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Civil Appeal No.94 of 1949.
107 834 Appeal from a judgment and decree of the High Court of Judi cature at Patna in Appeal from Appellate Decree No. 97 of 1946 (Mannohar Lall and Mukherji JJ.) dated 23rd Decem ber, 1947, confirming the judgment of the District Judge of Purulia in Appeal No. 159 of 1944.
S.P. Sinha (P. K. Bose, with him) for the appel lant.
N.C. Chatterjee and Panchanan Ghosh (Chandra Narayan Naik, with them) for the respondent. 1950.
December 1.
The Judgment of the Court was deliv ered by PATANJALI SASTRI J.
This appeal arises out of a suit brought by the respondent in the court of the Subordinate Judge, Dhanbad, for recovery of arrears of royalty and cess from the appellant and another alleged to be due under a compromise decree passed on the 6th March, 1923, in a previ ous suit between the predecessors in interest of the par ties.
The only plea which is material for the purpose of this appeal is that the compromise decree not having been registered was inadmissible in evidence.
The courts below held that the document did not require registration and gave effect to its terms in decreeing the suit.
The second defendant has preferred this appeal.
The facts are not now in dispute and may be briefly stated.
On 11th March, 1921, one Kumar Krishna Prasad Singh (hereinafter referred to as Kumar) granted a perma nent lease of the right to the underground coal in 5,800 bighas of land belonging to him to Shibsaran Singh and Sitaram Singh (hereinafter referred to as the Singhs) by a registered patta stipulating for a salami of Rs. 8,000 and royalty at the rate of 2a.
per ton of coal raised subject to a minimum of Rs. 8,000 and for certain other cesses and interest.
On 7th June, 1921, Kumar executed another perma nent patta leasing the right to the coal in 500 bighas out of the 5,800 bighas referred to above to one Prayngji Bal lavji Deoshi and his son Harakchand Deoshi (hereinafter referred to as the Deoshis).
By this document.
835 the Deoshis agreed inter alia to pay royalty at the rate of 2a. per ton on all classes of coal raised subject to a minimum of Rs. 750 a year.
The Singhs feeling themselves aggrieved by the latter transaction brought a title suit (No. 1291 of 1921) in the Court of the Subordinate Judge of Dhanbad for a declaration of their title and for possession of the 500 bighas leased to the Deoshis under the aforesaid patta of 7th June, 1921.
To that suit Kumar was made a party as defendant No. 3, the Deoshis being defendants 1 and 2.
The suit was however cornpromised on 6th March, 1923, by all the parties and a decree based on the compromise was also passed on the same day.
The interest of the Singhs was brought to sale in 193S in execution of a decree obtained against them and was purchased by the plaintiff who insti tuted the presnt suit on 3rd October, 1942, claiming the royalty and cesses payable under the compromise decree for the period from Pous 1345 to Asadh 1349 B.S. from defendants 1 and 2 as the representatives of the Deoshis who entered into the compromise of March, 1923.
In order to appreciate the contentions of the parties, it is necessary to set out the relevant terms of the compro mise decree which are as follows : "The plaintiffs (the Singhs) within two months from this date shall pay Rs. 8,000 as salami to defendant No. 3 (Kumar).
Otherwise all the terms of the compromise Will stand cancelled and the plaintiffs shall not be competent to claim any right to or possession over the.land covered by the patta dated 11th March, 1921.
The patta which defend ant No. 3 executed in favour of the plaintiffs in respect of 5,800 bighas of coal land in village Rahraband shall remain in force, and the plaintiffs will get a decree of declara tion of their right and title to the 500 bighas of coal land in dispute but defendants 1 and 2 (the Deoshis) shall hold possession as tenants.
Besides the terms mentioned below, defendants 1 and 2 shall remain bound by all the remaining terms under which they took settlement of the 500 bighas of coal land from defendant No. 3 under 836 patta and Kabuliyat, and both the defendants 1 and 2 shall possess the same under the plaintiffs from generation to generation and all the terms of the said patta and Kabuliyat shall remain effective and in force between them.
Both the defendants 1 and 2 shall remain bound to pay to the plain tiffs commission at the rate of 2a.
per ton on all sorts of coal instead of 2a.
a ton as stated before in the patta of 5,800 bighas of land settled with the plaintiffs.
The plaintiffs shall pay to defendant No. 3 in future the mini mum royalty of Rs. 6,000 instead of Rs. 8,000 as stipulated in the original patta of 11 th March 1921 and commission at the rate of la.
a ton in place of 2a.
a ton as stipulat ed in the patta of March 21 .
Unless the plaintiffs pay to the defendant No. 3 Rs. 8,000 within 2 months from this day they shall not be competent to take out execution of this decree, nor shall they be competent to take posses sion of the land in dispute.
The defendants 1 and 2 within one month from the date of payment of Rs. 8,000 as aforesaid to defendant No. 3 shall execute a new Kabuliyat in favour of the plaintiff in respect of the modified terms stated above, i.e., on the condition to pay commission at the rate of 2a.
per ton.
In the new patta which defendant No. 3 will execute in favour of the plaintiffs he shall embody the condition that the annual minimum royalty will be Rs. 6,000 instead of Rs. 8,000 and commission will be at the rate of la. 9p.
per ton in place of 2a.
per ton as mentioned in the aforesaid patta.
If the defendant No. 3 does not execute the parts on the aforesaid modified terms in favour 'of the plaintiffs within the time aforesaid and both the defendants 1 and 2 also do not execute a kabuliyat on the aforesaid modified terms, then this very rafanama shall be treated as the parts and kabuliyat, and the plaintiffs in accordance with the terms of the rafanama shall pay to defendant No. 3, Rs. 6,000 only as minimum royalty and commission at the rate of la.
per ton with respect to 5,800 bighas and shall continue to realise commission at the rate of 2a. 6p. per ton from defendants 1 and 2 who shall remain bound to pay the same.
" 837 The answer to the question whether this compromise decree requires registration depends on the legal effect of the changes in the status quo ante of the parties brought about by the document.
A careful analysis reveals the following alterations : (1) In the lease to the Singhs, the rate of royalty or commission was reduced from 2a.
per ton of coal raised to la.
per ton and the minimum royalty was reduced from Rs. 8,000 to Rs. 6,000 while the area of coal land in their khas possession was reduced by 500 bighas. (2) In the lease to the Deoshis the rate of royalty or commission was enhanced from 2a.
per ton to 2a.
per ton and tiffs was made payable to the Singhs.
The Singhs and the Deoshis were brought into a new legal relationship, the former accepting the latter as tenants holding the disputed 500 bighas under them in consideration of the latter agreeing to pay the enhanced royalty to the former. (4) The whole arrangement was made conditional on the Singhs paying Rs. 8,000 to Kumar within 2 months from the date of the compromise, it being expressly provided that the Singhs were not to be entitled to execute the decree or to take possession of the disputed area of 503 bighas which evidently had not till then passed into their possession.
Now, sub section (1) of section 17 of the , enumerates five categories of documents of which regis tration is made compulsory which include" (d) leases of immoveable property from year to year, or for any term exceeding one year, or reserving a yearly rent;".
Sub sec tion (2) however provided that "nothing in clauses (b) and (c) of sub section (1)applies to . (vi) any decree or order of court.
" It may be mentioned in passing that this clause was amended with affect from the 1st April, 1930, by the , so as to exclude from the scope of the exception compromise decrees comprising immovable property other than that which is the subject matter of the suit.
But 838 the amendment cannot affect the document here in question which came into existence in 1923.
Before the amendment, the clause was held to cover even compromise decrees comprising immovable property which was not the subject matter of the suit: [Vide Hemanta Kumari Debi vs Midnapur Zamindari Co. ( ')].
That decision applies to the present case and obviates the objection that because the compromise in question covered also the remaining 5,300 bighas which were not the subject matter of the title suit of 1921, it was outside the scope of the exception in sub section (2), clause (vi).
The only question, therefore, is whether the compromise decree is a "lease" [which expression includes "an agreement to lease" by the definition in section 2 (7)] within the meaning of el.
(d) of sub section (1).
It is obvious that if the compromise decree fails within clause (d) of sub section (1) it would not be protected under clause (vi) of sub section (2) which excepts only documents falling under the categories (b) and (c) of sub section (1).
The High Court was of opinion that, on a proper construction of the terms of the compromise, it did not fall under clause (d).
Mano har Lall J., who delivered the leading judgment, observed: "It was a tripartite agreement embodied in the decree of the court and was, therefore, exempt from registration.
It will be oh.served also that so far as the defendants were con cerned, their possession of the 500 bighas was not inter fered with and they still remained in possession as the lessees, but instead of paying the royalty to the plaintiffs it was agreed between all the parties that the defendants would pay the royalty in future to Shibsaran and Sitcram.
If the matter had stood there, the learned Advocate for the appellant could not have seriously contested the position, but he vehemently argued that when the agreement was not to pay the same amount of royalty or commission as previously agreed to but an altered amount of royalty and commission, the document should be held to fall within the mischief of section 17 (1)(d)of the (1) P.C. 839 .
The answer to this contention is, as I have stated just now, to be found in the Full Bench decision of this court :" [see Charu Chandra Mitra 's case ()].
It was there held that a mere alteration of the rent reserved does not make the transaction a new lease so as to bring it within clause (d)of subsection (1).
We are unable to share this view.
It oversimplifies the compromise transaction which, in our opinion, involves much more than a mere alteration of the royalties stipulated for in the previous pattas executed by Kumar.
Nor can we accept the suggestion of Mr. Chatterjee for the respondents theft the compromise operated as an assignment to the Singhs by Kumar of the latter 's reversion under the "lease granted to the Deoshis and all that the latter did was to acknowledge the Singhs as their landlords and attern to them.
On tiffs view it was said that the transaction would not fall under clause (d), although it would fall under clause (b) but then would be saved by the exception in clause (vi) of sub section (2).
The argument, however, overlooks that Kumar had leased the area of 5,800 bighas to the Singhs by his patta dated 11th March, 1921, and the compromise by providing that the Singhs should pay the reduced royalty of 1a.
per ton in respect of the whole area preserved Kumar 's reversion intact.
He could not therefore be deemed to have assigned any part of his inter est in 5,800 bighas as landlord to the Singhs who continue to hold the entire extent as tenants under him.
What the compromise really did was.
as stated already, to bring the Singhs and the Deoshis into a new legal relationship as underlessor and under lessee in respect of 500 bighas which were the subject matter of the title suit; in other words, its legal effect was to create a perpetual underlease be tween the Singhs and the Deoshis which would clearly fall under clause (d) but for the circumstance that it was to take effect only on condition float the Singhs paid Rs. 8,000 to Kumar within 2 months (1) 840 thereafter.
As pointed out by the Judicial Committee in Hemanta Kumar 's case (1) "An agreement for a lease, which a lease is by the statute declared to include, must, in their Lordships ' opinion, be a document which effects an actual demise and operates as a lease .
The phrase which in the context where it occurs and in the statute in which it is found, must in their opinion relate to some document which creates a present and immediate interest in the land.
" The compromise decree expressly provides that unless the sum of Rs. 8,000 was paid within the stipulated time the Singhs were not to execute the decree or to take possession of the disputed property.
Until the payment was made it was impossible to determine whether there would be any under lease or not.
Such a contingent agreement is not within clause (d) and although it is covered by clause (b). is excepted by clause (vi) of sub section ( '2).
We therefore agree with the conclusion of the High Court though on dif ferent grounds and dismiss the appeal with costs.
Appeal dismisseel.
|
An agreement for a lease, which a lease is by the Indian declared to include, must be a document which effects an actual demise and operates as a lease.
It must create present and immediate interest in land.
Where a litigation between two persons A and B who claimed to be tenants under C was settled by a compromise decree the effect of which was to create a perpetual underlease between A and B which was to take effect only on condition that A paid Rs. 8,000 to C within a fixed period: Held, that such a contingent agreement was not "a lease" within el.
(a) of section 17 (t) of the Indian , and even though it was covered by cl.
(b) of the said sec tion it was exempt from registration under el.
(vi) of subs.
(2) of section 17.
Hemanta Kumari Debi vs Midnapur Zamindari Co. (I P.C.) relied on.
|
Civil Appeal No.94 of 1949.
107 834 Appeal from a judgment and decree of the High Court of Judi cature at Patna in Appeal from Appellate Decree No. 97 of 1946 (Mannohar Lall and Mukherji JJ.) dated 23rd Decem ber, 1947, confirming the judgment of the District Judge of Purulia in Appeal No. 159 of 1944.
S.P. Sinha (P. K. Bose, with him) for the appel lant.
N.C. Chatterjee and Panchanan Ghosh (Chandra Narayan Naik, with them) for the respondent. 1950.
December 1.
The Judgment of the Court was deliv ered by PATANJALI SASTRI J.
This appeal arises out of a suit brought by the respondent in the court of the Subordinate Judge, Dhanbad, for recovery of arrears of royalty and cess from the appellant and another alleged to be due under a compromise decree passed on the 6th March, 1923, in a previ ous suit between the predecessors in interest of the par ties.
The only plea which is material for the purpose of this appeal is that the compromise decree not having been registered was inadmissible in evidence.
The courts below held that the document did not require registration and gave effect to its terms in decreeing the suit.
The second defendant has preferred this appeal.
The facts are not now in dispute and may be briefly stated.
On 11th March, 1921, one Kumar Krishna Prasad Singh (hereinafter referred to as Kumar) granted a perma nent lease of the right to the underground coal in 5,800 bighas of land belonging to him to Shibsaran Singh and Sitaram Singh (hereinafter referred to as the Singhs) by a registered patta stipulating for a salami of Rs. 8,000 and royalty at the rate of 2a.
per ton of coal raised subject to a minimum of Rs. 8,000 and for certain other cesses and interest.
On 7th June, 1921, Kumar executed another perma nent patta leasing the right to the coal in 500 bighas out of the 5,800 bighas referred to above to one Prayngji Bal lavji Deoshi and his son Harakchand Deoshi (hereinafter referred to as the Deoshis).
By this document.
835 the Deoshis agreed inter alia to pay royalty at the rate of 2a. per ton on all classes of coal raised subject to a minimum of Rs. 750 a year.
The Singhs feeling themselves aggrieved by the latter transaction brought a title suit (No. 1291 of 1921) in the Court of the Subordinate Judge of Dhanbad for a declaration of their title and for possession of the 500 bighas leased to the Deoshis under the aforesaid patta of 7th June, 1921.
To that suit Kumar was made a party as defendant No. 3, the Deoshis being defendants 1 and 2.
The suit was however cornpromised on 6th March, 1923, by all the parties and a decree based on the compromise was also passed on the same day.
The interest of the Singhs was brought to sale in 193S in execution of a decree obtained against them and was purchased by the plaintiff who insti tuted the presnt suit on 3rd October, 1942, claiming the royalty and cesses payable under the compromise decree for the period from Pous 1345 to Asadh 1349 B.S. from defendants 1 and 2 as the representatives of the Deoshis who entered into the compromise of March, 1923.
In order to appreciate the contentions of the parties, it is necessary to set out the relevant terms of the compro mise decree which are as follows : "The plaintiffs (the Singhs) within two months from this date shall pay Rs. 8,000 as salami to defendant No. 3 (Kumar).
Otherwise all the terms of the compromise Will stand cancelled and the plaintiffs shall not be competent to claim any right to or possession over the.land covered by the patta dated 11th March, 1921.
The patta which defend ant No. 3 executed in favour of the plaintiffs in respect of 5,800 bighas of coal land in village Rahraband shall remain in force, and the plaintiffs will get a decree of declara tion of their right and title to the 500 bighas of coal land in dispute but defendants 1 and 2 (the Deoshis) shall hold possession as tenants.
Besides the terms mentioned below, defendants 1 and 2 shall remain bound by all the remaining terms under which they took settlement of the 500 bighas of coal land from defendant No. 3 under 836 patta and Kabuliyat, and both the defendants 1 and 2 shall possess the same under the plaintiffs from generation to generation and all the terms of the said patta and Kabuliyat shall remain effective and in force between them.
Both the defendants 1 and 2 shall remain bound to pay to the plain tiffs commission at the rate of 2a.
per ton on all sorts of coal instead of 2a.
a ton as stated before in the patta of 5,800 bighas of land settled with the plaintiffs.
The plaintiffs shall pay to defendant No. 3 in future the mini mum royalty of Rs. 6,000 instead of Rs. 8,000 as stipulated in the original patta of 11 th March 1921 and commission at the rate of la.
a ton in place of 2a.
a ton as stipulat ed in the patta of March 21 .
Unless the plaintiffs pay to the defendant No. 3 Rs. 8,000 within 2 months from this day they shall not be competent to take out execution of this decree, nor shall they be competent to take posses sion of the land in dispute.
