carriage and four adverse entries in the history sheet relating to his lorry operation.
The State Transport Appellate Tribunal also pointed out that a portion of the route fell within the interior roads and it was, therefore, desirable in public interest to prefer "an experienced operator instead of single bus operator".
Having regard to these considerations the State Transport Appellate Tribunal set aside the order of the Regional Transport Authority granting permit to the respondent.
The State Transport Appellate Tribunal then proceeded to consider who amongst the appellants before it deserved to be granted permit.
After considering the claim of the appellants before it, the State Transport Appellate Tribunal took the view that since the appellant had higher marks which reflected his superior qualifications and was an experienced operator with a clean history sheet, he was entitled to be preferred to the other appellants and in this view, the State Transport Appellate Tribunal, by an order dated 23rd September, 1972, granted permit to the appellant.
The respondent thereupon preferred a revision application to the High Court under section 64B of the Madras Vehicles Act, 1939.
The learned Single Judge, who heard the revision application, held that the State Transport Appellate Tribunal had acted with material irregularity in exercise of its jurisdiction in preferring the appellant to the respondent for the grant of permit.
There were in the main five reasons which prevailed with the learned Single Judge in taking this view in favour of the respondent.
First, the learned Single Judge held that though according to the provisions for marking contained ' in clause (3) of rule 155A the appellant had admittedly more marks than the respondent, that was not ' a determinative factor because rule155A was itself subject to the overriding consideration of public interest emphasised in section 47(1) of the Act and public interest required that in the socialist pattern of society which we had adopted monopoly should as far as possible be avoided and a smaller operator with one stage carriage permit should be preferred to a bigger operator having three or more stage carriage permits.
This important consi deration was ignored by the State Transport Appellate Tribunal in 94 preferring the appellant to the respondent.
Secondly, the State Transport Appellate Tribunal had over looked the, fact that the appellant was a recent grantee of a stage carriage permit though it was a relevant circumstance which weighed against the appellant in the process of comparison with the respondent.
Thirdly, a proper standard of comparison was not applied in considering the rival claims of the appellant and the respondent.
Though the history sheet of the res pondent in regard to his performance, as a lorry operator was scanned by the State Transport Appellate Tribunal over a period of ten years, no such scrutiny was made in the case of the appellant of the history sheet relating to his stage carriage operation for the past ten years and this vitiated the order of the State Transport Appellate Tribunal.
Fourthly, the respondent was entitled to two marks on account of workshop under clause (3) (E) of rule 155A and these had been wrongly denied by the State Transport Appellate Tribunal, and lastly, the appellant was not entitled to two marks on account of sector experience under clause (3) (C) of rule 155A since the sector experience claimed by him was on the basis of operation on temporary permits.
The learned Single Judge accordingly allowed the revision application and set aside the order of the State Transport Appellate Tribunal granting permit to the appellant.
The result was that the order of the Regional Transport Authority granting permit to the respondent was restored.
The appellant was obviously aggrieved by this order made by the learned Single Judge and he accordingly preferred the present appeal with special leave obtained from this Court.
We will first dispose of the last two reasons which prevailed with the learned Single Judge in interfering with the order of the State Transport Appellate Tribunal.
So far as the claim of the respondent 'for two marks in respect of workshop under clause (3) (E) of rule 155A is concerned, we agree with the learned Single Judge that the 'State Transport Appellate Tribunal was in error in refusing that claim. 'The Regional Transport Officer under instructions from the Regional Transport Authority inspected the workshop of the respondent and found that it was in a pucca fire proof building and the respondent was accordingly entitled to two marks under clause (3) (E) of rule 155A.
But that would not make any difference because even with these two marks, the total number of marks of the respondent would not exceed 7.40 as against 9 marks of the appellant.
Moreover, ,these 9 marks, do not include two marks on account of sector experience under clause (3) (C) of rule 155A.
The State Transport Appellate Tribunal gave two marks to the appellant on account of sector experience but the learned Single Judge took a different view.
We do not think the learned Judge was right in refusing two marks to the appellant on this count.
Clause (3) (C) of rule 155A provides that two marks shall be awarded to the applicant who on the date of consideration of the application by the Regional Transport Authority has been plying a stage carriage on the entire route:.
It does not contain any restriction that in order to be entitled to these two marks the applicant should have been plying on the route; on the basis of a permanent permit.
It is immaterial whether the applicant has been plying ton the route on a temporary permit or a permanent permit.
What is 95 material is that the applicant should have experience of plying on the route and this experience would be there whether plying is done on a temporary permit or on a permanent permit.
The appellant was, therefore, entitled to two marks on account of sector experience under clause (3)(C) of rule 155A and that would raise his total number of marks to 11.
The position, therefore, was that the appellant was entitled to 11 marks as against 7.40 of the respondent.
But that by itself would not be determinative of the controversy.
The paramount consideration to be taken into account in determining as to which of the applicants should be selected for grant of permit always is public interest.
Section 47(1) provides in so many words that the Regional Transport Authority shall, in considering an application for a stage carriage permit have regard inter alia, to "the interest of the public generally", and this is a consideration which must necessarily outweigh all others.
It is ultimately on the touchstone of public interest that selection of an applicant for grant of permit must be justified.
Clause (3) of rule 155A undoubtedly provides for giving of marks to the rival applicants but the number of marks obtained by each applicant can only provide a guiding principle for the grant of permit.
It can never override the consideration of public interest which must dominate the selection in all cases.
In fact clause (4) of rule 155A concedes that after the applicants are ranked according to the total marks obtained by them the applications shall be disposed of in accordance with the provisions of section 47(1).
The fact that the appellant had 11 marks as against 7.40 of the respondent would certainly be a factor in favour of the appellant, but notwithstanding his higher marks, if public interest so requires, he may have to yield place to the respondent in the matter of selection for grant or permit.
Now, two circumstances were relied upon by the learned Single Judge for outweighing the higher marks obtained by the appellant and justifying the grant of permit to the respondent in public interest.
The first was that the respondent was a single bus operator while the appellant was a multi bus operator having four stage carriage permits and the second was that one of the stage carriage permits was recently granted to the respondent and hence he was in terms of the 'motor vehicle jurisprudence ' a "recent grantee".
Both these circumstances by themselves are not sufficient to constitute such requirement of public interest as to outweigh the higher marks obtained by the appellant.
This Court had occasion to consider in Ajantha Transports (P) Ltd., Coimbatore vs M/s. T. V. K. Transport, Pulampatti, Coimbatore Dist.(1) the relevance of possession of more than one permit as also recent grant in selecting an applicant for grant of permit and Beg, J., speaking on behalf of the Court, stated the law on the subject in the following words : "It should be clear when the main object, to which other considerations must yield in cases of conflict, of the permit issuing powers under sec.
47 of the Act is the service of (1) ; 96 interest of the public generally, that any particular fact or circumstances, such as a previous recent grant in favour of an applicant or the holding of other permits by an operator, cannot by itself, indicate how it is related to this object.
Unless, there are other facts and circumstance which link it with this object the nexus will not be established.
For instance, an applicant may be a recent grantee whose capacity to operate a transport service efficiently remains to be tested so that a fresh grant to him may be premature.
In such a case, another applicant of tested efficiency may be preferred.
On the other hand, a fresh grantee may have within a short period, disclosed such superiority or efficiency or offer such amenities to passengers that a recent grant in his favour may be no obstacle in his way at all.
Again, the fact that an applicant is operating other motor vehicles on other permits may, in one case, indicate that he had excee ded the optimum, or, has a position comparable to a monopolist, but, in another case, it may enable, the applicant to achieve better efficiency by moving towards the optimum which seems to be described as a "viable unit" in the rules framed in Madras in 1968.
Thus, it will be seen that, by itself, a recent grant or the possession of other permits is neither a qualification nor a disqualification divorced from other circumstances which could indicate low such a fact is related to the interests of the public generally.
It is only if there are other facts establishing the correlationship and indicate its advantages or disadvantages to the public generally that it will become a relevant circumstance.
But, in cases where everything else is absolutely equal as between two applicants, which will rarely be the case, it could be said that an application of principle of equality of oppor tunity, which could be covered by Article 14, may enable a person who is not a fresh grantee to obtain a preference.
" It would, therefore, be seen that the mere fact that an applicant has more than one permit or he is a recent grantee cannot by itself be regarded as a factor against him in the comparative scale.
It would all depend on the facts and circumstances of each case.
As 'pointed out by Beg, J., in the case just cited : "an applicant may be a recent grantee whose capacity to operate a transport service efficiently remains to be tested so that a fresh grant to him may be premature on the other hand.
a fresh grantee may have within a short period disclosed such superiority or efficiency or offer such amenities to passengers that a recent grant in his favour may be no obstacle in his way at all a recent grant could not, considered by itself and singly, be, converted into a demerit".
Similarly, possession of more than one permit also cannot by itself, divorced from other circumstances, be regarded as a disqualification.
It may in a given case show that the applicant has already reached the viable unit of five stage carriages contemplated under 'clause (3) (F) of rule 155A or that the effect of granting permit to him would be to make him a monopolist on the route a result disfavoured by the decision of this Court in Sri Rama 97 Vilas Service (P) Ltd. vs C. Chandrasekharan & Ors.(1) as being inconsistent with the interest of the general public or, on the other hand, it may be a circumstance in his favour enabling him to achieve greater efficiency by moving towards the optimum of viable unit.
The learned Single Judge, was, therefore, in error in rejecting the claim of the appellant to the grant of permit by mechanically relying on the circumstance that the appellant was a multi bus operator having four stage carriage permits, including a recent grant without considering how in the light of the other facts and circumstances, it was correlated to the question of public interest.
There was nothing to show that this circumstance would have, any prejudicial or adverse impact on public interest, if permit were granted to the appellant notwithstanding it.
The four stage carriage, permits which the appellant had were not on the same route and there was no question of.
any monopoly being created in his favour if the permit applied for by him were granted.
In fact, possession of more than on& permit by the appellant was a circumstance in his favour, because according to clause (3)(F) of rule 155A an applicant operating in more than four stage carriages would be entitled to one mark for each stage carriage in order to have a viable unit of five carriage.
The principle laid down in clause (3) (F) of rule 155A proceeds on the hypothesis that an applicant would be able to achieve greater efficiency if he has a larger number of stage carriages, but it sets a limit of five stage carriages as it was thought that that would be sufficient to constitute a viable unit which could legitimately be permitted to an applicant, consistently with the requirement of a socialistic pattern of society that there should be distributive or social justice and no undue economic disparities.
So long, therefore, as an applicant has not more than four stage carriages, it cannot by itself be regarded as a factor against him and, as pointed out by Beg, J., in the case cited above, the rule in clause (3) (F) of rule 155A providing for giving of one mark to the applicant for each stage carriage operated by him should be taken into account unless there is good enough reason to depart from it.
"Every additional stage carriage upto four would give an applicant an additional mark so as to help him to make up a viable unit of five".
The State Transport Appellate Tribunal was, therefore, right, in the circumstances of the case, in not regarding possession of four stage carriage permits by the appellant, including a recent grant, as a circumstance against him, but treating it as a circumstance in his favour by adding four marks under clause (3) (F) of rule 155A, and the learned Single Judge acted erroneously in upsetting this view taken by the State Transport Appellate Tribunal.
The learned Single Judge was also in error in holding, thatthe same standard was not applied by the State Transport AppellateTribunal in comparing the history sheets of the appellant and therespondent.
The history sheet of the appellant related only to hisperformance as stage carriage operator and the entire history sheetwas before the State Transport Appellate Tribunal and it showedthat the appellant had a clean record.
On the other hand, the respondent (1) ; L379 Sup.
CI/75 98 had two history sheets, one relating to his performance as stage carriage operator and the other relating to his performance as lorry operator and both the history sheets showed adverse entries.
It can hardly be disputed that this comparison with reference to the past performance of the appellant and the respondent was relevant to the question as to who between the two should be selected for grant of permit.
It may be that the history sheet of the respondent as lorry operator related to a period of ten years while that of the appellant as a stage carriage, perator covered a shorter period, but that cannot be helped.
The comparison has to be made on the basis of the available material and if the history sheet of the respondent, which may be for a longer period, shows that the past performance of the respondent 'was not satisfactory while the history sheet of the appellant, though for a shorter period, shows that he has had a clean record of performance, that would certainly be a relevant circumstance to lie taken into ;account.
The State Transport Appellate Tribunal was plainly right in relying on this circumstance, amongst others, for the purpose of preferring the appellant to the respondent.
Before we part with this case we may point out that the learned Single, Judge overstepped the limits of his revisional jurisdiction and treated the revision application before him as if it wore an appeal.
That was clearly impermissible as the revisional jurisdiction of the High Court under section 64B is as severely restricted as that under section 115 of the Code of Civil Procedure and it is only where there is a jurisdictional error or illegality or material irregularity in the exercise of jurisdiction that the High Court can interfere under section 64B ,with an order made by the State Transport Appellate Tribunal.
We must, therefore, set aside the judgment of the learned Single Judge and restore the order made by the State Transport Appellate Tribunal granting permit to the appellant.
The appeal is accordingly allowed.
The respondent will pay the costs to the appellant.
P.B.R. Appeal allowed.
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The Regional Transport Authority granted a stage carriage permit to the respondent as against the appellant on the ground that the former was a single bus operator while the appellant was an operator having four stage carriage permits, including a stage carriage permit which was recently granted to him.
The State Transport Appellate Tribunal, on the other hand, took the view that the respondent did not have a pucca fire proof building for workshop,.
that it was immaterial whether the sector experience of the appellant was derived under a temporary permit or a permanent permit; that the appellant was entitled to two marks even though the experience gained by him was by operation of temporary permits, that the history sheet of the appellant was clean without any adverse remark and that since a portion of the route fell within the interior roads it was desirable in public interest to prefer "an experienced operator instead of single bus operator".
The Appellate Tribunal,.
therefore, found that the appellant had superior qualifications and was entitled to be preferred to others.
On a revision application under section 64B of the a single Judge of the High Court took the view that public interest required that in the socialist pattern of society monopoly should as far as possible be avoided and a smaller operator with one stage carriage permit should be preferred to a bigger operator having three or more stage carriage permits, that the appellant was a recent grantee of stage carriage permit; that a proper standard of comparison of the history sheets of the appellant and the respondent had not been made; and that the respondent was entitled to two marks on account of sector experience.
The order of the Regional Transport Authority granting permit to the respondent was, therefore, restored.
Allowing the appeal, HELD : (1) The High Court was not right in refusing two marks to the appellant.
Clause 3(c) of rule 155A provides that two marks shall be awarded to the applicant, who.
on the date of the consideration of the application by the Regional Transport Authority, has been plying a stage carriage permit on the entire route.
It does not contain any restriction that in order to be entitled ' to these two marks the applicant should have been plying on the route on the basis of a permanent permit.
What is material is that the applicant should have experience of plying on the route and this experience would be there whether plying is done on a temporary permit or a permanent permit.
[94G H] (2) The paramount consideration to be taken into account in determining as to which of the applicants should be selected for grant of permit always is public interest.
[95 B C] (3) The mere fact that an applicant has more than one permit or he is a recent grantee cannot by itself be regarded as a factor against him in the comparative scale.
Possession of more than one permit also cannot, by itself, divorced from other circumstances, be regarded as a disqualification.
[96 F; H] Ajantha Transports (P) Ltd. vs T. Y. K. Transports, ; , followed.
The High Court was in error in rejecting the claim of the appellant to the grant of permit by mechanically relying on the circumstance that the 92 appellant was a multi bus operator having four Stage carriage permits including a recent grant without considering how in the light of the other facts and circumstances, it was correlated to the question of public interest. ' The four stage carriage permits which the appellant had were not on the same route and there was no question of any monopoly being created in his favour if the permit applied for by him was granted.
The possession of more than one permit by the appellant was a circumstance in his.
favour because according to cl.
3(F) of rule 155A an applicant operating more than four stage carriages would be entitled to one mark.
[97B D] (4) The High Court was in error in holding that the same standard was not applied by the State Transport Appellate Tribunal in comparing the history sheets of the appellant and the respondents.
[97H] (5) In the instant case the, High Court overstepped the limits of the revisional jurisdiction and treated the revision application as if it were an appeal.
The jurisdiction of the High Court under section 64B is as severely restricted as that under section 115 of the Code of Civil Procedure and it is only where there is a jurisdictional error or illegality or material irregularity in the exercise of jurisdiction that the High Court can interfere under section 64B with an order made by the State Transport Appellate Tribunal.
[98D E]
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3233.txt
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tion (Civil) No. 626 of 1988 etc.
(Under Article 32 of the Constitution of India) G. Ramaswamy, Additional Solicitor General, section Murlidha ran, A.D.N. Rao, A. Subba Rao and Krishnan Kumar for the Petitioners.
Kuldip Singh, Additional Solicitor General, K.K. Venugo pal, Kapil Sibbal, Lal Chand, C.S. Vaidyanathan, H.S. Phool ka, N.S. Das, Rajiv Khosla, P. Tripathi, Kailash Vasdev, Miss A. Subhashini, Harish Salve and Ravinder Sethi, for the Respondents.
The Judgment of the Court was delivered by OJHA, J.
In the writ petition and the special leave petitions filed by Smt.
Kiran Bedi, the orders dated 17th, 20th and 23rd May 1988 passed by the Committee of Inquiry consisting of Mr. Justice N.N. Goswami and Mr. Justice D.P. Wadhwa of the High Court of Delhi (hereinafter referred to as the Committee) are sought to be quashed whereas in the writ petition and the S.L.P. filed by Jinder Singh, the order dated 26th May, 1988 passed by the said Committee is sought to be quashed.
In order to appreciate the respective submissions made by learned counsel for the parties, it would be useful to give in brief the circumstances leading to the appointment of the Committee and also to quote the terms of reference.
What ultimately assumed the shape of confrontation between lawyers and police sparked off from an alleged unfortunate incident on 15th January, 1988 of a lawyer being apprehended by the students of St. Stephens College, University of Delhi and being handed over to the police on the accusation of committing an offence within the campus of the said College.
According to the statement of case filed before the Commit tee on behalf of the Delhi 28 High Court Bar Association, the said lawyer was brought by the police in handcuffs for production before a Metropolitan Magistrate on 16th January, 1988.
The lawyers present pro tested against the handcuffing but their protest was ignored by the police officials.
The Metropolitan Magistrate ulti mately discharged the lawyer on the same date and also directed the Commissioner of Police to take action against the guilty police officials.
In support of their demand for action against the police officials, the lawyers went on strike from 18th January 1988.
In the said statement of case it was further stated that on 20th January, 1988, Smt.
Kiran Bedi, Deputy Commissioner of Police, North District, Delhi, made a statement in a Press conference justifying the action of police and criticising the order of the Magistrate in discharging a "thief" and that in order to express their deep concern and anguish a group of lawyers went to meet Smt.
Bedi on 21st January, 1988 in her office which at that time was situated in the Tis Hazari Court Complex itself.
Bedi, however, refused to come out and meet the lawyers whereupon they preferred to wait upon her till such time as she agreed to meet them.
They assert that while they had waited for 15 20 minutes the police took recourse to lathi charge on the lawyers at the orders of Smt.
In the said statement of case it has further been asserted that while the indefinite strike and the agitation of the lawyers demanding a judicial inquiry into the incident of lathi charge and suspension of Smt.
Kiran Bedi was continuing, a mob which eventually swelled to about 3000 persons came to Tis Hazari Court Complex on 17th February 1988 raising slogans in support of Smt.
Bedi and against the striking lawyers.
The mob used brickbats and stones causing injury to some lawyers and damage to property.
According to them this mob attack was engineered by Smt.
Kiran Bedi.
A statement of case was also filed by Ved Prakash Marwah, the then Commis sioner of Police, attaching thereto affidavits of 25 police officers including an affidavit of Smt.
Kiran Bedi.
There is a denial on their part of the assertions and insinuations made against them by the Delhi Bar Association referred to above.
With regard to the incident on 21st January 1988 the case of Smt.
Kiran Bedi as is apparent from her affidavit filed along with the aforesaid statement of case is that she along with some other officers reached her Tis Hazari Office at about 11.15 A.M. and while a meeting was in progress in connection with the arrangements for the Republic Day some time around 22.00 noon, slogans were heard "being raised outside by an apparently large crowd approaching in our direction.
Before we realised what was happening.
all of sudden a group of lawyers stormed into my office pushing aside the female constable on duty at my door.
They rushed towards me making violent gestures and uttering obsceneties at me.
They made physical gesture 29 and threats to the effect . .
The Police Officers who were sitting around my table jumped to their feet.
They held back one of hysterical persons who had actually advanced in my direction and formed a ring around the lawyers and man aged to move them out of my office while bolting me inside along with my female constable and a female visitor who had come to see me for her own work".
We have thought it proper not to quote the actual words of threat stated in the said affidavit.
According to Smt.
Kiran Bedi the situation there after outside her office was handled by the other officers present while she remained inside the office.
We are not concerned with the correctness or otherwise of either of the two versions stated above and as already pointed out we have referred to them only to indicate the background in which the Committee was constituted.
Having referred in brief to the circumstances which led to the appointment of the Committee we now quote the order of reference: "F.No.
10/9/88 NP II DELHI ADMINISTRATION: DELHI (HOME POLICE II DELHI) Dated the 23rd Feb. 1988.
ORDER Whereas the Administrator of the Union Territory.
of Delhi is of the opinion that a judicial inquiry is neces sary into matters of public importance mentioned below; Now therefore, the Administrator is pleased to constitute a Committee, in consultation with the Chief Justice of Delhi High Court consisting of Mr. Justice N.N. Goswami and Mr. Justice D.P. Wadhwa Hon 'ble Judges of the High Court to inquire into and record their findings on the following: (i) The incident of the 15th January, 1988 in St. Stephen 's College, University of Delhi regarding apprehension of a lawyer by the police.
(ii) The incident and reported lathi charge on the 21st January, 1988 outside the office of the DCP/North, Delhi.
30 (iii) Circumstances leading to presence of a mob in Tis Hazari premises on 17th Febru ary, 1988 and the resultant violence.
(iv) Any other incidental development connected with the above.
The Committee is requested to ascertain the facts leading to the aforesaid incidents with a view to identifying those responsible for the incidents so that stringent action could be taken against all those responsible.
The Committee may, if it deems appro priate, submit an interim report within seven days of its first sitting suggesting action if any, against police officials or any other involved persons pending submission of the final report within a period of 3 months.
" Subsequently in pursuance of a direction issued by this Court the aforesaid notification was modified by the Admin istrator vide Notification dated 15th March, 1988 by direct ing that the provisions of Sections 4, 5, 5 A, 6, 8, 8 A, 8 B. 8 C, 9, 10 and 10 A of the and the rules made under Section 12 thereof shall apply to the said Committee.
The Committee submitted an interim report on 9th April, 1988 and during the course of proceedings before it thereaf ter passed the aforesaid orders which are the subject matter of these writ petitions and special leave petitions.
After having heard learned counsel for the parties at length we passed an order on 18th August, 1988 which we consider it appropriate to reproduce here with a view to avoiding the repetition of the reasons already given therein in support of the said order: "It is unfortunate that this case has arisen between lawyers and police who are both guardians of law and who constitute two important segments of society on whom the stability of the country depends.
It is hoped that cordiality between the two sections will be restored soon.
In order to avoid any further delay in the proceed ings before the Committee consisting of Goswamy and Wadhwa, JJ, 31 constituted by Order dated 23rd February, 1988 to enquire into certain incidents which took place on the 15th January, 1988.
2 1st January, 1988 and 17th February, 1988, we pass the following order now but we shall give detailed reasons in support of this order in due course.
The order is as under: 1.
This order is passed on the basis of the material available on record, the various steps already taken before the Committee and other peculiar features to the case.
The Delhi Administration has to examine first all its witnesses as required by Rule 5(5)(a) of the Commissions of Inquiry (Central) Rules, 1972 (hereinafter referred to as the Rules) framed under the (hereinafter referred to as the Act).
Even those witnesses who may have filed affidavits already may first be examined in chief before they are cross examined, since it is stated that when the affidavits were filed the deponents did not know what the other parties who have also filed affidavits had stated in their affidavits.
The question whether a party has the right of crossexamination or not shall be decided by the Committee in accordance with Section 8 C of the Act.
In the facts and circumstances of the case to which reference will be made hereafter this direction issued to the Delhi Administration to examine its witnesses first as provided by rule 5(5)(a) of the Rules referred to above does not apply to those witnesses falling under sec tion 8 B of the Act, who have to be examined at the end of the inquiry as opined by the Committee itself.
We have gone through the several affidavits and other material placed before the Committee and also the Interim Report dated April 9, 1988 passed by the Committee.
In para 13 of the Interim Report the Committee has observed thus: During the course of the inquiry, we have to examine the conduct of various police officers and others and particu larly, as the record shows, of the DCP (North), Addl.
DCP (North), SHO, PS Samepur (Badli) and SI Incharge Police Post, Tis Hazari and SI.
Samepur (Badli).
In para 14 of the Interim Report it is observed.
32 Lawyers have seriously urged that this Committee should send a report recommending suspension of the DCP (North) Ms Kiran Bedi.
Ultimately the Committee recommended the transfer of the petitioners in these cases, namely, Ms Kiran Bedi, DCP (North) and Jinder Singh SI, Incharge Police Post, Tis Hazari.
Section 8 B of the Act reads: "8 B. If, at any stage of the inquiry, the Commission, (a) considers it necessary to inquire into the conduct of any person; or (b) is of opinion that the reputation of any person is likely to be prejudicially affected by the inquiry, the Commission shall give to that person a reasonable opportunity of being heard in the inquiry and to produce evidence in his de fence: Provided that nothing in this section shall apply where the credit of a witness is being impeached." In its Interim Report the Committee has unequivocally observed that it had to examine the conduct of various police officers, and in particular among others Ms Kiran Bedi, DCP (North) and Jinder Singh, SI, Incharge Police Post, Tis Hazari.
Having given our anxious consideration to all the as pects of the case we hold that the petitioners Ms Kiran Bedi and Jinder Singh are persons who fall under Section 8 B of the Act and have to be dealt with accordingly.
According to the Committee 's own opinion formed in the light of the facts and circumstances of the case, all these persons to whom notices under Section 8 B of the Act are issued have to be examined at the end of the inquiry.
This is obvious from the order of the Committee passed on June 29, 1988 after it was asked by this Court by its order dated June 2, 1988 to reconsider the whole question relating to the order in which the witnesses had to be examined in the case.
In its order dated June 29, 1988 the Committee has observed thus: 33 "Without going into the controversy if Rule 5(5) is an independent rule or is governed by Sections 8 B and 8 C of the Act, we would direct that in the circumstances of the case three persons namely, the Additional Commis sioner of Police (Special Branch), DCP (Traf fic) and Mr. Gopal Das Kalra, SI to whom notices under Section 8 B of the Act have been issued be examined at the end of the inquiry.
" If three persons referred to above to whom notices under Section 8 B have been issued are to be examined even accord ing to the Committee at the end of the inquiry there is no justifiable reason to deny the same treatment to the peti tioners Ms Kiran Bedi and Jinder Singh who are in the same position as those three persons.
The action of the Committee in asking them to be cross examined at the beginning of the inquiry appears to us to be discriminatory.
Mere non issue of notices to them under Section 8 B ought not to make any difference if they otherwise satisfy the conditions men tioned in Section 8 B.
The issue of such a notice is not contemplated under Section 8 B of the Act.
It is enough if at any stage the Commission considers it necessary to in quire into the conduct of any person.
Such person would thereafter be governed by Section 8 B of the Act.
The Com mittee should have considered whether the petitioners were entitled to be treated as persons governed by Section 8 B of the Act before asking them to get into the witness box for being cross examined.
If the Committee had found that the petitioners were covered under Section 8 B, then perhaps they would not have been asked to get into the witness box for being cross examined till the end of the inquiry.
The Committee would have then asked them to give evidence along with others who were similarly placed at the end of the inquiry.
On behalf of both the petitioners it is submitted that they did not either wish to delay the proceedings or to show disrespect to the Committee but only wanted to protect their own interest by making the submission which they made before the Committee as per legal advice given to them.
This is not a case where the circumstances in which the several incidents that had taken place were not known to anybody else.
The affidavits and other material before the Committee show that there were a large number of persons who were eye witnesses to the incidents and who could give evidence before the Committee.
Taking into consideration all the aspects of the case we feel that 34 the Committee should not have in the circumstances of the case directed the filing of a complaint against either of the petitioners for an offence punishable under Section 178 IPC.
In view of the foregoing we feel that the orders of the Committee directing the filing of the complaints and the criminal proceedings initiated against the petitioners before the Metropolitan Magistrate pursuant to the com plaints filed on behalf of the Committee should be quashed and we accordingly quash the said orders of the Committee and also the criminal proceedings.
A judgment containing the reasons for this order will fol low.
Before concluding this order we record the statement made by Shri Kuldip Singh, learned Additional Solicitor General appearing for the Delhi Administration that the Delhi Administration and its police officers will fully cooperate with the Committee so that the Committee may complete its work as early as possible.
We also record the statement made by Shri G. Ramaswamy, learned Additional Solicitor General that he and his clients, the petitioners in this case hold the Committee in great respect and that they never intended to show any kind of discourtesy to the Committee.
He also expresses apology for using one or two strong words against the Committee in the course of the arguments in this Court.
We now proceed to give our detailed reasons in support of the aforesaid order: We find it necessary to refer to some of the regulations framed by the Committee to regulate its procedure.
We also find it necessary to indicate the nature of the orders which have been challenged in these writ petitions and special leave petitions.
It also seems appropriate at this very place to refer to the order of this Court passed in these proceedings on 2nd June 1988 and the order of the Committee passed on 29th June, 1988 in pursuance of the order of this Court dated 2nd June 1988.
As is apparent from a copy of the regulations filed in these proceedings, the Committee framed "Regulations of procedure under Section 8 of the Commissions of Enquiry Act, 1952 to be followed by the Committee of Inquiry".
Regulations 8, 11, 14, 18, and 21 which in our opinion appear to be relevant for purposes of these cases are reproduced as hereunder: "8.
To avoid its proceedings being unduly prolonged and 35 protracted, the Committee may divide and group together the various persons, Associations and departments before it in such manner as it thinks just and proper for the purposes of producing oral evidence, cross examination of witnesses examined before it, and for address ing arguments.
Provided, however, any person who is likely to be prejudicially affected as provid ed in Sec.
8 B of the Act shall be entitled to appear personally or through an authorised agent, and to produce evidence in his or her defence.
The witness whose evidence is recorded by the Committee orally on oath will be allowed to be cross examined by the concerned parties in accordance with the provisions of the Act.
The affidavit or statement of case filed by any deponent can be treated as his examina tion in chief.
Technical rules of the Evidence Act, as such, shall not govern the recording and admissibility of evidence before the Commit tee.
However, the principles of natural jus tice and fair play shall be followed.
The Committee reserves the right to alter, modify, delete or add to any of these regula tions of procedure at any time during the inquiry, as and when it considers necessary.
" In pursuance of a notice issued by the Committee under Rule 5(2)(a) of the Rules, statements of case inter alia on behalf of Delhi High Court Bar Association and the Commis sioner of Police which were accompanied by affidavits in support of the facts set out in the respective statements of case were filed before the Committee.
On 8th April, 1988, the parties and their counsel stated that they would need two weeks ' time to file counter affidavit and list of wit nesses to be examined by them.
The time prayed for was granted.
The proceedings on that date were adjourned to 22nd April, 1988.
On that date an application was made on behalf of the Commissioner of Police and other police officers for extension of time to file counter affidavit which was ex tended till 13th May, 1988.
The following order, how 36 ever, was simultaneously passed on that date. "Mr. Vijay Shankar Das has been told to keep.
his witnesses ready for being examined from 16th May, 1988.
The Committee proposes to hold the sitting from day today w.e.f.
16th May, 1988.
For further proceedings and recording of evidence to come up on 16th May, 1988.
" Here it may be pointed out that Mr. Vijay Shankar Das was the counsel appearing for the Delhi Police and the effect of the order aforesaid was that the Delhi Police was required to keep its witnesses ready for being examined from 16th May, 1988.
On 16th May time till 5.00 P.M. to all concerned to file their counter affidavits along with the list of witnesses was granted and further proceedings were adjourned for the next day.
On 17th May, 1988, two applications were made on behalf of the Commis sioner of Police; one for postponement of heating and the other for calling upon the Bar Association to start their evidence and to call upon the Commissioner of Police to adduce his evidence thereafter.
The counter affidavit and the list of witnesses on behalf of the Commissioner of Police had not been filed even till 17th May, 1988.
The Committee dismissed both the applications referred to above and passed an order saying that since the Commissioner of Police has failed to file the counter affidavit or the list of witnesses, Mr. Jinder Singh, S.I., and Mrs. Kiran Bedi, the then D.C.P. (North) be present in Court on 19.5.88 at 10.30 A.M. for being cross examined.
On 19th May, 1988, counsel for Delhi Police was directed to produce Mr. Jinder Singh, S.I., in the witness box for being cross examined.
On being informed by counsel for Delhi Police that Mr. Jinder Singh was not available, bailable warrant was ordered by the Committee to be issued for production of Mr. Jinder Singh at 10.30 A.M. on 23rd May, 1988.
Thereafter Smt.
Kiran Bedi who was present in Court was directed to come in the witness box for cross examination.
The relevant portion of the order passed thereafter on 19th May, 1988 reads as hereunder: "Mrs. Bedi has been asked to take oath, but she has refused to do so.
At this stage, we called upon Mr. G. Ramaswamy, Counsel appear ing for Delhi Police as also Mr. Vijay Shanker Dass, Counsel appearing for Mrs. Kiran Bedi to justify the action of the witness in not taking the .oath.
We call upon the counsel to address because according to us prima facie offence is made out under Section 178 I.P.C. Mr. Ramaswamy relies on the judgment of this Court in Smt.
Indira Gandhi and Anr.
vs Mr. J.C. Shah, Commission of Inquiry, ILR 1980(1) Delhi 5522.
We have been 37 taken through certain passages of judgment and we find that the facts of case are entirely different inasmuch as no affidavit had been filed by Smt.
Indira Gandhi in that case and she had been summoned merely under Section 8 B of the Commission of Enquiry Act.
In the present case, an affidavit of Mrs. Kiran Bedi is on record.
She had to be given further opportunity to make any further statement and her affidavit already filed has to be justified by cross examination.
Let notice issue to Mrs. Kiran Bedi to show cause why she should not be prosecuted under section 178 I.P.C.
Since she is present, she is accepting this notice.
The notice is returnable for tomorrow, the 20th May, 1988.
Ordinarily directions have to be issued to her to be present in court, but Mr. Shankar Dass undertakes that she will be present in Court tomorrow and as such no further directions are necessary.
" On 20th May, 1988 as the order sheet of that date indi cates counter affidavit along with list of witnesses was filed on behalf of the Commissioner of Police and both were taken on record.
With regard to the notice issued to Smt.
Kiran Bedi on 19th May, 1988, the following order was passed: "By our order dated 19.5.88, we had issued a notice to Mrs. Bedi to show cause as to why she should not be prosecuted under Section 178 of the I.P.C. for refusing to take oath in the witness box.
Notice was made returnable for today.
Mr. Shankar Dass who appears for Mrs. Kiran Bedi has refused to show any cause on the ground that notice was too short.
We have heard the arguments of Mr. K.K. Venugopal on behalf of the Bar Associa tion.
For orders to come up on 23rd May, 1988.
Mrs. Kiran Bedi who is present today is directed to be present in the Court on 23.5.88 at 10.30 A.M." 38 On 23rd May, 1988, the Committee held that refusal of Smt.
Kiran Bedi in not testifying on oath before the Commit tee was wholly unjustified and proceeded to file a complaint for an offence under section 178 of the Indian Penal Code.
As regards Mr. Jinder Singh, it seems that he could not be required to appear in the witness box on 23rd, 24th or 25th May, 1988.
On 26th May, 1988 the following order was passed: "Mr. Jinder Singh was directed to come into the witness box.
When asked by us to bind himself on oath or affirmation to state the truth, the witness refused to do so.
Earlier we had authorised the court master to administer him the oath.
But, as we have already said, the witness refused to take the oath.
The witness states that he is willing to make a statement without oath and would be prepared to answer all the questions in cross examination.
When asked if he is aware of the fact that his action in not taking the oath is punishable under Section 178 of the Indian Penal Code, he says he has nothing further to state.
On consideration the Committee is of the opinion that since this witness has already filed an affidavit which is a statement on oath, it is not possible to record any further statement or crossex amine without oath.
Mr. Jinder Singh, however, states that he is not prepared to take the oath because he is in the nature of an accused and he cannot be asked to start the evidence and would be prepared to come in the witness box after the evidence of other party is recorded.
Mr. Jinder Singh at present S.I. at Police Post, Railway Station, Subzi Mandi, Delhi, who was S.I. in charge Tis Hazari Courts, Delhi during January and February, 1988, was summoned as a witness and was asked to step into the witness box.
His statement was to be recorded on oath for the purpose of cross examination.
He, however, refused to bind himself by an oath or affirmation to state the truth when required so to bind himself by the Committee.
The Committee con siders that Mr. Jinder Singh who was at the relevant time S.I. in charge at Tis Hazari Courts, Delhi, where the incidents took place is a very material witness and his case is identical to the case of Ms. Kiran Bedi.
For the reasons recorded in our order dated 23rd May, 1988 regarding Ms. Kiran Bedi, we proceed to file a complaint for an offence under section 178 of the Indian Penal Code." 39 In pursuance of the orders dated 23rd May and 26th May, 1988 complaints were filed by the Committee in the Court of the Chief Metropolitan Magistrate, Delhi, for an offence under section 178 of the Indian Penal Code and as is appar ent from a copy of one of the complaints produced before us these complaints have been filed under sub section 4 of section 5 of the read with section 346 of the Code of Criminal Procedure, 1973.
As already indicated, it is the aforesaid orders dated 17th, 20th, 23rd and 26th May, 1988 which have been challenged in these writ petitions and special leave petitions.
These writ petitions and special leave petitions first came up for consideration ' before K.N. Singh, J. who was functioning as the Vacation Judge.
After hearing the parties he passed an order on 2nd June, 1988.
The relevant portion of the order which was passed by this Court on 2nd June, 1988 in these proceedings, reads as hereunder: "Learned counsel for the parties agree that the respondent Committee should be directed to re examine the order and sequence in which parties witnesses as well as the witnesses summoned by the Committee should be examined with reference to the incidents mentioned in the Notification dated 23rd February, 1988.
The Committee is accordingly directed to consider afresh the order in which the parties witnesses as well as witnesses summoned by the Committee on its own are to be examined with reference to the incidents mentioned in the Notification appointing the Committee after hearing counsel for the parties.
The Committee is further directed to consider the question as to the stage when main witnesses on behalf of the respective parties should be examined.
The Committee will pass a reasoned order after hearing the parties.
Parties agree that these questions should be considered by the Commit tee on 20th June, 1988 or any subsequent date subject to its convenience." In pursuance of the aforesaid order, the Committee after hearing learned counsel for the parties passed an order on 29th June, 1988.
It inter alia took the view that the con cept of burden of proof did not appear to be quite relevant in the proceedings before a Commission under the Act which had been given free hand to lay down its own procedure subject, of course, to the provisions of the Act and the rules made thereunder.
It also held that it would be diffi cult for the committee to lay down the manner in which the witnesses are to be 40 examined foregoing its right to examine any witness at any stage if his statement appeared to be relevant.
One of the submissions made by learned counsel for the Commissioner of Police was that since serious accusations have been made by the lawyers against Smt.
Kiran Bedi and the police with regard to the incidents dated 21st January and 17th February, 1988, the lawyers should be first called upon to lead evidence to substantiate their allegations and the police personnel may be required to lead evidence only in rebuttal.
This submission, however, did not find favour with the Committee.
It took the view that the whole stress of learned counsel seemed to be on burden of proof and was based on certain misconceptions.
Likewise, the argument that Smt.
Kiran Bedi and Jinder Singh also fell within the pur view of Section 8 B of the Act did not find favour with the Committee.
In this connection, it was pointed out that except for the three officers namely, the Addl.
Commissioner of Police (Special Branch), New Delhi, D.C.P. (Traffic) and Mr. Gopal Das Kalra, S.I., Police Station, Samepur (Badli), to no other officer notice under section 8 B of the Act had been issued and that merely because there were allegations against a particular person he could not be said to be covered under Section 8 B which required a positive order from the Committee.
It was also pointed out that a person has to be put on guard by the Committee if it considers it necessary to inquire into his conduct or the Committee is of the opinion that the reputation of that person is likely to be prejudicially affected by the inquiry.
When its attention was invited to the interim report where the Committee had mentioned that conduct of various police officers particu larly of the D.C.P. (North), Addl.
D.C.P. (North) S.H.O., P.S. Samepur (Badli) and S.I. Incharge Police Post, Tis Hazari and S.I., Samaypur (Badli), was to be examined and it was submitted that consequently they were covered under section 8 B, the Committee took the view that the submission was misplaced inasmuch as when the Committee mentioned that it was to examine the conduct of various police officers and others, it did not have in view section 8 B of the Act.
According to the Committee the plea that Section 8 B was attracted appeared to be an afterthought.
With regard to the three persons mentioned above to whom notices under section 8 B of the Act had been issued, the Committee specifically held that those persons would be examined at the end of the inquiry.
The Committee emphasised on the circumstance that in the inquiry before it there was no "Lis" as is commonly understood while trying a criminal or civil case and that principle of burden of proof had no relevance.
41 These cases were then posted before this Bench for hearing.
On the respective submissions made by learned counsel for the parties, the following points, in our opin ion, arise for consideration: (i) whether the procedure adopted by the Committee with regard to the sequence in which witnesses were to be examined was legal? (ii) Whether Smt.
Kiran Bedi and Jinder Singh, the two petitioners, fell within the category of persons contemplated by Section 8 B of the Act and were consequently entitled to the same treatment as was accorded by the Committee to the persons to whom notice had been issued by it under the said Section? (iii) whether the Committee was justified in calling upon the two petitioners to stand in the witness box for crossexamination almost at the very initial stage of the inquiry? (iv) whether the orders of the Committee directing prosecution of the two petitioners under Section 178 IPC are legal? (v) whether an appeal is maintainable against filing of complaint, the same being an administrative Act? (vi) whether a challenge to the filing of the complaint is infructuous inasmuch as the order issuing summons to the petitioners passed by the Magistrate upon the complaints filed against them had not been challenged? (vii) whether it is a fit case for inter ference by this Court at this stage with the filing of complaint, it being open to the petitioners to prove themselves to be innocent before the magistrate? With regard to point No. (i), we are of the opinion that apart from the directions contained in paragraph 4 of our order dated 18th August, 1988 regarding the stage at which persons failing under Section 8B of the Act were to be examined and also what has been observed in paragraph 2 of the said order, we do not find it expedient to lay down any particular rigid procedure to be followed by the Committee with regard to sequence in which witnesses were to be exam ined by it.
42 Consequently, we find it unnecessary to consider in any further detail, the submissions made by counsel for the parties on this point.
In so far as point No. (ii) is con cerned, it would be seen that the use of the word 'or ' between clauses (a) and (b) of Section 8B of the Act makes it clear that Section 8B would be attracted if requirement of either clause (a) or clause (b) is fulfilled.
Clause (a) of Section 8B applies when the conduct of any person is to be enquired into whereas Clause (b) applies to a case where reputation of a person is likely to be prejudicially affect ed.
As regards the enquiry about the conduct of Smt.
Kiran Bedi and Jinder Singh, even the Committee in its interim report specifically stated that the conduct of these two petitioners among others was to be examined.
Having once so stated in unequivocal terms, it was not open to the Commit tee to still take the stand that Section 8B was not attract ed in so far as they were concerned.
Recourse to procedure under Section 8 B is not confined to any particular stage and if not earlier, at any rate, as soon as the Committee made the aforesaid unequivocal declaration of its intention in its interim report, it should have issued notice under section 8 B to the two petitioners, if it was of the view as it seems to be, for which view there is apparently no justi fication, that issue of a formal notice under section 8 B was the sine qua non for attracting that Section.
At all events, the Committee could not deny the petitioners the statutory protection of Section 8 B by merely refraining from issuing a formal notice even though on its own declared intention the section was clearly attracted.
In State of Jammu and Kashmir vs Bakshi Ghulam Mohammad, [1966] Suppl.
S.C.R. page 401, while dealing with Section 10 of the Jammu and Kashmir Commission of Enquiry Act, 1962, which seems to be an amalgam of Section 8 B and 8 C of the Commissions of Enquiry Act, 1952 and repelling the argument that section 10 applied only when the conduct of a person came to be enquired into incidentally and not when the Commission had been set up to enquire directly into the conduct of a person, it was held: "If a Commission is set up to inquire directly into the conduct of a person, the Commission must find it necessary to inquire into that conduct and such a person would, therefore, be one covered by section 10.
It would be strange indeed if the Act provided for fights of a person whose conduct incidentally came to be enquired into but did not do so in the case of persons whose conduct has directly to be in quired into under the order setting up the Commission.
It would 43 be equally strange if the Act contemplated the conduct of a person being inquired into inci dentally and not directly.
What can be done indirectly should obviously have been consid ered capable of being done directly.
" In State of Karnataka vs Union of India & Another, [1978], 2 S.C.R., page 1, with reference to Section 8 B of the Act, it was held at page 108 of the report that it was undeniable that the person whose conduct was being enquired into was exposed to the fierce light of publicity.
Keeping in view the nature of the allegations made in the statements of case and the supporting affidavits filed on behalf of the various Bar Associations including the Delhi High Court Bar Association requirement of even Clause (b) of Section 8 B was filfilled inasmuch as if those alle gations were proved they were likely to prejudicially affect the reputation of the two petitioners.
Indeed, in view of the term of reference which contemplated taking of "strin gent action" against all those responsible, even the career of the petitioners as Police officers was likely to be affected in case an adverse finding was recorded against them.
In view of the aforesaid specific term of reference, the principle that the report of a Commission of Enquiry has no force proprio vigore does not on a pragmatic approach to the consequences seem to constitute sufficient safeguard so far as the petitioners are concerned.
The reason for the importance attached with regard to the matter of safeguarding the reputation of a person being prejudicially affected in Clause (b) of Section 8 B of the Act is not far to seek.
The following words of caution uttered by the Lord to Arjun in Bhagwad Gita with regard to dishonour or loss of reputation may usefully be quoted: "Akirtinchapi Bhutani Kathaishyanti te a vyayam, Sambhavitasya Chakirtir mara nadatirichyate." (234) (Men will recount thy perpetual dishonour, and to one highly es teemed, dishonour exceedeth death. ) In Blackstone 's commentary of the laws of England, Vol I, IVth Edition, it has been stated at page 101 that the right of personal security consists in a person 's legal and uninterrupted enjoyment of his life, his limbs, his body, his health and his reputation.
44 In Corpus Juris Secundum, Vol.
77 at page 268 is to be found the statement of law in the following terms: "It is stated in the definition Person, 70 C.J.S.p.
688 note 66 that legally the term "person" includes not only the physical body and members, but also every bodily sense and personal attribute, among which is the reputa tion a man has acquired.
Blackstone in his Commentaries classifies and distinguishes those fights which are annexed to the person, jura personarum, and acquired fights in exter nal objects, jura rerum; and in the former he includes personal security, which consists in a person 's legal and uninterrupted enjoyment of his life, his limbs, his body, his health, and his reputation.
And he makes the corre sponding classification of remedies.
The idea expressed is that a man 's reputation is a part of himself, as his body and limbs are, and reputation is a sort of fight to enjoy the goods opinion of others, and it is capable of growth and real existence, as an arm or leg.
Reputation is, therefore, a personal fight, and the right to reputation is put among those absolute personal fights equal in dignity and importance to security from violence.
Accord ing to Chancellor Kent, "as a part of the rights of personal security, the preservation of every person 's good name from the vile arts of detraction is justly included.
The laws of the ancients, no less than those of modern nations, made private reputation one of the objects of their protection.
The fight to the enjoyment of a good reputation is a valuable privilege, of ancient origin, and necessary to human society, as stated in Libel and Slander section 4, and this fight is within the constitutional guaranty of personal security as stated in Constitutional La section 205, and a person may not be deprived of this fight through falsehood and violence without liability for the injury as stated in Libel and Slander section 4.
Detraction from a man 's reputation is an injury to his personality, and thus an injury to reputation is a personal injury, that is, an injury to an absolute personal right.
" In D.F. Marion vs Davis, 55 American Law Reports, page 171, it was held: 45 "The right to the enjoyment of a private reputation, unassailed by malicious slander is of ancient origin, and is necessary to human society.
A good reputation is an element of personal security, and is protected by the Constitution equally with the right to the enjoyment of life, liberty, and property.
" In view of the foregoing discussion and the reasons already stated in our order dated 18th August 1988, we are of the view that the two petitioners namely, Smt.
Kiran Bedi and Jinder Singh clearly fell within the category of persons contemplated by section 8 B of the Act and were consequently entitled to the same treatment as has been accorded by the Committee to the persons to whom notice has been issued by it under the said section.
As a consequence, we are further of the opinion that our answer to point No. (iii) has to be that the Committee was not justified in calling upon the two petitioners to stand in the witness box for cross examina tion at the very initial stage of the enquiry.
In this connection, it has to be borne in mind that Section 8 B inter alia contemplates an opportunity being given to the person governed by the said section to produce evidence in his defence whereas Section 8 C inter alia gives him the right to cross examine the witnesses who depose against him.
Not only that calling upon a person governed by Section 8 B to produce evidence in his defence at the very inception of the inquiry is a contradiction in terms inasmuch as in this situation such a person would really be required to disprove statements prejudicial to him of such witnesses who are yet to be examined, it would also reduce the right of cross examination by such person to a mere formality for the obvious reason that by the time the witnesses who are to be cross examined are produced, the defence of such person which would normally constitute the basis for the line and object of crossexamination would already be known to such witnesses and they are likely to refashion their statements accordingly.
Perhaps in a case where there is no other witness to give information about the alleged incident about which the inquiry is being held and the only person or persons who would give such information is or are the person or persons who are likely to be adversely affected by the inquiry, it may be necessary to depart from the above view as a matter of necessity.
But this is not one such case.
There are admittedly any number of other persons who can give evidence about what happened on the relevant dates.
Learned counsel for the various Bar Associations who shall 46 hereinafter be referred to as learned counsel for the re spondent expressed an apprehension that in case a person governed by Section 8 B was to be examined at the end and at that stage such person even at the risk of not producing his defence, for some reason, chooses not to appear as a wit ness, the Committee would be deprived of knowing the facts in the knowledge of such person and such a course would obviously hamper the enquiry.
To us this apprehension seems to be more imaginary than real inasmuch as the power of the Commission to call upon any person to appear as a witness under Section 4 of the Act which in terms is very wide and is not circumscribed by fetters of stage, will be available to the Commission and the Commission would be entitled to call such person as a witness even at that stage.
Before parting with these points we may point out that learned counsel for the respondent cited several authorities in support of the principle that the report of a Commission of Inquiry which was only a fact finding body did not have force proprio vigore and was only recommendatory in nature.
Since the principle is well settled we have not considered it necessary to deal with those authorities.
Likewise some cases were cited with regard to claim of privilege by a witness.
Since the petitioners are not claiming any privi lege but are only claiming to be treated in a reasonable way as persons governed by Section 8 B of the Act and to be meted out the same treatment which has been given to persons falling in that category, those cases also are not necessary to be dealt with.
Now we come to the fourth point namely whether the orders of the Committee directing prosecution of the peti tioners under Section 178 I.P.C are legal.
In order to appreciate the respective submissions of the learned counsel for the parties on this point it will be useful to reproduce here Sections 178 and 179 I.P.C They read: "178.
Refusing oath or affirmation when duly required by public servant to make it.
Whoev er refuses to bind himself by an oath or affirmation to state the truth, when required so to bind himself by a public servant legally competent to require that he shall so bind himself, shall be punished with simple impris onment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.
Refusing to answer public serv ant authorised to question.
Whoever, being legally bound to state the truth 47 on any subject to any public servant, refuses to answer any question demanded of him touch ing that subject by such public servant in the exercise of the legal powers of such public servant, shall be punished with simple impris onment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.
" The Committee had in the instant case directed a com plaint to be filed against each of the petitioners for an offence punishable under Section 178 I.P.C. and subsequently filed complaints accordingly.
The charge against the peti tioners, therefore, was of refusal to bind themselves by an oath or affirmation to state the truth on being called upon to do so.
Section 179 I.P.C. in the context becomes relevant in so far as it deals with the consequences of refusal by the person concerned to answer questions demanded of him touching that subject with regard to which such person had bound himself to state the truth under Section 178.
The context in which the two petitioners were required to bind themselves by an oath or affirmation to state the truth was to face cross examination.
The petitioners were obviously placed on the horns of a dilemma.
If they refused to bind themselves by an oath or affirmation to state the truth they became liable to be punished with simple imprisonment for a term which may extend to six months or with fine which may extend to one thousand rupees or with both.
If on the other hand they had to bound themselves and thereafter refused to answer any question as contemplated by Section 179 they would have again become vulnerable to identical punishment.
The problem in the aforesaid background presents two propositions: (1) whether on the belief that they were persons covered by Section 8 B of the Act the petitioners could avoid the consequences of Sections 178 and 179 I.P.C by claiming absolute immunity from binding themselves by an oath or affirmation for answering questions put to them and (2) whether they could avoid those consequences if they had valid justification for refusing to take oath or affirmation without claiming an absolute immunity from binding them selves by an oath or affirmation.
The answer to the first proposition, in our opinion, has to be in the negative whereas of the second in the affirmative.
Our reasons for this conclusion are these: In McGrain vs Daugherty, ; one of the ques tions which arose for consideration was whether the Senate or the House of Representatives, both being on the same plane in this regard has 48 power, through its own process, to compel a private individ ual to appear before it or one of its committees and give testimony needed to enable it efficiently to exercise a legislative function belonging to it under the Constitution.
It was held that the power of inquiry with process to enforce it is an essential and appropriate auxiliary to the legislative function and that the provisions in this behalf are not of doubtful meaning, but "are intended to be effec tively exercised, and therefore to carry with them such auxiliary powers as are necessary and appropriate to that end.
While the power to exact information in aid of the legislative function was not involved in those cases, the rule of interpretation applied there is applicable here.
A legislative body cannot legislate wisely or effectively in the absence of information respecting the conditions which the legislation is intended to affect or change; and where the legislative body does not itself possess the requisite information which not infrequently is true recourse must be had to others who do possess it.
Experience has taught that mere requests for such information often are unavail ing, and also that information which is volunteered is not always accurate or complete; so some means of compulsion are essential to obtain what is needed.
All this was true before and when the Constitution was framed and adopted.
In that period the power of inquiry with enforcing process was regarded and employed as a necessary and appropriate at tribute of the power to legislate indeed, was treated as inhering in it.
Thus there is ample warrant for thinking, as we do, that the constitutional provisions which commit the legislative function to the two houses are intended to include this attribute to the end that the function may be effectively exercised.
" On these findings, with regard to refusal by the witness to appear and testify before the Committee and being at tached as a consequence thereof, it was held: "We conclude that the investigation was or dered for a legitimate object; that the wit ness wrongfully refused to appear and testify before the Committee and was lawfully at tached; that the Senate is entitled to have him give testimony pertinent to the inquiry, either at its bar or before the committee; and that the district court erred in discharging him from custody under the attachment.
" In Uphaus vs Wyman ; a witness at an investigation by the Attorney General of the State of New Hampshire, conducted pursuant to a resolution of the State legislature authorizing the 49 Attorney General to determine whether there were subversives within the state, refused to obey a subpoena calling for the production of a list of persons who were guests at a camp operated within New Hampshire by a voluntary corporation of which the witness was executive director.
On petition of the Attorney General, the Merrimack Country Court called the witness before it and the witness again refused to produce the information, asserting, first, that, by the Smith Act (18 USC section 2385), Congress had so completely occupied the field of subversive activities that the states were without power to investigate in that area, and, second, that the due process clause precluded enforcement of the subpoena.
The court rejected the witness ' argument, and, upon his contin ued refusal to produce the list, adjudged him in contempt and committed him to jail until he should comply.
The Su preme Court of New Hampshire affirmed, and even after remand by the United States Supreme Court it reaffirmed its former decision.
On appeal, while affirming the decision of the Supreme Court of New Hampshire the United States Supreme Court held that since the Attorney General sought to learn if subversive persons were in the State because of the legislative determination that such persons, statutorily defined with a view toward the Communist Party, posed a serious threat to the security of the State, the investiga tion was undertaken in the interest of self preservation and this governmental interest outweighed individual rights in an associational privacy which, however, real in other circumstances were here tenuous at best.
It was further held that "the governmental interest in self preservation is sufficiently compelling to subordinate the interest in associational privacy of persons who, at least to the extent of the guest registration statute, made public at the incep tion the association they now wish to keep private.
In the light of such a record we conclude that the State 's interest has not been "pressed, in this instance, to a point where it has come into fatal collision with the overriding" constitu tionally protected rights of appellant and those he may represent." In Sinclair vs United States, ; it was held: "Neither Senate Joint Resolution 54 nor the action taken under it operated to divest the Senate or the committee of power further to investigate the actual administration of the land laws.
It may be conceded that Congress is without authority to compel disclosures for the purpose of aiding the prosecution of pending suits; but the authority of that body, directly or through its committees, to require pertinent disclosures in aid of its own con stitutional power, is 50 not abridged because the information sought to be elicited may also be of use in such suits.
" In Kastigar vs United States, 12) the United States District Court for the Central District of California ' ordered the petitioners to appear before a grand jury and to answer its questions under a grant of immunity.
The immunity was based upon a provision of the Organized Crime Control Act of 1970 stating that neither the compelled testimony nor any information directly or indirectly derived from such testimony could be used against the witness.
Notwithstanding the grant of immunity, the petitioners refused to answer the grand jury 's questions and were found in contempt.
The United States Court of Appeals for the Ninth Circuit affirmed ; , rejecting the peti tioners ' contention that it violated their constitutional privilege against self incrimination to compel them to testify without granting them transactional immunity from prosecution for any offence to which the compelled testimony might relate.
On certiorari, the United States Supreme Court affirmed.
It held that the power of government to compel persons to testify in court or before grand juries and other governmen tal agencies was firmly established but was not absolute, being subject to a number of exemptions, the most important of which was the Fifth Amendment privilege against self incrimination.
With reference to Federal Statute (18 USCS section 6002) it was held: "That a federal statute permitting the govern ment to compel a witness to give testimony, but granting the witness immunity from the use in any criminal case of the compelled testimo ny or any evidence derived therefrom, does not violate the Fifth Amendment privilege against self incrimination.
" In Brown vs Walker, ; the question involved was with regard to an alleged incompatibility between that clause of the 5th Amendment to the Constitution, which declares that no person "shall be compelled in any criminal case to be a witness against himself" and the act of Con gress of February 11, 1983 (27 Stat.
at L. 443), which enacts that" no person shall be excused from attending and testifying or from producing books, papers, tariffs, con tracts, agreements and documents before the Interstate Commerce Commission, or in obedience to the subpoena of the Commission, . on the ground or for the reason that the testimony or evidence, documentary 51 or otherwise, required of him, may tend to criminate him or subject him to a penalty or forfeiture.
But no person shall be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concern ing which he may testify, or produce evidence, documentary or otherwise, before said Commission, or in obedience to its subpoena, or either of them, or in any such case or proceed ing.
" It was held: "it is entirely true that the statute does not purport, nor is it possible for any statute, to shield the witness from the personal dis grace or opprobrium attaching to the exposure of his crime; but, as we have already ob served, the authorities are numerous and very nearly uniform to the effect that, if the proposed testimony is material to the issue on trial, the fact that the testimony may tend to degrade the witness in public estimation does not exempt him from the duty of disclosure.
A person who commits a criminal act is found to contemplate the consequences of exposure to his good name and reputation, and ought not to call upon the courts to protect that which he has himself esteemed to be of such little value.
The safety and welfare of an entire community should not be put into the scale against the reputation of a self confessed criminal, who ought not, either in justice or in good morals, to refuse to disclose that which may be of great public utility, in order that his neighbors may think well of him.
The design of the constitutional privilege is not to aid the witness in vindicating his charac ter, but to protect him against being com pelled to furnish evidence to convict him of a criminal charge.
If he secure legal immunity from prosecution, the possible impairment of his good name is a penalty which it is reason able he should be compelled to pay for the common good.
If it be once conceded that the fact that his testimony may tend to bring the witness into disrepute, though not to incrimi nate.
him, does not entitle him to the privi lege of silence, it necessarily follows that if it also tends to incriminate, but at the same time operates as a pardon for the of fence, the fact that the disgrace remains no more entitles him to immunity in this case than in the other.
" It is in this view of the matter and in view of the provisions contained in Sections 4 to 6 of the Act and the rules framed thereunder that we are of the opinion that the petitioners on the belief that they 52 were persons covered by Section 8B could not avoid the consequences of Sections 178 and 179 by claiming absolute immunity from binding themselves by an oath or affirmation for answering questions put to them.
Indeed in the instant case the petitioners are not asserting that they could not be required at all to appear as a witness before the Committee and make statement on oath.
As is apparent from our order dated 18th August, 1988 on behalf of both the petitioners it was submitted that they did not either wish to delay the proceedings or to show disrespect to the Committee but only wanted to protect their own interest by making the submission which they made before the Committee as per legal advice given to them.
According to learned counsel for the petitioners the legal advice given to the petitioners was that since they were persons covered by Section 8B of the Act they were entitled to produce evidence in defence and could as such be called upon to enter the witness box at the end of the inquiry and could not be required to enter the witness box for cross examina tion almost as the first two witnesses before the Committee.
According to him the stand taken by the petitioners was that they being covered by Section 8B of the Act their defence would be put to serious jeopardy and will be prejudicially affected if they were required to appear in the witness box for cross examination at the very inception of the inquiry even before statements of witnesses proving the accusations against the petitioners had been recorded which they were entitled to defend.
That this was really the case of the petitioners will be apparent from our discussion a little later.
In this background we pass on to the second proposi tion referred to above namely whether the petitioners could avoid the consequences contemplated by Sections 178 and 179 I.P.C by putting forth valid justification for refusing to bind themselves by oath or affirmation even without claiming an absolute immunity from binding themselves by an oath or affirmation.
In Watkins vs United States, ; a union officer, appearing as a witness before a subcommittee of the House Committee on Un American Activities, refused to answer questions as to past Communist Party membership of certain persons, objecting to the questions on the ground of lack of pertinency to the subject under inquiry by the subcommittee.
In a prosecution in the United States District Court for the District of Columbia, he was convicted of violating the statute providing for criminal punishment of witnesses before congressional committees who refuse to answer any question pertinent to the question under inquiry, and the conviction was affirmed by the 53 United States Court of Appeals for the District of Columbia Circuit.
On certiorari, the United States Supreme Court reversed the conviction.
Warren, Chief Justice, speaking for the five members of the Court, ruled that to support a conviction under a statute a congressional investigating committee must, upon objection of a witness on the grounds of pertinency, state for the record the subject under in quiry at that time and the manner in which the propounded questions are pertinent thereto.
Consequently refusal to answer a question on the ground that it was not pertinent, was found to be a valid justification.