The defendants 1 and 2 within one month from the date of payment of Rs. 8,000 as aforesaid to defendant No. 3 shall execute a new Kabuliyat in favour of the plaintiff in respect of the modified terms stated above, i.e., on the condition to pay commission at the rate of 2a.
per ton.
In the new patta which defendant No. 3 will execute in favour of the plaintiffs he shall embody the condition that the annual minimum royalty will be Rs. 6,000 instead of Rs. 8,000 and commission will be at the rate of la. 9p.
per ton in place of 2a.
per ton as mentioned in the aforesaid patta.
If the defendant No. 3 does not execute the parts on the aforesaid modified terms in favour 'of the plaintiffs within the time aforesaid and both the defendants 1 and 2 also do not execute a kabuliyat on the aforesaid modified terms, then this very rafanama shall be treated as the parts and kabuliyat, and the plaintiffs in accordance with the terms of the rafanama shall pay to defendant No. 3, Rs. 6,000 only as minimum royalty and commission at the rate of la.
per ton with respect to 5,800 bighas and shall continue to realise commission at the rate of 2a. 6p. per ton from defendants 1 and 2 who shall remain bound to pay the same.
" 837 The answer to the question whether this compromise decree requires registration depends on the legal effect of the changes in the status quo ante of the parties brought about by the document.
A careful analysis reveals the following alterations : (1) In the lease to the Singhs, the rate of royalty or commission was reduced from 2a.
per ton of coal raised to la.
per ton and the minimum royalty was reduced from Rs. 8,000 to Rs. 6,000 while the area of coal land in their khas possession was reduced by 500 bighas. (2) In the lease to the Deoshis the rate of royalty or commission was enhanced from 2a.
per ton to 2a.
per ton and tiffs was made payable to the Singhs.
The Singhs and the Deoshis were brought into a new legal relationship, the former accepting the latter as tenants holding the disputed 500 bighas under them in consideration of the latter agreeing to pay the enhanced royalty to the former. (4) The whole arrangement was made conditional on the Singhs paying Rs. 8,000 to Kumar within 2 months from the date of the compromise, it being expressly provided that the Singhs were not to be entitled to execute the decree or to take possession of the disputed area of 503 bighas which evidently had not till then passed into their possession.
Now, sub section (1) of section 17 of the , enumerates five categories of documents of which regis tration is made compulsory which include" (d) leases of immoveable property from year to year, or for any term exceeding one year, or reserving a yearly rent;".
Sub sec tion (2) however provided that "nothing in clauses (b) and (c) of sub section (1)applies to . (vi) any decree or order of court.
" It may be mentioned in passing that this clause was amended with affect from the 1st April, 1930, by the , so as to exclude from the scope of the exception compromise decrees comprising immovable property other than that which is the subject matter of the suit.
But 838 the amendment cannot affect the document here in question which came into existence in 1923.
Before the amendment, the clause was held to cover even compromise decrees comprising immovable property which was not the subject matter of the suit: [Vide Hemanta Kumari Debi vs Midnapur Zamindari Co. ( ')].
That decision applies to the present case and obviates the objection that because the compromise in question covered also the remaining 5,300 bighas which were not the subject matter of the title suit of 1921, it was outside the scope of the exception in sub section (2), clause (vi).
The only question, therefore, is whether the compromise decree is a "lease" [which expression includes "an agreement to lease" by the definition in section 2 (7)] within the meaning of el.
(d) of sub section (1).
It is obvious that if the compromise decree fails within clause (d) of sub section (1) it would not be protected under clause (vi) of sub section (2) which excepts only documents falling under the categories (b) and (c) of sub section (1).
The High Court was of opinion that, on a proper construction of the terms of the compromise, it did not fall under clause (d).
Mano har Lall J., who delivered the leading judgment, observed: "It was a tripartite agreement embodied in the decree of the court and was, therefore, exempt from registration.
It will be oh.served also that so far as the defendants were con cerned, their possession of the 500 bighas was not inter fered with and they still remained in possession as the lessees, but instead of paying the royalty to the plaintiffs it was agreed between all the parties that the defendants would pay the royalty in future to Shibsaran and Sitcram.
If the matter had stood there, the learned Advocate for the appellant could not have seriously contested the position, but he vehemently argued that when the agreement was not to pay the same amount of royalty or commission as previously agreed to but an altered amount of royalty and commission, the document should be held to fall within the mischief of section 17 (1)(d)of the (1) P.C. 839 .
The answer to this contention is, as I have stated just now, to be found in the Full Bench decision of this court :" [see Charu Chandra Mitra 's case ()].
It was there held that a mere alteration of the rent reserved does not make the transaction a new lease so as to bring it within clause (d)of subsection (1).
We are unable to share this view.
It oversimplifies the compromise transaction which, in our opinion, involves much more than a mere alteration of the royalties stipulated for in the previous pattas executed by Kumar.
Nor can we accept the suggestion of Mr. Chatterjee for the respondents theft the compromise operated as an assignment to the Singhs by Kumar of the latter 's reversion under the "lease granted to the Deoshis and all that the latter did was to acknowledge the Singhs as their landlords and attern to them.
On tiffs view it was said that the transaction would not fall under clause (d), although it would fall under clause (b) but then would be saved by the exception in clause (vi) of sub section (2).
The argument, however, overlooks that Kumar had leased the area of 5,800 bighas to the Singhs by his patta dated 11th March, 1921, and the compromise by providing that the Singhs should pay the reduced royalty of 1a.
per ton in respect of the whole area preserved Kumar 's reversion intact.
He could not therefore be deemed to have assigned any part of his inter est in 5,800 bighas as landlord to the Singhs who continue to hold the entire extent as tenants under him.
What the compromise really did was.
as stated already, to bring the Singhs and the Deoshis into a new legal relationship as underlessor and under lessee in respect of 500 bighas which were the subject matter of the title suit; in other words, its legal effect was to create a perpetual underlease be tween the Singhs and the Deoshis which would clearly fall under clause (d) but for the circumstance that it was to take effect only on condition float the Singhs paid Rs. 8,000 to Kumar within 2 months (1) 840 thereafter.
As pointed out by the Judicial Committee in Hemanta Kumar 's case (1) "An agreement for a lease, which a lease is by the statute declared to include, must, in their Lordships ' opinion, be a document which effects an actual demise and operates as a lease .
The phrase which in the context where it occurs and in the statute in which it is found, must in their opinion relate to some document which creates a present and immediate interest in the land.
" The compromise decree expressly provides that unless the sum of Rs. 8,000 was paid within the stipulated time the Singhs were not to execute the decree or to take possession of the disputed property.
Until the payment was made it was impossible to determine whether there would be any under lease or not.
Such a contingent agreement is not within clause (d) and although it is covered by clause (b). is excepted by clause (vi) of sub section ( '2).
We therefore agree with the conclusion of the High Court though on dif ferent grounds and dismiss the appeal with costs.
Appeal dismisseel.
|
Civil Appeal No.94 of 1949.
107 834 Appeal from a judgment and decree of the High Court of Judi cature at Patna in Appeal from Appellate Decree No. 97 of 1946 (Mannohar Lall and Mukherji JJ.) dated 23rd Decem ber, 1947, confirming the judgment of the District Judge of Purulia in Appeal No. 159 of 1944.
S.P. Sinha (P. K. Bose, with him) for the appel lant.
N.C. Chatterjee and Panchanan Ghosh (Chandra Narayan Naik, with them) for the respondent. 1950.
December 1.
The Judgment of the Court was deliv ered by PATANJALI SASTRI J.
This appeal arises out of a suit brought by the respondent in the court of the Subordinate Judge, Dhanbad, for recovery of arrears of royalty and cess from the appellant and another alleged to be due under a compromise decree passed on the 6th March, 1923, in a previ ous suit between the predecessors in interest of the par ties.
The only plea which is material for the purpose of this appeal is that the compromise decree not having been registered was inadmissible in evidence.
The courts below held that the document did not require registration and gave effect to its terms in decreeing the suit.
The second defendant has preferred this appeal.
The facts are not now in dispute and may be briefly stated.
On 11th March, 1921, one Kumar Krishna Prasad Singh (hereinafter referred to as Kumar) granted a perma nent lease of the right to the underground coal in 5,800 bighas of land belonging to him to Shibsaran Singh and Sitaram Singh (hereinafter referred to as the Singhs) by a registered patta stipulating for a salami of Rs. 8,000 and royalty at the rate of 2a.
per ton of coal raised subject to a minimum of Rs. 8,000 and for certain other cesses and interest.
On 7th June, 1921, Kumar executed another perma nent patta leasing the right to the coal in 500 bighas out of the 5,800 bighas referred to above to one Prayngji Bal lavji Deoshi and his son Harakchand Deoshi (hereinafter referred to as the Deoshis).
By this document.
835 the Deoshis agreed inter alia to pay royalty at the rate of 2a. per ton on all classes of coal raised subject to a minimum of Rs. 750 a year.
The Singhs feeling themselves aggrieved by the latter transaction brought a title suit (No. 1291 of 1921) in the Court of the Subordinate Judge of Dhanbad for a declaration of their title and for possession of the 500 bighas leased to the Deoshis under the aforesaid patta of 7th June, 1921.
To that suit Kumar was made a party as defendant No. 3, the Deoshis being defendants 1 and 2.
The suit was however cornpromised on 6th March, 1923, by all the parties and a decree based on the compromise was also passed on the same day.
The interest of the Singhs was brought to sale in 193S in execution of a decree obtained against them and was purchased by the plaintiff who insti tuted the presnt suit on 3rd October, 1942, claiming the royalty and cesses payable under the compromise decree for the period from Pous 1345 to Asadh 1349 B.S. from defendants 1 and 2 as the representatives of the Deoshis who entered into the compromise of March, 1923.
In order to appreciate the contentions of the parties, it is necessary to set out the relevant terms of the compro mise decree which are as follows : "The plaintiffs (the Singhs) within two months from this date shall pay Rs. 8,000 as salami to defendant No. 3 (Kumar).
Otherwise all the terms of the compromise Will stand cancelled and the plaintiffs shall not be competent to claim any right to or possession over the.land covered by the patta dated 11th March, 1921.
The patta which defend ant No. 3 executed in favour of the plaintiffs in respect of 5,800 bighas of coal land in village Rahraband shall remain in force, and the plaintiffs will get a decree of declara tion of their right and title to the 500 bighas of coal land in dispute but defendants 1 and 2 (the Deoshis) shall hold possession as tenants.
Besides the terms mentioned below, defendants 1 and 2 shall remain bound by all the remaining terms under which they took settlement of the 500 bighas of coal land from defendant No. 3 under 836 patta and Kabuliyat, and both the defendants 1 and 2 shall possess the same under the plaintiffs from generation to generation and all the terms of the said patta and Kabuliyat shall remain effective and in force between them.
Both the defendants 1 and 2 shall remain bound to pay to the plain tiffs commission at the rate of 2a.
per ton on all sorts of coal instead of 2a.
a ton as stated before in the patta of 5,800 bighas of land settled with the plaintiffs.
The plaintiffs shall pay to defendant No. 3 in future the mini mum royalty of Rs. 6,000 instead of Rs. 8,000 as stipulated in the original patta of 11 th March 1921 and commission at the rate of la.
a ton in place of 2a.
a ton as stipulat ed in the patta of March 21 .
Unless the plaintiffs pay to the defendant No. 3 Rs. 8,000 within 2 months from this day they shall not be competent to take out execution of this decree, nor shall they be competent to take posses sion of the land in dispute.
The defendants 1 and 2 within one month from the date of payment of Rs. 8,000 as aforesaid to defendant No. 3 shall execute a new Kabuliyat in favour of the plaintiff in respect of the modified terms stated above, i.e., on the condition to pay commission at the rate of 2a.
per ton.
In the new patta which defendant No. 3 will execute in favour of the plaintiffs he shall embody the condition that the annual minimum royalty will be Rs. 6,000 instead of Rs. 8,000 and commission will be at the rate of la. 9p.
per ton in place of 2a.
per ton as mentioned in the aforesaid patta.
If the defendant No. 3 does not execute the parts on the aforesaid modified terms in favour 'of the plaintiffs within the time aforesaid and both the defendants 1 and 2 also do not execute a kabuliyat on the aforesaid modified terms, then this very rafanama shall be treated as the parts and kabuliyat, and the plaintiffs in accordance with the terms of the rafanama shall pay to defendant No. 3, Rs. 6,000 only as minimum royalty and commission at the rate of la.
per ton with respect to 5,800 bighas and shall continue to realise commission at the rate of 2a. 6p. per ton from defendants 1 and 2 who shall remain bound to pay the same.
" 837 The answer to the question whether this compromise decree requires registration depends on the legal effect of the changes in the status quo ante of the parties brought about by the document.
A careful analysis reveals the following alterations : (1) In the lease to the Singhs, the rate of royalty or commission was reduced from 2a.
per ton of coal raised to la.
per ton and the minimum royalty was reduced from Rs. 8,000 to Rs. 6,000 while the area of coal land in their khas possession was reduced by 500 bighas. (2) In the lease to the Deoshis the rate of royalty or commission was enhanced from 2a.
per ton to 2a.
per ton and tiffs was made payable to the Singhs.
The Singhs and the Deoshis were brought into a new legal relationship, the former accepting the latter as tenants holding the disputed 500 bighas under them in consideration of the latter agreeing to pay the enhanced royalty to the former. (4) The whole arrangement was made conditional on the Singhs paying Rs. 8,000 to Kumar within 2 months from the date of the compromise, it being expressly provided that the Singhs were not to be entitled to execute the decree or to take possession of the disputed area of 503 bighas which evidently had not till then passed into their possession.
Now, sub section (1) of section 17 of the , enumerates five categories of documents of which regis tration is made compulsory which include" (d) leases of immoveable property from year to year, or for any term exceeding one year, or reserving a yearly rent;".
Sub sec tion (2) however provided that "nothing in clauses (b) and (c) of sub section (1)applies to . (vi) any decree or order of court.
" It may be mentioned in passing that this clause was amended with affect from the 1st April, 1930, by the , so as to exclude from the scope of the exception compromise decrees comprising immovable property other than that which is the subject matter of the suit.
But 838 the amendment cannot affect the document here in question which came into existence in 1923.
Before the amendment, the clause was held to cover even compromise decrees comprising immovable property which was not the subject matter of the suit: [Vide Hemanta Kumari Debi vs Midnapur Zamindari Co. ( ')].
That decision applies to the present case and obviates the objection that because the compromise in question covered also the remaining 5,300 bighas which were not the subject matter of the title suit of 1921, it was outside the scope of the exception in sub section (2), clause (vi).
The only question, therefore, is whether the compromise decree is a "lease" [which expression includes "an agreement to lease" by the definition in section 2 (7)] within the meaning of el.
(d) of sub section (1).
It is obvious that if the compromise decree fails within clause (d) of sub section (1) it would not be protected under clause (vi) of sub section (2) which excepts only documents falling under the categories (b) and (c) of sub section (1).
The High Court was of opinion that, on a proper construction of the terms of the compromise, it did not fall under clause (d).
Mano har Lall J., who delivered the leading judgment, observed: "It was a tripartite agreement embodied in the decree of the court and was, therefore, exempt from registration.
It will be oh.served also that so far as the defendants were con cerned, their possession of the 500 bighas was not inter fered with and they still remained in possession as the lessees, but instead of paying the royalty to the plaintiffs it was agreed between all the parties that the defendants would pay the royalty in future to Shibsaran and Sitcram.
If the matter had stood there, the learned Advocate for the appellant could not have seriously contested the position, but he vehemently argued that when the agreement was not to pay the same amount of royalty or commission as previously agreed to but an altered amount of royalty and commission, the document should be held to fall within the mischief of section 17 (1)(d)of the (1) P.C. 839 .
The answer to this contention is, as I have stated just now, to be found in the Full Bench decision of this court :" [see Charu Chandra Mitra 's case ()].
It was there held that a mere alteration of the rent reserved does not make the transaction a new lease so as to bring it within clause (d)of subsection (1).
We are unable to share this view.
It oversimplifies the compromise transaction which, in our opinion, involves much more than a mere alteration of the royalties stipulated for in the previous pattas executed by Kumar.
Nor can we accept the suggestion of Mr. Chatterjee for the respondents theft the compromise operated as an assignment to the Singhs by Kumar of the latter 's reversion under the "lease granted to the Deoshis and all that the latter did was to acknowledge the Singhs as their landlords and attern to them.
On tiffs view it was said that the transaction would not fall under clause (d), although it would fall under clause (b) but then would be saved by the exception in clause (vi) of sub section (2).
The argument, however, overlooks that Kumar had leased the area of 5,800 bighas to the Singhs by his patta dated 11th March, 1921, and the compromise by providing that the Singhs should pay the reduced royalty of 1a.
per ton in respect of the whole area preserved Kumar 's reversion intact.
He could not therefore be deemed to have assigned any part of his inter est in 5,800 bighas as landlord to the Singhs who continue to hold the entire extent as tenants under him.
What the compromise really did was.
as stated already, to bring the Singhs and the Deoshis into a new legal relationship as underlessor and under lessee in respect of 500 bighas which were the subject matter of the title suit; in other words, its legal effect was to create a perpetual underlease be tween the Singhs and the Deoshis which would clearly fall under clause (d) but for the circumstance that it was to take effect only on condition float the Singhs paid Rs. 8,000 to Kumar within 2 months (1) 840 thereafter.
As pointed out by the Judicial Committee in Hemanta Kumar 's case (1) "An agreement for a lease, which a lease is by the statute declared to include, must, in their Lordships ' opinion, be a document which effects an actual demise and operates as a lease .
The phrase which in the context where it occurs and in the statute in which it is found, must in their opinion relate to some document which creates a present and immediate interest in the land.
" The compromise decree expressly provides that unless the sum of Rs. 8,000 was paid within the stipulated time the Singhs were not to execute the decree or to take possession of the disputed property.
Until the payment was made it was impossible to determine whether there would be any under lease or not.
Such a contingent agreement is not within clause (d) and although it is covered by clause (b). is excepted by clause (vi) of sub section ( '2).
We therefore agree with the conclusion of the High Court though on dif ferent grounds and dismiss the appeal with costs.
Appeal dismisseel.
|
An agreement for a lease, which a lease is by the Indian declared to include, must be a document which effects an actual demise and operates as a lease.
It must create present and immediate interest in land.
Where a litigation between two persons A and B who claimed to be tenants under C was settled by a compromise decree the effect of which was to create a perpetual underlease between A and B which was to take effect only on condition that A paid Rs. 8,000 to C within a fixed period: Held, that such a contingent agreement was not "a lease" within el.
(a) of section 17 (t) of the Indian , and even though it was covered by cl.
(b) of the said sec tion it was exempt from registration under el.
(vi) of subs.
(2) of section 17.
Hemanta Kumari Debi vs Midnapur Zamindari Co. (I P.C.) relied on.
|
An agreement for a lease, which a lease is by the Indian declared to include, must be a document which effects an actual demise and operates as a lease.
It must create present and immediate interest in land.
Where a litigation between two persons A and B who claimed to be tenants under C was settled by a compromise decree the effect of which was to create a perpetual underlease between A and B which was to take effect only on condition that A paid Rs. 8,000 to C within a fixed period: Held, that such a contingent agreement was not "a lease" within el.
(a) of section 17 (t) of the Indian , and even though it was covered by cl.
(b) of the said sec tion it was exempt from registration under el.
(vi) of subs.
(2) of section 17.
Hemanta Kumari Debi vs Midnapur Zamindari Co. (I P.C.) relied on.
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Special Leave Petition (Civil) No. 4221 of 1988.
From the Judgment and Order dated 3.12.1987 of the Delhi High Court in FAO (OS) No. 120 of 1987.
Mukul Rohtagi and Miss Bina Gupta for the petitioner.
Soli J. Sorabji, D.K. Sorab, P. Jain, Sushil Kr.
Jain and Sudhanshu Atreya for the Respondent.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
This is an application for leave to appeal under Article 136 of the Constitution from the order of the Division Bench of the Delhi High Court affirming the order of the learned single Judge of that High Court.
It appears that on 19th March, 1983, there was an agreement for distribution of the film "Savere Wali Gadi" entered into between the parties, the petitioner as the distributor and the respondent as the producer.
The agreement contained an arbitration clause.
It is stated that a sum of Rs.3 lakhs was paid by the petitioner and acknowledged by the respondent earlier to the execution of the said agreement and therefore, the first instalment payable under the agreement to the respondent of Rs.3.40 lakhs was deemed to be adjusted.
Under the aforesaid distribution agreement by 30th August, 1983, the respondent was to hand over the prints of the film by this date which he never did.
In or about 1984 certain other moneys of about Rs.3 lakhs were further advanced to the respondent.
On 11th March, 1985 a further agreement was entered into between the parties whereby the respondent agreed to pay a total amount of Rs.6.50 lakhs to the petitioner and the petitioner to give up his distribution rights in the first agreement of 19th March, 1983.
The first agreement was accordingly irrevocably cancelled and superseded by this subsequent agreement.
On or about 2nd June, 1985 respondent wrote to the Motion Pictures Association, Delhi to de register the film in the name of the petitioner in view of the petitioner having given up the distribution rights by virtue of Annexure P/2 dated 11.3.85 where under the petitioner had agreed to receive Rs.6.50 lakhs and finished the deal within six months of 11.3.85.
It is the case of the petitioner.
530 however, that the sum of Rs.6.50 lakhs was never paid by the respondent to the petitioner.
On 3rd July, 1985 the Motion Picture Association wrote to the respondent acknowledging receipt of respondent 's letter dated 22nd June 1985 whereby he had asked for de registration of the film in view of Annexure P/2.
The Motion Picture Association stated that de registration would be allowed only when the respondent pays Rs.6.50 lakhs to the petitioner or deposits the amount with the Motion Picture Association.
It is stated that between July 1985 and September 1985, the petitioner wrote two letters to the Motion Picture Association stating that the respondent had committed a breach of the subsequent agreement dated 11th March, 1985 executed between the parties whereunder the respondent was to make payment of Rs.6.50 lakhs and it was clear that the respondent had no desire to make payment and the respondent wrongly wanted to deal with the film and sell the distribution rights to somebody else thereby enjoying benefit of the same and also to deprive the petitioner of the amount of Rs.6.50 lakhs.
Civil suit was filed in February, 1986 for recovery of Rs.6.50 lakhs with interest by the petitioner against the respondent.
The written statement was submitted.
An application was made under section 20 in June, 1986.
This application had been made later than the institution of the civil suit in the same High Court.
The learned single Judge directed that the arbitration agreement to be filed and reference was directed according to the agreement.
There was an order passed by the learned single Judge to that effect.
There was an appeal to the Division Bench of the High Court and the Division Bench confirmed the order of the learned single Judge.
Hence this petition.
It appears that there were two agreements one dated 11th March, 1985 and the other dated 19th March, 1983.
The learned Judge found that there could be little doubt that the intention of the parties when agreement dated 11th March, 1985 was entered into was that the earlier contract dated 19th March, 1983 should be superseded.
But it appears that the agreement fell through because when the agreement of 1985 was entered into, it was the intention of the parties to the earlier agreement would be superseded and a new arrangement was sought to be brought about whereby the rights of the petitioner herein under agreement dated 19th March, 1983 were to be yielded for a sum of Rs.6.50 lakhs.
This amount of Rs.6.50 lakhs was never paid by the respondent.
It was the case of the petitioner herein that thereby the agreement of 11th March, 1985 stood cancelled.
The petitioner who claimed rights under the earlier agreement dated 19th March, 1983 and sought the continuation of his registration of distributorship.
The learned single Judge found that it was at the instance of petitioner 531 herein that respondent No. 2 confirmed vide its letter dated 19th September, 1985 that as the petitioner, before the learned single Judge, had failed to pay Rs.6,50,000 the aforesaid picture stood registered in the name of the petitioner herein.
This registration could continue only by virtue of the earlier agreement dated March 19, 1983.
The learned single Judge further found that the agreement dated 11th March, 1985 had come to an end and the earlier agreement dated 19th March, 1983 had revived.
In this connection reference may be made to the observations of the Patna High Court in Babulal Marwari and others vs Tulsi Singh and others, A.I.R. 1940 Patna 121.
Whether in any particular case there was a complete novation of a contract in the sense that the new contract replaced or substituted the old contract, could depend upon the facts and circumstances of the case.
In that view of the matter, the single Judge of the High Court, in our opinion, rightly directed that the first agreement be filed.
The Division Bench of the High Court pointed out after referring to the letter dated 19/21st September, 1985 the Motion Pictures Association confirmed that in view of the failure of the producer to comply with his earlier letter regarding payment of Rs. 6.50 lakhs plus interest, the picture in question stood registered in the name of M/s. Raja Movies in the Motion Pictures Association.
This position was accepted by Suyog Films in the letter dated 5th November, 1985 and the subsequent letter by them.
The non performance of the terms of the contract dated 11th March, 1985 may not by itself revive the earlier contract of 19th March, 1983, but the petitioner in his letters dated 15th July, 1985 and 19th September, 1985 fell back on the original contract of 19th March, 1983.
This was accepted by M/s. Suyog Films and thus a binding contract came into existence.
In this case the Division Bench came to the conclusion on the construction of the letters and the conduct of the party that the contract dated 19th March, 1983 continued.
The contract dated 19th March, 1983 contained an arbitration clause.
There is no reason why that arbitration agreement should not be filed.
A civil suit had been filed but that by itself unlike under section 34 of the does not preclude filing of proper arbitration agreement between the parties.
There being no impediment in filing the arbitration agreement which indubitably was subsisting at the relevant time when the High Court directed that the arbitration agreement be filed, that discretion should not be interfered with.
Section 20 of the provides as follows: "20.
Application to file in Court arbitration agreement 532 (1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement he filed in Court.
(2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested as plaintiff or plaintiffs and the remainder is defendant or defendants, if the application has been presented by all the parties, or if otherwise, between the applicant as plaintiff and the other parties as defendants.
(3) on such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed.
(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.
(5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by, the other provisions of this Act so far as they can be made applicable.
" It is significant to note that the sub section (1) gives an option to the parties by the use of expression 'may ' but the other sub section if the conditions are fulfilled, makes it obligatory for the Court to direct filing of an arbitration agreement.
Indubitably, in this case there was an arbitration clause in the agreement.
The parties have applied for reference.
The Division Bench has reiterated that the original agreement dated 19th March, 1983 which ceased to have effect and came to an end by the agreement dated 11th March, 1985, stood revived by virtue of the two letters dated 15th July, 1985 and 11th September, 533 1985 by the appellant.
The High Court has confirmed that the said two letters were acted upon by the Motion Pictures Association.
By letter dated 19/21 September, 1985 the Motion Pictures Association confirmed that in view of the failure of the producer to comply with his earlier letter regarding payment of Rs.6,50,000 plus interest, the picture "Savere Wali Gadi" stood registered in the name of M/s. Raja Movies in the Motion Pictures Association.
This position was accepted by Suyog Films in letter dated 5th November, 1985 and the subsequent letter by them.
It is clear that the petitioner in his letters dated 15th July, 1985 and 11th September, 1985 fell back on the original contract of 19th March, 1983.
This was accepted by the respondent.
Hence, there was at all relevant times a valid and binding contract between the parties.
That contract contained an arbitration clause.
There was nothing, in view of the reasons indicated above, to disentitle the parties to have their rights adjudicated in terms of an arbitration clause.
In the premises the High Court was right in the view it took.
This petition fails and is accordingly dismissed.
G.N. Petition dismissed.
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An agreement for distribution of the film "Savere Wali Gadi" was entered into on 19th March, 1983 between the petitioner as the distributor and the respondent as the producer.
The agreement contained an arbitration clause.
A sum of Rs.3.40 lakhs paid to the respondent and acknowledged by him earlier to the agreement was deemed to have been adjusted against the first instalment.
In or about 1984 about Rs. 3 lakhs were further advanced to the respondent.
As per the agreement the respondent was to hand over the prints of the film by 10th August, 1983, but it was not done.
On 11th March, 1985 a further agreement was entered into between the parties whereby the respondent agreed to pay a total sum of Rs.6.50 lakhs to the petitioner for giving up his distribution rights in the first agreement.
The first agreement was accordingly irrevocably cancelled and superseded by the subsequent agreement.
The respondent took up the matter with Motion Pictures Association to de register the film in the name of the petitioner.
The Motion Picture Association stated that de registration would be allowed only when the respondent pays Rs.6.50 lakhs to the petitioner or deposits the amount with the Association.
The petitioner 's claim before the Association was that the respondent committed breach of the subsequent agreement.
A civil suit was filed in the High Court for recovery of Rs.6.50 lakhs with interest, by the petitioner against the respondent.
Later, an application under section 20 of the was made.
The Single Judge held that the first agreement had revived and directed the 528 filing of the agreement.
On appeal, the Division Bench confirmed the order.
This special leave petition is against the order of the Division Bench of the High Court.
Dismissing the special leave petition, this Court, ^ HELD: 1.1 Whether in any particular case there was a complete novation of a contract in the sense that the new contract replaced or substituted the old contract, could depend upon the facts and circumstances of the case.
[531B C] 1.2 When the agreement of 1985 was entered into, it was the intention of the parties that the earlier agreement would be superseded and a new arrangement was sought to be brought about whereby the rights of the petitioner under the earlier agreement were to be yielded for a sum of Rs.6.50 lakhs.
This amount of Rs.6.50 lakhs was never paid by the respondent, and it was the case of the petitioner that the earlier agreement stood cancelled.
The petitioner who claimed rights under the earlier agreement, sought the continuation of his registration of distributorship.
This registration could continue only by virtue of the earlier agreement which had revived.
[530G HG; 531B] Babulal Marwari and others vs Tulsi Singh and others, A.I.R. 1940 Patna 121, refered to.
2.1 Sub section (1) of Section 20 of the gives an option to the parties by the use of the expression 'may ', but the other sub sections, if the conditions are fulfilled, make it obligatory for the Court to direct filing of an arbitration agreement.
[532G] 2.2 Indubitably, there was an arbitration clause in the agreement.
The parties have applied for reference.
The Division Bench has reiterated that the original agreement dated 19th March, 1983 which ceased to have effect and came to an end by the agreement dated 11th March, 1985 stood revived by virtue of the two letters dated 15th July, 1985 and 11th September, 1985 by the appellant.
It is clear that the petitioner in the above letters fell back on the original contract of 19th March, 1983.
This was accepted by the respondent.
Hence there was at all relevant times a valid and binding contract between the parties.
That contract contained an arbitration clause.
There was nothing to disentitle the parties to have their rights adjudicated in terms of an arbitration clause.
The civil suit filed does not by itself preclude filing of proper arbitration agreement between the parties.
There being no impediment 529 in filing the arbitration agreement which was subsisting at the relevant time when the High Court directed that the arbitration agreement be filed, that discretion should not be interfered with.
[532G H; 531F G]
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Special Leave Petition (Civil) No. 4221 of 1988.
From the Judgment and Order dated 3.12.1987 of the Delhi High Court in FAO (OS) No. 120 of 1987.
Mukul Rohtagi and Miss Bina Gupta for the petitioner.
Soli J. Sorabji, D.K. Sorab, P. Jain, Sushil Kr.
Jain and Sudhanshu Atreya for the Respondent.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
This is an application for leave to appeal under Article 136 of the Constitution from the order of the Division Bench of the Delhi High Court affirming the order of the learned single Judge of that High Court.
It appears that on 19th March, 1983, there was an agreement for distribution of the film "Savere Wali Gadi" entered into between the parties, the petitioner as the distributor and the respondent as the producer.
The agreement contained an arbitration clause.
It is stated that a sum of Rs.3 lakhs was paid by the petitioner and acknowledged by the respondent earlier to the execution of the said agreement and therefore, the first instalment payable under the agreement to the respondent of Rs.3.40 lakhs was deemed to be adjusted.
Under the aforesaid distribution agreement by 30th August, 1983, the respondent was to hand over the prints of the film by this date which he never did.
In or about 1984 certain other moneys of about Rs.3 lakhs were further advanced to the respondent.
On 11th March, 1985 a further agreement was entered into between the parties whereby the respondent agreed to pay a total amount of Rs.6.50 lakhs to the petitioner and the petitioner to give up his distribution rights in the first agreement of 19th March, 1983.
The first agreement was accordingly irrevocably cancelled and superseded by this subsequent agreement.
On or about 2nd June, 1985 respondent wrote to the Motion Pictures Association, Delhi to de register the film in the name of the petitioner in view of the petitioner having given up the distribution rights by virtue of Annexure P/2 dated 11.3.85 where under the petitioner had agreed to receive Rs.6.50 lakhs and finished the deal within six months of 11.3.85.
It is the case of the petitioner.
530 however, that the sum of Rs.6.50 lakhs was never paid by the respondent to the petitioner.
On 3rd July, 1985 the Motion Picture Association wrote to the respondent acknowledging receipt of respondent 's letter dated 22nd June 1985 whereby he had asked for de registration of the film in view of Annexure P/2.