In Flaxer vs United States, ; relying on the decision in Watkins (Supra) that the courts must accord to the defendants every right which is guaranteed to defend ants in all other criminal cases it was held that one of these guarantees is proof beyond a reasonable doubt that the refusal of the witness was deliberate and intentional.
This decision is.
therefore~ an authority for the proposition that if the refusal of the witness was not deliberate and intentional but was for a valid cause such refusal could not be made the basis for prosecuting the witness.
In Murphy vs Waterfront Commission of New York, 12 L.ed.
2d 678 notwithstanding the grant of immunity under the laws of New Jersey and New York, petitioners, as witnesses before the Waterfront Commission of New York Harbor, refused to answer questions on the ground that the answers might tend to incriminate them under federal law, to which the grant of immunity did not purport to extend.
Petitioners were there upon held in civil and criminal contempt of court.
The New Jersey Supreme Court affirmed the civil contempt judgments, holding that a state may constitutionally compel a witness to give testimony which might be used in a federal prosecu tion against him.
On certiorari, the United States Supreme Court vacated the judgment of contempt and remanded the cause to the New Jersey Supreme Court.
It was held: ".
We hold the constitutional rule to be that a state witness may not be compelled to give testimony which may be incriminating under federal law unless the compelled testi mony and its fruits cannot be used in any manner by federal officials in connection with a criminal prosecution against him.
We con clude, moreover, that in order to implement this constitutional rule and accommodate the interests of the State and Federal Governments in 54 investigating and prosecuting crime, the Federal Government must be prohibited from making any such use of compelled testimony and its fruits.
This exclusionary rule, while permitting the States to secure information necessary for effective law enforcement, leaves the witness and the Federal Government in substantially the same position as if the witness had claimed his privilege in the ab sence of a state grant of immunity.
It follows that petitioners here may now be compelled to answer the questions propounded to them.
At the time they refused to answer, however, petitioners had a reasonable fear, based on this Court 's decision in Feldman vs United States, supra, that the federal authorities might use the answers against them in connec tion with a federal prosecution.
We have now overruled Feldman and held that the Federal Government may make no such use of the an swers.
Fairness dictates that petitioners should now be afforded an opportunity, in light of this development, to answer the questions.
Accordingly, the judgment of the New Jersey courts ordering petitioners to answer the questions may remain undisturbed.
But the judgment of contempt is vacated and the cause remanded to the New Jersey Supreme Court for proceedings not inconsistent with this opinion.
" In this case also it is, therefore, clear that a valid justification put forth by the witness was considered to constitute sufficient ground to make him immune from prose cution.
We have already pointed out in our order dated 18th August, 1988 that if the Committee had found that the peti tioners were covered by Section 8B of the Act it would most probably itself not have required them to get into the witness box for being cross examined till the end of the inquiry.
We have reached this conclusion from the circum stances that it is the Committee 's own view as expressed in its order dated 29th June, 1988 that persons covered by Section 8B have to be examined at the end of the inquiry.
That the case of the petitioners in not taking oath for being cross examined at the very initial stage was based on Section 8B seems to be apparent.
The plea taken in the application made on behalf of the Commissioner of Police on 17th May, 1988 for first calling upon the Bar Association to start their evidence and to call upon the Commissioner of Police to adduce his evidence thereafter was the first indication in this behalf.
This plea was, at all events, relevant qua those police officers whose conduct was 55 to be examined.
Secondly, when on 19th May, 1988 the learned counsel for Smt.
Kiran Bedi was required to justify her stand of not taking oath, Section 8B was specifically plead ed and reliance was placed on the decision in the case of Smt.
Indira Gandhi and another vs Mr. J.C. Shah Commission of Inquiry, ILR 1980 1 Delhi 552 as is borne out by the order of the Committee of that date.
The justification so pleaded was repelled by the Committee on two grounds, namely that Smt.
Indira Gandhi in that inquiry had not filed any affidavit and that she had been summoned under Section 8B.
On the view of the Committee expressed in its order dated 29th June, 1988, which will, in the absence of any material to the contrary, be deemed to be its view even on 19th May, 1988, that persons covered by Section 8B were to be examined at the end of the inquiry, the fact that an affidavit of Smt.
Kiran Bedi was on record could hardly justify her being called upon to enter the witness box at the very inception.
As regards the second ground we have already held that the fact that no formal notice had been issued under Section 8B would constitute no justification for not treating a person to be covered by that section, if otherwise the ingredients of the said section were made out.
As regards Jinder Singh the order of the Committee dated 26th May, 1988 quoted earlier indicates that Jinder Singh had clearly stated that he is not prepared to take the oath because he is in the nature of an accused and he cannot be asked to start the evidence and would be prepared to come in the witness box after the evidence of other party is record ed.
Jinder Singh did not state that he was an accused before the Committee.
In saying that he was "in the nature of" an accused be obviously meant that since his conduct was to be examined as contemplated by Section 8B he was entitled to appear as a witness in his defence after the witnesses on behalf of the Bar Association which was accusing him had been examined.
Had the Committee not been labouring under the misapprehension that the petitioners were not covered by Section 8B, because no notices under that section had been issued to them, notwithstanding the fact that their conduct was to be examined on its own declared intention, it would obviously not have required the petitioners to take oath for being cross examined at the stage at which it did so.
The subsequent orders of the Committee directing complaints to be filed against the petitioners for an offence punishable under Section 178 I.P.C. and the act of filing such com plaints apparently were the consequences of the aforesaid misapprehension.
We have already held that the petitioners were covered by Section 8B of the Act.
The action of the Committee in compelling the petitioners to enter the witness box on the dates in question for being 56 cross examined, when even according to it as is apparent from its order dated 29th June, 1988, persons similarly situated were to do so at the end of the inquiry, was in itself discriminatory.
There was, therefore, valid justifi cation for the refusal by the petitioners to take oath for cross examination at the stage when they were required to do so.
The Committee could have on its own reconsidered the question whether the prosecutions should be pressed further when the case was referred back to it by the learned Vaca tion Judge of this Court by his order dated 2nd June, 1988.
For these reasons and the reasons already given in our order dated 18th August, 1988 we are of the opinion that the Committee should not have in the instant case directed the filing of a complaint against either of the petitioners for an offence punishable under Section 178 I.P.C.
We decide point (iv) accordingly.
As regards points (v), (vi) and (vii) suffice it to point out that the petitioners have apart from filing spe cial leave petitions also filed writ petitions challenging the very same orders and since we have held that the action of the Committee in holding that the petitioners were not covered by Section 8B of the Act and compelling them to enter the witness box on the dates in question was discrimi natory and the orders directing complaint being filed against the petitioners were illegal, it is apparently a case involving infringement of Articles 14 and 21 of the Constitution.
In such a situation the power of this Court to pass an appropriate order in exercise of its jurisdiction under Articles 32 and 142 of the Constitution cannot be seriously doubted particularly having regard to the special facts and circumstances of this case.
On the orders direct ing filing of complaints being held to be invalid the conse quential complaints and the proceedings thereon including the orders of the Magistrate issuing summons cannot survive and it is in this view of the matter that by our order dated 18th August, 1988 we have quashed them.
As regards the submission that it was not a fit case for interference either under Article 32 or Article 136 of the Constitution inasmuch as it was still open to the petitioners to prove their innocence before the Magistrate, suffice it to say that in the instant case if the petitioners are compelled to face prosecution in spite of the finding that the orders directing complaint to be filed against them were illegal it would obviously cause prejudice to them.
Points (v), (vi) and (vii) are decided accordingly.
These, apart from those stated in our order dated 18th August, 1988 are our reasons for the said order.
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A Committee consisting of two Judges of the High Court was constituted by Delhi Administration to enquire into certain incidents in January 1988, involving the lawyers and the police sequel to an alleged incident of a lawyer, being apprehended by the students of a College, and banded over to the police on the accusation of committing an offence within the campus of the said College and his subsequently being brought in handcuffs by the police for production before a Magistrate, 21 who ultimately discharged him with direction to the Commis sioner of Police to take action against the guilty police officials.
In its interim report, the Committee observed that it had 10 examine the conduct of various police officers, and, in particular, among others, the petitioners and recommended the transfer of the petitioners from their posts.
In pursuance of a notice issued by the Committee under Rule 5(2)(a) of the Rules, statements of cases on behalf of the High Court Bar Association and the Commissioner of Police together with the supporting affidavits were filed before the Committee.
The Police were required to be ready for examination from May 16, 1988 onwards but the counter affidavit and the list of witnesses had not been filed till 17th May, 1988, on which date the Commissioner of Police submitted two applications praying for postponement of hearing and for calling upon the Bar Association to start their evidence first and to call upon the Commissioner of Police to adduce the evidence thereafter.
Rejecting these applications, the Committee passed an order saying that since the Police had failed to file their counter affidavit or list of witnesses, the petitioners should be present in Court on May 19, 1988 for crossexamination.
On the petitioners ' refusing to enter the witness box for taking oath for cross examination, the Committee decided to file complaints against the petitioners for an offence under section 178 of the Indian Penal Code and in pursuance of which complaints were filed against the petitioners in the Chief Metropolitan Magistrate 's Court under sub section
(4) of section 5 of the Commissions of Enquiry Act, 1952 read with section 346 of the Code of Criminal Procedure, 1973.
The petitioners challenged these orders in this Court by way of writ petitions and Special Leave Petitions.
This Court passed an order on June 2, 1988 directing the Commit tee to reconsider the whole question relating to the order in which the witnesses had to be examined in the case.
In pursuance of the aforesaid order, the Committee passed an order on 29th June, 1988 holding that the concept of burden of proof was not quite relevant in the proceedings before a Commission, under the Act, which had been given free hand to lay down its own procedure subject, of course, to the provisions of the Act and the rules made thereunder and that it would be difficult for the committee to lay down 22 the manner in which the witnesses were to be examined, foregoing its right to examine any witness at any stage, if his statement appeared to be relevant, that merely because there were allegations against a particular person he would not be said to be covered under section 8 B, which required a positive order from the Committee, and that when the Commit tee mentioned that it was to examine the conduct of various Police Officers and others, it did not have in view section 8 B of the Act.
The Committee specifically held that the three other persons to whom notices had been issued under section 8 B would be examined at the end of the inquiry.
On August 18, 1988 this Court quashed the orders of the Committee directing the filing of the complaints and the criminal proceedings against the petitioners before the Metropolitan Magistrate and held (a) that the Delhi Adminis tration had to examine first all its witnesses as required by Rule 5(5)(a) of the Rules framed under the Act; even those witnesses who may have filed affidavits already may first be examined in chief before they were cross examined, since it was stated that when the affidavits were filed the deponents did not know what the other parties who had also filed affidavits had stated in their affidavits; the ques tion whether a party had the right of cross examination or not shall be decided by the Committee in accordance with section 8 C of the Act; the direction to the Delhi Administration to examine its witnesses first did not apply to those witnesses who fell under section 8 B of the Act, who had to be examined at the end of the inquiry, as opined by the Committee itself; (b) that the petitioners were persons, who fell under section 8 B of the Act and had to be dealt with accordingly, and (c) that if the three persons to whom notices under section 8 B had been issued were to be examined, even according to the Committee, at the end of the inquiry there was no justifia ble reason to deny the same treatment to the petitioners who were in the same position as those three persons; the action of the Committee in asking them to be cross examined at the beginning of the inquiry was, therefore, discriminatory; mere non issue of notices to them under section 8 B ought not to make any difference if they otherwise satisfied the condi tions mentioned in section 8 B; the issue of such a notice was not contemplated under section 8 B of the Act; it was enough if at any stage the Commission considered it necessary to inquire into the conduct of any person and such person would thereafter be governed by section 8 B of the Act.
Reasons for this order were to be given later.
Giving reasons for the above order the Court, HELD: 1.
Recourse to procedure under section 8 B of the Commis 23 sions of Enquiry Act, 1972 is not confined to any particular stage and if not earlier, at any rate, as soon as the Com mittee made the unequivocal declaration of its intention, in its interim report to examine the conduct of the two peti tioners it should have issued notice under section 8 B to the two petitioners, if it was of the view, for which view there is no justification, that issue of a formal notice under section 8 B was the sine qua non for attracting that Section.
At all events, the Committee could not deny the petitioners the statutory protection of section 8 B by merely refraining from issuing a formal notice even though on its own declared intention, the section was clearly attracted.
[42C E] State of Jammu and Kashmir vs Bakshi Ghulam Mohammad, [1966] Suppl.
S.C.R. page 401 and State of Karnataka vs Union of India & Another, [1978] 2 S.C.R. page 1, relied on.
2.1 The use of the word 'or ' between clauses (a) and (b) of section 8 B of the Act makes it clear that section 8 B would be attracted if requirement of either clause (a) or clause (b) is fulfilled.
Clause (a) of section 8 B applies when the conduct of any person is to be enquired into whereas clause (b) applies to a case where reputation of a person is likely to be prejudicially affected.
[42B] 2.2 The fact that no formal notice had been issued under section 8 B would constitute no justification for not treating a person to be covered by that section if otherwise the ingre dients of the said section were made out.
Having once stated in its interim report in unequivocal terms, that the conduct of these two petitioners among others was to be examined, it was not open to the Committee to still take the stand that section 8 B was not attracted in so far as they were concerned.
[42B C] 2.3 Keeping in view the nature of the allegations made in the statements of case and the supporting affidavits filed on behalf of the various Bar Associations including the Delhi High Court Bar Association, requirement of even clause (b) of section 8 B was fulfilled inasmuch as if those allegations were proved they were likely to prejudicially affect the reputation of the two petitioners.
In view of the specific term of reference which contemplated taking of "stringent action" against all those responsible, even the career of the petitioners as police officers was likely to be affected in case an adverse finding was recorded against them and the principle that the report of a Commission of Enquiry has no force proprio vigore does not, on a pragmatic approach to the consequences, seem to constitute sufficient safeguard so far as the petitioners are concerned.
[43C E] 24 The reason for the importance attached with regard to the matter of safeguarding the reputation of a person being prejudicially affected in cl.
(b) ors.
8 B of the Act is not far to seek.
[43E F] Blackstone 's Commentary of the laws of England Vol I, IVth Edition, Corpus Juris Secundum Vol. 77 at page 268 and D.F. Marion vs Davis, 55 American Law Reports page 171 referred to.
3.1 Section 8 B inter alia contemplates an opportunity being given to the person governed by the said section to produce evidence in his defence whereas section 8 C inter alia gives him the right to cross examine the witnesses who depose against him.
[45D] Not only that calling upon a person governed by section 8 B to produce evidence in his defence at the very inception of the inquiry is a contradiction in terms inasmuch as in this situation such a person would really be required to disprove statements prejudicial to him of such witnesses who are yet to be examined, it would also reduce the right of crossexam ination by such person to a mere formality for the obvious reason that by the time the witnesses who are to be crass examined are produced, the defence of such person which would normally constitute the basis for the line and object of cross examination would already be known to such witness es and they are likely to refashion their statements accord ingly.
[45E F] 3.2 Perhaps in a case where there is no other witness to give information about the alleged incident about which the inquiry is being held and the only person or persons who could give such information is or are the person or persons who are likely to be adversely affected by the inquiry, it may be necessary to depart from the above view as a matter of necessity.
But this is not one such case.
There are admittedly any number of other persons who can give evidence about what happened on the relevant dates.
[45G] Since the two petitioners clearly fell within the cate gory of persons contemplated by section 8 B of the Act and were consequently entitled to the same treatment as has been accorded by the Committee to the persons to whom notice has been issued by it under the said section, the Committee was not justified in calling upon the two petitioners to stand in the witness box for cross examination at the very initial stage of the enquiry.
[54B D] 3.3 The apprehension that in case a person governed by section 8 B 25 was to be examined at the end and at that stage such person even at the risk of not producing his defence, for some reason, chooses not to appear as a witness, the Committee would be deprived of knowing the facts in the knowledge of such person and such a course would obviously hamper the enquiry is more imaginary than real inasmuch as the power of the Commission to call upon any person to appear as a wit ness under section 4 of the Act, which in terms is very wide and is not circumscribed by fetters of stage, would be available to the Commission and it would be entitled to call such person as a witness even at that stage.
[46A C] 4.1 In view of the provisions contained in sections 4 to 6 of the Act, and the rules framed thereunder a person could not, on the belief that he was covered by section 8 B, avoid the consequence of sections 178 and 179, by claiming absolute immuni ty from binding himself by an oath or affirmation for an swering questions put to them.
[51H; 52A] Mc Grain vs Daugherty, 71 L. ed.
580; Uphaus vs Wyman, ; ; Sinclair vs United States, ; ; Kastigar vs United States, ; and Brown vs Walker40 L.ed. 819, referred to.
However, a valid justification put forth by the witness was sufficient ground to make him immune from prosecution.
[52F] Watkins vs United States, ; ; Flaxer vs United States; , and Murphy vs Waterfront Commission of New York, ; referred to.
In the instant case, the petitioners are not asserting that they could not be required at all to appear as a wit ness before the Committee and make statement on oath.
It was submitted on their behalf that they did not either wish to delay the proceedings or to show disrespect to the Commit tee, but only wanted to protect their own interest by making the submission which they made before the Committee, as per legal advice given to them, namely that they being covered by section 8 B of the Act their defence would be put to serious jeopardy and will be prejudicially affected if they were required to appear in the witness box for crossexamination at the very inception of the inquiry even before statements of witnesses proving the accusations against the petitioners had been recorded which they were entitled to defend.
[52B E] 4.2 On the view of the Committee that persons covered by 8 B were to be examined at the end of the enquiry, the fact that an affidavit of the petitioner was on record could hardly justify the petitioner being 26 called upon to enter the witness box at the very inception.
[55C] Smt.
Indira Gandhi and another vs Mr. J.C. Shah Commis sion of Inquiry, ILR 1980(1) Delhi 552 referred to.
4.3 Had the Committee not been labouring under the misapprehension that the petitioners were not covered by section 8 B, because no notices under that section had been issued to them, notwithstanding the fact that their conduct was to be examined on its own declared, intention, it would obvi ously not have required the petitioners to take oath for being cross examined at the stage at which it did so.
The subsequent orders of the Committee directing complaints to be filed against the petitioners for an offence punishable under section 178 IPC and the act of filing such complaints were the consequences of the said misapprehension.
[55F G] Since the petitioners were covered by section 8 B, the action of the Committee in compelling the petitioners to enter the witness box for being cross examined, when even according to it persons similarly situated were to do so at the end of the inquiry, was in itself discriminatory.
There was, there fore, valid justification for the refusal by the petitioners to take oath for cross examination at the stage when they were required to do so.
[55H; 56A B] Therefore, the Committee should not have, in the instant case, directed the filing of a complaint against either of the petitioners for an offence punishable under section 178 IPC.
[56C] 5.
Since the action of the Committee in holding that the petitioners were not covered by section 8 B of the Act and com pelling them to enter the witness box on the dates in ques tion was discriminatory and the orders directing complaint being filed against the petitioners were illegal, it is a case involving infringement of Articles 14 and 21 of the Constitution.
In such a situation, the power of this Court to pass an appropriate order in exercise of its jurisdiction under Articles 32 and 142 of the Constitution cannot be seriously doubted, particularly having regard to the special facts and circumstances of this case.
[56D El The orders directing filing of complaints being invalid, the consequential complaints and the proceedings thereon including the orders of the Magistrate issuing summons cannot survive.
[56E F] 6.
If the petitioners are compelled to face prosecution.
in spite of 27 the finding that the orders directing complaint to be filed against them were illegal, it would cause prejudice to them.
Therefore, this Court can interfere in the matter.
[56G] 7.
Apart from the directions contained in this Court 's order dated 18th August, 1988, it is not expedient to lay down any particular rigid procedure to be followed by the Committee with regard to sequence in which witnesses were to be examined by it.
[41G H]
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5917.txt
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Appeal No. 35 of 1959.
Appeal from the judgment and decree dated October 29, 1956, of the Allahabad High Court in Writ Petition No. 327 of 1956.
H. N. Sanyal, Additional Solicitor General of India, J. B. Dadachanji, section N. Andley, Rameshwar Nath and P. L. Vohra, for the appellants.
G. C. Mathur and C. P. Lal, for the respondents.
1960, December 13.
The Judgment of Imam, Kapur, Das Gupta and Dayal, JJ. was delivered by Das Gupta, J. Ayyangar, J. delivered a separate judgment.
DAS GUPTA, J.
This appeal is against an order of the High Court of Judicature at Allahabad rejecting the appellants ' application under article 226 of the Constitution.
The first appellant is the Diamond Sugar Mills Ltd., a public limited company owning and operating a sugar factory at Pipraich in the District Gorakhpur, for the manufacture of sugar from 244 sugarcane.
The second appellant is the Director of the company.
By this application the appellants challenged the imposition of cess on the entry of sugarcane into their factory.
On February 24, 1956, when the application was made the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (U. P. XXIV of 1953), was in force.
Section 20 of this Act gave to the Governor of U. P. the power to impose by notification "a cess not exceeding 4 annas per maund on the entry of sugarcane into an area specified in such notification for consumption, use or sale therein".
This Act it may be mentioned had taken the place of an earlier Act, the U. P. Sugar Factories Control Act, 1938, section 29 of which authorised the Governor of U. P. to impose by a notification after consultation with the Sugar Control Board under the Act "a cess not exceeding 10 per cent of the minimum price, if any, fixed under section 21 or 4 annas per maund whichever was higher on the entry of sugarcane into a local area specified in such notification for consumption, use or sale therein".
Notifications were issued under this provision for different crushing seasons starting from 1938 39, the last notification issued thereunder being for the crushing season of 1952 53.
These notifications set out a number of factories in a schedule and provided that during 1952 53 crushing season cess at a rate of three annas per maund shall be levied on the entry of all sugarcane into the local areas comprised in factories mentioned in the schedule for consumption, use or sale therein.
Act No. XXIV of 1953 repealed the 1938 Act.
The first notification under the provisions of section 20 of the 1953 Act was in these terms: "In exercise of the powers conferred by sub section (1) of section 20 of Uttar Pradesh Sugarcane (Regulation of Supply and Purchase) Act, 1953; (U. P. Act No. XXIV of 1953) the Governor is pleased to declare that during the 1954 55 crushing season, a cess at a rate of three annas per maund shall be levied on the entry of all sugar cane into the local areas comprised in the factories mentioned in the Schedule, for the consumption, use or sale therein".
245 Similar notifications were also issued on October 23, 1954, for the crushing season 1954 55 and on November 9, 1955, for the crushing season 1955 56.
The appellants ' factory was one of the factories mentioned in the schedule of all these notifications.
On the date of the application, i.e., February 24, 1956, a sum.
of Rs. 2,59,644 9 0 was due from the first appellant and a further sum of Rs. 2,41,416 3 0 as liability on account of cess up to the end of January, 1956, also remained unpaid.
The appellant contended on various grounds that section 20 of Act XXIV of 1953 was unconstitutional and invalid and prayed for the issue of appropriate writs directing the respondents the State of U. P. and the Collector of Gorakhpur not to levy and collect cess on account of the arrears of cess for the crushing season 1954 55 and in respect of the crushing season 1955 56 and successive crushing seasons and to withdraw the notifications dated October 23, 1954, and November 9, 1955 , which have been mentioned above.
During the pendency of this application under article 226 before the Allahabad High Court the U. P. Legislature enacted the U. P. Sugarcane Cess Act, 1956 (U. P. XXII of 1956), repealing the 1953 Act.
Section 3 of this Act as originally enacted was in these words: "The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for use, consumption or sale therein: Provided that the State Government may like.
wise remit in whole or in part such cess in respect of cane used or to be used in factory for any limited purpose specified in the notification.
Explanation: If the State Government, in the case of any factory situate outside Uttar Pradesh, so declare, any place in Uttar Pradesh set apart for the purchase 'of cane intended or required for use.
consumption or sale in such factory shall be deemed to be the premises of the factory.
(2) The cess imposed under sub section (1) shall 246 be payable by the owner of the factory and shall be paid on such date and at such place as may be prescribed.
(3) Any arrear of cess not paid on the date prescribed under sub section (2) shall carry interest at 6 per cent.
per annum from such date to date of payment.
" There is a later amendment by which the words "four annas" have been altered to "twenty five naye paise" and the words "Gur, Rab or Khandsari Sugar Manufacturing Unit" have been added after the words "factory" in sub section (1).
These amendments are however not relevant for the purpose of this appeal.
Section 9 of this Act repealed section 20 of the Sugar Cane (Regulation of Supply and Purchase) Act, 1953.
Sub sections 2 and 3 of section 9 are important.
They are in these words: "2.
Without prejudice to the general application of section 24 of the U.P. General Clauses Act, 1904, every notification imposing cess issued and every assessment made (including the amount of cess collected) under or in pursuance of any such notification, shall be deemed a notification issued, assess ment made and cess collected under this Act as if sections 2, 3 and 5 to 8 had been in force at all material dates.
Subject as provided in clause (1) of Article 20 of the Constitution every notification issued cess imposed and act or thing done or omitted between the 26th January, 1950, and the Appointed date in exercise or the purported exercise of a power under section 29 of the U. P. Sugar Factories Control Act, 1938, or of section 20 of the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, which would have been validly and properly issued, imposed, done or omitted if the said sections had been as section 3 of this Act, shall in law be deemed to be and to have been validly and properly imposed and done, any judgment, decree or order, of any court notwithstanding.
" The position after the enactment of the U. P. 247 Sugarcane Cess Act, 1956, was that the imposition and assessment of cess that had already been made under the 1953 Act would operate as if made under the 1956 Act.
In view of this the first appellant, the Diamond Sugar Mills Ltd., prayed to the High Court for permission to raise the question of constitutionality and validity of the 1956 Act.
It also prayed for the issue of a writ in the nature of mandamus directing the respondents not to levy cess upon the petitioners appellants under this new Act, the U. P. Sugarcane Cess Act, 1956.
This application was allowed and the High Court considered the question whether section 3 of the U. P. Sugarcane Cess Act, 1956, 'empowering the State Government to impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for the consumption, use or sale therein was a valid law.
The principal ground urged in support of the appellants ' case was that the law as enacted in section 3 was invalid and that it was beyond the legislative competence of the State Legislature.
Several other grounds including one that the provisions of the section went beyond the permissible limits of delegated legislation were also raised.
All the grounds were negatived by the High Court which accordingly rejected the appellants ' petition.
The High Court however gave a certificate under Article 132(1) and also under article 133(1)(c) of the Constitution and on the basis of that certificate the present appeal has been filed.
Of the several grounds urged before the High Court only two are urged before us in appeal.
One is that the law was invalid, being beyond the legislative competence of the State legislature; the other is that in any case the provision giving the Governor power to levy any cess not exceeding 4 annas without providing for any guidance as to the fixation of the particular rate, amounted to excessive delegation, and was accordingly invalid.
The answer to the question whether the impugned law was within or beyond the legislative competence of the State legislature depends on whether the law falls under Entry 52 of the State List 248 List II of the Seventh Schedule to the Constitution.
It is quite clear that there is no other entry in either the State List or the Concurrent List under which the legislation could have been made.
Entry 52 is in these words: "Tax on the entry of goods into a local area for consumption, use or sale therein".
Section 3 of the impugned Act which has already been set out provides for imposition of a cess on the entry of sugarcane into the premises of a factory for use, consumption or sale therein.
Is the "premises of a factory" a local area within the meaning of the words used in Entry 52? If it is the legislation was clearly within the competence of the State legislature; if it is not, the law was beyond the State legislature 's competence and must be struck down as invalid.
In considering the meaning of the words "local area" in entry 52 we have, on the one hand to bear in mind the salutary rule that words conferring the right of legislation should be interpreted liberally and the powers conferred should be given the widest amplitude; on the other hand we have to guard ourselves against extending the meaning of the words beyond their reasonable connotation, in.
an anxiety to preserve the power of the legislature.
In Re the Central Provinces & Berar Act No. XI V of 1938 (1) Sir Maurice Gwyer, C. J., observed: "I conceive that a broad and liberal spirit should inspire those whose duty it is to interpret it; but I do not imply by this that they are free to stretch or pervert the language of the enactment in the interests of any legal or constitutional theory, or even for the purpose of correcting any supposed errors".
Again, in Navinchandra Mafatlal vs The Commissioner of Income Tax, Bombay City (2) Das, J. (as he then was) delivering the judgment of this Court observed: ". . .
The cardinal rule of interpretation however, is that words should be read in their ordinary, natural and grammatical meaning subject to this rider that in construing words in a constitutional enactment conferring legislative power the most (1) , 37.
(2) [1955] 1 S.C.R. 829.
249 liberal construction should be put upon the words so that the same may have effect in their widest amplitude.
" Our task being to ascertain the limits of the powers granted by the Constitution, we cannot extend these limits by way of interpretation.
But if there is any difficulty in ascertaining the limits, the difficulty must be resolved so far as possible in favour of the legislative body.
The presumption in favour of constitutionality which was stressed by the learned counsel for the respondents does not take us beyond this.
On behalf of the appellants it has been urged that the word "local area" in its ordinary grammatical meaning is never used in respect of a single house or a single factory or a single plot of land.
It is urged that in ordinary use the words "local area" always mean an area covering a specified region of the country as distinguished from the general area.
While it may not be possible to say that the words "local area" have acquired a definite and precise meaning and the phrase may have different connotations in different contexts, it seems correct to say that it is seldom, if ever, used to denote a single house or a single factory.
The phrase appears in several statutes, some passed by the Central Legislature and some by the Provincial or State Legislatures; but in many of these the words have been defined.
These definitions being for the peculiar purpose of the particular statute cannot be applied to the interpretation of the words "local area" as used in the Constitution.
Nor can we derive any assistance from the judicial interpretation of the words "local area" as used in the Code of Criminal Procedure or other Acts like Bengal Tenancy Act as these interpretations were made with reference to the scope of the legislation in which the phrase occurs.
Researches into dictionaries and law lexicons are also of 'no avail as none of these give the meaning of the phrase "local area".
What they say as regards the meaning of the word "local" offers no guidance except that it is clear that the word "local" has different meanings in different contexts.
32 250 The etymological meaning of the word "local" is "relating to" or "pertaining to" a place.
It may be first observed that whether or not the whole of the State can be a "local area", for the purpose of Entry 52, it is clear that to be a "local area" for this purpose must be an area within the State.
On behalf of the respondents it is argued that "local area" in Entry 52 should therefore be taken to mean "any part of the State in any place therein".
So, the argument runs, a single factory being a part of the State in a place in the State is a "local area".
In other words, "local area" mean "any specified area inside the State".
The obvious fallacy of this argument is that it draws no distinction between the word "area" standing by itself and the phrase "local area".
If the Entry had been " entry of goods into any area of the State. . . some area would be specified for the purpose of the law levying the cess on entry.
If the Constitutions were empowering the State Legislatures to levy a cess on entry of goods into any specified area inside the state the proper words to use would have been "entry of goods into any area. . . " it would be meaningless and indeed incorrect to use the words they did use "entry of goods into a local area".
The use of the words "local area" instead of the word "area" cannot but be due to the intention of the Constitution makers to make sure that the power to make laws relating to levy on entry of goods would not extend to cases of entry of goods into any and every part of the state from outside that part but only to entry from outside into such portions of the state as satisfied the description of "local area".
Something definite was sought to be expressed by the use of the word "local" before the word "area": The question is: what exactly was sought to be expressed? In finding an answer to the question it is legitimate to turn to the previous history of constitutional legislation in the country on this subject of giving power to legislature to levy tax on the entry of goods.
In the State of Madras vs Gannon Dunkerley & Co., Ltd.(1) (1) ; 251 this Court referred with approval to the statement of law in Halsbury 's Laws of England, Vol.
II, para.
157, p. 93, that the existing state of English law in 1867 is relevant for consideration in determining the meaning of the terms used in the British North America Act in conferring power and the extent of that power.
This has necessarily to be so as in the words of Mr. Justice Brewer in South Carolina vs United States (1) "to determine the extent of the grants of power, we must, therefore place ourselves in the position of the men who framed and adopted the Constitution, and inquire what they must have understood to be the meaning and scope of those grants.
" Turning now to the previous legislative history we find that in the Government of India Act, 1935, Entry 49 of the Legislative List (List II of the 7th Schedule) was in the same words as Entry 52 of the Constitution except that instead of the words "taxes" as in Entry 52 of List II of the Constitution, Entry 49 List II of the Government of India Act, used the word "cess".
In Government of India Act, 1915, the powers of the provincial legislatures were defined in section 80A. 'Under clause (a) of the third sub section of this section the local legislature of any province has with the previous sanction of the Governor General power to make or take into consideration any law imposing or authorising the imposition of any new tax unless the tax was a tax scheduled as exempted from this provision by rules made under the Act.
The third of the Rules that were made in this matter under Notification No. 311/8 dated December 18, 1920, provided that the legislative council of a province may without the previous sanction of the Governor General make and take into consideration any law imposing or authorising a local authority to impose for the purpose of such local authority any tax included in Schedule II of the Rules.
Schedule II contained 11 items of which items 7 and 8 were in these words: 7.
An octroi 8.
A terminal tax on goods imported into a local (1) ; 252 area in which an octroi was levied on or before 6th July, 1917.
Item 8 was slightly modified in the year 1924 by another notification as a result of which it stood thus: 8.
A terminal tax on goods imported into or exported from a local area save where such tax is first imposed in a local area in which an octroi was levied on or before July 6, 1917.
Octroi is an old and well known term describing a tax on the entry of goods into a town or a city or a similar area for consumption, sale or use therein.
According to the Encyclopedia Britannica octroi is an indirect or consumption tax levied by a local political unit, normally the commune or municipal authority, on certain categories of goods on their entry into its area.
The Encyclopedia Britannica describes the octroi tax system in France (abolished in 1949) and states that commodities were prescribed by law and were divided into six classes and for all the separate commodities within these six groups maximum rates of tariff were promulgated by presidential decree, specific rates being fixed for the three separate sorts of octroi area, established on the basis of population, namely, communes having (1) less than 10,000 inhabitants, (2) from 10,000 to 50,000 and (3) more than 50,000.
While we are not concerned here with other features of the octroi tax system, it is important to note that the tax was with regard to the entry of goods into the areas of the communes which were local political units.
According to the Shorter Oxford English Dictionary "commune" in France is a small territorial division governed by a maire and municipal council and is used to denote any similar division elsewhere.
The characteristic feature of an octroi tax then was that it was on the entry of goods into an area administered by a local body.
Bearing in mind this characteristic of octroi duty we find on an examination of items 7 and 8 of the Schedule Rules mentioned above that under the Government of India Act, 1919, the local legislature of a Province could without the previous sanction of the Governor General impose a 253 tax octroi for entry of goods into an area administered by a local body, that is, a local government authority and the area in respect of which such tax could be imposed was mentioned in item 8 as local area.
It is in the background of this history that we have to examine the use of the word "local area" in item 49 of List II of the Government of India Act, 1935.
Here the word "octroi" has given place to the longer phrase "cesses on the entry of goods into a local area for consumption, use or sale therein.
" It was with the knowledge of the previous history of the legislation that the Constitution makers set about their task in preparing the lists in the seventh schedule.
There can bring title doubt therefore that in using the words "tax on the entry of goods into a local area for consumption, use or sale therein", they wanted to express by the words "local area" primarily area in respect of which an octroi was leviable under item 7 of the schedule tax rules, 1920 that is, the area administered by a local authority such as a municipality, a district Board, a local Board or a Union Board, a Panchayat or some body constituted under the law for the governance of the local affairs of any part of the State.
Whether the entire area of the State, as an area administered by the State Government, was also intended to be included in the phrase "local area", we need not consider in the present case.
The only other part of the Constitution where the word "local area" appears is in article 277.
That Article is in these words: "Any taxes, duties, cesses or fees which, immediately before the commencement of this Constitution, were being lawfully levied by the Government of any State or by any municipality or other local authority or body for the purposes of the State, municipality, district, or other local area may, notwithstanding that these taxes, duties, cesses or fees are mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by law.
" 254 There can be little doubt that "local area" in this Article has been used to indicate an area in respect of which there is an authority administering it.
While the scope of Article 277 is different from the scope of entry 52 so that no direct assistance can be obtained in the interpretation of the words "local area" in entry 52 from this meaning of the words in article 277 it is satisfactory to find that the meaning of "local area" in entry 52 which appears reasonable on a consideration of the legislative history of the matter is also appropriate to this phrase in its only other use in the Constitution.
Reliance was sought to be placed by the respondents on a decision of the Allahabad High Court in Emperor vs Munnalal (1) where the word "local area" as used in section 29 of the U. P. Sugar Factories Control Act, 1938, fell to be considered.
That section, as we have already mentioned, authorised the Governor of U. P. to impose by a notification, after consulting the Sugar Control Board under the Act, a cess on the entry of sugarcane into a local area specified in such notification for consumption, use or sale therein.
The notifications which were issued under this provision set out a number of factories for the levy of a cess at the rate of three annas per maund on entry of all sugarcane into the local area comprised in the factories mentioned in the schedule for consumption, use or sale therein.
Section 29 was clearly within the words of entry 49 of List 11.
The question that arose before the Court was whether the specification of certain factories as local areas was valid law.
The learned Judge appears to have proceeded on the basis that the Governor had notified the area comprised in 74 factories as one "local area" and held that once this was 'done the entire area covered by all these factories should be considered as one statutory local area.
It appears to us that the learned Judge was not right in thinking that the area comprised in 74 factories was notified as one local area.
What appears to have been done was that the area of each factory was being notified as a local area for the purpose of the Act.
Proceeding on (1) I.L.R. 1942 All. 302. 255 the basis that the area comprised in the 74 factories was notified as one local area the learned Judge addressed himself to the question whether this entire area was a local area within the meaning of the Act.
He appears to have accepted the contention that the word local area was used in the sense of an administrative unit, but, says he, the administration need not be political, it may be industrial and educational or it may take any other form of governmental activity.
"I cannot see," the learned Judge observed, "why it is not open to the provincial government or the provincial legislature to make an industrial survey of the province and to divide up the entire province into industrial areas or factory areas or mill areas or in any other kind of areas, and each one of these areas may be notified and be treated as a local area.
And once such areas come into existence and remain in operation they can be regarded as local areas within the meaning of entry No. 49 of List II in which a cess may be levied".
Even if this view were correct it would be of no assistance to the respondents.
It is no authority for the proposition that the area of one single factory is a local area within the meaning of entry 49.
We think however that the view taken by the learned Judge is not correct.
It is true that when words and phrases previously interpreted by the courts are used by the Legislature in a later enactment replacing the previous statute, there is a presumption that the Legislature intended to convey by their use the same meaning which the courts had already given to them.
This presumption can however only be used as an aid to the interpretation of the later Statute and should not be considered to be conclusive.
As Mr. Justice Frankfurter observed in Federal Commissioner vs Columbia B. System (1) when considering this doctrine, the persuasion that lies behind the doctrine is merely one factor in the total effort to give fair meaning to language.
The presumption will be strong where the words of the previous statute have received a settled meaning by a (1) 311 U.S. 131.
256 series of decisions in the different courts of the country; and particularly strong when such interpretation has been made or affirmed by the highest court in the land.
We think it reasonable to say however that the presumption will naturally be much weaker when the interpretation was given in one solitary case and was not tested in appeal.
After giving careful consideration ' to the view taken by the learned Judge of the Allahabad High Court in Emperor vs Munnalal (supra) about the meaning of the words "local area" and proper weight to the rule of interpretation mentioned above, we are of opinion that the Constitution makers did not use the words "local area" in the meaning which the learned Judge attached to it.
We are of opinion that the proper meaning to be attached to the words "local area" in Entry 52 of the Constitution, (when the area is a part of the State imposing the law) is an area administered by a local body like a municipality, a district board, a local board, a union board, a Panchayat or the like.
The premises of a factory is therefore not a "local area".
It must therefore be held that section 3 of the U. P. Sugarcane Cess Act, 1956, empowering the Governor to impose a cess on the entry of sugarcane into the premises of a factory did not fall within Entry 52 of the State List.
As there is no other Entry in either State List or Concurrent List in which the impugned law could fall there is no escape from the conclusion that this law was beyond the legislative competence of the State Legislature.
The law as enacted in section 3 of the U. P. Sugarcane Cess Act, 1956, must therefore be struck down as invalid.
It may be mentioned that this is not a case where the law is in two parts and one part can be severed from the other and saved as valid while striking down the other portion which is invalid.
Indeed, that was not even suggested by the learned counsel for the respondents.
It is unnecessary for us to consider whether if section 3 had instead of authorising levy of cess for entry of sugarcane into the premises of a factory for use, consumption or sale therein had authorised the imposition of a cess on entry of cane into a local area for 257 consumption, sale or use in a factory that would have been within Entry 52.
It is sufficient to say that we cannot re write the law for the purpose of saving a portion of it.
Nor is it for the Court to offer any suggestion as to how the law should be drafted in order to keep it within the limits of legislative competence.
As the law enacted by the Legislature stands there is no escape from the conclusion that this entire law must be struck down as invalid.
In view of this conclusion on the first ground raised on behalf of the appellant it is unnecessary to consider the other ground raised in the appeal that section 3 has gone beyond the permissible limits of delegated legislation.
As we have held that the impugned legislation was beyond the legislative competence of the State Legislature the appellants are entitled to the relief asked for.
We accordingly allow the appeal, set aside the order passed by the High Court and order the issue of a writ directing that the respondents do forbear from levying and collecting cess from the appellants on account of arrears of cess for the crushing season 1954 55 and in respect of the crushing season 1955 56 and successive crushing seasons under the U. P. Sugarcane Cess Act, 1956.
The appellants will get their costs here and below.
AYYANGAR, J. I have had the privilege of perusing the judgment just now pronounced, but with the utmost respect regret my inability to agree with the order proposed.
The learned Judges of the High Court held that the impugned enactment was within the scope of Entry 52 of the State Legislative List in Schedule 7 to the Constitution, by placing reliance on the following passage in the Judgment of Das, J. in Emperor vs Munna Lal (1) where the learned Judge said: "Indeed I cannot see why it is not open to Provincial Government or Provincial Legislature to make an industrial survey of the Province and to divide up the entire province into industrial areas (1) I.L.R. [1942] All. 302, 328. 33 258 or factory areas or mill areas or in any other kind of areas, and each one of these areas may be notified and be treated as a local area.
And once such areas come into existence and remain in operation they can be regarded as local areas within the meaning of Entry No. 45 of List II in which a cess may be levied.
" In other words, the view which they favoured was to read the expression "local area".
practically to mean any "area" entry into which was by the relevant fiscal statute, made the subject of taxation.
In my opinion that is not a correct interpretation of the entry and agree with my learned brethren that having regard to the historical material, which has been exhaustively set out and discussed in their judgment, the word "local area" can in the entry designate only a predetermined local unit a unit demarcated by statutes pertaining to local self government and placed under the control and administration of a local authority such as a municipality, a cantonment, a district or a local board, an union or a panchayat etc.
and not any region, place or building within the State which might be defined, described or demarcated by the State 's taxing enactment as an area entry into which is made taxable.
But there my agreement stops and we diverge.
In my opinion, this construction of the expression "local area" in entry 52 does not automatically result in the invalidity of the impugned enactment and of the levy under it, but the extent to which, if any the charging section exceeds the power conferred by the entry would depend on matters which have not been the subject of investigation, and it is this point that I shall elaborate in the rest of this judgment.
It is unnecessary for the purposes of this case and possibly even irrelevant, to determine the precise scope, content and incidents of an "octroi" duty except that in the context in which it appeared in the Scheduled Taxes Rules framed tinder the Government of India Act, 1919, the expression signified a tax levied on entry into an area of an unit of local administration.
It is unprofitable to canvass the question 259 whether a local authority empowered at that date to levy an 'octroi ' might or might not lawfully confine the levy to entry for consumption alone, to use alone or for sale alone.
But when that entry was refashioned and enacted as item 49 of the Provincial Legislative List under the Government of India Act, 1935 (in terms practically identical with Entry 52 in the State Legislative List under the Constitution), the matter was no longer left in doubt.
The new item ran: "Cesses on the entry of goods into a local area for consumption, use or sale therein".
In connection with the use of the words "for consumption, use or sale therein" in the item three matters deserve notice: (1) Where the entry into the "local area" was not for one of the purposes set out in it, viz., for consumption, use or sale therein, but the entry was, for instance in the course of transit or for warehousing during transit, the power was not available; in other words, a mere entry could not per se be made a taxable event.
(2) It was sufficient if the entry was for any one of the three purposes; the use of the disjunctive 'or ' making this clear.
(3) The passage of goods from one portion of a local area to another portion in the same local area, would not enable a tax to be levied, but the entry has to be "into the local area", i.e., from outside the local area.
It is the second and the third of the above features that call for a more detailed examination in the context of the points requiring decision in the present case.
With this background I shall analyse the terms of section 3(1) of the Act (United Provinces Act XXII of 1956) to ascertain where precisely the provision departs from the scope or content of entry 52.
I will read that section which runs: "3.
The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory for use, consumption or sale therein: Provided that the State Government may likewise remit in whole or in part such cess in respect 260 of cane used or to be used in factory for any limited purpose specified in the notification.
Explanation: If the State Government, in the case of any factory situate outside Uttar Pradesh, so declare, any place in Uttar Pradesh set apart for the purchase of cane intended or required for use, consumption or sale in such factory shall be deemed to be the premises of the factory.
" Leaving the Explanation for the present, there are two matters which require advertence: (1) The first was the point emphasised by Mr. Sanyal for the appellant, that entry into the premises of a factory "for the purpose of consumption, use or sale therein" is fastened on as the taxable event treating the factory premises as if that were itself a "local area".
(2) Apart from entry into factory premises for use, consumption or sale therein, entry of the cane into other places within the local area, i.e., into "unit for local administration" is not made the subject of tax levy.
The second of the above matters cannot invalidate the legislation, because a power to tax is merely enabling, and apart from any question of discrimination under article 14 which does not arise for consideration before us the State is not bound to tax every entry of goods into "a local area".
Again, the tax could undoubtedly be confined to entry of goods into a "local area" for consumption or use in particular modes; in other words, there could be no legal objection to the tax levy on the ground that it does not extend to entry of goods into "a local area" for every type of consumption or use.
In my judgment the real vice of the charging section 3(1) lies not in that it Confines the levy to cases where the entry is for purposes of consumption etc.
in a factory but 'in equating the premises of a factory with "a local area" entry of goods into which, occasions the tax.
Another way of expressing this same idea would be to say that whereas under Entry 52 the movement of goods from within the same local.
area in which the factory is situated into the premises of the factory, could not be the subject of tax liability, because there 261 would in such cases be no entry of the goods "into a local area" under section 3(1) of the Act, not merely is the movement of goods into the factory from outside the 'local area ' in which the factory is situate made the subject of tax, but the words used are capable of imposing the tax even in those cases where the entry into the factory is from within the same local area.
What I have in mind may be thus illustrated: If factory A situated in Panchayat area B gets its supply of cane from outside the Panchayat area, the levy of the tax on the entry of the cane into the Panchayat area would clearly be covered by entry 52.
The State is not bound to tax every entry of the cane into the area but might confine the levy to the entry of the cane for the purpose of consumption in a factory.
The tax might be levied and collected at the border of the Panchayat area but there is no legal obligation to do so, and the place at which the entry of the goods is checked and the duty realised is a matter of administrative machinery which does not touch on the validity of the tax imposition.
It would thus not detract from the validity of the tax if by reason of convenience for effecting collection, the tax was levied at the stage of entry into the premises of a factory.
So long, therefore, as the cane which enters a factory for the purpose of consumption therein comes from outside that local unit of administration in which the factory is situated, in my opinion it would be covered by the words of entry 52 and well within the legislative competence of the State Government.
The language of section 3, as it stands appears, however, also to extend to cases where the supply of cane to a factory is from within the same local unit of administration; in other words, where there is no entry of the cane into the local area as explained earlier.
If this were the true position, the enactment cannot be invalidated as a whole.
It would be valid to the extent to which the tax is levied on cane entering a factory for the purpose of consumption etc.
therein from outside the local area, within which the factory premises are situated, and only invalid where it out steps this limitation.
262 The next question is whether this is a case where the valid and invalid portions are so inextricably interwoven as to leave the Court no option but to strike down the entire enactment as invalid as beyond the legislative competence of the State, or whether the charging provision could be so read down as to leave the valid portion to operate.
In my opinion, what is involved in the case before us is not any problem of severance, but only of reading down.
Before taking up this question for discussion two objections to the latter course have to be considered.
The first is that this aspect of the matter was not argued before us by learned Counsel for the State as a ground for sustaining the validity of the legislation.
In my judgment this is not an objection that should stand in the way of the Court giving effect to a view of the law if that should appear to be the correct one.
In making this observation one has necessarily to take into account the fact that legislation in nearly this form, has been in force in the State for over twenty years, and though its vires was once questioned in 1942, that challenge was repelled and the tax levy was held valid and was being collected during all this period.
The sugar cane cess has been a prime source of State Revenue for this length of time and this Court should not pronounce such a legislation invalid unless it could not be sustained on any reasonable ground and to any extent.
The second ground of objection which has appealed to my learned brethren but with which, I regret, I cannot concur is that it would require a rewriting of the Act to sustain it.
Now if the first paragraph of sub section
(1) of section 3 bad read: "The State Government may by notification in the official gazette impose a cess not exceeding four annas per maund on the entry of the cane into the premises of a factory (from outside the local area in which the factory premises were situate) for use, consumption or sale therein:" (The words in brackets added by me) 263 the levy would be entirely within entry 52 even according to my learned brethren.
The question is whether the implication of these words would be a rewriting of the provision or whether it would be merely reading the existing provision so as to confine it to the powers conferred upon the State Legislature by the relevant legislative entry.
In view of the strong opinion entertained by my learned brethren, I have given the matter the utmost consideration, but I feel that the words which I have suggested are a permissible mode of construction of a statute by which wide words of an enactment which would cover an event, contingency or matter within legislative power as well as matters not within it, are read as confined to those which the law making only had authority to enact.
In my judgment the opinion of the Federal Court in In re Hindu Women 's Rights to Property Act, 1937 (1), affords a useful analogy to the present case.
The enactment there impugned provided for the devolution or succession to "property" in general terms which would have included both agricultural as well as nonagricultural property, whereas the Central Legislature which enacted the law had no power to deal with succession to agricultural property.
The contention urged before the Court was that by the use of the expression "property", the legislature had evinced an intention to deal with property of every type and that it would be rewriting the enactment and not carrying out the legislative intent if the reference to "property" in the statute were read as "property other than agricultural property".
Dealing with this contention, Sir Maurice Gwyer, delivering the opinion of the Court said: "No doubt if the Act does affect agricultural land in the Governors 'Provinces, it was beyond the competence of the Legislature to enact it: and whether or not it does so must depend upon the meaning which is to be given to the word "property" in the Act.
If that word necessarily and inevitably comprises all forms of property, including agricultural land, then clearly the Act went beyond the powers (1) 264 of the Legislature; but when a Legislature with limited and restricted powers makes use of a word of such wide and general import, the presumption must surely be that it is using it with reference 'to that kind of property with respect to which it is competent to legislate and to no other.
The question is thus one of construction, and unless the Act is to be regarded as wholly meaningless and ineffec tive, the Court is bound to construe the word "property" as referring only to those forms of property with respect to which the Legislature which enacted the Act was competent to legislate; that is to say, property other than agricultural land. . .
The Court does not seek to divide the Act into two parts, viz., the part which the Legislature was competent, and the part it was incompetent, to enact.
It holds that, on the true construction of the Act and especially of the word "property" as used in it, no part of the Act was beyond the Legislature 's powers.
" The Court accordingly held that the Hindu Women 's Rights to Property Act, 1937, applied to non agricultural property and so was valid.
In this connection it might be interesting to refer to the decision in Blackwood vs Queen (1) which Sir Maurice Gwyer, C.J., referred to with approval.
That case related to the validity of a duty imposed by the Legislature of Victoria (Australia) on the personal estates of deceased person.
The learned Chief Justice observed "The Judicial Committee construed the expression "personal estate" occurring in the statute to refer only to: "such personal estate as the colonial grant of probate conferred jurisdiction on the personal representatives to administer, whatever the domicile of the testator might be, that is to say, personal estate situate within the Colony, in respect of which alone the Supreme Court of Victoria had power to grant probate: Their Lordships thought that "in imposing a duty of this nature the Victorian Legislature also was contemplating the property which was under its own hand, and did not intend to levy a tax in respect of property (1) 265 beyond its jurisdiction".
And they held that "the general expressions which import the contrary ought to receive the qualification for which the appellant contends, and that the statement of personal property to be made by the executor under section 7(2) of the Act should be confined to that property which the probate enables him to administer" (1).
To confine the tax to the limitations subject to which it could, under the Constitution, be levied is, in my opinion, not an improper method of construing the statute.
The manner in which the word "property" was read down by the Federal Court in In re Hindu Women 's Rights to Property Act, 1937 (1) and the word "personal property" construed by the Privy Council in Blackwood vs Queen (2) make in my opinion less change in the text of the impugned provision than the addition of the words I have set out above, which after all are words implicit in the power conferred on the State Legislature.
I would, therefore, hold that the charging section would be invalid and beyond the legislative competence of the State of Uttar Pradesh only in so far as it seeks to levy a tax on cane entering a factory from within the same local area in which the factory is situate and that in all other cases the tax is properly levied; and that the impugned section could and ought to be so read down.
The matter not having been considered from this aspect at earlier stages, we have necessarily no material before us for adjudicating upon whether tax levied or demanded from the appellant is due and if so to what extent.
We have nothing before us to indicate as to how far the cane, the entry of which into the factory of the appellant is the subject of the impugned levy, has moved into the factory from outside the local unit in which the factory is situated or originated from within the same local area.
I consider that without these matters being investigated it would not be possible to adjudicate upon the validity of the tax demanded from the appellants.
There is one matter to which it is necessary to (1) Per Sir Maurice Gwyer, C. J. , 23, (2) 34 266 advert which I have reserved for later consideration, viz., the validity of the Explanation to section 3(1)of the Act.
It would be apparent that the Explanation was necessitated by the terms of sub section
(1) of section 3 which equated "factory premises" with "local areas", or rather rendering factory premises the sole local areas entry into which occasioned the tax.
So far as the purchasing centres which are dealt with in the Explanation are concerned, the cane that moves into them from outside the "local area" where these centres are would clearly be covered by Entry 52, since the purpose of the movement into the centre is on the terms of the provision for effecting a sale therein.
In other words, the same tests which I have discussed earlier in relation to entry into factory premises, would apply mutates mutandis to these purchasing centres and in so far as a tax is levied on the movement of the cane from outside the local area the levy would be legal and in order.
I would read down the Explanation in the same manner, as I have read down the main charging provision so as to confine the levy to entry from outside 'that "local area" local area being understood in the sense already explained.
I would accordingly allow the appeal, and remand it to the High Court for investigating the material facts which I have mentioned earlier with a direction to pass judgment in accordance with the law as above explained.
BY COURT.
In accordance with the opinion of the majority the appeal is allowed, the order passed by the High Court is set aside and a writ be issued directing that the respondents do forbear from levying and collecting cess from the appellants on account of arrears of cess for the crushing season 1954 55 and successive crushing seasons under the Uttar Pradesh Sugarcane Cess Act, 1956.
The appellants will get their costs here and below.
Appeal allowed.
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Entry 52 of List II of the Seventh Schedule to the Consti tution empowered State Legislatures to make a law relating to "taxes on the entry of goods into a local area for consumption, use or sale therein".
The U. P. Legislature passed the U. P. Sugarcane Cess Act, 1956, which authorised the State Government to impose a cess on the entry of cane into the premises of a factory for use, consumption or sale therein.
The appellant contended that the premises of a factory was not a 'local area ' within the meaning of Entry 52 and the Act was beyond the competence of the legislature.
243 Held, (per Imam, Kapur, Das Gupta and Raghubar Dayal, jj.) that the impugned Act was beyond the competence of the legislature and was invalid.
The premises of a factory was not a "local area" within the meaning of Entry 52.
The proper meaning to be attached to the words "local area" in Entry 52 was an area administered by a local body like a municipality, a district board, a local board, a union board, a Panchayat or the like.
In re: the Central Provinces & Beray Act No. XIV of 1938, , Navinchandra Mafatlal vs The Commissioner of Income tax, Bombay City, [1955] 1 S.C.R. 829, State of Madras vs Gannon Dunkerley & Co., Ltd., ; and South Carolina vs United States, , referred to.
Emperor vs Munnalal, I.L.R. 1942 All. 302, disapproved.
Per Ayyangar, J.
The Act was invalid only in so far as it sought to levy a tax on cane entering a factory from within the same local area in which the factory was situate and was valid in other cases.
It was permissible to read the Act so as to confine the tax to the limitations subject to which it could be constitutionally levied and to strike down that portion which out stepped the limitations.
In re Hindu Women 's Rights to Property Act, 1937, and Blackwood vs Queen, , applied.
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1083.txt
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Civil Appeal No. 3011 of 1979.
From the Judgment and Order dated the 7th September, 1979 of the Patna High Court in Election Petition No. 4 of 1977.
Shanti Bhushan and M.P. Jha for the Appellant.
S.K. Sinha for the Respondent.
The Judgment of the Court was delivered by VARADARAJAN, J.
This election appeal is directed against the judgment of the Patna High Court dismissing Election Petition No. 4 of 1977 with costs of Rs. 1000/ .
The appellant Dharmesh Prasad Verma, who is stated to have contested the election as a Janata candidate, had pleaded four items of corrupt practice in his election petition filed against the respondent Faiyazal Azam who is stated to have contested the election as a Congress I candidate.
The poll in this case was held on 12.6.1977 for the election of a member of the Bihar Legislative Assembly from No. 5 Sikta Constituency in West Champaran district.
The appellant secured 1795 votes while the respondent secured 28324 votes and was declared elected on 15.6.1977.
The election petition was filed on 18.7.1977.
The Legislative Assembly was dissolved in 1980 and fresh election had been held in that year and the respondent is stated to have contested as a non Congress I candidate and to have been elected from the same constituency.
The appellant is, however, interested in pursuing this election petition relating to the election of the year 1977 in order to prove corrupt practice on the part of the respondent.
Mr. Shanti Bhushan, Senior Counsel, appearing for the appellant, restricted his arguments to the first charge alone and that too regarding the use of the jeep USJ 5226 which is alleged to have belonged to one Kabir Ahmed.
That charge is that respondent committed the corrupt practice falling under section 123(5) of the Representation of the People Act, 1951 (hereinafter 14 referred to as the "Act") by procuring and using the jeep for the free conveyance of voters to the polling station on the date of poll.
The respondent denied the charge in his written statement and contended that the appellant had not complied with the mandatory provisions of sections 81, 82 and 83 read with order VI, Rule 15 of the Code of Civil Procedure and section 117 of the Act and that the election petition is, therefore, liable to be dismissed.
The learned Single Judge who tried the election petition, after observing that it is common knowledge that every politician realises the importance of vehicles during general elections, noticed this Court 's observations in Rahim Khan vs Khurseed Ahmed that proceedings arising out of election petitions are quasi criminal in nature and that the evidence relating to corrupt practices should be scrutinized with scrupulous care and merciless severity, and then proceeded to consider the evidence adduced by the parties.
On the evidence the learned Judge found that the jeep bearing No. USJ 5226 while carrying five ladies was seized by the District Magistrate and the Superintendent of Police of the district from a road near a canal situate about 1.5 or 2 miles away from the Sarkiatola booth on the date of the poll and that the five ladies including Murati @ Deokalia (P.W. 19), Mehrunnissa (P.W. 11) and Rasulia (P.W. 42) were voters who were being carried free of cost for casting votes on behalf of the respondent.
The learned Judge found that at the time of the seizure of the jeep it was driven by Kabir Ahmed 's nephew Tabrez Ahmed and that Kabir Ahmed was a great friend of the respondent and he and his father worked for the respondent in the election and were present in the booth on the date of the poll and that the respondent 's polling agent Manager Prasad stood surety for the release of the jeep.
However, the learned Judge held that these facts are not sufficient by themselves to hold that the respondent himself procured the jeep from Kabir Ahmed.
The learned Judge further found that since the jeep with the voters was caught not at the polling station but at some distance away from it, in any event, it was only a case of an attempt at corrupt practice and not corrupt practice itself as per section 123(5) of the Act.
Thus the learned Judge rejected the appellant 's case in regard to this instance of corrupt practice as also the other instances and dismissed the election petition.
15 Section 123(5) of the Act read thus: "section 123.
The following shall be deemed to be corrupt practice for the purpose of this Act: (1) . . . . (2) . . . . (3) . . . . (4) . . . . (5) The hiring or procuring, whether on payment or other wise, of any vehicle or vessel by a candidate or his agent or by any other person with the consent of a candidate or his election agent, or the use of such vehicle or vessel for the free conveyance of any elector other than the candidate himself, the members of his family or his agent, to or from any polling station provided under section 25 or a place fixed under sub section(1) of section 29 for the poll: Provided that the hiring of a vehicle or vessel by an elector or by several electors at their joint costs for the purpose of conveying him or them to and from any such polling station or place fixed for the poll shall not be deemed to be a corrupt practice under this clause if the vehicle or vessel so hired is a vehicle or vessel not propelled by mechanical power: Provided further that the use of any public transport vehicle or vessel or any tram car or railway carriage by any elector at his own cost for the purpose of going to or coming from any such polling station or place fixed for the poll shall not be deemed to be a corrupt practice under this clause.
Explanation: In this clause, the expression 'vehicle ' means any vehicle used or capable of being used for the purpose of road transport whether propelled by mechanical power or otherwise and whether used for drawing other vehicles or otherwise." 16 In clauses (5) of section 123 the word "or" is used in several places and the word "and" is used in two places in the first proviso and the explanation.
Prima facie, Parliament must be deemed to have used the word "or" and "and" for different purposes or objects.
If the matter is res integra it could be said that the main clause (5) consists of two separate parts, namely (1) the hiring or procuring, whether on payment or otherwise, of any vehicle or vessel by a candidate or his agent or by any other person, with the consent of a candidate or his election agent for the free conveyance of any elector to or from any polling station, or (2) the use of any vehicle or vessel by any candidate or his agent or by any other person with the consent of a candidate or his election agent for the purpose of free conveyance of any elector to or from any polling station.
It is true that in the latter part of clause (5) the word "such" issued before the words "vehicle or vessel for the free conveyance of any elector to or from any polling station".
But the matter is no longer res integra.
In Joshibhai Chunibhai Patel vs Anwar Beg Mirza Hidayattullah, C.J. speaking for himself and G.K. Mitter, J. has observed: "This brings us to the examination of section 123(5) with a view to finding out what are its requirements.
We have already indicated that in our opinion the election petitioner must prove in addition to the other ingredients of the section that the vehicle was used for free conveyance of voters which ingredient we have stated was not attempted to be established in the case. . .
This section defined one of the corrupt practices and it consists of hiring and procuring whether on payment or otherwise of any vehicle.
This hiring and procuring must be by any other person with the consent of the candidate or his election agent and the hiring according to the section must be for the free conveyance of any elector other than the candidate himself or members of his family or his agent to and from any polling station.
It will, therefore, appear that the section requires three things, (1) hiring or procuring of a vehicle; (2) by a candidate or his agent etc.
and (3) for the free conveyance of an elector.