The Motion Picture Association stated that de registration would be allowed only when the respondent pays Rs.6.50 lakhs to the petitioner or deposits the amount with the Motion Picture Association.
It is stated that between July 1985 and September 1985, the petitioner wrote two letters to the Motion Picture Association stating that the respondent had committed a breach of the subsequent agreement dated 11th March, 1985 executed between the parties whereunder the respondent was to make payment of Rs.6.50 lakhs and it was clear that the respondent had no desire to make payment and the respondent wrongly wanted to deal with the film and sell the distribution rights to somebody else thereby enjoying benefit of the same and also to deprive the petitioner of the amount of Rs.6.50 lakhs.
Civil suit was filed in February, 1986 for recovery of Rs.6.50 lakhs with interest by the petitioner against the respondent.
The written statement was submitted.
An application was made under section 20 in June, 1986.
This application had been made later than the institution of the civil suit in the same High Court.
The learned single Judge directed that the arbitration agreement to be filed and reference was directed according to the agreement.
There was an order passed by the learned single Judge to that effect.
There was an appeal to the Division Bench of the High Court and the Division Bench confirmed the order of the learned single Judge.
Hence this petition.
It appears that there were two agreements one dated 11th March, 1985 and the other dated 19th March, 1983.
The learned Judge found that there could be little doubt that the intention of the parties when agreement dated 11th March, 1985 was entered into was that the earlier contract dated 19th March, 1983 should be superseded.
But it appears that the agreement fell through because when the agreement of 1985 was entered into, it was the intention of the parties to the earlier agreement would be superseded and a new arrangement was sought to be brought about whereby the rights of the petitioner herein under agreement dated 19th March, 1983 were to be yielded for a sum of Rs.6.50 lakhs.
This amount of Rs.6.50 lakhs was never paid by the respondent.
It was the case of the petitioner herein that thereby the agreement of 11th March, 1985 stood cancelled.
The petitioner who claimed rights under the earlier agreement dated 19th March, 1983 and sought the continuation of his registration of distributorship.
The learned single Judge found that it was at the instance of petitioner 531 herein that respondent No. 2 confirmed vide its letter dated 19th September, 1985 that as the petitioner, before the learned single Judge, had failed to pay Rs.6,50,000 the aforesaid picture stood registered in the name of the petitioner herein.
This registration could continue only by virtue of the earlier agreement dated March 19, 1983.
The learned single Judge further found that the agreement dated 11th March, 1985 had come to an end and the earlier agreement dated 19th March, 1983 had revived.
In this connection reference may be made to the observations of the Patna High Court in Babulal Marwari and others vs Tulsi Singh and others, A.I.R. 1940 Patna 121.
Whether in any particular case there was a complete novation of a contract in the sense that the new contract replaced or substituted the old contract, could depend upon the facts and circumstances of the case.
In that view of the matter, the single Judge of the High Court, in our opinion, rightly directed that the first agreement be filed.
The Division Bench of the High Court pointed out after referring to the letter dated 19/21st September, 1985 the Motion Pictures Association confirmed that in view of the failure of the producer to comply with his earlier letter regarding payment of Rs. 6.50 lakhs plus interest, the picture in question stood registered in the name of M/s. Raja Movies in the Motion Pictures Association.
This position was accepted by Suyog Films in the letter dated 5th November, 1985 and the subsequent letter by them.
The non performance of the terms of the contract dated 11th March, 1985 may not by itself revive the earlier contract of 19th March, 1983, but the petitioner in his letters dated 15th July, 1985 and 19th September, 1985 fell back on the original contract of 19th March, 1983.
This was accepted by M/s. Suyog Films and thus a binding contract came into existence.
In this case the Division Bench came to the conclusion on the construction of the letters and the conduct of the party that the contract dated 19th March, 1983 continued.
The contract dated 19th March, 1983 contained an arbitration clause.
There is no reason why that arbitration agreement should not be filed.
A civil suit had been filed but that by itself unlike under section 34 of the does not preclude filing of proper arbitration agreement between the parties.
There being no impediment in filing the arbitration agreement which indubitably was subsisting at the relevant time when the High Court directed that the arbitration agreement be filed, that discretion should not be interfered with.
Section 20 of the provides as follows: "20.
Application to file in Court arbitration agreement 532 (1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement he filed in Court.
(2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested as plaintiff or plaintiffs and the remainder is defendant or defendants, if the application has been presented by all the parties, or if otherwise, between the applicant as plaintiff and the other parties as defendants.
(3) on such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed.
(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.
(5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by, the other provisions of this Act so far as they can be made applicable.
" It is significant to note that the sub section (1) gives an option to the parties by the use of expression 'may ' but the other sub section if the conditions are fulfilled, makes it obligatory for the Court to direct filing of an arbitration agreement.
Indubitably, in this case there was an arbitration clause in the agreement.
The parties have applied for reference.
The Division Bench has reiterated that the original agreement dated 19th March, 1983 which ceased to have effect and came to an end by the agreement dated 11th March, 1985, stood revived by virtue of the two letters dated 15th July, 1985 and 11th September, 533 1985 by the appellant.
The High Court has confirmed that the said two letters were acted upon by the Motion Pictures Association.
By letter dated 19/21 September, 1985 the Motion Pictures Association confirmed that in view of the failure of the producer to comply with his earlier letter regarding payment of Rs.6,50,000 plus interest, the picture "Savere Wali Gadi" stood registered in the name of M/s. Raja Movies in the Motion Pictures Association.
This position was accepted by Suyog Films in letter dated 5th November, 1985 and the subsequent letter by them.
It is clear that the petitioner in his letters dated 15th July, 1985 and 11th September, 1985 fell back on the original contract of 19th March, 1983.
This was accepted by the respondent.
Hence, there was at all relevant times a valid and binding contract between the parties.
That contract contained an arbitration clause.
There was nothing, in view of the reasons indicated above, to disentitle the parties to have their rights adjudicated in terms of an arbitration clause.
In the premises the High Court was right in the view it took.
This petition fails and is accordingly dismissed.
G.N. Petition dismissed.
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Special Leave Petition (Civil) No. 4221 of 1988.
From the Judgment and Order dated 3.12.1987 of the Delhi High Court in FAO (OS) No. 120 of 1987.
Mukul Rohtagi and Miss Bina Gupta for the petitioner.
Soli J. Sorabji, D.K. Sorab, P. Jain, Sushil Kr.
Jain and Sudhanshu Atreya for the Respondent.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J.
This is an application for leave to appeal under Article 136 of the Constitution from the order of the Division Bench of the Delhi High Court affirming the order of the learned single Judge of that High Court.
It appears that on 19th March, 1983, there was an agreement for distribution of the film "Savere Wali Gadi" entered into between the parties, the petitioner as the distributor and the respondent as the producer.
The agreement contained an arbitration clause.
It is stated that a sum of Rs.3 lakhs was paid by the petitioner and acknowledged by the respondent earlier to the execution of the said agreement and therefore, the first instalment payable under the agreement to the respondent of Rs.3.40 lakhs was deemed to be adjusted.
Under the aforesaid distribution agreement by 30th August, 1983, the respondent was to hand over the prints of the film by this date which he never did.
In or about 1984 certain other moneys of about Rs.3 lakhs were further advanced to the respondent.
On 11th March, 1985 a further agreement was entered into between the parties whereby the respondent agreed to pay a total amount of Rs.6.50 lakhs to the petitioner and the petitioner to give up his distribution rights in the first agreement of 19th March, 1983.
The first agreement was accordingly irrevocably cancelled and superseded by this subsequent agreement.
On or about 2nd June, 1985 respondent wrote to the Motion Pictures Association, Delhi to de register the film in the name of the petitioner in view of the petitioner having given up the distribution rights by virtue of Annexure P/2 dated 11.3.85 where under the petitioner had agreed to receive Rs.6.50 lakhs and finished the deal within six months of 11.3.85.
It is the case of the petitioner.
530 however, that the sum of Rs.6.50 lakhs was never paid by the respondent to the petitioner.
On 3rd July, 1985 the Motion Picture Association wrote to the respondent acknowledging receipt of respondent 's letter dated 22nd June 1985 whereby he had asked for de registration of the film in view of Annexure P/2.
The Motion Picture Association stated that de registration would be allowed only when the respondent pays Rs.6.50 lakhs to the petitioner or deposits the amount with the Motion Picture Association.
It is stated that between July 1985 and September 1985, the petitioner wrote two letters to the Motion Picture Association stating that the respondent had committed a breach of the subsequent agreement dated 11th March, 1985 executed between the parties whereunder the respondent was to make payment of Rs.6.50 lakhs and it was clear that the respondent had no desire to make payment and the respondent wrongly wanted to deal with the film and sell the distribution rights to somebody else thereby enjoying benefit of the same and also to deprive the petitioner of the amount of Rs.6.50 lakhs.
Civil suit was filed in February, 1986 for recovery of Rs.6.50 lakhs with interest by the petitioner against the respondent.
The written statement was submitted.
An application was made under section 20 in June, 1986.
This application had been made later than the institution of the civil suit in the same High Court.
The learned single Judge directed that the arbitration agreement to be filed and reference was directed according to the agreement.
There was an order passed by the learned single Judge to that effect.
There was an appeal to the Division Bench of the High Court and the Division Bench confirmed the order of the learned single Judge.
Hence this petition.
It appears that there were two agreements one dated 11th March, 1985 and the other dated 19th March, 1983.
The learned Judge found that there could be little doubt that the intention of the parties when agreement dated 11th March, 1985 was entered into was that the earlier contract dated 19th March, 1983 should be superseded.
But it appears that the agreement fell through because when the agreement of 1985 was entered into, it was the intention of the parties to the earlier agreement would be superseded and a new arrangement was sought to be brought about whereby the rights of the petitioner herein under agreement dated 19th March, 1983 were to be yielded for a sum of Rs.6.50 lakhs.
This amount of Rs.6.50 lakhs was never paid by the respondent.
It was the case of the petitioner herein that thereby the agreement of 11th March, 1985 stood cancelled.
The petitioner who claimed rights under the earlier agreement dated 19th March, 1983 and sought the continuation of his registration of distributorship.
The learned single Judge found that it was at the instance of petitioner 531 herein that respondent No. 2 confirmed vide its letter dated 19th September, 1985 that as the petitioner, before the learned single Judge, had failed to pay Rs.6,50,000 the aforesaid picture stood registered in the name of the petitioner herein.
This registration could continue only by virtue of the earlier agreement dated March 19, 1983.
The learned single Judge further found that the agreement dated 11th March, 1985 had come to an end and the earlier agreement dated 19th March, 1983 had revived.
In this connection reference may be made to the observations of the Patna High Court in Babulal Marwari and others vs Tulsi Singh and others, A.I.R. 1940 Patna 121.
Whether in any particular case there was a complete novation of a contract in the sense that the new contract replaced or substituted the old contract, could depend upon the facts and circumstances of the case.
In that view of the matter, the single Judge of the High Court, in our opinion, rightly directed that the first agreement be filed.
The Division Bench of the High Court pointed out after referring to the letter dated 19/21st September, 1985 the Motion Pictures Association confirmed that in view of the failure of the producer to comply with his earlier letter regarding payment of Rs. 6.50 lakhs plus interest, the picture in question stood registered in the name of M/s. Raja Movies in the Motion Pictures Association.
This position was accepted by Suyog Films in the letter dated 5th November, 1985 and the subsequent letter by them.
The non performance of the terms of the contract dated 11th March, 1985 may not by itself revive the earlier contract of 19th March, 1983, but the petitioner in his letters dated 15th July, 1985 and 19th September, 1985 fell back on the original contract of 19th March, 1983.
This was accepted by M/s. Suyog Films and thus a binding contract came into existence.
In this case the Division Bench came to the conclusion on the construction of the letters and the conduct of the party that the contract dated 19th March, 1983 continued.
The contract dated 19th March, 1983 contained an arbitration clause.
There is no reason why that arbitration agreement should not be filed.
A civil suit had been filed but that by itself unlike under section 34 of the does not preclude filing of proper arbitration agreement between the parties.
There being no impediment in filing the arbitration agreement which indubitably was subsisting at the relevant time when the High Court directed that the arbitration agreement be filed, that discretion should not be interfered with.
Section 20 of the provides as follows: "20.
Application to file in Court arbitration agreement 532 (1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement he filed in Court.
(2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested as plaintiff or plaintiffs and the remainder is defendant or defendants, if the application has been presented by all the parties, or if otherwise, between the applicant as plaintiff and the other parties as defendants.
(3) on such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the applicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed.
(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.
(5) Thereafter the arbitration shall proceed in accordance with, and shall be governed by, the other provisions of this Act so far as they can be made applicable.
" It is significant to note that the sub section (1) gives an option to the parties by the use of expression 'may ' but the other sub section if the conditions are fulfilled, makes it obligatory for the Court to direct filing of an arbitration agreement.
Indubitably, in this case there was an arbitration clause in the agreement.
The parties have applied for reference.
The Division Bench has reiterated that the original agreement dated 19th March, 1983 which ceased to have effect and came to an end by the agreement dated 11th March, 1985, stood revived by virtue of the two letters dated 15th July, 1985 and 11th September, 533 1985 by the appellant.
The High Court has confirmed that the said two letters were acted upon by the Motion Pictures Association.
By letter dated 19/21 September, 1985 the Motion Pictures Association confirmed that in view of the failure of the producer to comply with his earlier letter regarding payment of Rs.6,50,000 plus interest, the picture "Savere Wali Gadi" stood registered in the name of M/s. Raja Movies in the Motion Pictures Association.
This position was accepted by Suyog Films in letter dated 5th November, 1985 and the subsequent letter by them.
It is clear that the petitioner in his letters dated 15th July, 1985 and 11th September, 1985 fell back on the original contract of 19th March, 1983.
This was accepted by the respondent.
Hence, there was at all relevant times a valid and binding contract between the parties.
That contract contained an arbitration clause.
There was nothing, in view of the reasons indicated above, to disentitle the parties to have their rights adjudicated in terms of an arbitration clause.
In the premises the High Court was right in the view it took.
This petition fails and is accordingly dismissed.
G.N. Petition dismissed.
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An agreement for distribution of the film "Savere Wali Gadi" was entered into on 19th March, 1983 between the petitioner as the distributor and the respondent as the producer.
The agreement contained an arbitration clause.
A sum of Rs.3.40 lakhs paid to the respondent and acknowledged by him earlier to the agreement was deemed to have been adjusted against the first instalment.
In or about 1984 about Rs. 3 lakhs were further advanced to the respondent.
As per the agreement the respondent was to hand over the prints of the film by 10th August, 1983, but it was not done.
On 11th March, 1985 a further agreement was entered into between the parties whereby the respondent agreed to pay a total sum of Rs.6.50 lakhs to the petitioner for giving up his distribution rights in the first agreement.
The first agreement was accordingly irrevocably cancelled and superseded by the subsequent agreement.
The respondent took up the matter with Motion Pictures Association to de register the film in the name of the petitioner.
The Motion Picture Association stated that de registration would be allowed only when the respondent pays Rs.6.50 lakhs to the petitioner or deposits the amount with the Association.
The petitioner 's claim before the Association was that the respondent committed breach of the subsequent agreement.
A civil suit was filed in the High Court for recovery of Rs.6.50 lakhs with interest, by the petitioner against the respondent.
Later, an application under section 20 of the was made.
The Single Judge held that the first agreement had revived and directed the 528 filing of the agreement.
On appeal, the Division Bench confirmed the order.
This special leave petition is against the order of the Division Bench of the High Court.
Dismissing the special leave petition, this Court, ^ HELD: 1.1 Whether in any particular case there was a complete novation of a contract in the sense that the new contract replaced or substituted the old contract, could depend upon the facts and circumstances of the case.
[531B C] 1.2 When the agreement of 1985 was entered into, it was the intention of the parties that the earlier agreement would be superseded and a new arrangement was sought to be brought about whereby the rights of the petitioner under the earlier agreement were to be yielded for a sum of Rs.6.50 lakhs.
This amount of Rs.6.50 lakhs was never paid by the respondent, and it was the case of the petitioner that the earlier agreement stood cancelled.
The petitioner who claimed rights under the earlier agreement, sought the continuation of his registration of distributorship.
This registration could continue only by virtue of the earlier agreement which had revived.
[530G HG; 531B] Babulal Marwari and others vs Tulsi Singh and others, A.I.R. 1940 Patna 121, refered to.
2.1 Sub section (1) of Section 20 of the gives an option to the parties by the use of the expression 'may ', but the other sub sections, if the conditions are fulfilled, make it obligatory for the Court to direct filing of an arbitration agreement.
[532G] 2.2 Indubitably, there was an arbitration clause in the agreement.
The parties have applied for reference.
The Division Bench has reiterated that the original agreement dated 19th March, 1983 which ceased to have effect and came to an end by the agreement dated 11th March, 1985 stood revived by virtue of the two letters dated 15th July, 1985 and 11th September, 1985 by the appellant.
It is clear that the petitioner in the above letters fell back on the original contract of 19th March, 1983.
This was accepted by the respondent.
Hence there was at all relevant times a valid and binding contract between the parties.
That contract contained an arbitration clause.
There was nothing to disentitle the parties to have their rights adjudicated in terms of an arbitration clause.
The civil suit filed does not by itself preclude filing of proper arbitration agreement between the parties.
There being no impediment 529 in filing the arbitration agreement which was subsisting at the relevant time when the High Court directed that the arbitration agreement be filed, that discretion should not be interfered with.
[532G H; 531F G]
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An agreement for distribution of the film "Savere Wali Gadi" was entered into on 19th March, 1983 between the petitioner as the distributor and the respondent as the producer.
The agreement contained an arbitration clause.
A sum of Rs.3.40 lakhs paid to the respondent and acknowledged by him earlier to the agreement was deemed to have been adjusted against the first instalment.
In or about 1984 about Rs. 3 lakhs were further advanced to the respondent.
As per the agreement the respondent was to hand over the prints of the film by 10th August, 1983, but it was not done.
On 11th March, 1985 a further agreement was entered into between the parties whereby the respondent agreed to pay a total sum of Rs.6.50 lakhs to the petitioner for giving up his distribution rights in the first agreement.
The first agreement was accordingly irrevocably cancelled and superseded by the subsequent agreement.
The respondent took up the matter with Motion Pictures Association to de register the film in the name of the petitioner.
The Motion Picture Association stated that de registration would be allowed only when the respondent pays Rs.6.50 lakhs to the petitioner or deposits the amount with the Association.
The petitioner 's claim before the Association was that the respondent committed breach of the subsequent agreement.
A civil suit was filed in the High Court for recovery of Rs.6.50 lakhs with interest, by the petitioner against the respondent.
Later, an application under section 20 of the was made.
The Single Judge held that the first agreement had revived and directed the 528 filing of the agreement.
On appeal, the Division Bench confirmed the order.
This special leave petition is against the order of the Division Bench of the High Court.
Dismissing the special leave petition, this Court, ^ HELD: 1.1 Whether in any particular case there was a complete novation of a contract in the sense that the new contract replaced or substituted the old contract, could depend upon the facts and circumstances of the case.
[531B C] 1.2 When the agreement of 1985 was entered into, it was the intention of the parties that the earlier agreement would be superseded and a new arrangement was sought to be brought about whereby the rights of the petitioner under the earlier agreement were to be yielded for a sum of Rs.6.50 lakhs.
This amount of Rs.6.50 lakhs was never paid by the respondent, and it was the case of the petitioner that the earlier agreement stood cancelled.
The petitioner who claimed rights under the earlier agreement, sought the continuation of his registration of distributorship.
This registration could continue only by virtue of the earlier agreement which had revived.
[530G HG; 531B] Babulal Marwari and others vs Tulsi Singh and others, A.I.R. 1940 Patna 121, refered to.
2.1 Sub section (1) of Section 20 of the gives an option to the parties by the use of the expression 'may ', but the other sub sections, if the conditions are fulfilled, make it obligatory for the Court to direct filing of an arbitration agreement.
[532G] 2.2 Indubitably, there was an arbitration clause in the agreement.
The parties have applied for reference.
The Division Bench has reiterated that the original agreement dated 19th March, 1983 which ceased to have effect and came to an end by the agreement dated 11th March, 1985 stood revived by virtue of the two letters dated 15th July, 1985 and 11th September, 1985 by the appellant.
It is clear that the petitioner in the above letters fell back on the original contract of 19th March, 1983.
This was accepted by the respondent.
Hence there was at all relevant times a valid and binding contract between the parties.
That contract contained an arbitration clause.
There was nothing to disentitle the parties to have their rights adjudicated in terms of an arbitration clause.
The civil suit filed does not by itself preclude filing of proper arbitration agreement between the parties.
There being no impediment 529 in filing the arbitration agreement which was subsisting at the relevant time when the High Court directed that the arbitration agreement be filed, that discretion should not be interfered with.
[532G H; 531F G]
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he refund of cess paid by them.
[304D] & CIVIL ORIGINAL JURISDICTION: Writ Petitions Nos.
2687, 5822 of 1983 etc.
(Under Article 32 of the Constitution of India).
Dr. Shankar Ghosh, T.S.K. Iyer, M.L. Lahoty, P.S. Jha, D.D. Gupta, S.K. Jain, D.P. Mukherjee, S.R. Srivastava, P.N. Tewari and Parijat Sinha for the petitioners.
Tapas Ray, Anil B. Dewan, T.C. Roy, G.S. Chatterjee, Dalip Sinha and H.K. Puri for the respondents.
The judgment of the Court was delivered by PATHAK, CJ.
By these writ petitions and transferred cases the petitioners challenge the validity of the levy of cess in respect of tea estates under the West Bengal Rural Employment and Production Act, 1976.
The West Bengal Rural Employment and Production Act, 1976, (shortly referred to as the "West Bengal Act") is intended to provide the additional resources for the promo tion of employment in rural areas and for implementing rural production programmes.
The additional resources are sought to be raised from two sources, a surcharge on land revenue under section 3 of the Act and a rural employment cess under section 4 of the Act.
We are concerned here with the levy of the rural employment cess.
297 Originally section 4 of the West Bengal Act provided as follows: "4.(1) On and from the commencement of this Act, all immovable properties on which road and public work cesses are assessed according to the provisions of the Cess Act, 1880, shall be liable to the payment of rural employment cess: Provided that no raiyat who is exempted from paying revenue in respect of his holding under clause (a) of subsection (1) of section 23B of the West Bengal Land Reforms Act, 1955, shall be liable to pay rural em ployment cess.
(2) The rural employment cess shall be levied annually (a) in respect of lands, at the rate of six paise on each rupee of development value thereof; (b) in respect of coal mines, at the rate of fifty paise on each tonne of coal on the annual dispatches therefrom; (c) in respect of mines other than coal mines and quarries, at the rate of six paise on each rupee of annual net profits thereof.
" The West Bengal Taxation Laws (Amendment) Act, 1982 amended the West Bengal Act and by section 7(b) thereof amend ments were made in section 4(2) of the West Bengal Act with effect from 1 April, 1981.
As a result, as from that date, section 4(2) in so far as it is material read as follows: 4(2).
The rural employment cess shall be levied annually (a) in respect of lands, other than a tea estate, at the rate of six paise on each rupee of development value thereof; (aa) in respect of a tea estate at such rate, not exceeding rupees six on each kilogram of tea on the dispatches from such tea estate of tea grown therein, as the State Government may, by notification in the Offi cial Gazette, fix in this behalf: 298 Provided that in calculating the dispatches of tea for the purpose of levy of rural employment cess, such dispatches for sale made at such tea auction centres as may be recognised by the State Government by notification in the Official Gazette shall be excluded.
Provided further that the State Government may fix different rates on des patches of different classes of tea.
Explanation For the purpose of this section, "tea" means the plant Camellia Sinen sis (L) O. Kuntze as well as all varieties of the product known commercially as tea made from the leaves of the plant Camellia Sinensis (L) O. Kuntze, including green tea and green tea leaves, processed or unprocessed;" Section 4 was also amended further by the insertion of sub section
(4) which provided: "(4) The State Government may, if it considers necessary so to do, by notification in the Official Gazette, exempt such categories of despatches or such percentage of despatches from the liability to pay the whole or any part of the rural employment cess, or reduce the rate of the rural employment cess payable thereon, under clause (aa) of sub section (2), on such terms and conditions as may be speci fied in the notification.
Provided that the State Government may, at any time, add to, amend, vary of rescind any such notification.
" Thereafter the West Bengal Taxation Laws (Amendment) Act, 1982 was enacted with effect from 1 October, 1982.
section 4(2) of the West Bengal Act was amended and under clause (aa) thereof the first proviso was omitted.
Pursuant to the amendments in the West Bengal Act in 1981 and 1982, various notifications were issued by the State Government, which for our purpose broadly cover these different periods: (a) First Period: 1 April, 1981 to 30 Septem ber, 1982 299 Rural employment cess was levied at the rate of Rs.5 per Kg.
on all despatches of tea, but in respect of despatches to two tea auction centres within West Bengal the rate of duty was nil, and in respect of tea sold in West Bengal through registered dealers otherwise than through the two tea auction centres the rate of tax was Rs.2.50 per Kg.
(b) Second Period: 1 October, 1982 to 28 March, 1984 Rural employment cess was levied at the rate of Rs. 1.50 per Kg.
on all despatches of tea except that for despatches to the said two tea auction centres the rate of levy was 30 paise per Kg.
(c) Third Period: 29 March, 1984 onwards Rural employment cess was levied at the rate of Rs.3 per Kg.
on all despatches of tea except that for despatches to the said two tea auction centres in West Bengal the rate of tax was only 30 paise per Kg.
Learned counsel for the petitioners contend that the levy of the cess under section 4(1) read with section 4(2)(aa) of the West Bengal Act as amended in 1981 and 1982 is ultra vires inasmuch as the statutory provisions violate Article 14 and Article 301 of the Constitution and also lie outside the legislative competence of the State Government.
It seems to us that these cases can be disposed of on the short ground based on Article 301 of the Constitution and want of legis lative competence.
There can be no dispute that the rural employment cess is a tax.
cannot also be disputed that if the levy of a tax on goods has the direct and immediate effect of impeding the movement of goods throughout the territory of India, there is a violation of Article 301 of the Constitution.
If, however, the impact of the levy is indirect or remote, no valid complaint can be made in relation to Article 301.
In Atiabari Tea Co., Ltd. vs The State of Assam and Others, ; , Gajendragadkar, J (as he then was) speaking for the majority in that case held that tax laws would effect trade and commerce and could be violative of the freedom guaranteed by Article 30 1, provided they di rectly or immediately affect the freedom of trade and com merce and not indirectly or in a remote manner.
This princi ple was affirmed by this Court in The Automobile Transport (Rajasthan) 300 Ltd. vs The State of Rajasthan and Others, [1963] 1 S.C.R. 491 and again in Firm A.T.B. Mehtab Majid and Company vs State of Madras and Another, [1963] Suppl.
2 S.C.R. 435.
But the declaration in Article 301 that trade, commerce and intercourse throughout the territory of India shall be free is subject to Article 304(b) which provides: "304.
Restrictions on trade, commerce and intercourse among States.
Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law ( a ) .
. . (b) impose such reasonable restrictions on the freedom of trade, commerce or inter course with or within that State as may be required in the public interest.
Provided that no Bill or amendment for the purposes of clause (b) shall be intro duced or moved in the Legislature of a State without the previous sanction of the Presi dent.
" Therefore, there is no violation of Article 30 1 if the case falls under Article 304(b) and its proviso.
In Kalyani Stores vs The State of Orissa and Others, [1966] 1 S.C.R. 865 this Court held that a restriction on the freedom of trade and commerce which is guaranteed by Article 301 cannot be justified unless the procedure provided in Article 304 is followed.
That was also the view taken in State of Mysore vs H. Sanjeeviah; , and Andhra Sugars Ltd. & Anr.
vs State of Andhra Pradesh & Ors.
, [1968] 1 S.C.R. 705.
In other words, if the Legislature of a State enacts a law which imposes such reasonable restrictions on the free dom of trade, commerce or intercourse with or within that State as may be required in the public interest and further that the Bill or amendment for the purposes of clause (b) has been introduced or moved in the Legislature of a State with the previous sanction of the President, such enactment will not offend the Article 301.
The question then is whether the impugned levy impedes the free flow of trade and commerce throughout the territory of India, and if it does, whether it fails within the excep tion carved out in Article 304(b).
If the levy imposes a cess in respect of tea estates, it may well De said that even though the free flow of tea is impeded in its movement throughout the territory of India it is in consequence of an indirect or 301 remote effect of the levy and that it cannot be said that Article 301 is contravened.
The contention of the petition ers is, however, that it is ostensibly only in respect of tea estates but in fact it is a levy on despatches of tea.
If that contention is sound, there can be no doubt that it constitutes a violation of Article 301 unless the legisla tion is brought within the scope of Article 304(b).
To determine whether the levy is in respect of tea estates or is a levy on despatches of tea, the substance of the legis lation must be ascertained from the relevant provisions of the statute.
It cannot be disputed that the subject of the levy, the nature of which defines the quality of the levy, must not be confused with the measure of liability, that is to say, the quantum of the tax.
There is a plenitude of case law supporting that principle, among the cases being Union of India and Others vs Bombay Tyre International Ltd. and Others, ; But what is the position here? The statute speaks of a levy "in respect of a tea estate", and it says that the levy will not exceed Rs.6 on each Kilogram of tea on the des patches from such tea estate of tea grown therein.
The statute also provides that in calculating the despatches of tea for the purpose of levy of rural employment cess, the despatches for sale made at such tea auction centres as may be recognised by the State Government shall be excluded.
And there is a proviso which empowers the State Government to fix different rates on despatches of different classes of tea.
There is also section 4(4) which empowers the State Govern ment to exempt such categories of despatches or such per centage of despatches from the liability to pay the whole or any part of the rural employment cess, or to reduce the rate of the rural employment cess payable thereon under clause (aa) of sub section
(2) on such terms and conditions as it may specify by notification.
As from 1 October, 1982 the posi tion remained the same except that the first proviso to section 4(2)(aa) excluding the despatches for sale made at recog nised tea auction centres was deleted.
The remaining provi sions continued as before.
Now, for determining the true nature of the legislation, whether it is a legislation in respect of tea estates.
and therefore of land, or in respect of despatches of tea, we must, as we have said, take all the relevant provisions of the legislation into account and ascertain the essential substance of it.
It seems to us that although the impugned provisions speak of a levy of cess in respect of tea estates, what is really contemplated is a levy on despatches of tea instead.
The entire structure of the levy points to that conclusion.
If the levy is regarded as one in respect of tea estates and the measure of the liability is defined in terms of the weight of tea des patched from the tea estate there must be a nexus between the two indicating a 302 relationship between the levy on the tea estate and the criteria for determining the measure of liability.
If there is no nexus at all it can conceivably be inferred that the levy iS not what it purports to be.
The statutory provisions for measuring the liability on account of the levy throws light on the general character of the tax as observed by the Privy Council in Re: A Reference under the Government of Ireland Act, 1920 and Section 3 of the Finance Act (Northern Ireland), 1934, In R.R. Engineering Co. vs Zila Parishad, Bareilly & Anr., ; , this Court observed that the standard on which the tax is levied was a relevant consideration for determining the nature of the tax, although it could not be regarded as conclusive in the matter.
Again in The Hingir Rampur Coal Co. Ltd. and Others.
vs The State of Orissa and Others, ; , this Court observed that the method of determining the rate of levy would be relevant in consider ing the character of the levy.
All these cases were referred to in Bombay Tyre International Ltd. (supra) where in the discussion on the point at page 367 this Court said: "Any standard which maintains a nexus with the essential character of the levy can be regard ed as a valid basis for assessing the measure of the levy.
" It is apparent that the standards laid down for measur ing the liability under the levy must bear a relationship to the nature of the levy.
In the case before us, however, we find that the nexus with the tea estate is lost altogether in the provisions for exemption or reduction of the levy and that throughout the nexus is confined to despatches of tea rather than related to the tea estate.
There is nothing to suggest that a particular tea estate produces only one class of tea, and when reference is made to a certain class of tea the reference identifies a certain class of tea estates.
We may presume that a tea estate produces different classes of tea and not one class of tea only.
While there must always be a nexus between the subject of the levy and the measure of the levy that nexus extends into different dimensions.
Variations considered appropriate for the purpose of deter mining the measure must correspond to variations in the subject of the levy.
If the measure of levy is to vary with the despatches of different classes of tea there must be something in the class of tea concerned which points to a reason located in the particular tea estate or classes of tea estates which are made the subject of the levy.
So also if the measure varies with the centre of sale of tea, the variation must relate to a reason to be found in the nature of the tea estate or classes of tea estates.
In other words, there must be a reason why one class of tea is treated 303 differently from another class of tea when deciding upon the rate to be applied to different classes of tea and that reason must be found in the nature of the tea estate con cerned.
Ultimately the benefit of exemption or reduced levy must be related to the need for exempting the tea estate from that levy or relieving it from part of the normal levy.