It will be noticed that the section also speaks of the use but it speaks of the use of such vehicle which 17 connects the two parts, namely, hiring or procuring of vehicle and the use.
The requirement of the law therefore is that in addition to proving the hiring or procuring and the carriage of electors to and from any polling station, it should also be proved that the electors used the vehicle free of cost to themselves.
" In Razik Ram vs Jaswant Singh Chouhan, Sarkaria, J. speaking for himself and Alagiriswami, J. has observed: "On analysis, clause (5) of Section 123 falls into two parts.
The requirements of the first part are; (i) The hiring or procuring, whether on payment or otherwise, of any vehicle or vessel for the free conveyance of voters (ii) Such hiring or procuring must be by a candidate or his election agent or by any other person with the consent of a candidate or of his election agent.
The second part envisages the "use of such vehicle or vessel for the free conveyance of any elector (other than the candidate himself, the members of his family, or his election agent) to or from any polling station".
The two parts are connected by the conjunction "or" which is capable of two constructions.
In one sense, it is a particle coordinating the two parts of the clause and creating an alternative between them.
In the other sense which is akin to the sense of "and" it can be construed as conjoining and combining the first part of the clause with the second.
The latter construction appears to comport better with the aim and object of the amendment of 1966.
In this connection, it is not worthy that even before the amendment, this Court in Balwan Singh vs Lakshmi Narain ; , held that in considering whether a corrupt practice described in Section 123(5) is committed conveying of electors cannot be dissociated from the hiring of a vehicle.
Even if the word "or" is understood as a coordinating conjunction introducing alternatives then also a petitioner in order to succeed on the ground of a corrupt 18 practice under the second part of the clause, must prove, in addition to the use of the vehicle or vessel for the free conveyance of any elector to or from any polling station, the hiring or procuring of that vehicle or vessel.
This is so because the word "such" in the phrase introduced by the 1966 amendment, expressly imports these elements of the first into the second part of the clause.
In the view we take we are fortified by the dictum of this Court in Joshibhai Patel vs Anwar Beg Mirza ; , wherein Hidayatullah, C.J., speaking for the Court analysed the requirements of the clause, thus: It will be noticed that this section also speaks of the use of such vehicle which connects the two parts, namely, hiring or procuring of vehicle and its use.
The requirement of the law therefore is that in addition to proving the hiring or procuring and the carriage of electors to and from any polling station, it should also be proved that the electors used the vehicle free of cost to themselves.
" In Dadasahib Dattatraya Pawar vs Pandurang Raoji, Jagtap, Jaswant Singh, J. speaking for the Court has observed: In regard to section 123(5) of the Representation of People Act, 1951 which before its amendment by Act 47 of 1966 was identical in terms with section 144 1(3) of the Act, it was held by this Court in Shri Balwant Singh vs Shri Lakshmi Narain that in considering whether a corrupt practice described in section 123(5) is committed conveying of electors cannot be dissociated from the hiring of a vehicle.
It has also been held by this Court in Ch.
Razik Ram vs J.S. Chouhan and Ors.
that 19 to establish the corrupt practice under section 123(5) of the Representation of the People Act, 1951, it is necessary for an election petitioner to prove (i) that any vehicle or vessel was hired or was procured, whether on payment or otherwise by the returned candidate or by his election agent or by any other person with the consent of the candidate or of his election agent; (ii) that it was used for conveyance of the electors to or from any polling station and (iii) that such conveyance was free of cost to the electors.
Failure to substantiate any one of these ingredients leads to the collapse of the whole charge.
" We shall now proceed to consider the evidence adduced by the parties alleged by the appellant.
On the day of poll, 12.6.1977 J.K. Dutta, P.W. 69, the then District Magistrate, West Champaran was proceeding to Sikta in a jeep accompanied by the Superintendent of Police in the course of his duties in relation to the election.
Finding a jeep carrying some ladies, P.W. 69 instructed the Superintendent of Police to make the necessary enquiry.
After the necessary enquiry was made by the police the jeep with the occupants and the driver was taken to the police station by the Station House Officer, Sikta Police Station, who found the jeep having been detained by the District Magistrate and the Superintendent of Police on the road near a canal situate about 1.5 or 2 miles away from the Sarakiatola booth when he was proceeding towards Parsa village with some policemen.
Subsequently, the ladies who were in the jeep were taken from the police station by a government jeep to the place from where the private jeep with the occupants and the driver was taken by the officials to the Sikta Police Station.
Anil Kumar, P.W. 73.
the then Superintendent of Police, Bettiah who accompanied P.W. 69, has given a little more detailed evidence regarding what happened when he was accompanying P.W. 69 to Sikta.
He has deposed that since they suspected that the four or five rustic ladies who were being carried by the jeep could not be its owners, he seized the jeep, evidently under the impression that the ladies were being carried free of charge to the booth, near a canal situate about 1.5 or 2 miles from the booth and took it alongwith the driver and its occupants to the police station.
After the statements of the ladies and the driver were recorded by the Station House Officer at the Sikta Police Station, they were taken back 20 by a government jeep to the place from which the private jeep in which they were travelling earlier was seized so that they could go and cast their votes.
P.Ws. 69 and 73 do not remember the number of the jeep and P.W. 69 does not know to whom the jeep belonged.
Amal Ranjan Sarkar, P.W. 81, is the Station House Officer who took the jeep with its occupants and the driver to the police station after he found the jeep having been detained by P.Ws. 69 and 73.
Kabir Ahmad 's nephew Tabrez Ahmad was driving the jeep.
P.W. 81 obtained the statement, exhibit 13, written and signed by Tabrez Ahmad as also the statements of five ladies who were found travelling in the jeep.
The jeep USJ 5226 which was taken into custody was later released to Kabir Ahmad on 17.6.1977 under exhibit (c) after one Managar Prasad, who is proved to have been the polling agent of the respondent, furnished security under exhibit 14 (b).
There is evidence of Sheikh Ejazul, P.W. 8 that the jeep USJ 5226 which was used in the election belonged to Kabir Ahmad and that it was driven by Tabrez Ahmad.
There is evidence to show that Kabir Ahmad 's brother Nazir Ahmad was another polling agent to the respondent like Managar Prasad.
The learned Trial Judge has found that Managar Parasad was the respondent 's polling agent.
This fact, to which our attention was drawn by Mr. Shanti Bhushan was not disputed by the respondent 's learned counsel.
The respondent, R.W. 45 has admitted that Kabir Ahmad 's brother Nazir Ahmad was his polling agent and that Tabrez Ahmad is the nephew of Kabir Ahmad and Nazir Ahmad.
But he has stated that the does not know if Managar Prasad whom he knows was his polling agent or whether he had furnished security for the release of the jeep by the Police to Kabir Ahmad.
D.N. Pandey, P.W. 75 the then Anchal Adhikari of Sikta who had been deputed to work as the Sub Zonal officer during the election in 1977 has also deposed about the seizure of Kabir Ahmad 's jeep driven by Tabrez Ahmad.
He was present at the Sikta Police Station when the jeep with some women sitting in it was brought to the police station.
He has stated that Kabir Ahmad, who was very friendly with respondent, came to the police station to get the women and the jeep released from the custody of the police.
The evidence of Muratiwa @ Deokha, P.W. 10, Mehrunoissa, P.W. 11 and Rasulia, P.W. 42 who travelled in the jeep alongwith two other ladies including Queresha P.W. 67 21 is that Kabir Ahmad got them released from the police station on the day of the poll after they and the two other ladies who were travelling with them by the jeep had been taken to the police station.
The aforesaid evidence of P.Ws. 69, 73, 81, 75, 10, 11 and 42 which has not been seriously challenged in the cross examination establishes satisfactorily that the jeep USJ 5226 belonging to Kabir Ahmad was seen being driven by Kabir Ahmad 's nephew Tabraz Ahmad with five women electors including P.Ws. 10, 11, 42 and 67 on the road near a canal situate about 1 or two miles away from the Sarakiatola booth on the day of the poll, that the jeep with the ladies and the driver was seized on suspicion that it was being used for carrying electors to the booth free of cost, that the statements of the five ladies and the driver Tabrez Ahmad were recorded at the Sikta Police Station by the Station House officer, P.W. 81, in the presence of P.Ws. 69, 73 and 75, that Kabir Ahmad got the ladies released from police custody on the same day and they were thereafter brought by a government jeep from the police station to the place from where they had been previously taken to the police station in Kabir Ahmad 's jeep, that the jeep was released to Kabir Ahmad on 17.6.1977 under exhibit 14(c) and that the respondent 's polling agent Manager Prasad furnished security under exhibit 14(b) for the release of the jeep to Kabir Ahmad.
The appellant 's contention is that the respondent procured the jeep USJ 5226 from Kabir Ahmad and it was used for the conveyance of electors free of cost to themselves for the purpose of casting votes in favour of the respondent and that the respondent is thus guilty of corrupt practice under section 123(5) of the Act.
The evidence referred to above establishes the requirement of clause (5) of s 123 that the vehicle USJ 5226 which is proved to belong to the respondents close friend Kabir Ahmad was used for the conveyance of electors who were proceeding to cast votes in favour of the respondent on the day of the poll.
It is not possible to agree with the learned Trial Judge that what this evidence establishes is only an attempt to convey electors to the polling booth and not actual conveyance of the electors merely because the jeep with the electors who were being carried in it was intercepted at a distance of 1 or 2 miles away from the booth and taken to the police station by the official who had suspected that an election 22 offence had been committed.
The jeep was seized when it was being used for carrying electors who were proceeding to vote for the respondent, no doubt at a distance of 1 or 2 miles away from the polling booth.
Even the learned counsel for the respondent did not contend before us that what has.
been established is only an attempt at conveying electors by the jeep of Kabir Ahmad to the polling booth and not actual conveyance.
There is overwhelming evidence on record including that of the Anchal Adhikari, P.W. 75 who had worked as the Secretary of a Cement Committee of which the respondent was the President, to show that the respondent is a good friend of Kabir Ahmad, whose brother Nazir Ahmad was admittedly the respondent 's polling agent.
The respondent had used to him for the purchase of a motor cycle for the benefit of Nazir Ahmad who admittedly advanced the money required for its purchase and was using the vehicle which stood nominally registered in the name of the respondent.
The respondent has professed ignorance in his evidence whether Kabir Ahmad owned the jeep USJ 5226 at all and he has denied that the jeep was used for carrying electors for casting votes in his favour on the day of poll.
A reading of the evidence of R.W. 45 shows that his evidence is totally unreliable.
We may state at this stage that the respondent 's learned counsel Mr. S.K. Sinha found it practically impossible to deny any aspect of the appellant 's case in regard to this item of corrupt practice except the part relating to the procurement of the jeep USJ 5226 by the respondent from its owner Kabir Ahmad.
We find that this part of the appellants case relating to this item of corrupt practice is clearly established by the evidence referred to above.
The next point for consideration is whether the electors were carried free of cost to themselves by the jeep USJ 5226 on the day of poll.
On this aspect of the appellants case there is direct evidence of the electors P.Ws. 10, 11 and 42 besides that of some other evidence.
The appellant 's polling agent Jang Bahadur Mian, P.W.6, has stated in his evidence that the jeep 23 USJ 5226 was being used for carrying electors to cast votes in favour of the respondent, that the respondent met the expenses of electors and that the jeep was seized by the District Magistrate and the police on the day of poll.
He has denied the suggestion that the jeep USJ 5226 was not used for carrying electors at all.
In view of the other evidence referred to above we are of the opinion that there is no substance at all in this suggestion made P.W. 9 who was an elector from Parsa village in the election held in 1977 has stated in his evidence that electors were carried by Kabir Ahmad 's jeep on behalf of the respondent.
The suggestion made to him and denied by him is that he has given false evidence.
The electors P.Ws. 10, 11 and 42 belong to same Parsa Village.
P.W. 10 has stated that Kabir Ahmad has asked her to vote for the candidate whose symbol consisted of cow and calf, i.e. the respondent, that she and four other women electors were being carried in Kabir Ahmad 's jeep driven by Kabir Ahmad 's nephew when the jeep was seized and taken to the police station and that they did not pay anything to the owner or the driver of the jeep for their conveyance.
To the same effect is the evidence of P.Ws. 11 and 42 who also have stated clearly in their evidence that they did not pay anything for their conveyance to the owner or the owner or the driver of the jeep and that they and the other women were carried in the jeep free of cost to themselves.
What has been elicited from P.W. 10 in the cross examination is that she does not know the names of the other ladies who travelled with her in the jeep.
P.W. 11 has denied the suggestion that she has been tutored to give false evidence.
P.W. 42 has denied the suggestion that she was not an elector at all and that she has given false evidence.
P.W. 10 is a Hindu while PWs.
11, 42 and 67 are Muslims.
Yaqub Mian, PW 43, the husband of P.W. 42 also has stated in his evidence that the electors were carried by the jeep free of cost and that after learning that the jeep had been taken to the police station he went to the police station and found that Kabir Ahmad had already obtained the release of the electors from the police.
He too has denied the suggestion that he has been tutored to give false evidence and that he had worked for the appellant in that election.
We are of the opinion that there is no reason for disbelieving the evidence of P.Ws. 10, 11, 42 and 43 that the electors who travelled by the jeep which was intercepted by the officials and taken to the police 24 station were being carried to the polling booth free of cost to themselves for casting their votes in favour of the respondent.
This part of the appellant 's case is clearly proved by the evidence of these four witnesses.
We may state that the respondent 's learned counsel has not disputed that the evidence of these four witnesses proves that the electors were being carried to the booth by the jeep USJ 5226 for casting their votes in favour of the respondent free of cost to themselves.
We find that the evidence referred to above proves the second requirement of clause (5) of section 123 of the Act.
The third point which alone is seriously disputed by the learned counsel for the respondent is the question of procuring Kabir Ahmed 's jeep USJ 5226 by the respondent for carrying electors to vote for him.
Since it has been found that the jeep USJ 5226 belonging to the respondent 's close friend Kabir Ahmed was actually used for the conveyance of voters who were proceeding to cast votes in favour of the respondent free of cost to themselves, the jeep could have been put in use for the purpose either by Kabir Ahmed himself or some other person without reference to the respondent or his agent or it could have been procured by the respondent.
It could not have become available for carrying electors who were proceeding to vote for the respondent in any other manner.
It is not the respondent 's case that Kabir Ahmed or any other person put the jeep to use for carrying electors to vote for him free of cost to themselves without any reference whatsoever to him.
The details relating to the jeep USJ 5226 had been given in the election petition.
The respondent could have made necessary enquiries from Kabir Ahmed, the owner of the jeep and pleaded that the jeep was used for carrying electors for his benefit without any reference to him voluntarily by its owner Kabir Ahmed or by any other person if that were so.
The respondent has not come forward with any such plea.
Therefore, it is not possible to accept the submission of the respondent 's learned counsel Mr. S.K. Sinha that in view of the fact that it is the appellant 's case that Kabir Ahmed is a very close friend of the respondent, Kabir Ahmed himself could have put his jeep to use for carrying electors for the benefit of the respondent without any request for the use or the jeep on the part of 25 the respondent.
Therefore, the only other possibility is that the respondent or someone else acting as his agent had procured the jeep from Kabir Ahmed for the purpose of using it for the benefit of the respondent in connection with the election, namely, to carry electors for voting in his favour free of cost to themselves.
Having regard to this probability we are of the opinion that even slight evidence in this regard would be sufficient for proving this aspect of the appellant 's case.
Regarding this aspect of the appellant 's, case on the side of the respondent there is the interested evidence of the respondent alone and he has stated that he had not asked for any jeep or any other help from Kabir Ahmed in connection with the election held in 1977 and that Kabir Ahmed did not help him in any way in that election.
The evidence of the respondent is absolutely unreliable as stated earlier having regard to the fact that it is clearly established by the evidence that the jeep USJ 5226 belonging to Kabir Ahmed was actually used for carrying electors who were proceeding to vote in favour of the respondent free of cost to themselves and that it was seized by the officials when it was being driven by Kabir Ahmed 's nephew Tabrez Ahmed, white the electors seated in the jeep.
The evidence on record clearly proves and it is not challenged by the respondent 's learned counsel but is on the other hand conceded by him that Kabir Ahmed had helped the respondent by allowing his jeep USJ 5226 driven by his own nephew Tabrez Ahmed for the free conveyance of electors who were proceeding to the booth for voting in favour of the respondent.
The appellant 's polling agent P.W. 6 has stated in his evidence that the respondent had borrowed Kabir Ahmed 's jeep for the conveyance of electors from their respective places to the booth had for their return to their places from the booth.
He has also stated that one of the two jeeps used for carrying electors to vote for the respondent is USJ 5226.
He has denied the suggestion that the jeep USJ 5226 was not used at all for carrying electors on the day of poll.
Sahib Mian, P.W. 16 is a muslim barber belonging to Haripur, which is also known as Sikta.
He was an elector who had cast his vote in the election held in 1977.
He knows the respondent as well as Kabir Ahmed who 26 owns a jeep and a mill at Parsa.
He has deposed that when he was given a share to Kabir Ahmed at his mill in Parsa, three persons including the respondent went there and that the respondent asked, Kabir Ahmed agreed to give it to him.
He has denied the suggestion that he has given false evidence.
P.W. 43 has stated in his evidence that the respondent and Kabir Ahmed went to his village on day prior to the day of the poll and asked him to vote for the respondent and told him that a jeep had been borrowed from Kabir Ahmed to carry voters and that accordingly a jeep driven by Tabrej Ahmed came on the next day and carried female electors.
No doubt, P.W. 43 and his wife P.W. 42 are casual laborers P.W. 43 has denied the suggestion that he had worked for the appellant in that election and that he has been tutored to give false evidence.
There is no satisfactory reason for disbelieving the evidence of these three witnesses P.Ws. 6, 16 and 43 of whom P.W. 6 was no doubt the appellant 's polling agent.
It is not possible to reject the evidence of P.W. 6 merely because he was admittedly the appellant 's polling agent, especially having regard to the fact that his evidence is in a way corroborated by the evidence of P.Ws. 16 and 43.
The respondent R.W. 43 has admitted in his evidence that Kabir Ahmed and others own a mill and that Kabir Ahmed is a partner in that mill business.
As stated earlier, he has admitted that Kabir Ahmed 's brother Nazir Ahmed was his polling agent and that Tabrez Ahmed is the nephew of Kabir Ahmed and Nazir Ahmed.
The evidence of P.W. 75 shows that Tabrej Ahmed did not even hold driving licence when the was found to be driving the jeep USJ 5226 carrying electors to the booth on the day of poll and that he was prosecuted separately for that offence under the Motors Vehicles Act.
There is evidence of Daroga Mahato, P.W. 56, to show that the respondent and Kabir Ahmed were good friends and that Kabir Ahmad 's father Sharif Ahmad was sitting about 100 yards away from the booth on the day of poll.
The learned Trial Judge has found that Kabir Ahmad is a good friend of the respondent and that he and his father had worked for the respondent in the election held in 1977.
Inspite of all these facts the respondent has not called Kabir Ahmad as his witness to deny that he had procured the jeep USJ 5116 from Kabir Ahmed for the conveyance of his electors.
He has not examined even Tabrez Ahmad though he had been admittedly named as one of his witnesses in 27 the list of witnesses submitted on his behalf.
He would say that to the best of his knowledge Kabir Ahmad did not possess any jeep and that he submitted the list of witnesses by merely looking into the voters list without applying his mind because he was pressurized by his lawyer to file a tentative list of witnesses as soon as possible and was informed by his lawyer that if he did not file his list of witnesses he would lose his case on that ground alone.
It is not possible to accept this evidence of the respondent as well having regard to the fact that it is stated without any denial that he himself is a lawyer, it is improbable that he would have been pressurize by his lawyer and that he filed the list of witnesses merely by booking into the voters ' list without applying his mind as to who should be cited as his witness.
In these circumstances, we are of the opinion that it is not possible to place any reliance on the interested evidence of the respondent R.W. 45 on the question of procuring the jeep USJ 5226 from its owner Kabir Ahmad.
The evidence of P.W. 16 is most natural and reliable.
There is absolutely no reason whatsoever for rejecting his evidence which could not be outrode evidence.
We accept the evidence of P.Ws. 6, 16 and 43 on this aspect of the appellant 's case and find that the respondent had procured the jeep USJ 5226 from his close friend Kabir Ahmad for the free conveyance of his electors and that the jeep was, thereafter used for that purpose on the day of poll and seized by the officials P.Ws. 69, 73 and 81 when it was being used for the conveyance of the electors P.Ws. 10,11, 42 and others including P.W. 67 free of cost to themselves.
The appellant has thus proved satisfactorily all the three requirements of clause (5) of section 123 of the Act.
The respondent has therefore, to be held guilty of corrupt practice falling under that clause which is ordinarily difficult to prove.
We think that such corrupt practice which is very largely resorted to in the elections could be avoided by either locating polling booths within walking distance of the electors or by having mobile polling stations.
We accordingly allow this appeal in regard to this item of corrupt practical one with costs qualified Rs. 5,000 and hold that the res 28 pondent was guilty of corrupt practice under section 123(5) of the Act in regard to his election in 1977 as a member of the Bihar Legislative Assembly from No. 5 Sikta Constituency in West Champaran district.
N.V.K. Appeal allowed.
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The respondent was elected to a State Assembly Constituency.
The appellant who had contested the election pleaded four items of corrupt practice in his Election Petition filed against the respondent.
The Legislative Assembly to which the respondent was elected has been dissolved and a fresh election has been held.
Notwithstanding, the fresh election the appellant pursued his election petition in order to prove corrupt practice on the part of the respondent.
In his election petition, the appellant pleaded that the respondent committed a corrupt practice falling under section 123 (5) of the Representation of the People Act, 1951 by procuring and using a jeep for the free conveyance of voters to the polling station on the date of poll.
The respondent denied the charge and contended that the appellant had not complied with the mandatory provisions of sections 81, 82 and 83 of the Act read with Order VI, Rule 15 of the Code of Civil Procedure and section 117 of the Act and the election petition was therefore liable to be dismissed.
The Judge who tried the petition, followed this Court 's ruling in Rahim Khan vs Khurshid Ahmed that Proceedings arising out of 12 election petitions are quasi criminal in nature and that evidence relating to corrupt practices should be scrutinized with scrupulous care and merciless severity; considered the evidence adduced by the parties, and found that the jeep bearing No. USJ 5226 while carrying five ladies including P.Ws. 10, 11, 42 who were voters, free of cost, for casting votes on behalf of the respondent was seized by the District Magistrate and the Superintendent of Police about 1.5 miles from the polling booth and that at the time of the seizure, the jeep was driven by a close friend of the respondent and that this friend had worked for the respondent in the election and was present in the booth on the date of the polling and that the respondent 's polling agent stood surety for the release of the jeep.
The Judge held that these facts were not sufficient to hold that the respondent procured the jeep, and that since the jeep with the voters was caught not at the polling station but at some distance way from it, it was only a case of an attempt at corrupt practice and not corrupt practice itself under section 123 (5) of the Act, and dismissed the election petition.
Allowing the appeal, this Court, ^ HELD: 1.
The requirement of the law in regard to corrupt practice under section 123 (5) of the Representation of the People Act 1951 is that in addition to proving the hiring or procuring of any vehicle or vessel for the carriage of voters to and from any polling station it should also be proved that the electors used the vehicle or vessel free of cost to themselves.
[17A B] 2.
Section 123 (5) requires three things, (1) hiring or procuring of a vehicle; (2) by a candidate or his agent etc.
and (3) for the free conveyance of an elector.
[16H] Joshibhai Chunibhai Patel vs Anwar Beg Mirza, ; , Razik Ram vs Jaswant Singh Chouhan, at 775 and Dadasahib Dattatraya Pawar vs Pandurang Raoji Jagtap, ; at 528, refereed to.
The appellant has proved satisfactorily all the three requirements of clause (5) of section 123 of the Act.
The respondent has therefore to be held guilty of corrupt practice falling under this clause which is ordinarily difficult to prove.
[27F] In the instant case, the evidence of P.Ws. 6, 16 and 43 reveal that the respondent had procured the jeep USJ 5226 from his close friend, Kabir Ahmed for the free conveyance of his electors and that the jeep was, thereafter, used for that purpose on the day of poll, and seized by the officials, P. W 69 District Magistrate, P.W. 73 Superintendent of Police and P.W. 81 Station House Officer where it was being used for the conveyance of the electors P.Ws. 10, 11, 42 and others including P.W. 67 free of cost to themselves.
The appellant s case that the respondent committed corrupt practice is clearly established.
[27D E] 13 4.
Corrupt practice such as in the instant case is very largely resorted to in the elections and could be avoided by either locating polling booths within walking distance of the electors or by having mobile polling stations.
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4818.txt
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Appeals Nos. 147 & 148 of 1955.
Appeals from the judgment and order dated September 30, 1953, of the former Bombay High Court in Special Civil Applications Nos. 1008 and 1611 of 1953.
V. M. Limaye, Mrs. E. Udayaratnam and section section Shukla, for the appellants (in both the appeals).
H. N. Sanyal, Additional Solicitor General of India, B. Ganapathy Iyer, K. L. Hathi and R. H. Dhebar, for the respondent.
344 1960.
August 25.
The Judgment of Sinha, C. J., Kapur, Gajendragadkar and Wanchoo, JJ., was delivered by Gajendragadkar, J. Subba Rao, J., delivered a separate judgment.
GAJENDRAGADKAR J.
The appellants in these two appeals had filed two separate petitions under article 226 of the Constitution in the Bombay High Court in which they had challenged the vires of section 6(2) of the Bombay Tenancy and Agricultural Lands Act, 1948 (LXVII of 1948) (hereafter called the Act) and the validity of the notification issued by the Government on October 17, 1952, under the provisions of the said section 6(2).
It appears that on June 23, 1949, in exercise of the powers conferred by section 6(2) of the Act, the Government had issued a notification fixing " in the case of an irrigated land 1/5 and in the case of any other land 1/4 of the crops of such land or its value as determined in the prescribed manner as the maximum rent payable by the tenants of the lands situate in the areas specified in the schedule appended thereto ".
Amongst the areas thus specified was the area in which the appellants ' lands are situated.
Subsequently, on October 17, 1952, by virtue of the same powers and in supersession of all other earlier notifications issued in that behalf the Government purported to prescribe a rate as the lower rate of maximum rent at which the rent shall be payable by the tenants in respect of the lands situate in the areas specified in Schedule I appended to it.
It is unnecessary to set out the rates thus prescribed ; it would be enough to state that the rate of maximum rent prescribed by this notification is very much lower than the rate which had been fixed by the earlier one.
By their petitions filed in the Bombay High Court the appellants contended that section 6(2) was ultra vires, and that even if section 6(2) was valid the impugned notification was in valid.
Accordingly they prayed for a writ of mandamus or a writ in the nature of mandamus or any other appropriate direction or order against the Government, the Mamlatdar of the area concerned and their respective tenants prohibiting them or any one of them from giving effect to the said notification.
345 They also claimed a direction or order to the opponents directing them to cancel or withdraw the impugned notification.
These two petitions were heard by the High Court along with other companion matters in which the same points were raised, and in the result the High Court dismissed the petitions.
It held that section 6(2) was intra vires and the impugned notification was legal and valid.
The appellants then applied for and obtained a certificate from the High Court, and it is with the said certificate that they have come to this Court by their two appeals.
At the outset it may be relevant to state that, subsequent to the decision under appeal, in 1956 the Act has been substantially amended and now section 8 of the new Act provides for the rent and its maximum and minimum.
Shortly stated this section incorporates the provisions of the impugned notification and adds to it the further provision that in no case shall the rent be less than twice the assessment.
In consequence the point raised in the present appeals has ceased to be of any importance ; at best it may affect just a few cases between landlords and tenants that may be pending in respect of the rent payable by the latter to the former for a period prior to 1956.
At the time when the certificate was granted the questions raised by the appellants were undoubtedly of general importance.
We would first read section 6 of the Act.
Section 6(1) provides that notwithstanding any agreement, usage, decree or order of a court or any law the maximum rent payable by a tenant for the lease of any land shall not in the case of an irrigated land exceed one fourth and in the case of any other land exceed one third of the crop of such land or its value as determined in the prescribed manner.
Section 6(2) provides that the Provincial Government may by notification in the official gazette fix a lower rate of the maximum rent payable by the tenants of lands situate in any particular area or may fix such rate on any other suitable basis as it thinks fit.
For the appellants Mr. Limaye has contended that section 6(2) suffers from the vice of excessive delegation.
His argument is that 346 the power delegated to the Provincial Government is unfettered and uncanalised and no guidance has been afforded to it for exercising the said power.
He has also relied on the fact that while giving such wide powers to the delegate in fixing the lower rate of the maximum rent the Legislature has not prescribed any minimum as it should have done.
The High Court has held that the delegation involved in section 6(2) is within permissible limits and as such the challenge to the vires of the said provision cannot succeed.
It is now well established by the decisions of this Court that the power of delegation is a constituent element of the legislative power as a whole, and that in modern times when the Legislatures enact laws to meet the challenge of the complex socioeconomic problems, they often find it convenient and necessary to delegate subsidiary or ancillary powers to delegates of their choice for carrying out the policy laid down by their Acts.
The extent to which such delegation is permissible is also now well settled.
The Legislature cannot delegate its essential legislative function in any case.
It must lay down the legislative policy and principle, and must afford guidance for carrying out the said policy before it delegates its subsidiary powers in that behalf.
As has been observed by Mahajan, C.J., in Harishankar Bagla vs The State of Madhya Pradesh (1) "the Legislature cannot delegate its function of laying down legislative policy in respect of a measure and its formulation as a rule of conduct.
The Legislature must declare the policy of the law and the legal principles which are to control any given cases, and must provide a standard to guide the officials or the body in power to execute the law ".
In dealing with the challenge to the vires of any statute on the ground of excessive delegation it is, therefore, necessary to enquire whether the impugned delegation involves the delegation of an essential legislative function or power and whether the Legislature has enunciated its policy and principle and given guidance to the delegate or not.
As the decision in Bagla 's case(1) shows, in applying this test this Court has taken into (1) , 388.
347 account the statements in the preamble to the Act, and if the said statements afford a satisfactory basis for holding that the legislative policy and principle has been enunciated with sufficient accuracy and clarity the preamble itself has been held to satisfy the requirements of the relevant tests.
In every case it would be necessary to consider the relevant provisions of the Act in relation to the delegation made and the question as to whether the delegation is intra vires or not will have to be decided by the application of the relevant tests.
In this connection we may also refer to the decision of this Court in The Edward Mills Co. Ltd., Beawar vs State of Ajmer (1), where the validity of the notification issued under the provisions of the Minimum Wages Act XI of 1948 was impeached, and the said challenge raised the question about the validity of the delegation provided for by section 27 of the said Act.
The scheme of the Act was that a schedule had been attached to it which gave a list of employments to.
which the provisions of the Act applied an section 7 gave power to the appropriate Government to add to either part of the schedule any employment in respect of which it was of opinion that the minimum wages shall be fixed and this the appropriate Government was authorised to do by giving notification in a broad manner, and thereupon the schedule shall, in its application to the State, be deemed to be amended accordingly.
The argument was that the Act had nowhere formulated a legislative policy according to which an employment should be chosen for being included in the schedule; no principles had been prescribed and no standards laid down in that behalf, and so the delegation was unfettered and uncanalised.
This argument was rejected by this Court on the broad consideration that the legislative policy was apparent on the face of the Act itself.
" What the Act aims at ", observed Mukherjea, J., as he then was, " is the statutory fixation of minimum wages with a view to obviate the chance of exploitation of labour.
(1) ; ,750.
45 348 The Legislature undoubtedly intended to apply this Act not to all industries but to those industries only where by reason of unorganised labour or want of proper arrangements for effective regulation of wages or for other causes the wages of labourers in a particular industry were very low ".
The learned Judge then pointed out that conditions of labour vary under different circumstances and from State to State, and the expediency of including a particular trade or industry within the schedule depends upon a variety of facts which are not uniform and which can best be ascertained by the person who is placed in charge of administration of a particular State.
It is with a view to carry out the particular purpose of the Act that power is delegated to the appropriate Government by section 27.
That is how the challenge to the vires of section 27 was repelled.
The present Act is undoubtedly a beneficent measure.
It has enacted provisions for agrarian reform which the Legislature thought was overdue.
The preamble shows that the object of the Act, inter alia, was to improve the economic and social condition of peasants and ensure the full and efficient use of land for agriculture.
With that object the Act has made several provisions to safeguard the interests of the tenants.
Let us consider some of these provisions.
Section 6 which we have already set out prescribes the maximum rent payable by a tenant, and provides for the reduction of the said maximum by reference to particular areas.
Section 7 lays down that the rent payable by tenants shall, subject to the maximum rate fixed under section 6, be the rent agreed between the parties, or in the absence of any agreement or usage, or where there is a dispute as regards the reasonableness of the rent payable according to the agreement or usage, the reasonable rent.
It is thus clear that even in regard to an agreed rent or a rent fixed by usage, if a tenant raises a dispute about its reasonableness that dispute has to be settled in the manner prescribed by the Act and the amount of reasonable rent determined.
Section 8 provides for commutation of crop share rent into cash.
Section 9 prohibits a landlord from receiving from his tenant any rent in terms of service or 349 labour; and it requires him to apply to the Mamlatdar for commuting such rent into cash.
Section 10 provides for refund of excess rent recovered by the landlord from his tenant.
Section 11 prohibits the recovery by the landlord of any cess, rate, vero, huk or tax or service of any description from the tenant other than the rent lawfully due from such land.
Section 12 provides for enquiries in regard to the fixation of reasonable rent.
On an application made by the tenant or the landlord in that behalf the Mamlatdar has to determine the reasonable rent under section 12(3) having regard to the factors specified in the said sub section.
These factors are (a) the rental values of lands used for similar purposes in the locality, (b) the profits of agriculture of similar lands in the locality, (c) the prices of crops and commodities in the locality, (d) the improvements made in the land by the landlord or the tenant, (e) the assessment payable in respect of the land, and (f) such other factors as may be prescribed.
There is no doubt that the last clause which refers to other factors must be construed as referring to factors ejusdem generis with those that have been previously enumerated.
Section 13 provides for the suspension or remission of rent, and the conditions under which the said remission or suspension can be granted.
It would thus be seen that the material provisions of the Act aim at giving relief to the tenants by fixing the maximum rent payable by them and by providing for a speedy machinery to consider their complaints about the unreasonableness of the rent claimed from them by their respective landlords.
It is in the light of this policy of the Act which is writ large on the face of these provisions that we have to consider the question as to whether the delegation made by section 6(2) suffers from the infirmity of excessive delegation.
Broadly stated section 6(2) seeks to provide for the fixation of a lower rate of maximum rent area wise.
We have already seen that individual tenants are given the right to apply for the fixation of reasonable rent by section 12, and specific factors have been specified which the Mamlatdar must consider in fixing a reasonable rent.
The Legislature realised that a large number of 350 tenants in the State were poor, ignorant and in many cases helpless, and it was thought that many of them may not be able to make individual applications for the fixation of a reasonable rent under section 12.
That is why it was thought necessary to confer upon the Provincial Government the power to fix a lower rate of the maximum rent payable by tenants in respect of particular areas.
In a sense what could be done by the Mamlatdar in individual cases can be achieved by the Provincial Government in respect of a large number of cases covered in a particular area.
If that be so, the legislative policy having been clearly expressed in the relevant provisions and the factors for determining reasonable rent also having been specified in section 12(3), it is difficult to accept the argument that the Provincial Government has been given uncanalised or unfettered powers by section 6(2) to do what it likes without any guidance.
The relevant factors having been specified by section 12(3) when the Provincial Government considers the question of fixing a lower rate of the maximum rent payable in any particular area it is expected to adopt a basis which is suitable to that particular area.
The relevant conditions of agriculture would not be uniform in different areas and the problem of fixing a reduced maximum rent payable in the respective areas would have to be tackled in the light of the special features and conditions of that area ; that is why a certain amount of latitude had to be left to the Government in fixing the lower rate of the maximum rent in the respective areas, and that is intended to be achieved by giving it liberty to adopt a basis which it thinks is suitable for the area in question.
The word " suitable " in the context must mean I suitable to the area ' having regard to the other provisions of the Act such as section 6(1) and section 12.
It is true that the power to fix a reasonable rent conferred on the Mamlatdar under section 12 is subject to the power of the Provincial Government under section 6(2).
Even so we think it would be difficult to hold that the factors prescribed for the guidance of the Mamlatdar would have no relevance at all when the Provincial Government acts under 351 section 6(2).
In our opinion, therefore, having regard to the legislative policy laid down by the Act in its preamble and in the other relevant sections to which we have referred, and having regard to the guidance which has been provided for fixing a reasonable rent under section 12(3), it would not be possible to hold that the power delegated to the Provincial Government by section 6(2) suffers from the infirmity of excessive delegation The fact that no minimum has been prescribed would not materially affect this position.
Mr. Limaye has then contended that even if section 6(2) is valid the impugned notification is invalid because it offends against article 31 of the Constitution.
He concedes that the Act itself is saved under article 31B since it is one of the Acts enumerated in the Ninth Schedule; but his argument is that the notification has in substance amended the provisions of section 6(1) and thus it amounts to a fresh legislation to which article 31B cannot apply.
There is no, substance in this argument.
If section 6(2) is valid then the exercise of the power validly conferred on the Provincial Government cannot be treated as fresh legislation which offends against article 31.
If the Act is saved by article 31B section 6(2) is also saved, and the power must be held to be validly conferred on the Provincial Government, and a notification issued by virtue of the said powers cannot be challenged on the ground that it violates article 31.
The next argument is that the notification is invalid because the power to issue a notification conferred by section 6(2) was exhausted as soon as the Government issued the first notification on June 23, 1949.
This argument proceeds on the assumption that the power conferred on the Government by section 6(2) can be exercised only once, and it seeks to derive support from the fact that the words " from time to time " which were used in the corresponding section of the earlier tenancy legislation in the State have not been used in section 6(2).
Reliance is also placed on the fact that the said words have been used in section 8(1) of the Act.
The omission of the said words from section 6(2) as contrasted with their inclusion in section 8(1), says Mr. Limaye, indicates that the power delegated under section 6(2) was 352 intended to be used only once.
This argument is fallacious.
Why the Legislature did not use the words " from time to time " in section 6(2) when it used them in section 8(1) it is difficult to understand ; but in Construing section 6(2) it is obviously necessary to apply the provisions of section 14 of the Bombay General Clauses Act 1904 (1 of 1904).
Section 14 provides that where by any Bombay Act made after the commencement of this Act any power is conferred on any Government then that power may be exercised from.
time to time as occasion requires.
Quite clearly if section 6(2) is read in the light of section 14 of the Bombay General Clauses Act it must follow that the power to issue a notification can be exercised from time to time as occasion requires.
It is true that section 14 of the (X of 1897), provides that where any power is conferred by any Central Act or Regulation then, unless a different intention appears, that power may be exercised from time to time as occasion requires.
Since there is a specific provision of the Bombay relevant on the point it is unnecessary to take recourse to section 14 of the Central ; but even if we were to assume that the power in question can be exercised from time to time unless a different intention appears we would feel no difficulty in holding that no such different intention can be attributed to the Legislature when it enacted section 6(2).
It is obvious that having prescribed for a maximum.
by section 6(1) the Legislature has deliberately provided for a modification of the said maximum rent and that itself shows that the fixation of any maximum rent was not treated as immutable.
If it was necessary to issue one notification under section 6(2) it would follow by force of the same logic that circumstances may require the issue of a further notification.
The fixation of agricultural rent depends upon so many uncertain factors which may vary from time to time and from place to place that it would be idle to contend that the Legislature wanted to fix the maximum only once, or, as Mr. Limaye concedes, twice.
Therefore the argument that the power to issue a notification has been exhausted cannot be sustained.
353 The last argument which Mr. Limaye faintly attempted to place before us was that the expression " any particular area" would not be applicable to the areas in which the appellants ' lands are situated because, according to him, the expression should be construed in the light of the same expression used in section 298(2)(a) of the Government of India Act, 1935.
This argument is far fetched and fatuous and need not be considered.
In the result the appeals fail and are dismissed with costs.
SUBBARAO J. I have had the advantage of perusing the judgment prepared by Gajendragadkar, J.
I regret my inability to agree with my learned brother on the question of the vires of section 6(2) of the Bombay Tenancy and Agricultural Lands Act, 1948 (LXVII of 1948) (hereinafter called the Act).
The facts have been fully stated in the judgment of my learned brother and I need not restate them here.
It would be enough if I expressed my opinion on the said question.
Learned counsel for the appellants attacks the con stitutional validity of section 6(2) on the ground that the said subsection exceeds the limits of permissible delegated legislation.
Before considering the validity of section 6(2), it would be convenient to notice briefly the relevant aspects of the law of the doctrine of delegated legislation.
The scope of the doctrine of delegation of legislation has been so authoritatively laid down by this Court in more than one decision that it would be pedantic to attempt to resurvey the field over again.
I would, therefore, be content to collate the relevant passages from the decisions of this Court to ascertain the principle underlying the doctrine.
The leading decision on this subject is In re The (1).
There the Central Legislature had empowered the executive authority under its legislative control to apply at its discretion the laws to an area which was also under the legislative sway of the Centre.
The validity of the laws was questioned (1) ; 354 on the ground that the legislature bad no power to delegate legislative powers to executive authorities.
As many as seven Judges dealt with the question and wrote seven separate judgments considering elaborately the different aspects of the question raised.
I am relieved of the duty to ascertain the core of the decision as that has been done by Bose, J., with clarity in Rajnarain Singh vs The Chairman, Patna Administration Committee, Patna (1).
Bose, J., after pointing out the seven variations of the authority given to the executive in the Case (2), summarized the majority view on the relevant aspect of the question now raised at p. 301 thus: " In our opinion, the majority view was that an executive authority can be authorised to modify either existing or future laws but not in any essential feature.
Exactly what constitutes an essential feature cannot be enunciated in general terms, and there was some divergence of view about this in the former case, but this much is clear from the opinions set out above: it cannot include a change of policy.
" Rajnarain Singh 's Case (1) dealt with section 3(1) of the Patna Administration Act, 1915, (Bihar and Orissa Act 1 of 1915) as amended by Patna Administration (Amendment) Act, 1928 (Bihar and Orissa Act IV of 1928) and with a notification issued by the Governor of Bihar picking out section 194 out of the Bihar and Orissa Municipal Act of 1922, modifying it and extending it in its modified form to the Patna Administration and Patna Village areas.
Bose, J., after pointing out the difference between Rajnarain Singh 's Case (1) and the Case (2) observed at p. 303 thus: " But even as the modification of the whole cannot be permitted to effect any essential change in the Act or an alteration in its policy, so also a modification of a part cannot be permitted to do that either." This Court again in Harishankar Bagla vs The State of Madhya Pradesh (3) considered the scope of the Case (2).
Mahajan, C. J., stated at p. 388 thus.
(1) ; (2) ; (3) 355 " It was settled by the majority judgment in the Case (1) that essential powers of legislation cannot be delegated.
In other words, the legislature cannot delegate its function of laying down legislative policy in respect of a measure and its formulation as a rule of conduct.
The Legislature must declare the policy of the law and the legal principles which are to control any given cases and must provide a standard to guide the officials or the body in power to execute the law.
The essential legislative function consists in the determination or choice of the legislative policy and of formally enacting that policy into a binding rule of conduct.
" In The Edward Mills Co., Ltd., Beawar vs The State of Ajmer (2), Mukherjea, J., as he then was, speaking for the Court stated the principle thus at p. 749: " A Legislature cannot certainly strip itself of its essential functions and vest the same on an extraneous authority.
The primary duty of law making has to be discharged by the Legislature itself but delegation may be resorted to as a subsidiary or an ancillary measure.
" The latest decision on the point is that in Hamdard Dawakhana vs Union of India (3).
One of the questions raised in that case was whether section 3(d) of , exceeded the permissible limits of delegated legislation.
The principle has been restated by Kapur, J., at p. 566 thus: , "This means that the legislature having laid down the broad principles of its policy in the legislation can then leave the details to be supplied by the administrative authority.
In other words by delegated legislation the delegate completes the legislation by supplying details within the limits prescribed by the statute and in the case of conditional legislation the power of legislation is exercised by the legislature conditionally leaving to the discretion of an external (1) ; (2) ; (3) ; 46 356 authority the time and manner of carrying its legislation into effect as also the determination of the area to which it is to extend.
" Applying the principle to the facts of that case, the learned Judge observed at p. 568 thus: " In our view the words impugned are vague.
;Parliament has established no criteria, no standards and has not prescribed any principle on which a particular disease or condition is to be specified in the Schedule.
It is not stated what facts or circumstances are to be taken into consideration to include a particular condition or disease.
The power of specifying diseases and conditions as given in section 3(d) must therefore be held to be going beyond permissible boundaries of valid delegation.
It is not necessary to multiply decisions; nor is it necessary to point out the subtle distinction between delegates legislation and conditional legislation.
The law on the subject may be briefly stated thus: The Constitution confers a power and imposes a duty on the legislature to make laws.
The essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct.
Obviously it cannot abdicate its functions in favour of another.
But in view of the multifarious activities of a welfare State, it cannot presumably work out all the details to suit the varying aspects of a complex situation.
It must necessarily delegate the working out of details to the executive or any other agency.
But there is a danger inherent in such a process of delegation.
An overburdened legislature or one controlled by a powerful executive may unduly overstep the limits of delegation.
It may not lay down any policy at all; it may declare its policy in vague and general terms; it may not set down any standard for the guidance of the executive; it may confer an arbitrary power on the executive to change or modify the ' policy laid down by it without reserving for itself any control over subordinate legislation.
This self effacement of legislative power in favour of another agency either in whole or in part is beyond the permissible limits of delegation.
It is for a Court to hold on a fair, generous 357 and liberal construction of an impugned statute whether the legislature exceeded such limits.
But the said liberal construction should not be carried by the Courts to the extent of always trying to discover a dormant or latent legislative policy to sustain an arbitrary power conferred on executive authorities.
It is the duty of this Court to strike down without any ' hesitation any arbitrary power conferred on the executive by the legislature.
Bearing the aforesaid principles in mind, I shall look at the provisions of the Act to ascertain whether section 6(2) is in conformity with the law laid down by this Court.
I shall for the present ignore section 6(2) and briefly and broadly notice the scheme of the Act.
The preamble shows that the object of the Act was mainly to improve the economic and social conditions of peasants and to ensure the full and efficient use of land for agriculture.
It also indicates that the Act was not intended to be a confiscatory one, but was enacted to regulate the relationship between land lord and tenant, particularly in respect of rent payable by the tenant to the land lord.
In section 6(1) the legislature in clear terms fixes the maximum rent payable by a tenant, having regard to the nature of the land: in the case of irrigated land it fixes one fourth and in the case of other land one third of the crop of such land or its value as determined in the prescribed manner as the maximum rent.
The rest of the Act is to be worked out subject to the maximum rent fixed under section 6(1).
Section 7 enables the land lord and tenant to agree upon the rate of rent.
Section 8 gives power to the Provincial Government to issue notifications providing for the commutation of the rent in kind into cash rent.
It also, if no rate of commutation has been so fixed by the State Government, enables the Mamlatdar to fix the amount of commutation in the manner prescribed.
Sub section (3) of section 6 prohibits a landlord from recovering any rent by way of crop share or in excess of the commuted cash rent.
Section 9 compels the land lord to apply to the Mamlatdar, if the land lord is receiving rent from any tenant in terms of service or labour, for commuting such rent into 358 cash.
Section 10 makes the landlord liable to pay compensation to the tenant if he contravenes the provisions of sections 6, 7, 8 or 9.
Section 11 prohibits the land lord from collecting any cesses other than the rent lawfully payable in respect of the land.
Section 12 enables the tenant to apply to the Mamlatdar for the fixation of reasonable rent in respect of the land in his possession and section 12(3) lays down the factors the Mamlatdar has to take into consideration in fixing a reasonable rent.
After fixing the rent, the Mamlatdar makes an order for Payment of the rent to the land lord and the rent so fixed shall hold good for a period of five years.
There is also a provision for reduction of rent, if during the said period on account of deterioration of the land by floods or other causes beyond the control of the tenant the land has been wholly or partially rendered unfit for cultivation.
Section 13 enjoins on the land lord to suspend or remit the rent payable by the tenant to him if the payment of land revenue by him to the Government is suspended or remitted.
A right of appeal is provided against the order of the Mamlatdar to the Collector.
Shortly stated, this Act provides for the fixation of maximum rent by the Government, a reasonable rent by Mamlatdar and an agreed rent by the parties.
But both the agreed rent and the reasonable rent cannot exceed the maximum rent.
There are express provisions for reduction or remission of rent in appropriate circumstances.
The Act does not provide for an appeal or revision to the Government and the Government has, therefore, no say in the matter of fixation of reasonable rent.
The whole scheme of the Act, therefore, excluding section 6(2), is a self contained and integrated one.
The legislature fixes the maximum rent linked with crop having regard to the nature of the land, and the other provisions enable the appropriate authorities to fix reasonable rent subject to that maximum.
Now let us see the impact of section 6(2) on this scheme.
Section 6(2) reads : " The Provincial Government may, by notification in the Official Gazette, fix a lower rate of the 359 maximum rent payable by the tenants of lands situate in any particular area or may fix such rate on any other suitable basis as it thinks fit." Under this section the Provincial Government may fix a lower rate of the maximum in any particular area or to fix such rate on any other suitable basis.
Three elastic words are used in section 6(2), namely, (1) lower rate; (2) particular area ; and (3) on any other suitable basis.
Prima facie in section 6(2) the legislature has not laid down any policy or any standard to enable the Provincial Government to reduce the maximum rent fixed under section 6(1).
What is the limit of the lower rate the Government is empowered to fix ? What is the extent of the area with reference to which that rate can be fixed? What are the conditions prevailing in a particular area which require the reduction of the maximum rent ? Even if there are conditions justifiable for reduction of the maximum rent, what is the basis for that reduction ? The disjunctive " or " between " particular area " and " may fix" and the word ,other" qualifying " suitable basis " indicate that the situation of 'the land in a particular area may also be a basis for fixing a lower rent.
The situation of a land in a particular area cannot in itself afford a basis for fixing a specified rate of maximum rent.
The words " suitable basis " in the alternative clause is so vague that in effect and substance they confer absolute and arbitrary discretion on the Provincial Government.
What is the standard of suitability ? The standard of suitability is only what the Government thinks suitable.
In this section the legislature in clearest terms abdicated its essential functions in favour of the executive authority without laying down any standard for its guidance.
In effect it permitted the Government to amend section 6(1) of the Act.
To illustrate, the legislature fixes the maximum rent payable by a tenant to his landlord at X; the Mamlatdar after enquiry fixes Y as reasonable rent which is less than X; the Government in exercise of the power conferred under section 6(2) can arbitrarily fix Z which is far less than the reasonable rent; with the result that the entire scheme 360 promulgated by the legislature breaks.
The Government also may select any small area containing a few landlords and reduce the maximum rent to the lowest level with the result the Act can be worked out as an expropriatory measure which is contrary to the intention of the legislature.
Learned counsel for the respondents realising that arbitrariness is writ large on the face of section 6(2) attempted to evolve the legislative formula from the preamble to section 6(1) and section 12(3) of the Act.
I cannot find any indication of the legislative policy in the manner of fixation of the lower rate of maximum rent in the preamble.
Nor can I discover any such in section 6(1).
Section 6(1) contains a clear legislative policy in fixing the maximum rent on certain identifiable basis.
The legislature says in effect in section 6(2), " I have fixed the maximum rent in respect of irrigated lands and other lands on the basis of a definite share of the crop of such lands, but you can reduce that maximum rent on any basis you like ".
While section 6(1) overrides other provisions of the Act, section 6(2) derogates from section 6(1) itself Section 6(2) is capable of being exercised in such a way that the object of section 6(1) is itself frustrated.
Section 6(1) in effect is made subject to section 6(2).
Now coming to section 12(3), it is contended that the factors mentioned in section 12(3) afford a standard for the Government for fixing the maximum rent.
To put it differently the suitable basis is one or other of the factors in section 12(3).
The Act does not say so, either expressly or by necessary implication.
The criteria for fixing rent in section 13 are to afford a guide to Mamlatdar for fixing reasonable rent.
Indeed the sub clause is subject to section 6 indicating thereby that the maximum rent fixed by the Government is not the same as the reasonable rent.
Indeed if the reasonable rent determined on the basis of all or some of the factors in section 12(3) is more than the maximum rent fixed by the Government on a suitable basis, the latter prevails over the former.
As the maximum rent supersedes reasonable rent, the factors governing reasonable rent need not necessarily govern the fixation of maximum rent.
To attempt to read the factors in section 12(3) into 361 section 6(2) is, in my view, not permissible.
On a fair reading of the provisions of the Act, I find it not possible to discover any standard laid down by the legislature to enable the Provincial Government to fix a lower rate of the maximum rent.
The section conferring such arbitrary power on the Provincial Government without laying down any legislative standard is in excess of the permissible limits of delegation.
The learned Additional Solicitor General broadly contended that the policy of the legislature is to prevent rackrenting and to fix a reasonable rent and, therefore, any exercise of the power under section 6(2) is guided by that policy.
This is an extreme contention and, if accepted, will enable Parliament and legislatures to confer absolute and unguided powers on the executive.
If a legislature can legally be permitted to lay down a broad policy in general terms and confer arbitrary powers on the executive for carrying it out, there will be an end of the doctrine of the rule of law.
If the contention be correct.
, the legislature in the present case could have stated in the preamble that they were making the law for fixing the maximum rent and could have conferred an absolute power on the Government to fix suitable rents having regard to the circumstances of each case.
Such a law cannot obviously be valid.
When the decisions say that the legislature shall lay down the legislative policy and its formulation as a rule of conduct, they do not mean vague and general declaration of policy, but a definite policy controlling and regulating the powers conferred on the executive for carrying into effect that policy.
I must, therefore, hold that section 6(2) of the Act is void inasmuch as it exceeded the permissible limits of legislative delegation.
In the result the appeals are allowed with costs.
BY COURT: In view of the majority judgment, the appeals are dismissed with costs.
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Section 6(1) of the Bombay Tenancy and Agricultural Lands Act, 1948 (Bom.
LXVII of 1948), provided that the maximum rent payable by a tenant shall not in the case of irrigated land exceed one fourth and in the case of any other land exceed one third of the crop of such land or its value as determined by the prescribed manner.
Section 6(2) of the Act read as follows, " The Provincial Government may, by notification in the Official Gazette, fix a lower rate of the maximum rent payable by the tenants of lands situate in any particular area or may fix such rate on any other suitable basis as it thinks fit." By a notification under that section the Government of Bombay, in supersession of all other notifications prescribed a rate of maximum rent which was very much lower than the one previously fixed.
The petitioners challenged the vires of the said section and the validity of the notification under article 226 of the Constitution, but the High Court found against them.
The question for determination in these appeals was whether section 6(2) conferred unguided power on the Government and was void by reason of excessive delegation of legislative power.
342 Held (per Sinha, C. J., Kapur, Gajendragadkar and Wanchoo, jj.) that although the power of delegation is a constituent element of the legislative power, it is well settled that a legislature cannot delegate its essential legislative function in any case and before it can delegate any subsidiary or ancillary powers to a delegate of its choice, it must lay down the legislative policy and principle so as to afford the delegate proper guidance in implementing the same.
A statute challenged on the ground of excessive delegation must, therefore, be subjected to two tests, (1) whether it delegates essential legislative function or power and (2) whether the legislature has enunciated its policy and principle for the guidance of the delegate.
It is in that light that the preamble of the statute and its provisions relating to delegation should be considered.
Harishankay Bagla vs The State of Madhya Pradesh, and The Edward Mills Co. Ltd., Beawar vs State of Ajmer ; , referred to.
The preamble and the material provisions of the Act show that it seeks to improve the economic and social condition of the peasants and with that end in view fixes maximum rent payable by the tenants and provides a speedy machinery for fixation of reasonable rent.
This being the legislative policy and regard being had to the specific provisions laid down by section 12(3) of the Act for determining reasonable rent, it is impossible to hold that the power delegated to the Provincial Government by section 6(2) was vitiated by excessive delegation.
The fact that no minimum was prescribed by the section could not alter the position.
Held, further, that since the Act itself is within the protection of article 31 B of the Constitution and there can be no question as to the validity of section 6(2), the notification issued in exercise of the power conferred by that section cannot be challenged as infringing article 31 of the Constitution.
Nor was it correct to say that the power delegated by section 6(2) could be used only once and no more.
Per Subba Rao, J. The essential legislative function is the determination of the legislative policy and its formulation as a rule of conduct.
Obviously the legislature cannot abdicate its functions in favour of another.
But in view of the multifarious activities of a welfare State, it cannot presumably work out all the details to suit the varying aspects of a complex situation.
It must necessarily delegate the working out of details to the executive or any other agency.
But there is a danger inherent in such a process of delegation.
It may not lay down any policy at all; it may declare its policy in vague and general terms; it may not set down any standard for the guidance of the executive, it may confer an arbitrary power on the executive to change or modify the policy laid down by it without reserving for itself any control over subordinate legislation.
This self effacement of legislative power in favour of another agency 343 either in whole or in part is beyond the permissible limits of delegation.
It is for a Court to hold on a fair, generous and liberal construction of an impugned statute whether the legislature exceeded such limits.
But the said liberal construction should not be carried by the courts to the extent of always trying to discover a dormant or latent legislative policy to sustain an arbitrary power conferred on executive authorities.
In re The ; , , Rajnarain, Singh vs The Chairman, Patna Administration Committee, Patna, ; , Harishankay Bagla vs The State of Madhya Pradesh, , The Edward Mills Co., Ltd., Beaway vs The State of Ajmer, ; and Hamdard Dawakhana vs Union of India, ; , referred to.
The whole scheme of the Bombay Tenancy and Agricultural Lands Act, 1948 (LXVII of 1948), excluding section 6(2), is a self contained and integrated one.
The legislature fixes the maximum rent linked with crop having regard to the nature of the land, and the other provisions enable the appropriate authorities to fix reasonable rent subject to that maximum.
But under section 6(2) the legislature in clearest terms abdicated its essential functions in favour of the executive authority without laying down any standard for its guidance.
In effect it permitted the Government to amend section 6(1) of the Act.
While section 6(1) overrides other provisions of the Act, section 6(2) derogates from section 6(1) itself.
Section 6(2) is capable of being exercised in such a way that the object of section 6(1) is itself frustrated.
Section 6(1) in effect is made subject to section 6(2).
This is clearly an abdication by the legislature of its essential legislative function and the delegation must be held void.
It was not correct to say that the factors specified by section 12(3) afforded a standard 'for fixing the maximum rent.
It was not permissible to read them into section 6(2) of the Act.
No legislature can be legally permitted to lay down a broad policy in general terms and confer arbitrary powers on the executive for carrying it out.
Such a law must obviously be contrary to the decisions of this Court and cannot be valid.
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936.txt
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Civil Appeal No. 2849 of 1987.
(In Special Leave Petition (Civil) No. 12198 of 1987).
From the Judgment and order dated 26.9.1987 of the Bombay High Court in W.P. No. 1459 of 1987.
882 G. Ramaswamy, Additional Solicitor General and Ms. A Subhashini for the Petitioner.
Dr. Y.S. Chitale, A.M. Khanwilkar, A.S. Bhasme and Mrs. Jayshree Wad for the Respondents.
Dr. N.M. Ghatate and S.V. Deshpande for the Intervenor.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
We are very much disturbed by the manner in which the High Court of Bombay (Aurangabad Bench) has interfered not once but twice with the process of election which was being held under the provisions of the Representation of the People Act, 1951 (hereinafter referred to be 'the Act ') to the Legislative Council of the State of Maharashtra from the Osmanabad cum Latur cum Beed Local Authorities Constituency.
The Governor of Maharashtra by a notification dated 18th September, 1987 issued under section 16 of the Act called upon six local authorities constituencies in the State of Maharashtra to elect one member from each of the said constituencies in order to fill the vacancies in the Maharashtra Legislative Council which had been caused by the retirement of the members representing the said constituencies on the expiration of their terms of office.
On the same day the Election Commission of India, the appellant herein, issued a notification under section 30 of the Act fixing the calendar of events for the purpose of holding the elections accordingly.
Osmanabad cum Latur cum Beed Local Authorities constituency was one of the six constituencies referred to above.
According to the notification issued by the Election Commission the last date for making nominations was 25th September, 1987.
p The date for the scrutiny of nominations was 26th September, 1987.
The last date for the withdrawal of candidatures was 28th September, 1987 and the date on which the Poll, if necessary, was to be taken was 18th October, 1987.
The entire election process had to be completed within 21st October, 1987.
Respondents 1 to 5 Shivaji son of Vishwanath Gangane, Prof. K.S. Shinde, Prabhakar son of Bapurao Pudale, Shankarrao Madhavrao Mane and Ashok son of Rangnath Magar filed a writ petition under Article 226 of the Constitution in Writ Petition No. 1459 of 1987 on September 26, 1987 before the High Court of Bombay (Aurangabad Bench) challenging the validity of the notification issued by the Election Commission on 18th September, 1987 on the ground that the notification was invalid because the Zilla Parishad of Osmanabad and the Zilla Parishad of Latur district which 883 were within the constituency had not been constituted and the Administrators were appointed to run the said Zilla Parishads and therefore the members of the said Zilla Parishads who were entitled to take part in the said elections had been deprived of their right to participate in the said election.
Along with the writ petition an application was made for an interim order and the counsel who moved the said application just prayed for the postponement of the last date for withdrawal of candidatures from 28th September, 1987 to Ist October, 1987.
It is not clear why such a prayer was made.
The learned Single Judge before whom the writ petition came up for consideration however passed an order on September 26, 1987 issuing notice on the writ petition and passing an interim order ex parte directing the postponement of the last date of withdrawal of candidatures from 28th September, 1987 to October 1, 1987.
A Division Bench of the High Court which was presided over by the learned Single Judge who had issued the interim order earlier heard the writ petition on October 1, 1987 and dismissed it by the order passed on the same day.
In the course of its order the Division Bench relied on the decision in Inderjit Barua & Ors vs Election Commission of India & Ors., [1985] Supp.
3 S.C.R. 225=AIR 1984 S.C. 1911 which had laid down that the validity of an election process under the Act could be challenged only in an election petition filed under the Act as provided by Article 329(b) of the Constitution.
While dismissing the writ petition the High Court did not make any observation as to the effect of the interin order passed by it earlier on the election programme.
18 candidates withdrew their candidatures by Ist of October, 1987 which was the last date for withdrawal of candidatures as per the interim order passed by the High Court.
In the circumstances the Election Commission considered it fair to postpone the date of poll from 18th October, 1987 (as originally notified) to some later date in order to secure compliance with the spirit underlying section 30(d) of the Act which contemplated an interval of 20 days between the last date for withdrawal of candidatures and the date of poll.
Ordinarily a week 's postponement would have been in the opinion of the Election Commission adequate in the present case but as the postponement of one week would have led to the date of poll falling during the festival season the Election Commission revised the date of poll as Ist November, 1987 and notified the change of the date of poll in the official Gazette on 15th October, 1987.
The Election Commission also notified under the same notification the date before which the election had to be completed as 4th November, 1987 instead of 2 1st October, 1987 which was the date fixed for that purpose originally.