When the provisions before us are examined in their totali ty, we find no such relationship or nexus between the tea estate and the varied treatment accorded in respect of despatches of different kinds of tea.
It seems to us that having regard to all the relevant provisions of the statute, including section 4(2)(aa) and section 4(4), in substance the impugned levy is a levy in respect of despatches of tea and not in respect of tea estates.
Treating it as a levy on despatches of tea it is evident that the levy must be regarded as constituting a direct and immediate restriction on the flow of trade and commerce in tea throughout the territory of India, and the levy can avoid the injunction declared in Article 301 only if it satisfies the provisions of Article 304(b) and the proviso thereto.
For bringing the legislation within the saving provisions of Article 304(b) it is necessary that the Bill or amendment should have been introduced or moved in the Legislature of the State with the previous sanction of the President.
It is not disputed that the amendments to the West Bengal Act made in 198 1 and 1982 did not satisfy that requirement.
Indeed, it appears that the West Bengal Govern ment had sent an earlier Bill to the President with the object of levying a tax on the income from tea but the Presidential assent was not granted.
It appears further that the Finance Minister of WeSt Bengal made a statement in the West Bengal Legislature on 27 February, 1981 stating that he would introduce the rural employment cess on despatches of tea.
He referred to a Bill for amending the West Bengal Marketing (Regulation) Act, 1972 having been sent to the President and the President not having signified his consent to the amendment.
In our opinion, the impugned provisions brought into the West Bengal Act by the amendments in 1981 and 1982 so far as they purport to relate to tea estates are unconstitutional and void and cannot be given effect to.
Another aspect of the matter may be considered, and that relates to legislative competence.
If the impugned legisla tion were to be regarded as a levy in respect of tea es tates, it would be referable to Entry 49 in List II of the Seventh Schedule of the Constitution which speaks of "taxes on lands and buildings".
But if the legislation is in sub stance legislation in respect of despatches of tea, legisla tive authority must be 304 found for it with reference to some other Entry.
We have not been shown any Entry in List II or in List III of the Sev enth Schedule which would be pertinent.
It may be noted that Parliament had made a declaration in section 2 of the that it was expedient in the public interest that the Union should take under its control the tea industry.
Under the , Parliament has assumed control of the tea industry including the tea trade and control of tea prices.
Under section 25 of the Act a cess on tea produced in India has also been imposed.
It appears to us that the impugned legis lation is also void for want of legislative competence as it pertains to a covered field.
We do not consider it necessary to express our opinion on the other points raised between the parties in this case.
In the result, the writ petitions filed in this Court and the petitions in the Transferred Cases are allowed, the impugned amendments effected in the West Bengal Rural Em ployment and Production Act, 1976 by the amending Acts of 1981 and 1982 so far as they purport to relate to tea es tates are declared void and the petitioners are held enti tled to the refund of cess paid by them under the impugned statutory provisions.
The petitioners are entitled to their costs.
P.S.S. Petitions allowed.
|
Section 4(1) of the West Bengal Rural Employment.
and Production Act, 1976 provided for levy of rural employment cess on immovable properties.
Clause (aa) of section 4(2) as amended by section 7(b) of the West Bengal Taxation Laws (Amend ment) Act, 1981 provided for levy of rural employment cess in respect of tea estates on the despatches of tea grown therein.
The first proviso thereto provided for exclusion of despatches of tea for sale made at recognised centres.
The second proviso thereto empowered the State Government 10 fix different rates of cess on despatches of different classes of tea.
Sub section (4) of the amended section 4 provided for exemption of certain categories of despatches from the liability to pay the whole or part of the cess or to reduce the rate of the cess payable thereon.
The first proviso to section 4(2)(aa) was.
however, omitted by the West Bengal Taxa tion Laws (Amendment) Act, 1982.
Article 304(b) of the Constitution permits the legislature of a State to impose reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State provided the Bill or amendment for that purpose is introduced with the previous sanction of the President.
It was contended for the petitioners that the levy of the cess under section 4(1) read with section 4(2)(aa) of the Act, as amended in 1981 and 1982.
was violative of the freedom guaranteed by Article 301 of the Constitu 294 tion and also lay outside the legislative competence of the State Government.
Allowing the writ petitions.
HELD: 1.1 If the levy of a tax on goods has direct and immediate effect of impeding the movement of goods through out the territory of India, there is a violation of Article 301 of the Constitution.
If, however, the impact of the levy is indirect or remote, no valid complaint can be made in relation to Article 301.
There is also no violation of Article 301 if the case fails under Article 304(b) and its proviso.
[299F, 300D E] 1.2 Therefore, if the legislature of a State enacts a law which imposes such reasonable restrictions on the free dom of trade, commerce or intercourse with or within that State as may be required in the public interest and further that the Bill or amendment for the purposes of clause (b) has been introduced or moved in the Legislature of a State with the previous sanction of the President, such enactment will not offend Article 301.
The rural employment cess in the instant case was a tax.
[300F, 299F] Ariabari Tea Co., Ltd. vs The State of Assam & Ors. ; ; The Automobile Transport (Rajasthan) Ltd. vs The State of Rajasthan & Ors., [1963] 1 S.C.R. 491; Firm A.T.B. Mehtab Majid and Company vs State of Madras & Anr., [1963] Suppl.
2 S.C.R. 435; Kalyani Stores vs TIre State of Orissa & Ors., ; ; State of Mysore vs Ii.
Sanjeeviah, ; and Andhra Sugars Ltd. & Anr.
vs State of Andhra Pradesh & Ors.
, ; , referred to.
2.1 To determine whether the levy was in respect of tea estates, and, therefore, of land thus making an indirect impact or was a levy on despatches of tea thereby directly impeding movement of goods, the substance of the legislation must be ascertained from the relevant provisions of the statute.
[301B] 2.2 The subject of the levy, the nature of which de fines the quality of the levy, however, must not be confused with the measure of liability, that is to say, the quantum of the tax.
Furthermore, the standards laid down for measur ing the liability under the levy must bear a relationship to the nature of levy.
[301B C, 302D E] 295 Union of India & Ors.
vs Bombay Tyre International Ltd. 2.3 If the levy is regarded as one in respect of tea estates and the measure of the liability is defined in terms of the weight of tea despatched from the tea estate there must be a nexus between the two indicating a relationship between the levy on the tea estate and the criteria for determining the measure of liability.
If there is no nexus at all it can conceivably be inferred that the levy is not what it purports to be.
[301H, 302A] 2.4 In the instant case, the nexus with the tea estate is lost altogether in the provisions for exemption or reduc tion of the levy and throughout the nexus is confined to despatches of tea rather than related to the tea estate.
There is nothing to suggest that a particular tea estate produces only one class of tea, and when reference is made to a certain class of tea the reference identifies a certain class of tea estates.
[302E F] 2.5 While there must always be a nexus between the subject of the levy and the measure of the levy that nexus extends into different dimensions.
Variations considered appropriate for the purpose of determining the measure must correspond to variations in the subject of the levy.
If the measure of levy is to vary with the despatches of different classes of tea, there must be something in the class of tea concerned which points to a reason located in the particular tea estate or classes of tea estates which are made the subject of the levy.
So also, if the measure varies with the centre of sale of tea, the variation must relate to a reason to be found in the nature of the tea estate concerned.
Ultimately, the benefit of exemption or reduced levy must be related to the need for exempting the tea estate from that levy or relieving it from part of the normal levy.
[302F, 303A] 2.6 In the instant case the relevant statutory provi sions, including section 4(2)(aa) and section 4(4), indicate no such relationship or nexus between the tea estate and the varied treatment accorded in respect of the despatch of different kinds of tea.
The levy of rural employment cess was, there fore, a levy in respect of despatches of tea and not in respect of tea estates.
It must, thus, be regarded as con stituting a direct and immediate restriction on the flow of trade and commerce in tea throughout the territory of India.
[303B C] 2.7 Such a levy could avoid the injunction declared in Article 301 296 only if it satisfied the provisions of Article 304(b) and the proviso thereto.
The amendments made to the West Bengal Act in 1981 and 1982 had not been moved in the Legislature of the State with the previous sanction of the President.
The provisions brought into the Act by the said amendments were, therefore, unconstitutional and void and could not be given effect to.
[303C D, F, G] 3.
Under the Parliament had assumed con trol of the tea industry including the tea trade and control of tea prices.
Under section 25 of that Act a cess on tea pro duced in India had also been imposed.
The State legislation imposing a cess on despatches of tea was, therefore, also void for want of legislative competence as it pertained to a covered field.
[304B]
|
he refund of cess paid by them.
[304D] & CIVIL ORIGINAL JURISDICTION: Writ Petitions Nos.
2687, 5822 of 1983 etc.
(Under Article 32 of the Constitution of India).
Dr. Shankar Ghosh, T.S.K. Iyer, M.L. Lahoty, P.S. Jha, D.D. Gupta, S.K. Jain, D.P. Mukherjee, S.R. Srivastava, P.N. Tewari and Parijat Sinha for the petitioners.
Tapas Ray, Anil B. Dewan, T.C. Roy, G.S. Chatterjee, Dalip Sinha and H.K. Puri for the respondents.
The judgment of the Court was delivered by PATHAK, CJ.
By these writ petitions and transferred cases the petitioners challenge the validity of the levy of cess in respect of tea estates under the West Bengal Rural Employment and Production Act, 1976.
The West Bengal Rural Employment and Production Act, 1976, (shortly referred to as the "West Bengal Act") is intended to provide the additional resources for the promo tion of employment in rural areas and for implementing rural production programmes.
The additional resources are sought to be raised from two sources, a surcharge on land revenue under section 3 of the Act and a rural employment cess under section 4 of the Act.
We are concerned here with the levy of the rural employment cess.
297 Originally section 4 of the West Bengal Act provided as follows: "4.(1) On and from the commencement of this Act, all immovable properties on which road and public work cesses are assessed according to the provisions of the Cess Act, 1880, shall be liable to the payment of rural employment cess: Provided that no raiyat who is exempted from paying revenue in respect of his holding under clause (a) of subsection (1) of section 23B of the West Bengal Land Reforms Act, 1955, shall be liable to pay rural em ployment cess.
(2) The rural employment cess shall be levied annually (a) in respect of lands, at the rate of six paise on each rupee of development value thereof; (b) in respect of coal mines, at the rate of fifty paise on each tonne of coal on the annual dispatches therefrom; (c) in respect of mines other than coal mines and quarries, at the rate of six paise on each rupee of annual net profits thereof.
" The West Bengal Taxation Laws (Amendment) Act, 1982 amended the West Bengal Act and by section 7(b) thereof amend ments were made in section 4(2) of the West Bengal Act with effect from 1 April, 1981.
As a result, as from that date, section 4(2) in so far as it is material read as follows: 4(2).
The rural employment cess shall be levied annually (a) in respect of lands, other than a tea estate, at the rate of six paise on each rupee of development value thereof; (aa) in respect of a tea estate at such rate, not exceeding rupees six on each kilogram of tea on the dispatches from such tea estate of tea grown therein, as the State Government may, by notification in the Offi cial Gazette, fix in this behalf: 298 Provided that in calculating the dispatches of tea for the purpose of levy of rural employment cess, such dispatches for sale made at such tea auction centres as may be recognised by the State Government by notification in the Official Gazette shall be excluded.
Provided further that the State Government may fix different rates on des patches of different classes of tea.
Explanation For the purpose of this section, "tea" means the plant Camellia Sinen sis (L) O. Kuntze as well as all varieties of the product known commercially as tea made from the leaves of the plant Camellia Sinensis (L) O. Kuntze, including green tea and green tea leaves, processed or unprocessed;" Section 4 was also amended further by the insertion of sub section
(4) which provided: "(4) The State Government may, if it considers necessary so to do, by notification in the Official Gazette, exempt such categories of despatches or such percentage of despatches from the liability to pay the whole or any part of the rural employment cess, or reduce the rate of the rural employment cess payable thereon, under clause (aa) of sub section (2), on such terms and conditions as may be speci fied in the notification.
Provided that the State Government may, at any time, add to, amend, vary of rescind any such notification.
" Thereafter the West Bengal Taxation Laws (Amendment) Act, 1982 was enacted with effect from 1 October, 1982.
section 4(2) of the West Bengal Act was amended and under clause (aa) thereof the first proviso was omitted.
Pursuant to the amendments in the West Bengal Act in 1981 and 1982, various notifications were issued by the State Government, which for our purpose broadly cover these different periods: (a) First Period: 1 April, 1981 to 30 Septem ber, 1982 299 Rural employment cess was levied at the rate of Rs.5 per Kg.
on all despatches of tea, but in respect of despatches to two tea auction centres within West Bengal the rate of duty was nil, and in respect of tea sold in West Bengal through registered dealers otherwise than through the two tea auction centres the rate of tax was Rs.2.50 per Kg.
(b) Second Period: 1 October, 1982 to 28 March, 1984 Rural employment cess was levied at the rate of Rs. 1.50 per Kg.
on all despatches of tea except that for despatches to the said two tea auction centres the rate of levy was 30 paise per Kg.
(c) Third Period: 29 March, 1984 onwards Rural employment cess was levied at the rate of Rs.3 per Kg.
on all despatches of tea except that for despatches to the said two tea auction centres in West Bengal the rate of tax was only 30 paise per Kg.
Learned counsel for the petitioners contend that the levy of the cess under section 4(1) read with section 4(2)(aa) of the West Bengal Act as amended in 1981 and 1982 is ultra vires inasmuch as the statutory provisions violate Article 14 and Article 301 of the Constitution and also lie outside the legislative competence of the State Government.
It seems to us that these cases can be disposed of on the short ground based on Article 301 of the Constitution and want of legis lative competence.
There can be no dispute that the rural employment cess is a tax.
cannot also be disputed that if the levy of a tax on goods has the direct and immediate effect of impeding the movement of goods throughout the territory of India, there is a violation of Article 301 of the Constitution.
If, however, the impact of the levy is indirect or remote, no valid complaint can be made in relation to Article 301.
In Atiabari Tea Co., Ltd. vs The State of Assam and Others, ; , Gajendragadkar, J (as he then was) speaking for the majority in that case held that tax laws would effect trade and commerce and could be violative of the freedom guaranteed by Article 30 1, provided they di rectly or immediately affect the freedom of trade and com merce and not indirectly or in a remote manner.
This princi ple was affirmed by this Court in The Automobile Transport (Rajasthan) 300 Ltd. vs The State of Rajasthan and Others, [1963] 1 S.C.R. 491 and again in Firm A.T.B. Mehtab Majid and Company vs State of Madras and Another, [1963] Suppl.
2 S.C.R. 435.
But the declaration in Article 301 that trade, commerce and intercourse throughout the territory of India shall be free is subject to Article 304(b) which provides: "304.
Restrictions on trade, commerce and intercourse among States.
Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law ( a ) .
. . (b) impose such reasonable restrictions on the freedom of trade, commerce or inter course with or within that State as may be required in the public interest.
Provided that no Bill or amendment for the purposes of clause (b) shall be intro duced or moved in the Legislature of a State without the previous sanction of the Presi dent.
" Therefore, there is no violation of Article 30 1 if the case falls under Article 304(b) and its proviso.
In Kalyani Stores vs The State of Orissa and Others, [1966] 1 S.C.R. 865 this Court held that a restriction on the freedom of trade and commerce which is guaranteed by Article 301 cannot be justified unless the procedure provided in Article 304 is followed.
That was also the view taken in State of Mysore vs H. Sanjeeviah; , and Andhra Sugars Ltd. & Anr.
vs State of Andhra Pradesh & Ors.
, [1968] 1 S.C.R. 705.
In other words, if the Legislature of a State enacts a law which imposes such reasonable restrictions on the free dom of trade, commerce or intercourse with or within that State as may be required in the public interest and further that the Bill or amendment for the purposes of clause (b) has been introduced or moved in the Legislature of a State with the previous sanction of the President, such enactment will not offend the Article 301.
The question then is whether the impugned levy impedes the free flow of trade and commerce throughout the territory of India, and if it does, whether it fails within the excep tion carved out in Article 304(b).
If the levy imposes a cess in respect of tea estates, it may well De said that even though the free flow of tea is impeded in its movement throughout the territory of India it is in consequence of an indirect or 301 remote effect of the levy and that it cannot be said that Article 301 is contravened.
The contention of the petition ers is, however, that it is ostensibly only in respect of tea estates but in fact it is a levy on despatches of tea.
If that contention is sound, there can be no doubt that it constitutes a violation of Article 301 unless the legisla tion is brought within the scope of Article 304(b).
To determine whether the levy is in respect of tea estates or is a levy on despatches of tea, the substance of the legis lation must be ascertained from the relevant provisions of the statute.