But on 16.
l0.1987 respondent 1 to 5 filed a Review Petition in Civil Application for Review No. 2035 of 1987 before the High 884 Court seeking a direction to the effect that the election programme A might be renotified on the ground that clear 20 day 's interval was not there between the last date of withdrawal of candidatures and the date of poll which had been originally fixed as 18th October, 1987.
The said Review Petition came up for consideration on the 16th October, 1987 before the very same Bench which had dismissed the Writ Petition earlier on Ist October, 1987.
On that occasion it is alleged that it was brought to the notice of the High Court by the learned counsel appearing for the State of Maharashtra, Collector, Osmanabad and the Returning officer for the osmanabad Latur Beed Local Authority Constituency and the District Returning officer for Maharashtra Legislative Council Constituency No. 26, osmanabad Latur Beed Local Authority Constituency, osmanabad, that the Election Commission had on 15.
l0.1987 already postponed the date of poll from 18th October, 1987 to the Ist November, 1987.
Despite the above submission made by the said counsel the High Court was pleased to make the following order on 16th October, 1987.
"Notice before admission.
In this matter, the election fixed for the 18th October, 1987 will have to be stayed till we pass further order on 26th October, 1987, looking to the mandatory provision of section 30 of the Representation of the People Act, S.O. till 26 10 1987.
" The case was adjourned to October 26, 1987 for hearing.
Aggrieved by the interim order passed in the writ petition postponing the last date of withdrawal of the candidatures from 28th September, 1987 to October 1, 1987 and by the interim order passed on October 16, 1987 in the Review Petition the Election Commission has filed this appeal by special leave.
The Special Leave Petition filed in the above case came up for hearing on October 27, 1987.
On that date this Court directed issue of notice on the Special Leave Petition and also ordered stay of the operation of the stay order which had been passed by the High Court.
The Election Commission was permitted to proceed with the election process.
The contesting respondents took notice of the petition in the Court through their counsel.
The case was adjourned to 30th October, 1987 for final hearing.
On 30th October, 1987 the case was heard and the Court passed the following order: "Special leave granted.
The appeal is heard.
We allow the appeal, set aside the order dated 16.
l0.1987 pas 885 sed by the High Court of Bombay at Aurangabad and dismiss the Review Petition No. 2035 of 1987 in writ petition No. 1459 of 1987.
The Election Commission shall proceed with the election in accordance with law.
Respondent Nos. 1 to 5 shall pay Rs.5000 by way of costs to the appellant.
Reasons will follow.
" The appeal was accordingly allowed with costs.
The following are the reasons for allowing the appeal.
Part XV of the Constitution contains the provisions relating to the elections.
Article 324(1) of the Constitution vests the superintendence, direction and control of the preparation of the electoral rolls for, and the conduct of all elections to Parliament and to the Legislature of every State and of elections to the offices of the President and the Vice President held under the Constitution in the Election Commission.
Article 327 of the Constitution provides that subject to the provisions of the Constitution, Parliament may from time to time by law make provision with respect to all matters relating to, or in connection with, elections to either House of Parliament or to the House or either House of the Legislature of a State including the preparation of electoral rolls, the delimitation of constituencies and all other matters necessary for securing the due constitution of each House or Houses.
In exercise of the power granted under Article 327 of the Constitution Parliament has enacted the Act to provide for the conduct of elections to the either House of Parliament, to the House or either House of the Legislature of each State, qualifications and disqualifications for membership of those Houses, corrupt practices and other offences in connection with such elections and the decision of doubts and disputes arising out of or in connection with the such elections.
Article 329(b) of the Constitution provides that notwithstanding anything contained in the Constitution no election to either House of Parliament or to the House or either House of the Legislature of a State shall be called in question except by an election petition presented to such authority and in such manner as may be provided for by or under any law made by the appropriate Legislature.
The disputes regarding the elections have to be settled in accordance with the provisions contained in Part VI of the Act.
Section 80 of the Act states that no election shall be called in question except by an election petition presented in accordance with the provisions of Part VI of the Act.
The expression 'election ' is defined by section 2(d) of the Act as an election to fill a seat or seats in either House of Parlia 886 ment or in the House or either House of the Legislature of a State A other than the State of Jammu and Kashmir.
Thus a dispute regarding election to the Legislative Council of a State can be raised only under the provisions contained in Part VI of the Act.
Section 80A of the Act provides that the Court having jurisdiction to try an election petition shall be the High Court.
An election petition has to be presented in accordance with section 81 of the Act.
In view of the non obstante clause contained in Article 329 of the Constitution the power of the High Court to entertain a petition questioning an election on whatever grounds under Article 226 of the Constitution is taken away.
The word 'election ' has by long usage in connection with the process of selection of proper representatives in democratic institutions acquired both a wide and a narrow meaning.
In the narrow sense it is used to mean the final selection of a candidate which may embrace the result of the poll when there is polling, or a particular candidate being returned unopposed when there is no poll.
In the wide sense, the word is used to connote the entire process culminating in a candidate being declared elected and it is in this wide sense that the word is used in Part XV of the Constitution in which Article 329(b) occurs.
In N.P. Ponnuswami vs Returning officer, Namakkal Constituency and Ors, ; this Court held that the scheme of Part XV of the Constitution and the Act seems to be that any matter which has the effect of vitiating an election should be brought up only at the appropriate stage in an appropriate manner before a special Tribunal and should not be brought up at an intermediate stage before any court.
Any other meaning ascribed to the words used in the article would lead to anomalies, which the Constitution could not have contemplated, one of them being any dispute relating to the pre polling stage.
In the above decision this Court ruled that having regard to the important functions which the legislatures have to perform in democratic countries, it had always been recognised to be a matter of first importance that elections should be concluded as early as possible according to time schedule and all controversial matters and all disputes arising out of elections should be postponed till after the elections were over so that the election proceedings might not be unduly retarded or protracted.
Hence even if there was any ground relating to the noncompliance with the provisions of the Act and the Constitution on which the validity of any election process could be questioned, the person interested in questioning the elections has to wait till the election is over and institute a petition in accordance with section 81 of the Act calling in question the election of the successful candidate within fortyfive days from the date of election of the returned candidate but not earlier than the date of election.
This view has been reaffirmed by 887 this Court in Lakshmi Charan Sen & Ors.
vs A.K.M. Hassan Uzzaman & Ors.
etc., [1985] Supp. 1 S.C.R. 493 and in Inderjit Barua & Ors etc.
vs Election Commission of India & Ors.
(supra).
Realising the effect of Article 329 (b) of the Constitution the High Court even though it had by oversight issued an interim order in writ Petition No. 1459 of 1987 on 26.9.1987 postponing the last date for withdrawal of candidatures to Ist October, 1987 dismissed the petition by its judgment dated 1.10.1987.
The relevant part of its judgment reads as follows: "The challenge must fail mainly on two grounds.
First on the ground that the stage has reached of withdrawals of nominations for the said election which was infact, fixed on 30th but has been postponed because of our orders as on today.
Article 329(b) bars every challenge to any election including all the election process which commences from the date of notification in the official Gazette, except by way of election petition under the Representation of People Act.
Mr. Chapalgaonkar, appearing for the respondent has relied upon a decision reported in AIR 1984 Supreme Court page 1911 to support this plea that all election including every election process must be challenged only by way of election petition under the Representation of the People Act.
" Having thus dismissed the petition on 1. l0.1987 the Court committed a serious error in entertaining a Review Petition in the very same writ petition on 16.1().1987 and passing an order staying election which had been earlier fixed for 18.
l0.1987 till further orders "looking to the mandatory provisions of section 30 of the Representation of the People Act".
The High Court tailed to recall to its mind that it was not its concern under Article '26 of the Constitution to rectify any error even if there was an error committed in the process of election at any stage prior to the declaration of the result of the election notwithstanding the fact that the error in question related to a mandatory provision of the statute relating to the conduct of the election If there was any such error committed in the course of the election process the Election Commission had the authority to set it right by virtue of power vested in it under Article 324 of the Constitution as decided in Mohinder Singh Gill & Anr.
vs The Chief Election Commissioner, New Delhi & Ors.
and to see that the election process was completed in a fair manner.
888 It is true that the Zilla Parishads of Osmanabad and the Latur districts had not been constituted and administrators were functioning in their place.
The total voters in the local authorities constituency in question were 577 out.
Of which 533 were members of Municipal Councils and 44 were members of the Zilla Parishads.
Even if the Zilla Parishads of osmanabad and Latur districts had been in existence the total number of their members would not have exceeded above 110.
As such more than 3/4th of the voters entitled to vote in the constituency in question were in existence.
The Election Commission had a guideline that if at least 75% of the local authorities in a local authority constituency were functioning and again at least 75% of the voters in the total electorate were available, then the electorate should be asked to elect their representative to the Legislative Council.
In the instant case 75% of the total electorate (including the number of members of the Zilla Parishads of Osmanabad and Latur districts who would have been voters had the said Zilla Parishad been constituted) were entitled to participate.
Since the existing position in the constituency satisfied the guideline prescribed by the Election Commission, the election from the said constituency had been ordered.
It was only on account of the interim order passed by the High Court on 26.9.1987 postponing last date for withdrawal of candidatures from 28.9.1987 to 1.10.1987 and not on account of any mistake committed by the Election Commission the interval between the last date of withdrawal and the date of poll which had been originally fixed as 18.10.1987 fell short of the period of twenty days prescribed by clause (d) of section 30 of the Act.
After the judgment of the High Court was pronounced dismissing the writ petition on 1.
10.1987 in order to ensure that there was an interval of 20 days between the last date for the withdrawal of candidatures and the date of poll, the Election Commission had on its own postponed the date of poll to 1.11.1987 and had published a notification in the official Gazette of the State Government even before the Court passed another interim order on 16.10.1987 in the Review Petition.
All these changes in the calendar of events of the election in question came about because of the earlier interim order of the High Court.
It has to be stated here that it is not the law that every non compliance with the provisions of the Act or of the Constitution will vitiate an election.
It is only when it is shown that the result of the election was materially affected by such non compliance the High Court would have jurisdiction to set aside an election in accordance with section 100(1)(d)(iv) of the Act.
The High Court was in error in thinking that it alone had the exclusive power to protect the democracy.
The success of democracy is dependent upon the cooperation of the Legislature, the Executive, the Judiciary, the Election Commission, the press the 889 political parties and above all the citizenry and each of them discharging the duties assigned to it.
Every member of the body politic should play his legitimate role for the success of the democracy.
Some times the success of democracy also depends upon the observance of restraint on the part of the constitutional functionaries.
We are constrained to observe that the High Court grievously erred in entertaining the review petition and in passing an interim order on 16.
10.1987.
We are of the view that both the interim orders the one passed on 26.9.1987 postponing the last date of withdrawal of candidatures from 28.9.1987 to 1.10.1987 and the other passed on 16.10.1987 were without jurisdiction.
There was hardly any justification for entertaining the review petition in the circumstances of this case and for issuing notice thereon particularly after the High Court.
itself had rejected the writ petition on the ground that it had no jurisdiction to interfere with the process of election at that stage in view of the provisions of Article 329(b) of the Constitution.
The review petition filed before the High Court was liable to be dismissed.
We directed respondents 1 to 5 to pay Rs.5,000 to the appellant by way of costs since the entire proceedings in the High Court amounted to a clear abuse of the process of law.
These are the reasons for our order passed on 30.
10.1987 allowing the appeal.
S.L. Appeal allowed.
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% The Governor of Maharashtra by a notification dated 18th September, 1987, issued under section 16 of the Representation of the People Act, 1951 ( 'the Act ') called upon six local authorities Constituencies in the State of Maharashtra to elect one member from each of the said constituencies to fill the vacancies in the Maharashtra Legislature Council.
On the same day, the Election Commission of India, the appellant, issued a notification under section 30 of the Act fixing the calendar of events for the purpose of holding the elections.
Osmanabadcum Latur Beed Local Authorities constituency was one of the said six constituencies.
Under the notification of the Election Commission, the last date for the withdrawal of the candidatures was 28th September, 1987 and the poll, if necessary, was to be taken on the 18th October, 1987 and the entire election process was to be completed within 21st October, 1987.
Respondents 1 to 5 filed a writ petition in High Court challenging the validity of the notification issued by Election Commission on 18th September 1987, on the ground that the notification was invalid because the Zilla Parishad of Osmanabad and Latur districts which were within the constituency had not been constituted and the Administrators were appointed to run the said Zilla Parishads and, therefore, the members of the Zilla Parishads who were entitled to take part in the said elections had been deprived of their right to participate in the said election.
Along with the writ petition, an application was made praying for the postponement of the last date of withdrawal of the candidates from 28th September, 1987 to 1st October, 1987.
A Single Judge of the High Court passed an order on September 26, 1987, issuing notice on the writ petition and passing an interim order ex parte directing the postponement of last date of withdrawal of the candidatures from 28th September, 1987 to October 1, 1987.
On October 1. 1987.
a Division Bench of 879 the High Court dismissed the writ petition.
The High Court did not take any observation as to the effect of the interim order passed by it earlier on the election programme.
18 Candidates withdrew their candidature by 1st October, 1987, the last date for withdrawal of candidatures as per the interim order passed by the High Court.
In the circumstances, the Election Commission postponed the date of poll from 18th October, 1987 (as originally notified) to 18th November, 1987, in compliance with the spirit underlying section 30(d) of the Act, which contemplated an interval of 20 days between the last date for withdrawal of candidatures and the date of poll and notified the change of the date of poll in the official Gazette.
It also notified 4th November, 1987 as the date before which the election had to be completed instead of 21st October, 1987, originally fixed.
On 16 l0 1987, the respondents 1 to 5 filed a review petition before the High Court, seeking a direction that the election programme might be renotified on the ground that clear 20 days ' interval was not there between the last date of withdrawal of candidatures and the date of poll originally fixed, viz. 18th October, 1987.
The High Court on 16th October 1987, passed an order adjourning the case to October 26, 1987 and staying the election fixed for the 18th October, 1987 till it passed further order on 26th October 1987, even though it was brought to the notice of the High Court that the Election Commission had on 16.10.1987 already postponed the date of poll from 18th October, 1987 to 1st November, 1987.
Aggrieved by the interim order in the writ petition postponing the last date of withdrawal of the candidatures from 28th September, 1987, to October 1, 1987 and by the interim order passed on October 16, 1987 in the Review Petition, the Election Commission appealed to this Court for relief by special leave.
Allowing the appeal, the Court, ^ HELD: A dispute regarding election to the Legislative Council of a State can be raised only under the provisions contained in Part VI of the Act.
Section 80 A of the Act provides that the Court having jurisdiction to try on election petition shall be the High Court.
In view of the non obstante clause contained in Article 329 of the Constitution, the power of the High Court to entertain a petition questioning an election on whetever grounds under Article 226 of the Constitution is taken away.
If there was any ground relating to the non compliance with the provisions of the Act and the Constitution on which the validity of any election process could be questioned, the person interested in question 880 ing the election has to wait till the election is over and institute a petition in accordance with section 81 of the Act calling in question the election of the successful candidate within forty five days from the date of election of the returned candidate but not earlier than the date of election.
The High Court even though it had issued an interim order in the writ petition on 26.9.1987 postponing the last date for withdrawal of the 13 candidatures to 1st October, 1987, dismissed the petition by its judgment dated 1.10.1987.
Having dismissed the petition on 1.10.1987, the High Court committed a serious error in entertaining a review petition in the very same writ petition on 16.
10.1987 and passing an order staying the election which had been earlier fixed for 18.10.87 till further orders "looking to the mandatory provisions of section 30 of Representation of the People Act.
" The High Court failed to recall to its mind that it was not its concern under Article 226 of the Constitution to rectify any error even if there was an error committed in the process of election at any stage prior to the declaration of the result of the election notwithstanding the fact that the error in question related to a mandatory provision of the statute relating to the conduct of the election.
If there was any such error committed in the course of the election process, the Election Commission had the authority to set it right by virtue of power vested in it under Article 324 of the Constitution as decided in Mohinder Singh Gill & Anr.
vs The Chief Election Commisioner, New Delhi & Ors., , and to see that the election process was completed in a fair manner.
[886A B, G H; 887E H] In this case, 75% of the total electorate (including the number of members of the Zilla Parishads of Osmanabad and Latur districts who would have been voters had the said Zilla Parishads been constituted) were entitled to vote.
Since the existing position in the constituency satisfied the guideline prescribed by the Election Commission, the election from the said constituency had been ordered.
It was only on account of the interim order passed by the High Court on 26.9.1987 postponing last date for withdrawal of the candidatures from 28.9.1987 to 1.10.1987 and not on account of any mistake committed by the Election Commission that the interval between the last date of withdrawal and the date of poll, originally fixed as 18.10.1987 fell short of the period of twenty days prescribed by clause (d) of section 30 of the Act.
After the judgment of the High Court was pronounced dismissing the writ petition on 1.10.1987, in order to ensure that there was an interval of 20 days between the last date for withdrawal of candidatures and the date of poll, the Election Commission had on its own postponed the date of poll on 1.11.1987 and published a notification in the official Gazette even before the Court passed another interim order on 16.10.1987 in 881 the Review Petition.
All these changes in the calendar of events of the election came about because of the earlier interim order of the High Court.
It is not the law that every non compliance with the provisions of the Act or the Constitution will vitiate an election.
It is only when it is shown that the result of the election was materially affected by such non compliance that the High Court would have the jurisdiction to set aside an election in accordance with section 100(1)(d)(iv) of the Act.
[888C G] The High Court grievously erred in entertaining the review petition and passing an interim order on 16.10.1987.
Both the interim orders the one passed on 26.9.1987 postponing the last date of withdrawal of the candidatures, and the other, passed on 16.10.1987 were without jurisdiction.
There was hardly any justification for entertaining the review petition in the circumstances of the case and issuing notice thereon particularly after the High Court itself had rejected the writ petition on the ground that it had no jurisdiction to interfere with the process of election at that stage in view of the provisions of Article 329(b) of the Constitution.
The Review Petition before the High Court was liable to be dismissed.
The entire proceedings in the High Court amounted to a clear abuse of the process of law.
[889B D] OBSERVATION: The success of democracy is dependent upon the cooperation of the Legislature, the press, the political parties and above all the citizenry, and each of them discharging the duties assigned to it.
Every member of the body politic should play his legitimate role for the success of the democracy.
Some times, the success of democracy also depends upon the observance of restraint on the part of the Constitutional functionaries.
[888H; 889A B] Inderjit Barua & Ors.
vs Election Commission of India & Ors., [1985] Supp.
3 S.C.R. 225 A.I.R 1984 S.C. 1911; N.P. Ponnuswami vs Returning officer Namakkal Constituency and Ors., ; ; Lakshmi Charan Sen & Ors.
vs A.K.M. Hassan Uzzaman & Ors.
etc., [1985] Supp. 1 S.C.R. 493 and Mohinder Singh Gill & Anr.
vs The Chief Election Commissioner, New Delhi & Ors.
J , referred to.
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5529.txt
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Appeal No. 1675 of 1970.
Appeal by special leave from the Award dated February 18, 1970 of the Industrial Tribunal, Rajasthan, Jaipur in Case No. 1.T. 12 of 1967.
G. B. Pai, P. N. Tiwari and O. C. Mathur, for the appellant.
M. K. Ramamurthi and Vineet Kumar, for the respondent, 653 The Judgment of the Court was delivered by P. Jagamohan Reddy, J.
This Appeal is by Special '.
Leave against the Award of the Industrial Tribunal, Rajasthan directing the payment of a bonus of Rs. 1,21,000/ apart from an amount of Rs. 90,000/ already disbursed to the workmen of the Appellant for the year 1962 63.
The dispute for the bonus year beginning 1st July '62 and ending 30th June '63 was raised by the workmen because the Company which had admittedly made profits, did not pay them a bonus though a gratuity of one month was given to them.
The following dispute was therefore referred to the Tribunal: "Whether workmen of M/s. J.K. Synthetic Ltd., Kota are entitled to any bonus for the year 1962 63 and whether payment of one month 's wages as gratuity by the management can be regarded as payment towards bonus for the, year in question?".
The Mazdoor Union (hereinafter called 'the Union ') on behalf of the Workmen contended that on the basis of the calculation,; of available surplus they were entitled to a bonus of 60% in accordance with the bonus formula which will entitle them to a five months wages apart from the one month 's wages already paid to them.
The first statement of computation filed on behalf of the workers was obviously incorrect because it did not take into account the various prior charges such as Income Tax, return on reserves, rehabilitation reserve etc.
which are deductible under Full Bench formula as approved and accepted by this Court from% time to time.
It therefore filed another revised return showing an available surplus of Rs. 5.34 lakhs.
The management on the other hand challenged the validity of the claim as according to it there was no available surplus for distribution even though they had already paid one month 's bonus wrongly styled as gratuity.
The calculations given by it were also found to be equally wanting.
As such it filed a revised calculation showing a net deficit of Rs. 72.35 lakhs.
It may however, be mentioned that as pointed ' out by the Tribunal, there was no dispute with regard to any of the eight items which comprised the computation of gross profits amounting to Rs. 62.16 lakhs.
The Union also did not dispute the deduction of interest on debentures of Rs. 0.06 lakhs; share transfer fee of Rs. 0.05 lakhs; the notional normal depreciation of Rs. 30.57 lakhs; and the return on share capital of Rs. 7.50 lakhs.
It had however challenged the deduction of Rs. 4.1 lakhs received as dividend on shares as extraneous income which was being claimed as a deduction by the management.
It also disputed an amount of Rs. 1, 11,000/ shown as return on reserves employed in the business and Rs. 75.89 lakhs shown as the annual share required for rehabilitation.
The method of calculation of income tax amounting to Rs. 15.23 lakhs was also objected to.
The four" 654 items upon which the Tribunal was called on to adjudicate therefore were: ( 1 ) Deduction of Rs. 4.
10 lakhs received as dividend on shares from the gross profits as extraneous income; (2) Rs. 1, 11,000/ as return on reserves employed in business; (3) Rs. 75.89 lakhs as annual share required for rehabilitation, and (4) Rs. 15.23 lakhs towards Income tax.
With respect to the first issue the Tribunal felt that even though there was share capital available to the Appellant, instead of utilising it as working capital it had borrowed amounts to work the Nylon factory for which they had to pay an interest of over Rs. 5 lakhs.
In these circumstances it disallowed the claim for deduction on the ground that it would be unfair to allow the management to treat the income from Investments as extraneous income and still reduce the profits by raising loans and pay interests resulting in demunition of the surplus.
On the second issue the objection of the Union for a deduction of Rs. 1,11 lakhs as return on reserves employed as working capital was disallowed on the ground that the statement M.W. 2/1 produced by Talwar, established that the excess of liability over the assets was utilised as working capital during the course of the bonus.
The claim of the management for deduction of Rs. 75.89 lakhs as share required for rehabilitation was however disallowed, as the oral and documentary evidence produced on behalf of the Management did not according to the Tribunal either establish that the life of the Plant and machinery was only 10 years for 1961 62 Block (hereinafter called 'the first Block ') and 11 years for 1962 63 Block (hereinafter called 'the second Block ') nor was the deviser of six years for both the first and the second Block reasonable.
It found that the more reasonable multiplier was 13 years for machinery purchased in respect of the first Block and 14 years for machinery purchased in respect of, the second Block and likewise a reasonable deviser for these two Blocks would be four years and two years respectively.
In so far as rehabilitation requirements for buildings was concerned the Union did not raise any dispute to the claim of the management amounting to Rs. 0.90 lakhs.
As there was also no dispute about the original cost of plant & machinery, the Tribunal by applying the multiplier and deviser as aforesaid computed the annual rehabilitation replacement for plant, machinery and buildings as follows : Rupees in lakhs Block Origi Mul Repla Break Balan Funds Net Life Annu of nal tip cement down ce avail Repla al re plant lier cost value able cement quire & Mach cost cost ment 61 62 133 004 522 .006 65 525 35113 28412 07 1331 70 62 63 15 00 2 0 30 00 0 . '75 29 25 29 25 14 2 10 33.80 655 Rehabilitation replacement for machinery. .33.80
Rehabilitation replacement for building (as per Company calculation). . . . . . 0.90 Total 34.70 Accordingly the additional rehabilitation to be providedfor was calculated as under Funds available : Depreciation upto 31 3 62. .
Rs. 15 .68 lakhs General reserves . . 12.00 Investments . . . . 85.60 113 28 Annual rehabilitation replacement. . 34.70 Less : Depreciation provided during the year30 57 _________________ Additional rehabilitation to be provided . 4.23 In so far as Income tax calculation of Rs. 15.18 lakhs was accepted being in accordance with the calculations under the Income Tax Act with respect to which it was said the Union did not find itself in a position to contest.
The Tribunal after giving its finding on the matters in issue computed the available surplus as follows: 1.
Gross profit. .
62 11 lakhs 2, Deduct prior charges: Rs. 1.
Notional normal depreciation. . 30.57 lakhs 2.
Direct tax. . . . . 15.18 3.
Return on share capital. . . 7.50 4.
Return on reserves. . . .1.11 5.
Additional requirement for rehabilitation4 23 58.59 Available suprlus . .
Rs. 3 .25 lakhs of the 60% payable as bonus would come to Rs. 2,1 1,000/ .
As the Company had already disbursed Rs. 90,000/ , the Tribunal directed payment of the balance of Rs. 1,21,000/ .
Before us only two items of controversy have been urged namely:(1) relating to extraneous income of Rs. 4.10 lakhs and(2) relating to rehabilitation requirement amounting to Rs. 75.89 lakhs, the first of which the Tribunal disallowed while in respect of the second it only admitted Rs. 4.23 lakhs.
With respect to the first item, the disallowance of Rs. 4.10 lakhs, the management not only claimed this amount but also Rs. 7.5 lakhs as return on paid up capital of Rs. 125 lakhs @ 6% per annum.
Obviously even on a cursory glance it would appear that the management was seeking to obtain double benefit in respect of investments 656 made out of the paid up capital.
The reasons which impelled the Tribunal to reject the claim of the management have, already been noticed and it would therefore be unnecessary to reiterate them.
It however, appeared to the Tribunal that if the Company wanted to exclude income from investments it cannot also be allowed 6% return on that part of the share capital which is invested elsewhere and at the same time be allowed to treat the income of Rs. 4.10 lakhs earned therefrom as extraneous income, because apart from deducting income tax on this amount the Company also meets the expenses of administration and management in respect of the said investments.
In this view it sustained the objection of the Union.
The return on paid up capital is one of the prior charges admissible under the Full Bench formula as approved by this Court.
It is based on the principle that while the claim of labour to a share in the profits by way of bonus is in furtherence of social justice, the claim of the capital for a fair return to the investor and also to keep the industry running efficiently which will in the long run enure for the benefit of labour is equally based upon that principle.
If therefore any amount is earned from the employment of capital unconnected with the business of the Company, the labour cannot claim the right to participate in its returns.
Apart from this if any reserves are utilised for working capital whether these reserves are depreciation reserves or any other, a return in respect of these also is allowed as a prior charge at a reduced rate because utilisation of such reserves would obviate the borrowing from outside sources for which a higher interest has to be paid and which in the long run will not be for the benefit of the workers.
These principles have been laid down by this Court as well accepted in Industrial adjudication.
While it is true that the Company has the discretion to invest its capital in various activities it cannot on that account deprive the workmen of the benefits of the returns derived therefrom unless of course the investments in such activity is extraneous to the activities of the Company, in the earning of which they had not made any contribution.
Whether in any particular case the return on investments amounts to an extraneous income will depend on the facts and circumstances of each case.
So far as the case before us is concerned there can be no doubt that the return from the investments is a return on a part of the paid up capital of the Company which is invested for the purpose of earning an income.
It cannot therefore be construed as extraneous income.
In Workmen of M/s. Hindustan Motors Ltd. vs M/s. Hindustan Motorv Ltd. & Anr.,(1) to which one of us was a party (Vaidialingam, J.) no doubt where the income of the Company was from interest on (1) 1. 657 fixed deposits, it was treated as extraneous income because it was held that it accrued to the Company without any contribution by the workmen.
At the same time the Company was not permitted on equitable ground to claim the interest paid by it on its borrowings as business expenditure.
Further in that case even the income received by the Company from its foreign collaborators as commission on sales effected by the said collaborators of their own cars in India was treated as extraneous income to which the Company 's workmen made no contribution and was therefore not to be taken into account in calculating the available surplus.
In the recent case of MI? Gannon Dunkarley & Co. Ltd. vs Their Workmen(1), by a reference to the decision in the Hindustan Motor 's this principle was again reiterated.
In that case one of the question which this Court considered was whether dividends received from trade investments should be deducted from the gross profits for calculating the surplus available for bonus.
It was held that "these trade investments have to be treated as capital assets of the Company forming part of their trading activities.
The income accruing from these dividends must therefore be re lated to the business of the Company as a whole and hence the income from these dividends has to be included in the income for purposes of calculation of surplus available for bonus".
In this view we think the Tribunal was justified in disallowing the deduction of Rs. 4.10 lakhs and in fact on behalf of the Appellant it was frankly conceded before us that the claim in respect of the said item cannot be pressed on any tenable or valid grounds.
This brings us to the only remaining controversy, the provi sion for rehabilitation requirement.
The claim for a prior charge on this account like any other prior charge has to be established by evidence but As this item results in a substantial deduction from the gross profits and reduces available surplus, materially, effecting the claim of the employees for bonus, each constituent element which is necessary for computing the amount to be provided for must be proved by satisfactory evidence and cannot be left to surmises and conjectures.
It is idle to suggest that as the employees have not in any particular case given any evidence or have not produced any material to controvert the claim of the management that claim must be admitted, because it is the management that is in possession of all the relevant material and is accordingly required to satisfactorily substantiate that claim.
The elements which are important for the computation of annual rehabilitation requirement, is, the price of the assets at the original cost, the period for which these assets can be used before requiring rehabilitation and the probable increase in the cost of rehabilitation, due to rise in prices, devaluation etc.
The probable increase in the price of assets at the time of the rehabilitation over the original (1) L3SupCI/72 658 cost is the multiplier, as it is measured in terms of multiples of the original cost.
The number of years after which the asset requires replacement, rehabilitation or modernisation is termed the deviser because the probable cost on a future date has to be provided annually and therefore has to be divided by the number of years at the end of which the amount would be required.
There is in this case no dispute between the parties as to the original cost of the plant and machinery which is for the first block Rs. 133.00 lakhs and for the second block Rs. 15.00 lakhs.
The only controversy is about the multiplier and the deviser which has been adopted by the Tribunal.
The Appellant had in its written statement claimed the multiplier for each of the two blocks as six and the deviser for the first block as 10 and for the second block as 11 but as we have already noticed earlier the Tribunal has accepted the multiplier as 4 for the first block and 2 for the second block and the deviser as 13 and 14 respectively.
Even in respect of these the learned Advocate for the Appellant admitted that he is not in a position to contest the reasonableness of what has been adopted by the Tribunal but the Respondent has challenged the very basis adopted by the Tribunal as being more dependent on guess work than on any evidence or material before it.
On behalf of the management the right of the Union to chal lenge the multiplier and deviser, in the absence of an Appeal by it is strenuously contested but in our view there is little force in this objection.
The appeal by the employer is against the grant of bonus to the employees which implies that the method of computation of the gross profits, as well as of the available surplus and the rate at which the bonus is granted can be subjected to scrutiny.
It is needless to recount the several priorities that have to be deducted and the items in respect of which amounts have to be added, before arriving at the available surplus.
In an Appeal, the several steps which have to be taken for computation of the available surplus either in respect of the actual amounts or the method adopted, can be challenged.
If so the Union, even where it has not appealed against the Award, can support it on a method of computation, which may not have been adopted by the Tribunal but nonetheless is recognised by the Full Bench formula of this Court so long as in the final result the amount awarded is not exceeded.
We are supported in this view by a decision of this Court in Management of Northern Railway Cooperative Society Ltd. vs Industrial Tribunal, Rajasthan, Jaipur & Anr.(1) where it was held that the Respondents were entitled to support the decision of the Tribunal even on grounds which were not accepted by the Tribunal or on other grounds which (1)[1967] 2 S.C.R. 476.
659 may not have been taken notice of by the Tribunal while they were patent on the face of the record.
A passage from the case of Ramanbhai Ashabhai Patel vs Dabhi Ajithkumr Fulsinji & Ors.
(1), will give the reasons adopted by this Court for the aforesaid view.
That no doubt was an election appeal but it was said that though the rules framed by this Court in exercise of its rule making powers do not contain any provisions analogous to Order XLI Rule 22 of the Civil Procedure Code, which permits a party to support the Judgment appealed against upon a ground which has been found against him in the Judgment, it was held that this Court has the jurisdiction to sustain the Judgment on grounds which have been found against the Respondent.
Mudholkar, J. speaking for himself, Gajendragadkar, C.J., Wanchoo, Hidayatullah, and Raghubar Dayal, JJ. after considering whether the provisions of Order XVIII, Rule 3 of the Rules of this Court which requires parties to file statement of the case could limit it only to those contentions which deal with the points found in favour of that party in the Judgment appealed from, observed at page 724: "Apart from that we think that while dealing with the appeal before it this Court has the power to decide all the points arising from the Judgment appealed against and even in the absence of an express provision like O.XLI, R. 22 of the Code of Civil Procedure it can devise the appropriate procedure to be adopted at the hearing.
There could be no better way of supplying the deficiency than by drawing upon the provisions of a general law like the Code of Civil Procedure and adopting such of those provisions as are suitable.
We cannot lose sight of the fact that normally a party in whose favour the Judgment appealed from has been given will not be granted special leave to appeal from it.
Considerations of justice, therefore, require that this Court should in appropriate cases permit a party placed in such a position to support the judgment in his favour even upon grounds which were negatived in that Judgment".
In the view we have taken, we will have to consider the plea on behalf of the Respondents that the rehabilitation requirement has not been properly established, but this need only be entertained if we come to the conclusion that the main contention that the rehabilitation requirement has not been properly computed and if so computed there will be no available surplus for awarding bonus to the employees.
(1) ; 660 The learned Advocate for the Appellant as we said earlier has not seriously insisted on the adoption of the multiplier and the deviser claimed by the Appellant but on the other hand contends that even if the multiplier and the deviser as adopted by the Tribunal is followed the trade investments amounting to Rs. 85.6 lakhs cannot be said to be available for computation of rehabilitation requirement.
On this assumption while not disputing the computation of the Tribunal in respect of the original cost which as we have earlier mentioned has not been disputed, even by accepting the multiplier, the break down value and the deviser as adopted by the Tribunal the annual amount required would be Rs. 10.71 lakhs and not Rs. 4.23 lakhs as computed by the Tribunal.
The only variation between the computation of the appellant and that of the Tribunal is in respect of the funds available which according to the Tribunal is Rs. 113.28 lakhs including the trade investment of Rs. 85.6 lakhs and according to the Appellant it is Rs. 27.8 lakhs comprising of only two items namely depreciation of Rs. 15.68 lakhs and general reserve of Rs. 12 lakhs.
If this computation isaccepted then there will be a negative balance of Rs. 2.9 lakhs.
This result is arrived at as follows : Gross profits . . . . . .Rs. 62.11 lakhs 1.
Notional normal depreciation.
30.57 lakhs 2.
Direct tax . . . .
Rs. 15 .18 3.
Return on share capital. .
7 .50 4.
Return on reserves. . .
1 .11 5.
Additional requirement for rehabilitationRs.
10 .71 Rs.65.
07" Negative balance.
( ) Rs. 2 .96 lakhs It will be observed that the prior charges comprised in items 1 to 4 are not really in dispute.
It is only the additional requirement for rehabilitation that is the bone of contention between the parties and this is challenged on two grounds; firstly that the trade investment of Rs. 85.6 lakhs are available funds for rehabilitation requirement as admitted by the Appellant to be so available in the statement which it furnished to the Tribunal; secondly that no claim for rehabilitation requirement has been substantiated.
On the first ground it is contended that the question, what was the: available amount for the annual requirement was specifically before the Tribunal, and that it was the case of the management and not of the workmen that an amount of Rs. 1,23,90,000/ was available consisting of Rs. 26.30 lakhs towards depreciation, Rs. 12 lakhs towards general reserves and Rs. 85 6 lakhs towards investments.
In these circumstances the Tribunal was not called upon to investigate the question as to what exactly was the nature of the investments or whether any of 661 them were realisable or were not available for meeting the rehabilitation requirements.
Further there was no grievance made in this behalf in the Special Leave Petition and therefore the management is, it is submitted stopped from challenging before his Court the validity of inclusion of this amount in the amount available for rehabilitation.
It is further submitted that assuming that this question can be agitated, in the absence of any specific investigation as to the nature of the investments and more particularly when the management itself had shown this amount as being available, the Appellant cannot be permitted to say that it is not available.
The contention of the respondents proceeds on a basic error namely that the Appellant had held out that the trade investments were available for rehabilitation requirement.
This is not so.
In the amended written statement filed on 4 7 69 after obtaining the permission of the Tribunal on 3 7 69, the Appellant claimed the annual share required for rehabilitation as Rs. 93,56,207/ .
Even in the statement filed earlier on 10 4 69 it showed two amounts as being available namely depreciation of Rs. 26.31 lakhs and general reserves of Rs. 12 lakhs.
It is submitted by the Appellant that only when the arguments were completed on behalf of the Company on 9 12 69, having regard to the claim made by it for deduction of Rs. 4.1 lakhs as extraneous income derived from the trade investments, the corpus of Rs. 85.6 lakhs which earned that income was also shown as available and a statement to 'hat effect was filed on the same day to facilitate the Tribunal in arriving at an Award.
In as much as we are not allowing the deduction of Rs. 4.1 lakhs as extraneous income, the question whether the corpus should be treated as being available also has to be considered in the light of the decisions of this Court.
The Appellant in our view is fully justified in urging this contention before us, as it cannot be said that this was not raised before the Tribunal.
The Tribunal had ample opportunity of considering this aspect since it did specifically consider the nature of the income therefrom.
Assuming for the present that the adoption by the Tribunal of the multiplier and deviser can be justified, though the validity of the Tribunal 's award in this behalf has been seriously challenged 'before us, the question to be determined is whether the investments of the Appellant amount to Rs. 85.6 lakhs is available for rehabilitation which in turn will depend upon whether these investments are made in the course of the business of the Company or are unconnected with its business and only invested with a view to earning extraneous income.
The principles upon which rehabilitation grant is to be calculated as laid down by this Court is that the depreciation reserves, or in the case of other reserves only if they are available as liquid assets and cash and not earmarked for any specific purposes, are deemed to be available and can be taken into account in computing the annual requirement.
The 662 depreciation reserve, the object of which is to meet the requirement of replacement, rehabilitation and modernisation at a future date is considered to be always available whether it is in the form of a liquid asset or not.
It is obvious that even this amount will not achieve the purpose of recouping the cost of replacement of the wasted assets and it is for that reason the claim of the industry for rehabilitation in addition to the admissible depreciation has been recognised.
Then there are the general reserves, capital reserves and development reserves all of which will be considered to be available if they are in the form of liquid assets or cash.
The question in some of these cases will be whether they are considered to be the capital assets of the Company kept in that form in the course of its business or kept as investments outside the business of the Company for the purposes of earning an extraneous income.
If it is the former then they are available but if it is the latter they cannot be brought into account for calculating the rehabilitation requirement.
As it happens in most cases the claim by the employer is that the reserves are either wholly or partly not available because they have been used as working capital and consequently the, amount to be utilised should not be excluded from the amount claimed towards rehabilitation.
The principles governing what deductions should be made from out of reserves before calculating the amount in respect of rehabilitation for the bonus year were set out in the Full Bench formula and have been restated in the Associated Cement Co. Ltd. vs Its Workmen(1).
The two items according to that decision that are to be taken into consideration are the general reserves available to the employer and the reserves which have been reasonably earmarked for specific purposes of the industry.
In explaining what was meant by availability of the reserves or the earmarking for specific purposes Subba Rao, J. as he then was in Khandesh Spinning & Wvg.
Mills Co. Ltd. vs Th.? Rashtriya Girni Kamgar Sang Jalgaon(2), observed at page 845 846 : "We do not think that by using the said words this Court meant to depart from the well recognized principle that if the general reserves have not been used as working capital, they cannot be deducted from the rehabilitation amount.
The reserves may be of two kinds.
Moneys may be set apart by a company to meet future.
payments which the Company is under a contractual or statutory obligation to meet, such as gratuity etc.
These amounts are set apart and tied down for a specific purpose and, therefore, they are not available to the employer for rehabilitation purposes.
But the same thing cannot be said of the general reserves : they would be available to (1) @ 970.
(2) ; 663 The use of the words "reasonably earmarked" is also deliberate and significant.
The mere nominal allocation for binding purposes, such as gratuity etc.
in the Company 's books is not enough.
It must be ascertained by the Industrial Court on the material placed before it whether the said amount is far in excess of the requirements of the particular purpose for which it is so earmarked and whether it is only a device to reduce the claim of the labour for bonus".
What is meant by the above observations in the Khandesh Spinning & Wvg.
Mills case was later explained by Wanchoo J, as he then was in Bengal Kagazkal Mazdoor Union & Anr.
vs The Titaghur Paper Mills Co. Lid.(1).
This was what was said at page 54 "All that that decision lays down is that that part of the reserves which go to make up the working capital which is in the shape of raw materials etc.
or earmarked reserve will not be deducted from the I gross rehabilitation amount; it does not lay down that all cash reserves in the shape of depreciation reserve, general reserve, renewal reserve and so on and also in the shape of investments and advances cannot be deducted from the gross rehabilitation amount as they may be used as working capital next year".
Now the question of trade investments unconnected with the purposes of the industry fell for consideration in the National Engineering Industries Ltd. vs Its Workmen (2).
In this case the Company had an investment of Rs. 18.22 in shares, which were treated by this Tribunal as liquid assets available for rehabilitation.
But the Company contended that this investment can either be treated as a trading transaction carried out in the ordinary course of business or as a capital asset.
If it was the former then it should have been allowed the loss of Rs. 1.72 lakhs as trading expenditure but instead the tribunal had added the profits therefrom to the gross profits, thereby treating the investment as capital asset.
It could not therefore deduct Rs. 18.22 lakhs as a fund available for rehabilitation cost.
Negativing this contention of the Company, Shelat J, observed at page 796 797 : "We fail to see any contradiction on the part of the Tribunal.
The balance sheet for the year 1957 58 contains two schedules; Schedule A shows fixed assets and schedule B shows trade investments of the value of (1) (2) ; 664 Rs. 18,21,571/ .
The Company not being an investment Company the investment of Rs. 18.22 acs in shares of other joint stock Companies prima facie represents extra capital not required as working capital for otherwise the Company could not have spared this amount for investment in the stocks of other Companies.
The Tribunal was right in treating this investment as a capital asset and in refusing to treat the loss therefrom as trading expenditure. 'the Tribunal at the same time could deduct this amount from the rehabilitation cost because that amount was available to meet the rehabilitation cost.
The investment in shares could easily, if the Company was so minded, be converted into cash and utilised for replacement of its worn out machinery".
In Gannon Dunkerley 's case also these principles were reiterated.
It was held in that case that in calculating rehabilitation grant one of the principles which this Court has laid down is that the depreciation reserve must always be deducted irrespective of the fact whether it is available or not as a liquid asset.
In addition other reserves like general reserve are also to be deducted if they are available as liquid reserves and are not ear marked for any specific purpose.
The capital reserve and the development reserve can also be deducted if there is material to show that they existed in the form of liquid assets or cash.
The question would be whether they are capital assets of the Company kept in that form in the course of its business or whether they have been treated as investments outside the business for the purposes of earning extraneous income.
If they are investments made in the course of its business they are to be treated as part of the capital but otherwise if they are extraneous to the business they do not form part of the reserves available for rehabilitaion.
It may be observed that in the National Engineering Industries Ltd. vs lts Workmen(1), an exception had been made in the case of an investment Company the investment of which is to be treated as working capital employed in the business of the Company.
The Companies Act placed restrictions on the purchase of shares by one Company, of shares of any other body corporate except to the extent and except in accordance with the restrictions and conditions specified in Sec.
372 of that Act as amended by Act 65 of 1960.
373 it is enjoined on Companies investing after 1st April 1952 in shares of any other body corporate in exercise of the limit specified in sub section (2) and the second proviso to the said sub section of Sec. 372 to obtain the authority of 'he Central Government within six months from the commencement of the Act and if such authority and approval is not so obtained 665 the Board of Directors must dispose of the investments in excess of the limits specified in the aforesaid provision within two years from the commencement of the Act.
It is also provided by Sec.
372(10) that after the commencement of the Companies Amendment Act a statement should be annexed to the balance sheet giving the details of, the investments acquired; the bodies corporate in the same group, of which the shares have been acquired, whether the investments are existing or not, and the nature of the said investments.
An exception however has been made by the proviso to the said sub section in the case of investment Companies (which are those whose principal business is the acquisition of shares etc.) that it shall be sufficient if the investments, existing on the date as at which the balance sheet to which the statement is annexed has been made out From these provisions it is contended that the balance sheet in this case shows only those details which are required to be given by an investment Company which is also consistent with the plea,, ,that the investments of the Appellant were made prior to 1952 when it was an investment Trust Company and these investments, which are the same exceeded the limits prescribed by the Companies Amendment Act without having to conform to the conditions of having either to obtain approval of the Central Government or to dispose of the excess within two years i.e. by 31st March 1962.
On behalf of the Respondents however it is submitted that there has been no finding by the Tribunal that the Company is an Investment Company or that the investments were made prior to, 1952 as an Investment Company which would entitle it to treat those investments as not available for the purposes of rehabilitation within the exception indicated in the National Engineering Industries case.
In our view this submission has no force.
There is ample justification in the contention of the Appellant 's Advocate that the Tribunal did advert to the fact that the Company invested initially a capital of Rs. 75 lakhs as an investment Trust Company and from its inception these investments have been made and that it is only after the amendment in 1960 when it was not possible for it to invest further amounts that it changed its name, increased its capital and started the present industry.
On this, aspect of the matter the Tribunal stated thus : "Originally the Company was floated as J. K. Investments Trust Ltd. It had a share capital of Rs. 75 lakhs.
They invested this amount and some loans in debentures and loans.
Due to amendments in Company law they had to stop further investment from 1960 onwards and changed the name of the Company to J. K. Synthetics Limited, raised additional Rs. 50.00 lacs 666 share capital and started this Nylon factory.
Thus to date the share capital of the Company is Rs. 125.00 lacs including the old share capital of Rs. 75.00 lacs of J. K. investments Trust Ltd. Now instead of utilising the old share capital and loans invested in debentures the Company took separate loans to work the Nylon factory for which according to the balance sheet they had to pay over Rs. 5 lacs as interest on loans".
It is also apparent from Schedule 'E ' statement forming part of the balance sheet as at 30th June, 1963 that a list of trade investments held by the Appellant have been given.
There are two notes attached thereto.
Note (1) states Investments in the Companies marked with asterisks exceed ten per cent of their respective subscribed capital.
These investments were acquired before the commencement of the Companies (Amendment) Act, 1960, while Note (2) states The Total investments of the Company exceed thirty per cent of its subscribed capital.
These investments were acquired before the commencement of the Companies (Amendment) Act, 1960.
Having regard to these undisputed facts it appears to us clear that the trading investments were made prior to 1960 when the Company Was an Investment Company, as such these investments are not connected with the activities of the Company, are extraneous to its business and do not form part of the reserves available ,for rehabilitation.
In the circumstances the Tribunal is not justified in including this amount in the amounts available for rehabilitation purposes.
While this is so and the result of the non exclusion of Rs. 85.60 lakhs would result in a negative balance, the respondents as we have already held are entitled to challenge the claim for rehabilitation on the ground that the essential requisites have not been established by any cogent or sufficient evidence.
In computing the requirements for rehabilitation as has been stated often, regard must be had, to two imponderables out of the three main elements because one of them namely the original cost of the asset is specifically ascertainable while the other two have to be established as near as possible which might to some extent involve an estimate based on evidence deducible therefrom.
These two imponderables are the multiplier and the deviser.
Unless all these elements are determined the amount required for rehabilitation cannot be ascertained.
of course the scrap value of the old assets has also to be ascertained but this does not involve any difficulty because normally it is taken as 5% of the value of the assets at cost.
Even so the determination of the amount for rehabilitation no doubt poses problems but it is suggested that a reasonable method would be to divide them into blocks, accord 667 ing to the nature of the asset and the year in which the assets have been acquired.
The cost of the separate blocks has then to be ascertained and their probable future life has to be estimated.
Once this estimate is made it becomes possible to anticipate approximately the year when the plant and machinery would need replacement and the probable price of such requirement at a future date when the asset requires replacement.
In determining this difficult question the Tribunal as already observed must have before it all available evidence from which a reasonable and probable adjudication can be made in respect of these essential requisites.
The Respondent 's Advocate submits that the Tribunal while quite properly rejecting the evidence produced on behalf of the Appellants indulged in guess work when it adopted arbitrarily the multiplier and the deviser.
It is his case that the determination of the life of machinery depends on various factors such as for instance nature of the machinery, its quality, the nature of the industry, the efficiency of workmen etc.
In the Hindustan Motor 's case, Bhargava, J, after examining the several cases relating to this aspect of the matter observed at page 319 : "The life of machinery of one particular factory need not necessarily be the same as that of another factory.
Various factors come in that affect the useful life of a machinery.
There is, first the consideration of the quality of machinery installed.
If the machinery is purchased from a country producing higher quality of machines, it will naturally have longer life than the machinery purchased from another country where the quality of production is lower.
Again, the articles on which the machinery operates may very markedly vary the life of a machine.
If, for example, a machine is utilised for grinding of cement the strain on machine will necessarily not be the same as on a machine which operates on steel or iron".
In the Honorary Secretary South India Millowners ' Association & Ors.
vs The Secretary, Coimbatore District Textile Workers ' Union(1), to which a reference had been made in the above case, after accepting, on the facts of that case, that the life of the textile machinery was adopted as 25 years, this Court laid down the following principle at p. 933.
"We are not prepared to accept either argument because, in our opinion, the life of the machinery in every case has to be determined in the light of evidence adduced by the parties".
(1) [1962] 2 Supp.
S.C.R. 926.
668 The Advocate on behalf of the Appellant on the other hand says that the Full Bench Formula for determining rehabilitation as accepted in Associated Cement Companies(1) case laid down an elastic measure for determining the probable cost which was to be estimated "as near actualities or realities as possible".
At pages 967 968 Gajendragadkar J, as he then was observed : "The estimate about the probable life of the plant and machinery 'is itself to some extent a matter of guess work and any anticipation, however, intelligently made, about the probable trend of prices during the interven ing period would be nothing but a guess.
That is how, in determination of this problem, several imponderables face the tribunals.
One of the points which raises a controversy in this connection is : What level of prices should the tribunal consider in making its calculations about the probable cost of replacement. .
It seems to us that in order to enable the Tribunal to make an estimate in this matter as near actual ties of realises as possible it is necessary that the Tritunal should be given full discretion to admit all relevant evidence about the trend in price levels .
The problem of determining the probable cost of replacement itself is very difficult; but the difficulty is immediately increaser when it is remembered that the claim for rehabilitation covers not only cases of replacement pure and simple but of rehabilitation and modernisation.
In the context rehabilitation is distinguished from ordinary repairs which go into the working expenses of the industry.
It is also dis tinguished from replacement .
That is why we think it is necessary that the tribunals should exercise their discretion in admitting all relevant evidence which would enable them to determine this vexed question satisfactorily".
Keeping these observations in view what we must see is whether the Tribunal was justified on the evidence in adopting the particular multiplier and the deviser.
The stand taken by the management is that it had produced sufficient evidence in support of its own multiplier and deviser and in any case the learned Advocate says the Tribunal is right in arriving at its own conclusion.
In fact it is submitted, the management had made an application for appointment of an assessor to assist the Tribunal as an expert for determining the several questions appertaining to the computation of rehabilitation requirements, but that was rejected as the Tribunal did not feel any necessity for it and there is nothing more which the management could do in the circumstances.
(1)[1959] S.C.R. 925 @970.
669 It is pointed out that the Nylon industry was a new industry at the time when it was started and the evidence of the General Manager, who had been with the Company from the initial stages and throughout the negotiation for purchase of the machinery, says that according to the manufacturers the life of the machinery could only be six years.
That apart the management also produced sample invoices for each year and adduced the evidence of the Manager to prove what would be the cost of rehabilitation.
In fact it is said that the Appellant was fortunate in having actual invoices of machinery purchased because the Company had only then expanded its undertaking.
The Tribunal rejected the oral evidence on the ground that the witnesses produced by the management were no experts and they did not throw any material light on the matters to be adjudicated by it.
It also rejected the documentary evidence on the ground that the machinery which was said to have been purchased was not the same as was sought to be replaced and in any case there was not sufficient evidence for it to accept the multiplier and deviser as claimed by the management.
Whether this criticism is valid or not will depend largely on what in fact weighed with the Tribunal in arriving at the multiplier and the deviser.
No doubt the employer did make an appli cation to the Tribunal as noticed earlier and the same was rejected on 5 8 69 as it did not find it necessary to appoint an assessor.
The application itself was for requesting the Tribunal to appoint an assessor if it thinks necessary.
The management cannot without discharging its duty of placing all the necessary material before the Tribunal ask it to appoint an assessor who would be useless without that material.
We do not think in the circumstances the Tribunal was wrong in rejecting the application.
The Tribunal considered the evidence of S/Shri Jain, Aggarwal and that there had been hundred per cent increase in prices also machinery worth about Rs. 10 lakhs had already been replaced and that there had been hundred percent increase in prices also due to devaluation.
The witness was however, not able to give any details as to when the replacement of the parts and machinery took place even though the management kept the record of the replacement of the machinery.
He could not also explain what exactly was the impact of the devaluation of Rupee on prices.
He did not see the quotations of the machinery.
It was therefore concluded that his statement both with regard to the life of the machinery and the replacement cost was quite us less and was based on hearsay.
Shri Aggarwal 's evidence was also considered unsatisfactory, both with respect to the estimate of the replacement cost and the life of the machinery.
His calculations were based on a comparison of the original cost of machinery in invoices exhibit M. 1, M. 2 and M. 3 and their cost in 1967, as given in the corresponding invoices exhibit M. 4, M. 5 and M. 6 and the devalua 670 tion of the Rupee.
The Tribunal then considered the discrepancy between the machines mentioned in various exhibits.
No doubt there is some justification in the comment of the learned Advocate by the Tribunal merely because the machines mentioned therein for the Appellant that some of these invoices were not relied upon were different in size and weight to those which were installed in the factory.
Undoubtedly there would be a variation because the ingenuity of the inventor and technician is not static and as time goes on there are improvements, renovations and changes that make the machine more sophisticated and efficient.
While this is so the question is whether satisfactory evidence has been produced to prove the total cost of rehabilitation and also the life of the machinery.
The evidence of Talwar was equally found to be defective.
He was greatly relying on the Handbook of Chemical Engineers by John Parry, for establishing the life of the machinery.
He said that in that Book the life of a Chemical plant working in three shifts is shown to be 11 years.
He also admitted that the Author gives only the guideline for Income tax purposes only.
An extract of the Parry 's Handbook was also given by the Tribunal, which stated its conclusions as under : "In view of the above said infirmities it is evident that the management 's claim for rehabilitation is very much inflated.
The selection of the average multiplier is rather arbitrary or at least quite generous to the management and their estimate about the life of the machinery is slightly conservative.
From the available evidence on record he then proceeds to make his own estimates which as far as the life of the machinery is concerned was placed between that adopted for textile machinery of 25 years and the life given in he Chemical Engineers Handbook of 11 years.
It said after referring to the statement in the Chemical Engineer 's Handbook that the life of a Chemical machinery must be more than II years in America where they work efficiently to the maximum capacity of the machinery.
It was observed here the working conditions being different the machinery is likely to last longer and certainly due to poor economic conditions in the country the management also cannot afford to discard such valuable machines in eleven years only.
The life of the plant therefore must be more than 11 years.
On the other hand the ordinary life of textile machinery is taken to be 25 years or more.
In this view of the matter if we take the life of the machinery as 14 years it would still be on the side of the conservative estimate".
671 Regarding the multiplier the Tribunal said that : "The 1961 62 Block of the machinery would require replacement according to our estimate in 1975 76.
The Company 's claim of six times the original cost based on a comparative study of invoices exhibit M. 1 to M. 3 on the one hand and exhibit M. 4 to M. 6 on the other is very much inflated .
The Company has not produced the current price list also of the machinery or any price indices indicating the trend of prices of machines.
The prices of machines are more stabilised than prices of consumer goods.
The production of the machines has also gone up in the country and it is not impossible that by 1975 we might manufacture our own machines for Nylon factory also.
Even otherwise the prices of imported machines are not likely to be more than four times.
Therefore, in our opinion the multiplier should only be four for the block of 1961 62.
In awards also relied upon by Shri Talwar even though they considered only prewar block of machines, in no case they allowed a multiplier of six.
For the block of machines installed in the accounting year, ordinarily the unit is taken as the multiplier but as there has been in the meantime deva luation of the rupee we think it would on the whole be fair to adopt two as a suitable multiplier for the block installed in the accounting year".
It appears to us that this is an unsatisfactory way of determining the two most important factors required for computing the rehabilitation requirement.
The evidence produced before the Tribunal consisted only of a few invoices which were to serve as samples of the price of machines to show that they have gone up.
We are not impressed with the submission of the learned Advocate for the Appellant that a complete set of invoices in respect of all the Departments of the industry which required rehabilitation had been placed before the Tribunal.
Indeed the very application for appointment of Assessor demonstrably contradicts this assumption.
In this application the management stated that it did , 'examine S/Shri section section Aggarwal, A. C. Talwar as its expert witnesses and have filed some invoices by way of example to show the trend in rising cost in plant and machinery.
With regard to useful life of the plant the Respondent places reliance on Chemical Engineer 's Handbook IVth Edition by John Parry" (emphasis ours).
It is apparent from this application that the management was relying only on a few sample invoices which they said they had produced while depending heavily only on Parrv 's Handbook for ascertaining the life of the machinery and the probable cost.
672 We have also gone through the evidence of the three witnesses and the invoices referred to and we think that the Tribunal rightly rejected this evidence as not being of much assistance.
It is quite probable that the price of the indigenous industry as appearing from the bulletin of the Reserve Bank of India has gone up but that does not furnish a basis for arriving at any specific multiplier or deviser for the Appellant 's plant.
All that the invoices produced before the Tribunal establish is only the probable cost of machinery of 2 1/2 lakhs, in an attempt to prove the cost of replacement of plant and machinery worth Rs. 825 lakhs.
The Tribunal was therefore, amply justified in saying that the only evidence given is of the few invoices the value of which is only 2 1/2 % of the requirement of the replacement cost which in our view is not sufficient to establish, how many machines in each Department of the industry are required, what is the nature of those machines and what is the probable cost of each of those machines.
We are far from satisfied that the management has placed before the Tribunal any satisfactory evidence much less sufficient evidence to arrive at a multiplier and deviser nor has the Tribunal any bases for arriving at its own multiplier and deviser except it be on a pure conjecture and guess work.
The result is that though the appellant is able to succeed in one of the main points of his Appeal, the Appeal will have to be dismissed as the Respondents are able to sustain the Award on other grounds.
The circumstances of the case justify a direction for each party to bear its own costs.
S.C. Appeal dismissed.
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A dispute for Bonus was raised by the workers of the Appellant company before the Tribunal for the Bonus year 1962 63, as the appellant company which made profit during the year, did not pay any bonus to the workers; but only a gratuity of one month was paid to them.
According to revised returns filed by the workers, there was an available surplus of Rs. 5.34 lakhs; but according to the management, there was a deficit.
There were two main points of dispute : (1) the workers challenged the deduction of Rs. 4.1 lakh received as dividend by the company as extraneous income.
According to the management however, as the company invested part of the paid up capital in hares which earned an income of Rs. 4.1 lakh, the company was entitled to claim this amount as an extraneous income because the workers had made no contribution in its earning and so this amount should be deducted from the gross profit.
(2) The workers also disputed Rs. 75.89 lakhs shown by the management as the annual share required for rehabilitation.
The management divided the plant and machinery of the company into two blocks.
The original cost of the plant and machinery for firdt block was 133.00 lakhs and Rs. 15.0 lakhs for the second block.
The appellant company claimed the `multiplier ' (which is the probable increase in the price of assets at the time of rehabilation over the original cost) for each of the two blocks as 6 and the `deviser ' (number of years after which the asset require s replacement) for the first block as 10 and for the second block as 11.
The Tribunal decided the first point against the management because even though there was share capital available to the appellant, instead of utilising it as working capital, it had borrowed amounts to work the Nylon factory for which it bad to pay an interest of over Rs. 5 lakhs.
In these circumstances, it disallowed the claim for deduction on the ground that it would be unfair to allow the management to treat the income from investments as extraneous income and still reduce the profits by raising loans and pay interests resulting in diminution of the surplus.
On the second point the Tribunal admitted only a fraction of the total amount as annual share required for 'rehabilitation.
It held the 'Multipliee as 4 for the first block and 2 for the second block and the 'deviser ' as 13 and 14 respectively.
After deducting the prior charges from the gross profits, the tribunal computed the available surplus to be Rs. 3.25 lakhs and of this, 60 per cent payable as bonus would come to Rs. 2,11,000/ .
As the company bad already distributed Rs. 90,000 the tribunal directed payment of the balance of Rs. 1,21,000/ a# bonus.
In appeal by special leave, a further point was agitated before the Court as to whether the Respondent can challenge a finding by the Tribunal in the absence of an appeal by it.
Dismissing the appeal, HELD, : (i) Since the dividend in the present case is the return from investment , of part of the paid up capital of the company which is invested for the purpose of earning an income, it cannot be construed as 652 ,extraneous income and the Tribunal is justified in disallowing tile dividend on shares as a valid deduction.
The return on paid up capital is one of the prior charges admissible as a valid deduction and if any amount is .earned from the employment of capital unconnected with the business of the company, the labour cannot claim the right to participate in its returns.
Further if any reserve is utilised for working capital, whether this .reserve is depreciation reserve or any reserve, a return in respect of they are also allowed as prior charges, at a reduced rate.
The company has the discretion to invest its capital in various activities; but it cannot deprive the workmen of the benefits of the returns derived therefrom unless the investments in such activity is extraneous to the activities of the company, in the earning of which the workers had not made any contribution.
In the present case, the return from the investments is a return on a part ,of the paid up capital which is invested for the purpose of earning an income and therefore, it is not extraneous income as claimed by the management.
[656 G B] (ii) The elements which are important for the computation of annual rehabilitation is the price of the asset at original cost, the period for which these assets can be used before requiring rehabilitation due to rise in prices, devaluation etc.
In other words, for computation of annual rehabilitation, the 'multiplier ' and the 'deviser ' is to he found out.
In the present case, the management failed to place satisfactory evidence before the Tribunal to arrive at a proper 'multiplier ' and 'deviser ' and in absence of any proof as to how and on what basis the Tribunal had arrived at its own 'multiplier ' and 'deviser ' on a pure conjecture and guess work, the appeal cannot be sustained.
Further, the Tribunal is not justified in including the trading investments to be available for the purpose of re habilitation as these investments were made prior to 1960 when the company was an investment company and as such these investments were not connected with the activities of the present company, which was floated only in 1960.
[666 G] (iii)In appeal, the respondents are entitled to challenge or support the judgmentin his favour given before the High Court even upon grounds which are negatived in the judgment.
Workmen of M/s. Hindustan Motors Ltd. vs M/s. Hindustan Motors Ltd. & Anr. ; , M/s. Gannon Dunkerley & Co. vs Their Workmen, , Management of Northern Railway Cooperative Society Ltd. vs Industrial Tribunal, Rajasthan; , , Ramabhal Ashabhai Patel vs Dabhai Ajit Kumar Fulshingji ; , Associated Cement Co. Ltd. vs Its Workmen, , Khandesh spinning & Wvg.
Mills Co. Ltd. vs Rashtriya Gir Kamgar Samiti Jalgoan, ; , Bengal Kagazkar Mazdoor Union vs Titaghar Paper Mills Co. Ltd., , National Engineering Indnstries Ltd. vs Its Workmen, ; and Honorary Secretary, Coimbatore District Textile Workers Union [1962] Supp. 2 S.C.R. 926, referred to.
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3035.txt
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Civil Appeal Nos.
68 of 1974 and 936 of 1975.
Appeals by Special Leave from the Judgment and order dated 5 11 1973 of the Punjab & Haryana High Court in Sales Tax Reference Nos. 12 and 11 of 1969.
Desai, (In CA No. 936/75), P. C. Bhartari, R. Narain, K. J. John, O. C. Mathur for the Appellants.
B. Sen, (In CA No. 68/74), and R. N.Sachthey for the Respondent.
P. C. Bhartari for Applicant/Interveners (In CA No.68/74).
The Judgment of the Court was delivered by RAY, C.J.
This appeal by special leave is on the question whether the appellant is exempt from inter State tax on the sales of poles and cables to the Delhi Electric Supply Undertaking by reason of the provisions contained in section S(2)(a)(iv) of the Punjab Sales Act hereinafter referred to as the State Act.
Section 5(2) (a) (iv) of the State Act is as follows: "5(2) In this Act the expression "taxable turnover" means that part of a dealer 's gross turnover during any period which remains after deducting therefrom (a) his turnover during that period on (iv) sales to any undertaking supplying electrical energy to the public under a licence or sanction granted or deemed to have been granted under the , of goods for use by it in the generation or distribution of such energy.
" Under section 8 of the hereinafter referred to as the Central Act, every dealer, who in the course of inter State 994 trade or commerce sells to the Government any goods; or sells to a registered dealer other than the Government goods of the description referred to in sub section (3) shall be liable to pay tax under this Act, which shall be three per cent of his turnover.
The provisions in section 8(2A) of the Central Act are as follows : "Notwithstanding anything contained in sub section (1A) of section 6 or sub section (1) or sub section (2) of this section, the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally or subject to tax generally at a rate which is lower than three per cent, (whether called a tax of fee or by any other name), shall be nil or, as the case may be, shall be calculated at the lower rate.
EXPLANATION: For the purposes.
, of, this sub section a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the ' appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods.
" The contention on behalf of the appellant is that by reason of the Explanation to section 8(2A) of the Central Act read with section 5(2)(a)(iv) of the State Act the appellant is exempt from payment of inter State sales tax.
The words "goods for use by it in the gene ration or distribution of such energy" occurring in section S (2) (a) (iv) of the State Act are said by counsel for the appellant to be descriptive of the goods.
In short, the appellant 's contention is that goods for use by the undertaking supplying electrical energy are generally exempt from taxation, and, therefore, they should not be included in the turn over.
The contention on behalf of the State is that the exemption granted under section 5(2)(a)(iv) of the State Act is exemption in specified circumstances and under specified conditions.
The specified circumstances are said to be sales to an undertaking supplying electrical energy to the public under the .
The specified conditions are that the goods are for use by the undertaking in the generation or distribution of such energy.
The answer to the question in this appeal is whether the exemption mentioned in section 5(2) (a) (iv) of the State Act is in specified cir circumstance or under specified conditions, as the Case may be, or it is a general exemption as the appellant contends in cases of sales of goods to an Electric Supply Undertaking for use by it in the generation or distribution of such energy.
995 The appellant referred to Schedule read with section 6 of the State Act and in particular Items 33 and 46 to illustrate what would be exemption under specified circumstances or specified conditions.
In Schedule there are two columns.
The first column describes the goods.
The second column describes the conditions which make the goods tax free.
In Item 33 in Schedule "Photographs including Xrays photographs" mentioned in the first column are tax free "when sold by photographers and radiologists preparing them" as mentioned in the second column.
In Item 46 "hand spun yarn" mentioned in the first column becomes tax free "when sold by one who deals in hand spun yarn exclusively" as mentioned in the second column Section 5(2) of the State Act deals with taxable turnover.
There is no dispute that electricity poles and cables sold to the undertaking supplying electric energy are exempt under the State Act from being included within the taxable turnover.
The question is whether such sales made in the course of inter State trade are also exempt from the levy of Central Sales Tax.
The appellant contends that the exemption in the State Act is general because exemption applies in respect of goods without any enumeration or classification of goods.
Further, it is said that exemption is general because the sales are for use in generation and distribution of electrical energy.
According to the appellants sales of all goods to the undertaking supplying electrical energy are exempt from being included in the taxable turnover as long as the goods answer the description that they are for use in the generation or distribution of electrical energy.
The appellant relied on the decision of the Madhya Pradesh High Court in Commissioner of Sales Tax, Madhya Pradesh vs Kapoor Dori Niwar & Co., Gwalior(1) tn support of the meaning of the expression "exempt from tax generally".
In the Madhya Pradesh case (supra) the State Government issued a notification in the year 1959 exempting from the payment of sales tax for a period of one year sales of niwar by a dealer registered under the 1958 relevant State Act.
The exemption was later on extended up to 31 March, 1963.
The assessee a registered dealer claimed exemption on inter State sales of niwar.
The Madhya Pradesh High Court held that during the period of the exemption, the sales of niwar by a registered dealer were exempt from tax generally within the meaning of section 8(2A) of the Central Act, and, therefore, the assessee 's inter State sales of niwar were exempt from tax under the Central Act.
The expression "exempt only in specified circumstances or under specified conditions" occurring in the Explanation to section 8(2A) of the Central Act was held to mean such circumstances or conditions the non existence or non performance of which precludes the grant of exemption.
In other words, if those circumstances do not exist or those conditions are not performed then the sales of goods cannot be exempted from tax even if they are effected by a class of dealers to whom exemption is granted and during the period for which exemption is granted.
996 In the Madhya Pradesh case (supra) there was no dispute that the sales effected by the assessee fell under section 8(1) of the Central Act.
The State Act granted exemption from sales tax on sales of niwar effected by a registered dealer.
The exemption granted to sales by a registered dealer under the notification was without any restriction or limitation so far as sales by a registered dealer were concerned.
Though the period of exemption was fixed, it was not regarded as a condition imposed in relation to the exemption.
It was also contended there that because the exemption was granted to the registered dealers the exemption was granted to a class of dealers, and, therefore, it should be construed to be an exemption in specified circumstances or under specified conditions.
The Court repelled the contention by stating that the exemption was to all registered dealers without any restriction or condition.
The other decision on which the appellant relied is of the Allahabad High Court in Hindustan Safety Glass Works (P.) Ltd. vs The State of Uttar Pradesh & Anr.(1) In the Safety Glass Works case (supra) the company manufactured toughened glasses and mirrors in its factories.
Under a notification issued by the State Government under the State Act sales of mirrors and safety glasses were liable to sales tax either at the point of sale by the importer of such goods or at the point of sale by the manufacturer thereof.
Subsequently, a notification was issued by the State Government exempting toughened glasses and mirrors manufactured by the company at Allahabad from payment of sales tax for a period of three years.
The company claimed that the turnover of sales of toughened glasses and mirrors manufactured by it, being generally exempt from tax under the State Act, was also not liable to Central Sales Tax because of the provisions contained in section 8(2A) of the Central 'Act.
It was held that for purposes of section 8(2A) of the Central Act, sale of mirrors and toughened glasses manufactured by the company was under no condition and in no circumstance liable to be taxed in the hands of the company.
The reasons given were that normally it will be taken that the sale of mirrors and toughened glasses by the company was exempt from to the generally unless it could be shown that such goods belonged to the class specified in the Explanation to section 8(2A) of the Central Act.
As the toughening glasses and mirrors manufactured by the company did not fall in such a category the turnover of the sales of those goods in the hands of the company was not liable to tax under the Central Act.
The stipulation in the notification in the Safety Glass Work case (supra) that the turnover of such sales would for a period of three years be exempt from payment of sales tax did not amount to exempting the turnover of such goods from tax under specified circumstances or specified conditions.
Section 6 of the State Act does not speak of exemption, but deals with tax free goods.
In other words, section 6 deals with specified goods on which no tax is payable.
Section S of the State Act deals with what has to be excluded from the taxable turnover of the dealer.
997 Both the sections deal with goods which do not suffer from sales tax.
A Section 8(2A) of the Central Act exempts goods from inter State sales tax where a tax law of the State has exempted them from sales tax.
The Explanation to section 8(2A) of the Central Act takes away the exemption where it is not general and has been granted in specified circumstances or under specified conditions.
The provisions contained in section 5 (2) (a) (iv) of the State Act exclude sales which are made under specified circumstances or specified conditions.
The specified circumstances are that the sale must be to an undertaking engaged in supplying electrical energy to the public under a licence or sanction granted under the .
The specified condition is that the goods purchased by the undertaking must be used for the generation or distribution of electrical energy.
If the circumstances do not exist or if the conditions are not performed then the sales of goods cannot be exempted from tax.
General exemption means that r the goods should be totally exempt from tax before similar exemption from the levy of Central sales tax can become available.
Where the exemption from taxation is conferred by conditions or in certain circumstances there is no exemption from tax generally.
The contention of the appellant that the words "in the generation or distribution of such energy" in section 5(2)(a)(iv) of the State Act are descriptive of goods is unacceptable.
The expression "generation or distribution of such energy" specifies the condition under which exemption is granted.
For these reasons we are of opinion that the High Court was correct in holding that the sales by the undertaking supplying electrical energy were not exempt from tax generally within the meaning of section 8(2A) of the Central Act read with section 5(2)(a)(iv) of the State Act.
The appeal is dismissed.
In view of the fact that the High Court directed the parties to pay and bear their own costs, similar order is made here.
S.R. Appeal dismissed.
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Under section 5(2)(a)(iv) of the Punjab Sales Tax Act "taxable turnover" meant that part of a dealer 's gross turnover during any period which remains after deducting therefrom, his turnover during that period on sales to any undertaking supplying electrical energy to the public under a licence or sanction granted under the , of goods for use by it in the generation or distribution of such energy.
Under section 8 of the Central Sales Tax, every dealer.
who in the course of inter state trade or commerce sells to the Government any goods: or sells to a registered dealer other than the Government goods of the description referred to in sub section (3) shall be liable to pay tax under the Act, which shall be three per cent of his turnover.
Section 8(2A) reads as follows: "Notwithstanding anything contained in sub section (1A) of section 6 or sub section (1) or sub section (2) of this section, the tax pay able under this Act by a dealer on his turnover in so far as the turn over or any part thereof relates to the sale of any goods, the sale or, as the case may be, the purchase of which is, under the sales tax law of the appropriate state, exempt, from tax generally, or subject to tax generally at a rate which is lower than three per cent.
(whether called a tax or fee or by any other name), shall be nil or, as the case may be shall be calculated at tho lower rate.
Explanation: For the purpose of this sub section or sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate state, if under the law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods.
" The appellants were suppliers of poles and cables to the Delhi Electric Supply Undertaking and the sales were in the course of inter state trade or commerce and admittedly exempt under the state sales tax u/s 5(2) (a) (iv).
The state assessed tax u/s 8 of tho on the ground that the exemption granted u/s 5(2)(a)(iv) of the state Act fell under Explanation to section 8(2A) of the .
The High Court held that the sales by the undertaking supplying electrical energy were not exempt from tax generally within the meaning of section 8(1A) of the Central Act read with Section 5(2)(a)(iv) of the State Act.
Dismissing the appeal, by special leave, the Court.
^ HELD: (I) General exemption means that goods should be totally exempt from tax before similar exemption from the levy of central sales tax can become available.
Where the exemption from taxation is conferred by conditions or in certain circumstances there is no exemption from tax generally.
Section 6 of the State Act does not speak of exemption but deals with tax free goods.
Section 6 deals with specified goods on which no tax is payable.
993 Section 5 of the State Act deals with what has to be excluded from taxable turnover of the dealer.
Both the sections deal with goods which do not suffer from Sales tax.
Section 8(2A) of the Central Act exempts goods from inter State Sales tax where a tax law of the state has exempted them from sales tax.
The explanation to section 8(2A) of the Central Act takes away the exemption where it is not general and has been granted in specified circumstances or under specified conditions.
The provisions contained in section 5(2) (a) (iv) of the state Act exclude sales which are made under specified circumstances or specified conditions.
The specified circumstances are that the sale must be to an undertaking engaged in supplying electrical energy to the public under a licence or sanction granted under the .
The specified condition is that the goods purchased by the undertaking must be used for the generation or distribution of electrical energy.
If the circumstances do not exist or if the conditions are not performed then the sales of goods cannot be exempted from tax.
The expression "generation or distribution of such energy" specifies the condition under which exemption is granted.
[996H, G97A D] Commissioner of Sales Tax, M.P. vs Kapoor Dari Niwar & Co., Gwalior 22 STC p. 152; Hindustan Safety Glass Works (P) Lrd.
vs The State of U.P. and Anr.
34 STC 209, discussed.
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ivil Appeal No. 1187 of 1974.
From the Judgment and Order dated 19.12.1973 of the Calcutta High Court in Appeal No. 131 of 1971.
S.C. Manchanda and Ms. A. Subhashini for the Appellants.
B.P. Maheshwari, S.P. Mittal and R.S. Rana for the Respondent, The Judgment of the Court was delivered by RANGANATH MISRA, J.
This appeal by the Revenue is by certificate and is directed against the judgment of a Divi sion Bench of the Calcutta High Court which upheld the decision of a single judge in a writ petition quashing the notices issued to the petitioner under section 147(a) of the Income Tax Act of 1961 in respect of assessment years 1960 61, 1961 62 and 1962 63.
Respondent was assessed to income tax for the assessment year 1960 61 under section 23(3) of the Act of 1922 on 4.3.1961 and for the following two assessment years under section 143(3) of the Act of 1961 on 10th and 11th June, 1963, respectively.
Notices under section 147(a) read with section 148 of the Act of 1961 were issued to the respondent in respect of these three assessment years whereupon he challenged the validity of those notices by filing an appli cation under Article 226 of the Constitution.
Though the notices did not disclose any material to justify their issue, the Income tax Officer in his return to the rule nisi before the High Court stated: " . .
The assessment for the year 1963 64 of Smt.
Sushila Bala Devi Ladia, wife of the petitioner, was taken up by me.
During the course of the said assessment, she contended having received valuable assets from the petitioner between 11th December, 1955 and 28th October, 1960, without adequate consider ation in money or money 's worth.
It was con tended on her behalf that she received over 1203 tolas of gold in jewellery on or about 11.12./1955 and 1104 Rs.1,00,000 in cash on or about 28.10.1960.
It was further contended on her behalf that the said jewellery was sold between the years 1959 and 1962.
The income from the said assets which should have been included in the return of the petitioner was not so included by him.
The capital gains arising therefrom was also not included or disclosed by the petitioner in his returns.
" On behalf of the assessee reliance was placed on the deci sion of this Court in V.D.M. RM. M. RM.
Muthiah Chettiar vs Commissioner of Income tax, Madras, where with reference to failure of the assessee to include the share income of his wife and minor child in a firm, this Court held: "In considering the first question it is necessary to refer to certain provisions of the Income tax Act, 1922.
By section 3 the total income of the previous year of every individual, Hindu Undivided family, company and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually was charged to tax for that year in accordance with, and subject to the provi sions of the Act at any rate or rates pre scribed by the Finance Act.
Total income was defined in section 2(15) as meaning 'total amount of income, profits gains referred to in sub section (1) of section 4 computed in the manner laid down this Act '.
Section 4(1) set out the method of computation of total income; it enacted: '(I) subject to the provisions of this Act, a total income of any previous year of any person includes all income, profits and gains from whatever source derived which: (a) are received or are deemed to be received in the taxable territories in such year by or on behalf of such person, or (b) if such person is resent in the taxable territories during such year (i) accrue or arise or are deemed to accrue or arise to him in the taxable territories during such year, or . . ' 1105 Section 22 by sub section (1) required the income tax officer to give notice by publica tion in the press in the prescribed manner, requiring every person whose total income during the previous year exceed the maximum exempt from tax, to furnish a return in the prescribed form setting forth his total in come.
Sub section (2) authorised the Income tax Officer to serve a notice upon a person whose income in the opinion of the income tax officer exceeded the minimum free from tax.
Section 23 dealt with the assessment.
It conferred power upon the Income tax Officer to assess the total income of the assessee and to determine the sum payable by him on the basis of such return submitted by him.
Rule 19 framed under section 59 of the Income tax Act, 1922 required the assessee to make a return in the form prescribed thereunder, and in Form A applicable to an individual or a Hindu Undi vided family or an association of persons there was no clause which required disclosure of income of any person other than the income of the assessee, which was liable to be in cluded in the total income.
The Act and rules accordingly imposed no obligation upon the assessee to disclose to the Incometax Officer in his return information relating to income of any other person by law taxable in his hands." "But section 16 sub section (3) provided in computing the total income of any individu al for the purpose of assessment there shall be included the classes of income mentioned in clauses (a) and (b).
Sub section 3(a)(ii) insolar as it is material, provided: 'In computing the total income of any individual for the purpose of assessment there shall be included (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly . . (ii) From the admission of minor to the benefits of partnership in a firm of which such individual is a partner. ' The assessee was bound to disclose under section 22(5) the names and addresses of his partners, if any, engaged in business, profes sion or vocation together with the location and styled of the principal place and branches 1106 thereof and the extent of the shares of all such partners in the profits of the business, profession or vocation and branches thereof, but the assessee was not required in making a return to disclose that any income was re ceived by his wife or minor child admitted to the benefits of partnership of a firm of which he was a partner.
" Upon this conclusion this Court therein held: "For failing or omitting to disclose that income proceedings for reassessment cannot, therefore, be commenced under section 34( l)(a)." Relying upon this decision the learned Single Judge quashed the notices.
The Revenue appealed to the Division Bench but failed to obtain any relief in view of the said decision of this Court.
The Division Bench also took note of the decision in the case of Malegaon Electricity Co. (P) Ltd. vs Commissioner or Income tax, Bombay, Therein after referring to Muthiah Chettiar case (supra).
Hedge, J. speaking for the Court, stated: "Hence, by not showing the income of his wife and minor children, the assessee cannot be deemed to have failed to disclose fully and truly all material facts necessary for his assessment within the meaning of section 34(1)(a) of the Act.
" It is appropriate to take note of a later decision of this Court in Commissioner of Income tax, Kerala vs Smt.
P.K. Kochammu Amma, Peroke, That was of a two Judge Bench.
Reliance was sought to be placed on Muthiah Chettiar 's case (supra).
Dealing with the question of impo sition of penalty under section 27 1(l)(c) of the 1961 Act, the Division Bench observed: "It is obvious that on this view the order imposing penalty on the assessee would have to be sustained but there is a decision of this Court in V.D.M. RM, M. RM.
Muthiah Cheuiar vs Commissioner of Income tax, which is binding upon us and where we find that a different view has been taken by a Bench of three Judges of this Court.
It was held in this case that even if there were any printed instructions in the form of the return requiring the assessee to disclose the income received by his wife and 1107 minor child from a firm of which the assessee was a partner.
there was, in the absence in the return of any head under which the income of the wife or minor child could be shown, no obligation on the assessee to disclose this item of income, and the assessee could not be deemed to have failed or omitted to disclose fully and truly all material facts necessary for his assessment within the meaning of 34(l)(a) of the Indian Income Tax Act, 1922.
With the greatest respect to the learned Judges who decided this case.
we do not think, for reasons already discussed, that this decision lays down the correct law on the subject, and had it not been for the fact that since 1st April, 1972, the form of the return prescribed by rule 12 has been amended and since then.
there is a separate column provid ing that 'income arising to spouse/minor child or any other person as referred to in Chapter V of the Act ' should be shown separately under that column and consequently there is no longer any scope for arguing that the assessee is not bound to disclose such income in the return to be furnished by him, we would have referred the present case to a larger Bench.
But we do not propose to do so since the question has now become academic in view of the amendment in the form of the return car ried out with effect from 1st April, 1972.
we would, therefore, follow this decision in Muthian Chettiar 's case which being a decision of three Judges of this Court is binding upon us . . . . . . ." We agree with what has been stated in Kocharammu Amma 's case and for the reasons indicated therein, we do not pro pose to refer this case to a larger bench.
Following the law as laid down in the two cases reported in and we dismiss the appeal.
There would be no order for costs throughout.
A.P.J. Appeal dis missed.
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The respondent was assessed to income tax for assessment year 1960 61 under section 23(3) of the, Income Tax Act, 1922 and for the assessment years 1961 62 and 1962 63 under section 143(3) of the income Tax Act, 1961.
The validity of the notices issued under section 147(a) read with section 148 of the Act of 1961 in respect of these three assessment years was challenged by the respondent under Act 226.
Though the notices did not disclose any material to justify their issue, the Income Tax Officer in his return before the High Court stated that during the course of assessment for the year 1963 64 of the wife of the respondent, she contended having received valu able assets from the respondent between 11th December 1955 and 28th October, 1960 without adequate consideration in money or money 's worth.
The income from the said assets which should have been included in the return of the re spondent was not so included by him and that the capital gains arisen therefrom was also not included or disclosed by the respondent In his returns.
A Learned Single Judge relying upon the decision of the Supreme Court in V.D.M. RM.
M. RM.
Mathiah Chettiar vs Commissioner of Income tax, Madras quashed the notices.
The appeal of the Revenue failed before the Divi sion Bench. ' Dismissing the appeal, HELD: By failure of the assessee to include the share income of his wife and minor child in his return, it cannot be deemed that he has failed to disclose fully and truly all material facts necessary for the assessment within the meaning of section 34(1)(a) of the Indian Income Tax Act.
[1107B] V.D.M. RM.
M. RM.
Muthiah Chettiar vs Commissioner of Income tax, Madras, ; Malegaon Electricity Co. (P) Ltd. vs 1103 Commissioner of Income tax, Bombay, and Commis sioner of Income tax, Kerala vs Smt.
P.K. Kochammu Amma, Peroke, , followed.
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ivil Appeal Nos.
3452 54 and 4030 32 of 1982.
Appeals by Special leave from the Judgment and order dated the 20th November, 1979 of the Punjab and Haryana High Court in L.P.A. Nos.
26,62, 29, 38,39, and 30 of 1978.
R.K. Garg and N.S. Das Bahl for the Appellants in CAs.
Nos 3452 54 of 1982.
M.K. Ramamurthi, and Mrs. Urmila Sirur for the Appellants in CAs.
4031/82 and CAs.
4030 32 of 1982.
P.P. Rao and D.D. Sharma for the Respondents.
The Judgment of the Court was delivered by PATHAK, J.
The appellants, in these appeals by special leave, are aggrieved by the judgment of a Division Bench of the High Court of Punjab and Haryana affirming the dismissal of their writ petitions by a learned Single Judge of that Court.
The appellants are teachers in the service of the State of Punjab.
They claim the grades prescribed in paragraph 2 of the Government Circular letter No. 2036 ED.
1 67/2167 dated July 29, 1967, and in that regard seek the benefit of the Circular letter No. 9/9179 FR (2)/143 dated February 19, 1979 and its clarification by Circular letter No. 8937 5ED.
1179/2659 dated September 20, 1979.
The Circular letter dated July 29, 1967 gave effect to the recommendations of the Kothari Commission with effect from November 1, 1966 in respect of teachers in Government Schools.
Paragraph 2 of the Circular letter provided: "2.
Lectures in Higher Secondary Schools, Punjab Institute of English and Masters/Mistresses with Post 884 graduate qualifications in High/Higher Secondary Schools will be placed in Rs. 300 25 450/25 600 grade provided they have 1st and 2nd Division Master 's Degree.
Those with 3rd Class Master 's Degree will be placed in the grade of Rs. 250 25 400/25 550.
" It was specified that "the number of posts in Lecturer 's grade will be 1517 i.e. 742 posts for the existing school Lecturers and 829 additional posts for other Masters/Mistresses with Post graduate qualifications.
" It was clarified that "the Masters/Mistresses will be eligible to Lecturer 's grade only if they have Post graduate qualifications in the subject of their teaching.
No one will be entitled to those 829 additional posts automatically.
These posts will be allocated to various subjects keeping in view the requirements of the educational institutions and the appointments will be made keeping in view the rules/instructions as amended from time to time.
" Paragraph 3 stated that "all trained graduates and all other Masters with Post graduate qualifications, who are not fitted in the scale of Lecturer, will be in the scale of Rs. 220 8 300 10 400/20 500.
" It is apparent that paragraph 2 of the Circular letter dated July 29, 1967 is concerned essentially with providing for a Lecturer 's Grade: (1) It was intended to have 1571 posts in the Lecturer 's grade, consisting of 742 posts for the existing Lecturers and another 829 posts for Masters or Mistresses.
Masters or Mistresses were eligible for these posts in the Lecturer 's grade only if they possessed Post graduate qualifications in the subject of their teaching.
Those who did not satisfy that criterion were not eligible for those posts.
Moreover, no one was entitled to any of the 829 additional posts automatically.
The additional posts were to be distributed with reference to different subjects, and the distribution would be made having regard to the requirements of the educational institutions and subject to the rules and instructions currently in force.
(2) Existing Lecturers and Masters or Mistresses with Post graduate qualifications, who possessed a Master 's degree in the first or second division, would be entitled to the grade of Rs. 300 25 450/25 600.
Lecturers and 885 Masters or Mistresses with Post graduate qualifications who possessed a Master 's degrees in the third division would be entitled to the grade of Rs. 250 25 400/25 550 .
The appellants say that they are employed as Masters and Mistresses in High and Higher Secondary Schools run by the Punjab Government and possess an M.A. or M.Sc.
or B.T. or B.Ed.
degree and some of them have even acquired an M.Ed.
degree.
They are presently paid according to the pay scale Rs. 220 500.
They claim that they are entitled to either of the higher grades set forth in paragraph 2 of the Circular letter dated July 29, 1967.
From what has gone before it is clear that they can legitimately claim the benefit of those grades only if they are appointed to the posts of Lecturer.
And they do not dispute that they are not incumbents of those posts.
Much reliance has been placed on the decision of this Court in State of Punjab vs Kirpal Singh Bhatia.
In our opinion, that case is of no assistance to the appellants.
That was a case which was primarily concerned with Circular letter No. 5058 FR II 57/5600 dated July 23, 1957.
The Circular letter dated July 29, 1967 operates on a very different plane from the Circular letter dated July 23, 1957.
A brief reference to the historical background of the Circular letter dated July 23, 1957 will suffice.
Concerned at the low salaries granted to certain categories of Government servants, the Punjab Government issued Circular letter No. 5058 FR II/5600 dated July 23, 1957 revising their scales of pay.
Paragraph 3 classified all teachers in the Education Department according to their qualifications in two broad categories, category A being: "B.A./B.Sc./B.Com./B.Sc.
(Agriculture) and B.T./Diploma in Physical Education/Diploma in Senior Basic Training".
and they would now carry the scale of pay: 886 "Rs. 100 8 190 10 250 with a higher start for M.A. or M.Sc.
as at present.
" As is evident, the category was defined by reference to the possession of the specified graduate degree or Diploma.
In the event such a teacher also held a Post graduate degree he was entitled to a higher start in the grade.
The grade, however, remained the same.
It appears that several teacher tiled writ petitions in the High Court claiming revised scales of pay on the ground that they had taken graduate degrees and, therefore, were entitled to the benefit of the grade mentioned against Category in the Circular letter dated July 23, 1957.
In opposition to the writ petitions, the State Government contended that the letter did not contemplate tho grant of the grade to all teachers but only to teachers appointed as Masters.
The High Court held the teachers entitled to the benefit of the revised grade, whether or not they had been appointed as masters, because, in the opinion of the High Court, the qualifying criterion was the possession of a graduate degree.
The judgment of the High Court was affirmed by this Court in Kirpal Singh Bhatia (Suprd).
The State Government found it difficult, having regard to The prevailing burden on its financial resources, to extend the benefit of the Circular letter dated July 23, 1957 to the much wider section of teachers covered in consequence of the Court 's judgement.
Accordingly, the State Government issued Circular letter No. 9/9/79 FR (2)/143 dated February 19, 1979, paragraph 3 of which stated that in order to ensure that "these unintended and large financial implications do not continue arising in future" the whole matter had been reconsidered by the State Government and as a result the government ordered that henceforth the teachers or the Education Department would not automatically be entitled to placement in the higher scales of pay in terms of paragraph 3 of the Circular letter dated July 23, 1957 by the mere circumstance of their improving or acquiring higher qualifications in the course of their service.
The rigour of the restriction was relaxed in some measure.
Paragraph 3 said further: "However, in order to avoid discrimination between teachers who have already been allowed higher scales of pay on account of having improved their qualifications and those who have not yet been allowed this benefit even though they also possess higher qualifications it is decided that all teachers in the Education Department who have 887 improved their qualifications before the issue of this letter may be allowed the benefit of higher scale of on the basis of their qualifications.
" The benefit was not extended to those who were appointed or who had improved their qualifications after the issue of that Circular letter.
The teachers continued to agitate for a more generous dispensation.
The State Government then issued Circular letter.
No. 8937 5ED.1179/2659 dated September 20, 1979.
which declared: "The implementation of the decision contained in Finance Department Circular letter No. 9/9/79 FR (2)/143 dated February 19, 1979 to grant higher pay scales to the teachers on the basis of higher qualifications was kept pending for want of clarification on certain points from the Finance Department which has now become available and is reproduced below: 1.
The higher scale may be allocated from the date of passing the respective higher examination by the concerned teacher where this has already been done.
However, actual payment at enhanced rates should commence from 12 2.79 and the payment of arrears accruing from the date of passing the examination till 13.2.1979 be restricted to the maximum for 38 months.
The ben fit of the higher scale may be allowed from the date a particular teacher is appointed on regular basis or the date of passing the higher examination, which ever is later, but the payment of arrears as a result of grant of such benefit should be restricted to a period of 38 months only, as already mentioned above.
The teachers placed in the higher scale can only be regularly adjusted when corresponding posts in the higher scale become available; in that case such teachers may continue to enjoy the higher scale as a personal measure till they are adjusted against regular posts as and when the same become available.
" It was clarified that the contemplated benefit was confined to 888 the categories of teachers mentioned in the Circular letter No. 5058 FR II 57/5600 dated July 23, 1957.
The appellants claim the benefit of paragraph 2 of the Circular letter dated July 29, 1967, and therefore no reliance can be placed by them on the Circular letters dated February 19, 1979 and September 20, 1979, which relate merely to the scheme embodied in the Circular letter dated July 23, 1957.
The appellants contend that on the principle of "equal pay for equal work", affirmed by this Court in Randhir Singh vs Union of India & Ors.
they are entitled to the grades mentioned in paragraph 2 of the Circular letter dated July 29, 1967.
It is urged that like those Masters or Mistresses who have been given that benefit they have acquired Post graduate qualifications and are doing the same kind of work.
As has been explained earlier, the grades specified in paragraph 2 of the Circular letter dated July 29, 1967 are applicable only to those who specifically hold the posts of Lecturer.
There are a limited number of such posts, and appointment to them is strictly subject to the conditions detailed in paragraph 2 of the Circular letter.
In the result the appeals fail and are dismissed, but in the circumstances of the case there is no order as to costs.
N.V.K. Appeals dismissed.
|
The appellants who were employed as Masters and Mistresses in High and Higher Secondary Schools run by the State Government and possessed an M.A. or M.Sc.
or B.T. or B.Ed.
degree contended in their writ petitions that they were paid according to the pay scale of Rs. 220 500 and claimed that they were entitled to either of the higher grades set forth in paragraph 2 of the State Government Circular Letter dated July 29, 1967 viz. Rs. 300 25 450/25 600 for those with 1st and 2nd Division Master 's Degree and Rs. 250 25 450/25 250 for those with 3rd Class Master 's Degree.
The High Court negatived their contentions and dismissed the writ petition, and this was affirmed by the Division Bench in appeal.
Dismissing the Appeal to this Court, ^ HELD: 1.
The grades specified in paragraph 2 of the Circular Letter dated July, 29, 1967 are applicable only to those who specifically hold the posts of lecturer.
There are a limited number of such posts, and appointment to them is strictly subject to the conditions detailed in paragraph 2 of the Circular Letter.
The contention on behalf of the appellants that on the principle of "equal pay for equal work" Randhir Singh vs Union of India and Ors., ; they are entitled to the grades mentioned in para 2 of the Circular Letter dated July 29, 1967 has there fore to be negatived.
[888 D; C] 2.
The appellants claim the benefit of paragraph 2 of the Circular Letter dated July 29, 1967 and therefore no reliance can be placed by them on the Circular Letters dated February, 19, 1979 and September, 20, 1979 which relate merely (o the scheme embodied in the Circular Letter 883 dated July 23, 1957.
The Circular Letter dated July, 29, 1967 operates on a very different plane from the Circular Letter dated July 23, 1957.
[888 B; 885 E] 3.
The decision of this Court in State of Punjab vs Kirpal Singh Bhatia; , is of no assistance to the appellants.
That was a case which was primarily concerned with Circular Letter dated July, 23, [885 D]
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4879.txt
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Civil Appeal No. 2307 of 1969 (Appeal by Special leave from the Award dated the 1st April 1969 of the Addl.
Industrial Tribunal, Delhi in I. D. No. 83 of 1968) and Civil Appeals Nos.
1857 1859/70.
(Appeals by Special Leave from the Judgment and order dated the 17th November 1969 of the Addl.
Labour Court, Madras in claim Petition Nos.
627 and 629 of 1968).
M. K. Ramamurthi and Jitendra Sharma and Janardan Sharma, for the appellants in both the appeals.
371 section N. Andley, (Rameshwar Nath and B. R. Mehta in CAs 1857 A 59/70) for respondents in both the appeals.
The Judgment of the Court was delivered by UNTWALIA, J.
As the main question for determination in these appeals by special leave is common, they have been heard together and are being disposed of by this judgment.
Civil Appeal No. 2307 of 1969 The respondent company in this appeal has its Head office at Bombay.
It manufactures tyres at its Bombay factory and sells the tyres and other accessories in the markets throughout the country.
The company has a Distribution office at Nicholson Road, Delhi.
There was a strike in the Bombay factory from 3rd March, 1967 to 16th May, 1967 and again from 4th October, 1967.
As a result of the strike there was a short supply of tyres etc.
to the Distribution office.
In the Delhi office, there were 30 employees at the relevant time.
17 workmen out of 30 were laid off by the management as per their notice dated the 3rd February, 1968, which was to the following effect: "Management is unable to give employment to the following workmen due to much reduced production in the company 's factory resulting from strike in one of the factory departments.
These workmen are, therefore, laid off in accordance with law with effect from 5th February, 1968." The lay off of the 17 workmen whose names were mentioned in the notice was recalled by the management on the 22nd April, 1968.
The workmen were not given their wages or compensation for the period of lay off.
An industrial dispute was raised and referred by the Delhi Administration on the 17th April, 1968 even when the layoff was in operation.
The reference was in the following terms: "Whether the action of the management to 'lay off ' 17 workmen with effect from 5th Feb. 1968 is illegal and/or unjustified, and if so, to what relief are these workmen entitled? The Presiding officer of the Additional Industrial Tribunal, Delhi has held that the workmen are not entitled to any lay off compensation.
Hence this is an appeal by their Union.
We were informed at the Bar that some of the workmen out of the batch of 17 have settled their disputes with the management and their cases were not represented by the Union in this appeal.
Hence this judgment will not affect the compromise or the settlement arrived at between the management and some of the workmen.
The question which for our determination is whether the management had a right to lay off their workmen and whether the workmen are entitled to claim wages or compensation.
372 The simple dictionary meaning according to the Concise oxford Dictionary of the term 'lay off ' is "period during which a workman is temporarily discharged.
" The term 'lay off ' has been well known in the industrial arena.
Disputes were often raised in relation to the 'lay off ' of the workmen in various industries.
Sometime compensation was awarded for the period of lay off but many a time when the lay off was found to be justified workmen were not found entitled to any wages or compensation.
In Gaya Cotton & Jute Mills Ltd. vs Gaya Cotton & Jute Mills Labour Union(l) the standing order of the company provided that the company could under certain circumstances "stop any machine or machines or department or departments, wholly or partially for any period or periods without notice or without compensation in lieu of notice." In such a situation for the closure of the factory for a certain period, no claim for compensation was allowed by the Labour Appellate Tribunal of India.
We are aware of the distinction betwen a lay off and a closure.
But just to point out the history of the law we have referred to this case.
Then came an amendment in the hereinafter referred to as the Act by Act 43 of 1953.
In section 2 clause (kkk) was added to say: "lay off" (with its grammatical variations and cognate expressions) means the failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the break down of machinery or for any other reason to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched Explanation Every workman whose name is borne on the muster rolls of the industrial establishment and who presents himself for work at the establishment at the time appointed for the purpose during normal working hours on any day and is not given employment by the employer within two hours of his so presenting himself shall be deemed to have been laid off for that day within the meaning of this clause: Provided that if the workman, instead of being given employment at the commencement of any shift for any day is asked to present himself for the purpose during the second half of the shift for the day and is given employment then, he shall be deemed to have been laid off only for one half of that day: Provided further that if he is not given any such employment even after so presenting himself, he shall not be deemed to have been laid off for the second half of the shift for the day and shall be entitled to full basic wages and dearness allowance for that part of the day. '" (1) [1952] II Labour Law Journal, 37.
373 By the same Amending Act, Chapter VA was introduced in the Act to provide for lay off and retrenchment compensation.
Section 25A excluded the Industrial Establishment in which less than 50 workmen on an average per working day had been employed in the preceding calendar month from the application of Sections 25C to 25E. Section 25 C provides for the right of laid off workmen for compensation and broadly speaking compensation allowable is 50% of the total of the basic wages and dearness allowance that would have been payable 13 to the workman had he not been laid off.
It would be noticed that the sections dealing with the matters of lay off in Chapter VA are not applicable to certain types of Industrial Establishments.
The respondent is one such Establishment because it employed only 30 workmen at its Delhi office at the relevant time.
In such a situation the question beset with difficulty of solution is whether the laid off workmen were entitled to any compensation, if so, what '? We shall now read section 25 J.
It says: "(1) The provisions of this Chapter shall have effect not withstanding anything inconsistent therewith contained in any other law including standing orders made under the Industrial Employment (Standing orders) Act, 1946: Provided that where under the provisions of any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, a workman is entitled to benefits in respect of any matter which are more favourable to him than those to which he would be entitled under this Act, the workman shall continue to be entitled to the more favourable benefits in respect of that matter, notwithstanding that he receives benefits in respect of other matters under this Act.
For the removal of doubts, it is hereby declared that nothing contained in this Chapter shall be deemed to affect the provisions of any other law for the time being in force in any State in so far as that law provides for the settlement of industrial disputes, but the rights and liabilities of employers and workmen in so far as they relate to layoff and retrenchment shall be determined in accordance with the provisions of this Chapter.
" The effect of the provisions aforesaid is that for the period of lay off in an Industrial Establishment to which the said provisions apply, compensation will have to be paid in accordance with section 25C.
But if a workman is entitled to benefits which are more favourable to him than those provided in the Act, he shall continue to be entitled to the more favourable benefits.
The rights and liabilities of employers and workmen in so far as it relate to lay off and retrenchment, except as provided in section 25J, have got to be determined in accordance with the provisions of Chapter VA.
The ticklish question which does not admit of an easy answer is as to the source of the power of management to lay off a workman.
The employer has a right to terminate the services of a workman.
Therefore, his power to retrench presents no difficulty as retrenchment means the termination by the employer of the service of a workman for any reason whatsoever as mentioned in clause (oo) of section 2 of the 374 Act.
But lay off means the failure, refusal or inability of employer on account of contingencies mentioned in clause (kkk) to give employment to a workman whose name is borne on the Muster Rolls of his Industrial Establishment.
It has been called a temporary discharge of the workman or a temporary suspension of his contract of service.
Strictly speaking, it is not so.
It is merely a fact of temporary unemployment of the workman in the work of the Industrial Establishment.
Mr. section N. Andley submitted with reference to the explanation and the provisions appended to clause (kkk) that the power to lay off a workman is inherent in the definition.
We do not find any words in the definition clause to indicate the conferment of any power on the employer to lay off a workman.
His failure or inability to give employment by itself militates against the theory of conferment of power.
The power to lay off for the failure or inability to give employment has to be searched somewhere else.
No section in the Act confers this power.
There are two small matters which present some difficulty in the solution of the problem.
In explanation (1) appended to sub section ( 2) of section 25B the words used are: "he has been laid off under an agreement or as permitted by standing order made under the Industrial Employment (Standing orders) Act, 1946, or under this Act or under any other law applicable to the industrial establishment.
" indicating that a workman can be laid off under the also.
But it is strange to find that no section in Chapter VA in express language or by necessary implication confers any power, even on the management of the Industrial Establishment to which the relevant provisions are applicable, to lay off a workman.
Clause (ii) of section 25E says: "No compensation shall be paid to a workman who has been laid off If he does not present himself for work at the establishment at the appointed time during normal working hours at least once a day." This indicates that there is neither a temporary discharge of the work man nor a temporary suspension of his contract of service.
Under the general law of Master and Servants an employer may discharge an employee either temporarily or permanently but that cannot be without adequate notice.
Mere refusal or inability to give employment to the workman when he reports for duty on one or more grounds mentioned in clause (kkk) of section 2 is not a temporary discharge of the work man.
Such a power, therefore, must be found out from the terms of contract of service or the Standing orders governing the establishment.
In the instant case the number of workmen being only 30, there were no Standing orders certified under the Industrial employment (Standing orders) Act, 1946.
Nor was there any term of contract of service conferring any such right of lay off.
In such a situation the conclusion seems to be inescapable that the workmen were laid off without any authority of law or the power in the management under the contract of service.
In Industrial Establishments where there is a power in the management to lay off a workman and to which the 375 provisions of Chapter VA apply, the question of payment of compensation will be governed and determined by the said provisions.
Otherwise Chapter VA is not a complete Code as was argued on behalf of the respondent company in the matter of payment of lay off compensation.
This case, therefore, goes out of Chapter VA.
Ordinarily and generally the workmen would be entitled to their full wages but in a reference made under section 10(l) of the Act, it is open to the Tribunal or the Court to award a lesser sum finding the justifiability of the lay off.
` In The Management of Hotel Imperial, New Delhi & others vs Hotel Workers ' Union(l) in a case of suspension of a workman it was said by Wanchoo, J. as he then was, delivering the judgment on behalf of the Court at page 482: "Ordinarily, therefore, the absence of such power either as an express term in the contract or in the rules framed under some statute would mean that the master would have no power to suspend a workman and even if he does so in the sense that he forbids the employee to work.
he will have to pay wages during the so called period of suspension.
Where, however.
there is power to suspend either in the contract of employment or in the statute or the rules framed thereunder, the suspension has the effect of temporarily suspending the relation of master and servant with the consequence that ` the servant is not bound to render service and the master is not bound to pay.
" The same principle was reiterated in V. P. Gindroniya vs State of Madhya Pradesh & Ors.(2) We have referred to the suspension cases because in our opinion the principles governing the case of lay off are very akin to those applicable to a suspension case.
In Veiyra (M. A.) vs Fernandez (C. P.) and another(3) a Bench of the Bombay High Court opined that under the general law the employer was free to dispense with the services of a workman but under the he was under an obligation to lay him off; that being so, the action of lay off by the employer could not .
be questioned as being ultra vires.
We do not think that the view expressed by the Bomby High Court is correct.
There is an important decision of this Court in Workmen of Dewan Tea Estate and ors.
vs The Management(4) on which reliance was placed heavily by Mr. M. K. Ramamurti appearing for the appellant and also by Mr. Andley for the respondent.
One of the question for consideration was whether section 25C of the Act recognises the common law right of the management to declare a lay off for reasons other than those specified in the relevant clause of the Standing order.
While considering this question, Gajendragadkar, J. as he then was.
said at page 554: "The question which we are concerned with at this stage is whether it can be said that s.25C recognises a common law (1) ; (2) [1970] 3 S.C.R. 448.
(3) [1956] I Labour Law Journal, 547.
(4) []964] S S.C.R. 548.
376 right of the industrial employer to lay off his workmen.
This question must, in our opinion, be answered in the negative.
When the laying off of the workmen is referred to in section 25C, it is the laying off as defined by section 2 (kkk) and so, workmen who can claim the benefit of section 25C must be workmen who are laid off and laid off for reasons contemplated by section 2 (kkk); that is all that section 25C means.
Then follows a sentence which was pressed into service by the respondent.
It says: "If any case is not covered by the Standing orders, it will necessarily be governed by the provisions of the Act, and layoff would be permissible only where one or the other of the factors mentioned by section 2 (kkk) is present, and for such lay off compensation would be awarded under section 25C." In our opinion, in the context, the sentence aforesaid means that if the power of lay off is there in the Standing orders but the grounds of lay off are not covered by them, rather, are governed by the provisions of the Act, then lay off would be permissible only on one or the other of the factors mentioned in clause (kkk).
Subsequent discussions at pages 558 and 559 lend ample support to the appellant 's argument that there is no provision in the Act specifically providing that an employer would be entitled to lay off his workmen for the reasons prescribed by section 2 (kkk).
Mr. Andley placed strong reliance upon the decision of this Court in Sanjhi Jeevraj Ghewar Chand & Ors.
vs Secretary, Madras Chillies, Grains Kirana Merchants Workers ' Union & Anr.(l) The statute under consideration in this case was the and it was held that the Act was intended to be a comprehensive and exhaustive law dealing with the entire subject of bonus of the persons to whom it should apply.
The Bonus Act was not to apply to certain Establishments.
Argument before the Court was that bonus was payable de hors the Act in such establishment also.
This argument was repe11ed and in that connection it was observed at page 381: "It will be noticed that though the confers substantive rights on workmen with regard to lay off, retrenchment compensation, etc., it does not create or confer any such statutory right as to payment to bonus.
Bonus was so far the creature of industrial adjudication and was made payable by the employers under the machinery provided under that Act and other corresponding Acts enacted for ,.
investigation and settlement of disputes raised thereunder.
There was, therefore, no question of Parliament having to delete or modify item S in the Third Schedule to or any such provision in any corresponding Act or its having to exclude any right to bonus thereunder by any categorical exclusion in the present case." And finally it was held at page 385: "Considering the history of the legislation, the background and the circumstances in which the Act was enacted, the (1) [1969] I S.C.C. 366.
377 object of the Act and its scheme, it is not possible to accept A the construction suggested on behalf of the respondents that the Act is not an exhaustive Act dealing comprehensively with the subject matter of bonus in all its aspects or that Parliament still left it open to those to whom the Act does not apply by reason of its provisions either as to exclusion or exemption to raise a dispute with regard to bonus through Industrial adjudication under the or other corresponding law.
" In a case of compensation for lay off the position is quite distinct and different.
If the term of contract of service or the statutory terms engrafted in the Standing orders do not give the power of lay off to the employer, the employer will be bound to pay compensation for the period of lay off which ordinarily and generally would be equal to the full wages of the concerned workmen.
If, however, the terms of r employment confer a right of lay off on the management, then, in the case of an industrial establishment which is governed by Chapter VA, compensation will be payable in accordance with the provisions contained therein.
But compensation or no compensation will be payable in the case of an industrial establishment to which the provisions of Chapter VA do not apply, and it will be so as per the terms of the employment.
In Kanhaiya Lal Gupta vs Ajeet Kumar Dey and others(l) a learned single Judge of the Allahabad High Court seem to have rightly held that in the absence of any term in the contract of service or in the statute or in the statutory rules or standing orders an employer has no right to lay off a workman without paying him wages.
A learned single Judge of the Punjab and Haryana High Court took an identical view in the case of Steel and General Mills Co. Ltd. vs Additional District Judge, Rohtak and others.
(2) The majority view of the Bombay High Court in K. T. Rolling Mills Private Ltd. and another vs M. R. Meher and other(8) that it is not open to the Industrial Tribunal under the Act to award lay off compensation to workmen employed in an 'Industrial Establishment ' to which section 25 C does not apply, is not correct.
The source of the power of the employer to lay off workmen does not seem to have been canvassed or discussed by the Bombay High Court in the said judgment.
In the case of the Delhi office of the respondent the Tribunal has held that the lay off was justified.
It was open to the Tribunal to award a lesser amount of compensation than the full wages.
Instead of sending back the case to the Tribunal, we direct that 75% the basic wages and dearness allowance would be paid to the workmen concerned for the period of lay off.
As we have said above this will not cover the case of those workmen who have settled or compromised their disputes with the management.
Civil Appeals 1857 1859 (NL) of 1970 In these appeals the facts are identical to those in the other appeal.
There were only 33 employees in the Madras office of the respondent company.
Certain workmen were laid off for identical reasons from the (1) [1967] II Labour Law Journal, 761.
(2) [1972] 1 Labour Law Journal, 284.
(3) A.I.R. 1963 Bombay, 146.
378 5th February, 1968.
The lay off was lifted on the 29th April, 1968.
The concerned workmen filed petitions under section 33C (2) of the Act for computation of their wages for the period of lay off.
Holding that the lay off was justified and valid the Presiding officer of the Additional Labour Court, Madras has dismissed their applications for salary and allowances for the period of lay off.
Hence these appeals.
In a reference under section 10 (1) of the Act it is open to the Tribunal or the Court to award compensation which may not be equal to the full amount of basic wages and dearness allowance.
But no such power exists in the Labour Court under section 33C (2) of the Act.
only the money due has got to be quantified.
If the lay off could be held to be in accordance with the terms of the contract of service, no compensation at all could be allowed under section 33C (2) of the Act, while, in the reference some compensation could be allowed.
Similarly on the view expressed above that the respondent company had no power to lay off any workmen, there is no escape from the position that the entire sum payable to the laid off workmen except the workmen who have settled or compromised, has got to be computed and quantified under section 33C(2) of the Act for the period of lay off.
For the reasons stated above all the appeals are allowed.
In Civil Appeal No. 2307/1969 in place of the order of the Tribunal, an order is made on the lines indicated above.
And in Civil Appeals 1857 to 1859/1970 the orders of the Labour Court are set aside and the cases of the appellants are remitted back to that Court for computation and quantification of the sums payable to the concerned workmen for the period of lay off.
There will be no order as to costs in any of the appeals.
S.R Appeals allowed: Orders in CA 2307/69 modified : CAs 1857 1859/70 remitted hock to the Tribunal.
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The respondent company manufacturing tyres in Bombay, due to the general strike in its factory between the period 3rd March 1967 and 16th May 1967 and again from 4th October 1967 and due to the consequent short supply of tyres had to lay off 17 out of its 30 workmen in the Delhi distribution office and also some out of its 33 workmen in its Madras distribution office.
The workmen in the Delhi and Madras offices were called back to duty on 22nd April 1968 and 29th April 1968 respectively.
The workmen were not given their wages or compensation for the period of lay off.
An industrial dispute was raised and referred to the tribunal by the Delhi Administration even when the lay off was in operation.
The Presiding officer of the Additional Industrial Tribunal, Delhi held that the workmen were not entitled to any layoff compensation.
The workmen in Madras filed petitions under section 33C(2) of the for computation of their wages for the period of their lay off.
The Presiding officer of the Additional Labour Court, Madras, holding that the lay off was justified, dismissed their applications.
on appeal to this Court by special leave, ^ HELD: (I) The simple dictionary meaning according to the concise oxford Dictionary of the term "lay ofF ' is "period during which a workman is temporarily discharged".
Lay off means the failure, refusal or inability of employer on account of contingencies mentioned in cl.
(kkk) of section 2 of the , to give employment to a workman whose name is borne on the Muster Rolls of his Industrial Establishment.
It has been called a temporary discharge of the workmen or a temporary suspension of his contract of service.
Strictly speaking, it is not so.
It is merely a fact of temporary unemployment of the workman in the work of the lndustrial Establihment.
Mere refusal or inability to give employment to the workman when he reports for duty on one or more grounds mentioned in cl.
(kkk) of section 2 is not a temporary discharge of the workman.
[372A, 374A, B, G] Gaya Cotton & Jute Mills Ltd. vs Gaya Cotton & lute Mills Labour Union [1952] II Labour Law Journal 37, referred to.
(2)(i) That the power to lay off a workman is inherent in the definition in cl.
(kkk) of section 2 is not correct, since no words in the definition clause to indicate the conferment of any power on the employer to lay off a workman can be found.
His failure or inability to give employment, by itself militates against the theory of conferment of power.
No section in Chapter VA in express language or by necessary implication confers any power, even on the management of the Industrial Establishment to which the relevant provisions are applicable, to lay off a workman.
There is no provision in the Act specifically providing that an employer would be entitled to lay off his workmen 370 for the reasons prescribed by section 2 (kkk).
Such a power, therefore, must be found out from the terms of contract of service or the Standing orders governing the Establishment.
[374 B G] (ii) In the instant case, the number of workmen being only 3, there being no Standing orders certified under the Industrial Employment (Standing orders) Act (Act 20 of 1946), 1946, and there being no contract of service conferring any such right of lay off, the inescapable conclusion is that the workmen were laid off without any authority of law or the power in the management under the contract of service.
[374 G H] The Management of Hotel Imperial New Delhi & others vs Hotel Workers Union ; and V. P. Gindroniya vs State of Madhya Pradesh & ors.
[1970] 3 S.C.R. 448, referred to.
Veiyra (MA ) Fernandez (CP.) and another [1956] 1 Labour Law Journal.
547, reversed.
Workmen of Dewan Tea Estate and ors.
vs The Management [19641 S S.C.R. 548, applied.
Sanghi Jeevaraj Ghewar Chand & ors vs Secretary Madras Challies Grains Kirana Merchants Workers Union and Anr. , distinguished.
(3) If the terms of a contract of service or the statutory terms engrafted in the Standing orders do not give the power to lay off to the employer, the employer would be bound to pay compensation for the period of lay off which ordinarily and general would be equal to the full wages of the concerned V workman.
If, however, the terms of employment confer a right of lay off on the management then in the case of an Industrial Establishment which is governed by Chapter VA, compensation will be payable in accordance with the provisions contained therein.
But compensation or no compensation will be payable in the case of an Industrial Establishment to which the provisions of Chapter VA do not apply and it will be so as per the terms of employment.
[377 B D] Kanhaiya Lal Gupta vs Ajeet Kumar Dey and others [1967] II Labour Law Journal.
761 and Steel and General Mills Co. Ltd v Additional District judge Rohtak and others [1972] 1 Labour Law Journal, 2847 approved.
K. T Rolling Mills Private Ltd. and another vs M R Meher and others A.I.R. 1963 Bombay 146.
reversed.
(4) In a reference under section 10(l) of the Act.
it is open to the tribunal or court to award compensation which may not be equal to the full amount of basic wages and dearness allowance.
But no such power exists in the Labour Court under section 33C(2) of the Act.
Only the money due has to be quantified.
If the lay off could be held to be in accordance with the terms of contract of service.
no compensation at all could be allowed under section 33C(2) of the Act, while in the reference some compensation could be allowed.
[378 B Cl [In the instant case as regards the workmen in the Delhi case.
the court held 75% of the basic wages and dearness allowance would be the adequate compensation for the lay off period.]
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3421.txt
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Appeal No. 315/1958.
Appeal by special leave from the judgment and order dated February 5, 1957, of the Bombay High Court in I.T.R. No. 34/1956.
372 R. J. Kolah, and I. N. Shorff, for the appellant.
A. N. Kripal and D. Gupta, for the respondent.
January 6.
The Judgment of the court was delivered by KAPUR, J.
This is ail appeal against the judgment and order of the High Court of Judicature at Bombay in Income tax Reference No. 34 of 1956.
The appellant is a non resident Bank incorporated under the National Bank Act of the United States of America with its head office in that country and with branches all over the world including some branches in India.
It was assessed under the Business Profits Tax Act (Act XXI of 1947), hereinafter termed the " Act ", in respect of the chargeable accounting periods: 1 4 1946 to 24 12 1946, 25 12 1946 to 24 12 1947, 25 12 1947 to 23 12 1948, and 24 12 1948 to 31 3 1949 and the sole question for decision in this appeal is the meaning of the word " reserves " in R. 2(1) of Schedule 2 of the Act and how the capital of the appellant during the above mentioned chargeable accounting periods has to be computed for the purpose of allowing the " abatement " under the Act.
The appellant contended that in computing the amount for the purpose of abatement it was entitled to include what is termed in the United States " Undivided Profits ", the contention being that this item falls within the word " reserves" in R. 2(1) of Schedule 11 of the Act which provides: "Where the company is one to which rule 3 of Schedule I applies, its capital shall be the sum of the amounts of its paid up share capital and of its reserves in so far as they have not been allowed in computing the profits of the company for the purpose of the Indian Income tax Act, 1922 (XI of 1922), diminished by the cost to it of its investments or other property the income from which is not includable in the profits, so far as that cost exceeds any debt for money borrowed by it.
" 373 It is not necessary to give the details of all the years; but it will be sufficient as an illustration if we: were to confine ourselves to the " Undivided Profits " in the Balance Sheet as on December 31, 1946, wherein the relevant entries were as follows : Capital . $ 77,500,000 00 Surplus . $ 152,500,000.00 Undivided Profit . $ 29,534,614.21 The Report of the Directors dated January 14, 1947, was as follows: " At the year end, Capital of the Bank remains at $ 77,500,000 surplus has increased to $ 152,500,000 by the transfer of Rs. 10,000,000 from Undivided Profits.
After this transfer, Undivided Profits are $ 29,534,614 an increase of $ 240,376 from a year ago.
The Trust Company has Capital of $ 10,000,000 surplus of s 10,000,000 and Undivided Profits of $ 8,097,020.
The two institutions thus show total capital funds, that is Capital, Surplus and Undivided Profits of $ 287,631,634 or $ 46 39 per share compared with $ 44.60 per share at the end of 1945.
" According to the Balance Sheet of 1948, capital funds since 1939 had increased from $ 169,768 thousands to $ 320,795 thousands in the year 1948 and there had been a progressive increase both in what is called " Surplus " as well as " Undivided Profits ", the former increased from $ 62,500 thousands to $ 182,500 thousands and the latter from $ 19,768 thousands to $ 50,795 thousands.
The question in this case is whether this large sum of money shown as " Undivided Profits " is a part of the Reserves or is equivalent to the unallocated amount carried forward at the end of a year of account in the balance of Profit & Loss Account as we know it.
It was the sum of $ 29,534,614.21 and similar sums for the other chargeable Accounting Periods which are the subject matter of controversy in this appeal.
Both the Income tax Officer and the Appellate Assistant Commissioner excluded these amounts in determining the capital of the Bank under R. 2(1) of Schedule II on the ground that they were not a part of the reserves of the Bank.
374 The appellant took an appeal to the Income tax Appellate Tribunal which was dismissed on the ground that " Undivided Profits " meant nothing more than the " Balance of the profits and loss account" and that no distinction could be drawn merely because in the nomenclature used in the United States, the amount was shown as " Undivided Profits" and not balance of the profit and loss account.
At the instance of the appellant the following question of law was referred to the High Court.
" Whether on the facts and in the circumstances of the case I Undivided Profits ' of $ 29,534,614.21 shown in the condensed statements of conditions as of December 31, 1946, can be treated as reserves and added to the capital, as required by rule 2(1) of Schedule II to the Business Profits Tax Act for the chargeable accounting period 25 12 1946 to 24 12 1947?" In its order the Tribunal said that the Treasury Rules in United States divided capital account into four different heads, Capital, Reserve, Surplus and the Undivided Profits.
The reserves are really reserves for liabilities including the reserves for dividends.
" The general reserves as shown by the balance sheet in India is equivalent to the Surplus.
The undivided profits is equivalent to the balance of profit and loss account.
" In the statement of the Case submitted to the High Court, the Appellate Tribunal stated that the question whether the Undivided Profits meant the same thing as balance of the profit and loss account was a question of fact and it did not matter what name was given to it.
But this was the very question which was referred to the High Court.
The High Court after referring to the Directors ' Report to the shareholders held that the Undivided Profit of $ 29,534,614.21 did not constitute " reserves " because no direction had been given in regard to it, it had never been transferred to any reserve and had never been earmarked for any particular purpose and that the only act of volition on the part of the Directors of the Bank was the transfer of 10 million 375 dollars to the Surplus.
In its judgment the High Court said : "It is true that these large amounts (of Un divided Profits) remain with the Bank, that the Bank uses them, that business is carried on with the help of those funds and that they are as much capital of the Bank as capital in the strict sense of the term. " The High Court however held that they did not satisfy the test laid down by the Supreme Court in Century Spinning & Manufacturing Co. Ltd. vs C.I.T., Bombay (1) as the amount was not transferred to any reserve and there being no act of volition on the part of the Directors this could not be regarded as Reserve.
The correctness of this view is challenged before us.
The Directors ' report dated January 14, 1947, shows that the surplus increased as a result of the allocation made by the Directors, by 10 million Dollars, which was taken from Undivided Profits and the Undivided Profits themselves increased to $29,534,614.21 which was an increase of $240,376 in the year 1946 and therefore the Capital Funds of the company which included Capital, Surplus and Undivided Profits along with similar items from the Trust Company had increased considerably which was reflected in per share increase, i.e., 44.60 per share at the end of 1945 to 46.39 per share at the end of 1946 thus showing that it was the result of an act of the Directors that Surplus was increased and a particular sum was left in the Undivided Profits.
It was contended that no sum could be treated as 'Reserves ' unless the Directors recommended it to be so allocated and it was so adopted by the shareholders.
But this argument ignores the evidence placed by the appellant.
Under the Treasury Rules of the United States of America containing " Instructions for Preparation of Reports of Condition by National Banking Associations ", certain sums had to be specifically allocated under section 5211 of the revised Statute of the United States (Title Items 25 to 28, according to these instructions, deal (1) ; 376 with Capital Account.
Item 26 deals with 'Surplus ' and item 27 with 'Undivided Profits ' and item 28 with ' Reserves ' (and retirement account for preferred stock).
The following Reserves come under item 28: (a).
Reserve for dividends payable in Common stock.
(b) Reserves for other undeclared dividends.
(c) Retirement account for,preferred stock.
(d) Reserves for contingencies, etc.
Item 29 was as follows " Total capital accounts ".
This item is the sum of items 25 to 28, inclusive.
Along with this the appellant has placed a copy of the letter from the Deputy Controller of Currency, Washington, the relevant portion of which is as follows : " In connection with this matter we wish to assure you that your position as stated is in complete accord with that of the Office of the Comptroller of the Currency.
In the United States, the 'Undivided Profits ' as reflected in the accounting of a bank actually represents a part of its capital funds.
All of the other bank supervisory agencies in the United States consider the 'Undivided Profits ' of a bank as a part of its capital funds.