It cannot be disputed that the subject of the levy, the nature of which defines the quality of the levy, must not be confused with the measure of liability, that is to say, the quantum of the tax.
There is a plenitude of case law supporting that principle, among the cases being Union of India and Others vs Bombay Tyre International Ltd. and Others, ; But what is the position here? The statute speaks of a levy "in respect of a tea estate", and it says that the levy will not exceed Rs.6 on each Kilogram of tea on the des patches from such tea estate of tea grown therein.
The statute also provides that in calculating the despatches of tea for the purpose of levy of rural employment cess, the despatches for sale made at such tea auction centres as may be recognised by the State Government shall be excluded.
And there is a proviso which empowers the State Government to fix different rates on despatches of different classes of tea.
There is also section 4(4) which empowers the State Govern ment to exempt such categories of despatches or such per centage of despatches from the liability to pay the whole or any part of the rural employment cess, or to reduce the rate of the rural employment cess payable thereon under clause (aa) of sub section
(2) on such terms and conditions as it may specify by notification.
As from 1 October, 1982 the posi tion remained the same except that the first proviso to section 4(2)(aa) excluding the despatches for sale made at recog nised tea auction centres was deleted.
The remaining provi sions continued as before.
Now, for determining the true nature of the legislation, whether it is a legislation in respect of tea estates.
and therefore of land, or in respect of despatches of tea, we must, as we have said, take all the relevant provisions of the legislation into account and ascertain the essential substance of it.
It seems to us that although the impugned provisions speak of a levy of cess in respect of tea estates, what is really contemplated is a levy on despatches of tea instead.
The entire structure of the levy points to that conclusion.
If the levy is regarded as one in respect of tea estates and the measure of the liability is defined in terms of the weight of tea des patched from the tea estate there must be a nexus between the two indicating a 302 relationship between the levy on the tea estate and the criteria for determining the measure of liability.
If there is no nexus at all it can conceivably be inferred that the levy iS not what it purports to be.
The statutory provisions for measuring the liability on account of the levy throws light on the general character of the tax as observed by the Privy Council in Re: A Reference under the Government of Ireland Act, 1920 and Section 3 of the Finance Act (Northern Ireland), 1934, In R.R. Engineering Co. vs Zila Parishad, Bareilly & Anr., ; , this Court observed that the standard on which the tax is levied was a relevant consideration for determining the nature of the tax, although it could not be regarded as conclusive in the matter.
Again in The Hingir Rampur Coal Co. Ltd. and Others.
vs The State of Orissa and Others, ; , this Court observed that the method of determining the rate of levy would be relevant in consider ing the character of the levy.
All these cases were referred to in Bombay Tyre International Ltd. (supra) where in the discussion on the point at page 367 this Court said: "Any standard which maintains a nexus with the essential character of the levy can be regard ed as a valid basis for assessing the measure of the levy.
" It is apparent that the standards laid down for measur ing the liability under the levy must bear a relationship to the nature of the levy.
In the case before us, however, we find that the nexus with the tea estate is lost altogether in the provisions for exemption or reduction of the levy and that throughout the nexus is confined to despatches of tea rather than related to the tea estate.
There is nothing to suggest that a particular tea estate produces only one class of tea, and when reference is made to a certain class of tea the reference identifies a certain class of tea estates.
We may presume that a tea estate produces different classes of tea and not one class of tea only.
While there must always be a nexus between the subject of the levy and the measure of the levy that nexus extends into different dimensions.
Variations considered appropriate for the purpose of deter mining the measure must correspond to variations in the subject of the levy.
If the measure of levy is to vary with the despatches of different classes of tea there must be something in the class of tea concerned which points to a reason located in the particular tea estate or classes of tea estates which are made the subject of the levy.
So also if the measure varies with the centre of sale of tea, the variation must relate to a reason to be found in the nature of the tea estate or classes of tea estates.
In other words, there must be a reason why one class of tea is treated 303 differently from another class of tea when deciding upon the rate to be applied to different classes of tea and that reason must be found in the nature of the tea estate con cerned.
Ultimately the benefit of exemption or reduced levy must be related to the need for exempting the tea estate from that levy or relieving it from part of the normal levy.
When the provisions before us are examined in their totali ty, we find no such relationship or nexus between the tea estate and the varied treatment accorded in respect of despatches of different kinds of tea.
It seems to us that having regard to all the relevant provisions of the statute, including section 4(2)(aa) and section 4(4), in substance the impugned levy is a levy in respect of despatches of tea and not in respect of tea estates.
Treating it as a levy on despatches of tea it is evident that the levy must be regarded as constituting a direct and immediate restriction on the flow of trade and commerce in tea throughout the territory of India, and the levy can avoid the injunction declared in Article 301 only if it satisfies the provisions of Article 304(b) and the proviso thereto.
For bringing the legislation within the saving provisions of Article 304(b) it is necessary that the Bill or amendment should have been introduced or moved in the Legislature of the State with the previous sanction of the President.
It is not disputed that the amendments to the West Bengal Act made in 198 1 and 1982 did not satisfy that requirement.
Indeed, it appears that the West Bengal Govern ment had sent an earlier Bill to the President with the object of levying a tax on the income from tea but the Presidential assent was not granted.
It appears further that the Finance Minister of WeSt Bengal made a statement in the West Bengal Legislature on 27 February, 1981 stating that he would introduce the rural employment cess on despatches of tea.
He referred to a Bill for amending the West Bengal Marketing (Regulation) Act, 1972 having been sent to the President and the President not having signified his consent to the amendment.
In our opinion, the impugned provisions brought into the West Bengal Act by the amendments in 1981 and 1982 so far as they purport to relate to tea estates are unconstitutional and void and cannot be given effect to.
Another aspect of the matter may be considered, and that relates to legislative competence.
If the impugned legisla tion were to be regarded as a levy in respect of tea es tates, it would be referable to Entry 49 in List II of the Seventh Schedule of the Constitution which speaks of "taxes on lands and buildings".
But if the legislation is in sub stance legislation in respect of despatches of tea, legisla tive authority must be 304 found for it with reference to some other Entry.
We have not been shown any Entry in List II or in List III of the Sev enth Schedule which would be pertinent.
It may be noted that Parliament had made a declaration in section 2 of the that it was expedient in the public interest that the Union should take under its control the tea industry.
Under the , Parliament has assumed control of the tea industry including the tea trade and control of tea prices.
Under section 25 of the Act a cess on tea produced in India has also been imposed.
It appears to us that the impugned legis lation is also void for want of legislative competence as it pertains to a covered field.
We do not consider it necessary to express our opinion on the other points raised between the parties in this case.
In the result, the writ petitions filed in this Court and the petitions in the Transferred Cases are allowed, the impugned amendments effected in the West Bengal Rural Em ployment and Production Act, 1976 by the amending Acts of 1981 and 1982 so far as they purport to relate to tea es tates are declared void and the petitioners are held enti tled to the refund of cess paid by them under the impugned statutory provisions.
The petitioners are entitled to their costs.
P.S.S. Petitions allowed.
|
[304D] & CIVIL ORIGINAL JURISDICTION: Writ Petitions Nos. (Under Article 32 of the Constitution of India). Dr. Shankar Ghosh, T.S.K. Iyer, M.L. Lahoty, P.S. Jha, D.D. Gupta, S.K. Jain, D.P. Mukherjee, S.R. Srivastava, P.N. Tewari and Parijat Sinha for the petitioners. Tapas Ray, Anil B. Dewan, T.C. Roy, G.S. Chatterjee, Dalip Sinha and H.K. Puri for the respondents. The judgment of the Court was delivered by PATHAK, CJ. By these writ petitions and transferred cases the petitioners challenge the validity of the levy of cess in respect of tea estates under the West Bengal Rural Employment and Production Act, 1976. The West Bengal Rural Employment and Production Act, 1976, (shortly referred to as the "West Bengal Act") is intended to provide the additional resources for the promo tion of employment in rural areas and for implementing rural production programmes. The additional resources are sought to be raised from two sources, a surcharge on land revenue under section 3 of the Act and a rural employment cess under section 4 of the Act. We are concerned here with the levy of the rural employment cess. 297 Originally section 4 of the West Bengal Act provided as follows: "4.(1) On and from the commencement of this Act, all immovable properties on which road and public work cesses are assessed according to the provisions of the Cess Act, 1880, shall be liable to the payment of rural employment cess: Provided that no raiyat who is exempted from paying revenue in respect of his holding under clause (a) of subsection (1) of section 23B of the West Bengal Land Reforms Act, 1955, shall be liable to pay rural em ployment cess. (2) The rural employment cess shall be levied annually (a) in respect of lands, at the rate of six paise on each rupee of development value thereof; (b) in respect of coal mines, at the rate of fifty paise on each tonne of coal on the annual dispatches therefrom; (c) in respect of mines other than coal mines and quarries, at the rate of six paise on each rupee of annual net profits thereof. " The West Bengal Taxation Laws (Amendment) Act, 1982 amended the West Bengal Act and by section 7(b) thereof amend ments were made in section 4(2) of the West Bengal Act with effect from 1 April, 1981. As a result, as from that date, section 4(2) in so far as it is material read as follows: 4(2). Provided further that the State Government may fix different rates on des patches of different classes of tea. Provided that the State Government may, at any time, add to, amend, vary of rescind any such notification. " Thereafter the West Bengal Taxation Laws (Amendment) Act, 1982 was enacted with effect from 1 October, 1982. section 4(2) of the West Bengal Act was amended and under clause (aa) thereof the first proviso was omitted. Pursuant to the amendments in the West Bengal Act in 1981 and 1982, various notifications were issued by the State Government, which for our purpose broadly cover these different periods: (a) First Period: 1 April, 1981 to 30 Septem ber, 1982 299 Rural employment cess was levied at the rate of Rs.5 per Kg. on all despatches of tea, but in respect of despatches to two tea auction centres within West Bengal the rate of duty was nil, and in respect of tea sold in West Bengal through registered dealers otherwise than through the two tea auction centres the rate of tax was Rs.2.50 per Kg. (b) Second Period: 1 October, 1982 to 28 March, 1984 Rural employment cess was levied at the rate of Rs. on all despatches of tea except that for despatches to the said two tea auction centres the rate of levy was 30 paise per Kg. on all despatches of tea except that for despatches to the said two tea auction centres in West Bengal the rate of tax was only 30 paise per Kg. Learned counsel for the petitioners contend that the levy of the cess under section 4(1) read with section 4(2)(aa) of the West Bengal Act as amended in 1981 and 1982 is ultra vires inasmuch as the statutory provisions violate Article 14 and Article 301 of the Constitution and also lie outside the legislative competence of the State Government. It seems to us that these cases can be disposed of on the short ground based on Article 301 of the Constitution and want of legis lative competence. There can be no dispute that the rural employment cess is a tax. cannot also be disputed that if the levy of a tax on goods has the direct and immediate effect of impeding the movement of goods throughout the territory of India, there is a violation of Article 301 of the Constitution. If, however, the impact of the levy is indirect or remote, no valid complaint can be made in relation to Article 301. But the declaration in Article 301 that trade, commerce and intercourse throughout the territory of India shall be free is subject to Article 304(b) which provides: "304. Restrictions on trade, commerce and intercourse among States. Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law ( a ) . b) impose such reasonable restrictions on the freedom of trade, commerce or inter course with or within that State as may be required in the public interest. Provided that no Bill or amendment for the purposes of clause (b) shall be intro duced or moved in the Legislature of a State without the previous sanction of the Presi dent. " Therefore, there is no violation of Article 30 1 if the case falls under Article 304(b) and its proviso. In Kalyani Stores vs The State of Orissa and Others, [1966] 1 S.C.R. 865 this Court held that a restriction on the freedom of trade and commerce which is guaranteed by Article 301 cannot be justified unless the procedure provided in Article 304 is followed. That was also the view taken in State of Mysore vs H. Sanjeeviah; , and Andhra Sugars Ltd. & Anr. In other words, if the Legislature of a State enacts a law which imposes such reasonable restrictions on the free dom of trade, commerce or intercourse with or within that State as may be required in the public interest and further that the Bill or amendment for the purposes of clause (b) has been introduced or moved in the Legislature of a State with the previous sanction of the President, such enactment will not offend the Article 301. If the levy imposes a cess in respect of tea estates, it may well De said that even though the free flow of tea is impeded in its movement throughout the territory of India it is in consequence of an indirect or 301 remote effect of the levy and that it cannot be said that Article 301 is contravened. The contention of the petition ers is, however, that it is ostensibly only in respect of tea estates but in fact it is a levy on despatches of tea. If that contention is sound, there can be no doubt that it constitutes a violation of Article 301 unless the legisla tion is brought within the scope of Article 304(b). It cannot be disputed that the subject of the levy, the nature of which defines the quality of the levy, must not be confused with the measure of liability, that is to say, the quantum of the tax. There is a plenitude of case law supporting that principle, among the cases being Union of India and Others vs Bombay Tyre International Ltd. and Others, ; But what is the position here? The statute speaks of a levy "in respect of a tea estate", and it says that the levy will not exceed Rs.6 on each Kilogram of tea on the des patches from such tea estate of tea grown therein. The statute also provides that in calculating the despatches of tea for the purpose of levy of rural employment cess, the despatches for sale made at such tea auction centres as may be recognised by the State Government shall be excluded. And there is a proviso which empowers the State Government to fix different rates on despatches of different classes of tea. There is also section 4(4) which empowers the State Govern ment to exempt such categories of despatches or such per centage of despatches from the liability to pay the whole or any part of the rural employment cess, or to reduce the rate of the rural employment cess payable thereon under clause (aa) of sub section
(2) on such terms and conditions as it may specify by notification. As from 1 October, 1982 the posi tion remained the same except that the first proviso to section 4(2)(aa) excluding the despatches for sale made at recog nised tea auction centres was deleted. The remaining provi sions continued as before. Now, for determining the true nature of the legislation, whether it is a legislation in respect of tea estates. and therefore of land, or in respect of despatches of tea, we must, as we have said, take all the relevant provisions of the legislation into account and ascertain the essential substance of it. It seems to us that although the impugned provisions speak of a levy of cess in respect of tea estates, what is really contemplated is a levy on despatches of tea instead. The entire structure of the levy points to that conclusion. If the levy is regarded as one in respect of tea estates and the measure of the liability is defined in terms of the weight of tea des patched from the tea estate there must be a nexus between the two indicating a 302 relationship between the levy on the tea estate and the criteria for determining the measure of liability. If there is no nexus at all it can conceivably be inferred that the levy iS not what it purports to be. The statutory provisions for measuring the liability on account of the levy throws light on the general character of the tax as observed by the Privy Council in Re: A Reference under the Government of Ireland Act, 1920 and Section 3 of the Finance Act (Northern Ireland), 1934, In R.R. Engineering Co. vs Zila Parishad, Bareilly & Anr., ; , this Court observed that the standard on which the tax is levied was a relevant consideration for determining the nature of the tax, although it could not be regarded as conclusive in the matter. Again in The Hingir Rampur Coal Co. Ltd. and Others. vs The State of Orissa and Others, ; , this Court observed that the method of determining the rate of levy would be relevant in consider ing the character of the levy. All these cases were referred to in Bombay Tyre International Ltd. (supra) where in the discussion on the point at page 367 this Court said: "Any standard which maintains a nexus with the essential character of the levy can be regard ed as a valid basis for assessing the measure of the levy. " It is apparent that the standards laid down for measur ing the liability under the levy must bear a relationship to the nature of the levy. In the case before us, however, we find that the nexus with the tea estate is lost altogether in the provisions for exemption or reduction of the levy and that throughout the nexus is confined to despatches of tea rather than related to the tea estate. There is nothing to suggest that a particular tea estate produces only one class of tea, and when reference is made to a certain class of tea the reference identifies a certain class of tea estates. We may presume that a tea estate produces different classes of tea and not one class of tea only. While there must always be a nexus between the subject of the levy and the measure of the levy that nexus extends into different dimensions. Variations considered appropriate for the purpose of deter mining the measure must correspond to variations in the subject of the levy. If the measure of levy is to vary with the despatches of different classes of tea there must be something in the class of tea concerned which points to a reason located in the particular tea estate or classes of tea estates which are made the subject of the levy. So also if the measure varies with the centre of sale of tea, the variation must relate to a reason to be found in the nature of the tea estate or classes of tea estates. In other words, there must be a reason why one class of tea is treated 303 differently from another class of tea when deciding upon the rate to be applied to different classes of tea and that reason must be found in the nature of the tea estate con cerned. Ultimately the benefit of exemption or reduced levy must be related to the need for exempting the tea estate from that levy or relieving it from part of the normal levy. It seems to us that having regard to all the relevant provisions of the statute, including section 4(2)(aa) and section 4(4), in substance the impugned levy is a levy in respect of despatches of tea and not in respect of tea estates. For bringing the legislation within the saving provisions of Article 304(b) it is necessary that the Bill or amendment should have been introduced or moved in the Legislature of the State with the previous sanction of the President. It is not disputed that the amendments to the West Bengal Act made in 198 1 and 1982 did not satisfy that requirement. Indeed, it appears that the West Bengal Govern ment had sent an earlier Bill to the President with the object of levying a tax on the income from tea but the Presidential assent was not granted. It appears further that the Finance Minister of WeSt Bengal made a statement in the West Bengal Legislature on 27 February, 1981 stating that he would introduce the rural employment cess on despatches of tea. He referred to a Bill for amending the West Bengal Marketing (Regulation) Act, 1972 having been sent to the President and the President not having signified his consent to the amendment. In our opinion, the impugned provisions brought into the West Bengal Act by the amendments in 1981 and 1982 so far as they purport to relate to tea estates are unconstitutional and void and cannot be given effect to. Another aspect of the matter may be considered, and that relates to legislative competence. If the impugned legisla tion were to be regarded as a levy in respect of tea es tates, it would be referable to Entry 49 in List II of the Seventh Schedule of the Constitution which speaks of "taxes on lands and buildings". But if the legislation is in sub stance legislation in respect of despatches of tea, legisla tive authority must be 304 found for it with reference to some other Entry. We have not been shown any Entry in List II or in List III of the Sev enth Schedule which would be pertinent. It may be noted that Parliament had made a declaration in section 2 of the that it was expedient in the public interest that the Union should take under its control the tea industry. Under the , Parliament has assumed control of the tea industry including the tea trade and control of tea prices. Under section 25 of the Act a cess on tea produced in India has also been imposed. It appears to us that the impugned legis lation is also void for want of legislative competence as it pertains to a covered field. We do not consider it necessary to express our opinion on the other points raised between the parties in this case. In the result, the writ petitions filed in this Court and the petitions in the Transferred Cases are allowed, the impugned amendments effected in the West Bengal Rural Em ployment and Production Act, 1976 by the amending Acts of 1981 and 1982 so far as they purport to relate to tea es tates are declared void and the petitioners are held enti tled to the refund of cess paid by them under the impugned statutory provisions. The petitioners are entitled to their costs.
|
Section 4(1) of the West Bengal Rural Employment.
and Production Act, 1976 provided for levy of rural employment cess on immovable properties.