In any calculation for the purpose of determining the adequacy of capital in a: commercial bank in the United States, the supervisory authorities include 'Undivided Profits ' as an integral part of the capital structure as it would not be possible otherwise to make an accurate computation.
When losses occur in banks, it is the usual practice in many banks to charge them against the 'Undivided Profits ' account which by any reasoning would be inappropriate if the account were regarded as ' Undistributed Profits '.
In commercial banks in the United States, it is not customary to maintain any account that could be regarded specifically as 'Undistributed Profits ' in the same.
sense as applied to similar accounts in the other corporations in India.
The term 'Undivided Profits ' simply follows a bank accounting nomenclature used ill the 'United States to 377 designate profits set aside, after provisions for expenses and taxes, dividends and reserves, for continuous future use in the business of the bank ' and it bears a close, if not identical, relationship to the Earned Surplus Account of an industrial corporation.
Balance sheets of three other banks of the United States relied on by the appellant show that Capital Fund comprises three kinds of funds, i.e., Capital, Surplus and Undivided Profits.
The documents placed on the record show that these three different kinds of funds put together make up what is called " Capital Fund '.
The creation and maintenance of the item known as Undivided Profits is a requirement of the Treasury Rules which are made under the Statute and therefore it cannot be said that the amount of Undivided Profits in the Balance Sheet was not allocated as a result of either a resolution of the Directors, accepted by the shareholders or on account of the requirements of the law.
The " Undivided Profits " have to be employed in the manner indicated by the letter of the Deputy Controller of Currency.
They are set up for expenses, taxes, dividends and reserves for continuous use in the business of the Bank and are a part of the capital funds and an integral part of the capital structure and without it, it would not be possible to make an accurate computation.
The reason for the existence of this fund, as shown by that letter is that when there are losses, they can be charged against "Undivid ed Profits " which expression means profits set apart after provision for expenses and taxes etc.
for continuous use in the business of the Bank.
There is a difference between the system of accounting of Banking Companies in India and the United States; the failure to appreciate this difference has led the Appellate Tribunal as well as the High Court to arrive at an erroneous conclusion.
In India at the end of an year of account the unallocated profit or loss is carried forward to the account of the next year and such unallocated amount gets merged in the account of that year, In the system of accounting in the 48 378 U.S. A. each year 's account is self contained and ,nothing is carried forward.
If after allocating the profits to diverse heads mentioned above any balance remains, it is credited to the " Undivided Profits " which become part of the capital fund.
If in any year as a result of the allocation there is a loss the accumulated undivided profits of the previous years are drawn upon and if that fund is exhausted the Banking Company draws upon the surplus.
In its very nature the Undivided Profits are accumulation of amounts of residue on hand at the end of year of successive periods of accounting and these amounts are by the prevailing accounting practice and the Treasury directions regarded as a part of the capital fund of the Banking Company.
The nature of " Undivided Profits" was considered by the Supreme Court of America in Fidelity Title and Trust Co. vs United States (1).
In that case a suit was brought by the Fedelity Co. to recover the tax assessed on its whole capital and undivided profits under section 2 of the Spanish War Revenue Act.
In the Supreme Court it was contended by the company that the terms "Capital", " Surplus " and " Undivided Profits " have a precise and definite meaning in the business of banking and that Undivided Profits are not surplus and cannot therefore be taxed as " Surplus ".
The Government on the other hand contended that the undivided profits were taxable as being a part of Capital or Surplus.
The Court held that " Undivided Profits ".
were taxable as being a part of the Capital employed.
Mr. Justice Brandeis delivering the opinion of the Court said at p. 955: " The Act declares that 'in estimating capital surplus shall be included, ' and that the 'annual tax shall in all cases be computed on the basis of the capital and surplus for the preceding fisical year. . . . . . . " As it is the use or employment of capital in banking, not mere possession thereof by the banker, which determines the amount of tax, the fact that a portion of the capital so used or employed is (1) ; ; 379 designated 'undivided profits ' is of no legal signi ficance." As to what the word " Reserves " as used in the Business Profits Tax Act connotes, was considered by this Court in the Commissioner of Income tax vs Century Spinning & Manufacturing Co. Ltd. (1).
It was held that the true nature and character of a sum disputed as reserve was to be determined with reference to the substance of the matter.
The amount in dispute in that case was the profits after the deduction of depreciation and tax which amount was carried to the Balance Sheet and was later recommended by the Directors to be appropriated mainly to dividends and balance to be carried forward to the next year 's account.
Thus on the crucial date, i.e., April 1, 1946, from which the Chargeable Accounting Period began the sum in dispute had not been declared as reserve; on the other hand the Directors had earmarked it for distribution as dividend and it remained as a mass of undistributed profits available for distribution.
At page 209 Ghulam Hassan J. said: "The reserve may be a general reserve or a specific reserve, but there must be a clear indication to show whether it was a reserve either of the one or the other kind.
The fact that it constituted a mass of undistributed profits on the 1st January ' 1946, cannot automatically make it a reserve . . . . .A reserve in the sense in which it is used in rule 2 can only mean profit earned by a company and not distributed as dividend to the shareholders but kept back by the directors for any purpose to which it may be put in future. . . . " Applying this test to the disputed sum, it cannot be said that the amount is not "Reserve" within the meaning of the Rules.
As is shown by the instruction under section 5211 of the Revised Statute of the United States and the letter of the Deputy Controller referred to above, the appellant bank was required to keep a, certain sum of money under the head " Undivided ,Profits " and that is an integral part of the capital (1) ; 380 structure.
Under these circumstances it would be erroneous not to treat the amount of " Undivided Profits " as a part of the capital fund.
In our opinion therefore the amount designated as Undivided Profits " is a part of the reserves and has to be taken into account when computing the capital and reserves within R. 2(1) of Schedule 11 of the Act.
The question which was referred by the Tribunal should have been decided in the affirmative and in favour of the appellant and the amount should have been added to the capital as allowed by R. 2(1) for the Chargeable Accounting Periods.
In the result the appeal is allowed.
The appellant will have its costs in this Court and in the High Court.
Appeal allowed.
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The appellant, a non resident Banker incorporated under the National Bank Act of the United States of America with its Head Office in America, was assessed under Business Profits Tax Act, 147.
Under the Treasury Rules of the United States of America and Instructions for preparation of reports of conditions by the National Banking Association certain sums had to be specifically allocated under section 5211 of the Revised Statute of the United States, and the appellant bank was required to keep a certain sum of money under the head " undivided profits " and that was an integral part of tile capital structure.
The reason for the existence of this fund was that when losses occurred according to the practice they could be charged against " undivided profits ", i.e., profits set apart after provision for expenses and taxes etc.
for continuous use in the business of the Bank.
The appellant contended that in computing the amount for the purpose of " abatement " it was entitled to include the undivided profits " which fell within the word " reserves ".
The question was whether the large sum of money shown as " undivided profits " was a part of the reserves.
Held, that the amount designated as " undivided profits was a part of the reserves and had to be taken into account when computing the capital and reserves within Rule 2(1) of Sch.
II of the Business Profits Tax Act, 1947.
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Appeal No. 92 of 59.
Appeal from the judgment and order dated August 31, 1956, of the Orissa High Court in second appeal No. 1.5.1 of 1951.
A. V. Viswanatha Sastri and T. V. R. Tatachari, for the appellant.
M. section K. Sastri, for respondents.
674 1961.
September 20.
The Judgment of the Court was delivered by GAJENDRAGADKAR, J.
This is an appeal by a certificate granted by the High Court of Orissa and it raises a short question about the scope and effect of the provisions of section 7 (1) of the Orissa Tenants Protection Act, 1948 (Act III of 1948) (hereafter called the Act).
The appellant Magiti Sasamal sued the respondents Pandab Bissoi and others in the Court of the District Munsiff, Berhampur, for a permanent injunction restraining them from entering the suit lands belonging to the appellant.
The appellants case was that the suit lands belonged to him and were in his personal cultivation for many years.
In the year of the suit the appellant had cultivated the said lands as usual, manured and raised paddy crop thereon after spending a large amount in that behalf According to the appellant the respondents had no manner of right or title to the said lands and had never cultivated them.
From the notice given by them to the appellant, however, it appeared that the respondents wanted to enter upon the lands forcibly and to remove the standing crop therefrom.
This they desired to do by setting up a false claim that they were the tenants of the lands and as such were entitled to the protection of the Act.
The appel lant alleged that the respondents were local rowdies and were known for their high handed action in the neighbourhood.
On these allegations the appellant claimed a permanent injunction against the respondents.
The respondents admitted the title of the appellant to the lands in suit but pleaded that they were the tenants in respect of separate portions of the said lands.
Their version was that they had cultivated their holdings and raised the paddy crop thereon in the year in question.
According to them they had been in cultivating possession of their respective holdings as tenants long before September 1, 1947, and so they were entitled to remain in possession as such tenants under the 675 they had filed petitions under the Act before the Sub Collector, Berhampur, claiming appropriate relief against the appellant.
They urged that they were ever ready and willing to pay the Rajabhag as provided by the Act and they contended that the Suit was not maintainable in a civil court.
On these pleadings the learned trial judge framed appropriate issues.
Three issues of law had been framed by him on the pleas raised by the respondents.
These issues were, however, not pressed at the hearing, One of them, namely issue 5, refers to the jurisdiction of the Court to try the suit in view of the provisions of the Act.
Thus, it if; clear that the issue of jurisdiction was not pressed by the respondents at the trial.
On the merits the learned trial judge considered the evidence and held that though the appellant was the owner of the property the respondents had proved that they were the tenants in possession of their respective holdings and that their possession was long before September 1, 1947.
On these findings the learned judge came to the conclusion that the appellant was not entitled to claim an injunction against the respondents and so he dismissed his suit.
The matter was then taken by the appellant before the District Judge, Ganjam, Nayagarh.
The learned District Judge considered the evidence led by the parties and reversed the conclusions of the trial court.
He held that the onus was on the respondents to prove their possession of their respective holdings as tenants on or before the specified date, and according to him they had failed to dis charge that onus.
The question of jurisdiction was not raised before the appellate court by the respondents.
Having held against the respondents on the merits the learned District Judge allowed the appeal, set aside the decree passed by the trial court and directed that an injunction should be issued against the respondents as claimed by the appellant.
676 The respondents then moved the High Court by second appeal ; and the main point which they urged before the High Court was that the learned trial judge had no jurisdiction to entertain the suit having regard to the provisions of section 7 (1) of the Act.
The appellant pointed out to the High Court that this question of jurisdiction bad not been pressed before the trial court and had not been raised before the lower appellate court.
Even so the High Court allowed the point to be raised and decided it in favour of the respondents.
As a result of the finding that the civil court bad no jurisdiction to entertain the suit the second appeal preferred by the respondents has been allowed and the appellant 's suit dismissed with costs throughout.
It is against this decree that the appellant has come to this Court with the certificate granted by the High Court; and the short point which has been raised before us on his behalf by Mr. Viswanatha Sastri is that in holding that the present suit is outside the jurisdiction of the civil court the High Court has misconstrued the scope and effect of the Provisions of section 7(1) of the Act.
The Act received the assent of the Governor General on February 5, 1948 and was published on February 14,194S.
It is a temporary Act and by s.1(4) it has been provided that it shall cease to have effect on April 15, 1949 except is respects things done or omitted to be done before the expiration thereof.
It has been passed in order to provide for temporary protection to certain classes of tenants in the Province of Orissa.
Legislature thought that the said tenants deserved protection and so as a beneficent measure the Act has been passed.
Section 2(c) of the Act defines landlord and section 2(g) defines a tenant.
The main operative provision of the Act is contained in section 3.
This Section provides that not withstanding anything contained in any other law for the time being in force, or any express or implied agreement to the contrary, but subject to the provisions of this Act, 677 a person who, on the first day of September 1947, was cultivating any land as a tenant shall continue to have the right to cultivate such land and it shall not be lawful for the landlord to evict the tenant from the land or interfere in any way with the cultivation of such land by the tenant.
It would thus be seen that the Act purports to provide protection to tenants who were in possession of lands on the appointed day which is September 1, 1947.
The other sub sections of section 3 make material and subsidiary provisions in regard to the said protection.
Section 7(1) reads thus: " 'Any dispute between the tenant and the landlord as regards, (a) tenant 's possession of the land on the 1st day of September, 1947 and his right to the benefits under this Act.
or (b) misuse of the land by the tenant, or (c) failure of the tenant to cultivate the land properly, or (d) failure of the tenant to deliver to the landlord the rent accrued due within two months from the date on which it becomes payable, or (e) the quantity of the produce payable to the landlord as rent, shall be decided by the Collector on the application of either of the parties".
The appellant contends that section 7(1) covers disputes between landlords and tenants which are specified under cls.
(a) to (e) but it does not cover a dispute between the parties as to whether the relationship of landlord and tenant 'exists between them.
It is only where such a relation ship is either admitted or established in a civil court that the specified disputes fall within the exclusive jurisdiction of the Collector on the other hand the respondents ' case is that the dispute as to the status of the tenant is also included under section 7(1).
The High Court has upheld the respondents ' interpretation, and Mr. Viswanatha Sastri contends that this interpretation is based on a misconstruction of the section.
It is true that having regard to the beneficent object which the Legislature had in view in passing the Act its material provisions should be liberally 678 construed.
The Legislature intends that the 'disputes contemplated by the said material provisions should be tried not by ordinary civil courts but by tribunals specially designated by it, and so in dealing with the scope and effect of the jurisdiction of such tribunals the relevant words used in the section should receive not a narrow but a liberal construction.
While bearing this principle in mind we must have regard to another important principle of construction, and that is that if a statute purports to exclude the ordinary jurisdiction of civil courts it must do so either by express terms or by the use of such terms as would necessarily lead to the inference of such exclusion.
As the Privy Council has observed in Secretary of State vs Mask & Co., (1) "it is settled law that the exclusion of the jurisdiction of the civil courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied".
There can be no doubt that ordinarily a dispute in regard to the relationship between the parties such as that between a landlord and a tenant would be a dispute of a civil nature and would fall within the competence of the civil court.
If the respondents contend that the jurisdiction of the civil court to deal with such a civil dispute has been taken away by section 7 (1) we must enquire whether section 7(1) expressly takes away the said jurisdiction or whether the material words used in the section lead to such an inference or the scheme of the Act inescapably establishes such an inference.
The relevance and materiality of both these principles are not in dispute.
Let us then revert to section 7.
It would be noticed that a. 7(1) has expressly and specifically provided for five categories of disputes which are within the jurisdiction of the Collector and which must therefore be taken to be excluded from the jurisdiction of the civil court.
On a reasonable construction of section 7(1) a dispute specified by section 7(1)(a) would be a dispute between a tenant and a landlord in regard (1) (1940) L. R. 67 1.
A. 222, 236.
679 to the former 's possession of the land on September 1, 1947.
It is clear that the dispute to which section 7(1)(a) refers is a narrow dispute as to the possession of the tenant on a specific date and his consequential right to the benefits of the Act.
The same is the position with regard to the other categories of the dispute specified by section 7(1).
In none of the said categories is a dispute contemplated as to the relationship of the parties itself.
In other words section 7(1) postulates the relationship of tenant and landlord between the parties and proceeds to provide for the exclusive jurisdiction of the Collector to try the five categories of disputes that may arise between the landlord and the tenant.
The disputes which are the subject matter of section 7(1) must be in regard to the five categories.
That is the plain and obvious construction of the words "any dispute as regards".
On this construction it would be unreasonable to hold that a dispute about the status of the tenant also falls within the purview of the said section.
The scheme of section 7(1) is unambiguous and clear.
It refers to the tenant and landlord as such and it contemplates disputes of the specified character arising between them.
Therefore, in our opinion, even on a liberal construction of section 7(1) it would be difficult to uphold the argument that a dispute as regards the existence of the relationship of landlord and tenant falls to be determined by the Collector under section 7(1).
In this connection it would be relevant to take into consideration the provisions of section 7(2).
This clause provides that the Collector may, after making such enquiries as he may deem necessary, order the tenant, by a notice served in the prescribed manner and specifying the grounds on which the order is made, to cease to cultivate the land.
It is significant that the making of the enquiry and its mode are left to the discretion of the Collector.
If a serious dispute as to the existence of the relationship of landlord and tenant between the parties had been covered by section 7(1) it is difficult to imagine that the 680 Legislature would have left the decision of such an important issue to the Collector giving him full freedom to make such enquiries as he may, deem necessary.
As is well known, a dispute as to the existence of the relationship of landlord and tenant raises serious questions of fact for decision, and if such a serious dispute was intended to be tried by the Collector the Legislature would have provided for an appropriate enquiry in that behalf and would have made the provisions of the Code of Civil Procedure applicable to such an enquiry.
Section 7(2) can be easily explained on the basis that the relationship between the parties is outside section 7(1) and so the disputes that are covered by section 7(1) are not of such a nature as would Justify a formal enquiry in that behalf The provisions of sub sections
(3), (6) and (7) also indicate that the relationship between the parties is not, and cannot be, disputed before the Collector.
The parties arrayed before him are landlord and tenant or vice versa, and it is on the basis of such relationship between them that he proceeds to deal with the disputes entrusted to him by section 7(1).
It is true that when the relationship of landlord and tenant is proved or admitted the disputes falling within the five categories enumerated in section 7(1) will have to be tried by the Collector.
Let us take the present case itself to illustrate how section 7(1) will operate.
In the suit filed by the appellant against the respondents the issue about the status of the respondents was framed and so it had to be tried by the civil court.
In such a suit if the civil court holds that the relationship between the landlord and the tenant had not been established it may proceed to deal with the suit on the merits.
If, however, it holds that the said relationship is established then the civil court cannot deal with the dispute between the parties if it falls within any one of the categories specified by section 7(1).
In such a case, having made the finding about the relationship between the parties the civil court will either dismiss the suit on the ground that it can give no relief to 681 the landlord, or may, if it is permissible to do so, return the plaint for presentation to the Collector.
What course should be adopted in such a case it is unnecessary for us to decide in the present appeal.
All that we wish to emphasise is that the initial dispute between the parties about the relationship subsisting between them will still continue to be tried by the civil court and is outside the purview of section 7(1).
In support of the argument that a dispute as to the existence of relationship as landlord and tenant should be taken to be included under section 7(1) reliance is placed on the provisions of section 8(1) of the Act.
Section 8(1) provides that subject to the provisions of section 7 all disputes arising between landlord and tenant shall be cogniscible by the revenue court and shall not be cogniscible by the civil court.
It must be pointed out that we are really not concerned with section 8(1) in the present appeal because even according to the respondents the present dispute between the parties attracted section 7(1.) and should have been tried by the Collector and not by 'the civil court.
However, the question about the construction of section 8(1) has been incidentally raised before us.
In appreciating the scope and effect of section 8(1) it is necessary to bear in mind the provisions of section 13 of the Act.
The said section provides that the Act shall, as far as may be, read and construed.
as forming part of the Madras Estates Land Act, 1908, or as the case may be, of the Orissa tenancy Act, 1913.
Therefore reading the provisions of section 8(1) and section 13 tog other it follows that all that section 8 (1) provides is that except for the disputes covered by section 7 (1) all disputes arising between landlord and tenant shall be cogniscible by the revenue court and to the trial of such disputes by the revenue court the relevant provisions of the Orissa Tenancy Act, 1913 would apply.
It is true that disputes to which section 8(1) applies are entrusted to the exclusive jurisdiction of the revenue courts and are excluded from the jurisdiction of civil courts, but the effect of this 682 the other relevant provisions of the parent Act of which this temporary Act forms a part.
Now, if we turn to some of the relevant provisions of the, parent Act it would be clear that when the revenue courts are given jurisdiction to try the disputes the enquiry held by them purports to be a formal enquiry to which the provisions of the Code of Civil Procedure may apply (Vide: section 192 of the Orissa Tenancy Act, 1913).
Similarly, the provisions of section 204(1) which provides for appeals contemplate appeals to the District Court and the High Court where questions of title are involved.
These provisions illustrate the point that where serious disputes about title are entrusted to special tribunals usually the Legislature contemplates a formal en quiry and makes the provisions of the Code of Civil Procedure applicable to such an enquiry and provides for appropriate appeals.
Now, in regard to the order passed by the Collector under section 7(1) the only provision about appeals is that made by section 11 which provides that an appeal shall lie to the prescribed superior revenue authority whose decision shall be final, and shall not be subject to any further appeal or revision.
Departure made by the Legislature in providing only one appeal and that too in every case to the prescribed superior revenue authority clearly brings out that the disputes which are entrusted to the Collector under section 7(1) axe the simple disputes specified in the five categories and do not include a serious dispute like that of the relation,ship between the parties as landlord and tenant.
, If such a dispute had been intended to be tried by the Collector the Legislature would have provided for a formal enquiry and would have prescribed appropriate appeals on the lines of sections 192 and 204 of the parent Act.
In this connection we may in passing refer to the provisions of section 126 of the parent Act.
This section deals with the jurisdiction of civil courts in matters relating to rent.
Section 126(3) provides for the institution of suits in civil courts on the 683 grounds specified by cls.
(a) to (g).
Clause (c) deals with the ground that the relationship of landlord and tenant does not exist.
This clause shows that if a dispute arose between the parties as to the existence of the relationship of landlord and tenant a suit in a civil court a.% contemplated is prescribed by section 126(3) (c).
That also has some bearing on the construction of section 7(1); and it is for that limited purpose that we have referred to it.
Therefore, we are satisfied that the High Court was in error in holding that under a. 7(1) of the Act it was competent to the Collector to try the issue between the appellant and the respondents whether or not the Respondents were the tenants of the appellant and that the civil court had no jurisdiction to entertain the said dispute.
In the result, the appeal must be allowed, the order passed by the High Court set aside and that of the District Court restored with.
costs throughout.
Appeal allowed.
|
The appellant filed in the Civil Court a suit for permanent injunction restraining the respondents from entering the lands in suit on the allegation that the lands belonged to him and were in his cultivatory possession for many years and that the respondents had no right or title to them and had never cultivated them.
The respondents contended that they were tenants of portions of the said lands and were in cultivating possession of the same as tenants.
The question which arose for decision was whether having regard to the provisions of section 7(1) of the Orissa Tenants Protection Act, 1948, the Civil Court had jurisdiction to entertain the suit which involved a dispute as to the relationship of landlord and tenant between the parties.
Held, that even on a liberal construction of section 7(1) of the Act it cannot be held that disputes as regards the existence of the relationship of landlord and tenant fall to be deter mined by the Collector under that section.
Disputes which are entrusted to the Collector under section 7(1) are the simple disputes specified therein in the five categories and do not include a serious dispute as to the relationship between the parties as landlord and tenant.
In the present case the suit was therefore within the jurisdiction of the Civil Court.
Secretary of State vs Mask & Co. (1940) L.R. 67 I.A. 222, referred to.
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1317.txt
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vil Appeal No. 211 of 1964.
Appeal from the judgment and order dated February ,22, 1961 of the Bombay High Court in Miscellaneous Application No. 352 of 1959.
Niren De, Additional Solicitor General, R. Ganapathy lyer and R.N. Sachthey, for the appellants.
A.V. Viswanatha Sastri, T.A. Ramachandran, J.B. Dadachanji, O.C. Mathur and Ravinder Narain, for the respondents.
The Judgment of the Court was delivered by Sikri, J.
This appeal is in pursuant to a certificate of fitness granted by the High Court of Maharashtra at Bombay under article 133(1)(c)of the Constitution is directed against the judgment of the said High Court in a petition under article 226 of the Constitution filed by the respondent.
The India Fisheries (P) Ltd. hereinafter called the respondent was a private limited company and was directed to be wound up by an order of the Bombay High Court, dated October 11, 1950, and a Court Liquidator was appointed as the Official Liquidator thereof with all powers under section 179 of the Indian Companies Act.
1913 (VII of 1913) to be exercised by him under section 180 without sanction or intervention of the Court save and except in case of sales of immovable property belonging to the respondent.
For the assessment year 1948 49, the respondent was assessed on December 8. 1950, the tax being assessed at Rs. 8,737/15/ .
On or about March 15.
1951, the Income Tax Officer lodged a claim in respect of this tax with the Official Liquidator.
That claim was adjudged and allowed as an ordinary claim and certified as such on April 2 1952.
in August, 1954, the Official Liquidator declared a dividend of 9 1/2 annas in a rupee and paid to the Income Tax Department a sum of Rs. 5,188/3/ against the claim made by the Income Tax Officer as an ordinary creditor.
Thus a balance of Rs. 3,549/12 still remained payable to the Income Tax Department from the assets of the respondent.
For the year 1955 56, the Department made a demand from the respondent on June 22, 1954, for a sum of Rs. 2,565/6/ as advance tax.
This was paid by the Official Liquidator.
On a 681 regular assessment being made for the said year, only Rs. 1,1 26/12/was assessed as payable by the respondent.
After adjusting this sum against the advance payment of Rs. 2,565/6/ , Rs. 1,460/1/became refundable to the respondent, inclusive of interest.
Instead refunding the said balance to the respondent, the Income Tax Officer set off the said amount against the balance of Rs. 3,549/12/which was still outstanding in respect of the Income tax demand for the year 1948 49.
The respondent filed a revision petition to the Commissioner of Income tax, but the said petition was rejected by the Commissioner on September 21.
holding that the action of the Income Tax Officer was perfectly justified under the provision of section 49E of the Income Tax Act.
On November 25, 1959, the respondent filed a petition under article 226 of the Constitution and prayed for a writ, direction or order for setting aside the orders of the Income Tax Officer and the Income Tax Commissioner.
He further prayed for any further writ, direction or order restraining the Department from setting off the refund against the tax dues and directing them to hand over the balance to the Official Liquidator.
The High Court held that the demand of Rs. 8.737/12/ in respect of the assessment year 1948 49.
being adjudged and certified, came to have all the incidents and character of an unsecured debt payable by the Official Liquidator to the Department.
The High Court observed that "this claim thereafter was governed by the provisions of the Company law and could be paid to the creditor only in accordance with the provisions of the Company law.
No other remedy nor any other method of obtaining satisfaction of this claim was available to the creditor thereafter.
It was no longer the amount of tax remaining payable by a person to whom the refund was due within the meaning of Section 49E of the Income Tax Act.
In our opinion, therefore.
the provision of Section 49E was not available to the Department for setting off the amount of the excess towards the balance of its claim of Rs. 8,737/15/ which the department had proved in the insolvency of the company and was being dealt with in the Insolvency." The High Court accordingly set aside the orders passed by the Department in so far as they set off the amount of the refund towards the tax remaining payable, and directed the Income Tax Officer to deal with and dispose of the claim of the present respondent for the refund and pass appropriate orders in respect of the said amount of refund under the provisions of section 48 of the Income Tax Act.
The learned Additional Solicitor General on behalf of the appellant.
contends that s, 49E gives statutory power to the Income tax Officer.
inter alia, to set off the amount to be refunded or any part of that amount against the tax remaining payable by the person to whom the refund is due, and this statutory power is not subject to any provision of any other law.
He says that the Companies Act 682 does not take away this power.
Section 49E is in the following terms: "Where under any of the provisions of this Act, a refund is found to be due to any person, the Income tax Officer, Appellate Assistant Commissioner or Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded, or any part of that amount against the tax, interest or penalty, if any, remaining payable by the person to whom the refund is due.
" On the face of this provision, there is no doubt that this section is not subject to any other provision of law.
But it will be surprising if this power can be exercised in such a way as to defeat the provisions of the Indian Companies Act.
It is not denied by the learned Additional Solicitor General that the State has no priority in respect of this claim.
The question then arises whether section 49E is subject to the Insolvency Rules contained in the Companies Act.
Section 228 of the Companies Act, 1913, provides: "228.
Debts of all descriptions to be proved.
In every winding up (subject in the case of insolvent companies to the application in accordance with the provisions of this Act of the law of insolvency) all debts payable on a contingency, and all claims against the company, present or future, certain or contingent, shall be admissible to proof against the company, a just estimate being made, so far as possible, of the value of such debts or claims as may be subject to any contingency or for some other reason do not bear a certain value.
" Section 229 provides: "Application of insolvency rules in winding up of insolvent companies.
In the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and to debate provable and to the valuation of annuities and future and contingent liabilities as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent; and all persons who in any such case, would be entitled to prove for and receive dividends out of the assets of the company may come in under the winding up, and make such claims against the company as they respectively are entitled to by virtue of this section.
" The effect of these statutory provisions is, inter alia, that an unsecured creditor must prove his debts and all unsecured debts 683 are to be paid pari passu.
Therefore, once the claim of the Department has to be proved and is proved in the liquidation proceedings, the Department cannot by exercising the right under section 49E of the Income Tax Act get priority over the other unsecured creditors.
If we were to read section 49E in the way suggested by the learned Additional Solicitor General, it would be defeating the very object underlying sections 228 and 229 of the Companies Act, 1913.
If there is an apparent conflict between two independant provisions of law, the special provision must prevail.
Section 49E is a general provision applicable to all assessees and in all circumstances; sections 228 and 229 deal with the proof of debts and their payment in liquidation.
In our opinion, section 49E can be reconciled with sections 228 and 229 by holding that section 49E applies when insolvency rules do not apply.
Accordingly, agreeing with the High Court, we hold that the Income Tax Officer was in error in applying section 49E and setting off the refund due.
The Commissioner was equally in error in affirming this order.
The learned Additional Solicitor General also urged that the application under article 226 was misconceived because the Income Tax Officer had jurisdiction.
But if we interpret section 49E as we have done, it is a clear case of lack of jurisdiction.
At any rate, there is an error apparent on the face of the orders and the High Court was quite right in exercising its jurisdiction under article 226.
The appeal is accordingly dismissed with costs.
Appeal dismissed.
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The respondent company was directed to be wound up and an official liquidator appointed by an order of the High Court in October, 1950.
In December, 1950, the respondent was assessed to tax amounting to Rs. 3737/ for the year 1948 49.
A claim made for this tax on the official liquidator was adjudged and allowed as an ordinary claim and certified as such in April, 1952.
The Liquidator declared a dividend of 91/2 annas in the Rupee in August, 1954 and paid a sum of Rs. 5188 to the Department, leaving a balance of Rs. 3549.
In June, 1954.
the Department made a demand from the respondent and was paid Rs. 2565 as advance tax for the year 1955 56.
On a regular assessment being made for that year, only Rs. 1126 was assessed as payable, so that a sum of Rs. 1460, inclusive of interest, became refundable to the respondent.
However, the Income Tax Officer, purporting to exercise the power available to him under section 49E of the Income Tax Act, 1922, set off this amount against the balance of Rs. 3549 due for the year 194849.
A revision petition filed by respondent in respect of this set off was rejected by the Commissioner of Income Tax.
Thereafter, a petition under article 226 filed by the respondent to set aside the orders of the Income Tax Officer and the Commissioner was allowed by the High Court, mainly on the ground that the demand for Rs. 8737 in respect of 1948 49, being adjudged and certified came to have all the incidents and character of an unsecured debt payable by the liquidator to the Department; it was therefore governed by the provisions of Company Law and no other remedy or method to obtain satisfaction of the claim was available to the creditor.
In the appeal to this Court it was contended on behalf of the appellant that section 49E gave statutory power to Income tax Officer to set off a refundable amount against any tax remaining payable and that this power was not subject to any provision of any other law.
HELD:The Income Tax Officer was in error in applying section 49E and setting off the refund due to the respondent.
[683C D] The effect of sections 228 and 229 of the Companies Act, 1913, is, inter alia, that an unsecured creditor must prove his debts and all unsecured debts are to be paid part passu.
Once the claim of the Department has to be proved and is proved in liquidation proceedings, it 680 cannot, by exercising the right under section 49E get priority over the other unsecured creditors and thus defeat the very object of sections 228 and 229 of the Companies Act.
Furthermore, if there is an apparent conflict between two independant provisions of law, the special provision must prevail.
Section 49E is a general provision applicable to all assessees in all circumstances; sections 228 and 229 deal with proof of does and their payment in liquidation.
Section 49E can be reconciled with sections 228 and 229 by holding that section 49E applies when insolpency rules do not apply.
[682H 683D]
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1978.txt
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vil Appeal No. 1934 of 1972.
From the Judgment and Order dated 9.12.
1971 of the Punjab and Haryana High Court in regular Second Appeal No. 1286 of 1969.
V.C. Mahajan, K.R. Nagaraja (NP) and R.S. Hegde for the Appellant.
419 Uma Dutta, E.C. Agarwala, Ms. Sheil Sethi and Susheel Kumar for the Respondents.
The Judgment of the Court was delivered by K.N. SAIKIA, J.
This first defendant 's appeal by special leave is from the Judgment and Decree of the High Court of Punjab and Haryana in R.S.A. No. 1286 of 1969 dated 9.12.
Respondents 4 to 6 Balwant Singh, Jagir Singh and Teja Singh, sons of Kehar Singh sold land measuring 38 Kanals 3 Marlas, being 3/5th share of 63 Kanals 11 Marlas of ances tral land situated at village Maherna Kalan, Tehsil and District Ludhiana, as per sale deed dated June 4, 1964 in favour of the appellant (first defendant) for Rs. 14,000 as the vendors left their village Maherna Kalan and had not been cultivating the same and it was not yielding any prof it.
The sale deed contained a recital that the vendors sold the land with a view to purchase land in another village.
On November 6, 1965 the vendors actually purchased 80 Kanals of Nehri land for Rs. 11,000.
The parties are admittedly Jat Sikhs governed by Punjab Customs.
Respondents 1 to 3 filed a declaratory suit on August 3, 1966 in the Court of Sub Judge, Ludhiana seeking a declara tion that the sale of the suit land would not affect their reversionary rights after the death of respondents 4 to 6 as they were governed by the custom in the matter of alienation inasmuch as the suit land was ancestral in the hands of the alienors qua the plaintiffs (respondents 1 to 3) and that the sale was effected without consideration and without legal necessity; and respondents 4 to 6 (defendants 2 to 4) were restrained from alienating under the custom.
The appellant averred, inter alia, that the sale was for consideration and legal necessity as it was an act of good management on the part of the alienors; that respondents 4 to 6 who were not sonless and were men of good character and sober habits; that migrating from their village they had settled elsewhere as they were neither cultivating the suit land nor were in a position to manage and cultivate the same; and that the alienors had actually purchased 80 Kanals of better quality Nehri land which showed that the sale was an act of good management on the part of the vendors.
It was also contended that the land in suit was not ancestral qua the plaintiffs nor was it governed by customs and that the plaintiffs had no locus standi.
420 The respondents 4 to 6 being defendants 2 to 4 admitted the claims of the plaintiffs.
The respondent No. 5 who was the brother of respondent No. 2, was impleaded as proforma defendant having the same interest as the plaintiffs.
The Trial Court, inter alia held that the parties in respect of the sale of the suit land were governed by custom whereunder ancestral land could not be alienated except for legal necessity or as an act of good management; that the suit land was ancestral qua the plaintiffs (respondents 1 to 3) and defendants 2 to 4 (respondents 4 to 6); that the sale was effected for consideration of Rs. 14,000 as stipulated in the sale deed; and that the sale was an act of prudent management on the part of the vendors and as such unimpeach able.
The suit having been dismissed and the first appeal therefrom having failed, the respondents 1 to 3 preferred R.S.A. No. 1286 of 1969 in the High Court of Punjab and Haryana wherein they sought to adduce additional and further evidence of a sale deed dated June 3, 1969 alleged to have been executed by respondents 4 to 6 in respect of the suit land.
The High Court allowed the R.S.A. and set aside the sale holding that it was neither for any legal necessity nor could it be justified as an act of good management.
The suit was accordingly decreed.
The certificate to file Letters Patent Appeal having been refused, the appellant obtained special leave.
Mr. V.C. Mahajan, the learned counsel for the appellant, submits that whether the sale was or was not an act of good management having been a question of fact, the Trial Court and the first appellate court having arrived at a concurrent finding that it was an act of good management and as such unimpeachable, this concurrent finding could not have been set aside by the High Court in second appeal; that the sale deed dated June 3, 1969 which was never accepted and proved according to law was irrelevant for impeaching the sale and the High Court erred in law in taking it into consideration while determining whether the sale was an act of good man agement.
Mr. Uma Dutta, learned counsel for the respondents, submits, inter alia, that the sale of the suit land measur ing 38 Kanals 3 Marlas being on June 4, 1964 and the subse quent purchase of 80 Kanals for Rs. 11,000 being on November 8, 1965 and that land also having subsequently been sold on June 3, 1969 for Rs.35,000 and there being no evidence to show that the suit land was less fertile or that the vendors 421 had settled at village Pather, the High Court was correct in holding that the impugned sale was not an act of good man agement.
The only question to be decided in this appeal, there fore, is whether the High Court was correct in setting aside the concurrent finding that the impugned sale was an act of good management and not restricted by custom.
It is common ground that the parties are governed by the local custom which restricts alienation.
About the custom W.H. Rattigan in his 'A Digest of Customary Law in the Punjab ' (14th Ed.) in Chapter IV at page 283 said: "Thus, while the unhampered exclusive use of property in a man 's possession, whether ancestral or acquired, for his lifetime, with a free disposal of the income, is not denied, freedom of alienation, whether by gift or bequest, is in regard to ancestral immovable property, subject in most cases to certain restrictions." A 'late Senior Judge of the Chief Court ' in a leading case (Nos.
107 P.R. 1887, page 247) expressed generally that: respect of ancestral immovable properly in the hands of any individual.
there exists some sort of residuary interest in all the descendants of the first owner.
or body of owners, however, remote and contingent may be the proba bility of some among such descendants ever having the enjoy ment of the property.
In short, the owner in possession is not regarded as having the whole and sole interest in the property, and power to dispose of it, so as to defeat the expectations of those who are deemed to have a residuary interest and who would take the property if the owner died without disposing of it.
The limitations within which per sons having or claiming to have such a residuary interest may prevent an owner in possession from defeating their expectations will be found to vary according to local cir cumstances, which may either weaken or rebut the presumption that the owner has not an unrestricted power of disposition.
" 422 Sir Meredyth Plowden in Gujar vs Sham Das, 107P.R. 1887 also said: "In respect of ancestral immovable property in the hands of any individual, there exists some sort of residuary interest in all the descendants of the first owner or body of owners, however remote and contingent may be the probability of some among such descendants ever having the enjoyment of the property.
The owner in possession is not regarded as having the whole and sole interest in the property, and power to dispose of it, so as to defeat the expectations of those who are deemed to have a residuary interest, and who would take the property if the owner died without disposing of it.
" In the critical words of Chief Justice Sir Shadi Lal in Gujar vs Sham Das (supra) the issues before the Court were whether in a case, where the power of a sonless Jat proprie tor to alienate ancestral land without necessity was in dispute, it was the duty of the alienee to prove a custom authorizing a transfer of the ancestral land in favour of stranger, and on whom lay the onus of proving that a sonless proprietor has powers to dispose of ancestral land without necessity; and the rest were mere deductions.
In para 59 at page 291 of the Digest Rattigan states the restrictions on alienation of ancestral immovable property thus: "Ancestral immovable property is ordinarily inalienable (especially amongst 'Jats ' residing in the central districts of the Punjab), except for necessity or with the consent of male descendants, or, in the case of a sonless proprietor, of his male collaterals.
"Provided" that a proprietor can alienate ancestral immovable property at pleasure if there is at the date of such alienation neither a male descendant nor a male collateral in existence (No. 36 P.R. 1895; No. 55 P.R. 1903, F.B.)" In other words, the custom is that the ancestral immova ble property is ordinarily inalienable especially amongst Jats residing in the Central Districts of Punjab, except for necessity and the other permis 423 sible reasons.
An alientation as a bona fide act of good management has been treated as one of necessity and hence, valid.
At page 388 of the Digest we find the gloss: "In the case of a male proprietor, in the management of agricultural affairs a very strict economy and a very excel lent management must not be insisted upon.
Ordinary bona fide management is all that can be demanded (No. 70 P.R. 1894; No. 20 P.W.R. 1911; No. 40 P.W.R. 1911, and No. 25 P.R. 1911); 1922, 69 Ind. Case 521 (exchange of land).
Where although no immediate necessity for a sale is established, if the sale has been held to be an act of good management, it is binding on the reversioners.
" The above statement has been commented upon as being a bit wide, and the suggested statement is that 'such a sale must be upheld '.
In Mohammad Chiragh and Ors.
vs Fatta & Ors.
, A.I.R. 1934 Lahore 452 where although no immediate necessity for sale was established, but there was a recital in the sale deed that the vendors intended to purchase other land with the proceeds of the sale, and a representation of that kind was made to the vendees which might have been believed by them in good faith, the High Court did not see any good grounds for interference with the findings of the learned District Judge that the sale was an act of good management which, it was observed; "was essentially a find ing of fact.
" In Abdul Rafi Khan vs P. Lakshmi Chand & Ors., A.I.R. 1934 Lahore 998 where the members of the family, finding their position in the village precarious due to deteriorating relations between it and the tenants in the village sold their Land one by one as they found it diffi cult to manage them or recover rent and the vendors moved to another place where they purchased certain land, it was held that the sale of the land was an act of good management and the vendee was not expected to see to the application of the money by the vendors to the purposes mentioned in the sale deed.
Similarly in Dial Singh vs Surain Singh, A.I.R. 1937 Lahore 493, the question was whether a sale of ancestral land was for necessity.
On April 3, 1934 Bhagwan Singh sold ancestral land for Rs. 1,500 the entire consideration being paid to him before the Sub Registrar.
The object of the sale was the purchase of land in Bikaner and Gwalior States and actually since the sale Bhagwan Singh spent 424 about Rs. 160 in buying about 100 bighas of land in Gwalior.
The lower courts concurrently found that the sale was for.
necessity.
Before the District Judge it was urged that the money had not been actually spent on the purpose for which it was raised.
But the learned District Judge held that this was admitted to be correct, that all that the alienee had to do was to see that the money was required for a legitimate purpose.
The sole question, therefore, was whether the sale in order to buy land in Gwalior and Bikaner was an act of good management, which would be regarded as one of necessi ty.
The Division Bench held that no sufficient reason had been shown for dissenting from the concurrent finding of the courts below that the sale of land by Bhagwan Singh in the presence of his elder son was for necessary.
In Gajjan Singh & Ors.
vs Anna Singh, [1968] P.L.R. Vol.
70 195 it was held that no person could be tied down to the village where he had ancestral land unless it was shown that he was leaving the village or disposing of the land in the village on some false pretext.
Where relations of a proprie tor with his brother were strained and he sold the land to purchase land in some other village, the alienation was held to be an act of good management and that once a true repre sentation was made by the vendor, the vendees were not to see the application of the money and they need not prove that the money in fact was utilised for a necessary purpose.
It was further held that the land purchased with the sale proceeds of the ancestral land did not cease to be ancestral and it remained ancestral land.
In the instant case the vendee proved the ingredients of good management and the concurrent finding of the Trial Court and the first Appellate Court was that the impugned sale was an act of good management, and it was essentially a finding of fact.
Applying the law as enunciated in the above decisions we do not find any infirmity therein.
The submis sions of the learned counsel for the respondents that in view of the subsequent sale of the land would go to show that it was speculative sale would be wholly irrelevant.
There was evidence to show that even prior to the sale the vendors were not cultivating and as such not deriving any profit from the land.
The distance of time between the impugned sale on June 4, 1964 and the purchase of 80 Kanals of land in the other village on November 6, 1965 was not such as to disprove that the sale was an act of good manage ment and as such was for necessity.
The Trial Court clearly found that the vendors left for and settled at the new village where they purchased 30 Kanals of land.
The averment that the purchased land was subsequently sold on June 425 3, 1969 at Rs.35,000 besides having not been proved in accordance with law, was wholly irrelevant for the purpose of discharging the onus of the appellant vendee.
The High Court was, therefore, in error in setting aside the concur rent finding of fact in the facts and circumstances of the case, in Second Appeal.
In the result, this appeal is allowed, the impugned Order of the High Court is set aside and Decree of the lower courts in the suit restored.
The parties being near rela tions, we leave them to bear their ' own costs.
Y. Lal Appeal allowed.
|
Respondent Nos. 4 to 6 sold their 3/5th share of the ancestral land to the appellant for Rs.14,000, as the ven dors left their village and wanted to settle elsewhere where they purchased 80 kanals of Nehri land.
Respondents Nos. 1 to 3 filed a declaratory suit in the court of Sub Judge, Ludhiana seeking a declaration that the sale of the suit land would not affect their reversionary rights after the death of respondents 4 to 6.
They pleaded that the land was ancestral and according to the custom governing the parties, it could not be alienated; they also asserted that the land was sold without any consideration and legal necessity.
The appellant defendant No. 1, contended that the sale was an act of good management on the part of the alienors, and that the same was not without consideration/the vendors having decided to settle elsewhere.
The trial court held that the sale was an act of prudent management and was not without consideration.
As regards the custom it held that the parties were governed by custom, whereunder ancestral land could not be alienated except for legal necessity or as an act of good management.
The suit was accordingly dismissed and the first appeal preferred against that decision failed.
Respondents 1 to 3 thereafter preferred Regular Second Appeal before the High Court.
The High Court allowed the appeal, set aside the sale holding that it was neither for any legal necessity nor could it be justified as an act of good management.
The suit was accordingly decreed.
Hence this appeal by the appellant defendant No. 1 by special leave.
418 Before this Court the appellant contended that the sale was or was not an act of good management having been a question of fact, the trial court as also the first appel late court having arrived at a concurrent finding that it was an act of good management, the High Court should not have interfered with that finding.
On the other hand the respondents contended that the sale was not an act of good management.
Allowing the appeal, this Court, HELD: The custom is that the ancestral immovable proper ty is ordinarily inalienable specially amongst Jats residing in the Central Districts of Punjab, except for necessity and the other permissible reasons.
All alienation as a bona fide act of good management has been treated as one of necessity and hence valid.
[233B] In the instant case, the vendee proved the ingredients of good management and the concurrent finding of the Trial Court and the first appellate court was that the impugned sale was an act of good management, and it was essentially a finding of fact.
[234F] The High Court was, therefore, in error in setting aside the concurrent finding of fact in the facts and circum stances of the case in Second Appeal.
Gujar vs Sham Das, 107 P.R. 1887; Mohammad Chiragh and Ors.
vs Fatta & Ors., AIR 1934 Lahore 452; Abdul Rafi Khan vs
P. Lakshmi Chand and Ors., AIR 1934 Lahore 998; Dial Singh vs Surain Singh, AIR 1937 Lahore 493; Gujjan Singh and Ors.
vs Atma Singh, 1968 PLR Vol.
70 195.
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6566.txt
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Civil Appeal No. 982 (NT) of 1975.
From the Judgment and order dated 10.10.1974 of the Gujarat High Court in Gift Tax Reference No. 1 of 1973.
Dr. V. Gauri Shanker, K.C. Dua, C.V. Subha Rao and Miss A. Subhashini for the Appellant.
T.A. Ramachandran, Sonet P. Mehta.
D.N. Misra and Ms. Sunita Narhari for the Respondent.
The Judgment of the Court was delivered by VENKATACHALIAH, J.
This appeal, by certificate, by the Commissioner of Income Tax, Gujarat, directed against the order dated, 10.10.1974 of the Gujarat High Court in Gift Tax Ref.
No. 1 of 1973 raises a question touching the correct principles of valuation of certain shares constituting the subject matter of a gift, held in a company incorporated in the United Kingdom analogous to a private limited company in India.
Shri Ambalal Sarabhai, since deceased, held 480 shares in an English Company M/s. Bakubhai & Ambalal Ltd., London, the share capital of which consisted of 2000 shares of 10 each.
On 17.10.1964, under eight deeds of gift, the said Ambalal Sarabhai made gifts of the said 480 shares to certain members of his family.
In the proceedings of the assessment to gift tax respecting said gifts the question of the proper basis for determination of the value of the gifts having arisen, the assessee contended that, as the shares were not quoted in the stock exchange, their value be determined on the average of break up value indicated by the balance sheets of the Company as on 31.3.1964 and 31.3.1965.
The former figure was Rs.507 and the latter Rs.333 per share; the average of the two being Rs.420 per share.
The assessee also contended that in view of the decision of the General Body of the company, dated, 4.10.1961 to increase its share capital by issue of additional 2000 shares at 10 each, the value of the shares constituting the subject matter of the gifts which were transferred "ex right" would stand depreciated.
344 The Gift Tax Officer did not accept the contentions of the asses see.
He proceeded to value the shares at Rs.507 per share on the basis of the break up value yielded by and deducible from the balance sheet as on 31.3.1964.
The Appellate Assistant Commissioner dismissed the assessee 's appeal.
In the further appeal before the Income Tax Appellate late Tribunal, the Tribunal, placing reliance on what it considered to be the principles of valuation appropriate to such cases said to be contained in Lynal & Anr.
vs I.R. C. (H.L.), , valued the shares at Rs.450 each said to represent the break up value on the basis of the balance sheet of 31.3.1963.
The Tribunal held that it could not take into consideration any other document except the published in formation which, in this case, was the balance sheet as on 31.3.1963.
The Tribunal, at the instance of both the revenue and the assessee stated a case and referred three questions of law for the opinion of the High Court the first two at the instance of the revenue and the third at the instance of the assessee.
The assessee, it must be observed did not press the question referred at his instance and the High Court, accordingly, did not express any opinion on it.
The two questions referred for the opinion of the High Court at the instance of the Revenue were: "(1) Whether on the facts and in circumstances of the case.
the finding of the Tribunal based on the ratio of the case decided by the House of Lords in Lynall and Another vs Inland Revenue Commissioner, (83 l.
T.R. 563) and basing the valuation of the shares of Bakubhai and Ambalal Ltd., London, on its balance sheet as at 31.3.63 instead of 31.3.64 is bad in law? (2) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in accepting the valuation of the shares as returned by the assessee and deleting Rs.27,360 added by the Gift Tax officer under Section 15(3) of the Act?" The High Court by its order, now under appeal, answered the questions against the revenue.
It held: "The only information which was available as on October, 17, 1964 was in the form of the balance sheet as of March 31, 1963 and hence the Tribunal was right when it took into consideration for the purpose of arriving at the value of the 345 shares by the break up method, the balance sheet as at March 31, 1963 and not as the revenue was contending for the balance sheet as of March 31.
Dr. Gauri Shanker, Learned Senior Counsel urged in support of the appeal, that the entire exercise of valuation before the High Court rested on a case which had no application to the matter; that the case was governed squarely by the pronouncements of this Court in Commissioner of Wealth Tax, Assam vs Mahadeo Jalan & Ors., and, more particularly, in Commissioner of Gift tax, Bombay vs Smt.
Kusumben D. Mahadevia, ( and that the erroneous view of the High Court as to the principles of valuation should, therefore, not remain uncorrected.
Shri Ramchandran, learned senior counsel for the assessee, in the.
light of the aforesaid pronouncements to this court, found it difficult to support the principles on which the determination of the value of the shares proceeded before the authorities as well as before the Tribunal and the igh Court.
He, however, invited our attention to the following observations of the High Court: " .
As a matter of fact it may be pointed out that before the Tribunal it was common ground that the value of the shares should be ascertained by following the break up value method and the only difference was as to with reference to balance sheet of what date the total value of the assets has to be ascertained . and urged that in view of the consensus between the parties as to the basis of valuation it was not now open to the Revenue to turn around and urge the application of an altogether different principle.
We are afraid, the basis adopted by the High Court is clearly unsustainable in the light of the pronouncements of this court referred to earlier.
The reference to and reliance upon the Lynall principle was somewhat in apposite and misplaced.
That case principally dealt with the impermissibility of reliance on classified information considered confidential and privileged from disclosure.
Pointing out the inadequacy of the "break up value" method this court in Mahadeo Jalan 's case referred with approval to the following observations of Williams J in Mc.
Cathie vs Federal Commissioner 's of Taxation ; " . the real value of the shares . will depend 346 more on the profits which the company has been making and should be capable of making, having regard to the nature of its business than upon the amounts which the shares would be likely to realise upon liquidation . .
In Kusumben 's case referring to the principles of valuation relevant to the matter, this court said: ". .
But where the shares in a public limited company are not quoted on the stock exchange or the shares are in a private limited company the proper method of valuation to be adopted would be the profit earning method.
This method may he applied by taking the dividends as reflecting the profit earning capacity of the company on a reason able commercial basis but if it is found that the dividends do not correctly reflect the profit earning capacity because only a small proportion of the profits is distributed by way of dividends and a large amount of profits is systematically accumulated in the form of reserves, the dividend method of valuation may be rejected and the valuation may be made by reference to the profits.
The profit earning method takes into account the profits which the company has been making and should be capable of making and the valuation, according to this method is based on the average maintainable profits.
Of course, for the purpose of such valuation, the taxing authority is not bound by the figure of profits shown in the profit and loss account because it is possible that the amount of profits may have suffered diminution on account of unreasonable expenditure or the directors having chosen to take away a part of the profits in the form of remuneration rather than dividends.
The figure of profits in such a case would have to be adjusted in order to arrive at the real profit earning capacity of the company . ." The view of the High Court cannot, therefore, be said to reflect the position in law correctly.
The correct principle of valuation applicable to a given case Is a question of law.
The parties can agree upon a principle permissible under and recognised by law.
If two or more alternative principles ar equally valid and available, it might be permissible for the parties to agree upon one of the alternative modes of valuation in preference to 347 another.
In this case, the revenue cannot be said to be precluded from urging the correct legal position.
In the ultimate analysis, it requires to be held that the view of the High Court as to the principle of valuation in determining the value of the kind of shares concerned in this case cannot be held to be correct.
The first question of law referred for its opinion would otherwise, require to be answered in the affirmative and the second in the negative; both against the assessee.
As a logical consequence, the Tribunal would have to go through, over again, the exercise of determination of the value of the shares adopting the correct principle.
But the matter is already two and a half decades old.
The gift was in the year 1964.
The total Gift Tax as now assessed is Rs.5661.
Upon a fresh determination of the value of the shares adopting the somewhat intricate processes inherent in the 'profit method ' of valuation the difference in the quantum of the tax might, perhaps, not be substantial.
The magnitude of the mechanism for refixation of the value of the gifts and the difference in the quantum of the tax it might result in, do not bear a reasonable or sensible proportion.
Having regard to the pecuniary involvement in the case which is obviously small we think we should not expose the parties to a fresh round of litigation.
In this view of the matter, we think appellant should be content with the declaration of the law on the matter, without disturbing the valuation made by the Tribunal and approved by the High Court.
though the principle adopted is not supportable in law.
We therefore decline to interfere in the matter.
The valuation is therefore left undisturbed . 9.
The appeal is disposed of accordingly.
In the circumstances of the case, there will be no order as to costs.
N.P.V. Appeal disposed of.
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% The assessee contended in the gift tax assessment proceedings that the 480 shares in the English Company acquired as gift were not quoted in the stock exchange, that their value be determined on the average break up value indicated by the balance sheets of the Company as on 31.3.1964 and 31.3.1965, and that in view of the decision of the General Body of the Company dated 4.10.1961 to increase its share capital by issue of additional shares the value of the shares constituting the subject matter of the gifts which were transferred "ex right" would stand depreciated.
The Gift Tax officer valued the shares on the basis of the breakup value yielded by and deducible from the balance sheet as on 31.3.1964.
The Appellate Assistant Commissioner dismissed the assessee 's appeal.
In the further appeal before the Income tax Appellate Tribunal, the Tribunal, relying on the ratio laid down in the English Case, Lynall and another, vs Inland Revenue Commissioner, valued the shares at Rs.450 each, said to represent the break up value on the basis of the balance sheet of 31.3.1963, holding that it could not take into consideration any other document except the published information, which was the aforesaid balance sheet.
The Tribunal stated a case and referred the matter to the High Court, for its opinion.
The High Court held that since the only information which was available on the date of the gifts was in the form of the balance sheet as of March 31, 1963, the Tribunal was right in taking the same into consideration, for the purpose of arriving at the value of the shares by the 'break up ' method.
342 In the appeal to this Court it was contended on behalf of the Revenue that the principle of valuation relied upon by the High Court was erroneous, and that the case was covered by the decisions of this Court in Commissioner of Wealth Tax, Assam vs Mahadeo Jalan & Ors., and Commissioner of Gift Tax, Bombay vs Smt.
Kusumben .
Mahadevia, On behalf of the assessee it was urged that in view of the consensus between the parties as to the basis of valuation, it was not now open to the Revenue to urge the application of an altogether different principle.
Disposing of the appeal, ^ HELD:1.
The correct principle of valuation applicable to a given case is a question of law.
The parties can agree upon a principle permissible and recognised by law.
If two or more alternative principles arc equally valid and available it might be permissible for the parties to agree upon one of the alternative modes of valuation in preference to another.
[346G H] In the instant case, the Revenue cannot be precluded from urging the correct legal position.
[347A] 2.
When the shares in a public limited company are not quoted on the stock exchange.
Or are in a private limited company the proper method of valuation to be adopted would be the profit earning method.[346B C] Commissioner of Gift Tax, Bombay vs Smt.
Kusumben D. Mahadevia, , relied upon.
Commissioner of Wealth Tax, Assam vs Mahadeo Jalan .
& Ors.
, and, Williams J in Mc.
Cathie vs Federal Commissioner of Taxation, ; , referred to.
In the instant case, the view of the High Court as to the principle of valuation in determining the value of the kinds of shares concerned cannot be held to be correct.
As a logical consequence, the Tribunal would have to go through, over again, the exercise of determination of the value of the shares adopting the correct principle.
But, having regard to the fact that the matter is already two and a half decades old, and that the magnitude of the mechanism for the re fixation of the value of the gifts by adopting the somewhat intricate process inherent in the 343 "profit method" of valuation, and the difference in the quantum of tax that might result in, do not bear a reasonable or senible proportion, the valuation is left undisturbed.[347A D]
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5571.txt
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Appeal No. 257 of 1964.
Appeal by special leave from the judgment and order dated February 19, 1963 of the Government of India, Ministry of Mines and Fuel, New Delhi on an application for review under rule 54 of the Mineral Concession Rules 1960.
section N. Andley, Rameshwar Nath, P. L. Vohra and Mahinder Narain, for the appellant.
C. K. Daphtary, Attorney General, R. Ganapathy lyer and B. R. G. K. Achar, for respondent No. 1.
R. N. Sachthey, for respondent No. 2.
The Judgment of the Court was delivered by Hidayatullah, J.
The appellant Messrs. Nandram Hunatram of Calcutta, a firm consisting of four partners including one Kishan Lal Aggarwal, held a mining lease for coal in respect of Handidhua Colliery for a period of 30 years commencing on April 6, 1959.
Under Part VII of the lease, which contained the covenants of the lessee, the firm had undertaken to commence mining operations within one year from the date of the execution of the lease and then to continue the work of searching and winning minerals without voluntary intermission in a skillful and workman like manner.
The firm had appointed one M. L. Goel as the Manager and Kishan Lal Aggarwal as the occupier of the colliery.
It appears (and in fact it is not denied) that the partners fell out among themselves and as none of them was willing to spend money on the colliery, work deteriorated and came to a standstill in May 1962.
Goel reported to the State Government that the wages of the labourers had not been paid for weeks, that work had stopped at the colliery and that even the essential services were not being maintained owing to non payment of wages.
He wrote to the firm and Government early in the first week of May, bringing to their notice that the colliery was in danger of being flooded if the essential services stopped working.
On May 9, 1962 the essential services stopped working as their wages had not been paid for several weeks.
The colliery began to get flooded when the pumps stopped and it was apprehended that within the next few hours the pumps would be drowned and the colliery lost.
Government, however, stepped in and made a promise to the essential workmen that their wages would be paid and this saved the colliery.
On May 14, the Chief Inspector of Mines was informed by Kishan Lal Aggarwal that he was restrained by the other 106 Partners of the firm from making payment for running expenses of the colliery and that he was not in a position to perform his duties as an occupier.
He accordingly resigned his office.
Goel also resigned and on May 16, 1962 the Sub divisional Officer, Talchar informed Government that the situation had become very alarming and that some action was absolutely necessary.
Government thereupon gave a notice on May 19, 1962 asking the firm to remedy the defect within sixty days of the receipt of the notice failing which Government threatened to take over the colliery from the firm.
As the firm did nothing to remove the defects and did not request for extension of time, Government took over the colliery and terminated the lease.
The firm thereupon filed an application for revision before the Central Government under Rule 54 of the Mineral Concession Rules 1960.
The Central Government asked for the comments of the State Government on the application and invited the firm to make its own comments upon the reply of the State Government.
Taking the entire matter into consideration the Central Government by order, February 19, 1963, rejected the application for revision.
The present appeal is against the order of the Central Government by special leave of this Court.
It was admitted in the application for revision and it is not denied before us that the partners were quarrelling among themselves and the work at the colliery had therefore stopped.
It is admitted that the wages of the labourers were not paid for about five weeks before Government sent its notice on May 19, 1,962.
It is further admitted that the essential services had also stopped working and that but for the timely action of the Government, the colliery would have been flooded in a matter of hours and probably rendered unworkable till dewatered.
With this background in mind we have to consider the objections of the firm to the order of the Central Government in the first instance and of the State Government in the final analysis.
Clause (3) of Part VII of the lease is one of the covenants by the lessee and under it the lessee undertook to continue work, without voluntary intermission, in a skilful and workman like manner.
Under cls.
(i) to (x) of Rule 41 of the Mineral Concession Rules, 1949 and under Rule 27(5) of the Mineral Concession Rules, 1960 power is conferred on the State Government to require the lessee by notice to remove a breach within 60 days of the receipt of notice and in default to determine the lease and forfeit the whole or part of the security in deposit.
Under Rule 27(1)(f) the lessee is also required to conduct operations in a proper, skilful and workmanlike manner.
It is abvious that there was a breach by the lessee of the covenants and the Mineral Concession Rules when the firm stopped working the colliery.
Even if the firm did not order the stoppage of the work at the colliery it is clear from the complaints 107 of Goel and Kishan Lal Aggarwal that no payment was being made to the labourers and they stopped work.
On record there are many telegrams and letters sent by the Workers ' Association to Government complaining of the failure of the firm to pay their wages for weeks.
It is thus clear that action was absolutely necessary to save the colliery from being ruined.
It is contended, however, that the wages were paid in full on the 17th of July but that obviously cannot do away with voluntary intermission which had already taken place for a few weeks.
The firm in its representation to the Central Government said that it had plans to raise as much as 240,000 tons of coal per year but their performance shows that in April, 1962 they had raised less than 2,000 tons and nothing in May, June and July.
In these circumstances, there is no merit whatever in the submission of the firm that the action by the State Government was arbitrary and high handed.
It is plain that the firm did not fulfil its obligations under the lease and, whatever the reason, it was guilty of voluntary intermission in the working of the colliery and of endangering it by neglect.
This entitled the State Government to step in and determine the lease under the terms of the lease and the provisions of the Mineral Concession Rules.
It is, however, argued before us that the Central Government did not give a hearing to the firm and also did not give any reasons in its order dismissing the application for revision.
Reliance is placed upon two recent decisions of this Court which, following the earlier decision reported in Harinagar Sugar Mills Ltd. vs Shyam Sundar Jhunjhunwala(1) have laid down that Government should give reasons when it performs quasi judicial functions such as hearin appeals and revisions.
The two cases are Madhya Pradesh Industries Ltd. vs Union of India and Ors.(2) and Aluminium Corporation of India Ltd. vs Union of India and Ors(3) In Harinagar Sugar Mills(1) the order was reversed on the ground that reasons for the decision should have appeared.
In the Aluminium case there was dispute as to how much scrap was remelted and Government gave its decision on a report received behind the back of the aggrieved party again without stating why a part of the assessee 's case was rejected.
In the Madhya Pradesh Industries case it was pointed out that an order affirming an earlier decision need not fail because it does not repeat the same reasons over again.
The Mineral Concession Rules make it incumbent on the Central Government to obtain the comments of the State Government upon the application for revision and cast a duty on the Central Government to afford an opportunity to the applicant to make representations in respect of the comments of the State Government.
This procedure was correctly followed and the Central Government thus had a detailed discussion of the pros and cons of the case before it.
The facts in the case were quite clear and spoke (1) ; , (2) ; (3) C.A. No.635 of 1964 decided on September 23,1965.
108 for themselves.
The belated attempt to pay the back wages of the workmen did not undo the voluntary intermission for a significantly long period and did not wipe off the dereliction on the part of the firm by which the existence of the colliery was gravely endangered.
The documents on the record quite clearly establish that the colliery was being flooded as the essential services had stopped functioning and but for the timely intervention of the State Government the colliery would have been lost.
In these circumstances, it is quite clear that the action of the State Government was not only right but proper and this is hardly a case in which any action other than rejecting the application for revision was called for and a detailed order was really not required because after all the Central Government was merely approving of the action taken in the case by the State Government, which stood completely vindicated.
The order of the Central Government is clearly sustainable on the ma terial and it is not said that anything has been withheld from us.
The action of the State Government far from being arbitrary or capricious was perhaps the only one to take and all that the Central Government has done is to approve of it.
The appeal fails and is dismissed with costs.
Appeal dismissed.
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The appellant firm held mining lease of a colliery on the condition to continue the work, without voluntary intermission, in a skillful and workman like manner.
The partners fell out amongst, themselves, the work of the colliery stopped, wages of the labourers were not paid, the essential services stopped working, and the colliery began to get flooded.
The State Government stepped in and made a promise to the essential workmen that their wages would be paid and this saved the colliery.
The State Government gave a notice asking the firm to remedy the defect within sixty days failing which it would take over the colliery.
As the firm did nothing to remove the defects and did not request for extension of time, the State Government took over the colliery and terminated the lease.
The firm filed a revision before the Central Government.
The Central Govern ment asked for the comments of the State Government and invited the firm to make its own comment upon the reply of the State Government.
Taking the entire matter into consideration, the Central Government rejected the revision.
In appeal to this Court, the firm contended that the action by the State Government was arbitrary and highhanded and that the Central Government did not give a hearing to the firm and also did not give any reasons in its order dismissing the revision.
HELD:The action of the State Government far from being arbi trary or capricious was not only right but proper.
This$ was hardly a case in which any act ion other than rejecting the application for revision was called for and a detailed order was really not required because after all the Central Government was merely approving the action taken in the case by the State Government, which stood completely vindicated.
[108 B C] The Mineral Concession Rules make it incumbent on the Central Government to obtain the comments of the State Government upon the application for revision and cast a duty on the Central Government to afford an opportunity to the applicant to make representations in respect of the comments of the State Government.
This procedure was correctly followed and the Central Government thus had a detailed discussion of the pros and cons of the case before it.
[107 G].
Harinagar Sugar Mills Ltd. vs Shyam Sundar Jhunjhunwala, [ ; , Madhya Pradesh Industries Ltd. vs Union of India.
[1966] J.S.C.R. 466 and Aluminium Corporation of India Ltd. vs Union of India and Ors., C.A. No. 635/64, dated 22 1965] referred to.
105 The firm did not fulfil its obligations under the lease and, whatever the reason, it was guilty of voluntary intermission in the working of the colliery and of endangering it by neglect.
This entitled the State Government to step in and determine the lease under the terms of the lease and the provisions of the Mineral Concession Rules.
[107 C D].
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2094.txt
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ivil Appeal No. 13 of 1958.
Appeal by special leave from the judgment and order dated June 29, 1954, of the former Nagpur High Court in Misc.
Civil Case No. 219 of 1952.
R. Ganapathy Iyer and D. Gupta, for the appellant.
M. C. Setalvad, Attorney General for India, K. G. Chondke, J. B. Dadachanji and K. K. Raizada, for the respondents.
I. N. Shroff, for the Intervener (State of Madhya Pradesh).
April 21.
The Judgment of the Court was delivered by DAS, C. J.
This is an appeal by special leave, against the order of the High Court of Judicature at Nagpur dated June 29, 1954, answering against the 704 appellant certain questions referred to it by the Board of Revenue under section 23(1) of the Central Provinces & Berar Sales Tax Act, 1947 (hereinafter referred to as "the Act").
The reference arose out of an order of assessment made on the respondent for ' payment of sales tax for the period June 1, 1947, to November 12, 1947, on a taxable turnover of Rs. 30,067 9 0.
The facts leading up to the present appeal may shortly be stated as follows.
The respondent deals in matchwood called " sawar " (Bombay Malabaricum).
His place of business is situate at Chanda in the erstwhile Central Provinces.
In January 1948 the respondent entered into an agreement with the Western India Match Co. Ltd., which is popularly known and will hereinafter be referred to as " WIMCO " for the supply of a minimum quantity of 2,500 tons of sawar logs during the season 1947 48.
This agreement is evidenced by WIMCO 's letter dated January 7, 1948, accepting and confirming it.
Unfortunately that letter, although a part of the record, has not been printed in the Paper Book.
It is common ground, however, that the agreement of sale was subject to the conditions appearing in a formal contract in writing dated March 2, 1945, which is said to have been renewed from year to year.
It appears that prior to the execution of the last mentioned contract there was another contract between the respondent and WIMCO which was dated October 18, 1940.
Evidently that contract was superseded by the later one of March 2, 1945, the terms and conditions whereof were renewed year after year.
It is, therefore, not easily intelligible why both the contracts were filed before the Sales Tax authorities and actually mentioned in the first question that was referred to the Hight Court.
Both the contracts have been printed in the Paper Book and reference has been made to some of the terms of both of them in the course of the arguments before us.
The reason for referring to the terms of the ,earlier contract is presumably to emphasise the variation in the language used in the corresponding provisions of the later contract as indicative of a definite change in the intention of the parties.
It is, therefore, 705 as well that the relevant clauses of both the contracts should be set out here for properly following the arguments advanced on both sides.
Reference may first be made to the earlier contract dated October 18, 1940.
Clause I sets out the specifications, that is to say, the dimensions and quality of the logs to be delivered under the contract which need not be reproduced here.
The other material clauses, omitting the unnecessary portions thereof, may now be set out: " 2.
The Contractor agrees that any logs supplied by him which do not conform with the specification herein shall not be accepted or paid for by the company and he the contractor undertakes to remove all logs so rejected at his own expense from the Company 's premises within fifteen days after date of notice to him or his representative from the Company so to remove such logs.
Should the Contractor fail to i.e. move such logs from the Company 's premises within the period stipulated it is hereby mutually agreed that such failure shall be construed as being the Contractor 's consent to relinquish all claims whatsoever to such rejected logs, and the Contractor agrees to such logs thereupon becoming the property of the company and that the contractor shall have no claim whatsoever upon the company for payment either in respect of the supply by him of such rejected logs or arising out of the disposal by the Company of such logs." " 3.
The said goods shall be delivered at Ambernath in the quantities and at the times hereinafter mentioned, i.e., " 4.
The goods to be supplied under this Contract shall be despatched by the Contractor from Railway Stations on the B.N.R. and G.I.P.R. Sections between the following Stations : " 5.
Measurements: The goods under this contract shall be measured under the supervision of the 89 706 Company 's Factory Manager at Ambernath on arrival of the goods at the Factory in accordance with the following stipulations: The Contractor agrees to. accept the decision of the Company 's Factory Manager at Ambernath as final and binding.
" The prices of the logs to be supplied are set out in cl. 6 of the contract as "F.O.R. Ambernath ".
We now pass on to the later contract of March 2, 1945.
Clause 1 sets out the specifications of the logs to be supplied under the contract in exactly the same language as in el.
I of the earlier contract.
The other material clauses, again omitting the unnecessary portions, are as follows: " 2.
The contractor agrees that any logs supplied by him which, on arrival at Ambernath, are found in the opinion of the Company 's Factory Manager not to conform with the specifications herein shall not be accepted or paid for by the Company, notwithstanding the fact that such logs may have been accepted by the Company 's representatives before being railed to Ambernath.
" It may be mentioned here that Ambernath is a place situate in the erstwhile province of Bombay and outside the Central Provinces.
The goods to be supplied under this contract shall be despatched by the Contractor from railway stations on the B. N. Railway, N. section Railway and G. 1.
P. Railway sections between the following stations.
It is unnecessary to set out the names of the stations which, it may, however, be stated, are all in the erstwhile Central Provinces.
Clause 6 provides: "6.
Measurements: The goods under this contract shall be measured under the supervision of the Company 's representative in accordance with the following stipulations: 707 The contractor agrees to accept the decision of the Company 's Factory Manager at Ambernath as final and binding.
" The prices of the logs to be supplied under the contract are specified as " F.O.R. Ambernath " in cl. 7 which concludes with the following sentence: " The money so due and payable shall be paid by the Company to the Contractor when the measurements of the goods have been completed under the supervision of the Company 's representative." Pursuant to the agreement between the respondent and WIMCO, the former loaded diverse quantities of Sawar logs on railway wagons and despatched the same by railway from Chanda or other railway stations in the Central Provinces to Ambernath in the erstwhile province of Bombay and outside the Central Provinces.
It is not disputed that on many occasions the representative of WIMCO was present at the railway station when the logs were sorted out and loaded into the wagons.
The statement of the case submitted along with the reference under section 23(1) of the Act is silent on the point as to whether the railway receipts were made out with WIMCO as the consignee; but it is abundantly clear from the order of the Assistant Commissioner, Sales Tax, which is part of the record and it has not been disputed before us that " the railway receipt which is a document of title according to section 2(4) of the Indian is taken in the name of the consignee.
" The course of dealings between the parties also appears to be that, on arrival of the logs at Ambernath, the consignee buyer WIMCO, paid the railway freight and the logs were inspected and measured by WIMCO 's Factory Manager and the prices, calculated at the agreed rates, were paid to the respondent 's agent at Bombay.
There is no doubt that the price of the logs supplied by the respondent to WIMCO under the agreement and accepted by the latter during the period in question amounted to Rs. 30,067 9 0.
The question for our 708 decision is whether the respondent is liable to pay any sales tax under the Act.
It will be convenient at this stage to refer to the relevant provisions of law applicable to the facts of this case.
Section 4 of that Act is the charging section.
According to this section safes tax is payable " on all sales effected after the commencement of the Act." " Sale " is defined by section 2(g) of the Act.
At the relevant period, that section, omitting Explanation 1, which is not material for our purpose, ran as follows: " 'Sale ' with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods made in course of the execution of a contract, but does not include a mortgage, hypothecation, charge or pledge.
. . . . . . . . . . Explanation II: Notwithstanding anything to the contrary in the Indian , the sale of any goods which are actually in the Central Provinces and Berar at the time when the contract of sale as defined in that Act in respect thereof is made, shall, wherever the said contract of sale is made, be deemed for the purpose of this Act to have taken place in the Central Provinces and Berar.
" The Act being a piece of legislation enacted by the legislature of the erstwhile Province of Central Provinces and Berar, its operation is limited to the territories of that province.
Therefore, the question arises: Does the sum of Rs. 30,067 9 0 represent the prices of logs sold by the respondent within the Central Provinces ? Sale being the transfer of property in the goods agreed to be sold, we have to enquire if the property in the goods which fetched the sale proceeds on which the sales tax is sought to be levied was transferred in the Central Provinces as contemplated in the main definition or if those goods were actually in the Central Provinces at the time when the contract for sale as defined in the in respect thereof was made as required by Explanation II set 709 out above.
This takes us to the .
Section 4 of the is expressed in the words following: "4.
Sale and agreement to sell: (I) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.
There may be a contract of sale between one part owner and another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.
(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.
" There can be no doubt that the agreement pursuant to which the logs were supplied by the respondent to WIMCO was an agreement to sell within the meaning of the above section.
There is also no controversy between the parties that at the date when this agreement was entered into, the logs were unascertained goods.
The question is: When did that agreement to sell unascertained goods become a sale and where did such sale take place ? In other words, when and where did the property in those goods pass from the respondent to WIMCO ? The transfer of property in the goods as between the seller and buyer is dealt with in Ch.
III of the .
Section 18 of the runs thus : " 18.
Goods must be ascertained: Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.
" Passing over sections 19 to 22 which (except as to sub section
(3) of section 19) apparently apply to contracts for the sale of 710 specific or ascertained goods, we come to section 23 which provides : " 23.
Sale of unascertained goods and appropriation : (I) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer.
Such assent may be expressed or implied, and may be given either before or after the appropriation is made.
(2) Delivery to carrier: Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.
" Reference may next be made to section 33 and section 39(1).
Section 33 says: " 33.
Delivery : Delivery of goods sold may be made by doing anything which the parties agreed shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorised to hold them on his behalf" Section 39(1) runs as follows: " 39.
Delivery to carrier or wharfinger: (1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to wharfinger, for safe custody, is prima facie deemed to be delivery of the goods to the buyer.
" Keeping the provisions of the above quoted sections of the two Acts in view, we have to decide when and where the property in the logs passed from the respondent to WIMCO.
The Assistant Commissioner of Sales Tax assessed the respondent to a tax of Rs. 939 10 0 and imposed on the respondent a penalty of Rs. 100 under section 25 of 711 the Act for not having submitted its return in contravention of r. 19 of the Central Provinces and Berar Sales Tax Rules.
The Assistant Commissioner took the view that the loading of the logs into the wagons at railway stations within the Central Provinces and the taking out of the railway receipts in the name of the consignee, WIMCO, and the delivery of the same to WIMCO, had the effect of putting the latter in pos session of the goods as laid down in section 39(1) of the Indian and he accordingly held that the sale of the goods took place at Chanda and other railway stations in the Central Provinces and that the assessee was, consequently, liable to pay the sales tax under the Act.
The respondent preferred an appeal to the Sales Tax Commissioner who upheld the Assistant Commissioner 's order of assessment as well as of the penalty.
He laid greater emphasis on Explanation II to section 2(g) of the Act as over riding the provisions of the Indian in respect of the transfer of property in the logs and held that as the ' logs were in the Central Provinces at the date when the contract for sale was made, the transfer in them must be deemed to have taken place there under that Explanation.
He also agreed with the Assistant Commissioner that the delivery of the logs to the railway company and the sending of the documents of title to WIMCO had, under section 39(1) of the , the effect of putting WIMCO in possession of the logs.
The respondent preferred what in form appeared to be a second appeal to the Board of Revenue.
As, however, there could be no second appeal under section 22(4) of the Act, the Board treated the memorandum of appeal as an application for revision under sub section
5 of section 22 of the Act read with r. 57.
Both the members of the, Board of Revenue came to the same conclusion, namely, that the sales were liable to assessment under the Act, but the reasonings adopted by them were somewhat different.
Shri Shrivastava, a member of the Board of Revenue, took the view that as soon as logs answering the description agreed upon were brought to the railhead at Chanda and sorted out and 712 loaded in the wagons in the presence of WIMCO 's re presentatives, there was an implied contract of sale of specific and ascertained goods, as evidenced by the conduct of parties and the property in each consignment passed immediately from the respondent to WIMCO at the railway station in the Central Provinces where such implied contracts were made.
The Chairman of the Board of Revenue, however, took the view that the contract of sale was made outside the Central Provinces, namely, in Bombay and that, under the , the property in the logs passed to WIMCO in Ambernath outside the province but that as the logs were in the Central Provinces, either in the form of logs or in the form immediately preceding, namely, trees standing on the land which had been impliedly agreed to be severed from the land before actual sale, Explanation II to section 2(g) of the Act applied and the sale must, accordingly, be deemed to have taken place within the Central Provinces and, must, therefore, be liable to sales tax under the Act.
The Board rejected the application but remitted the penalty.
On the application of the respondent under section 23(1) of the Act, the Board of Revenue submitted to the High Court a statement of case raising the following questions: " (1) Did the agreements of the kind on record the one dated 18 10 40 and the other dated 2 3 45constitute contracts of sale either express or implied in respect of sawar wood supplied by the assessee to WIMCO? (2) If the answer to question No. I be in the affirmative, did the contracts relate to specific or ascertained goods or to unascertained or future goods? (3) Did the property in the goods pass to WIMCO by consignment simpliciter at different railway stations within this province, or did it pass at Ambernath when the goods were approved as provided in the contract ? (4) Was reliance on the definition of I goods ' contained in section 2(7) of the in order in applying Explanation II to section 2(g) of the Sales Tax 713 Act in cases, where the goods sold were in the form of trees standing on the land in this province at the time of the contract of sale?" In its judgment dated June 29, 1954, the High Court took the view that the sales in question did not take place in the Central Provinces and Berar and consequently were not " sales " within the meaning of the Act and, therefore, not liable to tax.
It gave the following answers to the above questions: " Our answers to the questions referred for decision are : (1) The agreement in question was an express agreement to sell sawar logs to WIMCO.
There was neither an express nor an implied contract each time goods were railed.
(2) The contract was not for delivery of specific goods but of unascertained or future goods by description.
(3) The property in the goods did not pass to the buyer by the delivery to the railway for carriage.
It passed at Ambernath where the goods were appropriated by the buyer to the contract with the assent of the seller.
(4) The word ' goods ' in the definition of I sale in the Sales Tax Act must be interpreted according to its definition in section 2(d) of the Act and not according to the definition in section 2(7) of the .
The standing sawar trees are not goods within the meaning of the former Act.
" The effect of the answers being to nullify the assessment order, the Commissioner of Sales Tax has come up on appeal before us after obtaining special leave of this Court.
The answers to the first two questions have not been questioned before us.
The main arguments have centred round the answers to questions 3 and 4.
The answer to question 3 turned on the construction placed by the High Court on section 23 of the .
After quoting section 23, the High Court observed as follows: " After sorting the logs with the assent of the buyer 's representative, the applicant appropriated the 90 714 logs to the contract by railing them to the buyer 's destination at Ambernath.
The statement of the case is silent on the point whether the railway receipts were made out with the Company as the consignee.
The assent of the representative was provisional and was not binding on the Company.
Under the agreement it did not agree to unconditionally appropriate the logs to the contract as soon as they were delivered to the railway with the assent of its representative for carriage to Ambernath.
It had expressly reserved its right to reject the goods on examination at Ambernath.
The agreement therefore was that the buyer should, with the assent of the seller, appropriate the goods to the contract at Ambernath.
The appropriation under section 23 was not complete till the goods reached Ambernath and were appropriated by the Company to the contract.
The appropriation of the goods by the applicant at the railheads was conditional on their acceptance by the buyer at Ambernath.
There is nothing in the statement of the case to show that the logs were not so appropriated.
Therefore, the property in the logs passed to the buyer at Amber nath." The learned counsel for the department appearing in support of this appeal contends that property in the logs passed from the respondents to WIMCO under section 23 when sawar logs were brought to the railway station and loaded in the wagon and the railway receipts taken in the name of WIMCO were forwarded to the latter.
There was an unconditional appropriation of the goods to the contract by the respondent.
There was, according to learned counsel, assent on the part of WIMCO to this appropriation in two ways, namely, (a) expressly given by its representative who was present at the railway station, and (b) impliedly given by WIMCO by having agreed in advance that the goods should be despatched by rail from the stations mentioned in cl. 4 of the agreement, all of which were situate in the Central Provinces.
There is no doubt and indeed it has been categorically conceded by learned counsel for the department that the contract was for sale of unascertained goods and consequently the property in them could 715 not, under section 18, pass unless and until the goods were ascertained.
His contention is that logs of the contract quality and description having been unconditionally appropriated by the respondent to the contract without reserving to itself any right of disposal and WIMCO having expressly through its representative or impliedly by the very terms of the contract assented to such appropriation, property in them passed under section 23 from the respondent to WIMCO at the railway stations within the Central Provinces as soon as the sawar logs were loaded on the wagons and the railway receipts were taken out in the name of WIMCO.
It is said that so far as the respondent is concerned it unconditionally appropriated the logs to the contract.
Seeing that they were actually accepted by WIMCO on their arrival at Ambernath it is quite clear that the logs were of the contract quality and description.
The only question, according to learned counsel for the department therefore, is whether there was assent of WIMCO to such appropriation.
It has been found as a fact that WIMCO 's representative was not present on all occasions when sawar logs used to be loaded on the railway wagons.
There is no evidence that he was actually present when these particular sawar logs, with the sale proceeds of which we are concerned, were put into the wagons.
Nor is there an iota of evidence that the representative of WIMCO had any authority to.
bind WIMCO by any assent.
In view of these difficulties, learned counsel for the department did not press the case of express assent of the representative of WIMCO and concentrated on the case of implied assent.
It is quite clear from the language of section 23 itself, that the appropriation may be by the seller with the assent of the buyer or by the buyer with the assent of the seller, that assent to representation may be express or implied and that it may be given after the appropriation or in advance before such appropriation.
Learned counsel for the department lays strong emphasis on the provision of cl. 4 in the contract that the sawar logs should be despatched by rail from certain stations within the Central Provinces and contends that delivery by the seller of sawar logs of the contract quality and 716 description to the railways in terms of the contract without the reservation of any right of disposal has the effect of passing the property therein to WIMCO at the railway stations in the Central Provinces under section 23 as well as of constituting delivery of them at the railway stations under sections 33 and 39(1).
The argument is prima facie sound unless there be some other provision in the contract to negative this conclusion, e. g., that the logs must be carried to Ambernath and delivered there (See The Badische Anilin and Soda Fabrik vs The Basle Chemical Works, Bindschedler (1)).
Learned counsel for the department does not urge that if the matter had to be decided on the terms of the earlier contract dated October 18, 1940, he could properly say that there was nothing in the contract negativing the idea of the passing of property in the logs within the Central Provinces.
The cumulative effect of the provisions of el. 2 that the property in the rejected logs would ' pass to WIMCO upon the failure of the respondent to remove the same after rejection, of el. 3 that the goods shall be delivered at Ambernath in the presence of WIMCO 's Factory Manager and of el. 6 providing that the prices will be " F.O.R. Ambernath " clearly militate against the theory of passing of property immediately on the goods being loaded into the wagons.
While not contesting this, learned counsel for the department urges that there is no such contrary intention indicated in the later contract of March 2, 1945, which really governs the case.
We are unable to accept this distinction as of any substance.
It is true that in this later contract cl. 2 is differently worded and there is no express provision that the goods should be delivered at Ambernath.
There are, nevertheless, several other provisions in the later contract indicating that property in the logs loaded in the wagon will not pass to WIMCO until after the goods arrive at Ambernath and are inspected, measured and accepted by WIMCO 's Factory Manager.
Clause 2 of the later contract quite clearly reserves the right of WIMCO to examine the goods on arrival and to reject the same if they are found, in the opinion of its Factory Manager, not to (1) , 717 conform with the specifications.
This reservation, which is made notwithstanding the fact that the logs may have been accepted by its representative before they were railed to Ambernath, clearly indicates that the so called acceptance by the representative was not final but was entirely tentative and subject to approval of the logs by WIMCO 's Factory Manager at Ambernath after their arrival.
This circumstance certainly militates against the property in them having already 'passed to WIMCO at the railway stations in the Central Provinces.
The provisions of cl. 6 that the goods shall be measured under the supervision of WIMCO 's representative, the decision of its Factory Manager at Ambernath being binding on the respondent and of el. 7 that the prices shall be " F.O.R. Ambernath " and shall be payable after such measurement of the logs by WIMCO 's representative further reinforce the conclusion that the intention of the parties was that property in the goods shall not pass until the logs arrive at Ambernath and are there inspected, measured and accepted by WIMCO.
In our judgment the prima facie case of what might have been the appropriation of the logs by the respondent by loading on the wagons logs of the contract quality and description with the assent of WIMCO given in .advance by the terms of el. 4 is effectively displaced by the provisions of cls. 2, 6 and 7 of the later contract which clearly indicate a contrary intention.
On a proper construction of the contract as a whole the intention of the parties clearly was that the respondent would send the logs by rail from the different stations in the Central Provinces to Ambernath where WIMCO 's Factory Manager would inspect, measure and accept the same if in his opinion they were of the description and quality agreed upon.
In other words the respondent sent the logs and left it to WIMCO to appropriate to the contract such of them as they accepted as of contract quality and description.
The respondent, therefore, gave in advance its assent to WIMCO 's appropriation of the goods at Ambernath.
Therefore, the decision of the High Court cannot be assailed but must be accepted as well founded in fact and in law.
Learned counsel for the department then falls back 718 upon the Argument founded on Explanation II to section 2(g) and 'argues, somewhat halfheartedly, that notwithstanding the provisions of the regarding the passing of property in the goods the sale under consideration must be deemed, in the light of that Explanation, to have taken place within the Central Provinces.
The question of the constitutional validity of that Explanation was not raised in the High Court and indeed, in view of the decision of this Court in Poppatlal Shah vs State of Madras (1) and other ' cases, cannot now be raised and we must proceed on the footing that Explanation 11 did not transgress the legislative competency of the Legislature which enacted the same.
It will be noticed that Explanation II can apply only if the goods " in respect of " which the contract of sale is entered into are, at the date of such contract, actually in the Central Provinces.
Learned counsel for the department urges that the logs delivered must have been in existence in the Central Provinces either in the shape of ';logs or in the shape of standing timber.
There is no evidence that at the date when the agreement for sale was made, the particular logs delivered thereunder were in the Central Provinces in the shape of logs at all.
Learned counsel says that, at any rate, they must have been in existence there in the shape of standing timber.
Apart from anything else,, the agreement here was riot " in respect of " any standing timber and there was no provision in the agreement as between the respondent and WIMCO for severance of the standing timber before sale under that agreement.
In order to attract Explanation II the goods, in respect of which the contract of sale is made, must, at the date of the contract be in existence in the Central Provinces, that is to say, that the goods must at the date of the contract be there in the form in which they are agreed to be sold.
There is not an iota of evidence on that point.
In our judgment, there is no force in this alternative argument.
The result, therefore, is that this appeal is dismissed with costs.
Appeal dismissed.
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The respondent company was a dealer in matchwood called sawar " and his place of business was situate in Chanda in the erstwhile Central Provinces.
Pursuant to an agreement between the respondent and a match factory, the former loaded diverse quantities of " sawar " logs on railway wagons and despatched the same by rail from Chanda and other railway stations in the Central Provinces to Ambernath, a town in the erstwhile Province of Bombay.
Under cl. 4 Of the agreement the goods to be supplied under the contract shall be despatched by the contractor from certain railway stations within the Central Provinces, while cl. 2 reserved the right of the consignee to examine the goods on arrival at.
Ambernath and to reject the same if they, were found, in the opinion of the factory manager, not to conform with the specifications.
Clause 6 provided that the goods shall be measured under the supervision of the factory 's repre sentative, the decision of the factory manager at Ambernath being binding on the contractor, and by cl. 7 the prices of the goods shall be " F. O.R. Ambernath ".
The course of dealings between the parties was that on arrival of the logs at Ambernath the logs were inspected and measured by the factory manager and the prices, calculated at the agreed rates, were paid to the respondent 's agent at Bombay.
The question was as to when and where the property in the logs passed from the respondent to the consignee and whether the respondent was liable to pay sales tax under the provisions of the Central Provinces and Berar Sales Tax Act, 1947.
At the date when the agreement was entered into, the logs were unascertained goods.
There was also no evidence that at that date the particular logs delivered thereunder were in the Central Provinces in the shape of logs at all.
The sales tax department levied the tax on the respondent on the grounds, inter alia, that (1) the property in the logs passed from the respondent to the factory consignee under section 23 Of the Indian , when the logs were loaded in the wagons at railway stations within the Central Provinces and the railway 703 receipts taken in the name of the factory were forwarded to the latter, and that (2) in any case, as the logs were in the Central Provinces at the date when the contract for sale was made, the transfer in them must be deemed to have taken place there under Explanation II to section 2(g) Of the Central Provinces and Berar Sales Tax Act, 1947.
Held : (1) that on a proper construction of the contract as a whole the intention of the parties was that the respondent would send the logs by rail from the different stations in the Central Provinces to Ambernath where the factory manager would inspect, measure and accept the same if in his opinion they were of the description and quality agreed upon.
Conse quently, as the respondent sent the logs and left it to the factory to appropriate to the contract such of them as they accepted as of contract quality and description, the property in the logs did not pass to the buyer by the mere delivery to the railway for carriage but passed only at Ambernath when the logs were appropriated by the factory with the assent of the seller within the meaning of section 23 of the Indian .
(2) that Explanation II to section 2(g) of the Central Provinces because under the Explanation the goods, in respect of which the contract of sale is made, must, at the date of the contract be in existence in the Central Provinces, that is to say, that the goods must at the date of the contract be there in the form in which they are agreed to be sold and there was no evidence, in the present case, for this.
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720.txt
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vil Appeals Nos.
4885 91 of 1989.
From the Judgment and Order dated 21.9.
1989 & 6.10.1989 of the Punjab & Haryana High Court in C.W.P. No. 11218/89 and 12519, 12520, 12521, 12593, 12868 & 12463 of 1989.
P.H. Parekh, Manoj Swarup and J.P. Pathak for the Appellant.
Krishan Kumar and Mehta Dave & Co. for the Respondents.
The Judgment of the Court was delivered by SAWANT, J.
These appeals are directed against two Orders of the Punjab & Haryana High Court by which the High Court has directed the appellant Institute to admit respondent students 1 to 8B to its B .E. course irrespective of their merits.
The relevant admitted facts are that on May 24 and 25, 1989, respondent No. 9 Punjab University held a Com bined Entrance Test (C.E.T.) for admission to B.E. course (Session 1989 90) conducted by 4 different institutes in cluding the appellant Institute.
On June 26, 1989, the University declared the merit list of students who appeared in C.E.T. June 30, 1989 was the last date fixed for submit ting applications by students to individual institutes.
The students were given choice of the institutions and they were required to state their choice in order of preference.
The representatives from the 4 institutes met together at Chand igarh from 24th to 27th July 1989 to finalise the admissions tO the 4 institutes.
The meeting of the representatives of the 4 institutes was necessary to ensure that the students were given the institutes of their choice in the order of merit, subject, of course, to the students applying to the particular institutes and that the student did not get admission at more than one institute at a time.
The Commit tee of representatives interviewed the students and awarded them the institutes of their choice in the order of their respective merits.
Accordingly, the appellant Institute drew up its merit list of candidates.
Interviews were held in the respective institutes including the appellant Institute for filling up the reserved seats other than those 397 reserved for Scheduled Castes and Scheduled Tribes and also for filling up seats in general category which fell vacant subsequentIy as a result of the students leaving the appel lant Institute.
On August 14, 1989, a second round of inter views was held in all the institutes including the appel lant Institute for filling seats which fell vacant as a result of the students leaving the appellant Institute subsequently.
Incidentally, this was also the last date of admission to B.E. course as was notified in the prospectus of the appellant Institute.
However, the last date was extended to 25th August, 1989 by an advertisement in the newspaper, namely, Tribune published on August 19, 1989 wherein it was clearly mentioned that the admission to the course will be closed on August 25, 1989.
The advertisement was repeated in another newspaper, namely, the Times of India on August 20, 1989.
The appellantInstitute closed the admissions at 5.00 p.m. on August 25, 1989.
On this day, the position of the appellant Institute was that the last stu dent who was admitted to the B .E.
Course was at serial number 1127 in the merit list prepared by the University as per the results of the C.E.T 3.
On August 30, 1989, respondents 1 to 4 filed a Writ Petition No. 112 18/89 before the Punjab & Haryana High Court for a direction to the appellant Institute to extend its last date of admission and to admit them to the B.E. course in the appellant Institute alleging that six seats were lying vacant in the Institute.
In the meanwhile, as usual, the first test of the B.E. course was held by the appellant Institute after six weeks of the commencement of the course.
On September 19, 1989, the appellant Institute filed its written statement to the writ petition objecting to the maintainability of the petition against the appellant Institute as it was not a State within the meaning of Article 12 of the Constitution of India.
It was also pointed out in the written statement that since the past experience showed that some students left the Institute as soon as they got admission in the other institutes, the appellant Institute had admitted 10 additional students to the B.E. course.
The total seats available in the B.E. course in the appellant Institute were 180 and students at numbers 181 190 were admitted to meet this contingency.
It was also pointed out in the written statement that the last date of admission to the course was fixed by the appellant Institute taking into account the said past experience as well as to put a seal of finality on the process of admission which would otherwise continue indefinitely.
On September 20, 1989, the appellant Institute also filed a short affidavit in the writ petition stating therein that the admissions to the B.E. course had closed on 25th August, 1989 and no student had been 398 admitted thereafter.
It was also pointed out that regular classes had begun, and the first terminal examination had been held from 4th September, 1989 to 9th September, 1989 which carried weightage of about 30% marks.
Hence, the students admitted at the belated stage would not be able to cover up lecture attendance and no seat in excess of the total seats could be filled up.
On September 21, 1989, the High Court allowed the writ petition by proceeding on the assumption that more than half a dozen seats were lying vacant with the appellant Institute.
The High Court held that belated admissions were something that the students seeking such admissions would worry about rather than the appellant Institute.
The appel lant Institute was also directed to grant admissions to respondents 1 to 4 in the B.E. course forthwith.
As pointed out by the appellant Institute, on that day the factual position with regard to seats in the course was that out of 190 students who were granted admission, 12 students had left leaving a total strength of 178 students.
Since the last date for admission was August 25, 1989, 178 students had continued in the course with regular instructions and tests one of which was already held as stated earlier be tween 4th and 9th September, 1989, six weeks after the commencement of the course.
A further batch of Writ Petitions, namely, Writ Petitions Nos.
125 19, 12520, 1252 1, 12593, 12868, 12463 all of 1989 filed by respondents 5 to 8B respectively were allowed by the High Court on October 6, 1989 directing the appellant Institute to admit the respective respondents to the said course.
It also further appears that three other similar writ petitions filed by other students seeking admission to the course in the appellant Institute are pending before the High Court for preliminary hearing.
The appellant Institute further points out that the second test of the said course was scheduled to be held from 23rd to 28th October, 1989.
It is not disputed before us that whereas the last student admitted on merit in the appellant Institute was at serial number 1127 in the merit list prepared by the Univer sity as per the Combined Entrance Test, the respondent students were at the serial numbers in the said merit list, as follows: respondent No. 1 (1145), No. 2 (1147), No. 3 (116 1), No. 4 (1277), No. 5 (1259), No. 6 (1112), No. 7 (1266), No. 8 (1218), No. 8A (1189) and No. 8B (1245).
Thus it will be seen that except for respondent No. 6 who had not earlier applied for being admitted to the appellant Insti tute and had opted for some other Institute, all the re spondents had secured lower numbers in the merit list.
399 What is further, the students who were at a higher serial number of merit list were still waiting for admission to the appellant Institute, when the High Court directed the appel lant Institute to admit the respondent students.
What is more, even in their writ petitions before the High Court the respondent students had claimed no further relief than that they should be directed to be admitted to the appellantIn stitute according to their merit.
The relief claimed in Writ Petition No. 112 18/89 may be reproduced here by way of illustration: "this Hon 'ble Court may please to issue a Writ of Mandamus directing the respondents to extend the date of admission and to admit the petitioners in the B.E. course as per their merits;".
(emphasis supplied) The High Court further not only ignored the fact which was specifically pointed out in the appellant Institute 's affi davit in reply before it, that there were no seats available in the appellant Institute whose capacity was only 180 seats but also the fact that there were more meritorious students than the respondents as per the C.E.T. who could not secure admission and who were waiting to be admitted to the appel lant Institute.
The respondent students could get admission to the appellant Institute only if their comparative merits ordained it and not otherwise.
They could claim no merit over other meritorious students merely because they had approached the Court for securing admission.
There was further nothing wrong in the appellant Institute admitting 10 more students in the circumstances pointed out above.
The Institute has a capacity of only 180 students.
To meet the contingency of the students leaving it soon after admission they had admitted, as they do every year, 10 more students.
As it turned out, 12 of the students left leaving 178 students on the roll, with only 2 vacan cies.
The High Court could have directed only two students to be admitted and that too on merit.
Admittedly, there were more meritorious students than the respondents, waiting in queue.
The High Court thus travelled beyond its jurisdiction and not only directed more students than the Institute could absorb but also students who were less meritorious, to be admitted.
No reasons whatsoever have been given by the High Court for exercising its extraordinary writ jurisdiction so peremptorily which has resulted in injustice both to the appellantInstitute as well as to the students who stood higher in merit than almost all the respondent students except respondent No. 6.
We refrain from making any further comments on the impugned order.
400 8.
Since the respondent students stand already admitted, and the more meritorious students cannot now avail of the seats given to the respondents due to lapse of time, we do not propose to interfere with their pursuit of the course.
It is for this reason that we are dismissing the appeals.
In the circumstances, the appeals stand dismissed, but with no order as to costs.
G.N. Appeals dismissed.
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For admission to B.E. Course (1989 90 Session) in the appellant Institute and 3 other institutes, there was a Combined Entrance Test held by the Punjab University.
The results were declared, and students allotted to the respec tive institutes of their choice.
The appellantInstitute drew up merit list of candidates allotted to it and gave admis sions in that order.
To fill up the vacant seats as a result of some students leaving the Institute, the appellant Institute held inter views on 14.8.1989, which incidentally was the last date for admission to B.E. Course.
However, the last date was extend ed up to 25.5.1989.
When admission was closed on that day, the last student admitted was at section No. 1127 in the merit list prepared by the University.
Respondents 1 to 4 filed a writ petition before the High Court on 30.8.1989, alleging that six seats were vacant and the appellantInstitute be directed to admit them.
The High Court on 21.9.1989 allowed the writ petition on the assump tion that six seats were vacant, whereas only 2 seats were available, according to the appellantInstitute.
Respondents 5 to 8B also approached the High Court by way of writ petitions and the High Court directed the appel lant Institute to admit the six Respondents also in the B.E. Course.
Further, three other similar writ petitions were pending before the High Court.
395 Against the above said orders of the High Court, the appellantInstitute has preferred these appeals contending that the last candidate admitted was at section No. 1127 in the merit list and admittedly all the Respondents except Re spondent No. 6 were less meritorious, while candidates with higher merits were still waiting for admission.
It was contended that while there were only 2 vacant seats, the High Court has directed the appellant Institute to admit as many as ten candidates, that too long after the course started and the First Terminal Exams were over.
Dismissing the appeals, this Court, HELD: 1.1 The High Court not only ignored the fact which was specifically pointed out in the appellant Institute 's affidavit that there were no seats available in the appel lant Institute whose capacity was only 180 seats, but also the fact that there were more meritorious students than the Respondents as per the Combined Entrance Test, who could not secure admission and who were waiting to he admitted to the appellant Institute.
The Respondent students could get admission to the appellant Institute only if theft compara tive merits ordained it and not otherwise.
They could claim no merit over other meritorious students merely because they had approached the Court for securing admission.
In fact, in their writ petitions before the High Court, the respondent students had claimed no further relief than that they should be directed to be admitted according to their merit.
[399B E] 1.2 There was nothing wrong in the appellant Institute admitting 10 more students in B.E. Course.
The Institute has a capacity of only 180 students.
To meet the contingency of the students leaving it soon after admission the appellant Institute had admitted 10 more students as has been done every year.
As it turned out, 12 of the students left leav ing 178 students on the roll, with only 2 vacancies.
The High Court could have directed only two students to be admitted and that too on merit.
Admittedly, there were more meritorious students than the respondents, waiting in queue.
The High Court thus travelled beyond its jurisdiction and not only directed more students than the Institute could absorb but also students who were less meritorious to he admitted.
No reasons whatsoever have been given by the High Court for exercising its extraordinary writ jurisdiction so peremptorily which has resulted in injustice both to the appellant Institute as well as to the students who stood higher in merit than almost all the respondentstudents except Respondent No. 6.[399E H] 396 2.
Since, however, the respondent students stand already admitted, and the more meritorious students cannot now avail of the seats given to the respondents due to lapse of time, their pursuit of the course is not interfered with.
[400A]
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6419.txt
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Appeal No. 684 of 1968.
Y. section Dharmadhikari, Advocate General for the State of Madhya Pradesh and 1.
N. Shroff, for the appellants.
M. C. Setalvad, Rameshwar Nath and section K. Dholakia, for respondent No. 1.
The Judgment of the Court was delivered by Mitter, J.
This is an appeal from a judgment of the Madhya Pradesh High Court quashing the proceedings initiated on the complaint filed by the Divisional Forest Officer, Saugor in the Court of the Magistrate of the First Class Saugor for imposition of a penalty on the respondents.
The matter arises thus.
Chhotahhai Jethabhai Patel, a partnership firm of which the second respondent, Jhaverbhai Bhulabhai Patel is a partner, carried on business on a fairly large scale as manufacturers of bidis at various places in the State of Madhya Pradesh including Saugor.
Being unable to secure sufficient quantities of tendu leaves grown in the forest units in the State, the firm took leases for the collection of such leaves in the States of Bihar Maharashtra.
They actually imported tendu leaves under two railway consignments from Bihar to Saugor.
They informed the Divisional Forest Officer about the same and asked for permission for transport of the leaves and to utilise the said leaves for manufacture of bidis in their factories.
By letter dated July 27, 1965 the said Forest Officer intimated the firm that the imported leaves were not to be moved for bidi manufacture until permission was accorded for so doing.
The respondents ' grievance was that notwithstanding the above communication and in spite of the fact that they had not moved the imported leaves from their godowns, the Sub Divisional Forest Officer Saugor seized two quantities of such leaves of 9007 bags imported from Garwah Road, Bihar and 256 bags of tendu leaves imported from Bindoumaganj, Bihar and followed the same up by filing a complaint alleging contravention of section 5 of the Madhya Pradesh Tendu Patta Wyapar Viniyaman) 84 0 Adhiniyam, 1964, hereinafter referred to as the Act.
The respondents filed a petition under article 226 of the Constitution before the High Court for the issue of a writ of certiorari quashing the complaint.
The contention of the respondents (importers of the leaves) before the High Court was that the Act did not prohibit the import of tendu leaves from places outside the State nor was there any restriction on a manufacturer importing such leaves with the express object of consumption of the same, in his factory for the manufacture of bidis and in any event the Act or the Rules made thereunder did not purport to regulate the transport of tendu leaves imported from places outside the State.
On behalf of the State it was contended that transport of tendu leaves whether grown in the State or outside the State was completely prohibited by section 5(2) of the Act and regulation and control of transport of such imported leaves was necessary for the successful working of the State monopoly in the trade of tendu leaves envisaged by the Act.
Further the Act did not prohibit the import of tendu leaves and was not therefore violative of articles 31, 301 and 304 of the Constitution and the control of movement of tendu leaves after their import from another State was in no way repug nant to articles 301 and 304.
The High Court rejected the contentions of the State.
Hence the appeal.
In order to find out whether the action of the Forest Officer was justified, we have to look into the relevant provisions of the Act and the rules framed thereunder.
The Act as its preamble shows is one to make provision for regulating in the public interest the trade of tendu leaves by creation of State monopoly in such trade.
By section 1(2) it was to extend to the whole of the State and under sub section
(3) of section 1 it was to come into force in such area or areas and on such date or dates as the State Government may, by notification, specify.
The broad scheme of the Act appears to be as follows.
Under section 3 the State Government was empowered to divide every specified area defined in cl.
(h) of section 2 into such number of units as it may deem fit.
section 4 empowered the State Government to appoint agents in respect of different units for the purpose of purchase of and trade in tendu leaves on its behalf.
Under section 5(1); "On the issue of a notification under sub section (3) of section 1 in any area no perso n other than (a) the State Government; (b) an officer of State Government authorised in writing in that behalf; or 841 (c) an agent in respect of the unit in which the leaves have grown; shall purchase or transport tendu leaves.
" The two Explanations to this subsection show that purchase of tendu leaves from the State Government or its officers or agents was not to be deemed to be a purchase in contravention of the Act and a person having no interest in a holding but acquiring the right to collect tendu leaves grown on such holding was to be deemed to have purchased such leaves in contravention of the Act.
Sub section
(2) of the section allowed a grower of tendu leaves to transport them from any place within the unit wherein such leaves had grown to any other place in that unit and tendu leaves purchased from the State Government or any officer or agent of the Government by any person for manufacture of bidis within the State or by any person for sale outside the State could be transported by such person in accordance with the terms and conditions of a permit to be issued in that behalf.
section 7 empowered the State Government to fix prices at which tendu leaves were to be, purchased by it or its agent and under section 9 the State Government or their authorised officer or agent was to be, bound to purchase at the price fixed under section 7 leaves offered for sale at the depot, subject to the right of rejection of such leaves as were not fit for the manufacture of bidis.
Under section 1 1 all manufacturers of bidis and all exporters of tendu leaves had to get themselves registered in such manner as might be prescribed.
section 12 enabled the State Government to sell or dispose of tendu leaves purchased by it or its agent as therein prescribed.
Under section 1 5 any person contravening any of the provisions of the Act or the rules thereunder was liable to punishment, both with imprisonment and fine and tendu leaves in respect of which such contravention took place were liable to forfeiture by Government.
section 19 gave the Government power to make rules to carry out the provisions of the Act.
Rule 4 framed under the Act lays down the kinds of transport permits which may be issued.
They are to be, of four types (i) for transport from collection depot to storage godown; (ii) for transport from one storage godown to another or to distribution centre; (iii) for transport from a distribution centre to Sattedars or Mazdoors ' and (iv) for transport outside the State.
The application for a transport permit is to be under rule 9 in form 'M ' and the permit to be issued is to be in form 'M. Form 'M ' gives the quantity of tendu leaves purchased, the place or places where they were stored, the destination to which they were to be transported and the place or places where transported leaves were to be stored.
Similar particulars are to be contained in a permit in form 'N '.
842 It was contended on behalf of the State that the High Court had gone wrong in taking the view that the object of the Act was confined to trading in tendu leaves grown in the State as disclosed by the above provisions.
It was urged that the embargo on purchase and transport of tendu leaves by section 5 was necessary for creation and preservation of the State monopoly in tendu leaves.
It was submitted that there was nothing in the Act, which on the face of it showed that tendu leaves mentioned in the different provisions were to be confined to leaves grown in the State.
It was further submitted that unless the State had the power to check the purchase of tendu leaves from outside the State and in any event to restrict the transport thereof within the State, the monopoly would not be effective.
It was urged further that transport of goods within the State was so essentially integrated with the trade in the goods that the restriction on transport should be upheld in the interest of the State monopoly.
We find ourselves unable to accept the contentions put forward by counsel on behalf of the State.
All the relevant provisions of the Act and the rules referred to above show that the legislature intended that everybody growing leaves within the State should offer the same to it or its agents in different units for sale and the State was bound to purchase every single lot of tendu leaves unless the same could be said to be unfit for the manufacture of bidis.
Prima facie trade in tendu leaves as was held by this Court in Vrajlal Manilal vs M. P. State(1) would consist of dealing in those leaves i.e. their purchase and sale but "transport of the leaves once purchased or sold would not prima facie be an organic or integral part of dealing in those leaves.
" It was further held in that case: :. a permit system which regulates the movement of leaves purchased by a manufacturer of bidis from the unit where they are purchased to his warehouse, then to the branches and to the sattedars cannot up to that stage be regarded as unreasonable in the light of the object of the Act, the economic conditions prevailing in the State, and the mischief which it seeks to cure.
At the same time to expect the manufacturer to get permits issued to his sattedars for distribution by them to the innumerable mazdoors of comparatively small quantities of these leaves would not only be unreasonable but frustrating.
" In that case there was no question of import of any tendu leaves from outside the State or the issue of any permits in that regard.
What was objected to was the insistence upon transport permits for the leaves to be distributed by the manufacturers to his innumerable sattedars and mazdoors under section 5 of the Act.
It was held that though the section "is couched in apparently wide language, (1) ; at 408.
843 the very object of the Act, as disclosed by its long title, contains inherent limitations against an absolute or as strictly regulated a ban as it would at first reading of the section appear.
" Though the Court there upheld the provisions relating to the creation of the monopoly in the public interest in the matter of sale and purchase of tendu leaves, it was not disposed to uphold the restrictions on movement to the extent it was sought to be enforced by the State in that case.
In coming to the above conclusion the Court relied on the dictum in Akadasi Padhan vs State of Orissa(1) "A law relating to a State monopoly cannot, in the context, include all the provisions contained in the said law whether they have direct relation with the creation of the monopoly or no the said expression should be construed to mean the law relating to the monopoly in its absolutely essential features.
If a law is passed creating a State monopoly, the Court should enquire what are the provisions of the said law which are basically and essentially necessary for creating the State monopoly.
It is only those essential and basic provisions which are protected by the latter part of article 19(6).
If there are other provisions made by the Act which are subsidiary, incidental or helpful to the operation of the monopoly, they do not fall under the said part and their validity must be judged under the first part of article 19(6).
In other words, the effect of the amendment made in article 19(6) is to protect the law relating to the creation of monopoly and that means that it is only the provisions of the law which are integrally and essentially connected with the creation of the monopoly that are protected.
The rest of the provisions which may be incidental do not fall under the, latter part of article 19(6) and would inevitably have to satisfy the test of the first part of article 19(6).
" It is settled law that where two constructions of a legislative provision are possible one consistent with the constitutionality of the measure impugned and the other offending the same, the Court will lean towards the first if it be compatible with the object and purpose of the impugned Act, the mischief which it sought to prevent ascertaining from relevant factors its true scope and meaning.
It was in the light of this principle that the High Court observed : "If section 5 of the Act or any of its provisions were to be construed as prohibiting the import of tendu leaves into (1) [1963] Supp.
2 S.C.R. 691.
844 the State or restricted within the State of imported leaves, then the provision would clearly be invalid as violative of articles 301 and 304 of the Constitution.
" Without expressing our views on the subject we hold that the entire provisions of the Act and the rules are consistent with and aim at the State monopoly in the trade of tendu leaves in case of leaves grown or _produced in the State and the legislature never intended that the monopoly should be operative even to the extent of banning import of tendu leaves from outside or stalling the tendu leaves once they found their way into the State from outside.
The transport of tendu leaves purchased outside but consigned to places within the, State to be used for the manufacture of bidis is not integrally connected with the State monopoly as envisaged in the Act.
It stands to reason that manufacturers of bidis in the State of Madhya Pradesh would not think of importing tendu leaves from distant places like, Bihar and Maharashtra if they could help it and it must be the exigencies of the situation which drives a manufacturer of bidis to such course of action.
In any event, the Act ought not to be construed so as to ban import of tendu leaves from outside the State or restrict their movement once they were within the State unless clear language was used in that behalf.
If and when such express embargo is imposed, a question may arise as to whether it offends the different provisions of Part XIII of the Constitution.
In the result the appeal fails and is dismissed with costs.
S.C. Appeal dismissed.
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The respondent, a partnership firm of which the second respondent was a partner, carried on business as manufacturers of bidis at various places in the State of Madhya Pradesh.
Being unable to secure sufficient tendu leaves locally, the firm took leases for the collection of such leaves in Bihar & Maharashtra.
They actually imported tendu leaves under two railway consignments from Bihar.
They informed the Divisional Forest Officer about the same and asked permission for transport of the leaves and to utilise them in their factories.
By letter, the D.F.O. informed the respondents that the leaves must not be moved for bidi manufacture until permission is given.
Respondents obeyed the order; but in spite of that, the Sub divisional Forest Officer seized two quantities of such leaves and filed a complaint alleging contravention of section 5 of Madhya Pradesh Tendu Patta (Vyapar Viniyaman) Adhiniyam, 1964.
The respondent filed a petition under article 226 of the Constitution for a writ of certiorari quashing the complaint.
The contention of the respondents was that the Act did not prohibit import of tendu leaves from outside nor was there any restriction on a manufacturer to consume the same for the manufacture of bidis or the Rules made under the Act did not regulate the transport of the tendu leaves imported from outside.
The State however, contended that transport of tendu leaves whether grown locally or imported from outside was completely prohibited under section 5 of the Act, except by a license holder in terms of a permit issued.
S.5(1) provides that no person other than the State Government or an Officer of the State Government etc.
shall purchase or transport tendu leaves.
Further, the Act did not prohibit import of tendu leaves and so the Act is not violative of articles 31, 301 and 304 of the Constitution and the control of movement of tendu leaves after their import was in no way repugnant to articles 301 and 304 of the Constitution.
The State contended that unless the State had the power to check the purchase of tendu leaves from outside the State and to restrict the transport thereof within the State, the monopoly of State trading in tendu leaves would not be effective.
The High Court rejected these contentions of the State and hence the appeal.
Dismissing the appeal, HELD : (1) All the relevant provisions of the Act and the rules made thereunder show that the legislature intended that everybody growing leaves within the State should offer the same to it to its agents in different units for sale and the State was bound to purchase every single lot of usable tendu leaves.
Prima facie trade in tendu leaves could consist of dealing in those leaves, i.e., their purchase and sale but transport 'of the leaves once purchased or sold would not prima facie be an organic or integral part of dealing in those leaves.
[842 D] 839 Vrajlal Manilal vs M.P. State ; , followed.
(ii) In the present case, the transport of tendu leaves purchased outside but consigned to places within the State to be used for the manufacture of bidis is not integrally connected with the State monopoly as envisaged in the Act.
The Act ought not to be construed so as to ban import of tendu leaves from outside the State or restrict their movement once they are within the State unless clear language was used in that behalf.
[844 C] Akadasi Padhan vs State of Orissa, [1963] Supp. 2 S.C.R. 691, referred to.
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Appeal No. 231/1955.
Appeal from the Judgment and Decree dated February 16, 1954, of the Patna High Court in Title Suit No. 105/1953.
446 N. C. Chatterjee, Sanjeev Choudhuri and Ganpat Rai, for the appellant.
C. K. Daphtary, Solicitor General of India, P. K. Chatterjee and T. M. Sen, for respondent No. 1.
* Lal Narayan Sinha, Bajrang Sahai and R. C. Prasad, for respondent No. 2. 1960.
August 31.
The Judgment of the Court was delivered by WANCHOO J.
This is an appeal from a decree of the Patna High Court.
The appellant is a Public Limited Company with its registered office at Calcutta.
A mining lease was granted to it by the Raja of Ramgarh on December 29, 1947, for a period of 999 years in respect of 3026 villages situate within the Ramgarh Estate and the appellant was put in possession thereof.
On February 1, 1950, the appellant granted a sub lease of two of the villages comprised in its grant to one Bhagat Singh for a term of 15 years.
In the meantime the Mines and Minerals (Regulation and Development) Act (LIII of 1948), (hereinafter called the Act), had come into force along with the Mineral Concession Rules, 1949 (hereinafter called the Rules), in the area in which the two villages lay.
Bhagat Singh then applied to the Deputy Commissioner, Hazaribagh, for the grant of a certificate of approval under the Rules.
Thereupon the Deputy Commissioner, taking the view that the sub lease granted was in contravention of the Act and the Rules, filed a complaint on September 25, 1951, before a magistrate against two directors and the secretary of the appellant charging them with the breach of r. 45 of the Rules and also rr.
47 and 49 (now r. 51) read with r. 51 (now r. 53) and section 9 of the Act.
While the criminal case was going on, the appellant filed a suit challenging the validity and constitutionality of the Act and the Rules.
A number of grounds were taken in support of this challenge but it is not necessary now to set out all of them, as learned counsel for the appellant has confined his arguments only to two points, namely, (i) a sub lease is not covered by the definition of the term ' mining lease ' in section 3(d) of the 447 Act and therefore the Act and the Rules do not apply to a sub lease at all, and (ii) as these Rules were made under sections 5 and 6 of the Act and not under section 7 they have no application to a sub lease granted by a lessor, even after the coming into force of the Act and the Rules, where the lessor 's own lease was of a date anterior to the coming into force of the Act and the Rules.
The suit was resisted by the respondents and their defence was that the term ' mining lease ' included a sub lease and that the Rules framed under Bs.
5 and 6 of the Act were applicable to all sub leases granted after the Act and the Rules had come into force.
The High Court repelled the contentions raised by the appellant against the validity and constitutionality of the Act and the Rules.
It further held that the term 'mining lease ' as defined in section 3(d) of the Act included a sub lease and therefore the Act and the Rules applied to sub leases granted after the Act and the Rules came into force and it was immaterial that the lease granted to the appellant was anterior in time to the coming into force of the Act and the Rules.
On this view, the suit was dismissed.
Thereupon the appellant applied for a certificate which was granted and that is how the matter has come up before us.
The main question that falls for consideration is whether the term 'mining lease ' as defined in section 3(d) of the Act includes a sub lease.
Clause (d) of section 3 is in these terms: " mining lease ' means a lease granted for the purpose of searching for, winning, working, getting, making merchantable, carrying away, or disposing of mineral oils or for purposes connected therewith, and includes an exploring or a prospecting licence; ".
There is no specific mention of a sub lease in it.
But if one takes the plain meaning of the words used in section 3(d), it is clear that the term 'mining lease ' means any kind of lease granted for the purpose of searching for, winning, working, getting, making merchantable, 448 carrying away or disposing of minerals or for purposes connected therewith.
It is significant that the definition does not require that the lessor must be the proprietor; and so on a fair reading it would include a lease executed by the proprietor as much as a lease executed by the lessee from such a proprietor.
If we turn to the definition of 'lease ' in section 105 of the , we find that a lease of immovable property is a transfer of a right to enjoy such property made for a certain time, express or implied or in perpetuity in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value to be rendered periodically or on specified occasions to the transferor by the transferee who accepts the transfer on such terms.
What a lease therefore requires is a transferor and a transferee and a transfer of immovable property on the terms and conditions mentioned in section 105.
How the transferor gets his title to make a lease is immaterial so long as the transaction is of the nature defined in section 105.
Applying therefore the plain words of section 3(d) of the Act and the definition of lease as contained in section 105 of the , it is perfectly clear that there is a transferor in this case, (namely, the appellant) and a transferee (namely, Bhagat Singh) who has accepted the transfer; the transaction is with respect to immovable property and creates a right to enjoy such property for a certain term and for consideration on the conditions mentioned in it.
Though, therefore, the document may be termed a sub lease in view of the fact that the transferor is not the owner of the property transfer red but is itself a lessee, the transaction between the appellant and Bhagat Singh is nothing but a mining lease.
The terms ' sub lease ', ' under lease ' and "derivative lease ' are used conveniently to indicate not only that the transfer is a lease but also that the transferor is not the owner of the property but is a lessee ; but the transfer as between a lessee and a sub lessee is nonetheless a lease provided it satisfies the definition of section 105.
We may add that Ch.
V of the , which deals with leases of immovable 449 property has nowhere made any distinction between a lease and a sub lease and all the provisions of that Chapter which apply to a lease also apply to a sublease.
It is only when dealing with the rights and liabilities of the lessee that section 108(j) of the lays down that the lessee may transfer absolutely or by way of mortgage or sub lease the whole or any part of his interest in the property, and that is where one finds mention of a sub lease, namely, that it is a lease by a person who is himself a lessee.
But the fact that the lessor is himself a lessee and the transaction between him and the person in whose favour he makes the transfer by way of lease is called a sub lease does not in any way change the nature of the transfer as between them.
Therefore on the plain words of section 3(d) read with section 105 of the there can be no doubt that the term 'mining lease ' includes a sub lease. ' Learned counsel for the appellant referred in this connection to a number of statutes wherein a sub lease has been expressly stated to be included in the term 'lease '.
In the Mines and Minerals (Regulation and Development) Act, LXVII of 1957, which has replaced the Act, the term 'mining lease ' has been defined in section 3(c) as meaning a lease granted for the purpose of undertaking mining operations and includes a sublease.
The 1957 Act was enacted after the judgment of the High Court in this case and the legislature apparently thought it fit ex abundanti cautela to say that a sub lease is included within the term ' mining lease '.
In the corresponding English Act also as well as the English Law of Property, 1925, a lease has been defined to include a sub lease.
The fact however that in some laws a lease is defined to include a sub.
lease, does not mean that a lease cannot otherwise include a sub lease.
An example to the contrary is the , where the definition of the word 1 lease ' clearly includes a sub lease.
Learned counsel for the appellant also relied on certain decisions in which it was held that a lease did not include a sub lease.
Those decisions, however, turn on the particular terms of the enactment there under 450 consideration and are of no assistance in determining the question whether the term 'mining lease ' in the Act includes a mining sub lease.
Ordinarily, a lease will include a sub lease unless there is anything to the contrary in the particular law.
We may in this connection refer to the observations of Jessel, M. R., in Camberwell and South London Building Society vs Holloway (1) at p. 759: " The word `lease ' in law is a well known legal term of well defined import.
No lawyer has ever suggested that the title of the lessor makes any difference in the description of the instrument, whether the lease is granted by a freeholder or a copyholder with the licence of the Lord or by a man who himself is a leaseholder.
It being well granted for a term of years it is called a lease.
It is quite true that where the grantor of the lease holds for a term, the second instrument is called either an under lease or a derivative lease, but it is still a lease. . .".
We see nothing in the Act to indicate that the term ' mining lease ' as defined in a. 3(d) does not include a mining sub lease.
On the other hand, looking to the purpose and object with which the Act was passed, it seems to us quite clear that a sub lease must be included within the term 'mining lease ' as it obviously is within the plain words of section 3 (d).
That the Act was passed in the public interest is shown by the fact that it provides for the regulation of mines and oil fields and for the development of minerals.
The intention was that the mineral wealth of the country should be conserved and should be worked properly without waste and by persons qualified in that kind of work.
With that object in view section 5 inter alia provides for making rules as to the conditions on which mining leases may be granted and the maximum or minimum area and the period 'for which such lease may be granted as also the terms on which leases in respect of contiguous areas may be amalgamated, and the fixing of the maximum and minimum rent payable by a lessee (1) , 759 451 whether the mine is worked or not.
Section 6 provides for framing of rules for the conservation and development of minerals, the manner in which any mineral or any area as respects which the grant of mining lease is prohibited may be developed and the development of any mineral resources in any area by prescribing or regulating the use of engines, machinery or other equipment, and so on.
These provisions for the conservation, development and regulation of mining areas and minerals would be more or less completely frustrated if a mining sub lease was not included in the definition of the term 'mining lease ', for then all that would be necessary for a per.
son who wanted to avoid the law would be to interpose an intermediary between himself and the owner and get a sub lease from him which would be free from the regulatory control of the Act and the Rules. 'We are therefore of opinion that looking at the plain words of section 3(d) and the object and the purpose for which the Act was passed, it is clear that a mining sub lease is included within the definition of the term 'mining lease ' and there is nothing in the Act which militates against this.
We therefore hold that a mining sub lease made after the coming into force of the Act and the Rules is included in the term 'mining lease ' as defined in section 3 (d) and is subject to the Act and the Rules.
The argument in this connection is that a. 4 of the Act provides that no mining lease shall be granted after the commencement of the Act otherwise than in accordance with the rules framed under the Act and any mining lease granted otherwise shall be void and of 'no effect.
Sections 5 and 6 give power to the Central Government to make rules for purposes already set out above and refer to mining leases granted under section 4 Then comes section 7, which lays down that the Central Government may by notification in the official gazette make rules for the purpose of modifying or altering the terms and conditions of any mining lease 58 452 granted prior to the commencement of the Act so as to bring such lease into conformity with the rules framed under Be.