Clause (aa) of section 4(2) as amended by section 7(b) of the West Bengal Taxation Laws (Amend ment) Act, 1981 provided for levy of rural employment cess in respect of tea estates on the despatches of tea grown therein.
The first proviso thereto provided for exclusion of despatches of tea for sale made at recognised centres.
The second proviso thereto empowered the State Government 10 fix different rates of cess on despatches of different classes of tea.
Sub section (4) of the amended section 4 provided for exemption of certain categories of despatches from the liability to pay the whole or part of the cess or to reduce the rate of the cess payable thereon.
The first proviso to section 4(2)(aa) was.
however, omitted by the West Bengal Taxa tion Laws (Amendment) Act, 1982.
Article 304(b) of the Constitution permits the legislature of a State to impose reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State provided the Bill or amendment for that purpose is introduced with the previous sanction of the President.
It was contended for the petitioners that the levy of the cess under section 4(1) read with section 4(2)(aa) of the Act, as amended in 1981 and 1982.
was violative of the freedom guaranteed by Article 301 of the Constitu 294 tion and also lay outside the legislative competence of the State Government.
Allowing the writ petitions.
HELD: 1.1 If the levy of a tax on goods has direct and immediate effect of impeding the movement of goods through out the territory of India, there is a violation of Article 301 of the Constitution.
If, however, the impact of the levy is indirect or remote, no valid complaint can be made in relation to Article 301.
There is also no violation of Article 301 if the case fails under Article 304(b) and its proviso.
[299F, 300D E] 1.2 Therefore, if the legislature of a State enacts a law which imposes such reasonable restrictions on the free dom of trade, commerce or intercourse with or within that State as may be required in the public interest and further that the Bill or amendment for the purposes of clause (b) has been introduced or moved in the Legislature of a State with the previous sanction of the President, such enactment will not offend Article 301.
The rural employment cess in the instant case was a tax.
[300F, 299F] Ariabari Tea Co., Ltd. vs The State of Assam & Ors. ; ; The Automobile Transport (Rajasthan) Ltd. vs The State of Rajasthan & Ors., [1963] 1 S.C.R. 491; Firm A.T.B. Mehtab Majid and Company vs State of Madras & Anr., [1963] Suppl.
2 S.C.R. 435; Kalyani Stores vs TIre State of Orissa & Ors., ; ; State of Mysore vs Ii.
Sanjeeviah, ; and Andhra Sugars Ltd. & Anr.
vs State of Andhra Pradesh & Ors.
, ; , referred to.
2.1 To determine whether the levy was in respect of tea estates, and, therefore, of land thus making an indirect impact or was a levy on despatches of tea thereby directly impeding movement of goods, the substance of the legislation must be ascertained from the relevant provisions of the statute.
[301B] 2.2 The subject of the levy, the nature of which de fines the quality of the levy, however, must not be confused with the measure of liability, that is to say, the quantum of the tax.
Furthermore, the standards laid down for measur ing the liability under the levy must bear a relationship to the nature of levy.
[301B C, 302D E] 295 Union of India & Ors.
vs Bombay Tyre International Ltd. 2.3 If the levy is regarded as one in respect of tea estates and the measure of the liability is defined in terms of the weight of tea despatched from the tea estate there must be a nexus between the two indicating a relationship between the levy on the tea estate and the criteria for determining the measure of liability.
If there is no nexus at all it can conceivably be inferred that the levy is not what it purports to be.
[301H, 302A] 2.4 In the instant case, the nexus with the tea estate is lost altogether in the provisions for exemption or reduc tion of the levy and throughout the nexus is confined to despatches of tea rather than related to the tea estate.
There is nothing to suggest that a particular tea estate produces only one class of tea, and when reference is made to a certain class of tea the reference identifies a certain class of tea estates.
[302E F] 2.5 While there must always be a nexus between the subject of the levy and the measure of the levy that nexus extends into different dimensions.
Variations considered appropriate for the purpose of determining the measure must correspond to variations in the subject of the levy.
If the measure of levy is to vary with the despatches of different classes of tea, there must be something in the class of tea concerned which points to a reason located in the particular tea estate or classes of tea estates which are made the subject of the levy.
So also, if the measure varies with the centre of sale of tea, the variation must relate to a reason to be found in the nature of the tea estate concerned.
Ultimately, the benefit of exemption or reduced levy must be related to the need for exempting the tea estate from that levy or relieving it from part of the normal levy.
[302F, 303A] 2.6 In the instant case the relevant statutory provi sions, including section 4(2)(aa) and section 4(4), indicate no such relationship or nexus between the tea estate and the varied treatment accorded in respect of the despatch of different kinds of tea.
The levy of rural employment cess was, there fore, a levy in respect of despatches of tea and not in respect of tea estates.
It must, thus, be regarded as con stituting a direct and immediate restriction on the flow of trade and commerce in tea throughout the territory of India.
[303B C] 2.7 Such a levy could avoid the injunction declared in Article 301 296 only if it satisfied the provisions of Article 304(b) and the proviso thereto.
The amendments made to the West Bengal Act in 1981 and 1982 had not been moved in the Legislature of the State with the previous sanction of the President.
The provisions brought into the Act by the said amendments were, therefore, unconstitutional and void and could not be given effect to.
[303C D, F, G] 3.
Under the Parliament had assumed con trol of the tea industry including the tea trade and control of tea prices.
Under section 25 of that Act a cess on tea pro duced in India had also been imposed.
The State legislation imposing a cess on despatches of tea was, therefore, also void for want of legislative competence as it pertained to a covered field.
[304B]
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Section 4(1) of the West Bengal Rural Employment. and Production Act, 1976 provided for levy of rural employment cess on immovable properties. Clause (aa) of section 4(2) as amended by section 7(b) of the West Bengal Taxation Laws (Amend ment) Act, 1981 provided for levy of rural employment cess in respect of tea estates on the despatches of tea grown therein. The first proviso thereto provided for exclusion of despatches of tea for sale made at recognised centres. The second proviso thereto empowered the State Government 10 fix different rates of cess on despatches of different classes of tea. The first proviso to section 4(2)(aa) was. was violative of the freedom guaranteed by Article 301 of the Constitu 294 tion and also lay outside the legislative competence of the State Government. HELD: 1.1 If the levy of a tax on goods has direct and immediate effect of impeding the movement of goods through out the territory of India, there is a violation of Article 301 of the Constitution. If, however, the impact of the levy is indirect or remote, no valid complaint can be made in relation to Article 301. The rural employment cess in the instant case was a tax. 2 S.C.R. 435; Kalyani Stores vs TIre State of Orissa & Ors., ; ; 2.1 To determine whether the levy was in respect of tea estates, and, therefore, of land thus making an indirect impact or was a levy on despatches of tea thereby directly impeding movement of goods, the substance of the legislation must be ascertained from the relevant provisions of the statute. [301B] 2.2 The subject of the levy, the nature of which de fines the quality of the levy, however, must not be confused with the measure of liability, that is to say, the quantum of the tax. [301B C, 302D E] 295 Union of India & Ors. If there is no nexus at all it can conceivably be inferred that the levy is not what it purports to be. [301H, 302A] 2.4 In the instant case, the nexus with the tea estate is lost altogether in the provisions for exemption or reduc tion of the levy and throughout the nexus is confined to despatches of tea rather than related to the tea estate. There is nothing to suggest that a particular tea estate produces only one class of tea, and when reference is made to a certain class of tea the reference identifies a certain class of tea estates. [302E F] 2.5 While there must always be a nexus between the subject of the levy and the measure of the levy that nexus extends into different dimensions. Variations considered appropriate for the purpose of determining the measure must correspond to variations in the subject of the levy. So also, if the measure varies with the centre of sale of tea, the variation must relate to a reason to be found in the nature of the tea estate concerned. Ultimately, the benefit of exemption or reduced levy must be related to the need for exempting the tea estate from that levy or relieving it from part of the normal levy. [302F, 303A] 2.6 In the instant case the relevant statutory provi sions, including section 4(2)(aa) and section 4(4), indicate no such relationship or nexus between the tea estate and the varied treatment accorded in respect of the despatch of different kinds of tea. The levy of rural employment cess was, there fore, a levy in respect of despatches of tea and not in respect of tea estates. The provisions brought into the Act by the said amendments were, therefore, unconstitutional and void and could not be given effect to. Under the Parliament had assumed con trol of the tea industry including the tea trade and control of tea prices.
| 0.799233
| 0.901363
| 0.400612
| 0.694669
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"ON: Criminal Appeal No. 165 of 1957.\nAppeal by special leave from the judgment and order dated the(...TRUNCATED)
| "The appellants were tried before an Assistant Sessions judge for the offence of dacoity under secti(...TRUNCATED)
| "ON: Criminal Appeal No. 165 of 1957.\nAppeal by special leave from the judgment and order dated the(...TRUNCATED)
| "ON: Criminal Appeal No. 165 of 1957.\nAppeal by special leave from the judgment and order dated the(...TRUNCATED)
| "The appellants were tried before an Assistant Sessions judge for the offence of dacoity under secti(...TRUNCATED)
| "The appellants were tried before an Assistant Sessions judge for the offence of dacoity under secti(...TRUNCATED)
| 1
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| 1
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"ivil Appeal No. 103 of 1975.\nFrom the Judgment and Order dated 19.4.1974 of the Patna High Court i(...TRUNCATED)
| "For the year 1964 65, the assessee, a registered dealer, under the Bihar Sales Tax Act, 1959 return(...TRUNCATED)
| "ivil Appeal No. 103 of 1975.\nFrom the Judgment and Order dated 19.4.1974 of the Patna High Court i(...TRUNCATED)
| "ivil Appeal No. 103 of 1975.\nFrom the Judgment and Order dated 19.4.1974 of the Patna High Court i(...TRUNCATED)
| "For the year 1964 65, the assessee, a registered dealer, under the Bihar Sales Tax Act, 1959 return(...TRUNCATED)
| "For the year 1964 65, the assessee, a registered dealer, under the Bihar Sales Tax Act, 1959 return(...TRUNCATED)
| 1
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"Petition Nos.\n1483, 1494 and 1544 of 1986 etc.\nUnder Article 32 of the Constitution of India.\nDr(...TRUNCATED)
| "By a common order dated April 18, 1985 in C.A. No. 1423 of 1984, etc., Union of India vs Rajnikant (...TRUNCATED)
| "Petition Nos.\n1483, 1494 and 1544 of 1986 etc.\nUnder Article 32 of the Constitution of India.\nDr(...TRUNCATED)
| "Under Article 32 of the Constitution of India. Dr: Y.S. Chitale, Satish Chandra, P.K. Banerjee, S.N(...TRUNCATED)
| "By a common order dated April 18, 1985 in C.A. No. 1423 of 1984, etc., Union of India vs Rajnikant (...TRUNCATED)
| "By a common order dated April 18, 1985 in C.A. No. Indeed, they give effect to the letter and spiri(...TRUNCATED)
| 0.267608
| 0.608163
| 0.174163
| 0.543086
|
"ivil Appeal No. 2027 of 1974.\nFrom the Judgment and Order dated 8.10.1973 of the Gujarat High Cour(...TRUNCATED)
| "Under a deed of partnership dated 12.11.1958, a firm by the name M/s. Chhotalal Vedilal came into e(...TRUNCATED)
| "ivil Appeal No. 2027 of 1974.\nFrom the Judgment and Order dated 8.10.1973 of the Gujarat High Cour(...TRUNCATED)
| "ivil Appeal No. 2027 of 1974.\nFrom the Judgment and Order dated 8.10.1973 of the Gujarat High Cour(...TRUNCATED)
| "Under a deed of partnership dated 12.11.1958, a firm by the name M/s. Chhotalal Vedilal came into e(...TRUNCATED)
| "Under a deed of partnership dated 12.11.1958, a firm by the name M/s. Chhotalal Vedilal came into e(...TRUNCATED)
| 1
| 1
| 1
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"ON: Civil Appeal No. 1777 of 1973.\nFrom the Judgment and Decree dated 25.6.1973 of the Karnataka H(...TRUNCATED)
| "The respondent company had a current account with the lant bank in its Mangalore Builder Branch.\nT(...TRUNCATED)
| "ON: Civil Appeal No. 1777 of 1973.\nFrom the Judgment and Decree dated 25.6.1973 of the Karnataka H(...TRUNCATED)
| "From the Judgment and Decree dated 25.6.1973 of the Karnataka High Court in Regular First Appeal No(...TRUNCATED)
| "The respondent company had a current account with the lant bank in its Mangalore Builder Branch.\nT(...TRUNCATED)
| "The respondent company had a current account with the lant bank in its Mangalore Builder Branch. th(...TRUNCATED)
| 0.142538
| 0.511035
| 0.173831
| 0.539028
|
"ivil Appeal No. 544 of 1975.\nFrom the Judgment and Order dated 20.8.\n1973 of the Gujarat High Cou(...TRUNCATED)
| "The respondent challenged the notice for reasessment issued under section 147(b) of the Income Tax (...TRUNCATED)
| "ivil Appeal No. 544 of 1975.\nFrom the Judgment and Order dated 20.8.\n1973 of the Gujarat High Cou(...TRUNCATED)
| "ivil Appeal No. 544 of 1975.\nFrom the Judgment and Order dated 20.8.\n1973 of the Gujarat High Cou(...TRUNCATED)
| "The respondent challenged the notice for reasessment issued under section 147(b) of the Income Tax (...TRUNCATED)
| "The respondent challenged the notice for reasessment issued under section 147(b) of the Income Tax (...TRUNCATED)
| 1
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"Appeal No. 25 of 1961.\nAppeal by special leave from the judgment and decree dated November 26, 195(...TRUNCATED)
| "The respondent, who owned agricultural properties in the different districts of Uttar Pradesh, was (...TRUNCATED)
| "Appeal No. 25 of 1961.\nAppeal by special leave from the judgment and decree dated November 26, 195(...TRUNCATED)
| "Appeal by special leave from the judgment and decree dated November 26, 1957, of the Allahabad High(...TRUNCATED)
| "The respondent, who owned agricultural properties in the different districts of Uttar Pradesh, was (...TRUNCATED)
| "The respondent, who owned agricultural properties in the different districts of Uttar Pradesh, was (...TRUNCATED)
| 0.175634
| 0.538948
| 1
| 1
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