5 and 6.
It is urged that where a mining lease has been granted before the Act and the Rules came into force, it is only the rules framed under section 7 which will affect any sub lease granted by such a lessee even though the sub lease is after the date on which the Act and the Rules came into force.
Section 7 in our opinion was enacted for an entirely different purpose, as sub section
(2) thereof will show.
It is however not necessary to go into this matter further, for once it is held that a, sub lease is included in the term 'mining lease ', the rules made under sections 5 and 6 would apply to such a sub lease, if it is made after the Act and the Rules came into force.
In the present case, the sub lease was granted after the Act and the Rules came into force in the area with which the sub lease is concerned and therefore the sub lease would be governed by the Act and the Rules.
There is no question in this case of modifying or altering the terms and conditions of any mining lease granted prior to the commencement of the Act, for the Act and the Rules are being enforced with respect to a sub lease which is a mining lease, within the definition of that term in section 3(d), made 'after the Act and the Rules came into force.
No change is being made by the Rules in the terms and conditions of the mining lease granted to the appellant and all that has happened is that the appellant 's directors and secretary, are being prosecuted for granting a sub lease (which is a mining lease) against the provisions of the Act and the Rules after the Act came into force.
There is no force therefore in this contention of the appellant and it must be repelled.
There is no force in this appeal and it is hereby dismissed with costs.
, One set of hearing costs only.
Appeal dismissed.
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The appellant, a limited company, which was the lessee of a mining lease granted a sub lease in respect of two of the villages comprised in its grant.
The secretary and two of the directors of the company were prosecuted for having contravened the provisions of the Mines and Minerals (Regulation & Development) Act, 1948, and the Mineral Concession Rules, 1949, which were framed under it.
The appellant contended, firstly, that the sub lease was not covered by the definition of the term " Mining lease " of the Act and as such the Act and Rules did not apply to a sub lease at all ; and secondly, that as these rules were made under sections 5 and 6 of the Act and not under section 7 they have no application to a sub lease granted by a lessor, even after the coming into force of the Act and the Rules where the lessor 's own lease was of date anterior to the coming into force of the Act and the Rules.
Held, that the definition of " Mining lease " contained in section 3(d) of the Mines and Minerals (Regulation and Development) Act, 1048, does not require that the lessor must be a proprietor and its plain language read with section 5 of the , makes it clear that a mining lease includes one executed by a proprietor as much as a lease executed by the lessee from such proprietor.
The facts that the lessor is himself a lessee, and the transaction between him and the person in whose favour he makes the transfer by way of lease is called a sub lease does not in any way change the nature of the transfer as between them.
Held, further, that the Rules made under sections 5 and 6 of the Act would apply to a mining sub lease if it is made after the Act and the Rules came into force.
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941.txt
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Civil Appeal No. 570 of 1976.
Appeal by Certificate from the Judgment and Order dated 9.2.1976 of the Madras High Court in Tax Case No. 104 of 1969.
T.A. Ramachandran, P.N. Ramaligam and A.T.M. Sampath for the Appellant.
628 V.Gauri Shanker, Manoj Arora, section Rajappa and Ms.
A.Subhashini for the Respondent.
The Judgment of the Court was delivered by RANGANATHAN, J.
This is the assessee 's appeal form a judgment of the Madras High Court dated 10.1.1975 answering three questions referred to it by the Income tax Appellate Tribunal in favour of the Revenue and against the assessee.
The reference related to the assessment year 1961 62, the previous year in respect of which commenced on 13.4.1960.
The judgment of the High Court is reported as (1976) 102 I.T.R.622.
The appellant assessee is a partnership firm.
Since 1949, it was carrying on, in Malaya, a money lending business and, as part of and incidental to the said business, a business in the purchase and sale of house properties, gardens and estates.
It had been reconstituted under a deed dated 26.3.1960.
The firm 's accounts for the year 1960 61, which commenced on 13.4.60, would normally have come to a close on or about the 13th April, 1961.
However, the firm closed its accounts as on 13.3.1961 with effect from which date it was dissolved.
Along with its income tax return for the assessment year 1961 62 filed on 10th April 1962, the assessee filed a profit and loss account and certain other statements.
In the profit and loss account, a sum of $ 1,01,248 was shown as "difference on revaluation of estates, gardens and house properties" on the dissolution of the firm on 13.3.61, such difference being $ 70,500 in respect of "house properties" and $ 30,748 in respect of estates and gardens.
In the memo of adjustment for income tax purposes, however, the above sum was deducted on the ground that it was not assessable either as revenue or capital.
A statement was also made before the officer that partner Ramanathan Chettiar, forming one group and the other partners forming another group, were carrying on business separately with the assets and liabilities that fell to their shares on the dissolution of the firm.
The Income tax Officer (I.T.O.) issued a notice under section 23(2) on the same day (10.4.1962) posting the hearing for the same day and completed the assessment also on the same day, after making a petty addition of Rs. 2083 paid as property tax in Malaya, and recording the following note: "Audit assessment Lakshmanan appears return filed I.T. 86 acknowledged in list of books scrutinised order dictated".
629 For the subsequent assessment year 1962 63, the assessee filed a return showing nil income along with a letter pointing out that the firm had been dissolved on 13.3.1961.
Thereafter, on 3.9.63, the I.T.O. wrote a letter to the assessee to the effect that the revaluation difference of $ 1,01,248 should have been brought to tax in the assessment year 1961 62 in view of the decision of the Madras High Court in Ramachari & Co. vs C.I.T., He called for the basis for the valuation and also for the assessee 's objections.
The assessee sent a reply stating that no profit or loss could be assessed on a revaluation of assets.
Relying on a circular of the Central Board of Revenue dated 21.6.1956, it was urged that the assessee was gradually winding up its business in Malaya and that therefore, the surplus would only be capital gains.
It was urged that the revaluation had been at a market price prevalent since 1.1.1954 and that, therefore, no capital gains were chargeable to tax.
The I.T.O. followed up his letter by a notice under section 148 read with section 147(b).
The assessee objected to the reassessment on two grounds: (1) that the circumstances did not justify the initiation of proceedings under section 147(b); and (2) that no assessable profits arose to the firm on the revaluation of assets on the eve of the dissolution of the firm.
Overruling these objections, the I.T.O. completed a reassessment on the firm after adding back the sum of Rs.1,58,057 (the equivalent of $ 1,01,248) to the previously assessed income.
The assessee 's successive appeals to the Appellate Assistant Commissioner and the Appellate Tribunal and reference, at its instance, to the High Court having failed,the assessee is before us.
Three questions of law were referred to the High Court by the Tribunal.
These were: "1.
Whether, on the facts and circumstances of the case, the reassessment made on the assessee firm for the assessment year 1961 62 under section 147 of the Income tax Act is valid in Law? 2.
Whether, on the facts and circumstances of the case, assessment of the sum of $ 1,01,248 as revenue profit of the assessee firm chargeable to tax for the assessment year 1961 62 is justified in law? 3.
Whether, on the facts, and circumstances of the case, the Appellate Tribunal is right in law in sustaining the assessment of the sum of $ 1,01,348 after having found that the Department Officers are bound by the Circular of the Central Board of Revenue?" 630 We may deal at the outset with the third question.
Though the High Court has dealt with this question at some length, we do not think any answer to this question can or need be furnished by us for the following reasons.
First, the assessee has not been able to place before us the circular of the Board on which reliance is placed.
It is not clear whether it is a circular or a communication of some other nature.
Second, the circular, to judge from its purport set out in the High Court 's judgment, seems to have been to the effect that the surplus arising from the sale of properties acquired by a money lender in the course of his business would be in the nature of capital gains and not of income.
Obviously such a proposition could not have been intended as a broad or general proposition of law, for the nature of the surplus on sale of assets would depend on the nature of the asset sold and this, in turn, would depend on the facts and circumstances of each case.
In this case, no material was placed at any stage to show that the assets in question constituted the capital assets of the firm and not its stock in trade.
Third, the plea of the assessee which was in issue all through was that there was no sale of assets by the firm when its assets are distributed among its partners and that no profits whether capital or revenue could be said to arise to the firm merely because, at the time of the dissolution, the firm revalued its assets on the basis of market value or any other basis, for adjusting the mutual rights and liabilities of the partners on the dissolution of the firm.
The terms of the circular, as set out in the order of the High Court, cannot therefore be of any assistance to the assessee in answering the issues in this case.
We, therefore, do not answer the third question posed by the Tribunal.
Turning now to the first question, the relevant facts have already been noticed.
The following relevant and material facts viz. (i) the dissolution of the firm, (ii) the revaluation of its assets, (iii) the distribution thereof among two groups of its partners, and (iv) the division and crediting of the surplus on revaluation to the partner 's accounts were not only reflected in the balance sheet, the profit and loss account and the profit and loss adjustment account but were also mentioned in the statement filed before the I.T.O. along with the return.
Clearly, action u/s 148 read with clause (a) of s.147 could not be initiated in these circumstances but is action under clause (b) of that section also impermissible? That is the question.
We may now set out the provisions of clause (b) of section 147 for purposes of easy reference.
This clause which corresponds to section 34(1)(b) of the Indian Income tax Act, 1922 (`the 1922 Act ') permits initiation of reassessment of proceedings, "notwithstanding 631 that there has been no omission or failure as mentioned in clause (a) on the part of the assessee" provided "the Income tax Officer has, in consequence of information in his possession, reason to believe that income chargeable to tax has escaped assessment".
In the present case, on the information already on record and in view of the decision in Ramachari & Co. vs C.I.T., , there can be no doubt that the I.T.O. could reasonably come to the conclusion that income, profits and gains assessable for the assessment year 1961 62 had escaped assessment.
But is that belief reached "in consequence of information in his posession"? The assessee 's counsel says "no", for, says he, it is settled law that the "information" referred to in clause (b) above, should be "information" received by the I.T.O. after he had completed the original assessment.
Here it is pointed out that all the relevant facts as well as the decision in Ramachari (supra) had been available when the original assessment was completed on 10.4.1962.
Action cannot be taken under this clause merely because the I.T.O., who originally considered the surplus to be not assessable, has on the same facts and the same case law which had been available to him when he completed the assessment originally, changed his opinion and now thinks that the surplus should have been charged to tax.
The validity of the assessee 's argument has to be tested in the light of the decisions of this Court which have interpreted section 147(b) of the 1961 Act or its predecessor section 34(1)(b) of the 1922 Act and expounded its parameters.
We may start with the decision in Maharaj Kumar Kamal Singh vs I.T.O., S.C.
In this case it was held that the word "information" would include information as to the true and correct state of the law and would also cover information as to relevant judicial decisions.
In that case the I.T.O. had re opened the assessment on the basis of a subsequent decision of the Privy Council and this was upheld.
Referring to the use of the word "escape" in the section, the Court observed.
"In our opinion, even in a case where a return has been submitted, if the income tax Officer erroneously fails to tax a part of asessable income, it is a case where the said part of the income has escaped assessment.
The appellant 's attempt to put a very narrow and artificial limitation on the meaning of the word "escape" in section 34(1)(b) cannot, therefore, succeed." (underlining ours) 632 The meaning of the word "information" was again explained thus in C.I.T. vs A. Raman & Co., [1968] 67 I.T.R. 11 SC: "The expression `information ' in the context in which it occurs must, in our judgment, mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment. .
Jurisdiction of the Income tax Officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment.
That information, must, it is true, have come into the possession of the Income tax Officer after the previous assessment, but even if the information be such that it could have been obtained during the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the Income tax Officer is not affected." (underlining ours) We may next refer to Kalyanji Mavji & Co. vs C.I.T., [1976 102] I.T.R. 287.
It is unnecessary to set out the facts of this case.
It is sufficient to refer to the enunciation of the law regarding the scope of section 34(1)(b) as culled out from the earlier decisions of this Court on the subject.
At page 296 the Court observed: "On a combined review of the decisions of this Court the following tests and principles would apply to determine the applicability of section 34(1)(b) to the following categories of cases: (1) where the information is as to the true and correct state of the law derived from relevant judicial decisions; (2) where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the Income tax Officer.
This is obviously based on the principle that the taxpayer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority; 633 (3) where the information is derived from an external source of any kind.
Such external source would include discovery of new and important matters or knowledge of fresh facts which were not present at the time of the original assessment; (4) where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law." Before applying the above principles to the facts of the present case, we may refer to two earlier decisions of the Madras High Court which have been followed in the judgment under appeal.
In Salem Provident Fund Society Ltd. vs C.I.T., , the Income tax officer, in calculating the annual profits of an insurance company, had, under the statute to work out the difference between the deficiencies as shown in the actuarial valuation of the company in respect of two successive valuation periods.
At the time of original assessment, the Income tax Officer, by mistake, added the two deficiencies instead of subtracting one from the another.
This mistake he committed not in one assessment year but in two assessment years.
Subsequently, he discovered his mistake and initiated proceedings under section 34(1)(b).
The contention urged on behalf of the assessee was that all the statements, on the basis of which the re assessment proceedings were taken, were already on record and that, in such a case, there was no `information ' which would justify the reassessment.
An argument was also raised that the rectification, if any, could have been carried out only under section 35 and not under section 34.
These contentions were repelled.
In regard to the former objection, the High Court pointed out: "We are unable to accept the extreme proposition that nothing that can be found in the record of the assessment, which itself would show escape of assessment or under assessment, can be viewed as information which led to the belief that there has been escape from assessment or under assessment.
Suppose a mistake in the original order of assessment is not discovered by the Income tax Officer himself on further scrutiny but it is brought to this notice by another assessee or even by a subordinate or a superior officer, that would appear to be information disclosed to the Income tax Officer.
if the mistake itself is not extraneous 634 to the record and the informant gathered the information from the record, the immediate source of information to the Income tax Officer in such circumstances is in one sense extraneous to the record.
It is difficult to accept the position that while what is seen by another in the record is `information ' what is seen by the Income tax Officer himself is not information to him.
In the latter case he just informs himself.
It will be information in his possession within the meaning of section 34.
In such cases of obvious mistakes apparent on the face of the record of assessment that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment or under assessment.
A similar question arose in CIT vs Rathinasabapathy Mudaliar, In that case the assessee, who was a partner in a firm, did not include in his return the income of his minor son admitted to the benefits of the partnership as required by section 16(3) of the 1922 Act.
The minor son submitted a separate return and was assessed on this income.
Subsequently, the Income tax Officer "discovered" his error in not assessing the father thereon and started re assessment proceedings.
The re assessment was upheld by the Madras High Court on the same logic as had been applied in Salem Provident Fund Society Ltd. case (supra).
The above line of thinking has not only held the field for about thirty years now but has also received approval in Anandji Haridas and Co. (P) Ltd. vs S.P. Kushare, Sales Tax Officer, [1968] 21 S.T.C. 326.
This issue has further been considered in the decision of this Court in the case of Indian and Eastern Newspaper Society vs C.I.T. (the IENS case, for short) [1979] I.T.R. 996.
In this case the income of the assessee derived by letting out certain portions of the building owned by it to its members as well as to outsiders was being assessed as business income.
In the course of audit, an internal audit party expressed the view that the money realised by the assessee on account of the occupation of its conference hall and rooms should have been assessed under the head "income from property" and not as business income.
The Income tax Officer thereupon initiated re assessment proceedings and this was upheld by the Tribunal.
On a direct reference under s.257 of the Act, this Court held that the opinion of the audit party on a point of law could not be regarded as "information" and that the initiation of the reassessment proceedings was not justified.
It was contended for the Revenue, that the reassessment proceedings would 635 be valid even on this premise.
Dealing with this argument, the Court observed: "Now, in the case before us, the ITO had, when he made the original assessment, considered the provisions of sections 9 and 10.
Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him.
The revenue contends that it is open to him to do so, and on that basis to reopen the assessment under section 147(b).
Reliance is placed on Kalyanji Mavji & Co. vs CIT, , where a Bench of two learned, Judges of this Court observed that a case where income had escaped assessment due to the "oversight, inadvertence or mistake" of the ITO must fall within section 34(1)(b) of the Indian Income Tax Act, 1922.
It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on re appraising the material considered by him during the original assessment, the ITO discovers that he has committed an error inconsequence of which income has escaped assessment, it is open to him to reopen the assessment.
In our opinion, an error discovere on a reconsideration of the same material (and no more) does not give him that power.
That was the view taken by this Court in Maharaj Kumar Kamal Singh vs CIT, [1959] 35 I.T.R. 1; CIT vs A. Raman & Co., and Bankipur Club Ltd. vs CIT and we do not believe that the law has since taken a different course.
Any observation in Kalyanji Mavji & Co. vs CIT, suggesting the contrary do not, we say with respect, lay down the correct law." (underlining ours) The Court proceeded further to observe: "A further submission raised by the revenue on section 147(b) of the Act may be considered at this stage.
It is urged that the expression "information" in section 147(b) refers to the realisation by the ITO that he has committed an error when making the original assessment.
It is said that, when upon receipt of the audit note the ITO discovers or realizes that a mistake has been committed in the original 636 assessment, the discovery of the mistake would be "information" within the meaning of section 147(b).
The submission appears to us inconsistent with the terms of section 147(b) Plainly, the statutory provision envisages that the ITO must first have information in his possession, and then in consequence of such information he must have reason to believe that income has escaped assessment.
The realisation that income has escaped assessment is covered by the words "reason to believe", and it follows from the "information" received by the ITO.
The information is not the realisation, the information gives birth to the realisation.
" Sri Ramachandran submits that these decisions support his contention that reassessment proceeding can be validly initiated only if there is some information received by the I.T.O. from an external source after the completion of the original assessment but not in a case like the present where there is nothing more before the I.T.O. than what was available to him when the original assessment was completed.
He also submits that the observations in the IENS case have cast doubts on the propositions enunciated in Kalyanji Mavji 's case (supra) and reiterates the proposition that reassessment proceedings cannot be availed of to revise, on the same material, the opinion formed or conclusion arrived at earlier in favour of the assessee.
On the other hand, Dr. Gaurisankar, appearing for the Revenue, mentioned that the decision in the IENS case holding that the opinion of an audit party would not constitute `information ' and qualifying the principles enunciated in Kalyanji Mavji is pending consideration by a larger Bench of this Court.
He, however, submitted that the reassessment in this case would be valid even on the strength of the observations in the IENS case.
We shall proceed to consider the correctness of this submission.
We have pointed out earlier that Kalyanji Mavji (supra) outlines four situations in which action under S.34(1)(b) can be validly initiated.
The IENS case has only indicated that proposition (2) outlined in this case and extracted earlier may have been somewhat widely stated; it has not cast any doubt on the other three propositions set out in Kalyanji Mavji 's case.
The facts of the present case squarely fall within the scope of propositions 2 and 4 enunciated in Kalyanji Mavji 's case.
Proposition (2) may be briefly summarised as permitting action even on a "mere change of opinion".
This is what has been doubted in the IENS case (supra) and we shall discuss its application to this case a 637 little later.
But, even leaving this out of consideration, there can be no doubt that the present case is squarely covered by proposition (4) set out in Kalyanji Mavji & Co. (supra).
This proposition clearly envisages a formation of opinion by the Income tax Officer on the basis of material already on record provided the formation of such opinion is consequent on "information" in the shape of some light thrown on aspects of facts or law which the I.T.O. had not earlier been conscious of.
To give a couple of illustrations, suppose an I.T.O., in the original assessment, which is a voluminous one involving several contentions, accepts a plea of the assessee in regard to one of the items that the profits realised on the sale of a house is a capital realisation not chargeable to tax.
Subsequently he finds, in the forest of papers filed in connection with the assessment, several instances of earlier sales of house property by the assessee.
That would be a case where the I.T.O. derives information from the record on an investigation or enquiry into facts not originally undertaken.
Again, suppose if I.T.O. accepts the plea of an assessee that a particular receipt is not income liable to tax.
But, on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt.
He would be entitled to reopen the assessment under s.147(b) by virtue of proposition (4) of Kalyanji Mavji.
The fact that the details of sales of house properties were already in the file or that the decision subsequently come across by him was already there would not affect the position because the information that such facts or decision existed comes to him only much later.
What then, is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Mavji (supra)? The difference, if one keeps in mind the trend of the judicial decisions, is this.
Proposition (4) refers to a case where the I.T.O. initiates reassessment proceedings in the light of "information" obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for e.g., as in the two Madras decisions referred to earlier.
Proposition (2) no doubt covers this situation also but it is so widely expressed as to include also cases in which the I.T.O., having considered all the facts and law, arrives at a particular conclusion, but reinitiates proceedings because, on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been drawn earlier, he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax.
In other words, as pointed out in IENS case, it also 638 ropes in cases of a "bare or mere change of opinion" where the I.T.O. (very often a successor officer) attempts to reopen the assessment because the opinion formed earlier by himself (or, more often, by a predecessor I.T.O.) was, in his opinion, incorrect.
Judicial decisions had consistently held that this could not be done and the IENS case (supra) has warned that this line of cases cannot be taken to have been overruled by Kalyanji Mavji (supra).
The second paragraph from the judgment in the IENS case earlier extracted has also reference only to this situation and insists upon the necessity of some information which make the ITO realise that he has committed an error in the earlier assessment.
This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas, [1986] 21 S.T.C. 326.
Even making allowances for this limitation placed on the observations in Kalyanji Mavji, the position as summarised by the High Court in the following words represents, in our view, the correct position in law: "The result of these decisions is that the statute does not require that the information must be extraneous to the record.
It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income tax Officer subsequent to the original assessment.
If the Income tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment.
Where, however, the Income tax Officer had not considered the material and subsequently come by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act.
" Let us now examine the position in the present case keeping in mind the narrow but real distinction pointed out above.
On behalf of the assessee, it is emphasised (a) that the amount of surplus is a very substantial amount,(b) that full details of the manner in which it had resulted had been disclosed, (c) that the profit and loss account, the profit and loss adjustment account and statement made before the I.T.O. had brought into focus the question of taxability of the surplus and (d) that decision in Ramachari 's case had been reported by 10.4.1962.
No Income tax Officer can be presumed to have completed the assessment without looking at all this material and the said decision.
No doubt, some doubt had been thrown as to whether a statement had been given at the time of original assessment that the amount 639 of surplus was not taxable as an income or a capital gain but the case has proceeded on the footing that such a statement was there before the officer.
This, therefore, is nothing but a case of "change of opinion".
On the other hand, the authorities and the Tribunal have drawn attention to the fact that the return, the section 143(2) notice and assessment were all on the same day and counsel for the Revenue urged that obviously, in his haste, the I.T.O. had not looked into the facts at all.
It is urged that no Income tax Officer who had looked into the facts and the law could have failed to bring the surplus to tax in view of then recent pronouncement in Ramachari 's case.
Dr. Gaurishankar submitted that the Tribunal has found that the I.T.O. "had acted mechanically in accepting the return without bringing his mind to play upon the entry in the statement with reference to the distribution of the assets".
He pointed out that there is no evidence of any enquiry with reference to this aspect and that, the amount involved being sufficiently large, the I.T.O., if he had been aware of the existence of the entry would certainly have discussed it.
He urged that the question whether the I.T.O. had considered this matter at the time of the original assessment or not is purely a question of fact and the Tribunal 's conclusion thereon having been endorsed by the High Court, there is no justification to interfere with it at this stage.
We think there is force in the argument on behalf of the assessee that, in the face of all the details and statement placed before the I.T.O. at the time of the original assessment, it is difficult to take the view that the Income tax Officer had not at all applied his mind to the question whether the surplus is taxable or not.
It is true that the return was filed and the assessment was completed on the same date.
Nevertheless, it is opposed to normal human conduct that an officer would complete the assessment without looking at the material placed before him.
It is not as if the assessment record contained a large number of documents or the case raised complicated issues rendering it probable that the I.T.O. had missed these facts.
It is a case where there is only one contention raised before the I.T.O. and it is, we think, impossible to hold that the Income tax Officer did not at all look at the return filed by the assessee or the statements accompanying it.
The more reasonable view to take would, in our opinion, be that the Income tax Officer looked at the facts and accepted the assessee 's contention that the surplus was not taxable.
But, in doing so, he obviously missed to take note of the law laid down in Ramachari which there is nothing to show, had been brought to his notice.
When he subsequently became aware of the decision, he initiated proceedings under section 147(b).
The material which constituted information and on 640 the basis of which the assessment was reopened was the decision in Ramachari.
This material was not considered at the time of the original assessment.
Though it was a decision of 1961 and the I.T.O. could have known of it had he been diligent, the obvious fact is that he was not aware of the existence of the decision then and, when he came to know about it, he rightly initiated proceedings for assessment.
We may point out that the position here is more favorable to the Revenue than that which prevailed in the Madras cases referred to earlier.
There, what the I.T.O. had missed earlier was the true purport of the relevant statutory provisions.
It seems somewhat difficult to believe that the I.T.O. could have failed to read properly the statutory provisions applicable directly to facts before him (though that is what seems to have happened).
Perhaps an equally plausible view, on the facts, could have been taken that he had considered them and decided, in one case, not to apply them and, in the other, on a wrong construction thereof.
In the present case, on the other hand, the material on which the I.T.O. has taken action is a judicial decision.
This had been pronounced just a few months earlier to the original assessment and it is not difficult to see that the I.T.O. must have missed it or else he could not have completed the assessment as he did.
Indeed it has not been suggested that he was aware of it and yet chose not to apply it.
It is therefore much easier to see that the initiation of reassessment proceedings here is based on definite material not considered at the time of the original assessment.
In the above view of the matter, we uphold the High Court 's view on the first question.
The second question raises a more difficult problem.
There can be no doubt that the decision of the Madras High Court in Ramachari squarely covers the situation.
Ramachari holds that the principle of valuing the closing stock of a business at cost or market at the option of the assessee is a principle that would hold good only so long as there is a continuing business and that where a business is discontinued, whether on account of dissolution or closure or otherwise, by the assessee, then the profits cannot be ascertained except by taking the closing stock at market value.
Ramachari has subsequently been followed by the Kerala High Court in Popular Workshops vs Commissioner of Income Tax, and in Popular Automobiles vs Commissioner of Income Tax, Shri Ramachandran contends that the decision in Ramachari 641 does not lay down the correct law.
He submits than, while it is no doubt true that the closing stock has to be valued, the well settled principle is that it should be valued, at cost or market whichever is lower and there is no justification for laying down a different principle for valuation of the closing stock at the point of discontinuance of business unless the goods are actually sold by the assessee at the time of discontinuance.
Further, it has been held by a series of decisions of this Court that when a firm is dissolved and the assets are distributed among the partners, there is no sale or transfer of the assets of the firm to the various partners: vide, Addanki Narayanppa vs Bhaskara Krishnappa, ; ; CIT vs Dewas Cine Corporation, ; CIT vs 2Bankey Lal Vaidya, ; Malabar Fisheries Co. vs C.I.T., and in Sunil Siddharthbhai vs C.I.T., He submits that, in logical sequence, dissolution comes first and distribution of assets comes later.
Therefore, revaluation of the assets of a firm, which is only for the division of the assets among the partners on a real and not a notional basis, is part of the division of the assets and therefore logically, in point of time, subsequent to the dissolution of the firm.
Since the revaluation takes place after the dissolution no profits can be said to have accrued to the firm by the process of revaluation.
The revaluation of the assets is not in the course of business and is not an activity which can partake of the nature of trade.
Assuming but not conceding that it is possible to have a revaluation of the assets, for example, stock in trade before dissolution, any excess which arises on the revaluation is only an imaginary or notional profit and cannot be brought to tax for the following reasons: (i) As a result of such revaluation, there can be no profit, because the firm cannot make a profit out of itself: Vide Kikabhai Premchand vs C.I.T., (ii) The process of revaluation of stock by itself cannot bring in any real profits: vide C.I.T. vs K.A.R.K. Firm, [1934]2 I.T.R. 183; Chainrup Sampatram vs C.I.T., [1953) and C.I.T. V. Hind Construction ltd., [1972] 83 I.T.R. 211; and (iii) It is well settled that what is taxable under the income tax law is only real income vide C.I.T. vs M/s Shoorji Vallabhdas and Co., [1962] 46 I.T.R. 144 and C.I.T. vs Birla Gwalior (P) Ltd., There is, therefor, no principle by which the stock in trade can be valued at market price so as to bring to tax the notional profits which might in future be realised as a result of the sale of the stock in trade.
642 The question posed before us is a difficult one.
We think, however, that the High Court was right in pointing out that the several decisions relied upon for the assessee as to the nature of the transaction by which a firm, on dissolution, distributes its assets among its partners, have no relevance in the present case.
As the High Court rightly observed, those cases relate to what happens after or in consequence of the dissolution of a firm whereas we are here concerned with a question that arises before or at the time of dissolution.
What we have to decide is the basis on which, in making up the accounts of a firm upto the date of dissolution, the closing stock with the firm as at a point of time immediately prior to the dissolution is to be valued.
It is this principle that has been decided in Ramachari and the High Court decisions following it (including the one under appeal) and the question is whether they lay down the correct law.
In the first place, it is settled law that the true trading results of a business for an accounting period cannot be ascertained without taking into account the value of the stock in trade remaining at the end of the period.
Though, as pointed out by this Court in Chainrup Sempatram vs C.I.T., it is a misconception to think that any profit arises out of the valuation of closing stock, it is equally true that such valuation is a necessary element in the process of determining the trading results of the period.
This is true in respect of any method of accounting and in C.I.T. vs Krishnaswamy Mudaliar, this Court pointed out that, even where the assessee is following the cash system of accounting, the valuation of closing stock cannot be dispensed with.
In this decision, this Court quoted with approval the following observations in C.I.R. vs Cock, Russel & Co. Ltd. "There is no word in the statutes or rules which deals with this question of valuing stock in trade.
There is nothing in the relevant legislation which indicates that in computing the profits and gains of a commercial concern the stock in trade at the start of the accounting period should be taken in and that the amount of the stock in trade at the end of the period should also be taken in.
It would be fantastic not to do it: it would be utterly impossible accurately to assess profits and gains merely on a statement of receipts and payments or on the basis of turnover.
It has long been recognised that the right method of assessing profits and gains is to take into account the value of the stock in trade at the beginning and the value of the stock in trade at the 643 end as two of the items in the computation.
I need not cite authority for the general proposition, which is admitted at the Bar, that for the purposes of ascertaining profits and gains the ordinary principles of commercial accounting should be applied, so long as they do not conflict with any express provision of the relevant statutes.
" Next the principles as to the method of valuation of the closing stock are equally well settled.
Lord President Clyde set these out in Whimster & Co. vs C.I.R., in the following words: "In computing the balance of profits and gains for the purposes of income tax,. two general and fundamental commonplaces have always to be kept in mind.
In the first place, the profits of any particular year or accounting period must be taken to consist of the difference between the receipts from the trade or business during such year or accounting period and the expenditure laid out to earn those receipts.
In the second place, the account of profit and loss to be made up for the purpose of ascertaining that difference must be framed consistently with the ordinary principles of commercial accounting, so far as applicable, and in conformity with the rules of the Income tax Act, or of that Act as modified by the provisions and schedules of the Acts regulating excess profits duty, as the case may be.
For example, the ordinary principles of commercial accounting require that in the profit and loss account of a merchant 's manufacturer 's business the values of the stock in trade at the beginning and at the end of the period covered by the account should be entered at cost or market price, whichever is the lower; although there is nothing about this in the taxing statutes.
" The principle behind permitting the assessee to value the stock at cost is very simple.
In the words of Bose, J. In Kikabhai Premchand vs C.I.T., [1953] 24 I.T.R. 506 S.C. it is this: "The appellant 's method of book keeping reflects the true position.
As he makes his purchases he enters his stock at the cost price on one side of the accounts.
At the close of the year he enters the value of any unsold stock at cost on the other side of the accounts thus cancelling out the entries relating to the sum unsold stock earlier in the 644 accounts; and then that is carried forward as the opening balance in the next year 's account.
This cancelling out of the unsold stock from both sides of the accounts leaves only the transactions on which there have been actual sales and gives the true and actual profit or loss on his year 's dealings.
" As against this, the valuation of the closing stock at market value invariably will create a problem.
For if the market value is higher than cost, the accounts will reflect notional profits not actually realised.
On the other hand, if the market value is less, the assessee will get the benefit of a notional loss he has not incurred.
Nevertheless, as mentioned earlier, the ordinary principles of commercial accounting permit valuation "at cost or market, whichever is the lower".
The rationale behind this has been explained by Patanjali Sastri, C.J. in Chainrup Sampatram vs C.I.T., , S.C. where an attempt was made to value the closing stock at a market value higher than cost.
The learned Chief Justice observed: "It is wrong to assume that the valuation of the closing stock at market rate has, for its object, the bringing into charge any appreciation in the value of such stock.
The true purpose of crediting the value of unsold stock is to balance the cost of those goods entered on the other side of the account at the time of their purchase, so that the cancelling out of the entries relating to the same stock from both sides of the account would leave only the transactions on which there have been actual sales in the course of the year showing the profit or loss actually realised on the year 's trading.
As pointed out in paragraph 8 of the Report of the Committee on Financial Risks attaching to the holding of Trading Stocks, 1919, "As the entry for stock which appears in a trading account is merely intended to cancel the charge for the goods purchased which have not been sold, it should necessarily represent the cost of the goods.
If it is more or less than the cost, then the effect is to state the profit on the goods which actually have been sold at the incorrect figure. .
From this rigid doctrine one exception is very generally recognised on prudential grounds and is now fully sanctioned by custom, viz., the adoption of market value at the date of making up accounts, if that value is less, than cost.
It is of course an anticipation of the loss that may be made on those goods in 645 the following year, and may even have the effect, if prices rise again, of attributing to the following year 's results a greater amount of profit than the difference between the actual sale price and the actual cost price of the goods in question" (extracted in paragraph 281 of the Report of the Committee on the Taxation of Trading Profits presented to British Parliament in April 1951).
While anticipated loss is thus taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into the account, as no prudent trader would care to show increased profit before its actual realisation.
This is the theory underlying the rule that the closing stock is to be valued at cost or market price whichever is the lower, and it is now generally accepted as an established rule of commercial practice and accountancy.
" From the above passage, it will be seen that the proper practice is to value the closing stock at cost.
That will eliminate entries relating to the same stock from both sides of the account.
To this rule custom recognises only one exception and that is to value the stock at market value if that is lower.
But on no principle can one justify the valuation of the closing stock at a market value higher than cost as that will result in the taxation of notional profits the assessee has not realised.
The High Court in Ramachari has, however, outlined another exception and seems to have rested this on two considerations.
The first is the observation of Lord Buckmaster in C.I.T. vs Ahmedabad New Cotton Mills Co. Ltd., [1930] L.R. 57 I.A. 21 to the following effect: "The method of introducing stock into each side of a profit and loss account for the purpose of determining the annual profits is a method well understood in commercial circles and does not necessarily depend upon exact trade valuations being given to each article of stock that is so introduced.
The one thing that is essential is that there should be a definite method of valuation adopted which should be carried through from year to year, so that in case of any division from strict market values in the entry of the stock at the close of one year it will be rectified by the accounts in the next year.
" From these observations, the High Court inferred: "It is obvious from the above that the privilege of valuing 646 the opening and closing stock in a consistent manner is available only to continuing business and that it cannot be adopted where the business comes to an end and the stock in trade has to be the disposed of in order to determine the exact position of the business on the date of closure. " The second consideration which prevailed with the High Court is reflected in the following passage from the judgment: "It seems to us that none of these cases has any application to the facts of the present case .
There is no authority directly in point dealing with this question, where a partnership concern dissolves its business in the course of the accounting year, what is the basis on which the stock in trade has to be valued as on the date of dissolution.
We have accordingly to deal with the matter on first principles.
The case of a firm which goes into liquidation forms a close parallel to the present case.
In such a case all the stock in trade and other assets of the business will have to be sold and their value realised.
It cannot be controverted that it is only by doing so that the true state of the profits or losses of the business can be arrived at.
The position is not very different when the partnership ceases to exist in the course of the accounting year.
The fact that Ramachari, one of the ex partners, took over the entire stock and continued to run the business on his own, is not relevant at all, when we consider the profits or losses of the partnership ' which has come to an end.
It should, therefore, follow that in order to arrive at the correct picture of the trading results of the partnership on the date when it ceases to function, the valuation of the stock in hand should be made on the basis of the prevailing market price.
" We are not quite sure that the first of the considerations that prevailed with the High Court is relevant in the present case.
Even in a continuing business, the valuation at market value is permissible only when it is less than cost; it is not quite certain whether the rules permit an assessee if he so desires to value closing stock at market value where it is higher than cost.
But, in either event, it is allowed to be done because its effect can be offset over a period of time.
But here, where the business comes to a close, no future adjustment of an over 647 or under valuation is possible, In this context, it is difficult to see how valuation, at other than cost, can be justified on the principle of Ahmedabad Advance Mills case (supra).
We, however, find substance in the second consideration that prevailed with the High Court.
The decision in Muhammad Hussain Sahib vs Abdul Gaffor Sahib, [1950] 1 M.L.J.81 correctly sets out the mode of taking accounts regarding the assets of a firm.
While the valuation of assets during the subsistence of the partnership would be immaterial and could even be notional, the position at the point of dissolution is totally different: "But the situation is totally different when the firm is dissolved or when a partner retires.
The settlement of his account must be not on a notional basis but on a real basis, that is every asset of the partnership should be converted into money and the account of each partner settled on that basis. .
The assets have to be valued, of course, on the basis of the market value on the date of the dissolution . " This applies equally well to assets which constitute stock in trade.
There can be no manner of doubt that, in taking accounts for purposes of dissolution, the firm and the partners, being commercial man, would value the assets only on a real basis and not at cost or at their other value appearing in the books.
A short passage from Pickles on Accountancy (Third Edn), p. 650 will make this clear: "In the event of the accounts being drawn up to the date of death or retirement, no departure from the normal procedure arises, but it will be necessary to see that every revaluation required by the terms of the partnership agreement is made.
It has been laid down judicially that, in the absence of contrary agreement, all assets and liabilities must be taken at a "fair value," not merely a "book value" basis, thus involving recording entries for both appreciation and depreciation of assets and liabilities.
This rule is applicable, notwithstanding the omission of a particular item from the books, e.g. investments, goodwill (Cruikshank vs Sutherland).
Obviously, the net effect of the revaluation will be a profit or loss divisible in the agreed profit or loss sharing ratios.
" 648 The real rights of the partners cannot be mutually adjusted on any other basis.
This is what happened in Ramachari.
Indeed, this is exactly what the partners in this case have done and, having done so, it is untenable for them to contend that the valuation should be on some other basis.
Once this principle is applied and the stock in trade is valued at market price, the surplus, if any, has to get reflected as the profits of the firm and has to be charged to tax.
The view taken by the High Court has held the field for about thirty years now and we see no reason to disagree even if a different view were possible.
For these reasons, we agree with the answer given by the High Court to the second question as well.
The appeal fails and is dismissed.
But we would make no order regarding costs.
R.N.J. Appeal dismissed.
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The Appellant Assessee, a partnership firm was engaged mainly, in Malaya, in money lending business since 1949 and incidental to this business was also doing the business of sale and purchase of house properties, gardens and estates.
It was reconstituted under a deed dated 26.3.1960.
The firm was dissolved on 13.3.1961 and closed its accounts with effect from that date.
In its income tax return filed on 10.4.1962 for the assessment year 1961 62 it had filed a profit and loss account wherein amount of $.1,01,248 equivalent of Rs.1,58,057 was shown as "difference on revaluation of the estates, gardens and house properties" on the dissolution of the firm.
In the memo of adjustment for income tax purposes this amount was deducted as being not assessable either as revenue or capital.
The Income Tax Officer issued notice under section 23(2) of the Act on that very day and completed the assessment also on the same day after making a petty addition of Rs.2088 paid as property tax in Malaya.
When for the subsequent year 1962 63, the assessee filed its return showing nil income stating in the forwarding letter that the Firm had been dissolved on 13.3.1961, the I.T.O. wrote to the assessee that the revaluation difference of Rs.1,58,057 should have been brought to tax in the previous year.
The assessee replied that no profit or loss could be assessed on a revaluation of assets, that the assessee was gradually winding up its business in Malaya, the surplus would be only capital 625 gains and that revalutation had been at the market price prevalent since 1954 and thus no capital gains were chargeable to tax.
Not satisfied, the I.T.O. issued a notice under section 148 read with Section 147(b) of the Income Tax Act, 1961.
The assessee filed objections.
Overruling all the objections, the Income Tax Officer completed reassessment of the assessee Firm adding back the sum of Rs. 1,58,057 to the previously assessed income.
Having failed right upto the High Court, the assessee came in appeal before this Court.
Dismissing the appeal, affirming the decision of the High Court, this Court.
HELD: (1) The proceedings u/s 147(b) were validly initiated.
The facts of this case squarely fall within the scope of propositions (2) and (4) enunciated in Kalyanji Mavji 's case.
Proposition (2) may be briefly summarised as permitting action even on a "mere change of opinion".
This is what has been doubted in the IENS case.
But, even leaving this out of consideration, there can be no doubt that the present case is squarely covered by proposition (4) set out in Kalyanji 's case.
This proposition clearly envisages a formation of opinion by the Income Tax Officer on the basis of material already on record provided the formation of such opinion is consequent on "information" in the shape of some light thrown on aspects of facts or law which the Income Tax Officer had not earlier been conscious of.
[636G 637B] The difference between the situations envisaged in propositions (2) and (4) of Kalyanji Mavji is this, that proposition (4) refers to a case where the Income Tax Officer initiates reassessment proceedings in the light of "information" obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier.
Proposition (2) no doubt covers this situation also but it is so widely expressed as to include also cases in which the Income Tax Officer, having considered all the facts and law, arrives at a particular conclusion, but reinitiates proceedings because, on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been drawn earlier, he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax.
[637F H] It is true that the return was filed and the assessment was completed on the same date.
Nevertheless, it is opposed to normal human 626 conduct than an officer would complete the assessment without looking at the material placed before him.
It is not as if the assessment record contained a large number of documents or the case raised complicated issues rendering it probable that the Income Tax Officer had missed these facts.
It is a case where there is only one contention raised before the Income Tax Officer and it is, we think, impossible to hold that the Income Tax Officer did not at all look at the return filed by the assessee or the statements accompanying it.
The more reasonable view to take would, in our opinion, be that the Income Tax Officer looked at the facts and accepted the assessee 's contention that the surplus was not taxable.
But, in doing so, he obviously missed to take note of the law laid down in Ramachari which there is nothing to show, had been brought to his notice.
when he subsequently became aware of the decision, he initiated proceedings under section 147(b).
The material which constituted information and on the basis of which the assessment was reopened was the decision in Ramachari.
this material was not considered at the time of the original assessment.
Though it was a decision of 1961 and the Income Tax Officer could have known of it had he been diligent, the obvious fact is that he was not aware of the existence of that decision then and, when he came to know about it, he rightly initiated proceedings for reassessment.
[639E 640B] The material on which the Income Tax Officer has taken action is a judicial decision.
This had been pronounced just a few months earlier to the original assessment and it is not difficult see that the Income Tax Officer must have missed it or else he could not have completed the assessment as he did.
Indeed it has not been suggested that he was aware of it and yet chose not to apply it.
It is therefore, much easier to see that the initiation of reassement proceedings here is based on definite material not considered at the time of the original assessment.
[640D E] (2) The stock in trade of a firm at the time of its disolution, has to be assessed at a fair value.
there can be no manner of doubt that, in taking accounts for purposes of dissolution, the firm and the partners, being commercial men, would value the assets only on a real basis and not at cost or at their other value appearing in the books.
The real rights of the partners cannot be mutually adjusted on any other basis.
This is what happened in Ramachari.
Indeed, this is exactly what the partners in this case have done and, having done so, it is untenable for them to contend that the valuation should be on some other basis.
Once this principle is applied and the stock in trade is valued at market price, the surplus, if any, has to get reflected as the profits of the firm 627 and has to be charged to tax.
The view taken by the High Court has held the field for about thirty years now and we see no reason to disagree even if a different view was possible.
[642B D, 647E,648A C] Popular Automobiles vs Commissioner of Income Tax, ; Sunil Siddharthbhai vs Commissioner of Income Tax, ; Pupular Workshops vs Commissioner of Income Tax ; Malabar Fisheries Co. vs Commissioner of Income Tax, ; Indian & Eastern Newspaper Society vs Commissioner of Income Tax, ; Kalyanji Mavji & Co. vs Commissioner of Income Tax, [1976] 102 I.T.R. 287; M/s A.L.A. Firm vs The Commissioner of Income Tax, Madras ; Commissioner of Income Tax vs Hind Construction Ltd., ; Commissioner of Income Tax vs Birla Gwalior (P) Ltd., ; Anandji Haridas & Co. (P) Ltd. vs S.P. Kushare, Sales Tax Officer, [1968] 21 S.T.C. 326; Commissioner of Income Tax vs Dewas Cine Corporation, ; Ramachari & Co. vs Commissioner of Income Tax, ; Maharaj Kumar Kamal Singh vs Income Tax Officer, S.C.; Commissioner of Income Tax vs A Raman & Co., S.C.; Salem Provident Fund Society Ltd. vs Commissioner of Income Tax, ; Commissioner of Income Tax vs Rathinasabapathy Mudaliar, ; Addanki Narayanappa vs Bhaskara Krishnappa, ; ; Commissioner of Income Tax vs Bankey Lal Vaidya ; Kikabhai Premchand vs Commissioner of Income Tax, [1953] 24 I.T.R. 506 (S.C.); Commissioner of Income tax vs K.A.R.K. Firm, ; Chainrup Sampathram vs Commissioner of Income Tax, ; Commissioner of Income Tax vs M/s. Shoorji Vallabhadas & Co., , Commissioner of Income Tax vs Krishnaswamy Muldaliar, ; Commissioner of Income Tax vs Ahmedabad New Cotton Mills Co. Ltd., [1930] L.R. 57 I.A. 21; Muhammad Hussain Sahib vs Abdul Gaffor Sahib, reffered to.
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Appeal No. 431 of 1963.
Appeal from the judgment and decree dated May 21, 1958 of the Punjab High Court in Civil Regular Second Appeal No. 263 P of 1952.
Tarachand Brijmohanlal, for the appellants.
B.R.L. lyengar, S.K. Mehta and K.L. Mehta, for the respondents.
The Judgment of the Court was delivered by Mudholkar, J.
The only question for consideration in this appeal by certificate from the High Court of Punjab is whether the suit for possession instituted by the respondents Lal Singh and Pratap Singh is within time.
According to the appellants the suit is governed not by article 141 of the Limitation Act, 1908 (9 of 1908) as held by the High Court but either by article 142 or by article 144 and is on that basis barred by time.
While it is conceded on behalf of the respondents that the suit is not governed by article 141 it is contended that it is governed by article 144 and not by article 142 and is within time.
In order to appreciate the contentions it is necessary to set out the relevant facts which are no longer in dispute.
Raj Kaur was in possession of 851 kanals 18 marlas of land situate in village Dhaipai in the former State of Faridkot.
Out of this land 481 kanals 7 marlas was in her possession as occupancy tenant, the landlord being the Raja of Faridkot while the remaining land was held by Smt.
Raj Kaur as Adna Malik, the Aala malik again being the said Raja of Faridkot.
In Samvat 1953 (A.D.1896) Smt.
Raj Kaur who had two daughters Prem Kaur and Mahan Kaur, adopted the former 's son Bakshi Singh and put him in possession of the whole of the land.
Bakshi Singh transferred part of the land to Pratap Singh, second son of Mahan Kaur, who is respondent No. 2 in the appeal.
Mahan Kaur had one more son Lal Singh and he is respondent No. 1 in this appeal.
In the year 1915 the Raja of Faridkot filed a suit against Bakshi Singh and Raj Kaur in the court of Sub Judge, Faridkot for a declaration that the adoption of Bakshi Singh was invalid.
This suit was decreed on February 9, 1916.
Raj Kaur died on August 14, 1930.
On February 19, 1934 the Raja filed two suits against Bakshi Singh and Pratap Singh for possession of the aforementioned lands, one pertaining to the land of which Raj Kaur was occupancy tenant and the other for that of the land of which she was Adna malik.
These suits were decreed on March 12, 1938 and in execution of the decrees obtained in these suits the Raja 65 took possession of the entire land in October 1938.
On April 7, 1948 he sold the entire land along with some other land to one Kehar Singh for Rs. 84,357 5 0.
Thereupon Gurbinder Singh and Balbinder Singh.
who are the appellants before us, filed a suit for pre emption of the land against Kehar Singh and obtained a decree in their favour.
In execution of that decree they got possession of the land on June 22, 1950.
On October 20, 1948 Mst.
Prem Kaur instituted a suit for possession of the entire land on the ground that she was the legal heir of Raj Kaur against Kehar Singh and the Raja of Faridkot.
Later she impleaded the appellants as defendants to that suit and discharged the Raja of Faridkot.
On February 17, 1950, Lal Singh, respondent No. 1, filed a suit for possession of the entire land against the Raja of Faridkot and Kehar Singh.
To that suit he joined Prem Kaur and Pratap Singh as defendants.
Later, however, Pratap Singh was transposed as a plaintiff.
Both the suits were consolidated and were tried together.
The suit of Prem Kaur was dismissed by the trial court but that of the respondents was decreed to the extent of half share in the property.
Prem Kaur and the appellants preferred appeals before the District Court but that court dismissed both the appeals.
A second appeal was taken by the appellants as well as by Prem Kaur to the High Court and cross objections were preferred by the respondents.
The High Court dismissed these appeals as well as the cross objections.
In the absence of any appeal by Prem Kaur against the decision of the High Court confirming the dismissal of her suit we have only to consider the claim of the respondents to half the property left by Raj Kaur.
Their claim was resisted by the appellants on several grounds in the courts below.
Before us, however, only one ground is pressed and that is, the suit is barred by limitation.
As already stated, according to the appellants, the suit is governed either by article 142 or by article 144 of the Limitation Act and not by article 141.
Mr. lyengar for the respondents.
does not rely upon article 141 at all.
He also contends that article 142 has no application and that the suit is governed by article 144 only.
Mr. Tarachand Brijmohanlal for the appellants also relied on article 144 in the alternative.
In order that article 142 is attracted the plaintiff must initially have been in possession of the property and should have been dispossessed by the defendant or someone through whom the defendants claim or alternatively the plaintiff should have discontinued possession.
It is no one 's case that Lal Singh ever was in possession of the property.
It is true that Pratap Singh was in possession of part of the property which particular part we do not know by reason of a transfer thereof in his favour by Bakshi Singh.
In the present suit both Lal Singh and Pratap Singh assert their claim to property by success on in accordance with the rules contained in the dastur ul amal whereas the possession of Pratap Singh for some 66 time was under a different title altogether.
So far as the present suit is concerned it must, therefore, be said that the plaintiffs respondents were never in possession as heirs of Raj Kaur and consequently article 142 would not be attracted to their suit.
It is in these circumstances that we have to consider whether under article 144 the suit is barred by time.
The starting point of limitation set out in col. 3 of article 144 is as follows: "When the possession of the defendant becomes adverse to the plaintiff".
To recapitulate the events.
Raj Kaur died on August 14, 1930 whereupon under dastur ul amal her daughters Prem Kaur and Mahan Kaur became entitled to the possession of the land.
According to the appellants the daughters succeeding their mother took an absolute estate.
Assuming that is so, what would be the position? As already stated, Bakshi Singh and Pratap Singh were in possession of the entire land belonging to Raj Kaur.
Ignoring for the time being their relationship with Raj Kaur, what can be said is that they were adversely in possession to the true owners, that is, Prem Kaur and Mahan Kaur, daughters of Raj Kaur as from August 14, 1930.
Before, however, they could perfect their title against Prem Kaur and Mahan Kaur the Raja instituted a suit for possession, obtained a decree thereunder and actually entered into possession to the entire land in October, 1938.
Though the Raja obtained possession under a decree of the court he was in the eye of law nothing but a trespasser in so far as the heirs of Raj Kaur, her daughters Prem Kaur and Mahan Kaur were concerned.
Mahan Kaur had in fact died on July 13, 1938, i.e. before the Raja obtained possession.
Therefore, it is more accurate to say that the possession of the Raja became adverse to Prem Kaur and to the respondents Lal Singh and Pratap Singh as from October, 1938.
Kehar Singh who was a transferee from the Raja stood in the Raja 's position and got the benefit of the Raja 's adverse possession.
Similarly the appellants who had preempted these lands under the decree obtained against Kehar Singh got advantage not only of the Raja 's adverse possession but also of Kehar Singh 'section The sum total of the adverse possession of these three persons at the date of the respondent 's suit would, however, be less than 12 years and so the respondents ' suit could not be said to be barred by article 144 if the starting point of limitation is taken to be some day in October, 1938.
Mr. Tarachand Brijmohanlal, however, advanced an interesting argument to the effect that if persons entitled to immediate possession of land are somehow kept out of possession may be by different trespassers for a period of 12 years or over, their suit will be barred by time.
He points out that as from the death of Raj Kaur her daughters, through one of whom the respondents claim.
were kept out of possession by trespassers and that from the date of Raj Kaur 's death right up to the date of the respondents 67 suit, that is, for a period of nearly 20 years trespassers were in possession of Mahan Kaur 's, and after her death, the respondents share in the land, their suit must therefore be regarded ' as barred by time.
In other words the learned counsel wants to tack on the adverse possession of Bakshi Singh and Pratap Singh to the adverse possession of the Raja and those who claim through him.
In support of the contention reliance is placed by learned counsel on the decision in Ramayya vs Kotamma(1).
In order to appreciate what was decided in that case a brief resume of the facts of that case is necessary.
Mallabattudu, the last male holder of the properties to which the suit related, died in the 'year 1889 leaving two daughters Ramamma and Govindamma.
The former died in 1914.
The latter surrendered her estate to her two sons.
The plaintiff who was a transferee from the sons of Govindamma instituted a suit for recovery of possession of Mallabattudu 's property against Punnayya, the son of Ramamma to whom Mallabattudu had made an oral gift of his properties two years before his death.
Punnayya was minor at the date of gift and his eider brother Subbarayudu was managing the property on his behalf.
Punnayya, however, died in 1894 while still a minor and thereafter his brothers Subbarayudu and two others were in possession of the property.
It would seem that the other brothers died and Subbarayudu was the last surviving member of Punnayya 's family.
Upon Subbarayudu 's death the properties were sold by his daughters to the third defendant.
The plaintiffs appellants suit failed on the ground of limitation.
It was argued on his behalf in the second appeal before the High Court that as the gift to Punnayya was oral it was invalid, that consequently Punnayya was in possession as trespasser, that on Punnayya 's death his heir would be his mother, that as Subbarayudu continued in possession Subbarayudu 's possession was also that of a trespasser, that as neither Subbarayudu nor Punnayya completed possession for 12 years they could not tack on one to the other and that the plaintiff claiming through the nearest reversioner is not barred.
The contention for the respondents was that there was no break in possession so as to retest the properties in the original owners, that Punnayya and Subbarayudu cannot be treated as successive trespassers and that in any event the real owner having been out of possession for over 12 years the suit was barred by limitation.
The High Court following the decision of Mookerjee J. in Mohendra Nath vs Shamsunnessa(3)held that time begins to run against the last full owner if he himself was dispossessed and the operation of the law of limitation would not :be arrested by the fact that on his death he was succeeded by his widow, daughter or mother, as the cause of action cannot be prolonged by the mere transfer of title.
It may be mentioned that as Mallabattudu had given up possession to Punnayya under an invalid gift article 142 of the Limitation Act was clearly attracted.
The (1) Mad. 370.
(2) , 164.
68 sons of Govindamma from whom the appellant had purchased the suit properties claimed through Mallabattudu and since time began to run against him from 1887 when he discontinued possession it did not cease to run by the mere fact of his death.
In a suit to which that article applies the plaintiff has to prove his possession within 12 years of his suit.
Therefore, so long as the total period of the plaintiff 's exclusion from possession is, at the date of the plaintiff 's suit, for a period of 12 years or over, the fact that this exclusion was by different trespassers will not help the plaintiff provided there was a continuity in the period of exclusion.
That decision is not applicable to the facts of the case before us.
This is a suit to which article 144 is attracted and the burden is on the defendant to establish that he was in adverse possession for 12 years before the date of suit and for computation of this period he can avail of the adverse possession of any person or persons through whom he claims but not the adverse possession of independent trespassers.
In so far as the adverse possession of Bakshi Singh and Pratap Singh is concerned it began upon the death of Raj Kaur and not during her life time.
That being so, article 142 cannot possibly be attracted whereas the Madras decision turns upon a case to which article 142 applied.
No doubt, there, on behalf of the plaintiff appellant it was argued on the authority of Agency Co. vs Short( ') that in cases of successive trespassers limitation ceases to run against the lawful owner of the land after an intruder has relinquished his possession; that on the death of Punnayya it must be taken that there was an interruption in the possession and that there was an interval between Punnayya 's death and Subbarayudu 's taking possession in his own right however minute the interval may be and that except in the case of succession or revolution all other cases would fall within the principle enunciated in Agency Co 's case(1).
The learned Judges did not accept the contention but relying upon the decision in Willis vs Earl Howe(2) and a passage 'in Dart on Vendors and Purchasers, Vol.
17th ed.
p. 474 held that the suit was barred by time.
It may be pointed out that on Punnayya 's death his mother would be the heir and that it was established in that case that she was living with his brother Subbarayudu and his other brothers.
Subbarayudu would therefore, be a presumptive reversioner on the death of his mother and there was evidence to show that she was a consenting party to Subbaryudu 's enjoying the properties after Punnayya 's death.
It is under these circumstances that the High Court found it difficult to hold that there was a fresh trespass by Subbarayudu after the death of Punnayya.
On the other hand, according to them, there was a continuity of possession because the person who continued to hold possession was the presumptive heir of the deceased.
From the facts of the case it will be clear that what was tacked on was not the possession of independent trespassers at all.
In the case before us what (1)[1888] 13 A.C. 793.
(2) 69 is being sought to be tacked on to the possession of the Raja and those who claim through him is the possession of Bakshi Singh and Pratap Singh.
The Raja in his suit against Bakshi Singh challenged the right of Bakshi Singh and Pratap Singh to possession on the ground that they were trespassers.
As it has turned out, the possession of the Raja, though obtained under the decree of a civil court, was in itself a trespass on the rights of the persons who were in law entitled to possession of property.
Thus this is a case of one trespasser trespassing against another trespasser.
There is no connection between the two and, therefore, in law their possession cannot be tacked on to one another.
As pointed out by Varadachariar J., in Rajagopala Naidu vs Ramasubramania Ayyar(1).
"Further the doctrine of independent trespassers will come in only when the second man trespasses upon the possession of the first or the first man abandons possession.
" Where it applies the principle laid down in Agency Co 's(1) case would apply and preclude the tacking of possession of successive trespassers.
The following observations of Lord Macnaghten in that case are pertinent and run thus: "They are of opinion that if a person enters upon the land of another and holds possession for a time, and then, without having acquired title under the statute, abandons possession, the rightful owner, on the abandonment, is in the same position in all respects as he was before the intrusion took place.
There is no one against whom he can bring an action.
He cannot make any entry upon himself.
There is no positive enactment, nor is there any principle of law.
which requires him to do any act.
to issue any notice or to perform ,my 'ceremony in order to rehabilitate himself.
No new departure is necessary.
The possession of the intruder, ineffectual for the purpose or transferring title, ceases upon its abandonment to be effectual for any purpose.
It does not leave behind it any cloud on the title of the rightful owner, or any secret process at work for the possible benefit in time to come of some casual interloper or lucky vagrant.
There is not, in their Lord ships ' opinion, any analogy between the case supposed and the case of successive disabilities mentioned in the statute.
There the statute 'continues to run ' because there is a person in possession in whose favour it is running.
" This view has not been departed from in any case.
At any rate none was brought to our notice where it has not been followed.
Apart from that what we are concerned with is the language used by the legislature in the third column of article 144.
The starting point of limitation there stated is the date when the possession of (1) A.LR. 70 the defendant becomes adverse to the plaintiff.
The word "defendant" is defined in section 2(4) of the Limitation Act thus: " 'defendant ' includes any person from or through whom a defendant derives his liability to be used".
No doubt, this is an inclusive definition but the gist of it is the existence of a jural relationship between different persons.
There can be no jural relationship between two independent trespassers.
Therefore, where a defendant in possession of property is sued by a person who has title to it but is out of possession what he has to show in defence is that he or anyone through whom he claims has been in possession for more than the statutory period.
An independent trespasser not being such a person the defendant is not entitled to tack on the previous possession of that person to his own possession.
In our opinion, therefore, the respondents ' suit is within time and has been rightly decreed by the courts below.
We dismiss this appeal with costs.
Appeal dismissed.
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One Mst.
Raj Kaur was holding certain lands on different tenures under the Raja of Faridkot.
She had two daughters.
She adopted the son of one of them and put him in possession of all the lands.
He transferred a part of the lands to the second respondent who was son of the other daughter of Raj Kaur.
After Raj Kaur 's dearth the Raja filed suits for possession of the land, and in execution of the decree he obtained in those suits, took possession of the entire land, in October, 1938.
He then transferred the land, but the transferee was dispossessed by the appellants in June 1950, in execution of a decree they obtained, in a suit for preemption filed by them against the transferee.
The second respondent 's mother had died in 1938 and her sons the first and second respondents, filed a suit for possession of the entire land in February 1950, as heirs of Raj Kaur, but it was decreed only to the extent of their half share, and the decree was affirmed by the High Court.
In the appeal to this Court it was contended that the suit was governed either by article 142 or article 144 of the Indian Limitation Act, 1908, and on either basis, was barred by time.
HELD: (i) Article 142 would not be attracted to the suit.
In order that the article may be attracted the plaintiff must initially have been in possession of the property and should have been dispossessed by the defendant or some one through whom the defendant claims or alternatively, the plaintiff should have discontinued possession.
It was no one 's case that the first respondent was ever in possession of the property.
As regards the second respondent 's possession at one time of a part of the property, it was by reason of a transfer by the adopted son.
The claim in the instant case, however, was by succession, under a different title altogether, and so it must be held that the plaintiffs respondents, as heirs of Raj Kaur, were never in possession of the land.
[65H] (ii) Article 144 was applicable to the suit, but the suit was not barred by time.
Adverse possession against the respondents started in October.
1938, when the Raja took possession of the land.
To that adverse possession could be added that of his transferee and that of the appellants who had preempted the lands under the decree obtained by them against the transferee.
But, the sum total of the adverse possession of all those persons at the date of the respondent 's suit would be less than 12 years.
The adverse possession of the adopted son could not be tacked on to the adverse possession of the Raja and those who claim through him, because, in a suit to which Art 144 is attracted, the burden is on the defendant to establish that he was in adverse possession for 12 years before the date of suit, and for computation of that period, he can avail himself of the adverse possession of any person or persons through whom he claims but not the adverse possession of independent tres 64 passers.
The starting point of limitation in article 144 is the date when the possession of the defendant becomes adverse to the plaintiff.
The gist of the definition of the word "defendant" in section 2(4) of the Act is the existence of a jural relationship between the different persons referred to in the definition, and there can be no jural relationship between two independent trespassers.
[66 F H; 68C; 70B].
Ramayya vs Kotamma, Mad. 370, explained.
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